Dec. 2 (Bloomberg) -- The following are the day's top business stories:
1. Greece's Credit Rating May Be Cut by S&P as EU Rules Threaten Bondholders 2. Temasek, Soros Snared in India Microfinance Crackdown as IPOs Are Frozen 3. Greece `End Game' Veers Toward Potential Debt Restructuring: Euro Credit 4. Japanese Stocks Rise for Third Day on U.S. Housing Data, Europe Loan Plan 5. China Bullet Trains Triple Rail Stocks as Boom Brings Most Tracks in World 6. Seagate Is Said to Have Turned Down Takeover Proposal From Western Digital 7. Nuclear Boom in China Sees Reactor Builders Risk Their Know-how for Cash 8. JPMorgan, Deutsche Bank Step Up Hunt for Millionaires After Basel Change 9. Japan Tobacco Said to Sell 80 Billion Yen of Bonds at Lower Relative Yield 10.Manila's Night Banter Beats Bangalore in $21 Billion Call-Center Industry 11.Lexus Pushes $311,000 Cars in China as Sales More Profitable Than in U.S. 12.Winters Finds Road to Asia's Expanding Consumer Wealth Runs Through Europe
1. Greece's Credit Rating May Be Cut by S&P as EU Rules Threaten Bondholders
Greece was warned it could receive a lower credit rating from Standard & Poor´s as proposed European Union rules threaten to hurt bondholders. Greece´s `BB+´ long-term sovereign rating was placed on "CreditWatch" with negative implications, Standard & Poor´s Ratings Services said in a statement today from Madrid. S&P said it is assessing credit implications of the so-called European Stability Mechanism that may govern European Union sovereign bonds beginning in July 2013. "Assigning `preferred creditor´ status to future official lending via the ESM could be detrimental to the ability of non- official holders of sovereign debt to be repaid," S&P said. The possible cut by S&P "is simply an indication of tightening liquidity conditions there and growing uncertainty about Greece and other front-line European countries´ ability to handle their debt loads," said Gary Schlossberg, senior economist at Wells Capital Management Inc. in San Francisco.
2. Temasek, Soros Snared in India Microfinance Crackdown as IPOs Are Frozen
Private equity companies may struggle to recoup almost $565 million in investments in India´s microfinance industry since 2006 after a regulatory backlash led at least two firms to delay initial public offerings. Temasek Holdings Pte, billionaire George Soros and Sequoia Capital are among investors who´ve put money into the world´s largest market for micro-loans as lending and profits swelled. The boom culminated with the IPO of Sequoia-backed SKS Microfinance Ltd., which raised 16.3 billion rupees ($357 million) in August. The risks associated with the industry were highlighted in October, when India´s southern Andhra Pradesh state capped loan rates and cracked down on recovery tactics, causing lending and collections to slump and private equity-backed micro-lenders to postpone share sales, Bloomberg Businessweek reports in its Dec. 6 edition. "I don´t think private equity investors will recover their money at the rates they thought they would," said Sanjay Sinha, managing director of Gurgaon, India-based Micro-Credit Ratings International Ltd. "The market is not as wonderful or as large as the investors made it out to be, and they paid far too high prices for their stakes."
3. Greece `End Game' Veers Toward Potential Debt Restructuring: Euro Credit
Greece risks having to restructure its debt even with an extension in terms of the loan repayments by the European Union as the economy remains mired in recession. "You would be wrong to rule out the possibility of a debt restructuring at some point," said John Stopford, the London- based head of fixed income at Investec Asset Management, who helps oversee $65 billion for clients. "Greece has a structural problem, and there has got to be risk we have another recession or economic crisis." The extra yield investors demand to hold 10-year Greek debt instead of benchmark German bunds is within 90 basis points of the record set in May when Greece was granted a three-year aid package of 110 billion euros ($145 billion) from the European Union and International Monetary Fund. In the Irish bailout announced Nov. 28, Greece received preliminary approval for an extra four-and-a-half years to pay back emergency loans. The country´s first aid repayment is due in 2013. While Greece struggles to reduce its budget deficit from 9.4 percent of the gross domestic product, Finance Minister George Papaconstantinou said yesterday that a restructuring is out of the question. The domestic economy probably will contract by 2.7 percent in 2011 and 0.1 percent in 2012, according to analyst estimates compiled by Bloomberg.
4. Japanese Stocks Rise for Third Day on U.S. Housing Data, Europe Loan Plan
Japanese stocks rose for a third day as U.S. housing data and an extended emergency loan program from the European Central Bank´s bolstered confidence in a global economic recovery. Canon Inc., which is the world´s biggest camera maker and gets more than 80 percent of its sales abroad, climbed 1 percent. Toyota Motor Corp., the No. 1 carmaker worldwide, gained 0.6 percent. Mitsubishi Corp., Japan´s largest commodities trader, advanced 0.8 percent after metal prices increased and crude climbed to a two-year high yesterday. "The increase in pending home sales was a positive surprise," said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. The Nikkei 225 Stock Average rose 0.7 percent to 10,235.49 as of 9:07 a.m. in Tokyo, set for the highest close since June 21. The broader Topix index advanced 0.7 percent to 883.49 with more than six stocks gaining for each that fell. All 33 industry groups in the Topix increased.
5. China Bullet Trains Triple Rail Stocks as Boom Brings Most Tracks in World
Zhu Yi used to nap on the five-hour train ride home to Wuhan from Zhuzhou in central China. Now that a fast rail line has cut the trip to an hour and 40 minutes, he can spend more time selling information-management systems. Before, "it took three days to get a project done," said Zhu, 31, a sales manager for Beijing Lanxum New Technology Co. in Wuhan. "Now it´s so fast I can work out a solution for the client and be back home on the same day." The view from Zhu´s reclining seat shows how China´s push to build a 16,000-kilometer high-speed passenger network by 2020 is carrying China´s industrial boom inland. All along the trackside are earth movers and excavators clearing land and beginning construction. They merge into a blur as the express accelerates to 350 kilometers (218 miles) an hour. The country´s planned 2 trillion yuan ($300 billion) in spending will give it almost as much track by 2012 as the entire rest of the world, even before the network is completed.
6. Seagate Is Said to Have Turned Down Takeover Proposal From Western Digital
Seagate Technology Plc, the disk- drive maker that ended takeover talks with TPG Capital, also turned down a proposal from competitor Western Digital Corp., according to two people with knowledge of the matter. A combination with Western Digital would have faced antitrust obstacles and may have resulted in management departures, said the people, who declined to be identified because the talks were private. Western Digital indicated to Seagate it was willing to pay 10 percent to 50 percent more than TPG, one person said. TPG had considered offering more than $7.5 billion, people familiar with the matter said in October. Seagate, which has a market value of about $6.9 billion, said Nov. 29 it terminated discussions with private-equity firms because the indicated deal value wasn´t in the best interest of the company or its shareholders. TPG couldn´t find enough equity partners to finance a takeover after KKR & Co. and Bain Capital LLC lost interest in a transaction, one person familiar with the situation said at the time. Western Digital made its approach after Seagate said Oct. 14 that it received interest about a going-private transaction, one person said. The Lake Forest, California-based company has a market value of about $8 billion. It had cash and equivalents of about $2.9 billion and $375 million in debt as of Oct. 1.
7. Nuclear Boom in China Sees Reactor Builders Risk Their Know-how for Cash
The ballroom of the Grand Hyatt on Beijing´s East Chang An Avenue was packed. The occasion: the first-ever China International Nuclear Symposium, a gathering of China´s top nuclear players and the world´s nuclear power companies, including Westinghouse, Areva SA, and Hitachi-GE. What brought the Chinese to the Hyatt on Nov. 24 and 25 was a hunger for the latest technology, Bloomberg Businessweek reports in its Dec. 6 issue. What brought the foreigners was money: According to Michael Kruse, consultant on nuclear systems for Arthur D. Little, the Chinese are ready to spend $511 billion to build up to 245 reactors. "The market is being driven by the construction of new reactors, and it is no secret that most of those are right here in China," says Fletcher T. Newton, an executive vice-president of Uranium One, a mining company. The global nuclear industry is willing to take big risks to get a piece of China´s nuclear budget. The danger is that in landing those fat contracts -- and sharing technology with Chinese partners -- the industry will help build a formidable rival. Even though they lack the most advanced technology, the Chinese are rapidly becoming self-sufficient in reactor design and construction, according to the World Nuclear Association.
8. JPMorgan, Deutsche Bank Step Up Hunt for Millionaires After Basel Change
JPMorgan Chase & Co., Deutsche Bank AG and Citigroup Inc. are hiring bankers who cater to millionaire clients as more stringent capital rules reduce returns from investment banking. JPMorgan, the biggest U.S. bank by market value, plans to increase its wealth management staff in Europe, the Middle East and Africa by as much as 20 percent a year until 2013. Frankfurt-based Deutsche Bank is bulking up its Asia business after buying Sal. Oppenheim Group, Germany´s biggest independent private bank, nine months ago, said spokesman Klaus Winker. Leaders for the Group of 20 nations approved plans last month at a meeting in Seoul to more than double capital requirements for banks after the industry posted losses of more than $1.3 trillion from 2007 through 2009. The change provides renewed impetus for banks to focus on less risky and less capital-intensive units such as overseeing assets for wealthy clients, said Cedric Tille, a professor at the Graduate Institute in Geneva. "It´s a natural reaction for banks to go more and more toward fee-based advisory activities in response to capital requirements," said Tille, a former economist at the Federal Reserve Bank of New York. "If they make a mistake, it´s only the clients who get upset."
9. Japan Tobacco Said to Sell 80 Billion Yen of Bonds at Lower Relative Yield
Japan Tobacco Inc. plans to raise 80 billion yen ($950 million) from bonds today at a lower relative yield than it paid before a record increase in domestic tobacco taxes, according to a person with direct knowledge of the matter. The maker of Mild Seven and Winston brand cigarettes told investors it will price five-year notes to yield 10 basis points more than government debt, said the person, who asked not to be named as the information is private. The Tokyo-based company paid a 24 basis-point spread on similar-maturity 1.128 percent bonds in May 2009, according to data compiled by Bloomberg. Japan, the world´s fourth-biggest cigarette market, raised tobacco duty 40 percent in October to discourage smoking and raise money. Japan Tobacco, which controls 65 percent of its home market, acquired U.K.-based Gallaher Group in 2007 and Japanese frozen-food producer TableMark Co. in 2008. That reduced its dependence on a shrinking domestic cigarette market to 31.1 percent as of March 31, from 44.7 percent three years earlier, according to a company statement. "Japan Tobacco knew this would come so they´ve diversified their business," said Nobuto Yamazaki, a fund manager who helps oversee 1 trillion yen at DIAM Asset Management Co. in Tokyo, who smokes 20 Mild Seven a day and who doesn´t own the company´s bonds. "I don´t think the non-smoking trend will ruin them."
10.Manila's Night Banter Beats Bangalore in $21 Billion Call-Center Industry
For the past decade, Americans dialing customer service stood a strong chance of being connected to someone in India. Now they´re more likely to end up phoning the Philippines. Strong government support, a supply of English-speaking college graduates and an effort by call-center operators to reduce their dependence on India have helped the Philippines overtake India in call-center revenue, Bloomberg Businessweek reports in its Dec. 6 edition. "It´s not that we are trying to take business away from India," said Oscar Sañez, chief executive officer of the Business Processing Association of the Philippines, an industry group. "We´re just looking for our own place in the sun." The Philippines will earn $5.7 billion for call-center work this year from the U.S., Europe and Australia, compared with the $5.5 billion generated by India, according to the Everest Group, a Dallas-based outsourcing advisory firm working with the Philippines industry. The two hubs account for about half of the $21 billion global industry, according to Everest data.
11.Lexus Pushes $311,000 Cars in China as Sales More Profitable Than in U.S.
Toyota Motor Corp.´s profit per vehicle in China for its luxury Lexus brand has eclipsed that of the U.S., where it has been forced to triple incentives following record recalls earlier this year. Even after China´s import duties and higher taxes on luxury cars, Lexus currently earns more per car in the world´s largest auto market, said Karl Schlicht, head of the marque´s global product and marketing division, citing a weaker dollar. Premium pricing in China and the higher incentive spending in the U.S. are also factors, analysts said. "We´re going through pretty unprecedented times with our U.S. operations given the quality issue," Schlicht said in an interview this week in Nagoya, west of Tokyo. Lexus sales in China will rise about 50 percent this year, Schlicht said. Deliveries totaled about 30,400 units in 2009, according to researcher J.D. Power & Associates. Sales gained 7.7 percent to 201,769 in the U.S., the brand´s biggest market, this year through November.
12.Winters Finds Road to Asia's Expanding Consumer Wealth Runs Through Europe
David Winters likes to quote hockey great Wayne Gretzky, who said the key to success was skating to where the puck was going to be, not where it had been. The puck has moved from the U.S. and Europe to the emerging economies of Asia, Winters said. The manager of a top-performing mutual fund during both halves of the past decade, Winters says he is seeking to profit from this "tectonic shift" after doubling the portion of non-U.S. stocks in his portfolio to about 70 percent and buying companies that can profit from Asia´s growth. "I want my shareholders to have exposure to the parts of the world where people want everything we have and are willing to go out and get it," Winters, who runs the $1.3 billion Wintergreen Fund from Mountain Lakes, New Jersey, said in a telephone interview. Investors have poured a record amount of money into emerging-market equity funds this year to try to tap into the fast-growing economies of Asia and Latin America and their expanding ranks of consumers with rising incomes. While Asian stocks can be a vehicle for exploiting that continent´s wealth, buying European companies with a global reach is often a better way to achieve the same goal at a discount, according to Winters.
For the complete stories summarized here, and for more of the day's top news, see TOP <Go>.