Jan. 26 (Bloomberg) -- The following are the day's top business stories:
1. China Will Face Crisis Within 5 Years, 45% of Investors in Global Poll Say 2. Dow Average Tops 12,000 as Treasuries, Dollar Fall on Fed, Home Sales Data 3. State Defaults in U.S. Are Unlikely, 50% of Investors Say in Global Poll 4. Deficit Expansion Means Record Bond Sales as Yields Increase: Japan Credit 5. Casino Billionaire Ho Ends Family Feud Reading Cue Card in Reclining Chair 6. South Korea Posts Current-Account Surplus, Weathering Won's Appreciation 7. Hewlett-Packard Seeks Dismissal of Lawsuit Over Ex-Chief Hurd's Departure 8. Sharp Adds 300 Jobs to Double Capacity in U.K. Solar Panel Plant Expansion 9. Sukuk Revival Seen in $1 Trillion of Development Projects: Islamic Finance 10.Trichet Reiterates ECB Will Do What Is Needed to Keep Inflation In Check 11.Lee's Inflation Fight Lifts Won Amid Killing of South Korea Diseased Herds 12.McDonald's No Match for KFC in China Where Colonel Sanders Rules Fast Food
1. China Will Face Crisis Within 5 Years, 45% of Investors in Global Poll Say
Global investors are bracing for the end of China´s relentless economic growth, with 45 percent saying they expect a financial crisis there within five years. An additional 40 percent anticipate a Chinese crisis after 2016, according to a quarterly poll of 1,000 Bloomberg customers who are investors, traders or analysts. Only 7 percent are confident China will indefinitely escape turmoil. "There is no doubt that China is in the midst of a speculative credit-driven bubble that cannot be sustained," says Stanislav Panis, a currency strategist at TRIM Broker in Bratislava, Slovakia, and a participant in the Bloomberg Global Poll, which was conducted Jan. 21-24. Panis likens the expected fallout to the aftermath of the U.S. subprime-mortgage meltdown. On Jan. 20, China´s National Bureau of Statistics reported that the economy grew 10.3 percent in 2010, the fastest pace in three years and up from 9.2 percent a year earlier. Gross domestic product rose to 39.8 trillion yuan ($6 trillion).
2. Dow Average Tops 12,000 as Treasuries, Dollar Fall on Fed, Home Sales Data
Stocks rose, sending the Dow Jones Industrial Average above 12,000 for the first time since June 2008, while Treasuries and the dollar fell after the Federal Reserve kept stimulus measures and new-home sales in the U.S. beat estimates. Commodities advanced, and Egyptian shares tumbled the most since 2009. The Dow climbed 0.1 percent to 11,985.44 at 4 p.m. New York time and climbed to 12,020.52 earlier. The 10-year Treasury note yield climbed nine basis points to 3.42 percent. The Dollar Index fell as much as 0.3 percent to a two-month low. The S&P GSCI Spot Index of 24 commodities rose 1.9 percent, led by sugar, gasoline and hogs. Egypt´s EGX30 Index sank 6.1 percent. Fed policy makers said signs of an accelerating recovery don´t warrant paring back efforts to reduce unemployment near the highest levels since the early 1980s. Purchases of new homes in the U.S. surged 18 percent in December, the biggest jump since 1992 and five times faster than the median estimate, as sales in California surged before a state tax credit expired. "Investors are welcoming the fact there´s no change in the view about the need for a stimulus program," said Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania. "The housing data this morning also helps the overall mood."
3. State Defaults in U.S. Are Unlikely, 50% of Investors Say in Global Poll
Investors are divided over whether a big U.S. city or state will default on its bonds this year, though most say the federal government would step in with a bailout and a financial crisis would be averted. Half of respondents to a Bloomberg Global Poll conducted Jan. 21-24 say they think a default by a state or major city this year either isn´t likely or is just somewhat likely, though almost as many, 46 percent, say such a prospect is likely. Even if a default were imminent, two-thirds of global investors say Washington would come to the rescue, and almost 6-in-10 say it is unlikely or only somewhat likely that turmoil would spread to other financial markets this year, according to the poll of 1,000 Bloomberg customers who are investors, traders or analysts. Investors say their portfolios reflect pessimism about the prospects for the $2.9 trillion municipal-bond market: By a 4- to-1 ratio, poll respondents over the next six months say they plan to reduce rather than increase their exposure to municipals, whose prices have been battered by concerns about local finances.
4. Deficit Expansion Means Record Bond Sales as Yields Increase: Japan Credit
The Japanese government´s prediction of wider budget deficits for the next three years may boost bond sales just as waning domestic demand drives yields higher. Yields on benchmark 10-year bonds rose 0.02 percentage points to 1.24 percent yesterday, and are up from a seven-year low of 0.82 percent in October. Yesterday, the government projected a combined shortfall of 155.5 trillion yen ($1.9 trillion) through the three years ending March 2015. Demand from Japanese investors for the government´s debt is "nearing its limit," Vice Finance Minister Fumihiko Igarashi said in an interview this week. Japan´s bonds have lost 3.1 percent this year, the worst-performing in Asia, according to data compiled by Bloomberg. Treasuries have gained 0.13 percent, according to Bank of America Merrill Lynch indexes. "Japan´s debt situation is getting to a stage where it won´t be OK to just balance the budget," said Akito Fukunaga, chief interest-rate strategist in Tokyo at Royal Bank of Scotland Group Plc. "What´s required is not only fiscal discipline, but also ending deflation to boost growth. I don´t see either of those happening soon in Japan´s future."
5. Casino Billionaire Ho Ends Family Feud Reading Cue Card in Reclining Chair
Hong Kong billionaire Stanley Ho withdrew a demand that family members return the bulk of his casino fortune and pronounced the end of an ownership dispute that threatened to split Asia´s largest gambling empire. Ho, 89, said yesterday in a televised broadcast that he had agreed to transfer his 31.7 percent stake in Sociedade de Turismo e Diversoes de Macau SA to five of his children and the woman he calls his third wife. The day before, he said those family members took the stake without his consent, and he was ready to take legal action against them to get it back. "I have been really unhappy recently because of the disputes, my family members were unhappy as well," Ho said, reading an off-camera cue card from a reclining chair as his daughter held a microphone. "The big problem has been resolved." Two days of conflicting statements from Ho´s lawyer and the public-relations company representing some family members helped drive the stock price of STDM unit SJM Holdings Ltd. down by 4.9 percent yesterday, slicing about $480 million from its market value. SJM runs most casinos in the Chinese city of Macau, where gambling revenue is four times that of the Las Vegas Strip.
6. South Korea Posts Current-Account Surplus, Weathering Won's Appreciation
South Korea posted a current- account surplus for a 10th straight month in December as demand for the nation´s exports of cars and electronics products weathered an appreciation in the won. The surplus was $2.11 billion, compared with a revised $1.93 billion in November, the Bank of Korea said in a statement in Seoul today. The current account is the broadest measure of international trade, tracking goods, services and investment income. South Korea has stepped up measures to pare currency gains driven by foreign capital inflows, helping to keep exports competitive. Overseas shipments contributed to the fastest economic expansion last year since 2002, spurring consumer-price growth, a report from the central bank showed yesterday. "The won hasn´t risen as much as most other Asian currencies, which has assisted exports," said Kwon Young Sun, an economist at Nomura Holdings Co. in Hong Kong. Policy makers need to raise borrowing costs again and allow more gains in the currency to limit inflation, he said.
7. Hewlett-Packard Seeks Dismissal of Lawsuit Over Ex-Chief Hurd's Departure
Hewlett-Packard Co. asked a Delaware judge to dismiss a shareholder lawsuit seeking documents related to former Chief Executive Officer Mark Hurd´s departure, saying the request is "overbroad" and fails to set forth a basis to find probable wrongdoing. Shareholder Ernesto Espinoza sued the company in November over access to corporate documents detailing an internal investigation of Hurd´s relationship with a contractor and the board´s subsequent decision to award him as much as $53 million in severance pay. Espinoza lacks a proper purpose for the inspection, HP said a filing today in Delaware Chancery Court in Wilmington. Espinoza "has not set forth a credible basis to find probable corporate wrongdoing or mismanagement by the board," HP´s lawyers said in the filing. Hurd resigned in August after the Palo Alto, California- based company found that he violated business conduct standards by trying to conceal a personal relationship with former marketing contractor Jodie Fisher. HP´s finding came after Hurd was accused of sexual harassment by Fisher. HP found that Hurd didn´t violate its harassment policy.
8. Sharp Adds 300 Jobs to Double Capacity in U.K. Solar Panel Plant Expansion
Sharp Corp., Japan´s largest maker of solar cells, said it added 300 jobs in the U.K. following the extension of its European solar panel plant in Wrexham, Wales. The enlarged factory, first announced in July, will almost double manufacturing capacity to 500 megawatts a year by March, the company said today in an e-mailed statement. That´s enough to power over 170,000 homes, it said. The number of employees has increased to 1,100 from 800, it said. British homes and companies last year installed a record 33 megawatts of solar panels, more than doubling the total installed base after the government in April introduced guaranteed electricity prices called feed-in tariffs for power from small-scale renewable projects. "This job creation proves that there is an appetite for solar technology in the U.K. and that this sector has huge growth potential," Andrew Lee, head of the Osaka-based electronics maker´s U.K. solar division, said in the statement. "The feed-in tariff led to a shot in the arm for the solar industry, and we´ve responded by creating jobs."
9. Sukuk Revival Seen in $1 Trillion of Development Projects: Islamic Finance
Plans by Saudi Arabia, Malaysia and Qatar to spend almost $1 trillion on development projects over the next decade will overwhelm the amount banks can provide in loans, reviving sales of sukuk, according to HSBC Holdings Plc and BNP Paribas SA. At least $3.9 billion of Islamic bond sales announced this year will fund the building of oil refineries, steel mills and petrochemical plants, according to data compiled by Bloomberg. New York-based law firm Chadbourne & Parke LLP estimated last year that Shariah-compliant project financing in the Gulf Cooperation Council will account for 30 percent of the total by 2012, up from 12.5 percent in 2006. "The capacity of the Islamic commercial banking sector may not be sufficient to satisfy demand for capital," said Rafael Dalmau, the Singapore-based head of the Islamic portfolio unit at BNP Paribas, in an interview Jan. 18. There will be "greater activity and transactions in the capital markets," he said. HSBC expects to arrange more project financing after helping to manage a ringgit-denominated sukuk in November for a gas pipeline in Thailand, the first such issuance in Malaysia since 2008, said Mukhtar Hussain, chief executive officer at the Islamic unit HSBC Amanah Malaysia Bhd. in Kuala Lumpur. Global sales of Shariah-compliant bonds will increase 17 percent this year, rebounding from the slump in 2010, according to Dalmau at BNP.
10.Trichet Reiterates ECB Will Do What Is Needed to Keep Inflation In Check
European Central Bank President Jean-Claude Trichet reiterated policy makers will do what is needed to keep inflation in check and stressed that the ECB´s credibility on price stability remains intact. "We will do what is necessary," Trichet told Francine Lacqua in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland, yesterday. "It is not by chance that we have delivered price stability. Our credibility it based on that doctrine." ECB Executive Board Member Juergen Stark and Belgium´s Guy Quaden, colleagues of Trichet on the bank´s governing council, said yesterday that officials will "act" to counter inflation risks from so-called second-round effects, where workers demand higher wages in compensation for higher living costs. German import prices rose at the fastest annual pace in 29 years in December, while inflation in the euro area breached the ECB´s 2 percent limit for the first time in more than 2 years. Policy makers are debating how to respond to those price gains fanned by surging commodity costs without derailing an uneven recovery in the crisis-afflicted euro region.
11.Lee's Inflation Fight Lifts Won Amid Killing of South Korea Diseased Herds
South Korea´s plans to slaughter 7.9 million cattle, pigs and poultry to halt the spread of disease are pricing pensioner Lee Ok Soon out of a Lunar New Year tradition of cooking beef soup as an offering for her ancestors. The nation´s biggest cull is meant to stamp out the foot- and-mouth and bird-flu viruses. It also may frustrate President Lee Myung Bak´s vow to limit inflation to less than 3 percent and to protect low-income earners hit by record food prices. "I don´t believe the government can do anything to pull down prices, which are soaring as if the sky´s the limit," said Lee, 77, as she shopped at a market in central Seoul on Jan. 20. President Lee´s task is made harder by the need to balance inflation control with his pledge to deliver economic growth of 5 percent. Investors should sell short-term bonds and buy the won as the central bank raises rates to halt price rises, said Park Tae Kuen, a fixed-income analyst at Hanwha Securities Co. in Seoul. It was ranked among the nation´s top five bond dealers in the first half of 2010 by the Financial Supervisory Service, the country´s regulator.
12.McDonald's No Match for KFC in China Where Colonel Sanders Rules Fast Food
On the edge of Tiananmen Square, just across the street from Mao Zedong´s tomb, He Yingying munches on a piece of chicken and gazes at the benign-looking figure beaming down at her. "We love him," she says, bursting into an impish smile. The 21-year-old student from Beijing´s Capital University of Economics and Business isn´t referring to Mao, whose iconic official portrait dominates the square. She´s talking about a long-dead, white-bearded Kentucky colonel on the logo of the KFC restaurant where she´s feasting on her favorite fast food, Bloomberg Markets reports in its March issue. In its home market, the U.S., KFC is struggling, an also- ran to McDonald´s Corp., the world´s biggest restaurant company, and feuding with some of its own franchisees over how to halt declining profits.
For the complete stories summarized here, and for more of the day's top news, see TOP <Go>.