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Gadhafi forces attack oil town
(India facsimile Vol. 2 No. 192)
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Tuesday, March 8, 2011
ASIA
asia.WSJ.com
Protests prompt Yemen’s president to call for talks
Forces loyal to Col. Moammar Gadhafi launched airstrikes on a rebel-held town Monday to check the rebels’ advance west toward the capital, as the U.S. and allies said they were discussing military options.
Toyota plans deep cutback in board size BY CHESTER DAWSON AND NORIHIKO SHIROUZU
By Margaret Coker in Tripoli, Charles Levinson in Benghazi, Libya, and Joe Lauria at the United Nations President Barack Obama, saying Col. Gadhafi and his allies would be held accountable for the actions, said the U.S. was discussing military options with allies in the North Atlantic Treaty Organization. The U.S. also increased humanitarian aid, Mr. Obama said. NATO Secretary-General Anders Fogh Rasmussen said “I can't imagine that the U.N. and international community will stand idly by,” the Associated Press reported. He said Friday that any NATO military Please turn to page 18
Associated Press
Protesters threw a boy into the air Monday during a demonstration demanding the resignation of Yemeni President Ali Abdullah Saleh, who called for a national dialogue to quell the gatherings.
TOKYO—Toyota Motor Corp. will unveil a long-term strategic plan on Wednesday that will cut sharply the number of board members, a move that has renewed longsimmering tensions within the Japanese auto maker’s management. More broadly, the blueprint for the decade will provide one of the first public glimpses of President Akio Toyoda’s management style and goals. The plan, tentatively dubbed 2020 Global Vision, marks a new chapter for the world’s largest auto maker after an unprofitable period helped propel the family scion into his current role in 2009, and follows the fallout from massive recalls that consumed Mr. Toyoda’s first two years as president. Toyota has declined to provide any details about the new strategy prior to its for-
China’s state media push deeper into Web BY LORETTA CHAO
BEIJING—As increasing numbers of Chinese go online, China’s state media outlets are aggressively expanding beyond their traditional roles as propaganda outlets and competing with private Internet companies. Xinhua, the state-run news service, recently launched a search engine, Panguso.com, in partnership with stateowned telecommunications
carrier China Mobile Ltd. The move comes a few months after People’s Daily, a big staterun newspaper, started its own search engine, Goso.cn. The paper has also started its own Twitter-like messaging service. Meanwhile, China Central Television has launched its own online video platform, CNTV, which provides content from the monopoly broadcaster’s 20 channels, as well as content from other online-
video sites. But the state-run giants face challenges as they scramble to catch up with companies such as Baidu Inc., which operates China’s largest search engine; Sina Corp., which runs China’s most active Twitter-like service; and Youku.com Inc., China’s biggest video website. “Expanding into Internet services is both an opportunity and challenge for stateowned media,” a CCTV
S&P/ASX 200 4797.88 g 1.37%
spokesman said in a written response to questions from The Wall Street Journal. “Since the Internet market is a fully open and competitive area, state-owned media face difficulties and problems with low marketization and so on, compared with newly emerged private Internet companies.” Although state-media outlets have long tried to commercialize, there appears to have been a renewed push to
do so online, says Jeremy Goldkorn, founder of Danwei, a website about Chinese media. He is skeptical of these outlets’ ability to win over China’s 457 million Internet users. The news business in China is “overwhelmingly state-owned and controlled,” while “private companies built the Chinese Internet. It’s different, and it requires a very different set of skills,” Please turn to page 18
mal announcement. But people familiar with the plan say that one hallmark is a proposal to roughly halve the number of board members from the current 27. Mr. Toyoda’s support base within the company views the move to slim the board as a bold attempt to speed decision making, but his detractors view the plan as a brazen effort to consolidate power. One current board member recently fretted that the auto maker’s best days might be behind it. “Do you think Toyota is past its prime? It feels like that these days,” the executive said. The board member added that the success of charismatic chief executives such as Ford Motor Co.’s Allan Mulally and Apple Inc.’s Steve Jobs provides hope for a decisive turnaround at the Japanese company—if Mr. Toyoda has the managerial chops to pull it off. “But is Akio a Mulally? Is Please turn to page 18
Luxury deal
LVMH announced a takeover of Italian jeweler Bulgari in a deal valued at about $6.03 billion and underscoring the strength in the luxury sector. Page 19
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THE WALL STREET JOURNAL.
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Tuesday, March 8, 2011
PAGE TWO
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What’s News—
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Inside
Business & Finance n China is looking for ways other than rapid yuan appreciation to ease tensions with global trading partners, the nation’s commerce minister said. His comments indicate that while the government wants to reduce its large surpluses, it remains wary of allowing rapid appreciation of the currency as a means to do so. 3 n Nomura Holdings shuffled its senior management, promoting a foreigner to the highest role in the firm’s history and naming its first female senior executive. 19
Japan: New breed of independent candidate guns for voter revolt. 4
n LVMH will take a controlling stake in Italy’s Bulgari in a deal valued at $6.03 billion, adding to the French firm’s watch and jewelry brands and underscoring the strength in the luxury sector. 19 n Terumo is buying U.S. medical company CaridianBCT for $2.63 billion, in the latest overseas acquisition by a Japanese company buoyed by the strong yen. 20
n A Chinese company settled separate copyright-infringement lawsuits with Microsoft, Adobe and Autodesk, marking the latest triumph for the U.S. software makers against piracy in China. 22 n Hitachi is selling its hard-diskdrive business to Western Digital for about $4.3 billion in cash and stock, creating a dominant player in the segment. 20 n The U.S. Fed is unlikely to withdraw its economic stimulus until more evidence of a self-sustaining recovery is seen. 6 n Japan suspended the use of Pfizer’s Prevnar and Sanofi’s ActHIB pending a probe of whether the deaths of four children are linked to the vaccines. 20
Asia Deal Journal: Singapore Exchange pursues niches. 19
Getty Images
n U.S. stocks fell as an analyst downgraded the technology sector and concerns over supplies kept crude-oil prices above $105 a barrel. Asian shares also dropped, with the Nikkei down 1.8%. 25
Downing Street moved to quash speculation that Prince Andrew will have to resign as the U.K.’s special trade envoy amid criticism about the appropriateness of his friendship with U.S. businessman Jeffrey Epstein, who has served a prison sentence for soliciting an underage girl for prostitution. Above, Prince Andrew in London on Monday. Page 8 n Barclays CEO Diamond received total compensation valued at more than $32.5 million, making him the best-paid British banking boss and a likely lightning rod for criticism. 27 n Tullow Oil and the Ugandan government resolved a tax dispute that should allow Tullow to bring Total and Cnooc into its oil projects in the East African nation. 22 n Developer China Vanke said profit rose 37% in 2010 on higher sales and property prices, and it expects the market to shift in favor of home buyers this year. 25 n The dollar fell to a nearly fourmonth low against the euro. 24
n Thai AirAsia plans an IPO in Bangkok in the fourth quarter. 27
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World-Wide n Hard-line Bahraini opposition protesters gathered in Manama in a new escalation of tensions between antigovernment demonstrators and the ruling family. Also, Oman’s government shuffled its cabinet and Tunisia dissolved its state security department. n A Taiwan general at the center of a spy case is suspected of leaking details to China about an electronic-defense system being sold to the island by Lockheed Martin, a senior Taiwan lawmaker said. 5
n Pyongyang raised the pressure on four North Koreans who defected to the South, saying it wants them to face their relatives at a meeting this week. 4 n Secretary of Defense Gates arrived in Afghanistan on a surprise trip to meet with U.S. troops and Afghan leaders, as the U.S. looks for signs that its strategy is starting to pay security dividends. 8 n Fighting erupted in Ivory Coast between forces backing the men who both claim to be president.
Business & Finance: Dunkin’ focuses on Asia for expansion. 21
n A Vietnamese rights lawyer was freed from prison after serving a four-year sentence for advocating a multiparty system.
ONLINE TODAY Most read in Asia
1. China’s Focus Turns to Its Poor 2. Japan’s Foreign Minister Resigns 3. Suppliers Confront iPad Hurdles 4. Libya Rebels March West as Fronts Firm 5. Chinese Billionaire Embraces Religion
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Heard on the Street: India’s oil refiners back in the line of fire. 32 THE WALL STREET JOURNAL ASIA Dow Jones Publishing Company (Asia) 25/F, Central Plaza, 18 Harbour Road, Hong Kong Tel 852-2573 7121 Fax 852-2834 5291 www.wsj-asia.com SUBSCRIPTIONS and Address Changes, please telephone our local customer service hotline, Hong Kong/Taiwan: 852-2831 2555; Beijing: 86-10 6581 4090; Shanghai: 86-21 5836 8228; Indonesia: 62-21 527 7592; Japan: 81-3 6269-2760; Korea: 82-2 756 1695; Malaysia: 60-3 2026 4061; Philippines: 63-2 848 5873; Singapore: 65-6415 4000; Thailand: 66-2 690 4222 to 7; India: 91-11 6462 0215. Or email:
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WORLD NEWS
Imports to reduce China’s trade gap BEIJING—Although China plans to shrink its trade surplus further this year, the nation’s commerce minister on Monday expressed skepticism about the benefits of rapid yuan appreciation, indicating China is looking for other ways to ease tensions with global trading partners. Beijing wants to “stabilize exports, grow imports, and shrink the trade surplus,” Commerce Minister Chen Deming said at a press briefing on the sidelines of the National People’s Congress, the annual meeting of China’s legislature.
Beijing wants to shrink its large surpluses, but remains wary of using a rapid yuan rise as a means to do so. Mr. Chen’s comments, coming on the heels of a long list of economic goals laid out by Premier Wen Jiabao over the weekend, indicate that while the government wants to reduce its large surpluses, it remains wary of allowing rapid appreciation of the currency as a means to do so. The U.S. has long accused China of manipulating its currency to keep it artificially low, giving the country an unfair trade advantage. To boost imports, China is considering cutting tariffs on imported
goods and will unilaterally cut tariffs on goods imported from less-developed countries, Mr. Chen said, underscoring the government’s priority to shift the economy away from its dependence on exports and industry and toward greater domestic consumption. In particular, China wants to expand imports from the U.S. and views rebalancing bilateral trade with the world’s largest economy as the key to resolving its overall trade surplus, Mr. Chen said. China’s trade surplus narrowed for the second consecutive year to $183 billion in 2010, according to government figures. However, the country’s surplus with the U.S. for the year expanded by 26%, to $181.27 billion, which has led to calls from U.S. officials for China to allow faster appreciation of the yuan against the dollar. Mr. Chen reiterated China’s standard line that reform of the yuan exchange rate will be gradual and controlled. He expressed skepticism of an argument that a rising yuan can help offset inflation pressure. Currency appreciation can help curb inflation in theory, he said, but added that based on his own experience and observations, “in fact, the effect of the exchange rate on inflation can be positive or negative. So we can’t look at this too simply. It depends for example on the structure of imports.” In wide-ranging comments, Mr. Chen also defended China’s stance on limiting exports of rare-earth
Greek credit rating slashed by Moody’s BY NATASHA BRERETON AND ALKMAN GRANITSAS SINGAPORE—Moody’s Investors Service Inc. lowered Greece’s credit rating by three notches Monday and signaled it could cut the rating even further, dragging the country’s debt deeper into junk-grade territory. The ratings agency downgraded Greece to B1 from Ba1, and kept its outlook negative. Standard & Poor’s and Fitch Ratings both rate the country slightly higher at double-Bplus, with a negative outlook. Moody’s acknowledged progress that Greece has made in fiscal consolidation and structural reforms but warned that the changes needed to stabilize Greece’s debts remain “very ambitious” and face “significant implementation risks.” It also cited a risk that Greece would be unable to satisfy the conditions required for continued support from official sources after 2013, which could lead to a restructuring of existing debt. “Moreover, the risk of a post-2013 restructuring might lead the Greek authorities and investors to participate in a voluntary distressed exchange before that time,” the ratings agency cautioned. The country additionally faces significant difficulties with revenue collection, it said. “The negative outlook on the B1 rating reflects Moody’s view that the country’s very large debt burden and the significant implementation risks in its structural-reform package both skew risks to the downside.” Greece’s Finance Ministry lashed
out at Moody’s, calling its decision to cut the country’s rating “completely unjustified.” “The rating downgrade announced by Moody’s today is completely unjustified as it does not reflect an objective and balanced assessment of the conditions Greece is presently facing,” the ministry said, calling for better regulation on the way international ratings agencies operate. “Furthermore, its timing and the multinotch nature of the downgrade are incomprehensible and raise a number of questions.” Greek financial markets were closed Monday because of a national holiday. European Union leaders are due to meet at the end of March to decide on a future permanent bailout mechanism for the euro zone, to replace a temporary fund that was cobbled together last year after Greece’s debt crisis threatened the stability of the euro zone. In May 2010, Greece narrowly avoided default with the help of a €110 billion ($153.85 billion) bailout from the EU and the International Monetary Fund in exchange for measures to cut its deficit and liberalize its economy. In criticizing Moody’s decision, Greece said the ratings agency was both premature in its assessment and failed to take into account fresh data on the country’s public finances. “The arguments made can in no way be justified by the additional information available since Moody’s last downgrade in June 2010 and the progress achieved since,” the Finance Ministry said.
Steady surpluses China's monthly trade balance in billions
$30 20 10 0 -10 2009
’10
’11
Sources: China's General Administration of Customs; Associated Press (photo)
China's Minister of Commerce Chen Deming speaks at a press conference in Beijing on Monday metals, arguing that their development is harmful to the environment. Mr. Chen said he hopes that other countries can share the burden of rare-earth development. China has about 30% of the world’s rare-earth reserves, but accounts for more than 90% of global rare-earth production, he said. China’s trade surplus would likely fall this year, both in absolute terms and as a percentage of gross domestic product, Mr. Chen said, as imports grow faster than exports. Several adverse conditions, including rising prices for raw materials, rising labor costs, and a still-uncertain outlook for the global economy,
cloud the outlook for China’s exports, he said. China can’t rule out the possibility that it may run a trade deficit for a few months this year, he added. China should channel more of its export earnings into international expansion by Chinese companies, Mr. Chen said, rather than funneling it all into China’s ever-growing pile of foreign-exchange reserves. Mr. Chen noted that Germany, another major export power, has much lower foreign-exchange reserves because “Germans are quite good at foreign investment.” Last month, China gave in to
pressure from its trading partners after years of resistance and agreed at a meeting of the Group of 20 industrial and developing nations to allow exchange rates to be included in a set of indicators that could be used to gauge whether countries’ economic policies are contributing to global imbalances. China’s currency rose to a record high 6.5634 yuan against the U.S. dollar late Monday. The yuan has risen 4% against the U.S. unit since June, when China effectively ended its currency’s two-year-long peg to the dollar. —Jean Yung in Shanghai contributed to this article.
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Tuesday, March 8, 2011
WORLD NEWS: ASIA
Japanese start a voter revolt TOKYO—Less than two years after voters ousted Japan’s longtime ruling party from power, a new revolt may be emerging in local election campaigns around the country that could foreshadow a further splintering of the nation’s alreadyfractious politics. A new breed of independent candidates with colorful backgrounds has emerged as contenders in local races in some of Japan’s biggest cities and prefectures. Many espouse tax cuts and a greater role for local governments—ideas that make them sound similar to the tea-party movement in the U.S., although their platforms differ significantly and most of the candidates aren’t affiliated with each other. Their catchy slogans take aim at the now-ruling Democratic Party of Japan, but they are also unwilling to align themselves with the opposition Liberal Democratic Party, which controlled the government for half a century. Their expected success in gubernatorial and local assembly elections scheduled for April 10 and April 24 could further complicate the political outlook if turmoil at the national level leads to new national parliamentary elections this year. Japan’s political scene already is split, with the surprise resignation Sunday of Japan Foreign Minister Seiji Maehara underscoring the DPJ’s inability to push measures to shake up the economy and address the nation’s debt-ridden finances. Japan Prime Minister Naoto Kan said Monday that Chief Cabinet Secretary Yukio Edano will temporarily succeed Mr. Maehara. In a poll released by Tokyo Broadcasting System on Monday, 18% of respondents said they approved of Mr. Kan’s government, while 81% said they disapproved. “The DPJ came to power with so much fanfare, but rather than making changes and improvements, they are running the country into the ground,” said Miki Watanabe, a founder of a pub chain, who is running for governor in Tokyo as an in-
Agence-France Presse/Getty Images (left) Bloomberg News
BY YUKA HAYASHI
More politicians are rejecting established parties. Nagoya Mayor Takashi Kawamura, left, seeks candidates for his new Genzei Nippon, or Tax Cut Japan, party. Businessman Miki Watanabe is an independent candidate for governor of Tokyo. dependent. “National politics are now descending into chaos. I am running to save Tokyo, to keep it from sinking with the rest of the country.” In Nagoya, an industrial hub in central Japan, an independent candidate touting a flat 10% cut in city income taxes scored a landslide victory in a February mayoral election. Mayor Takashi Kawamura is now scouring the nation to recruit local candidates for his new party, Genzei Nippon, or Tax Cut Japan. “It is a lie that the economy is treating everyone badly,” Mr. Kawamura said. “Taxpayers are trudging through hell, but people who live on taxpayers’ money are living in heaven.” To help pay for it, the 62-yearold politician wants to halve the annual pay for local assembly members from the current 16 million yen, or about $194,000. Despite declines in population and wealth in many Japanese communities, local assemblies remain large and their members well-paid. Still, many in Japan believe Mr. Kawamura’s popularity derives from
his flamboyant personality rather than growing support for small government. In a country where social benefits such as universal health care and subsidized child care are taken for granted, political debates are more about maintaining and expanding expensive programs, even in the face of big national and local deficits. To maintain those perks, polls show, a majority of Japanese are resigned to the idea of tax increases. “Rather than being carried away by tax cuts, he should focus on paying down municipal debts,” Japanese fiscal-policy minister Kaoru Yosano, a DPJ member, said recently. Nagoya’s outstanding municipal debt totals 1.8 trillion yen, or about $22 billion. In Osaka, a regional party led by its popular 41-year-old governor, Toru Hashimoto, is aiming to sweep the race for local assembly seats. His platform: Osaka Capital Vision, a plan to gain more independence for Japan’s No. 3 city by population so it can reinvigorate its economy and play catch-up with Tokyo. In Tokyo, an entrepreneur and a
former comedian are among potential candidates aiming to succeed the retiring Shintaro Ishihara, a three-term governor who has suggested he wouldn’t seek re-election. Neither Mr. Kan’s DPJ nor the LDP have been able to come up with gubernatorial candidates. Another independent, Shigefumi Matsuzawa, has entered the Tokyo race after a successful stint as governor of neighboring Kanagawa prefecture. His platform centers on expanding autonomy for the metropolitan region, which has remained economically healthy. Other potential candidates for Tokyo governor include Hideo Higashikokubaru, a former comedian who succeeded as governor of remote Miyazaki prefecture, playing salesman to its local products. Renho, the DPJ’s administrative reform minister who goes by one name, has also been mentioned, but the current crisis probably would make it difficult for Mr. Kan to part with the high-profile female member of his cabinet. —Miho Inada contributed to this article.
North Korea pressures defectors BY EVAN RAMSTAD AND JAEYEON WOO SEOUL—North Korea raised the pressure Monday on four North Koreans who defected to South Korea, saying it wants the four to face their relatives at a meeting of the two Koreas later this week. South Korean officials said they agreed to meet North Korea on Wednesday to discuss the issue, but added they won’t bring the four North Koreans to the meeting or force them to leave the South against their will. North Korea has sharply criticized South Korea for allowing the defection of the four people, who were part of a group of 31 that drifted on a fishing boat to a South Korean island on Feb. 4. The 27 others want to return to North Korea, and South Korea attempted last week to deliver them at a border crossing, but North Korean officials didn’t turn up to take them. With its criticism over these four people, North Korea, which typically says little about defections, has cast
a spotlight on the limits to its citizens’ freedom of movement. By saying it would bring their relatives to Wednesday’s meeting, North Korea is trying to put pressure on the four, who include the captain of the wayward vessel. Pyongyang severely punishes the families of defectors, often sending them for years to labor camps considered some of the worst prisons on earth. Many defectors hide their identities once they leave the country, seeking to protect relatives left behind. North Korea said it wants the four defectors to confirm in front of their relatives their intention to stay. Human-rights activists called the demand cruel, saying the defectors are likely already wrestling with the consequences their choice will have on their families. “It’s such an inhumane act,” said Kim Sung-min of Free North Korea Radio, a defector-operated radio station in the South. “Whatever pressure they feel, the four people would not dare to go back, because there is no question that they will
be executed. The family members are now branded as traitors and could face the same fate.” In a statement on Monday, North Korea made clear it already has investigated the four people and identified their relatives and colleagues.
North Korea made clear it has investigated the four people and identified their relatives and colleagues. “As for those four persons whom the south Korean authorities claim expressed their intention to ‘defect’ to the south, they have no ground whatsoever to do so in light of their socio-political circumstances and family background,” North Korea’s statement said. “Their families, relatives and colleagues absolutely vouch for them.” North Korea accused South Korea of forcing the four to stay and blamed the U.S., which leads the
United Nations Command that confirms the repatriation desires of North Koreans who wind up in the South, for conspiring with the South to keep them. When the group first arrived, South Korea said the 31 didn’t appear to be trying to defect and that the boat apparently lost power in foggy weather. Even so, suspicions about the group have been high from the start. The boat was small to hold so many people and the number of young women aboard suggested it wasn’t a fishing crew. South Korea says the four people asked to stay during individual interviews conducted last week as arrangements were being made for the transfer back to the North. Since word of the four defections was announced Thursday, North Korea has refused to discuss the other 27 on the boat who want to return. South Korea authorities took the group to the border on Friday and waited for more than eight hours for the officials from the North to meet them.
Bo Xilai: China’s red star rising Chinese leaders don’t often warrant comparisons to rock stars, but amid the turgid proceedings of an annual parliament session over the weekend, there was one who came close: Bo Xilai, the jovial and outspoken Communist Party chief of Chongqing city. While most of his peers stuck to a predictably dry script, Mr. Bo—a favorite for promotion to the Party’s Politburo Standing Committee, China’s highest decision-making body, next year— kept reporters entertained for over three hours with another display of his populist rhetorical skills at a press conference Sunday. The former Commerce Minister bemoaned the younger generation’s obsession with the Internet and other forms of entertainment, and suggested many would benefit from being sent temporarily to factories or farms, as millions of teenagers were in China during the 1966-76 Cultural Revolution. “A country’s future lies with its youth, but it’s hard to say what they have in their brains today,” he said.
He also waxed lyrical on the question of what made people “happy”—a central theme for the government this year—arguing that they needed a sense of community and confidence in the future as well as material gains. “You kids are too young to know this, but older people like us understand that in the 1950s, for example, although China was very poor and backward, the vast majority of Chinese people had a sense of happiness,” he said. Mr. Bo, 61 years old, put on a similar show at last year’s parliamentary session in what political analysts see as an unusually overt bid to win a more powerful position within the party and government following next year’s leadership change. He did not talk about his “princeling” background—he is the son of Bo Yibo, a revolutionary leader who rose to a high party position. But he did take a question about whether his son, Bo Guagua, was in love. Photographs were posted on the Internet last month that appeared to show the younger Mr. Bo with the granddaughter of another late revolutionary leader, Chen Yun. Chuckling at the question, Mr. Bo replied somewhat enigmatically: “I think the business of the third generation—aren’t we talking about democracy now?” —Jeremy Page Keep up on China minute by minute with The Wall Street Journal’s China Real Time Report at blogs.wsj.com/chinarealtime
Tuesday, March 8, 2011
THE WALL STREET JOURNAL.
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WORLD NEWS: ASIA
BY PAUL MOZUR TAIPEI—A general at the center of Taiwan’s worst spy case in 50 years is suspected of leaking sensitive details to China about an electronic defense system being sold to the island by U.S. contractor Lockheed Martin Corp., according to a senior member of Taiwan’s parliamentary national defense committee. Maj. Gen. Lo Hsien-che was arrested in late January for allegedly leaking military secrets to China, highlighting a “smokeless” intelligence war across the Taiwan Strait that defense analysts say is deepening, despite flourishing economic ties over the past several years. He couldn’t be reached for comment. Analysts say that a surge in trade and travel between the two has made it much easier for the former Cold War rivals to spy on each other. This has created a dilemma for Taiwan’s Kuomintang government, which needs the economic boost from growing business links with China but is also deeply concerned about security. China is determined to unify Taiwan with the
Chinese mainland—and has never renounced the use of force to achieve this. The island is heavily dependent on U.S. arms sales for its defense, and the spy case has sparked concern in Taiwan about the willingness of the U.S. to continue selling advanced weapons systems given the risk that their secrets could fall into Chinese hands. The lawmaker, Lin Yu-fang, a member of the ruling Kuomintang, said Gen. Lo is suspected of handing over details about Taiwan’s Po Sheng—or Broad Victory—program, a system to integrate ground, naval and air forces with command centers that is being sold to Taiwan by Lockheed Martin. A Lockheed Martin spokesman said the company had no additional information. The 51-year-old general was recruited by a Chinese agent while he worked as a military attaché in Thailand in 2004 according to Taiwan’s Ministry of National Defense. Mr. Lin said the government has worked fast to respond to the most recent flare-up in the intelligence war, instituting new measures to polygraph test every Ministry of Na-
Reuters
Lockheed system target in Taiwan spy case
Maj. Gen. Lo Hsien-che in 2007. tional Defense official after they return from trips abroad. He said because Gen. Lo wasn’t an engineer, and was unable to gain access to critical software and hardware components of the Po Sheng program, preliminary assessments are that damage from the case is limited. Wendell Minnick, the Asia bureau chief of Defense News, an independent defense trade periodical, said he believed that Gen. Lo could have caused damage in other ways because he had access to sensitive
China Economic Development Forum 中國經濟發展論壇
Prof. Justin Yifu Lin Senior Vice President and Chief Economist, The World Bank HKUST Business School Former Professor
Prof. David Daokui Li Director of the Center for China in the World Economy, Tsinghua University HKUST Business School Former Professor
Prof. Yi Gang Deputy Governor, The People’s Bank of China; Administrator, State Administration of Foreign Exchange HKUST Business School Adjunct Professor
Prof.K.C.Chan, SBS, JP Secretary for Financial Services and theTreasury, HKSAR Government HKUST Business School Former Dean
international military cables while working as an attaché. He may also have worked as a “talent spotter” recruiting other officers to spy for China, Mr. Minnick said. China has long sought details of the Po Sheng program. The technology featured prominently in a 2008 case in which an employee at a U.S. Department of Defense agency, Gregg Bergersen, gave out secret information about the program to a naturalized U.S. citizen from Taiwan named Kuo Tai-shen with the understanding the leaks would lead to business opportunities for Mr. Bergersen. But Mr. Kuo sent the information to a Chinese official in Guangzhou, according to an affidavit relating to the case. He was sentenced to more than 15 years in prison while Mr. Bergersen received a 57-month sentence and three years supervised release. The Chinese focus on the Po Sheng program shows its intense interest and progress in developing the capability to disrupt Taiwanese communications ahead of an attack, according to Mr. Minnick. He added the arrest itself was also an impressive achievement for Taiwan’s coun-
terintelligence. A spokeswoman for the American Institute of Taiwan, the de facto U.S. embassy in Taiwan, said it was working with Taiwanese authorities on the case. Taiwan’s Defense Ministry said an investigation into the case is ongoing and no more details are available at this time. China’s Taiwan Affairs Office was unavailable for comment. Although it remains to be seen what impact Gen. Lo’s case will have on a new round of U.S. arms sales, Taiwan’s penetration by China has already affected what types of arms the U.S. is willing to sell to Taiwan, according to former deputy defense minister Chong Pin Lin. U.S. Defense Department spokeswoman, Cmdr. Leslie Hull-Ryde, declined to comment directly on whether the episode had jeopardized U.S. arms sales to the island, saying it would be inappropriate since an investigation is ongoing. Military analysts say Taiwan’s recent opening to China has given mainland spies new opportunities. “This will continue to happen, we have to be very careful,” says Mr. Lin, the KMT legislator.
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THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
WORLD NEWS: U.S.
Fed is unlikely to pull aid yet BY JON HILSENRATH Federal Reserve officials have grown more confident that a selfsustaining economic recovery is taking root in the U.S., but they want to see more evidence before they seriously consider how and when to pull back the enormous amounts of stimulus they pumped into the financial system. So when officials gather for their next policy meeting March 15, they are likely to decide to continue a $600 billion Treasury securities purchasing program. They are also likely to maintain a commitment to keep short-term interest rates near zero for an “extended period.” Barring a surprising turn in the economy or inflation, it seems increasingly likely that the securities purchase program, known by some as quantitative easing, is likely to end in June as scheduled. Discussion inside the central bank’s Federal Open Market Committee might then turn toward how and when to tighten policy, either by raising short-term interest rates or reducing its securities holdings, but it could be months before it acts. Top Fed officials believe the securities purchase program has been effective and has helped improve the economy’s performance in recent months. Some want to see how the economy performs later in the year without it. The recovery, in this view, might be likened to a child riding a bicycle with training wheels. How will it perform when the added support comes off? Trading in the federal-funds futures market, where investors make bets on when the Fed will raise or lower interest rates, suggests they expect the central bank to start raising short-term interest rates in early 2012. The federal-funds rate, an overnight lending rate between banks which the Fed controls, is now close to zero.
In testimony to Congress last week, Fed Chairman Ben Bernanke laid out three criteria that would dictate his decision on tightening monetary policy: He wants to be sure that a sustainable recovery is at hand, that employment is clearly improving and that inflation is moving toward the Fed’s long-term objective of 2%. The U.S. employment report released Friday was the latest piece of evidence that the economy is making progress on these fronts. In the past three months, private payroll employment has increased on average by 152,000 per month, the best performance since early 2007. The unemployment rate, at 8.9%, is already at the low end of the Fed’s projection for 2011. “We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” Mr. Bernanke said in his testimony. The hawks on the Fed’s policymaking committee who tend to worry about inflation and be less supportive of easy-money policies, aren’t yet pushing very hard for a change of course either, another reason why policy is likely to remain steady for now. In 2008, when commodities prices started soaring, presidents of some regional Fed banks urged the Fed to start tightening. This time, as oil prices surge again, they have been relatively quiet. “I think that’s quite likely, that this ends up being a passing event,” Richmond Fed President and inflation hawk Jeffrey Lacker said of the rise in oil prices, in an interview last week. Another counterweight to inflation that has drawn the Fed’s attention is the strong growth in labor productivity—or output per hour worked—in recent quarters. These gains are holding down labor costs, which are a much bigger factor in inflation than commodity costs.
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Food-price worries grow [ The Outlook ]
Food plight
BY SCOTT KILMAN
Demand for several crops is outpacing harvests, pushing up prices for agricultural commodities.
The world is consuming grains faster than farmers are growing them, draining reserves and pushing prices to the levels that fueled food riots in poor countries three years ago. The U.S.’s role in keeping a global food shortage at bay hinges in large measure on harvests over the next several months as farmers in the U.S., the world’s biggest agricultural exporter, coax wheat, soybeans and other crops from their fields. That outlook is likely to be reinforced Thursday when the U.S. Agriculture Department releases its monthly update on world agricultural markets. Economists expect world wheat production to recover this year as drought conditions ease in the Black Sea, which would reduce U.S. wheat exports and cause prices to moderate. While economists expect grain prices to ease somewhat if world harvests climb this year, prices would still be expected to remain high for years. What’s more, anything less than big crops could cause wild price swings. “The stage is set for very serious disruptions, should weather disasters happen,” said Keith Collins, the former chief economist of the U.S. Department of Agriculture. “It seems clear to me that the chance of a more widespread global food crisis has increased.” With emerging-market economies surging, food prices are soaring along with global demand. Today, wheat prices are up 80% from a year ago. High food prices were among the triggers of street protests that recently swept North Africa, where wheat dominates the region’s diet. Egypt is the world’s biggest importer of the grain. Governments across Asia are using subsidies and price controls to shield their consumers from inflation. In the U.S., retail food prices are expected to climb about 4% this year, far faster than in 2010, when the government’s consumerprice index for food rose 0.8%, the slowest rate since 1962. Higher food prices are setting in just as consumers are paying more at the pump. Surging energy prices unleashed by unrest in the Arab world also could add to foodproduction costs. Chief executives of supermarkets and other food businesses such as restaurants are reluctant to pass along all their rising costs as long as the U.S. unemployment rate, now 8.9%, remains high. That could change if the economy improves. Evidence of what could lie ahead abounds in the U.S.’s farm belt. Commodity prices are climbing, partly because foodimporting nations have few other places to shop. The U.S. controls 55% of the world trade in corn, as well as 44% of the soybean trade, 41% of the trade in cotton and 28% in wheat. The USDA’s February farmproducts price index, covering 48 commodities, was 24% higher than in February 2010. That increase
Food Price Index
World grain consumption
300
2.50 billion metric tons
225
2.25
150
2.00
75
1.75
0
1.50
2000
'05
'10
Consumption
Production
2000
’05
’10
Note: The Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. Sources: U.N. FAO (prices); USDA (grain)
translates into a windfall for U.S. grain farmers but pain for cattle feedlot owners, who fatten their livestock with grain. China is gobbling up nearly a quarter of the U.S. soybean crop to fatten hogs and chickens craved by its middle class. The country’s textile mills are buying nearly a third of America’s cotton exports. Due to rising gasoline prices, as well as federal mandates, about 40% of corn—America’s biggest crop—is being brewed into ethanol. By the time the fall harvest begins, the Agriculture Department expects the U.S. to have enough corn left to satisfy the country’s appetite for 18 days. The country marked a supply this tight just once since the 1930s Dust Bowl era. Farmers have long responded to high prices by planting more land and then producing pricedepressing gluts. But this cycle appears to be breaking down, which means high food prices could stick much longer than in the past. Farmers are still producing bigger crops. The USDA is predicting U.S. farmers will increase the area planted with the nation’s eight biggest crops this year by 9.8 million acres, or 4%, the biggest change in 15 years. The department expects corn farmers to harvest a record 13.73 billion bushels this fall. But demand for corn is so strong that this 10% increase in the harvest would lengthen the country’s reserves by merely five days. As a result, the USDA expects the price of this year’s yet-to-be-planted corn crop to average a record $5.60 a bushel. Global coffee production was at a record last year, but prices are rising because reserves are stretched thin. Sugar prices are the highest in nearly 31 years despite a record-large crop last year. The potential for civil war in cocoa-exporting giant Ivory Coast has lifted prices to the highest level in 32 years despite record production last year. Due to weather problems last year in major wheat-producing nations such as Canada and Russia, world wheat production dropped 5.5%, but output was the third biggest ever. “Demand strength has increased to the point that good years are not filling bins to compensate for bad years,” said Keith Flury, a senior commodity analyst at Rabobank, London.
A solution is for farmers to ramp up production even faster than they have been. But that is hard to do in farming powers such as the U.S., where prices for cropland are soaring and the best land is already taken. Much of the foreign land that could be brought under plow is located in regions where the weather is volatile, such as the Black Sea wheat belt. “The era of [crop] surpluses is over,” said Dan Glickman, who was agriculture secretary during the Clinton administration, and is now a senior fellow at the Bipartisan Policy Center, a Washington think tank. Many economists worry about what would happen to food prices if a long-overdue drought were to hit the Midwest’s corn and soybean-growing states this summer. Most meteorologists aren’t forecasting one for the Midwest, but are watching dry weather in the Southern Plains with concern. The 1988 drought slashed the size of the U.S. corn crop by 31%. The food system absorbed that shock because the U.S. had seven months of corn in reserve when farmers harvested their shriveled fields. With this year’s puny crop reserves, such a drought could cause the per-bushel prices of corn and soybeans to roughly double to $12 and $27, respectively, from current skyhigh levels, says Dan Basse, president of AgResource Co., a Chicago commodity-forecasting concern. Economists say the political pressure to strip the ethanol industry of federal support could build if U.S. food prices soared and the high cost of feeding livestock crippled the production of milk, pork, beef and chicken. Overseas, the numbers of malnourished people would climb even as the buying power of U.S. funds to feed the hungry around the world—an amount estimated at $2.1 billion in fiscal 2010—weakened. Drought is on the minds of many U.S. analysts because dry weather is already shrinking the potential of the winter wheat crop on the Southern Plains, which is planted in the fall and harvested in early summer. Meteorologists see a good chance for unusually dry weather to persist across much of the southern U.S. this spring. In Texas, a major wheatgrowing state, 56% of the crop is rated in poor to very-poor condition by the USDA.
Tuesday, March 8, 2011
THE WALL STREET JOURNAL.
NASDAQ congratulates Starbucks on 40 awe-inspiring years. The dream began in 1971 with a small store in Seattle’s Pike Place Market serving only the finest coffee. Then, in 1983, the espresso bars of Milan fueled the imagination of Howard Schultz. He wondered if Starbucks could bring a coffeehouse culture to the States and beyond. Today, with over 16,000 locations in 50 countries, Starbucks is the world’s favorite gathering place, where connections are formed, the human spirit is nurtured, and life is improved, daily. And the coffee? Best on the planet. In the coming weeks, this incredible company will once again blend innovation and action, with new menu items and new ways for people everywhere to connect. That’s the thing about game-changers like Howard Schultz and everyone at Starbucks. They’re never done dreaming. Or doing.
NASDAQ. Dream it. Do it.
SM
Neither The NASDAQ OMX Group, Inc. nor any of its affiliates (collectively “NASDAQ OMX”) makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Investors should undertake their own due diligence and carefully evaluate companies before investing. ©2011. The NASDAQ OMX Group, Inc. All Rights Reserved.
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8
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
WORLD NEWS
Gates makes surprise Afghan visit KABUL, Afghanistan—U.S. Secretary of Defense Robert Gates arrived Monday on a surprise visit to Afghanistan to meet with U.S. troops and Afghan leaders, as the Obama administration looks for signs that its strategy there is starting to pay security dividends. In a meeting with troops at Bagram Airfield, a large U.S. base north of Kabul, Mr. Gates said U.S. forces needed to be prepared for difficult days ahead as Afghanistan’s traditional fighting season resumes in the spring. “You’ve had a tough winter, it’s going to be a tougher spring and summer, but you’ve made a lot of headway,” he said. Mr. Gates’s visit to Afghanistan comes amid continued friction between U.S. forces and the Afghan government over civilian casualties from coalition operations. Most recently, nine teenage boys were mistakenly killed in a coalition attack in eastern Kunar province. In a news conference Monday evening in Kabul, Mr. Gates took the unusual step of making a personal apology to Afghan President Hamid Karzai over the incident. “This breaks our heart,” he said. “Not only is their loss a tragedy for their families, it is a setback for our relationship with the Afghan people.” Mr. Karzai, who a day earlier rejected a similar overture from U.S. Gen. David Petraeus, thanked Mr.
Associated Press
BY NATHAN HODGE
Lt. Gen. John Campbell, left, greets U.S. Defense Secretary Robert Gates at Bagram Airfield on Monday. Gates, and added, “I trust him fully when he says he’s sorry.” But Mr. Karzai said the issue of civilian casualties was “at the heart of some of the tensions in an otherwise very healthy relationship between the two countries.”
The Obama administration launched a surge of forces in Afghanistan in December 2009 with the aim of bolstering the country’s precarious security, particularly in the east and south. Operations are also focused on expanding the secu-
rity zone around the capital, Kabul, which has seen a number of insurgent attacks. Mr. Gates said troops in eastern Afghanistan were “expanding the Kabul security bubble.” Pentagon spokesman Geoff Morrell told reporters accompanying the
defense secretary that the visit—Mr. Gates’s 13th trip to the country as defense secretary—wasn’t tied directly to any key decision points for U.S. policy, but added that it would inform decisions about the pace and scope of a gradual U.S. troop drawdown that is slated to begin in midsummer. “These frequent and regular visits provide him a good measuring stick to gauge how quickly progress is being made,” he said. The U.S. military has bolstered its uniformed presence here to roughly 100,000, a commitment that is projected to cost more than $100 billion in fiscal 2011. Maj. Gen. John Campbell, the commander of forces in Regional Command East, said his forces were focused on “expanding [the] security zone in the highways leading into the capital” ahead of the spring fighting. He said a recent increase in the number of improvised explosive device, or IED, attacks, suggested fighting was off to an earlier start. “In the last two weeks, the number of IEDs, the number of attacks has risen,” he said. “I think that the enemy is trying to get an early start of what they call their spring campaign.” In his visit to Bagram, Mr. Gates took questions from troops about the future of the U.S. presence in Afghanistan, and said Washington and Kabul had recently begun negotiations about a long-term security agreement.
U.K. government backs the prince BY AINSLEY THOMSON LONDON—U.K. Prime Minister David Cameron and a group of leading businessmen Monday rallied around Prince Andrew following intense media scrutiny of the prince’s suitability to carry out the role of the U.K.’s special trade envoy. Downing Street moved to quash speculation that Prince Andrew will have to resign from the role, saying that the prime minister “fully supports” the prince. Mr. Cameron’s support follows publicity of Prince Andrew’s friendship with U.S. businessman Jeffrey Epstein, who served a prison sentence for soliciting an underage girl for prostitution. Questions also have been asked about the appropriateness of the prince’s links with Saif el-Islam Gadhafi, son of Libyan leader Col. Moammar Gadhafi, and with Sakher el-Materi, the son-in-law of the ousted Tunisian President Zine alAbidine Ben Ali. A spokeswoman for Prince Andrew said earlier Monday he remains fully committed to his role as special trade envoy. U.K. Trade and Investment, Britain’s business-promotion agency, Monday released comments from 17 business leaders—including Malcolm Brinded, managing director of Royal Dutch Shell PLC; Peter Levene, chairman of Lloyd’s of London; and John Rose, chief executive of RollsRoyce Group PLC—endorsing Prince Andrew’s work as trade envoy. The pledge of support from the
prime minister’s offices contradicts earlier media reports suggesting the government was looking to distance itself from Prince Andrew by downgrading his role. Downing Street said there will be no review of Prince Andrew’s role, which he has held since 2001 and involves him promoting U.K. trade and investment overseas. Earlier Monday, Business Secretary Vince Cable noted Prince Andrew’s role as special trade envoy was voluntary. “He is not a government appointee, he is not someone
U.K. Trade and Investment released comments from 17 business leaders endorsing Prince Andrew’s work. who is appointed and sacked,” Mr. Cable said in an interview on BBC Radio. “I think it is down to him, essentially, to judge the position he wants to be in.” Mr. Cable, who is also president of the Board of Trade, said he hasn’t spoken to Prince Andrew about the matter, but said: “Obviously, there are conversations that will take place with him about what he is to do in the future.” Labour Party lawmaker Chris Bryant has been one of the most vocal critics of Prince Andrew’s relationship with Mr. Epstein and of some of his conduct while carrying out the role of trade envoy.
A Chinese opera house ZAHA HADID’S VISION FOR GUANGZHOU 10
TUESDAY, MARCH 8, 2011
LIFE & STYLE
asia.WSJ.com
The brains behind the meat dress Backstage with Nicola Formichetti, Lady Gaga collaborator and creative director for Thierry Mugler Nicola Formichetti was in Amsterdam a couple of months ago when his close friend and collaborator Lady Gaga, who was mulling the concept of rebirth, sent him a text message containing a picture of a human embryo. The picture led Mr. Formichetti’s mind to footwear. For the Grammy Awards, where Lady Gaga was to sing her new single “Born This Way,” Mr. Formichetti suggested creating “egg [shaped] shoes—like you were born that way, with eggs as feet.” Lady Gaga wanted to take the egg notion further, a thought that resulted in the most dramatic moment of the night, when the pop star was carried down the red carpet in an egg-shaped structure. “One thing leads to another,” said Mr. Formichetti. “It starts small and then explodes.” Mr. Formichetti, the 33-year-old stylist and new creative director for the French fashion house Thierry Mugler, communicates in images. His computer contains a trove of unusual photographs, cartoons and abstract art, arranged in no particular order. He periodically culls through them for certain themes and mixes them up to see if the reconfiguration sparks something new. Sometimes, an individual picture “doesn’t mean anything when you look at it alone,” he said. “But when you put it next to something”—like looking at the embryo image next to shoes—“it can become an idea.” To convey his inspiration for his debut fall 2011 women’s collection, unveiled last Wednesday evening in a Paris runway show starring and featuring music by Lady Gaga, Mr. Formichetti emailed a series of photos to collaborators, like hairstylist Sam McKnight. The audience cheered as Lady Gaga made her entrance, smoking a cigarette and dancing down the runway in tall platforms. Models wore body-hugging ensembles, some made of unusual materials like neoprene. After the show, Lady Gaga placed an order for the entire collection. Less than a week before the show, all Mr. McKnight had been told was that the look Mr. Formichetti was going for was “tribal and alien.” Mr. McKnight, who styled Lady Gaga’s hair to match her red-meat dress dreamed up by Mr. Formichetti for the MTV Video Music Awards, said he’s learned to “always be prepared for anything.” Mr. Formichetti said he used to keep his ideas in sketchpads, but the iPhone has changed the way he organizes and shares information. He constantly communicates with his 40,000-plus followers on Twitter, recently posting a photo of a metallic sculpture of an alien-like woman. “When I was younger, I always wished I could send messages to people, like Thierry Mugler, and say, ‘Oh, how fabulous you are!’ ” Like Mr. Mugler, Mr. Formichetti has no formal design training. The son of an Italian pilot and a Japanese stewardess, he grew up aware of his surroundings, he said, as he tried to assimilate into both countries. He later got into architecture school but quit and partied for four years, becoming an avid student of London nightlife and street wear. While he worked at a boutique, his unique style caught the eye of fashion editor Katy England, who offered him a job editing a page in the niche magazine Dazed & Confused. These days, Mr. Formichetti shuttles among his homes in New York, London and
Derek Hudson for The Wall Street Journal; Getty Images (below)
BY RACHEL DODES
Paris, in addition to monthly visits to Japan to see family and work for the Uniqlo brand and Vogue Hommes Japan. To quiet his mind, Mr. Formichetti learned to meditate. If he hits a logjam, Mr. Formichetti Googles random words, surfs his network on Tumblr (which he describes as a “Facebook for images”) and visits blogs of people he follows. In early January he found a picture of Rick Genest, a man completely covered in tattoos depicting skeletal and muscle structure. Mr. Formichetti said Mr. Genest embodied the spirit of “transformation” that he wanted to convey with his Mugler’s men’s collection. “I was like, ‘Oh, my God, he’s the one. This is the one I’ve been looking for.’ ” For his Mugler men’s collection presentation in January, Mr. Formichetti was initially planning something small with five models. But Mr. Genest inspired him to do something grand. He cut a high-concept video of Mr. Genest and used it as a backdrop for the show, live-streamed over the Internet with an original score by Lady Gaga. Since then, Mr. Genest has walked the runway for the fall 2011 women's collection and can be seen dancing with Lady Gaga in her “Born This Way” video. “Isn’t that amazing?” Mr. Formichetti says, pulling up a photo of Mr. Genest on his computer. “Insane.”
Snapshots Fashion designer Nicola Formichetti trained as a classical pianist as a child and said that playing piano helps calm him down. He’s planning on renting a piano —with a socket for headphones so that his playing doesn’t disturb his neighbors in New York. Mr. Formichetti said that he has always drawn inspiration from unusual-looking people. He found two of his assistants via Facebook, attracted to their unique style. Mr. Formichetti joined Tumblr last month. On his page, he has been sharing things he finds compelling—like a recent alternating flash of Elmo and Cookie Monster—and often will track who reblogged his pictures and check out their sites for inspiration. He also keeps a private Tumblr account, so that he can assemble his ideas without ruining the element of surprise when his vision is revealed to the public. Top, designer Nicola Formichetti in Paris last week, preparing for his first women’s ready-towear show as creative director for the house of Mugler; Lady Gaga walking the runway during the show, above. Her platform shoes made the petite pop star as tall as the models.
Mr. Formichetti says going to clubs with friends helps him stay balanced and focused. “I work really hard and take it seriously, and I party really hard and take it seriously,” he said.
10
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
LIFE STYLE
A global Chinese opera house An architect’s first permanent building in China makes a dramatic addition to Guangzhou's skyline
Zaha Hadid first visited China three decades ago, and has traveled there regularly since. With the opening of the Guangzhou Opera House last month, the Pritzker Prize-winning architect finally has a permanent building in China too. Nearly eight years in the making, the 1,800-seat venue dominates the riverfront of the prime Zhujiang New Town business district and makes a dramatic statement about the city’s continuing evolution. “It is a very rewarding experience to see the realized design and I am grateful to the city of Guangzhou,” she says “There are very few places in the world today where architects can find such forward-looking, enthusiastic clients with such passion for innovation.” The 70,000-square-meter complex of steel, glass and concrete was built using both cutting-edge and near-obsolete construction methods. A pair of asymmetric buildings—the main structures of the opera house—contain a metal skeleton that requires 59 unique, custom-cast steel joints. According to Ms. Hadid's firm, the Shanghai foundry that made them borrowed techniques perfected in medieval Europe to produce church bells. Then, since precision was critical to ensuring that the irregularly shaped shell was structurally sound, engineers assembled the components using lasers and GPS positioning. One of the challenges was to build a performance hall that works for both Italian and Chinese opera, which have radically different acoustic requirements. “With Western opera the focus is on natural acoustics, whereas in Chinese opera, the drama and story have priority and audio equipment is used in almost every occasion,” says Simon Yu, an architect with Ms. Hadid's office. Marshall Day, an acoustics firm, was brought in to help find solu-
Zaha Hadid Architects (2)
BY ALEXANDRA A. SENO
tions. These included using specially treated gypsum panels near the stage to control volume in the asymmetric room. “For Western productions, the space is designed to ensure perfectly balanced acoustics with concealed lighting and audio equipment that can be revealed as needed,” says Mr. Yu. The exterior of the opera house is inspired by the idea of two rocks in a stream, “a poetic analogy,” says Ms. Hadid, who as a young architect in 1981 visited traditional gardens in China. The approach resulted in spaces that smoothly flow into others. Ramps and gradually cascading stairs give access to the main entrances and the outdoors. Inside, visitors go from one area to the next surrounded by the kind of clean, fluid lines and textures that have become Ms. Hadid's signature. In the grand entrance hall, windows composed of triangular pieces of glass let in sunlight by day and the neighborhood’s neon-lit skyscrapers and towers by night.
Top, Guangzhou's new opera house, designed by Zaha Hadid, above, will host both Western and Chinese opera. The opera house—which had a soft opening in May for last year’s National Arts Festival—has become a landmark, a favorite backdrop for wedding photos and souvenir snaps. After executing a number of designs for China that have never been built—a yacht club and a housing estate among them—Ms. Hadid is now working on a performing arts space in Chengdu and three projects in Beijing and Shanghai for SOHO
China, the private real-estate developer known for its high-end apartment buildings. While calling China’s development “breathtaking,” Ms. Hadid says, “As a country known for its speed of development and expansion, China differs in its prerequisites to possess major public projects in the shortest time possible. The constraints for design are certainly not as limiting, though there’s a significant restriction for time.” Managers of the opera house began to use the facility last summer, though it wasn’t complete. Some problems remain, including flaws on the outside walls and leaks in the ceiling; the latter was fixed temporarily with a pipe that’s oddly visible in the main hall. On this, a spokesman of Ms. Hadid's firm could only say: “We’ve been working with the clients on a few details and understand they will be addressed in due course.” (In China, architects have limited authority over construction.)
But on the night last month when the architect arrived to open her opera house, these cosmetic details seemed trivial. Nearly 2,000 assembled for a performance by Akram Khan, a British-born Bengali contemporary-dance sensation. Overseas guests had paid for their own tickets to fly in from the Middle East, Europe and around Asia. Sipping champagne in the foyer, they mingled with property tycoons from China and Korea waiting to see Ms. Hadid. When she walked in, the room seemed to explode with camera flashes from the 10-person deep crowd that thronged her. It took 10 minutes for her to walk a meter. Muttered one attendee: “That’s how an architect should be treated.”
WSJ.com ONLINE TODAY: Food, wine, fashion, design, travel, culture and the arts in Asia. It’s all at blogs.WSJ.com/SCENE
OBJECT OF DESIRE
It’s art you can touch—and sit on. On Friday, Christie’s in New York will put up for auction a marble sculpture of a polar bear that doubles as a bench. That’s typical for the 66-year-old artist, Judy Kensley McKie, whose work is in Boston’s Museum of Fine Arts and the vice president’s residence in Washington. Everything she’s made over four decades, she says, “has a practical use.” The bear bench is one of six McKie works being auctioned by Christie’s that stood in the New York duplex of bond trader Morton Swinsky, who died last year. Mr. Swinsky also had a hand in producing many Broadway shows, including “Chicago,” “Hairspray” and “Billy Elliot.”
The polar-bear bench “had a life to it,” says daughter Karen Swinsky. “The room doesn’t have the same energy without it.” At the Rhode Island School of Design, Ms. McKie trained as a painter, not a sculptor. She married a fellow art student. “We were living on absolutely nothing,” she says. “We slept on pillows on the floor, because we couldn’t afford furniture. I decided I would make my husband a table as a birthday present, and that was the beginning of realizing that furniture was what I really loved doing.” Stone and wooden objects depicting animals in pre-Colombian, African and American Indian art have long fascinated Ms. McKie. The animals came into the furniture, she notes, because she wanted to bring her sculpted objects to life. Her two-dozen-odd benches and her bowls,
Christie’s
An American sculptress with animal bench strength
JUDY KENSLEY MCKIE’S bear bench is priced at $25,000-$35,000. lamps and other furniture have incorporated not only polar bears but baboons, doves, alligators and jaguars. Among other McKie works being auctioned by Christie’s are a serpent side table and a monkey bench.
At the Boston museum, visitors are invited to sit on a McKie bench with winged horses at each of its four corners. (The bench is part of the museum’s effort to display art that also serves as public seating.)
In Washington, former Vice President Walter Mondale’s wife, Joan, bought a wooden table with dogs for their residence. According to Christie’s, all 14 of Ms. McKie’s pieces to come to auction previously brought a price “significantly in excess” of their estimates, with one in 2008 bringing in $134,500. For the polar bear, made in 2004, Ms. McKie needed something white. Her previous benches had been made from wood or bronze. So she turned to marble from Carrara, Italy, the source of many of Michelangelo’s masterpieces. Christie’s estimates that the bench will bring between $25,000 and $35,000. —Stan Sesser
Tuesday, March 8, 2011
11
THE WALL STREET JOURNAL.
OPINION: REVIEW OUTLOOK
The Tokyo Campaign Finance Inquisition
J
apan’s campaign finance laws have claimed yet another talented politician. Foreign Minister Seiji Maehara resigned on Sunday after admitting that he had received a small donation from a constituent who was not a Japanese citizen. Mr. Maehara’s career may not be over, but this minor scandal comes when Prime Minister Naoto Kan is teetering, and the foreign minister was a strong candidate to succeed him. The crusade for moral purity in politics is crippling Japan’s leadership. In January, prosecutors indicted Ichiro Ozawa, Japan’s most powerful political figure, on charges of falsifying the records of his political funding entity, similar to a political action committee in the U.S. All that has been proven so far is that the entity took an illegal 21 million yen ($252,000) donation from the Nishimatsu construction company. But it doesn’t make sense that this was done knowingly. As Mr. Ozawa pointed out, the donation was only illegal because it was made through organizations created by Nishimatsu—in other words, the deception was on the giver’s side. Had he known, Mr. Ozawa could
simply have directed the money to his 1990s. So it’s telling that in 2009, proseparty, the Democratic Party of Japan, cutors decided not to pursue a case which can legally accept corporate funds. against LDP politicians for similar donaThe complex web of tions from Nishimatsu, campaign finance laws but continued to invesmay have started with tigate Mr. Ozawa. the noble intention of Complex rules reduce Then last year it “cleaning up politics.” transparency and emerged that one of the But the reality is that prosecutors who was politics costs money, protect the ruling elite. involved in the investiand money is one way gation against Mr. interest groups get a Ozawa falsified eviseat at the table. So the politicians pass dence in a bribery case against another laws that give the appearance of remov- politician. Tsunehiko Maeda was arrested ing money from politics, but actually just in September for altering data on a redirect it through new channels. In the floppy disk, and his superior is also being course of this obfuscation, transparency charged with covering it up. The data decreases while opportunities to use the was changed in order to make the facts laws for political purposes increase. of the case conform to the prosecution’s Prosecutorial discretion is especially theory of the crime—which probably concerning in Japan, where the bureau- happens more often than many would cracy has entrenched power that some- like to think in a judicial system with a times enables it to resist the will of 99.7% conviction rate. elected politicians. Mr. Ozawa is well In Japanese society the merest sugknown for wanting to tame the clout of gestion of a criminal act brings strong civil servants and reform old-style ma- censure, and an arrest is often considered chine politics (despite being a master evidence of guilt, meaning that once the practitioner himself) ever since he left judicial process is started an acquittal is the Liberal Democratic Party in the early nearly impossible. Some might argue that
convicting innocent defendants is an acceptable cost in the fight against violent crime—Japan boasts the safest cities in the world. But when it comes to politics, the system seems to be devouring itself, and taking the country down with it. The Political Funds Control Law has been continually amended over the decades, making the requirements ever more Byzantine and the penalties for breaking them ever more Draconian. It has become impossible for voters to keep track of who is giving what to whom, while politicians must live with the knowledge that they are all in violation of the law in some way, and hence could be brought down at any time. The result is that leaders who offer new ideas are rarely able to build up their own political support structure to challenge the “iron triangle” of business, bureaucrats and established politicians. If somehow they do rise to the top, they will be tripped up like Mr. Ozawa and Mr. Maehara. Campaign finance laws were supposed to be about making sure the system is not rigged in favor of the corrupt. But that is precisely what they have accomplished in Japan.
Mexico’s Longest Haul
I
t has been 17 years since the United States committed to long-haul crossborder trucking with Mexico as part of the North American Free Trade Agreement. Mexico is still waiting for the U.S. to start trucking. Now the Obama Administration says it’s ready to negotiate a pilot program to allow some Mexican longhaul trucks access to the U.S. market. With luck, the U.S. may be compliant in time for Nafta’s 20th anniversary. What appears to be progress is welcome, of course. But the Administration advised low expectations, attaching the caveat to its own press release that “this is a very positive development, but it is
not a done deal.” In other words, the usual political suspects could still drive it into a ditch. Recall how we got here. In 1995 the Teamsters got Bill Clinton to put the kibosh on opening the border to Mexican long-haul competition. Mr. Clinton alleged safety concerns. But this was still a clear violation of America’s Nafta obligations. Then in 2001 a Nafta panel gave Mexico the right to retaliate with tariffs on U.S. exports. It did not do so immediately. Hopes were raised in 2007 when the Bush Administration launched a pilot program to monitor the safety of Mexi-
can trucks, which after one year had achieved better safety records than their U.S. counterparts. Mr. Obama killed that program when he took office. That prompted Mexico in spring 2009 to impose (legal) retaliatory tariffs on $2.4 billion of U.S. exports. American business took a hit. In the first year of the tariffs, the Mexican government says imports of products on the list dropped 81%. It was the pain from those tariffs, not any free-trade epiphany, that brought Mr. Obama to the table last week. Mexico and the U.S. will now negotiate a “reciprocal, phase-in program,” according to the White House. A document
is supposed to be available for public comment by early April. But if Congress has concerns (the Teamsters, naturally, are already complaining) the U.S. may have to go back to Mexico for further negotiations. When a deal is signed, Mexico says it will lift 50% of its retaliatory duties. It will take another two to four months to implement the program, at which time Mexico says it will lift the other half of the tariffs. If all goes as planned, the result is likely to get us back to the equivalent of the 2007 Bush pilot program by 2012. That’s what’s known as a trade breakthrough during the Obama Presidency.
Obama’s Libyan Abdication
T
he battle for Libya has reached a bloody impasse. Moammar Gadhafi continues to hold Tripoli, but his sons and mercenaries have been unable to break the uprising or retake the country’s east. Having loudly declared that Gadhafi “needs to step down from power and leave,” President Obama now seems to have retreated into a bizarre but all too typical passivity. We say bizarre because the U.S. has already announced its preferred outcome, yet it is doing little to achieve this end. The greatest danger now to U.S. interests—and to Mr. Obama’s political standing—would be for Gadhafi to regain control. A Libya in part or whole under the Gadhafi clan would be a failed, isolated and dangerous place ruled by a vengeful tyrant and a likely abettor of terrorists. We presume that’s what Secretary of State Hillary Clinton meant the other day when she said that “one of our biggest concerns is Libya . . . becoming a giant Somalia.” Ghadafi can also only prevail at this
stage through a murderous campaign tally committed before they order U.S. that will make U.S. passivity complicit in forces to action. But no one is talking a bloodbath. Media reports relate stories about introducing U.S. ground forces à la of his secret police terrorizing Tripoli’s Afghanistan or Iraq. The Libyans want to population and killing indiscriminately. Al liberate Libya. The issue is how the U.S. Jazeera is already comparing the West’s can help them do it, which includes hufailure to act in Libya to manitarian, diplomatic the slaughter of Iraq’s and perhaps military marsh Arabs in 1991 and Will the U.S. let assistance. of the Bosnian Muslims As for the no-fly Gadhafi slaughter his by Serbs later that dezone, the Administracade. tion is far too solicitous way back to power? The Administration of U.N. and Arab apis explaining its relucproval. The approval tance to act by exaggerating the costs that matters is from the Libyan opposiand the risks. It rolled out Pentagon chief tion. The Arab League is heavily influRobert Gates last week to mock “loose enced by the Saudis, who have their own talk” of military options. “It’s a big oper- budding problem with popular dissent. ation in a big country,” he said. “We also Moscow and Beijing don’t want a no-fly have to think about, frankly, the use of zone in Libya, but so what? the U.S. military in another country in We didn’t need Chinese or Russian the Middle East.” Centcom Commander support to keep Iraqi Kurds safe from James Mattis offered a similar warning. Saddam Hussein’s bombers in the 1990s. We can understand if American war- NATO can act without U.N. approval, or fighters are trying to make sure that ci- at least it could before this Administravilians understand the costs and are to- tion. Even Senator John Kerry thinks
the Administration is making too much of the risks of a no-fly zone. “This is not a big air force,” he says about Libya. “It’s not an enormously complicated defense system.” We suspect the real reason for Mr. Obama’s passivity is more ideological than practical. He and his White House team believe that any U.S. action will somehow be tainted if it isn’t wrapped in U.N. or pan-Arab approval. They have internalized their own critique of the Bush Administration to such a degree that they are paralyzed to act even against a dictator as reviled and blood-stained as Gadhafi, and even though it would not require the deployment of U.S. troops. Mr. Obama won’t lead the world because he truly seems to believe that U.S. leadership is morally suspect. But if Mr. Obama thinks George W. Bush was unpopular in the Arab world, he should contemplate the standing of America—and the world reputation of Barack Obama—if Gadhafi and his sons slaughter their way back to power.
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THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
OPINION
Deterrence in the Age of Nuclear Proliferation BY GEORGE P. SHULTZ, WILLIAM J. PERRY, HENRY A. KISSINGER AND SAM NUNN As long as there has been war, there have been efforts to deter actions a nation considers threatening. Until fairly recently, this meant building a military establishment capable of intimidating the adversary, defeating him or making his victory more costly than the projected gains. This, with conventional weapons, took time. Deterrence and war strategy were identical. The advent of the nuclear weapon introduced entirely new factors. It was possible, for the first time, to inflict at the beginning of a war the maximum casualties. The doctrine of mutual assured destruction represented this reality. Since the first use of nuclear weapons against Japan, neither of the superpowers, nor any other country, has used nuclear weapons in a war. U.S. defense leaders made serious efforts to give the president more flexible options for nuclear use short of global annihilation. They never solved the problem, and it was always recognized that Washington and Moscow both held the keys to unpredictable and potentially catastrophic escalations. As a result, nuclear deterrence was useful in preventing only the most catastrophic scenarios that would have threatened our survival. But even with the deployment of thousands of nuclear weapons on both sides of the Iron Curtain, the Soviet moves into Hungary in 1956 and Czechoslovakia in 1968 were not deterred. Nor were the numerous crises involving Berlin, including the building of the Wall in 1961, or major wars
in Korea and Vietnam, or the Soviet invasion of Afghanistan in 1979. In the case of the Soviet Union, nuclear weapons did not prevent collapse or regime change. Today, the Cold War is almost 20 years behind us, but many leaders and publics cannot conceive of deterrence without a strategy of mutual assured destruction. We have written previously that reliance on this strategy is becoming increasingly hazardous. With the spread of nuclear weapons, technology, materials and know-how, there is an increasing risk that nuclear weapons will be used. It is not possible to replicate the high-risk stability that prevailed between the two nuclear superpowers during the Cold War in such an environment. The growing number of nations with nuclear arms and differing motives, aims and ambitions poses very high and unpredictable risks and increased instability. Recently, the four of us met at the Hoover Institution with a group of policy experts to discuss the possibilities for establishing a safer and more comprehensive form of deterrence and prevention in a world where the roles and risks of nuclear weapons are reduced and ultimately eliminated. Our broad conclusion is that nations should move forward together with a series of conceptual and practical steps toward deterrence that do not rely primarily on nuclear weapons or nuclear threats to maintain international peace and security. The first step is to recognize that there is a daunting new spectrum of global security threats. These threats include chemical, biological and radiological weapons, catastrophic terrorism and
cyber warfare, as well as natural disasters resulting from climate change or other environmental problems, and health-related crises. An accident or mistake involving nuclear weapons, or nuclear terrorism fueled by the spread of nuclear weapons, nuclear materials, and nuclear knowhow, is still a very real risk. An effective strategy to deal with these dangers must be developed. The second step is the realization that continued reliance on
The doctrine of mutual assured destruction is obsolete in the post-Cold War era. nuclear weapons as the principal element for deterrence is encouraging, or at least excusing, the spread of these weapons, and will inevitably erode the essential cooperation necessary to avoid proliferation, protect nuclear materials and deal effectively with new threats. Third, the U.S. and Russia have no basis for maintaining a structure of deterrence involving nuclear weapons deployed in ways that increase the danger of an accidental or unauthorized use of a nuclear weapon, or even a deliberate nuclear exchange based on a false warning. Reducing the number of operationally deployed strategic nuclear warheads and delivery vehicles with verification to the levels set by the New Start Treaty is an important step in reducing nuclear risks. Deeper nuclear reductions and changes in nuclear force posture involving the two nations should remain a priority. Further
steps must include short-range tactical nuclear weapons. Fourth, as long as nuclear weapons exist, America must retain a safe, secure and reliable nuclear stockpile primarily to deter a nuclear attack and to reassure our allies through extended deterrence. There is an inherent limit to U.S. and Russian nuclear reductions if other nuclear weapon states build up their inventories or if new nuclear powers emerge. It is clear, however, that the U.S. and Russia—having led the nuclear buildup for decades—must continue to lead the build-down. The U.S. and its NATO allies, together with Russia, must begin moving away from threatening force postures and deployments including the retention of thousands of short-range battlefield nuclear weapons. All conventional deployments should be reviewed from the aspect of provocation. This will make America, Russia and Europe more secure. It will also set an example for the world. Fifth, we recognize that for some nations, nuclear weapons may continue to appear relevant to their immediate security. There are certain undeniable dynamics in play—for example, the emergence of a nuclear-armed neighbor, or the perception of inferiority in conventional forces—that if not addressed could lead to the further proliferation of nuclear weapons and an increased risk they will be used. Thus, while reliance on nuclear weapons for deterrence is becoming increasingly hazardous and decreasingly effective, some nations will hesitate to draw or act on the same conclusion unless regional confrontations and conflicts are addressed. We must therefore redouble our efforts to resolve these issues.
Achieving deterrence with assured security will require work by leaders and citizens on a range of issues, beginning with a clearer understanding of existing and emerging security threats. The role of non-nuclear means of deterrence to effectively prevent conflict and increase stability in troubled regions is a vital issue. Changes to extended deterrence must be developed over time by the U.S. and allies working closely together. A world without nuclear weapons will not simply be today’s world minus nuclear weapons. Nations can begin moving now together toward a safer and more stable form of deterrence. Progress must be made through a joint enterprise among nations, recognizing the need for greater cooperation, transparency and verification to create the global political environment for stability and enhanced mutual security. Ensuring that nuclear materials are protected globally in order to limit any country’s ability to reconstitute nuclear weapons, and to prevent terrorists from acquiring the material to build a crude nuclear bomb, is a top priority. Moving from mutual assured destruction toward a new and more stable form of deterrence with decreasing nuclear risks and an increasing measure of assured security for all nations could prevent our worst nightmare from becoming a reality, and it could have a profoundly positive impact on the security of future generations.
Mr. Shultz was secretary of state from 1982 to 1989. Mr. Perry was secretary of defense from 1994 to 1997. Mr. Kissinger was secretary of state from 1973 to 1977. Mr. Nunn is former chairman of the Senate Armed Services Committee.
The Dictator’s Wife Wears Louboutins BY BARI WEISS AND DAVID FEITH Maybe it takes a fashion dictator to know a fashionable dictator. How else to explain Vogue editor Anna Wintour’s decision this month to publish a 3,000-word paean to that “freshest and most magnetic of first ladies,” Syria’s Asma al-Assad? That’s right. As Libyans braved fighter jets and machine-gun fire in their drive to overthrow the tyrant Moammar Gadhafi in Tripoli, the queen of Condé Nast thought it was in good taste to feature the beautiful wife of Syria’s Bashar alAssad. Apparently Vogue missed the trend: Dictators are out this season. The Assad family—first Hafez and now his son Bashar—has ruled Syria since 1970. In that time, they’ve killed 20,000 Syrians to put down an uprising in Hama, provoked civil war in Lebanon and then occupied the country to “keep peace,” built a secret nuclearweapons facility modeled on North Korea’s, and established Damascus as a hub for terrorists from Hezbollah to Hamas and Islamic Jihad. All part of keeping their countrymen under foot for 40 years. No matter. The only feet that seem to interest Vogue writer
Joan Juliet Buck are the manicured toes of the first lady. Mrs. Assad reveals a “flash of red soles,” we’re told, as she darts about with “energetic grace.” The red soles are an allusion to the signature feature of Christian Louboutin designer heels—easily $700 a pair—that Mrs. Assad fa-
Vogue magazine missed the trend: Middle Eastern tyrants are out this season. vors. (Mr. Louboutin, says Vogue, visits Damascus to buy silk brocade, and he owns an 11th-century palace in Aleppo.) Mrs. Assad also sports Chanel sunglasses and travels in a Falcon 900 jet. But, we’re assured, she’s not the ostentatious sort: “Her style is not the couture-and-bling of Middle Eastern power but deliberate lack of adornment.” She once worked at J.P. Morgan, never breaks for lunch, and starts her day at 6 a.m.—all while raising three children! Just another 21stcentury woman trying to do it all in style.
And her parenting? “The household is run on wildly democratic principles,” Vogue reports. “We all vote on what we want and where,” says Mrs. Assad of herself, her husband and their children. For the people of Syria, not so much. Outside their home, the Assads believe in democracy the way Saddam Hussein did. In 2000, Bashar al-Assad won 97% of the vote. Vogue musters the gumption only to call this “startling.” In fact, it’s part of a political climate that’s one of the world’s worst—on par, says the watchdog group Freedom House, with those of North Korea, Burma and Saudi Arabia. But none of those countries has Asma. “The 35-year-old first lady’s central mission,” we’re told, “is to change the mind-set of six million Syrians under eighteen, encourage them to engage in what she calls ‘active citizenship.’” That’s just what 18-year-old high-school student Tal al-Mallouhi did with her blog, but it didn’t stop the Assad regime from arresting her in late 2009. Or from sentencing her, in a closed security court last month, to five years in prison for “espionage.” Ms. Mallouhi goes unmentioned in Vogue. But readers get other crucial details: On Fridays, Bashar
al-Assad is just an “off-duty president in jeans—tall, long-necked, blue-eyed.” He “talks lovingly about his first computer,” Vogue records, and he says that he studied ophthalmology “because it’s very precise, it’s almost never an emergency, and there is very little blood.” So it’s the opposite of his Syria: murky and lawless, operating under emergency law since 1963, and wont to shed blood through its security forces and proxies like Hezbollah. It’s hard to believe that a veteran journalist would so diminish these matters, but it seems that Ms. Buck’s aim was more public relations spin than reportage. As she reveals, her every move was watched by state security: “The first lady’s office has provided drivers, so I shop and see sights”—including, in a trip reminiscent of Eva Perón, an orphanage—“in a bubble of comfort and hospitality.” In the past weeks, as people power has highlighted the illegitimacy and ruthlessness of the Middle East’s strongmen, various Western institutions have been shamed for their associations with them. There’s the London School of Economics, which accepted
over $2 million from Libya’s ruling family, and experts like political theorist Benjamin Barber, who wrote that Gadhafi “is a complex and adaptive thinker as well as an efficient, if laid-back, autocrat.” When Syria’s dictator eventually falls—for the moment, protests against him have been successfully squelched by police—there will be a similar reckoning. Vogue has earned its place in that unfortunate roll call.
Ms. Weiss and Mr. Feith are assistant editorial features editors at The Journal.
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THE WALL STREET JOURNAL.
OPINION
BY SADANAND DHUME It’s time to bury the myth of moderate Pakistan. You know the one: the notion, repeated ad nauseam in magazine articles, thinktank reports and Congressional testimony—as though saying it often enough will make it true—that Pakistan is an essentially tolerant country threatened by a rising tide of fundamentalism. Here’s a news flash: The tide has risen. The most recent reminder of this came Wednesday in Islamabad when suspected Taliban militants shot dead Shahbaz Bhatti, Pakistan’s 42-year-old minister for mi-
The supposedly tolerant country has run out of easy options for weeding out Islamist fundamentalism. nority affairs and the only Christian in the overwhelmingly Muslim nation’s cabinet. His crime? Supporting the repeal of a barbaric blasphemy law that makes insulting the prophet Muhammad punishable by death. The law is often used to settle scores with hapless religious minorities, especially Christians such as Asia Bibi, an illiterate peasant sentenced to hang last year after she allegedly badmouthed the prophet during a row with Muslim co-workers. Bhatti’s assassination comes two months after a bodyguard murdered Punjab Governor Salmaan Taseer for visiting Ms. Bibi in jail and speaking out against abuse of the law. To be fair, Pakistan’s claim to relative moderation has been kept alive thus far by more than just
wishful thinking. Overtly Islamist parties such as the Jamaat-e-Islami have rarely commanded more than a fraction of the national vote. Women enjoy freedoms in the public square that their counterparts in Saudi Arabia and Iran could only dream of. At great personal risk, a small but courageous group of activists, intellectuals and politicians speak out publicly against bigotry and religious intolerance. Scratch the surface, however, and a bleaker picture emerges. Islamist parties may not garner large-scale electoral support, but Islamist ideas are widely tolerated by mainstream political parties. The major opposition party, former Prime Minister Nawaz Sharif’s Pakistan Muslim League (N), flaunts its closeness to sundry Islamists, including Jamaat-ud-Dawa, the parent organization of the international terrorist group Lashkar-e-Taiba. Ostensibly secular, the ruling Pakistan Peoples Party supported both Kashmiri militancy and the Afghan Taliban in the past. In its current incarnation it appears permanently cowed by the country’s legion of vocal fundamentalists. President Asif Ali Zardari failed to attend the funerals of either Taseer or Bhatti. His government has made it clear that it will not touch the controversial blasphemy law. And Interior Minister Rehman Malik declared that he would personally kill anyone who dared blaspheme Muhammad’s name. As for Pakistan’s undeniably brave activists and intellectuals, unfortunately they appear to have more admirers overseas than among their compatriots. Handwringing in the pages of Dawn and the Friday Times, two of the country’s leading English-language
Associated PRess
Confronting the Myth of ‘Moderate Pakistan’
Shahbaz Bhatti (left), the minister killed last week for his opposition to an Islamist blasphemy law, holds up a threatening letter sent to a Christian. newspapers, has not prevented Mumtaz Qadri, Taseer’s murderer, from becoming a national hero. At court appearances, supporters garland Mr. Qadri and shower him with rose petals. Across Pakistan, rallies in support of the murderer attract thousands of fervent supporters. Dozens of Facebook groups extol him as, among other things, a ghazi (religious warrior), “the new hero of Pakistan,” and “the great soldier of Islam.” Shortly after Taseer’s murder, 500 leading clerics from the supposedly moderate Barelvi sect—often contrasted favorably with the more rigid Deobandis—publicly applauded Mr. Qadri, a fellow Barelvi, for his “bravery, valor and faith.” Not surprisingly, anti-American sentiment—often reliable shorthand for a society’s paranoia and self-loathing—is rampant. According to the Pew Global Attitudes Project, American favorability ratings stood at 17% last year, the lowest of all countries surveyed.
(Today they’re likely lower.) On the streets, bloodcurdling yells for the execution of alleged Central Intelligence Agency operative Raymond Davis, accused of killing two Pakistanis in January, have prevented the government from granting Mr. Davis the diplomatic immunity commonly enjoyed by spies all over the world. This despite personal pleas by President Barack Obama and Senator John Kerry. By now the reasons for Pakistan’s predicament are well known. Among them: the intolerance embedded in the nation’s founding idea of a separate “land of the pure” for Indian Muslims; the malign shadow of Saudi Arabia on religious life; blowback from the anti-Soviet jihad of the 1980s; and the overwhelming influence the army and its thuggish intelligence wing, the Inter-Services Intelligence, wield on national life. The army’s very motto, Jihad-fi-Sabilillah, or jihad in the path of Allah, is an exhortation to holy war.
Whether out of hardheaded realpolitik or genuine religious zeal, successive Pakistani governments, civilian and military alike, have coddled fundamentalists. Now the proverbial genie may be too big to put back in the bottle. For the international community, then, the long road to fixing Pakistan begins with the simple recognition that the country’s true face is not the urbane intellectual making reasoned arguments, but the frenzied mob showering rose petals on a murderer for his services to the faith. Over time, Pakistan can only be saved by rearranging the basic building blocks of the country. This means backing provincial autonomy and linguistic identity as an alternative to the centralized pan-Islamism used by the military and its supporters to weld the country together. It means deploying social networks and satellite television to open the door to reasonable discourse about religion. It means channeling aid to ensure that children are no longer taught to glorify Islamic conquest and reflexively mistrust the West and India. It means accepting that the most poisonous madrassas—such as Jamia Binoria in Karachi and Darul Uloom Haqqania outside Peshawar—must be shuttered if they can’t be reformed. Needless to say, none of this will be easy. But the consequences of the alternative approach—pandering to fundamentalists while blaming outsiders for all the country’s ills—can be seen in the freshly turned soil of Bhatti’s grave.
Mr. Dhume is a resident fellow at the American Enterprise Institute in Washington, and a columnist for WSJ.com. Follow him on Twitter @dhume01.
China’s Facebook Reactionaries [ Information Age ] BY L. GORDON CROVITZ In Tunisia, the self-immolation of street vendor Muhammad Bouazizi, protesting harassment by local authorities, led to demonstrations that toppled the regime. In Egypt, it was photos posted online of Khaled Said, who had been beaten to death by corrupt police officers. In both cases, Facebook pages drew attention to the cases, and Twitter posts helped organize protests. They do things differently in China. In contrast to more amateur authoritarians, Beijing is so sensitive to protests against similar abuses of power that it controls access to the Internet almost totally. Consider the case of a college student who might have been killed by railroad employees in January. According to researchers at the University of Hong Kong’s China Media Project, Zhao Wei was on his way home to Inner Mongolia from his studies in Tianjin when he got into a dispute
with a railway employee over his seat assignment. His parents were informed that he had committed suicide by jumping from the train. Last week, the parents managed to post on Sina, the domestic version of Twitter, photos of his dead body with injuries indicating death by beating. The post was quickly forwarded more than 66,000 times and commented on 14,000 times. The Hong Kong researchers found that mentions of the case have been “actively scrubbed from the Internet.” Domestic search engines have been so effectively filtered that searches result in a link simply saying the railroad is investigating. A similar case late last year involved the son of a public security official who ran over two university students in Hebei, killing one. When arrested, he said, “Go ahead—sue me if you dare. My father is Li Gang,” the local deputy police chief. The case quickly became well known on the Web, including a contest to use “My father is Li Gang” in a poem. The phrase became synonymous with shirking responsibility. The Central Propaganda Department then issued a directive that there be “no more hype regarding the dis-
turbance.” In her famous 1979 Commentary essay, “Dictatorships and Double Standards,” Jeane Kirkpatrick argued that totalitarian regimes such as the Soviet Union differed fundamentally from merely authoritarian ones. Today there is a gap between what we can call information totalitarians and information authoritarians. China has simply
Unlike Egypt or Tunisia, China never releases its grip on the Web. shut down communication services such as Facebook and Twitter and sources of information like Google. Likewise, Iran has largely closed off communication, and North Korea has no Internet access. Other countries are authoritarian but with modest openness. The Mubarak regime, for example, briefly shut down the Internet in Egypt, but only after reformers had used its tools to organize opposition. Beijing does not hide its ambitious control over the Web. Ac-
cording to a study by researchers at Tsinghua University, China spends about as much on domestic security—$77 billion—as it does on its military. There are officially some 80,000 protests a year in China, mostly over abuses such as illegal land seizures, forced evictions and refusals of officials to accept petitions of complaints. According to the state news service Xinhua, more than 300,000 government employees perform “community service management,” such as monitoring the Web for dissent. Propaganda ministry officials have told local officials they have about two hours between news of “sudden incidents” to close down online information flows and stop people from gathering for protests. Officials are working on new software to track trending topics such as complaints about corruption. More than 100 Chinese have been arrested and charged with “inciting subversion” for blogging about the Middle East demonstrations. When protest organizers used online tools to encourage people to go on “strolls” in cities across China every Sunday, the U.S.-based Committee to Protect
Journalists reported harassment and beatings of foreign journalists trying to cover these silent protests. There is a disconnect between the enormous economic progress China has made over the past generation and the tight lid it keeps on their ability to communicate. Chinese people have more reason to be confident and optimistic about their future than did Arabs in authoritarian countries, but they also want to be free of both petty and large corruption of local and national officials throughout China. Reformers within the government know they sit on a tinderbox, but Beijing opts to clamp down instead of letting people vent frustrations. Strong-armed control over the Web may be the clearest sign of political weakness. “The Chinese authorities instinctively choose repression when confronted with any problem: lock up people, censor their writings, block the Internet,” wrote veteran China watcher Frank Ching in the China Post last week. If this is really necessary, “maybe China is much more vulnerable that it would appear on the surface.”
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THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
THE JOURNAL REPORT: ENVIRONMENT
Green technology gets strong attention Innovation in the field is emerging as new front in global economic fight; biggest unknown is which bet will win
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grabbing clean-technology market share not because of its cheap labor, executives at the conference said, but through strong mandates and subsidies to build a new export industry. In solar power, the U.S. is “neither the largest in manufacturing nor the largest market,” said Mark Pinto, executive vice president of Applied Materials Inc., a California-based company that builds machines to make solar panels and computer chips. “That’s very unusual.” The U.S. is in danger of losing “entire supply chains and the human capital that goes with it,” warned Andrew Liveris, chief executive of Dow Chemical Co. “The market needs to be made.” But general calls for government to do more to juice clean technology gave way to deep disagreement over what government should do. To some, the Obama administration’s stimulus spending on everything from
wind turbines to electric-car batteries was enlightened. To others, it was bloated. “Of course there’s a risk” in governments spending taxpayer dollars to promote industry, said Haley Barbour, Mississippi’s Republican governor. But, he said, “you’ve just got to put on your big-boy britches and sit down and work through the deal and be sure you are being responsible about the risk.” As governments and companies place their bets, perhaps the biggest unknown is which technologies will win. Amid breathless talk about the future of electric cars, Ford Motor Co. figures hybrids, which still use gasoline, will make more sense for most drivers. But that’s a guess, said Bill Ford, the company’s executive chairman. In truth, today’s predictions “don’t mean anything,” he said. “ ‘Who knows?’ is the real answer.” —Jeffrey Ball
Mark Pinto ‘Most of the manufacturing is in Asia.’
Louis Chênevert China’s boom helps it adopt technologies faster.
Genesis Photos for The Wall Street Journal (3)
omething big is shifting in the business of the environment. Yesterday’s clean fun has become today’s Clean War. Not long ago, talk of powering economic growth with less fossil fuel came mostly from Madison Avenue and the Birkenstock crowd. Not anymore. With economies still weak and China pushing hard to dominate growing industries such as wind and solar power, clean-energy innovation is emerging as the new front in the global economic fight. The winners won’t be clear for years, said the chief executives and entrepreneurs from Beijing to Boston who gathered last week at ECO:nomics, The Wall Street Journal’s annual conference on the business of the environment. But the stakes and strategies are getting clearer. Dominating the discussion was talk of China. It’s
Shi Zhengrong ‘There are no decisions being made’ in the West.
Is China winning clean-energy race? In recent years, China has spent enormous sums on clean technologies. The Wall Street Journal’s Alan Murray and Kimberley A. Strassel talked about the China market with Louis R. Chênevert, chairman and CEO of United Technologies Corp.; Mark R. Pinto, executive vice president of Applied Materials Inc.; and Shi Zhengrong, chairman and CEO of Suntech Power Holdings Co. Here are edited excerpts of their conversation.
Alan Murray: Three years ago, people thought of China as a problem because it had the highest rate of greenhouse-gas emissions. Increasingly, you hear people talk about China as the source of the solution. All three of you work in both the U.S. and China. We’d like to talk about how the two markets compare. Louis Chênevert: I spend a lot of time in China because it’s a highgrowth market for us. China today is growing extremely fast. You can’t be an elevator company and not be in China because one in two sold globally is sold to China. We sell today the regenerative drive, which is the energy-efficient elevator, representing onethird of sales in China when it was only 5% 10 years ago. They’ve caught up. It’s now the same percentage of ReGen drive elevators sold in China as what we sell in the U.S.
Mr. Murray: But is the difference just that China is a much faster growing market and so you sell more units? Or is there a clearer focus on energy-saving products? Mr. Chênevert: A big driving force is that you’ve got a lot of urbanization momentum, which drives all these new cities to be built. Because you build everything new, it’s easier to do it with the latest technology. And, I would say, the pressure from the government to adopt some of these latest technologies is pretty substantial. Mr. Murray: Mark, you made a decision not long ago to relocate from Silicon Valley to China. Is that because you agree with what John Doerr [partner at Kleiner Perkins Caufield & Byers] said, that there’s a sense that in the clean-tech area, China is winning? Mr. Pinto: No, I wouldn’t say that. We make manufacturing equipment for semiconductors, flatpanel displays, and now energy and solar. What we certainly see is that most of the manufacturing is in Asia.
Mr. Murray: Dr. Shi, you run one of the largest solar companies in the world, starting in China. How important was government policy in terms of you being able to get your foothold? Could you, for instance, have done the same thing in the U.S.? Dr. Shi: I spent 14 years in Australia, and many [there] ask the same question. In the first three to five years, if Suntech had been founded here or in Australia or Europe, it would probably be OK. At that time, the price was higher and the supply chain was not very much developed. After 2005, [if we had started in] Australia and we decided not to go to China or other parts of Asia, then I think we’d probably be less competitive. The reason for that is because the Chinese government streamlined the policy of supporting innovation for this new energy industry. That really supported supply-chain development in China. If we move to the U.S. or anywhere, if it is without a supply chain, we are not going to be competitive.
Mr. Murray: How much is solar? Mr.. Pinto: This year over 80% of our solar business will be in China. Most of the panels are being built and shipped to Europe, some to the U.S., but Europe is the biggest end market.
Mr. Murray: How do they support the supply chain? Are we talking about subsidies? Dr. Shi: No. For example, First Solar is very successful. Why? First Solar has a whole supply chain within the company because in thin film they’re vertically inte-
grated, from glass to the panel. But for the silicon-based solar industry, you have a very long supply chain and any single company cannot do it. You need a big group of enterprises to focus on each section of the supply chain to innovate, improve manufacturing efficiency and reduce cost.
Mr. Murray: Louis, you saw the John Doerr quote. Is it your sense that in clean technology the leading edge of innovation is in China, not in the U.S., which is what he was suggesting? Mr. Chênevert: I would say that the rate at which China embraces that technology and their willingness to integrate between, for example, HVAC, lighting, etc., in buildings, is perhaps a faster pace because of all this new construction. Mr. Murray: So you really see it very much driven by the rate of growth and the fact that there’s so much more new construction? Mr. Chênevert: Absolutely. Kimberley Strassel: If you’re manufacturing products, is China simply going to beat us every time because costs are lower there? Do you want to invest significant amounts of money to compete with that? Mr. Pinto: That’s the way it might be today, but where you’ve got the manufacturing scale—since that’s such a big factor in improv-
ing the technology—scale plus technology is going to win. Where would you invest? The place where they’re investing in the scale. Dr. Shi: Manufacturing also requires innovation. Nobody believes there’s a labor shortage in China, but it’s a fact. In the younger generation, life quality has been improving. Nobody wants to do this hard work on the manufacturing floor, so I think China is actually in the situation where they have to consider the future in manufacturing technology. So that’s why the Chinese government has focused so much on innovation. If we don’t change, maybe in 10 or 15 years’ time, China will not be competitive in manufacturing. So I think there’s definitely a lot of innovation in manufacturing.
Mr. Murray: Dr. Shi, what’s your advice for the United States? Dr. Shi: I’ve lived in the Western world for 14 years and I sometimes feel perhaps there’s too much democracy here. Mr. Murray: Too much democracy? Dr. Shi: There are no decisions being made. It’s like in a company. Sometimes you hear all the voices. The CEO knows what the right decision is and sometimes they just want to bang the table and say, “Let’s do it.”
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THE JOURNAL REPORT: ENVIRONMENT
One man’s search for next smart thing It’s possible that Nathan Myhrvold still hasn’t found his true calling. The former chief technology officer at Microsoft Corp. has degrees in subjects including economics, geophysics, and theoretical and mathematical physics, and recently wrote a 2,000-plus page cookbook. He devotes much of his time lately to his company, Intellectual Ventures, whose business plan is to invest in new ideas. Mr. Myhrvold discussed his company and a few ideas of his own with The Wall Street Journal’s Alan Murray. Edited excerpts of their conversation follow.
Are coal’s days over? Predictions of coal’s demise are everywhere. At the same time, though, it remains an important power source world-wide. The Wall Street Journal’s Jeffrey Ball talked with Tom Albanese, chief executive of mining giant Rio Tinto PLC, and Michael Morris, CEO of American Electric Power Co., about how coal fits into the future of energy supply. Here are edited excerpts of their conversation.
The next stage
Jeffrey Ball: A third of the coal fleet in the U.S. is going to be retired in the next few years, people say, even though there’s no expectation of cap-and-trade legislation in Washington, even though China and India are building large numbers of new coal-fired power plants. What does the future of coal look like to you, both here and internationally? Michael Morris: In the United States it’s clear that coal is going to bow to combined-cycle natural gas when you look at new installations. I think the price points are pretty dramatic in that regard. The forecast of 30-plus percent of the fleet retiring has everything to do with the approach that the EPA may or may not take. But you’ve got an existing coal fleet that you just can’t throw away. There’s trillions of dollars of capital invested in the coal-generation fleet throughout the United States, and you can’t throw that overboard. Tom Albanese: I tend to share that view in terms of the U.S. But at the same time we look at Asia, we look at China, we look at India, where Southeast Asia’s going to go, we certainly see that the energy security around coal is quite important, and it will continue to be the focus. Now, it’s not going to be with 50-year-old plants; these are going to be brand-new plants. They’re going to be looking at efficiency levels that will be 10%, 20%, 30% higher than the average plant in the U.S. Mr. Ball: So, is what you’re saying, both of you, that there is essentially going to be no improvement and no retrofitting of the U.S. coal
fleet? No improvement in the efficiency? These things are generally less efficient than what China’s building and they’re just going to sort of die over time as they get too old? Mr. Albanese: I don’t see a lot of new capital going into coal in the U.S. But I do think that you’re seeing that capital deployment in a very big way taking place in Asia. Mr. Morris: What we’ve done over the last number of years at American Electric Power is we retrofitted our larger units. Our largest plants are 1,300 megawatts; we have a 250 class, a 500 class, an 800 class and a 1,300-megawatt class. We’ve retrofitted the 1,300s, so we have gotten better efficiencies there. But you get to a point where you look out at the timeline left of the station and you say to yourself, “We can’t put any more capital to work there.” So, when you look at our fleet, if you look at the 500-megawatt class, that’s on the border. Anything below that is going to go. It’s just going to go in its normal course. That will be affected by legislation, regulation, whatever comes out of the requirements at a state level or a federal level. Mr. Albanese: I’d like to say, in terms of deployment of capital and coal in the U.S., we should remind ourselves that we have a lot of coal in the U.S. There are technologies that actually work in the lab, they work at a small scale. They need to be ramped up. All this talk we’ve heard about incremental economics, how you progressively get the efficiencies up and get the cost down—that is not rocket science for coal. You’ve got lots of coal there, so down the road that still should be a key part of the total energy equation. I don’t think it can be just solar or just energy efficiency, or just natural gas, or just the Mideast oil. It’s got to be a combination of everything.
Mr. Ball: There’s no cap-and-trade legislation in Washington. Do you see that changing? Do you see much push for carbon regulation internationally?
Mr. Albanese: There needs to be some type of global solution. Global solutions are easier said than done, but you do need to work toward a mechanism for pricing and monetizing of CO2. And that in itself will spur on innovation. That in itself will spur on conservation, and that will spur on the types of things that need to happen early on if you think about what could happen over the next several decades. I think China and the U.S. both have to come to the table to set the tone for the rest of the world.
A familiar balance
Mr. Ball: I’m just curious for your sense of the likely scale of renewable-electricity technology. Solar power is in the 1% range, much less than that; wind globally now is about 1% of electricity generation. What do you think is realistic? Mr. Albanese: I always tell our team, don’t underestimate solar. You’ve got infinite amounts of solar energy out there and you’ve got a lot of smart people around the world. They’re going to try to figure out a way of converting that to electrons, so don’t underestimate it. But, that being said, it’s still a pretty high price point compared to alternative technologies. Mr. Morris: The penetration will continue to grow, but I think it will always be a small part. The intermittency of the two sources is the real Achilles’ heel. Mr. Albanese: In the long term for it to really work you’ve got to create hybrid solutions where you have solar and wind side by side with some type of centralized power generation that can be turned up and turned down. Mr. Ball: To be clear, Mike, you don’t see any fundamental change in the way that the global energy pie looks with regard to coal versus renewables? Renewables are always going to be a small slice and coal is always, at least as far your crystal ball sees, going to be the dominant slice? Mr. Morris: I believe that to be the case. Gas will grow at the expense of coal.
Mr. Murray: And do you pay them to do this? Mr. Myhrvold: Yeah. We try to encourage people to come up with solutions. Sometimes we don’t come up with a solution. Usually, we come up with some solution, but often it’s not to the problem we posed. We then go through a process we call triage: Which of the ideas we generated are really worth pursuing? Sometimes you discover
Mr. Murray: So in 10 years’ time, what was your Google moment? Mr. Myhrvold: It takes a long time to go through this process. If you had asked where was the Google in 1980, the answer would have been “not quite yet.” But we’ve got a bunch of ideas that we feel very strongly about. We’ve got a nuclear-reactor company. We invented a fundamentally new kind of nuclear-power reactor. We can burn waste as fuel. We can burn depleted uranium as fuel. We can also burn spent fuel rods from conventional reactors as fuel, and we achieve far higher burn-up than you achieve. Burn-up is how much of the uranium you actually are able to react, so we can easily get 10 to 20 times more energy out of uranium than you would the other way. Mr. Murray: You’ve done a lot of work in the energy area. Can you talk about where you’re focusing your effort there? Mr. Myhrvold: The single biggest problem we have to focus on in this century is how to get every citizen of Earth roughly the same per-capita energy we enjoy in the developed world. China is developing. India is developing. Brazil is developing. They all want the lifestyle we have. The world’s energy problem is about how we expand our energy budget by a factor of 10 or more, and short of incredible disaster or war, I don’t know how we stop that. We don’t have any viable way to do it. I don’t believe that problem can be solved with any combination of existing technologies. Mr. Murray: Biofuels, electric cars… Mr. Myhrvold: They all have a role. But I don’t know of any single silver bullet. Take electric cars as an example. Batteries suck. They’re better than they used to be. They get a little better every year. The current rate of progress will take a very long time to get there. What it means is we have to roll up our sleeves and invent something radically better.
Genesis Photos for The Wall Street Journal (2)
Michael Morris, center, and Tom Albanese, right: Coal will shrink in the U.S., but the story may be different elsewhere.
Alan Murray: Innovation is what you do, and you do it at your company. What is the process that enables you to come up with great ideas? Nathan Myhrvold: We invest in invention. Venture capitalists invest in companies, including companies that don’t exist yet. We try to invest in the actual idea. We’ll invest in existing ideas. Someone will have already invented something; they won’t know what to do with it. We’ll take a controlling investment in that idea and say maybe we can figure out what to do with it. But we also generate ideas ourselves. We try to pick a topic, pick a really important problem within that topic, do some homework on it, then get a set of experts who know something of the topic. But also experts who know something other than that. We’ve got about 100 people in our inventor network. About 10 of them work for us full time. The biggest other collection of them are professors at universities. Then there’s consultants, and there’s retired people. So, altogether we’ll bring typically six to 10 people—a few more than 10. We’ll get them in a room, and we’ll start brainstorming solutions.
they’re really not going to work; and often we discover someone else had the idea already. But if there’s something promising, then we’ll queue it up for a subsequent invention session.
Nathan Myhrvold: Existing technologies won’t be able to meet rapidly growing global demand for energy.
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Special Advertising Section
EnErgy StratEgiES for a World of ChangE:
CERAWEEK 2011 ®
To Readers Much of the energy infrastructure the world will need in 2030 has yet to be built. This fact poses enormous responsibility and opportunity. How will the future of energy be shaped by the confluence of policy, market forces, technology, climate concerns, geopolitics—and the sheer scale of investment required? This week’s special sections, Energy Strategies for a World of Change, focus on how the energy system will evolve to meet the needs of a growing world—and the resulting multiple demands, risks, and possibilities. Today we address Iraq’s drive to modernize its oil industry. Tomorrow’s special section will look at the future of the electric car. Additional articles will appear in special advertising sections published in the U.S. edition of the Wall Street Journal, and these will also be available at www.ceraweek.com. We are pleased to partner again in these special sections with the Wall Street Journal and offer its readers thinking and analysis on the challenges ahead, as we embark on the 30th CERAWEEK conference in Houston, Texas. CERAWEEK is recognized as the most prestigious annual meeting for the global energy industry. This year’s conference will feature presentations and interactive sessions by more than two hundred senior executives, government officials, and thought leaders from across the energy spectrum. We anticipate attendance by more than 2,000 participants representing over 50 countries. The conference, including expanded “Energy Tech Pioneers,” will culminate on Thursday evening and Friday with perspectives on The Next 30 Years in politics, economics, and energy. CERAWEEK On Demand will again bring the conference to a wider network of virtual participants. For more information, see www.ceraweekondemand.com As we embark on CERAWEEK’S 30th anniversary, we invite you to join us in a dialogue about the energy future through our experts’ insights in these pages.
Daniel Yergin IHS CERA Chairman and Chairman of CERAWeek
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IHS Cambridge Energy Research Associates (IHS CERA) is a leading global advisory firm providing insight on global energy, markets, geopolitics, and economics. IHS CERA’s team of experts is headed by Pulitzer Prize-winning author of The Prize: The Epic Quest for Oil, Money, and Power, Daniel Yergin, IHS CERA Chairman. CERAWEEK has been ranked one of the five most influential senior executive conferences in the world, and the only one focused on a specific industry. CERAWEEK brings together more than 2,000 leaders from more than 50 countries to discuss and debate the global energy future. www.ceraweek.com ®
CERAWEEK On Demand Participate virtually in CERAWEEK 2011 and gain access to the conference’s exclusive insights. Available for individuals or entire organizations. For more information, visit www.ceraweekondemand.com. IHS (NYSE: IHS) is the leading information company with comprehensive content, insight and expertise in pivotal areas shaping today’s global business landscape: energy, economics, geopolitical risk, sustainability and supply chain management. Businesses and governments around the world use our products and solutions to make faster and more confident strategic decisions. IHS.com This special section was prepared by IHS CERA’s research staff. Editor: Robert Laubacher
The GreaT IraqI OIl rush By Bhushan Bahree
I
raq’s oil situation is changing, possibly in a very big way. This will have serious implications for Iraq and for world petroleum supply, and it could well be one of the defining factors for global oil markets in the years ahead.
Iraq has a long and turbulent oil history. October 14, 1927 was the day the Turkish Petroleum Company found oil in Iraq. A company chronicle described the scene: oil was “gushing with tremendous force from No. 1 well at Baba Gurgur...and remaining for some days beyond control.” Since that first discovery near Kirkuk in 1927, many huge oil fields have been found in Iraq, including those near Basra in the country’s south. Iraq now vies with Iran to be the second largest holder of conventional oil reserves after Saudi Arabia. Yet for more than 80 years, Iraq failed to realize its potential to be among the very biggest oil producers because of politics, wars, and industry dynamics. That is now changing. In late 2009, Iraq embarked on an ambitious plan to catapult the country into the ranks of the world’s very largest oil producers and exporters—Russia and Saudi Arabia—in less than a decade. Baghdad hopes to realize its plan with the help of international oil companies, who have contracted to expand Iraq’s oil production capacity more than fourfold in less than a decade, from 2.5 million barrels per day (mbd) of existing capacity today to a target of about 12 mbd by 2017. It is one of the biggest openings ever for international oil companies, who have flocked to Iraq despite some facing very tough terms and difficult conditions. These companies came to Iraq because it presents an opportunity to develop some of the largest oil fields in the world. Despite the formidable financial, technical, and organizational resources that international companies bring to Iraq, so large an expansion in such a short a time is unprecedented, and probably too ambitious to be
achievable. Even though early expansion efforts are off to a good start, IHS CERA’s liquids capacity outlook for Iraq indicates a much slower than planned capacity build to just over 5 mbd in 2017 and to 6 mbd in 2019 (see chart, which illustrates IHS CERA’s outlook for Iraq’s liquids productive capacity to 2030). But even reaching the halfway mark to the target of 12 mbd will be a significant achievement for Iraq, whose infrastructure has been devastated by three decades of wars and political upheavals. The fastest capacity buildup in recent decades was in Russia, where output rose by about 3.7 mbd in the ten years before 2008. Saudi Arabia took about five years to expand its capacity by a net 2 mbd over the past decade. Iraq also faces unique hurdles as it tries to implement its expansion plan. Security continues to be an issue, especially in areas that have been prone to violence in the recent past. The political situation is fragile, with an extremely delicate balance among competing interests that may be easily upset. Water, power, transport, and other resources are scarce, slowing projects and prompting jostling among companies as they try to secure what they need. In the face of these constraints, Prime Minister Nouri al-Maliki has pledged to tackle logistical and other hurdles so that international oil companies can move faster to lift output capacity. Iraq’s pressing need for money to rebuild its shattered infrastructure and economy means Baghdad will be keen to export as much oil as it can. After all, oil accounts for some 90 percent of government revenues. Depending on the world oil supply and demand picture as Iraq’s output builds, Baghdad could find itself on a collision course with its big oil exporting neighbors and other members
Illustration by Alex Williamson
Tuesday, March 8, 2011
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Special Advertising Section
IHS CERA Outlook for Iraq Liquid Productive Capacity 9
8 7
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6 5 4 3
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2
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to rein in its expansion program and rejoin OPEC’s output allocation system. Iraq has not been part of that system since its invasion of Kuwait in 1990. Iraq’s rising output is also likely to alter the balance of power in OPEC, where Saudi Arabia has been far and away the dominant player for decades. As Iraq realizes its expansion plans, its influence in OPEC will grow. It is far too early to say how Iraq may
choose to exercise this influence. Expanding oil exports will provide Iraq with much needed money to reconstruct its infrastructure and rebuild the economy. And it will also help to fuel the global economy. Hundreds of millions of people will enter the middle class around the world in the coming decade, and as they do so, global demand for energy is expected to grow. From the perspective of consumers,
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of the Organization of Petroleum Exporting Countries (OPEC). In any case, Iraq will become a defining factor in global oil markets over the next decade, with the extent of its influence depending on the speed of its capacity expansion. Initial growth in Iraqi output, as is happening now, is unlikely to cause much friction in the marketplace. The expansion is modest so far, though production of some 2.7 mbd this January represented a marked increase from levels of 2.5 mbd or less that had characterized Iraqi oil flows for many years. An output buildup toward 3.5 mbd, or somewhat above that level, will likely trigger concern among producers, though other OPEC members recognize that Iraq has produced well below its potential for decades, thus leaving some of its market share for others to fill. Still, such an increase in Iraqi production could be more easily accommodated if it happened at a time when world demand was expanding, as it is now, and the need for oil from OPEC producers was at least equal to, or greater than the extra supply from Iraq. If demand does not grow sufficiently before the new oil from Iraq comes on line, downward pressure on prices may occur. Other OPEC members would then face a hard choice: reduce their own output to support prices or try to compel Iraq
the prospect of Iraq rising up to expand its oil production is a positive development, one that can help to meet the challenge presented by the world’s ever expanding appetite for energy. Bhushan Bahree, IHS CERA Senior Director, focuses on global oil markets, OPEC, and the Middle East. He is the author of the IHS CERA Private Report Fields of Dreams: The Great Iraqi Oil Rush—Its Potential, Challenges and Limits.
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FROM PAGE ONE
Continued from first page he a Steve Jobs?” the executive asked rhetorically, adding that the 2020 Global Vision plan would serve as a good indicator. Toyota officials say privately that Mr. Toyoda broached the idea as a way to allow for more substantive discussions at the highest levels. It follows a decision by Honda Motor Co. on Feb. 22 to cut the size of its board to 12 operating officers from the previous 20 executives for similar reasons of speed and efficiency. Company officials say Toyota’s new vision will also formally incorporate emerging markets such as China and India into the company’s long-term strategic planning goals. The plan will be the company’s fourth so-called vision statement to be released since the mid-1990s—documents that, while often opaquely worded, have proven significant in laying out the company’s direction in following years. The 2010 vision plan, which was announced in 2002, provided clues to the company’s capacity buildup in Europe and North America later that decade. “Toyota will shift to a structure supported by three profit bases—Japan, North America and Europe,” it said. As officials put the finishing touches on the latest statement, they will need to address a number of fresh challenges at home and abroad, including a shrinking domestic market and a strong yen against the dollar, which makes the company’s exports from Japan less competitive overseas. In the U.S., Toyota’s recall of millions of vehicles has provided an inroad for rivals such as Hyundai Motor Co. and a revitalized Detroit Big Three. And
Associated Press
Toyota to slash the size of its board
Akio Toyoda, with the Prius V, on Wednesday will present his strategic plan. in China, now the world’s biggest market, Toyota trails its major global competitors. The coming plan will displace the current 2020 Global Vision, which was announced in 2007 two years after Mr. Toyoda’s predecessor became president. That follows a recent pattern of vision statements coming soon after a change at the top of the company, a tradition that began with the initial 2005 vision plan unveiled in 1996. Mr. Toyoda, who turns 55 years old in May, became the youngest head of the auto maker since his grandfather established the company in 1937. Since then, he has kept a low profile with a few notable exceptions, such as his testimony before the U.S. Congress a year ago when he vowed to redouble Toyota’s safety efforts amid the recall of millions of vehicles world-wide. Toyota’s previous strategy plans have highlighted vague concepts
such as improved corporate citizenship and greater delegation of responsibility to local operations outside Japan. Likewise, company officials say the coming statement will be short on specific numerical targets and results-oriented commitments by senior management. That is likely to disappoint investors and other Toyota watchers, who say the auto maker needs a detailed plan to instill faith in management and restore lost luster to its brands. “I’d like to see something like Nissan’s [plan] with a lot of detailed financial targets and management goals, but that’s not Toyota’s style” said Christopher Richter, a senior analyst at Credit Agricole Securities Asia in Tokyo, referring to Nissan’s 1999 effort to recover profitability. “I’m keeping my expectations low, but hope to be surprised.” One person knowledgeable about Toyota’s new board structure said it
has stirred up considerable controversy within the upper echelons of management. This person said the boardroom maneuver is viewed by some insiders as a naked political play and the latest salvo in a struggle for influence over company operations pitting Toyoda family and nonfamily factions. Allies of Mr. Toyoda’s immediate predecessor, Katsuaki Watanabe, have complained that the former president could lose his board seat and title of vice chairman in the shake-up—though a formal announcement might not be made for a few weeks. Mr. Watanabe couldn’t be reached for comment. Toyota’s first vision plan was an outgrowth of trade tension with the U.S. during the mid-1990s, when Toyota and other Japanese auto makers narrowly averted sanctions by pledging to invest more overseas and boost imports of auto parts. Then-President Hiroshi Okuda announced his 2005 vision plan in January 1996. A person familiar with that document says it rapidly evolved into an operational strategy aiming to retool the auto maker over the following decade by relying less on exports and more on overseas factories. That plan morphed into the 2010 vision plan that was released in 2002, which aimed for 15% global market share by the early 2010s, a jump from the 10% mark Toyota had at the time. But the company’s consolidated group market share peaked at nearly 13% in 2008, according to IHS Automotive, a consultancy that tracks auto makers. —Yoshio Takahashi contributed to this article.
Gadhafi forces attack rebel-held oil town Continued from first page action would require a U.N. Security Council resolution. Britain, France and others were drafting a no-fly resolution at the U.N. in case it became necessary. British Foreign Minister William Hague told the House of Commons that Britain is “working closely with partners on a contingency basis on elements of a resolution on a no-fly zone.” A British diplomat said the resolution would be ready in the event of a serious attack on civilians by Libyan air power. The U.S. has also had input into the draft elements, which have been discussed with Russia and China, the diplomat said. Beijing and Moscow have been cool to the idea of foreign military intervention into the Libyan crisis. But Western diplomats say they think an egregious attack on civilians from the air could change that. Chinese and Russian officials in New York couldn’t be immediately reached for comment. U.N. Secretary-General Ban Kimoon called on Libyan authorities to end the “government’s disproportionate use of force and indiscriminate attacks on civilian targets.” Mr. Ban urged Libya, in a telephone conversation Sunday with Libyan Foreign Minister Musa Kusa, to lift media restrictions and allow humanitarian organizations freedom of movement, according to a spokesman. Mr. Ban on Monday appointed Abdelilah Al-Khatib, the former Jordanian foreign minister, as his special envoy to Libya.
The envoy will “undertake urgent consultations with the authorities in Tripoli and in the region on the immediate humanitarian situation as well as the wider dimensions of the crisis,” a spokesman for Mr. Ban said. Mr. Obama said he authorized an additional $15 million in humanitarian aid to Libya Monday, adding to the $10 million pledged last week. U.N. aid officials said up to one million foreign workers and others trapped in Libya are expected to need emergency aid because of fighting in the North African nation, as the U.N. launched a $160 million appeal to international donors on Monday. “This appeal is based on planning scenario projecting up to 400,000 people leaving Libya—including the 200,000 who have left to date—and another 600,000 people inside Libya expected to need humanitarian aid to varying degrees,” said Valerie Amos, the U.N.’s emergency relief coordinator. Libyan warplanes launched multiple airstrikes on opposition fighters regrouping at Ras Lanouf, an oil port on the Mediterranean coast east of Tripoli, the AP reported, as Col. Gadhafi’s forces continued their effort to prevent rebel fighters from advancing toward Tripoli. Mohamad Samir, an army colonel fighting with the rebels, told AP that his forces were expecting reinforcements from the east. A day earlier, a heavy assault by pro-Gadhafi forces stalled the rebels’ advance toward Sirte, the hometown and a stronghold of Col. Gadhafi.
The attack on Ras Lanouf added to concerns about the North African country’s future ability to export the oil it produces. Crude oil prices rose close to 2½year highs Monday on worries that the heavy fighting would damage oil infrastructure, with crude oil for delivery in April hitting a high of $106.82 a barrel on the New York Mercantile Exchange. As fighting intensifies and fears of a protracted civil war grow, oil
U.N. Secretary-General Ban appointed the former Jordanian foreign minister as special envoy to Libya. markets are facing the prospect of a prolonged cut in crude shipments from the world’s 13th biggest oil exporter. Libya’s oil production of 1.6 million barrels a day has more than halved since the uprising against Col. Gadhafi broke out last month. Crude at 11 a.m was selling in New York at $105.47, up $1.05, or 1.01%. During morning trading crude hit its highest price in almost 2½ years. Morgan Stanley has stopped buying Libyan crude oil and refined products due to sanctions announced last month, a person familiar with the matter said. Attacks by pro-Gadhafi forces against the rebels over the weekend failed to win the government much
ground, increasing the likelihood of a prolonged standoff. The forces trying to oust Col. Gadhafi say they will be outgunned if the regime continues to unleash its air power on them and have asked for international support, including the imposition of a no-fly zone to protect them from more strikes, the AP reported. But they oppose foreign troops on the ground, and have called for airstrikes on foreign mercanaries fighting for Col. Gadhafi, and not against fellow Libyans in his armed forces. U.S. Defense Secretary Robert Gates last week, however, warned that imposition of a no-fly zone would require military intervention—saying it would have to begin with airstrikes on Libyan military facilities. The AP said a rebel force estimated at 500 to 1,000 fighters was pushing steadily down the highway toward Tripoli when it was driven out of the town of Bin Jawwad, east of the capital, on Sunday by proGadhafi forces using helicopter gunships, artillery and rockets. The fighting killed at least eight people and wounded 59, according to medical officials. The rebels regrouped about 40 miles to the east in Ras Lanouf, where MiG fighters circled over rebel positions Monday before launching airstrikes behind their front lines in the morning and afternoon, according to the AP. —Guy Chazan, Sam Dagher and Alistair MacDonald contributed to this article.
State-run media in China push deeper into Web Continued from first page Mr. Goldkorn said. Internet “is not all about news, it’s about user experience, it’s about technology.” Some users praised the government’s efforts while others poked fun at the idea of searching for information on a website run by a propaganda organ. The search engines set up by Xinhua and People’s Daily currently return far fewer search results than Baidu or Google Inc., but some experts say they have innovative features. Panguso, for example, has a search function dedicated to “commentary” which returns real-time results from Chinese microblogs. It also allows users to send search results from their computers to their cellphones via text message and includes a music search. Goso displays a real-time news feed on its homepage that includes reports from commercial Chinese media outlets such as iFeng.com, the portal of Phoenix Television. “They’re way behind in terms of products and content,” but some of these Internet ventures shouldn’t be dismissed, said Bill Bishop, a Beijing-based investor who watches the China Internet. “I don’t expect them to get a lot of share anytime soon, but if you’re playing a longer game, like the government here usually plays, three to five years from now people might be surprised.” State media outlets also have more resources at their disposal. As a monopoly nationwide broadcaster, CCTV has exclusive licenses for major events like the 2010 World Cup. In January, Xinhua unveiled a massive Beijing research center where it plans to develop media products. And last month, People’s Daily hired an ex-Google research executive to be its chief scientist for Goso. “State-owned media companies have capital advantages, content advantages, and human-resources advantages … but lack influence,” said Yu Guoming, a journalism professor at Renmin University in Beijing. State media outlets “will never keep up with private companies,” he said. CNTV, which was launched in 2009, has a 7.1% share of onlinevideo ad revenue, ranking fifth in the market. The top two video sites, Youku and Tudou, have 21% and 17%, respectively, according to research firm Analysys International. CCTV said it possesses the “irreplaceable advantage of resources,” while Xinhua said it is facing “the same challenge and transformation issue” as other traditional media. Both CCTV and Xinhua declined to disclose the amount of traffic to their websites. People’s Daily didn’t respond to requests for comment. Baidu—which had a 76% share of search-market revenue in China in the fourth quarter, according to Analysys International—said it welcomed state media’s efforts. “We’re always happy to see more competition,” a spokesman said. “It keeps us on our toes.” Victor Koo, chief executive of Youku, said CCTV and CNTV—which have partnerships to broadcast their content on Youku—“have been trying to do online video for a while” but “if you look at the market share they’re still a very small player in the overall market. And it’s not for lack of putting together a large effort behind it.” —Yoli Zhang and Kersten Zhang contributed to this article.
As of 11 a.m. ET
Euro 1.4015 À 0.17%
Yen/US$ ¥82.03 g 0.42%
Yen/A$ ¥83.29 g 0.12%
Oil 105.47 À 1.01%
Gold 1434.00 À 0.41%
Hitachi to sell hard-disk business to Western Digital for $4.3 billion
10-year Treasury g 2/32 yield 3.503%
3-month Libor 0.30950
In China, there is still no healthy push to splurge
BUSINESS& FINANCE. BUSINESS & FINANCE 20
HEARD ON THE STREET 32
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
LVMH to buy fabled Bulgari
French firm adds to its watch and jewelry brands, demonstrating strength of luxury sector BY INTI LANDAURO AND ELIZABETH HOLMES
LVMH agreed to take a controlling stake in Italy’s Bulgari. Above, the Bulgari boutique on New Bond Street in London. for luxury-sector multiples, which should help the whole sector,” said a Milan-based analyst. Shares in Italian peer Tod’s SpA were up 4% at €76.25, while in London, Burberry Group PLC was the second-highest riser on the FTSE 100 Index, up 4.2% at 1,206 pence ($19.62). LVMH shares were down 1% at €110.20. LVMH will use a mix of cash and debt to finance the acquisition, and its debt-to-equity ratio would rise to 25% from 15% previously, the company said, without giving further details. Bulgari said Paolo and Nicola
Bulgari will remain chairman and vice chairman of the Bulgari board of directors as part of the deal. The Bulgari family will be entitled to appoint two representatives to the LVMH board of directors and Francesco Trapani, Bulgari’s chief executive, will join the executive committee of LVMH. Mr. Trapani, who is also a member of the Bulgari family, will head an enlarged LVMH’s jewelry and watches business, which already includes Zenith and Hublot as well as TAG Heuer. The division saw the strongest revenue growth of LVMH’s
main business groups last year, posting a 29% rise in revenue to €985 million, but it is by far the smallest division and accounts for less than 5% of LVMH’s total revenue. “We found in Bernard Arnault and the group he has built all the elements that are required to guarantee the long term future of Bulgari,” Paolo and Nicola Bulgari said in a statement. They added the corporate culture at both firms is “completely identical,” a point also stressed by LVMH Chief ExecutivePlease turn to page 23
In listing fight, SGX trusts in niches [ Asia Deal Journal ] BY P.R. VENKAT The effort by Singapore's stock exchange to purchase Australia’s ASX Ltd. for more than US$8 billion marks the centerpiece of its push to catch up with Hong Kong’s surging stock market and stay relevant as competition intensifies. But Singapore Exchange Ltd. is also going after niches that its larger rival overlooks, as it moves to match the Hong Kong stock exchange’s appeal to far-flung companies looking to list in Asia’s heady growth markets. Singapore recently won the US$6.4 billion initial public offering of Hong Kong billionaire Li Ka-shing’s Hutchison Port Holdings Trust. If successful, the offering will be the city’s largest ever. It also won a pending IPO of nearly US$500 million by U.K.based gym operator Fitness First,
At Nomura, foreigner and female in big roles BY ATSUKO FUKASE
Bloomberg News
LVMH Möet Hennessy Louis Vuitton on Monday agreed to take a controlling stake in Italy’s Bulgari SpA, adding to the French firm’s watch and jewelry brands and underscoring the strength in the luxury sector. The deal, valued at about €4.3 billion ($6.03 billion), is the latest acquisitive move by LVMH, which has already swallowed up a string of competitors such as Fendi and Donna Karan, and last year disclosed it held a 17% stake in rival Hermès International SCA, which it has since raised to 20%. LVMH will issue 16.5 million new shares in exchange for the 152.5 million Bulgari shares currently held by the Bulgari family, which owns 50.43% of the firm, Bulgari said in a statement. The French firm will also submit a public offer at €12.25 a share for the stock held by minority shareholders. An LVMH spokesman said it estimated the deal at €4.3 billion, based on a share price of €113. The Bulgari family will end up with 3% of LVMH and would be the second-largest “family shareholder” behind Bernard Arnault, though several institutional investors may have larger stakes. LVMH offered a 61% premium to Bulgari’s Friday closing price of €7.59 and the shares of the Italian firm rose 60% in early trade Monday. The deal is “in the high range
asia.WSJ.com
Uneven contest IPO revenue from Hong Kong and Singapore exchanges, in billions of dollars
$1.0
Singapore
Hong Kong
0.75 0.50
Note: For dual listings, the full value is credited to each exchange with the exception of simultaneous listings of Chinese A and H shares. Source: Dealogic
0.25 0 2006 '07 '08 '09 '10
owned by London-based buyout firm BC Partners. The offering is planned for the third quarter. Bankers say other European, Vietnamese and Indonesian companies involved in real estate, commodities and consumer businesses are looking to Singapore. “We have been actively going around profiling ourselves [as a listings venue for foreign
2006 '07 '08 '09 '10
companies] in our own way,” said Lawrence Wong, executive vice president and head of listings at the exchange. Singapore has a long way to go. Hong Kong has been the world’s hottest IPO market for two years in a row, raising a total of US$53.2 billion last year in a wave that included foreign companies like Russia’s UC Rusal. Singapore raised US$6 billion; its largest
foreign IPO was the US$224 million offer by Norway’s STX OSV Holding Ltd. While it moves to seal the ASX deal amid regulatory scrutiny, the Singapore Exchange is focusing on niches. One is business trusts. While Hong Kong began listing realestate investment trusts in 2005, it limits public listings by other kinds of trusts. The Singapore Exchange has been marketing the structure aggressively. The Hutchison Port IPO “is a very clear statement that our business trust structure can help companies achieve certain business and financial objectives, which otherwise might be difficult to achieve in a normal company structure or may take a longer time,” Mr. Wong said. The trusts give their operators greater flexibility to sell securities backed by the cash flows from a broad range of assets, though that flexibility could expose investors Please turn to page 26
TOKYO—Nomura Holdings Inc. unveiled a broad reshuffling of its senior management Monday, promoting a foreigner to the highest role in the company’s 86-year history and naming its first female senior executive. Japan’s largest brokerage by revenue appointed Hong Kong-based Jasjit “Jesse” Bhattal as group deputy president and chief executive of the wholesale banking division. Takumi Shibata, current wholesale chief executive, will keep his roles as chairman of the division and deputy president and chief operating officer of Nomura Holdings. It also appointed 45-year-old Junko Nakagawa as chief financial officer, its first female senior executive and a rare move for a major Japanese financial institution. Current finance chief Masafumi Nakada will become president of Nomura’s trust banking unit. Both appointments take effect April 1. The moves are part of the bank’s continuing efforts to become a true global player in investment banking, aiming to compete with Western giants like Goldman Sachs Group Inc. and Morgan Stanley. As part of this agenda, Nomura bought Lehman Brothers’ Asian and European operations in September 2008. By giving Mr. Bhattal more responsibility for the wholesale division, Nomura seeks to improve its global operations, which lag behind those of the world’s top investment banks in terms of profitability. The company’s wholesale division includes its global-markets, investment-banking, trading and other businesses. Mr. Bhattal, 54 years old, was born and raised in India. He became president and chief operational officer of Nomura’s global wholesale banking division in April. He is Lehman’s former chief executive in Asia. Meanwhile, Ms. Nakagawa’s promotion from co-deputy chief financial officer makes her the first woman to become an executive managing director and the first on Nomura’s executive management board. The board currently consists of 11 men. Ms. Nakagawa graduated from Kobe University and became co-deputy chief financial officer last June. She quit the company in 2004 due to her husband’s overseas job posting, and returned as president of Nomura Healthcare Support & Advisory from 2008 to 2010. Ms. Nakagawa earlier held various senior positions in the finance divisions.
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Tuesday, March 8, 2011
BUSINESS FINANCE
Hitachi to sell disk-drive unit Western Digital’s $4.3 billion deal creates a dominant player, posing challenge to Seagate Western Digital agreed to acquire Hitachi Ltd.’s hard-disk-drive business for about $4.3 billion in cash and stock, the companies said Monday, in a deal that would create a dominant player in the segment with a nearly 50% market share. Under the deal to acquire Hitachi Global Storage Technologies Ltd., Western Digital will pay $3.5 billion in cash and issue the Japanese electronics conglomerate 25 million of its own shares. Hitachi would own about 10% of Western Digital’s stock after the issuance. Shares of Western Digital were ahead 14% at $34.12 in midday trading Monday on the New York Stock Exchange, while Hitachi rose 4.5% to $64. The deal comes amid significant challenges for the hard-disk-drive industry. Once an integral part of all PCs, hard-disk drives now compete with flash-memory products to be the main storage device for everything from laptop computers to computer servers, whereas fastgrowing products like tablet computers don’t use hard-disk drives. For Hitachi, the deal marks a significant milestone in the company’s shift away from its consumer electronics-related operations toward its future growth drivers in large in-
Associated Press
BY DAISUKE WAKABAYASHI AND MATT JARZEMSKY
Hitachi President Hiroaki Nakanishi seen last April at a conference in Tokyo. frastructure businesses such as railways and power generation. Hitachi bought the HDD operation from International Business Machines Corp. in 2003 for about $2 billion, but it struggled to turn a profit as prices for hard disk drives plunged amid intense competition. “To continue delivering solid performance next fiscal year and beyond, we need to secure ample funding to back up our business,” said Hitachi President Hiroaki Nakanishi at a news conference Monday in
Tokyo. “In that sense, this sale is very important,” he said. In the fourth quarter of 2010, Western Digital accounted for about 31% of the total market while Hitachi totaled about 18% of shipments for hard disk drives, according to research firm iSuppli. Together, the two companies would dwarf No. 2 Seagate Technology, which accounted for 29% of shipments. Western Digital expects the deal to add to its per-share earnings, excluding acquisition-related ex-
penses, restructuring charges and amortization of intangibles. Hitachi said Western Digital is strong in the consumer market for external hard drives while the Japanese company has a footing with large corporate customers. In addition, there is very little overlap geographically with Western Digital’s main customer base, which is located in North America and Europe, versus Hitachi’s strength in Asia. “The HDD market is characterized by rapid changes and constant technology upgrades, and it requires a lot of investment. The management of this kind of business should be independent so executives can make their own decisions,” said Mr. Nakanishi. Steve Milligan, president and chief executive of the Hitachi unit, will be Western Digital’s president. Two Hitachi representatives will join Western Digital’s board. Hitachi said the hard-disk-drive unit’s operating profit rose six-fold to $645 million in 2010 on revenue of about $6 billion. In January, Western Digital reported a 47% drop in quarterly earnings. Reflecting the price pressure and tough competition facing the business, Western Digital’s revenue fell 5.5% to $2.48 billion even as shipments rose 5.5%. —Juro Osawa contributed to this article.
Terumo makes U.S. medical acquisition BY JURO OSAWA AND ANNA MOLIN TOKYO—Terumo Corp. said Monday it is buying U.S. bloodtransfusion-technology firm CaridianBCT Holding Corp. for $2.63 billion, marking the latest overseas acquisition by a Japanese company buoyed by the strong yen. The medical-equipment company said it would acquire all of the shares in Colorado-based CaridianBCT, a wholly owned unit of Gambro AB of Sweden, and aims to close the deal in April or May. The acquisition will increase Terumo’s sales in blood-transfusion-re-
lated businesses to about 70 billion yen, or about $850 million, making it the world’s leading company in the sector, it said. The deal, the fifth-largest overseas acquisition in the medical and health-care sectors by a Japanese company, according to data provider Dealogic, is part of Terumo’s efforts to expand overseas to achieve its goal of one trillion yen in group revenue within the next 10 years. “This is a major step forward in our growth strategy,” said Terumo President Yutaro Shintaku at a news conference. The acquisition is also the latest in a series of deals by major Japa-
nese companies—aided by the yen hovering near 15-year highs against the dollar—as they look to expand for growth. Earlier this month, Daiichi Sankyo Co. said it will spend $805 million to buy privately held California drug maker Plexxikon Inc., hoping to tap into its promising pipeline and technology platform. Meanwhile, FujiFilm Holdings Corp. said last month it would buy all of the equity interests in two biodrug-manufacturing units of U.S. pharmaceutical giant Merck & Co. in a deal that local media reports said was valued at about $500 million. Gambro is a unit of Sweden’s In-
vestor AB, the main investment arm of the country’s prominent Wallenberg family. The acquisition price corresponds to about 15 times CaridianBCT’s earnings before interest, taxes, depreciation and amortization, Investor said. CaridianBCT is one of two remaining independent entities within Gambro, which focuses on kidney and liver dialysis and is jointly controlled by Investor and private-equity fund EQT IV. Investor and EQT bought Gambro in 2006 and split the company into three units, including Gambro Healthcare which was sold in 2007. With the sale of CaridianBCT, Gambro will be the sole entity.
Japan puts hold on pair of vaccines BY SHAWN SCHROTER TOKYO—Japan’s health ministry said it has temporarily suspended the use of Prevnar, made by Pfizer Inc., and ActHIB, made by SanofiAventis SA, as it investigates whether the deaths of four children are linked to the pediatric vaccines. The children, ranging in age from 6 months to 2 years old, died after receiving either Prevnar, ActHIB or a combination of vaccinations, the ministry said in a statement. The deaths were reported between March 2 and 4. Prevnar is a pneumococcal conjugate vaccine protecting against a bacterium that can cause meningitis. ActHIB is a type b Haemophilus influenzae vaccine protecting against a bacterium that can cause meningitis and pneumonia. In 2009, Pfizer suspended distribution and quarantined a batch of Prevnar in the Netherlands following reports of the deaths of three infants around the time of vaccination. However, it was later determined that there was no correlation between the deaths and the vaccine injections. The Japanese Health Ministry said that the suspension will be in place pending the results of an investigation of the four deaths by a group of medical experts, expected to be released on March 8. Pfizer “thoroughly evaluates all reported cases and works closely with health authorities to determine if there is any association with use of our medicines and vaccines,” a Pfizer spokeswoman said Monday, adding that the Health Ministry has posed a number of questions to the drug maker and it is in the process of preparing responses to those inquiries. She added that based on the company’s evaluation, the Prevnar doses administered in the four cases were from three separate lots. A spokesman for Sanofi said that his company is also awaiting the finding of the panel of experts and that it isn’t planning to recall ActHIB at this time.
INDEX TO BUSINESSES AND PEOPLE Businesses This index of businesses mentioned in today’s issue of The Wall Street Journal is intended to include all significant reference to companies. First reference to the companies appears in bold face type in all articles except those on page one and the editorial pages. Accuray..........................25 Adobe Systems.............22 AirAsia..........................27 Airbus............................25 Air New Zealand .......... 25 Airsavings.....................23 Allegiant Travel............23 American Electric Power.........................15 American Express.........25 AMR .............................. 23 Apple.............................18 Applied Materials.........14
ArcelorMittal................21 ASX ............................... 19 AutoDesk ...................... 22 Baidu...............................1 Bain Capital..................21 Bharat Petroleum.........32 Boeing...........................25 Boston Scientific..........25 Bulgari...........................19 Canon ............................ 25 CaridianBCT Holding .... 20 Carlyle Group................21 Cathay Pacific Airways 25 Chevron.........................25 China Coal Energy........25 China Mobile...................1 China National Offshore Oil...............................22 China Shenhua Energy.25 China Vanke..................25 Ciena ............................. 25 Cisco Systems .............. 25 Citic Securities.............22 Cnooc.............................25 Daewoo International .. 21 Delta Air Lines.............23 Dunkin’ Brands.............21 Exxon Mobil..................25 Facebook ....................... 22
Fitness First ................. 19 Ford Motor....................18 Galleon Group...............26 Gambro..........................20 Google......................18,22 HDFC Bank....................25 Heritage Oil..................22 Hermès International.........19,23 Hindustan Petroleum...32 Hitachi......................20,25 Hitachi Global Storage Technologies Ltd ....... 20 Honda Motor............18,25 Hunton & Williams.......22 Hutchison Port Holdings.....................19 Hyundai Motor................1 ID Law Partners ........... 22 Indian Oil ...................... 32 Inpex..............................25 Intel...............................25 Intellectual Ventures ... 15 International Business Machines....................20 Investor AB...................20 Itochu............................21 Jetblue Airways............23 J.P. Morgan Chase........32 Korea Electric Power....21
Korean Air Lines...........25 Korea Resources...........21 LG International ........... 21 Lockheed Martin.............5 LVMH Möet Hennessy Louis Vuitton.............19 Mapletree Commercial Trust...........................26 Marubeni.......................21 Microsoft..................15,22 Mitsui............................21 Nissan Motor................25 Nomura Holdings..........19 Oil & Natural Gas.........27 Peabody Energy............21 Perennial Real Estate..26 PetroChina .................... 25 Pfizer.............................20 Reliance Communications........25 Rio Tinto.......................15 S&P 500 ........................ 25 Sanofi-Aventis..............20 Santos...........................25 Seagate Technology ..... 20 Shandong Gold-Mining.25 Shenhua Group.............21 Sina ................................. 1 Singapore Exchange.....19
Sojitz.............................21 State Street..................25 Sumitomo ..................... 21 Suntech Power Holdings.....................14 Tata Motors..................25 Terumo..........................20 Thai AirAsia..................27 Thomas H. Lee Partners.....................21 Tod’s..............................19 TomoTherapy.................25 Total..............................22 Toyota Motor..................1 Tullow Oil......................22 Tyco International........26 United Continental Holdings.....................23 United Technologies.....14 US Airways Group........23 Vale ............................... 21 Virgin Blue Holdings....25 Walt Disney..................25 Western Digital.......20,25 Xstrata..........................21 Youku.com.......................1 Zhejiang Southeast Space Frame..............22 Zijin Mining Group.......25 Zions Bancorporation...25
People This index lists the names of businesspeople and government regulators who receive significant mention in Today’s Journal. Abele, John...................25 Albanese, Tom..............15 Aparicio, Javier.............22 Arnault, Bernard...........23 Bain, Malcolm...............22 Barron, Peter................22 Bejar, Raphael .............. 23 Bernanke, Ben..............24 Bhattal, Jasjit...............19 Bishop, Bill....................18 Bulgari, Nicola..............19 Bulgari, Paolo ............... 19 Chênevert, Louis R.......14 Cioffi, Ralph..................26 Combias, James............24 Cooper, Christian..........24 Daniels, Eric..................27 DeVita, James .............. 26 Diamond, Bob ............... 27 Douramakos, Tom.........23 Ebbers, Bernard............26
Epstein, Jeffrey..............8 Fisher, Richard..............24 Fletcher, Owen ............. 22 Geoghegan, Michael.....27 Goldkorn, Jeremy ........... 1 Green, Stephen.............32 Guidotti Russo, Hugo...22 Gulliver, Stuart.............27 Hester, Stephen............27 Jobs, Steve...................18 Khan, Akram.................10 Kim Shin-jong...............21 Kirby, Scott...................23 Koo, Victor....................18 Kozlowski, L. Dennis....26 Lam, Vivian...................26 Levy, Andrew................23 Li Ka-shing....................19 Little, Edward...............26 Lokeris, Peter ............... 22 McMichael, Lawrence G................26 Milligan, Steve ............. 20 Minnick, Wendell............5 Miura, Tetsuya..............24 Morris, Michael ............ 15 Mulally, Alan.................18 Myhrvold, Nathan.........15 Nakada, Masafumi.......19 Nakagawa, Junko ......... 19
Nakanishi, Hiroaki........20 Okuda, Hiroshi..............18 Pahwa, Sandeep...........26 Pinto, Mark...................14 Potter, Ben....................25 Rajaratnam, Raj............26 Reding, Viviane.............22 Richter, Christopher.....18 Rigas, Timothy ............. 26 Salvaggio, Greg ............ 24 Sands, Peter.................27 Serebriakov, Vassili......24 Shi Zhengrong..............14 Shibata, Takumi............19 Shintaku, Yutaro .......... 20 Skilling, Jeffrey............26 Sorensen, Jay...............23 Stillman, Charles..........26 Swartz, Mark................26 Tannin, Matthew..........26 Tassapon Bijleveld........27 Thomas, Richard...........22 Toyoda, Akio...................1 Trapani, Francesco........19 Travis, Nigel..................21 Varley, John..................27 Villalta, Tom.................25 Watanabe, Katsuaki.....18 Wong, Lawrence...........19 Yu Guoming .................. 18 Yu, Simon......................10
Tuesday, March 8, 2011
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Dunkin’ brands to expand in Asia Economic recovery, rise in region’s currencies likely to aid retailer’s customer base; China and Vietnam in focus BANGKOK—The parent company of Dunkin’ Donuts and Baskin-Robbins ice cream shops plans to expand further in Asia, with thousands of new outlets in China in coming years and ambitions to open its first stores in Vietnam within 18 months. The moves come as the company, Dunkin’ Brands Inc., sees a steady economic recovery in markets where it operates and amid further appreciation in Asia’s currencies, which should boost the spending power of the region’s consumers. “You’d have to think it’s natural for some of these fast-growing economies to have appreciating currencies” as more companies invest their money in Asia, said Dunkin’ Brands Chief Executive Nigel Travis in an interview. The Canton, Mass.-based company—owned by a consortium of private-equity firms including Bain Capital, Carlyle Group and Thomas H. Lee Partners—has long had an international footprint. About 3,000 of its 9,700 Dunkin’ Donuts restaurants, for example, are outside of the U.S. All its stores are franchised. But a large percentage of its Asian stores are located in a handful of countries—including South Korea, the Philippines, Indonesia and Japan—with minimal presence in some of the region’s fastest-growing markets like China and India. That’s
Bloomberg News
BY PATRICK BARTA
Dunkin’ Donuts had a few dozen locations in China at year-end. Above, customers at a 2008 store opening in Shanghai. in part because the company focused some of its earlier growth on markets with closer ties to American culture, including places with a sizeable U.S. military presence.
Dunkin’ Donuts had about threedozen locations in mainland China at the end of 2010, while many other Western restaurant chains are aggressively ramping up expansion
Mongolia narrows the bidders for coal project to six from 15 BY MIN-JEONG LEE
JAPAN Area of detail CHINA
500 miles 500 km European Pressphoto Agency
SEOUL—Competition to develop Mongolia’s Tavan Tolgoi coal mine—one of the world’s biggest undeveloped deposits—is intensifying after the government narrowed the race to six bidders from 15, a Korean participant said Monday. Rapid industrialization in Asia, especially China and India, is prompting miners and other investors to step up their search for reserves of coking coal, key to steelmaking. Tavan Tolgoi, estimated to contain at least five billion metric tons of coal, is close to Mongolia’s border with China. That will give the winning bidder a ready-made export market, with a further option, once infrastructure is in place, to send coal by rail through Russia to the Pacific coast. Korea Resources Corp., or Kores, said Monday its consortium of Korean, Russian and Japanese companies will begin negotiating with the Mongolian government March 15. In addition to Kores, the consortium includes Itochu Corp., Sumitomo Corp. Marubeni Corp., Sojitz Corp. and OAO Russian Railways, an Itochu spokesman said. Other preferred bidders include Peabody Energy Corp. of the U.S., Brazil’s Vale SA, Xstrata PLC and ArcelorMittal, Kores said in a statement. Peabody separately confirmed it has been selected as a preferred bid-
RUSSIA
Ulan Bator
MONGOLIA
CHINA
Tavan Tolgoi
Beijing
Tavan Tolgoi, above, is estimated to have at least five billion metric tons of coal. der. “We look forward to continuing to work with the government on the best approach for Tavan Tolgoi to benefit the people of Mongolia.” Peabody separately confirmed it has been selected as a preferred bidder. Xstrata also said it is one of the shortlisted bidders and that Xstrata Coal is “considering new opportunities within Mongolia.” ArcelorMittal declined to comment. The China-Japan consortium of Mitsui & Co. and Shenhua Group is also on the shortlist, Kores said. A Mitsui spokesman declined to comment. Tavan Tolgoi “is one of the few large mines left in the world that can produce soft coal used in
steelmaking,” Kim Shin-jong, Kores’s chief executive, said in a statement. “(We) will do our best to win the development rights.” The development of the Tavan Tolgoi mine will likely require an initial investment of about $7.3 billion, Kores said. The government will spearhead the deposit’s development in eastern Tsankhi using contract miners. Tsankhi block 1, which has been opened to bids from foreign investors, has an estimated 1.2 billion tons of coal. —Mari Iwata in Tokyo, Mark Peters in Chicago and Devon Maylie in London contributed to this article.
there. Despite the opportunities for growth in Asia, retail-food operations face significant risks, in large part because of the rising commodity costs squeezing profit margins.
The costs of wheat and other grains, for instance, are at their highest levels since 2008, while prices for coffee—another Dunkin’ staple—have also soared over the past year. China remains the company’s top international target in the long run, with ambitions to eventually open thousands of stores there. But it may take a while to fully ramp up, Mr. Travis said, because the company is trying to focus on a few cities, including Shanghai, before expanding more aggressively elsewhere. It has followed a similar strategy as in the U.S., where Dunkin’ Donuts has a large presence in certain places such as the Northeast, but little or no presence in some major markets like California. “I’m nervous about going all over China and then finding out we have issues,” he said. “I’m quite content to build it as we are and get real knowledge” through a more “disciplined” expansion, he said. Other markets with room for growth include Indonesia and Thailand, the latter Mr. Travis said could probably sustain 50% more locations. It had 197 Dunkin’ Donuts stores and 10 Baskin-Robbins outlets at the end of 2010. Vietnam is one of the most attractive markets, Mr. Travis said. The company is looking for partners there and hopes to begin adding outlets within 18 months. “It’s a mini-China,” he said.
22
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
CORPORATE NEWS
In 1991, the Spanish newspaper El País published an article centered on a dispute between Madrid plastic surgeon Hugo Guidotti Russo and one of his patients over an allegedly botched breast surgery. The headline: “The Risk of Wanting to Be Slim.” By Paul Sonne, Max Colchester And David Roman Nearly 20 years later, Dr. Guidotti Russo, backed by Spain’s privacy regulator, contends that the tale of the dispute is personal information and wants to purge the article from Google, where it shows up on the first page of results when his name is searched. His complaint accounts for one of about 80 instances in which the Spanish regulator has told U.S.based Google Inc. to remove personal information about individuals from its search results. Google says it plans to challenge most of those orders, arguing that the agency is overstepping its authority. In January, a Spanish court heard the first five complaints that Google is contesting, including Dr. Guidotti Russo’s. Now, after weeks of deliberation, the Spanish court is considering referring the matter to the European Court of Justice in Luxembourg to clarify European privacy law, according to a person familiar with the situation. “We’re pleased that the [Spanish] court is considering asking guidance from Europe’s top court on whether Spain’s [data-protection agency] has overridden European
law. It shows that key issues are at stake,” Peter Barron, Google’s head of European external relations, said in a statement. “Requiring intermediaries like search engines to censor material published by others would have a profound chilling effect on free expression without protecting people’s privacy.” Such a referral could pave the way for a major Europe-wide ruling on the indexing of personal data on the Web—but it also could delay a resolution for years. European lawmakers in Brussels, meanwhile, are working on an overhaul of the same European Union data-protection law the Luxembourg court could be asked to interpret. The legal wrangle between Google and the Spanish regulator comes amid a broader debate about how much control individuals should have over their private data and reputations in the era of the Internet. A movement has cropped in parts of Europe to create a “right to be forgotten,” which would let individuals excise personal information from the Web on privacy grounds. The European Commission, as part of its data-protection overhaul, has proposed recognizing such a right. France’s Senate has also approved similar proposals, which have yet to be ratified by the National Assembly. Though freedom-of-expression provisions of Spanish law protect newspapers, legal gazettes and other publishers from government censors, the Spanish data regulator contends the protections don’t extend to Internet search engines like Google.
Associated Press
Google face-off tests demands for Web purging Google lawyer Javier Aparicio, left, addressed a Jan. 19 hearing in Madrid on the retention of personal data on the Web. The idea is that the Internet shouldn’t retain, or remember, a citizen’s personal data and leave it accessible in perpetuity. The Spanish regulator says that in situations where having material included in search results leads to a massive disclosure of personal data, the individual concerned has the right to ask the search engine to remove it on privacy grounds. Google calls that censorship. “Spain has always taken an extremely strong line over privacy,” says Malcolm Bain, a lawyer at ID Law Partners in Barcelona who specializes in information-technology law. That stance could benefit people like Dr. Guidotti Russo. The El País article from two decades ago says he was accused of medical malpractice in connection with the allegedly botched surgery, and that the 21year-old plaintiff the equivalent of around $4 million in damages; it isn’t clear whether she received any money. El País, which identified the plaintiff in its article only by her initials, says it stands by its article. The newspaper isn’t being asked to remove it from its own website. Dr. Guidotti Russo, who still has his practice, says he was cleared of the charge of reckless endangerment, but declined to discuss the
matter further. The Spanish court where the legal dispute described in the 1991 article took place said the records of the proceedings were impossible to retrieve because they dated from before the country digitized court records. Dr. Guidotti Russo’s lawyer, Gabriel Gómez, says his client was cleared of any criminal wrongdoing. He argues, however, that the outcome of the 20-year-old case isn’t relevant. Mr. Gómez says that what’s at stake is an individual’s right to remove personal information he objects to—whether it is accurate or not. Javier Aparicio, a lawyer representing Google, said at a Jan . 19 Spanish court hearing that Spain is the only country where the company is forced to remove links to Web pages that don’t have illegal content of any kind. In other countries, courts have asked the company to delete links to pages with material such as illegal pornography or bootleg movies or songs. With the EU’s 15-year-old dataprotection law slated for overhaul within the next year or two, the issue of how to reconcile the freedom of expression with the right to privacy has become a recurrent theme
in Europe. Viviane Reding, EU commissioner for justice, fundamental rights and citizenship, has introduced her own version of a right to be forgotten. Her proposal, which is still taking shape, could allow Internet users to force websites like Facebook Inc. to permanently erase personal data about them, such as photos and e-mail addresses. “God forgives and forgets,” Ms. Reding said in a November speech. “But the Web never does.” Her proposal will be up for debate for at least a year before EU lawmakers vote on a final draft. Some privacy specialists say there is a difference between information that is part of the public record and personal data or photos submitted to a social-networking site. “It may be that there should be a right to have your name removed from a social network where you volunteered it in the first place,” says Richard Thomas, a former British data-privacy commissioner, who is now a strategy adviser to international law firm Hunton & Williams LLP. “But that’s rather different from deleting altogether a record, for example, of a crime that you committed or something embarrassing from your past.”
Chinese steel firm settles software-piracy suits
Tullow, Uganda end dispute
BY OWEN FLETCHER
KAMPALA, Uganda—Tullow Oil PLC and the Ugandan government have resolved a tax dispute that should allow Tullow to bring Total SA and China National Offshore Oil Co. into its oil projects in the East African country, Uganda’s junior energy-and-minerals minister said in an interview Monday. “We have reached an understanding on the taxes and we don’t expect more interruptions now that the election period is over,” the official, Peter Lokeris, said in a phone interview. The Ugandan government has also restored two licenses in its oilrich Albertine Rift Basin to U.K.based Tullow, Mr. Lokeris said. The licenses were withdrawn at the height of the dispute, he said. Mr. Lokeris’s comments suggest the impasse between Uganda and international oil companies has ended and should accelerate foreign oil companies’ entry into the country. Tullow’s attempt to involve China National Offshore Oil, or Cnooc, and Total in its projects had been held up by a tax dispute between Uganda and Heritage Oil PLC over the capital gains from Tullow’s purchase of
Guangzhou Wuyang Steel must pay $198,000 to three U.S. companies as well as damages. A court in Guangzhou’s Nansha district, in southern China, in May accepted the lawsuits filed by the three U.S. companies, Zhejiang Southeast Space Frame said last year. The use of pirated software is widespread in Chinese homes and offices. Microsoft in July said it settled a separate copyright infringement case with China’s Citic Kington Securities Co., a unit of Citic Securities Co.
,Bloomberg News
BEIJING—Software makers Microsoft Corp., Adobe Systems Inc. and Autodesk Inc. settled separate copyright infringement lawsuits against a midsize Chinese steel structure engineering company, Guangzhou Wuyang Steel Structure Co., the industry group Business Software Alliance said. The agreement marks the latest triumph for the U.S. software makers against software piracy in China. The agreement means the Chinese company, a subsidiary of Zhejiang Southeast Space Frame Co., must pay a total of 1.3 million yuan, or $198,000, to the three software makers as well as undisclosed financial damages, the BSA said Monday. The Chinese company will purchase authorized software products such as Microsoft’s Windows operating system, Adobe’s Photoshop graphics editing program and Autodesk’s AutoCAD design software, the BSA said, without elaborating. Phone calls to Guangzhou Wuyang Steel Structure and its parent
company went unanswered late Monday. The three U.S. companies signed the agreements with the Chinese company Monday morning, said Dai Zhipeng, Adobe software legalization head for Greater China. Microsoft and Autodesk declined to comment.
BY NICHOLAS BARIYO
Tullow Oil regained a license to the Kingfisher well near Lake Albert in Uganda. Heritage’s assets in Uganda. Tullow declined requests for comment. Tullow is scheduled to release its 2010 earnings Wednesday. Since July, Tullow has pushed Uganda to endorse its $1.45 billion purchase of the interests of its former partner, Heritage, in blocks 1 and 3A, as well as the planned sale of a third of Tullow’s licenses. The government repossessed the Kingfisher oil field in August last year from Tullow, accusing the company of not applying for a produc-
tion license in time. A month later, the government repossessed the entire block 3A, located at the southern tip of Lake Albert, from Tullow following the expiration of its exploration license. The seizures were seen as a pressure tactic in light of the tax dispute. Mr. Lokeris decline to discuss the details of the agreement between Uganda and Tullow. But he said the conflict had been resolved. —James Herron contributed to this article.
Tuesday, March 8, 2011
23
THE WALL STREET JOURNAL.
CORPORATE NEWS
Airlines seek new ways to add fees After checked bags, carriers study charges for early boarding, fancier foods and seats that recline more than others BY SUSAN CAREY Airlines are digging around for ways to pile on more fees. In recent years, airlines from AMR Corp.’s American Airlines to Spirit Airlines Inc. found new ways to boost profits—and annoy fliers—by charging fees for checked bags, selecting a choice seat or other services once included in ticket prices. Now they’re studying and testing various new fees for services that never were part of a ticket: Want a seat that reclines more? A preordered champagne brunch in coach? Insurance against a blizzard that waylays a trip? Access to speedy security lines and early boarding? Soon you might be able to get them all—for a price. Airlines started charging for checked bags, snacks, pillows and other items in a big way in 2008. Last year, such fees brought in an estimated $22 billion, or 5% of global industry revenue. Carriers could tap into “billions and billions of potential revenue” says Tom Douramakos, chief executive of GuestLogix Inc., a Toronto technology supplier that helps airlines sell products and services. “The airlines are only scratching the surface” with baggage and seat fees, he insists. They could become virtual shopping malls, offering captive travelers a variety of buy-whilethey-fly items such as theater tickets or a handbag, he says. Two small, low-fare carriers, Spirit and Allegiant Travel Co., have led the way in the U.S. by charging for almost everything but lavatory access and by marketing travel packages including hotels, rental cars and theme-park tickets along with air travel. Spirit derives 27% of its revenue from fees, says the U.S. Department of Transportation. Last summer, it began charging between $20 and $30 for a second carry-on bag. Spirit also charges between $10 and $18 for advanced seat assignments. Allegiant last year piled an average of $34.58 in fees and commissions from travel-related services atop its average fare of $76.26. Andrew Levy, Allegiant’s president, says it is looking at copying Spirit’s carry-on fees. A rich new vein for airline fees is early boarding, which American and United Airlines already sell to their nonelite frequent fliers. As more
Flying high AIRLINE CATEGORY
Global low-cost
Fee hungry
U.S. majors
International
(Air Arabia, Air Berlin, Virgin America, Westjet, others)
(Allegiant, Ryanair, Spirit, Tiger Airways, others)
(American, Delta, United, others)
(British Airways, Lan Airlines, Scandinavian, others)
TOTAL REVENUE
$66.2 billion
$19.4 billion
$92.6 billion
$295.4 billion
ANCILLARY REVENUE
$3.6 billion
$3.8 billion
$6.7 billion
$8.5 billion
AS PERCENTAGE OF TOTAL
5.4%
19.6%
7.2%
2.9%
Note: 2010 estimates
passengers avoid paying checked luggage fees by hauling their bags on board, overhead bin space is at a premium. That means getting to board ahead of other travelers can be worth a few extra bucks. Jay Sorensen, president of Shorewood, Wis., airline consulting firm IdeaWorks Co., predicts that charging nonelite fliers for advanced seat assignments is inevitable. Big carriers already have discovered passengers will pay for better seats in coach. Delta Air Lines Inc. recently said it will remove seats from its international planes by summer to create an “Economy Comfort” zone that offers up to four inches more legroom and 50% more recline than regular coach seats. Seating there will cost an extra $80 to $160 each way. Delta’s top elite fliers won’t have to pay, and its two lower tiers will receive 50% and 25% discounts, respectively. United Continental Holdings Inc. said it plans to expand the roomier Economy Plus seating it already offers in coach cabins of its United Airlines planes to the aircraft of merger partner Continental Airlines. Elite frequent fliers get access automatically, but other travelers can “buy up” to these seats. United even sells an annual upgrade to
LVMH agrees to acquire controlling stake in Bulgari Continued from page 19 Bernard Arnault. The transaction comes as the luxury goods market is rebounding sharply from a deep trough during the recession. Bulgari reported a 21% jump in quarterly revenue in January, helped by strong sales in Japan, pushing its annual sales well over €1 billion. Watch sales account for about a fifth of Bulgari’s revenue while jewelry accounts for nearly half. Mr. Trapani aims to push more aggressively into China this year. The agreement with the Bulgaris contrasts with Mr. Arnault’s standoff
with Hermès International SCA. LVMH shocked the family-owned luxury brand last year when it disclosed it controlled 17% of the smaller company, a stake LVMH boosted in December to about 20%. Mr. Arnault recently described the Hermès investment as peaceful but not passive, while Hermès’ Chief Executive Patrick Thomas said last week that LVMH’s stake is not “desired” nor “desirable.” In response to LVMH’s move, the Hermès family members plan to regroup a majority of the company into a family-controlled holding company to lock up the firm from any takeover intent.
Source: IdeaWorks
Economy Plus for $425. Scott Kirby, president of US Airways Group Inc., says some fliers are “absolutely willing to pay for a better seat on the airplane.” US Airways sells Choice Seats, window or aisle seats in the front of coach with no extra legroom. He says he thinks that program ultimately could yield
between $200 million and $300 million annually, up from about $40 million this year, once US Airways expands its sales efforts. While some new ideas may never make it off the ground, the industry is clearly feeling the pinch of higher fuel prices and seeking new revenue sources. So far this year there have
been six successful domestic fare increases by U.S. carriers, compared with just three for all of last year, says FareCompare.com, a tracking service. Jetblue Airways Corp. sells first-run movies. Delta offers Wi-Fi for a fee. Most carriers sell coach food and charge for transporting minors and pets, having reservations agents help book a ticket and changing ticket times, dates and destinations. Airsavings SA, a Paris-based firm that creates products for airlines to sell, thinks the industry “is at the end of the road” for charging for once-free services, says CEO Raphael Bejar. Now, carriers’ emphasis is shifting to new services that allow flyers to customize their travel, he says. Airsavings offers weather insurance and runs a travel concierge service that consumers can buy on a per-trip basis. It recommends restaurants, arranges for theater tickets and re-books travel when necessary. Airlines also are experimenting with improving the options and quality of cuisine in coach. It could prove to be more of a passengerpleaser than money-maker, though. U.S. airlines now sell economy-class customers boxed snacks and shelfstable meals costing between $6 and $12, a pursuit that is, at best, breakeven.
2010 RÉSULTS
A remarkable performance “VINCI recorded strong growth in revenue and profit in 2010. The year’s external growth operations, particularly the acquisition of Cegelec, contributed substantially to the growth in revenue, as did the momentum in motorway concessions and the good resilience of the works activities in our contracting branch. This sound performance reflects a return to organic growth during the second half of the year, which we expect to see confirmed in 2011. The contracting branch’s order book increased by almost 15% over the year even though four major contracts have not yet been included: the South Europe Atlantic high-speed line between Tours and Bordeaux, the new Notre Dame des Landes airport, the Nice stadium and the first section of the Moscow–St Petersburg motorway. These results show that our concession-construction business model has the capacity to create value in the high-potential markets of urban development, mobility and energy efficiency. On my proposal, the Board of Directors has decided to increase the 2009 dividend by 3.1%, bringing the dividend for 2010 to €1.67 per share.” Xavier Huillard Chairman and CEO
Revenue: +8.6% • €33.4 billion Operating profit from ordinary activities: +10.8% • €3,434 million, i.e. 10.3% of revenue Net profit: +11.3% • €1,776 million, i.e. 5.3% of revenue Order book at 31 December 2010: +15% • €25.9 billion Dividend: +3.1% • €1.67 per share* * Dividend to be proposed to the Shareholders Meeting on 2 May 2011
www.vinci.com
24
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
INTERNATIONAL INVESTOR
Treasurys rebound from early losses BY MIN ZENG
year bonds Thursday. Late morning in New York, the benchmark 10-year note was down 2/32, or 62.5 cents for each $1,000 invested, pushing the yield up to 3.503%, as prices and yields move inversely. The two-year note fell 5/32, to yield 0.693%. The five-year note, the best performer, was up 1/32, to yield 2.175%. Shorter-dated notes got some support from the Federal Reserve, which bought $6.61 billion in Treasurys maturing from September 2013 to February 2015. It was part of the central bank’s $600 billion Treasury bond-buying program.
NEW YORK—Shorter-dated Treasurys pared early losses as some investors sold stocks and bought safe assets amid the political turmoil in the Middle East and U.S. CREDIT North Africa. MARKETS Long-dated Treasurys reclaimed most of their lost ground, though they were largely laggards ahead of the week’s $66 billion in debt sales. The Treasury Department will sell $32 billion in three-year notes Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-
Japanese yields slip as oil rises BY ANDREW MONAHAN
Thursday. The offerings could push prices higher if they show strong demand, but market participants are on edge after a recent string of lackluster sales. The benchmark 10-year government-bond yield fell 0.02 percentage point to 1.275%. The 10-year yield could fall to 1.255% this week, said Tetsuya Miura, chief market analyst at Mizuho Securities. The gains came as oil surged, sending the benchmark Nikkei Stock Average down 1.8% as investors worried that higher oil prices will push up gasoline costs and depress spending in key export markets.
TOKYO—Yields on Japanese government bonds fell as a continued climb in crude-oil prices fed concern that further rises could blunt global economic growth, BOND sending investors MARKETS out of risk-sensitive assets like equities and into safer investments. But analysts said sharper gains for Japanese government debt are unlikely for now as investors hesitate to make big bets ahead of sales of 30-year government debt on Tuesday and five-year securities on
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Data as shown is for information purposes only. No offer is being made by Morningstar, Ltd. or this publication. Funds shown aren’t registered with the U.S. Securities and Exchange Commission and aren’t available for sale to United States citizens and/or residents except as noted. Prices are in local currencies. All performance figures are calculated using the most recent prices available.
FUND NAME
NAV GF AT LB DATE CR
NAV
—%RETURN— YTD 12-MO 2-YR
n AHW CAPITAL MANAGEMENT Tel (+49) 1805 - 23 82 82 www.ahw-capital.com AHW Top-Div.Int.
GL
EQ LUX 03/04 EUR
52.41
2.5
3.5
26.2
15.1 14.1 18.0 18.7 16.9 17.5 19.0 9.2 9.4 9.4 9.4 9.4 8.5 8.6 8.6 8.6 8.6 8.7 8.9 9.8 9.3 9.4 9.4 8.3 8.3 8.3 8.8 8.9 9.9 17.0 15.8 16.5 17.9 7.6 7.6 7.7 7.7 7.8
32.2 30.9 34.6 35.4 33.2 34.0 35.7 19.8 19.8 19.8 19.8 19.8 18.9 19.0 19.0 19.0 19.0 19.2 19.3 20.5 28.0 28.1 28.1 26.8 26.8 26.8 27.5 27.5 28.6 47.8 46.3 47.2 49.0 27.6 27.6 27.8 27.8 27.8
n ALLIANCE BERNSTEIN www.alliancebernstein.com/investments Tel. +800 2263 8637 Am Eq Blend A Am Eq Blend B Am Growth A Am Growth AX Am Growth B Am Growth C Am Growth I Am Income A Am Income A2 Am Income A2 Am Income AT Am Income AT Am Income B Am Income B2 Am Income B2 Am Income BT Am Income BT Am Income C Am Income C2 Am Income I Emg Mkts Debt A Emg Mkts Debt A2 Emg Mkts Debt AT Emg Mkts Debt B Emg Mkts Debt B2 Emg Mkts Debt BT Emg Mkts Debt C Emg Mkts Debt C2 Emg Mkts Debt I Emg Mkts Growth A Emg Mkts Growth B Emg Mkts Growth C Emg Mkts Growth I Eur Income A Eur Income A Eur Income A2 Eur Income A2 Eur Income AT
US US US US US US US OT OT OT OT OT OT OT OT OT OT OT OT OT GL GL GL GL GL GL GL GL GL GL GL GL GL OT OT OT OT OT
EQ EQ EQ EQ EQ EQ EQ OT OT OT OT OT OT OT OT OT OT OT OT OT BD BD BD BD BD BD BD BD BD EQ EQ EQ EQ OT OT OT OT OT
LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX
Europe ex-UK Large-Cap Equity
BY JAVIER E. DAVID
Leading 10 Performers
02/28 USD 02/28 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 HKD 03/04 USD 03/04 HKD 03/04 USD 03/04 USD 03/04 HKD 03/04 USD 03/04 HKD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 EUR 03/04 USD 03/04 EUR 03/04 USD 03/04 EUR
11.77 10.94 36.45 39.61 30.29 32.80 40.78 8.82 165.73 21.28 68.61 8.81 8.82 141.66 18.19 69.00 8.86 8.82 27.13 8.82 16.23 22.54 16.29 16.23 21.46 16.26 16.23 22.04 16.23 39.15 32.79 33.76 43.81 6.86 9.59 14.30 20.00 6.86
3.4 3.3 8.3 8.4 8.1 8.1 8.4 1.1 1.1 1.1 1.2 1.2 1.0 1.1 1.1 1.0 1.0 1.0 1.1 1.2 -0.1 0.0 0.0 -0.3 -0.2 -0.2 -0.2 -0.1 0.0 -1.0 -1.2 -1.1 -0.9 1.6 1.6 1.7 1.7 1.7
NAV GF AT LB DATE CR
Eur Income B Eur Income B Eur Income B2 Eur Income B2 Eur Income BT Eur Income C Eur Income C Eur Income C2 Eur Income C2 Eur Income I Eur Income I Eur Strat Value A Eur Strat Value A Eur Strat Value I Eur Strat Value I Eur Value A Eur Value A Eur Value B Eur Value B Eur Value C Eur Value C Eur Value I Eur Value I EuroZone Strat Val AX EuroZone Strat Val AX EuroZone Strat Val BX EuroZone Strat Val BX EuroZone Strat Val CX EuroZone Strat Val IX EuroZone Strat Val IX Gl Balanced (Euro) A Gl Balanced (Euro) B Gl Balanced (Euro) C Gl Balanced (Euro) I
OT OT OT OT OT OT OT OT OT OT OT EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU EU
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FUND NAME
OT OT OT OT OT OT OT OT OT OT OT EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ BA BA BA BA
LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX
03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04 03/04
NAV
EUR USD EUR USD EUR EUR USD EUR USD EUR USD EUR USD EUR USD EUR USD USD EUR EUR USD USD EUR USD EUR EUR USD EUR USD EUR USD USD USD USD
6.86 9.59 13.19 18.44 6.85 6.86 9.59 14.18 19.83 6.86 9.59 9.26 12.95 9.57 13.38 10.07 14.08 12.81 9.16 9.69 13.55 16.42 11.74 11.61 8.30 7.38 10.32 6.25 12.77 9.13 17.52 16.88 17.32 18.00
—%RETURN— YTD 12-MO 2-YR 1.5 1.5 1.6 1.6 1.5 1.5 1.5 1.6 1.6 1.7 1.7 3.1 3.1 3.3 3.3 3.1 3.1 2.9 2.9 3.1 3.1 3.3 3.3 5.6 5.6 5.4 5.4 5.4 5.7 5.7 NS NS NS NS
6.9 6.9 6.9 6.9 6.9 7.1 7.1 7.2 7.2 8.2 8.2 9.1 9.1 9.9 9.9 10.3 10.3 9.3 9.3 9.9 9.9 11.3 11.3 17.2 17.2 16.2 16.2 16.6 18.3 18.3 NS NS NS NS
5 5 5 2 4 2 NS 2 2 4
FUND MGM'T CO.
NAV GF AT LB DATE CR
NAV
26.8 26.8 26.8 26.8 26.8 27.1 27.1 27.2 27.2 28.3 28.3 27.8 27.8 28.9 28.9 30.1 30.1 28.8 28.8 29.5 29.5 31.1 31.1 28.8 28.8 27.6 27.6 28.2 29.8 29.8 NS NS NS NS
—%RETURN— YTD 12-MO 2-YR
2352.40
1.7
32.3
54.4
100.25
-18.2
-5.6
10.4
n CREDIT PACIFIC ASSET MANAGMENT www.creditpacific.com GL OT WSM 03/04 USD
NOTE: Changes in currency rates will affect performance and rankings. KEY: ** 2YR and 5YR performance is annualized NA-not available due to incomplete data; NS-fund not in existence for entire period
pect of higher interest rates in the euro zone. The euro touched and then backed off a new four-month high of $1.4036 in early trading Monday. By noon, the common currency was at $1.3979 from $1.3986 late Friday. Meanwhile, the dollar was at 82.11 yen compared to 82.32 yen late Friday. The euro was at 114.81
FUND NAME
NAV GF AT LB DATE CR
Gl Balanced A Gl Balanced B Gl Balanced C Gl Balanced C Gl Balanced I Gl Bond A Gl Bond A2 Gl Bond A2 Gl Bond AT Gl Bond AT Gl Bond B Gl Bond B2 Gl Bond B2 Gl Bond BT Gl Bond BT Gl Bond C Gl Bond C2 Gl Bond I Gl Conservative A Gl Conservative A2 Gl Conservative B Gl Conservative B2 Gl Conservative C Gl Conservative C2 Gl Conservative I Gl Eq Blend A Gl Eq Blend B Gl Eq Blend C Gl Eq Blend I Gl Growth A Gl Growth B Gl Growth C Gl Growth I Gl High Yield A
US US US US US OT OT OT OT OT OT OT OT OT OT OT OT OT US US US US US US US GL GL GL GL GL GL GL GL OT
BA BA BA BA BA OT OT OT OT OT OT OT OT OT OT OT OT OT BA BA BA BA BA BA BA EQ EQ EQ EQ EQ EQ EQ EQ OT
LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX
03/04 USD 03/04 USD 03/04 USD 03/04 EUR 03/04 USD 03/04 USD 03/04 HKD 03/04 USD 03/04 HKD 03/04 USD 03/04 USD 03/04 HKD 03/04 USD 03/04 HKD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD
FUND NAME
NAV GF AT LB DATE CR
Platinm-Gbl Dividend Platinm-Nordic Platinm-Premier Platinm-Turnberry
GL OT OT OT
NAV 18.05 16.96 17.72 12.67 18.87 9.41 133.10 17.09 73.29 9.41 9.41 115.18 14.79 73.52 9.44 9.41 14.75 9.41 15.55 18.13 15.55 17.02 15.57 17.64 15.63 12.91 11.97 12.61 13.75 46.72 38.54 44.59 52.37 4.70
—%RETURN— YTD 12-MO 2-YR 3.0 2.9 3.0 3.0 3.2 -0.2 -0.1 -0.1 0.0 0.0 -0.3 -0.3 -0.3 -0.2 -0.2 -0.3 -0.1 -0.1 1.6 1.6 1.4 1.4 1.5 1.5 1.7 5.1 4.9 5.0 5.3 4.1 3.9 4.0 4.3 2.5
10.2 9.1 9.9 9.9 10.9 4.4 4.4 4.4 4.5 4.5 3.4 3.4 3.4 3.5 3.5 3.9 3.9 4.9 7.1 6.6 5.9 5.6 6.5 6.2 7.6 13.6 12.4 13.1 14.6 13.8 12.6 13.2 14.7 15.1
25.1 23.9 24.7 24.7 26.0 11.1 11.1 11.1 11.2 11.2 10.0 10.0 10.0 10.0 10.0 10.6 10.6 11.7 16.0 15.7 14.7 14.5 15.4 15.2 16.7 34.5 33.2 33.8 35.6 31.8 30.5 31.2 32.9 39.0
CYM USA USA USA USA
02/28 10/31 02/28 02/28 05/29
USD USD USD USD USD
NS 129.92 NS NS 35.02
CYM CYM CYM USA
02/28 02/28 08/29 02/28
USD SEK USD USD
NS NS 28.37 NS
—%RETURN— YTD 12-MO 2-YR 2.3 -6.1 NS 0.0
23.6 3.4 NS -1.8
38.1 8.5 NS NS
GL GL GL GL GL
OT OT OT OT OT
CYM LUX CYM CYM AUT
03/01 03/01 03/01 03/01 03/01
USD USD USD USD EUR
57.92 2675.00 1359.33 1351.69 7642.00
5.9 4.0 3.7 5.3 2.2
66.4 38.5 51.9 62.9 24.6
-17.9 -15.3 4.5 -3.6 -7.3
11.2 11.4 11.3 0.1 14.4 0.1 0.1
8.1 8.3 8.3 17.5 14.4 17.4 17.7
NS NS 3.5 3.9 4.8 3.2 4.0
n WINTON CAPITAL MANAGEMENT LTD Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301
n PLATINUM CAPITAL MANAGEMENT Tel: +44 207 024 9840, www.platinumfunds.net OT OT OT OT OT
EQ OT OT OT
NAV
n SUPERFUND ASSET MANAGEMENT GMBH For info about open funds, contact
[email protected] and www.superfund.com *Closed for New Investments Superfund Cayman* Superfund GCT USD* Superfund Green Gold A (SPC) Superfund Green Gold B (SPC) Superfund Q-AG*
OT OT OT OT OT
1.6 NS -1.3 6.3 -18.2
5.8 NS 4.3 24.7 -63.7
LEGAL CURR. BASE
YTD
BGF Blackrock EURLUX ContinentalEuropeanFlexibleA2EUR (Luxembourg) S.A. Threadneedle Threadneedle EURGBR Eurp Sel Inst Net EUR Investment Services Ltd. Threadneedle Threadneedle EURGBR European Inst Net EUR Investment Services Ltd. Investec GSF Investec Asset USDLUX ContEurpnEqAIncGrsUSD Management Luxembourg Jupiter Jupiter Unit Trust GBPGBR EuropeanSpecialSituations Managers Ltd. Baring Baring Fund GBPGBR European Growth Trust Managers Ltd Standard Standard Life EURLUX LifeSICAVEuroEquityUnconsA Investments (USA) Ltd. Aberdeen Aberdeen Asset EURLUX GlobalEuropeanEq(ex-UK)A2 Managers Limited(Lux) DBS Horizon DBS Asset SGDSGP Euro Eq Management Limited GAM Star GAM Fund GBPIRL ContEuropeanEquityGBPAcc Management Limited
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AlexandraConvertibleBondFundI,Ltd.(ClassA) OT OT VGB 01/31 USD
Platinm-All Star Platinm-All Weather Platinm-Dynasty Platinm-Emancipation Platinm-Equity Plus
FUND FUND RATING * NAME
3.86
% Return in $US ** 1-YR 2-YR 5-YR
31.73 58.85
9.72
5.55 24.56 40.79
5.41
6.88
21.43 40.90
4.64
4.36
21.28 38.50
1.14
6.18
19.65 38.18
5.90
6.67
19.35 39.91
2.43
7.39
19.15 45.13
NS
6.21
18.43 44.27
0.52
6.72 18.30 41.44
1.11
4.68
4.71
17.65 37.52
Source: Morningstar, Ltd 1 Oliver’s Yard, 55-71 City Road London EC1Y 1HQ United Kingdom www.morningstar.co.uk; Email:
[email protected] Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001
yen from 115.13 yen, while the pound traded at $1.6203 from $1.6271. The dollar changed hands at 0.9255 Swiss franc from 0.9259 franc. At least for the moment, the interest-rate outlook has overwhelmed concerns about Europe’s sovereign-debt crisis. The euro rose in spite of Moody’s Investors Service Inc. downgrading Greek debt.
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n ALEXANDRA INVESTMENT MANAGEMENT Tel: +1 212 301 1800 Fax: +1 212 301 1810
CPS-Master Priv Fund
Funds that invest in the equities of large-cap companies in continental Europe. At least 75% of total assets are invested in equities. Ranked on % total return (dividends reinvested) in Euros for one year ending March 07, 2011
NEW YORK—The dollar traded near a four-month low versus the euro Monday, hurt by surging oil prices, rising inflation and prospects for a sustained period of loose U.S. monetary policy. Markets have recently favored currencies that offer higher yields, which have broadly CURRENCY underpinned the MARKETS euro and pound. Meanwhile, ongoing instability in the Middle East and North Africa have spurred nervous traders to buy Swiss francs and yen as a safe harbor. Although the dollar has traditionally benefited from investment flows during times of geopolitical instability, a possible global crudeoil shock—triggered by festering civil unrest in Libya—has made investors shun the greenback during bouts of risk aversion. During past oil crises, the dollar has fallen as oil—which hit 2½-year highs on Monday—stirs broad-based inflation. “There’s still this incredible uncertainty surrounding this Libya situation,” said Greg Salvaggio, vice president of capital markets at Tempus Consulting in Washington. “The the longer it drags out, the more uncertainty exists, and that drags on the dollar,” Mr. Salvaggio said, adding that the euro was likely to remain underpinned by the pros-
INTERNATIONAL INVESTMENT FUNDS FUND NAME
FUND SCORECARD
Surging oil, inflation push dollar lower
10.8 NS 10.4 31.0 -45.6
Winton Evolution EUR Cls H Winton Evolution GBP Cls G Winton Evolution USD Cls F Winton Futures EUR Cls C Winton Futures GBP Cls D Winton Futures JPY Cls E Winton Futures USD Cls B
GL GL GL GL GL GL GL
OT OT OT OT OT OT OT
CYM CYM CYM VGB VGB VGB VGB
09/30 09/30 09/30 01/31 11/30 01/31 01/31
EUR 1049.82 GBP 1056.92 USD 1332.74 EUR 224.87 GBP 234.75 JPY 15874.03 USD 801.13
FUND NAME
NAV GF AT LB DATE CR
NAV
—%RETURN— YTD 12-MO 2-YR
Gl High Yield A2 Gl High Yield A2 Gl High Yield AT Gl High Yield AT Gl High Yield B Gl High Yield B2 Gl High Yield B2 Gl High Yield BT Gl High Yield BT Gl High Yield C Gl High Yield C2 Gl High Yield I Gl Thematic Res. A Gl Thematic Res. B Gl Thematic Res. I Gl Value A Gl Value B Gl Value C Gl Value I Greater China A Greater China B Greater China C India Growth A India Growth AX India Growth B India Growth BX India Growth I Int'l Health Care A Int'l Health Care B Int'l Health Care C Int'l Health Care I Int'l Technology A Int'l Technology B Int'l Technology C Int'l Technology I Japan Eq Blend A Japan Eq Blend B Japan Eq Blend C Japan Growth A Japan Growth B Japan Growth C Japan Strat Value A Japan Strat Value B Japan Strat Value C Real Estate Sec. A Real Estate Sec. B Real Estate Sec. I Short Mat Dollar A Short Mat Dollar A2 Short Mat Dollar AT Short Mat Dollar B Short Mat Dollar B2 Short Mat Dollar BT Short Mat Dollar C Short Mat Dollar C2 Short Mat Dollar I US Thematic Portfolio A EUR H US Thematic Portfolio B EUR H US Thematic Portfolio C EUR H US Thematic Portfolio I EUR H US Thematic Research A US Thematic Research B US Thematic Research I
OT OT OT OT OT OT OT OT OT OT OT OT GL GL GL GL GL GL GL AS AS AS EA EA EA EA EA OT OT OT OT OT OT OT OT JP JP JP JP JP JP JP JP JP OT OT OT US US US US US US US US US US US US US US US US
85.51 10.98 4.65 36.21 4.70 135.90 17.45 36.84 4.73 4.70 16.19 4.70 17.95 15.52 20.20 12.30 11.17 11.89 13.21 44.01 38.49 43.22 137.32 120.45 142.17 101.76 125.56 141.33 117.82 134.75 155.88 140.47 120.30 135.03 159.00 6099.88 5822.20 5973.14 5713.54 5454.58 5595.92 6829.00 6525.00 6678.00 17.13 15.47 18.58 7.46 10.36 7.45 7.46 10.26 7.47 7.46 14.50 7.46 20.05 19.91 19.98 20.14 11.18 10.16 12.14
2.5 2.5 2.5 2.5 2.3 2.3 2.3 2.3 2.3 2.4 2.4 2.6 3.3 3.2 3.5 6.2 6.0 6.1 6.4 -0.7 -0.8 -0.7 -10.1 -10.1 -10.3 -10.2 -10.0 3.1 2.9 3.0 3.3 8.1 7.9 8.0 8.3 2.1 2.0 2.1 1.7 1.6 1.6 7.9 7.7 7.8 2.9 2.7 3.1 0.9 1.0 0.9 0.8 0.9 1.0 0.8 0.8 1.0 6.8 6.6 6.7 6.9 6.9 6.6 7.1
For information about listing your funds, please contact: Carson Wong tel: +852 2831-6481; email:
[email protected]
OT OT OT OT OT OT OT OT OT OT OT OT EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ BD BD BD BD BD BD BD BD BD EQ EQ EQ EQ EQ EQ EQ
LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX
03/04 HKD 03/04 USD 03/04 USD 03/04 HKD 03/04 USD 03/04 HKD 03/04 USD 03/04 HKD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 02/28 JPY 02/28 JPY 02/28 JPY 02/28 JPY 02/28 JPY 02/28 JPY 03/04 JPY 03/04 JPY 03/04 JPY 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 USD 03/04 EUR 03/04 EUR 03/04 EUR 03/04 EUR 03/04 USD 03/04 USD 03/04 USD
15.2 15.2 15.1 15.1 13.9 14.1 14.1 13.8 13.8 14.5 14.7 15.7 23.0 21.8 24.0 14.0 12.8 13.5 15.0 16.1 14.9 15.6 7.3 7.6 6.2 6.6 8.2 -0.3 -1.3 -0.8 0.5 30.9 29.6 30.3 32.0 4.2 3.2 3.7 2.6 1.7 2.2 11.4 10.4 10.9 21.1 19.9 22.2 5.0 5.0 5.0 4.5 4.6 4.6 4.5 4.5 5.5 NS NS NS NS 29.2 27.8 30.3
39.0 39.0 38.9 38.9 37.5 37.6 37.6 37.6 37.6 38.3 38.3 39.8 49.1 47.6 50.3 37.7 36.3 37.1 38.8 36.7 35.3 36.1 NS 51.0 NS 49.5 51.7 18.4 17.2 17.9 19.4 46.7 45.3 46.1 47.9 16.2 15.1 15.7 9.6 8.5 9.1 26.1 24.9 25.5 50.1 48.7 51.4 9.9 9.9 10.0 9.5 9.5 NS 9.5 9.5 10.5 NS NS NS NS 38.5 37.0 39.6
Tuesday, March 8, 2011
25
THE WALL STREET JOURNAL.
INTERNATIONAL INVESTOR
Technology downgrade, crude hit U.S. stocks BY KRISTINA PETERSON
cerned about Saudi Arabia, where some have called for demonstrations later in the week. Société Générale said in a research note that oil could reach $200 per barrel if supplies from Saudi Arabia were disrupted. Western Digital rose 14% after agreeing to acquire Hitachi’s harddisk-drive business for about $4.3 billion in cash and stock, the two companies said. Shares of radiation treatment firm TomoTherapy soared 24% after Accuray, the maker of a robotic system designed to treat solid tumors, said it will buy TomoTherapy for $4.80 a share in cash and stock, or a total of around $277 million. Accuray fell 12%.
U.S. stocks fell as an analyst downgraded the technology sector and concerns over supplies kept oil prices elevated. The Dow Jones Industrial Average dropped 84 points, or 0.7%, to 12085. Weighing on ABREAST OF the measure, Cisco THE MARKET Systems fell 1.9% and Intel shed 2.1% after Wells Fargo cut its view of the semiconductor sector to “market weight” from “overweight” for the first time in more than two years. Boeing slid 2.2% after its rival, European aircraft manufacturer Airbus, said on Monday it is confident of maintaining its share of global sales of commercial aircraft and expects a continued expansion in demand in the Asia-Pacific region. The Nasdaq Composite tumbled 1.7% to 2737 as technology stocks lagged behind other sectors. The Standard & Poor’s 500-stock index shed 0.9% to 1310. Utilities stocks clung to slim gains. Crude-oil prices pulled back slightly, but were still over $105 a barrel. Concerns remained over supply disruptions as opposition forces and soldiers loyal to Libyan leader Col. Moammar Gadhafi clashed near key energy installations. With no end in sight for the conflict, the oil market began to price in longer interruption to Libya’s production of 1.6 million barrels a day. In particular, traders are con-
European stocks European equity markets finished lower as banks posted losses, while deal news boosted the luxurygoods sector. The Stoxx Europe 600 index slipped 0.4% to end at 280.73. German engines and powertrains maker Tognum soared 23% after Daimler and Rolls-Royce Group said they are in talks with Tognum about a possible takeover of the firm. Shares of LVMH Moet Hennessy Louis Vuitton advanced 1.3% after the luxury-goods group said it would buy Italy’s Bulgari, offering stock for the Bulgari family’s controlling stake and cash to minority shareholders.. Shares of Bulgari soared more than 59% in Milan.
SHANGHAI—China Vanke Co., China’s largest property developer by market share, said net profit surged 37% in 2010 on higher sales and property prices. The Shenzhen company said net profit rose to 7.28 billion yuan ($1.1 billion) from 5.33 billion yuan a year earlier. Revenue rose 3.8% to 50.71 billion yuan from 48.88 billion yuan. Vanke said gross margins rose 7.76 percentage points to 29.75% as efforts to control costs bore fruit. Vanke recommended a final dividend of one yuan for every 10 existing shares, up from 0.7 yuan for 2009. The company said in January that revenue from property sales in 2010 rose 71% from a year earlier to 108.16 billion yuan. In terms of floor area, China Vanke’s 2010 property sales rose 35% to 8.98 million square meters. Vanke said the local supply of residential property will be sharply higher this year, predicting that this, together with the government’s efforts to curb speculative property demand, will shift the market in favor of home buyers. The State Council, or cabinet, introduced tightening measures for the property market in late January, including more limits on home buying and another increase in down payments for second-home purchases, highlighting authorities’ desire to rein in property prices. —Esther Fung and Wynne Wang
[ Search by company, category or country at asia.WSJ.com/funds ] FUND NAME
NAV GF AT LB DATE CR
NAV
—%RETURN— YTD 12-MO 2-YR
n ALLIANZ GLOBAL INVESTORS KAPITALANLAGEGESELLSCHAFT Concentra AE Industria AE InternRent AE
EU EQ DEU 03/07 EUR EU EQ DEU 03/07 EUR EU BD DEU 03/07 EUR
63.60 75.51 38.77
2.9 -1.0 -4.1
25.1 6.4 4.3
46.4 27.9 5.0
n CHARTERED ASSET MANAGEMENT PTE LTD - TEL NO: 65-6835-8866 Fax No: 65-6835 8865, Website: www.cam.com.sg, Email:
[email protected] CAM-GTF Limited
OT
OT MUS 02/25 USD 383232.77
-7.7
34.1
74.8
FUND NAME
NAV GF AT LB DATE CR
GAMStarPharoEmerMktDebt&FXUSDAcc GAMStar-AsEqUSD Ord Ac GAMStar-AsPacEqEUR Acc GAMStar-ContEurEqEUR Ac GAMStar-EurpEqEUR Acc GAMStar-EurpEqUSD Acc GAMStar-JpnEq EUR Acc GAMStar-JpnEq JPY Acc GAMStar-JpnEq USD Acc GAMStar-World Eq EUR Acc
GL BD IRL 03/01 USD OT OT IRL 03/03 USD AS EQ IRL 03/04 EUR EU EQ IRL 03/03 EUR EU EQ IRL 03/04 EUR EU EQ IRL 03/04 USD JP EQ IRL 03/03 EUR JP EQ IRL 03/03 JPY JP EQ IRL 03/03 USD GL EQ IRL 03/03 EUR
NAV 10.77 14.30 116.78 12.70 200.40 17.10 100.85 995.38 12.45 11.79
—%RETURN— YTD 12-MO 2-YR -2.8 -3.5 0.5 0.7 0.6 5.0 3.5 6.4 5.9 3.0
4.9 12.1 10.7 15.3 10.1 13.5 7.7 6.3 7.8 14.6
NS 43.1 24.9 30.8 25.0 31.5 20.8 20.2 23.8 28.4
n HSBC Trinkaus Investment Managers SA E-Mail:
[email protected] Telephone: 352 - 47 18471 n GAM FUND MANAGEMENT LIMITED George's Court, 54-62 Townsend Street, Dublin 2, Ireland Tel +353 1 609 3927 Fax +353 1 611 7941, Internet: www.gam.com GAM Asia Equity Hedge US GAM Asia Equity USD GAM Asia-Pacific Eq USD GAM Com Glb Bal EUR Op GAM Com Glb Bal USD Op GAM Comp Glb Eq EUR Op GAM Comp Glb Eq USD Op GAM Comp Glb Gr EUR Op GAM Comp Glb Gr USD Op GAM CompAbsRT EUR Op GAM CompAbsRT SGD Op GAM CompAbsRT USD Op GAM Cptal Apprec Eq Inc GAM Diversity EUR Op GAM Diversity USD 2.5XL GAM Diversity USD Op GAM Dvrsty II USD Op GAM Euro Eq Hdg EUR Op GAM Euro Eq Hdg USD Op GAM GAMCO Eq GAM Gbl Divers USD Inc. GAM Grtr China Eq Hdg Op GAM Intrst Trend Inc GAM Japan Eq Hdg USD Op GAM Japan Eq Hdg YEN Open GAM Japan Eq USD GAM Japan Eq YEN GAM Money Mkt EuroOp GAM Money Mkt USD GAM Multi-Arb EUR Op GAM Multi-Emer Mkts USD GAM Multi-Eur EUR Op GAM Multi-Eur II EUR Op GAM Multi-Eur II USD Op GAM Multi-Eur USD Op GAM Selection Hdg GAM Sing/Malaysia Eq GAM Sterling Spe Bd Inc GAM Trading EUR Inc GAM Trading USD Inc GAM Trdg II IncUSD Op GAM USDSpecBondInc GAM Worldwide GAMut Investments GAMut Investments - T class
GL OT AS US US GL GL US US OT OT OT US OT OT OT OT EU EU US GL GL OT AS AS JP JP EU US OT OT OT OT OT OT US EA OT OT OT OT OT GL OT GL
EQ OT EQ BA BA EQ EQ BA BA OT OT OT EQ OT OT OT OT EQ EQ EQ EQ EQ OT EQ EQ EQ EQ MM MM OT OT OT OT OT OT EQ EQ OT OT OT OT OT EQ OT OT
VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB VGB
02/28 03/04 03/01 02/28 02/28 02/28 02/28 02/28 02/28 02/28 02/28 02/28 02/28 02/28 02/28 02/28 02/28 03/03 03/03 03/01 02/28 02/28 02/28 02/28 02/28 03/04 03/04 03/03 03/03 02/28 02/28 02/28 02/28 02/28 02/28 02/28 03/04 02/28 02/28 02/28 02/28 02/28 03/03 02/28 11/30
USD USD USD EUR USD EUR USD EUR USD EUR SGD USD USD EUR USD USD USD EUR USD USD USD USD USD USD JPY USD JPY EUR USD EUR USD EUR EUR USD USD USD USD GBP EUR USD USD USD USD USD USD
265.89 703.61 1443.34 106.02 141.64 115.62 149.69 98.80 143.01 150.24 108.63 902.28 315.67 636.39 72.89 672.82 205.46 238.07 220.76 1068.20 292.65 237.00 324.50 132.27 9157.77 1265.39 9712.23 51.06 100.08 89.30 664.23 290.43 149.47 122.58 507.35 3418.93 2820.89 253.25 340.43 1023.23 332.36 649.95 2493.92 8101.25 116.46
-1.7 -2.7 4.2 2.2 2.2 3.8 3.8 2.8 2.8 0.5 0.9 0.9 8.2 1.3 2.9 1.4 1.2 -3.0 -2.2 3.3 6.0 -1.7 4.9 3.8 4.1 7.2 7.6 -0.1 0.0 -3.0 -2.5 3.5 3.5 3.6 3.5 3.7 -3.6 3.0 -0.7 -0.7 -0.7 3.4 7.3 -0.3 2.5
2.3 13.7 14.4 11.5 11.5 19.8 19.8 14.4 14.4 5.4 6.1 6.5 28.8 -1.6 -5.9 -0.9 -2.0 8.4 8.3 30.9 18.3 -7.8 15.9 5.7 6.2 11.7 9.0 0.2 0.2 -20.6 4.4 10.0 10.0 10.3 10.4 26.7 16.5 13.5 6.0 6.4 6.5 16.3 16.6 6.4 10.3
29.7 42.5 28.4 17.7 17.7 29.0 29.0 20.8 20.8 8.1 8.6 9.0 41.7 1.1 0.3 1.5 0.6 11.6 12.2 46.4 30.6 35.2 53.9 13.4 14.1 25.5 21.0 0.5 0.1 -10.3 13.4 6.7 6.7 6.8 6.8 46.4 40.5 31.6 4.6 5.0 5.0 53.8 35.2 3.6 NS
AS OT OT OT
EQ OT OT OT
IRL IRL IRL IRL
03/03 03/02 03/01 03/03
USD USD USD USD
20.15 10.66 10.99 10.42
-0.4 -2.6 1.2 -1.2
10.6 NS 7.7 NS
65.0 NS NS NS
n GAM Star Fund Plc GAMStar China EqUSD (SCHUA) GAMStar Emer Mkt Rates USD Acc GAMStar Global Rates USD Acc GAMStar Keynes Quant Strategy USD Acc
Prosperity Return Fund A Prosperity Return Fund B Prosperity Return Fund C Prosperity Return Fund D Renaissance Hgh Grade Bd A Renaissance Hgh Grade Bd B Renaissance Hgh Grade Bd C Renaissance Hgh Grade Bd D
JP OT OT OT JP JP JP JP
BD OT OT OT BD BD BD BD
LUX LUX LUX LUX LUX LUX LUX LUX
03/07 03/07 03/07 03/07 03/07 03/07 03/07 03/07
JPY JPY USD EUR JPY JPY USD EUR
10026.76 9196.30 100.50 113.39 10247.17 9350.86 101.31 106.25
1.6 4.1 7.4 1.8 2.3 4.7 5.9 1.2
LIST YOUR FUNDS
-0.2 -3.7 6.7 13.5 3.3 -0.5 8.6 7.4
NS NS NS NS NS NS NS NS
n J.P. MORGAN ASSET MANAGEMENT For additional fund prices, please visit www.jpmorganam.com.sg Tel: +65 6882 1328 JF ASEAN Eq (SGD)A(acc) JF ASEAN Eq (USD)A(acc) JF Asia Pac ex-Jap Eq(SGD)A(acc) JF Asia Pac ex-Jp (USD)A(acc) JF China (SGD)A(acc) JF China (USD)A(dist) JF Greater China (SGD)A(acc) JF Greater China (USD)A(dist) JF India (SGD)A(acc) JF India (USD)A(acc) JF Korea Equity (USD) A (acc) JF Pacific Tech (USD) A (acc) JF Singapore (SGD)A(acc) JF Singapore (USD)A(dist) JPM Africa (USD) A (acc) JPM Asia Pac Bond (USD)A(acc) JPM Brazil Alpha+ (USD)A(acc) JPM Brazil Alpha+(SGD)A(acc) JPM East Eur (EUR)A(dist)(JF) JPM Emerg EMEA (SGD)A(acc) JPM Emerg EMEA (USD)A(dist) JPM Emerg Mid East Eq(SGD)A(acc) JPM Emerg Mid East(USD)A(dist) JPM Emerg Mkt Eq (SGD)A(acc) JPM Emerg Mkt Eq (USD)A(dist) JPM Emerg Mkt Infra(USD)A(acc) JPM Emerg Mkt LC Debt(USD)A(mth) JPM Glb Dyn (SGD)A(acc) JPM Glb Dyn (USD)A(dist)(JF) JPM Glb Nat Res (EUR)A(dist) JPM Glb Nat Res (SGD)A(acc) JPM Glb Nat Res (USD)A(acc) JPM Latin Amer Eq(SGD)A(acc) JPM Latin Amer Eq(USD)A(dist)JF JPM Russia (USD) A (dist)
AS EQ LUX 03/04 SGD AS EQ LUX 03/04 USD AS EQ LUX 03/04 SGD AS EQ LUX 03/04 USD AS EQ LUX 03/04 SGD AS EQ LUX 03/04 USD AS EQ LUX 03/04 SGD AS EQ LUX 03/04 USD EA EQ LUX 03/04 SGD EA EQ LUX 03/04 USD AS EQ LUX 03/04 USD OT EQ LUX 03/04 USD AS EQ LUX 03/04 SGD AS EQ LUX 03/04 USD OT OT LUX 03/04 USD AS BD LUX 03/04 USD OT OT LUX 03/04 USD OT OT LUX 03/04 SGD EU EQ LUX 03/04 EUR GL EQ LUX 03/04 SGD GL EQ LUX 03/04 USD OT OT LUX 03/03 SGD OT OT LUX 03/03 USD GL EQ LUX 03/04 SGD GL EQ LUX 03/04 USD OT OT LUX 03/04 USD OT OT LUX 03/04 USD GL EQ LUX 03/04 SGD GL EQ LUX 03/04 USD GL EQ LUX 03/04 EUR GL EQ LUX 03/04 SGD GL EQ LUX 03/04 USD GL EQ LUX 03/04 SGD GL EQ LUX 03/04 USD EE EQ LUX 03/04 USD
Asia sinks on oil fears as politics roils Tokyo
China Vanke reports jump of 37% in net
14.94 15.48 14.62 20.45 13.09 50.12 14.62 28.90 14.76 26.35 11.16 17.44 15.46 32.61 11.05 10.79 11.42 13.85 33.94 14.62 62.61 12.31 21.51 14.68 32.48 8.82 16.08 15.26 14.19 22.17 27.10 22.07 14.40 45.16 17.11
-5.3 -3.6 -2.9 -1.8 -0.8 0.3 -2.5 -1.4 -10.5 -9.5 -1.8 2.3 -4.9 -3.8 -7.1 -0.4 -4.9 -6.5 -2.6 -4.6 -3.5 -16.3 -14.9 -4.2 -3.2 -2.2 1.0 4.7 5.8 -2.5 0.8 1.9 -6.2 -4.5 5.7
In print & online. Contact:
NS 37.2 NS 16.0 1.6 12.4 9.9 21.4 2.1 12.8 34.3 18.1 11.5 23.3 19.3 NS 11.6 NS 19.2 NS 19.8 NS 7.7 5.6 16.6 22.2 13.4 9.0 20.4 38.0 28.2 41.6 NS 15.8 25.4
NS NS NS 50.7 NS 38.6 NS 45.1 NS 56.6 63.2 42.0 NS 63.0 61.2 NS 59.7 NS 74.5 NS 65.1 NS 29.1 NS 49.8 56.5 NS NS 39.6 66.6 NS 75.8 NS 65.5 100.9
BY V. PHANI KUMAR AND COLIN NG Asian markets slumped as rising oil prices fueled fears about inflation and economic growth, while Japanese and Indian stocks faced added pressure from political setbacks to the ruling governments. Japan’s Nikkei Stock Average tumbled 1.8% to 10505.02. South Korea’s Kospi conASIAN-PACIFIC tinued to spiral STOCKS lower, shedding 1.2% to 1980.27. It has fallen in 14 of the past 19 trading sessions. Australia’s S&P/ASX 200 fell 1.4% to 4797.88, the ninth fall in the past 12 sessions. Hong Kong’s Hang Seng Index shed 0.4% to 23313.19. India’s Sensex sank 1.4% to 18222.67, leaving it down 11% for 2011. But Chinese shares rose on the back of supportive economic policies, sending the benchmark Shanghai Composite Index up 1.8% to a 2011 closing high of 2996.21. With crude-oil prices vaulting past $106 a barrel Monday, energy shares outperformed stock benchmarks. Cnooc rose 1.9%. PetroChina added 0.4% in Hong Kong. Inpex rose 1.6% in Tokyo. Santos climbed 1.6% in Sydney. But airlines retreated. Virgin Blue Holdings shed 4.1%, Korean Air Lines fell 3.1%, and Air New Zealand sank 2.3%. Cathay Pacific Airways fell 3.5% in Hong Kong. “Oil markets are continuing to dictate direction of equity markets,
with escalating tensions in Libya intensifying chatter of $200 a barrel. You only have to remember back to 2008, when outlandish numbers were being bandied around,” said Ben Potter, market strategist at IG Markets. Declines in Tokyo were aggravated by political turmoil, with Foreign Minister Seiji Maehara—one of the country’s more popular politicians—resigning Sunday over illegal political donations from a foreign national. The move further complicates Prime Minister Naoto Kan’s nine-month grip on power, given that his Democratic Party-led government already faces gridlock in the opposition-controlled Upper House over budget-related bills. Exporters slumped. Canon slid 2.4%, Honda Motor fell 3.1%, and Nissan Motor shed 2.6%. Shares tumbled in Mumbai after weekend media reports said the Dravida Munnettra Kazhagam—an ally of the federal government formed by a multiparty coalition—had withdrawn its support. HDFC Bank fell 2%, Reliance Communications shed 3.6%, and Tata Motors declined 4.1%. In China, coal miners rose on hopes prices will ride higher in tandem with oil. Gold miners advanced on the metal’s price outlook. China Shenhua Energy and China Coal Energy jumped by the 10% daily limit in Shanghai; Zijin Mining Group and Shandong Gold-Mining rose 2% and 2.2%, respectively.
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US EQ LUX 03/07 USD US EQ LUX 03/07 USD OT OT LUX 03/07 USD OT OT LUX 03/07 USD OT OT LUX 03/07 USD AS EQ LUX 03/07 USD AS EQ LUX 03/07 USD AS EQ LUX 03/07 USD AS EQ LUX 03/07 HKD EU EQ LUX 03/07 USD EU EQ LUX 03/07 USD EU EQ LUX 03/07 USD EU EQ LUX 03/07 USD GL EQ LUX 03/07 USD OT EQ LUX 03/07 USD GL EQ LUX 03/07 USD OT EQ LUX 03/07 USD EA EQ LUX 03/07 USD GL EQ LUX 03/07 USD GL EQ LUX 03/07 USD JP EQ LUX 03/07 USD JP EQ LUX 03/07 USD GL EQ LUX 03/07 USD OT OT LUX 03/07 USD OT OT LUX 03/07 USD EE EQ LUX 03/07 USD AS EQ LUX 03/07 USD OT OT LUX 03/07 USD US BD LUX 03/07 USD US EQ LUX 03/07 USD US BD LUX 03/07 USD OT OT LUX 03/07 USD
18.25 1.05 2.88 0.93 1.56 8.25 2.59 1.78 8.67 5.66 2.43 10.40 0.74 1.18 0.82 1.36 1.06 1.16 3.41 0.79 3.14 0.81 1.42 1.12 1.37 0.90 1.27 0.88 1.18 1.09 1.02 1.20
6.7 6.6 1.1 1.0 -0.4 -0.2 -0.3 0.3 0.4 5.1 5.1 8.2 8.2 0.9 4.5 5.0 5.7 -10.5 6.5 6.4 5.3 5.4 -2.2 1.9 -0.6 8.6 -1.8 -11.5 1.1 3.0 1.8 1.0
21.4 21.1 24.0 23.7 35.8 24.2 23.9 14.8 14.9 22.5 22.4 20.5 20.2 29.0 24.4 25.9 8.9 9.6 13.9 13.6 13.5 11.4 14.6 11.5 22.8 31.4 28.4 20.1 7.5 23.6 19.2 5.6
37.5 37.1 49.6 49.1 72.0 43.4 43.0 39.7 39.7 70.2 70.0 46.4 46.1 73.7 56.8 45.7 25.4 50.1 30.7 30.4 26.7 25.8 61.6 NS NS 86.0 53.0 73.9 13.8 61.5 60.7 8.2
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26
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
MARKETS
Rajaratnam to make biggest bet yet Galleon founder is set to testify on his own behalf at insider-trading trial; the ‘hardest decision’ in any case Hedge-fund giant Raj Rajaratnam made many successful gambles while amassing a net worth exceeding $1 billion. Few of those likely were as risky as his plan to take the stand in his own defense at the insider-trading trial set to start this week. The 53-year-old founder of Galleon Group has told people close to him that he intends to testify at his own trial, the biggest legal showdown over insider trading in a generation. A spokesman for Mr. Rajaratnam declined to comment on his potential testimony, and it is possible Mr. Rajaratnam and his lawyers will decide against the move. Such a strategy is relatively rare in white-collar criminal cases because of the danger something will go wrong during cross-examination by prosecutors. In 2005, WorldCom Inc. founder Bernard Ebbers was found guilty of an $11 billion fraud at the telecommunications company. Jurors said afterward that they couldn’t square Mr. Ebbers’s insistence that he was unaware of the fraud with his hands-on image. Former Enron Corp. President Jeffrey Skilling and Tyco International Ltd.’s former finance chief Mark Swartz also took the stand at their criminal trials. Both men were convicted and sent to prison.
Getty Images (Kozlowski); Associated Press (Rigas)
BY MICHAEL ROTHFELD AND JOANNA CHUNG
Former Tyco CEO Dennis Kozlowski, left, didn’t take the stand at his first trial but did at his second. John Rigas of Adelphia didn’t testify at his 2004 trial. “The decision whether to call a defendant as a witness, other than whether or not to plead guilty, is the hardest decision to make in any trial,” says James DeVita, an Arlington, Va., lawyer who represented L. Dennis Kozlowski in two criminal trials of the former Tyco CEO. Mr. Kozlowski didn’t take the stand at his first trial, which ended in a mistrial. At the second trial, Mr. Kozlowski testified and was convicted with Mr. Swartz on 22 of 23 counts related to bonuses and other improper compensation they received while working as Tyco’s top executives. Mr. Kozlowski has been
locked up since 2005. At Mr. Rajaratnam’s criminal trial, which starts Tuesday in a New York federal court, whether he takes the stand probably will be determined by how incriminating taped conversations of Mr. Rajaratnam sound—and if any of the recordings work in his favor. Mr. Rajaratnam’s voice was captured on some of hundreds of hours of wiretaps. He is charged with 14 counts of fraud and conspiracy. Federal prosecutors are likely to play tapes of the hedge-fund manager receiving information, and he might be forced to testify in order to con-
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vince jurors that he didn’t know the ing television, so the issue is more information was material or that his about who committed that crime,” source had a duty not to disclose it, said Lawrence G. McMichael, a lawaccording to legal experts. The yer for John Rigas and Timothy Rihedge-fund manager might be able gas. The father and son were conto avoid taking the stand if some of victed in 2004 of looting cable the wiretaps contain conversations company Adelphia Communications that sound favorable to Mr. Corp. “The question in Rajaratnam. His lawyers white-collar cases is could play those tapes and whether there was a crime “pretend that he testified,” at all.” The Rigases didn’t says Charles Stillman, a take the stand at their 2004 lawyer for Mr. Swartz, the trial but are planning to do former Tyco executive. so at a tax-related trial exA similar situation pected next year, Mr. McMihelped former Bear Stearns chael says. Cos. hedge-fund manager Testifying also can huRalph Cioffi avoid testifymanize a defendant—and ing at his criminal trial for backfire if the defendant alleged fraud related to Raj Rajaratnam isn’t likable. Jurors look for subprime mortgage deals, hesitation or other behavior says Edward Little, a lawyer repre- often interpreted as a sign of guilt. senting Mr. Cioffi in civil litigation. After Mr. Kozlowski’s first trial The defense was able to respond to ended in a mistrial, he and his lawincriminating emails introduced by yers decided to put the former Tyco prosecutors with other emails that CEO on the stand during his second were more favorable. Mr. Cioffi and trial. “I thought he would do better, another Bear fund manager, Mat- because he was a very articulate, thew Tannin, were acquitted in very likable man,” Mr. DeVita says. 2009. During cross-examination, though, Many lawyers believe juries in Mr. Kozlowski was presented with white-collar cases want to hear di- financial documents and had to tell rectly from the defendant. The rea- jurors that he wasn’t personally inson: Fraud prosecutions depend volved with what they showed. highly on the accused person’s state “They think that if you’re the of mind, or whether they knowingly CEO of a $25 billion company, that committed a crime. you know everything down to the In many other cases, “there is a last nickel and dime,” Mr. DeVita dead body, a broken window, a miss- says. “The reality is: They don’t.”
In fight for listings, SGX trusts in niches Continued from page 19 to greater risk if the cash flow involved is less than steady. “Hong Kong regulators have not come up with the relevant rules for listing business trust[s] because they may be concerned that investors do not fully understand the higher level of risks,” said Vivian Lam, a partner in the corporate department of law firm Paul Hastings. She added that a “business trust is so versatile that you can put anything into it, and it can be marketed not as an income play at all because there may be [initially] little or no income.” Singapore is also a preferred destination among investors for REITs, compared with Hong Kong. While Hong Kong only has seven listed REITs, with a total of US$13.5 billion in market capitalization, Singapore has 25 valued at US$30 billion. Analysts say that the size of Singapore’s listed REIT sector makes the city-state a natural choice for others. Sandeep Pahwa, head of investment banking in Southeast Asia for Barclays Capital, said six to seven REITs are looking to list in Singapore and could raise between US$3 billion to US$4 billion in the next 12 months. According to people familiar with the situation, Mapletree Commercial Trust, which is linked to Singaporean sovereign-wealth fund Temasek Holdings Pte. Ltd., is seeking US$1 billion in an IPO. Other areas the Singapore Ex-
change has heavily marketed are the potentially lucrative, but often speculative, areas of technology and biotechnology. The exchange is also pitching its closeness to rapidly growing Southeast Asian economies. Last month, SGX, along with exchanges based in Malaysia, the Philippines and Thailand, announced a plan to develop a trading link by the end of 2011. The arrangement would enable investors to buy or sell shares listed on any of the exchanges while settling the transactions in their own market. It isn’t clear whether these niches will help Singapore compete with Hong Kong, with its close ties to mainland China, if the ASX deal falters. In a sign of how limited the niches can be, Perennial China Retail Trust, a unit of property investment firm Perennial Real Estate, Saturday postponed an IPO that was expected to raise 1.1 billion Singapore dollars (US$896.86 billion) via a business trust. A person familiar with the matter cited competition with the Hutchison Port IPO. “The Hong Kong market is deeper,” said Mervyn Chow, Credit Suisse’s co-head of equity capital markets for Asia, excluding Japan. “In Singapore, apart from REITs and property companies, there are few US$1 billion-plus IPOs. For this reason, there are strong arguments for jumbo overseas companies seeking an Asian listing to choose Hong Kong.”
Tuesday, March 8, 2011
27
THE WALL STREET JOURNAL.
MARKETS
Barclays chief is Thai AirAsia plans stock sale best-paid boss Total compensation exceeds $32.5 million BY DAVID ENRICH AND MARGOT PATRICK LONDON—Barclays PLC Chief Executive Officer Bob Diamond received total compensation valued at more than £20 million ($32.5 million), making him the best-paid British banking boss and a likely lightning rod for criticism of such windfalls. Mr. Diamond, who became CEO at the start of the year, collected a £6.5 million stock-based bonus for 2010 and about £13.8 million of Barclays shares stemming from prior years’ incentive plans. That was on top of his £250,000 annual salary last year. In addition, the U.K. bank awarded Mr. Diamond a package of shares that, depending on Barclays’s financial performance over the next three years, could be worth a maximum of £6.75 million. Barclays estimated their likely value at £2.25 million. Mr. Diamond, a Massachusetts native who helped build Barclays’s investment bank into a global powerhouse, has been a controversial figure in London due to his hefty paydays. Last year, in the heat of a national election campaign, some leading politicians singled him out for criticism over his pay—even though, for 2009, at least, he declined a bonus. This year, Mr. Diamond has been outspoken in calling for an end to the popular sport of banker bashing. At a Parliamentary hearing in January, he said the industry’s time for “remorse and apology” should be over, but vowed to exercise “any restraint I can” when it comes to bonuses. People familiar with the matter earlier this year said Mr. Diamond’s bonus was likely to be around £9 million. On Monday, they said Bar-
clays’s board reduced the amount to £6.5 million after Mr. Diamond urged directors to take into account the current political environment, including a recent industry agreement with the British government to rein in compensation. That bonus is comprised of £1.8 million of shares that Mr. Diamond is free to sell after six months. The remainder is stock and bonds that vest over several years. The bulk of Mr. Diamond’s compensation came in the form of stock grants that initially were established in prior years but wouldn’t actually be awarded unless Barclays met certain performance goals. Mr. Diamond last week received about 4.3 million Barclays shares, worth about £13.8 million. About half of those were sold on his behalf to cover taxes. Aside from his salary, Mr. Diamond didn’t receive any cash. The pay package disclosed Monday was based on Mr. Diamond’s job running Barclays’s investment-banking arm. As CEO, his salary will jump to £1.35 million. He will pocket another £675,000 a year in cash in lieu of pension contributions. His bonus for 2011 is capped at £3.38 million. Mr. Diamond’s £6.5 million bonus is more than double the £2.75 million that his predecessor as CEO, John Varley, received for 2010. HSBC Holdings PLC’s new CEO, Stuart Gulliver, received a £5.2 million bonus, while his predecessor, Michael Geoghegan, collected £3.8 million. Standard Chartered PLC’s CEO, Peter Sands, collected a £2.16 million bonus, while Lloyds Banking Group PLC CEO Eric Daniels received a £1.45 million bonus. Royal Bank of Scotland Group PLC’s CEO, Stephen Hester, collected £2 million.
Bloomberg News
Barclays CEO Bob Diamond is likely to be lightning rod for compensation critics.
ONGC targets April share sale BY BIJOU GEORGE MUMBAI—India’s Oil & Natural Gas Corp. is seeking to launch its follow-on share sale by April 5, after deferring the sale from its earlier deadline of March 15, two people familiar with the matter said Monday. The state-run oil explorer planned to file a draft prospectus for the share sale last week, but the plan hit a roadblock with the capi-
tal-markets regulator because of a shortfall in the number of independent directors on its board. India’s federal government, which owns 74.14% of ONGC, plans to sell a 5% stake in the company to raise funds for social welfare and infrastructure projects. The government has a target to raise 400 billion rupees ($8.9 billion) through such share sales in the fiscal year beginning April 1.
BANGKOK—Budget carrier Thai AirAsia plans to list on the Thai stock exchange in the fourth quarter after selling at least a 25% stake through an initial public offering, raising a minimum of $150 million. “The proceeds of this IPO will be used to further strengthen the company’s capital structure to a level appropriate to support our future operations, including the acquisition of additional aircraft,” Chief Executive Tassapon Bijleveld said. The fresh capital will be used to partly finance the purchase of 20 new Airbus 320 aircraft it has ordered to double its fleet, he said. Two new A320s are scheduled to be delivered later this year while an average of four planes are expected to be delivered each year over the next three years, Mr. Tassapon said, adding that all the 20 new aircraft are expected to be delivered by 2016. The planned IPO will include new and existing shares, which will be offered to both local and foreign investors. However, the carrier plans to maintain the interest of local shareholders at 51% after the IPO. Malaysia’s AirAsia Bhd. owns 49% of Thai AirAsia while the remaining 51% is owned by its Thai management. The airline has appointed three joint lead underwriters for the offering: Credit Suisse Securities (Thailand), CIMB Securities (Thailand) and Thanachart Securities. “We will try to get ourselves
Bloomberg News
BY PHISANU PHROMCHANYA
Malaysia’s AirAsia Bhd. owns 49% of Thai AirAsia, which plans an IPO this year. ready by the beginning of the fourth quarter and we will float the IPO sometime within that quarter,” said Mr. Tassapon. “Following the strong performance in 2010, we are confident that this is the right time to access the capital markets for further expansion.” Thai AirAsia booked a 33% increase in 2010 revenue to 12.4 billion baht ($407.2 million) and a net profit of 2.85 billion baht. Load factor last year was 78% while passenger volume was at 5.8 million. Revenue is targeted to rise to 15 billion baht this year as load factor and passenger volume are expected to increase to 82% and seven million respectively, while Thai AirAsia aims to maintain its net profit mar-
gin at 22% to 23%, on par with last year, Mr. Tassapon said. With new planes being added to its fleet in the coming years, the company aims for average annual revenue growth of about 35% over the next three years, he said. The airline plans to introduce one new route to India this year and a new route to the Philippines early next year, the chief executive said. It is also seeking to increase its ancillary income to offset rising fuel costs instead of adding fuel surcharges to its ticket fees, which could damp travel demand, he said. The company currently hedges around 30% of its fuel usage for a three-month period, Mr. Tassapon said.
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28
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
BLUE CHIPS BONDS Dow Jones Asia Titans: Monday's best and worst...
Major players benchmarks
Market value, in billions of US$
Company
Country
Industry
CNOOC
Hong Kong
Exploration Prdctn
$104.2
Previous close, in local currency
STOCK PERFORMANCE Previous session
18.16
52-week
1.91%
Three-year
47.2%
48.9%
At right, a look at the Asia Titans, the biggest and best known companies in Asia. Below, some of the Dow Jones Titans indexes of biggest and most liquid stocks in individual countries and regions
Tokyo Elec Power
Japan
Electricity
41.5
2,128
0.61
-13.7
-17.0
PetroChina
Hong Kong
Integrated Oil Gas
29.5
10.90
0.37
22.1
3.6
Giants around the world
Kansai Elec Power
Japan
Electricity
23.4
2,131
-0.05%
-0.1
-15.8
Reliance Industries
India
Exploration Prdctn
71.0
43.44
-0.16
-1.4
-21.5
Samsung Electronics
South Korea
Semiconductors
$105.1
906,000
16.9
64.7
Honda Motor
Japan
Automobiles
76.4
3,435
-3.10
10.5
14.9
Japan Tobacco
Japan
Tobacco
38.7
331,000
-3.07
2.2
-37.8
In U.S.-dollar terms.
Dow Jones Country Titans INDEX PERFORMANCE Previous session
Italy
0.89%
Year-to-date
52-week
9.9%
0.6%
Russia
2.47
9.4
30.5
Spain
1.23
8.4
-0.7
China 88
1.99
7.3
-3.6 17.3
Canada
0.51
7.1
France
0.46
6.0
2.9
Netherlands
0.42
5.7
9.5
Japan
-1.54
4.8
0.4
Germany
0.97
4.5
19.4
Switzerland
0.39
3.5
-1.2
U.K.
0.70
2.5
5.8
Hong Kong
-0.32
1.9
12.9
Australia
-1.33
1.3
-1.8
Brazil
-0.35
0.5
10.7
1.25
-2.3%
14.4
South Korea
-1.26
-2.4
21.3
South Africa
-0.02
-2.4
12.2
Sweden
Singapore
0.15
Turkey
-1.51
-3.2
Tokio Marine Hldgs
Japan
Property Casualty Insr
25.3
2,644
-2.72
5.7
-32.4
Nissan Motor
Japan
Automobiles
42.2
829.00
-2.59
18.4
-7.4
...And the rest of Asia's blue chips Panasonic 27.6 Japan (Consumer Electronics) NTT DoCoMo 78.9 Japan (Mobile Telecommunications) Seven I Hldgs 24.5 Japan (Broadline Retailers) Bank of China 44.8 Hong Kong (Banks) Takeda Pharm 39.0 Japan (Pharmaceuticals) China Mobile (HK) 190.0 Hong Kong (Mobile Telecommunications) China Construction Bank 214.6 Hong Kong (Banks) China Life Insurance 28.7 Hong Kong (Life Insurance) Hon Hai Precision Ind 38.4 Taiwan (Electrical Components Equipment) Indl Comm Bk China 68.4 Hong Kong (Banks) KDDI 28.8 Japan (Mobile Telecommunications) Nippon T&T 65.4 Japan (Fixed Line Telecommunications) Westfield Grp 22.7 Australia (Retail) Woodside Petroleum 33.5 Australia (Exploration Production) Mitsubishi 45.5 Japan (Industrial Suppliers) Aus NZ Bk 61.1 Australia (Banks) JFE Hldgs 16.1 Japan (Steel) Westpac Bking 70.5 Australia (Banks) Nintendo 35.7 Japan (Toys) Mizuho Financial Grp 39.2 Japan (Banks)
11.3
Dow Jones Regional Sector Titans Oil Gas Insurance
14.3%
1.21%
24.0%
11.3
11.2
10.8
27.0
0.56
Media
0.22
Ind Gds Svcs
0.29
7.7
24.5
Chemicals
0.19
7.4
32.3
Banks
0.09
7.2
3.2
5.4
9.8
Global 50
-0.01
Asian 50
-1.21
1.5
8.0
Tiger 50*
-0.96
1.1
16.4
Arab 50
-0.43
-9.8%
Market value, in billions (U.S)
Company/Country (Industry)
11.5
-10.2
-4.13%
-0.6
*Asia excluding Japan
Latest, in local currency
STOCK PERFORMANCE Latest 52-week Three-year
1,094 155,200
-0.18%
-13.9%
-49.0%
-0.19
12.5
-1.8
2,281
-0.22
17.5
-4.0
4.17
-0.24
10.7
38.5
4,060
-0.25
1.0
-24.1
74.40
-0.27
2.0
-32.4
6.95
-0.29
17.4
28.9
30.05
-0.33
-12.5
6.0
117.00
-0.43
-2.2
-30.7
6.14
-0.49
7.9
22.7
534,000
-0.56
12.4
-12.2
4,060
-0.85
4.1
-99.1
9.66
-0.92
1.1
-26.6
42.42
-1.00
-4.7
-24.9
2,272
-1.05
-0.7
-31.2
23.49
-1.05
-1.4
15.9
2,502
-1.07
-27.4
-37.9
23.22
-1.11
-13.2
9.8
22,900
-1.17
-12.9
-56.8
167.00
-1.18
-7.7
-100.0
Market value, in billions (U.S)
Company/Country (Industry)
Shinhan Financial Grp 21.0 South Korea (Banks) East Japan Railway 27.6 Japan (Travel Tourism) QBE Insurance Group 18.6 Australia (Reinsurance) Taiwan Smcndtr Mfg 62.4 Taiwan (Semiconductors) Sun Hung Kai Prop 41.2 Hong Kong (Real Estate Holding Development) Cheung Kong 36.7 Hong Kong (Real Estate Holding Development) Woolworths 33.2 Australia (Food Retailers Wholesalers) National Australia Bk 54.1 Australia (Banks) Mitsubishi UFJ Finl 75.6 Japan (Banks) Rio Tinto Ltd. 37.3 Australia (General Mining) POSCO 31.5 South Korea (Steel) Nippon Steel 22.1 Japan (Steel) Sony 35.5 Japan (Consumer Electronics) Sumitomo Mitsui Finl 51.5 Japan (Banks) Commonwlth Bk of Aus 80.6 Australia (Banks) BHP Billiton 157.9 Australia (General Mining) Mitsui 32.9 Japan (Industrial Suppliers) Shin-Etsu Chml 22.9 Japan (Specialty Chemicals) Toyota Motor 141.6 Japan (Automobiles) Canon 57.7 Japan (Electronic Office Equipment)
All statistics published in The Wall Street Journal Asia from markets outside the Asian-Pacific region reflect preliminary data.
49,400
-1.20%
13.3%
5,740
-1.20
-7.4
-99.3
-0.8%
17.41
-1.25
-15.1
-15.4
70.90
-1.25
17.4
10.8
125.20
-1.26
13.5
-0.6
123.50
-1.28
28.6
15.3
26.99
-1.42
-3.8
-6.0
25.14
-1.49
-5.1
-6.6
447.00
-1.54
-2.4
-48.1
84.15
-1.60
12.2
-35.9
457,500
-1.61
-16.1
-10.1
288.00
-1.71
-16.0
-40.5
2,926
-1.75
-8.7
-36.5
3,030
-1.78
6.1
-99.6
51.69
-1.82
-6.2
31.4
46.32
-1.97
9.0
19.1
1,491
-2.23
2.6
-35.5
4,425
-2.32
-9.6
-15.6
3,695
-2.38
8.8
-30.7
3,840
-2.41
-1.3
-15.2
Credit derivatives
Credit-default swaps: Asian companies
Spreads on credit derivatives are one way the market rates creditworthiness. Regions that are treading in rough waters can see spreads swing toward the maximum—and vice versa. Indexes below are for five-year swaps.
At its most basic, the pricing of credit-default swaps measures how much a buyer has to pay to purchase-and how much a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives a sense which way the market was moving yesterday.
Markit iTraxx Indexes Index: series/version
Europe: 14/1 Eur. High Volatility: 14/1 Europe Crossover: 14/1 Asia ex-Japan IG: 14/1 Japan: 14/1
Spreads Spreads on fiveyear swaps for corporate debt; based on Markit iTraxx indexes.
Mid-spread, in pct. pts. Mid-price
Coupon
SPREAD RANGE, in pct. pts. since most recent roll Maximum Minimum Average
Showing the biggest improvement...
And the most deterioration
CHANGE, in basis points
CHANGE, in basis points
1.00
100.01%
0.01%
1.20
0.94
1.03
1.36
98.44
0.01
1.84
1.29
1.52
Rep Indonesia
144
–4
–5
–10
Nippon Stl
63
–1
–4
3.87
104.44
0.05
5.37
3.81
4.45
Rep Philippines
134
–3
–4
–1
SK Telecom
89
–1
...
4
1.06
99.75
0.01
1.25
0.93
1.08
Nissan
76
–3
–7
–7
Canon
29
–1
...
–2
0.99
100.03
0.01
1.16
0.90
1.02
Index roll
Yesterday Yesterday Five-day 28-day
Yesterday Yesterday Five-day 28-day
HYUNDAI
113
–3
...
1
POSCO
Note: Data as of March 4
KT
94
–2
2
2
CHINA Dev
In percentage points
Lg Electrs
104
–2
–2
...
Wharf Hldgs
125
–2
–7
–14
Bk of China
129
–2
–3
Expt Import Bk of China
130
–2
Kawasaki Heavy
105
–2
Europe Sub Financials t
4.00 3.00 2.00
–1
95
–1
...
3
130
...
–3
–3
Indl Bk Korea
119
...
1
–3
Woori
143
...
–1
...
–5
GS Caltex Oil
117
...
...
1
–2
–5
Korea Elec Pwr
93
...
...
2
2
3
MTR
41
1
...
–4
Source: Markit Group
1.00
t
— NOTICE TO READERS —
STOCK PERFORMANCE Latest 52-week Three-year
Sources: Dow Jones Indexes; WSJ Market Data Group
Source: Dow Jones Indexes
Tracking credit markets dealmakers
Latest, in local currency
Europe Senior Financials
0
Sept. Oct. Nov. Dec. Jan. Feb. 2010 2011 Source: Markit Group
Behind Europe's deals: Bank revenue rankings, UK Behind every IPO, bond offering, merger deal or syndicated loan is one or more investment banks. Here are investment banks ranked by year-to-date revenues from recent deals. PERCENTAGE OF TOTAL REVENUE Debt Mergers & capital markets acquisitions
Revenue, in millions
Market share
Equity capital markets
$57
10.1%
26%
42%
30%
3%
JPMorgan
44
7.9
24
25
42
9
Bank of America Merrill Lynch
39
6.9
20
26
51
2
WSJ.com
Goldman Sachs
36
6.4
8
44
38
10
RBS
34
6.1
10
82
1
7
Follow the markets throughout the day, with updated stock quotes, news and commentary at WSJ.com. Also, receive emails that summarize the day’s trading in Europe and Asia. To sign up, go to WSJ.com/Email.
Morgan Stanley
31
5.6
...
9
90
1
Deutsche Bank
28
5.0
16
55
27
2
UBS
28
4.9
18
23
54
5
Credit Suisse
26
4.6
18
40
28
14
Barclays Capital
Loans
Source: Dealogic
Tuesday, March 8, 2011
29
THE WALL STREET JOURNAL.
GLOBAL MARKETS LINEUP Commodities
Currencies
Prices of futures contracts with the most open interest
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; NYBOT: New York Board of Trade; MDEX: Bursa Malaysia Derivatives Berhad; LIFFE: London International Financial Futures Exchange; LME: London Mercantile Exchange; NYMEX: New York Mercantile Exchange; ICE: IntercontinentalExchange Contract ONE-DAY CHANGE Commodity Exchange Last price Net Percentage high CBOT
Corn (cents/bu.) Soybeans (cents/bu.) Wheat (cents/bu.) Live cattle (cents/lb.) Cocoa ($/ton) Coffee (cents/lb.) Sugar (cents/lb.) Cotton (cents/lb.) Crude palm oil (ringgit/ton) Cocoa (pounds/ton) Robusta coffee ($/ton)
CBOT CBOT CME ICE-US ICE-US ICE-US ICE-US MDEX LIFFE LIFFE COMEX
Copper (cents/lb.) Gold ($/troy oz.) Silver (cents/troy oz.) Aluminum ($/ton) Tin ($/ton) Copper ($/ton) Lead ($/ton) Zinc ($/ton) Nickel ($/ton)
COMEX COMEX LME LME LME LME LME LME NYMEX
Crude oil ($/bbl.) Heating oil ($/gal.) RBOB gasoline ($/gal.) Natural gas ($/mmBtu) Brent crude ($/bbl.) Gas oil ($/ton)
NYMEX NYMEX NYMEX ICE-EU ICE-EU
725.00 1411.00 822.50 113.675 3,684 281.10 30.01 219.70 3,695.00 2,351 2,410
-3.00 -3.00 -9.75 -0.375 27 8.30 0.13 7.00 35 11 20
442.00 1439.50 3646.00 2,601.00 31,725.00 9,853.50 2,608.00 2,440.00 28,550
-6.55 10.90 113.30 -17.00 -200.00 -125.50 -45.00 -72.00 -355
105.47 3.0997 3.0431 3.917 116.71 978.50
1.05 0.0104 -0.0033 0.030 0.74 9.50
744.25 1,467.50 925.50 116.600 3,775 281.85 33.11 219.70 3,930 2,425 2,417
-0.41% -0.21 -1.17 -0.33 0.74% 3.04 0.44 3.29 0.96 0.47 0.84
Contract low
366.50 909.25 521.75 89.975 2,650 133.75 11.84 68.05 2,095 1,818 1,493
465.75 280.00 1,445.70 1,005.00 3,674.50 18.50 2,618.00 1,857.00 32,590.00 15,925.00 10,123.00 6,120.00 2,676.00 1,580.00 2,584.00 1,617.00 29,050 18,005
-1.46 0.76 3.21 -0.65 -0.63 -1.26 -1.70 -2.87 -1.23
136.90 3.1372 3.0936 10.050 133.58 990.00
1.01 0.34 -0.11 0.77 0.64 0.98
67.95 1.7225 1.9900 3.805 68.02 634.25
Source: Thomson Reuters; WSJ Market Data Group
WSJ.com
Price-to-
earnings ratio* 16
Region/Country Index ASIA-PACIFIC DJ Asia-Pacific
PREVIOUS SESSION
Net change
142.47
-1.38
4797.88
-66.40
CBN 600
28263.46
480.93
Hong Kong
Hang Seng
23313.19
-95.67
India
Sensex
18222.67
-263.78
...
Indonesia
Jakarta Composite
3561.717
18.814
...
Japan
Nikkei Stock Average
10505.02
-188.64
941.63
-13.96
1515.74
-6.87
Australia
SPX/ASX 200
...
China
14 17
...
Topix
...
Malaysia
Kuala Lumpur Composite
...
New Zealand
NZSX-50
3430.054
11.948
9
Pakistan
KSE 100
11974.55
-25.48
12
Philippines
Manila Composite
3886.48
3.77
...
Singapore
Straits Times
3066.52
5.21
11
South Korea
Kospi
1980.27
-24.41
15
Taiwan
Weighted
8713.79
-70.61
10
Thailand
SET
1002.94
7.03
16
EUROPE
Stoxx Europe 600
14
Stoxx Europe 50
2.09% 1.90 2.18 2.30 2.56 2.64 2.12 2.60 2.56 2.56 2.29 2.29
16 15 14 16 16 15 12 14 12 12 13 13
Last
Global TSM 2722.77 Global DOW 2202.02 Global Titans 50 186.70 Asia/Pacific TSM 1408.62 Asia/Pacific ex-Japan TSM 3524.62 Europe TSM 2949.82 Emerging Markets TSM 4678.00 Asian Titans 50 147.84 BRIC 50 660.11 CBN China 600 -c 28263.46 China Offshore 50 4321.48 Shanghai -c 380.74
2.69 1.88 -0.02 -13.27 -26.79 19.78 -15.25 -1.81 -3.01 480.93 -4.33 6.17
PERFORMANCE Yr.-to-date 52-wk.
-0.96%
...
-1.37
1.1%
4.0265 0.2484 1.6554 0.6041 0.9713 1.0296 0.9719 1.0289 0.9733 1.0274 0.9758 1.0248 473.55 0.002112 1892.80 0.0005283 1 1 12.0106 0.0833 2.7695 0.3611 19.400 0.0515 1 1 4.29 0.232848
ASIA-PACIFIC Australia dollar China yuan Hong Kong dollar India rupee Indonesia rupiah Japan yen 1-mo. forward 3-mos. forward 6-mos. forward Malaysia ringgit-c New Zealand dollar Pakistan rupee Philippines peso Singapore dollar South Korea won Taiwan dollar Thailand baht
1.3801 0.7246 9.1979 0.1087 10.9116 0.0916 63.1353 0.0158 12313 0.0000812 114.95 0.008699 114.93 0.008701 114.88 0.008705 114.78 0.008713 4.2471 0.2355 1.9017 0.5258 119.614 0.0084 60.641 0.0165 1.7730 0.5640 1565.77 0.0006387 41.232 0.02425 42.611 0.02347
0.9848 6.5632 7.7860 45.0500 8786 82.03 82.01 81.97 81.90 3.0305 1.3569 85.350 43.270 1.2651 1117.25 29.421 30.405
1.73% -0.41 -1.43 0.53 -1.76 -1.46 -0.45
Price-to-
earnings ratio* 14
13.7%
U.S. Australia Britain Canada China Euro Hong Kong India Indonesia Japan New Zealand South Korea Malaysia Philippines Singapore Switzerland Taiwan Thailand
US$
1.015 1.623 1.030 0.1524 1.401 0.128 0.0222 0.0001 0.012 0.737 0.0009 0.330 0.023 0.790 1.082 0.034 0.033
1.598 1.014 0.150 1.380 0.126 0.0219 0.0001 0.012 0.726 0.0009 0.325 0.023 0.778 1.065 0.033 0.032
£ 0.616 0.626 0.634 0.094 0.864 0.079 0.0137 0.0001 0.008 0.454 0.0006 0.203 0.014 0.487 0.666 0.021 0.020
C$ 0.971 0.986 1.576
5.9
3.4
19
Denmark
OMX Copenhagen
0.148 1.361 0.125 0.0216 0.0001 0.012 0.716 0.0009 0.320 0.022 0.768 1.051 0.033 0.032
Per U.S. dollar
In U.S. dollars
1 0.9996 0.9985 0.9962 0.0413 0.1341 0.003681 0.1289 0.2516 0.02532 0.1128 0.7718 0.7720 0.7723 0.7727 0.4464 1.1581 1.1577 1.1568 1.1549
0.7135 0.7138 0.7146 0.7163 17.269 5.3218 193.85 5.5337 2.8362 28.184 6.3241 0.9245 0.9243 0.9239 0.9235 1.5985 0.6162 0.6164 0.6168 0.6179
1.4015 1.4009 1.3994 1.3962 0.0579 0.1879 0.005159 0.1807 0.3526 0.03548 0.1581 1.0817 1.0819 1.0824 1.0829 0.6256 1.6229 1.6224 1.6212 1.6185
0.8858
1.1289
Finland
OMX Helsinki
7394.88
9.33
France
CAC-40
3990.41
-29.80
-3.8
35.6
13
Germany
DAX
7161.93
-16.97
2.7
-0.8
12
Italy
FTSE MIB
22145.79
7.35
4.8
1.5
13
Netherlands
AEX
366.08
-1.87
-0.2
14.5
...
Russia
RTSI
2025.17
9 10
0.10
-7.5
25.6
...
0.17
-3.9
8.2
13
-3.4
19.3
18
-2.9
12.3
-2.9
39.2
16
0.71 -0.28
1.9
9.4
-0.44
2.4
2.9
0.3770 2.6523 5.9023 0.1694 3.5920 0.2784 0.7083 1.4119 0.2777 3.6010 1500.50 0.0006665 3.7504 0.2666 6.8586 0.1458 3.6731 0.2723 0.6321
1.5821
4.4% 5.5 5.4 -0.1 -2.4 7.3 -2.5 1.5 0.8 5.9 1.8 6.9
16.3% 11.9 9.8 13.7 15.1 14.1 14.6 8.0 12.8 3.4 9.3 3.3
-0.4% -3.2 -3.8 0.0 1.3 -5.3 -0.1 -1.6 0.0 -8.5 0.1 -7.9
Price-toDividend earnings yield* ratio* Dows Jones Index
2.29% 13 1.67 20 5.25 14 6.17 11 3.73 7 3.96 15 1.54 20 1.89 15 2.30 14 1.34 18 3.20 22
EURO 0.714 0.725 1.158 0.735 0.109 0.092 0.0158 0.0001 0.009 0.526 0.0006 0.235 0.016 0.564 0.772 0.024 0.023
HK$ 7.786 7.906 12.636 8.016 1.186 10.912 0.1728 0.0009 0.095 5.738 0.0070 2.569 0.180 6.154 8.422 0.265 0.256
RUPEE 45.050 45.746 73.114 46.384 6.864 63.135 5.786 0.0051 0.549 33.200 0.0403 14.866 1.041 35.610 48.729 1.531 1.482
RUPIAH 8785.80 8921.54 14258.92 9045.87 1338.66 12312.86 1128.42 195.02 107.11 6474.70 7.86 2899.13 203.05 6944.75 9503.30 298.62 288.96
YEN 82.025 83.292 133.122 84.453 12.498 114.954 10.535 1.8208 0.0093 60.448 0.0734 27.066 1.896 64.837 88.724 2.788 2.698
0.0012 0.448 0.031 1.073 1.468 0.046 0.045
WON 1117.24 1134.50 1813.23 1150.32 170.23 1565.76 143.49 24.80 0.13 13.62 823.35 368.67 25.82 883.13 1208.48 37.97 36.75
-0.31%
PERFORMANCE Yr.-to-date 52-wk. 4.2% 5.6% 5.0
1.9
1.9
24.8
-3.5
5.5
-0.53 -0.26 0.13% -0.74 -0.24 0.03
2.2
3.6
21.9
9.8
-1.1
3.2
8.3
13.7
33.4
-0.51 Closed
4.9
6.5
-5.3
0.9
-5.2
-8.8
13.0
Spain
IBEX 35
10495.7
-3.0
Switzerland
SMI
6495.52
-35.02
Turkey
ISE National 100
60217.58
-895.25
U.K.
FTSE 100
5973.78
-16.61
AMERICAS
DJ Americas
359.38
1.06
...
Brazil
Bovespa
68012.10
Closed
-1.9
-1.0
...
Argentina
Merval
3467.72
Closed
-1.6
50.3
Mexico
IPC
-4.8
12.8
Last
Net change
Shenzhen -c 452.33 6.92 U.S. TSM 13862.24 43.88 Global Select Div -d 225.07 0.35 Asia/Pacific Select Div -d 298.28 -1.50 Hong Kong Select Div -d 218.34 -1.16 U.S. Select Dividend -d 369.28 2.27 Islamic Market 2331.02 4.14 Islamic Market 100 2349.18 3.94 Islamic China/HK Titans 30 1702.03 1.35 Sustainability Korea 1501.63 -24.77 Brookfield Infrastructure 2377.34 1.79 DJ-UBS Commodity -p 169.28 1.02
NZ$ 1.357 1.378 2.202 1.397 0.207 1.902 0.174 0.0301 0.0002 0.017
Percentage change
36686.32
-0.03 -0.54 -1.46
-214.52
-0.28 0.30
-0.58
1.3
6.5
5.4
18.1
Thomson Reuters is the primary data provider for several statistical tables in The Wall Street Journal, including foreign stock quotations, futures and futures options prices, and foreign exchange tables. Reuters real-time data feeds are used to calculate various Dow Jones Indexes.
Sources: Thomson Reuters; WSJ Market Data Group
PERFORMANCE YearThree-yr., to-date 52-wk. annualized
-1.15
12
6.4
-0.80
434.92
14
22.9
-1.22
-15.53
6.5
3.7
-0.21
2933.65
10.0
-0.4
0.35
PREVIOUS SESSION
Net change -0.89
1.2
-0.78
0.10% 0.09 -0.01 -0.93 -0.75 0.68 -0.32 -1.21 -0.45 1.73 -0.10 1.65
9.198 0.843 0.1457 0.0007 0.080 4.837 0.0059 2.166 0.152 5.188 7.099 0.223 0.216
SDR -f
-11.1
-11.80
Daily
YUAN 6.563 6.665 10.652 6.757
In euros
MIDDLE EAST/AFRICA Bahrain dinar 0.5284 1.8926 Egypt pound-a 8.2717 0.1209 Israel shekel 5.0340 0.1986 Jordan dinar 0.9926 1.0075 Kuwait dinar 0.3892 2.5695 Lebanon pound 2102.88 0.0004755 Saudi Arabia riyal 5.2560 0.1903 South Africa rand 9.6119 0.1040 United Arab dirham 5.1476 0.1943
Close 286.06
Euro Stoxx 50
PERFORMANCE YearThree-yr., to-date 52-wk. annualized
Daily
1.55% 0.32 0.15 -0.50 -0.53 0.62 0.18 0.17 0.08 -1.62 0.08 0.61
3.7% 5.6 3.9 0.2 -0.8 3.0 4.6 4.7 2.0 0.7 4.9 4.2
11.4% 18.2 14.7 11.2 13.8 13.9 17.3 11.6 12.5 23.3 17.2 25.7
-2.4% 2.2 -3.3 -5.7 6.7 -2.5 2.0 0.1 -1.3 4.8 1.6 -7.5
Source: DowJones Indexes
U.S.-dollar and euro foreign-exchange rates in global trading A$ 0.985
Per euro EUROPE Euro zone euro 1 1-mo. forward 1.0004 3-mos. forward 1.0015 6-mos. forward 1.0038 Czech Rep. koruna-b 24.202 Denmark krone 7.4582 Hungary forint 271.67 Norway krone 7.7552 Poland zloty 3.9747 Russia ruble-d 39.498 Sweden krona 8.8629 Switzerland franc 1.2956 1-mo. forward 1.2954 3-mos. forward 1.2948 6-mos. forward 1.2942 Turkey lira 2.2402 U.K. pound 0.8635 1-mo. forward 0.8638 3-mos. forward 0.8645 6-mos. forward 0.8659
1.0155 0.1524 0.1284 0.0222 0.0001138 0.012191 0.012194 0.012199 0.012210 0.3300 0.7370 0.0117 0.0231 0.7905 0.0008951 0.03399 0.03289
Region/Country Index Euro Zone Euro Stoxx
13
*Fundamentals are based on data in U.S. dollar. Footnotes: c-in local currency. d-dividends reinvested. p-previous day. Note: All data as of 11:30 a.m. ET.
Cross rates
In euros
-0.2
281.12
Dow Jones Indexes Net change
Percentage change
2649.62
*P/E ratios use trailing 12-months, as-reported earnings European and Americas index data are as of 12:00 p.m. ET.
Price-toDividend earnings yield* ratio* Dows Jones Index
In U.S. dollars
5.6429 0.1772 2.3199 0.4311 1.3612 0.7347 1.3621 0.7342 1.3640 0.7331 1.3676 0.7312 663.66 0.001507 2652.66 0.0003770 1.4015 0.7135 16.8323 0.0594 3.8813 0.2576 27.188 0.0368 1.4015 0.7135 6.02 0.166148
Per euro
Stock indexes from around the world, grouped by region. Shown in local-currency terms.
Close
...
Per U.S. dollar
AMERICAS Argentina peso-a Brazil real Canada dollar 1-mo. forward 3-mos. forward 6-mos. forward Chile peso Colombia peso Ecuador US dollar-f Mexico peso-a Peru sol Uruguay peso-e U.S. dollar Venezuela bolivar
a-floating rate b-commercial rate c-government rate c-commercial rate d-Russian Central Bank rate f-Special Drawing Rights from the International Monetary Fund ; based on exchange rates for U.S., British and Japanese currencies. Note: Based on trading among banks in amounts of $1 million and more, as quoted by Thomson Reuters.
Follow the markets throughout the day with updated stock quotes, news and commentary at WSJ.com Also, receive email alerts that summarize the day’s trading in Europe and Asia. To sign up, go to WSJ.com/Email
Major stock market indexes
London close on March 7
RINGGIT PH. PESO 3.031 43.270 3.077 43.939 4.918 70.225 3.120 44.551 0.462 6.593 4.247 60.641 0.389 5.557 0.0673 0.9605 0.0003 0.0049 0.037 0.528 2.233 31.888 0.0027 0.0387 14.278 0.070 2.395 34.203 3.278 46.804 0.103 1.471 0.100 1.423
S$ S FRANC 1.265 0.924 1.285 0.939 2.053 1.500 1.303 0.952 0.193 0.141 1.773 1.296 0.162 0.119 0.0281 0.0205 0.0001 0.0001 0.015 0.011 0.932 0.681 0.0011 0.0008 0.417 0.305 0.029 0.021 0.731 1.368 0.043 0.031 0.042 0.030
TW$ 29.421 29.876 47.749 30.292 4.483 41.232 3.779 0.6531 0.0033 0.359 21.682 0.0263 9.708 0.680 23.256 31.824
BAHT 30.405 30.875 49.346 31.305 4.633 42.611 3.905 0.6749 0.0035 0.371 22.407 0.0272 10.033 0.703 24.034 32.888 1.033
0.968
Source: Thomson Reuters via WSJ Market Data Group
MSCI indexes Developed and emerging-market regional and country indexes from MSCI Barra as of March. 07, 2011 Price-toDividend earnings yield ratio Morgan Stanley Index
LOCAL-CURRENCY PERFORMANCE
Last
Daily
YTD
52-wk.
2.30% 16
ALL COUNTRY (AC) WORLD* 345.34
0.10%
4.4%
19.3%
2.30
16
World (Developed Markets) 1,348.44
0.27
5.3
19.0
1.60
26
World Small Cap
249.14
-0.01
5.4
31.4
2.40
16
Kokusai (World ex-Japan)
1,334.26
0.39
5.4
19.4
2.90
15
EAFE
1,745.76
-0.14
5.3
16.6
2.20
14
Emerging Markets (EM)
1,138.47
-0.97
-1.1
21.6
2.70
15
AC ASIA PACIFIC EX-JAPAN 474.24
-1.30
-1.0
20.3
2.40
14
AC Far East ex-Japan
521.36
-1.54
-0.7
23.2
1.80
16
Japan
596.45
0.80
6.2
6.7
2.30
14
China
67.05
1.54
0.9
10.7
1.00
22
China A (China Domestic)
3,208.09
1.41
3.8
1.9
2.50
22
Hong Kong
12,143.33
1.33
-0.6
22.8
1.10
19
India
727.83
0.15 -10.3
8.3
1.30
11
Korea
577.25
1.90
-1.7
28.1
2.50
17
Malaysia
558.41
1.11
-0.4
19.8
3.10
14
Singapore
1,672.53
0.58
-4.8
8.6
3.30
15
Taiwan
314.45
0.80
-1.5
17.6
2.80
14
Thailand
404.18
0.41
-1.8
36.9
4.10
17
Australia
993.49
1.22
2.8
3.4
4.80
17
New Zealand
88.57
0.93
5.7
5.4
1.70
18
US BROAD MARKET
1,498.00
0.70
5.2
21.7
3.10
15
EUROPE
97.57
-0.61
2.3
14.3
*Twenty-three developed and 26 emerging markets
Source: MSCI Barra
30
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
SCANNING THE GLOBE Dow Jones Industrial Average
Nasdaq Composite Index
P/E: 15
t 14.46, or 0.12%
LAST: 12155.42 YEAR TO DATE: OVER 52 WEEKS
t 25.99, or 0.93%
LAST: 2758.68 YEAR TO DATE: OVER 52 WEEKS
s 577.91, or 5.0% s 1,602.90, or 15.2%
S&P 500 Index
P/E: 13*
P/E: 18 t 4.52, or 0.34%
LAST: 1316.63 YEAR TO DATE: OVER 52 WEEKS
s 105.81, or 4.0% s 426.47, or 18.3%
s 58.99, or 4.7% s 178.13, or 15.6%
High 12500
2825
1375
12000
2700
1300
11500
2575
1225
11000
2450
1150
10500
2325
1075
Close Low
t
50–day moving average
10000 10
17 23
31
7
14
21
28
Jan.
4 Feb.
11
18 25
2200
4 Mar.
10
17 23
31
7
14
21
28
Jan.
4 Feb.
11
18 25
1000
4 Mar.
10
17 23
31
7
14
21
Jan.
U.S. stocks: most active...
Symbol
Volume, in millions
Latest
AT&T Alcoa AmExpress BankAm Boeing Caterpillar Chevron CiscoSys CocaCola Disney DuPont ExxonMobil GenElec HewlettPk HomeDpt Intel IBM JPMorgChas JohnsJohns KftFoods McDonalds Merck Microsoft Pfizer ProctGamb 3M TravelersCos UnitedTech Verizon
T AA AXP BAC BA CAT CVX CSCO KO DIS DD XOM GE HPQ HD INTC IBM JPM JNJ KFT MCD MRK MSFT PFE PG MMM TRV UTX VZ
9.2 9.6 3.3 57.9 1.9 2.8 3.2 35.7 3.6 4.3 2.3 7.4 24.5 7.5 3.3 25.3 2.0 12.0 3.4 3.1 3.1 4.3 28.0 17.2 4.9 1.6 1.2 1.3 3.8
$27.94 16.25 43.88 14.02 70.28 101.72 103.55 18.06 65.48 42.53 53.26 85.12 20.14 42.07 37.13 21.14 160.14 45.11 60.51 31.30 76.08 32.83 25.73 19.37 61.55 92.48 59.23 82.30 36.19
0.02 –0.33 0.16 –0.10 –1.52 –1.32 –0.20 –0.34 0.27 –1.02 –0.61 0.04 –0.23 –0.54 –0.09 –0.42 –1.69 –0.41 –0.55 –0.28 0.05 –0.23 –0.22 –0.29 –0.48 0.29 0.05 –0.56 0.11
0.08% –1.97 0.37 –0.71 –2.12 –1.28 –0.20 –1.85 0.41 –2.34 –1.13 0.05 –1.13 –1.27 –0.24 –1.95 –1.04 –0.90 –0.90 –0.90 0.06 –0.70 –0.86 –1.48 –0.77 0.31 0.08 –0.68 0.30
WalMart
WMT
4.6
51.91
–0.16
–0.30
Stock
CHANGE Points Percentage
4 Feb.
11
18 25
4 Mar.
Sources: WSJ Market Data Group; Birinyi Associates
*Price-to-earnings ratio for the Nasdaq 100 Note: Price-to-earnings ratios are for trailing 12 months
DJIA component stocks
28
Stock
Volume, Symbol in millions
Citigroup SPDR S&P 500 BankAm PwrShrs QQQ iShrRu2000 FordMotor CiscoSys iShrSilverTr SprintNextel SPDR FnclSelSct SeagateTch Microsoft AlcatelLucent ADS Intel GenElec
C SPY BAC QQQQ IWM F CSCO SLV S XLF STX MSFT ALU INTC GE
ADRs of Asian companies* Latest
CHANGE Points Percentage
190.5 95.1 57.9 43.2 37.8 37.6 35.7 32.8 31.6 29.7 28.1 28.0 26.8 25.3 24.5
$4.51 131.29 14.02 56.97 80.72 14.10 18.06 35.14 4.38 16.44 13.68 25.73 5.60 21.14 20.14
–0.03 –1.19 –0.10 –1.00 –1.72 –0.32 –0.34 0.45 0.04 –0.08 1.24 –0.22 –0.06 –0.42 –0.23
–0.55% –0.89 –0.71 –1.72 –2.09 –2.22 –1.85 1.29 0.92 –0.47 9.99 –0.86 –1.06 –1.95 –1.13
ATRN 553.5 TOMO 14,487.6 LEI 14,336.4 RAME 9,038.1 JRCC 3,577.4
$6.05 4.55 5.01 2.38 23.42
3.06 0.88 0.77 0.36 3.17
102.68% 23.98 18.16 17.82 15.65
$3.60 25.32 8.82 1.83 2.58
–1.31 –3.49 –1.19 –0.24 –0.34
–26.68% –12.11 –11.89 –11.59 –11.50
52-WEEK High Low
$13.85 131.63 96.66 15.55 3.94 7.27 25.18 37.65 58.22 19.24 12.55 5.68 53.16 6.66 15.72 28.15 77.92 54.70 7.69 22.81 10.49 17.60 9.50 17.32 10.06 3.56 21.59 75.00 44.56 30.93
Biggest gainers... Atrinsic TomoTherapy LucasEnergy RAM EngyRes JamesRvrCoal
...Biggest losers Repligen Ciena Accuray ChEduAlliance Macatawa
RGEN 917.4 CIEN 11,731.2 ARAY 2,007.5 CEU 254.7 MCBC 116.4
Volume, Symbol in OOOs
Stock
TaiwanSemi Baidu ADS BHPBilton ADS SuntechPwr UtdMicro ADS Slcnwr ADS Nippon ADS TataMtrs ADS ICICI Bk ADS SK Tele ADS AU Optrncs MitsuUFJ ADS CtripInt ADS AdSemEg ADS Panasonic ADS FocusMediaHldg Infosys ChinaMobile NmuraHldg KT Crp ADS Alumina ADS ChinaUnicomHK SilicnMotnTch KoreaElecPwr Kongzhong SifyTech ADS LG DisplayADS ChinaLfIns ADS HondaMtr ADS ChunghwaTel
$9.30 52.22 58.38 7.05 2.50 4.45 19.59 15.25 33.21 14.58 8.38 4.48 31.35 3.33 12.14 14.36 53.28 44.36 4.75 17.48 4.76 10.91 3.35 10.43 5.22 1.18 13.75 55.47 28.33 22.34
TSM BIDU BHP STP UMC SPIL NTT TTM IBN SKM AUO MTU CTRP ASX PC FMCN INFY CHL NMR KT AWC CHU SIMO KEP KONG SIFY LPL LFC HMC CHT
CHANGE Latest Points Percentage
7,842.0 $12.10 –0.31 2,636.7 119.62 –2.72 1,960.6 94.61 –1.15 1,840.7 9.19 –0.24 1,485.1 2.83 –0.11 1,160.7 6.74 –0.16 1,097.7 24.79 –0.13 1,044.0 24.87 –0.96 1,003.8 44.57 –0.78 915.8 18.23 ... 881.8 9.07 –0.15 762.6 5.38 –0.08 705.2 38.00 –1.04 679.3 5.80 –0.20 674.5 13.42 0.12 638.0 27.48 –0.02 543.3 66.69 –0.98 423.2 47.65 –0.31 339.6 5.96 –0.15 315.5 19.17 –0.32 306.0 9.62 –0.35 282.4 16.79 –0.17 264.9 8.25 –0.61 257.9 12.32 –0.03 239.2 8.36 –0.36 235.4 2.75 –0.04 232.9 15.88 –0.24 215.2 57.43 –0.24 203.3 41.80 –1.20 185.3 29.86 –0.22
–2.50% –2.22 –1.20 –2.54 –3.74 –2.32 –0.52 –3.72 –1.72 ... –1.62 –1.37 –2.66 –3.33 0.90 –0.09 –1.45 –0.65 –2.45 –1.64 –3.51 –1.00 –6.88 –0.24 –4.13 –1.43 –1.49 –0.42 –2.79 –0.73
*Most active American depositary receipts tracked by Dow Jones Source: WSJ Market Data Group
U.S. Treasury yield curve
Global government bonds
The curve shows the yield to maturity of current bills, notes and bonds; all data as of 3 p.m. ET.
Coupon
Country/ Maturity, in years
4.960% 5.515 2.113 3.724 2.484 4.317 1.853 3.344 1.713 3.345 1.817 3.648 1.759 3.293 0.729 2.985 3.101 4.893 0.225 1.285 1.529 3.483 6.138 7.633 3.258 5.394 0.684 1.881 1.373 3.732 0.693 3.509
SPREAD OVER TREASURYS, in basis points Latest Previous Month ago Year ago
426.7 200.6 142.0 21.5 179.1 80.8 116.0 -16.5 102.0 -16.4 112.4 13.9 106.6 -21.6 3.6 -52.4 240.8 138.4 -46.8 -222.4 83.6 -2.6 544.5 412.4 256.5 188.5 -0.9 -162.8 68.0 22.3 ... ...
428.8 203.7 140.9 23.3 178.4 80.1 115.8 -15.7 103.6 -15.5 113.9 15.7 106.9 -21.7 14.0 -43.9 242.3 140.4 -44.3 -218.3 84.4 -4.3 533.4 409.2 255.7 190.5 -1.3 -162.4 72.7 23.0 ... ...
432.6 201.4 113.9 5.1 147.6 52.1 109.5 -18.4 73.5 -34.5 80.7 -2.8 66.2 -39.7 -22.6 -73.3 165.2 96.8 -53.7 -236.1 55.6 -20.0 349.1 343.1 207.9 151.0 -14.3 -170.9 75.9 17.5 ... ...
370.5 179.1 39.7 -10.0 27.4 -1.4 61.9 -21.2 80.6 -23.2 6.8 -23.0 -2.4 -53.6 -23.8 -93.8 47.2 26.6 -75.6 -237.0 4.4 -26.0 99.1 64.2 32.1 20.4 -50.4 -178.0 20.8 36.8 ... ...
Previous
YIELD Month ago
Year ago
4.965% 5.520 2.086 3.716 2.461 4.284 1.835 3.326 1.713 3.328 1.816 3.640 1.746 3.266 0.817 3.044 3.100 4.887 0.234 1.300 1.521 3.440 6.011 7.575 3.234 5.388 0.664 1.859 1.404 3.713 0.677 3.483
5.078% 5.657 1.891 3.694 2.228 4.164 1.847 3.459 1.487 3.298 1.559 3.615 1.414 3.246 0.526 2.910 2.404 4.611 0.215 1.282 1.308 3.443 4.243 7.074 2.831 5.153 0.609 1.934 1.511 3.818 0.752 3.643
4.606% 5.475 1.298 3.584 1.175 3.670 1.520 3.472 1.707 3.452 0.969 3.454 0.877 3.148 0.663 2.746 1.373 3.950 0.145 1.314 0.945 3.424 1.892 4.326 1.222 3.888 0.397 1.904 1.109 4.052 0.901 3.684
Source: Thomson Reuters
5% 4
One year ago
s
4.750% Australia 2 4.500 10 3.800 Austria 2 3.500 10 4.000 Belgium 2 4.250 10 1.750 Canada 2 3.500 10 4.000 Denmark 2 4.000 10 3.750 France 2 2.500 10 1.500 Germany 2 2.500 10 0.580 Hong Kong 2 2.440 10 2.000 Italy 2 3.750 10 0.200 Japan 2 1.300 10 5.000 Netherlands 2 3.500 10 5.450 Portugal 2 4.800 10 2.300 Spain 2 5.500 10 4.000 Switzerland 2 2.000 10 4.500 U.K. 2 3.750 10 0.625 U.S. 2 3.625 10
Yield
3 2 1
s
Latest, month-ago and year-ago yields and spreads over or under U.S. Treasurys on benchmark two-year and 10-year government bonds around the world. Data as of 11 a.m. ET
Thursday
1
3
6
month(s)
1
2 3 5 710
years maturity
0 30
Ryan Index
Yield to maturity
Modified duration
30-year Treasury 10-year Treasury 7 Year Treasury Five-year Treasury Ryan Index 3 Year Treasury Two-year Treasury 1 Year Treasury Six-month Treasury Ryan Cash Index-a Three-month bill
4.639% 3.572 2.994 2.298 2.597 1.293 0.783 0.255 0.163 0.168 0.132
15.99 8.29 6.31 4.71 6.69 2.89 1.98 0.94 0.50 0.44 0.25
One-month bill
0.122
0.08
Month to-date
TOTAL RETURN
Quarter to-date
–2.30 % –1.26 –1.01 –0.73 –0.97 –0.33 –0.17 –0.01 0.01 ... 0.01
Year to-date 12-month
–4.18 % –1.63 –1.05 –0.63 –1.35 –0.50 –0.16 0.11 0.08 0.06 0.04
–4.18 % –1.63 –1.05 –0.63 –1.35 –0.50 –0.16 0.11 0.08 0.06 0.04
4.87 % 4.02 4.74 3.44 3.54 2.18 1.02 0.71 0.32 0.36 0.26
0.03
0.03
0.16
...
a-Performance of a cash investment
Source: Ryan ALM
Key money rates Latest
52 wks ago
Prime rates
Latest Euro Libor One month
Offer Eurodollars One month
Bid
0.85813%
0.37813%
0.3500%
0.2500%
Three month
1.12438
0.59813
Three month
0.5500
0.4500
1.475
Six month
1.43438
0.90813
Six month
0.7500
0.6000
0.50
One year
1.87563
1.19875
One year
1.0500
0.8500
1.00
Hibor One month
0.16929
0.08000%
Latest
52 wks ago
0.23893
0.13000
U.S. discount
0.75%
0.75%
0.30000
0.24000
Fed-funds target
0.25
0.25
0.63143
0.53857
Call money
2.00
2.00
U.S.
3.25%
3.25%
Canada
3.00
2.25
Japan
1.475
Britain
0.50
ECB
1.00
Switzerland
0.55
0.53
Australia
4.75
4.00
Three month
Hong Kong
5.25
5.25
Six month One year
Libor One month
52 wks ago
Asian dollars One month
0.2720%
0.25900%
0.23000%
Three month
0.30950
0.25425
Three month
0.3145
0.2570
Six month
0.46250
0.39531
Six month
0.4731
0.3950
U.K. (BBA)
0.537
0.517
One year
0.78650
0.86750
One year
0.7980
0.8550
Euro zone
0.77
0.61
0.24%
Overnight repurchase rates U.S. 0.20%
0.16%
Sources: WSJ Market Data Group; Reuters
Tuesday, March 8, 2011
31
THE WALL STREET JOURNAL.
MARKETS LINEUP Asian index movers…
Moving the markets
At right, Japan’s benchmark stock index and the biggest movers among the larger Asian stocks indexes and stocks Monday. Below each index are its most actively traded stocks. The charts show the percentage change in each index’s or stock’s value, rather than the point change, for purposes of comparison. The index level or stock price is indicated on each axis. All indexes and stocks are shown in local currency terms.
Nikkei Stock Average
CBN 600
Japan
China
t
10505.02 1.76% or 188.64
The domestic political outlook was clouded by the abrupt resignation of Japan’s foreign minister over illegal political donations, while rising crude prices weighed on auto makers.
Volume in millions
Close
125.21
112
Hitachi
91.91
505
Mizuho Financial
87.76
167
Tobu Railway
79.80
357
Oki Elec
59.91
83
Stock
Shinsei Bank
The index closed at its highest level since Nov. 15 as tightening concerns eased after a senior official said he expects inflation to have moderated in February.
t
18222.67 1.43% or 263.78
Shares fell for a second session as investors fretted about the stability of the ruling coalition after a key member withdrew from the federal government over the weekend.
Australia t
4797.88 1.37% or 66.40
The market was dragged lower by jitters over rising oil prices, which could put a brake on the global economic recovery, and instability in the Mideast and North Africa.
45000
30000
6000
12500
37500
25000
5000
10000
30000
20000
4000
7500
22500
15000
3000
M A M J J A S O N D J F 2010 2011
Follow the markets throughout the day, with updated stock quotes, news and commentary at WSJ.com. Also, receive emails that summarize the day’s trading in Europe and Asia. To sign up, go to WSJ.com/Email.
s
ASX 200
India
15000
5000
WSJ.com
Sensex 28263.46 1.73% or 480.93
Change Net
15000 M A M J J A S O N D J F 2010 2011 Stock
%
10000 M A M J J A S O N D J F 2010 2011
Volume in millions
Close
Change Net
403.57
3.29
0.19
6.13
%
Volume in millions
Close
Jaiprak Asso-A
3.00
82.30
Stock
…
BOETechGroup
5
1.00
AgricBkofChina
359.12
2.70
0.02
0.75
Reliance Com-A
2.76
–2
–1.18
CiticSecurities
257.53
15.38
0.48
3.22
Tata Steel-A
1.37
–16
–4.29
ChinaMinshengBkg 208.98
5.42
0.07
1.31
Hindalco-A
1.13
10
13.70
Everbright Bank 206.29
4.01
0.02
0.50
Itc-A
0.83
…
Change Net
%
2000 M A M J J A S O N D J F 2010 2011 Stock
Volume in millions
Close
Change Net
%
–1.70
–2.02
Ing Indust Units
128.81
0.53
0.01
1.92
90.05
–3.25
–3.48
Carsales Fpo
119.38
5.00
-0.24
–4.58
602.85
–14.75
–2.39
Lynas Fpo
30.83
2.10
-0.10
–4.55
209.65
–0.40
–0.19
Alumina
22.45
2.38
-0.07
–2.86
172.55
0.05
0.03
Telstra
21.19
2.78
-0.03
–1.07
Asian stocks in the news Lotte Shopping Korea
SembCorp Marine 415,000 won Singapore
S$5.63
s 1.8% or 7,500 won
Credit Suisse upgraded the stock to “outperform” from “neutral.”
In won
750000
s 2.4% or S$0.13
HK$34.00
s 3.2% or HK$1.05
Coal miners rose sharply on hopes prices will ride higher on the back of surging oil prices.
In Singapore dollars
In rupiah
In won
In Hong Kong dollars
10
10000
125000
60
8
8000
100000
48
450000
6
6000
75000
36
300000
4
4000
50000
24
15 28012.97 0.4 10.6% 24.6%
Kubota ¥807
t 3.0% or ¥25
2000
2 J
A S O N D J F 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
M A M J J A S O N D J F 2010 2011 14 0.42 2.0
Oil & Gas SembCorp Marine
0.3% 2.4%
2.1% 5.2%
20.0% 41.8%
Japan
15 418.36 1.9
¥3,435
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Banks Bank Mandiri (Persero)
-0.8% 2.4%
0.4% 9.5%
11.0% 41.2%
Makita
t 3.1% or ¥110
25000 M A M J J A S O N D J F 2010 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Honda Motor
Japan
80,300 won Hong Kong
s 2.7% or 2,100 won
The company’s shares have risen nearly 13% in the past three trading sessions.
M A M J 2010
0.2% 5.9%
Korea
6,350 rupiah
s 2.4% or 150 rupiah
Hopes for strong 2010 earnings for many banks boosted shares.
PERCENTAGE CHANGE Daily 1 wk. 52 wks
-0.8% 1.8%
Indonesia
China Shenhua Energy
Rig builders rose as higher crude-oil prices are expected to spur investment in exploration and production.
150000
Retail Lotte Shopping
Hyundai Eng & Con
600000
M A M J J A S O N D J F 2010 2011 Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
Bank Mandiri (Persero)
Japan
15 5323.91 0.7
¥3,420
J A S O N D J F 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Constructn & Matl Hyundai Eng & Con
-1.1% 2.7%
1.6% 7.8%
8.5% 27.9%
Axis Bank t 3.1% or ¥110
12 M A M J 2010
India
17 1.97 1.8
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Basic Resources China Shenhua Energy
-0.9% 3.2%
0.3% 5.3%
13.9% -3.0%
Samsung Elec 1,284.30 rupee Korea
t 3.3% or 44.00 rupee
906,000 won
t 4.1% or 39,000 won
Goldman Sachs lowered its rating to “sell” from “neutral” and cut its target price.
Car makers fell on worries that higher gasoline prices will erode demand, especially in the U.S.
Goldman cut the stock to “neutral” from “buy.”
JPMorgan cut its price target and lowered its FY12 earnings forecast on lower loan growth and margins.
Investors grow concerned that first-quarter earnings will come in weaker than expected.
In yen
In yen
In yen
In rupee
In won
1500
6000
2000
1400000
900
3600
3600
1500
1050000
600
2400
2400
1000
700000
1200 M A M J J A S O N D J F 2010 2011
20 40.40 1.7
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Indus Gds & Svcs Kubota
-1.0% -3.0%
0.8% -3.7%
1750000
4800
J A S O N D J F 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
2500
4800
300 M A M J 2010
6000
1200
19.4% 0.2%
1200 M A M J J A S O N D J F 2010 2011
12 298.10 1.6
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Automobiles & Parts Honda Motor
-1.9% -0.7% -3.1% -3.1%
24.6% 6.3%
500 M A M J 2010
16 214.30 1.9
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Personal & Hshld Gds Makita
-0.8% -0.4% -3.1% -0.7%
7.0% 15.6%
J A S O N D J F 2011
350000 M A M J J A S O N D J F 2010 2011
17 76.97 0.9
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Banks Axis Bank
-0.8% -3.3%
0.4% 4.9%
11.0% 13.8%
9 104701.79 1.1
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Technology Samsung Elec
-1.7% -4.1%
0.7% -1.8%
11.7% 15.3%
THE WALL STREET JOURNAL.
Tuesday, March 8, 2011
HEARD ON THE STREET FINA NCIA L A NA LYSIS & COMMENTARY
Email:
[email protected]
WSJ.com/Heard
India won’t do fuel monty India’s oil refiners are back in the line of fire. This year more than ever, their fortune depends on New Delhi’s actions. Shares of the three biggest—Bharat Petroleum, Hindustan Petroleum and Indian Oil—have fallen by an average of 16% this year. Investors have been quick to anticipate the squeeze these companies face thanks to India’s policy of setting the market price of most fuels without considering global oil prices. If this means the refiners have to sell products at a loss, New Delhi compensates them, in part. The trouble for stock investors is that the timing of that compensation, and its size, is a guessing game. In the April-December period, New Delhi paid for 46% of the losses. As it looks to control spending next year, expecting more aid could be wishful thinking: In its annual budget for the coming fiscal year, the
(R)oiled Rising crude-oil prices are hurting shares of Indian oil refiners. Daily crude-oil settlement price per barrel $110
Daily share performance of Indian oil companies Indian Oil
105
Bharat Petroleum
5%
Hindustan Petroleum
0
100
-5
95
-10
90 85 80
-15
Oil price
January 2011
-20 February
March
-25
Sources: Thomson Reuters via WSJ Market Data Group (crude-oil price); Thomson Reuters (share prices)
government lowered the planned subsidy amount by 5% from the current year’s $4.6 billion. True, New Delhi often increases this bill during the course of the
year. But even if it triples its initial estimate, that won’t be enough to match the expected losses, which Deutsche Bank predicts could touch $22 billion. Anyway, the payments
are a temporary and partial solution. What is more critical to watch out for this year is how New Delhi implements its policies. Here, the government has recently shown some intent. It is gradually attempting to free market prices from its control. Last year, it removed price caps on gasoline and has said it will do the same for diesel, easing the pressure on refiners. Moreover, the finance minister has created a team to work out a mechanism by which subsidies on other fuel, such as kerosene, can be given to consumers directly, mainly India’s poor, instead of to the companies. This would allow companies to raise prices and cut down on losses. The first report of this committee is expected by June. Until then, it’s all about having faith in New Delhi’s charity. —Harsh Joshi
In China, still no healthy push to splurge How do you get 1.3 billion people to spend more? Make them feel better about their future. On this front, the Chinese government certainly has the right idea: Spending on universal education and health care is seen as critical to achieving a higher level of domestic consumption. Increased welfare spending is also a way to give households a bigger share in the benefits of China’s development. The problem is, Beijing just isn’t spending enough. The Chinese public’s response is to squirrel away cash to pay for health care and education. China’s savings rate hovers at about 30% of household income, not a natural state of affairs.
But the Ministry of Finance’s report on the implementation of the budget for 2010, released to coin-
Increased welfare spending is a way to give households a bigger share in China’s development. The problem is, Beijing just isn’t spending enough. cide with the annual National People’s Congress this week, shows that budget allocations for spending on health and education remain lack-
luster. A shrinking budget deficit isn’t a good start. The target for the year is a deficit at 2% of gross domestic product, down from 2.5% last year. If the government wants to raise the share of domestic consumption in the economy, it should be spending more, not less. Health-care spending last year was just 1.2% of GDP. True, that is more than twice the level of 2005, when the government made improving the quality and coverage of health and education services a priority, but it still puts China below emerging-market peers such as Brazil and South Africa. On education, the situation is a little better: The 2010 budget shows
public spending at 3.1% of GDP, though that still is below the average for middle-income countries in recent years, World Bank data show. And China’s education spending has suffered from a tilt toward university and vocational education, rather than more egalitarian primary schooling, says Stephen Green, economist at Standard Chartered. The direction of travel is right: Spending on health care and education is expanding at a faster rate than GDP. But without a step change, China still will find itself in the bottom half of the middle-income class, and households will be hard pressed to turn from savers to spenders. —Tom Orlik
A big serving of uncertainty on bank values Some big U.S. bank stocks may be more expensive than investors realize. That may become more apparent amid debates on how banks are compensated for servicing home loans, and separately, on whether banks should forgive some principal of troubled mortgages. Banks’ mortgage-servicing businesses collect and disburse mortgage payments, as well as deal with loan modifications or foreclosures. Currently, banks receive a flat fee, usually about 0.25 percentage point of the outstanding mortgage balance. But there is a push to move to a variable payment system. This would mean banks receive higher payments for troubled mortgages, but less for performing loans. The upshot: lower compensation. That would likely reduce the value of mortgage-servicing-rights assets. At the same time, government investigations have led to proposals for banks to forgive mortgage principal in some cases. The potential changes affect bank-stock valuations because of how mortgage-servicing rights have been presented to investors. Over the past two years, many banks have lumped the rights in with their tally of tangible equity, even though they are intangible assets. They can do this because tangible equity isn’t defined by accounting rules. The maneuver bolsters tangible equity—also known as tangible book value—and in turn flatters valuation metrics. Shares in J.P. Morgan Chase, for example, trade at about 1.5 times tangible book. Exclude servicing-rights assets and the multiple rises to about 1.7 times. The business is in for big changes. Investors should know just how much they are paying for a bank stock. —David Reilly
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