The Wall Street Journal Asia No.117 dated Wednesday February 16, 2011

As of 11 a.m. ET

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Animation generation

OPINION: Obama’s budget punts on deficit cuts Page 9

The rise of online cartoons

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(India facsimile Vol. 2 No. 178)

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ASIA

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Trans-Atlantic deal is set NYSE Euronext, Deutsche Börse finalize terms, but don’t yet have a name; it’s not ‘Big Börse’ BY NATHAN BECKER AND WILLIAM LAUNDER Deutsche Börse AG and exchange operator NYSE Euronext have agreed to tie up, forming the world’s largest trading platform as the exchange industry enters a period of global consolidation. Under the terms of the deal, Deutsche Börse shareholders will own 60% of the newly merged company, as expected, with NYSE shareholders controlling 40%. One Deutsche Börse share will be exchanged for one share of the new company’s stock, while each share of NYSE Euronext will be swapped for 0.47 share of the new company stock. The companies didn’t provide a name for the new German-U.S. exchange company amid concerns from politicians and regulators on both sides of the Atlantic, but said they expect to register a newly formed Netherlandsbased holding company, Alpha Beta Netherlands Holding NV. Joint headquarters will be in New York and Eschborn, near Frankfurt. “The increasing globalization and interconnectedness of capital markets, and the rapidly growing presence of alternative trading venues that operate with less transparency and far fewer regula-

Korea outbreak

Reto Francioni, left, will become chairman of the combined company. Duncan Niederauer, right, will become chief executive. tory requirements, will position the new company as a true global player,” said Duncan Niederauer, chief executive of the New York Stock Exchange operator. Politics also have been a

Japan The government is stepping up its search for soldiers’ remains on Iwo Jima. Page 4

factor in a proposed combination of the Singapore and Australian exchanges. On Tuesday, Singapore Exchange Ltd. and Australia’s ASX Ltd. announced a revised board structure that will give Aus-

tralian and Singaporean citizens equal weighting in a bid to address Australian governance and national-interest concerns surrounding the $8.3 billion merger plan. (Please see article on page 15.)

As expected, Mr. Niederauer will be CEO of the new combination of NYSE Euronext and Deutsche Börse, while Deutsche Börse CEO Reto Francioni will be the chairPlease turn to page 14

Switzerland to hinder tax cheats BY DEBORAH BALL

A disease that has decimated South Korean livestock and damaged the country’s food production now appears to be out of control in North Korea. Page 5

Small victory for China on prices BY AARON BACK AND BOB DAVIS

European Pressphoto Agency

SK. MENPEN R.I. NO: 01/SK/MENPEN/SCJJ/1998 TGL. 4 SEPT 1998

Australia: A$6.00(Incl GST), Brunei: B$7.00, China: RMB25.00, Hong Kong: HK$18.00, India: Rs25.00, Indonesia: Rp18,000(Incl PPN), Japan: Yen500(Incl JCT), Korea: Won2,500,

MICA (P) NO. 164/10/2010

Malaysia: RM6.00, Pakistan: Rs140.00, Philippines: Peso80.00, Singapore: S$4.00(Incl GST), Sri Lanka: Slrs180(Incl VAT), Taiwan: NT$60.00, Thailand: Baht50.00, Vietnam: US$2.50

KKDN PP 9315/10/2011 (026992)

LIFE & STYLE Page 7

ZURICH—Switzerland said it will make it easier for foreign governments to hunt for tax cheats with Swiss bank accounts, amid continuing criticism that it still does too little to assist international tax authorities, even after years of pressure to ease bank secrecy. The Swiss Finance Ministry said Tuesday that Switzerland will provide information on holders of bank accounts if foreign tax authorities provide just the bank-account number or other information, such as a Social Security number or credit-card details. Until now, the Swiss demanded full bank-account de-

tails, as well as the name and address of the individual—a requirement that goes beyond rules typical in other countries. The extra hurdles made it hard for foreign tax authorities to get enough information out of the Swiss to pursue tax cheats. The Swiss requirements were so tough that Bern received an average of only three such requests each year until 2009, despite Switzerland’s being the world’s largest offshore banking center. “In the past, the Swiss had an extremely high threshold [for giving help in tax matters],” according to Milan Patel, head of the Zurich office of tax advisory firm Sharp

Kemm PA. “The perception was, ‘Why bother if we’re not going to get anything?’ ” Switzerland made the change after it concluded it wouldn’t pass review by a tax

The Swiss will aid pursuit if reasonable amounts of account details are provided. forum organized under the umbrella of the Organization for Economic Cooperation and Development. The continuing review stems from the move in 2009 by the OECD to put Switzerland on a so-called

gray list of uncooperative tax havens because of its refusal to recognize tax evasion as a crime. Tax fraud, or intentionally seeking to avoid taxes, was a crime in Switzerland, while tax evasion was not. Back then, foreign governments had to prove a suspected tax cheat committed tax fraud, rather than tax evasion, to get help from the Swiss. In 2009, Switzerland dropped the distinction, and was removed from the gray list. But it demanded the exact name and address of the individual. Tax agencies often have bank-account information because they see movements of Please turn to page 14

BEIJING—China registered a minor success in its anti-inflation efforts as the central bank reported that credit growth, while strong by the standards of most countries, expanded somewhat slower than was anticipated in January. Financial institutions in China extended 1.04 trillion yuan ($157.83 billion) in new yuan loans last month, the People’s Bank of China reported Tuesday. Although that is more than twice the 480.7 billion yuan reported in December, it was 26% less than last January’s 1.4 trillion yuan. China also reported on Tuesday that consumer prices in January were up 4.9% from a year earlier, a relatively high figure—faster than December’s 4.6%—that fueled concerns that the world’s second-largest economy is falling behind in the fight against inflation, as are other countries in Asia. Chinese leaders are extraordinarily sensitive to inflation, long associated with political unrest. The headline numbers underplay the impact of rising prices on many ordinary Chinese. The foods component of China’s consumer-price index, for instance, jumped 10.3%, and has averaged more than 10% for the past four months. Hundreds of millions of Chinese still live at or just above poverty levels, and so are especially sensitive to food prices. Inflation has also been affecting companies in China. Prices on some McDonald’s menu items could increase in the second half of the year “depending on the burden of inflation and labor costs,” spokeswoman Vivan Zhang said Tuesday, adding that the amount of the increases hasn’t been decided. McDonald’s raised prices on some Please turn to page 14
Heard on the Street: Inflation can’t be papered over ......... 28

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Business & Finance n Sanofi is expected to acquire Genzyme for about $19 billion in cash, plus possible additional payments in the future, in a deal that could be announced as soon as Wednesday. As part of that broad agreement, Sanofi agreed to raise its offer for Genzyme to about $74 a share from $69 a share. 19 n Singapore Exchange and ASX sought to address Australian concerns about their merger by changing the board structure for the new company. 15

World News: Huawei set back on takeover deal in the U.S. 5

n Japan said it will sign a freetrade agreement with India, bolstering ties with the fast-growing South Asian economy with which it shares concern about larger economic rival China. 3 n Japan raised its assessment of the economy for the first time in nine months but kept its easy monetary policy unchanged as deflation remains a problem. 4

n GM said it is seeking opportunities to boost exports of its cars made in China despite the impact of a rising yuan. 16 n Foster’s unveiled a longplanned divestiture of its wine business and said fiscal first-half profit declined 12%. 17, 28 n Barclays’s profits rose last year as smaller losses on soured assets made up for sluggish revenue at the U.K. bank. 20, 28 n ING is selling its real-estate investment-management business to CB Richard Ellis for $1 billion as it cuts its exposure to the sector. 20 n Westpac’s quarterly cash earnings slipped from a year earlier, leaving the bank with a weaker result than its Australian peers. 20

Business & Finance: China furniture makers buy U.S. peace. 15

Associated Press

n China sold U.S. Treasury debt for the second month in a row, further reducing its holdings. Overall, international investors were net buyers of long-term U.S. financial assets. 22

A funeral for a man killed during demonstrations in Bahrain swelled into a massive protest, drawing in thousands for a second day of clashes that ended with another death and the defection of the country’s main opposition bloc from parliament. Above, demonstrators wave Bahraini flags near the Pearl Monument on a main square in Manama. Page 13 n Bank of East Asia’s full-year profit rose 62% despite lower earnings on lending in China. 20 n Apple launched a service for its App Store that allows for magazine and newspaper subscriptions for its iPhone and iPad devices, but publishers aren’t rejoicing. 19 n LG Electronics aims to make its handset business profitable as early as this half. 17 n Taiwanese phone maker HTC released a new set of smartphones targeting Facebook users. 19 n An Ecuadorean judge ordered Chevron to pay $8.6 billion to clean up oil pollution. 16

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World-Wide n Obama called for Pakistan to release a U.S. government employee who shot and killed two armed men last month, as U.S. Sen. John Kerry arrived in the country for talks aimed at ending the diplomatic standoff. 3 n Brazil’s finance minister said his country and the U.S. have no plans to jointly press China to allow further yuan appreciation. n A swiftly moving disease that has decimated South Korean livestock and damaged the country’s food production now appears to be out of control in North Korea. 5

n Japan is accelerating a project to search for undiscovered remains on Iwo Jima, 66 years after the battle on the Pacific island. 4 n An Italian judge ordered Prime Minister Berlusconi to stand trial on charges of patronizing an underage woman for sex and abusing his office in an attempt to cover up the alleged relations. 6 n The nephew of the Dalai Lama was struck by a vehicle and killed on a U.S. highway while raising awareness of the Tibetan struggle for independence from China.

Technology: Apple audit details changes at China’s Foxconn. 15

n The Philippine government and Marxist rebels resumed stalled peace talks in Norway.

ONLINE TODAY Most read in Asia

1. A Cantilevered Glass House 2. Apple Develops Less-Expensive iPhones 3. Manny Returns—Sporting a Bieber 4. Massive Population Lifts Nation’s Growth 5. Rising China Bests a Shrinking Japan

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Hong Kong’s residential rents for expats are the thirdmost expensive in the world after Tokyo and Moscow.

The modernization of one of Hong Kong’s largest Taoist temples has inspired both awe and disapproval.

Most emailed in Asia 1. Why Chinese Mothers Are Superior 2. A Cantilevered Glass House 3. Apple Develops ... 4. Rising China Bests ... 4. Massive Population Lifts ...

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Marc Jacobs teases his audience, and more from New York Fashion Week: blogs.wsj.com/runway

Corporate News: Facebook’s Web of frenemies. 18 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: 66-2 652 0871; India: 91-11 6462 0215. Or email: [email protected] ADVERTISING SALES worldwide through Dow Jones International. Hong Kong: 852-2831 2504; Singapore: 65-6415 4300; Tokyo: 81-3 6269-2701; Frankfurt: 49 69 29725390; London: 44 207 842 9600; Paris: 33 1 40 17 17 01; New York: 1-212 659 2176. Or email: [email protected] Trademarks appearing herein are used under license from Dow Jones & Company. USPS 337-350ISSN 0377-9920

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WORLD NEWS

Japan, India bolster ties Free-trade pact comes as both nations warily watch China’s growth

Obama, Kerry press Pakistan on shooter BY TOM WRIGHT LAHORE, Pakistan—U.S. President Barack Obama called for Pakistan to release a government employee who killed two men last month, as Sen. John Kerry arrived here for talks aimed at ending the diplomatic standoff. The man, Raymond Davis, has been in custody in Lahore, Pakistan’s second-largest city, since the incident on Jan. 27. The U.S. says he is covered by diplomatic immunity and should be released. Mr. Obama weighed in on the row Tuesday, saying Pakistan must release Mr. Davis under its commitments as a signatory to the Vienna Convention on Diplomatic Relations, a pact from the 1960s that guarantees diplomats immunity from prosecution. “If it starts being fair game on our ambassadors around the world, including in dangerous places…it means they can’t do their job,” Mr. Obama told a news conference. The shooting on a Lahore street sparked protests here and demands for Mr. Davis’s prosecution; subsequent questions about Mr. Davis’s role at the consulate have fueled critical reporting in Pakistan’s media. The public anger over the shooting makes it difficult for Pakistan’s central government—an ally of the U.S.—to order his release. The U.S. has said Mr. Davis is a “technical and administrative” staff of the U.S. Consulate in Lahore, but hasn’t said what his role was or whether he was authorized to carry a weapon. The U.S. confirmed Mr. Davis’s identity Friday, two weeks after Pakistani authorities released his name. A court in Lahore is expected to begin hearing a case Thursday on whether Mr. Davis has immunity from prosecution. Lahore police officers say they recovered a number of effects from Mr. Davis’s car after the incident, including two Glock pistols and more than 70 rounds of ammunition. Officials say they also found a metal detector, a latex mask with a beard and headpiece, and a make-up kit. A spokeswoman for the U.S. Embassy in Islamabad declined to comment on Mr. Davis’s effects. Mr. Kerry, chairman of the Senate Foreign Relations Committee, has made four trips to Pakistan in the past two years and was instrumental in co-writing in 2009 a fiveyear, $7.5 billion civilian aid package. Despite closer ties, many here remain wary of the U.S., which is viewed as building alliances with Pakistan’s rivals, notably India.

Washington, too, has been disappointed with Pakistan for failing to clamp down on Taliban havens on its soil. The incident involving Mr. Davis has added a further level of mistrust to the relationship. The U.S. last week canceled a meeting scheduled for late February in Washington, involving Secretary of State Hillary Clinton and the foreign ministers of Pakistan and Afghanistan, in protest against Mr. Davis’s detention. Washington has also scaled back other routine bilateral contacts. According to the U.S. version of events, Mr. Davis, 36 years old, opened fire on two armed men in self-defense after they attempted to stop his white Honda Civic car at a busy intersection in broad daylight. U.S. officials say the two men, who were on a motorbike, had earlier in the day robbed other people in the area. A senior official with Inter-Services Intelligence, the military’s spy agency, said the organization was unaware of Mr. Davis. “Apparently he was working behind our backs,” the official said. The U.S. Embassy denied this and said it notified Pakistan’s Foreign Ministry of Mr. Davis’s arrival in the country in January 2010, which, the U.S. says, means he is covered by diplomatic immunity. Senior Pakistani officials have made contradictory statements in recent weeks over whether, in their view, Mr. Davis is covered by immunity from prosecution. Pakistani police investigating the incident have yet to formally charge Mr. Davis, but say they are treating the case as murder. In Lahore’s British-era town center, placards put up by an Islamist group show a photo of Mr. Davis’s head with a hangman’s noose superimposed around it. Witnesses say the men were circling around Mr. Davis’s car, which he was driving himself, according to the police officers. What happened next is unclear. Mr. Davis fired nine bullets from inside the car, seven of which hit the men. He got out of the car to photograph the dead men on his cellphone and then fled an angry crowd that was forming, the officers said. Police arrested him in his car a few miles from the scene. Another vehicle from the consulate, which came to rescue Mr. Davis, ran over and killed a bystander. The driver of that car wasn’t taken into custody and hasn’t been identified. —Shahnawaz Khan contributed to this article.

Indian Trade Minister Anand Sharma meeting Prime Minister Naoto Kan. spat. Takeshi Matsunaga, a Japanese foreign ministry spokesman, said the agreement won’t likely refer directly to rare earths, but could make it easier for Japanese companies to invest in development of the key resources in India. “Diversifying the sources of rare earths and other natural resources is a major effort” of the government, Mr. Matsunaga said. Indian Trade Minister Anand Sharma, in Japan to sign the cooperation pact, on Tuesday proposed setting up a revolving $9 billion fund jointly with Japan to help finance an industrial link, a move that highlights India’s growing efforts to fix its shabby infrastructure, which is blamed for curbing growth. Mr. Sharma met Japanese Prime

Minister Kan and updated him on the status of the industrial and transport link between New Delhi and India’s financial capital, Mumbai. The project, which started in 2007, is financed by the Indian government, yen loans from Japan and investment from Japanese companies. Mr. Sharma, who expects the project to attract more than $100 billion in investments, encouraged Japanese companies to invest in capital goods such as power equipment. Wednesday’s trade agreement will span a large variety of industries, including agriculture, Mr. Matsunaga said. Yet, with rice a delicate issue for Japan, the agreement won’t affect pre-existing tariffs on that staple, Mr. Matsunaga said. The pact also marks Japan’s latest effort to catch up with South Korea, which has leveraged its trade agreements to increase the global competitiveness of its electronics, nuclear power and other sectors. Mr. Kan has been pushing for Japan to join negotiations for a Trans Pacific Partnership that would include the U.S., despite fierce opposition from Japan’s agriculture sector. The deal with India will likely hearten a range of Japanese exporters, from electronics to auto makers. Suzuki Motor Corp. Chairman and CEO Osamu Suzuki said last year, “We will remain handicapped unless Japan reaches an FTA deal with India as soon as possible.”

cartier.com

European Pressphoto Agency

An Islamist party in Lahore on Tuesday rallied for Raymond Davis’s execution.

TOKYO—Japan’s government said it will sign a free-trade agreement with India on Wednesday, bolstering ties with the fast-growing South Asian economy with which it shares a mutual concern about larger economic rival China. The agreement will make Japan and India each other’s biggest freetrade partners, and will do away with tariffs on 94% of trade between the two countries within 10 years, according to local media reports. The deal comes days after official data showed Japan ceded its place as the world’s second-largest economy to China in 2010. China’s growing market for Japanese goods has galvanized corporate Japan. But many business leaders say the risk of diplomatic flare-ups with China highlights the need for more partnerships, like the one with India. Closer ties with India could potentially open the way for Japanese investment in the development of rare-earth minerals, used in a wide range of products such as cellphones, analysts say. In October, India’s Prime Minister Manmohan Singh agreed with Japanese Prime Minister Naoto Kan in Tokyo that the two countries would explore cooperation in the development of rare-earth resources. Japan has sought alternative supplies since China cut shipments last year amid a territorial

Agence France-Presse/Getty Images

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WORLD NEWS: ASIA Search for the dead

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Prime Minister Naoto Kan pledges to accelerate the effort to find some 13,000 Japanese soldiers still believed buried on Iwo Jima, site of a fierce battle with the U.S. in 1945.

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Prime Minister Naoto Kan watching as the remains of Japanese soldiers are carried past during Tuesday’s ceremony

Japan steps up search for its Iwo Jima dead BY YUKA HAYASHI TOKYO—Sixty-six years after the bloody battle of Iwo Jima, the Japanese government is accelerating an unusual project to search for the large number of undiscovered remains left on the Pacific island. “We will make it a national priority to gather up the bones and bring them home as soon as possible,” Prime Minister Naoto Kan said Tuesday. He was speaking at a ceremony at a Tokyo war memorial where the remains of 822 soldiers found during the past year were handed over to government officials by a group of volunteers participating in excavations. The number of soldiers was far larger than the several dozen whose remains were found annually in the past—and is likely to be larger yet in the fiscal year starting April 1, when the government plans to send 600 people, including a number of student volunteers, to participate in the search. Until last year, four yearly search missions were conducted by groups of 20 or so. The recent success stems from new research by Japanese officials at the U.S. National Archives in Washington, D.C., part of a project initiated by Mr. Kan soon after he took office in June. They found documents identifying several mass graves of Japanese soldiers, where excavation efforts are now concentrated. In late winter and early spring of

1945, the U.S. and Japan fought one of the fiercest battles of World War II on Iwo Jima, a speck of land between Japan and Guam. More than 8,000 Americans were killed—in action or later from their wounds— while some 19,000 more were wounded. An estimated 23,000 Japanese died in the fighting. The battle is famous in the U.S. for a photograph showing Marines raising the flag on a mountain at the island’s southern tip. Mr. Kan has surprised many in Japan with his enthusiastic push for a project to bring home the bones of some of the 13,000 people believed buried on the island. The issue appeals to the domestic audience, particularly older voters disappointed by the government’s performance on other World War II legacy issues. A deadlock over the relocation of a U.S. military base on Okinawa, another World War II battleground, has tested Tokyo’s ties with Washington, and Russia is stepping up its claims to islands north of Japan disputed since the end of the war. Groups representing Japan’s war veterans and widows long had significant political clout, which encouraged senior politicians—including generations of prime ministers— to visit a controversial Tokyo war shrine even at the risk of infuriating neighboring nations such as China and South Korea. No such visits have been made so far by leaders of Mr. Kan’s left-ofcenter Democratic Party of Japan.

But Mr. Kan felt pressure from veterans groups on issues such as finding the missing war dead before their generation dies out. The prime minister made a surprise visit to an excavation site on Iwo Jima in December, drawing rare editorial praise from the Sankei Shimbun, a conservative daily normally critical of the DPJ. The gesture also was appreciated by family members of the Iwo Jima war dead who attended Tuesday’s ceremony. Led by Mr. Kan, dozens of government officials joined more than 100 family members in offering stems of yellow chrysanthemum before the urns containing the newly recovered bones, as a bright morning sun melted the rare snow that had accumulated overnight in central Tokyo. Hideki Sugahara, a 76-year-old retired glass-factory worker, came to the memorial this year with deep emotions, having learned that the bodies included some found under a corner of the local airport, one of the newly identified mass-grave sites—and the one where members of his father’s unit are believed to have been buried. Mr. Sugahara said he was 10 years old when his father, a steelworker, died in the battle at the age of 42. “I feel this year, my father finally returned home,” he said. Most of the remains—essentially sand-covered bones divided among 36 urns—weren’t identified.

For Japan, the fall to No. 3 is no reason for being down It may now be No. 3 globally rather than No. 2, but being overtaken by China isn’t exactly a Doomsday scenario: Japan remains an extremely wealthy country. In fact, in GDP per capita, the Japanese are No. 1 in Asia and No. 18 globally between Canada and Germany, the World Bank says. Japan’s success after World War II—the “economic miracle,” underpinned by annual growth that averaged 10% in the 1960s and 5% in the 1970s—is still seen as model by much of the world. The West may see decline and demographic issues, said Sherman Abe, professor of international business strategy at Hitotsubashi University’s Graduate School of International Corporate Strategy, but “Japan is still seen as a shining example of success when you go to places like Myanmar, India and Vietnam.” Others ponder what might have been if Japan’s economy had been able to eke out more growth in the 20 years since the collapse of the speculative asset bubble—the “lost decades.” If the annual growth rate over the past two decades had been just a percentage point higher, said Takatoshi Ito, a professor at Tokyo University’s Graduate School of Economics and former finance ministry official, “we could have stayed ahead of China for another 20 years.” —Chester Dawson

Video leaker in the spotlight Masaharu Isshiki insists he is not a hero. But the former Coast Guard member better known in Japan as “Sengoku38,” the YouTube handle he used to leak footage of a controversial boat collision that rocked China-Japan relations last year, is making the most of his soapbox moment. Speaking at the Foreign Correspondents’ Club in Japan on Monday afternoon, he said, “As to whether the video that I released was to be considered confidential or secret, that’s a question I’d like to ask you, or those of you who have seen the video, do you think that qualifies as something that the government should keep

secret?” The crowd cheered and applauded the 44-year-old accidental activist. Despite his decision to go rogue with the classified video, Mr. Isshiki doesn’t fancy himself the next Julian Assange, the founder of WikiLeaks. “I believe that the fundamental intent between our two actions and philosophies are different,” he said, adding, “I worked for the government for many years, and as a result I have a very different understanding and belief that there are some secrets that need to be kept confidential.” —Yoree Koh

Glaswegian’s subtle charms The Glasgow accent has been described as many things, but outside the west of Scotland, it’s a fair bet that “attractive” is rarely one of them. But Japanese learners of English who listened to English spoken with a variety of accents in a new study declared the Glasgow loll the most likeable. It was a pleasantly surprising result for Robert McKenzie, who conducted the study and is a senior lecturer in sociolinguistics at Northumbria University in the U.K. He is from Glasgow himself and chose the accent as a reference point precisely because it is frequently regarded with disdain in the U.K. The study asked more than 500 Japanese people to listen to English spoken with six different accents and evaluate the speakers for certain personality traits. Running second to the Glasgow brogue was the Alabama drawl, which slides around the tongue like a stick of butter in a frying pan. The evaluation was based on traits of modesty, pleasantness, fun and gentleness. Mr. McKenzie says the Glaswegian and Southern twang may have resonated with the Japanese because they value gentleness and modesty so highly. —Yoree Koh Keep up on Japan minute by minute with The Wall Street Journal’s Japan Real Time at http://blogs.wsj.com/japanrealtime

Bank of Japan raises outlook BY MEGUMI FUJIKAWA

TOKYO—Japan’s central bank raised its assessment of the economy for the first time in nine months but kept its easy monetary policy unchanged as deflation, while easing, remains a problem. The Japanese economy is “steadily taking a step forward” in line with its economic forecasts in January, Bank of Japan Gov. Masaaki Shirakawa said after a twoday policy-board meeting. While the BOJ’s assessment Tuesday offered guarded optimism that the economic contraction is ending, the report also made clear

that the bank’s longer-term goals of a self-sustaining recovery and an end to persistent price falls were still some time away. The board voted unanimously to leave the unsecured overnight call loan rate in the 0.0%-0.1% range. “Japan’s economy is gradually emerging from the current deceleration phase,” the bank said. In January, the BOJ said economic improvements seemed to be pausing. Data have shown recent improvements in exports and industrial production—engines of growth for the Japanese economy that the bank said are “showing signs of resuming an uptrend.”

And while the government reported Monday that the economy contracted at a 1.1% annual rate in the fourth quarter of 2010, economists had predicted a decline more than twice that size. Still, despite some encouraging signs, analysts expect the BOJ to stay biased toward easing given the persistence of mild deflation. “The economy does appear to be picking up this year, but it remains very hard to see for the foreseeable future how price rises could reach the 1% that would trigger any BOJ tightening,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

European Pressphoto Agency

Tokyo knows: There are worse things to be than Asia’s No. 1 in per capita GDP.

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WORLD NEWS: ASIA

Livestock disease hits North Korea BY EVAN RAMSTAD SEOUL—A swiftly moving disease that has decimated South Korean livestock and damaged the country’s food production now appears to be out of control in North Korea. It is unclear where or when the latest outbreak of the airborne, easily transported illness known as foot-and-mouth disease began on the Korean peninsula. But in a sign of the pressure North Korea is facing over the issue, its state media on Tuesday reported that the outbreak originated in the South and that other countries, including Malaysia and Mongolia, have been hit with outbreaks in the past. North Korea, which faces chronic food shortages and whose authoritarian government resists interaction with outsiders, hasn’t taken any apparent steps to cull animals infected with the disease, as South Korea did. Visitors to North Korea reported as far back as December they suspected the country was battling foot-and-mouth disease, but North Korea’s state news agency didn’t officially confirm the outbreak until Thursday when it said “more than 10,000 head of draft oxen, milk cows and pigs have been infected” and “thousands of them died.” In addition to reducing the North’s already-constrained food supply, the disease’s spread to oxen, widely used in place of tractors there, will limit the ability of North Korean farmers to carry out planting

Foot-and-mouth outbreak | Toll of disease on South Korea’s swine industry Dec. 1, 2010

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and other tasks. Some reports say the North has invited the United Nations Food and Agriculture Organization to help, but the FAO hasn’t confirmed that. While the two Koreas have cooperated in the past on public-health issues, they haven’t discussed the current outbreak. Relations between the two Korea have been more fractious than usual since 2008, when South Korea placed disarmament-related conditions on its economic assistance to the North. Last year, North Korea conducted two military strikes against the South, killing 50. In the past, foot-and-mouth disease has plagued farm animals in other parts of Asia, Africa and South America and occasionally in Europe. Although animals can recover from

it, they are weakened and unable to viably produce meat and milk. The disease poses no risk to humans. Over the past decade, South Korea has quickly contained three outbreaks of foot-and-mouth disease, and Japan contained one last year. But the latest South Korean outbreak, fueled in part by cold weather that reduced the effectiveness of disinfectants and by Seoul authorities’ slow initial response, has proved difficult to stop. The FAO’s chief veterinary officer, Juan Lubroth, recently called the outbreak’s magnitude “unlike anything we’ve seen for at least half a century.” South Korea has reported approximately 150 confirmed cases of the disease since late November. To halt its spread, authorities ordered the slaughter of animals at farms

close to places where cases were confirmed. As a result, more than three million pigs, about a third of the total on South Korean farms, and 150,000 cattle, about 5% of national total, have been killed since the outbreak began. About 6,000 of South Korea’s 178,000 farms have lost their livestock. South Korea’s government estimates it will spend more than $2 billion helping farmers recover. South Korea’s pork and dairy production have been severely damaged and demand for corn and other feed grains has plunged. South Koreans eat pork more than any other meat and South Korean farmers produced about 70% of the nation’s consumption, with imports making up the rest. But this year, South Korean farmers will be able to provide only about half the country’s pork needs.

Huawei plans to let Obama decide deal BY SHAYNDI RAICE A U.S. panel has decided Huawei Technologies Co. should divest itself of a small technology company the Chinese telecom-equipment maker bought in May. Huawei said Monday it was told by the Committee on Foreign Investment in the United States that if it doesn’t shed the acquired company, the committee will recommend to U.S. President Barack Obama that the deal be unraveled. Huawei has decided to take its chances with the president, who doesn’t have to act on the recommendation, said Bill Plummer, vice president for government affairs for Huawei USA. “We have great respect for the process,” said Mr Plummer, adding that the company was willing to negotiate a broad national-security agreement that could alleviate concerns from some officials. “To withdraw and divest would have tarnished our brand and reputation.” The Treasury Department, which typically takes the lead on CFIUS matters, declined to comment, saying that by law, information filed with CFIUS can’t be disclosed. CFIUS laid out the options after concluding its review of Huawei’s purchase of U.S. start-up 3Leaf Systems, which created technology allowing groups of computers to work together like a more-powerful machine. The Chinese gear maker has said it initially failed to disclose the $2 million deal because it didn’t think it was necessary, given it only

purchased some assets, such as intellectual property, and hired some employees. When Pentagon officials found out about the deal, they took the unusual step of asking the company to file retroactively for a review by CFIUS, an interagency committee that examines acquisitions by foreign companies that may pose a national-security risk. CFIUS doesn’t release information about companies under review, but a person familiar with the process has said presidents have vetoed foreign transactions only two or three times. Typically, a company will withdraw its application if it gets an indication the committee will recommend against a deal, but Huawei in this case completed the deal without first seeking approval. Under the deal, Huawei hired 15 3Leaf employees, bought several former 3Leaf patents and purchased the start-up’s servers out of bankruptcy. The CFIUS decision comes as the president has been trying to defuse rising political and economic tensions with China. Huawei has struggled to gain a foothold in North America, thwarted on other deals by government officials who have said China’s military could use Huawei equipment to disrupt or intercept U.S. communications. Huawei has repeatedly denied links to the Chinese military and says it is ready to open its equipment to inspection to satisfy security concerns. —Spencer E. Ante contributed to this article.

To make up for the shortfall, South Korean food producers and wholesalers ramped up purchases of pork and beef from other countries, and the government reduced tariffs on pork. In January, pork imports were up 46% from a year earlier. Even so, wholesale pork prices are about 50% higher than a year ago. Although the number of new reported cases in South Korea has slowed to a trickle, quarantines remain on nearly all the affected farms. Some farmers hope they will begin to be lifted this week or next. “One month after they lift the quarantine restriction, we can bring in herds of pigs,” says Im Cheongsoo, a farmer in Gimpo, near Seoul, who lost 2,500 pigs to disease-related culling in December. Up the supply chain, distributors and restaurants have been damaged. At Jeoung-eun Family’s Gobchang, a Seoul pork restaurant, prices have been raised and hours shortened because of reduced supplies. “In the past, our business was from three in the afternoon to five in the morning,” says Kook Myunghee, who runs the restaurant with her husband. “Now, we’re barely open several hours a day and my husband is desperately running around to secure more supply.” The environment ministry last week ordered an examination of the more than 4,000 farms where animals were buried to assess risks of other types of contamination. —Jaeyeon Woo contributed to this article.

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Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

WORLD NEWS

Berlusconi to stand trial Voters’ fickle stance Italian prime minister is charged with sex crime and abuse of office BY STACY MEICHTRY AND NATHANIA ZEVI ROME—An Italian judge on Tuesday ordered Prime Minister Silvio Berlusconi to stand trial on charges of patronizing an underage woman for sex and abusing his office in an attempt to cover up the alleged relations. In her indictment, Judge Cristina Di Censo said there was sufficient evidence for Mr. Berlusconi to be tried in a Milan court for allegedly paying Karima El Mahroug, a Moroccan nightclub dancer who goes by the nickname “Ruby,” for sexual relations when she was under the age of 18, according to a statement from the judge’s office. The judge also indicted the premier on charges of abuse of office for making a phone call to police in May 2010 to allegedly press for the young woman’s release, the statement said. Prosecutors allege that Mr. Berlusconi made the call in an attempt to prevent the young woman, who was detained for petty

7

theft, from undergoing questioning with authorities about the nature of her relationship with the premier. Piersilvio Cipolotti, a lawyer for Mr. Berlusconi, on Tuesday reiterated that his client denied all the charges, adding there was no evidence that the premier had sexual relations with Ms. Mahroug. The premier’s phone call to police was “friendly,” Mr. Cipolotti said. The billionaire media magnate has long denied both charges in the case, asserting that he is the victim of persecution by politically motivated prosecutors who are determined to bring him down—an assertion many Italians believe. The premier has also said he never paid for sex and that he called the police station in May to request Ms. Mahroug’s release, because he believed she was a relative of former Egyptian President Hosni Mubarak. Leaving Ms. Mahroug, who isn’t related to Mr. Mubarak, in police custody, could have provoked an “international diplomatic incident,” Mr. Berlusconi has said.

Mr. Cipolotti said he planned to file a motion to have the trial moved to a special tribunal for government officials, which Mr. Berlusconi’s lawyers consider impartial. Judge Di Censo scheduled the first hearing of the trial for April 6. She also accepted the prosecutors’ request to expedite Mr. Berlusconi’s trial, bypassing preliminary hearings that can drag on for years. Alfonso Celotto, a constitutional law professor at the University of Roma Tre in Rome, said expedited trials usually last two months. Mr. Berlusconi’s trial will probably last longer, because his governing duties could get in the way of his ability to mount a defense, Mr. Celotto added. A charge of patronizing an underage woman for sex carries a sentence of up to three years. The abuse-of-office charge carries a sentence of up to 12 years. The trial will be Mr. Berlusconi’s fourth. He is already facing charges of embezzlement, corruption and tax fraud—charges he has vigorously denied.

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on cuts chills Capitol [ Capital Journal ] BY GERALD F. SEIB

If you want to get a pained look from a Washington politician these days, just ask them this question: Are voters ready to accept meaningful cuts in programs they love in order to tame the budget deficit? The question produces furrowed brows and shrugs of shoulders. And that, as much as anything, explains the federal budget President Barack Obama presented Monday—and many of the various alternative approaches Republicans have suggested. The U.S. is deeply unhappy with a $1.6 trillion deficit this year, and in theory voters demand that spending be ratcheted back. But that’s not the same as wanting spending cut back in the areas where it’s really big and really sensitive. And for now, the simple fact is that politicians aren’t convinced that they see in public opinion real signs that voters are ready to applaud a cut in the Medicare benefits Granny receives, or the Social Security benefits they can expect themselves, which happen to be the nub of the long-term spending problem. Given that Washington isn’t a land of great courage on these matters to begin with, this view of public opinion is likely to continue to produce what we’re all seeing: inaction. In many ways, the new Obama budget encapsulates this picture perfectly. The budget envisions that spending on all the programs Congress argues about and votes to fund every year—including defense programs—actually will decline slightly over the next 10 years. Meanwhile, the budget estimates that spending will rise 71% for Social Security, 72% for Medicare and 115% for Medicaid over the same period, with the increases getting bigger after that. These programs are on autopilot, and will keep eating up tax dollars unless changed. Yet the Obama budget itself proposes little of significance to change the trend lines on these socalled entitlement programs. The budget summary from the president talks more about what shouldn’t be reduced in Social Security than what might be, and it repeats ideas already set in train in last year’s health bill to slow down Medicare. Meanwhile, these underlying realities are almost entirely missing in the cacophonous debate between the two parties about “spending cuts.” Contrary to popular belief, people in Washington aren’t stupid, and many actually can do math, so what explains the disconnect? Here it is: When the Pew Research Center surveyed Americans this month about government spending, they found that just 12% wanted to cut spending on Medicare or on Social Security, and only 6% wanted to reduce spending on veterans benefits. Those are the kinds of numbers that don’t merely suggest to politicians that there are no

rewards for cutting entitlements; they scream that there may well be political punishment for doing so. Polling in recent months by The Wall Street Journal and NBC News suggests a similar bottom line: Voters want spending cuts in theory but offer limited support for them. Which doesn’t mean that public attitudes aren’t changing at all. The Pew survey showed a decline in the percentage of Americans who want to increase spending in these areas. In short, public attitudes are evolving, but slowly. “What you’re watching is the general electorate going through the process of figuring out the scale of what’s going on here and what’s going to have to happen,” says David Winston, a Republican pollster who advises House GOP leaders. Similarly, Democratic pollster Peter Hart, who co-directs The Wall Street Journal/NBC News survey, says: “Philosophically we’ve all arrived at the place of cuts. But practically, we’re a long ways away from cuts.” This isn’t to say the cuts being proposed, in the Obama budget and even more so by House Republicans, aren’t meaningful. They are. When Mr. Obama proposes, as he did, cutting the Low Income Home Energy Assistance Program by $2.5 billion, as he did in his budget, that sort of action takes real dollars off the table to help low-income citizens pay heating bills.

Sinking deeper Budget balance, in billions $300 Surplus Deficit 300

Projected

600 900 1,200 1,500 FY1995

2000

’05

’10

’15

Note: Fiscal year ends Sept. 30 Source: White House Office of Management and Budget

Similarly, when House Republicans propose, as they did last week, cutting $256 million out of federal aid to state and local lawenforcement agencies, that would take real dollars off the table for cops across the country. Nor is there a total absence of political leaders willing to talk about risky cuts in entitlements. As this newspaper has reported in recent days, conversations are under way in both parties—among House Republicans on Medicare and Obama aides on Social Security—about steps that might be taken to start taming the spending beast within those programs. Certainly the Republicans’ House Budget chairman, Rep. Paul Ryan, is one politician willing to risk a backlash by talking of tough steps on entitlements. Still, until politicians are convinced public attitudes have changed, don’t expect many such profiles in courage.

Life-changing apps 8 GOOD-LOOKING IPOD DOCKS 8

WEDNESDAY, FEBRUARY 16, 2011

LIFE & STYLE

asia.WSJ.com

The rise of the animation generation Quickly made digital cartoons are attracting an audience of millions of viewers online Last fall, television actor Richard Ruccolo sat down to make an animated movie about life in Hollywood. Twenty minutes later, a frustrated actor and a clueless talent agent, played by two cuddly-looking stuffed animals, strolled across his computer screen. Within two days, people were watching Mr. Ruccolo’s cartoon at talent agencies, management firms and TV studios around Los Angeles. A viewing of the short briefly brought work to a halt in the writers’ room at ABC’s “Desperate Housewives.” Mr. Ruccolo said he was introduced at a party to Chuck Lorre, the executive producer of the CBS comedy “Two and a Half Men,” as “the guy who made the agent video.” In an email, Mr. Lorre said he thought the video was “pretty inside and very funny.” Mr. Ruccolo looks at such videos as “electronic business cards.” On the heels of Twitter, blogs and YouTube videos, do-it-yourself animation has emerged as the latest form of self-expression online. These days, anyone looking to make fun of their boss, unleash a rant or comment on the latest news can quickly create a cartoon, thanks to a crop of animation websites. And corporations, advertisers—and Hollywood executives—are beginning to take notice. Insurance giant Geico is using the lo-fi animation for a series of TV ads in the U.S.. Some of the most successful amateur videomakers are fielding offers from agents and producers. One popular animation site, Xtranormal, has been adapting its technology for smart phones. The graphics in these videos are simplistic, and the voices are typically computerized monotones—it’s a long way from the golden age of animation. But TV shows such as “South Park” have refined the art of using crude-looking animated figures to comment on the news of the day. The Taiwanese firm Next Media Animation pumps out animated spoofs online—sometimes in a matter of hours—in response to everything from Tiger Woods’s meltdown to Chinese President Hu Jintao’s visit to the U.S. (Mr. Hu tosses the keys to his jet to President Barack Obama, calling over his shoulder, “Don’t scratch it.”) Now, the masses are getting in on the joke. Many amateur-designed videos follow a basic pattern: A clueless dolt irritates a jaded insider with an astonishing blend of naiveté and ill-earned self-confidence. In one, entitled, “So You Want to Go to Law School,” a prospective law student tells a lawyer, “I love the Constitution,” to which he replies: “If you say it’s a living, breathing document, I may kill myself.” “But it is,” she says. “Oh no. You’re going to make me orphan my daughter,” he responds. In another video, a would-be writer tells a publishing insider that he just quit his job, bought a laptop and intends to write a novel by the end of the week. “What was the last book you read?” the insider asks. “I saw all of the Harry Potter movies,” he smugly replies. Both of those videos were created by David Kazzie, a 37-year-old lawyer and a frustrated author. He had pitched two unsolicited manuscripts to dozens of agents over the last decade, both of which were rejected, and he thought the videos might at least drive readers to his blog. After watching Mr. Kazzie’s novelist video, New York literary agent Ann Rittenberg signed him as a client. The short “was

Xtranormal (3); Next Media Animation (Hu)

BY ELLEN GAMERMAN

Clockwise from top left, Geico’s ‘Sexy Grandpa’ cartoon ad; Taiwan’s Next Media Animation spoofs President Hu Jintao’s visit to the U.S.; ‘So You Want to Write a Novel’ mocks first-time authors; A lawyer’s parody of his profession generated more than a million YouTube hits. so funny and brilliantly accurate that I thought actually he’d done a Vulcan mindmeld with me,” Ms. Rittenberg said. Do-it-yourself animation sites like Xtranormal and GoAnimate are designed to be simple enough for anyone to use: All a person has to do is sit at a computer and type. Users pick out characters, voices, motions, backgrounds and facial expressions. On Xtranormal there are six possible looks, including ones described as “Ooh that makes me happy!” and “Ew. Gross.” The site’s deadpan voices, occasional mispronunciations of typed words and wide-eyed, nearly expressionless characters add to the comic incongruity of the characters’ often outraged rants. “It’s a quick, down-and-dirty way to get smart writing and observational comedy on the Internet,” said Richard Appel, a veteran of the Fox TV shows “Family Guy” and “The Simpsons” and a creator and executive producer of “The Cleveland Show.” Homemade cartoons can riff off the news easily, he said, unencumbered by the time-consuming production demands of an animated TV show. Mr. Appel doesn’t think these lowbudget cartoons are about the visuals: “It’s a writer’s medium that’s cleverly found a way to get people to look at their screen and listen to what’s being said.” Geico recently created five TV commercials using Xtranormal. One spot features a “sexy grandpa” who gyrates under a cartoon apple tree. The ad’s message, delivered by the robot-voiced senior citizen: People can get a rate quote from Geico in 15 minutes, the same time it took to create the cartoon.

Geico’s advertising agency, the Martin Agency, sold the Xtranormal idea to Geico executives based partly on the easy and cheap production. Ad executives were inspired by an Xtranormal cartoon spoof of iPhone 4 buyers, which had gone viral after appearing on YouTube last June. In it, a clueless customer demands: “IPhone 4. Where is the iPhone 4? I need an iPhone 4.” She is unconvinced by his arguments that another phone, the HTC EVO 4G, is better. Finally, he tells her in an increasingly profane diatribe that the rival phone can print money, fly her to a private island and “grant up to three wishes, even if one of those wishes is for an iPhone.” (The customer remains unswayed.) The video has more than 12 million hits on YouTube. To move beyond Internet fad territory, animation companies are trying to tap a new pool of users. At Xtranormal’s main rival GoAnimate, the education division has provided 2,500 schools with its animation tools since December, promoting cartoons as a way to make a history lesson more interesting or bring an English student’s short story to life. Corporations such as defense contractor Lockheed Martin are using animated shorts for internal staff videos. “Dan in Cube #5, are you ready to rock?” a cartoon Keith Richards type asks an employee in one such short using GoAnimate’s cartoon characters. “I’m your reminder to rock your ethics and business conduct compliance training. Woo-hoo!” The fast-cartoon phenomenon took off online in late 2009, when Taiwan’s Next Media

Animation released a video depicting Tiger Woods fleeing his enraged wife. Since then, the company has spoofed a range of current events, with videos like a rap battle between Presidents Obama and Hu over the appreciation of the yuan. (One Next Media video parodied competition between The Wall Street Journal and the New York Times.) The company’s 300-person animation team, based in Taipei, prides itself on being able to turn out new videos quickly in response to the news cycle, producing more than 50 animated clips a day. In its twostory newsroom, projects move from concept to storyboard to fully edited pieces in less than three hours. The site’s directors, writers, modelers and animators hold up to 14 meetings a day, packing into a conference room where storyboard artists present their sketches. Actors then head to the firm’s motion-capture studio. Specialized cameras pick up their movements, which are used to help bring digital characters to life. While some of the pieces target foreign audiences and are purely satirical, many others are designed as more conventional news clips tailored for Next Media’s regular news outlets in Asia, including a TV station and the Apple Daily newspaper. The company even plans to launch a wire service to provide straight-news animated clips that can be integrated into video broadcasts in the U.S. Paul Mozur contributed to this article.

8

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

LIFE
STYLE

Apps that will change your life Essential gizmos, from a handy way to store passwords to an application that will help locate your car BY MICHELLE PRICE Microsoft Word and Excel are both applications, but these rather staid and well-established pieces of software are not what modernday tech enthusiasts mean when they talk about “apps.” The emergence of Web or “cloud”-based IT services and super-smart mobile phone and tablet technology, as embodied by the iPhone and the iPad, has given birth to a universe of weird and wonderful pieces of software brimming with all sorts of information and tools. Apps combine the unique features of the new wave of super-clever hardware, including a camera, a global positioning system, a highresolution screen, and WiFi capability, with a bottomless pit of Web-based information and data, to deliver some truly innovative and mind-boggling gizmos. Because apps can be developed by any third party who wishes to try, there are literally millions to choose from. Presented here are eight of the most useful, most recommended and most interesting.

OmniFocus Always forgetting to pick up your dry cleaning? OmniFocus has the answer. Developed by productivity application specialist the Omni Group, OmniFocus is a location-based task manager founded on the principle that certain tasks are performed in certain contexts. OmniFocus uses the GPS and WiFi positioning capability of the iPhone to organize the user’s list of chores according to their location. For example, if the user has a number of chores to perform in a morning, the OmniFocus app will remind him or her of the tasks when they are in the relevant contexts, such as passing the dry cleaners. OmniFocus also has a sister iPad app.

DataVault Password Manager As more and more applications and IT services are delivered via the Web, consumers are expected to memorize an ever-bewildering array of passwords with an ever-expanding number of characters. Designed by California company Ascendo Inc., DataVault Password Manager offers a handy and intuitive way to store a

Apps combine features of super-clever hardware with a bottomles pit of Web-based information and data, delivering some excellent gizmos. range of passwords, PINs, creditcard details, and other vital personal information, which is protected with strong encryption technology. The application, which is designed for the iPhone, iPad and iPod Touch, allows users to have all their vital password information safely to hand at all times, although a desktop version is also available.

Find My Car! Wondering around helplessly trying to find your parked car is a common recurring mid-life frustration dream, but it need never again be a reality with this inspired application. Developed by French mobile application specialist Presselite, Find My Car puts an end to the ignominy of misplacing your car. Using the iPhone location capability, the application allows the user to locate the position of the car and fix it on the iPhone’s map function. For those who have trouble following maps, the application also has the facility to record visual information as a helpful prompt using the phone’s camera. Once the user’s excursion is over, he or she simply follows the map back to the vehicle.

Layar Reality Browser Produced by Dutch company Layar, Layar Reality Browser is one of hundreds of applications that use a technology known as augmented reality to provide additional information about the user’s surroundings. Augmented reality overlays images, Web links and data on top of the image displayed by the phone’s camera in order to provide useful context-specific information. Hold up the iPhone’s

camera to capture the surrounding area and Layar displays a wealth of additional information onto the smartphone’s field of vision, such as the most popular bars nearby, or flats to rent in the area.

IMDb Whatever happened to the boy who played Oliver in the 1968 film musical? What year was the first Alien film released? The Internet Movie Database (IMDb) has all the answers. As the world’s largest collection of TV and film trivia with a database of some 1.5 million films and TV shows, IMDb can satisfy a vast majority of obscure film-related questions. This app is for any household incapable of finishing a film without squabbling over the name of the supporting actor and other films he has starred in.

Spotify A good musicstreaming application is an absolute must-have for anyone who loves to listen to music, whether the app is downloaded onto a desktop, tablet or smartphone. Music-streaming apps allow users to listen to their favorite music on-demand via the Web, without the irritation of endless radio adverts. There are a number of good streaming applications out there these days, but Spotify, which has been around a while, continues to improve and is available on desktops, a number of different smartphones, and the iPad. In addition to providing online music streaming, Spotify allows users to play back tunes when offline, and the mobile application also offers smooth syncing with the desktop app.

Word Lens One of the most celebrated apps to be released in recent months, Word Lens instantly translates printed words in one language into another using the phone’s built-in video camera. For example, the user is traveling abroad and cannot understand what a sign says. He or she points the iPhone or iPad camera at the sign, and the English translation will immedi-

ately appear on the screen overlaying the initial image using augmented reality. At the moment the application only provides translation between English and Spanish, but the application’s creators—augmented-reality app development firm Quest Visual Inc.—promises more European languages in due course. Ms. Price is Trading and Technology Editor at Financial News in London. She can be reached at [email protected].

THE FIXER | By Kevin Sintumuang

Dock innocuously Q: I went to look at some iPod docks/radios and they all have overwrought aesthetics. I want something that sounds nice and is fairly compact, affordable (about US$200) and isn’t the room’s center of attention. Any thoughts? A: I looked around for you. A lot. And while there are many beautiful, simple options on the high end of the price spectrum, there are really only a few dock/radios on the more affordable end that don’t look like they’re trying to beat the iPod in the sleekness department. My favorite is an oldie (it’s been around since 2009) called the Vers 1.5 R. (US$200, versaudio.com). It comes in a variety of wood finishes, and despite its bookshelf-friendly size, it’ll churn out the sound you need for everyday listening. —Kevin Sintumuang Have a tech quandary? Email us: [email protected]

Vers

This is an application for anyone who has ever heard a song or tune they love on an advert or in a shop but have not been able to identify it. Selfstyled as a “music discovery engine,” Shazam is a smartphone application boasting a simple but revelatory function: Hold up the phone to the music, whether the tune is being broadcast from a speaker in a shop, on the TV, or in the gym, and the Shazam application will identify the song and the artist. Users can also view related YouTube videos. Shazam is primarily a smartphone application but it can also be downloaded onto the iPad.

Bloomberg

Shazam

The Vers 1.5 R. in a walnut finish.

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

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OPINION: REVIEW
OUTLOOK

The Cee Lo Green Budget

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his was supposed to be the moment we were all waiting for. After three years of historic deficits that have added almost $4.5 trillion to the national debt, President Obama was finally going to get serious about fiscal discipline. Instead, what landed on Congress’s doorstep on Monday was a White House budget that increases deficits above the spending baseline for the next two years. Hosni Mubarak was more in touch with reality last Thursday night. The White House actually touts as tightfisted a budget proposing a record $1.645 trillion deficit for fiscal 2011, due largely to a new surge in spending to 25.3% of GDP. That’s more spending than in any year since 1945. Federal debt held by the public—the kind we have to pay back—will rise to 75.1% in 2012, which is the highest since 1951 and more than double what it was as recently as 2007. (See the nearby chart.) This $3.73 trillion budget does a Cee Lo Green (“Forget You,” as cleaned up for the Grammys) to the voter mandate in November to control spending. It leaves every hard decision to the new House Republican majority. And it ignores almost entirely the recommendations of Mr. Obama’s own deficit commission. No wonder the commission’s Democratic cochairman, Erskine Bowles, said Monday that this budget goes “nowhere near where they will have to go to resolve our fiscal nightmare.” And he’s an ally. How unserious is this budget? Although the White House trumpets $2.18 trillion in deficit reduction over the next decade, those savings are so far off in the

magical “out years” that you can barely lion in 2021 from $1.4 trillion in 2010. see them from here. More than 95% of the Every serious analyst agrees that the savings would happen after Mr. Obama’s time to fix these retirement programs is first term in the White House is over, and before 75 million graying baby boomers almost two-thirds of the promised deficit start collecting the benefits and voting as reduction would beneficiaries rather arrive after 2016. The Obama Fisc than as net payers. Pretending to cut Meanwhile, Medicdeficits by pushing Federal outlays and debt held by the public as shares aid spending would all real cuts into of GDP, 2000-2012* grow by 115% over the future is Bud- 80% the next decade get Flimflam 101. 70 thanks to that reFrom hard exnowned deficit reperience, we know 60 ducer, ObamaCare. that what matters 50 The proudest are the cuts and White House boast Debt held by the public reforms a White 40 is that its budget House is willing to 30 would cap domesmake now. The tic discretionary Outlays Obama budget 20 spending at curdoesn’t cut a 10 rent levels for five penny from the years. These are ‘00 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12 deficit in the last *2011 and 2012 are estimates programs ranging seven months of Source: Office of Management and Budget from NASA to the fiscal 2011. Over Washington Metro the next three to school lunch years—through 2013—the spending re- programs to wind turbine grants, which ductions in this budget add up to a paltry overall and including stimulus expanded $20 billion net, out of a projected $3.5 by more than 80% in Mr. Obama’s first trillion deficit. That’s a 0.57% reduction in two years. This spending freeze would cut red ink and less than what the feds spend these programs from 2011-2013 by a every two days. grand total of $14 billion. As for Medicare, Medicaid, Social SecuBy contrast, the plan now emerging rity and other entitlements, which ac- from House Republicans would cut about count for roughly 60% of federal expendi- $80 billion immediately, and nearly $280 tures, the proposed savings are close to billion over three years—some 20 times zero. The President would allow these the White House savings. Mr. Obama’s programs to continue on automatic pilot, budget also assumes annual economic meaning they nearly double to $2.7 tril- growth of more than 4% from 2012-2014.

That’s far more robust than anything this recovery has produced so far, and it is at least a percentage point higher than most private economists or the Congressional Budget Office predict. We’d love to see that happen, because deficit reduction depends above all on economic growth to generate more tax revenue. But those growth targets would be undermined by the sizable tax hikes in Mr. Obama’s budget. After 2013 the capital gains and dividend tax rates would rise to 20% from 15%, and the highest income tax rate, paid mostly by noncorporate businesses, would rise to 39.6% from 35%. The Administration foresees a $700 billion windfall, but history shows that higher rates are unlikely to yield anywhere near that amount. The budget also proposes roughly $300 billion in new taxes on energy companies, multinationals and banks. So much for the new detente between the White House and business. When including all the tax increases, there is more than $1 of new taxes for every $1 of future spending cuts. i

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This will go down as canny politics in Washington, as the President lies in wait to ambush Republicans when they propose their real spending cuts. Then he hopes he can cut them to ribbons on his way to reelection. That may be the White House game plan, but we wonder if the politics will play out that way. The American people also want a President to lead, and this budget is so transparently cynical it may help Republicans make their case that if they don’t lead, no one will.

5,100 More IRS Agents

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resident Obama’s fiscal 2012 budget doesn’t cut much of anything (see above), and certainly not the Internal Revenue Service. The White House is requesting that the most beloved of all government agencies get an additional 5,100 agents next year, no doubt to wring further tax revenue from Americans. The White House wants to give the IRS a 9.4% raise in fiscal 2012,

to $13.28 billion. Reuters reports this would allow for a roughly 5% increase in agency manpower to 100,537, including $460 million more for tax enforcement than in 2010. We doubt this is the kind of fiscal discipline that voters had in mind in November, but it does reflect the mentality of an Administration that assumes it could go a long way to balancing the

budget if only fewer Americans shirked their tax bills. The 5,100 extra IRS gumshoes are supposed to chase the $300 billion “tax gap,” the Beltway’s version of the Loch Ness monster that is the difference between what the IRS collects and what Congress thinks Americans owe. It’s about as real as Nessie, though at least with the monster some Scots claim photographic evidence.

This is the same mentality that gave us the IRS Form 1099 small business harassment as part of ObamaCare, a provision that 81 Senators voted last week to repeal. Federal revenues are still below normal, although individual tax receipts are up 23% through January as the recovery gains steam. Revenues will rise as growth does, no thanks to the IRS.

Pakistan’s Undiplomatic Bungle

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wo and a half weeks ago, an American consular official shot dead two Pakistanis in Lahore, the country’s second-largest city. Raymond Davis has an “official” visa stamped into his U.S. diplomatic passport, making him immune from prosecution in Pakistan. Whatever anyone thinks of him or his actions, the Vienna Convention obliges Pakistan to release Mr. Davis into U.S. custody. End of story—anywhere, except Pakistan. Pakistan’s civilian government has managed to turn a straightforward, if unfortunate, incident into a domestic political firestorm. Mr. Davis shot the two Pakistani men, who were on a motorcycle, while driving alone on January 27. He told police that the armed men tried to intercept his car and he fired in self-defense. After the police arrested him, they should have contacted the foreign minis-

try to clarify his diplomatic status and tention around the case in Pakistan now, let him go. Instead they called the Paki- it’ll be a brave judge who frees Mr. Davis stani media, which pounced on the story. and becomes a target himself. Allowed to fester, Vicious anti-Amerithe case has turned canism explains the potoxic. President Asif Ali Everything that could litical sensitivity. So Zardari, an unpopular does Mr. Davis’s role in go wrong has in the leader, hasn’t dared to the country. The U.S. step in. The foreign Davis murder case. embassy describes him ministry dragged its as a “technical and adfeet in certifying Mr. ministrative” staff Davis’s status. The government fired For- member, without specifying his duties. eign Minister Shah Mahmood Qureshi Pakistani media have speculated that Mr. last week but still hasn’t asked for Mr. Davis was a spy and knew his victims, Davis’s release. Mr. Zardari considers who they allege belonged to a crime synhimself an American ally, but with dicate. friends like these, U.S. officials may wonWe’re told by our sources that Mr. der who needs the Taliban. Davis, a former Army special forces solA court in Lahore last Friday ordered dier, was more likely a special operations Mr. Davis held another two weeks on contractor and the Pakistanis on the mopossible murder charges, in contraven- torcycle were his tail. The presence of tion of international law. With all the at- armed Americans on Pakistani soil is a

sore point. Pakistan is the world’s leading terrorist sanctuary, home to al Qaeda’s leadership as well as the Afghan Taliban. Mr. Davis’s duties are irrelevant to the principle at issue. Diplomatic immunity is sacrosanct among countries in good international standing. By behaving as Iran did in taking American hostages in 1979, Pakistan puts itself in rogue company. There’s no limit to how far the U.S. should and will need to go to secure Mr. Davis’s release. Washington last week cancelled a trilateral summit with Afghanistan and Pakistan later this month. President Zardari’s state visit to Washington late next month is in jeopardy, as is $3.5 billion in annual aid. A simple resolution to this needless crisis exists. Pakistan need only muster the political will and common sense to apply the law and free Mr. Davis.

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Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

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OPINION

Understanding the Muslim Brotherhood

Letters To The Editor *

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Debating Race Relations in Malaysia John R. Malott’s op-ed, “The Price of Malaysia’s Racism” (Feb. 8), is littered with inaccuracies, distortions and personal prejudices. Far from being an impartial commentator on our country, Mr. Malott is out of touch with the realities of present-day Malaysia. His suggestion that the government is deliberately stoking racial tensions is both false and irresponsible. More crucially, it offends the large majority of Malaysians of all ethnicities and religions who live in peace and harmony with each other, and who uphold the principles of One Malaysia. Mr. Malott’s claim that racial and religious tensions “are worse than at any time since 1969” is completely false. The real difference between then and now is the greater freedom of expression and

discourse in today’s Malaysia. Greater discussion of far fewer incidents does not equal more racial tension. Mr. Malott’s economic analysis is also flawed. Foreign firms are in fact increasing their investment in Malaysia due to our competitiveness and comprehensive reform agenda. According to the United Nations Conference on Trade and Development, foreign direct investment in Malaysia grew by an impressive 409.7% in 2010. Also, Malaysia was ranked among the 10 most competitive countries in the world by the Institute for Management Development. JAMALUDIN JARJIS Ambassador of Malaysia to the United States Washington Reading Mr. Malott’s article *

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one might conclude that Malays are the richest racial group in Malaysia. In fact, the average income of Malays, at 3,500 ringgit ($1,140), is lower than that of both Indians (4,500 ringgit) and Chinese (6,200 ringgit). Malays own less than 5% of the thousands of the country's small and medium enterprises. And when the “actual profits” from manufacturing are considered, the actual average income of the non-Malays is about three or four times that of Malays. It’s true that 90% of the civil service, police and military are Malays, but these are mostly lowpaying jobs. When Malaysia reaches the status of a developed nation, Malays are likely to be the largest segment of the population with income below the average. EFFENDI TENANG Kuala Lumpur

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Open Societies, Their Enemies and Multiculturalism Regarding your editorial “David Cameron’s Warning” (Feb. 10): British Prime Minister David Cameron’s excellent call for a “muscular liberalism” involves important philosophical difficulties going back to the lack of logic in Karl Popper’s concept of “The Open Society and Its Enemies.” If a society is “open” to all ideas, how can it simultaneously define some ideas as absolutely inimical? This logical difficulty in turn goes back to the vagueness of J.S. Mill’s concepts of “reason” and “civilization,” on which rests his essay “On Liberty,” the basic blueprint of Western liberal modernity. Mill was utterly confident that the meanings of these two words were indubitably clear, but the subsequent century of sharp epistemological arguments proved him wrong, creating what your editorial calls, “a society . . . that lacks the confidence of its own values.” In fact, these values ultimately are based on the Western Enlightenment, which absolutely contradicts the core beliefs of Islam, not just “Islamic extremism.” Logically implied by the idea of “the open society,” so-called “multiculturalism” with its absolutization of diversity simultaneously negates the Enlightenment and Mill’s concepts of “reason” and “civilization.” This paradox sounds like an abstruse philosophical problem irrelevant to pragmatic political realities, but, if left unresolved, it robs

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Mr. Cameron’s “muscular liberalism” of the logical consistency needed to refute multiculturalism. Multiculturalism then legitimizes the ingenious efforts of many, many Muslims to use the logic of liberalism to undermine liberalism. We are dealing, then, with an abstruse philosophical problem at the root of the concrete political dangers Mr. Cameron so eloquently discussed. THOMAS A. METZGER The Hoover Institution Stanford, Calif. In 1991, Arthur M. Schlesinger Jr. wrote a monograph “The Disuniting of America: Reflections on a Multicultural Society.” He was critical of the cult of ethnicity that was playing out in our politics, churches, volunteer organizations and schools. He cites Diane Ravitch’s statement, “Once ethnic pride and selfesteem become the criterion for David Cameron teaching history, certain things cannot be taught.” In the forward Schlesinger wrote, “The national ideal had once been e pluribus unum. Are we now to belittle unum and glorify pluribus? Will the center hold? Or will the melting pot yield to the Tower of Babel?” He added, “The contemporary ideal is shifting from assimilation to ethnicity, from integration to separatism.” Schlesinger’s monograph is worth re-reading. FRANK A. NICOLAI Fort Washington, Md.

Alice Chai, Research Director Connie Cheng, Operations Director Simon Wan, IT Director Olivier Legrand, General Manager Digital Christine Brendle, Publisher Published since 1889 by

Dow Jones and Company © 2011 Dow Jones & Company. All Rights Reserved

jk

Multiculturalism is the collectivist belief that the ultimate political unit is the group, that all individuals must be classified in some group and treated according to the supposed mores of that group, regardless of any deadly consequences to the individual. Individualism recognizes that

each person is the fundamental political unit and has a right to his or her own life, liberty, property and happiness which no person or institution may violate by the initiation of force. At root, tolerance of cultural differences is a consequence of individualism. A full embrace of individualism is the antidote to Europe’s impending plunge into the barbarism of Islamism or its own forms of deadly collectivism: nationalism, fascism and communism. MARSHA FAMILARO ENRIGHT Chicago *

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George W. Bush Was Right on Democracy David Feith’s “Journal Interview with Natan Sharansky: Democracy’s Tribune on the Arab Awakening” (Feb. 7) regarding the Egyptian crisis serves as another clear validation of U.S. President George W. Bush’s “freedom agenda.” It should not be lost on the current administration to recall a 2006 conversation reported in Bob Woodward’s book, “The War Within,” when Iraq Study Group member James Baker stated that he received advice regarding the stabilization of Iraq from Egyptian President Hosni Mubarak. President Mubarak said that “Iraq—like Egypt—needed a strongman who could get things done.” While a “strongman” solution might have produced short-term results, the current situation in Egypt clearly demonstrates that the longterm implications would have been disastrous. President Bush has admitted to many mistakes with regard to rebuilding Iraq, but anchoring U.S. policies to the steadfast principles of the “freedom agenda” was not one of them. RONALD R. SHAW JR. Mililani, Hawaii

[ Global View ] BY BRET STEPHENS It’s what the good people on West 40th Street like to call a “Times Classic.” On Feb. 16, 1979, the New York Times ran a lengthy op-ed by Richard Falk, a professor of international law at Princeton, under the headline “Trusting Khomeini.” “The depiction of [Khomeini] as fanatical, reactionary and the bearer of crude prejudices seems certainly and happily false,” wrote Mr. Falk. “What is also encouraging is that his entourage of close advisers is uniformly composed of moderate, progressive individuals.” After carrying on in this vein for a few paragraphs, the professor concluded: “Having created a new model of popular revolution based, for the most part, on nonviolent tactics, Iran may yet provide us with a desperately needed model of humane governance for a third-world country.” Whoops. The Times is at it again. Last week, the paper published an oped from Essam El-Errian, a member of the Muslim Brotherhood’s Guidance Council, who offered this soothing take on his organization: “We aim to achieve reform and rights for all: not just for the Muslim Brotherhood, not just for Muslims, but for all Egyptians.” Concurring with that view, Times reporter Nicholas Kulish wrote on Feb. 4 that members of the Brotherhood “come across as civicminded people of faith.” It’s easy to be taken in by the Brotherhood: Eight decades as a disciplined, underground organization, outwardly involved in charitable social work, have made them experts at tailoring messages to separate audiences. The Brotherhood has also been careful to distinguish itself from the Salafist followers of Sayyid Qutb, himself a Muslim Brother who developed the concept of takfir, which allows one Muslim to denounce another Muslim as an apostate and treat him accordingly. “The thought of the Brotherhood doesn’t have the tendency to . . . take violent measures,” Muhammad Habib, the Brotherhood’s former deputy supreme guide, told me in Cairo in 2006. But if that counts for moderation in the context of intra-Islamic politics, it hardly makes the Brotherhood moderate by Western standards. Hassan al-Banna (1906-1949), the Brotherhood’s founder, was an admirer of the fascist movements of his day, and he had similar ambitions for his own movement. “Andalusia, Sicily, the Balkans, south Italy and the Roman sea islands were all Islamic lands that have to be restored to the homeland of Islam,” he wrote in a message dedicated to Muslim youth. “As Signor Mussolini believed that it was within his right to revive the Roman Empire . . . similarly it is our right to restore to the Islamic empire its glory.”

Today the Brotherhood has adopted a political strategy in keeping with Banna’s dictum that the movement must not over-reach on its way toward “[subjugating] every unjust ruler to its command”: “Each of these stages,” he cautioned his followers, “involves certain steps, branches and means.” Thus the Brotherhood has gone out of its way in recent weeks to appear in the most benign light, making an ally of former IAEA chief Mohamed ElBaradei and forswearing any immediate political ambitions. But that doesn’t mean the Brothers don’t have an idea of what they’re aiming for. “We think highly of a country whose president is important, courageous and has a vision, which he presents in the U.N., in Geneva, and everywhere,” the Brotherhood’s Kamal al-Hilbawi told Iran’s Al-Alam TV earlier this month, referring to Mahmoud Ahmadinejad’s Holocaust and 9/11 denials. “We think highly of a

In 1979, Western thinkers were quick to call the Ayatollah Khomeini ‘moderate’ and ‘progressive.’ country . . . that confronts Western hegemony, and is scientifically and technologically advanced. Unfortunately, these characteristics can be found only in the Islamic Republic of Iran. I hope that Egypt, Saudi Arabia and Tunisia will be like that.” Nor should there be any doubt about what the Brotherhood is aiming against. “Resistance is the only solution against the ZioAmerican arrogance and tyranny,” Muhammad Badie, the Brotherhood’s supreme guide, sermonized in October. “The improvement and change that the [Muslim] nation seeks can only be attained . . . by raising a jihadi generation that pursues death just as the enemies pursue life.” Such remarks may come as a rude shock to James Clapper, the Director of National Intelligence who last week testified in Congress that the Brotherhood was “largely secular” (a remark his office later retracted). They may also surprise a coterie of Western analysts who are convinced that the Brotherhood is moving in a moderate direction and will only be further domesticated by participation in democratic politics. Yet the evidence for that supposition rests mainly on what the Brotherhood tells Westerners. What it says in Arabic is another story. In 2005, candidates for the Brotherhood took 20% of the parliamentary vote. Gamal al-Banna, Hassan’s youngest brother, once told me they command as much as 40% support. Neither figure is a majority. But unless Egypt’s secular forces can coalesce into serious political parties, the people for whom Islam is the solution won’t find the fetters of democracy to be much of a problem.

Write to [email protected]

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

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OPINION

BY KAREN ELLIOTT HOUSE Riyadh, Saudi Arabia In any authoritarian regime, instability seems unthinkable up to the moment of upheaval, and that is true now for Saudi Arabia. But even as American influence recedes across the Middle East, the U.S. soon may face the staggering consequences of instability here, in its most important remaining Arab ally. While a radical regime in Egypt would threaten Israel directly but not America, a radical anti-Western regime in Saudi Arabia—which produces one of every four barrels of oil world-wide—clearly would endanger America as leader of the world economy.

The Saudi royal family, corrupt and infirm, is about to face a delicate, perhaps divisive, succession process. Thirty years of visiting Saudi Arabia convinces me that unless the regime rapidly and radically reforms itself—or is pushed to do so by the U.S.—it will remain vulnerable to upheaval. Despite the conventional wisdom that Saudi Arabia is unique, and that billions in oil revenue and an omnipresent intelligence system allow the regime to maintain power by buying loyalty or intimidating its passive populace, it can happen here. The many risks to the al Saud family’s rule can be summed up in one sentence: The gap between aged rulers and youthful subjects grows dramatically as the information gap between rulers and ruled shrinks. The average age of the

kingdom’s trio of ruling princes is 83, yet 60% of Saudis are under 18. Thanks to satellite television, the Internet and social media, the young now are well aware of government corruption—and that 40% of Saudis live in poverty and nearly 70% can’t afford a home. As Cairo was erupting in revolution in recent weeks, Saudis were treated to a glaring example of government incompetence as the kingdom’s second largest city, Jeddah, flooded with sewage and rainwater for the second time in 14 months. This, despite promises from King Abdullah after the first flood to punish those responsible for leaving most of Jeddah without proper sewage or drainage. The combination of revolution in Cairo and ineptitude in Jeddah produced widespread Saudi cynicism and anger on the Internet. Even state television carried pictures of Saudi women angrily berating a senior prince over Jeddah’s flooding. Most surprisingly, King Abdullah—widely respected for his modest reform efforts by most Saudis, who blame problems on those around him—was pictured in an Internet posting (shown to me by a gloomy senior prince) with a huge red X adjacent to his photo and the words, “Why do you give them all this power when they all are thieves?” The traditional sources of stability in Saudi Arabia have been the royal family and the Wahhabi religious establishment with which it is closely intertwined. These twin pillars were losing credibility and legitimacy even before Egypt. Al Saud legitimacy rests largely on personifying, promoting and protecting Islam—indeed, the Saudi monarch refers to himself as “Custodian of the Two Holy

Mosques.” Yet the royal family increasingly is seen by its subjects as profligate, corrupt and unable to deliver efficient government. The religious establishment, even as it enforces its uniquely austere brand of Islam, is increasingly seen as prostituting itself by using religion to support whatever the ruling family wants. “We are hypocrites tricking each other, lying to each other as the government has taught us to do,” one deeply devout imam tells me. “We are not Islamic.” Over the years, the royal family—now numbering nearly 7,000 princes—has come to pervade every corner of Saudi life, but it has lost public respect in the process. Almost every Saudi business, key ministry and mayoralty is headed, or figure-headed, by a prince. A royal family that once was relatively unified when decisions were made by a handful of senior brothers now is so large and fractured that different branches pursue conflicting agendas. Exacerbating the problem is that the royal rulers are old, infirm and largely out of touch. King Abdullah has been out of the kingdom for three months receiving medical treatment in the U.S. and Morocco. Crown Prince Sultan, 85 years old and ill with cancer and Alzheimer’s, rarely is seen in public. Rounding out the ruling trio is the deputy prime minister, Prince Naif, who is 77 and suffering from diabetes and osteoporosis. After them? No one knows. What scares much of the royal family and many ordinary Saudis is that the succession, which historically has passed from brother to brother, soon will have to jump to a new generation. That could mean that only one branch of the family

Associated Press

From Tunis to Cairo to Riyadh?

Saudi King Abdullah. will have power, a prescription for potential conflict as 34 of the 35 lines of the founder’s family could find themselves disenfranchised. All this is reminiscent of the dying decade of the Soviet Union, when one aged and infirm Politburo chief briefly succeeded another—from Brezhnev to Andropov to Chernenko—before Gorbachev took power with reform policies that proved too little too late. As events in Cairo have played out, some worried younger princes have privately acknowledged the need to curb corruption, better serve citizens, and reform the dysfunctional government bureaucracy. Still, even these princes stress the inevitability of al Saud rule. “We united Arabia and we remain the glue that holds it together,” says one. What these reform-minded princes fail to understand—or at least acknowledge to foreigners—is the degree to which many young Saudis no longer respect or fear the royal family. Rather, they increasingly resent the indignity inherent in having to beg princes for favors

that should be a public right. Frustrated by these daily indignities, young Saudis experiment with drugs, steal cars and vandalize government property. Saudis at all levels of society are becoming increasingly lawless, emulating their leaders in doing whatever they can get away with. A recent target of youthful ire is a new camera system that tickets speeders. The system has been repeatedly vandalized by youth who claim that their fines enrich the Minister of the Interior, who is also responsible for the kingdom’s invasive intelligence agencies. In choosing this target, Saudis protest both corruption and state intrusion. Still, most ordinary Saudis do not crave democracy. They fear that traditional tribal divisions, coupled with a lack of social and political organizations, would lead to mayhem—or to even greater domination by the conservative religious establishment that is wellorganized through the kingdom’s 70,000 mosques. What Saudis hunger for are standard services provided by far less wealthy governments: good education, jobs, decent health care. “The gap between reform here and the demands of our young is widening,” warns a senior prince. “It is a race against time because the young are tired of the status quo, tired of talk.” Saudi Arabia is not Egypt. But even in this most shrouded and supposedly most stable of Arab societies, time is running out.

Ms. House, a former publisher of The Wall Street Journal and 1984 Pulitzer Prize-winning reporter for her coverage of the Middle East, is researching a book on Saudi society.

Bangladesh’s War on Terror BY ASHOK K. MEHTA On Monday, top leaders of the United Liberation Front of Assam, the insurgent group that has terrorized the northeast region of India for the two decades, met Indian Prime Minister Manmohan Singh as it begins peace talks with New Delhi—talks for which the group itself asked. What prompted ULFA to do so? In large part, because it had lost its base in Bangladesh. It’s another sign that counterterrorism operations in that Muslim-majority country are starting to pay off. That’s a far cry from the situation in Bangladesh five years ago, when Islamic terrorist groups, some linked to major political parties, were running riot. Then, the Bangla Bhai-led Jagrata Muslim Janata Bangladesh (JMJB), a breakaway faction of the Jamat ul Mujahideen Bangladesh (JMB), set off 50 simultaneous bomb blasts in each of the outlying districts in 2005, assassinated judges and threatened to impose Shariah law. Bangladesh became not only a sanctuary for northeast Indian groups like ULFA, but also a base for Pakistani terrorist organizations like the Lashkar-e-Taiba. Links between Pakistan and Bangladesh military intelligence agen-

cies were widely known. Their target was India. In 2004, Indian Foreign Minister Yashwant Sinha described relations with Bangladesh as being at the lowest ebb ever, even worse than with Pakistan. The ruling coalition of Bangladesh’s then Prime Minister Khaleda Zia had driven the country down the path of fundamentalism and distanced it from India. Despite New Delhi providing Dhaka the map coordinates of insurgent bases, Ms. Zia’s government did nothing. Her antipathies toward India here reflect the peculiar nature of Bangladeshi politics: Ms. Zia’s family is the political archrival of the family of Sheikh Hasina, whose father Sheikh Mujib ur Rahman founded the Bangladeshi state in 1971 with Indian assistance and whose Awami League party has historically been friendlier with India. It took a potential civil war and a near army coup for Bangladesh to change track. After the armybacked caretaker government returned power to newly elected civilians in 2008, the centrist Awami League led by Ms. Hasina, the current prime minister, started a necessary course correction toward moderate Islam and friendly ties with India. As a first step, Ms. Hasina’s government targeted mili-

tant groups like the JMB, JMJB and the Harkat ul Jehadi Islami Bangladesh. The Rapid Action Battalion, a new counterterror unit trained by the British, was set up in 2004; it currently numbers about 9,000. RAB has successfully broken the back of militancy, though at times it has violated human rights norms.

Thanks to Dhaka, the subcontinent is better off. Last year, a high court order restored the 1972 constitution reinstating secularism. The original constitution had been swept away in 1979 when President General Zia ur Rehman—Ms. Zia’s husband—promulgated an amendment permitting religious political parties. As part of her policy of deradicalization, Ms. Hasina is now slowly banning religious parties like the Islamic Oikya Jote and the Jamaat e Islami (JeI), which have links with terrorist groups. The fight against extremist Islam turned an important corner after the May 2010 arrest and conviction of Maulana Said ur Rehman, the chief of the JMB, a militant party that has 400 full-

time cadres across the country. The JMB is closely associated with the JeI, whose three top leaders were also arrested last July. A war crimes tribunal is set to try the known Islamist accomplices in Bangladesh—including JeI leaders—of Pakistan military’s genocide in 1971, in what was then East Pakistan. Thanks to all these efforts, there has not been a single terrorist attack in that country since 2005. Through such efforts, Ms. Hasina has cautiously restored relations with India. Besides affirming her political party’s historical ties with India, she openly acknowledges India’s role in the creation of Bangladesh in the past. And for the future, she wants to integrate with the rapidly growing Indian economy, and instead distance her country from its tag as an Islamic republic and ally of Pakistan. India has reasons to be pleased. Last month, two ULFA commanders were handed over by Bangladesh to Indian authorities. At this month’s annual state chief ministers’ conference on internal security, Home Minister P. Chidambaram, the politician charged with internal security in India, noted that violence from insurgencies in northeast India has declined dramatically. Last December, Indian army vet-

erans who fought alongside Bengali freedom fighters in the 1971 IndiaPakistan war that liberated Bangladesh were invited by Army Chief Gen. Abdul Mubeen to jointly commemorate the historic event for the second time since 2007. Ringing throughout the week-long visit was the message that Bangladesh was a country created thanks to India’s heroic sacrifice. If there’s any indication that Bangladesh is starting to do some good for India, consider how Ms. Hasina’s overtures are affecting China. Beijing, which has close ties with Bangladesh’s military, is worried that Bangladesh may fall outside its sphere of influence. China has the potential to create some trouble here, given allegations that it’s responsible for igniting the insurgencies in India’s northeast. Still, there’s no doubt Bangladesh is fast becoming an oasis of stability in an otherwise dangerous neighborhood. This is great news for deradicalizing Muslims worldwide and for the global war on terror. And it’s especially good for India’s attempts to avoid another attack on its soil.

Mr. Mehta is a retired major general of the Indian Army and was part of the Indian forces which liberated Bangladesh in 1971.

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Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

IN DEPTH

Egypt’s Muslim Brotherhood presents two different faces Younger, tolerant activists played role in protests but anti-Western old guard make up bulk of group’s leadership BY CHARLES LEVINSON Cairo

M

the group will ultimately harness any newfound political gains and whether its moremoderate wing will, in fact, have lasting clout. “It’s never entirely clear with the Brothers,” says Josh Stacher, a political science professor at Kent State University who spent years in Egypt studying the organization. “It’s a big group, with lots of different points of view. You can find the guy always screaming about Israel and then you got the other guys who don’t care about Israel because they’re too busy worrying about raising literacy rates.” Israel, which shares a long and porous border with Egypt, fears that if a moderate wing of the Brotherhood exists—and many in Israel’s leadership are skeptical that it does—it could be shoved aside by more extreme factions within the group. The Brotherhood’s conservative wing has for years put out anti-Israel comments and writings, and helped fund Hamas, the Palestinian militant group. It has also spoken out in support of attacks against U.S. soldiers in Iraq and Afghanistan. “If the Muslim Brotherhood comes to power, through elections or some other way, that would be a repeat of 1979 in Iran,” when moderate governments installed after the shah gave way to the ayatollahs, says a senior Israeli official. “It’s something we’re looking at with great caution.” The U.S. appears to be taking a wait-

Guy Martin for the Wall Street Journal

OAZ Abdel Karim, an affable 29year-old who was among a handful of young activists who plotted the recent protests here, is the newest face of the Muslim Brotherhood. His political views on women’s rights, religious freedom and political pluralism mesh with Western democratic values. He is focused on the fight for democracy and human rights in Egypt. A different face of the Brotherhood is that of Mohamed Badi, 66-year-old veterinarian from the Brotherhood’s conservative wing who has been the group’s Supreme Guide since last January. He recently pledged the Brotherhood would “continue to raise the banner of jihad” against the Jews, which he called the group’s “first and foremost enemies.” He has railed against American imperialism, and calls for the establishment of an Islamic state. After Egyptian President Hosni Mubarak stepped down on Friday amid the region’s most dramatic grassroots uprising since the Iranian Revolution in 1979, the Brotherhood became poised to assume a growing role in the country’s political life. The question for many is: Which Brotherhood? It was Mr. Karim and his younger, more tolerant cohorts who played a key role organizing the protests that began on Jan. 25 and ultimately unseated a 29-year president. But it’s the more conservative, anti-

Western old guard that still make up by far the bulk of the group’s leadership. Mr. Badi, the current leader, wrote an article in September on the group’s website in which he said of the U.S. that “a nation that does not champion moral and human values cannot lead humanity, and its wealth will not avail it once Allah has had His say.” He wrote in that same article that “resistance is the only solution against the Zio-American arrogance and tyranny, and all we need is for the Arab and Muslim peoples to stand behind it and support it... We say to our brothers the mujahideen in Gaza: be patient, persist in [your jihad], and know that Allah is with you...” On Monday, meanwhile, Mr. Karim stood shoulder to shoulder at a press conference with youth leaders from half a dozen mostly secular movements, to lay out their vision for how Egypt’s transition to democracy should proceed and to praise the Army for cooperating. Their top demand: a unity government that includes a broad swath of opposition forces. The Brotherhood, whose leaders Mr. Karim butted heads with in recent weeks, put out a similar message on Saturday calling for free and fair elections. Seeking to allay fears that it would make a power grab, the Brotherhood also said it wouldn’t run a candidate in presidential elections or seek a majority in parliament. Both Egyptians and outsiders, however, remain wary. They are unsure about how

Activist Moaz Abdel Karim, left, in Cairo. His views on women’s rights, religious freedom and political pluralism mesh with Western democratic values.

and-see approach, with officials saying in recent days it should be given a chance. President Barack Obama, in an interview with Fox News, acknowledged the group’s anti-American strains, but said it didn’t enjoy majority support in Egypt and should be included in the political process. “It’s important for us not to say that our only two options are either the Muslim Brotherhood or a suppressed Egyptian people,” he said. The outlawed Islamist opposition group is plagued by rifts between young and old, reformist and hard-liner. There are big city deal-making politicians, and conservative rural preachers who eschew politics in favor of proselytizing Islam. Egypt’s government has long highlighted the group’s hard-line wing as a threat to the country. Yet its selective crackdowns have historically empowered the very hardliners it has sought to undermine, analysts and Brotherhood members say. The conservative leadership’s autocratic leadership style within the movement, its lack of tolerance for dissenting opinions and its preference to conduct business behind closed doors have all contributed to deep skepticism among outsiders about the Brotherhood leadership’s stated commitment to democracy. In recent years, meanwhile, the group’s pragmatic wing has forged a historic alliance with secular opposition activists. Their role in the unseating of Mr. Mubarak appears to have given them a boost in a struggle for influence with the Brotherhood’s fiery old guard. “The Muslim Brotherhood as a whole doesn’t deserve credit for this revolution, but certain factions within the movement absolutely do, generally those that have more modern views,” says Essam Sultan, a former member of the group who left in the 1990s to form the moderate Islamist Wasat, or Centrist, Party. “That wing should get a massive bounce out of this.” Whether that bounce will be enough to propel the more-moderate Brothers to a permanent position of influence—or what their legislative agenda would actually be—is one of the key unknowns in Egypt’s political evolution. In many ways, this faction resembles conservative right-of-center politicians elsewhere in the Arab world. They espouse a view of Islam as a part of Egyptian heritage and argue that democracy and pluralism are central Islamic values. They are pious and socially conservative, and reject the strict secularism that is a feature of most Western concepts of liberal democracy. On Wednesday, when it was still unclear whether Mr. Mubarak would step down, Essam el-Eryan, one of the only reformists currently on the group’s 12-member ruling Guidance Council, said in a statement that the group didn’t seek the establishment of an Islamic state; believed in full equality for women and Christians; and wouldn’t attempt to abrogate the Camp David peace treaty with Israel—all tenets espoused by Brotherhood leaders over the decades. Mr. el-Eryan said those Brothers who had suggested otherwise in their writings and public comments in recent days and years had been misunderstood or weren’t speaking for the organization. Founded in the Suez Canal town of Ismailiya in 1928 by a 22-year-old school teacher, the organization used violence to battle the British occupation in the 1940s.

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

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IN DEPTH

In Bahrain, Shiites defect amid clashes BY JOE PARKINSON

Associated Press

Mohamed Badi, from the Brotherhood’s conservative wing, pledged the group would ‘continue to raise the banner of jihad’ against the Jews. The group allied with some young officers to overthrow the king in 1952 and bring Gamal Abdel Nasser to power, only to become implicated in an assassination attempt on Nasser two years later. He responded with a fierce crackdown, sending the group’s leadership to prison for years, and its membership ranks into exile. The Muslim Brotherhood abandoned violence in the years that followed, formally renouncing it as a domestic strategy in 1972. But some of its offspring have taken a bloodier path. Some former members established the group responsible for the assassination of Egyptian President Anwar Al-Sadat in 1981, and others have allied with Al Qaeda. In the late 1970s and early 1980s, an older generation of leftist and Islamist student activists battled each other violently on college campuses. Egypt’s opposition grew increasingly ineffective, partially as a result of those rifts. “We saw three successive generations of Brotherhood leaders fail to bring change, and we learned from their mistakes,” says Mr. Karim, one of the leaders of the group’s youth wing. Brotherhood and secular leaders say the seeds of the cooperation that drove this year’s protests were planted in the early 2000s when Israel’s crackdown on the second Palestinian uprising and the 2003 U.S. invasion of Iraq brought secularists and Islamists alike into the streets to protest a common cause. Then, in 2005, the Brotherhood struck a key victory in the parliamentary elections, winning an all-time high of 88 seats. Though officially banned, the organization is tolerated and allowed to put up candidates as independents. Many of the Brotherhood lawmakers were pragmatists compared to the hard-line members of the group who preferred to stay out of politics. They were more open to working with other groups to forge compromises, and won plaudits from secular opposition leaders by focusing their legislative efforts on fighting an extension of the country’s emergency law. They also stood up for the independence of the judiciary and pushed for press freedoms, and didn’t work to ban books or impose Islamic dress on women—moves many critics had feared. “In the past, Muslim Brothers in parliament sometimes made noise about racy books or the Ms. Egypt beauty pageant, and it made a lot of us uncomfortable,” says Osama Ghazali Harb, head of the National Democratic Front, a secular opposition

party. “They didn’t do this in the last five years.” The regime responded to the Brothers’ newfound parliamentary prowess with one of the most brutal crackdowns in the group’s history. Instead of coming down on the organization’s hard-line leaders, it focused on the movement’s moderates. “The government wants them to be secretive, hard-line, because it makes them fulfill the role of the bogey man that they’re propped up to be,” says Kent State’s Mr. Stacher. “You don’t want soft and squishy huggable Islamists, and you don’t want sympathetic characters. You want scary people who go on CNN and rail against Israel.” Eighteen Brotherhood legislative staffers drafting education and health-care reform bills were among hundreds arrested. So, too, were the leading pragmatists on the movement’s 12-man leadership bureau. The power vacuum was quickly filled by conservatives, who in 2007 put out a platform paper walking back many of the group’s more-moderate views. It stated, for example, that neither women nor Christians were qualified to run for president. Casting further doubts on the organization’s commitment to the separation of church and state, the paper called for a religious council to sign off on laws. Rifts between conservatives and reformers in the group began to flare into the open. The group’s moderates argued that the paper was only a draft and never officially adopted. In the 2008 elections to the Brotherhood’s Guidance Council, hard-liners nearly swept the field, according to people familiar with the group. Only one seat on the leadership council is held by a consistent reformist, say these people, as well as one of the two alternate members who would step in should someone be arrested or die. During this same period, Mr. Karim, from the Brotherhood’s youth wing, says his relationships with activists in other groups were being cemented through online networks. “The new media allowed me to connect with the other” activists in Egypt, he says. “And I realized that there are things we agree on, like human-rights issues and political issues.” Past partnerships between the Brotherhood and secular parties had been topdown short-lived agreements born of political necessity. This latest alliance formed more organically, say several young activists who are working with the Brotherhood. “We just got to know, trust and like each

other, even—believe it or not—the Brothers,” says Basim Kamel, a 41-year-old leader in Mohamed ElBaradei’s secular movement. As conservatives were gaining influence within the Muslim Brotherhood’s leadership ranks, Mr. Karim and his fellow youth cadres were growing impatient. He says they began arguing with their superiors, saying the group was losing credibility in the street because they weren’t out protesting for democracy like the secular activists were. In November 2008, the Brotherhood’s then-leader Mahdy Akef called for “establishing a coalition among all political powers and civil society” to challenge the “tyranny that Egypt is currently witnessing.” Mr. Akef couldn’t be reached for comment, but those familiar with the group’s inner workings say the shift came as the leadership realized they risked losing their youth cadres, particularly after a series of high-profile defections by young Brotherhood activists. When Mr. ElBaradei returned to Egypt in February 2010 to lead an alliance of opposition groups, many of them youth-driven, the Muslim Brotherhood backed him, formalizing a partnership that had already gelled among the rank and file. The alliance was uneasy at times. When other opposition groups voted to boycott November’s parliamentary elections, for example, the Brotherhood broke ranks and ran. After the uprising in Tunisia in January, Brotherhood youth, including Mr. Karim, met with the leaders of other youth movements and decided to plan a similar uprising in Egypt. A group of about 12 youth leaders, including Mr. Karim, met secretly over the course of two weeks to figure out how to plot a demonstration that would outfox security forces. The Brotherhood’s senior leadership refused to endorse their efforts at first. They ultimately agreed to allow members to participate as individuals—and to forgo holding up religious slogans that the Brotherhood might have used in the past, such as “Islam is the solution,” or waving Korans. —Summer Said in Cairo and Richard Boudreaux in Jerusalem contributed to this article.

WSJ.com ONLINE TODAY: Watch a video report with Charles Levinson on the Muslim Brotherhood at WSJ.com/World

MANAMA, Bahrain—A funeral for a man killed during demonstrations swelled into a massive protest Tuesday, drawing in thousands for a second day of clashes that ended with another death and the defection of the country’s main opposition bloc from parliament. Meanwhile, in Yemen, security forces dispersed hundreds of protesters for a fifth consecutive day on Tuesday, after pro- and antigovernment demonstrators clashed in the capital San’a. The clashes in Bahrain represent a significant escalation of the Arab unrest that has fanned out from Tunisia, culminating in Friday’s resignation of Egypt’s Hosni Mubarak. In Yemen, the protests have swelled into daily, boisterous and violent clashes pitting antiregime protesters—many of them students and young activists—against pro-government supporters. Bahrain’s King Hamad bin Isa Al Khalifa, in a TV address, offered condolences for the deaths, pledging an investigation into the killings, and promised to push ahead with reforms, which include loosening state controls on the media and Internet. As the Bahrain violence continued, parliamentarians from the country’s main Shiite opposition bloc suspended their participation in the body in solidarity with the protesters. The bloc, called Al-Wafaq, controls 18 of Bahrain’s 40 parliamentary seats. The move raises a new hurdle for Bahrain’s Sunni ruling family, robbing it of a legitimate, political counterparty with which to negotiate a settlement to the unrest. Early Tuesday, thousands of demonstrators gathered at the Salmaniya Medical Complex, where injured protesters from Monday’s clashes had been taken. They gathered to mourn a young Shiite man that the hospital said had been killed Monday by pellet wounds. Eyewitnesses said security forces had shot the man at close range with pellets designed to disperse crowds. As protesters on Tuesday escorted the dead man’s body from the hospital for burial, security forces intervened, attempting to disperse crowds, eyewitnesses said. Police fired tear gas and more pellets. Tear gas filled part of the hospital’s accident and emergency ward, eyewitnesses said. In the melee, a second man was killed, the interior ministry confirmed Tuesday. Bahraini authorities reiterated late Monday that security forces were only using proportionate force. In Yemen, human-rights activists have accused the progovernment supporters of using violence to intimidate protesters. In clashes on Monday, progovernment supporters threw rocks at demonstrators, according to eyewitnesses. So far, security forces have kept control, each day breaking up clashes and demonstrations after just a few hours. But humanrights groups and opposition politicians have accused government forces of using excessive force. At one point Tuesday afternoon, police tried to disperse demonstrators using tear gas, batons and stun guns, according to the AP. Eyewitnesses saw uniformed security forces beating protesters. Government officials weren’t immediately available to comment on the protests Tuesday or the conduct of security forces. The recent protests in Yemen have been smaller than those that flared on two consecutive Thursdays this month. But their violent nature contrasts sharply with those earlier protests, which were called for and closely choreographed by Yemen’s relatively strong and united opposition parties. In the last two days, judges joined some of the protests, according to eyewitnesses. —Chip Cummins and Hakim Almasmari contributed to this article.

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THE WALL STREET JOURNAL.

FROM PAGE ONE

Continued from first page man. In addition to Messrs. Niederauer and Francioni, 15 directors will join the 17 member, one-tier board, with the majority coming from the German company. An executive committee will be led by Mr. Niederauer with four members representing each exchange. From Deutsche Börse, Andreas Preuss will become deputy CEO and president as well as head of derivatives. Gregor Pottmeyer will become chief financial officer, Jeffrey Tessler will lead settlement and custody operations, Frank Gerstenschlaeger will lead the company’s market data and analytics operations. Key board members from NYSE Euronext will include Dominique Cerutti as head of technology services and information technology, Lawrence Leibowitz, who will head cash trading and listings and John K. Halvey, who will become general counsel. Deutsche Börse and NYSE are expected to postpone announcements on a new name, technology implementation and potential job cuts as the political and regulatory ramifications shake out.

Switzerland set to help nations hunt tax cheats Continued from first page money, but don’t have the account holder’s name. The Swiss also hindered tax investigations in the case of misspelled names or inexact addresses. In some cases, they demanded the name of the so-called beneficial owner, or the individual behind a trust or an offshore entity that were the titular account holders. Now, the Swiss will help if a foreign country provides reasonable amounts of information to track down an account, although it will draw the line at so-called fishing expeditions, where a foreign government provides only scarce details in search of a tax cheat. “We can’t be so formalistic” in the information we require,” said Urs Ursprung, director of the Swiss Federal Tax Administration in an interview. “But the requesting state has to give some background as to why they suspect a person.” Jeffrey Owens, director of the Centre for Tax Policy and Administration at the OECD, said the change will likely affect a small number of cases, but will act as a deterrent to tax evaders seeking to open Swiss bank accounts. “This sends a strong signal that Switzerland is no longer in the business of facilitating offshore tax evasion,” he said in an interview. The news comes as Switzerland continues to grapple with ways to satisfy foreign governments seeking to crack down on tax evaders in order to fill depleted public coffers. Last fall, Switzerland struck a landmark tax agreement in principle with the U.K. and Germany whereby the Swiss would collect a withholding tax on assets stashed by British and German investors in Swiss accounts, and send the money to London and Berlin. In return, the identity of the accounts would remain secret. Bern is still finalizing the details of these treaties.

European Pressphoto Agency

NYSE and Deutsche Börse finalize deal

Traders on the floor of the Big Board. Automated trading has hurt the exchange. Sen. Charles Schumer (D., N.Y.) expressed concerns over the weekend that a merger could result in lost influence for the NYSE, particularly if a new name for the merged company emphasized Deutsche Börse’s majority ownership. Labor representatives from

Deutsche Börse have said that a U.S.-based CEO could result in lost jobs and resources for Germanybased staff. Mr. Niederauer, meanwhile, acknowledged the national pride involved in the name and said the new group expects to find a new name in

the next two months. “No decision has been made yet. It’s an emotional decision for everyone, let’s be honest about it,” he said at a news conference. He did squelch any rumor that the combined company would be “the Big Börse.” “That will not be the name,” he said, laughing. In addition to regulatory approval, sealing the deal will require that a majority of NYSE Euronext shareholders controlling outstanding shares provide approval. Additionally, 75% of Deutsche Börse shareholders will have to approve the deal. Together, the two companies will earn 2010 net revenue of €4.1 billion ($5.5 billion) and earnings before interest, taxes, depreciation and amortization, or Ebitda, of €2.1 billion. In addition to the Big Board, NYSE Euronext operates the French, Dutch, Belgian and Portuguese stock markets as well as the London-focused NYSE Liffe derivatives exchange. Deutsche Börse operates the main German stock exchange and owns half of Eurex, one of the world’s largest derivatives exchanges.

The deal is expected to result in €300 million in annual revenue synergies, achieved after three years. About 25% of synergies will be achieved after one year, with 50% acquired after two years. The deal will immediately lift adjusted earnings of both companies. About 25% of estimated cost savings will be reached after one year, rising to 50% in the year after and achieving full synergies three years after merging, the companies said. The companies expect to complete the merger by the end of 2011. The merger was seen as driven by the potential to develop a globally leading derivatives franchise, combining heavily traded fixed-income and equity-index futures across the exchanges’ European markets. Smaller and more nimble platforms geared toward automated share-trading have cut into the profitability of both NYSE Euronext’s and Deutsche Börse’s stock markets. NYSE Euronext last week said its fourth-quarter profit declined by one-fifth from a year earlier. The results were hurt by a dollar that strengthened against the euro and by weak trading volume in both the U.S. and Europe.

Tiny victory for China on prices Continued from first page items in November. The latest bank-lending figure was below the median forecast of 1.2 trillion yuan from a survey of a dozen economists. A surge is typical at the start of the year as lending quotas are reset. “The lower-than-expected January loan data is good news, which shows that policy tightening has been working well. But there is still a long way to go to reach the target of economic controls,” according to HSBC economist Qu Hongbin. China has raised interest rates three times since October, and Mr. Qu said he expects one more increase in the second quarter. He also expects three further increases in the reserve requirement ratio—the share of deposits lenders must keep with the central bank, rather than issue as loans—in the coming three months.

The central bank’s ability to police the growth of credit has been substantially diminished over the past few years as the economy has grown more complex. Louis Kuijs, a Beijing-based economist at the World Bank, echoed that view, saying the data indicates that lending activity is still “fairly strong” and that policy measures to curb lending are likely to continue for the rest of the year. That will slow China’s economic growth a bit, but is necessary to reduce risks of overheating, he said. The weeklong Chinese Lunar New Year holiday, which fell at the start of February this year but came later in 2010, also distorted the January loan data to some extent, economists said. Preparations for the holiday—China’s biggest—start weeks in

advance. The holiday likely also affected January’s inflation number. In addition, China’s National Bureau of Statistics said that it had reworked the way it calculates the CPI, in part by slightly reducing the weighting for food and increasing the weighting for housing items. The bureau said that the inflation rate in January would have been slightly lower by the old measure. A Wall Street Journal calculation using an estimate of the old weighting shows an inflation reading of 5.1%, higher than the government reported. But estimates of the previous weights vary; one by Bank of America-Merrill Lynch economist Lu Ting was consistent with the figures reported by the government. Yao Jingyuan, chief economist of the statistics bureau, said on state radio that the CPI rise in January was due to robust demand ahead of the Lunar New Year and a sharp rise in the global prices of agricultural products and food. The rate of increase will remain high in the first quarter, but slow in the second half and especially in the fourth quarter, he said. China has a number of policy tools to combat inflation. The government relies far less than most nations on interest-rate tightening, and much more on setting an overall target for credit growth. the authorities try to hit that target by, among other measures, raising bank reserve requirements and offering so-called window guidance—hardto-resist advice—to individual banks that it considers to be lending too rapidly. But the central bank’s ability to police the growth of credit has been substantially diminished over the past few years as the economy has grown more complex. In 2009, bank lending doubled to about 9.6 trillion yuan as China used credit growth as the main lever to stimulate the economy. For 2010, trying to tamp down inflation, the central bank tar-

Credit surge New yuan loans in China, in trillions of yuan 2.0 1.5 1.0 0.5 0.0

2009

'10

'11

Source: People's Bank of China

geted a reduced lending level of 7.5 trillion yuan. Last month it reported that the actual amount lent in 2010 was about eight trillion yuan, exceeding its target but down from 2009. But in an influential report in December, Fitch Ratings said that actual lending hadn’t declined at all. Instead, banks had devised ways of hiding lending from regulators, including using off-balance-sheet instruments. Fitch predicted that similar problems would occur this year “until the problems of leakage is effectively contained” or interest rates rise substantially. Neither has happened. This year, the central bank hasn’t formally adopted a target, which analysts say is because of bureaucratic fights between the central bank, the People’s Bank of China, and other agencies. But many analysts believe the central bank is shooting for lending of between 7 trillion yuan and 7.5 trillion yuan. It’s hard to know from the early data whether the central bank is making much progress, because lenders rush to make loans before the bank regulators try to clamp down. China’s broadest measure of

money supply, M2, was up 17.2% at the end of January from a year earlier, the central bank said, below economists’ expectations of 18.8%. M2 was up 19.7% at the end of December. “There is still going to be up upward pressure on prices in the months ahead, especially with drought conditions and commodity prices rising,” said UBS economist Wang Tao. Rising inflation has become a problem across fast-growing Asia, which has attracted a huge increase in investment from overseas and which relied on big stimulus measures to fight the effects of the global financial crisis between 2008 and 2010. Anoop Singh, the International Monetary Fund’s Asia chief, said there are signs inflation is becoming a structural issue, reflecting underlying demand, not just a temporary rise in food or commodity prices. Mr. Singh urged Asian nations to fight against price increases by boosting the value of their currencies, which would reduce the cost of imports. China worries, though, that letting its currency appreciate more rapidly would harm its thriving export industry. The value of the yuan has risen just 3.5% since China said last June that it would let the currency float somewhat. Finance ministers and central bankers of the Group of 20 nations, meeting in Paris on Friday and Saturday, are bound to press China on its currency policy. In China, food prices typically rise prior to the Lunar New Year holiday, which ended on Feb. 8, but January’s price increase was intensified by adverse weather, including drought conditions. The rise in nonfood prices also accelerated in January, to 2.6% from 2.1% a year earlier, indicating that inflation pressures are spreading through the Chinese economy. —Liu Li contributed to this article.

As of 11 a.m. ET

Euro 1.3516 À 0.41%

Yen/US$ ¥83.81 À 0.52%

Yen/A$ ¥83.79 À 0.32%

Oil 85.28 À 0.55%

Gold 1373.40 À 0.64%

Barclays warns on returns as profit takes off

10-year Treasury À 1/32 yield 3.610%

3-month Libor 0.31350

Trouble with beer may dent Foster’s

BUSINESS& FINANCE. MARKETS 20

Wednesday, February 16, 2011

BY IAN SHERR Apple Inc. dispatched its chief operating officer to a Chinese manufacturing partner last year to assess and advise the company after a rash of highly publicized suicides raised concerns about worker conditions at companies affiliated with the consumer-electronics giant. In its annual survey of suppliers, Apple said Tim Cook visited a Foxconn International Holdings Ltd. factory in Shenzhen, China, last June after nearly a dozen workers killed themselves, some by jumping from buildings. The suicides came as Apple launched its iPad tablet computer and raced to meet demand for the device. The Cupertino, Calif., company said Mr. Cook and his team made recommendations, including better training of counselors, which were adopted by Foxconn, according to the report made public Monday. Mr. Cook and his team interviewed more than 1,000 workers and evaluated Foxconn’s reaction to the events, which included establishing a 24hour care center. Apple’s annual report has grown in importance following increasing scrutiny from labor and environmental groups that challenge Apple’s business practices. Like many modern electronics hardware makers, Apple depends heavily on manufacturing partners in Asia to build its products. Apple has now audited 288 supplier facilities since 2007 and it is expanding its initiatives to make sure its partners don’t employ underage workers, that they appropriately train employees and that they pay fair wages, according to the report. The company said the audit results led the company to terminate its relationship with three facilities because management didn’t enact changes it expected. Apple said it discovered 91 underage workers in the facilities it visited and is working with suppliers to better detect falsified identification papers and improve management oversight. In one case, Apple said it terminated business with a facility because management had chosen to overlook the issue. The company is taking actions to ensure that minerals such as tantalum tin, tungsten and gold aren’t purchased from smelters that get their products from regions known for armed conflict or humanrights abuses, according to the report.
Apple sets up an app battle with a new subscription service................... 19

asia.WSJ.com

THE WALL STREET JOURNAL.

SGX, ASX revise board Exchanges propose more Australian representation in a bid to address objections to merger BY SAM HOLMES AND CYNTHIA KOONS

SINGAPORE—Singapore Exchange Ltd. and Australia’s ASX Ltd. announced a revised board structure for the proposed combination of the two exchanges, in a bid to address Australian governance and national-interest concerns surrounding the $8.3 billion merger plan. In a joint statement, the companies said the board of a merged entity would now have an equal number of Australian and Singaporean citizens. The proposed number of board members has been reduced to 13 from 15 and would comprise five Australian citizen and five Singapore citizen members, with three international members from neither country. The revised structure brings the number of Australian board members up from four. The companies also said revenue generated from listings, transactions and fees on the Australian exchange would remain in Australia. SGX Chief Executive Magnus Bocker said the two companies have held 300 meetings with stakeholders over the past four months. “We’ve had a lot of feedback and comments to what we have proposed and we have spent a lot of time during our presentations listening and trying to understand if there are concerns and comments

Agence France-Presse/Getty Images

Apple audit scrutinizes Foxconn’s protocols

HEARD ON THE STREET 28

SGX chief Magnus Bocker will lead the company, but Singaporeans and Australians will have equal board representation. . that we need to take into what we have originally proposed,” Mr. Bocker said in a conference call from Sydney. “What we have announced today is very much to seek to address those concerns.” Mr. Bocker, a Swedish citizen, would take one of the three international-director positions and become the combined entity’s managing director and CEO designate. Chew Choon Seng, current chairman of SGX, would be chairman of the combined company, and David Gonski, current chairman of ASX, would

be the combined company’s deputy chairman and chairman of the ASXSGX Integration Committee. The proposed changes to the original structure of the deal come as several other major exchanges are moving ahead with plans to merge. Deutsche Börse AG and NYSE Euronext announced Tuesday an agreement for a tie-up that would create the world’s largest financial exchange, while London Stock Exchange Group PLC and Toronto’s TMX Group Inc. have reached a deal to merge their opera-

tions. “The recent merger announcements from LSE/TMX and Deutsche Börse/NYSE Euronext underscore the dynamic forces that are driving developments across the world’s major licensed exchange market operators,” ASX CEO Rob Elstone said in the joint statement Tuesday. In October last year, SGX announced an $8.3 billion offer for all the shares of ASX, the operator of the Australian stock exchange, a deal that would create the world’s Please turn to page 19

Chinese pay price of trade peace, in cash BY JAMES R. HAGERTY Some U.S. furniture makers and their lawyers have found a reliable way to cash in on trade policies involving Chinese imports found by the U.S. to have been sold at unfairly low prices. Each year since 2006, they have asked the Commerce Department to review the U.S. duties paid by Chinese manufacturers on imports of wooden bedroom furniture. Many Chinese firms, fearing a steep rise in duties, agreed within months each time to pay cash to their U.S. competitors in return for being removed from the review list. “Everybody in the industry in the U.S. and China understands that these payments are clever shakedowns,” said William Silverman, a lawyer representing U.S. furniture retailers, big importers of Chinese products, at an October hearing of the U.S. International Trade Commission. Representatives of the furniture makers, including La-Z-Boy Inc. and Vaughan-Bassett Furniture Co., say the payments are legal. Late last month, those two companies and

Moving furniture Despite duties, U.S. manufacturers lose market share to imports Total sales in U.S.

Market share

Production workers

Operating income/loss

$5 billion

100%

50,000

$150 million

4

80

3

40,000

100

60

30,000

50

2

40

20,000

0

1

20

10,000

–50

0

–100

Importers' share

U.S. producers' share 0

0 2001

’03

’05

’07

’09

2001

’03

’05

’07

’09

2001 ’03 ’05 ’07 ’09

2001

’03 ’05 ’07

’09

Source: U.S. International Trade Commission

about 15 other U.S. furniture makers sought the latest review, listing 110 Chinese firms. About $13 million was paid to a group of 20 U.S. furniture makers from 2006 through 2009, according to a November ITC report. The U.S. firms told the ITC that a much

larger, but unspecified, amount of money went to pay the U.S. firms’ lawyers. The ITC report didn’t include 2010 payments. Two of six ITC commissioners expressed misgivings about the payments. Commissioner Charlotte Lane said at the October hearing that she

was “very, very troubled” by the settlements, adding: “I cannot figure out for the life of me how they are actually legal.” In a note included in a December ITC report, Commissioner Daniel Pearson said the settlements create Please turn to page 17

16

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

BUSINESS
FINANCE

GM looks to expand Chinese exports Auto maker will build in China new or redesigned models over two years, calls joint ventures key to global success BY NORIHIKO SHIROUZU

On wheels Retail sales of GM vehicles in China, in millions of units 2.5 2.0 1.5 1.0 0.5 0

2005 ’06

’07

’08

’09

’10

Source: J.D. Power

The Chevrolet Volt, a plug-in hybrid GM plans to launch in China this year, on display in Guangzhou

Imaginechina/Zuma Press

BEIJING—General Motors Co. executives, on a visit to Beijing by new Chairman and Chief Executive Dan Akerson, said the U.S. auto maker is seeking opportunities to boost exports of its cars made in China despite the impact of a rising yuan, and that it plans to sustain its growth within China’s market by launching more than 20 new or redesigned cars here over the next two years. “China is central to GM’s global strategy,” Mr. Akerson told a news conference in Beijing on Tuesday. The GM chief said the company has 11 joint ventures in China with two of its primary local partners, SAIC Motor Corp. and FAW Group Corp. “We regard our 11 joint ventures as 11 keys to success, not just in China but globally.” Tim Lee, president of GM’s international operations, told the same news conference that GM “will look at every export potential” out of China, such as shipping vehicles to South America or Southeast Asia, even though an appreciating yuan makes the endeavor “marginally more difficult.” A stronger yuan makes it more expensive for overseas customers to buy goods made in China and cuts into the income earned from overseas markets when converted into the local currency.

To compensate for the effect of a rising yuan, Kevin Wale, head of GM’s China operations, said the company will focus on slashing costs in China, such as those for design and manufacturing. By driving out cost, GM aims to be “competitive in both” selling within China and exporting out of the country cars it produces here, Mr. Wale said. Mr. Lee said GM aims to exploit an export opportunity if the company and its joint-venture partners could determine a given China-produced car could become a “[market] segment-leading product” in a sales

region outside China. He noted the GM-SAIC joint venture last year began exporting Chevy Sail compacts designed and made in China to Chile and Peru. GM exports Chinese-made Wuling microvans and uses its dealer networks to sell those vans in markets such as Columbia, Ecuador, Peru, and Egypt, according to the company. In total, GM exported 5,670 GM-branded cars and 7,048 Wuling vans in 2010, a spokeswoman said. GM last year also established a joint venture to produce and sell nofrills Wuling-designed microvans

initially through GM’s dealer network in India, and eventually expanding to Southeast Asia and other emerging markets. As well as gradually beefing up GM’s Chinese export capabilities, Mr. Akerson said, it will continue to “invest heavily to ensure our longterm success” in China, the world’s biggest auto market. One area that will receive further investment is product. Mr. Akerson described GM’s plan to launch more than 20 new or redesigned cars in China over the next two years, while making more advanced technology

available in the Chinese market, as part of an effort to ensure Chinese demand for its cars grows steadily. GM says it and its local partners sold 2.4 million vehicles in China last year, up 29% from 2009. The company usually doesn’t issue a formal sales projection each year, but GM spokesman Johan Willems said on the sidelines of Tuesday’s news conference that GM expects its China sales to expand between 10% and 15% in 2011, in line with most industry forecasts for China’s overall vehicle market. “China is clearly a crown jewel in the GM universe,” Mr. Akerson said. “China is a unique market sitting in what I think is the highest growth area in the world for the next 10, 20, 30 years.” Mr. Willems, meanwhile, reiterated that GM and its Chinese partners plan to build a plant for lowcost cars in southern China’s Guangxi province. The new plant, in the city of Liuzhou, will have capacity to produce 400,000 cars a year and will start production in 2012. The new plant will produce cars mainly for Baojun, a new, low-cost car brand from SAIC-GM-Wuling Automobile Co., GM’s mini-commercial-vehicle joint venture in Liuzhou with SAIC and Wuling Automobile Co. As of the end of 2010, GM and its partners in China had capacity to produce 2.8 million vehicles a year.

Ecuador judge hits Chevron with record judgment An Ecuadorean judge on Monday ordered Chevron Corp. to pay $8.6 billion to clean up oil pollution in the country’s rain forest in what is believed to be the largest-ever judgment in an environmental case. By Ben Casselman, Isabel Ordonez And Angel Gonzalez And if the U.S. oil giant doesn’t publicly apologize in the next 15 days, the judge ordered the company to pay twice that amount. The ruling brings to an end one chapter of a legal drama that has played out in courtrooms in Ecuador and the U.S. for nearly two decades. The case has been bitterly fought by both sides, with each accusing the other of improprieties. In recent

months, Chevron uncovered a secret memo revealing the plaintiffs’ strategy for enforcing any favorable Ecuadorian ruling around the world. That means that Chevron could be forced to defend itself in any of the dozens of countries where it does business. The oil company, which denies responsibility for the pollution, has no assets in Ecuador and has vowed to fight any efforts to seize its property overseas. Other multinational corporations are closely watching the case. The plaintiffs, residents of Ecuador’s oil-rich Amazon rain forest, are seeking to hold Chevron accountable for environmental damage they say was caused by Texaco Inc., which operated in the country from 1965 to 1992. Chevron inherited the case when it acquired Texaco in 2001. Chevron has said for more than a

year that it expected to lose the case in Ecuador, where it says collusion between the government and the plaintiffs have made a fair ruling impossible. On Monday, the company vowed to appeal and said it won’t pay the fine or apologize as the judge demanded. “We believe it to be illegitimate and unenforceable,” Chevron spokesman Kent Robertson said. “It’s the product of fraud, and it’s contrary to the legitimate scientific evidence.” The plaintiffs deny Chevron’s fraud allegations and say scientific evidence backs up their claims of environmental damage. The ruling was a rare piece of good news for the plaintiffs after months of setbacks in U.S. courts. But the victory could be shortlived. Last week a panel of

international arbitrators in The Hague granted Chevron a preliminary injunction that could block the plaintiffs’ efforts to enforce the judgment. Steven Donziger, a New York lawyer who led the case for years until Chevron’s continued attacks caused him to step down as lead plaintiffs’ attorney, declined to comment. Instead, the plaintiffs released a statement from their Ecuadorbased attorney Pablo Fajardo. “We believe today’s judgment affirms what the plaintiffs have contended for the past 18 years about Chevron’s intentional and unlawful contamination of Ecuador’s rain forest,” he said. Under Ecuadorian law, Chevron doesn’t have to pay any judgment until after an initial appeal.

Meanwhile, Chevron is using the U.S. courts, in hopes of never paying anything at all. The company sued the plaintiffs and their lawyers in the U.S., where a federal judge recently issued a temporary stay blocking the plaintiffs’ American lawyers from seeking to enforce any judgment. Chevron has also sued the country of Ecuador under the terms of a trade agreement between it and the U.S. Last week, a panel of arbitrators in The Hague ordered Ecuador to take “all measures at its disposal” to block enforcement of any ruling, both in Ecuador and overseas, until the panel rules on the case. Ecuador has asked a U.S. court to block Chevron’s trade suit and has challenged the panel’s jurisdiction.

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. Aluminum Corp. of China...........................23 Amazon.com.............18,19 AOL................................18 Apollo Global Management..............21

Apple..........15,17,18,19,23 Ascendo...........................8 ASX.............................1,15 Bain Capital...................21 Bank of America...........21 Bank of East Asia.........20 Barclays...............20,23,28 Bessemer Venture Partners......................18 BJ’s Wholesale..............21 C12 Capital Management..............20 CB Richard Ellis Group.20 Chevron.....................16,23 China Overseas Land & Investment.................23 Cnooc.............................23 Criteria CaixaCorp.........20 Del Monte Foods...........21 Deutsche Börse.....1,15,23 eBay...............................18

Exxon Mobil...................23 Facebook...................18,19 FAW Group Corp...........16 FedEx.............................23 Foster’s Group..........17,28 Foxconn International Holdings ..................... 15 General Atlantic............21 General Motors.............16 Google..................17,18,19 Groupon.........................18 GS Yuasa.......................23 HTC................................19 Huawei Technologies......5 Hutchison Whampoa....18 ING Groep NV ............... 20 Jiangxi Copper...............23 Kirin Holdings ............... 28 KKR................................21 Layar................................8 La-Z-Boy........................15

Leonard Green & Partners 21 LG Electronics...............17 Lightyear Capital .......... 20 London Stock Exchange Group..........................15 McDonald’s......................1 Microsoft.............17,18,19 Morgan Stanley ............ 21 Netflix............................19 News Corp................18,19 Nokia..............................19 Nvidia.............................17 NYSE Euronext ..... 1,15,23 Omni Group.....................8 PetroChina.....................23 Presselite ........................ 8 Protium Finance............20 Providence Equity Partners......................21 Quest Visual....................8

SABMiller......................28 SAIC Motor ................... 16 Samsung Electronics....17 Shimao Property Holdings ..................... 23 Singapore Exchange...1,15 Softbank........................23 SRA International.........21 Suzuki Motor .................. 3 3Leaf Systems................5 Time Warner.................19 TMX Group....................15 Twitter...........................18 Vaughan-Bassett Furniture Co...............15 Westpac Banking..........20 Wuling Automobile Co . 16 Yahoo.............................18 Yamaha Motor .............. 23 Yelp................................18 Zynga Game Network...18

People This index lists the names of businesspeople and government regulators who receive significant mention in Today’s Journal. Aberg, Ari ..................... 19 Abe, Sherman.................4 Akerson, Daniel............16 Bartz, Carol...................18 Bocker, Magnus............15 Cerutti, Dominique.......14 Cheng, Alvin ................. 23 Chew Choon Seng ........ 15 Chou, Peter...................19 Cook, Timothy...............15 Cowan, David................18 Diamond, Robert E. Jr.

.............................. 20,28 Elop, Stephen ............... 19 Elstone, Rob ................. 15 Francioni, Reto..............14 Gerstenschlaeger, Frank ................................... 14 Gonski, David................15 Halvey, John K..............14 Ito, Takatoshi..................4 Karnstedt, David .......... 18 Kauppi, Heikki...............19 Kelly, Gail......................20 Kerns, Mike...................18 Kopponen, Mona...........19 Lee, Tim........................16 Leibowitz, Lawrence .... 14 Levick, Jeff ................... 18 MacDonald, Jack...........21 Martin, Jarrod...............20 McKenzie, Robert...........4 Miura, Tetsuya..............23

Niederauer, Duncan........1 Owens, Jeffrey.............14 Park Jong-seok.............17 Patel, Milan .................... 1 Plummer, Bill..................5 Pottmeyer, Gregor........14 Preuss, Andreas ........... 14 Profusek, Robert .......... 21 Quinn, Bill.....................23 Rinne, Antti..................19 Rose, Dan......................18 Sandberg, Sheryl..........18 Schmidt, Eric ................ 18 Suzuki, Osamu................3 Tessler, Jeffrey.............14 Thompson, Scott..........18 Ursprung, Urs ............... 14 Varley, John..................20 Wale, Kevin...................16 Weidema, Jan Willem..20 Willems, Johan.............16

Wednesday, February 16, 2011

17

THE WALL STREET JOURNAL.

BUSINESS
FINANCE

LG Electronics (2)

Paying the price of trade peace, in cash

Park Jong-seok, president and chief executive of LG Electronics’ mobile-communications division. At left, LG Optimus Pad.

LG sees return to profit South Korean handset maker pins forecast on smartphones, tablet BY JUNG-AH LEE SEOUL—LG Electronics Inc. aims to make its handset business profitable as early as the first half of this year as it rolls out smartphones with new features and introduces a new tablet globally. Park Jong-seok, president and chief executive of LG’s mobile-communications division, said he expects demand for high-margin smartphones and tablet devices to increase globally this year and that the South Korean company will be a main beneficiary. LG, the world’s third-largest handset maker by shipments, has been hurt by failing to address the fast-growing smartphone market, where it lags behind Apple Inc. and Samsung Electronics Co. LG posted a fourth-quarter loss of 256.4 billion South Korean won ($228.1 million), mainly because of its struggling handset division. But the company is hopeful that the introduction of smartphones based on Google Inc.’s Android software will foster a turnaround. “Last year, we were in a defensive position and we admit that we let our guard down when the industry was just about to make a big shift to smartphones,” Mr. Park said. “But we’ve started the attack since late last year, and LG will offer a full range of premium products this year. I am definitely sure that we will return to a profit sometime

within this year and it may even happen during the first half of the year.” He said the company plans to introduce 20 smartphones this year and expects to sell as many as 30 million units. LG has set a goal of grabbing a double-digit market share in smartphones this year, up from around 2.5% last year. LG expects its overall handset market share to rise globally, as well, slightly exceeding 10%, as it plans to sell around 150 million

LG plans to grab a doubledigit market share in smartphones this year, up from around 2.5% last year. units this year, Mr. Park said. LG sold 116.6 million cellphones last year, giving it an 8.6% share of the market. The company also expects its new tablet computer—called the GSlate in the U.S. and the Optimus Pad elsewhere—to drive sales and profit growth. The 8.9-inch tablet runs on the Android platform and is equipped with Nvidia Corp.’s Tegra 2 dualcore processor. It also has a threedimensional camera and will hit the U.S. market in March through T-Mo-

bile USA. Mr. Park said the company is in talks with other carriers globally to sell the tablet. “We are also discussing with major carriers in Japan, as well as in Europe,” he said. He declined to comment on the tablet’s sales target or price, except to say it will be “competitive.” Many analysts have said LG will face an uphill battle in the tablet market, given the flood of devices being introduced this year. As many as 80 tablets are expected to be introduced globally this year, based on statements by companies at the International Consumer Electronics Show in Las Vegas in January. Challenges still remain in handsets for LG, as well. After its Chocolate phone, which was introduced in 2005, the company hasn’t been able to compete well in the wake of the broader shift in the industry toward more-sophisticated handsets. LG initially gave full support of Microsoft Corp.’s Windows mobile-phone software but turned to Google’s platform in late 2009 as Android’s profile jumped. Late last year, LG started offering its Optimus 3D, which allows users to view and record three-dimensional content. LG said Monday it has teamed up with Google’s YouTube to provide users the ability to capture and view 3D videos on their cellphones without needing to wear special glasses.

Continued from page 15 “additional costs and distortions” in furniture trade, “with little evidence that these distortions have yielded any benefits to the industry overall, the U.S. consumer, or the U.S. taxpayer.” Since 2005, the Commerce Department has imposed antidumping duties on wooden bedroom furniture from China after determining those products were being dumped on the U.S. market at “less than fair value.” The tariffs range from less than 1% to more than 200% of the import value. U.S. trade law allows the companies hurt by dumping to submit to the department once a year a list of exporters for review. The department has up to 18 months to determine whether the listed companies should be subject to tougher duties. A Commerce Department spokesman said it didn’t approve of the private settlements but lacked “authority to investigate or police agreements between private parties.” The normally secret settlements surfaced during that hearing, which was held to determine whether the U.S. should continue applying the duties. A November vote by the ITC kept the duties in force. The duties have done little to stem imports. The ITC found that imports accounted for 78% of the $3.4 billion of wooden bedroom furniture sold in the U.S. in 2009, up from 44% in 2001. But the duties did prompt much of the production to shift from China to Vietnam, where the duties don’t apply. Leslie and Jim Thompson, owners of Up Country, a furniture company based in Dawsonville, Ga., complained about the practice at the October hearing. About seven years ago, they began making hand-carved bedroom furniture near Shanghai, but they recently ceased production there amid uncertainty over duties. At the October ITC hearing, Ms. Thompson recalled calling Joseph

Dorn, a Washington lawyer representing La-Z-Boy and other furniture makers, in 2007 and asking for help averting a review of her company’s duty levels. Mr. Dorn “asked me what I could give him that would entice his client…to drop me from the review,” she told the ITC. She added, “My husband and I were not, and are not, willing to pay what we believe were extortion payments.” Mr. Dorn told the ITC at the hearing that he didn’t recall that telephone conversation, and that in any case he wouldn’t have been in a position to help her get a lower duty. La-Z-Boy and Vaughan-Bassett referred questions about the settlements to Mr. Dorn, who said in an email that “settling legal disputes is commonplace, legal and totally appropriate.” He said cash settlements were possible only because the Chinese firms sought them. Peter Koenig, a Washington lawyer representing some Chinese furniture makers, said many feel compelled to settle because of uncertainty over the level of duties if they are subject to reviews. The duties are set retroactively, meaning an exporter could face a sudden jump in the amount owed a year or two after making a shipment. Those duties are based partly on estimates of production costs. The department generally reviews only a few producers and uses estimated costs at those firms to apply to other firms deemed to be in a similar situation. That makes it hard for the Chinese firms to estimate what duties might apply after a review. “You’ve got potential for abuse,” said Frank Lavin, Commerce undersecretary for international trade from 2005 to 2007. He said the private deals could allow U.S. furniture makers to favor certain Chinese firms over others and effectively set an entry price for the market. He suggested the U.S. develop rules to prevent any such abuses.

Foster’s unveils spinoff of wine unit BY CYNTHIA KOONS SYDNEY—Foster’s Group Ltd. unveiled a long-planned divestitute of its wine business Tuesday and said fiscal first-half net profit fell 12% from a year ago on troubles in the domestic beer market. Foster’s will spin off its wine business, Treasury Wine Estates, to trits shareholders, creating a new company publicly traded in Australia. Foster’s investors will receive one share in the wine business for every three Foster’s shares held in the spinoff. The group expects the transaction to be completed in May. Analysts have long suspected Foster’s would undertake this move to make the individual divisions attractive takeover targets. The wine business has been a drag on the

company’s bottom line in recent years while the more lucrative beer business has been viewed as a more likely buyout target. But in the first half ended Dec, 31, Foster’s said its beer business saw earnings decline compared with a year earlier as the domestic market shrank. According to Foster’s estimate, the local beer market contracted by 7% during the period. The company blamed abnormal weather conditions for much of that, saying volume in Australia’s Queensland state—plagued by extreme rainfall and flooding in recent months—was down 14%. The group said a third of that decline was due to weather. In the rest of Australia, volumes were down a little more than 5%, half of which the beverage maker blamed on weather.

Overall, Foster’s reported firsthalf net profit of 312.1 million Australian dollars (US$313 million), down 12% from A$355.7 million a year ago. In the Carlton and United Breweries division, the group’s biggest line of business, net sales revenue was down 6.8% in the first half. Across the group, first-half net sales revenue fell 6.6% to A$2.15 billion from A$2.3 billion a year ago. Foster’s offered tepid guidance, saying the rate of volume decline in the beer market is expected to moderate in the second half. Still, the company expects beer market volume in the six months to the end of June to be down 3% to 4% compared with a year-ago.
Heard on the Street: Beer troubles may dent Foster’s ................................ 28

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18

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

CORPORATE NEWS

Facebook creates new ‘frenemies’ The social-networking site’s practices are disrupting the businesses of established companies like Yahoo and Google BY GEOFFREY A. FOWLER Facebook Inc.’s growing ambitions are redrawing battle lines in Silicon Valley. As the seven-year-old company ramps up its hiring and adds new features to its social network, it is disrupting the businesses of established companies like Yahoo Inc. and Google Inc. and putting even more Internet firms on notice. Facebook, which has more than 600 million users and was valued at $50 billion in a recent funding round, is grabbing online-advertising from Yahoo, Myspace and others. The social network is a potential rival in electronic payments to eBay Inc.’s PayPal, while partnerships Facebook is cementing with smartphone makers set the stage for competition with Apple Inc. and Google in mobile services. Meanwhile, Facebook is tussling with Google and Microsoft Corp. for top engineers. As a result, many Silicon Valley companies increasingly have to decide whether to treat Facebook like a friend whose reach and user data can help propel their own growth, or a foe that can become a destructive force. “Facebook is both a great competitor and a benefactor here in Silicon Valley,” said David Cowan, a venture capitalist at Bessemer Venture Partners in Menlo Park, Calif. “Anyone who’s trying to get the attention of the young Internet user now has to compete with the dominant position that Facebook has there. On the other hand, they have opened up a lot of opportunities.” Facebook executives aren’t shy about their aspirations. “We think every industry is going to be rebuilt around social engagement,” Chief Operating Officer Sheryl Sandberg said. Facebook already helped spur a new crop of videogame companies designed around interacting with friends, Ms. Sandberg said, adding, “News, health, finance, shopping and commerce—we think similarly, all of these things will be rebuilt by companies that work with us to put social at the core.” So far, Facebook’s battleground has been in online marketing. In just two years, Facebook’s share of online display ads has surged to 13.6% from 2.9% of the U.S. market, which reached $8.88 billion in 2010, according to research firm eMarketer.

Growing tentacles As Facebook expands its reach and moves into new areas, it's creeping onto the turf of other Internet players, which have to decide whether Facebook is friend, foe or both.

Apple has competing social network Ping; could become rival in phone software and mobile ads.

Twitter competes for user attention and marketing dollars. Successful game maker built on Facebook's platform, but must pay 30% fee for use of Facebook Credits

Competes for top engineers and online marketing dollars.

Partners to simplify user logon, competes in marketing local deals

Share of minutes spent online each month in the U.S. Facebook

14% 12 10

Yahoo Google

8

AOL

6 4

Partners to fund Facebook Credits for games but could compete in online payments if Credits expands.

Myspace lets users import their interests from Facebook; competes for user attention and display ad dollars.

Facebook’s growth comes at the expense of companies such as Yahoo and AOL Inc., and the site is also likely taking ad money away from traditional media like newspapers and TV. Yahoo has stopped trying to compete directly with the social network and instead integrated Facebook features into its sites, hoping to halt a slide in the time its users spend on Yahoo each month. Myspace, which like Yahoo has struck some partnerships with Facebook, declined to comment. Myspace and The Wall Street Journal are owned by News Corp. Jeff Levick, the president of AOL advertising, said he viewed the rise of Facebook as “complementary” because the companies are “running

Partners to bring Facebook content to Yahoo sites; competes for user attention and display ad dollars.

two very, very different businesses.” AOL, he said, focuses on monetizing the content that Facebook users share. “The more high quality content we produce and is shared, the traffic comes back to us,” Mr. Levick said. The top advertisers who are working with both companies are spending more with AOL each quarter, he said. Facebook likely had revenue of $1.9 billion to $2 billion last year, mostly in advertising, one person familiar with the company has said. Facebook has recently introduced ad formats that incorporate users’ networks of friends—even their names, photos and postings—into the ads. And Facebook also has turned its attention to the local ad market,

2 0

Myspace/Fox Interactive

2009

'10

'11

Source: comScore

launching its own location check-in and deals services that bring together elements of sites such as coupon site Groupon Inc. and business reviews service Yelp Inc. Groupon and Yelp declined to comment. Facebook is likely to tread on more toes as it builds out what’s known as a platform for the Internet, which other websites, cellphones and now even cars can use to build their own offerings to allow people to take their friends and preferences with them. Some 2.5 million websites have so far tapped the platform, which lets them populate blog posts, news articles, product listings and other pages with Facebook’s “Like” button. With its platform play, Facebook

is positioning itself as a partner to other tech companies—even Google, which allows YouTube users to share videos with their Facebook friends. “The foundation of a platform is one where people want to build on top because there is equal value exchange,” said Dan Rose, Facebook’s vice president of partnerships and platform marketing. Still, Mr. Rose said Facebook intends to participate in new businesses that emerge from the use of its platform. One case in point: Game developers such as Zynga Game Network Inc., among the first to find massive growth on Facebook’s platform, now have to pay a kind of tax. Last month, Facebook said it would require all game developers on its platform to use its in-house Credits, a virtual currency for buying things in games. Facebook takes a 30% cut from all Credit sales. Zynga declined to comment. Facebook could later extend its Credits system to other areas of commerce, including physical goods, potentially making it a competitor to PayPal and Amazon.com Inc. Mr. Rose didn’t rule that out, but said the company had no current plans to do so and was focused on virtual goods for now. PayPal President Scott Thompson plays down any rivalry with Facebook. He said his company partners with Facebook, which lets people pay for Facebook Credits with PayPal. Even if Facebook gets deeper into payments, he said PayPal will be well-protected. “Payments is really, really hard to do,” he said. Facebook executives also have their sights set on smartphones, where they hope to become more integrated in the software on the handsets. Last week, INQ Mobile, owned by Hutchison Whampoa Ltd., unveiled a handset for the U.K. that prominently features data from users’ Facebook accounts. Google declined to comment on Facebook, but in an interview last year, Chief Executive Eric Schmidt said the two companies compete for talent but not for ad dollars and that Facebook users use more Google services than any other users. He also said that “you’re assuming that if they do well we do poorly,” but “winners tend to all do well.” —Stu Woo and Amir Efrati contributed to this article.

Yahoo, looking for clicks, moves to friend Facebook BY AMIR EFRATI Yahoo Inc. watched as socialnetworking website Facebook Inc. stole the attention of users and grabbed a major share of the onlineadvertising market. Now the Internet pioneer is following an old mantra: If you can’t beat ’em, join ’em. After struggling for years to develop services that compete with the social network, Yahoo in recent months has installed tools such as Facebook’s “Like” and “Share” buttons on its news and sports websites in order to help Yahoo users share articles with their contacts on Facebook, among other things.

Yahoo, like other content providers, is seeking to leverage Facebook’s huge user base to draw more traffic back to Yahoo after readers click on the sharing buttons. The moves also are aimed at ensuring that links to Yahoo content appear in the search feature on Facebook’s site. Yahoo is using similar approaches with Twitter Inc., the Internet messaging service, and Zynga Game Network Inc., which offers online social games. Yahoo hopes the moves will solve one of its biggest problems—a 10% slide in the time users collectively spent per month on Yahoo sites last year, according to research

firm comScore. Yahoo’s internal research shows the main culprit for the slide is Facebook, people familiar with the matter said. “‘Frenemy’—part friend, part enemy—is where Yahoo finds itself with Facebook,” said David Karnstedt, a former senior vice president of North American sales at Yahoo and currently chief executive of online marketing firm Efficient Frontier. The enemy part, Mr. Karnstedt said, is that Facebook’s ad business is big and growing fast, sometimes at Yahoo’s expense. “The friend part is that Yahoo has stopped trying to get people not to go to Facebook and decided it was better off en-

abling that, largely because it didn’t have a real choice,” he added. Yahoo Chief Executive Carol Bartz recently called Facebook her company’s top competitor. That is certainly true in U.S. display ads, a market that reached nearly $9 billion in 2010. Yahoo was No. 1 with 16.2% of the market, down from 16.5% in 2009, according to research firm eMarketer. Second-place Facebook saw its market share rise to 13.6% from 7.3% the prior year, eMarketer said. “They’re a hot site, but there’s room for more than one of anything,” Ms. Bartz said at an event in December.

Some others at Yahoo stress recent collaboration with Facebook. “They’re a partner, and a good one at that,” said Mike Kerns, Yahoo’s vice president of social, games and personalization, in an interview. “We view them and their platform as a great opportunity to both distribute Yahoo and its partners’ content” and “to enhance user experience” on Yahoo. Search giant Google Inc., which rose past Yahoo in the Web-search market during the last decade, has recently invested in developing a social-networking-type experience that could rival Facebook’s, people familiar with the matter have said.

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

19

**

CORPORATE NEWS

Apple sets up app battle Sanofi, Genzyme New subscription service creates conflict with media companies BY NAT WORDEN

to announce deal

Bloomberg News

BY GINA CHON Apple Inc. launched a new service for its App Store that allows for magazine and newspaper subscriptions for its popular iPhone and iPad devices, but publishers and other suppliers of content aren’t rejoicing. The service is setting up a conflict with some major media companies that are wary of allowing the computing giant to come between them and their customers. Apple is using the popularity of its digital devices and its iTunes and App Store to stake a larger position in the media and entertainment business. Meanwhile, as the digitalmedia world evolves, publishers are struggling to establish online subscription businesses in anticipation of further erosion in their offline businesses. Most publishers have yet to reach agreement with Apple to sell subscription apps, due to issues such as pricing disputes and the company’s privacy policy, which requires subscribers to opt-in to share their names and addresses with the publishers of the magazines or papers they will get digitally. Time Warner Inc.’s publishing arm, Time Inc., said last week it has yet to reach an agreement with Apple to sell subscriptions for its digital version of Sports Illustrated, a magazine that has launched new digital subscriptions for users of tablet computers and smartphones

An Apple store in San Francisco displays icons for iPhone and iPad apps. made by Apple competitors. Under the new service, companies can no longer provide links in their apps that allow customers to purchase content or subscriptions outside of the app—a requirement that could have major repercussions for the way movies and books are consumed through Apple devices. An Apple spokeswoman said apps that currently aren’t in compliance with this requirement will have to change. Popular media apps that could be affected include Netflix Inc., Amazon Inc.’s Kindle app, Hulu LLC’s Hulu Plus app and The Wall Street Journal.

Representatives for those companies weren’t immediately available to comment. The new subscription-billing service is the same as the one Apple recently launched with News Corp.’s new subscription-based newspaper for tablet computers, The Daily. The Daily costs 99 cents a week or $39.99 a year. News Corp. also owns The Wall Street Journal. Apple said users will be able to buy a set-length subscription to an App and be charged for it in the App Store. —Nathan Becker contributed to this article.

HTC unveils tablet, Facebook phones BY RUTH BENDER BARCELONA—Taiwanese phone maker HTC Corp. released Tuesday a new set of smartphones targeting Facebook users, as the group looks to cash in on the rising popularity of social networking. The two new smartphones, the ChaCha and the Salsa, have a dedicated Facebook button that provides easy access to the social networking site. Users will be able to directly upload photos or web links from the phone to the social net-

work. “HTC brings social networking to phones in a new way,” HTC Chief Executive Peter Chou said at a news conference at the Mobile World Congress. The Hsinchu-based company also announced its first tablet device—a portable personal computer with a touchscreen—and three other new smartphones, all running on Google Inc.’s Android operating system, as the group aims to grab a bigger share of the fast-growing market. “2010 was an amazing year for HTC

and smartphone users,” Mr. Chou said. The group sold 25 million handsets in 2010, more than double the number in 2009, he added. Mr. Chou said the coming year should be an exciting one for the company, adding, “The popularity of smartphones is exploding.” Research indicates smartphones will outsell lower-end feature phones by the end of this year, he said. According to research firm Gartner, HTC was the world’s No. 9 handset maker by shipments at the end of 2010.

Sanofi-Aventis SA is expected to acquire Genzyme Corp. for about $19 billion in cash, plus possible additional payments in the future, in a deal that could be announced as soon as Wednesday, people familiar with the matter said. After Sanofi initially considered trying to obtain a slightly lower price, the drug makers largely agreed to the broad terms that they originally negotiated when Sanofi was given access to Genzyme’s books on Jan. 31, these people said. Talks are ongoing and final details are still being worked out, these people added. As part of that broad agreement, Sanofi agreed to raise its offer from $69 per share to about $74 a share

in cash, or about $19 billion, people familiar with the matter said. Genzyme investors also would receive a so-called contingent value right, or CVR, that would entitle them to additional payments if the company meets certain sales goals. The CVR, which investors would be able to trade on a stock exchange, would have an initial trading value of at least $2 a share, people familiar with the matter said. After Sanofi finished due diligence, the company pushed to change some of the original terms and therefore, some of the criteria for the CVR has been adjusted, these people added. Details of the terms of the CVR are still being finalized, they said. In August, Sanofi made an unsolicited bid for Genzyme, and went hostile with its offer in October.

SGX, ASX revamp boards to allay merger concerns Continued from page 15 fifth-largest listed exchange operator with access to a combined $1.9 trillion market, according to analyst estimates. Mr. Bocker said there have been no changes made to the offer price for ASX and that he expects to submit an application for the merger to Australia’s foreign-investment watchdog, the Foreign Investment Review Board, in the next few weeks. He said discussions with the Australian Department of Treasury about the merger have been good. However, the changes failed to placate one of the merger’s firmest political opponents, Australian independent lawmaker Bob Katter, who maintains the ASX should remain Australian-owned. The tie-up needs to clear legislative hurdles in Australia’s Parliament and faces stiff opposition from some vocal minority lawmakers, notably Mr. Katter and Bob Brown, an upper-house member from the Greens party.

A spokeswoman for Mr. Katter said the parliamentarian’s position hasn’t changed as a result of the adjustments to the proposed structure. “That is simply that the ASX must remain in Australian hands. Any merger is still a foreign takeover,” the spokeswoman said. A spokeswoman for Mr. Brown said he is expected to deliver a statement on the merger Wednesday. A closely contested August election in Australia means a few swing votes in Parliament could torpedo the deal. The minority Labor government needs the support of either the main opposition Liberal-National coalition of center-right parties or the Greens and nonparty lawmakers in the lower and upper houses of Parliament to pass any new laws, including one that lifts a cap on foreign ownership of ASX. Shares of SGX fell 0.6% in Singapore on Tuesday, while shares of ASX rose 1.7% in Sydney, after trading halts on both stocks placed earlier in the day were lifted.

20

* *

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

THE PROPERTY REPORT

MARKETS

CB Richard Ellis to buy an ING property unit

Barclays’s profit jumps

BY MAARTEN VAN TARTWIJK

LONDON—Barclays PLC’s profits surged 36% to £3.6 billion ($5.77 billion) last year, as smaller losses on soured assets made up for sluggish revenue across much of the U.K. banking company. But the strong results, which propelled Barclays’s shares up 5.8%, belied the uphill climb facing the bank and its new chief executive, Bob Diamond, as they try to slim down and boost returns. With revenues seemingly stuck in a rut, Mr. Diamond, who made his name by building Barclays’s investment bank from the ground up, now finds himself needing to shrink his company. Barclays’s return on equity, a closely watched metric among investors and analysts, remained stuck well below peers, coming in at 7.2% for 2010, up slightly from 6.7% the prior year. Mr. Diamond on Tuesday described that as “not acceptable” and vowed to nearly double returns to 13% by 2013. Highlighting the challenge facing Barclays, the growth in its 2010 profits was fueled mainly by it losing less money on bad loans. Impairment charges for the full company fell 30% to £5.7 billion from £8.1 billion a year earlier.

BUSINESS REAL ESTATE UNITED STATES

Getty Images

AMSTERDAM—ING Groep NV said it will sell its real-estate investment-management business for about $1 billion, in a deal that will cut its exposure to that market and free up capital to repay the Dutch state. ING said it will sell most of ING REIM to U.S. commercial real-estate brokerage CB Richard Ellis Group Inc., in a deal valued at $940 million. In a smaller transaction, Clarion Partners, a U.S.-based real-estate investment manager, will be acquired by Clarion’s management and private-equity firm Lightyear Capital LLC for $100 million. The Dutch financial-services company said the deals, which also include $100 million in sales of stakes in REIM funds, will result in a gain of €500 million ($674.4 million) after tax. It expects the trans-

actions to close in the second half of 2011, subject to regulatory approval. ING REIM suffered heavy losses in the financial crisis due to the slump in international real-estate markets. ING had been searching for a buyer since last summer. ABN Amro analyst Jan Willem Weidema said the divestment is a good deal, noting that the sale price was on the higher end of his expectations. Mr. Weidema added that it will allow ING to free up capital, helping it to repay the €5 billion it still owes the Dutch government and which it plans to repay this year. Meanwhile, ING REIM’s Australian operations won’t be sold and ING said it plans a phased withdrawal from that business. ING will report full-year results Wednesday. Analysts expect the company will return to a fourthquarter net profit. —Nathan Becker contributed to this article.

BY MARGOT PATRICK

Barclays shares rose 5.8% on Tuesday. Results in its investment-banking unit, Barclays Capital, were similarly muted. Its total income jumped 17% to £13.6 billion, but the increase stemmed entirely from the absence of 2009’s £4.4 billion loss on risky credit assets and a £1.8 billion accounting loss tied to the value of Barclays’s debt. BarCap’s revenue actually fell 25% to £13.3 billion. Mr. Diamond is betting that a key to resuscitating Barclays’s returns lies in a cleanup project. For example, Barclays is still sitting on more than £23 billion in as-

sets that were at the heart of the financial crisis. While most banks long ago dumped those assets, Barclays has rid itself of about half of what it was holding in 2007. Barclays also is trying to extricate itself from a controversial loan it made in an effort to get risky assets off its books during the financial crisis. In 2009, Barclays created an entity called Protium Finance LP, staffed by about 40 former Barclays executives, to house about £7.5 billion of mortgage-backed securities and other related assets. The U.K. bank then issued a 10-year, $12.6 billion loan to Protium. The idea was that the transaction would allow Barclays to avoid writing down the value of the risky assets. But new regulations mean that the loan will become one of the most capital-intensive assets on Barclays’s balance sheet, according to Mr. Lucas. As a result, the bank is negotiating with Protium officials to accelerate repayment, a process that is likely to lead to the still-illiquid assets getting dumped in the market at money-losing prices. Barclays said Tuesday that is the reason it took a £532 million charge on the Protium loan.
Heard on the Street: A weak start for Diamond ........................................... 28

Westpac’s cash earnings slip

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MELBOURNE—Westpac Banking Corp. said its fiscal first-quarter cash earnings fell about 3% from a year earlier, falling short of its peers’ performances, and the Australian lender warned that insurance claims from recent natural disasters could increase. Westpac said cash earnings for the quarter ended Dec. 31 fell to 1.55 billion Australian dollars ($1.56 billion) from A$1.6 billion a year earlier. “The operating environment is positive, although the recent natural disasters and subdued consumer sentiment are likely to see businesses remaining cautious,” said Gail Kelly, chief executive officer, in a trading update statement. Westpac’s first-quarter earnings compare poorly with leading rivals National Australia Bank Ltd. and Commonwealth Bank of Australia. NAB reported last week that firstquarter cash profit rose 18% to A$1.3 billion from a year earlier and Commonwealth Bank announced that fiscal first-half cash profit climbed 13% to A$3.34 billion, a re-

Bloomberg News

BY GAVIN LOWER

Gail Kelly, chief executive of Westpac cord. Analysts shrugged off Westpac’s fall in earnings. Jarrod Martin, an analyst at Credit Suisse, said Westpac showed “good margin management, excellent cost control and bad debts continuing their slow grind down.” Westpac said the year-earlier figure was boosted by high treasury and markets income. Ms. Kelly told analysts she was

“quietly optimistic” about the result and underlying momentum for the business. “While margins are likely to be stable to slightly improving for the next quarter or so, there are still headwinds from rising average funding costs and likely deposit competition,” she said. Ms. Kelly also pointed out that home-loan growth was “soft” because of rising interest rates and consumer caution, while business credit growth wasn’t expected to pick up until the second half. Australia’s major banks have borne the brunt of political pressure recently over home-loan interestrate rises above moves in the official cash rate, provoking new laws aimed at boosting competition in the sector. The banks themselves have begun an aggressive campaign for market share in the home-loan market, with NAB offering to pay exit fees for people to move their loans from Westpac and Commonwealth Bank. Westpac, which has 16.5% of Australia’s mortgage market, has countered by cutting fees on one of its most popular loan packages.

Bank of East Asia profit rises 62% BY FIONA LAW HONG KONG—Bank of East Asia Ltd. said Tuesday its full-year net profit rose 62% to a record, despite a slide in loan earnings from China, thanks to a surge in loan growth and exceptional gains from the sale of its operations in Canada. Bank of East Asia, Hong Kong’s fifth-largest lender by assets, said its net profit rose to 4.22 billion Hong Kong dollars (US$541.3 million) in 2010 from HK$2.6 billion in 2009. However, despite a 20% rise in overall loans, especially to corpora-

tions in China, after-tax profit from the mainland—a key focus—slid 5% as the bank lowered its loan-to-deposit ratios. The bank, in which Spain’s Criteria CaixaCorp SA has a 15.01% stake, lowered the ratios to meet the requirements of Chinese regulators, who have been pushing banks to bring down lending as part of efforts to rein in asset prices. Even as China loan earnings took a hit, the bank said it was maintaining its focus on growing in China, where it has 92 branches, and added that its Hong Kong operations would benefit from the mainland’s

moves to internationalize the yuan. The continued focus on China comes after the bank sold stakes in two North American units in the past year. It sold 80% of its U.S. subsidiary to Industrial & Commercial Bank of China Ltd. for $140 million last month, and a 70% stake in its Canadian unit also to ICBC early last year. Bank of East Asia said net interest income rose 12% to HK$7.54 billion for the year, while noninterest income rose 4%. Impairment losses fell 73% to HK$306 million from HK$1.14 billion a year earlier, the lender said.

Wednesday, February 16, 2011

21

THE WALL STREET JOURNAL.

MARKETS

BY ANUPREETA DAS AND GINA CHON An emailed letter flashed on executives’ screens at Del Monte Foods Co.’s offices in January 2010. Private-equity firm Apollo Global Management was proposing to buy the food company for nearly $3 billion, said the message, according to people familiar with the matter and regulatory filings. Ten months after the email—an expression of interest that is referred to by some in deals circles as a “love letter”—Del Monte agreed to a $4 billion leveraged buyout by a group led by KKR & Co.’s Kohlberg Kravis Roberts & Co. The deal was the latest in a list of companies that have been quietly put “in play” by private-equity buyers. Despite a frenetic takeover battle immortalized in “Barbarians at the Gate,” private-equity firms typically don’t employ a hostile approach in their pursuit of companies. There is a business reason for this: They want to win the support of managements, whom they often employ after sealing a deal. Then there is the matter of politics. Most big buyout shops have billions of dollars in investments from public pension funds. Those funds typically have written clauses that prevent the firms from making hostile bids. But the firms lately have taken a more loose interpretation of those rules, dispatching the so-called love letters to companies expressing their interest. The approach doesn’t technically constitute a hostile offer—in which a proposal is taken directly to a company’s shareholders—but it can still have the effect of putting a company into play. That is especially the case because these approaches have an uncanny tendency to leak in the media. Mergers-and-acquisitions bankers and lawyers say they have seen a proliferation of offer letters, much of it driven by a return to health in the equity and credit markets. They say buyout shops have become more aggressive since the second half of 2010, as fears of a second recession receded and demand for quality companies up for sale outweighs supply. Buyout firms have access to $400 billion of equity capital, and these firms can borrow at least two to three times as much, creating the potential for more than $1 trillion of LBOs over the next several years, said Jack MacDonald, the co-head of Americas M&A at Bank of America Corp.’s Bank of America Merrill Lynch. “Because the leveraged finance markets are so strong, boards now need to take those letters and inbound inquiries very seriously,” Mr. MacDonald said. That is different from the past year or two, he said: “Without available or committed financing, those buyout offers were more readily dismissed on the basis that credit markets weren’t strong enough to finance the larger transactions.” These letters, delivered by email, fax or messenger, usually outline a proposal, including a per-share price, and invite company executives to engage in further discussions. For companies like Del Monte that hadn’t actively considered selling themselves, the receipt of an offer via phone call or printed letter abruptly pushes executives to a big decision. Information-technology provider SRA International Inc., is one such company, having recently hired a financial adviser to consider

a sale after several private-equity firms, including Providence Equity Partners, banged on its door. Several more, such as General Atlantic, KKR and Bain Capital, have since raised their hand to express their interest, undeterred by SRA’s $2 billion asking price—a roughly 66% premium to where the stock traded before December news reports of buyer interest. Last summer, when Los Angeles private-equity firm Leonard Green & Partners disclosed a 9.5% stake in BJ’s Wholesale and said it intended to approach the warehouse retailer about an acquisition, many deal makers raised their eyebrows at the unusual approach. Observers say Leonard Green behaved like an activist investor, saying publicly that BJ’s stock was undervalued and the company could be improved through a leveraged buy-

out or new financing. In early February, BJ’s bowed to the pressure and hired Morgan Stanley to explore “strategic alternatives” for the company. Leonard Green declined to comment. The average multiple paid—the price of a deal as a multiple of the target company’s earnings before interest, taxes, depreciation and amortization—for a U.S. public company was still meaningfully lower in 2010 than the average multiple paid in 2007, Dealogic data shows. That is because private-equity firms are still being cautious about how much they borrow relative to how much cash they invest, bankers said. Buyout firms also are taking advantage of the fact that company boards and managements, having shepherded their companies through the recession, are more amenable to exploring an offer, ei-

Bloomberg News (2)

Private equity’s new tactic: ‘love letters’

Del Monte was sold in $4 billion leveraged buyout to a group led by KKR. ther from a private-equity firm or another company, said Robert Profusek, a lawyer at Jones Day. Directors today are far more at-

tuned to the idea of “maximizing shareholder value” and few directors would ignore a love letter, he added.

22

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

INTERNATIONAL INVESTOR

Hopes of recovery in U.S. lift dollar BY ANDREW J. JOHNSON

83.31 yen late in New York Monday. The euro strengthened to 113.01 yen from 112.35 yen. The euro was flat at $1.3490 from $1.3487. Sterling strengthened to $1.6122 from $1.6039. The dollar moved to 0.9675 Swiss franc from 0.9699 franc. “The latest retail-sales data was on the disappointing side, but weather was almost certainly a factor in keeping with what we saw from chain-store sales,” said Alan Ruskin, head of Group of 10 foreignexchange strategy at Deutsche Bank in New York. “The market’s inclination is to give the economy the benefit of the doubt, and the latest numbers will probably not change views that [gross domestic product] can still register growth close to 4%” in the first quarter.

NEW YORK—The dollar rose against the yen to the strongest point in nearly two months, as investors shrugged off a disappointing U.S. retail-sales report and held to the view that the U.S. economy was still expanding at a fairly brisk clip. The higher-yielding euro and U.K. pound both advanced, with the latter hitting a sesCURRENCY sion high, continuMARKETS ing the risk-on trading tone from overnight. Many analysts felt that winter weather didn’t allow for a true reading of an improving U.S. economy. By midday in New York, the dollar was trading at 83.77 yen from

Treasurys register small gains BY JAVIER E. DAVID

Treasurys holdings for the second month in a row. Data showed that among all foreign investors, net purchases of U.S. Treasury notes and bonds totaled $54.64 billion, less than the prior month but sufficient to cover U.S. borrowing needs. In midday trading, the 10-year note was up 2/32 to yield 3.614%. The 30-year bond was up 2/32 to yield 4.67%. Yields and bond prices move inversely.

NEW YORK—Treasurys posted modest gains Tuesday, as unexpectedly weaker JanuU.S. CREDIT ary retail sales and MARKETS falling stocks encouraged demand for safer instruments. Treasurys also got a lift from news that foreign demand for U.S. securities remained robust in December, even as China trimmed its

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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 02/14 EUR

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5.7

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02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 HKD 02/14 USD 02/14 HKD 02/14 USD 02/14 USD 02/14 HKD 02/14 USD 02/14 HKD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 EUR 02/14 USD 02/14 EUR 02/14 USD 02/14 EUR

11.76 10.94 36.79 39.97 30.59 33.12 41.14 8.78 164.63 21.12 68.44 8.78 8.78 140.77 18.06 68.83 8.83 8.78 26.92 8.78 16.08 22.26 16.17 16.08 21.20 16.13 16.08 21.77 16.08 38.23 32.04 32.97 42.76 6.86 9.25 14.26 19.23 6.86

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NAV

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Leading 10 Performers FUND FUND RATING * NAME

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NAV GF AT LB DATE CR

NAV

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—%RETURN— YTD 12-MO 2-YR

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9.4

n CREDIT PACIFIC ASSET MANAGMENT www.creditpacific.com GL OT WSM 02/14 USD

JF Asset USDHKG Management Limited (HK) Prudential Asset USDLUX Mgmnt (Singapore) Ltd First State USDIRL Investments (Hong Kong) Ltd First State SGDSGP Investments (Singapore) UOB Asset SGDSGP Management Ltd LionGlobal Lion Global SGDSGP Singapore/Malaysia SGD Investors Ltd ING ING Securities TWDTWN Singapore Malaysia Invest Trust Co., Ltd LionGlobal Lion Global SGDSGP Philippines SGD Investors Ltd UPAMC Uni-President TWDTWN Chindia Asset Management Corp. PRU Dragon Prudential Asset SGDSGP Peacock Mgmnt (Singapore) Ltd

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

analysts suspect that China may be routing some of its purchases of U.S. Treasurys through money managers in London. Separately, the closely watched figure of net long-term securities transactions showed total buying of $65.9 billion in long-term U.S. securities in December, after purchases of $85.1 billion the month before.

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

02/14 USD 02/14 USD 02/14 USD 02/14 EUR 02/14 USD 02/14 USD 02/14 HKD 02/14 USD 02/14 HKD 02/14 USD 02/14 USD 02/14 HKD 02/14 USD 02/14 HKD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD

NAV 18.04 16.96 17.72 13.14 18.86 9.40 132.75 17.03 73.27 9.40 9.40 114.90 14.74 73.50 9.43 9.40 14.70 9.40 15.57 18.08 15.55 16.99 15.58 17.60 15.67 12.94 12.01 12.64 13.77 46.96 38.76 44.84 52.62 4.68

—%RETURN— YTD 12-MO 2-YR 3.0 2.9 3.0 3.0 3.1 -0.6 -0.4 -0.4 -0.4 -0.4 -0.7 -0.6 -0.6 -0.6 -0.6 -0.7 -0.5 -0.6 1.3 1.3 1.2 1.2 1.2 1.3 1.4 5.4 5.3 5.2 5.4 4.6 4.5 4.6 4.8 1.5

13.4 12.2 13.1 13.1 14.2 4.8 4.9 4.9 4.8 4.8 3.8 3.7 3.7 3.8 3.8 4.3 4.3 5.3 8.5 8.1 7.4 7.0 7.9 7.6 9.0 18.9 17.7 18.4 19.8 19.4 18.2 18.9 20.4 17.6

20.0 18.8 19.7 19.7 20.9 9.9 9.9 9.9 9.9 9.9 8.9 8.8 8.8 8.8 8.8 9.4 9.4 10.5 13.2 13.0 12.1 11.9 12.7 12.5 14.0 26.2 24.9 25.5 27.1 25.0 23.7 24.4 26.0 35.5

FUND NAME

NAV GF AT LB DATE CR

Platinm-Gbl Dividend Platinm-Nordic Platinm-Premier Platinm-Turnberry

GL OT OT OT

CYM USA USA USA USA

12/31 10/31 12/31 12/31 05/29

USD USD USD USD USD

101.99 129.92 116.25 110.98 35.02

EQ OT OT OT

CYM CYM CYM USA

12/31 12/31 08/29 12/31

USD SEK USD USD

NAV 77.23 668.78 28.37 60.88

—%RETURN— YTD 12-MO 2-YR 1.5 -3.2 NS 0.6

25.6 3.2 NS 0.7

33.2 8.8 NS NS

n SUPERFUND ASSET MANAGEMENT GMBH For info about open funds, contact [email protected] and www.superfund.com *Closed for New Investments GL GL GL GL GL

OT OT OT OT OT

CYM LUX CYM CYM AUT

02/08 02/08 02/08 02/08 02/08

USD USD USD USD EUR

52.45 2480.00 1222.27 1181.93 7280.00

-4.1 -3.6 -6.8 -8.0 -2.6

57.9 27.6 36.9 43.3 NS

-21.2 -17.8 1.8 -7.3 -9.2

11.2 11.4 11.3 14.2 14.4 15.5 14.4

8.1 8.3 8.3 14.2 14.4 15.5 14.4

NS NS 3.5 4.5 4.8 4.2 4.5

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

0.4 NS -0.5 2.2 -18.2

4.5 NS 5.5 19.8 -63.7

YTD

JF Philippine Pru IOF Philippines Equity A First State SingaporeandMalaysiaGrI First State Singapore Growth UOB UniFund

FUND NAME

Superfund Cayman* Superfund GCT USD* Superfund Green Gold A (SPC) Superfund Green Gold B (SPC) Superfund Q-AG*

OT OT OT OT OT

LEGAL CURR. BASE

% Return in $US ** 1-YR 2-YR 5-YR

-10.26 54.76 69.69 20.44 -9.42 42.76 56.39

NS

-0.37 36.58 52.18 15.61 -0.38

36.11 51.63 15.23

-0.42

35.14 46.84

-1.18

34.91 51.23 15.30

7.33

-4.90 32.46 44.39 13.54 -10.91 25.67 38.56 16.04 -7.75

16.99

NS

NS

-5.86

16.81 43.14 14.62

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

More broadly, net purchases of long-term U.S. securities, including transactions that don’t occur on the open market, totaled $41.8 billion following net buying of $64.5 billion in November. The monthly Treasury report highlights cross-border acquisitions of securities with maturities of more than one year.

[ Search by company, category or country at asia.WSJ.com/funds ]

—%RETURN— YTD 12-MO 2-YR 1.1 1.1 1.3 1.3 1.3 1.1 1.1 1.4 1.4 1.2 1.2 5.7 5.7 5.8 5.8 5.6 5.6 5.5 5.5 5.6 5.6 5.8 5.8 7.6 7.6 7.6 7.6 7.6 7.8 7.8 NS NS NS NS

NS

FUND MGM'T CO.

[ALTERNATIVE INVESTMENT FUNDS www.WSJ.com] Advertisement

AlexandraConvertibleBondFundI,Ltd.(ClassA) OT OT VGB 01/31 USD

Platinm-All Star Platinm-All Weather Platinm-Dynasty Platinm-Emancipation Platinm-Equity Plus

Funds that invest in Indonesian, Thai, Pakistani or Vietnamese companies. At least 75% of total assets invested in equities of ne or more Asian countries. Ranked on % total return (dividends reinvested) in Euros for one year ending February 15, 2011

WASHINGTON—China sold U.S. Treasurys for a second month in a row in December, further reducing its holdings from its largest position in nearly a year in October, but remained the largest foreign holder, the Treasury Department said Tuesday. Overall, foreigners were net buyers of long-term U.S. financial assets in December, according to the monthly Treasury International Capital report, known as TIC. China slimmed its net holdings by $4 billion to $891.6 billion, following net selling of $11.2 billion in November. Meanwhile, Japanese holdings hit a record in December, threatening to overtake China as the top foreign holder. Its holdings rose to $883.6 billion from $877.2 billion in November, making it the secondlargest holder. Among all foreign investors, net purchases of U.S. Treasury notes and bonds totaled $54.64 billion, compared with net buying of $61.72 billion in November. Private foreign investors bought a net $43.02 billion in Treasury notes and bonds, after buying a net $51.54 billion the previous month. One of the biggest foreign net buyers was the U.K., which boosted its net holdings by $29.5 billion to $541.3 billion in December. Some

n ALEXANDRA INVESTMENT MANAGEMENT Tel: +1 212 301 1800 Fax: +1 212 301 1810

CPS-Master Priv Fund

Other Asia-Pacific Equity

BY IAN TALLEY AND MICHAEL R. CRITTENDEN

INTERNATIONAL INVESTMENT FUNDS 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

FUND SCORECARD

China sells Treasurys for second month

9.9 NS 11.8 24.2 -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 11/30 11/30 11/30 11/30

EUR 1049.82 GBP 1056.92 USD 1332.74 EUR 216.69 GBP 234.75 JPY 15315.25 USD 771.55

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

85.04 10.91 4.65 36.25 4.68 135.16 17.34 36.87 4.73 4.68 16.09 4.68 17.91 15.49 20.14 12.29 11.17 11.89 13.19 42.87 37.51 42.11 134.70 118.13 139.53 99.85 123.11 140.64 117.31 134.12 155.05 142.51 122.11 137.02 161.23 6100.00 5822.00 5973.00 5714.00 5455.00 5596.00 6827.00 6526.00 6677.00 17.05 15.41 18.49 7.46 10.34 7.45 7.46 10.24 7.46 7.46 14.48 7.46 20.34 20.22 20.29 20.44 11.35 10.33 12.32

1.9 1.9 1.9 1.9 1.4 1.7 1.7 1.8 1.8 1.4 1.8 1.5 3.1 3.0 3.2 6.1 6.0 6.1 6.2 -3.2 -3.3 -3.3 -11.8 -11.8 -11.9 -11.9 -11.7 2.6 2.5 2.6 2.7 9.7 9.6 9.6 9.8 2.1 2.0 2.1 1.7 1.6 1.6 7.9 7.8 7.8 2.4 2.3 2.6 0.7 0.8 0.7 0.7 0.7 0.7 0.7 0.7 0.8 8.4 8.2 8.3 8.5 8.5 8.4 8.6

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

02/14 HKD 02/14 USD 02/14 USD 02/14 HKD 02/14 USD 02/14 HKD 02/14 USD 02/14 HKD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 JPY 02/14 JPY 02/14 JPY 02/14 JPY 02/14 JPY 02/14 JPY 02/14 JPY 02/14 JPY 02/14 JPY 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 USD 02/14 EUR 02/14 EUR 02/14 EUR 02/14 EUR 02/14 USD 02/14 USD 02/14 USD

17.8 17.8 17.7 17.7 16.4 16.6 16.6 16.6 16.6 17.1 17.3 18.2 28.5 27.2 29.4 18.9 17.7 18.4 19.9 15.3 14.2 14.8 12.2 12.5 11.1 11.4 13.1 3.5 2.5 3.1 4.3 37.8 36.4 37.1 38.9 4.2 3.2 3.7 2.4 1.5 2.0 11.9 10.9 11.4 27.1 25.8 28.1 5.2 5.1 5.1 4.8 4.6 4.6 4.8 4.6 5.8 NS NS NS NS 36.3 34.9 37.2

35.5 35.5 35.5 35.5 34.0 34.2 34.2 34.2 34.2 34.8 34.9 36.3 46.7 45.3 47.9 27.7 26.4 27.1 28.7 32.0 30.7 31.4 NS 41.6 NS 40.2 42.2 9.9 8.8 9.4 10.7 40.9 39.5 40.2 42.0 14.1 13.0 13.6 8.6 7.5 8.1 23.0 21.8 22.4 39.5 38.1 40.6 9.5 9.5 9.5 9.0 9.0 NS 9.0 9.0 10.1 NS NS NS NS 27.7 26.5 28.8

Wednesday, February 16, 2011

23

THE WALL STREET JOURNAL.

INTERNATIONAL INVESTOR

Exxon Mobil leads loss for blue-chip index BY DONNA KARDOS YESALAVICH

holders a 10% premium. Deutsche Börse fell 2.4% in Germany. FedEx rose 2%, despite a warning from the package-delivery giant that its quarterly earnings will reflect two unfavorable trends of early 2011—unusually harsh weather and rising fuel prices—even as the economy continues to improve.

NEW YORK—U.S. stocks fell on a weaker-than-expected rise on U.S. retail sales and a bigger-than-expected increase in U.S. import prices The Dow Jones Industrial Average shed 41.09 points, or 0.3%, to 12226.98 in midday trade. Exxon Mobil led the measure’s decline with a 2.2% drop. The oil ABREAST OF giant said it added THE MARKET 3.5 billion barrels of oil equivalent, led by natural-gas projects, to its proven reserves last year, replacing more than 200% of its production for 2010. The report weighed on other energy companies, as the increase in reserves sparked worries that higher inventories could weigh on oil prices, traders said. Crude-oil futures pared earlier gains. The Nasdaq Composite fell 0.4% to 2806.39. The Standard & Poor’s 500-stock index declined 0.3% to 1328.08, led by its energy sector. Among stocks in focus, NYSE Euronext fell 3% after the exchange company and Germany’s Deutsche Börse outlined plans for a combination that would form the world’s largest exchange operator, but would face hurdles in winning support from regulators. The companies aim to close a transaction by year end that would see Deutsche Börse shareholders own 60% of the merged entity in an all-stock deal that offers NYSE Euronext share-

European stocks Strong earnings from Barclays and Danone helped investors look past lackluster economic data and give key indexes a small boost. The Stoxx Europe 600 index gained 0.1% to end at 289.44, inching past the 29-month high set Monday. Barclays jumped 5.8%. Falling impairment charges for the year helped the U.K. lender beat earnings expectations, though it also said its return on equity—a key measure of profitability—won’t return to precrisis levels. Danone rallied 3.3% after the food producer reported a 38% jump in full-year net profit and 14% growth in sales, eclipsing analyst forecasts. Mining stocks fell after inflation data from China. The January figures showed wholesale inflation rose at a faster-than-expected annual rate of 6.6%, while the consumerprice index rose 4.9%, compared with an expected 5.4% rise. Shares had rallied Monday on talk that the CPI figure would be lower than anticipated. Antofagasta slid 3.9%.

BY TAKASHI MOCHIZUKI

BY SHRI NAVARATNAM AND GA-WOON PHILIP VAHN

TOKYO—Japanese governmentbond yields generally fell as investors bet that the recent runup in yields will buoy demand at Wednesday’s auction of five-year notes. The benchmark 10-year yield fell 0.015 percentage point to 1.29%, while the five-year yield fell 0.01 percentage point to BOND 0.575%. MARKETS The government will offer 2.4 trillion yen ($28.81 billion) in five-year notes, and analysts expect the coupon on the issue will be 0.6%, up 0.1 percentage point from the previous auction and the highest since November 2009. Many market participants expect the auction to see solid demand as such a coupon is a byproduct of recent rises in yields that analysts said are temporary. “It is a good chance to build up a good chunk of the midterm portfolio,” said RBS Securities Chief Strategist Akito Fukunaga. Still, the auction isn’t risk-free, said Tetsuya Miura, chief market analyst at Mizuho Securities. He said it is possible that Japanese banks, the main buyers of five-year notes, will hold back if U.S. yields have continued to rise ahead of the sale. Earlier Tuesday, Bank of Japan policy makers, as expected, kept rates unchanged. It also upgraded its view on the economy for the first time in nine months.

Hong Kong shares declined as investors continued to worry about further monetary tightening moves by Beijing, despite Chinese inflation figures that came in lower than expected. Other Asian markets were mixed in narrow ranges. The Shanghai Composite InASIAN-PACIFIC dex was little STOCKS changed. Hong Kong’s Hang Seng Index fell 1% to 22899.78. Japan’s Nikkei Stock Average rose 0.2% to 10746.67. Australia’s S&P/ ASX 200 slipped 0.1% to 4931.03, and South Korea’s Kospi declined 0.2% to 2010.52. China’s consumer-price index rose 4.9% in January from a year earlier, faster than December’s 4.6% pace but slower than the 5.4% expected by economists. Analysts said the latest figures are hard to weigh because China’s statistics bureau also confirmed that it changed the weighting of the components of the CPI basket effective January, including a reduction in the weighting of fast-rising food prices. “It is a game of numbers. The general feeling in the market is that without the change in weighting, the January CPI would definitely have been more than 5%,” said Alvin Cheng, associate director of Prudential Brokerage.

[ 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 02/14 EUR EU EQ DEU 02/14 EUR EU BD DEU 02/14 EUR

64.71 78.45 39.33

4.7 1.8 -2.7

34.5 14.2 6.9

33.1 20.8 5.1

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 02/02 USD 401213.31

-3.3

47.2

76.3

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 02/08 USD OT OT IRL 02/11 USD AS EQ IRL 02/11 EUR EU EQ IRL 02/11 EUR EU EQ IRL 02/11 EUR EU EQ IRL 02/11 USD JP EQ IRL 02/11 EUR JP EQ IRL 02/11 JPY JP EQ IRL 02/11 USD GL EQ IRL 02/11 EUR

NAV 10.86 14.04 117.23 12.76 202.71 16.75 101.48 990.14 12.33 12.06

—%RETURN— YTD 12-MO 2-YR -1.9 -5.2 0.9 1.2 1.7 2.9 4.1 5.8 4.9 5.4

5.4 14.2 15.3 21.2 15.4 14.3 12.5 9.0 10.8 21.5

NS 34.0 18.2 21.9 18.3 21.3 13.4 14.7 14.2 22.5

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

02/07 02/14 02/08 02/07 02/07 02/07 02/07 02/07 02/07 02/07 02/07 02/07 02/11 02/07 02/07 02/07 02/07 02/11 02/11 02/08 02/07 02/11 02/07 02/07 02/07 02/14 02/14 02/11 02/11 02/07 02/07 02/07 02/07 02/07 02/07 02/04 02/14 02/07 01/31 02/07 02/07 02/07 02/11 02/09 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

279.33 695.34 1426.62 106.32 140.82 116.04 148.44 99.38 142.08 150.39 108.52 901.39 320.41 633.77 72.24 669.88 204.65 240.07 222.77 1083.07 288.65 239.76 318.00 130.30 8995.47 1262.66 9726.68 51.06 100.07 90.86 679.26 286.95 147.68 121.07 501.31 3282.53 2871.56 248.17 338.52 1027.47 333.73 642.31 2477.46 8187.77 116.46

3.3 -3.8 2.9 1.6 1.6 2.9 2.9 2.2 2.2 0.6 0.8 0.8 9.8 0.9 2.0 0.9 0.8 -2.2 -1.3 4.8 4.6 -0.6 2.8 2.2 2.3 6.9 7.8 0.3 0.0 -1.3 -0.3 2.3 2.3 2.3 2.3 -0.4 -1.9 1.0 -1.2 -0.3 -0.3 2.1 6.5 0.7 2.5

6.7 15.5 12.3 11.2 11.2 20.0 20.0 14.2 14.2 5.6 6.1 6.4 37.3 -1.7 -6.2 -1.1 -2.0 10.3 10.2 36.0 15.0 -4.9 16.0 3.9 4.2 13.2 10.4 0.6 0.3 -18.8 5.8 7.3 7.4 7.6 7.8 23.3 21.5 11.1 4.7 6.2 6.2 15.4 20.1 7.5 10.3

30.6 34.9 21.1 14.8 14.8 23.9 23.9 17.1 17.1 7.9 8.3 8.6 33.2 0.9 -0.2 1.3 0.5 10.3 10.8 40.4 25.3 31.1 42.8 10.9 11.2 18.6 17.7 0.7 0.1 -9.5 14.7 6.5 6.5 6.5 6.6 40.2 37.1 28.1 4.1 5.0 5.1 44.8 25.3 4.8 NS

AS OT OT OT

EQ OT OT OT

IRL IRL IRL IRL

02/11 02/10 02/08 02/11

USD USD USD USD

19.55 10.65 11.02 10.57

-3.3 -2.7 1.5 0.2

15.4 NS 9.3 NS

55.6 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

02/14 02/14 02/14 02/14 02/14 02/14 02/14 02/14

JPY JPY USD EUR JPY JPY USD EUR

9924.40 8956.92 96.84 114.54 10219.04 9174.75 98.49 106.40

1.1 3.9 3.5 2.9 2.1 4.7 4.1 1.0

LIST YOUR FUNDS

0.2 -3.3 4.0 15.3 3.5 -0.6 6.8 7.6

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) 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)JF JPM Latin Amer Eq(USD)A(dist)JF JPM Russia (USD) A (dist)

AS EQ LUX 02/14 SGD AS EQ LUX 02/14 USD AS EQ LUX 02/14 SGD AS EQ LUX 02/14 USD AS EQ LUX 02/14 SGD AS EQ LUX 02/14 USD AS EQ LUX 02/14 SGD AS EQ LUX 02/14 USD EA EQ LUX 02/14 SGD EA EQ LUX 02/14 USD AS EQ LUX 02/14 USD OT EQ LUX 02/14 USD AS EQ LUX 02/14 SGD AS EQ LUX 02/14 USD OT OT LUX 02/14 USD AS BD LUX 02/14 USD OT OT LUX 02/14 USD OT OT LUX 02/14 SGD EU EQ LUX 02/14 EUR GL EQ LUX 02/14 SGD GL EQ LUX 02/14 USD OT OT LUX 02/14 SGD OT OT LUX 02/14 USD GL EQ LUX 02/14 SGD GL EQ LUX 02/14 USD OT OT LUX 02/14 USD OT OT LUX 02/14 USD GL EQ LUX 02/14 SGD GL EQ LUX 02/14 USD GL EQ LUX 02/14 EUR GL EQ LUX 02/14 SGD GL EQ LUX 02/14 USD OT OT NA NS GL EQ LUX 02/14 USD EE EQ LUX 02/14 USD

Hong Kong declines 1%, as China CPI is no relief

Japan’s yields decline ahead of 5-year sale

14.90 15.26 14.71 20.32 12.89 48.73 14.46 28.24 14.47 25.51 11.05 17.02 15.78 32.87 11.11 10.63 10.93 13.42 34.49 14.58 61.64 13.71 23.70 14.36 31.37 8.61 15.63 15.31 14.06 22.52 26.81 21.56 NS 43.84 16.51

-5.5 -5.0 -2.3 -2.4 -2.3 -2.4 -3.5 -3.6 -12.3 -12.4 -2.7 -0.2 -2.9 -3.0 -6.6 -1.8 -9.0 -9.4 -1.0 -4.8 -5.0 -6.8 -6.3 -6.3 -6.5 -4.5 -1.8 5.1 4.8 -0.9 -0.3 -0.5 NS -7.3 2.0

In print & online. Contact:

NS 40.0 NS 19.5 1.3 11.8 9.9 21.2 7.2 18.1 36.1 17.1 15.4 27.4 25.5 NS 12.0 NS 28.3 NS 24.8 NS 18.0 7.6 18.6 22.8 13.9 14.3 26.1 49.4 34.0 47.7 NS 20.2 29.5

NS NS NS 43.5 NS 32.4 NS 39.1 NS 41.5 48.7 33.4 NS 52.6 54.9 NS 47.4 NS 67.4 NS 55.6 NS 33.1 NS 39.1 45.6 NS NS 28.4 61.1 NS 64.9 NS 50.1 84.7

In Hong Kong, property developers declined on worries about monetary tightening. China Overseas Land & Investment gave up 1.9%, while Shimao Property Holdings fell 1.6%. Energy-sector shares declined after crude-oil prices fell in New York overnight. PetroChina shed 0.9%. Cnooc fell 1.2%. In Tokyo, relief over the Chinese numbers helped to underpin the market. Investors largely shrugged off the widely predicted outcome of the Bank of Japan’s policy meeting. The central bank’s policy board voted unanimously to maintain the policy interest-rate target in a 0.0%-0.1% range and raised its assessment of the broader economy for the first time in nine months. GS Yuasa advanced 5.4% a day after the battery maker raised its full-year earnings outlook. Softbank rose 3.4% after The Wall Street Journal reported Apple is working on the first of a new line of less-expensive iPhones. Softbank is Japan’s only carrier for Apple products. Yamaha Motor tumbled 11% after the motorcycle maker issued profit forecasts for year through December that undershot consensus forecasts. In Shanghai, metal plays posted solid advances, supported by Monday’s strength in global metal prices. Jiangxi Copper climbed 3.2%. Aluminum Corp. of China added 4.3%.

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NAV GF AT LB DATE CR

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NAV GF AT LB DATE CR

Eq. MENA EURO A Eq. MENA USD A Eq. US Rel Val A Money Market EURO A Money Market USD A

OT OT LUX OT OT LUX US EQ LUX EU MM LUX US MM LUX

02/14 02/14 02/11 02/11 02/11

EUR USD USD EUR USD

NAV 41.28 55.57 25.25 27.55 15.89

—%RETURN— YTD 12-MO 2-YR -3.8 -3.8 6.9 0.1 0.0

9.8 9.8 26.9 0.5 0.3

26.5 26.5 32.2 0.6 0.4

-6.7 -4.8 -3.1 -2.0

-15.3 0.1 NS -1.8

-6.9 6.6 NS 12.1

n MANULIFE ASSET MANAGEMENT TEL:(852)2108 1110 Internet:http://www.manulife.com.hk 47/F Manulife Plaza, Causeway Bay, Hong Kong American Growth American Growth AA Asian Equity Asian Equity AA Asian Sm Cap Equity AA China Value A China Value AA Dragon Growth Dragon Growth AA Emg Eastrn Europe A Emg Eastrn Europe AA European Growth European Growth AA Global Contrarain AA Global Property AA Global Resources AA Healthcare AA India Equity AA International Growth International Growth AA Japanese Growth Japanese Growth AA Latin America Equity AA Manulife GF Strategic Income Fund AA MGF Asia Value Dividend Equity Fund Russia Equity AA Taiwan Equity AA Turkey Equity AA U.S. Bond AA U.S. Sm Cap Equity AA U.S. Special Opportunities U.S. Tsy Inf-ProtSec AA

US EQ LUX 02/14 USD US EQ LUX 02/14 USD OT OT LUX 02/14 USD OT OT LUX 02/14 USD OT OT LUX 02/14 USD AS EQ LUX 02/14 USD AS EQ LUX 02/14 USD AS EQ LUX 02/14 USD AS EQ LUX 02/14 HKD EU EQ LUX 02/14 USD EU EQ LUX 02/14 USD EU EQ LUX 02/14 USD EU EQ LUX 02/14 USD GL EQ LUX 02/14 USD OT EQ LUX 02/14 USD GL EQ LUX 02/14 USD OT EQ LUX 02/14 USD EA EQ LUX 02/14 USD GL EQ LUX 02/14 USD GL EQ LUX 02/14 USD JP EQ LUX 02/14 USD JP EQ LUX 02/14 USD GL EQ LUX 02/14 USD OT OT LUX 02/14 USD OT OT LUX 02/14 USD EE EQ LUX 02/14 USD AS EQ LUX 02/14 USD OT OT LUX 02/14 USD US BD LUX 02/14 USD US EQ LUX 02/14 USD US BD LUX 02/14 USD OT OT LUX 02/14 USD

18.22 1.05 2.85 0.92 1.55 8.06 2.53 1.75 8.51 5.47 2.35 10.16 0.73 1.15 0.82 1.30 1.05 1.16 3.38 0.78 3.15 0.81 1.38 1.12 1.36 0.84 1.27 0.96 1.17 1.12 1.06 1.17

5.7 5.7 -0.5 -0.6 -1.3 -2.5 -2.5 -1.7 -1.5 2.1 2.0 5.5 5.5 -2.2 3.9 0.8 3.3 -12.2 5.0 5.0 4.6 4.8 -5.3 1.4 -1.4 2.9 -2.1 -3.7 0.4 5.0 5.8 -1.4

24.1 23.8 25.0 24.7 41.2 24.1 23.8 14.5 14.6 25.8 25.6 23.3 23.0 30.0 30.0 27.7 12.6 13.4 16.9 16.6 15.2 13.0 16.7 13.8 24.0 33.4 NS 29.2 8.0 34.1 30.9 3.2

25.1 24.8 41.4 40.9 63.5 37.8 37.5 34.6 34.6 59.6 59.4 32.6 32.2 60.6 44.3 31.8 12.4 37.9 20.5 20.2 18.3 17.4 46.1 NS NS 72.6 50.5 71.0 12.4 51.2 59.2 5.3

n PT CIPTADANA ASSET MANAGEMENT Tel: +62 21 25574 883 Fax: +62 21 25574 893 Website: www.ciptadana.com Indonesian Grth Fund

GL

EQ BMU 02/09 USD

164.44

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25.2

72.7

n THE NATIONAL INVESTOR TNI Tower | Zayed 1st Street Khalidia| Web:www.tni.ae TNI Mena Real Estate Fund TNI MENA Special Sits Fund TNI MENA UCITS Fund TNI UAE Blue Chip Fund

OT OT OT OT

EQ BMU OT BMU OT IRL OT ARE

02/03 01/31 02/10 02/10

USD USD USD AED

773.66 1092.55 1064.99 4.96

n WEBSITE: WWW.VALUEPARTNERS.COM.HK, TEL: (852) 2880 9263, FAX: (852) 2564 8487 *formerly known as China ABH Shares Fund Intel-Chin Mainlnd Foc Intel-China Converg* VP Classic - A VP CLassic - B VP High Dividend Stk

AS AS AS AS OT

EQ EQ EQ EQ OT

CYM CYM CYM CYM CYM

01/31 01/31 02/14 02/14 02/07

USD USD USD USD USD

36.07 133.95 219.98 101.96 58.11

-2.5 -3.2 -1.9 -1.9 1.6

28.2 25.1 24.2 23.6 32.3

52.4 50.5 46.6 45.9 55.3

JP

EQ IRL 02/15 JPY

10267.00

8.2

13.4

17.3

JP JP

EQ IRL 02/15 JPY EQ IRL 04/27 JPY

6326.00 5230.34

8.7 -7.3

7.9 -5.4

9.9 -27.3

EQ IRL 02/15 JPY EQ IRL 02/15 JPY

7240.00 8777.00

7.2 10.1

9.3 15.9

14.2 12.1

4695.00 5367.00 5459.00

7.9 6.0 8.6

3.2 4.1 12.6

8.6 8.8 14.5

4413.00 4754.00 6955.00 9390.00 6791.00 7984.00 5326.00 12746.00 7880.00 7741.00 6066.00 2701.00

7.7 8.1 7.9 8.8 7.7 6.0 6.9 9.8 6.6 9.1 8.0 6.5

4.9 7.8 4.6 13.9 12.1 7.2 6.0 11.4 5.0 15.4 10.0 3.6

9.5 10.6 14.1 16.5 12.4 6.8 11.7 15.0 9.1 19.3 14.7 10.6

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54.9

n SGAM FUND AMUNDI HONG KONG LIMITED Hotline in Hong Kong (852) 2521 4231 Bonds US OppsCoreplus A Bonds World A Eq. AsiaPac Dual Strategies A Eq. China A Eq. Global Energy A Eq. Global Resources A Eq. Gold Mines A Eq. India A Eq. Luxury & Lifestyle EURO A Eq. Luxury & Lifestyle USD A

US BD LUX 02/11 USD OT OT LUX 02/11 USD AS EQ LUX 02/14 USD AS EQ LUX 02/14 USD OT EQ LUX 02/11 USD GL EQ LUX 02/11 USD OT EQ LUX 02/11 USD EA EQ LUX 02/14 USD OT EQ LUX 02/11 EUR OT EQ LUX 02/11 USD

JP JP

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EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ

n Yuki Mizuho Series 40.27 42.99 11.43 23.24 20.59 132.69 37.16 137.64 94.38 127.89

0.2 -2.1 -3.4 -4.1 6.6 0.0 -8.6 -12.1 0.6 0.6

8.0 3.4 18.6 7.0 20.3 29.3 30.3 13.6 44.7 44.7

11.3 6.0 37.6 27.1 21.8 34.4 30.1 37.6 52.5 52.5

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IRL IRL IRL IRL IRL IRL IRL IRL IRL IRL IRL IRL

02/15 02/15 02/15 02/15 02/15 02/15 02/15 02/15 02/15 02/15 02/15 02/15

JPY JPY JPY JPY JPY JPY JPY JPY JPY JPY JPY JPY

24

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

BLUE CHIPS
BONDS Dow Jones Asia Titans: Tuesday's best and worst...

Major players
benchmarks

Market value, in billions of US$

Company

Country

Industry

Reliance Industries

India

Exploration Production

$67.9

Previous close, in local currency

STOCK PERFORMANCE Previous session

41.50

52-week

Three-year

2.52%

-3.9%

-35.7%

2.33

16.4

-35.3

9.1

-26.7

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

Mitsui

Japan

Industrial Suppliers

33.2

1,537

Mitsubishi

Japan

Industrial Suppliers

46.9

2,391

Giants around the world

NTT DoCoMo

Japan

Mobile Telecomms

76.8

154,200

1.51

12.1

-9.8

Tokio Marine Hldgs

Japan

Property CasualtyInsr

25.3

2,692

1.39

11.7

-32.9

Cheung Kong

Hong Kong

Real Estate Hldg Dev

$35.2

118.50

24.5

-2.9

Shinhan Financial Grp

South Korea

Banks

20.7

48,900

-1.81

16.4

0.3

Hon Hai Precision Ind

Taiwan

Electrical Cmpnts Eqpmnt

37.7

115.00

-1.71

-4.2

-26.2

China Construction Bank

Hong Kong

Banks

203.0

6.58

-1.64

13.8

15.0

Canon

Japan

Electronic Office Eqpmnt

57.7

3,920

-1.51

11.0

-16.9

In U.S.-dollar terms.

Dow Jones Country Titans INDEX PERFORMANCE Previous session

Italy

0.72%

Spain

0.47

France

0.43

Year-to-date

52-week

11.9%

7.7%

10.0

7.2

8.0

11.8

Japan

0.39

7.3

7.9

Germany

-0.01

6.9

28.3

Netherlands

-0.01

6.2

17.2

Switzerland

0.04

5.6

7.9

Australia

-0.17

4.5

7.4

Canada

0.44

3.8

17.9

China 88

-0.26

3.4

-6.9

Russia

-0.04

3.3

29.5

3.0

U.K.

-0.10

Hong Kong

-0.98

-1.7%

14.3

South Korea

-0.47

-2.0

25.3

South Africa

-0.06

-2.1

16.4

Sweden

-0.91

-2.5

22.6

Singapore

-0.77

-2.7

14.6

0.50

-2.8

23.6

Brazil

0.60

-3.3

10.2

Insurance

0.48%

9.5%

15.3%

Banks

0.83

9.4

12.8

0.17

8.2

32.7

-0.33

7.7

31.7

Oil Gas

-0.02

7.5

18.8

Auto Parts

-0.20

6.9

49.2

Media

Global 50

5.5

0.26

Asian 50

-0.34

Tiger 50*

-0.60

Honda Motor 80.3 Japan (Automobiles) Nintendo 37.3 Japan (Toys) Toyota Motor 146.9 Japan (Automobiles) Woolworths 32.2 Australia (Food Retailers Wholesalers) Japan Tobacco 38.6 Japan (Tobacco) Mizuho Financial Grp 39.3 Japan (Banks) Samsung Electronics 110.6 South Korea (Semiconductors) Seven I Hldgs 23.3 Japan (Broadline Retailers) Westfield Grp 22.9 Australia (Retail) Tokyo Elec Power 40.0 Japan (Electricity) Kansai Elec Power 22.9 Japan (Electricity) Panasonic 27.6 Japan (Consumer Electronics) Nissan Motor 44.1 Japan (Automobiles) Nippon Steel 23.0 Japan (Steel) Nippon T&T 62.0 Japan (Fixed Line Telecommunications) East Japan Railway 26.2 Japan (Travel Tourism) BHP Billiton 158.8 Australia (General Mining) Woodside Petroleum 33.1 Australia (Exploration Production) Sumitomo Mitsui Finl 51.1 Japan (Banks) Taiwan Smcndtr Mfg 63.7 Taiwan (Semiconductors)

Arab 50

0.07

12.9

1.9

14.9

0.3

20.0

-5.1%

Market value, in billions (U.S)

Company/Country (Industry)

Dow Jones Regional Sector Titans

Ind Gds Svcs

-2.31%

...And the rest of Asia's blue chips

13.5

Turkey

1.74

3.9

*Asia excluding Japan

Latest, in local currency

3,685

STOCK PERFORMANCE Latest 52-week Three-year

1.24%

23.5%

1.20

-1.4

-52.8

3,910

1.03

16.5

-35.2

26.61

0.60

3.4

-1.9

337,000

0.60

5.0

-42.7

171.00

0.59

0.6

-100.0

958,000

0.52

27.7

63.5

2,212

0.41

13.9

-17.9

9.92

0.40

6.4

-30.7

2,094

0.38

-14.1

-27.3

2,128

0.38

2.2

-21.9

1,116

0.36

-11.8

-51.4

883.00

0.34

23.2

-7.2

306.00

0.33

-3.5

-45.1

3,930

0.26

...

-99.2

5,560

0.18

-5.1

-99.4

47.36

0.17

16.5

20.5

42.60

0.09

-1.4

-14.5

3,070

...

9.2

-99.6

72.50

...

24.1

17.9

24,420

Company/Country (Industry)

12.0%

QBE Insurance Group 19.6 Australia (Reinsurance) KDDI 28.2 Japan (Mobile Telecommunications) Mitsubishi UFJ Finl 77.4 Japan (Banks) JFE Hldgs 17.2 Japan (Steel) Takeda Pharm 37.8 Japan (Pharmaceuticals) Sony 34.5 Japan (Consumer Electronics) Rio Tinto Ltd. 38.4 Australia (General Mining) Westpac Bking 72.6 Australia (Banks) National Australia Bk 55.5 Australia (Banks) China Life Insurance 28.0 Hong Kong (Life Insurance) Shin-Etsu Chml 24.0 Japan (Specialty Chemicals) Aus NZ Bk 65.2 Australia (Banks) Bank of China 42.5 Hong Kong (Banks) China Mobile (HK) 187.3 Hong Kong (Mobile Telecommunications) PetroChina 28.4 Hong Kong (Integrated Oil Gas) Commonwlth Bk of Aus 81.7 Australia (Banks) POSCO 33.1 South Korea (Steel) CNOOC 94.7 Hong Kong (Exploration Production) Indl Comm Bk China 63.7 Hong Kong (Banks) Sun Hung Kai Prop 40.9 Hong Kong (Real Estate Holding Development)

-0.16%

534,000

-18.2%

-0.19

-32.2%

8.2

-26.3

467.00

-0.21

4.9

-50.5

2,735

-0.22

-11.6

-34.1

4,010

-0.37

2.7

-35.3

2,907

-0.38

-4.2

-40.1

88.14

-0.41

24.9

-35.7

24.31

-0.45

4.3

4.1

26.18

-0.46

7.7

-14.6

29.35

-0.51

-14.3

-4.6

4,735

-0.53

-2.4

-15.7

25.48

-0.66

24.3

6.6

3.96

-0.75

8.4

31.5

73.45

-0.81

-3.0

-39.0

10.48

-0.95

21.7

-11.9

53.30

-1.00

3.3

14.9

482,500

-1.13

-9.6

-6.5

16.52

-1.20

35.6

34.1

5.72

-1.21

4.5

10.8

124.40

-1.27

20.7

-12.3

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

Mid-spread, in pct. pts. Mid-price

Coupon

SPREAD RANGE, in pct. pts. since most recent roll Maximum Minimum Average

Spreads Spreads on fiveyear swaps for corporate debt; based on Markit iTraxx indexes.

Showing the biggest improvement...

And the most deterioration

CHANGE, in basis points

CHANGE, in basis points

0.98

100.09%

0.01%

1.20

0.94

1.04

1.32

98.60

0.01

1.84

1.29

1.54

GS Caltex Oil

116

–5

...

–1

Sony

59

...

1

4.03

103.85

0.05

5.37

3.89

4.52

Rep Indonesia

152

–5

–1

15

Honda

57

...

...

1

1.07

99.67

0.01

1.25

0.93

1.08

Indl Bk Korea

122

–4

2

5

Kintetsu

119

...

–1

21

1.03

99.87

0.01

1.16

0.90

1.02

In percentage points

Index roll Europe Senior Financials t

2.00 1.50 1.00

t

All statistics published in The Wall Street Journal Asia from markets outside the Asian-Pacific region reflect preliminary data.

18.61

Credit derivatives

Note: Data as of February 14

— 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

Market value, in billions (U.S)

Yesterday Yesterday Five-day 28-day

Korea Dep

Yesterday Yesterday Five-day 28-day

90

–3

...

–3

Nomura Hldgs

171

...

5

14

Woori

142

–3

–3

4

Bk of Tokyo Mitsubishi

76

...

...

–11

Shin Han

135

–3

–1

2

Telekom Malaysia

77

...

...

–1

85

–2

–3

1

Sumitomo Metal

70

...

1

–12

Korea Elec Pwr

93

–2

3

3

2

3

–2

1

140

7

12

Nippon Yusen Kabushiki Kaisha

76

Rep Philippines Kdom Thailand

115

–2

3

11

TAISEI

211

1

–1

49

SK Energy

127

2

...

...

Malayan Bkg

Source: Markit Group

0.50

Europe

0 Sept. Oct. Nov. Dec. Jan. Feb. 2011 2010 Source: Markit Group

–2

Behind Asia's deals: Bank revenue rankings, Asia (ex Japan) 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.

Deutsche Bank

Revenue, in millions

Market share

Equity capital markets

$57

6.1%

56%

PERCENTAGE OF TOTAL REVENUE Debt Mergers & capital markets acquisitions

41%

Loans

2%

... ...

Guosen Securities Co Ltd

47

5.0

99

1

...

UBS

45

4.7

35

41

17

WSJ.com

Morgan Stanley

42

4.5

87

5

8

Huatai Securities Co Ltd

27

2.9

99

...

...

...

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.

Citi

27

2.8

56

23

5

16

8% ...

Bank of America Merrill Lynch

26

2.7

33

20

33

13

Ping An Securities Co Ltd

26

2.7

96

...

3

...

Goldman Sachs

24

2.5

81

14

5

... Source: Dealogic

Wednesday, February 16, 2011

25

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

-6.50 -23.00 -8.50 1.175 -58 0.60 -0.63 3.52 -22 -27 unch.

458.60 1374.00 3076.00 2,509.50 32,590.00 10,109.00 2,647.00 2,517.00 28,905

-5.15 8.90 22.60 9.50 290.00 -14.00 22.00 18.00 255

88.87 2.7640 2.6613 4.050 103.18 867.00

0.14 0.0136 0.0036 -0.006 0.10 -4.50

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)

700.00 1393.00 895.50 113.875 3,348 262.30 28.15 186.58 3,933.00 2,212 2,283

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)

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

721.00 1,467.50 925.50 116.600 3,468 266.75 33.11 189.40 3,967 2,322 2,318

-0.92% -1.62 -0.94 1.04% -1.70 0.23 -2.19 1.92 -0.56 -1.21 unch.

Contract low

366.50 909.25 521.75 89.975 2,650 133.75 11.84 68.05 2,885 1,610 1,493

465.75 280.00 1,434.10 1,005.00 3,127.50 1,475.00 2,557.00 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 28,905 18,005

-1.11 0.65 0.70 0.38 0.90 -0.14 0.84 0.72 0.89

136.90 2.8041 2.6902 10.050 133.58 875.75

0.16 0.49 0.14 -0.15 0.10 -0.52

67.95 1.5625 1.9900 3.882 68.02 629.75

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

142.25

-0.33

4931.03

-4.79

CBN 600

27136.25

-18.44

Hong Kong

Hang Seng

22899.78

-221.28

India

Sensex

18273.80

71.60

...

Indonesia

Jakarta Composite

3416.767

...

Japan

Nikkei Stock Average

10746.67

21.13

962.57

3.38

Australia

SPX/ASX 200

...

China

14 17

...

Topix

...

Malaysia

Percentage change

4.0238 0.2485 1.6688 0.5993 0.9877 1.0125 0.9882 1.0119 0.9896 1.0105 0.9922 1.0079 471.95 0.002119 1900.00 0.0005263 1 1 12.1026 0.0826 2.7700 0.3610 19.550 0.0512 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

1.3519 0.7397 8.9060 0.1123 10.5353 0.0949 61.3964 0.0163 12049 0.0000830 113.28 0.008828 113.26 0.008830 113.20 0.008834 113.06 0.008845 4.1271 0.2423 1.7947 0.5572 115.359 0.0087 59.074 0.0169 1.7304 0.5779 1517.51 0.0006590 39.824 0.02511 41.501 0.02410

1.0003 0.9998 6.5892 0.1518 7.7947 0.1283 45.4250 0.0220 8915 0.0001122 83.81 0.011932 83.79 0.011934 83.75 0.011940 83.65 0.011954 3.0535 0.3275 1.3278 0.7531 85.350 0.0117 43.707 0.0229 1.2803 0.7811 1122.75 0.0008907 29.464 0.03394 30.705 0.03257

In euros

PERFORMANCE Yr.-to-date 52-wk.

Price-to-

earnings ratio* 27

Region/Country Index Euro Zone Euro Stoxx

-0.2%

19.6%

-0.10

3.9

8.0

14

-0.07

1.6

1.1

22

Denmark

OMX Copenhagen

-0.23%

-0.96 0.39% Closed

0.20 0.35

1505.33

Kuala Lumpur Composite

In U.S. dollars

5.4385 0.1839 2.2555 0.4434 1.3349 0.7491 1.3357 0.7487 1.3376 0.7476 1.3411 0.7457 637.89 0.001568 2568.04 0.0003894 1.3516 0.7399 16.3579 0.0611 3.7439 0.2671 26.424 0.0378 1.3516 0.7399 5.80 0.172276

Per euro

Per euro EUROPE Euro zone euro 1 1-mo. forward 1.0003 3-mos. forward 1.0011 6-mos. forward 1.0026 Czech Rep. koruna-b 24.356 Denmark krone 7.4560 Hungary forint 271.41 Norway krone 7.8591 Poland zloty 3.9286 Russia ruble-d 39.601 Sweden krona 8.7495 Switzerland franc 1.3075 1-mo. forward 1.3071 3-mos. forward 1.3064 6-mos. forward 1.3050 Turkey lira 2.1543 U.K. pound 0.8363 1-mo. forward 0.8365 3-mos. forward 0.8372 6-mos. forward 0.8385

In euros

Per U.S. dollar

In U.S. dollars

1 0.9997 0.9989 0.9974 0.0411 0.1341 0.003684 0.1272 0.2545 0.02525 0.1143 0.7648 0.7650 0.7655 0.7663 0.4642 1.1957 1.1954 1.1945 1.1926

0.7399 0.7401 0.7407 0.7418 18.020 5.5165 200.81 5.8147 2.9066 29.299 6.4735 0.9674 0.9671 0.9665 0.9655 1.5939 0.6188 0.6189 0.6194 0.6204

1.3516 1.3512 1.3501 1.3481 0.0555 0.1813 0.004980 0.1720 0.3440 0.03413 0.1545 1.0338 1.0340 1.0346 1.0357 0.6274 1.6161 1.6157 1.6145 1.6119

MIDDLE EAST/AFRICA Bahrain dinar 0.5095 Egypt pound-a 7.9461 Israel shekel 4.9279 Jordan dinar 0.9573 Kuwait dinar 0.3787 Lebanon pound 2028.08 Saudi Arabia riyal 5.0688 South Africa rand 9.8853 United Arab dirham 4.9643

1.9625 0.1258 0.2029 1.0446 2.6403 0.0004931 0.1973 0.1012 0.2014

SDR -f

0.8685

1.1514

0.3770 2.6526 5.8790 0.1701 3.6460 0.2743 0.7083 1.4119 0.2802 3.5687 1500.50 0.0006665 3.7503 0.2666 7.3138 0.1367 3.6729 0.2723 0.6426

1.5562

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 Feb. 15

Closed

Euro Stoxx 50

Close 294.03

PREVIOUS SESSION

Net change 0.37

3028.90

10.52

438.15

-0.14

-0.6

13.0

14

Finland

OMX Helsinki

7596.83

-39.68

-10.9

12.6

13

France

CAC-40

4110.34

13.72

-7.7

33.5

15

Germany

DAX

7400.04

3.41

5.1

7.1

13

Italy

FTSE MIB

22823.82

186.53

7.1

8.7

11

Netherlands

AEX

370.51

0.34

-0.9

20.1

...

Russia

RTSI

1865.99

-13.57

Spain

IBEX 35

10826.2

51.5

Switzerland

SMI

6690.90

24.84

64802.14

233.28

6037.08

-23.01

358.12

-0.77

2.4

9.8

9

0.5

23.6

15

-9.8

27.7

...

Turkey

ISE National 100

-3.4

11.7

12

U.K.

FTSE 100

-2.0

25.6

17

AMERICAS

DJ Americas

Percentage change 0.13%

PERFORMANCE Yr.-to-date 52-wk. 7.1% 15.0%

0.35 -0.03% -0.52

8.5

11.4

2.6

31.8

-0.8

16.6

8.0

12.0

7.0

32.3

0.33 0.05 0.82

13.1

7.2

4.5

16.2

5.4

31.6

0.09 -0.72

9.8

4.2

0.37

4.0

3.0

0.36

-1.8

25.2

0.48

...

New Zealand

NZSX-50

3390.091

6.621

9

Pakistan

KSE 100

12077.84

131.75

12

Philippines

Manila Composite

3790.78

-5.95

...

Singapore

Straits Times

3080.66

-23.76

11

South Korea

Kospi

2010.52

-4.07

15

Taiwan

Weighted

8721.93

36.46

-2.8

17.2

...

Brazil

Bovespa

66565.47

7.92

0.01

-4.0

1.1

10

Thailand

SET

968.49

1.42

0.15

-6.2

39.8

...

Argentina

Merval

3509.55

0.62

0.02

-0.4

52.4

23

EUROPE

0.07

4.9

18.5

16

Mexico

IPC

36919.46

-79.47

-4.2

17.6

5.9

11.2

14

Stoxx Europe 600

289.32

0.21

Stoxx Europe 50

2739.85

11.97

*P/E ratios use trailing 12-months, as-reported earnings European and Americas index data are as of 12:00 p.m. ET.

2.06% 1.83 2.14 2.27 2.45 2.49 2.08 2.20 2.57 2.57 2.27 2.27

17 15 14 17 17 16 12 14 13 13 13 13

Last

Net change

Global TSM 2704.07 -0.45 Global DOW 2206.82 -0.35 Global Titans 50 186.76 0.49 Asia/Pacific TSM 1406.51 -3.12 Asia/Pacific ex-Japan TSM 3511.52 -8.52 Europe TSM 2902.73 15.69 Emerging Markets TSM 4573.27 3.43 Asian Titans 50 148.47 -0.51 BRIC 50 632.57 -1.23 CBN China 600 -c 27136.25 -18.43 China Offshore 50 4166.94 -42.34 Shanghai -c 364.65 -0.22

1.10 -0.16 -0.77 -0.20 0.42

0.44

Price-toDividend earnings yield* ratio* Dows Jones Index

PERFORMANCE YearThree-yr., to-date 52-wk. annualized

Daily

-0.02% -0.02 0.26 -0.22 -0.24 0.54 0.08 -0.34 -0.19 -0.07 -1.01 -0.06

3.7% 5.7 5.5 -0.3 -2.8 5.6 -4.7 1.9 -3.4 1.6 -1.9 2.4

21.0% 17.2 12.9 19.5 21.3 17.5 18.2 14.9 14.6 1.1 10.9 1.1

-1.3% -4.0 -4.6 -1.2 -0.3 -5.4 -1.9 -3.1 -3.0 -10.6 -4.0 -9.9

2.27% 13 1.69 19 5.48 14 5.67 11 3.61 7 4.03 14 1.47 20 1.81 15 2.21 14 1.19 19 3.17 21

Last

Shenzhen -c 433.74 U.S. TSM 13888.63 Global Select Div -d 223.80 Asia/Pacific Select Div -d 298.25 Hong Kong Select Div -d 215.73 U.S. Select Dividend -d 365.16 Islamic Market 2299.45 Islamic Market 100 2324.31 Islamic China/HK Titans 30 1645.82 Sustainability Korea 1503.36 Brookfield Infrastructure 2346.23 DJ-UBS Commodity -p 162.98

Net change

0.04 -44.71 0.66 -0.98 -0.81 -0.91 -5.00 -8.94 -6.77 -2.54 3.52 0.52

*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 U.S. Australia Britain Canada China Euro Hong Kong India Indonesia Japan New Zealand South Korea Malaysia Philippines Singapore Switzerland Taiwan Thailand

US$

1.000 1.616 1.013 0.1518 1.352 0.128 0.0220 0.0001 0.012 0.753 0.0009 0.327 0.023 0.781 1.034 0.034 0.033

PERFORMANCE YearThree-yr., to-date 52-wk. annualized

Daily

0.01% -0.32 0.30 -0.33 -0.38 -0.25 -0.22 -0.38 -0.41 -0.17 0.15 0.32

-0.6% 5.8 3.3 0.2 -2.0 1.9 3.2 3.6 -1.3 0.9 3.6 0.4

10.4% 23.6 17.4 15.3 14.8 16.8 20.0 13.2 14.7 30.0 20.0 24.4

-3.9% 0.7 -4.5 -7.0 4.4 -5.4 1.2 -0.8 -4.4 3.3 0.2 -6.6

Source: DowJones Indexes

U.S.-dollar and euro foreign-exchange rates in global trading A$ 1.000 1.617 1.013 0.152 1.352 0.128 0.0220 0.0001 0.012 0.753 0.0009 0.328 0.023 0.781 1.034 0.034 0.033

£ 0.619 0.619 0.627 0.094 0.836 0.079 0.0136 0.0001 0.007 0.466 0.0006 0.203 0.014 0.483 0.640 0.021 0.020

C$ 0.988 0.987 1.596 0.150 1.335 0.127 0.0217 0.0001 0.012 0.744 0.0009 0.323 0.023 0.771 1.021 0.034 0.032

YUAN 6.589 6.588 10.649 6.672 8.906 0.845 0.1451 0.0007 0.079 4.962 0.0059 2.158 0.151 5.147 6.812 0.224 0.215

EURO 0.740 0.740 1.196 0.749 0.112 0.095 0.0163 0.0001 0.009 0.557 0.0007 0.242 0.017 0.578 0.765 0.025 0.024

HK$ 7.795 7.793 12.597 7.892 1.183 10.535 0.1716 0.0009 0.093 5.870 0.0069 2.553 0.178 6.088 8.058 0.265 0.254

RUPEE 45.425 45.414 73.411 45.993 6.894 61.396 5.828 0.0051 0.542 34.210 0.0405 14.876 1.039 35.481 46.958 1.542 1.479

RUPIAH 8914.24 8912.02 14406.31 9025.71 1352.86 12048.49 1143.63 196.24 106.36 6713.32 7.94 2919.35 203.96 6962.89 9215.12 302.55 290.32

YEN 83.810 83.789 135.445 84.858 12.719 113.278 10.752 1.8450 0.0094 63.117 0.0746 27.447 1.918 65.464 86.639 2.844 2.730

NZ$ 1.328 1.328 2.146 1.344 0.202 1.795 0.170 0.0292 0.0001 0.016 0.0012 0.435 0.030 1.037 1.373 0.045 0.043

WON 1122.75 1122.47 1814.48 1136.79 170.39 1517.51 144.04 24.72 0.13 13.40 845.54 367.69 25.69 876.98 1160.65 38.11 36.57

-0.38 -0.21

-0.21

2.3

15.1

5.1

23.5

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

Dow Jones Indexes

Price-toDividend earnings yield* ratio* Dows Jones Index

0.20

RINGGIT PH. PESO 3.054 43.707 3.053 43.696 4.935 70.634 3.092 44.253 0.463 6.633 4.127 59.074 0.392 5.607 0.0672 0.9622 0.0003 0.0049 0.036 0.521 2.300 32.915 0.0027 0.0389 14.314 0.070 2.385 34.139 3.157 45.182 0.104 1.483 0.099 1.423

S$ S FRANC 1.280 0.967 1.280 0.967 2.069 1.563 1.296 0.979 0.194 0.147 1.730 1.307 0.164 0.124 0.0282 0.0213 0.0001 0.0001 0.015 0.012 0.964 0.729 0.0011 0.0009 0.419 0.317 0.029 0.022 0.756 1.323 0.043 0.033 0.042 0.032

TW$ 29.464 29.457 47.617 29.832 4.472 39.824 3.780 0.6486 0.0033 0.352 22.189 0.0262 9.649 0.674 23.014 30.458

BAHT 30.705 30.697 49.622 31.089 4.660 41.501 3.939 0.6759 0.0034 0.366 23.124 0.0273 10.056 0.703 23.984 31.741 1.042

0.960

Source: Thomson Reuters via WSJ Market Data Group

MSCI indexes Developed and emerging-market regional and country indexes from MSCI Barra as of February. 15, 2011 Price-toDividend earnings yield ratio Morgan Stanley Index

LOCAL-CURRENCY PERFORMANCE

Last

Daily

YTD

52-wk.

2.30% 16

ALL COUNTRY (AC) WORLD* 343.22 -0.42%

3.8%

19.9%

2.30

16

World (Developed Markets) 1,344.83

-0.28

5.1

20.1

1.60

26

World Small Cap

248.23

-0.58

5.0

33.8

2.40

16

Kokusai (World ex-Japan)

1,331.57

-0.17

5.2

20.7

2.90

15

EAFE

1,727.59

-0.22

4.2

14.4

2.10

14

Emerging Markets (EM)

1,105.58

-1.30

-4.0

18.4

2.60

16

AC ASIA PACIFIC EX-JAPAN 468.42

-1.64

-2.2

20.1

2.20

15

AC Far East ex-Japan

512.40

-1.73

-2.4

21.4

1.90

16

Japan

598.56

1.33

6.6

6.1

2.20

14

China

65.19

2.40

-1.9

9.9

1.00

21

China A (China Domestic)

3,141.12

2.81

1.7

2.5

2.40

23

Hong Kong

12,040.20

0.64

-1.4

26.4

1.00

19

India

715.96

2.74

-11.8

7.8

1.10

12

Korea

577.70

2.42

-1.6

26.6

2.40

18

Malaysia

554.40

0.80

-1.1

19.6

2.80

15

Singapore

1,710.34

0.88

-2.6

12.0

3.10

16

Taiwan

309.38

1.14

-3.1

11.9

2.70

13

Thailand

383.54

2.91

-6.8

34.8

4.10

17

Australia

1,007.83

1.10

4.3

7.0

5.10

17

New Zealand

86.79

1.09

3.6

2.6

1.70

18

US BROAD MARKET

1,510.74 -0.30

6.1

26.6

3.10

15

EUROPE

4.8

16.7

100.00

*Twenty-three developed and 26 emerging markets

0.35

Source: MSCI Barra

26

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

SCANNING THE GLOBE Dow Jones Industrial Average

Nasdaq Composite Index

P/E: 15

t 50.37, or 0.41%

LAST: 12217.82 YEAR TO DATE: OVER 52 WEEKS

s 1,949.01, or 19.0%

High

t 11.77, or 0.42%

LAST: 2805.41 YEAR TO DATE: OVER 52 WEEKS

s 640.31, or 5.5%

S&P 500 Index

P/E: 13*

P/E: 18 t 4.75, or 0.36%

LAST: 1327.57 YEAR TO DATE: OVER 52 WEEKS

s 152.54, or 5.7% s 591.22, or 26.7%

s 69.93, or 5.6% s 232.70, or 21.3%

12500

2825

1375

12000

2700

1300

11500

2575

1225

11000

2450

1150

10500

2325

1075

Close Low

t

50–day moving average

10000 19 26

3 Dec.

10

17 23

31

7

14

21

Jan.

28

4 Feb.

2200

11

19 26

3 Dec.

10

17 23

31

7

14

21

28

Jan.

4 Feb.

1000

11

19 26

3 Dec.

10

17 23

31

7

Symbol

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 10.3 1.9 45.8 1.7 1.8 2.8 40.5 2.7 6.8 2.6 11.8 16.2 5.8 2.8 21.4 1.7 20.7 3.6 3.0 1.5 7.6 20.6 16.8 3.5 1.0 1.4 1.0 10.3

$28.22 17.47 46.62 14.82 71.66 102.36 96.51 18.67 62.94 43.20 53.93 83.16 21.30 47.96 37.42 21.34 162.78 47.04 60.60 30.52 75.88 32.67 27.02 18.91 64.38 91.90 59.29 84.87 36.24

–0.25 –0.12 0.10 –0.08 –0.61 –0.90 –0.44 –0.14 –0.20 –0.04 –0.59 –1.75 –0.20 –0.35 –0.16 –0.23 –0.44 0.50 –0.10 0.03 –0.36 –0.15 –0.05 –0.14 –0.16 ... 0.45 –0.34 0.34

–0.86% –0.68 0.22 –0.50 –0.84 –0.87 –0.45 –0.74 –0.32 –0.09 –1.08 –2.06 –0.95 –0.72 –0.43 –1.04 –0.27 1.07 –0.16 0.10 –0.47 –0.44 –0.18 –0.72 –0.25 ... 0.76 –0.40 0.95

WalMart

WMT

4.3

54.89

0.09

0.16

Stock

CHANGE Points Percentage

28

4 Feb.

11

Sources: WSJ Market Data Group; Birinyi Associates

U.S. stocks: most active...

Volume, in millions

21

Jan.

*Price-to-earnings ratio for the Nasdaq 100 Note: Price-to-earnings ratios are for trailing 12 months

DJIA component stocks

14

Stock

Volume, Symbol in millions

Citigroup SiriusXM AnnalyCap SPDR S&P 500 BankAm CiscoSys Nokia iShrMSCIEmrgMkt AlcatelLucent ADS PwrShrs QQQ LimeltNtwks JDS Uniphs FordMotor Intel JPMorgChas

C SIRI NLY SPY BAC CSCO NOK EEM ALU QQQQ LLNW JDSU F INTC JPM

ADRs of Asian companies* Latest

CHANGE Points Percentage

198.0 118.5 86.3 53.6 45.8 40.5 34.5 26.4 25.5 22.2 21.8 21.5 21.5 21.4 20.7

$4.89 1.74 17.41 132.93 14.82 18.67 9.04 45.46 4.50 58.36 8.22 25.63 16.06 21.34 47.04

–0.02 –0.09 –0.53 –0.50 –0.08 –0.14 0.20 0.06 –0.11 –0.22 1.76 –2.26 –0.04 –0.23 0.50

–0.31% –4.92 –2.95 –0.37 –0.50 –0.74 2.26 0.13 –2.28 –0.38 27.23 –8.10 –0.22 –1.04 1.07

LLNW 21,760.1 NSIT 819.0 KV/B 116.5 CVV 266.9 ACMR 1,223.3

$8.22 17.59 7.68 9.54 2.91

1.76 2.98 1.28 1.54 0.47

27.23% 20.40 20.00 19.25 19.22

$1.88 10.88 53.26 10.17 7.09

–0.46 –2.30 –10.08 –1.68 –1.08

–19.66% –17.45 –15.91 –14.17 –13.22

52-WEEK High Low

$15.55 13.85 3.94 131.63 7.27 53.16 37.65 96.23 12.55 5.63 58.22 19.24 22.81 54.70 21.59 17.60 17.61 52.30 77.92 93.50 8.51 9.90 27.48 16.81 46.88 6.66 6.74 125.97 8.94 7.69

Biggest gainers... LimeltNtwks InsightEnt KV Pharm B CVDEquip AC MooreArt

...Biggest losers Micrvisn UltraClean CapellaEdu Derma Sci LfPtnrHldgs

MVIS UCTT CPLA DSCI LPHI

3,522.6 1,014.7 762.1 131.3 507.2

Volume, Symbol in OOOs

Stock

SuntechPwr TaiwanSemi UtdMicro ADS Baidu ADS Slcnwr ADS CtripInt ADS TataMtrs ADS BHPBilton ADS AU Optrncs MitsuUFJ ADS ICICI Bk ADS SK Tele ADS KT Crp ADS ChinaMobile LG DisplayADS ChinaUnicomHK KoreaElecPwr Canon ADS Infosys ToyotaMtr ADS O2MicroIntl Rediff ADS FocusMediaHldg Wipro ADS Netease.com AdSemEg ADS SemiMfgInt ADS Posco TeleNZ ADS NmuraHldg

$7.05 9.30 2.50 48.50 4.45 31.35 14.50 58.38 8.38 4.48 33.21 14.58 17.48 44.36 13.75 10.91 10.43 36.80 53.28 67.56 4.75 1.69 13.71 11.30 26.16 3.33 3.08 87.80 5.90 4.75

STP TSM UMC BIDU SPIL CTRP TTM BHP AUO MTU IBN SKM KT CHL LPL CHU KEP CAJ INFY TM OIIM REDF FMCN WIT NTES ASX SMI PKX NZT NMR

CHANGE Latest Points Percentage

3,804.4 $9.46 0.11 3,503.7 12.80 –0.10 3,114.0 3.02 0.02 2,608.5 127.07 –1.74 1,651.0 6.74 0.04 1,646.9 40.01 –0.64 1,526.8 27.08 0.08 1,237.9 94.05 –1.59 1,109.4 9.08 –0.03 800.8 5.52 –0.05 672.3 46.49 0.35 629.7 17.13 –0.26 590.6 19.61 –0.18 566.7 47.35 –0.32 510.1 16.06 –0.44 507.5 16.83 –0.34 484.9 12.56 0.22 464.5 46.77 –1.09 404.3 68.40 0.26 376.0 92.98 0.17 276.1 8.22 –0.23 242.7 7.37 –0.06 234.2 25.59 –0.07 228.9 12.86 0.07 214.9 43.88 –0.76 211.4 5.99 –0.02 189.3 4.39 –0.19 187.6 108.46 –0.81 177.3 8.40 –0.01 175.9 6.36 –0.07

1.18% –0.74 0.67 –1.35 0.60 –1.57 0.30 –1.66 –0.28 –0.90 0.76 –1.50 –0.88 –0.67 –2.67 –1.98 1.78 –2.28 0.38 0.18 –2.72 –0.81 –0.27 0.55 –1.70 –0.33 –4.15 –0.74 –0.16 –1.09

*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

5.045% 5.660 1.908 3.740 2.427 4.298 1.935 3.485 1.494 3.340 1.648 3.672 1.403 3.296 0.885 3.200 2.485 4.806 0.240 1.321 1.295 3.488 5.469 7.453 3.298 5.418 0.587 1.919 1.544 3.849 0.847 3.606

SPREAD OVER TREASURYS, in basis points Latest Previous Month ago Year ago

419.8 205.4 106.1 13.4 158.0 69.2 108.8 -12.1 64.7 -26.6 80.1 6.6 55.6 -31.0 3.8 -40.6 163.8 120.0 -60.7 -228.5 44.8 -11.8 462.2 384.7 245.1 181.2 -26.0 -168.7 69.7 24.3 ... ...

422.8 207.2 105.2 12.0 163.5 69.3 108.7 -15.0 64.4 -28.2 76.4 4.8 55.6 -32.3 -1.8 -39.2 165.4 120.0 -59.5 -230.3 45.3 -14.8 363.1 383.2 217.3 180.6 -24.3 -169.6 67.4 21.2 ... ...

439.9 215.9 96.5 19.5 97.7 74.8 120.6 -5.5 66.6 -25.8 73.2 8.4 56.5 -29.3 1.4 -53.8 201.8 133.7 -39.9 -212.8 46.8 -10.4 381.8 356.4 282.4 201.3 -708.4 -148.1 75.5 28.1 ... ...

374.2 184.0 61.8 -4.2 49.3 5.6 50.6 -23.8 97.4 -17.9 25.8 -17.0 14.3 -49.5 -13.2 -68.2 72.8 36.1 -66.9 -236.5 22.2 -18.4 75.8 77.6 63.3 33.6 -37.4 -170.6 36.0 36.9 ... ...

Previous

YIELD Month ago

Year ago

5.063% 5.690 1.887 3.738 2.470 4.311 1.922 3.468 1.479 3.336 1.599 3.666 1.391 3.295 0.817 3.226 2.489 4.818 0.240 1.315 1.288 3.470 4.466 7.450 3.008 5.424 0.592 1.922 1.509 3.830 0.835 3.618

4.983% 5.488 1.549 3.524 1.561 4.077 1.790 3.274 1.250 3.071 1.316 3.413 1.149 3.036 0.598 2.791 2.602 4.666 0.185 1.201 1.052 3.225 4.402 6.893 3.408 5.342 -6.500 1.848 1.339 3.610 0.584 3.329

4.576% 5.537 1.452 3.655 1.327 3.753 1.340 3.459 1.808 3.518 1.092 3.527 0.977 3.202 0.702 3.015 1.562 4.058 0.165 1.332 1.056 3.513 1.592 4.473 1.467 4.033 0.460 1.991 1.194 4.066 0.834 3.697

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 1.000 Germany 2 2.500 10 0.580 Hong Kong 2 2.440 10 2.000 Italy 2 3.750 10 0.200 Japan 2 1.200 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 4.750 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

Monday

1

3

6

month(s)

1

2 3 5 710

years maturity

0 30

Ryan Index

Yield to maturity

Modified duration

Month to-date

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

4.666% 3.614 3.021 2.349 2.652 1.410 0.850 0.295 0.173 0.173 0.132

16.00 8.33 6.30 4.69 6.70 2.93 1.94 0.99 0.50 0.45 0.25

–1.43 % –1.73 –1.82 –1.76 –1.40 –1.16 –0.54 –0.02 0.02 0.01 0.01

One-month bill

0.091

0.07

0.01

TOTAL RETURN

Quarter to-date

Year to-date 12-month

–4.80 % –4.80 % –2.13 –2.13 –1.52 –1.52 –1.14 –1.14 –1.81 –1.81 –0.90 –0.90 –0.38 –0.38 0.06 0.06 0.06 0.06 0.04 0.04 0.03 0.03 0.02

a-Performance of a cash investment

0.02

5.60 % 4.24 4.85 3.53 3.69 2.01 0.97 0.71 0.31 0.36 0.25 0.15

Source: Ryan ALM

Key money rates Latest

52 wks ago

Prime rates

Latest Euro Libor One month

52 wks ago

Offer Eurodollars One month

Bid

0.85500%

0.38313%

0.3500%

0.2500%

1.04375

0.59969

Three month

0.5500

0.4500

Six month

1.29125

0.91250

Six month

0.7500

0.6000

One year

1.64813

1.20063

One year

1.0500

0.8500

Latest

52 wks ago

U.S.

3.25%

3.25%

Canada

3.00

2.25

Japan

1.475

1.475

Britain

0.50

0.50

ECB

1.00

1.00

Switzerland

0.55

0.53

Hibor One month

0.15107

0.06964%

Australia

4.75

3.75

Three month

0.23107

0.13000

U.S. discount

0.75%

0.50%

Hong Kong

5.25

5.25

Six month

0.30000

0.24000

Fed-funds target

0.25

0.25

One year

0.68000

0.55000

Call money

2.00

2.00

Libor One month

Three month

Asian dollars One month

0.2725%

0.26400%

0.22875%

Three month

0.31350

0.25000

Three month

0.3155

0.2566

Six month

0.46570

0.38813

Six month

0.4755

0.3910

U.K. (BBA)

0.500

0.520

One year

0.79875

0.85563

One year

0.8020

0.8590

Euro zone

0.76

0.30

0.24%

Overnight repurchase rates U.S. 0.26%

0.14%

Sources: WSJ Market Data Group; Reuters

Wednesday, February 16, 2011

27

THE WALL STREET JOURNAL.

MARKETS LINEUP

Moving the markets

Asian index movers…

At right, Japan’s benchmark stock index and the biggest movers among the larger Asian stocks indexes and stocks Tuesday. 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

Hang Seng

Japan

Hong Kong

s

10746.67 0.20% or 21.13

Relief over China’s milder-than-expected inflation data helped to offset profit-taking in exporter shares. The Nikkei Average settled at the highest point since April 30.

t

22899.78 0.96% or 221.28

Concerns about further monetary tightening by Beijing pressured shares. Developers were mostly weaker. Shipping firm Cosco Pacific bucked the trend, rising 3.1%.

Regional inflation fears depressed shares, reversing the previous day’s advances. Commodities firms, banks and rig builders were among the worst performers.

t

Shares ended off lows after the China data, with technology stocks rising. LG Electronics advanced after it rolled out a series of new mobile devices. 2700

12500

25000

3750

2250

10000

20000

3000

1800

7500

15000

2250

1350

10000 FM A M J J A S O N D J 2010 2011

1500 F M A M J 2010

%

Stock

Volume in millions

Close

0.59

CCB

246.00

6.58

–0.11

–1.64

Genting Spore

7

1.41

Bank Of China

196.91

3.96

–0.03

–0.75

–1

–0.21

Icbc

193.28

5.72

–0.07

–1.21

–0.15

–1.82

–0.10

–0.95

Close

148.24

171

Hitachi

70.33

505

Mtshbsh Fin Grp

49.87

467

Toshiba

42.79

532

3

0.57

ChinaPetroChem

76.86

8.11

GSYuasa

38.71

620

32

5.44

PetroChina

73.70

10.48

Mizuho Financial

t

2010.52 0.20% or 4.07

4500

Volume in millions

Stock

South Korea

3080.66 0.77% or 23.76

30000

FM A M J J A S O N D J 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.

Kospi

Singapore

15000

5000

WSJ.com

Straits-Times

Change Net

1

Change Net

%

J A S O N D J 2011 Volume in millions

Close

170.61

1.99

Golden Agri

84.91

0.70

Noble Grp

24.69

2.11

Olam Inter

24.21

2.92

CapitaLand

19.88

3.37

Stock

Change Net

900 FM A M J 2010 Stock

%

J A S O N D J 2011 Volume in millions

Close

10.67

3,470

Change Net

%

–1.49

CJ Seafood

–0.01

–1.42

Rnl Bio

7.95

2,445

210

9.40

–0.06

–2.76

Ilshin Stone

6.76

1,265

-220

–14.81

–0.12

–3.95

Eugene Invt

6.75

730

15

2.10

unch.

…

Haein Corp

6.46

8,600

-530

–5.81

–0.03

340

10.86

Asian stocks in the news Punjab Natl Bk India

Formosa Chmls & Fibre 1,096.45 rupee Taiwan

s 3.4% or 36.55 rupee

HTC

TW$104.50

s 3.5% or TW$3.50

Taiwan

Kasikornbank TW$973.00

s 3.5% or TW$33.00

Thailand

Beijing Enterprs Hldgs 114.0 baht Hong Kong

s 3.6% or 4.0 baht

HK$45.80

s 4.1% or HK$1.80

The Indian bank’s shares were higher for a third day, climbing 12% over the period.

Petrochemical makers outperformed the broader Taiwan market on earnings optimism.

The smartphone maker unveiled a tablet computer and phones with Facebook button.

The bank scored a third straight day of gains as Thailand shares climbed.

The stock advanced for a third session, bringing its three-day gain to 12%.

In rupee

In Taiwan dollars

In Taiwan dollars

In baht

In Hong Kong dollars

2000

150

800

160

80

1200

90

600

120

60

800

60

400

80

40

30 F M A M J 2010

8 138.52 2.0

J

-0.5% 3.4%

-1.2% 9.0%

17.3% 23.6%

TonenGenl Sekiyu Japan

A S O N D

J 2011

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Banks Punjab Natl Bk

0.4% -2.6% 3.5% -1.4%

¥931

Japan

¥2,478

t 3.6% or ¥92

The company was one of the Japanese exporters to fall after strong gains a day earlier.

In yen

In yen

1500

5000

-0.2% -2.7% 18.7% 3.5% -1.7% 232.2%

J 2011 14 8.33 2.2

Banks Kasikornbank

-0.5% 3.6%

-1.2% 2.2%

United Co. Rusal PLC

Korea

Hong Kong

9,300 won

17.3% 44.3%

A S O N D

J 2011

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

17 2.68 1.5

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Indus Gds & Svcs Beijing Enterprs Hldgs

0.1% -2.0% 4.1% 4.8%

26.7% -8.0%

Yamaha Motor

HK$13.04 Japan

¥1,525

t 4.1% or HK$0.56

Shares in the banking company have dropped 17% in the past month.

The big aluminum producer plans to raise production by only 2% this year.

In won

In Hong Kong dollars

22500

J

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Korea Exchange Bk t 3.7% or 360 won

20 F M A M J 2010

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Technology HTC

A S O N D

t 10.6% or ¥180

The motorcycle maker tumbled after it predicted lower-than-expected earnings.

20

In yen

2500

18000

16

2000

900

3000

13500

12

1500

600

2000

9000

8

1000

1000 FM A M J 2010

4 214.10 4.1 21.2% 22.5%

J A S O N D J 2011

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

PERCENTAGE CHANGE Daily 1 wk. 52 wks

... -1.9% -3.5% -0.6%

20 48.58 2.5

J

4000

300

Oil & Gas TonenGenl Sekiyu

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

F M A M J 2010

1200

J A S O N D J 2011

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

40.9% 53.7%

Olympus

t 3.5% or ¥34

J A S O N D J 2011

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Chemicals Formosa Chmls & Fibre

40

200 F M A M J 2010

14 7.45 4.3

Shares fell for the first time in four trading days despite the company’s swing to a profit.

F M A M J 2010

100

120

J A S O N D J 2011

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

200

1600

400 F M A M J 2010

1000

4500 FM A M J 2010

48 51.60 1.2

J A S O N D J 2011

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Health Care Olympus

-0.4% -3.6%

-1.4% 1.4%

11.9% -9.6%

5 1745.07 3.9

J

-0.5% -1.2% -3.7% -9.3%

17.3% -26.8%

A S O N D

J 2011

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Banks Korea Exchange Bk

500

4 F M A M J 2010

8 1.67 None

F M A M J 2010

J A S O N D J 2011

Price-to-earnings ratio Earnings per share, past four quarters Dividend yield

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Basic Resources United Co. Rusal PLC

-0.1% -4.1%

-1.2% 1.1%

24.6% 54.0%

27 57.20 None

PERCENTAGE CHANGE Daily 1 wk. 52 wks

Automobiles & Parts Yamaha Motor

... 2.1% -10.6% -2.4%

32.6% 28.6%

Wednesday, February 16, 2011

THE WALL STREET JOURNAL.

HEARD ON THE STREET Email: [email protected]

FINA NCIA L A NA LYSIS & COMMENTARY

WSJ.com/Heard

Inflation can’t Beer trouble may dent Foster’s be papered over Changing the measuring stick isn’t a solution to China’s inflation problem. In 2010, Premier Wen Jiabao set a target of 3% for the consumer-price index. It was recently changed to 4% for 2011, partly to give the government room to move subsidized prices for gas and other products closer to the market. But a CPI reading of 4.9% in January was still outside the government’s comfort zone. And to add to the uncertainty, Tuesday’s data from the National Bureau of Statistics includes periodic tweaks to the inflation basket, designed to reflect the purchases of a typical consumer. The NBS published changes to the weights of different items. The biggest were an increase to the accommodations component—rent, utilities, and the cost of buying a property—of more than four percentage points and a reduction of food by more than two points. But, true to form, it kept the absolute weightings a secret. Adding to the mystery, the stats

bureau has also published its calculations of what the CPI would have looked like under the old approach. The results suggest that the new weights have had the effect of fractionally raising the headline reading. That is a surprise, given the soaring price of food, still the biggest component of the CPI and key contributor to the current bout of price pressure. Even though the costs of rental housing are also rising fast, the data left some private-sector economists scratching their heads. The data show Beijing needs to do more to tame inflation, even before factoring in the risks from elevated property prices. The change in methodology might be well-intentioned, and the timing is in accordance with the normal five-year schedule. But by changing the mix at a time when global markets are focused on the problem of inflation, and keeping key details to itself, the NBS has done little to enhance the credibility of the data—or to improve its own reputation for transparency. —Tom Orlik

An underwhelming start for Barclays’s Diamond This wasn’t what Barclays investors had hoped to hear. Robert Diamond’s first annual results announcement as chief executive of the U.K. bank contained no shortage of good news, notably a better-than-expected £6.1 billion ($9.78 billion) pretax profit and a core Tier 1 capital ratio of 10.8%. But what shareholders really wanted was a detailed roadmap of how Mr. Diamond plans to raise Barclays’s current 7.2% return on equity above the bank’s 11% cost of capital. On this score, Mr. Diamond was underwhelming. True, Mr. Diamond set out a new, lower target for group return on equity of 13% by the end of 2012. Barclays argues this is achievable: To reach the target, the bank will need to increase pretax profit to roughly £13 billion. A combination of cost cuts, lower impairment charges and margin expansion as interest rates rise should get Barclays most of the

way there, leaving it with about £1 billion in extra revenue to find. But this target was based on a 9% core Tier 1 capital ratio, which looks likely to be below the minimum ultimately demanded by U.K. regulators. A core Tier 1 ratio of 10% would require an extra £1 billion of revenue to meet the 13% target. Barclays provides little detail on how it expects to generate the extra revenue, which low-returning businesses and exposures it will exit, and the likely impact on revenue of shrinking its balance sheet. Mr. Diamond can argue with some justification that it is difficult to set out a clearer roadmap while the global and U.K. regulatory outlook is so uncertain. But if it is difficult for Mr. Diamond, it is even harder for investors. Barclays trades at just 0.85 times book value. Without more clarity, Mr. Diamond will find that discount hard to shift.—Simon Nixon

Investors may not rush to toast the news that Foster’s Group is going ahead with its long-anticipated plan to separate its beer and wine operations. The move had been viewed as an invitation for takeover bids for the Australian brewer’s beer unit, its crown jewel. But the froth came out of beer sales in the second half of 2010, particularly in the major tourist market of Queensland. The state did suffer wet and extreme weather conditions that hurt beer sales, but that may not be the whole story: The company said the weather was likely to account for just a third of the 14% decline in the volume of beer sold there. Outside of Queensland, volumes were down a little more than 5%, only half of which the beverage maker blamed on the weather. Beer consumption has been on the decline in Australia. According to the latest data from the Australian Bureau of Statistics, the amount of beer available for consumption has been on the rise, but the amount of beer consumed per capita has been falling. Foster’s says it expects the declines to moderate in the current half—the second half of its fiscal

Going flat

Australia’s per-capita consumption of pure alcohol in alcoholic beverages, liters per person

Beer

4.5

4.0

Wine 3.5

3.0 FY2005

’06

’07

’08

’09

Note: Fiscal years ending June 30 Source: Australian Bureau of Statistics

year—but foresees volume down 3% to 4% from a year earlier. Still, Foster’s maintains a dominant position domestically, having increased its share of the contracting beer market. Credit Suisse analysts said the beer division’s earnings before interest and tax have grown in 18 of the past 20 years. “This business remains attractive

over the long term,” they said. Will international brewers find it attractive? Globally, the beer market has been consolidating. Foster’s biggest domestic rival, Lion Nathan, was taken out by Japanese brewer Kirin Holdings in 2009. But that was then. A strong Australian dollar combined with the weaker beer market may keep investors away for now. In a recent note, Citigroup said “nearterm bids are unlikely.” Reports earlier tipped SABMiller as a potential suitor with an offer of £7 billion ($11.2 billion) for the Foster’s beer assets, but the company has been silent about its intentions. Absent any bids for individual divisions, the company’s parts may be worth less than the whole. Macquari said before the latest result, “We can construct an outcome where the combined equity market value of a listed [beer company] and [wine company] is equivalent to A$4.78 (US$4.80) a share.” The stock closed at A$5.74, giving it a price-to-earnings multiple 25% above the average these days, a sign investors are still betting on a white knight to emerge. They may be waiting awhile. —Cynthia Koons

presented by:

in partnership with:

Is your innovation a natural winner? Sometimes recognition is all that’s needed to elevate an idea onto the world stage. From an entirely new invention to the advancement of a classic, the Asian Innovation Awards and the Credit Suisse Technopreneur Award are committed to finding the next big ideas in Asia. Whether conceptualized in a backyard or a laboratory, we are seeking innovations that break with conventional processes in creative ways to improve quality of life or productivity, as well as those demonstrating the greatest potential for financial success. Entries welcomed from individuals, small businesses, large corporations and academia in Asia Pacific, from any field including health care, technology, medicine, energy, social sciences, government and others. To enter or to find out more, visit wsj-asia.com/aia Deadline for entries: March 25, 2011

Bloomberg News

Barclays CEO Robert Diamond, pictured last month, needs to find extra revenue.

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