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OPINION: Bruce Riedel on South Asia’s new arms race Page 13
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Buffett’s trading policies unheeded
(India facsimile Vol. 2 No. 214)
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Thursday, April 7, 2011
ASIA
asia.WSJ.com
Migrant boat from Libya sinks on way to Italy
Warren Buffett warned Berkshire Hathaway Inc.’s top employees last year against trading in shares of companies in which Berkshire might invest—the very issue that now is dogging the conglomerate.
BY MITSURU OBE AND GEORGE NISHIYAMA
By Leslie Scism, Erik Holm and Jean Eaglesham His memo, “ ‘Insider’ Trading Policies and Procedures,” sent last May and in place for more than 10 years, could turn up the heat on Mr. Buffett regarding recent trading by his top lieutenant David Sokol. Mr. Buffett revealed last week that Mr. Sokol bought shares of a chemicals maker about a week before Mr. Sokol suggested that Berkshire buy the company, which it later agreed to do. Mr. Buffett added that he believed Mr. Sokol’s purchases weren’t unlawful. However, the memo bars certain Berkshire officials Please turn to page 16
Video roils Malaysia
European Pressphoto Agency
Italy’s coast guard rescued 48 of some 200 migrants whose boat, en route to Italy from Libya, capsized near the island of Lampedusa. The tragedy highlighted the influx of migrants from North Africa, where NATO forces have been ramping up the rebel fight against Gadhafi’s forces. Page 6
China state press breaks silence on artist’s arrest BY JEREMY PAGE
Malaysia’s government said it would consider launching an investigation into whether opposition leader Anwar Ibrahim was involved in a sex film leaked online. Page 5
Fuel pressure China will raise prices for gasoline and diesel, bowing to pressure from rising global crude-oil prices Page 5
Japan plans steps to avert hydrogenblast
BEIJING—A Chinese newspaper linked to the Communist Party offered the first indirect acknowledgment that Ai Weiwei, China’s most famous artist-activist, is being held by police and accused him of being a “maverick” who trod too close to the “red line” of the law. The Chinese government maintained its official silence Wednesday about the fate of Mr. Ai, 53 years old, who has been out of contact since being stopped and led away by officials at Beijing Airport while trying to board a flight to Hong Kong on Sunday morning.
But the Global Times, a nationalistic tabloid run by the party’s flagship People’s Daily, published an editorial in Chinese and English that indirectly acknowledged his detention by dismissing calls for his release from the U.S., Britain, France, Germany and Australia, as well as rights groups. “He has been close to the red line of Chinese law,” said the editorial, titled “The Law Will Not Bend for Mavericks.” “Ai Weiwei chooses to have a different attitude from ordinary people toward law. However, the law will not bend for mavericks just because of the Western media’s criticism. Ai Weiwei will be
judged by history, but he will pay a price for his special choice, which is the same in any society.” The unusual editorial was published on the eve of a visit to Beijing by Kurt Campbell, the U.S. assistant secretary of state for East Asia, who even before Mr. Ai’s detention had expressed concern over recent forced disappearances of rights lawyers. The Global Times isn’t an official government mouthpiece, and the Chinese Foreign Ministry didn’t respond to a request to comment on Mr. Ai’s status or Mr. Campbell’s one-day visit. But it was the only ChiPlease turn to page 16
TOKYO—Tokyo Electric Power Co. began efforts Wednesday to stem the possibility of a hydrogen explosion at the quake-damaged Fukushima Daiichi nuclear power complex, demonstrating the increasing technical hurdles as the utility and Japanese government work to keep the plant under control. The utility, known as Tepco, was preparing Wednesday night to deal with the potential that hydrogen gas in the plant’s No. 1 reactor could come into contact with oxygen and explode—a scenario that could damage the reactor’s containment vessel and leak large quantities of radioactive material. Tepco and government officials late Wednesday were planning to stabilize the reactor’s containment vessel by injecting nitrogen gas into it. Hidehiko Nishiyama, spokesman for Japan’s Nuclear and Industrial Safety Agency, said
the measure is being taken “as a precautionary step.” He added: “There is no immediate risk of a hydrogen explosion occurring.” The measures illustrate the complexities that arise even as workers stabilize parts of the plant damaged in the March 11 earthquake and tsunami. The risk at reactor No. 1 appears to stem in part from the falling temperature of its reactor core—the top goal of Tepco and government officials trying to stop the release of more radioactive material. Workers can’t get close enough to the No. 1 reactor to see what is going on inside. But according to one engineer working for the Japanese regulator, experts believe that as the reactor’s fuel rods have cooled, steam inside the containment vessel is condensing into water, reducing the presPlease turn to page 15 Seeking to reopen schools, in bid to return to normalcy... 14 Japanese businesses knock government energy plan..... 17
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THE WALL STREET JOURNAL.
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Thursday, April 7, 2011
PAGE TWO
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Business & Finance n The yen fell to its lowest level in months against the dollar and the euro, a sign that post-quake central bank efforts to keep it from rising are succeeding. The decline is encouraging a view that a two-year stretch of gains for the currency is ending. 3, 26 n The head a Japanese lobby called for businesses to come up with their own energy-saving plans, criticizing a government proposal to cut industry’s electricity supply by 25% this summer. 17
Capital: Republicans inadvertently make case for tax rises. 8
n Kohlberg Kravis Roberts and the founder of Taiwan’s Yageo made an offer valuing the electronic-components company at about US$1.6 billion. 18 n Australia’s treasurer fired back at criticism of his opposition to the Singapore stock exchange’s purchase of the local market. 23 n Mapletree Commercial Trust plans to raise up to $1.3 billion in an IPO, which would be Singapore’s second-biggest this year. 24
Autos: Tata’s Jaguar Land Rover has a mini sales renaissance. 17
n Hitachi expects the earthquake and tsunami that struck Japan last month will have a “considerable” impact on its profit for the fiscal year ended March 31. 21
Indian policemen detained a protester in Srinagar on Wednesday as Kashmiri government employees demonstrated to demand a pay increase. The police had sprayed water cannons filled with violet color dye to disperse protesters.
n SAIC Motor plans to acquire $4.37 billion of assets from its parent to boost the Chinese car maker’s core competitiveness. 19
n A Reliance Power executive was shot and killed in Jharkhand, India, as he was traveling through a stronghold of leftist militants. 6
n RBS appointed Sherry Liu, formerly of J.P. Morgan, as chairman and chief executive for the bank in China. 24
n Asian nations must tackle inflation pre-emptively, the Asian Development Bank said, warning that some economies still show signs of overheating. 4
n Marriott plans to introduce its Fairfield Inn brand in India, part of a broader move to tap into the country’s growing middle class. 20
World-Wide
n China will raise prices for gasoline and diesel fuel by around 5%, bowing to pressure from rising global crude-oil prices. 5
Reuters
n Toyota’s debt rating was placed under review by Moody’s due to the impact of last month’s quake as Honda and Chrysler said they are curbing some production to conserve auto parts. 19
n A group of 13 lenders to Kingfisher Airlines has taken a 23.37% stake in the Indian carrier after the company restructured part of its $1.73 billion in debt. 21
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n NATO dismissed rebel complaints that it had cut back on airstrikes, saying missions were increasing. 6 n Yemenis demonstrated in the thousands in Taiz, the southern
city where police killed 16 protesters. n Ivory Coast’s President-elect Alassane Ouattara ordered his troops to launch an assault on the presidential residence, where rival Laurent Gbagbo sought refuge. n Italian Prime Minister Silvio Berlusconi’s trial for allegedly paying an underage girl for sex and abusing his powers was adjourned until May 31 after a 10minute hearing.
Business & Finance: Retailer, mall operator in proxy battle. 18
ONLINE TODAY Most read in Asia
1. The Sleepless Elite 2. Worries Grow for Those Still by Power Plant 3. Release of Irradiated Water Is Stopped 4. Few India Graduates Are Fit to Hire 5. China Raises Rates to Fight Inflation
Most emailed in Asia 1. Few India Graduates Are Fit … 2. The Sleepless Elite 3. Australia Deals Blow to SGX Bid 4. Tiny Fish Spur Widening Worry 5. Apple Crunched in Nasdaq Rebalance
Wine
Driver’s Seat
Deal Journal
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Bordeaux 2010: descending on the swath of vineyards and châteaux that line the Gironde in France.
Half the top 10 richest takeover offers over the past decade were in health care or pharmaceuticals.
Lexus will unveil a new car called the LF-Gh this month in New York International Auto Show. blogs.wsj.com/drivers-seat
Heard on the Street: A Satyam party seems premature. 32 THE WALL STREET JOURNAL ASIA Dow Jones Publishing Company (Asia) 25/F, Central Plaza, 18 Harbour Road, Hong Kong Tel 852-2573 7121 Fax 852-2834 5291 www.wsj-asia.com SUBSCRIPTIONS and Address Changes, please telephone our local customer service hotline, Hong Kong/Taiwan: 852-2831 2555; Beijing: 86-10 6581 4090; Shanghai: 86-21 5836 8228; Indonesia: 62-21 527 7592; Japan: 81-3 6269-2760; Korea: 82-2 756 1695; Malaysia: 60-3 2026 4061; Philippines: 63-2 848 5873; Singapore: 65-6415 4000; Thailand: 66-2 690 4222 to 7; India: 91-11 6462 0215. Or email:
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Thursday, April 7, 2011
THE WALL STREET JOURNAL.
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WORLD NEWS
Yen succumbs to post-quake intervention BY ALEX FRANGOS The yen’s fall to its lowest level against the dollar and the euro in months is the latest sign that a coordinated post-earthquake intervention is working. But how low can the yen go? The dollar was buying more than ¥85 during the Asian trading day Wednesday. That amounts to a 7% decline for the yen since the Group of Seven industrialized nations announced a coordinated bout of yen selling on March 18, and its weakest level since September, after Japan intervened in currency markets on its own. In midday U.S. trading Wednesday, the dollar was at ¥85.30, up from ¥84.83 late Tuesday in New York. The euro was at ¥122.36 from ¥120.64. A day before the intervention, the dollar was at around ¥78.95 and the euro was at around ¥110.70. “This is shaping up to be one of the most successful episodes of intervention ever,” says Sean Callow, senior currency strategist for Westpac Institutional Bank in Sydney. The euro hit an 11-month high against the yen in Asia on Wednesday, thanks to the increasingly divergent paths being set by monetary authorities in the two economies. The European Central Bank is widely expected to raise interest rates at a meeting Thursday. Higher interest rates generally attract capital. The yen’s steady drop in recent weeks is encouraging the view that a turning point could finally be at hand for the Japanese currency after more than two years of strengthening against the dollar that has frustrated Japanese companies and politicians. Analysts at Nomura say the break of 85 yen “could be significant from a medium-term perspective and we would not be surprised to see a trend of further yen weakness.” Nomura has revised its forecast to reflect a further drop in the yen, predicting that the dollar will be buying more than ¥90 in 2012 as U.S. interest rates rise and Japan’s rates remain anchored. The success of the intervention is partly explained by traders who now see a ceiling on yen strength, thanks to the threats of future intervention. That has given investors confidence to pile into so-called carry-trade bets, in which they borrow yen at very low interest rates and convert that cash into higheryielding currencies such as the Australian dollar, which is also trading at recent highs against the yen. Another factor is Japan’s weakened economic condition. Rolling electricity blackouts and nuclear fears are hampering manufacturing and exports. Even a temporary disruption could lessen the demand for Japanese automobile, technology and machinery companies to convert money earned abroad back into yen. Standard Chartered dropped its 2011 Japan growth forecast from 1.9% to 0.7% this year. It raised its 2012 forecast in expectation of a strong V-shaped recovery, and figures the dollar will strengthen to ¥90. Meanwhile, the Bank of Japan was scheduled to meet Thursday and is under pressure to further loosen monetary conditions by expanding its asset-purchase program to support Japan’s post-earthquake recovery, a move that would naturally depress the yen by increasing
its supply. A weaker yen should help embattled Japanese companies coping with the aftermath of twin natural and nuclear disasters, and continued supply and electricity shortages. Hitachi Ltd. President Hiroaki Nakanishi said Wednesday that the dollar trading above 85 yen is a “more natural state.” He said that Hitachi designed its budget for the fiscal year that just began this month based on the expectation that the dollar would trade at 80 yen. “For us, it would be favorable if the dollar remained stable in the 85 yen to 90 yen range,” he said. While mostly welcomed, a much weaker yen could complicate Japan’s rebuilding by making energy and commodity imports more expensive, a situation noted Tuesday by the country’s economy minister,
Slipping yen How many U.S. dollars 100 yen buys $1.30 1.20 1.10 March 18: G-7 intervention was announced
1.00 0.90
2010
’11
Source: Thomson Reuters via WSJ Market Data Group
Kaoru Yosano. “With the recent yen weakening, high oil prices could hit the economy directly,” Mr. Yosano said. Ja-
pan imports more than four million barrels of oil a day. And its badly damaged nuclear infrastructure suggests it will have to rely on other forms of fuel such as natural gas and coal, which will also need to be imported. The long-term success of currency interventions needs to be measured in months and years, rather than weeks. A stronger yen could resurface, as it did after Japan unilaterally intervened in markets in September. After an initial weakening, the yen rebounded, growing stronger than at the initial intervention point within a few weeks. Indeed, not everyone is expecting the yen to slide. Deutsche Bank continues to recommend that clients bet on a stronger yen versus the dollar, figuring the dollar will dip back below 80 yen in coming quarters thanks in part to Japan’s per-
sistent trade and current-account surpluses. The coordinated intervention has been successful despite governments swapping relatively small amounts of currency. Japan disclosed recently that it used 692.5 billion yen on March 18, compared with 2.1 trillion yen in the September intervention. Canada has said it sold around $124 million in yen on March 18. The U.K. sold about $150 million worth. Joint interventions are increasingly rare. But they also tend to be successful, though economists question whether it’s the interventions that cause a change in a currency’s direction or other, more-powerful underlying factors, such as trade flows and interest rates. —Chester Dawson, Yoshio Takahashi and Juro Osawa contributed to this article.
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THE WALL STREET JOURNAL.
Thursday, April 7, 2011
WORLD NEWS: ASIA
Curbing inflation is priority, bank says BY NATASHA BRERETON SINGAPORE—Asian policy makers need to make tackling inflation through pre-emptive action a priority, the Asian Development Bank said Wednesday, warning that several central banks may be behind the curve and some economies still show signs of overheating. While more-flexible exchange rates may be a better tool to help some nations address excessive price growth, capital controls “can be an option” for others if coordinated internationally, it said. In its annual Asian Development Outlook report, the ADB tipped output in the region to grow solidly over the next couple of years, forecasting gross domestic product will increase 7.8% in 2011 and 7.7% in 2012, a slight moderation from 9% in 2010. But the region faces “critical challenges” to support inclusive growth, it said—most immediately by tackling swelling inflationary pressures, but also by fostering new sources of expansion by strengthening economic links between emerging African, Asian, Latin American and Middle Eastern nations. “Managing inflation is not easy,” ADB President Haruhiko Kuroda said in a foreword to the report. He noted that price growth in the region was likely to pick up to 5.3% this year. “Many countries may already be behind the curve in fighting inflation, and some countries are showing signs of overheating. The task is complicated because lifting interest rates may induce foreign capital inflows, which can add to price pressures,” he noted. How best to tackle capital inflows is high on the International Monetary Fund and the Group of 20 industrialized and emerging nations’ list of priorities, and is likely to feature prominently at meetings of financial officials in Washington next week. For the first time in its nearly 70-year history, the IMF on Tuesday endorsed controls on international capital inflows as a legitimate tool under certain circumstances to protect emergingmarket economies. Capital has flooded into developing nations as growth there has bloomed while advanced countries’ economies have stagnated. Although inflows are desirable for investment, they can be destabilizing and can fuel overheating and asset bubbles. In an attempt to control such flows, many emerging nations have implemented measures such as higher taxes for foreigners buying government bonds, restrictions on foreign capital investment in real estate, and limits on currency operations. The ADB said inflation must be carefully managed using a coherent mixture of tools, rather than relying solely on monetary policy. What measures were appropriate would depend on the circumstances in the country in question, it said. For countries with persistent current-account surpluses and the values of whose currencies are
Slowing growth GDP growth rate for selected Asian countries 15% 10
Developing Asia
China
India*
Indonesia
Vietnam
Thailand
Forecast
5 0 2006’08 ’10 ’12 -5 Note: Developing Asia refers to 44 developing member countries of the Asian Development Bank and Brunei Darussalam, an unclassified regional member; * India figures are for fiscal years ending March 31. Source: Asian Development Bank
misaligned with economic fundamentals, more-flexible exchange rates may be a better option than raising interest rates or imposing capital controls, the ADB said. But for others, capital controls “can be an option” if coordinated internationally, it said. Donghyun Park, principal economist at the ADB’s economics and research department, said that while there was a case for regional coordination on capital controls, such measures should be “temporary, selective” and used by countries with current-account deficits. For nations enjoying strong current-account surpluses but reluctant to allow their exchange rates to move higher to protect exporters, a regionwide policy of moving in step with trading rivals in boosting exchange rates is key, he added. “For those countries, flexible exchange rates are the best option,” Mr. Park said in an interview. “Orderly and coordinated but gradual exchange-rate appreciation.” He noted that weakening currencies through intervention would defeat the object of raising interest rates.
The Asian Development Bank warned that several central banks may be behind the curve and that some economies still show signs of overheating. The ADB said the expected softening in growth in the region’s economy over the next couple of years reflected slower expansion in major industrialized nations and in world trade, as well as the normalization of monetary and fiscal policy. “The moderation marks a welcome return to growth rates that can be sustained without stoking inflation,” it said. Supporting the advance is strong output growth in China and India. The ADB expects China’s output to increase 9.6% in 2011 and 9.2% in 2012, after posting a 10.3% gain in 2010, while India’s is expected to grow 8.2% in the fiscal year that started this month, and 8.8% the following year, after the 8.6% expansion in the just-ended year. ADB chief economist Changyong Rhee said in Hong Kong that the People’s Bank of China still has
room to introduce further monetary tightening to tame inflation after it raised benchmark lending and deposit rates on Tuesday. Mr. Park also said there were risks from an asset bubble in China’s property market, which could spill into the financial sector, but recent policy tightening makes that less likely. The Reserve Bank Of India is likely to increase its policy rates by 0.50 percentage point by March 2012, even as growth in Asia’s third-largest economy moderates, Rana Hasan, principal economist at ADB India, said at a briefing in New Delhi. In its report, the ADB said that the pickup in major industrialized economies was progressing “modestly,” but that it remained uncertain whether private demand would be able to support growth once the authorities start to normalize fiscal and monetary policies. “The recent surge in oil prices could undermine the global recovery, and geopolitical and other factors have heightened uncertainty about future prices,” it added. “Political instability in the Middle East raises questions about oil supplies, while Japan’s nuclear energy woes have heightened concerns about this alternative energy source.” It noted that food prices had hit record levels in February, and that although core inflation was still benign in industrialized nations, oil and food price pressures could fuel price growth in rapidly expanding developing economies. The ADB also highlighted other risks, including “stubbornly high” unemployment and the weak housing market in the U.S., and unresolved sovereign-debt problems in the euro-zone periphery. It noted the challenges faced by Japan after it was struck last month by its biggest earthquake on record, which triggered a devastating tsunami and nuclear radiation leaks. Mr. Rhee of the ADB said the disaster would slow economic activity in Japan for two quarters, but the impact on Asia and other regions would be limited if the nuclear situation didn’t deteriorate further. The ADB forecasts Japan’s economy, the world’s third-largest, will bounce back from the impact of supply disruptions and power shortages and grow 1.5% in 2011 and 1.8% in 2012. —Enda Curran, Chester Yung, Prasanta Sahu and Anant Vijay Kala contributed to this article.
Group’s education solution: teach the professors first Students at SVPM College of Engineering in rural Maharashtra state say their classes got a whole lot more interesting after their professors took a course on how to teach. “Before, our attention would go away,” said Anup Krishna Kumar, 21 years old, who is finishing his final year studying electronics and telecommunications at the college. By their own admission, the professors used to spend a third of their time with their backs to the class, drawing diagrams on the blackboard. They filled the remaining time in class lecturing at the students—almost never asking a single question. Wipro Technologies, a unit of outsourcing firm Wipro Ltd., set up the teacher-training program as part of an effort to improve the quality of engineering-school graduates. As India grows, information technology and other global industries are struggling to find enough highskilled employees. Only a quarter of the graduates of India’s engineering colleges are prepared to join the work force, an Indian industry trade group study showed. In response to the problem, Wipro started a nonprofit called Mission 10X. Its leaders say they interviewed 300 campus placement officers and 53 heads of universities before deciding that the best way to improve the quality of graduates was to improve the teaching. “Before I didn’t take the students into consideration,” Vishal Nitnaware, a senior lecturer in mechanical engineering at the college, told The Wall Street Journal. “Now I’ve removed the fear, so the students ask questions.” Mr. Nitnaware and other members of the faculty say they now engage students in discussions and try to teach them to apply the concepts they learn in their textbooks with the help of practical examples. So far 10,000 professors have participated in five-day workshops that include videotaping the teachers’ lectures to give them feedback and advising them on how to engage students in discussions. Mission 10X programs are free, and the foundation
shows up only when invited by colleges. Yogesh Nerkar, principal of PVG College of Engineering and Technology in Pune, says attendance in his classes soared when he applied the techniques he learned in the workshops in 2008. —Geeta Anand
Indian language integration? Critics, supporters weigh in In a country that is home to more than 20 regional languages and many more dialects, language has always been a bit of an issue. During a recent book launch in Andhra Pradesh, Indian Vice President Mohammad Hamid Ansari suggested that a key to national integration could be learning an Indian language other than Hindi, and that limiting the use of English to mediate among languages could help improve cultural ties within India. But Anjan Roy, an economic affairs expert at the Federation of Indian Chambers of Commerce and Industry, said Indian languages aren’t so central to the work world. “A good tradesman will always be good at his work irrespective of the language he speaks. He should be proficient in his area of expertise with a general proficiency in English.” Anil Sadagopal, former dean at Delhi University’s faculty of education said that while most in southern India speak Hindi in addition to another regional language, Northerners seldom learn Southern languages. Mr. Sadagopal, who is also a former member of India’s Central Advisory Board on Education, said that in Northern states people mainly speak Hindi and English, something he described as “a major handicap.” He said that rather than turning to English, people should learn other Indian languages to appreciate the literature and cultural history of India as a whole. With employment being a top priority for most of India’s youth, learning additional Indian languages for cultural enrichment seems unlikely to catch on soon. —Nikita Garria Keep up on India minute by minute with The Wall Street Journal’s India Real Time at http://blogs.wsj.com/indiarealtime
Associated Press
Students in class this past August at a cram school in Kota, India.
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
5
WORLD NEWS: ASIA
Leaked video roils Malaysia leaders Government weighs launching investigation into whether prominent opposition figure was caught in sex film Malaysia’s government will consider establishing a royal commission to investigate whether opposition leader Anwar Ibrahim is the man featured in a controversial sex video that is further polarizing this politically divided country. Parts of the video were leaked on the Internet Monday, triggering a flurry of speculation over whether the senior opposition politician allegedly caught in the film is Mr. Anwar. The opposition leader, who once served as Malaysia’s deputy prime minister, has already said he isn’t the man shown in the grainy, black-and-white film, and calls it “an evil plot” orchestrated by his political opponents. Mr. Anwar’s wife on Tuesday said her husband isn’t the man filmed having sex with another woman, and condemned the airing of the clip as a crude attempt to smear Mr. Anwar’s reputation ahead of a series of vital elections. “It is clear that the body and physique of the actor in the video is extremely different from the body and physique of Anwar Ibrahim,” his wife, Wan Azizah Wan Ismail, said in a statement. Nazri Aziz, who oversees political affairs in the Prime Minister’s Department, on Wednesday told reporters that an independent Royal Commission of Inquiry should be established, otherwise the government will be accused of orchestrating the release of the video, the state-run Bernama news agency reported. “I think to settle this once and for all, as I said Ms. Wan Azizah is not a competent party to decide on the identity of the person, I think it is only fair that we have an [inquiry], consisting of neutral people,” Mr. Nazri said at Malaysia’s parliament, though it isn’t certain the cabinet will agree to the proposal. Malaysians have long witnessed a political atmosphere at odds with the conservative, mostly Muslim country’s usual social taboos. Claims of sexual impropriety often overshadow policy debate. In 2008, a married government minister resigned after hidden cameras showed him in a liaison with another woman in a hotel room. Many such allegations have tar-
The Anwar Ibrahim saga | The struggle for Malaysia
European Pressphoto Agencey
BY JAMES HOOKWAY
Mr. Anwar arrives at a police station in Kuala Lumpur last month n 1982: Student firebrand Anwar Ibrahim joins the United Malays National Organization led by then Prime Minister Mahathir Mohamad and shoots up the ranks. n 1993: Mr. Anwar is appointed Deputy Prime Minister and appears set to succeed Dr. Mahathir as premier. n 1998: Dr. Mahathir sacks Mr. Anwar after months of disagreements on how to stabilize Malaysia’s economy. Mr. Anwar is then arrested and charged with breaking Malaysia’s sodomy laws with a speechwriter and driver. Mr. Anwar says he is innocent and geted Mr. Anwar, a 63-year-old father of six. After turning against the government in 1998, he was arrested and later convicted of sodomizing his speechwriter and chauffeur. He denied the allegations, saying he was framed to end his political career. His conviction was later overturned. After Mr. Anwar’s opposition alliance broke the ruling National Front’s traditional two-thirds majority in 2008 parliamentary elections, a former male aide accused the opposition leader of sodomy. Mr. Anwar, who is on trial for the latest allegations, says he is the
is the victim of a political conspiracy. n 2000: Mr. Anwar is found guilty of sodomy and sentenced to nine years in prison.
n July: Mr. Anwar is arrested after a former male aide accuses him of sodomy. He again says he’s innocent. n February 2010: Mr. Anwar’s second sodomy trial begins.
n March 21: Three men with links to n 2004: Mr. Anwar is freed after a the ruling party present a video to court overturns his sodomy members of the media in which a conviction a year after Dr. Mahathir man they describe as a senior retires. opposition leader has sex with a n March 2008: Mr. Anwar’s woman in a Kuala Lumpur hotel opposition alliance hands the room. government its worst election n March 23: Mr. Anwar denies he’s result in decades, winning over a the man in the video and files a third of the parliamentary seats defamation complaint with police. and five state assemblies in national elections. Source: WSJ reporting victim of a political conspiracy. Prime Minister Najib Razak denies there is any plot against Mr. Anwar, saying the newer sodomy complaint was brought by a private individual. Mr. Najib’s government says it has nothing to do with the new video controversy. The video emerged when two pro-administration politicians and a local businessman on March 21 arranged for a group of Malaysian journalists to view the film, which they said was taken in a hotel room and featured a prominent opposition politician and a female prostitute. Local newspapers covered the
claims and counterclaims extensively. The country’s burgeoning news websites are full of comments and opinions. The tape’s release comes ahead of April 16 elections in Sarawak, Malaysia’s largest state, which could influence national polls that must be called by the end of 2013. In the run-up to the vote, Mr. Anwar has tried to build the opposition’s momentum, while Mr. Najib and his backers are unleashing a wave of economic overhauls to promote the National Front. A network of Islamic organizations has called religious leaders to
use their influence to stop risqué allegations from being aired publicly. “We are distraught,” said Azmi Hamid, coordinator of the Anti-Defamation Secretariat. Ahmad Syukri Razab, chairman of the Malaysian Students Solidarity group, said young Malaysians need to know that “such dirty tactics are unhealthy for our democratic nation.” The multifaith Malaysian Consultative Council for Buddhism, Christianity, Hinduism, Sikhism and Taoism described the latest video release as “disgusting.” “This sad sordid episode, once again, brings the nation to prominence for the wrong reasons,” the group’s president, said the Rev. Thomas Philips. In Malaysia, entertainers from rock band Linkin Park to soul singer Beyoncé have been warned by Malaysia’s censors to tone down their acts. Last month, pop singer Lady Gaga caused a stir by urging young Malaysians to push back against local radio stations that garble the line: “No matter gay, straight or bi, lesbian or transgendered life, I’m on the right track, baby” in her song “Born This Way.” In one attempt to end the controversy, Mr. Anwar’s lawyers requested that the 21-minute film be shown in parliament, where it will be exempted from the country’s pornography laws. They hope showing the film there will dispel any suggestion that the man in the film is the opposition leader. Mr. Nazri, of the prime minister’s office, says he supports the idea if the parliament’s speaker agrees. The speaker, Pandikar Amin Mulia, shot down that suggestion Tuesday, telling parliament that to air the film there would breach the legislature’s rules of conduct and it would also be forbidden under Islam. Malaysian police are investigating whether the three men who presented the video to the media—politicians Rahim Tamby Chik and Shuib Lazim and businessman Shazryl Eskay Abdullah—should be charged with breaking the country’s pornography laws by showing the tape. The three have been questioned by police but haven’t been charged. None of the trio could be reached to comment. —Celine Fernandez contributed to this article.
China to raise fuel prices 5% amid pressure China said it will raise prices for gasoline and diesel fuel by around 5%, bowing to pressure from rising global crude-oil prices despite concerns about rising inflation in the world’s second biggest economy. The increase, announced late Wednesday and effective from Thursday, is the fourth increase since October in fuel prices, which are controlled by the central government in China. The pace of price increases, however, has lagged behind increases in global crude oil prices, a trend that analysts said Beijing will likely maintain going forward to keep a lid on inflation pressures. Gasoline retail prices will increase 500 yuan ($76.40) a metric ton, while diesel’s retail prices will rise 400 yuan a ton, the National Development and Reform Commission,
an economic planning agency, said in a statement. The move represents increases of 5.6% and 4.9% over the current average gasoline and diesel retail ceiling benchmarks. By comparison, a basket of crude oils that the NDRC tracks has rallied 14% since the last increase in February, according to an estimate by local energy information portal C1 Energy, which correctly reported the price moves ahead of the official announcement on Wednesday. The composition of the NDRC’s basket isn’t publicly revealed. After the move, the average gasoline and retail benchmark ceilings will be 8,880 yuan per ton and 8,130 yuan per ton respectively, according to Dow Jones Newswires calculations. The gasoline price works out roughly to the equivalent of around
$3.70 per U.S. gallon. China’s price moves demonstrate a difference of approach compared with South Korea—another major oil importer—where refiners recently announced cuts in domestic gasoline and diesel prices after coming under heavy pressure from the government, which is also worried about inflation and concerned about a lack of competition in the oil-product markets. China’s major oil refiners are owned and controlled by the state. Thus Beijing has the authority to force them to take losses on their refining activities by holding down increases in refined products such as gasoline at times when global crude prices are rising. In past years, refiners have responded by slowing output to stem
losses, leading to shortages in some local markets. Since the start of 2009, Beijing has adjusted prices for refined products more frequently to reflect more closely international crude prices, though as Wednesday’s move demonstrates, domestic prices still lag behind rises in international markets. Refining margins at Chinese refiners such as China Petroleum & Chemical Corp. and PetroChina Co. may still be in the red this month even after such a price rise, said Shi Yan, an energy analyst at UOB KayHian Ltd. In addition to inflation, the nation’s fuel-pricing mechanism also allows the government to cut refiners’ margins when oil prices are between $80 and $130 a barrel and they won’t be guaranteed any mar-
gin if prices rise above $130, Ms. Shi said. On Tuesday China’s central bank raised interest rates for the fourth time in less than six months in its latest move to rein in inflation and asset-bubble pressures. Rising commodity prices, including oil and other raw materials, have been cited as a major factor driving Chinese inflation. China’s consumer prices rose 4.9% in February from a year earlier, unchanged from January’s 4.9% rise but above the government’s full-year target of a 4% increase. The producer-price index, a measure of wholesale factory prices that is more sensitive to fluctuations in raw material prices, rose 7.2% in February, up from 6.6% in January. —Jing Yang in Shanghai and Aaron Back in Beijing
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Thursday, April 7, 2011
WORLD NEWS
NATO ramps up Libya flights Allies insist campaign is in full force after retreating rebels blame them for setbacks BY CHARLES LEVINSON
BY AMOL SHARMA AND VIBHUTI AGARWAL
Associated Press
The North Atlantic Treaty Organization dismissed criticism by Libyan rebels who said they weren’t getting adequate air support, saying the number of sorties had increased. Rebels had voiced frustration as pro-Gadhafi forces bombarded newly reorganized rebel forces with artillery and forced them to retreat from the strategic oil town of Brega. “What is NATO doing? They haven’t done a thing,” said the rebels’ top military commander, Chief of Staff Gen. Abdel Fattah Younis. “A strike here and strike there, it leads to nothing.” Gen. Younis has asked for more firepower, including helicopters. He said he would recommend that the rebel government suspend its cooperation with NATO if the alliance doesn’t “carry out its function properly.” NATO said Wednesday it had carried out 155 sorties the previous day, including 66 strike sorties, more than Monday. It said it had 198 sorties planned Wednesday. NATO on Tuesday estimated that allied air attacks have taken out 30% of the capacity of Col. Moammar Gadhafi’s military forces, which are also being forced to take heavy armor such as tanks out of front-line fighting. That shift has made effective airstrikes more difficult. Brig. Gen. Mark van Uhm, chief of NATO’s allied operations, said Tuesday that the alliance has increased reconnaissance flights to identify tanks, particularly if they started moving toward the battle zones in the east. The U.K. on Wednesday said it has moved an extra four Typhoons from an air-policing role to a ground-attack one, following the deployment of an extra four Tornados to a ground-attack role. The U.K. now has 20 jets deployed in southern Italy. The rebel retreat from Brega on Tuesday was particularly frustrating for opposition leaders who had handed responsibility to profes-
Rebels near Brega point to smoke in the distance. NATO said it planned an increased number of sorties Wednesday. sional military units in a bid to tip the battle in the rebels’ favor. Rebel forces had held their lines on the outskirts of Brega for three days, since they counterattacked the city Friday night. But on Tuesday morning they woke up to a withering counterattack by Col. Gadhafi’s forces that drove them out of the city. By noon, the most forward rebel positions appeared to sit about 12 miles east of the city. From rocket launchers on Col. Gadhafi’s distant but slowly advancing vehicles, orange fireballs streaked eastward, followed seconds later by thuds, booms, and dust clouds, some far from rebel positions, some disconcertingly less so. Two distinctive rebel efforts appeared to be unfolding. Organized military units traveled unpaved desert roads and stretched out along an
expanded front line, while rebel volunteers continued to work primarily along the paved main highway. Poor coordination and occasional tensions hampered the parallel forces. On Monday, a rebel volunteer unit fired a rocket at a rebel army position by mistake, according to Capt. Sufyan Mami, an army logistics officer outside Brega. One soldier was killed, he said. Khaled Hamza, a soldier from Tobruq, said his unit, one of the newly deployed professional units, thought they had successfully flanked a government position on Monday and were preparing to attack them on Tuesday morning. But when they woke up they found that Col. Gadhafi’s forces had moved on them under the cover of darkness. Instead of launching the attack they had planned, Mr. Hamza’s unit fled a blistering artil-
lery bombardment. Mr. Hamza said he learned amid his retreat that a column of about 50 Land Cruisers presumably carrying pro-Gadhafi reinforcements was seen by rebel spotters making its way to the front on Monday. “We have no phones, no radios, so no one told us anything until it was too late,” he said. Frustrated rebel fighters looked to the skies for support as they retreated from Brega. Abdallah Daboob, who comes from the oil town, accused NATO of backing off amid rumors of stepped-up diplomatic efforts to end the conflict. “Ever since Gadhafi started looking for a way out, negotiating for an end, NATO has backed off,” he said. “Our question for NATO is this: Are you with us or against us?” —Stephen Fidler contributed to this article.
U.S.-Colombia pact clears a path BY ELIZABETH WILLIAMSON AND TOM BARKLEY WASHINGTON—The deal unveiled Wednesday to address U.S. concerns with labor conditions in Colombia clears the way for talks with Congress for passing all three pending trade pacts, senior Obama administration officials said. The breakthrough in the Colombia pact allows for “broader discussion” with lawmakers about the timing of passage of trade pacts with South Korea and Panama, as well as other trade issues such as an expired program to help displaced workers, a U.S. official told reporters during a conference call. “We now need to sit down with Congress and work out a schedule and calendar to move this agreement together with the other” freetrade agreements, said another official, adding that trade preferences, trade-adjustment assistance, and Russia’s accession to the World Trade Organization also need to be
Reliance executive is killed in India
addressed. Colombian President Juan Manuel Santos, who is currently in the U.S., is expected to meet Thursday with U.S. President Barack Obama to discuss the “action plan” to beef up protections of union leaders and workers and bolster Colombia’s enforcement regime. The measures are expected to draw enough Democratic votes for passage, and the deal was welcomed by Republicans and business groups who have been frustrated with the lack of movement on the trade pacts that were first negotiated by the Bush administration. Republican leaders have said they won’t pass a pending South Korea trade agreement without action on pacts with Colombia and Panama, forcing the administration to act on the pending Latin American pacts. Senate Minority Leader Mitch McConnell (R., Ky.) said that reports of the Colombia trade deal are “very good news” and that he hopes all three deals are sent up to Congress
soon. U.S. Chamber of Commerce President Thomas Donohue pledged to work with the White House and Congress to secure passage of the trade agreements. “This proves the United States can still lead on trade,” Mr. Donohue said, adding that “passionate, bipartisan support
The deal will allow for renewed discussion about U.S. trade pacts with South Korea and Panama. in Congress for the trade agreement with Colombia was also critical to this breakthrough.” Revisions to the 2007 pact will require Colombia, by April 22, to “dramatically expand” the scope of existing protections for union leaders and to provide protection for labor activists and workers “trying to
organize or join a union,” according to a U.S. statement. Those protections would extend to former union activists threatened for past efforts to organize workplaces. The revised pact would also require Colombia to revise its criminal code by June 15 to “criminalize and penalize actions or threats that could adversely affect fundamental workers’ rights, including threats against labor organizers and otherwise interfering with workers’ rights to organize and bargain collectively.” Penalties to be incorporated in the revised criminal code include imprisonment for up to five years. The South Korea deal, revised to include provisions that favor U.S. auto makers, won important support from the United Auto Workers union. The Colombia deal isn’t expected to draw union support, but administration officials—under pressure to boost U.S. exports—have signaled their intent to proceed anyway.
NEW DELHI—An executive of India’s Reliance Power Ltd. was shot and killed as he was traveling through a stronghold of leftist militants who fiercely oppose industrial development, police said. Manoj Ojha, general manager of Reliance Power’s operations in the central Indian state of Jharkhand, likely was killed unintentionally in crossfire Wednesday between warring factions of leftist rebels in the area, said G.S. Rath, director general of police in Jharkhand. Local police were investigating the exact circumstances of the attack. Reliance Power, a unit of Anil Ambani’s Reliance ADA Group conglomerate, said Mr. Ojha and other company executives of the powergeneration company were traveling in two vehicles in the Chatra district of Jharkhand when they came under fire. Several employees were injured and hospitalized and one was in critical condition. Reliance said it was “deeply saddened at the unfortunate demise” of Mr. Ojha. Mr. Rath said the Reliance executives were scouting land for a company project and didn’t notify police that they were traveling through a dangerous area. Reliance declined to comment on whether it notified police. Maoist rebels scattered throughout several Indian states pose one of the country’s most serious security threats. Also known as Naxalites—after the town of Naxalbari in West Bengal, where their movement began as a peasant uprising in the late 1960s—the militants have become increasingly violent in their quest to protect tribal populations from encroachment by industry. “They have been opposed to these industries setting up plants in their areas. That is a fact,” said Prakash Singh, an expert on Naxalites and a former police chief in Uttar Pradesh state. “They also insist on extortion money, and if it is not paid, they sometimes show their strength.” Though the police account suggested that Mr. Ojha wasn’t targeted, the incident still underscores the perils for Indian companies operating where rebels control large swaths of territory. States like Jharkhand contain vital natural resources like coal and iron-ore that are needed to develop factories and support India’s massive infrastructure needs in coming years. The Maoists are making industrial development a dangerous game in some parts of the country. Prime Minister Manmohan Singh in February said leftist attacks, which usually are carried out against government security forces or local government officials, decreased somewhat last year. But he still highlighted the Maoists as one of the country’s gravest threats. He called for state police and central-government forces to coordinate better and said the central government is working to win over tribal populations in states like Jharkhand by carrying out development projects, such as construction of schools and hospitals.
Thursday, April 7, 2011
THE WALL STREET JOURNAL.
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Thursday, April 7, 2011
WORLD NEWS
Central banks’ courses are diverging Europe, U.S. face fragile recoveries, inflation, but ECB is poised to raise rates, while Fed is expected to hold steady BY BRIAN BLACKSTONE AND JON HILSENRATH The European Central Bank and the U.S. Federal Reserve, facing similar challenges of fragile economic recoveries and surging commodity prices, are charting different courses. The ECB, preparing for a policy meeting Thursday, is poised to become the first central bank among the world’s large, developed economies to raise interest rates since the world fell into deep recession in 2008. The Federal Reserve is carrying on its easy monetary policies, keeping short-term interest rates near zero and pumping extra money into the economy by buying government bonds. An increasingly intense debate has broken out within the U.S. central bank about when to raise interest rates. A vocal minority of officials is discussing the possibility of raising rates later this year to tamp down inflation, but the Fed’s leadership and a majority of officials look disinclined to move anytime soon. The central banks’ divergent policies will have enormous effects on economic growth, inflation and financial markets. The stakes are high for both banks. If the ECB is wrong in moving rates higher now, it could choke off economic growth in the euro zone. If the Fed is erring on the side of easy money, it could let U.S. inflation take off, damaging the domestic economy. This comes as other major central banks are pursuing their own varying approaches. The People’s Bank of China on Tuesday raised its
Different paths
Central bank key interest rates One year ago
Bank of Japan
Current
Projected year end
U.S. Federal Reserve
Bank of England
European Central Bank
1.75% 1.50 1.25 1.00 0.75 0.50 0.25 0
Source: J.P. Morgan
policy rate by a quarter percentage point, continuing a phase of interest-rate increases in the world’s fast-growing emerging economies that began earlier but that many economists say has been too timid. The Bank of Japan, shaken by natural disasters and a nuclear crisis, is preparing for a meeting Wednesday and Thursday at which it is considering new easy-money measures that would direct low-interest loans through banks to crisishit areas. The Bank of England, which also meets Thursday and is wrestling with both high inflation and the risk of recession, is expected to stay on hold but faces mounting pressure to stem rising consumer prices.
The world’s major central banks “are in the post-traumatic stress clinic,” says Willem Buiter, chief economist at Citigroup and a former member of the Bank of England’s policy board. Interest rates are “ludicrously low,” he says. “This is clearly not the world central banks like to operate in.” Managing the exit from easymoney policies could be more fraught than usual. Central banks have to decide both when to start the process, and how to do it. Minutes from the Fed’s latest meeting in March, released Tuesday, gave hints of the brewing debate within the Fed about the economic outlook and its policy course. The Fed decided to continue a
$600 billion bond-buying program, known as quantitative easing, but “a few members” thought the Fed might need to reduce the program. The minutes also showed Fed officials had an extended discussion about the outlook for inflation, in which they tried to make sense of higher prices for oil, grains, metals and other commodities. Though Fed Chairman Ben Bernanke expects the broader inflation impact of higher energy prices to be muted, some Fed officials are eager to start moving to contain it. The U.S. consumer price index was up 2.1% in February from a year earlier, though another measure preferred by the Fed was slightly lower. Excluding the volatile food and energy sectors, the index was up 1.1%. Euro-zone inflation was 2.6% in the 12 months ended in March. It was up 1% for February when food and energy prices were excluded. “Inflation has probably bottomed out in the U.S. and from this point on will probably start to move higher,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in an interview Tuesday. He wants to cut the Fed’s bond-buying program to $500 billion at its meeting at the end of this month, but he’s in the minority. Mr. Bernanke said Monday that he thinks commodity price pressures will prove transitory. He added that if he’s wrong and consumer prices rise more broadly than he expects, he’ll act to stamp it out. Although the Fed hasn’t yet decided when to start tightening, the debate has begun over how to do so. Some Fed officials, including Mr. Bullard, want the Fed to sell off its
stockpile of Treasury securities as a first step toward tightening, rather than pursue the traditional course of raising short-term interest rates, a proposal where he is again in the minority. With the ECB moving toward tighter policy and the Fed staying easy, the U.S. dollar could be heading for continued declines as investors seek higher-returning holdings elsewhere, said Bruce Kasman, chief global economist for J.P. Morgan. The dollar is down 3% against a broad basket of currencies since the beginning of the year and down 24% from a decade ago, though it has been weaker before, including in July 2008 and in the early 1990s, according to Fed data. The divergence among central banks is a test of their credibility. The ECB is betting a rate increase now will prove its anti-inflation mettle and might help it avoid more draconian increases in borrowing costs later. ECB officials are expected to raise the bank’s main lending rate one-quarter percentage point to 1.25% at the meeting Thursday. The euro hit five-month highs against the U.S. dollar this week. The Fed, on the other hand, is betting it can afford to let a nascent U.S. recovery—still challenged by a slumping housing market, thrifty consumers and high unemployment—run a while before trying to slow it down. If ECB President Jean-Claude Trichet is wrong, higher interest rates could unnecessarily punish Europe’s fragile economies, such as Greece, Ireland, Portugal, and Spain, while a rising euro could trim German exports by making them more expensive on world markets.
How the GOP budget makes case for tax increase [ Capital ] BY DAVID WESSEL U.S. House Budget Committee Chairman Paul Ryan says a budget is “an expression of ... principles, vision and philosophy of governing.” The vision in the Republicans’ 2012 budget he outlined Tuesday is for smaller government. It is for the most significant reshaping of government-benefit programs in 50 years. And it is for overcoming government addiction to deficits and debt by cutting spending, not raising taxes. In sketching out that plan, Mr. Ryan may inadvertently be making the case for tax increases. Reason one: Even with the spending cuts he proposes, Mr. Ryan wouldn’t balance the budget until 2030 or so. Republicans, reluctant to raise the debt ceiling to cover past spending, would be asked to increase it every year until then because debt, measured in dollars, keeps climbing. Reason two: The most farreaching change he proposes—limiting the sum the
government will spend on each Medicare beneficiary’s health care—won’t save a nickel for a decade. Grandfathering today’s retirees, as nearly everyone wants to do, means savings from Medicare changes don’t arrive quickly. Reason three: Even without many of the details, and there aren’t many, the Ryan plan shows how severe the spending cuts would have to be to avoid raising taxes. Amid the blizzard of praise for Mr. Ryan’s courage from one side and criticism for his heartlessness from the other, deficit warriors Democrat Alice Rivlin and Republican Pete Domenici said Tuesday they were disappointed that the plan “fails to address the need for new revenue” which they see as key to “a bipartisan, comprehensive debt reduction plan.” The Obama budget, it’s worth remembering, falls short of outlining a path to fiscal sustainability even while raising taxes. And because Mr. Obama is widely seen as having failed to offer a comprehensive deficitreduction plan, Mr. Ryan was lionized even before he published details. Mr. Ryan was skimpy with
some details. He asserts he would pay off the federal debt eventually—but by making the ludicrous assumption that federal spending (now about 24% of gross domestic product) will be cut to 14.75% of GDP by 2050. He vows to end “corporate welfare” but defines that as lighter regulation, identifying not a single corporate tax break he would eliminate. Reframing the argument over which, if any, Bush tax cuts to extend, Mr. Ryan starts with the revenue that would be collected if all the Bush tax cuts were made permanent and tax increases embodied in the Obama health plan were repealed. Then he shuffles who actually pays. On health spending, Mr. Ryan wages semantic warfare over whether “voucher” or “premium support” describes his Medicare plan, a distinction that smacks of focus-group testing. By any label, this is a big deal. And a bit ironic: Remember the Obama plan to allow working-age Americans to shop for insurance in newly formed exchanges, offering government subsidies for lowincome families? That’s what Mr. Ryan would do to Medicare. If the subsidy doesn’t cover the premium, or if the policy doesn’t
cover your costs, you pay. The hope is that competition among private insurers will yield hitherto-unrealized efficiencies. But, especially if Republicans manage to repeal the Obama health bill, there’s no mechanism for forcing change to the healthcare delivery system or for compensating for the fact that Medicare, despite its flaws, is cheaper to administer than private insurance. The notion is to shift risks and costs to
The most far-reaching change proposed—limiting what the government will spend on each Medicare beneficiary’s health care—won’t save a nickel for a decade. beneficiaries so they’ll shop more aggressively, and hope that produces a leaner health-care system. If it doesn’t, beneficiaries pay more. With Medicaid, the insurance program for the poor, Mr. Ryan caps federal spending, and lets states and individuals figure out what to do with $750 billion less
over 10 years than the Congressional Budget Office projects the program will cost. The argument is that with “flexibility,” states can do more with less. But the biggest “flexibility” that states now lack—given that many already rely heavily on managed care and low provider fees—is the authority to reduce the rolls. That leaves them to do less with less. Mr. Ryan exempted Social Security (for now) and embraced the Obama defense budget dollarfor-dollar. That meant he relied heavily on cutting everything else. For fiscal 2015, for instance, his budget would spend 18.5% less than the $449 billion on annually appropriated domestic spending that Mr. Obama proposed, which, the president noted, brings it “as a share of the economy to the lowest level since Dwight D. Eisenhower was president.” In 2021, Mr. Ryan would spend 28% less than Mr. Obama’s budget. Those numbers are easy to type into a spreadsheet where one doesn’t have to give details, but much harder to turn into legislation that Congress will pass. Write to David Wessel at
[email protected]
Pieter Bauermeister/WSJ
Eating well in Beirut 10 SOUTH AFRICA’S HISTORIC WINES 10
THURSDAY, APRIL 7, 2011
LIFE & STYLE
asia.WSJ.com
Why we’re just mad about saffron It’s not everyone’s favorite color, but you can afford to be bold when decorating with yellow [ Living Well ]
This just in: Yellow is the new red! Where designers once declared no room complete without a stroke of crimson, now it’s a flash of yellow that’s required, from the most acidic to the yolkiest tone. This is a color that you can be bold with. Don’t rule it out for upholstery, for example, but keep it as the accent color rather than the canvas. Dining chairs in yellow leather will zing against pale gray walls. Sunny roller blinds will fill the room with warmth on even the dreariest day. California’s Raoul Textiles makes fabrics that are as bright as that West Coast sun. Their yellow is suitably named sulphur and the patterns are beautiful for pillows or a slipper chair. Madeline Weinrib’s ikat prints are also irresistible and her yellow is a ray of light. Her pillows are a good start, either alone or mixed in with other things, such as Jonathan Adler’s tapestried banana pillow. Yellow is not everyone’s favorite, so if you want to experiment before you commit, put some yellow candles in your candlesticks or fill a vase with a large bunch of mimosa or daffodils and see how it suits your space. (Though who can find anything to say against the daffodil? Not only do they pack a cheery punch but they promise the end of snow storms and the weighty, unattractive clothing that comes with them.) These sorts of things will give you the little pools of color that we so often forget to add. I am always drawn in by them when flicking through magazines and think how easy it is to do—and then completely forget to do it.
Simon Upton (interior); F. Martin Ramin for The Wall Street Journal (objects)
BY RITA KONIG
Dandelion tumblers from West Elm; ‘Eve’ pattern from Raoul Textiles; Saffron Mu Ikat pillow; ‘Gold’ Maipin vase; leather upholstery adds snap to chairs. For other accents I love West Elm’s lacquered trays, which are useful in almost every room. This season they have done a soft custardy yellow. On the poolside bar this summer it will be perfect, especially filled with pretty San Pellegrino Limonata cans. Lars Bolander sells a sunflower ceramic vase that would be great turned into a lamp, particularly if you use a patterned lampshade to balance out the bold block of color. Or you can do a shade in another
strong color. I find a lot of inspiration in sorbets—think mango and cassis. Glass is a lovely way to introduce new colors. I am a massive fan of Laguna B Venetian glasses and the yellow margarita tumblers are just the most divine things. Very whimsical and light (in weight and color), they’re ideal for lemonade or a sparkly gin and tonic with a twist of lemon, of course. This year’s yellow is bold and bright and even a little off. What is important with
yellow is the colors you put with it, and this is why I like it as an accent rather than as the main event. It does wonderful things when dropped in the middle of other palettes and even better when the other colors are a different hue. Put a milky yellow with very clear shades of blue. Or a very sharp yellow with dark purples and rusts. Yellow works the best when it challenges its surroundings. And its surroundings work better in return.
[ Creating ] BY CECILIE ROHWEDDER As a young graphic design student, Neisha Crosland once got lost in the vast halls of London’s Victoria & Albert Museum and found herself in a dimly lit room full of 16th-century Ottoman textiles. Stunned by their bold, modern-looking patterns, she took the bus back to her college and knocked on the dean’s door to announce a decision: She would become a textile designer. “I was in awe of the patterns, the simplicity and modern-ness of them,” she recently recalled, back once again at the museum, which houses one of the world’s largest collections of textiles and fashion. Ms. Crosland creates fabrics and wallpapers for homes, clubs and hotels from London to Los Angeles. “Neisha Crosland is one of a tiny handful of designers responsible for wallpaper’s current revival,” said Charlotte Abrahams, author of “Wallpaper: The Ultimate Guide.” “Her work has a sense of rhythm which translates beautifully onto wallpaper and, while these papers look
striking on a single wall, they really come to life when they are wrapped around all four walls of a room.” Ms. Crosland still gets inspired by the Victoria & Albert’s ancient textiles. Her latest collection includes wallpaper patterns that are reminiscent of Moorish floor tiles, lanterns in the market of Marrakech and arched doorways in the old town of Tunis. The geometric shapes, swirling florals and bold color combinations in her creations reflect two more sources of early inspiration: the paintings of Russian Constructivists such as Kazimir Malevich and Lyubov Popova—and flowers. Ms. Crosland, a 50-yearold mother of two, remembers how, as a child, she used to copy drawings of plants from botany and herbology books in her grandfather’s library. One day, laying in the tub of her father’s bathroom, she studied the floral wallpaper, made from a design by the English artist and writer William Morris. “I was fascinated by how the pattern repeated, and how you couldn’t see how that was engineered,” she said. Having long languished in the doldrums of the design world, wallpaper is making a comeback. In design history, its popularity
Chris Floyd for The Wall Street Journal
From the walls of Marrakech to the clubs of London
Neisha Crosland at her London studio. Her iPhone is a trove of photos ... and ideas. has fluctuated, but the golden era for wallpaper, experts agree, was from 1770 to 1870 in France. More recently, as sleek minimalism has given way to a cozier, more ornamental style in high-end homes, decorators have started to use wallpaper again. Sales remain far below their peak of 1983, when
U.S. sales hit $4.5 billion dollars, according to the Paint & Decorating Retailers Association. But high-end stores have reported an uptick in wallpaper sales over the past two years. (A roll of Ms. Crosland’s wallpaper sells for over $200.) A well-made wallpaper, with its recurring pattern, can have a soothing, enveloping effect similar to waves or music, said Ms. Crosland. In 1988, the British interior company Osborne & Little asked the recent graduate to design a collection based on her degree show at the Royal College of Art. In 1994, she started her own business. Now each collection starts with “magpie eyes,” Ms. Crosland said. She constantly collects fabric scraps, ribbons, postcards, magazine cut-outs, candy wrappers and photos taken on the iPhone that has replaced a camera and sketchbook in her purse. In her latest collection, “Wallpaper 7,” the colors of the Arab-inspired and floral designs came from the plaster of Moroccan walls, her grandmother’s espresso spoons, old Swedish enamel matchboxes that Ms. Crosland spotted in a Sotheby’s catalogue and mocha-brown Sobranie cigarettes with golden tips.
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THE WALL STREET JOURNAL.
Thursday, April 7, 2011
LIFE STYLE
The grape of good hope [ Wine ] BY WILL LYONS
Massaya
Lunch at Chateau Massaya, a renowned vineyard in Lebanon’s Bekaa Valley.
Another fine mezze in Beirut Lebanon’s restaurant scene gets its first luxury brand [ Food ] BY BRUCE PALLING Lebanon has long been the most interesting Middle East culinary destination, in part because of its cosmopolitan outlook and also the sheer range—from street food to haute cuisine. While Beirut was certainly not high on any foodie’s agenda during the destructive 15-year civil war that began in 1975, nor was its status helped by a resurgence in violence as recently as 2006, Lebanon is nothing if not resilient and tourists have been returning, if tentatively. Last month brought yet another sign of rebirth with the arrival of the first luxury restaurant brand: Mourad Mazouz’s Franco-North African-inspired restaurant Momo. With the popping of Champagne corks and the occasional snarl from prowling Ferraris and Lamborghinis, one could as easily imagine that this was an opening in Monte Carlo or Malibu as downtown Beirut. This is a large undertaking, with a separate bar area holding more than 100 people and a restaurant with 70 covers, which triples during the summer months, thanks to the 360-degree balcony. Mr. Mazouz, who also owns Sketch, reputed to be the most expensive restaurant in London, admits that his decision to open in Beirut is considered by some to be bizarre. “I don’t care,” he says. “It is not just the mixture of cultures and environments, but there is a sense of freedom and optimism here which I find irresistible.” This launch was the first in a carefully planned operation by Solidere, the private corporation responsible for the redevelopment of downtown Beirut. Solidere was launched in 1994, which means it has now been going longer than the actual civil war, with twothirds of the 400 projects completed.
So far, the reconstruction has been done with considerable architectural flair and taste, with the showcase being the reconstructed souk area, where most of the restaurants will be located, along with luxury-brand retail outlets. The next phase is the launching of three connected restaurants opposite the Momo site by Yannick Alléno, the three-star Michelin chef from Le Meurice in Paris. At the end of this year, Joël Robuchon will open one of his L’Atelier de Robuchon. Davide Bisetto, the two-star Michelin chef from Corsica, will also be launching a new restaurant. And Gordon Campbell Gray, the British hotelier who opened designer hotel Le Gray in the Lebanese capital in late 2009, is said to have signed a deal this week with Zuma, the major Japanese-inspired restaurant group which has already opened branches in the Middle East. “We decided to get involved in opening these places because no one else was doing it and we want to raise dining in Beirut to a higher level,” says Joseph Asseily, the head of Solidere’s hospitality division. He adds that the firm has other plans beyond what he terms the “Rodeo Drive” sector of the redevelopment, “but we are not eager to do more until these places are operational; otherwise, we would be shooting ourselves in the foot.” It isn’t as if Beirut is lacking stylish and expensive restaurants. Just outside the main redevelopment area in Saifi Village, Burgundy opened in the middle of last year. Boasting an entire wall of Domaine Romanée-Conti wines, with individual bottles costing from €550 to more than €4,500, this is the most expensive restaurant in Lebanon, costing around €150 per person. Last October, another French restaurant called Chez Sophie was opened by 28-year-old Sophie Tabet in the more Bohemian neighborhood of Mar Mikhael in East Beirut. The Lebanese diaspora during the civil war has meant that people like Ms. Tabet, who was brought up in Montreal,
have returned armed with diplomas from L’institut Paul Bocuse and experience at L’Astrance, one of the greatest restaurants in Paris. Her spacious restaurant, housed in the vaulted ground floor of a traditional mansion, offers accomplished French cuisine. My recent lunch there included bone marrow on toast; crispy spring rolls; basil, mango and yuzu vinaigrette over green salad; and roasted lamb loin and braised Swiss chard with mashed potatoes with black truffles. But what about traditional Lebanese cuisine, with its assorted plates of mezze—baba ghanoush, falafel, hummus and the like? My friend Anissa Helou, the author of “Lebanese Cuisine,” said categorically that there were no first-rate Lebanese restaurants in Beirut. “You have to go to the little stalls or outside the capital. It is puzzling, but perhaps it is the high rental costs or the fact that it is more chic for friends to go to a trendy foreign restaurant than a local one.” Not prepared to accept this without evidence, I went to Karam, one of the best-known Lebanese restaurants, close to Momo. The flavors of the small dishes were bland and unexciting, and even my guest, another wellknown Lebanese foodie, returned two of the dishes, complaining they weren’t fresh. My friend was right; one has to explore beyond the capital—along the coast or in the mountains or the Bekaa Valley near Syria. I ate superb dishes at a private house north of Byblos, and delicious meat and spinach pastries from an open kitchen in the bazaar of Baalbek. The best meal of the entire trip was an informal Sunday lunch served at Château Massaya, a renowned vineyard in the Bekaa Valley underneath the snowtopped peak of Mount Lebanon. No one was enquiring if this was traditional cuisine or some foreign interpretation—perhaps when you are in a country as diverse and fractious as Lebanon, it is the wrong question to ask.
To step into the cellars of Klein Constantia is to step into a little corner of winemaking history. It was on this farm in South Africa’s Constantia region, perched on a series of undulating hills in the Western Cape, that one of the world’s leading wines was produced 200 years ago. The wine in question was a sweet wine known as Constantia, or Vin de Constance, which in the 18th century was as sought after and admired as Château Lafite or Château Pétrus are today. It is reputed to have been requested by Napoleon Bonaparte upon his exile to the island of St. Helena and was enjoyed by royalty throughout Europe. Jane Austen and Charles Dickens both mentioned it in their writings. Its downfall came in the form of two fungal diseases that ripped through the vineyards—first oidium, which at the height of its powers, effects grape ripening; followed by phylloxera, a root-feeding aphid that destroys vines. The effect was devastating. By the end of the 19th century, the wine estate was beset with financial ruin and the wine that only years earlier had delighted the European court vanished. In 1980, the farm was bought by the Jooste family, who busily set about renovating the cellars, winery and accommodation. Six years later, they reintroduced Vin de Constance in a replica 18th-century bottle. The 2004 vintage I tasted in the cellars of Klein Constantia was golden in color, with a syrupy, honeyed texture and a nose that reminded me of dried apricots, spice and ginger. History came full circle in 2008 when it was included in the book “1001 Wines You Must Try Before You Die.” In many ways the story of Vin de Constance mirrors the story of South African wine. A glorious, world-dominating start was preceded by decline, as the principal European markets were subject to competition. Following the phylloxera outbreak in 1918, the Co-operative Wine Growers Association (KWV) was created to help protect the Cape’s wine industry by setting
minimum prices and limiting production. At the end of apartheid, the industry once again began selling to the world. Much of the early post-apartheid success was made on the back of commercial bottlings of varieties such as Chenin Blanc and Pinotage. In 2009, the country’s wine industry celebrated its 350th anniversary and it is now, more than 15 years since South African wines were reintroduced to the world, that the finewine category is really hitting its stride. Having visited the region twice in recent years, it was informative to taste through a comprehensive range of the Cape’s wines at the South African High Commission in London’s Trafalgar Square. What is clear is that there are so many interesting styles and different grape varieties being grown in the Cape that South Africa’s wine industry has firmly moved on from the days when it was principally known for its Pinotage and Chenin Blanc. The Bordeaux blends immediately impressed. Producers such as Meinert, Waterford, Delaire Graff and Thelema produce Cabernet Sauvignon-dominated blends that are refined, balanced with distinctly Old World flavor profiles such as cigar box and cedar. To those I would add Kanonkop’s Paul Sauer blend, Rustenburg’s John X Merriman, Meerlust’s Rubicon, Vergelegen’s and Warwick’s Cabernet Francs. A number of Pinot Noirs stood out for their deep color and power. Hamilton Russell, Meerlust, Newton Johnson and Bouchard Finlayson are well worth tracking down. Many of the Sauvignon Blancs I tasted were defined by a spritzy, racing acidity and a predominance of green pepper. Tokara Walker Bay Sauvignon Blanc 2009 had a rich, grassy style, while Steenberg’s Sauvignon Blanc 2010 impressed with its freshness. The country’s Chardonnay has established a reputation for a toasty, nutty character. I recommend Vergelegen, Delaire Graff and Paul Cluver. The latter produces a Riesling, with attractive notes of green apple and lime reminiscent of a Riesling from Germany’s Mosel, illustrating the difficulty of categorizing South African wines. For while some argue that they are a New World wine-producing country, their history and, in many cases, the style of their wines points to the Old World.
Drinking Now Synchronicity Meinert Wines, Stellenbosch, South Africa Vintage: 2005 Alcohol: 14.5% Price: About $24 Of all the wines I have tasted from South Africa, in recent years it has been the Bordeaux blends that have stood out. Synchronicity is a case in point, although to describe it as a Bordeaux blend is slightly disingenuous as there is 14% of Pinotage in the final wine; the remainder being 67% Cabernet Sauvignon and 19% Merlot. The wine sits heavy and dense in the glass, a deep ruby color. The first impression on the nose is of an opened cigar box with sweet cedar. The fruit aromas are black cherry and mulberry, which come through on the palate. The slight downside is the alcohol level, which is a little high.
Thursday, April 7, 2011
THE WALL STREET JOURNAL.
11
OPINION: REVIEW OUTLOOK
The Ryan Resolution
W
ell, so much for dodging enti- ment, which is spending. tlements. This year’s trendy The Ryan plan would chop $179 billion complaint, shared by America’s from the 2012 White House budget and left and the tea party, that Republicans another $241 billion in 2013. This would hadn’t tackled the toughest budget issues be the largest two-year savings since the was blown away Tuesday with the re- demobilization of the military after lease of House Budget Chairman Paul World War II. Mr. Ryan would cut fundRyan’s budget for 2012. We’ll now sepa- ing for corporate welfare and hundreds rate the real reformers from the fiscal of ineffective programs, reform agriculchickenhawks. ture subsidies, reduce the federal work Mr. Ryan’s budget rollout is an impor- force by 10% and repeal ObamaCare, tant political and policy moment because among other good ideas. it is the most serious attempt to reform Mr. Ryan’s budget would reduce fedAmerican government eral borrowing to 2% of in at least a generation. GDP by 2017, which is a The plan offers what The most serious manageable level of voters have been saying new debt and a huge attempt to reform they want—a blueprint improvement from the to address the roots of government in a roughly 10% of GDP the Washington’s fiscal disTreasury is borrowing generation. order. It does so not by now. Given the epic the usual posturing hole we Americans are (“paygo”) and symbolism (balanced bud- in, this would be a historic achievement. get amendment) but by going to the As for entitlements, the House GOP heart of the spending problem, especially wants to let the states run Medicaid in on the vast and rapidly growing health- return for an annual fixed payment or care entitlements of Medicaid and Medi- “block grant,” letting Governors expericare. The Wisconsin Republican’s plan is ment with ways to save money and proa generational choice, not the usual Belt- vide better care. This is the way welfare way echo. was successfully reformed in the 1990s, i i i and it would give states more control That choice is clear enough by com- over their fastest-growing budget item. paring the Ryan blueprint with the 2012 On Medicare, the Wisconsin Republibudget that President Obama rolled out can would phase in reforms for Amerionly two months ago. The nearby charts cans under 55 years old. Medicare curshow the difference in federal outlays rently pays doctors and hospitals directly overall and as a share of GDP over the on a fee-for-service model that is pricenext decade. Mr. Ryan proposes to spend controlled and increasingly unaffordable. $6.2 trillion less, return spending to its Fewer doctors want to see Medicare pamodern average of roughly 20% of GDP, tients and, among other deficiencies, it and add $4.7 trillion less to the national lacks true catastrophic coverage. debt. Mr. Ryan would create a “premium Mr. Obama would keep spending at support” system in which government 24% of GDP even before ObamaCare fully would pay a subsidy of roughly $15,000 kicks in, while running annual deficits of to private insurers chosen by seniors. $600 billion a year or more despite tril- This means at age 65 you would be able lions of dollars in tax increases. to keep your same insurer, with the feds Some House conservatives are grous- paying for that insurance instead of your ing that Mr. Ryan’s proposal doesn’t cut employer. That would slow the growth of spending enough to balance the budget spending over time through competition in 10 years. This is a foolish complaint. and senior choice, rather than continue Mr. Obama will be happy to balance the on Medicare’s current path of governbudget too—at 24% of GDP, which means ment-rationed care. far higher taxes. Republicans should keep Tackling Medicare is the politically their eye on what Milton Friedman un- riskiest part of this budget, as Democrats derstood was the real burden of govern- are already returning to their old stand
of denouncing roll it out as part any change as a of the budget. Two Budget Futures “war on the elRepublicans will Federal outlays as a percentage of GDP under the derly and poor” have a better Obama and Ryan plans, 2011-2121 (as Illinois Demchance of winocrat Jan Schaning the fiscal 26% kowsky put it). argument if they 25 These are the keep explaining 24 Obama same Democrats that their re23 who oppose forms are essen22 smaller spending tial to reviving 21 cuts on grounds growth and raisRyan 20 that entitlements ing middle class 19 are where the incomes. '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 i i i real money is. Since they The truth is they Federal outlays in trillions of dollars under the only control the want only token Obama and Ryan plans, 2011-2021 House, Republispending cuts of 6.0 cans can’t expect the kind that Mr. to pass all or 5.5 Obama’s budget even most of offers. 5.0 these reforms For that politObama 4.5 this year. But in ical reason, Mr. rising to meet Ryan decided not 4.0 our main fiscal to walk point on Ryan 3.5 challenges, they Social Security, are honoring though everyone 3.0 their pledge to knows that re'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 voters last year tirement entitleSources: House Budget Committee, Congressional Budget Office and offering votment is also uners a serious govsustainable with $17 trillion in unfunded liabilities. As a erning platform. Mr. Ryan is showing policy matter, Social Security is also the Americans that there is an alternative to easiest problem to solve—change the Mr. Obama’s vision of the U.S. as a highbenefit formula, means test benefits, tax, slow-growth, European-style entitleraise the retirement age, and more. But ment state. The GOP political bet is that this deyou can’t blame Republicans for dodging at least one political buzzsaw if Mr. bate won’t be another replay of 1985, Obama is going to continue to dodge all 1995 or 2005 because the political times have changed. Our fiscal problems are far fiscal responsibility. Unlike many Republicans and some deeper, and Mr. Ryan’s hope is that the in the tea party, Mr. Ryan understands American people realize this and are that the budget can’t be balanced with willing to reward politicians who address spending cuts alone. Above all, we need those problems, rather than politicians faster economic growth to drive higher who say we can keep spending and borincomes and more revenues. So Mr. rowing ad infinitum. Republicans in Congress will need to Ryan also proposes a tax reform that would cut the U.S. personal and corpo- rise to Mr. Ryan’s occasion, and in particrate tax rate to 25%, in return for elimi- ular so will GOP Presidential candidates. nating loopholes and credits that allow The first voter test for those candidates companies like Whirlpool and General should be which of them are missing in action from the debate that House ReElectric to pay little tax. Chairman Dave Camp has been push- publicans are kicking off. If we fail to reing a similar reform in the tax-writing form the entitlement state now, we will House Ways and Means Committee, and do it eventually. But the price and pain he deserves credit for letting Mr. Ryan will be so much greater.
The Message of Ai Weiwei
C
hinese artist Ai Weiwei posed an important question about the oneparty state in this newspaper’s oped pages last year: “The question . . . is how a state based on limiting information flows and freedom of speech can remain powerful.” And if that’s possible, “what kind of monster” will it become? Mr. Ai’s detention Sunday at Beijing’s airport as he attempted to travel to Hong Kong brings this juggernaut into sharp relief. The police have provided no information about the 53-year-old’s whereabouts or explained why he was arrested. The same day, Mr. Ai’s wife, nephew and a clutch of his employees were arrested and questioned. Authorities raided his Beijing studio and carted away computers and other items. Mr. Ai has thus joined the growing ranks of China’s new “disappeared.” In February amid the popular Arab revolt, an online petition urged a similar Jas-
mine Revolution in China. The govern- Monday to “urgently clarify Ai’s situament has reacted by criminally detaining tion and well being” and called for his dozens, if not hundreds or thousands, of immediate release. Germany’s Foreign the country’s most prominent human Minister did the same. rights lawyers, blogThe U.S. State Degers, democracy activpartment managed to ists and others. roll out spokesman A famous artist is the The detention of Mr. Mark Toner, who said latest to disappear Ai is especially notable the U.S. government because of his national in China’s crackdown. was “deeply concerned” stature. The son of a but added “our relafamous poet, he is a tionship with China is prominent artist, film-maker and archi- very broad and complex, but it’s an issue tect in his own right, a popular Web where we disagree and we continue to communicator, and an advocate for the make clear those concerns.” Secretary of rule of law and individual freedoms. He State Hillary Clinton and President is also unafraid: In 2009, when Mr. Ai Obama have been mute. tried to attend the trial of another activPerhaps the Obama Administration ist, the police beat him so badly he got should listen to Mr. Ai, whose op-ed for a brain bleed that almost killed him. He us included this statement: “Most discontinued to speak out. couraging to those of us who are fighting British Foreign Secretary William for increased freedom is the tendency for Hague called on the Chinese government developed nations to lower the bar to
please China. They make excuses not to concern themselves with violations of human rights. To espouse universal values and then blind oneself to China’s active hostility to those values is irresponsible and naive.” The State Department says its top Asia official, Kurt Campbell, is set to visit Beijing today to “prepare for the upcoming Strategic and Economic Dialogue.” Maybe that trip should be postponed until Beijing tells the world in which dungeon it has dumped Ai Weiwei.
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THE WALL STREET JOURNAL.
Thursday, April 7, 2011
OPINION
[ Business Asia ] BY JOSEPH STERNBERG Months of turmoil in the Middle East have focused attention on two points. First, authoritarian regimes are inherently unstable. Second, this poses some significant problems for businesses. Consider managers trying to evacuate staff, safeguard physical property or keep supply chains operating as smoothly as possible. Think it couldn’t happen in China? Four months ago, no one would have predicted imminent mass unrest in Tunisia, Egypt, Syria, Bahrain, Yemen or Libya, either. While signs of discontent with those governments were obvious, the authoritarians seemed by all accounts to have the situation firmly in hand. That is precisely the case in China today, too. Disaffection over inflation and official corruption are rising rapidly, while the government has further reduced, to 7%, its official growth target for the year. Beijing clearly is worried, to judge from the lengths to which authorities have gone to suppress the whiff of any Jasmine protest. Businesses don’t have to believe that regime collapse is imminent—it probably isn’t—to look at these events and conclude some planning might be prudent just in case. Herewith a brief guide to
keeping your business afloat if China goes kablooey: The first step is to recognize that it really could happen. Human nature is to assume the status quo will continue indefinitely. On top of that, foreign businesses that don’t plan for civil unrest, although they almost certainly don’t think of it this way, put great faith in the effectiveness of Beijing’s repressive apparatus to quell regime-destabilizing protests. So far that faith has been justified, most dramatically in Tiananmen Square in 1989. But Eastern European communists, Ferdinand Marcos, South Korea’s military and Hosni Mubarak all used various forms of repression to maintain power, until one day it didn’t work anymore. It’s only prudent to assume that such a day will also come in China. Next, understand where your vulnerabilities lie. Some points will be obvious, others less so. A foreign company may keep a detailed list of expat staffers in China, their addresses and dependents, to aid in a worst-case evacuation. But it also needs to track executives who might be visiting, in case one of those should happen to be in town when mass protests erupt. Or consider reputational risks that might come to the fore amid civil unrest. Are your factories identifiably “foreign” and is that likely to be a sore point in the eyes of local residents? Have you
Associated Press
A Businessman’s Guide to China’s Collapse
Can you afford to be unprepared for Yemen-style unrest in Asia? previously stirred controversy for hiring lower-wage workers from other regions instead of locals? Are you in a controversial industry, such as a heavily polluting one, that could make you a target for popular discontent in the event of mass demonstrations? Perhaps the biggest risk companies need to manage in China is one that hides in plain sight: supply-chain security. China’s position as the world’s low-cost factory means that if serious political unrest were to unfold there, many businesses could find themselves struggling to get the components their factories outside China need to assemble finished products, or to obtain finished products for store shelves. Companies caught
flat-footed by strikes in Egypt—or an earthquake in Japan—have learned this the hard way. The key is to diversify supply chains, a practice some—though by no means all—companies already have adopted. This is not necessarily cheap. But those companies that invest in a little excess factory capacity in another country or buy insurance against supply-chain disruptions may one day find the additional expense a price worth paying. And a hundred other contingencies: Companies need to think ahead of time about how they would respond to varying degrees of disruption. What events would trigger a factory closure for a couple days, or a reduction in factory
hours, or moving workers’ dependents to another area, or in the worst case an evacuation of expat staff entirely? Who would make those decisions, based on what sources of information, and how would the decision be communicated down the line. And so on. This sounds likes a fanciful exercise. The Jasmine “movement” has fizzled. As unstable as authoritarian regimes are, predicting the precise moment and manner of their collapse is a fool’s errand. And yet. Beijing’s extreme anxiety over relatively minor calls for protests bespeaks a pronounced lack of self-confidence from China’s rulers. It would be foolish for managers not to take that signal at least a little seriously. Especially since even the faint prospect of civil unrest in China has implications for business beyond the practicalities of a disaster plan. The Communist Party trades on perceptions of its permanence. This supposed stability helps explain many of the cost savings China traditionally has offered—the ability to build infrastructure rapidly with minimal regard for public opposition and the suppression of independent labor unions being two of the bigger ones. The Middle East shows that authoritarianism isn’t necessarily as cheap for business as it looks.
Mr. Sternberg edits the Business Asia column.
Crisis Mismanagement [ Bookshelf ]
Fatal Risk By Roddy Boyd Wiley, 349 pages, $27.95 BY JAMES FREEMAN Was the life-and-death crisis at AIG triggered by a false rumor from a New York law firm? That’s one of the many questions raised by Roddy Boyd’s “Fatal Risk,” a vivid portrait of the giant insurer at the center of the 2008 financial crisis. The book’s subtitle is “A Cautionary Tale of AIG’s Corporate Suicide.” Readers may end up wondering whether the corporation jumped—or was pushed. Although AIG wouldn’t need a bailout until September 2008, the seeds of its crisis were sown in 2005. That’s when Eliot Spitzer, New York’s attorney general, piggy-
backed on a federal investigation of reinsurance transactions and forced the company to fire its longtime chief executive, Hank Greenberg. When Mr. Greenberg stepped down on March 14 of that year, the plan was for him to remain as nonexecutive chairman. But attorneys at Mr. Spitzer’s old law firm—Paul, Weiss, Rifkind, Wharton & Garrison—soon dropped a bombshell. Representing AIG, they called Mr. Spitzer and told him that Mr. Greenberg’s lawyers were stealing and destroying AIG documents, Mr. Boyd reports. There appears to have been no substance to their charges, but Mr. Spitzer quickly demanded that AIG cut all ties with its former boss. As The Wall Street Journal reported at the time, Mr. Spitzer told AIG’s directors that, with Mr. Greenberg still around, “you have serious criminal exposure.” AIG soon barred Mr. Greenberg from its offices. Even before the Paul, Weiss accusation, Mr. Spitzer was putting intense pressure on AIG’s board, so it is possible that he would have engineered Mr. Greenberg’s exile even without the claim of evidence destruction. What is certain is that the world’s largest insurer was abruptly separated from the world’s most experienced risk manager at the worst possible moment. Mr. Boyd doesn’t argue that if Mr. Greenberg had remained at the helm, AIG would have sailed through the crisis of 2008 unscathed. AIG under Mr. Greenberg was under pressure to continue its remarkable profit growth and was thus taking on more risk in the
capital markets; before he was fired, the firm was attracting the attention of short sellers like James Chanos of Kynikos Associates. But readers of “Fatal Risk” will have a hard time believing that Mr. Greenberg wasn’t superior to the AIG management that followed. Mr. Greenberg had long been obsessed with addressing every potential threat to the company. While CEO, he even drew up a plan for AIG to survive a nuclear attack. His outlook may have been shaped by his own experience with catastrophe and risk. Mr. Boyd reports that Mr. Greenberg was just 5 years old when his father, a cab driver, was killed. While still a teenager, Mr. Greenberg landed at Omaha Beach on D-Day and later witnessed the horror of Dachau. He would lead an infantry platoon in the Korean War, where he earned a Bronze Star. Of course it was AIG where Mr. Greenberg earned a world-wide reputation, serving as chief executive for almost four decades. Mr. Boyd says that there was one appointment he never missed—a regular Tuesday meeting that included AIG’s chief financial officer, its general counsel and the leadership of its now infamous financialproducts subsidiary. The subject was risk. Once Mr. Greenberg left AIG, the meetings stopped—and so, apparently, did the habit of making risk a matter of abiding concern. Mr. Boyd says that federal investigators, looking into the postGreenberg AIG, could not find a senior New York-based manager “sending so much as an inquisitive email” to the financial-products
group in Connecticut about the risk-filled portfolio that would plunge AIG into crisis. Mr. Greenberg’s successor, Martin Sullivan, knew insurance but not much about Wall Street. After Greenberg lieutenant Ed Matthews briefed the new CEO on the potential pitfalls of financial products, he was surprised that Mr. Sullivan didn’t ask any questions. “On his way out of Sullivan’s office,” Mr. Boyd writes, “Ed Matthews looked down and saw the legal pad Sullivan had made a show of taking out for note-taking purposes. It was completely blank.” In the months after Mr. Greenberg departed, the financial-products division went on a subprimemortgage binge. It had largely avoided writing swaps on bonds backed by mortgages during the Greenberg era but quickly entered into tens of billions of dollars of contracts that would require AIG to pay the full value of such securities in the event of default. What almost no one at AIG realized was that, even without a default, the company would have to post billions of dollars of collateral if the market price of the bonds declined or if AIG’s own credit rating slipped. Not everyone at AIG was caught up in the delusions of the housing bubble. Fred Geissinger was the head of an AIG subsidiary that offered mortgages, among other products. But after the “most absurd stories he had ever heard” about people getting mortgage loans from competitors without providing any financial information, he decided to get out of the
subprime market. He reported his decision to AIG headquarters, but apparently no one there thought to follow up on his (impeccable) reasoning. The rest, as they say, is history. The government would make more than $182 billion available to assist AIG. Today, Uncle Sam owns 92% of the business, though in a few months it is supposed to begin selling its stake. Not even the shortseller Mr. Chanos was able to profit from AIG’s near-collapse. The company didn’t fail quickly enough, and he exited his money-losing short positions in 2007. But he profitably shorted other stocks—Fannie Mae and Freddie Mac. Of course, major misadventures in real estate can happen outside the U.S., too. The book reports that Mr. Chanos is now shorting China.
Mr. Freeman is assistant editor of the Journal’s editorial page.
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Almar Latour, Editor in Chief, Asia Peter Stein, Associate Editor Dean Napolitano, Senior Editor Hugo Restall, Editorial Page Editor Shawn Hiltz, Vice President, Marketing Alice Chai, Research Director Connie Cheng, Operations Director Simon Wan, IT Director Olivier Legrand, General Manager Digital Christine Brendle, Publisher Published since 1889 by
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THE WALL STREET JOURNAL.
Thursday, April 7, 2011
13
OPINION
South Asia’s Looming Arms Race BY BRUCE RIEDEL
states. While relative transparency and geographical concentration are the norm in places like the U.S.—Washington is fairly open about how many warheads it maintains and where it houses them—Pakistan’s program is marked by secrecy and dispersion. The Pakistani army makes every effort to prevent information about the locations of its weapons from falling into its enemy’s hands, and especially American hands. Islamabad also has a somewhat different view of how to leverage its nuclear program than is found in more traditional nuclear states. Pakistan has used its nuclear program to deepen relations of a sort with various regimes. The country has both been the recipient of nuclear proliferation (from China) and a supplier of technology (to North Korea, Iran, Libya and possibly Saudi Arabia). A.Q. Khan, the father of Pakistan’s bomb, is thought to have been at the center of most proliferation activities. The arsenal has also been useful in emboldening Pakistan to engage in provocative non-nuclear behavior against India. A year after publicly declaring and testing its nuclear program, Pakistan launched a limited war against India in Kashmir in 1999. Its intelligence service has sponsored terrorist groups that have attacked India’s cities, most famously Mumbai in November 2008. The FBI’s interrogation of the PakistaniAmerican David Headley, who masterminded the attack, established this connection, as has India’s own investigation.
After a hiatus of two years, the resumption of talks between Pakistan and India announced in February is good news. This was capped by Indian Prime Minister Manmohan Singh’s brilliant move to invite his Pakistani counterpart Yusuf Raza Gilani to attend the India-Pakistan cricket world cup semifinal last week. Despite these diplomatic efforts, however, a huge challenge to peace is brewing: a nuclear arms race in South Asia. Pakistan’s arsenal of warheads, currently close to overtaking the fifth largest (the United Kingdom) in the world, is growing faster than any other. It’s on track to become the fourth largest in the world by the end of the decade, overtaking France and behind only the United States, Russia and China. So far India has held back but that restraint will become harder to maintain as Pakistan forges ahead. An understanding of what Pakistan’s arsenal means for the subcontinent’s nuclear future begins with recognizing who manages that arsenal and to what ends. The army controls all aspects of the nuclear program, while the civilian administration exercises only nominal supervision. Having lost four wars to India since 1947, the Pakistani military sees the bomb as an equalizer and deterrent against its bigger neighbor—the primary reason it has spent scarce resources on this capability. Pakistan’s arsenal also is managed in a different way than is common in Western nuclear
While India is the main enemy that has driven Pakistan’s nuclear build-up, the army now also sees the bomb as a useful deterrent against Washington. PakistaniAmerican relations have become deeply troubled in the past few years, with both sides having little confidence in the other. Last fall, President Obama warned Islamabad, including its army chief Ashfaq Kayani, that another terror attack on the U.S. postmarked from
Pakistan is enlarging its nuclear arsenal. And India is sure to follow suit. Pakistan could lead to a profound crisis between the two countries. But Mr. Kayani understands that as long as Pakistan has a nuclear weapon, Washington will have to hesitate before using force. Recent events in the Middle East have likely only heightened Islamabad’s view of this deterrent. With the imposition of a no-fly zone in Libya last month, Pakistan now has watched America take military action against three Muslim countries in the past decade. Mr. Kayani will doubtless conclude that if Libya had maintained the nuclear program that A.Q. Khan had sold it—rather than scrapping that program after the 2003 invasion of Iraq—the U.S. would have been more reluctant to start air strikes. His army will be more determined to build up the arsenal. If that build-up proceeds apace, New Delhi isn’t going to sit back.
Mr. Singh has shown remarkable restraint in recent years: He tried hard to strike a deal with former Pakistani dictator Pervez Musharraf in 2006, resisted calls for military counterstrikes after the 2008 Mumbai attacks, and is now facilitating rapprochement. India’s nuclear arsenal has grown at a more relaxed pace since it conducted tests in 1998. But India knows it can’t be left behind, not least because it must take into consideration the nuclear program of a larger and potentially more menacing neighbor, China. Relations between the two emerging giants have been rocky the past few years, thanks mainly to border disputes. More importantly, it is unrealistic to expect New Delhi to trust Islamabad after four wars and terror attacks. It now knows that its smaller neighbor holding a bigger nuclear hand spells trouble. Pakistan has suggested earlier that it needs the bomb to deter the armored columns India can mobilize, but India is unlikely to reduce its conventional forces, just to help its neighbor wean itself off nukes. Rather, Indian economic growth will enhance its military superiority over Pakistan in the years ahead and feed into the latter’s paranoia. Absent a diplomatic breakthrough, sooner or later India will have to ratchet up its weapons program. This will have implications for military planners in the region, including in Iran and China, and fallout for countries farther afield like Israel. The renewed bilateral diplo-
macy seen this year is not likely to succeed in the face of years of hostility and mistrust. That makes it urgent for the world community, especially the U.S., to address the budding arms race. U.S. policy toward Pakistan in general and the Pakistani bomb in particular has oscillated wildly over the last 30 years between blind enchantment and unsuccessful sanctions. George Bush lifted sanctions after 9/11 and poured billions into the Pakistani army, much of it unaccounted for. But Mr. Bush’s civilian nuclear deal with India in 2005 left many Pakistanis angry at what they see as a double standard that gives India access to technology denied to them. Washington now needs a policy toward Islamabad and its bomb which emphasizes constancy and consistency. It also needs to help Mr. Singh and Mr. Gilani address the root issues dividing the two nations. President Obama should encourage small steps at first like increased trade and communications, but press quietly behind the scenes to address Kashmir and other tough problems. The alternative, a full-blown South Asian arms race, will seriously threaten global security.
Mr. Riedel is a Senior Fellow at the Saban Center for Middle East Policy at the Brookings Institution. A former CIA officer, he chaired President Obama’s strategic review of policy toward Afghanistan and Pakistan in 2009 and is author of “Deadly Embrace: Pakistan, America and the Future of the Global Jihad” (2011).
The Unaccountable Fed “I will maintain to my deathbed that we made every effort to save Lehman, but we were just unable to do so because of a lack of legal authority.” So said Federal Reserve Chairman Ben Bernanke in 2009. The statement was striking—not because it was false, but because the Fed lacked explicit legal authority to do so much of what it did during the financial crisis. Drawing the line at Lehman seemed arbitrary, and it proved that the Fed has become an unaccountable power within American government. Mr. Bernanke’s insistence that the Fed is restrained by some obscure statute is central to his argument that the Fed is a body subject to the check of external forces. But it’s not. The principal check on its power is the self-restraint of its chairman, a point proven by the Lehman example: Had Mr. Bernanke saved Lehman, who would have enforced the statute that he had violated? No one. That’s because the Fed, as currently configured, has no opposing force to rein it in. In the beginning, it was not so. When the Fed was created in 1913, the gold standard limited its power as did the balance between the 12 reserve banks across the country and the Federal Reserve Board in Washington. Lawmakers thought that the reserve banks would represent regional economic interests
Chad Crowe
BY SEAN FIELER AND JEFFREY BELL
in tension with the national political agenda of the board in Washington. Moreover, the Federal Reserve Act imposed a hard constraint on the Fed’s balance sheet: 40% of the Fed’s notes had to be backed by gold. Finally, the Fed’s charter was temporary, lasting only 20 years before requiring congressional reauthorization. These constraining forces began unraveling almost right away. During World War I, the Wilson administration suspended and then restricted the dollar’s convertibility into gold. In 1927, the Fed’s charter was extended indefinitely. In 1932, the Glass-Steagall Act effectively unmoored the Fed’s balance sheet from gold by allowing government bonds to serve as collateral against the issuance of Fed notes. And with the passage of the Banking Act of 1935, the Fed’s newly expanded powers were con-
centrated in the board, at the expense of the reserve banks. Thus by the mid-1930s, the only remaining check on the Fed’s power was statutory. Statutory supervision of government bureaucracies is usually workable because Congress maintains the power of the purse. But the Fed, which can print money, has no budget constraint. Its profit and loss statement doesn’t matter because, unlike every other legal entity, its liabilities are irredeemable. Not having a real budget means that the Fed doesn’t have to compete with anyone for scarce resources. Accordingly, the U.S. Congress, banks and businesses—institutions that would typically be skeptical of a bureaucracy’s uncontrolled expansion—are instead interested in capturing the Fed for their own purposes. From Long-Term Capital Management’s bailout in 1998 to
the cleanup of 2008, Congress has come to rely on the Fed—thereby excusing Congress from having to vote on unpopular bailouts. What’s more, the government remains dependent on the Fed to help finance its debt. Similarly, banks and big corporations are potential beneficiaries of low-cost leverage and expedient bailouts. Thanks to the tea party, there are increased numbers of leaders in Congress willing to take on big issues such as the Fed. But even those lawmakers who recognize the Fed’s threat to liberty are advocating narrow fixes, such as imposing the “single mandate” of price stability (and removing the Fed’s statutory responsibility for full employment). That alone wouldn’t impose any meaningful check on the Fed’s power. If the history of the Fed proves anything, it is that no mere rule will take the fiat out of fiat money. And there is no reason to believe that a single mandate would have stopped “quantitative easing.” More importantly, what would happen to the single mandate of price stability if and when the Fed violated it? At worst, Congress would hold hearings and be very, very upset. Or it wouldn’t do even that, because the most likely reason the Fed would allow inflation to get out of control is to finance Congress’s ever-growing budget deficits. Members of Congress seeking
to restrict the Fed’s power need to consider what oppositional force is truly capable of hemming it in. One answer is a revived gold standard, which would once again obligate the Fed to redeem dollars for gold at a fixed rate. Equally effective would be to leave the Fed and the dollar system untouched, but to allow gold a level playing field on which to compete with the dollar. Utah has already taken the first step in this direction by passing a law formally recognizing gold as legal tender. But for the playing field to be truly leveled, all taxes on gold transactions need to be removed and individuals and businesses need to be permitted to report their financial accounts in gold. While it might not seem obvious to pit the dollar against gold, which has not been used as final money in over 100 years, it would provide a significant restraint on the Fed. Simply allowing gold to be used as currency again would concentrate the minds of the Federal Reserve Board on keeping inflation under control. Competition, after all, would mean that if the Fed doesn’t preserve price stability, it will lose its monopoly franchise—not just get a tough talkingto from Congress.
Mr. Fieler and Mr. Bell are chairman and policy director, respectively, of the American Principles Project.
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THE WALL STREET JOURNAL.
Thursday, April 7, 2011
Reuters
DISASTER IN JAPAN
A girl walked with her mother after her first day of school at the Shimizu Elementary School in Fukushima, Japan, where more than 70 schools began their regular classes on Wednesday.
Japan works to get kids back in class Authorities hope that reopening schools will give needed routine to children traumatized by the March 11 disaster BY DAISUKE WAKABAYASHI AND MIHO INADA RIKUZENTAKATA, Japan—The gymnasium of fifth-grader Ryodai Kinno’s school in Rikuzentakata, Japan, is packed with evacuees and its parking lot is full of aid vehicles. But authorities are determined to reopen his school and others across northeast Japan that have been closed since March 11, to help the youngest victims get over the trauma of the disaster. Ryodai says he still gets frightened by the aftershocks and sometimes finds his legs shaking uncontrollably. “I’m not really sure the reason why,” he says. On the day of the tsunami, Ryodai watched as his home get swallowed up by the rushing waters after fleeing to higher ground. “I was shocked,” he says. “My parents told me that 20 of the 48 people in my neighborhood were washed away.” These days, Ryodai sleeps at his grandparents’ house and treks across town to eat at another relative’s home. During the days, he kicks a ball around with friends, but the park where he used to play football is covered in debris. Many of his friends are among the 157 people sheltered in his school, Yonesaki Elementary School in Rikuzentakata, Iwate prefecture, which was spared any significant damage. Japanese authorities believe getting students back into the familiar
routine of school, which in Japan typically opens the first week of April, is a necessary therapy for Ryodai and other children, who have suffered the loss of home, family, friends, schools, teachers and classmates. “I really want the schools to open as soon as possible,” says Kikumi Suzuki, a 37-year-old mother whose six-year-old son, Tatsuki, is planning to start first grade in the same seaside town. “It’ll be one step toward getting his life back to normal.” She said her son has lost his home and all his toys, and rarely gets a chance to play with friends. They are living with relatives in town. As of Monday, 392 students and teachers are confirmed dead in Iwate, Miyagi and Fukushima prefectures, the regions hardest-hit by last month’s disaster, while more than 1,000 students and teachers are still missing, according to Japan’s education ministry. Some two-thirds of the public and private schools in that area were damaged. Those schools that were spared are now a refuge for thousands without homes. “It’s really important to get the children back to a stable lifestyle as soon as possible and get them back into a regular rhythm,” said Yoshinori Kanno, a section manager of the board of education in Rikuzentakata, where more than 1,000 residents are dead and another 1,200 residents are missing.
All the schools in Rikuzentakata are slated to open on April 20, about two weeks later than usual, but that plan has challenges. Even the most basic questions, including where to put all of the students, haven’t been answered. Seven of Rikuzentakata’s 18 elementary and middle schools won’t be able to reopen then, so students from those schools will be merged into the remaining schools. The town is trying to figure out ways to deal with the overcrowding—including possibly combining students in the same grade from all the schools into one big classroom, then adding a second teacher for “team teaching.” In another town wiped out by the tsunami, Otsuchi, Iwate prefecture, officials are considering using school buses to shuttle children to schools in neighboring towns to avoid having children walk through dangerous mounds of debris that litter their town. The majority of residents from Futaba, Fukushima prefecture, where the damaged Fukushima Daiichi nuclear reactor is located, have relocated to Saitama prefecture. Their children will have to crowd into local schools, as it is unclear when, or even if, they can return to Futaba. In Rikuzentakata, three of 10 local nursery schools—which take children from three months old to kindergarten—were destroyed on March 11. Sadako Nagano, who runs
Yonesaki Nursery School, one of the town’s remaining nurseries, has spent the past three weeks preparing to welcome her students to the new year. “As someone who looks after children, my goal is to reopen the school, even one day earlier, so they can return to being kids,” said Ms. Nagano, who is 55 years old and has lived in Rikuzentakata her entire life. Ms. Nagano has been walking or riding her bicycle all over town to check on the well-being and whereabouts of the 115 children enrolled at her nursery. Many are still in evacuation centers, while some parents have taken their children to live with relatives in other towns. As she does her rounds, Ms. Nagano says she witnesses many signs of stress. Some children act younger than their age or cling to their mothers, while others get jittery and frightened during aftershocks, now a daily occurrence. Rikuzentakata built a brand-new nursery school for Yonesaki before the tsunami, next to its former building, but the children aren’t allowed to use the new facility until it passes a safety inspection, which has been delayed. Once the building passes inspection, there are other hurdles to reopening. The old nursery school is serving as a kitchen for one of the city’s evacuation centers. There is no running water at either the new or old nursery, which makes it nearly im-
possible to care for babies. There also isn’t enough food to ensure proper school lunches for all of the children. Ms. Nagano had 50 children whose parents hadn’t yet come to pick them up when the disaster struck. She recalled looking toward the ocean and seeing what appeared to be the “white smoke” of the rapidly approaching tsunami. Sensing danger, Ms. Nagano and 18 other teachers led the children to higher land. Some teachers held the babies in their arms while others pushed groups of toddlers too young to walk in giant laundry carts along a mountain road. The teachers, some of the children and some of their families took shelter for the night in a shed near a local community center at the top of a hill. One of the children under her care, a two-year-old girl who was picked up by her grandmother from the nursery on the day of the earthquake, died trapped in a car that was swept away by the waves. As she prepares the school, Ms. Nagano said she is considering asking parents to send children with their own water supply, or she may open the nursery just for morning sessions. For fifth-grader Ryodai Kinno, April 20 will come all too soon. He said he doesn’t like all the work he has to do and with the evacuees still in his school’s gym, it looks like he won’t be enjoying his favorite subject: physical education.
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
15
DISASTER IN JAPAN
Tepco plans steps to avert hydrogen blast Under pressure Tokyo Electric Power and government officials are moving to avert a potential explosion at the Fukushima Daiichi No. 1 reactor
1: Fuel rods that overheated earlier produce hydrogen.
2: As fuel rods cool, steam condenses into water, reducing pressure.
Fuel rods
Containment vessel
3: The reduced pressure causes air to rush in through cracks in the quakedamaged pipes, exposing hydrogen to oxygen.
Note: Water levels are estimates
said the regulator believes there was significant fuel damage in all three reactors and the four spent fuel pools. “But we don’t believe at this point in time that that core has left the vessel,” he said. “That’s not in the situation report that we have from the team in Japan, and that’s as of this morning.” Also Wednesday, Japan Chief Cabinet Secretary Yukio Edano said the government was discussing whether to revise radiation evacuation orders according to age or other criteria. “The government has yet to decide whether to implement an age-specific evacuation order,” he said. His comment followed a local media report that the town of Iitate in Fukushima prefecture will recommend that pregnant woman and
Workers plugged a leak of highly radioactive water into the ocean from the plant’s No. 2 reactor. children below the age of 3 evacuate the town. Japanese officials have faced international scrutiny over their 20-kilometer evacuation zone, which is smaller than one recommended by U.S. officials. Workers on Wednesday also plugged a worrisome leak of highly radioactive water into the ocean from the plant’s No. 2 reactor. They are still in process of pumping water
Air
4: Injection of nitrogen into the No. 1 reactor increases pressure and blocks oxygen from coming into contact with hydrogen, a volatile mix.
Nitrogen
Source: Tokyo Electric Power; Japan Nuclear and Industrial Safety Agency; WSJ reporting
out of flooded trenches and basements in order to restart crucial equipment that will help keep reactors from overheating. “Until the cooling system is in place, we cannot say that we’ve gotten over the crisis,” said Keiji Miyazaki, who specializes in nuclear reactor engineering at Osaka University. Without these cooling systems, Tepco has kept the three damaged reactors from overheating by pumping in seawater in the first two weeks of the accident, and then fresh water thereafter. But the No. 1 reactor has exhibited higher temperatures than the other reactors in recent weeks, partly because Tepco was initially unable to pump in enough seawater into the reactor due to a problem with its pipes. The failure to cool the reactor quickly enough has left as much as 70% of the core damaged, according to Tepco. Overheating of the reactor is also likely to have damaged the control rods, which help control the speed of a nuclear reaction. As a result, Tepco said has been mixing boron into the cooling water for the past three weeks. Boron absorbs neutrons and helps prevent so-called recriticality, in which the nuclear reaction accelerates and reaches a self-sustaining level that is difficult to stop. Tepco reported steady progress in its effort to drain contaminated water that has been hindering work to repair the cooling systems. By Wednesday morning, workers had discharged more than half of the
Zuma Press
Continued from first page sure inside. The containment vessel is meant to be airtight. But the overheating of fuel rods following the breakdown of the cooling system in the wake of last month’s earthquake, and the subsequent pumping of seawater into the reactor, are believed to have damaged some of the vents and pipes running in and out of the reactor. Inside the vessel, meanwhile, hydrogen has gathered, the engineer said. Overheating of fuel rods earlier in the crisis likely caused the material coating the fuel rods to melt, producing hydrogen. The process also resulted in the gas buildup that caused explosions within the buildings housing the No. 1, No. 3 and No. 4 reactors. Now, a drop in pressure inside the damaged containment vessel could allow outside air to flow in, introducing oxygen that could react with hydrogen, touching off an explosion. The injection of nitrogen would keep the pressure inside the containment vessel from falling and keep air from entering. Nitrogen is often injected into such reactors during normal operations, said Wataru Sugiyama, who teaches at Kinki University’s Atomic Energy Research Institute. The risk of a hydrogen explosion within the reactor has been flagged by the U.S. Nuclear Regulatory Commission, Mr. Nishiyama said. But he added: “It was our own decision to inject nitrogen and the exchanges of opinion with the NRC further corroborated this decision.” The process, which was set to begin just after midnight Wednesday, would be delayed until 4 or 5 a.m. Thursday, a Japanese regulator said early Thursday. Separately, the NRC on Wednesday disputed remarks by a U.S. lawmaker who raised fears that a core meltdown had occurred at the plant’s reactor No. 2. In a Wednesday statement, Rep. Ed Markey, a Massachusetts Democrat and a critic of nuclear power, said the NRC had informed him “that the core of Unit Two has gotten so hot that part of it has probably melted through the reactor pressure vessel.” Soon afterward, Martin Virgilio, deputy executive director for reactor and preparedness programs at NRC,
A woman undergoes radiation testing Wednesday in Fukushima. 10,000 tons of low-level radioactive water that Tepco had said it would transfer from the site into the sea nearby. That will help clear a space where workers can store dangerously radioactive water that is now flooding the No. 2 reactor building. Adding to the urgency to drain Reactor No. 2 is the possibility of leakage into the ocean, according to the Nuclear and Industrial Safety Agency. The water flooding the reactor and its cable trench is one million times more radioactive than the dumped water: Just 10 liters of this water from Reactor No. 2 could
cause as much damage to the environment as the whole 11,500 tons of dumped low-level radioactive water, the nuclear agency said. Some of the water was found spilling out from a cracked concrete pit near the shoreline Saturday. Earlier Wednesday, Tepco said it stopped the leak by pouring a gellike adhesive around the pit. Regulators said they will make sure that the crack will remain sealed and that there will not be any other leaks near the ocean. —Toko Sekiguchi and Tennille Tracy contributed to this article.
Often in mass deaths, many are never found BY JOHN BUSSEY This past weekend, a big U.S.Japan joint military operation—more than 100 helicopters and planes, three score ships, 18,000 personREPORTER’S nel—set out to NOTEBOOK find some of the 15,000 bodies believed lost to the earthquake and tsunami that hit Japan last month. In this, Japan joins many other nations that in the past decade have experienced the ordeal of mass death, in which many of the victims are never found. Southeast Asia’s tsunami in 2004, the terror attacks in the U.S. in 2001, floods in South Asia, among other events—these similarly challenged nations to contend with a crisis at once deeply personal and, in sheer size and
scope, numbingly impersonal. The result of the weekend’s search was sobering: just 339 bodies found, the bulk of the rest likely swept out to sea and lost forever, or still pinned under wreckage on shore. The coast guard rescued a dog found atop a house floating about two kilometers out in the ocean. The news report declared: “Miracle Tsunami Dog Rescue.” The single recovery seemed only to underscore Japan’s great loss. In Southeast Asia in 2004, there was a similar vanishing. The ocean first receded as the tsunami approached the shore and grew in height, sucking water out to sea. Children in villages in Indonesia, at resorts in Thailand, on beaches in India ran down to the sand to pick up shells and small fish suddenly exposed to the air.
Then the waves hit. As in Japan, whole families disappeared, villages too. For weeks, the navies of several nations searched the sea. In the end, the missing numbered in the tens of thousands. In New York, after years of work, officials still haven’t been able to identify more than 1,000 of the 2,752 people killed when the World Trade Center fell. Many bodies simply disappeared as the buildings cascaded. Grieving by the public consolidated early around leaflets picturing the missing that were posted by families and friends at sites such as St. Vincent’s Hospital near the World Trade Center. Hundreds of mourners gathered outside the hospital, silently reading the messages posted on the walls. This continued for
months. Similar scenes played out in Southeast Asia in 2004. Large display boards set up outside of city hall in Phuket, Thailand, were soon covered with pictures of the missing, and pleas from families for information. The leaflets attracted crowds of mourners who quietly filed by in the sun and heat, trying to understand the dimension of the tragedy that had hit them. The faces and names on the postings were a momentary antidote to the anonymity that seemed to overwhelm so large a killing. On nearby beaches, Buddhist priests set empty chairs at table settings laden with food—offerings to the spirits of the dead and missing. In the weeks to come in Japan, an article of clothing or a photo
will take the place of a missing body at the burial ceremony. “If you don’t have the body, than what do you do,” says John Nelson, who lived in Japan and is now chairman of the Department of Theology and Religious Studies at the University of San Francisco. “There has to be some representation of the person. But the main thing is that the ritual needs to take place.” In reading the postings outside St. Vincent’s Hospital, in offering rice to the spirits in Phuket, in burying a photo in Sendai, survivors remember the missing and address the otherwise anonymous nature of so large and complete a loss. “It’s scattered out there, and the ceremony localizes it,” says Mr. Nelson. “It brings it all to one place, in one space and time.”
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THE WALL STREET JOURNAL.
Thursday, April 7, 2011
FROM PAGE ONE
Continued from first page from trading in public companies “that may be involved in a significant transaction with Berkshire,” including those “in which Berkshire has invested or may in the future invest.” At issue is whether Mr. Buffett should have pressed Mr. Sokol for more details about his stock holdings in Lubrizol Corp., such as when he purchased them, given the timing of the acquisition. Few executives in corporate America are as revered as Mr. Buffett, as much for his integrity as his investment acumen. Now, the unfolding events are raising questions about controls and governance at the highest levels of his business. Messrs. Sokol and Buffett stunned investors last Wednesday with news that Mr. Sokol was resigning from Berkshire. In the unusual announcement, Mr. Buffett also revealed Mr. Sokol’s purchase of the shares in Lubrizol, saying the executive had bought what amounted to about $10 million worth before Berkshire reached a $9 billion deal to acquire the company in mid-March. Berkshire’s purchase price of $135 per share meant that Mr. Sokol’s stake rose $3 million in value. Mr. Sokol, 54 years old, was widely seen as a leading contender to succeed the aging billionaire at the helm of the Omaha insurance and industrial conglomerate, one of the nation’s biggest companies. In his announcement last week, Mr. Buffett said the resignation was Mr.
Sokol’s choice but noted that, unlike past instances where the younger executive contemplated leaving, he didn’t try to stop him from resigning. Separately, the Securities and Exchange Commission intends to investigate past acquisitions by Berkshire to see whether Mr. Sokol held shares in other target companies before deals were announced, according to people familiar with the situation. The Buffett memo on the company’s trading policy, reviewed by The Wall Street Journal, covers top executives of Berkshire subsidiaries, such as Mr. Sokol. It has been in place for more than 10 years and is consistent with the broad legal ban on insider trading. Mr. Sokol certified having reviewed the policy, according to a person familiar with the matter. The memo raises questions about why Mr. Buffett didn’t allude to the possible violation of his own policy when on March 30 he revealed details of the trades. In that statement, he praised Mr. Sokol for his “extraordinary” contribution to the company. He said he didn’t ask Mr. Sokol for his resignation and said it came “as a surprise” to him. Now, an independent committee of the conglomerate’s board will be reviewing the transaction and Mr. Sokol’s trades to determine whether there was a violation of the trading policy, a person familiar with the matter said. Mr. Buffett didn’t respond to a re-
quest for comment on his directive and whether Mr. Sokol’s actions violated it. Berkshire Chief Financial Officer Marc Hamburg said Mr. Buffett intended to field questions on the matter at the April 30 annual meeting in Omaha and wasn’t expected to comment publicly before then. Mr. Sokol also didn’t respond to a request for comment. Mr. Sokol has said he believes he did nothing wrong in making the trades and they weren’t a factor in his decision to resign. Despite the strong wording of the trading-policy memo, Mr. Buffett by his own account didn’t have much concern when Mr. Sokol told him in January he owned shares in Lubrizol as he recommended to Mr. Buffett that Berkshire buy it. Mr. Buffett called it a “passing remark.” Only after the deal was announced two months later did Mr. Buffett ask Berkshire’s chief financial officer to get the details from Mr. Sokol. That was when they learned Mr. Sokol bought about $10 million in shares around a week before he recommended the company as an acquisition. Mr. Buffett assumed Mr. Sokol had the ownership stake for some time, and there was no mention of recent purchases in January when the two men first discussed acquiring Lubrizol, according to people familiar with the matter. The separate SEC inquiry is part of the agency’s look into whether Mr. Sokol’s purchases of Lubrizol shares violated insider trading or other securities laws. An SEC spokesman declined to comment. The Berkshire policy says that from “time to time” the SEC has asked Berkshire to disclose the names of employees who “may be aware of our trading activities.” Mr.
‘This restriction applies ... [ to ] securities of other public companies in which Berkshire has invested or may in the future invest.’ – Excerpt from Berkshire Hathaway insider-trading policies memo
Reuters
Buffett’s trading policies went unheeded
David Sokol resigned unexpectedly last week from Berkshire Hathaway. Sokol is among the employees whose names have been given to the agency in the past, a person familiar with the matter said. The memo says the purpose of these requests is to “determine whether any insider trading has occurred among our employees or their ‘tippees,’ ” meaning people with whom employees share inside information. The existence of the memo may help Berkshire counter critics who have said the company’s lean bureaucracy and high trust in its leaders have left it vulnerable to potential ethics violations.
The policy says, among other things, that if a person covered by the policy is aware that Berkshire is “actively considering” taking a position in a public company’s securities, trading in the company’s securities is “expressly prohibited” prior to public disclosure of Berkshire’s actions. A lawyer for Lubrizol said the company became aware of Mr. Sokol’s resignation and his purchases of Lubrizol stock when Berkshire put out its news release last week. —Serena Ng contributed to this article.
Continued from first page nese newspaper to mention Mr. Ai, and it is often used as an outlet for the hawkish elements of the military and security establishments to influence public opinion, said diplomats and Chinese and foreign political analysts. The editorial’s strong wording therefore reinforced concerns among liberal Chinese scholars, rights groups and Western diplomats that Mr. Ai has become the latest victim of a sustained campaign by Chinese security services to use extrajudicial measures to silence government critics. Mr. Ai was once touted as a cultural ambassador, and helped to design the Bird’s Nest stadium for the 2008 Beijing Olympics, but has since fallen out of favor because of his increasingly vocal criticism of the government, especially on Twitter, where he has more than 70,000 followers. Dozens of other activists have also been detained, confined to their homes or placed under surveillance since anonymous online appeals for a so-called Jasmine Revolution in China began to circulate in mid-February. Three have been charged with subversion, but many have simply disappeared. The editorial provoked especially angry responses from several Chinese intellectuals, who also posted
messages calling for Mr. Ai’s release on China’s Twitter-like Sina Weibo microblogging service—where most were quickly deleted by censors. “The law also should not bend for those in power,” wrote Yu Jianrong, a professor at the Chinese Academy of Social Sciences, in a post that was deleted after a few minutes. “Either the arrestee’s family or work unit is to be notified of the reason for arrest and place of detention within 24 hours—this is clearly required by legal regulations.” The U.S. Embassy declined to comment on whether Mr. Campbell would raise Mr. Ai’s case in his meetings Thursday. But Jon Huntsman, the U.S. ambassador who leaves his post at the end of this month, vowed in his final public address in Shanghai that his successors would continue to raise human-rights issues, including the cases of Mr. Ai and other dissidents. “We do so not because we oppose China but, on the contrary, because we value our relationship,” said Mr. Huntsman, a Republican who hasn’t denied repeated reports that he plans to contend in the 2012 U.S. presidential election. He said the U.S. should understand China’s perspectives, too, but made an unusually public plea that dialogue shouldn’t be suspended every time the two countries had a dispute—as it often has been during
Associated Press
Chinese paper acknowledges activist’s detention
Lu Qing, wife of Ai Weiwei, during an interview in Beijing on Wednesday. his tenure. “Canceling meetings as a sign of displeasure will not encourage greater respect for each other’s views,” Mr. Huntsman said. “We cannot move forward if, when differences emerge, only one of us is fully committed and fully engaged.” He also made an appeal to the next generation of leaders—a pointed remark in the approach to a once-a-decade Communist Party leadership change next year. “Today’s leaders may struggle
with the legacy of outdated ideologies or past differences, but the next generation in both countries will carry with them a profoundly more global outlook,” he said. The international fallout from Mr Ai’s detention continued Wednesday when China’s ambassador to Germany was summoned for a meeting about the artist with Foreign Minister Guido Westerwelle, Reuters reported. “The artist Ai Weiwei must be released,” Mr. Westerwelle was quoted as telling a news conference.
Human Rights Watch also issued a statement on Wednesday calling Mr. Ai’s detention a “test case for the international community” and warning that Chinese authorities appeared to be laying the groundwork for his formal arrest. The crackdown on dissent could complicate Mr. Campbell’s efforts to prepare for the next round of the U.S.-China Strategic and Economic Dialogue in Washington in May, said Chinese political analysts. Before the Washington meeting, the two sides are supposed to resume a human-rights dialogue and a legal experts’ dialogue, according to a joint declaration signed during President Hu Jintao’s visit to the U.S. in January. A timetable has yet to be announced, however, and the political climate for those discussions has deteriorated because of the unrest in the Arab world and the ensuing Chinese crackdown. The prospect of another highprofile detention was raised Wednesday when one of the most prominent rights campaigners inside China, Zhao Lianhai, posted an emotional YouTube video in which he urged the government to understand that Mr. Ai’s intentions were good and to release him. Mr. Zhao was jailed last year for protesting over a massive taintedmilk scandal, but was released three months ago on medical parole.
As of 12 p.m. ET
Euro 1.4350 À 1.02%
Yen/US$ ¥85.44 À 1.06%
Yen/A$ ¥89.19 À 1.97%
Oil 108.74 À 0.37%
Gold 1457.20 À 0.37%
Toyota faces possible downgrade of ratings amid quake impact
10-year Treasury g 8/32 yield 3.515%
Beijing able to tame fears while raising interest rates
BUSINESS& FINANCE. BUSINESS & FINANCE 19
HEARD ON THE STREET 32
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
3-month Libor 0.29263
asia.WSJ.com
BY CHESTER DAWSON TOKYO—The head of Japan’s leading big-business lobby on Wednesday sharply criticized a government proposal to avoid massive blackouts this summer by cutting the supply of electricity to industry by 25%, calling instead for businesses to come up with their own energy-saving plans in ways that keep more Japanese factories humming amid a crippling power shortage. “The government had been drafting a plan to cut demand by 25% across the board, but we raised immediate objections,” Hiromasa Yonekura, chairman of Nippon Keidanren, the Japan’s top industry association, said in an interview with The Wall Street Journal. Japan’s trade minister, Banri
Kaieda, told reporters Tuesday that it would be “necessary” to place restrictions on electricity supplies, but he said that would likely exempt households—thereby targeting businesses. That came as the government floated a trial balloon about a plan to impose a 25% cut on industrial use of electricity, which was expected to be announced by week’s end, according to Japanese media reports. Much of eastern and northern Japan, including the capital city of Tokyo, faces a large gap between the expected demand and supply of power during the peak summer months after the March 11 earthquake knocked out several electricity-generation facilities, including a nuclear-power plant. The Japanese government has scrambled to prevent uncontrolled power outages
Jaguar Land Rover delivers for Tata BY VANESSA FUHRMANS In the auto industry’s long line of jettisoned brands, few have lived to see a better day. But for Jaguar Land Rover, getting dumped has given way to a mini sales renaissance. Last week, the company reported that its U.S. sales rose 16% in March. Through February, Jaguar Land Rover sales are up 19% world-wide from the year-earlier period. Such gains are making the strongest case yet for a revival of the brands after being cast off from the shelter of a larger auto maker. Ford Motor Co. sold the storied British luxury marques three years ago, among the first of nine combined that Ford and General Motors Co. would unload amid the industry’s sharp decline. Some brands, such as Hummer and Pontiac, went straight to the junk yard, while Jaguar Land Rover, Saab and Volvo won a second chance under new owners. After losing more than $500 million in its first year under new owner, Tata Motors Ltd., Jaguar Land Rover has become the profit standout among spin-offs. It posted earnings of £275 million ($443 million) for the quarter ended Dec. 31 and is plowing profits into hiring some 1,000 engineers to expand its offerings, opening a new factory in India and is in talks to build cars in China, its fastest-growing market. A freshened lineup of sleek models, most begun under Ford, has fueled the nascent turnaround. So has a sharp, post-recession rebound,
particularly in Land Rover’s sportutility vehicles. Land Rover’s March U.S. sales jumped 26% from a year earlier to 3,441 vehicles, while European sales were nearly 9,000 units in the first two months of this year. It is also benefiting from years of restructuring under Ford. The U.S. auto maker spent billions of dollars, particularly on Jaguar, after taking over the then-independent brand in 1989 and acquiring Land Rover in 2000 with the aim of transforming them into premium cash cows. Ford finally turned them around just as its own operations sank into crisis and forced the fire sale. “Ford laid out a good foundation for us,” says John Edwards, global brand director for Land Rover, “but I think we’re more nimble now.” One of the brands’ biggest challenges will be keeping up with big technology investments needed to meet stricter emissions regulation in the U.S. and Europe: Unlike BMW and other luxury rivals, the company has few smaller models to offset their gas-guzzlers and meet the fleet-average targets. Jaguar Land Rover can pull it off, argues Jaguar brand director Adrian Hallmark, because it operates in the premium automotive sphere, where luxury cars carry significantly greater margins than mass-market models. “Do you need to be making 6 million cars [a year] to be profitable?” he asks, alluding to the threshold that Sergio Marchionne, Fiat SpA and Chrysler Group LLC’s Please turn to page 18
since then through rolling blackouts, but this has disrupted production schedules at manufacturers. Japan’s large-lot industrial users make up about 40% of total electricity demand, and its household sector accounts for an additional 30%, with the remainder coming from service businesses. Tokyo Electric Power Co. estimates it will be able to lift the supply of electricity to 50 million kilowatts over the next several weeks from 46.5 million kilowatts currently by bringing damaged or mothballed generation capacity back online. But Tepco expects demand to reach 55 million kilowatts this summer. Last year, it peaked at 60 million kilowatts during a midsummer heat wave. The Nippon Keidanren and other business groups have bristled at the Please turn to page 21
Bloomberg News
Business leader blasts Japan’s electricity plan
Hiromasa Yonekura urges businesses to propose their own energy-saving plans.
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Thursday, April 7, 2011
BUSINESS FINANCE
Japan proxy fight brews in retail Aeon seeks to oust management at shopping-mall developer Parco in a rare public dispute TOKYO—In a country where most corporate disputes are settled behind closed doors, a proxy battle is brewing between one of Japan’s biggest retailers and a small shoppingmall operator, even as the nation shows a spirit of unity following last month’s earthquake and tsunami. Aeon Co., the nation’s secondbiggest retailer by sales after Seven & i Holdings Co., is demanding that Parco Co. oust President Hidekazu Hirano and four other board members at its annual meeting next month, saying that mall operator has failed to increase shareholder value. Aeon took a 12.3% stake in Parco in February. The battle between two established, publicly traded companies is virtually unheard of here. Aeon is a household name in the country. Parco is known for its trendy shopping centers filled with brand names that appeal to young shoppers. Aeon is joined in the scrap by real-estate developer Mori Trust Co., Parco’s biggest shareholder with a 33.2% stake. The wrangling comes as shareholder activism has quieted in Japan, following the exit of activist foreign funds that lost battles with management. U.S. investment fund Steel Partners, which became a symbol of ag-
Bloomberg News
BY MARIKO SANCHANTA AND HIROYUKI KACHI
An Aeon store in Tagajo City is seen behind cars damaged by the earthquake. gressive capitalism, sold its investment in Sapporo Holdings Ltd. last year after the brewer’s shareholders rejected the fund’s proposed new board members. “I can’t believe the timing of this,” Mr. Hirano said. “We’re confirming the safety of our employees and just getting back on our feet.” Aeon, with roughly ¥5 trillion ($59 billion) in sales in the year ended February 2010, is Goliath to Parco’s David, with ¥263.69 billion in revenue for the same period. Aeon, which is expanding rapidly in China and Southeast Asia, on March 17 proposed to Parco that the two consider teaming up to address a declining home market. Aeon voiced concern about Parco’s lack of an international pres-
ence, especially in China, as a shrinking, aging population and stagnant consumer demand chip away at Japan’s customer base. Parco operates 21 malls in Japan and only one beyond, in Singapore. Its revenue has been largely stagnant for the last several years. Parco rejected the proposal. “Our corporate culture is too different,” said Mr. Hirano, who met with Aeon President and Chief Executive Motoya Okada on the morning of March 11, before the earthquake struck. “Aeon just wants to expand and compete with the likes of WalMart. We are more of a niche business.” Aeon and Mori Trust have argued that Parco can’t survive on its own in Japan, given the dismal state of
the retail sector; department-store sales have declined for 14 straight years. Ties between Mori Trust and Parco broke down last year after the developer proposed boosting its stake to around half of Parco. Takeshi Yoshida, an executive vice president of Mori Trust, said Parco subsequently told Mori Trust “out of blue” that the Development Bank of Japan was investing in the mall operator by purchasing convertible bonds. “We felt betrayed by [Parco] as the company didn’t consult with us, their top shareholder, advance,” Mr. Yoshida said. Mr. Hirano acknowledged that he didn’t discuss the DBJ deal in advance with Mori Trust. People in the industry have said Parco needs to adjust. “The Japanese domestic retail business is shrinking,” said Seth Sulkin, chief executive of Pacifica Malls, a developer that specializes in retail properties. “I think [Parco] would be great in China, but they are too small to go there on their own. A Parco-Aeon combination would make great sense.” Parco said it is open to tie-ups with other retailers and developers abroad and is studying the Chinese market. Meanwhile, it is rallying its shareholders to prevent an ouster of its management. —Atsuko Fukase contributed to this article.
Jaguar Land Rover delivers for Tata Motors Continued from page 17 chief executive, has often declared necessary for future car makers to be successful. “You do, if they’re €10,000 ($14,200) a piece.” Jaguar Land Rover isn’t standing alone. Tata Motors’ parent, conglomerate Tata Group, generates some $67 billion in sales annually from businesses from Tata Steel Europe to Tetley tea. Tata Motors already poured more than $2 billion into Jaguar Land Rover since buying it for $2.3 billion in 2008. It also aims to play a key role in position-
ing the brands in India’s still nascent luxury market, where Land Rover plans to open its first assembly plant later this year. “Right now, they’re doing well because all of the costs were paid for by Ford, but the need for scale is still there,” says Garel Rhys, an automotive economist at Cardiff University in Wales. In the longer term, he estimates, Jaguar Land Rover will have to reach annual sales of 500,000 cars a year—about double current volume—“and that’s only viable if you
are in a group with deep pockets like Tata.” There are scant synergies between the two luxury brands and Tata, best known for launching the world’s cheapest car, the $3,000 mini Nano. And ultimately Tata is counting on Jaguar Land Rover to sustain profits on its own. Volvo, another brand sold by Ford, is also pushing to build scale, in part by expanding in China, the home market of its new parent, Zhejiang Geely Holding Group Co. Last year, its global sales rose 11% to 373,525 cars,
though sales slipped 12% in the U.S., Volvo’s biggest market. But Saab, now owned by Dutch sports-car maker Spyker Cars NV, is struggling. It sold just 31,696 cars last year, less than a quarter of its peak of 133,000 in 2006, and both it and its parent, Spyker, are burdened by heavy debt and losses. Jaguar Land Rover is counting on a product offensive to better compete as an alternative to the German luxury stalwarts BMW AG, Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi.
Founder, KKR bid for Yageo BY ALISON TUDOR HONG KONG—Kohlberg Kravis Roberts & Co. and the founder of Taiwan’s Yageo Corp. made an offer valuing the electronic-components company at about US$1.6 billion. If the bid goes through, Pierre T. M. Chen, Yageo’s founder, chairman and chief executive, would retain control of the business in what would be the Asian-Pacific region’s biggest private-equity-backed deal this year, according to data provider Dealogic. Established in 1977, Yageo is the world’s largest maker of chip resistors, which are used in computers and electronics. Going private will give Yageo more flexibility to deal with challenges such as the demand for miniaturization and shorter product cycles in the electronics industry, Yageo and KKR said. “Now is the time to take Yageo to the next level,” Mr. Chen said. Yageo and its peers have struggled with shrinking margins as competition pushes product prices lower, even as the cost of raw materials rises. Its financial results have also been under pressure from the appreciation of Taiwan’s currency. Yageo increased its production capacity by about 40% in 2010, according to Bank of America Merrill Lynch, though it has told analysts to expect more moderate capital spending for 2011. The offer of 16.10 New Taiwan dollars (55 U.S. cents) per share represents a premium of about 14% to Yageo’s closing price Tuesday on the Taiwan Stock Exchange. Held back by a daily trading limit, the shares rose 6.7% Wednesday to NT$15.05. UBS AG advised the consortium on the transaction. UBS and Nomura Holdings Inc. jointly provided roughly US$930 million of debt to finance the deal, which the banks will look to syndicate with local banks in Taiwan, people familiar with the matter said. Upon completion, Mr. Chen and affiliates will have a 54% stake in the company and KKR will hold the remainder, said a person familiar with the deal.
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. Adobe Systems.............25 Aeon Co.........................18 Agricultural Bank of China..........................27 AIA Group.....................24 Air New Zealand .......... 22 American Superconductor..........27 Apple........................19,25 Assicurazioni Generali..24 ASX ............................... 23 Bain Capital..................25 Bank of China...............27 Berkshire Hathaway.......1 Blockbuster...................20 Boeing...........................22
Caterpillar.....................27 China Life Insurance .... 27 China Petroleum & Chemical ...................... 5 Chrysler Group LLC.......19 Cisco Systems .............. 27 Citigroup ....................... 24 Cognizant Technology Solutions....................32 Commerzbank..........25,27 Cravath Swaine & Moore LLP.............................25 DBS ............................... 24 Deutsche Bank..............25 Development Bank of Japan..........................18 Dish Network................20 Ford Motor...............17,19 Galaxy Securities ......... 24 General Motors.............19 GM Korea......................19 Goldman Sachs Group..24 Google...........................25 GTI Capital Group.........20 HCL Technologies ......... 32 Hewlett-Packard...........27 Hillboro Capital Ltd......24 Hilton Worldwide.........20 Hitachi........................3,21 Home Depot..................27 Honda Motor.................19 Huayu Automotive Systems.....................19 Hutchison Port Holdings
Trust...........................24 Hyundai Motor..............19 Industrial & Commercial Bank of China............27 Intel...............................25 IntercontinentalExchange ................................... 18 Itochu............................24 J.P. Morgan Chase........24 Kingfisher Airlines.......21 Kohlberg Kravis Roberts ...................... 18 LG..................................19 Lighthouse Financial Group..........................25 Mapletree Commercial Trust...........................24 Mapletree Industrial Trust...........................24 Mapletree Investments...............24 Marriott International..20 Mediobanca...................24 Microsoft..................25,27 Monsanto......................27 Mori Trust.....................18 Nasdaq OMX.................25 Newcrest Mining..........27 Nomura Holdings..........18 NTUC Fairprice Cooperative....................24 NYSE Euronext.............18 Oracle............................25 Pacifica Malls ............... 18
Parco..............................18 Perennial China Retail . 24 Perennial Real Estate..24 Petreoleo Brasileiro......20 PetroChina ...................... 5 Ping An Insurance........27 Postbank AG.................25 PowerShares QQQ........25 Renault..........................19 Royal Bank of Scotland Group..........................24 SAIC Motor...................19 Samhi Hotels................20 Samsung Electronics....19 Satyam Computer Services ..................... 32 Shanghai Automotive Industry ..................... 19 Singapore Exchange.....23 SJM Holdings................27 Skadden, Arps, Slate, Meagher & Flom LLP 25 SK Telecom...................20 Southwest Airlines ...... 22 Starwood Hotels & Resorts Worldwide ... 20 Sumitomo Chemical.....21 Sumitomo Metal Mining........................27 Suzhou Trust Co. Ltd ... 24 Tata Group....................18 Temasek Holdings Pte. 24 Tokyo Electric Power...............17,21,27
Toyota ........................... 19 Toyota Motor................19 Transocean....................22 UBS ............................... 18 Vale ............................... 20 Vanguard Group............25 Volkswagen...................19 Walt Disney..................27 Wilson, Sonsini, Goodrich & Rosati.....................25 Wipro...............................4 Wynn Macau.................27 Yageo.............................18 Zijin Mining Group.......27
People This index lists the names of businesspeople and government regulators who receive significant mention in Today’s Journal. Ackermann, Josef.........25 Agnelli, Roger...............20 Ahluwalia, Navjit..........20 Bauer, Garrett...............25 Bobillier, Arnaud A.Y....22 Böcker, Magnus............23 Brown, Eric ................... 22 Buffett, Warren..............1
Buiter, Willem................8 Bullard, James..............26 Callow, Sean...................3 Caltagirone, Francesco Gaetano......................24 Chambers, John............27 Chen, Pierre T. M. ........ 18 Chesler, Evan R.............25 Cooper, Suki..................27 Cullen, Tom...................20 Edwards, John..............17 Ergen, Charles .............. 20 Ferreira, Murilo.............20 Fishman, Paul J............25 Fukunaga, Akito ........... 26 Geronzi, Cesare.............24 Govoni, Mark ................ 25 Gunter, Lori...................22 Hamburg, Marc.............16 Hirano, Hidekazu..........18 Icahn, Carl.....................20 Jakhanwala, Ashish ..... 20 Kasman, Bruce................8 Kim, David .................... 19 Kim, Peter Bahnsuk.....19 Kluger, Matthew .......... 25 Kohli, Aaron..................26 Lesko, Greg...................20 Liu, Sherry....................24 Lockhart, Dennis...........26 Macey, Rex....................27 Maher, Daragh..............26 Marrale, Mike...............25
Nakanishi, Hiroaki.....3,21 Nelson, John.................15 Newman, Steven..........22 Okada, Motoya ............. 18 Peace, Jon.....................25 Rosenker, Mark.............22 Rousseff, Dilma............20 Roy, Anjan.......................4 Rushmore, Steve..........20 Sadagopal, Anil...............4 Sauter, Gus...................25 Sokol, David....................1
Sulkin, Seth..................18 Thadani, Manav............20 Toma, Ihab M................22 Tsuchiyama, Naoki ....... 26 Tuz, Peter......................27 Usui, Tadashi................19 Watt, David .................. 26 Yan, Shi...........................5 Yap, Alex.........................6 Yonekura, Hiromasa.....17 Yoshida, Takeshi...........18 Yu Jianrong...................16
Corrections Amplifications The name of private-equity firm Kohlberg Kravis Roberts & Co. was misstated as Kohlberg, Kravis & Roberts in a Business & Finance article Wednesday about the merger-deals market, and the name of NYSE Euronext was misstated as NYSE Euronext Group. A chart accompanying the article misstated the name of IntercontinentalExchange Inc. as InterContinentalExchange, and should have noted that bidders are trying to break up the existing deal for NYSE Euronext, not that they have broken it up.
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
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BUSINESS FINANCE
Toyota ratings reviewed Debt firm signals possible downgrade on quake financial impact BY NATASHA BRERETON
ZUMAPRESS.com
SAIC says it was the No. 8 global auto maker in terms of sales last year.
SAIC plans to buy assets from parent SHANGHAI—SAIC Motor Corp., China’s largest auto maker by sales, said Wednesday it plans to acquire 28.6 billion yuan ($4.37 billion) of assets from its parent to boost its core competitiveness. SAIC, which has vehicle-making joint ventures with General Motors Co. of the U.S. and Volkswagen AG of Germany, said in a written statement that it will finance the deal by selling 1.73 billion new shares at 16.53 yuan each to its parent, Shanghai Automotive Industry Corp., in a private placement. The assets that Shanghai Automotive Industry will sell to the listed unit include its 60.1% stake in auto-parts maker Huayu Automotive Systems Co.; its wholly owned units in the U.S. and Hong Kong; its 6.01% stake in GM Korea Co.; and its stakes in other units such as newenergy car makers and trade and investment firms, according to the statement. Shanghai Automotive Industry’s
ownership in SAIC will rise to 77.21% from 72.95% after the deal, according to the statement. “The deal will help the company achieve its aim of raising its core competitiveness,” SAIC said in the statement. Through the deal, SAIC said, “the company can accelerate the development of making cars and new-energy vehicles under its own brand name, increase its asset size and enhance its financial strength.” SAIC’s vehicle sales increased 31% to 3.58 million units last year, when the company was the eighthlargest auto maker in the global car market in terms of sales, the statement said. Shares in SAIC closed at 18.48 yuan on the Shanghai Stock Exchange Wednesday, as the stock resumed trading after a seven-week suspension. The stock previously closed at 18.45 yuan on Feb. 11. —Rose Yu
Korean battery makers to ramp up investment BY JUNG-AH LEE AND MIN-JEONG LEE SEOUL—Samsung SDI Co. and LG Chem Ltd. said Wednesday they will increase investment in their battery businesses as they seek to capitalize on fast-growing demand for rechargeable batteries used in consumer electronics and cars. Samsung SDI—an affiliate of Samsung Electronics Co. that supplies lithium-ion batteries for Apple Inc.’s iPhones and iPads as well as Samsung’s Galaxy mobile phones and tablet PCs—said it will spend 390.5 billion won ($360 million) this year on new facilities. The latest spending plan is a 35% increase from last year. LG Chem, an affiliate of LG Corp. that provides batteries for auto makers, said it will double its existing investment plan for the production of batteries for electric cars to two trillion won by 2013. The companies said the plans weren’t linked to a potential increase in demand because of supply problems from Japanese companies following the earthquake and tsunami on March 11. However, the disasters have created disruptions for many manufacturers in Japan—including suppliers of batteries—that go far beyond physical damage to plants and production lines.
Analysts say South Korean companies are well placed to earn new orders as a result. Research firm IHS iSuppli points to Japanese-manufactured lithium-ion polymer batteries—used in some tablets—as components that are running short. Samsung SDI will mainly use its investment to develop new batteryproduction facilities and bolster existing plants to cater to strong demand for newer electronics gadgets, said spokesman David Kim. At the completion ceremony of a car-battery plant in Ochang, in central Korea, LG Chem Chief Executive Peter Bahnsuk Kim said the company expects to secure Japanese companies as new clients, according to a company spokesman. The CEO didn’t elaborate. LG Chem supplies batteries to auto makers such as General Motors Co., Ford Motor Co., Renault SA, Hyundai Motor Co. and China’s Chana. It doesn’t currently have any Japanese clients for its batteries. LG Chem said it aims to expand annual capacity to produce batteries for at least 350,000 electric cars by 2013, from about 100,000 now. In tandem with the expansion, LG Chem, best known as a chemical company, said it is targeting sales of four trillion won from the battery business by 2015, up from its previous plan of three trillion won.
SINGAPORE—Moody’s Investors Service said Wednesday that it has put Toyota Motor Corp. and its subsidiaries on review for possible downgrade due to the likely financial impact from the business interruption caused by the March 11 earthquake and tsunami. Separately, Chrysler Group LLC and Honda Motor Co. said they would curb some manufacturing to ease a shortage of auto parts due to the quake’s impact on component companies. Honda said it may halt production at a plant in the U.K. next month due to a shortage of made-inJapan components. The plant makes Civic, CR-V and Jazz vehicles. Chrysler is cutting overtime this week at plants in Canada and Mexico to conserve its supplies of critical parts. Its Brampton, Ontario, plant make Dodge Challenger, Dodge Charger and Chrysler 300 vehicles. The Toluca, Mexico, plant makes its Dodge Journey and the Fiat 500, which Chrysler is now introducing to the U.S. market. “We have not experienced any disruptions to regularly scheduled production as a result of the issues in Japan,” a Chrysler spokeswoman said Wednesday. “We are, however, taking some planned overtime out of our production schedule in an effort to conserve supplier parts that are potentially impacted by the di-
saster.” J.P. Morgan analyst Himanshu Patel said in a research note Tuesday that he doesn’t expect U.S. auto production to recover to pre-quake levels until October or later. Mr. Patel forecast a 57% drop in U.S. production in the calendar second quarter compared to the yearago period as auto makers take actions to address their lack of parts. Other analysts have estimated that Japanese auto makers’ combined domestic production would fall by some 500,000 units this year due to the quake’s impact. Moody’s senior analyst Tadashi Usui said the debt ratings company was also watching “carefully” the impact of the quake on competitors Nissan and Honda. The credit-rating firm placed Toyota’s Aa2 long-term senior unsecured and issuer ratings under review. It said the company’s Prime-1 short-term rating was unaffected. The action follows Standard & Poor’s downgrade of Toyota’s longterm corporate credit and senior unsecured debt ratings in early March. The Japanese auto maker—the world’s largest—has been struggling to rebuild its reputation after a string of recalls last year, which saw it recall around 10 million vehicles world-wide. “The review for possible downgrade reflects Moody’s view that Toyota’s financial and operating performance will worsen in the af-
termath of the March 11 earthquake and tsunami and the resulting supply chain disruptions,” the ratings company said in a statement. “Toyota’s financial performance was already weak relative to expectations for the Aa2 rating level, which had been reflected in the negative outlook,” it added. Moody’s said that its current rating on the company reflected a view that Toyota will be able to restore its global market position and profitability following a decline in global demand and its succession of quality issues. “However, Moody’s is still concerned that an expected improvement in profitability may be hampered or delayed by not just the negative impact of the earthquake, but also the other challenges Toyota faces,” it said. It added that it would focus on the firm’s ability to quickly restore production in Japan and to maintain its market positions, as well as how quickly the auto maker is able to improve its profitability despite the impact of the disasters. “As the company still has a strong business franchise and excellent balance sheet, the likelihood of a multiple-notch downgrade is very limited,” it added. Toyota earlier warned that some of its U.S. plants may be temporarily shut at some point in the future. —Jeff Bennett in Detroit contributed to this article.
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Thursday, April 7, 2011
CORPORATE NEWS
U.S. hotelier plans to team up with domestic fund on midtier chain BY ALEXANDRA BERZON Marriott International Inc. said it plans to introduce its Fairfield Inn brand in India, part of a broader move by midtier U.S. hotel brands to try to tap into the country’s growing middle class. The hotel operator, based in Bethesda, Md., said Wednesday it will form a joint venture with Samhi Hotels Pvt. Ltd., a hotel-investment fund, to build a Fairfield by Marriott brand in India. Construction is expected to start around year-end. Marriott also is doing something unusual for the hotel behemoth: investing its own money. The company typically lends its names and manages hotels but generally doesn’t own them. The move comes as limited-service U.S. hotel brands are being lured to India by the country’s burgeoning middle class and a deficit of big-brand hotels. Hilton Worldwide is working on sending its Hampton Inn brand to India, and Starwood Hotels & Resorts Worldwide Inc. has opened two Aloft hotels with a partner and has more in the works. The hoteliers believe India is an ideal fit for modest brands, which typically guarantee a clean room and breakfast but not much more, when opportunities in the U.S. are slim. “More and more cities are coming on the horizon and they need more economy hotels,” said Ashish Jakhanwala, managing director of
India-based Samhi Hotels. “You cannot ignore this country.” U.S. hotel companies in India so far have focused on introducing high-tier brands, such as W Hotels, which Starwood is planning, and JW Marriott from Marriott. The midtier push marks a renewed attempt to crack a market that as historically has proved difficult for some U.S. brands. Marriott started resetting its strategy in 2006 when it opened its first local office in India. It will take a more active role in managing the new hotels than it usually would for Fairfield. “We are very careful,” Navjit Ahluwalia, Marriott’s senior vice president of development for India. Marriott initially will hold a 30% stake in the venture, which will decrease to 10% over time, Mr. Ahluwalia said. The venture is expected to operate around 15 midtier hotels in India by 2015. Mr. Ahluwalia said that for the first time, Marriott has redesigned a brand for a foreign market. The new line follows a year-long research and design operation run by India-based employees. The result includes a full restaurant, expansive lobby and meeting space, none of which exist in Fairfield hotels in the U.S. The chain also has created a palette based on saffron, turmeric and Indian embroidered textiles. The brand’s first few hotels will
be in fairly central locations in major cities such, as Chennai, Hyderabad and Bangalore. Eventually, Mr. Ahluwalia said, the franchise will expand into India’s tertiary cities, which are less expensive. At that point, Marriott will likely franchise the brand, as it does in the U.S. For chains such as Fairfield, which in the U.S. are inexpensive and easy to build but don’t fetch high room rates, operating many hotels is important to establishing brand recognition and making the venture worthwhile. That’s a challenge in India, where land is expensive and hotel construction takes much longer than in the U.S. because of permitting and other bureaucratic issues. The Samhi partnership should help on that score because the group has expertise in a variety of India markets and financial backing. Samhi was formed last year by Steve Rushmore, founder of hotel consulting group HVS; Ashish Jakhanwala, who has developed hotels in India for Accor India/InterGlobe Hotels, and Manav Thadani, who has studied India markets for HVS. The group is raising around $150 million in a first round of financing from GTI Capital Group, an Indiafocused private-investment and advisory firm and expects to raise as much as $250 million by 2012 or 2013, Mr. Jakhanwala said.
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Brazil flexes its muscle on Vale with CEO pick BY JOHN LYONS SAO PAULO, Brazil—Mining giant Vale SA’s choice for its new head—a former executive considered the government’s pick—appears to give Brazilian President Dilma Rousseff greater control over the world’s largest iron-ore producer. That has left investors and executives alike scrambling to gauge whether and how far Ms. Rousseff might push the Rio de Janeiro-based company into potentially money-losing projects to drive the country’s broader development goals, like reviving its shipping industry. “We know they are clearly meddling,” said Greg Lesko, who helps manage $800 million at Deltec Asset Management, including shares of Vale. “The question for us is how much the new guy will be a commercial manager and how much he will have to toe the line.” Monday, Vale said that a former executive, Murilo Ferreira, would take the helm from Roger Agnelli, a Wall Street darling who was removed after years of resisting government efforts to intervene in the firm, which has revenue of $46 billion a year. Mr. Ferreira, who declined interview requests through a Vale spokesperson, is expected to be confirmed by Vale’s board in the coming days. The president’s office declined to comment on Tuesday. Mr. Agnelli’s ouster marked the latest effort by Brazil’s left-leaning government to reassert control over
Bloomberg News
Marriott resets in India
New Vale CEO Murilo Ferreira. formerly state-owned companies, such as oil giant Petroleo Brasileiro SA, that were partially privatized in the late 1990s. Ms. Rousseff took office Jan. 1 after a landslide victory aided by the popularity of her mentor and predecessor, Luiz Inácio Lula da Silva. Brazil’s federal government has pushed Vale since the global financial crisis to lend more muscle to government initiatives, such as ordering Brazilian-made ships or building steel mills in remote locations where jobs are needed. Mr. Ferreira, 58 years old, was a long-time Vale executive until leaving for personal reasons in 2008 and is viewed as an able manager. —Diana Kinch contributed to this article.
Blockbuster sold to Dish in bankruptcy auction BY MIKE SPECTOR AND JOSEPH CHECKLER NEW YORK—Dish Network Corp. won a bankruptcy auction for Blockbuster Inc. early Wednesday morning, offering about $320.6 million for the movie-rental chain. Dish won Blockbuster after a marathon auction that began Tuesday morning in federal bankruptcy court in Manhattan and concluded in the middle of the night at the offices of law firm Cadwalader, Wickersham & Taft. Blockbuster’s creditors will see about $178.8 million of Dish’s bid, according to people familiar with the matter. The balance of the money will go toward expenses associated with the auction and the company’s bankruptcy proceedings. The auction finished around 1:25 a.m. Dish, led by satellite-television billionaire Charles Ergen, has expressed interest in using some Blockbuster stores to sell subscriptions to its service, one of the people said. Dish also is interested in possible synergies from Blockbuster’s on-demand business, this person said. Dish views Blockbuster as a “going concern,” this person said, in contrast to some other bidders who considered liquidating the company. Dish confirmed its winning bid Wednesday morning. The satelliteTV company said its winning bid was valued at around $320 million, and that it expects to pay $228 million in cash to acquire Blockbuster when the deal closes in the second quarter. Dish’s bid beat out offers from a
group comprising investor Carl Icahn and several liquidators, and a group of hedge funds led by Monarch Alternative Capital. “With its more than 1,700 store locations, a highly recognizable brand and multiple methods of delivery, Blockbuster will complement our existing video offerings while presenting cross-marketing and service-extension opportunities for Dish Network,” Tom Cullen, the company’s vice president of sales, marketing and programming, said in a prepared statement. He acknowledged that Blockbuster’s business “faces significant challenges.” The auction opened with a $284 million bid from Dish. After a few rounds of bidding, Mr. Icahn, seated at a lawyer’s table in U.S. Bankruptcy Judge Burton R. Lifland’s courtroom, countered with an offer of $310.6 million that would send $164.2 million to creditors. The Monarch-led group’s bid that came afterward was deemed “higher and better” by Blockbuster’s representatives; it would have sent $166.7 million to creditors. Mr. Icahn, a Blockbuster bondholder, had teamed in his pursuit of Blockbuster with several liquidators, including Great American Group and Tiger Capital Group. South Korea’s SK Telecom Co., and a liquidators team consisting of Gordon Brothers Group and Hilco Merchant Resources had also submitted early bids. Blockbuster filed for Chapter 11 in September with plans to reorganize, but lackluster holiday sales and continued losses forced the company to put itself on the market.
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CORPORATE NEWS
BY ANIRBAN CHOWDHURY MUMBAI—A consortium of 13 lenders to Kingfisher Airlines Ltd. has taken a 23.37% stake in the company after the Indian carrier restructured part of its 76.51 billion rupees ($1.73 billion) in debt. That has cut the combined stake held by the founders of India’s second-biggest airline by market share to 58.61% from 66.28%, said Ravi Nedungadi, chief financial officer of parent UB Group. Kingfisher’s founders include UB Group Chairman Vijay Mallya and three UB Group units: UB Overseas; United Breweries (Holding) Ltd.; and Kingfisher Finvest India Ltd. The debt restructuring is the final step of a plan approved late last year that entailed converting close to one-third of the unprofitable airline’s debt into shares and issuing them to lenders and two founder companies. The remaining debt was restructured to be repaid in nine years instead of yearly roll-overs, with a two-year moratorium on interest payments. The restructuring cuts Kingfisher’s debt by 21% to 60.07 billion rupees. Shares in Kingfisher increased 4.6% to close at 48.05 rupees on the Bombay Stock Exchange on Wednesday.
Hitachi to take ‘considerable’ hit Firm warns of quake’s impact on profit, but sees no big changes to Japan’s energy policy BY JURO OSAWA TOKYO—Hitachi Ltd. expects the earthquake and tsunami that struck Japan last month to have a “considerable” impact on its profit for the fiscal year ended March 31, its president said Wednesday. President Hiroaki Nakanishi said that he doesn’t expect any “drastic change” in Japan’s energy policy, even though it may become more difficult to gain support for new reactors from residents around other planned nuclear plants. “It is impossible for Japan to stop using nuclear power,” he said. Hitachi has a significant nuclear-power venture. Hitachi—which has wide-reaching operations that include consumer electronics, railway systems and information-technology services—will report earnings for the fiscal year on May 11. The company, one of Japan’s biggest by revenue, said in February that it expects to post a fiscal-year net profit of ¥230 billion ($2.7 billion), an operating profit of ¥440 billion and revenue of ¥9.3 trillion. Mr. Nakanishi told reporters the earthquake’s impact “certainly won’t be small.” Hitachi is one of many Japanese companies grappling with issues that go far beyond the physical damage from the quake, as utility companies carry out rolling blackouts and disrupted supply chains threaten production. The March 11 earthquake dam-
Business leader blasts Japan’s power plan Continued from page 17 government’s top-down approach to saving electricity. Instead, corporate Japan has asked to be allowed to take the initiative by coming up with its own energy-saving strategies such as running plants on weekends, when electricity demand is lower, and spreading out traditional summer holidays. Mr. Yonekura, who also serves as chairman of Sumitomo Chemical Co., said that one of his company’s plants outside Tokyo can supply itself with its own generators, even though they cost more to run than tapping into the electricity grid. The lack of a stable supply of electricity is expected to weigh heavily on the Japanese economy this year. Overall damage from the earthquake and its aftermath will likely total some ¥14 trillion to ¥15 trillion ($165 billion-$177 billion) and push down Japan’s already low economic growth by about one percentage point, Mr. Yonekura estimated. Before the quake occurred, the government had expected the gross domestic product to increase 1.5% on a real-term basis in the year that started April 1. Mr. Yonekura defended the embattled Tepco’s management, and its response to—and responsibility for—the crisis at the Fukushima Daiichi nuclear plant, which has been leaking radiation. Critics say Tepco failed to properly prepare for a large quake and tsunami, even though Japan sits astride an active fault zone and the plant was built
directly on the Pacific coast. “Tepco is also a victim in all of this,” Mr. Yonekura said, noting two of its employees died in the tsunami and others have toiled without rest since then. “They built their plants strictly in line with government standards. It’s not the least bit true they have been too lax,” he said. As a result of the continuing crisis at the Daiichi plant, Prime Minister Naoto Kan and other officials have indicated that the country may need to revisit its strategic energy policies, which call for increased reliance on nuclear power. The country’s Basic Act on Energy Policy envisions adding nine new nuclear plants by 2020, which would raise nuclear power’s share of total electricity output from the current 30% to nearly 50%. Mr. Yonekura said that schedule may be postponed while the cause of the Daiichi crisis is investigated and new supplemental safety measures are implemented at existing plants. But he scoffed at the notion of abandoning those longer-term goals to promote nuclear power and said that Japan would still be able to meet its commitments to reduce carbon-dioxide emissions by cutting the use of fossil fuels. Mr. Yonekura also welcomed the recent weakening of the Japanese currency to a six-month low of ¥85 against the dollar, describing it as a return to normalcy after a spike following the March 11 earthquake. The Japanese currency rose to a postwar high of ¥76.25 to the U.S. dollar on March 17.
Zuma Press
Kingfisher sets stake for lenders
Hitachi’s Hiroaki Nakanishi says Japan can’t avoid using nuclear power. aged seven of Hitachi’s domestic manufacturing facilities, forcing them to temporarily halt operations, while five other plants were disabled by subsequent power supply problems. All of the affected plants have now resumed operations, at least partially, the company said. Recently resumed production at those plants relies mainly on inventories of parts and materials that the company had procured prior to the quake. Mr. Nakanishi said the company is looking at various options to secure supplies as its production capacity recovers.
The cash necessary for a recovery from the quake could pressure Hitachi’s budget for mergers and acquisitions, he added. Apart from the quake’s impact on the overall business, Hitachi was directly involved with the crisis at the Fukushima Daiichi nuclear plant, which was badly damaged by the tsunami and has since become a source of widespread radioactive contamination of the air, sea as well as food and drinking water. Hitachi supplied the plant’s No. 4 reactor, which wasn’t in service at the time of the quake. Although the reactor has no fuel inside, the build-
ing has a pool that stores spent fuel. Since a suspected hydrogen explosion damaged the building, plant operator Tokyo Electric Power Co. has been trying to keep the spent fuel covered in water. Reactors Nos. 1-3, where the fuel rods are believed to have been damaged, are considered more troublesome than the No. 4 reactor. The situation at the Fukushima Daiichi site is “the most important issue at the moment,” Mr. Nakanishi said. He added that the company didn’t expect to face questions of liability or compensation from the incident because it fully complied with the law in building and installing the reactor. The still-unfolding disaster at the plant has stirred debate over whether Japan needs to revise its longstanding policy of promoting nuclear power. Japanese officials have publicly questioned the nation’s nuclear strategy, including plans to build dozens of new reactors to meet future needs. Hitachi formed a nuclear-power business alliance with General Electric Co. in 2007 by creating a joint venture in Japan and another in the U.S. While some countries are revising their nuclear plant construction plans, others are determined to go ahead with their plans, Mr. Nakanishi said. The company hopes that it will receive new orders for nuclear plants this fiscal year, he said.
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CORPORATE NEWS
Boeing is surprised by jet’s rupture Aircraft maker says wear on Southwest 737 was faster than expected; Air New Zealand plans safety checks Boeing Co. says its engineering and safety experts were caught off guard by the recent rupture of the fuselage of a Southwest Airlines Co. jet, which exposed a miscalculation in the aircraft maker’s formula for assuring the safety of the plane. In trying to explain what went wrong, Boeing made the unusual move of publicly acknowledging technical missteps. A senior company engineer laid out at a news conference on Tuesday how some company decisions years earlier unwittingly set the stage for the 1.5meter tear in the Boeing 737’s aluminum skin Friday while it was cruising above 10,000 meters. The tear led to rapid decompression of the passenger cabin and an emergency landing, but no one was hurt in the incident. On Wednesday, Air New Zealand Ltd. said it is checking 15 Boeing 737-300 planes in response to a service bulletin from Boeing. The Auckland-based carrier, 76.5%-owned by the government, said the planes are used on domestic routes. Boeing said it knew that certain older versions of its 737 aircraft could face cracking problems, but had thought the risks wouldn’t emerge—and so needn’t be tested for—until much later in a plane’s life. The company had advised air-
Reuters
BY ANDY PASZTOR AND PETER SANDERS
A damaged piece of the fuselage from the Southwest 737 in Friday’s incident is displayed in Washington on Tuesday. lines that older 737s could make 60,000 flights before they needed to undergo detailed inspections of the relevant skin sections. On Tuesday, however, Boeing said it had erred and that, as “a precautionary measure,” it now recommends inspections when the planes reach 30,000 flights, half the original number. The switch followed a decision
by Southwest to voluntarily ground 79 of its oldest 737s after Friday’s incident to inspect them for metal fatigue, a process it finished Tuesday. Among those planes, the Dallasbased discount carrier said five were found to have “small, subsurface cracks” that would require further evaluation and possibly repairs. Boeing’s miscalculation was a
rare slip-up in the system the company uses to keep its planes safe. Over decades, the company has made a science of being able to predict when problems might occur in the life of a jetliner. In designing its planes, one of Boeing’s many considerations is that metal flexes and fatigues over time as cabins pressurize and depressur-
ize on each flight. Predicting when tiny cracks are likely to grow into catastrophic failures is one of Boeing’s core engineering talents. This time, however, “Boeing’s engineering assumptions weren’t nearly as accurate as they thought, or as they should have been,” said Mark Rosenker, a former chairman of the U.S. National Transportation Safety Board. “But nobody else recognized the problem either.” Paul Richter, a chief project engineer at Boeing, said that problems with the aluminum sections now under scrutiny “weren’t completely unanticipated,” because the same places showed a tendency to crack in earlier 737s. So Boeing redesigned the way those panels were held together by rivets. The cracking in the redesigned panels, however, caught Boeing by surprise. Boeing engineers for years felt satisfied that the 570 737 jets world-wide with that design could safely make at least 60,000 flights without needing any inspections for subsurface cracks, Mr. Richter said. That was until Friday, when the fuselage rupture opened in a Southwest jet that had made about 40,000 landings and takeoffs. The U.S. Federal Aviation Administration issued an emergency safety directive Tuesday mandating inspections of at least 150 older 737s. —Lucy Craymer contributed to this article.
Transocean officials to donate bonuses BY DIONNE SEARCEY Senior executives at Transocean Ltd. said they will donate safety bonuses received based on the rigowner’s performance last year to the families of victims of the company’s Deepwater Horizon explosion in the Gulf of Mexico. Five senior executives will donate collectively more than $250,000—slightly more than onequarter of their overall bonuses—to a fund set up for the victims, the company said. Transocean has endured intense criticism after saying last week in a securities filing that despite the explosion in April 2010 that left 11 dead and triggered a massive oil spill, it had its “best year in safety performance.” “The executive team made this decision because we believe it is the right thing to do,” Transocean Chief Executive Steven Newman said. “Nothing is more important to Transocean than our people, and it was never our intent to diminish the effect the Macondo tragedy has had on those who lost loved ones,” he said. “We offer our most sincere apologies and we regret the impact this matter has had on the entire Transocean family.” Besides Mr. Newman, executives making the donations include senior vice president and Chief Financial Officer Ricardo H. Rosa; executive vice president, asset and performance Arnaud A.Y. Bobillier; vice president, legal and administration Eric Brown; and executive vice pres-
ident, global business Ihab M. Toma. The five executives earned a total of about $900,000 in overall incentive bonuses, according to filings. The company said in the filing that executives received two-thirds of their target safety bonus. Safety accounts for 25% of the equation that determines the yearly cash bonuses, along with financial factors including new rig contracts.
‘It was never our intent to diminish the effect the Macondo tragedy has had,’ CEO Steven Newman said. In 2009 the company withheld all executive bonuses after incurring four fatalities that year. In an earlier securities filing on executive pay, Transocean said, “Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record.” Based on the total rate of incidents and their severity, “we recorded the best year in safety performance in our company’s history.” Nine of the 11 workers who died in the explosion were Transocean employees. The company has paid settlements for three of the workers at a price range of roughly $8 million to $9 million, people familiar with the settlements have said. —Daniel Gilbert contributed to this article.
Thursday, April 7, 2011
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Swan defends his comments on SGX deal BY ENDA CURRAN SYDNEY—Australia’s treasurer fired back over his opposition to Singapore Exchange Ltd.’s proposed 8.4 billion Australian dollar (US$8.68 billion) takeover of ASX Ltd. and said he will explain his thinking when he makes a formal decision. “When I take a final decision, I will publish all of my reasons in full and part of that will be advice from the Foreign Investment Review Board,” Wayne Swan told state radio on Wednesday. A final decision from Mr. Swan is expected around the end of this week. On Tuesday, he effectively rejected the proposed acquisition of
Portugal pays up to borrow LISBON—Portugal paid heavily to borrow €1 billion ($1.42 billion) in short-term debt, and a government spokeswoman acknowledged that the government’s ability to borrow has worsened since Parliament rejected a package of austerity measures.
the operator of Australia’s stock exchange when he released a statement in which he said he doesn’t believe the deal is in the national interest, but gave little detail. That move places intense pressure on the government to justify why it is pushing back against the deal in the context of consolidation among exchanges across the world. Mr. Swan also will need to make clear that the country, which relies heavily on foreign capital, remains open to investors. Proposed foreign investments in Australia must seek the approval of the Treasury department’s Foreign Investment Review Board, or FIRB, but the final decision lies with the treasurer. Mr. Swan said the FIRB process was independent of politics
and he had consulted widely on the offer. “I welcome foreign investment, but ultimately all proposals have to be in the national interest,” he said. In a hasty sequence of events on Tuesday, ASX said it had been informed by SGX, which in turn had been informed by FIRB, that the treasurer considered the deal wouldn’t meet thes national-interest test. Mr. Swan said SGX was informed of the government’s viewpoint to allow the company time to respond, and that it was SGX’s decision to release that advice. “It was the unanimous advice of all FIRB members that the takeover would not be in the national interest,” he said. The pushback on the SGX-ASX
bid came during a legally required 30-day consultation period, raising concerns over political interference. The transaction requires parliamentary approval, so opposition from some key lawmakers means the ruling Labor government, which has a slim majority, would face a stiff uphill battle if it sanctioned the deal. Singapore Exchange Chief Executive Magnus Böcker said he was “surprised” by the timing of the FIRB’s notification, but Mr. Swan said politics didn’t play into his thinking, nor did it interfere with the regulatory process. “I’ve had a very open mind about it,” said Mr. Swan. “The FIRB board is independent. They do their work; they take their decisions independently.”
Bloomberg News
Australian official says all members of Foreign Investment Review Board believe takeover isn’t in national interest
Wayne Swan: “I’ve had an open mind.”
Ambition in Wealth Management.
By Patricia Kowsmann, Frances Robinson and Emese Bartha At an auction Wednesday, the government paid an average yield of 5.117% on the six-month Treasury bills on offer, compared with 2.984% at the previous auction on March 2. It also sold 12-month Treasury bills, at an average yield of 5.902%, compared with 4.331% at the most recent auction on March 16. “Today’s debt auction confirmed the deterioration of the financing conditions since Parliament rejected austerity measures presented by the government,” a finance ministry spokeswoman said in a statement. But she added that the government is able to secure all the financing needed to meet its obligations. Prime Minister José Socrates resigned following the vote on the austerity package. Portuguese banks have been among the main buyers of government debt in recent months but are becoming increasingly unwilling to add to their purchases, raising the odds that the outgoing government will have to make a formal request for a bailout from the European Union and the International Monetary Fund or seek some kind of short-term bridging loan until elections are held in June. In separate statements Wednesday, the Portuguese government and the European Commission, the EU’s executive arm, said Portugal hasn’t requested any aid. The government must repay €4.2 billion in debt due later this month, and €4.9 billion in mid-June. Barclays Capital economists said in a note to clients that a bridge loan would be “the more reasonable option at this stage to help Portugal to cover its needs at least through end-June.”
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BY P.R. VENKAT AND SAM HOLMES SINGAPORE—Mapletree Commercial Trust said it plans to raise up to 1.6 billion Singapore dollars (US$1.3 billion) through an initial public offering in Singapore that, if successful, would be the second biggest listing there so far this year. In a prospectus filed to the Monetary Authority of Singapore on Wednesday, Mapletree Commercial Trust, which is planning to raise the funds via a real estate investment trust, said that it will offer 1.86 billion units in a price range of S$0.84 to S$0.91 per unit. Of the total offer, 713 million units are being offered to institutional investors and the public. Cornerstone investors—including Asian insurance company AIA Group Ltd—have committed to take 302 million units. The remaining units will be offered to the sponsor and as part of an overallotment option. If shares are priced at the top of the proposed range and that overallotment option of 102 million units
is exercised, the deal would raise about S$1.6 billion. The company, a unit of sovereign wealth fund Temasek Holdings Pte. Ltd.’s Mapletree Investments, had earlier planned for listing in March, but had to delay the IPO process due to uncertain market conditions caused by the destructive earthquake and tsunami in Japan and worsening geopolitical tensions in the Middle East. Mapletree Commercial Trust’s IPO is set to be the second biggest IPO this year in Singapore after the US$5.4 billion offering by Hutchison Port Holdings Trust in March. In recent years, Singapore has been one of the preferred destinations for property developers looking to raise funds through real-estate investment trust or business trust listings. Perennial China Retail Trust, a unit of property investment firm Perennial Real Estate, said that it was looking to raise S$1.1 billion in an IPO. However, it deferred the plan in March citing volatile market conditions. People familiar with the
Reuters
Property IPO could raise $1.3 billion
Singapore’s VivoCity shopping mall is one of the properties owned by Mapletree Commercial Property Trust. situation said the company is still keen to proceed, but the timing is yet to be decided. Mapletree said it is expected to list the trust April 27. The trust’s portfolio will include Singapore properties such as the VivoCity shopping mall, Bank of AmericaMerrill Lynch Harbourfront and the PSA Building. The plan to list Mapletree Com-
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mercial Trust came after the parent’s industrial property unit, Mapletree Industrial Trust, was listed in the fourth quarter and raised S$1.2 billion. The company said it has firmed up four cornerstone investors who have committed to invest up to S$275 million in the IPO. The cornerstone investors include AIA, which has agreed to in-
Generali chairman quits amid push for his ouster BY SABRINA COHEN MILAN—In a surprise move, Assicurazioni Generali SpA Chairman Cesare Geronzi resigned from the board of the Trieste-based insurer after a majority of members on the company’s board threatened to hold a no-confidence vote. In a statement, Generali said Mr. Geronzi resigned “in the greater interest of the company” and that the board of directors expressed gratitude for his work. A spokesman for Mr. Geronzi couldn’t be reached for comment. Mr. Geronzi, 76 years old, has been at the helm of the Italian insurer since last April, after he quit his chairmanship at Mediobanca SpA, the Milan-based merchant bank that controls a 13.5% stake of Generali. The unexpected move comes after months of battles between Mr. Geronzi and some shareholders over
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the governance of the insurer, which manages more than €400 billion ($568.84 billion) in assets and has large holdings of Italian government-bonds. The decision to seek a no-confidence vote came after Monday’s resignation of longtime board member Ana Botín, a move that investors had been expecting. Mr. Geronzi resigned before the vote was held. Ms. Botín’s departure decreased the total number of board members of Generali to 17, making it easier for the majority of the board members to gain the necessary support to oust the chairman, people with knowledge of the situation said Wednesday. They also said two representatives of Mediobanca who sit on Generali’s board were in favor of ousting Mr. Geronzi. Shares of Generali ended up 3% at €15.93. —Liam Maloney contributed to this article.
RBS appoints China chairman BY NISHA GOPALAN
Deadline Extended: April 8, 2011
vest up to S$125 million. The other three—Hillboro Capital Ltd., Japan’s Itochu Corp. and Singapore’s retailer NTUC Fairprice Co-operative Ltd.—have agreed to invest up to S$50 million each. The group has appointed Citigroup, DBS, Deutsche Bank and Goldman Sachs Group global coordinators on the offer. CIMB is a joint global coordinator and bookrunner.
HONG KONG—Royal Bank of Scotland Group PLC said it appointed Sherry Liu, formerly of J.P. Morgan Chase & Co., as chairman and chief executive for the bank in China. Ms. Liu was previously J.P. Morgan’s chairman for China financial institutions and vice chairman for China. At RBS, Ms. Liu will be responsible for the bank’s overall business
strategy in China. RBS operates in China through a locally incorporated bank, with headquarters in Shanghai, five branches in China and 500 employees. The bank has also built multiple nonbanking business platforms, including a wholly owned leasing company; a shareholding in Suzhou Trust Co. Ltd., an investment trust based in Jiangsu province; and a joint venture with Galaxy Futures, a futures-trading joint venture with China’s Galaxy Securities.
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Banks brace for new era Choppy countdown Deutsche, Commerzbank seek shareholder approval to raise funds FRANKFURT—Germany’s largest commercial banks—Deutsche Bank AG and Commerzbank AG—are seeking shareholder approval to raise billions of euros in capital, in the latest sign that Europe’s banks are trying to shore up their balance sheets in anticipation of a tougher regulatory environment.
BY TOM LAURICELLA AND MATT PHILLIPS
Associated Press
By Laura Stevens, Dana Cimilluca and Eyk Henning Deutsche Bank, one of Europe’s largest banks, said Tuesday in the invitation to its May shareholder meeting that it would seek approval to raise as much as €18 billion ($25.6 billion) in fresh capital. Commerzbank, meanwhile, outlined plans Wednesday for a capital increase of €11 billion as the bank looks to emerge from a multibillioneuro government bailout it received during the financial crisis. The preparations underscore the continued efforts by European banks to bolster their finances ahead of regulatory changes that would force banks to take fewer risks. German banks, which are among the most exposed to the government-debt crisis among Europe’s weaker economies, have long been viewed as undercapitalized. It isn’t certain that Deutsche Bank will ultimately pursue capital increases even if shareholders give it the authority to do so. Deutsche Bank raised €10.2 billion in October as part of its acquisition of German retail-banking giant Postbank AG last year. That deal was meant to reduce Deutsche Bank’s reliance on investment banking in the wake of the financial crisis. Though it has made progress in that direction, Deutsche
Commerzbank, its headquarters behind the German flag in Frankfurt on Wednesday, aims to raise about $15.6 billion and repay some government aid. Bank has failed to convince many investors and analysts that it is adequately capitalized for its total balance sheet of €1.9 trillion. “Deutsche Bank, under Basel III, is arguably one of the least wellcapitalized banks in the sector,” said Nomura analyst Jon Peace, referring to upcoming global banking standards named after the Swiss city. At a banking event Friday in Cernobbio, Italy, Deutsche Bank Chief Executive Josef Ackermann said that no further capital increases are planned and that the bank is well capitalized. Unlike Deutsche, which hasn’t accepted any government aid, Commerzbank, Germany’s second-largest bank, required an €18.2 billion bailout from the government in 2009. The German government holds a 25% stake in Commerzbank via “silent participation,” a special class of
subordinated debt. Commerzbank’s management has said it would like to free itself from government influence as soon as possible. Commerzbank, which has a balance sheet of €754 billion, outlined plans for a two-step capital increase, with €8.25 billion from new and existing shareholders and the remainder from the German government. Commerzbank said it will convert €2.75 billion of the government’s silent participations into regular shares to allow it to keep its stake intact, and it will also repay €11.5 billion in state aid. Because of a law enacted last year, shareholders can’t legally block any decision made at the annual meeting, and the move will allow Commerzbank to free itself of most of its government aid by June. —William Launder contributed to this article.
Lawyer, trader face insider charges BY CHAD BRAY AND VANESSA O’CONNELL Federal prosecutors accused a corporate lawyer and a trader of stealing confidential information about pending mergers and other deals from three prominent law firms in a years-long scheme that they said resulted in more than $32 million worth of profits. The defendants allegedly used pay phones and prepaid phones paid for with cash in order to avoid detection by law enforcement authorities and suspended the alleged scheme for six years out of fear their alleged criminal activity might be detected, according to a federal criminal complaint filed Wednesday in Newark, N.J. Paul J. Fishman, the U.S. attorney for New Jersey, said this is the largest insider-trading case ever brought in New Jersey. Matthew Kluger, who most recently worked at the Silicon Valley law firm of Wilson, Sonsini, Goodrich & Rosati PC, allegedly obtained secret information from his employers beginning as a summer associate 17 years ago, when he was working at Cravath Swaine & Moore LLP, another big law firm. Mr. Kluger was arrested at his home in Virginia Wednesday morning. Mr. Kluger allegedly passed on the information to a middleman, an unidentified “co-conspirator” in the complaint, who then passed it on to
to Nasdaq shuffle
Garrett Bauer, a trader who most recently worked at Lighthouse Financial Group LLC, a securities brokerage that recently filed for bankruptcy protection, according to the complaint. Mr. Bauer was arrested at his apartment in Manhattan Wednesday morning. An attorney for Mr. Kluger couldn’t immediately be located. William J. Davis, an attorney at Scheichet & Davis PC in New York, said Wednesday that he had met with Mr. Bauer “about two weeks ago and had discussions with him,” but hadn’t spoken with him since his arrest. The alleged scheme came to light last month after the Federal Bureau of Investigation and the Internal Revenue Service executed search warrants at the Long Beach, N.Y., house of the unidentified co-conspirator, prosecutors said. Mr. Kluger, of Oakton, Va., allegedly stole information regarding 11 deals while at Wilson Sonsini, which he left last month. Mr. Bauer, Mr. Kluger and the unnamed co-conspirator allegedly invested more than $109 million, making at least $32.2 million in illicit profits, according to the criminal complaint. Information was also allegedly stolen from Skadden, Arps, Slate, Meagher & Flom LLP, where Mr. Kluger worked from 1998 to 2001. The deals in question included an acquisition by affiliates of Bain Capital Partners of 3Com Corp. in 2007;
Oracle’s purchase of Sun Microsystems Inc. in 2009; Adobe Systems Inc.’s acquisition of Omniture Inc. in 2009; and Intel Corp.’s purchase of McAfee Inc. in 2009, according to the criminal complaint. The criminal charges include conspiracy to commit securities fraud, conspiracy to commit money laundering and multiple counts of securities fraud and obstruction of justice. The Securities and Exchange Commission also brought separate civil charges on Wednesday against the two men. A spokeswoman for Wilson, Sonsini said, “We were shocked to learn of the conduct the government has alleged a former employee committed against us and two other prominent law firms.” She said the firm would provide its “full support to the federal investigation.” “Kluger worked for us quite some time ago,” said Evan R. Chesler, presiding partner at Cravath. “Needless to say, we condemn this kind of conduct by anyone, and certainly by anyone associated with Cravath, and we’re going to cooperate with the U.S. attorney’s office.” “We have strict policies that protect our clients’ confidential information, which we monitor closely,” a spokesman for Skadden said. “It would be deeply disappointing if these policies were not followed in this instance. We are cooperating fully with the government in this matter.”
Nasdaq OMX on Tuesday set off what is likely to be one of the biggest trades in the stock market for the next month: gaming the massive rebalancing of the widely followed Nasdaq-100 index. Nasdaq reduced the weighting of Apple Inc. in the index to 12.3% from more than 20% and increased the share of other big tech names such as Microsoft, Google and Intel. The rare and extensive rebalancing—all 100 stocks had their weightings changed—means managers that closely follow the index will be forced to buy and sell stocks to mimic the changes. Apple declined to comment. That is likely to be a process that will play out until the final minutes of trading on April 29. That is when portfolios designed to closely track the index, such as the $24 billion PowerShares QQQ exchange-traded fund, will be looking to adjust their holdings to that of the new composition which takes effect on May 2. Meantime, hedge funds and other more active managers will be seeking to profit from that buying and selling. “You’re going to have traders in any [rebalancing] trying to game it,” says Mike Marrale, head of U.S. sales trading at RBC Capital Markets. “That means there’s going to be more trading and more volume than is actually attributed to the rebalancing…trying to get ahead of the trade that’s going to occur after the close on April 29.” In this case, that means betting that there will be a rush to sell Apple and buy stocks in the index such as Microsoft. Typically most of that speculative positioning takes place up to a week in advance of the rebalancing date, says Gus Sauter, who as chief investment officer at Vanguard Group, has watched traders attempt this strategy for more
Big Apple As Apple’s shares have risen, so has its weighting in the Nasdaq-100 $400
Daily share price 300 200 100 0 120
2008
'09
'10
Trading volume, millions of shares
90 60 30 0
2008
'09
'10
than two decades. The risk for these traders, Mr. Sauter says, is that so many traders will make the same bets “that they can end up undermining their strategies.” There also is a “pretty lengthy” amount of time for the market to digest trading associated with the rebalance, says Mark Govoni, head of U.S. program sales trading at Nomura Securities. While that could smooth out any choppiness, the window extends through earnings season, raising the prospect stocks could swing wildly. Nomura says 57 of the Nasdaq-100 companies will report earnings before the changes go into effect. That could make it dicey for fund managers to buy and sell ahead of the rebalance. And that could mean more will wait until the last minute to get their trading done.
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26
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
INTERNATIONAL INVESTOR
FUND SCORECARD
Euro jumps on dollar, yen ahead of ECB BY ERIN MCCARTHY
pace the Federal Reserve’s. Japan’s central bank, meanwhile, is expected to keep rates low indefinitely as the country rebuilds from its devastating March earthquake. Ongoing risk sentiment has encouraged investors to put on “carry trades” with the yen as the funding currency, analysts said. “We’re just in a period where yen is getting beaten down,” said David Watt, currency strategist at RBC Capital Markets. Meanwhile, the dollar changed hands at ¥85.32 from ¥84.83. The pound traded at $1.6316 compared with $1.6278. The dollar bought 0.9182 Swiss franc from 0.9252 late Tuesday. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, slipped to 75.54 from 75.873. The euro climbed to its highest level since January 2010 in Euro-
NEW YORK—The euro rose steadily against the dollar and yen Wednesday as investors heightened their expectations of a European Central Bank rate increase. The euro hit $1.4350, a fresh 14month high against the dollar. The common currency CURRENCY reached its highest MARKETS level against the yen since May 2010, with the yen suffering across the board as investors sought out higher-yielding currencies. The euro recently traded at $1.4326 compared to $1.4221 late Tuesday. The euro was at ¥122.25 from ¥120.64. The ECB is widely expected to raise interest rates by 0.25 percentage point on Thursday, and the euro has surged ahead of the dollar in response, as markets expect the central banks’s tightening cycle to out-
Global Debt These funds primarily take long positions in global debt. The funds may invest in emerging markets, US, or global debt issuance. Ranked on % total return (dividends reinvested) in U.S. dollars for one year ending April 06, 2011
Leading 10 Performers FUND FUND RATING * NAME
NS
pean trading hours, supported by expectations that the ECB will raise interest rates Thursday for the first time in nearly three years. “It seems that the euro is really just trading on the basis of an ECB rate hike and momentum but there is a danger that that gets over-extended,” said Daragh Maher, senior currency strategist at Credit Agricole in London. “People will look toward $1.45 initially. The market is happy to disregard any bad news we have had or any hawkish noises from the Federal Reserve.” Better-than-expected German manufacturing data for February added to the euro’s upward momentum. Manufacturing orders in Europe’s largest economy rose 2.4% in February, above the 0.5% increase analysts expected and with good domestic and foreign demand. —Jessica Mead contributed to this article.
4 1 NS 3 4 1 3 NS NS
FUND MGM'T CO.
LEGAL CURR. BASE
YTD
SPM Core
Structured USDUSA Portfolio Management LLC SPM Structured USDUSA Opportunity Portfolio Management LLC Concise Concise Capital USDCYM CapitalOffshoreFund,SPC Management, L.p. CCA Citi Capital USDCYM Mortgage/CreditOpportunityFund Advisors SPM Structured USDUSA Parmenides Master LP Portfolio Management LLC P&G Asset P&G SGR EURIRL Backed Securities UFG Russia UFG Asset USDCYM Select Fund Ltd Management MD Sass M.D. Sass USDUSA Waterfall Eden Fund LP Investors Services, Inc. WAF Master West Side Advisors USDUSA Fund, LP LLC Cheyne Real Cheyne Capital GBPCYM Estate Debt Fund Class B Management (UK) LLP
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
% Return in $US ** 1-YR 2-YR 5-YR
3.26 36.90
NS
NS
35.91 60.19
NS
6.85 35.79 98.93
NS
9.68 34.49 26.76
NS
3.27
3.77 32.87 57.29 18.91 10.69 32.74 26.03 12.75 16.18
31.70 50.60 -0.87
4.75 30.74 11.90
4.64
5.70 29.87 49.38
NS
8.17 28.24
NS
NS
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
Treasurys fall amid Fed debate Japanese yields climb BY CYNTHIA LIN
has laid the groundwork for building expectations that there may not be all that much support for Treasury markets,” said Aaron Kohli, interest-rate strategist at Nomura Securities. In noon trade, the benchmark 10year note slid 8/32 to 100 29/32 to yield 3.5151%, while the 30-year note lost 19/32 to 103 9/32 to yield 4.5477%. The two-year note slipped 1/32 to 99 27/32, yielding 0.8297%. Bond prices and yields move in opposite directions. Late Tuesday, St. Louis Federal Reserve Bank President James Bullard said he intends to push to reduce the “quantitative easing” program, dubbed QE2, by $100 billion at the April meeting, though he ex-
NEW YORK—U.S. Treasurys extended losses as investors interpreted the escalating debate among Federal Reserve officials to underscore a gradually turning focus toward tightening U.S. CREDIT monetary policy. MARKETS As the government bond-buying program draws to an end in June, discussion has been heating up, not over whether a tighter policy is necessary, but rather the timing of such action. That has prompted a selloff in Treasurys as investors adjust to the eventual increase in rates. “The data is out of the way and all the hawkish talk from the Fed
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INTERNATIONAL INVESTMENT FUNDS FUND NAME
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
n AHW CAPITAL MANAGEMENT Tel (+49) 1805 - 23 82 82 www.ahw-capital.com AHW Top-Div.Int.
GL EQ LUX 04/05 EUR
NAV
51.93
—%RETURN— YTD 12-MO 2-YR
1.5
-4.6
13.4
n ALLIANZ GLOBAL INVESTORS KAPITALANLAGEGESELLSCHAFT Concentra AE Industria AE InternRent AE
EU EQ DEU 04/06 EUR EU EQ DEU 04/06 EUR EU BD DEU 04/06 EUR
64.24 75.74 37.96
3.9 -0.7 -6.1
17.8 3.4 2.6
32.2 19.2 7.5
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 03/31 USD 388419.91
-6.4
19.0
77.7
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
n GAM Star Fund Plc 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 GL EQ VGB 04/04 USD GAM Asia Equity USD OT OT VGB 04/05 USD GAM Asia-Pacific Eq USD AS EQ VGB 04/05 USD
280.22 729.56 1354.75
3.6 0.9 -2.2
1.4 9.9 -2.1
31.4 32.3 19.3
NAV GF AT LB DATE CR
GAMStar China EqUSD (SCHUA) GAMStar DiversMktNeutCredit USD Acc GAMStar Emer Mkt Rates USD Acc GAMStar GEO USD Acc GAMStar Global Conv.Bd USD Acc GAMStar Global Eq Inflat Focus USD Acc GAMStar Global Rates USD Acc
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
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
03/31 03/31 03/31 03/31 03/31 03/31 03/31 03/31 03/31 04/01 03/31 03/28 03/28 03/28 04/04 04/05 04/05 04/04 04/04 03/31 04/04 04/04 04/05 04/05 04/05 04/05 03/28 03/28 03/28 03/28 03/28 03/28 03/31 04/05 03/31 02/28 03/28 03/28 03/31 04/05 03/31 11/30
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
AS EQ IRL 04/05 USD OT OT IRL 04/01 USD OT OT IRL 04/04 USD OT OT IRL 04/04 USD OT OT IRL 04/01 USD GL EQ IRL 04/05 USD OT OT IRL 03/31 USD
BY TAKASHI MOCHIZUKI
pects little support. Wednesday morning, Atlanta Fed President Dennis Lockhart offered an opposing view, saying the government should see the bond-buying program through to the end in June. Minutes released from the Federal Open Market Committee meeting in March highlighted such divergence among Fed officials, though discussion seemed to skew in favor of completing the program. As it stands, QE2 aims to inject $600 billion into the U.S. economy. A much-anticipated rate increase by the European Central Bank is another event keeping investors on edge. ECB policy makers are set to convene Thursday, when a rate increase is widely expected.
NAV 103.76 140.41 112.17 148.05 95.72 141.09 148.22 107.41 892.41 320.66 635.40 72.08 670.41 204.56 238.00 220.52 1103.71 283.35 241.73 336.39 125.26 8680.76 1123.06 8707.16 51.03 100.09 87.67 672.56 287.23 147.82 121.12 501.51 3387.55 2921.93 257.11 340.43 1010.73 328.31 666.65 2510.08 7996.70 116.46 20.36 10.14 10.72 10.57 10.53 153.74 11.03
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—%RETURN— YTD 12-MO 2-YR 0.6 0.6 1.7 1.7 0.6 0.6 -0.9 -0.2 -0.2 9.9 1.0 1.8 1.0 0.8 -3.0 -2.3 5.8 2.7 0.2 8.8 -1.7 -1.3 -4.9 -3.5 -0.1 0.1 -4.8 -1.3 2.4 2.4 2.4 2.3 2.8 -0.2 4.6 -0.7 -1.9 -1.9 6.0 7.7 -1.6 2.5 0.7 0.3 -2.1 5.7 4.0 9.4 1.5
6.9 6.9 12.2 12.2 8.4 8.4 1.7 2.9 3.2 22.1 -2.7 -8.6 -2.1 -3.0 5.7 5.6 26.3 7.2 -12.2 12.4 -8.4 -7.9 -11.5 -14.6 0.1 0.3 -22.1 1.9 6.4 6.4 6.7 6.7 21.3 12.4 11.3 6.0 4.6 4.6 12.9 11.1 3.6 10.3 5.5 NS NS NS NS NS 3.7
TOKYO—Japanese government bond yields rose as investors focused on the hawkish tone from central banks in Europe and the U.S. The European Central Bank is expected to raise its key rate by 0.25 percentage point on BOND Thursday, and inMARKETS vestors are factoring in further ECB rate increases this year, dealers said. In the U.S., speculation is growing that the Federal Reserve won’t extend its quantitative-easing program after its planned expiry in June, and the market is now focused on what steps the Fed will take next. “Global share markets are strong
on speculation that these central banks will be hawkish for the time being, and JGBs can’t be free from that influence,” said Naoki Tsuchiyama, a strategist at Mizuho Securities. The benchmark 10-year yield rose 0.025 percentage point to 1.295%, even as the Nikkei Stock Average fell 0.3% on Wednesday and U.S. blue chips slipped on Tuesday. Mr. Tsuchiyama expects the yield may rise to a bit above 1.30%. But some analysts cited factors that could support the bond market and therefore push yields lower. Akito Fukunaga, chief bond strategist at RBS Securities, said Japan is “completely isolated” from the global trend of higher interest rates because of the March 11 earthquake.
15.4 15.4 24.7 24.7 17.4 17.4 7.4 8.0 8.3 37.6 1.0 0.1 1.4 0.4 11.3 11.8 45.1 25.6 30.4 54.9 6.6 7.4 8.3 4.4 0.4 0.1 -11.4 13.4 6.3 6.3 6.4 6.5 43.3 38.4 35.2 4.6 4.4 4.4 52.6 24.8 3.4 NS 50.5 NS NS NS NS NS NS
FUND NAME
NAV GF AT LB DATE CR
GAMStar Keynes Quant Strategy USD Acc GAMStarPharoEmerMktDebt&FXUSDAcc GAMStar Technology USD Acc GAMStar Trading USD Acc GAMStar-AsEqUSD Ord Ac GAMStar-AsPacEqEUR Acc GAMStar-ContEurEqEUR Ac GAMStar-EurpEqEUR Acc GAMStar-EurpEqUSD Acc GAMStar-JpnEq EUR Acc GAMStar-JpnEq JPY Acc
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FUND NAME
OT GL OT OT OT AS EU EU EU JP JP
OT BD EQ OT OT EQ EQ EQ EQ EQ EQ
IRL IRL IRL IRL IRL IRL IRL IRL IRL IRL IRL
04/04 03/31 04/04 04/04 04/05 04/05 04/05 04/05 04/05 04/05 04/05
USD USD USD USD USD EUR EUR EUR USD EUR JPY
NAV 10.29 10.91 9.94 9.86 14.97 107.88 12.72 201.12 17.45 88.94 903.79
—%RETURN— YTD 12-MO 2-YR -2.4 -1.5 NS NS 1.1 -7.1 1.2 0.9 7.2 -8.7 -1.9
NS 1.9 NS NS 10.3 -7.4 9.1 3.5 9.2 -14.2 -12.2
NS NS NS NS 32.0 12.5 24.2 20.9 24.2 5.8 4.6
NAV GF AT LB DATE CR
AlexandraConvertibleBondFundI,Ltd.(ClassA) OT OT VGB 02/28 USD
NAV
—%RETURN— YTD 12-MO 2-YR
2364.66
2.2
29.4
52.1
104.84
-14.5
-3.0
12.4
n CREDIT PACIFIC ASSET MANAGMENT www.creditpacific.com GL OT WSM 04/05 USD
GAMStar-JpnEq USD Acc
JP EQ IRL 04/05 USD
NAV
—%RETURN— YTD 12-MO 2-YR
11.18
-4.9
-12.0
7.2
10215.29 9678.54 103.35 114.51 10438.94
4.1 12.3 10.4 2.8 4.3
0.2 -1.1 8.8 12.4 3.3
NS NS NS NS NS
n HSBC Trinkaus Investment Managers SA E-Mail:
[email protected] Telephone: 352 - 47 18471 Prosperity Return Fund A Prosperity Return Fund B Prosperity Return Fund C Prosperity Return Fund D Renaissance Hgh Grade Bd A
JP BD LUX 04/04 JPY OT OT LUX 04/04 JPY OT OT LUX 04/04 USD OT OT LUX 04/04 EUR JP BD LUX 04/04 JPY
OT OT OT OT OT GL
OT OT OT OT OT EQ
CYM USA USA USA USA CYM
02/28 10/31 02/28 02/28 05/29 02/28
USD USD USD USD USD USD
103.48 129.92 114.52 117.39 35.02 NS
FUND NAME
NAV GF AT LB DATE CR
Platinm-Nordic Platinm-Premier Platinm-Turnberry
OT OT CYM 02/28 SEK OT OT CYM 12/31 USD OT OT USA 02/28 USD
NAV 628.58 NS 60.14
—%RETURN— YTD 12-MO 2-YR -6.0 NS -1.2
3.4 NS -3.0
8.6 NS NS
n SUPERFUND ASSET MANAGEMENT GMBH For info about open funds, contact
[email protected] and www.superfund.com *Closed for New Investments Superfund Cayman* Superfund GCT USD* Superfund Green Gold A (SPC) Superfund Green Gold B (SPC) Superfund Q-AG*
GL GL GL GL GL
OT OT OT OT OT
CYM LUX CYM CYM AUT
03/31 03/31 03/31 03/31 03/31
USD USD USD USD EUR
NS 2606.86 1322.88 1300.74 NS
3.1 1.4 0.9 1.3 0.4
28.5 13.9 31.4 31.4 7.2
-16.2 -14.7 5.8 -2.3 -7.0
3.1 3.1 3.1 1.6 1.6 1.6 1.6
17.8 17.8 18.1 16.5 16.6 16.4 16.7
5.3 5.7 5.4 4.8 5.1 4.4 4.9
n WINTON CAPITAL MANAGEMENT LTD Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301
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FUND NAME
1.5 NS -1.5 5.8 -18.2 2.3
5.7 NS 4.1 24.1 -63.7 23.6
10.7 NS 10.3 30.6 -45.6 38.1
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
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GL GL GL GL GL GL GL
OT OT OT OT OT OT OT
CYM CYM CYM VGB VGB VGB VGB
02/28 02/28 02/28 02/28 02/28 02/28 02/28
EUR NS GBP NS USD NS EUR 228.31 GBP 247.50 JPY 16111.36 USD 813.20
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
27
INTERNATIONAL INVESTOR
U.S. tech stocks gain, but Monsanto slumps BY DONNA KARDOS YESALAVICH
Street expectations. Monsanto’s report comes ahead of U.S. corporations’ first-quarter results, which effectively begin next week. While many expect results to continue topping expectations, some are concerned about the impact of higher commodities prices. American Superconductor tumbled 42%. The company, which makes wind-turbine gear and motors among other products, warned that it expects to post a fourthquarter loss and cut its revenue view for the quarter sharply as it said a customer refused to accept some shipments of components and parts.
NEW YORK—U.S. stocks struggled to hold on to small gains as investors weighed stronger-than-expected German manufacturing data against disappointing revenue from Monsanto. The Dow Jones Industrial Average was up 26 points, or 0.2%, to 12419.9 in early afternoon trading. Cisco Systems ABREAST OF jumped 4.3% as inTHE MARKET vestors continued to digest a suggestion from Chief Executive John Chambers on Tuesday that changes to the technology company’s operations—and possibly cost cuts— would be coming. The Dow’s other technology components also rose, with Hewlett-Packard up 2.3% and Microsoft up 1.2%. Leading the decliners, Caterpillar fell 1.2%. The Nasdaq Composite recovered from intraday losses to gain 1.72 points, or 0.1%, to 2792.91. The Standard & Poor’s 500-stock index eked out a rise of 0.65 point, or 0.1%, to 1333.28. The materials sector was hurt by a 4.7% drop in Monsanto. The agribusiness firm’s fiscal second-quarter profit climbed 15% as sales of seeds and herbicides grew and margins improved, but revenue missed Wall
European stocks Banks led the region’s gains amid plans by some to raise cash. The Stoxx Europe 600 banks index rose 1.9%. Germany’s Commerzbank advanced 1.9% after the bank announced plans to raise cash to help repay some of the state aid it has received. Italian lender Intesa Sanpaolo rallied 5.4% after it announced its own fund-raising plans. U.K. retailer Marks & Spencer jumped 6% after its fourth-quarter sales beat expectations. Eléctricité de France fell 3.2% after the government said Tuesday it would freeze natural-gas prices.
Gold near record highs on inflation-hedge buys BY MATT WHITTAKER
U.S. Gold Futures
NEW YORK—Gold futures remained near record highs as investors continued to fret about global inflationary pressures from rising oil prices. The front-month gold contract, for April delivery, was up $5.40, or 0.4%, at $1457.20 a COMMODITIES troy ounce in noon MARKETS trading, after hitting an intraday record of $1,462.30 on the Comex division of the New York Mercantile Exchange. Often bought as a hedge against inflation and a refuge in times of economic or political tumult, gold has been “deriving support from ongoing geopolitical uncertainty across the [Middle East and North Africa] region, uncertainty following the events in Japan, and fears of rising inflation,” Barclays Capital analyst Suki Cooper said in a note to clients. Silver has also been moving higher as a cheaper precious-metals investment than gold. In noon trading, the front-month April contract was up 35.50 cents, or 1%, at $39.540 a troy ounce after hitting an intraday peak of $39.715, the
Daily settlement price on the continuous front-month contract Wednesday intraday high*: $1,462.30 a troy ounce $1,450
1,400
1,350
1,300
Jan.
Feb.
March
*As of noon in New York Source: Thomson Reuters
highest for the metal since Feb. 11, 1980. Much of the recent gains in gold and silver have come as surging oil prices stoke fears of inflationary pressure around the globe and also prompt worries the high crude prices will be a drag on the economic recovery. The front-month May crude contract on Nymex was up 40 cents at $108.74 a barrel as fierce fighting
continued around Libya’s oil towns. While core inflation remains subdued in the U.S., food and energy prices have been on the rise. The Fed has maintained its easy-money policies but has also offered reassuring words about the economic outlook and signaled vigilance on inflation. “A significant increase in longerterm inflation expectations could contribute to excessive wage and price inflation, which would be costly to eradicate,” the Fed said in minutes from its March 15 meeting, released Tuesday. Meanwhile, China, the world’s second-largest gold buyer after India, on Tuesday raised interest rates to curb inflation. There are also expectations that the European Central Bank will raise interest rates for the first time in nearly three years Thursday. That pushed the euro higher against the dollar, and the weaker buck is supporting gold prices. That makes dollar-denominated gold less expensive for buyers using foreign currencies. Market participants also continued watching the saga at Japan’s crippled Fukushima Daiichi nuclearpower complex.
China shares slough off rate rise, gold miners rally BY COLIN NG AND NICK GODT
recovery after the March 11 earthquake and tsunami. China’s Shanghai Composite tacked on 1.1% to 3001.36 as the market reopened after a two-day holiday. Japan’s Nikkei Stock Average fell 0.3% to 9584.37. Hong Kong’s Hang Seng Index added 0.6% to 24285.05, its fifth straight advance, as trading resumed after a holiday Tuesday. Australia’s S&P/ ASX 200 extended its win streak to seven in rising 0.3% to 4912.91. The
Chinese shares rose, as investors took the central bank’s interest-rate increase in stride, while gold plays around the reASIAN-PACIFIC gion surged as STOCKS the metal’s price touched a record. Elsewhere, markets were mixed, with Japanese stocks falling on continued concerns about the pace of
benchmark is up 3.8% during the streak. South Korea’s Kospi fell 0.2% to 2126.71, and India’s Sensex fell 0.4% to 19612.20. Gold stocks rose after the yellow metal touched a record above $1,460 an ounce. Newcrest Mining climbed 2.9% in Sydney, Sumitomo Metal Mining rose 0.5% in Tokyo, and Zijin Mining Group leapt 3.8% in Hong Kong. Chinese insurers climbed on expectations the central bank’s rate
[ Search by company, category or country at asia.WSJ.com/funds ] FUND NAME
NAV GF AT LB DATE CR
Renaissance Hgh Grade Bd B JP BD LUX 04/04 JPY Renaissance Hgh Grade Bd C JP BD LUX 04/04 USD Renaissance Hgh Grade Bd D JP BD LUX 04/04 EUR
NAV 9847.08 104.22 107.40
—%RETURN— YTD 12-MO 2-YR 12.3 10.2 1.9
LIST YOUR FUNDS
2.0 12.0 6.0
AS AS AS AS AS AS AS AS EA EA AS OT AS AS OT AS OT OT EU GL GL OT OT GL GL OT OT GL GL GL GL GL GL GL EE
EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ OT BD OT OT EQ EQ EQ OT OT EQ EQ OT OT EQ 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
04/05 04/05 04/05 04/05 04/04 04/04 04/04 04/04 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05 04/05
SGD USD SGD USD SGD USD SGD USD SGD USD USD USD SGD USD USD USD USD SGD EUR SGD USD SGD USD SGD USD USD USD SGD USD EUR SGD USD SGD USD USD
15.75 16.39 15.31 21.51 13.69 52.66 15.05 29.89 15.85 28.41 11.99 16.48 15.99 33.86 11.17 11.06 12.01 14.50 35.17 15.38 66.12 13.40 23.55 15.28 33.95 9.38 16.54 15.13 14.13 21.62 26.63 21.78 14.91 46.95 17.48
-0.1 2.1 1.7 3.3 3.7 5.4 0.4 2.0 -3.9 -2.4 5.5 -3.3 -1.6 -0.1 -6.1 2.1 0.0 -2.2 0.9 0.4 1.9 -8.9 -6.8 -0.3 1.2 4.0 4.1 3.8 5.4 -4.9 -1.0 0.6 -2.9 -0.7 8.0
In print & online. Contact:
NAV GF AT LB DATE CR
NAV
—%RETURN— YTD 12-MO 2-YR
FUND NAME
NAV GF AT LB DATE CR
NAV
—%RETURN— YTD 12-MO 2-YR
Asia Value Formula Fd-B
OT
OT CYM 04/04 USD
n MANULIFE ASSET MANAGEMENT TEL:(852)2108 1110 n SGAM FUND Internet:http://www.manulife.com.hk 47/F Manulife Plaza, Causeway Bay, Hong Kong American Growth US EQ LUX 04/06 USD 18.53 7.5 15.1 27.3 AMUNDI HONG KONG LIMITED Hotline in Hong Kong (852) 2521 4231 American Growth AA US EQ LUX 04/06 USD 1.06 7.5 14.8 27.0 NS NS NS 37.9 NS 28.9 NS 34.1 NS 47.6 44.9 25.5 NS 50.8 44.8 NS 48.9 NS 60.6 NS 51.6 NS 27.7 NS 38.4 44.2 NS NS 27.8 53.4 NS 57.6 NS 51.3 75.7
[email protected]
FUND NAME
Advertisement
NAV GF AT LB DATE CR
NAV
—%RETURN— YTD 12-MO 2-YR
n WEBSITE: WWW.VALUEPARTNERS.COM.HK, TEL: (852) 2880 9263, FAX: (852) 2564 8487 *formerly known as China ABH Shares Fund
n SENSIBLE ASSET MANAGEMENT LIMITED www.samfund.com.hk Tel: (852) 2868 6848 Fax: (852) 2810 9948
NS 33.7 NS 14.5 0.3 11.2 6.7 18.2 3.3 14.4 34.0 3.5 9.5 21.3 15.9 10.7 13.4 NS 11.5 NS 16.7 NS 5.8 2.6 13.5 21.8 13.2 2.0 13.0 24.2 17.5 30.1 NS 14.0 20.1
China climbed 1.8%. In Hong Kong, casino operators jumped for a second straight session, with SJM Holdings and Wynn Macau both setting records on expectations of robust revenue after Macau’s gambling revenue set a record last month. SJM rose 2.2% and Wynn Macau surged 6.1%. In Japan, Tokyo Electric Power, the operator of the stricken Fukushima Daiichi nuclear plant, slumped 6.9% to the lowest close on record.
INTERNATIONAL INVESTMENT FUNDS
NS NS NS
n J.P. MORGAN ASSET MANAGEMENT For additional fund prices, please visit www.jpmorganam.com.sg Tel: +65 6882 1328 JF ASEAN Eq (SGD)A(acc) JF ASEAN Eq (USD)A(acc) JF Asia Pac ex-Jap Eq(SGD)A(acc) JF Asia Pac ex-Jp (USD)A(acc) JF China (SGD)A(acc) JF China (USD)A(dist) JF Greater China (SGD)A(acc) JF Greater China (USD)A(dist) JF India (SGD)A(acc) JF India (USD)A(acc) JF Korea Equity (USD) A (acc) JF Pacific Tech (USD) A (acc) JF Singapore (SGD)A(acc) JF Singapore (USD)A(dist) JPM Africa (USD) A (acc) JPM Asia Pac Bond (USD)A(acc) JPM Brazil Alpha+ (USD)A(acc) JPM Brazil Alpha+(SGD)A(acc) JPM East Eur (EUR)A(dist)(JF) JPM Emerg EMEA (SGD)A(acc) JPM Emerg EMEA (USD)A(dist) JPM Emerg Mid East Eq(SGD)A(acc) JPM Emerg Mid East(USD)A(dist) JPM Emerg Mkt Eq (SGD)A(acc) JPM Emerg Mkt Eq (USD)A(dist) JPM Emerg Mkt Infra(USD)A(acc) JPM Emerg Mkt LC Debt(USD)A(mth) JPM Glb Dyn (SGD)A(acc) JPM Glb Dyn (USD)A(dist)(JF) JPM Glb Nat Res (EUR)A(dist) JPM Glb Nat Res (SGD)A(acc) JPM Glb Nat Res (USD)A(acc) JPM Latin Amer Eq(SGD)A(acc) JPM Latin Amer Eq(USD)A(dist)JF JPM Russia (USD) A (dist)
FUND NAME
rise would boost investment income and because the move was within expectations. Banks advanced on anticipation the move would help net interest margins and boost profits. Ping An Insurance rose 3.9% in Shanghai and 2% in Hong Kong, while China Life Insurance advanced 2.2% in Shanghai and 1.5% in Hong Kong. In Shanghai, Bank of China added 1.2%, Agricultural Bank of China rose 2.5%, and Industrial & Commercial Bank of
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
OT OT OT AS AS AS AS EU EU EU EU GL OT GL OT EA GL GL JP JP GL OT OT EE AS OT US US US OT
OT OT OT EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ OT OT EQ EQ OT BD EQ BD 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
04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06
USD USD USD USD USD USD HKD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD
3.08 0.99 1.66 8.75 2.74 1.86 9.05 6.12 2.62 10.48 0.75 1.23 0.82 1.39 1.09 1.27 3.42 0.79 2.75 0.71 1.48 1.14 1.44 0.93 1.30 1.06 1.19 1.11 1.02 1.22
7.4 7.3 5.4 5.8 5.7 4.8 4.8 14.2 14.2 8.8 8.8 4.7 3.8 7.8 7.4 -3.5 6.1 6.0 -8.8 -8.8 1.7 3.2 4.6 13.1 0.0 6.5 1.7 4.3 1.2 2.5
23.1 22.8 32.0 23.6 23.3 12.9 12.7 20.7 20.6 15.8 15.5 27.3 16.1 23.9 7.9 9.9 8.2 8.0 -5.8 -7.7 11.5 10.6 22.0 24.0 22.6 24.4 8.0 15.1 15.6 7.6
37.5 37.0 62.9 37.9 37.6 31.6 31.5 55.4 55.2 30.3 30.0 53.2 38.9 35.0 21.6 40.5 20.9 20.6 10.7 9.8 44.0 NS NS 63.0 37.9 69.9 13.7 42.3 52.6 6.7
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 03/30 USD
180.76
-0.7
27.6
73.3
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 Eq. MENA EURO A Eq. MENA USD A Eq. US Rel Val A Money Market EURO A Money Market USD A
US OT AS AS OT GL OT EA OT OT OT OT US EU US
BD OT EQ EQ EQ EQ EQ EQ EQ EQ OT OT EQ MM MM
LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX
04/04 04/04 04/05 04/04 04/04 04/04 04/04 04/05 04/04 04/04 04/05 04/05 04/04 04/04 04/04
USD USD USD USD USD USD USD USD EUR USD EUR USD USD EUR USD
Intel-Chin Mainlnd Foc Intel-China Converg* VP Classic - A VP CLassic - B VP High Dividend Stk
10.92
3.3
29.1
50.7
40.75 43.66 12.10 25.13 21.89 140.32 38.96 150.56 88.58 126.09 38.68 54.84 25.41 27.58 15.89
1.4 -0.6 2.3 3.7 13.3 5.7 -4.2 -3.9 -0.8 -0.8 -5.1 -5.1 7.6 0.2 0.1
8.9 6.0 13.7 6.5 20.3 25.1 25.3 11.5 25.6 25.6 -1.2 -1.2 16.2 0.6 0.3
12.1 7.7 36.3 26.2 25.4 36.9 33.5 41.5 44.3 44.3 21.3 21.3 30.7 0.6 0.3
AS AS AS AS OT
EQ CYM EQ CYM EQ CYM EQ CYM OT CYM
03/31 03/31 04/04 04/04 03/28
USD USD USD USD USD
37.45 139.05 233.04 107.94 57.93
1.3 0.5 4.0 3.8 1.3
22.7 19.5 19.4 18.8 21.8
48.5 46.4 47.1 46.3 49.3
JP EQ IRL 04/06 JPY
9047.00
-4.0
-9.2
6.2
JP EQ IRL 04/06 JPY JP EQ IRL 04/27 JPY
5522.00 5230.34
-4.5 -7.3
-14.5 -5.4
-2.0 -27.3
6322.00 7547.00
-5.8 -4.2
-13.8 -11.5
2.1 1.7
4141.00 4791.00 4642.00
-4.1 -5.0 -6.7
-17.0 -16.7 -11.3
-0.7 0.5 5.6
3893.00 4125.00 6150.00 8227.00 5944.00 7140.00 4683.00 10737.00 6903.00 6622.00 5281.00 2327.00
-4.2 -5.5 -3.8 -4.0 -5.1 -4.9 -5.5 -6.2 -5.6 -5.5 -5.4 -7.3
-16.2 -15.3 -15.4 -11.5 -9.7 -13.2 -15.8 -15.9 -15.6 -9.3 -13.4 -17.4
-0.8 -0.5 1.8 2.9 1.5 -0.9 0.0 1.7 -1.7 9.7 2.4 1.5
n YUKI MANAG\EMENT & RESEARCH n YMR-N Series YMR-N Growth Fund
n Yuki 77 Series Yuki 77 General Yuki 77 Growth
n Yuki Chugoku Series Yuki Chugoku Jpn Gen Yuki Chugoku JpnLowP
JP EQ IRL 04/06 JPY JP EQ IRL 04/06 JPY
n Yuki Hokuyo Japan Series Yuki Hokuyo Jpn Gen Yuki Hokuyo Jpn Inc Yuki Hokuyo Jpn Sm Cap
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 EQ BMU 03/31 USD OT OT BMU 02/28 USD OT OT IRL 03/24 USD OT OT ARE 03/31 AED
775.45 1066.09 1009.30 4.91
n Yuki Mizuho Series -6.4 -7.1 -8.2 -2.8
-18.1 -3.9 NS -10.8
-5.2 5.6 NS 2.0
Yuki Mizuho Gen Jpn III Yuki Mizuho Jpn Dyn Gro Yuki Mizuho Jpn Exc 100 Yuki Mizuho Jpn Gen Yuki Mizuho Jpn Gro Yuki Mizuho Jpn Inc Yuki Mizuho Jpn Lg Cap Yuki Mizuho Jpn LowP Yuki Mizuho Jpn PGth Yuki Mizuho Jpn SmCp Yuki Mizuho Jpn Val Sel Yuki Mizuho Jpn YoungCo
For information about listing your funds, please contact: Carson Wong tel: +852 2831-6481; email:
[email protected]
JP EQ IRL 04/06 JPY JP EQ IRL 04/06 JPY JP EQ IRL 04/06 JPY
JP JP JP JP JP JP JP JP JP JP AS AS
EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ
IRL IRL IRL IRL IRL IRL IRL IRL IRL IRL IRL IRL
04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06 04/06
JPY JPY JPY JPY JPY JPY JPY JPY JPY JPY JPY JPY
28
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
BLUE CHIPS BONDS Dow Jones Asia Titans: Wednesday's best and worst...
Major players benchmarks
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
Giants around the world
In U.S.-dollar terms.
Market value, in billions of US$
Company
Country
Industry
Hon Hai Precision Ind
Taiwan
Electrical C.mpnts Eqpmnt $36.5
Previous close, in local currency
STOCK PERFORMANCE Previous session
109.50
52-week
Three-year
3.30%
-14.5%
-30.9%
3.11
15.0
13.2
-7.5
-40.4
Taiwan Smcndtr Mfg
Taiwan
Semiconductors
65.1
72.90
Japan Tobacco
Japan
Tobacco
34.9
310,000
China Life Insurance
Hong Kong
Life Insurance
29.0
30.30
1.51
-20.3
2.4
PetroChina
Hong Kong
Integrated Oil Gas
33.2
12.22
1.50
32.3
17.0
$6.3
337.00
-6.91%
-86.2
-88.1
-3.37
1.81
Dow Jones Country Titans Tokyo Elec Power
Japan
Electricity
52-week
JFE Hldgs
Japan
Steel
14.0
2,262
-39.4
-51.0
28.6%
Panasonic
Japan
Consumer Electronics
27.5
1,012
-2.69
-29.9
-52.8
INDEX PERFORMANCE Previous session
Russia
Year-to-date
12.4%
0.78%
11.8
Spain
1.41
Italy
1.33
9.1
-3.4
China 88
1.78
8.2
-5.6
0.2
Hong Kong
0.41
7.0
France
0.33
6.4
0.3
Canada
-0.06
6.1
15.0
0.35
5.4
5.0
Brazil
-0.32
5.2
11.8
Germany
0.63
4.1
12.4
Australia
0.35
4.1
-2.4
South Korea
-0.15
4.0
22.8
U.K.
0.73
Netherlands
2.9
3.8
Turkey
1.64
2.6
15.4
0.50
1.7
-4.0
South Africa
0.80
1.0
11.1
Sweden
0.56
0.6
12.9
Japan
-0.1%
0.74 -0.79
Japan
Banks
61.7
372.00
-2.62
-24.1
-62.3
South Korea
Banks
21.9
50,200
-2.52
8.7
-8.1
12.9
Switzerland
Singapore
Mitsubishi UFJ Finl Shinhan Financial Grp
...And the rest of Asia's blue chips Company/Country (Industry)
Shin-Etsu Chml 20.4 Japan (Specialty Chemicals) Cheung Kong 39.2 Hong Kong (Real Estate Holding Development) Sun Hung Kai Prop 42.4 Hong Kong (Real Estate Holding Development) Bank of China 48.1 Hong Kong (Banks) Woolworths 34.1 Australia (Food Retailers Wholesalers) Tokio Marine Hldgs 21.1 Japan (Property Casualty Insurance) BHP Billiton 167.4 Australia (General Mining) Nippon T&T 58.2 Japan (Fixed Line Telecommunications) Canon 52.4 Japan (Electronic Office Equipment) Westpac Bking 76.1 Australia (Banks) NTT DoCoMo 71.5 Japan (Mobile Telecommunications) China Mobile (HK) 190.8 Hong Kong (Mobile Telecommunications) Toyota Motor 120.6 Japan (Automobiles) Seven I Hldgs 21.2 Japan (Broadline Retailers) Westfield Grp 22.5 Australia (Retail) Commonwlth Bk of Aus 83.5 Australia (Banks) China Construction Bank 232.5 Hong Kong (Banks) Aus NZ Bk 64.6 Australia (Banks) Rio Tinto Ltd. 39.0 Australia (General Mining) National Australia Bk 58.8 Australia (Banks)
9.0
-7.7
-17.7
Dow Jones Regional Sector Titans Oil Gas
0.44%
Media
0.31
15.8% 10.1
22.3% 21.0
Insurance
1.33
10.1
Chemicals
0.66
9.3
31.9
Ind Gds Svcs
0.12
8.5
18.9
Constructn Mat
0.41
7.9
11.5
Tiger 50*
0.93
6.7
Global 50
0.28
5.6
Asian 50
-0.36
Arab 50
0.83
5.2
16.9 7.5
-3.4%
-1.7
-7.7
Market value, in billions (U.S)
-3.3
*Asia excluding Japan
Latest, in local currency
STOCK PERFORMANCE Latest 52-week Three-year
4,100
1.36%
-26.8%
-28.9%
131.50
1.23
28.3
9.7
128.60
1.18
9.4
-3.5
4.47
1.13
10.7
30.6
27.07
1.05
-4.6
-11.8
2,284
0.97
-16.4
-46.9
47.95
0.84
7.4
24.2
3,750
0.67
-4.3
-99.2
3,620
0.56
-18.6
-26.0
24.46
0.53
-13.4
-2.7
146,000
0.41
1.3
-7.0
73.95
0.41
-2.1
-40.3
3,265
0.15
-13.5
-34.6
2,048
0.15
-12.7
-25.3
9.35
0.11
-0.1
-33.7
52.30
0.10
-8.6
15.0
7.52
...
19.3
18.9
23.93
-0.04
-6.0
1.6
86.10
-0.07
6.8
-34.2
26.03
-0.12
-6.8
-16.3
Company/Country (Industry)
QBE Insurance Group Australia (Reinsurance) Reliance Industries India (Exploration Production) Woodside Petroleum Australia (Exploration Production) Nissan Motor Japan (Automobiles) Indl Comm Bk China Hong Kong (Banks) Takeda Pharm Japan (Pharmaceuticals) East Japan Railway Japan (Travel Tourism) Sony Japan (Consumer Electronics) Nintendo Japan (Toys) Honda Motor Japan (Automobiles) Mitsui Japan (Industrial Suppliers) Kansai Elec Power Japan (Electricity) Mizuho Financial Grp Japan (Banks) Nippon Steel Japan (Steel) Mitsubishi Japan (Industrial Suppliers) KDDI Japan (Mobile Telecommunications) Sumitomo Mitsui Finl Japan (Banks) CNOOC Hong Kong (Exploration Production) Samsung Electronics South Korea (Semiconductors) POSCO South Korea (Steel)
18.97
-0.16%
-24.7%
77.9
47.66
-0.17
-6.9
-19.5
38.0
47.00
-0.30
-1.6
-16.1
34.9
712.00
-0.42
-14.0
-16.0
74.2
6.65
-0.45
12.0
15.3
35.9
3,875
-0.51
-6.3
-30.2
20.9
4,510
-0.55
-32.0
-99.5
30.3
2,591
-1.18
-26.3
-39.2
32.5
21,640
-1.19
-33.4
-60.2
61.2
2,895
-1.33
-13.1
-0.9
31.4
1,479
-1.33
-8.6
-30.4
18.1
1,713
-1.44
-18.9
-35.1
32.6
129.00
-1.53
-29.5
-100.0
18.9
256.00
-1.54
-29.5
-51.7
44.4
2,303
-1.54
-6.5
-29.1
26.3
507,000
-1.55
5.4
-23.6
40.8
2,494
-2.00
-20.3
-99.7
117.2
20.40
-2.16
56.0
66.9
110.2
923,000
-2.33
6.2
42.0
35.0
493,000
-2.38
-11.6
-4.6
Credit derivatives
Credit-default swaps: Asian companies
Spreads on credit derivatives are one way the market rates creditworthiness. Regions that are treading in rough waters can see spreads swing toward the maximum—and vice versa. Indexes below are for five-year swaps.
At its most basic, the pricing of credit-default swaps measures how much a buyer has to pay to purchase-and how much a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives a sense which way the market was moving yesterday.
Markit iTraxx Indexes Index: series/version
Europe: 15/1 Eur. High Volatility: 15/1 Europe Crossover: 15/1 Asia ex-Japan IG: 15/1 Japan: 15/1
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
0.97
100.12%
0.01%
1.04
0.97
1.01
1.36
98.31
0.01
1.42
1.35
1.40
NTT Docomo
40
–2
–1
11
Tokyo Elec
3.68
105.59
0.05
3.93
3.68
3.82
CHUBU Elec Pwr
74
–4
7
36
Asahi Glass
1.04
99.80
0.01
1.16
1.04
1.10
Mazda
140
–4
7
26
Victor Co of Japan
1.41
98.00
0.01
1.43
1.38
1.40
GS Caltex Oil
Europe Senior Financials
Yesterday Yesterday Five-day 28-day
Yesterday Yesterday Five-day 28-day 383
29
–8
51
4
5
15
650
22
–34
75 –2
349
109
–3
–8
–8
Hongkong
79
3
–5
SUZUKI
71
–2
...
17
MTR
39
1
–1
–1
In percentage points
KDDI
47
–1
1
12
CASIO COMPUTER
62
2
1
12
Index roll
Mitsubishi Estate
69
–1
2
17
Fujitsu
77
2
–5
20
Kookmin
113
–2
–9
–11
Sumitomo Metal
94
2
6
29
Kansai Elec
80
–1
11
42
JFE Stl
104
2
5
31
SANYO Elec
56
–1
2
15
Mitsubishi Elec
46
1
–1
12
t
2.00 1.50 1.00
t
— NOTICE TO READERS —
-10.8%
Sources: Dow Jones Indexes; WSJ Market Data Group
Note: Data as of April 5
All statistics published in The Wall Street Journal Asia from markets outside the Asian-Pacific region reflect preliminary data.
STOCK PERFORMANCE Latest 52-week Three-year
20.8
Source: Dow Jones Indexes
Tracking credit markets dealmakers
Latest, in local currency
Market value, in billions (U.S)
Source: Markit Group
0.50
Europe
0 Oct. Nov. Dec. Jan. Feb. Mar. 2010 2011 Source: Markit Group
Behind Europe's deals: Bank revenue rankings, Eurozone 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
WSJ.com 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.
PERCENTAGE OF TOTAL REVENUE Debt Mergers & capital markets acquisitions
Revenue, in millions
Market share
Equity capital markets
$272
8.3%
11%
49%
29%
Loans
11%
JPMorgan
224
6.8
10
41
39
9
BNP Paribas
198
6.0
5
55
26
15
Morgan Stanley
181
5.5
22
20
50
9
Goldman Sachs
179
5.5
33
28
30
8
Credit Suisse
153
4.7
29
47
18
7
SG Corporate Investment Banking
146
4.5
7
45
34
14
Bank of America Merrill Lynch
139
4.2
29
36
23
11
Barclays Capital
138
4.2
16
52
25
7 Source: Dealogic
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
29
GLOBAL MARKETS LINEUP Commodities
Currencies
Prices of futures contracts with the most open interest
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; NYBOT: New York Board of Trade; MDEX: Bursa Malaysia Derivatives Berhad; LIFFE: London International Financial Futures Exchange; LME: London Mercantile Exchange; NYMEX: New York Mercantile Exchange; ICE: IntercontinentalExchange Contract ONE-DAY CHANGE Commodity Exchange Last price Net Percentage high CBOT
Corn (cents/bu.) Soybeans (cents/bu.) Wheat (cents/bu.) Live cattle (cents/lb.) Cocoa ($/ton) Coffee (cents/lb.) Sugar (cents/lb.) Cotton (cents/lb.) Crude palm oil (ringgit/ton) Cocoa (pounds/ton) Robusta coffee ($/ton)
CBOT CBOT CME ICE-US ICE-US ICE-US ICE-US MDEX LIFFE LIFFE COMEX
Copper (cents/lb.) Gold ($/troy oz.) Silver (cents/troy oz.) Aluminum ($/ton) Tin ($/ton) Copper ($/ton) Lead ($/ton) Zinc ($/ton) Nickel ($/ton)
COMEX COMEX LME LME LME LME LME LME NYMEX
Crude oil ($/bbl.) Heating oil ($/gal.) RBOB gasoline ($/gal.) Natural gas ($/mmBtu) Brent crude ($/bbl.) Gas oil ($/ton)
NYMEX NYMEX NYMEX ICE-EU ICE-EU
758.00 1380.25 780.25 119.625 3,018 266.20 25.17 208.06 3,376.00 1,926 2,386
-8.75 7.00 -6.00 -0.375 25 -2.05 -0.45 7.00 10 15 -12
436.35 1457.80 3942.00 2,655.50 31,925.00 9,500.00 2,770.00 2,415.50 25,990
9.90 5.30 23.70 29.50 525.00 229.00 50.00 4.50 815
108.74 3.1834 3.1863 4.173 122.08 1,019.25
0.40 -0.0016 -0.0150 -0.058 0.19 1.00
770.75 1,467.50 1,036.00 121.625 3,710 296.65 29.75 219.70 3,872 2,348 2,543
-1.14% 0.51% -0.76 -0.31 0.84 -0.76 -1.76 3.48 0.30 0.78 -0.50
Contract low
366.50 909.25 540.00 89.575 2,670 133.75 11.82 68.05 3,163 1,837 1,604
465.75 280.00 1,467.00 775.00 3,978.50 18.50 2,655.50 1,857.00 32,590.00 15,925.00 10,123.00 6,120.00 2,770.00 1,580.00 2,584.00 1,617.00 29,050 18,005
2.32 0.36 0.60 1.12 1.67 2.47 1.84 0.19 3.24
129.16 3.5800 3.2120 10.050 134.60 1,027.75
0.37 -0.05 -0.47 -1.37 0.16 0.10
66.00 1.6000 2.0122 3.805 58.40 637.00
Source: Thomson Reuters; WSJ Market Data Group
WSJ.com
Price-to-
earnings ratio* 14
Region/Country Index ASIA-PACIFIC DJ Asia-Pacific
139.31
-0.15 12.78
CBN 600
27955.72
230.11
Hong Kong
Hang Seng
24285.05
134.47
India
Sensex
19612.20
-74.62
3727.798
41.862
9584.37
-31.18
839.61
-7.55
1552.89
-0.18
SPX/ASX 200
...
China
13 18 ...
Indonesia
Jakarta Composite
...
Japan
Nikkei Stock Average
...
Topix
...
PREVIOUS SESSION
Net change
4912.91
Australia
Malaysia
Kuala Lumpur Composite
Percentage change 0.26% 0.83 0.56
-0.38 1.14 -0.32 -0.89 -0.01
...
New Zealand
NZSX-50
3449.876
-19.500
Pakistan
KSE 100
11933.17
31.80
14
Philippines
Manila Composite
4212.52
45.43
...
Singapore
Straits Times
3170.33
23.58
11
South Korea
Kospi
2126.71
-3.72
15
Taiwan
Weighted
8851.98
146.85
10
Thailand
SET
1076.13
16
EUROPE
Stoxx Europe 600
281.60
0.69
0.25
Stoxx Europe 50
2636.47
9.87
0.38
-0.56 0.27 1.09 0.75 -0.17 1.69 Closed
*P/E ratios use trailing 12-months, as-reported earnings European and Americas index data are as of 12:00 p.m. ET.
PERFORMANCE Yr.-to-date 52-wk.
In euros
Per U.S. dollar
In U.S. dollars
5.8169 2.2991 1.3747 1.3757 1.3776 1.3812 679.52 2622.73 1.4350 16.9049 4.0322 27.264 1.4350 6.16
0.1719 0.4349 0.7274 0.7269 0.7259 0.7240 0.001472 0.0003813 0.6969 0.0592 0.2480 0.0367 0.6969 0.162269
4.0538 1.6023 0.9580 0.9587 0.9600 0.9626 473.55 1827.75 1 11.7808 2.8100 19.000 1 4.29
0.2467 0.6241 1.0438 1.0431 1.0416 1.0389 0.002112 0.0005471 1 0.0849 0.3559 0.0526 1 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
1.3747 0.7274 9.3906 0.1065 11.1547 0.0896 63.2526 0.0158 12417 0.0000805 122.60 0.008156 122.58 0.008158 122.53 0.008161 122.42 0.008169 4.3407 0.2304 1.8404 0.5434 122.186 0.0082 61.886 0.0162 1.8082 0.5530 1556.85 0.0006423 41.662 0.02400 43.257 0.02312
0.9580 6.5442 7.7736 44.0800 8654 85.44 85.43 85.39 85.31 3.0250 1.2825 85.150 43.128 1.2601 1084.95 29.034 30.145
1.0439 0.1528 0.1286 0.0227 0.0001156 0.011704 0.011706 0.011711 0.011722 0.3306 0.7797 0.0117 0.0232 0.7936 0.0009217 0.03444 0.03317
Price-to-
earnings ratio* 14
6.1%
-2.3%
-0.11%
8
14
Per euro
Region/Country Index Euro Zone Euro Stoxx
3.5
-1.0
13
2.17% 1.95 2.29 2.46 2.57 2.77 2.10 2.67 2.51 2.51 2.27 2.27
15 14 14 14 16 14 14 13 15 15 17 17
4.7
-1.0
19
Denmark
OMX Copenhagen
5.4
10.7
14
Finland
OMX Helsinki
-4.4
9.1
12
France
CAC-40
0.7
28.6
13
Germany
DAX
-6.3
-15.1
12
Italy
FTSE MIB
-6.6
-15.7
12
Netherlands
2.2
15.4
...
Russia
4.3
3.8
9
-0.7
13.4
10
Last
U.S. Australia Britain Canada China Euro Hong Kong India Indonesia Japan New Zealand South Korea Malaysia Philippines Singapore Switzerland Taiwan Thailand
1.044 1.632 1.044 0.1528 1.435 0.129 0.0227 0.0001 0.012 0.780 0.0009 0.331 0.023 0.794 1.091 0.034 0.033
1.563 1.000 0.146 1.375 0.123 0.0217 0.0001 0.011 0.747 0.0009 0.317 0.022 0.760 1.045 0.033 0.032
£ 0.613 0.640 0.640 0.094 0.879 0.079 0.0139 0.0001 0.007 0.478 0.0006 0.203 0.014 0.486 0.669 0.021 0.020
SDR -f
0.9035
1 0.9994 0.9980 0.9953 0.0409 0.1341 0.003792 0.1281 0.2516 0.02472 0.1109 0.7603 0.7605 0.7607 0.7611 0.4606 1.1374 1.1369 1.1359 1.1336
0.6969 0.6973 0.6983 0.7002 17.021 5.1973 183.76 5.4403 2.7701 28.187 6.2852 0.9166 0.9164 0.9161 0.9156 1.5130 0.6127 0.6130 0.6135 0.6148
1.4350 1.4340 1.4321 1.4282 0.0588 0.1924 0.005442 0.1838 0.3610 0.03548 0.1591 1.0910 1.0912 1.0916 1.0922 0.6609 1.6320 1.6314 1.6299 1.6267
1.1068
PREVIOUS SESSION
Net change 1.75
2972.92
21.96
438.31
1.81
0.3770 2.6526 5.9645 0.1677 3.4530 0.2896 0.7088 1.4109 0.2769 3.6108 1507.50 0.0006634 3.7502 0.2667 6.6850 0.1496 3.6729 0.2723 0.6296
1.5883
Percentage change 0.61%
PERFORMANCE Yr.-to-date 52-wk. 5.8% 3.1%
0.74 0.41
6.4
-0.1
2.6
18.1
7611.18
3.72
0.05
-0.7
2.1
4048.16
6.42
0.16
6.4
0.5
4.4
16.0
10.7
-3.6
7215.11
39.80
22326.52
267.54
AEX
369.64
0.68
RTSI
2110.90
22.26
Spain
IBEX 35
10845.1
166.5
Switzerland
SMI
6443.06
12.76
0.55 1.21
4.3
4.5
19.2
30.8
0.18 1.07 1.56
10.0
-3.1
0.1
-5.9
4.0
17.1
0.20
0.3
28.8
...
Turkey
ISE National 100
68649.24
959.78
6.1
13
U.K.
FTSE 100
6041.13
34.07
0.57
2.4
4.8
3.7
23.2
18
AMERICAS
DJ Americas
364.58
1.54
0.42
7.0
14.9
-1.3
9.0
...
Brazil
Bovespa
69431.13
-406.39
4.2
32.4
...
Argentina
Merval
3515.91
4.86
2.1
4.7
11
Mexico
IPC
38019.23
186.27
1.9
-1.3
1.42
0.2
-2.1
-0.2
41.6
-1.4
12.7
-0.58% 0.14 0.49
Thomson Reuters is the primary data provider for several statistical tables in The Wall Street Journal, including foreign stock quotations, futures and futures options prices, and foreign exchange tables. Reuters real-time data feeds are used to calculate various Dow Jones Indexes.
Sources: Thomson Reuters; WSJ Market Data Group
PERFORMANCE YearThree-yr., to-date 52-wk. annualized
Daily
0.49% 0.40 0.28 -0.10 0.84 1.01 0.64 -0.36 0.25 0.83 0.28 1.09
5.3% 5.8 5.6 -2.2 3.5 9.1 3.8 -3.4 7.0 4.7 9.4 6.9
13.0% 8.3 7.5 6.2 15.4 13.3 15.0 -1.7 12.8 -1.0 11.2 -0.6
-1.8% -5.4 -5.8 -1.8 2.5 -6.6 1.6 -5.0 1.6 -1.0 1.0 -0.1
Price-toDividend earnings yield* ratio* Dows Jones Index
2.27% 17 1.72 19 4.83 12 5.94 11 3.82 6 3.94 15 1.56 17 1.92 15 2.44 16 1.23 20 3.16 21
Last
Net change
Shenzhen -c 441.43 -0.02 U.S. TSM 14057.17 59.38 Global Select Div -d 230.08 1.26 Asia/Pacific Select Div -d 306.06 0.68 Hong Kong Select Div -d 227.64 0.63 U.S. Select Dividend -d 378.58 1.14 Islamic Market 2363.70 13.04 Islamic Market 100 2359.63 11.55 Islamic China/HK Titans 30 1750.50 8.39 Sustainability Korea 1648.90 4.36 Brookfield Infrastructure 2433.74 8.77 DJ-UBS Commodity -p 171.25 0.40
PERFORMANCE YearThree-yr., to-date 52-wk. annualized
Daily
... 0.42 0.55 0.22 0.28 0.30 0.55 0.49 0.48 0.27 0.36 0.23
1.2% 4.8% 7.0 15.2 6.2 13.2 2.8 9.3 3.4 13.6 5.6 12.4 6.1 15.2 5.1 9.7 4.9 12.7 10.6 29.8 7.4 16.7 5.5 26.8
6.6% 0.7 -4.3 -6.3 6.2 -3.5 1.1 -1.0 -0.6 5.6 1.5 -5.8
Source: DowJones Indexes
U.S.-dollar and euro foreign-exchange rates in global trading A$ 0.958
In U.S. dollars
-0.6
*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.
US$
Per U.S. dollar
MSCI indexes Net change
Global TSM 2747.09 13.32 Global DOW 2209.07 8.87 Global Titans 50 186.98 0.53 Asia/Pacific TSM 1379.19 -1.35 Asia/Pacific ex-Japan TSM 3737.00 31.25 Europe TSM 2998.15 30.00 Emerging Markets TSM 4982.36 31.68 Asian Titans 50 140.69 -0.51 BRIC 50 700.76 1.71 CBN China 600 -c 27955.72 230.11 China Offshore 50 4644.79 12.78 Shanghai -c 380.49 4.11
Cross rates
In euros
MIDDLE EAST/AFRICA Bahrain dinar 0.5410 1.8486 Egypt pound-a 8.5588 0.1168 Israel shekel 4.9549 0.2018 Jordan dinar 1.0170 0.9833 Kuwait dinar 0.3974 2.5163 Lebanon pound 2163.19 0.0004623 Saudi Arabia riyal 5.3813 0.1858 South Africa rand 9.5926 0.1042 United Arab dirham 5.2704 0.1897
Close 290.32
Euro Stoxx 50
Dow Jones Indexes Price-toDividend earnings yield* ratio* Dows Jones Index
Per euro EUROPE Euro zone euro 1 1-mo. forward 1.0006 3-mos. forward 1.0020 6-mos. forward 1.0047 Czech Rep. koruna-b 24.424 Denmark krone 7.4579 Hungary forint 263.69 Norway krone 7.8066 Poland zloty 3.9750 Russia ruble-d 40.447 Sweden krona 9.0189 Switzerland franc 1.3152 1-mo. forward 1.3150 3-mos. forward 1.3145 6-mos. forward 1.3139 Turkey lira 2.1711 U.K. pound 0.8792 1-mo. forward 0.8796 3-mos. forward 0.8804 6-mos. forward 0.8821
Stock indexes from around the world, grouped by region. Shown in local-currency terms.
Close
...
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 $1 million and more, as quoted by Thomson Reuters.
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Major stock market indexes
London close on April 6
C$ 0.958 1.000 1.564 0.146 1.375 0.123 0.0217 0.0001 0.011 0.747 0.0009 0.317 0.022 0.760 1.045 0.033 0.032
YUAN 6.544 6.831 10.680 6.831 9.391 0.842 0.1485 0.0008 0.077 5.103 0.0060 2.163 0.152 5.193 7.140 0.225 0.217
EURO 0.697 0.727 1.137 0.727 0.106 0.090 0.0158 0.0001 0.008 0.543 0.0006 0.230 0.016 0.553 0.760 0.024 0.023
HK$ 7.774 8.114 12.687 8.114 1.188 11.155 0.1764 0.0009 0.091 6.061 0.0072 2.570 0.180 6.169 8.481 0.268 0.258
RUPEE 44.080 46.013 71.941 46.013 6.736 63.253 5.671 0.0051 0.516 34.369 0.0406 14.572 1.022 34.981 48.093 1.518 1.462
RUPIAH 8653.51 9032.97 14122.97 9032.89 1322.32 12417.36 1113.20 196.31 101.28 6747.14 7.98 2860.67 200.65 6867.32 9441.40 298.05 287.06
YEN 85.440 89.187 139.442 89.186 13.056 122.602 10.991 1.9383 0.0099 66.618 0.0788 28.245 1.981 67.804 93.219 2.943 2.834
NZ$ 1.283 1.339 2.093 1.339 0.196 1.840 0.165 0.0291 0.0001 0.015 0.0012 0.424 0.030 1.018 1.399 0.044 0.043
WON 1084.95 1132.53 1770.70 1132.52 165.79 1556.85 139.57 24.61 0.13 12.70 845.94 358.66 25.16 861.00 1183.73 37.37 35.99
RINGGIT PH. PESO 3.025 43.128 3.158 45.019 4.937 70.386 3.158 45.018 0.462 6.590 4.341 61.886 0.389 5.548 0.0686 0.9784 0.0003 0.0050 0.035 0.505 2.359 33.627 0.0028 0.0398 14.257 0.070 2.401 34.225 3.300 47.054 0.104 1.485 0.100 1.431
S$ S FRANC 1.260 0.917 1.315 0.957 2.057 1.496 1.315 0.957 0.193 0.140 1.808 1.315 0.162 0.118 0.0286 0.0208 0.0001 0.0001 0.015 0.011 0.982 0.715 0.0012 0.0008 0.417 0.303 0.029 0.021 0.727 1.375 0.043 0.032 0.042 0.030
TW$ 29.034 30.307 47.384 30.306 4.437 41.662 3.735 0.6587 0.0034 0.340 22.637 0.0268 9.598 0.673 23.041 31.677
BAHT 30.145 31.467 49.198 31.467 4.606 43.257 3.878 0.6839 0.0035 0.353 23.504 0.0278 9.965 0.699 23.923 32.890 1.038
0.963
Source: Thomson Reuters via WSJ Market Data Group
Developed and emerging-market regional and country indexes from MSCI Barra as of April. 06, 2011 Price-toDividend earnings yield ratio Morgan Stanley Index
LOCAL-CURRENCY PERFORMANCE
Last
Daily
YTD
52-wk.
2.40% 15
ALL COUNTRY (AC) WORLD* 346.54
0.11%
4.8%
12.7%
2.40
15
World (Developed Markets) 1,343.64
0.15
5.0
11.9
1.60
25
World Small Cap
252.63
-0.11
6.8
23.9
2.40
15
Kokusai (World ex-Japan) 1,349.49 -0.04
6.6
13.8
3.10
14
EAFE
1,712.84
0.39
3.3
8.1
2.20
14
Emerging Markets (EM)
1,194.83
-0.14
3.8
18.3
2.70
15
AC ASIA PACIFIC EX-JAPAN 494.42
-0.12
3.2
16.9
2.30
14
AC Far East ex-Japan
543.88 -0.02
3.6
20.3
2.00
15
Japan
527.70
-1.36
-6.0
-13.8
2.20
14
China
70.30
0.00
5.7
10.1
1.00
22
China A (China Domestic)
3,199.40
0.00
3.6
-0.2
2.60
20
Hong Kong
12,442.49
0.00
1.9
19.6
1.00
19
India
779.15
0.18
-4.0
9.0
1.20
12
Korea
610.87
0.65
4.1
27.2
2.60
18
Malaysia
573.87
-0.15
2.4
18.5
2.90
14
Singapore
1,734.42
-0.13
-1.2
8.7
3.20
15
Taiwan
309.08
0.00
-3.2
9.4
2.80
14
Thailand
442.11
-0.37
7.5
34.2
4.10
16
Australia
999.98
0.28
3.5
-1.0
4.80
19
New Zealand
89.00
0.36
6.2
4.8
1.70
17
US BROAD MARKET
1,517.54 -0.06
6.6
16.2
3.30
13
EUROPE
1.9
6.3
97.18
*Twenty-three developed and 26 emerging markets
0.23
Source: MSCI Barra
30
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
SCANNING THE GLOBE Dow Jones Industrial Average
Nasdaq Composite Index
P/E: 15
s 19.15, or 0.15%
LAST: 12413.05 YEAR TO DATE: OVER 52 WEEKS
s 1,515.53, or 13.9%
High Close Low
t
50–day moving average
s 1.50, or 0.05%
LAST: 2792.69 YEAR TO DATE: OVER 52 WEEKS
s 835.54, or 7.2%
14 21
28
4 Feb.
11
18 25
4 Mar.
11
18
25
P/E: 18 s 0.57, or 0.04%
LAST: 1333.20 YEAR TO DATE: OVER 52 WEEKS
s 139.82, or 5.3% s 361.53, or 14.9%
s 75.56, or 6.0% s 150.75, or 12.7%
13000
2925
1375
12500
2800
1300
12000
2675
1225
11500
2550
1150
11000
2425
1075
10500 7 Jan.
S&P 500 Index
P/E: 13*
2300
1
7 Jan.
14 21
28
4 Feb.
11
18 25
4 Mar.
11
18
25
1000
1
7 Jan.
14 21
28
4 Feb.
11
18 25
U.S. stocks: most active...
Symbol
Volume, in millions
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
15.7 18.1 4.5 59.2 3.1 3.3 4.1 98.4 3.4 3.3 2.0 6.7 18.9 9.3 5.4 32.7 1.5 15.4 5.3 2.9 2.2 7.0 40.3 23.3 4.8 1.3 1.4 1.1 8.4
$30.50 18.18 46.24 13.61 73.84 110.98 108.54 17.96 67.59 42.33 55.75 85.11 20.47 41.22 37.47 19.80 164.17 47.13 59.66 31.74 76.62 33.40 26.07 20.36 61.75 93.69 59.68 85.55 37.85
0.23 0.13 1.00 0.14 0.61 –1.33 –0.79 0.74 0.13 –0.10 –0.31 –0.31 0.14 0.93 –0.13 0.09 0.18 0.55 –0.14 0.25 0.02 0.24 0.29 –0.09 0.08 0.30 0.55 0.15 –0.04
0.76% 0.75 2.21 1.00 0.83 –1.18 –0.72 4.30 0.19 –0.24 –0.55 –0.36 0.66 2.31 –0.35 0.46 0.11 1.18 –0.23 0.79 0.03 0.72 1.13 –0.43 0.13 0.32 0.93 0.18 –0.10
WalMart
WMT
4.2
53.04
0.30
0.57
Stock
Latest
CHANGE Points Percentage
11
18
25
1
Sources: WSJ Market Data Group; Birinyi Associates
*Price-to-earnings ratio for the Nasdaq 100 Note: Price-to-earnings ratios are for trailing 12 months
DJIA component stocks
4 Mar.
Stock
Volume, Symbol in millions
Citigroup CiscoSys SiriusXM SPDR S&P 500 BankAm Microsoft FordMotor SPDR FnclSelSct iShrMSCIEmrgMkt iShrRu2000 Intel SprintNextel PwrShrs QQQ Nokia AmSuprcnd
C CSCO SIRI SPY BAC MSFT F XLF EEM IWM INTC S QQQ NOK AMSC
ADRs of Asian companies* CHANGE Points Percentage
Latest
230.0 98.4 83.1 68.4 59.2 40.3 40.0 38.7 38.6 35.7 32.7 32.4 31.3 24.9 23.7
$4.51 17.96 1.84 133.27 13.61 26.07 15.64 16.59 49.98 84.99 19.80 4.62 57.02 9.00 14.80
0.04 0.74 0.06 0.03 0.14 0.29 –0.15 0.09 0.21 –0.20 0.09 0.07 –0.09 0.23 –10.08
0.95% 4.30 3.38 0.02 1.00 1.13 –0.98 0.52 0.43 –0.23 0.46 1.54 –0.17 2.62 –40.51
ORCH 9,234.4 PLBC 7.6 BLTI 1,831.0 ABAT 10,000.9 SIMO 1,326.8
$2.77 2.55 5.84 2.45 9.28
0.76 0.53 1.00 0.38 1.37
37.81% 26.23 20.66 18.45 17.32
$14.80 4.75 5.11 27.76 2.02
–10.08 –0.79 –0.64 –3.12 –0.21
–40.51% –14.26 –11.13 –10.10 –9.42
52-WEEK High Low
$13.85 143.48 15.55 99.65 5.68 7.27 53.16 9.70 31.19 37.65 44.56 7.67 3.94 93.90 4.34 12.55 58.22 37.60 9.90 77.92 52.69 19.24 4.50 15.53 21.59 6.66 8.94 54.70 17.60 19.23
Biggest gainers... OrchidCell PlumasBcp BiolaseTch AdvBatteryTech SilicnMotnTch
...Biggest losers AmSuprcnd NtrlAltern TechOpsS SkywrkSol NewLeadHldg
AMSC 23,667.0 NAII 179.0 TO 2.0 SWKS 8,553.2 NEWL 2.4
$9.30 59.67 7.05 58.38 4.36 4.45 31.35 3.83 14.36 15.25 28.33 4.75 2.49 67.56 1.18 8.14 33.21 25.85 1.69 53.28 26.16 14.58 1.09 10.76 13.75 3.33 5.90 44.36 10.91 14.47
Volume, Symbol in OOOs
Stock
TaiwanSemi Baidu ADS SuntechPwr BHPBilton ADS MitsuUFJ ADS Slcnwr ADS CtripInt ADS SilicnMotnTch FocusMediaHldg TataMtrs ADS HondaMtr ADS NmuraHldg UtdMicro ADS ToyotaMtr ADS SifyTech ADS AU Optrncs ICICI Bk ADS SonyCp Rediff ADS Infosys Netease.com SK Tele ADS PranaBiotech Panasonic ADS LG DisplayADS AdSemEg ADS TeleNZ ADS ChinaMobile ChinaUnicomHK NTT DOCOMO
TSM BIDU STP BHP MTU SPIL CTRP SIMO FMCN TTM HMC NMR UMC TM SIFY AUO IBN SNE REDF INFY NTES SKM PRAN PC LPL ASX NZT CHL CHU DCM
CHANGE Latest Points Percentage
8,327.6 $12.72 0.26 5,694.6 136.46 –5.19 3,110.0 9.53 0.22 2,926.7 99.09 0.70 1,963.3 4.39 –0.12 1,672.8 6.43 0.14 1,383.7 43.87 –0.87 1,326.8 9.28 1.37 1,297.5 29.69 –0.84 1,230.8 28.51 0.24 1,173.8 34.31 –0.47 1,129.6 4.84 –0.07 1,127.1 2.83 0.01 1,088.5 77.59 –0.04 936.2 4.18 0.14 920.2 8.91 0.12 854.0 49.12 –0.89 853.7 30.41 –0.70 788.4 7.79 –0.21 729.5 72.73 –0.67 708.3 51.27 –0.63 514.8 18.94 0.04 501.2 2.46 –0.05 451.1 12.00 –0.31 434.9 16.93 0.09 431.5 5.67 0.07 366.7 7.79 –0.01 343.1 47.60 0.11 322.1 17.40 –0.12 115.9 17.27 0.02
2.09% –3.66 2.36 0.71 –2.66 2.23 –1.94 17.32 –2.75 0.85 –1.35 –1.43 0.35 –0.05 3.46 1.37 –1.78 –2.25 –2.63 –0.91 –1.21 0.21 –1.99 –2.52 0.53 1.25 –0.14 0.23 –0.68 0.12
*Most active American depositary receipts tracked by Dow Jones Source: WSJ Market Data Group
U.S. Treasury yield curve
Global government bonds
The curve shows the yield to maturity of current bills, notes and bonds; all data as of 3 p.m. ET.
Coupon
Country/ Maturity, in years
4.950% 5.582 2.178 3.838 2.266 4.253 1.873 3.372 1.841 3.508 1.847 3.758 1.854 3.431 0.708 2.931 2.800 4.745 0.210 1.305 1.812 3.691 8.995 8.766 3.065 5.235 0.747 2.060 1.401 3.762 0.826 3.515
SPREAD OVER TREASURYS, in basis points Latest Previous Month ago Year ago
412.4 206.7 135.2 32.3 144.0 73.8 104.7 -14.3 101.5 -0.7 102.1 24.3 102.8 -8.4 -11.8 -58.4 197.4 123.0 -61.6 -221.0 98.6 17.6 816.9 525.1 223.9 172.0 -7.9 -145.5 57.5 24.7 ... ...
409.8 205.7 140.2 33.7 139.9 78.3 102.9 -9.9 98.8 -0.7 103.9 26.2 101.7 -8.9 -4.4 -58.7 199.0 128.4 -61.3 -221.2 99.6 18.2 839.9 544.2 230.7 181.4 -8.8 -148.0 61.2 28.7 ... ...
431.4 206.6 142.5 24.3 178.1 81.6 115.8 -15.8 110.8 -12.4 112.9 16.6 107.4 -20.0 6.9 -58.1 241.0 140.0 -45.1 -219.2 87.8 -3.1 539.2 410.3 258.1 189.9 4.9 -158.9 72.6 22.5 ... ...
391.7 188.1 9.7 -42.4 -5.6 -35.6 71.9 -27.5 46.5 -54.3 -19.7 -48.0 -14.7 -80.9 -30.9 -104.5 44.2 -4.6 -96.6 -254.8 -20.0 -56.3 54.1 31.6 3.6 -7.0 -62.6 -199.0 -10.6 5.2 ... ...
Previous
YIELD Month ago
Year ago
4.920% 5.537 2.224 3.817 2.221 4.263 1.851 3.381 1.810 3.473 1.861 3.742 1.839 3.391 0.778 2.893 2.812 4.764 0.209 1.268 1.818 3.662 9.221 8.922 3.129 5.294 0.734 2.000 1.434 3.767 0.822 3.480
4.999% 5.558 2.110 3.735 2.466 4.308 1.843 3.334 1.793 3.368 1.814 3.658 1.759 3.292 0.754 2.911 3.095 4.892 0.234 1.300 1.563 3.461 6.077 7.595 3.266 5.391 0.734 1.903 1.411 3.717 0.685 3.492
5.053% 5.837 1.233 3.532 1.080 3.600 1.855 3.681 1.601 3.413 0.939 3.476 0.989 3.147 0.827 2.911 1.578 3.910 0.170 1.408 0.936 3.393 1.677 4.272 1.172 3.886 0.510 1.966 1.030 4.008 1.136 3.956
Source: Thomson Reuters
5% 4
One year ago
s
6.500% Australia 2 5.750 10 3.800 Austria 2 3.500 10 4.000 Belgium 2 4.250 10 1.750 Canada 2 3.500 10 4.000 Denmark 2 4.000 10 3.750 France 2 2.500 10 1.500 Germany 2 2.500 10 0.580 Hong Kong 2 2.440 10 2.000 Italy 2 3.750 10 0.200 Japan 2 1.300 10 1.750 Netherlands 2 3.250 10 5.450 Portugal 2 3.850 10 2.300 Spain 2 5.500 10 4.000 Switzerland 2 2.000 10 4.500 U.K. 2 3.750 10 0.750 U.S. 2 3.625 10
Yield
3 2 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 12 p.m. ET
Tuesday 1 0
1
3
6
month(s)
1
2 3 5 710
years maturity
30
Ryan Index
Yield to maturity
Modified duration
30-year Treasury 10-year Treasury 7 Year Treasury Five-year Treasury Ryan Index 3 Year Treasury Two-year Treasury 1 Year Treasury Six-month Treasury Ryan Cash Index-a Three-month bill
4.512% 3.485 2.917 2.263 2.548 1.288 0.822 0.285 0.153 0.140 0.071
16.05 8.21 6.28 4.69 6.68 2.88 1.97 0.99 0.50 0.45 0.25
One-month bill
0.051
0.08
Month to-date
TOTAL RETURN
Quarter to-date
0.06 % –0.23 –0.10 –0.14 –0.09 –0.06 –0.05 0.02 0.02 0.01 0.01
0.06 % –0.23 –0.10 –0.14 –0.09 –0.06 –0.05 0.02 0.02 0.01 0.01
...
a-Performance of a cash investment
...
Year to-date 12-month
–1.80 % –0.61 –0.14 –0.11 –0.49 –0.25 –0.12 0.17 0.10 0.09 0.05
11.48 % 7.98 7.95 5.85 6.51 3.39 1.67 0.83 0.35 0.40 0.25
0.04
0.16
Source: Ryan ALM
Key money rates Latest
52 wks ago
Prime rates
Latest Euro Libor One month
Offer Eurodollars One month
Bid
0.3500%
0.2500%
Three month
1.21938
0.58063
Three month
0.5500
0.4500
1.475
Six month
1.53250
0.88688
Six month
0.7500
0.6000
0.50
One year
1.98313
1.18750
One year
1.0500
0.8500
1.00
1.00
Switzerland
0.52
0.52
Hibor One month
0.21036
0.08464%
Latest
52 wks ago
Australia
4.75
4.25
Three month
0.26036
0.13357
U.S. discount
0.75%
0.75%
Hong Kong
5.00
5.25
Six month
0.32071
0.24929
Fed-funds target
0.25
0.25
One year
0.64143
0.57786
Call money
2.00
2.00
U.S.
3.25%
3.25%
Canada
3.00
2.25
Japan
1.475
Britain
0.50
ECB
Libor One month
Asian dollars One month
0.96000%
52 wks ago
0.2429%
0.36500%
0.23350%
0.25138%
Three month
0.29263
0.29525
Three month
0.3020
0.2990
Six month
0.45450
0.45250
Six month
0.4605
0.4488
U.K. (BBA)
0.538
0.508
One year
0.77825
0.94250
One year
0.7845
0.9290
Euro zone
0.53
0.29
0.26%
Overnight repurchase rates U.S. 0.13%
0.19%
Sources: WSJ Market Data Group; Reuters
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
31
MARKETS LINEUP Asian index movers…
Moving the markets
At right, Japan’s benchmark stock index and the biggest movers among the larger Asian stocks indexes and stocks Wednesday. Below each index are its most actively traded stocks. The charts show the percentage change in each index’s or stock’s value, rather than the point change, for purposes of comparison. The index level or stock price is indicated on each axis. All indexes and stocks are shown in local currency terms.
Nikkei Stock Average
CBN 600
Japan
China
t
9584.37 0.32% or 31.18
Stocks fell on renewed jitters over companies’ unassessed losses in the wake of the earthquake, tsunami and subsequent electricity outages. Auto makers ended lower.
s
27955.72 0.83% or 230.11
Insurers gained on hopes of rising investment income after the central bank’s latest interest-rate increase. Banks were helped by expectations of strong first-quarter results.
Volume in millions
Close
Tokyo Elec Power
303.12
337
Mizuho Financial
213.81
129
Mtshbsh Fin Grp
98.89
372
Hitachi
53.68
417
Toshiba
46.42
390
Stock
Investors shrugged off China’s latest rate increase on expectations it will help tame inflationary pressures. Commodity-linked shares rose on strong commodity prices.
s
The index finished higher for a fifth consecutive session as China’s rate increase fueled expectations that its credit-tightening cycle may be close to an end. 36000
12500
35000
3500
30000
10000
28000
2800
24000
7500
21000
2100
18000
14000
Volume in millions
Close
–6.91
China State Con 642.02
3.91
0.18
–2
–1.53
AgricBkofChina
591.28
2.86
–10
–2.62
ChinaMinshengBkg
391.72
5.94
–1
–0.24
InnerMoBaotouSteel
274.12
–4
–1.02
Bank Of Comm
261.60
%
–25
s
24285.05 0.56% or 134.47
4200
A M J J A S O N D J F M 2010 2011
Change Net
Hong Kong
3170.33 0.75% or 23.58
42000
A M J J A S O N D J F M 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.
Hang Seng
Singapore
15000
5000
WSJ.com
Straits-Times
Stock
1400 A M J J A S O N D J F M 2010 2011
Change Net
%
Stock
Volume in millions
Close
Change Net
44.84
0.72
0.02
12000 A M J J A S O N D J F M 2010 2011 Stock
%
Volume in millions
Close
Change Net
384.16
4.47
0.05
1.13 –0.45
%
2.14
Bank Of China
0.02
0.95
Icbc
365.94
6.65
-0.03
0.03
0.88
CCB
320.66
7.52
...
…
2.23
0.02
0.90
ChinaPetroChem
137.74
8.02
0.13
1.65
2.00
…
…
CNOOC
106.19
20.40
-0.45
–2.16
4.83
Golden Agri
0.07
2.51
Genting Spore
42.23
2.12
0.13
2.24
CapitaLand
23.60
3.44
7.91
0.02
0.25
Noble Grp
22.44
6.06
0.25
4.30
GlbLogisticProp
22.33
Asian stocks in the news Anhui Conch Cement Hong Kong
Samsung Hvy Inds
HK$48.85 Korea
s 3.5% or HK$1.65
HTC
42,600 won
s 3.5% or 1,450 won
Taiwan
Hyundai Mobis TW$1,200.00
s 5.3% or TW$60.00
The cement maker expects net profit for first quarter 2011 to jump more than 150% from a year ago.
The firm signed a preliminary deal worth $800 million to build four LNG carriers for Golar LNG.
Tech heavyweights got a lift from Texas Instruments’ plans to acquire National Semiconductor.
In Hong Kong dollars
In won
In Taiwan dollars
60
60000
-0.3% 3.5%
750
240000
18
24
24000
500
160000
12
12000 A M J J A S O N D J F M 2010 2011
9.3% 78.9%
466.10 rupee
t 2.9% or 14.05 rupee
750
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
10 4108.86 1.2
-0.6% 3.5%
-1.3% 7.8%
Japan
8.5% 68.7%
¥347
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Technology HTC
0.7% 5.3%
2.0% 4.2% 9.6% 213.4%
Japan
13 26255.62 0.5
Automobiles & Parts Hyundai Mobis
-0.2% 5.4%
-4.1% 8.3% 1.1% 105.0%
Hana Finl Group ¥1,368
t 3.9% or ¥56
A S O N D
Korea
J F M 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
42 0.61 None
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Travel & Leisure Wynn Macau Ltd.
-0.3% -1.2% 6.1% 16.7%
4.6% 111.3%
Tokyo Elec Power 47,300 won Japan
¥337
t 4.1% or 2,000 won
t 6.9% or ¥25
The insulator maker’s losses extended to a fifth consecutive trading day.
The shares have fallen nearly 5% in the past two sessions.
Shares slumped, despite news that leakage of highly radioactive water into the ocean had stopped.
In yen
In yen
In won
In yen
500
2500
75000
2000
60000
450
300
1500
45000
300
200
1000
30000
100 A M J 2010
4.2% 8.6%
J
PERCENTAGE CHANGE Daily 1 wk. 52 wks
400
22 21.24 0.8 2.0% -1.4%
25 48.58 2.1
6 A M J 2010
The company’s shares have lost 6.5% so far this week.
J A S O N D J F M 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
0.7% -2.9%
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
A M J J A S O N D J F M 2010 2011
NGK Insulators
t 3.3% or ¥12
150
Technology Wipro
J A S O N D J F M 2011
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Indus Gds & Svcs Samsung Hvy Inds
80000
250 A M J 2010
600
J A S O N D J F M 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
30
36000
Software shares fell on worries that a stronger rupee will hurt software exports.
A M J 2010
In Hong Kong dollars
400000
36
Kawasaki Hvy Inds
In rupee
In won
24
Wipro India
Macau-focused firms continued to gain on expectations of robust gaming revenue.
320000
24 2.06 0.4 0.5% 3.5%
Shares in the auto-parts company finished at a record.
1000
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Constructn & Matl Anhui Conch Cement
HK$25.15
s 6.1% or HK$1.45
48000
J A S O N D J F M 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
331,000 won Hong Kong
s 5.4% or 17,000 won
48
12 A M J 2010
1250
Korea
Wynn Macau Ltd.
500 A M J 2010
17 21.00 0.9
J A S O N D J F M 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Indus Gds & Svcs Kawasaki Hvy Inds
-0.6% -1.3% -3.3% -6.0%
8.5% 34.5%
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Indus Gds & Svcs NGK Insulators
-0.6% -1.3% -3.9% -8.3%
8.5% -27.1%
2100 1500 900
300
15000 A M J 2010
A M J J A S O N D J F M 2010 2011 19 71.10 1.5
2700
10 4828.55 1.5
J A S O N D J F M 2011
Price-to-earnings ratio Earnings per share, past four quarters Dividend yield
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Banks Hana Finl Group
-0.3% -4.1%
0.7% 2.3%
3.8% 38.7%
None -62.20 8.9
PERCENTAGE CHANGE Daily 1 wk. 52 wks
Utilities Tokyo Elec Power
-0.7% -3.4% -6.9% -27.7%
-14.7% -86.2%
THE WALL STREET JOURNAL.
Thursday, April 7, 2011
HEARD ON THE STREET FINA NCIA L A NA LYSIS & COMMENTARY
Beijing raises rates, not fear China’s markets aren’t as shy of rate increases as you might think. On the day following rate increases in October, December and February, the Shanghai Composite was up, down and flat, respectively. The Hang Seng also was mixed. Both rose Wednesday, apparently taking Tuesday’s rate increase in stride. The markets’ most important sector, with a weighting of 46% in the Hang Seng Index, is financials. For China’s banks, profitability rests largely on the margin between the interest paid on deposits and that received on loans. And unlike in the U.S. and Europe, the spread is protected by the regulator. The recent impact is neutral. Combined with the ability to charge credit-hungry customers rates above the benchmark, this has widened the banks’ net interest margin, supporting profitability even as lending volume falls. Citigroup calculates the sector’s net interest margin expanded 0.11 percentage point in the fourth quarter from the third and has kept widening this year.
No interest in rates The Shanghai Composite Index and Hang Seng Index have been little troubled by the recent series of increases in China’s interest rates
The government has tried to limit the impact of rate increases on the industrial sector. For five-year deposits, the past four moves have increased the benchmark rate by 1.65 percentage points. For five-year loans, the benchmark is up just 0.86 percentage point. The varied pace suggests Beijing wants to offer households some protection from inflation and prevent an exodus of funds from the banking system, rather than choke off the flow of funds to enterprises. Interest-rate rises that finesse the winners and losers and shore up market stability are smart in the short term. But they do come at a cost. Slow increases in the lending rate will do little to take the heat out of the mainland economy. Maintaining a wide margin for the banks comes at the cost of keeping depositors in the red. There will be a price to be paid in higher inflation down the road, but for now the central bank has found a way to tighten the reins without scaring the horses. —Tom Orlick
3200 3000 2800 2600 2400 t
Email:
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SHANGHAI COMPOSITE
Oct. 19
t HANG SENG
Dec. Feb. April 25 8 5
24000 23000 22000 21000 20000 A S O 2010
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Source: Thomson Reuters Datastream
India on target to miss its inflation mark—again How much do you have to pay economists in India these days? More than last year, most likely—which is a shame, because the government could use some good ones. Inflation beat Indian policy makers’ forecasts all through the fiscal year that ended last week. It now threatens to deflate their hopes of high economic growth. New Delhi predicts gross domestic product will expand by at least 8.75%, and perhaps as much as 9.25%, in the fiscal year that began April 1. That’s higher than the 8.6% penciled in for the previous year. Set against the backdrop of serious inflationary pressures and continued macroeconomic uncertainty from the Middle East to Japan, that looks optimistic. Consider oil: An increase of $10 per barrel cuts 0.3 to 0.5 percentage point off India’s headline growth, CLSA estimates, and the price of
Scalding In this cycle, India’s domestic fuel and power prices have touched new highs ahead of global crude-oil prices
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A Satyam party seems premature Given the 7% jump in shares of Satyam Computer Services Wednesday, it would seem the company had finally put its trouble behind it. That’s far from the reality. The company did reach an agreement with the U.S. Securities and Exchange Commission by paying $10 million to settle allegations of providing false financial information. That’s the second-to-last step toward Satyam relisting its shares in the U.S. But it’s a relatively minor one along the road to improving profitability and rebuilding the company’s sullied reputation after the fraud disclosed in early 2009. Satyam still has to restate its accounts going back half a decade, a process that will likely take it the rest of this year, before it can apply for relisting. And there are tougher challenges ahead. Satyam is still embroiled in a tussle with India’s tax department, which insists the company pay around $135 million in taxes it owes from 2003 to 2009. That argument sounds strange, given that the company is being investigated for overstating earnings during those years.
But it may be hard to contest. Even after all the legal and regulatory matters are settled, it will take time to rebuild Satyam’s lost credibility with customers. India’s No. 4 outsourcer by revenue before its downfall has been overtaken by rivals such as HCL Technologies and Cognizant Technology Solutions, and now ranks sixth. To just keep its existing business, Satyam has had to give discounts to clients. As a result, its margin on earnings before interest, taxes, depreciation and amortization was 6.4% in the quarter ended December, far from the 20%-plus levels its rivals boast of. Meanwhile, Satyam is dealing with a 25% attrition rate among its employees, a whopper even in an industry known for high churn. Improving this requires a gradual and steady mending of trust. Satyam management admitted in a conference call in February that it would take the company two more years to get back to industry performance standards. There’s no need to pop those champagne corks just yet. —Harsh Joshi
Actionable information is louder than words
Brent crude has increased by more than $25 this year. The upward trend in other commodities prices compounds the threat. The Reserve Bank of India has been one of the most aggressive central banks in the past year, raising rates eight times for a total of two percentage points. Meanwhile, high prices of basic foods and manufactured items fuel demands for wage increases. In the services sector, which accounts for more than half of India’s GDP, annual wage increases of 14% are common, according to Aon Hewitt, a human-resource consultancy. Some economists are skeptical of the government’s growth forecast. In March, Morgan Stanley cut its estimate for this year’s growth rate to 7.7%, from 8.2%. CLSA still predicts 8% to 8.3%. New Delhi looks set to be caught off the mark again. And next year, those economists will cost even more. —Harsh Joshi
Brent crude, dollars per barrel
WSJ.com/Heard
WSJ.com/dealsindia
India’s wholesale price index for fuel and power
$150
175
100
150
50
125
0
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Now live at WSJ.com/dealsindia Sources: WSJ Market Data Group (Brent crude); Credit Suisse Research (WPI)
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