Financial Freedom. Best business news.

A shortage of electronic components such as chips and displays threatens to derail a nascent recovery in Asia’s technology sector spurred by China’s stimulus plan.

At the Computex trade show in Taiwan this week, electronics companies including Acer and Asustek Computer will showcase their latest gadgets to tempt buyers wary of spending as a global recession pinches.

In the last few months, China’s $600 billion stimulus spending has driven a recovery in Asia’s tech sector, especially in Taiwan, as China moulds itself into an electronics consumer and not just an exporter.

But many tech companies, especially makers of memory chips and displays, have sharply trimmed output since late last year or were too cash-strapped to invest in new production equipment in the sector’s downturn, leading to shortages of key components.

“Tight supplies are creating a headache for many computer vendors,” said Alex Huang, vice president of Taiwan’s Mega International Securities.

“So it remains a question mark if you ask me how strong the recovery will be in the next few months.”

AU Optronics Corp, the world’s No.3 maker of LCD panels for PCs and flat-screen TVs, said it has a shortage now and can only meet 70 percent of its orders even if it runs at full capacity in the next three months.

It’s a double blow as many leading PC companies have seen their profit margins weaken as they sell more cheaper netbooks — some of them small enough to slip into a purse no fax payday loans.

As prices of displays and memory chips rise due to supply shortages while demand remains lukewarm, Merrill Lynch expects PC vendors to face more pressure on margins from this quarter.

Research firm IDC has forecast worldwide PC shipments will fall 4 percent this year.

A total of 1,712 exhibitors will attend the June 2-6 show in Taipei, slightly fewer than last year. Many Chinese buyers, including Lenovo Group and Sichuan Changhong Electric, will also shop for new gadgets at the show.

“For us, China is a very important market, where growth will be faster than any other major market,” said J.J. Wang, a vice president of Dutch NXP Semiconductor.

ULTRAPORTABLE

Mobility will be a key theme at the world’s second biggest PC fair this year, and there is likely to be keen interest in super-thin, lightweight laptops designed to cut power consumption and save battery life.

Acer, Asustek and Microstar are betting on new-generation laptops, powered by Intel’s new consumer ultra-low voltage (CULV) processors. 

Read more

U.K. consumer confidence matched the highest level in almost a year this month as people became more optimistic that they can weather the recession, GfK NOP said.

An index of sentiment stayed at minus 27, the same as in April, when it was the strongest in 11 months, the market researcher said in a statement today in London. The survey of 2,005 people was conducted between May 1 and May 10.

Retailers’ sentiment about their businesses rose to the highest level since 2007, the Confederation of British Industry said yesterday. Prime Minister Gordon Brown’s government predicts the British economy will endure its worst recession since World War II this year, pushing up unemployment and deepening the property slump.

Sentiment “is still very low historically, but is at least standing firm in the face of continuing depressed markets and May’s warnings of a possible pandemic,” Rachael Joy, an analyst at GfK, said in the statement. While “worries about job losses and harder times are still very much alive,” the U.K. “appears to be stoical about the continuing economic situation.”

Confidence withstood concern on the global spread of swine flu in May. Britain has the sixth-highest total of confirmed swine flu cases, with 137 people diagnosed with the strain of influenza formally known as H1N1 as of May 27, according to World Health Organization data released yesterday paperless payday loans.

Personal Finances

The index of confidence in personal finances for the next year rose two points to minus one, GfK said. That outweighed declines in the gauges for finances in the past year and consumers’ views on the economy.

The housing-market slump has also shown signs of easing. Rightmove Plc says home sellers raised asking prices this month by the most in more than a year. Mortgage approvals rose in April from the previous month, the British Bankers Association said this week.

Unemployment still jumped in the first quarter by the most since 1981 and consumer slumped as the recession intensified.

“Market conditions remain difficult, not least as a result of rising unemployment,” Stephen Goodyear, Chief Executive Officer of Young & Co.’s Brewery Plc, said yesterday in a statement. The company has more pubs on England’s River Thames than any rival.

Source

U.S. yellow-pages publisher R.H. Donnelley Corp filed for Chapter 11 bankruptcy protection on Thursday, court documents showed.

In a filing with the U.S. Bankruptcy Court for the District of Delaware, the company listed total assets of about $11.88 billion and total debts of about $12.37 billion.

R.H. Donnelley’s largest unsecured creditors include Bank of New York Mellon and U.S. Bancorp.

The company said last week that it was seeking support of its bank lenders as part of a potential comprehensive debt restructuring plan, after it missed a $55 million interest payment on a series of senior unsecured notes due on April 15 car insurance companies.

R.H. Donnelley exercised a 30-day grace period for the payment and then asked creditors for a forbearance until May 28.

Competitor Idearc Inc filed for bankruptcy protection in March and said it had agreed with its lenders to reduce its total debt from around $9 billion to $3 billion in secured bank loans.

The case is In re: R.H. Donnelley Corp., U.S. Bankruptcy Court, District of Delaware, No. 09–11833.

(Editing by Muralikumar Anantharaman)

Read more

India’s credit rating may come under pressure if Prime Minister Manmohan Singh’s government is not able to rein in a widening budget deficit, Moody’s Investors Service said.

“The stable outlook on the ratings has recently faced growing pressure, mainly due to substantial deterioration in the fiscal position,” Aninda Mitra, a senior analyst at Moody’s in Singapore, said in a report today. “Inability of the newly re- elected government to meaningfully adjust fiscal policies and push ahead with reforms could pressurize the foreign currency credit rating.”

Moody’s Baa2 rating on India’s long-term foreign debt is the second-lowest investment grade. The ranking is the highest in South Asia after Kazakhstan’s, four levels below China’s, two levels under Malaysia’s and six levels above Pakistan’s.

Prime Minister Manmohan Singh’s government, which won a second five-year term this month, is borrowing more to fund three stimulus packages to revive growth in Asia’s third-largest economy, forecast by the central bank to expand at the slowest pace in seven years. Higher borrowing widened the budget deficit to 6 percent of gross domestic product in the year to March 31.

“If the newly re-elected government proves able to quickly outline and sustain a credible program for reducing consolidated deficits, then the sustainability prospects for general government debt would improve,” Moody’s said in its report. “These trends could boost the outlook for the country’s local currency credit ratings.”

Record Borrowings

India plans to borrow a record 3.62 trillion rupees ($76 billion) in the current fiscal year that started April 1 and estimates the budget shortfall at 5.5 percent of GDP bad credit payday advance.

Sustaining economic growth is a “higher priority at this moment” over sovereign ratings, India’s Finance Secretary Ashok Chawla told reporters in New Delhi yesterday. India has asked the rating agencies to explain the rationale behind their recent warnings on ratings, he said.

India’s Finance Minister Pranab Mukherjee yesterday said the government will continue to step up spending this year to support growth, risking a wider budget deficit.

“Let me say unambiguously that we are committed to restoring growth and employment and that would not have been possible without increased spending funded by incremental borrowing,” Mukherjee said. “This would need to be further continued in the current year.”

Widening Deficit

The comments from Moody’s today came after Fitch Ratings, which ranks India’s debt BBB-, on May 14 said it expected the new government to step up spending to arrest slowing growth. That would widen India’s national budget deficit, including state government finances, to more than 10 percent of GDP for a second year in a row, Fitch said.

Singh’s government has unveiled three stimulus packages since December, including lowering retail fuel prices, cutting taxes on consumer products and injecting capital into state-run banks, to shield the economy from the global crisis.

The $1.2 trillion economy may grow by between 6.5 percent and 7 percent in the current fiscal year that started April 1, the slowest pace of expansion since 2003, Chawla said yesterday. The central bank expects economic growth in the current fiscal year at 6 percent.

Source

Bank of Japan Governor Masaaki Shirakawa said central banks should be mindful about the soundness of their balance sheets as they purchase more assets to combat global financial turmoil.

“In times of crisis, a central bank attempts to provide liquidity aggressively sometimes with taking some credit risk,” Shirakawa said at a speech in Tokyo today. Even so, “a central bank should be cautious about the risk of undermining its credibility, which is prerequisite for any policy implementation.”

Central banks in Japan, the U.S. and Europe have lowered interest rates and purchased government and corporate debt since the collapse of Lehman Brothers Holdings Inc. in September froze credit markets around the world. The Bank of Japan has also eased requirements for securities it accepts as collateral to channel more funds to companies.

“Outright purchases of credit instruments imply that a central bank shoulders credit risk in a more straightforward manner,” Shirakawa said payday cash loan. “In that regard, monetary policy approaches the region of fiscal policy.”

Shirakawa’s policy board last week decided to add government bonds issued by the U.S., the U.K., Germany and France to its eligible collateral to make it easier for lenders to borrow from the central bank.

“The effectiveness of monetary policy measures crucially depends on the central bank’s credibility, which is partly affected by the soundness of the central bank balance sheet and central bank’s neutrality perceived by the public at large,” he said.

Source

Japan’s deepest postwar recession is encouraging cash-strapped consumers to eat more bean sprouts, ketchup and cheap beef, according to a report by Dai-Ichi Life Research Institute.

Spending by each household fell a record 69,509 yen ($734) in 2008, Toshihiro Nagahama, chief economist at Dai-Ichi Life in Tokyo, wrote in a report published today. Consumers cut back the most on food, paring outlays by 16,952 yen, he said.

“Households are in serious penny-pinching mode,” Nagahama wrote in a report that compares last year’s consumption with spending during the 1998 financial crisis. “We’re seeing families eat more at home to help save money.”

The recession that began with slumps in exports and production has started to spread to consumers in the world’s second-largest economy as companies cut jobs and wages cash advance. Purchases of bean sprouts, an inexpensive and nutritious vegetable, rose to the highest level since 1998, according to Dai-Ichi Life.

Ketchup is the only condiment that consumers tend to purchase more during recessions, probably because it has a strong correlation with so-called aibiki meat, an inexpensive mix of ground beef and pork families buy more frequently when they’re not eating out, the report said. Consumption of sausage is at the highest level since at least 1997, it said.

Source

Pranab Mukherjee, named this weekend as India’s finance minister, will likely take advantage of the government’s stable majority to introduce measures to revive the economy amid a global slump.

The 73-year-old Congress party veteran told the Economic Times yesterday the new government’s numerical strength would encourage credit flows and boost confidence. Mukherjee has been acting in the finance portfolio since January as Prime Minister Manmohan Singh, 76, recovered from surgery.

Mukherjee, who ran a closed economy as the finance minister in Indira Gandhi’s cabinet from 1982 to 1984, inherits one that is now open and exposed to the worst worldwide recession since the Great Depression of the 1930s. He earned a reputation as a trouble shooter in Singh’s cabinet since 2004 by resolving spats among ministries and coalition partners.

“He is a deliverer,” said Alastair Newton, a political analyst at Nomura International Plc in London. “He will have challenges in the economic portfolio given the political realities — market expectations are high.”

The Bombay Stock Exchange’s benchmark stock index surged by a record 17 percent on May 18, the first day after Singh’s re- election, as investors bet the resounding victory will enable the new finance minister to ease foreign investment rules and sell state assets — policies that were stalled by Singh’s communist partners in his previous term.

Congress has the support of 322 lawmakers in the lower house of parliament, with the party getting 206 lawmakers of its own. That’s the most since 1991, when Singh as finance minister abandoned Soviet-style state planning and introduced free-market policies that have helped India’s economy quadruple in size.

‘Strong Endorsement’

The victory was as much Mukherjee’s as Singh’s. As the No. 2 in the cabinet, he backed the prime minister’s policies ranging from creating jobs in rural areas and writing off farmers’ loans to closer ties with the U.S., renewing a relationship that began in the early 1980s when he appointed Singh as the central bank governor.

“Despite the strong endorsement from voters, the finance minister may have a tough job pushing through some much-needed reforms,” said Nikhilesh Bhattacharyya, an economist at Moody’s Economy.com in Sydney. “It’s very hard for politicians, for example, to do away with subsidies, which may result in a backlash. Expectations should be tempered.”

India spends one trillion rupees ($21 billion), or a tenth of its budget, on food, fuel and other subsidies each year in a country where the World Bank estimates three-quarters of the people live on less than $2 a day. About 13 percent of spending goes to defense and 20 percent to pay interest on national debt. That leaves little for other needs, such as health, education and power plants, boosting borrowings.

Ballooning Deficit

The federal government budget deficit was at 6 percent of gross domestic product for the year ended March 31, more than double the target of 2.5 percent of GDP.

Moody’s Investors Service places India’s long-term local currency rating at Ba2, two levels below investment grade, and lower than the ratings assigned to Colombia, Romania and Kazakhstan credit reports. S&P has a BBB- long term credit rating on India, the lowest investment-grade level.

Investors will be looking at how much fiscal stimulus Mukherjee, who was on the boards of the International Monetary Fund and the World Bank in the 1980s, can provide in his first policy statement — the budget for this year — expected in early July.

Singh’s government said before the elections that stimulus of at least another 1 percent of GDP is needed to prop up an economy that’s growing at its slowest pace since 2003.

Policy Conflicts

Mukherjee, who first became a minister in 1973, estimated in February that India may need to raise a record 3.62 trillion rupees from bond sales in the fiscal year that started April 1. The central bank governor Duvvuri Subbarao said May 22 that borrowings have “already expanded rapidly” and that it goes against his efforts to keep borrowing costs low.

“The government faces a challenge to balance two conflicting issues — to stimulate the economy while preventing fiscal position from further erosion,” said Takahira Ogawa, S&P’s director of sovereign ratings. “There is a possibility for the government to implement various measures to further expand the economy and consolidate the fiscal situation.”

Singh’s administration, which doesn’t need communists’ support for a majority in parliament, could raise as much as $20 billion from sale of state-run companies, according to Rashesh Shah, chief executive officer of Edelweiss Capital Ltd.

Asset Sales

Among the companies that could be placed on the block are NHPC Ltd., India’s largest producer of electricity from water, explorer Oil India Ltd. and fuel retailer Hindustan Petroleum Corp., according to Mumbai-based brokerage Religare Capital Markets Ltd.

Still, analysts such as Seema Desai at Eurasia Group, a London-based political-risk advisory firm, expect economic changes will be “selective and gradual.”

“There is a significant segment within the party that is suspicious of sweeping pro-market reforms,” Desai said.

Mukherjee, who last year successfully rallied China, Japan, Russia and 42 other nations to end India’s nuclear isolation and resume supplies without signing the Nuclear Non-Proliferation Treaty, needs to bring the same acumen to gain support of his party colleagues, many of whom are still tied to the original socialist principles of the Congress party.

At stake is a bill to raise the foreign investment ceiling for Prudential Plc and other insurers to 49 percent from 26 percent, and other proposed legislation aimed at removing a 10 percent cap on the voting rights of foreign investors in non- state banks. The government also wants to allow global retailers such as Wal-Mart Stores Inc. into India.

“Mukherjee is a seasoned politician with excellent skills to bring people around,” said N. Bhaskara Rao, chairman at the Centre for Media Studies in New Delhi. “Expectations from him will be high.”

Source

The U.S. Treasury’s plan to regulate the over-the-counter derivatives market outlined by Secretary Timothy Geithner on May 13 contains recommendations similar to those made by Goldman Sachs Group Inc., JPMorgan Chase & Co., Credit Suisse Group AG and Barclays Plc three months earlier.

The banks sent the Treasury a plan written in February titled “Outline of Potential OTC Derivatives Legislative Proposal,” saying the Federal Reserve should extend capital and margin requirements to companies and hedge funds that trade in the $592 trillion unregulated market, according to a document obtained by Bloomberg News and confirmed by the Treasury. Energy companies, corporations and hedge funds don’t face such requirements now, while banks do under central bank oversight.

“The banks appear to wish to maintain the intra-dealer market and raise barriers to new entrants to keep the OTC business as compartmentalized as possible and to protect their profitable market conditions,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “The Street’s lobbyists appear to be asking for a ‘club’ structure in OTC trading.”

On May 13, U.S. officials called for increased oversight of over-the-counter derivatives to reduce risk to the financial system. Derivatives contributed to the failures last year of Lehman Brothers Holdings Inc. and American International Group Inc., leading to the seizure of credit markets and causing more than $1.4 trillion in writedowns and losses amid the worst financial crisis since the Great Depression.

‘Little Impact’

The Treasury hears from many interested participants while crafting policy, said spokesman Andrew Williams. Derivatives are contracts whose values are tied to assets including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

“This proposal had little impact on our final result,” he said. “Our proposal calls for dramatically increased transparency and the enhancement of regulatory powers to prevent market manipulation that go well beyond anything in that draft.”

Bruce Corwin, a spokesman for Zurich-based Credit Suisse, and Goldman Sachs spokesman Michael DuVally and JPMorgan spokesman Brian Marchiony declined to comment on the bank draft. Representatives from New York-based Goldman Sachs and London- based Barclays didn’t immediately return calls and messages for comment left after normal business hours.

‘Robust Regime’

Geithner sent a proposal to Congressional leaders on May 13 laying out his plan to police the unregulated market where swaps based on interest rates, currencies, commodities and a company’s ability to repay debt are traded.

“All OTC dealers and other firms who create large exposures to counterparties should be subject to a robust regime of prudential supervision and regulation,” the proposal said pay day advance. These included “conservative capital requirements,” “reporting requirements,” and “initial margin requirements.”

The bank-written plan, dated Feb. 13, said the systemic regulator “shall promulgate rules” requiring “capital adequacy,” “regulatory and market transparency” and “counterparty collateral requirements.”

“Better the devil you know than the devil you don’t,” said Robert Webb, a finance professor at the University of Virginia in Charlottesville, describing the bank’s preference for their current regulator.

Shifting Views

The banks sought sole authority for the Fed over the market and limited the role of the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, according to the document. The three agencies currently share information in the $28 trillion credit-default swap market.

Geithner’s proposal didn’t specify what agency or combination of agencies should oversee the market.

The Obama administration favors the Fed becoming the new systemic risk regulator to oversee financial companies that could pose a danger to the banking system, according to participants in a May 8 White House meeting.

While the central bank has been favored to take the job since a proposal by former Treasury Secretary Henry Paulson last year, lawmakers and some regulators have shifted away from that view. Federal Deposit Insurance Corp. Chairman Sheila Bair and SEC Chairman Mary Schapiro earlier this month recommended that a council of regulators assume the role.

Geithner’s plan goes further in many aspects than what the banks laid out in their draft.

No Clearing Requirement

The Treasury Secretary is proposing mandatory guaranteeing of private contracts with clearinghouses for standardized OTC contracts such as interest-rate swaps or indexes of credit- default swaps and increased electronic trading to improve price transparency for customers. He also wants required reporting of positions and trades.

The bank proposal doesn’t endorse clearing of OTC derivatives. In annotations to the draft it states “Note that the proposed outline does not propose any specific OTC derivatives clearing requirement.” It also says reporting requirements on trade data should be made to regulators “upon request.”

Webb said any regulation over the market should be applied evenly. “It’s not clear requiring everyone to have the same capital requirements is necessary,” he said. He added that banks have worked closely with the Fed for many years.

“You’re going to see some close ties between the industry and the regulator,” he said.

Source

Bank of England Governor Mervyn King’s economic outlook has fuelled tension between the central bank and Prime Minister Gordon Brown’s office, the Financial Times reported today.

King’s prediction this month of a “slow” economic recovery has provided the opposition Conservative Party with “ammunition,” the paper said individual health insurance plans. The BOE says it isn’t “talking the economy down” and acknowledged that the issue has sparked tension with the government, the paper reported.

Source

Thailand’s economy probably slid into a recession in the first quarter, shrinking the most since the Asian financial crisis a decade ago.

Gross domestic product fell 6.5 percent last quarter from a year earlier, after contracting 4.3 percent in the previous three months, according to the median estimate of 17 economists surveyed by Bloomberg News. The government will release the data on May 25 at 9:30 a.m. in Bangkok.

“Exports deteriorated markedly,” said Radhika Rao, an economist at IDEAglobal Ltd. in Singapore. “Investment interest was also likely sluggish against the backdrop of simmering political tensions.”

The government has boosted spending on training, cash handouts and public works to buoy consumption as the worst global economic slump since World War II and political protests hurt Southeast Asia’s second-largest economy. The central bank, which this week ended its most aggressive string of rate cuts ever, says there are signs the contraction is moderating.

“The economy possibly hit the bottom in the first quarter,” said Somprawin Manprasert, an economist at Tisco Securities Ltd. in Bangkok. “There are some positive signs but it doesn’t mean the recovery has started. We will go through periods of moderate contraction and may pick up next year.”

Contraction ‘Moderating’

The SET Index of stocks is poised for its 11th consecutive weekly gain, its best such winning streak since 1988, according to Bloomberg data. The baht has climbed 3.2 percent against the dollar since March, putting it on course to snap its longest series of quarterly losses since 2001.

The government “will do whatever we can” to ensure economic expansion by this year’s final quarter, Prime Minister Abhisit Vejjajiva said on May 20, the same day the Bank of Thailand kept interest rates at 1.25 percent, saying economic indicators are showing a more “moderate” contraction even as risks to the economy remain.

Production has picked up in electronic and automotive industries and exports, and consumer demand is recovering, Finance Minister Korn Chatikavanij said May 7.

“Things improved in the past six weeks,” Richard Han, chief executive officer at Hana Microelectronics Pcl, said May 20. “The worst is over.”

Worst May Be Over

Thailand’s economy will contract less each quarter before returning to growth in the final three months of this year, the median estimate of the economists surveyed by Bloomberg shows. The Bank of Japan today raised its view of the economy on signs that a record contraction in the first quarter represented the worst of the recession faxless payday advances. Singapore and Taiwan said yesterday their economies may be past the worst.

Exports, Thailand’s main economic driver, declined for a sixth straight month in April, the longest contraction in seven years, the Commerce Ministry said May 20. Industrial output slid for a fifth month in March as exporters curbed output and cut jobs, the central bank said April 30.

Consumer confidence is at its lowest level in seven years. An emergency decree was imposed for 13 days in Bangkok last month to quell anti-government riots that left two people dead.

“It’s very difficult to do business amid unpredictable events like this,” said Pornrat Janejarassakul, vice president of Advanced Info Service Pcl, the nation’s biggest mobile-phone operator. “Our sales have been hurt by the political turmoil.”

Profit Slide

Advanced’s profit slid 11 percent in the first quarter as service and rental revenue declined. The average share price of companies trading in the benchmark SET Index fell to 8.3 times earnings in the three months to March 30, compared with 15 times a year earlier.

Thailand’s economy hasn’t shrunk for two straight quarters since the first three months of 1999. That was the last of eight quarterly contractions triggered two years earlier, when the nation cut a peg to the dollar that had overvalued the baht and slashed exports. The economic crisis eventually extended to the Philippines, Indonesia, Malaysia, Taiwan and South Korea.

Abhisit has pledged to call elections once stability is restored in the nation of 66 million people. The protesters say the prime minister’s rule is illegitimate because he came to office after a court dissolved the former ruling party.

Power in Thailand has shifted between parties allied to former Prime Minister Thaksin Shinawatra and his opponents since the 2006 coup that ousted him, hurting successive governments’ ability to implement spending plans.

Abhisit’s seven-party coalition is strong enough to pass a borrowing plan and next year’s 1.7 trillion-baht ($49 billion) budget, he said this week. That’s in addition to a 1.4 trillion- baht, four-year investment plan, and a 116.7 billion-baht stimulus package aimed at stemming this year’s economic slide.

Source