Finance Blog number 1

Chinese industrial companies’ profits grew at the slowest pace on record as the economy cooled and commodity prices plunged.

Net income increased 4.9 percent in the first 11 months of 2008 to 2.41 trillion yuan ($353 billion), the statistics bureau said today. Profits advanced 36.7 percent a year earlier.

The world’s fourth-largest economy grew at the slowest pace in five years in the third quarter as a global recession cut demand for exports and companies reduced output. Overcapacity in almost all industries and “unprecedented” drops in some commodity prices may hurt profits further, Li Yizhong, head of the nation’s industry regulator, said this month.

“The double-whammy of cooling demand and plunging prices have caused company profits to worsen seriously,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “Profits may shrink as much 15 percent over the next six months.”

The CSI 300 Index of domestic stocks declined 12.74, or 0.7 percent, to 1,858.03 at the midday break. The index has plunged 65 percent this year on concern that the economic slowdown will hurt earnings.

Profits at companies owned or controlled by the state fell 14.5 percent in the first 11 months to 798.5 billion yuan, compared with a 0.7 percent increase in the first eight months.

Steel Industry Profits

Steel-industry profits fell 13.7 percent after increasing 31.5 percent in the first eight months. Power-industry profits slumped 84.1 percent.

Baosteel Group General Manager He Wenbo said in November that his company is facing its “most difficult” period since it was founded 30 years ago. Spot prices of hot-rolled sheet have fallen 35 percent in China since June.

The government may buy steel stockpiles, offer subsidies for plant upgrades and give higher export rebates to help the nation’s steel industry, the largest in the world, weather a “severe” slowdown, ’’ Minister of Industry and Information Li said Dec. 12.

China’s policy makers are concerned that a slowing economy, combined with falling profits, will prompt companies to shed more workers, raising unemployment and fomenting social unrest.

In 2008 more than 10 million migrant workers had lost their jobs as of the end of November, Caijing Magazine reported Dec. 17, citing an unidentified labor ministry official.

Exports Drop

State-owned companies should avoid firing workers next year Li Rongrong, head of the State-owned Assets Supervision and Administration Commission said yesterday payday loans.

China’s exports fell for the first time in seven years in November, imports plunged and manufacturing contracted by a record. The World Bank forecast China’s economy will grow 7.5 percent in 2009, which would be the slowest pace in almost two decades.

To help exporters, the government said yesterday it would raise rebates on shipments of some machinery and electronics and let some trade with Hong Kong, Macau and Southeast Asia be settled in yuan.

Industrial output grew at the weakest pace in almost a decade last month. China’s zinc, aluminum and steel smelters all turned unprofitable this quarter after metal prices dropped. Prices of aluminum, used in car parts, have fallen 36 percent this year.

Social Stability

Industry regulator Li said Dec. 19 that measures must be taken to sustain production to protect jobs and social stability. China aims for 8 percent growth in 2009 and production accounts for 43 percent of the nation’s gross domestic product.

“No company can fight the tide of an overall economic slowdown,” said CICC’s Xing. “The government’s stimulus plans to build airports, low-rent homes and railways may start to help boost demand for industrial goods from the middle of next year.”

China has pledged to spend 4 trillion yuan ($585 billion) in an effort to spur growth and limit unemployment. The central bank on Dec. 22 lowered its key lending rate for the fifth time in three months to help trim corporate funding costs.

China’s producer price inflation dropped to 2 percent last month from the peak of 10.1 percent in August, adding pressure on metal smelters and processors of oil and chemicals.

Sinopec Shanghai Petrochemical Co., the nation’s biggest ethylene maker, expects to post a “substantial loss” this year on a decline in prices.

Today’s increase in profits compared with a 19.4 percent gain in the first eight months. Overall, industrial companies’ sales rose 24.1 percent to 43.95 trillion yuan, down from a 29 percent increase in the first eight months.

Quarterly data on industrial profits was first released in February 2007.

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The U.S. government’s emergency rescue of Citigroup Inc. offers a new model for bank bailouts: explicitly insuring against losses on toxic assets, with taxpayers footing the bill.

The Citigroup plan extends the federal commitment beyond the previous framework of capital injections from the Treasury and credit from the Federal Reserve. Now, the U.S. is a partner in the performance of $306 billion in real-estate loans and securities, sharing losses beyond $29 billion on what are likely to be some of Citigroup’s worst holdings.

“Everybody and his brother has got to have their hand out now,” said Eric Hovde, chief investment officer at Hovde Capital Advisors, which manages $1 billion in financial-services stocks. “The whole problem is so much bigger and deeper than the Fed and Treasury ever understood.”

Taxpayers are likely to be at greater risk from the new template, which may be used to help more companies as debt writedowns continue to climb, analysts said.

“Every situation will need to be evaluated on a case by case basis, but obviously we are able to draw from our experiences as we work through these issues in the financial system,” Treasury spokeswoman Brookly McLaughlin said.

Citigroup’s crisis escalated as it was forced to take on its balance sheet a number of special units created to invest in riskier securities. The New York-based bank’s shares lost 60 percent last week, and then recouped some of those losses yesterday after the government’s rescue. Other lenders remain vulnerable.

Weakened Banks

Wells Fargo & Co. is absorbing Wachovia Corp., the bank that regulators pushed in September to merge amid mounting losses from $120 billion in a portfolio of home loans. Bank of America Corp. has taken on both Countrywide Financial Corp., once the biggest independent mortgage lender, and Merrill Lynch & Co., the securities dealer hobbled by $24 billion of losses. Morgan Stanley slumped almost one third in the past three months.

Other banks “are going to show up” and ask for the Citigroup deal, predicted Joseph Mason, a professor at Louisiana State University in Baton Rouge who previously worked at the Treasury’s Office of the Comptroller of the Currency.

The loss-sharing plan is another twist in the saga of Treasury Secretary Henry Paulson’s management of the $700 billion Troubled Asset Relief Program. Since the rescue fund was approved by Congress and enacted last month, Paulson has been criticized by lawmakers and others for not having a clear design for using the money. President-elect Barack Obama joined the chorus yesterday.

‘Confusion’ on Strategy

There has been “confusion on what the overall direction might be” of the Bush administration’s plans, Obama said in a press conference in Chicago. At the same time, he pledged to “honor the commitments” of the outgoing team.

“The model is that there is no model,” said V business cards. Gerard Comizio, senior partner in the banking practice at the Paul, Hastings, Janofsky & Walker law firm in Washington. “It is an improvisation battle plan.”

Under the terms of the agreement, Citigroup will cover the first $29 billion of pretax losses from the $306 billion asset pool, in addition to reserves it already set aside.

Citigroup will accept 10 percent of losses above that amount, with the government responsible for 90 percent. The Treasury is second in line, taking $5 billion in losses, and the Federal Deposit Insurance Corp. is third, absorbing up to $10 billion. If the portfolio plummets through those triggers, the Fed steps in with a loan for the remaining assets.

Initial $25 Billion

U.S. authorities acted after the second-biggest U.S. bank by assets touched $3.05, the lowest level since 1992, threatening confidence among its depositors and counterparties. Citigroup had already received a $25 billion infusion under Paulson’s $250 billion capital-injection program.

“The Treasury and the Fed are doing what they can do to hold the pieces together, and it hasn’t been easy,” said Martin Regalia, chief economist at the U.S. Chamber of Commerce, which lobbies on behalf of 3 million businesses. “If we don’t keep the financial system going that is going to impose costs on the American public that will be real and palpable.”

The Fed’s exposure in the deal also represents a tack in the way the central bank has approached the crisis.

Since what was an effective purchase of $29 billion Bear Stearns Cos. assets in March, Fed officials have shown a preference for providing short-term credits for firms facing a cash squeeze.

Assets Swell

The central bank’s balance sheet expanded $1.3 trillion in the past year as the Fed auctioned $415 billion of cash to banks and purchased $272 billion of commercial paper.

Fed officials have pushed to keep the risks involved in future bailouts at the Treasury, which would be forced to negotiate with Congress about the use of taxpayer funds.

Now, the Fed is stepping outside the liquidity boundary once again. The central bank took a step toward risk sharing earlier this month when it opened two new facilities with up to $52.5 billion in loans to help American International Group Inc. wind down its portfolio.

“It is clear that regulators still lack a comprehensive plan to address problems in our financial markets,” Senator Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee, said through his spokesman Jonathan Graffeo. “It is unclear whether they have carefully considered the implications of their continued ad-hoc approach.”

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Wells Fargo has emerged victorious in its weeklong tug-of-war with Citigroup over Wachovia and will proceed with its $15 billion purchase of the troubled bank.

The Wells-Wachovia combination creates the nation’s third banking powerhouse, with about 10,700 branches and 12,200 ATMs stretching from coast-to-coast. Wells Fargo and its ubiquitous stagecoach will now roll from New York City to Miami in the East, through Texas and into the West with branches from San Diego to Seattle.

The combined company, to be called Wells Fargo and based in San Francisco, will have $1.42 trillion in assets, $787 billion in deposits and 280,000 employees.

Wells Chairman Dick Kovacevich, CEO John Stumpf and their team will have their hands full in the days and weeks ahead, handling triage among Wachovia employees who became increasingly nervous about their futures as Wells and Citigroup fought over the Charlotte bank.

Wells (NYSE: WFC) is expected to avoid layoffs, if possible, in the largest acquisition in the company’s 156-year history. Even in making last year’s in-market, Bay Area acquisition of Greater Bay Bancorp, Wells kept the vast majority of the acquired bank’s employees (faxless payday loan).

“We know this has been a time of great uncertainty for Wachovia (NYSE: WB) team members and many of its customers as their company has gone through a very painful and challenging time of unprecedented change in our industry,” Wells Fargo’s Stumpf said. “We want to assure them we’ll do everything we can to make the integration of our operations as smooth as possible. An important measure of success for this integration will be our ability to retain as many of the talented Wachovia team members as possible.”

Although Wells is acquiring Wachovia, the San Francisco bank is likely to find a few gems at the Charlotte bank to extend into Wells Fargo territory beyond Wachovia’s huge presence in the East. Wells Chairman Dick Kovacevich told analysts about a year ago that Wells Fargo’s customer service in retail banking had room for improvement. Wachovia has consistently won high marks in that department. Wachovia’s Way2Save program is also a candidate for going national under the Wells Fargo banner.

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Hotel operator Marriott International Inc (MAR.N: Quote, Profile, Research, Stock Buzz) said on Thursday third-quarter profit fell 28 percent as its time-share business slowed, and the company warned that 2009 would be tough, sending its shares down more than 10 percent.

The hotel operator also said it may delay or cancel some projects in the current quarter, which may lead to write-offs.

“Our timeshare business has certainly been far more impacted by the current financial environment than our core lodging business,” said Marriott Chairman and Chief Executive J.W. Marriott in a statement.

“Tight credit, soft consumer spending and a difficult securitization market have lowered our expectations for the fourth quarter and 2009,” Marriott added.

Marriott, which typically manages hotels instead of owning them, reported third-quarter net income of $94 million compared with $131 million in the year-ago quarter, and earnings per share of 26 cents compared with 33 cents a year ago.

Third-quarter revenue rose 1 percent to $3 billion.

Marriott said it expects to earn between 44 cents and 50 cents a share in the fourth quarter online payday advance. That is below analysts’ average forecast of 62 cents, according to Reuters Estimates.

The company expects worldwide revenue per available room (RevPAR), a key industry measure, to decline 1 percent to 3 percent in the fourth quarter. 

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The Bank of Israel will probably leave its benchmark lending rate unchanged next week, ending a string of four increases, on concern the global credit crisis will slow economic growth.

The bank will hold the rate at 4.25 percent, according to 15 of 17 economists surveyed by Bloomberg, with the rest predicting a quarter point increase. The Jerusalem-based bank will announce its decision at 6:30 p.m. tomorrow.

“We don't expect the bank to raise rates — not because of inflation, which was actually high in August, but because of the situation in the world,'' said Yaniv Hevron, an economist at Psagot Investment House Ltd. in Tel Aviv. The global turmoil “will come to Israel eventually.''

Gross domestic product will probably expand 4.4 percent this year, the slowest since 2003, and growth may slow in 2009 to 2.9 percent, Merrill Lynch & Co. said in a Sept. 12 report before the collapse of Lehman Brothers Holdings Inc. set off a new round of turmoil in world financial markets.

The Central Bureau of Statistics will provide its preliminary estimate for 2008 GDP growth on Sept. 24.

While annual inflation has been above the government's target of between 1 percent and 3 percent since November, reaching 5 percent in August, the pace will probably slow, Migdal Capital Markets Ltd faxless payday advance. said in a Sept. 18 report, citing commodities prices.

Preventing a further deterioration in economic growth is more important than grappling with inflation, Migdal said, and the bank may lower the rate in the first quarter.

Last Week

Last week, the yield on the benchmark 6.5 percent Shahar bond due in January 2016 rose to 5.87 percent from 5.55 percent a week earlier. The shekel gained about 2.6 percent to 3.5150 per dollar as of Sept. 18.

The Tel Aviv Stock Exchange's benchmark TA-25 Index fell 10.8 percent to 842.03. Africa Israel Investments Ltd., the property developer controlled by diamond billionaire Lev Leviev, led the declines, shedding 40.5 percent. Delek Group Ltd., a property and energy holding company, was the next-biggest loser, falling 27 percent.

Foreign Minister Tzipi Livni won the Kadima Party primary Sept. 17 to replace Prime Minister Ehud Olmert as leader. Livni, who won 43.1 percent of the votes cast, defeating three rivals for party leadership, now begin talks to form a new coalition with herself as prime minister.

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Texas Comptroller Susan Combs this week introduced a new program designed to help parents prepay their child’s college education, while locking in current tuition rates.

The Texas Tuition Promise Fund allows parents to make flexible monthly payments toward their child’s future college expenses. Once an account is opened, parents can make minimum monthly payments of $15 toward a college plan, depending upon the age of the child and how much money they want to apply toward college.

Parents can spread out the cost of the education over longer periods of time if they start saving early.

“Starting early makes saving for college more affordable, and it also has another very important benefit,” Combs says no teletrak payday loans. “Studies show that regardless of a family’s income level, the children of parents who start saving early are more likely to have higher academic achievement throughout their school years. It increases the children’s expectations of going to college and achieving their dreams.”

texastuitionpromisefund.com

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A Seattle company has made its second investment into Triangle apartments with the purchase of a student housing complex in Raleigh.

Horizon Realty Advisors paid $21 million earlier this month for the Village Green apartment complex along Lake Wheeler Road, according to Wake County land records. The complex, which offers individual leases, mostly houses students at North Carolina State University and Meredith College.

There are 156 units in the complex. The property also includes a 4,000-square-foot clubhouse.

Reed Cos., a Florida developer of student housing, was the seller for the complex, built in 2003 faxless payday loan. According to its Web site, that company owns no other apartment properties in the Triangle.

The purchase of Village Green gives Horizon three student-housing apartment complexes in Raleigh. The company also owns sister complexes Centennial Ridge and Centennial Village, with the former located off Tryon Road and the latter at the corner of Gorman Street and Avent Ferry Road.

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Singapore said its exports will fall this year for the first time since 2001, as the city-state joined its neighbors in signaling a deepening economic slowdown.

The island's trade promotion agency today lowered its forecast for exports this year, saying they will drop between 2 percent and 4 percent, from an earlier estimate of a 2 percent- to-4 percent growth. Shipments fell 2.4 percent in the first half of 2008.

The U.S. housing recession that has roiled financial markets is hurting export demand and threatening expansion in a region the Asian Development Bank says will account for more than a fifth of global growth this year. Asian governments have lowered their 2008 growth forecasts since the start of the year as the global slowdown spreads and soaring prices hurt spending.

“U.S. consumption is declining sharply and the outlook for export demand will remain weak until 2009,'' said Takayuki Urade, head of Asia economics at Nomura Holdings Inc. in Singapore.

Australia's central bank today said it expects a “significant moderation'' in domestic demand that will cut economic growth by half and drive up unemployment. Japan last week said the world's second-biggest economy is “weakening'' for the first time since 2001.

In China, economic growth slowed for a fourth straight quarter in the three months to June 30, expanding 10.1 percent. Growth below 9 percent would be “unacceptable'' for a government targeting 10 million new jobs a year, Credit Suisse Group said this month.

Weak Demand

“Weaker growth in the major economies, coupled with the need to contain inflationary pressures, will dampen growth in the fast-growing Asian economies,'' Singapore's trade ministry said today. It “expects the electronics industry to remain soft in the second half of 2008, reflecting weak demand for semiconductors.''

Singapore's government on Aug payday loans in 1 hour. 8 cut its forecast for growth this year to between 4 percent and 5 percent, from an earlier estimate of as much as 6 percent expansion. Growth will be at the lower half of the new forecast, the trade ministry said today.

Gross domestic product increased 2.1 percent from a year earlier in the second quarter, after expanding 6.9 percent in the previous three months, the trade ministry said today. That compares with a preliminary estimate of 1.9 percent published on July 10.

“Singapore's economy has so far been partly buffered, because we have been carried along by the vibrancy of the Asian region,'' Prime Minister Lee Hsien Loong said Aug. 8. “But Asian economies are starting to feel the impact of America's problems, and so are we. We must therefore prepare ourselves for a bumpy year ahead.''

Korea, Japan

South Korea on Aug. 7 said growth in Asia's fourth-largest economy is easing as consumer spending slows and higher fuel costs stoke inflation. An expansion of 4.8 percent last quarter was the weakest annual pace since the start of 2007.

The Reserve Bank of India last month lowered its economic growth estimate for the year ending March 2009 to 8 percent from a range of 8 percent to 8.5 percent as inflation at a 13-year high erodes spending by consumers and companies.

Gross domestic product in Japan probably shrank an annualized 2.3 percent in the three months ended June 30, according to a Bloomberg News survey. The figures will be released on Aug. 13.

The country's exports fell for the first time in more than four years in June as growth in shipments to Asia and China eased, signaling the U.S. slowdown is spreading to the emerging markets that helped sustain expansion.

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Australia unexpectedly lost jobs in May, ending a record 18 months of gains and sending the nation's currency lower on speculation the central bank may not raise interest rates again.

Companies cut 19,700 workers after adding a revised 37,500 in April, the statistics bureau said in Sydney today. The median estimate of 22 economists surveyed by Bloomberg News was for a 13,500 gain. The jobless rate held at 4.3 percent.

The biggest decline in employment since September 2005 is the strongest signal yet that the Reserve Bank's two rate increases this year may be enough to cool the economy's 17-year expansion and damp inflation. Australian employers are mirroring job cuts in the U.S. and U.K. as oil prices surge to a record and global growth slows.

“The Reserve Bank is firmly on hold for the remainder of the year,'' said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “Businesses have put off or ceased their hiring for the time being. We'll have to wait and see whether this is a sign of more to come.''

The number of full-time positions declined 10,400 in May and part-time jobs dropped 9,300, today's report showed. About half of the nation's 21 million people are employed.

Australia's dollar slumped to 93.82 U.S. cents at 1:03 p.m. in Sydney, the lowest since May 16, from 94.63 cents before the report was released. The yield on the two-year bond shed 9 basis points, or 0.09 percentage points, to 7.01 percent. The benchmark S&P/ASX Index of stocks fell 2.2 percent to 5,348.70.

Airlines, Carmakers

Qantas Airways Ltd., Australia's largest carrier, said this month that it will slash services to Japan, shift other Asian routes to low-cost unit Jetstar and cut jobs in response to surging fuel costs. Crude oil climbed to a record $139.12 a barrel last week.

General Motors Corp.'s Australian unit, Holden, said last week that it will end production of four-cylinder engines at its Melbourne factory, where more than 500 people are employed. The company also cut 600 jobs at its Adelaide factory in March.

“Some loosening in the drum-tight labor market will be welcomed, and should help keep the Reserve Bank sidelined,'' said Su-Lin Ong, a senior economist at RBC Capital Markets in Sydney. Still, given there's a shortage of skilled workers, most “employers are unlikely to turn around and shed labor after only several months of moderation in activity.''

Mining Boom

China's growing appetite for natural resources has seen companies including Rio Tinto Group expand mines, railways and ports, helping stoke 18 months of job gains through April that generated 456,000 positions in Australia low fee cash advance.

The mining boom has driven expansion in Australia's $1 trillion economy, helping it weather the global credit crunch.

Reserve Bank Glenn Stevens and his board raised the benchmark interest rate to a 12-year high of 7.25 percent in March on concern a shortage of skilled labor would drive up wages and stoke inflation, already at the strongest since 1991.

Steven left the rate unchanged last week for a third month.

The chance of another quarter-point rate increase by September fell to 48 percent from 74 percent before the jobs report was released, according to 30-day interbank contracts traded on the Sydney Futures Exchange.

The slump in Australian jobs follows reports that show the U.S. unemployment rate gained the most in more than two decades in May, and the U.K. jobless rate rose to a seven-month high.

`Vengeance'

“Employment data is always the last to turn in an economic slowdown, but when it does turn it usually does so with a vengeance,'' said Clifford Bennett, chief economist at Sonray Capital Markets Ltd. in Sydney. “The Australian economy is in a precarious state.''

Adding to signs the economy is moderating, consumer confidence slumped to the lowest level in almost 16 years in June, home-loan approvals dropped for a third month in April, and businesses were pessimistic for a fifth consecutive month in May, reports this week showed.

The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65.2 percent in May from 65.5 percent in April, the figures showed.

The report “is a sign that the Reserve Bank is on track, and their tightening is delivering the right amount of pain,'' said Matthew Johnson, an economist at ICAP Australia Ltd. in Sydney. “A looser labor market cuts wage negotiating power, and thereby reduces the risk that high inflation will become embedded in the wage-price mechanism.''

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The Hawaii Department of Health announced Wednesday that the state will implement a voluntary checkpoint screening process for international visitors to detect flu-like illness at Honolulu International Airport.

The program will span a one-year period and was made possible through a cooperative agreement between the Hawaii Department of Health and the Centers for Disease Control and Prevention in the amount of $289,000, the department said.

The Department of Health will collaborate with U.S. Customs and Border Protection, CDC, the Hawaii Department of Transportation and Hawaiian Airlines, the health department said.

"During [severe acute respiratory syndrome] other countries screened for flu-like illness at airports," said Chiyome Fukino, director of the Health Department, in a statement. "It makes sense for the U.S. to investigate this strategy, given the very real concerns for a potential influenza pandemic low fees payday loan. Being a global travel destination, Hawaii is a good place to start. We hope to share what we learn here with the rest of the nation."

The screening process will include a questionnaire, which includes basic demographic information, recent travel history and illness history. Travelers who feel feverish will be asked to go through a voluntary checkpoint process. Those passengers will then be checked for illness. If they have a fever, the traveler will be tested voluntarily for the flu.

The program builds upon the illness surveillance procedures that the Department of Health began at Honolulu International Airport in November 2005, which was designed to detect influenza-like illnesses and identify infection by new flu strains, including avian flu.

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