Finance Blog number 1

Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, won Hong Kong’s first land auction of the year with a bid that exceeded most analysts’ estimates after selling 900 homes over the weekend as demand for property in the city surges.

The shares closed 2 percent higher after the developer paid HK$3.37 billion ($434 million) for the site in the eastern Tseung Kwan O district. The company raised HK$4.2 billion in a weekend apartment sale that attracted 120,000 prospective buyers in the city of 7 million.

The land auction and the weekend sale fanned speculation a bubble is forming in Hong Kong’s housing market, where home prices surged 29 percent in 2009 as low interest rates and an increase in buying by mainland Chinese stoked demand. Norman Chan, chief executive of the Hong Kong Monetary Authority, told lawmakers Feb. 1 that the city faces a “huge” potential risk of bubbles forming in its asset markets given high liquidity.

“The outcome is positive for the Hong Kong property market,” said Eva Lee, a Hong Kong-based property analyst at Macquarie Securities Ltd. “People expect 2010 won’t be an easy market given the strong growth last year, but the auction has reinforced their confidence.”

Sun Hung Kai spokeswoman Brenda Wong confirmed the company made the winning bid today. Price estimates for the auction ranged from HK$2.6 billion to HK$3.4 billion, and the median projection of five analysts Bloomberg News surveyed by phone and e-mail was HK$2.9 billion.

‘Reasonable’

Hong Kong is trying to ease a shortage in land supply and new properties that developer Cheung Kong (Holdings) Ltd. said last month may help raise home prices by as much as 20 percent this year.

Sun Hung Kai paid a “reasonable” price for the site, Victor Lui, executive director of Sun Hung Kai’s real estate broker, said by phone today. The price paid was “higher than expected but reasonable,” he said, adding he is “positive” about the outlook for the property market.

Sun Hung Kai plans to invest HK$6.5 billion on the plot of land in a medium-sized residential project, which may take between three and four years to complete, Lui said.

The developer at the weekend sold 900 apartments at the Yoho Midtown apartment complex in northwestern Yuen Long district for an average HK$5,400 per square foot, Amy Teo, Sun Hung Kai project director, said. That compares with an average HK$3,000 per square foot for new homes in the area a year ago, according to Wong Leung-sing, an associate director at Centaline Property Agency Ltd.

Crowds Attracted

“All the ingredients are in place for a property bubble in Hong Kong, including low interest rates and limited supply, but I don’t think we are in one yet,” said Buggle Lau, chief property analyst at Midland Holdings Ltd. “If more speculators enter the market then it could push prices up too high.”

The city had the world’s fastest-growing major housing market last year, according to a survey compiled by real-estate agents Knight Frank LLP.

Some 120,000 prospective buyers have flocked to the show homes since Feb. 19, Teo said, speaking at the display properties set up in a shopping center near the apartment complex in the city’s New Territories. Sun Hung Kai increased the number of apartments on sale to 900 from 700 because of demand, she said. The building complex has a total of 1,890 homes, according to Teo.

About 40 units were immediately advertised for resale at asking prices of as much as 20 percent more than the original costs of purchase, the South China Morning Post newspaper reported, citing property agents.

Supply

The number of private homes completed in Hong Kong last year fell 18 percent to 7,200 units, the lowest since 1997, the government said in a report Jan. 22.

The city’s home sales more than doubled in value in January from a year earlier to HK$36.2 billion, according to figures released by the government’s land registry. Sales gained 4.1 percent last month from December, the agency said.

The authority, Hong Kong’s de facto central bank, raised deposit levels for luxury apartments in October to try to cool lending. The government also plans to raise stamp duty, or transaction tax, on homes selling for more than HK$20 million to 4.5 percent from 3.75 percent in a bid to rein in the property market, the Chinese-language Sing Tao Daily said Feb. 11.

“Government intervention could lead to higher interest rates, but I can’t see mortgage rates much above 2.5 percent this year, which is unlikely to deter some buyers,” said Midland Holdings’ Lau.

Prices may rise as much as 15 percent in the first quarter, Centaline’s Wong said. Hong Kong’s Chamber of Commerce forecasts the city’s economy may grow between 3 percent and 4 percent this year.

“Given that the U.S. is unlikely to raise interest rates sharply and the yuan is under appreciation pressure, Hong Kong property prices may have substantial growth this year, but there is also a risk of a bubble,” said Benny Wong, executive director at Hong Kong-based Pan Asian Mortgage Advisory Company Ltd. “I expect the Hong Kong government will increase land supply this year in response to the high prices.”

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The Bank of England may this week pause its 200 billion-pound ($317 billion) bond purchase plan and keep open the option of expanding it further as officials assess if the economic recovery is too anemic to last.

The bank will halt spending with newly created money for the first time since it began the so-called quantitative easing program in March last year, according to the median of 51 forecasts in a Bloomberg News survey. The central bank will release its decision on Feb. 4 at 12 p.m. in London.

Governor Mervyn King is juggling the threat of resurgent inflation against the risk of a relapse in growth after gross domestic product barely rose in the fourth quarter. Officials must also gauge if the economy may need more stimulus to weather reductions in the record budget deficit after the general election, which is due by June.

“I would be surprised if they say they’re going to stop” altogether, Patrick Minford, a former adviser to Margaret Thatcher and now an economics professor at Cardiff University, said in an interview. “This could be quite risky, particularly when governments are going to be taking rebalancing action on fiscal policy. The issue is whether the economy is strong enough to take withdrawal of quantitative easing.”

The pound fell against the dollar to its lowest level this year today, and traded at $1.5858 at 10:52 a.m. in London.

The economy expanded 0.1 percent in the last three months of 2009 as service and manufacturing businesses expanded just enough to end Britain’s deepest recession on record.

Uneven Recovery

Recent data have suggested an uneven recovery. Mortgage approvals unexpectedly dropped in December for the first time in more than a year, Bank of England showed today. Manufacturing expanded at the fastest pace in 15 years, according to a report from the Chartered Institute of Purchasing and Supply and Markit Economics.

“It’s certainly possible that the economy needs more policy support in the future,” said Jonathan Loynes, an economist at Capital Economics Ltd. “When you have a big fiscal tightening coming, which is likely from either party, unless you’ve got some underlying momentum in the economy you may want to loosen monetary policy further.”

Prime Minister Gordon Brown’s Labour Party has trailed the Conservative opposition for two years in voter opinion polls as both parties wage a campaign on plans to cut the budget deficit. The Conservatives led Labour by 11 points, according to an ICM Research Ltd. poll that finished on Jan. 24.

Budget Deficit

Chancellor of the Exchequer Alistair Darling said on Jan. 26 that the government will take steps to trim the 15.7 billion- pound deficit once the recovery gains traction. Cameron has pledged to start budget cuts immediately after the election.

While the prospect of a public spending squeeze looms, the global recovery may still buoy the economy as companies raise overseas sales and take advantage of the pound’s 17 percent drop on a trade-weighted basis since 2007. The Confederation of British Industry said today its index of export orders for small and medium-sized manufacturers rose to a two-year high in the quarter through January.

The pound’s weakness has stoked consumer prices, complicating the Bank of England’s task. The inflation rate jumped 1 percentage point in December, the most on record, to reach 2.9 percent. The central bank’s target is 2 percent.

Inflation Outlook

King said last month that inflation may accelerate further, though policy makers will look through that jump as they focus on the risk that it will slow below their goal because of slack in the economy created by the recession.

The case for adding to the bond-purchase program may strengthen if a pause in the plan results in a jump in bond yields, said Kit Juckes, chief economist at ECU Group Plc in London. He said a 50 basis-point increase in 10-year bond yields to about 4.5 percent may be “inevitable but not disastrous,” though a jump to 6 percent “would scare me.’

“The end of QE will be a pretty short-lived end if it’s really damaging gilt yields,” Juckes said. “QE is working, and pausing makes some sense to let it continue to work, but you really can’t rule out them coming back with more. This is a pathetic little recovery however you look at it.”

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Robert M. Mills has been named the new president and chief operating officer of University Housing Services Inc. in St. Petersburg, succeeding UHS founder William H. Mills Jr., who will remain as chairman and chief executive officer.

Robert Mills, who joined his father’s firm in 2002, was the executive vice president of the campus housing development company, responsible for the operational efficiency of the development process and directly involved in more than $300 million of on-campus development projects in the last eight years.

The leadership shift comes when the student housing industry has been faced with the ongoing challenge of finding viable ways to implement increasing demands for student housing with shrinking college budgets and financial options, UHS said in a release. Robert Mills is expected to focus on growing the company’s core student housing business by expanding both the company’s service offerings and geographic reach.

UHS has worked on more than 16 campus housing projects throughout the Southeast, according to the company’s Web site, including Florida Gulf Coast University, the Florida Institute of Technology and the University of North Alabama among others payday loans. UHS maintains a southeast regional office in Atlanta.

Robert Mills, who received a bachelor’s degree in building construction in 1987 from the University of Florida, previously worked for Beers Construction Co., rising to group vice president where he was responsible for meeting all the construction needs of both public and private higher-education institutional clients.

Before starting UHS, William Mills was owner, chairman and president of Federal Construction Co. fro 1982 to 1991, which would become one of the largest construction management firms in the Southeast before being sold to Trafalgar House.

Federal Construction was originally known as Mills & Jones Construction Co., founded by William Mills Sr. in 1946. That builder was responsible for buildings such as the Maas Brothers Department Store in St. Petersburg, the Florida Power Corp. headquarters in St. Petersburg and the original Busch Gardens outside of Temple Terrace.

William Mills Sr., who helped found UHS following the Federal Construction sale, died last June. He was 98.

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Romania’s central bank unexpectedly cut its main interest rate to the lowest since January 2008 after the appointment of a government ended months-old political turmoil and signs that lenders may resume payments of a bailout loan.

The Banca Nationala a Romaniei trimmed the monetary policy rate to 7.5 percent from 8 percent at its first meeting since last month’s presidential elections, the Bucharest-based bank said in an e-mail today. The decision was expected by only two of 11 economists in a Bloomberg survey. Seven predicted no change and two predicted a smaller cut.

“This is a small surprise in timing, but not in direction,” Raffaella Tenconi, the chief economist at Wood & Co. in Prague, said in an interview today. “With the new government already going forward to meet the IMF requirements, a loosening doesn’t change our view of a stable leu in the near term.”

Traian Basescu was re-elected president last month and re- appointed Prime Minister Emil Boc, ending a political stalemate that had left the country without a government since October. The International Monetary Fund, which is leading a $30 billion bailout loan to Romania, has said it may resume loan payments.

Recovering Economies

Economies throughout east Europe are recovering from recession or contractions are slowing as demand picks up from their main trading partners in western Europe. Romania aims for economic growth of as much as 1.5 percent this year after an estimated contraction of 7.5 percent in 2009.

“It is worth noting the continued slowdown in real terms of the annual dynamics of credit to the private sector, especially of the leu-denominated component, amid weak demand for loans against the background of the recession,” the bank said in a statement after today’s decision business cards.

The Romanian leu held its gains against the euro after the announcement and traded 0.2 percent stronger at 4.2071 per euro as of 12:50 p.m. in Bucharest, while the Bucharest Stock Exchange’s main benchmark BET index rose 2.5 percent to 4867.35.

The IMF and the European Union froze the bailout payments to Romania last October after Boc’s previous administration collapsed and the ruling coalition of parties disintegrated in feuding. The lenders said they would visit Romania again in January to discuss the new government’s economic program and 2010 budget plan.

The IMF has said it would only consider unfreezing the payments after Romania installed a new government and passed a 2010 budget plan. The new government was approved in Parliament on Dec. 23 and Parliament is scheduled to vote on the budget plan by Jan. 15.

Romania’s inflation rate rose in November for the first time in 10 months, the National Statistics Institute said on Dec. 11. The rate rose to 4.7 percent from 4.3 percent in October, mainly because of an increase in taxes on tobacco.

The central bank said that increases in tobacco prices last year contributed 1.8 percentage points to the annual inflation rate. Tobacco accounts for 4.6 percent of the basket of products the central bank uses in its consumer price index.

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The cities of the mountain West have felt the recession as deeply as any in the nation, although the pain has not been spread evenly, according to a report Tuesday.

Denver emerged as one of the strongest cities in the six-state region on a number of measures, according to the report by Brookings Mountain West, a partnership between the Brookings Institution and the University of Nevada.

“Phoenix, Boise, and Las Vegas… remained three of the most troubled metropolitan areas in the entire nation in the third quarter, with all residing in the weakest quintile of metros on a combined measure of overall economic performance,” researchers wrote. “Still, metros like Colorado Springs, Albuquerque, and Denver have only been moderately affected by the recession and seem poised to renew their upward trajectory as the pace of recovery quickens.”

Denver’s unemployment rate averaged 7 payday loan.1 percent in the third quarter, below the 100-city average of 9.6 percent. It ranked 14th of the 100 cities in terms of unemployment rate — with 1 signifying the strongest-performing metro and 100 the weakest-performing — and ninth in terms of change in the unemployment rate over the 12 months ending in September.

The city also fared well on housing prices: over the 12 months through September, Denver house prices were up 1.6 percent, compared with an average drop of 3 percent.

But foreclosures remained a problem, with the city ranking 76th out of 100 in terms of real-estate-owned properties per 1,000 mortgageable properties.

Denver ranked 70th for gross metropolitan product, and 57th for employment growth.

Click here for the full report.

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Opportunities for Nordic bank mergers will emerge as new capital rules expose weaker players in a post-crisis world, but big-scale tie-ups are doubtful in 2010 as lenders focus on loan losses and curbing risk.

Analysts say that the one possible big deal — between Nordea and Swedbank — is unlikely in the near term due to uncertainty over bad loans, adding that Swedbank’s shares do not fully discount the lender’s exposure to the troubled Baltics.

Consolidation in Nordic banking would make sense: markets are mature, growth opportunities limited and players too small to compete on a pan-European scale. The banks are good targets for foreign players because they are efficient and have been — at least until recently — highly profitable.

Add the new capital requirements that add to costs and eat into profits, and the need for scale is more acute than ever.

But the crisis has made banks shy of risk-taking and left the developments in the regulatory environment uncertain.

“Never say never, but I think all the Nordic players, or financial institutions, are quite busy running their own shops at the moment,” Nils-Fredrik Nyblaeus, senior advisor to SEB chief executive Annika Falkengren, told Reuters.

“The main owners of each of the banks have to be convinced that the synergies are by far outweighing the risk with it, and that’s obviously not the case at this moment.”

Predictions that Europe could see a wave of consolidation as a result of the crisis have so far not come true as most of the bigger players tread carefully.

But there have been rumblings.

The top executive of Nordea, which, with a $46 billion market capitalization, is on par in size with Deutsche Bank, recently said Swedish rival Swedbank made a good fit for his group.

Christian Clausen said the financial crisis had spurred the long-term need for strategic tie-ups, although he added that he expected little would happen in the near future.

SWEDBANK-NORDEA A HOT TIE-UP?

While the recent crisis has not led to any major bank failures or nationalizations in the region, lenders are still smarting from the worst downturn in decades.

Heavy exposure to the Baltics and Ukraine — economies among the worst hit by the recent downturn — and Ireland has left several Nordic players facing very painful loan losses.

The tough climate has made Swedbank — the biggest lender in the Baltics — the hottest tip for a tie-up, with Nordea seen as the main candidate. Some have put potential synergies at 400 million euros ($600 million) a year. 

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Shares of Internet retailer Amazon.com Inc hit an all-time high of $135.01 on a split-adjusted basis on Monday as the stock rose more than 2 percent.

The run-up in the shares comes on “Cyber Monday,” a day billed as a search for bargains on the Internet after the Thanksgiving Day holiday weekend.

(Reporting by Ellis Mnyandu; Editing by Padraic Cassidy)

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Thailand’s economy probably contracted the least in a year last quarter as a nascent global recovery and government spending began to pull the nation out of its first recession in a decade.

Gross domestic product fell 3.2 percent in the third quarter from a year earlier, after contracting 4.9 percent in the previous three months, according to the median estimate of 16 economists surveyed by Bloomberg News. The government will release the data on Nov. 23 at 9:30 a.m. in Bangkok.

The benchmark stock index has risen two straight quarters since the start of April and the baht gained 4.5 percent against the U.S. dollar this year as companies including Hana Microelectronics Pcl report rising orders. Prime Minister Abhisit Vejjajiva said yesterday the government will pursue its stimulus spending plans amid lingering “political problems.”

“A gradual global recovery, fiscal stimulus packages and easy money policy are resulting in improved GDP performance,” said Luz Lorenzo, an economist at ATR-Kim Eng Securities Inc. in Manila. “The improvement will be gradual. This is barring any grave political developments.”

Singapore, which raised its 2009 GDP estimate in October, said yesterday its economy will grow 3 percent to 5 percent in 2010 after shrinking as much as 2.5 percent this year. Malaysia may report today that its recession eased last quarter, according to a Bloomberg News survey.

Interest Rates

The Bank of Thailand said last month Southeast Asia’s second-largest economy is “out of recession”, citing improving employment and quarter-on-quarter GDP expansion. Still, the central bank refrained from raising borrowing costs for a fourth straight meeting on Oct. 21 as it judged the nation’s economic recovery to be at “an early stage.”

There may be cause to keep interest rates low for a while as economists including Morgan Stanley Asia Chairman Stephen Roach say the global recovery faces risks.

“My outlook remains extremely cautious although we can see the worst is over” for the global economy, Roach said in Singapore today. Asian economies are still too export dependent, he said.

Thailand’s consumer confidence fell for the first time in five months in October on concern that the economic recovery may be derailed by rising oil prices, politics and a court case that has stalled 76 government-approved projects on pollution complaints.

Political Risk

At least five people were injured after a bomb exploded at a Nov. 15 protest against former Prime Minister Thaksin Shinawatra, the Nation newspaper reported this week. Power in Thailand has shifted between parties allied to Thaksin and his opponents since the 2006 coup that ousted him, with protests and leadership changes hurting successive governments’ ability to implement spending plans.

Abhisit’s government has managed to stay in power for almost a year and implemented a 116.7 billion-baht stimulus package in the first half of 2009. It plans to spend 1.3 trillion baht on transportation, logistics, health and education projects over three years to help revive the economy.

The fiscal spending helped “stop the economic contraction” and prevented unemployment from jumping, Abhisit said Nov. 16.

“Our only concern is politics,” said Santi Vilassakdanont, chairman of the Federation of Thai Industries. “If the political stability continues like this, the economy can move ahead. If not, things may turn bad again.”

Return to Growth

The government expects the Thai economy to return to growth this quarter. Thailand’s exports dropped the least in 11 months in September as more than $2 trillion in stimulus by governments worldwide helped revive global demand.

Hana Microelectronics, which makes parts for computers and mobile phones including Apple Inc.’s iPhone, has restored its workforce to “pre-crisis” levels and will spend about $20 million by March 31 to expand capacity and meet rising demand, Chief Executive Officer Richard Han said.

“We continue to see robust demand,” said Han. “We expect the fourth-quarter performance to be an improvement over last year.”

The central bank has kept its benchmark interest rate unchanged at 1.25 percent since cutting it by 2.5 percentage points from December to April. Thai consumer prices rose for the first time in October after falling for nine consecutive months.

“The recovering global economy will lead to improving exports and tourism,” Abhisit said yesterday. “The government is also committed to spend money under our stimulus plan. Everything still goes as planned despite political problems” that may persist into next year, he said.

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Lehman Brothers Holdings Inc has filed a lawsuit against Barclays Capital Inc alleging the British bank took control of excess assets in collusion with Lehman executives when it bought its U.S. brokerage business a year ago, court documents show.

Lehman filed for bankruptcy on September 15, 2008, in the largest U.S. bankruptcy in history. Its flagship U.S. brokerage business was sold to Barclays less than a week later in a hurriedly assembled deal.

Lehman said in September this year that Barclays Capital got an $8.2 billion “windfall profit” due to the fire sale of its business for an undisclosed $5 billion discount off the book value of securities transferred to Barclays.

“The windfall to Barclays was not disclosed to the Court, the Lehman Boards or Lehman’s lawyers so as to allow the transfer to Barclays of billions of dollars in excess assets, without consideration, in a manner designed to avoid judicial, corporate and creditor oversight,” Lehman said in a Monday court filing.

The charges come after Lehman received approval in June to probe whether Barclays got “too good of a deal” when it bought Lehman’s brokerage business, as the British bank was able to quickly book a $4 direct lender payday loans.2 billion gain on its $1.75 billion purchase.

Barclays said at the time that it did not expect the probe to result in any additional claims.

In the lawsuit, Lehman requested the court to order Barclays to “disgorge to Lehman any ill-gotten gains it obtained” and pay punitive damages.

A Barclays Asia spokesman said in an email that all queries on the lawsuit should be directed to its New York office. Barclays’ New York officials were not immediately available for comment, outside of normal U.S. hours.

The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555. (Reporting by Supantha Mukherjee and Ajay Kamalakaran in Bangalore; Editing by Muralikumar Anantharaman)

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While the national economic picture is starting to brighten, the states are still suffering their worst budget crises in decades, a new report found.

States that have already slashed services and raised taxes to close a collective $54 billion budget gap now face another $51 billion deficit this year and next, according to preliminary results from the Fiscal Survey of States released Thursday.

"These are the worst numbers we’ve ever seen in the decades of putting together this report," said Scott Pattison, executive director of the National Association of State Budget Officers. "States have been forced to lay off and furlough employees, raise taxes, drain rainy day funds and sharply cut state spending in ways that impact every part of state government."

The full report, which will be released in December, is jointly compiled by the budget officers’ group and the National Governors Association. Fiscal year 2010 started on July 1 in 46 states.

Some $135 billion in federal stimulus funding helped states avoid even more draconian cuts, particularly to health services and education. But it was not enough to put the states back on solid footing.

States typically continue to suffer for two years after a national recession is declared over. Many economists predict that the current downturn ended last quarter, when the gross domestic product grew at a 3.5% annual rate.

Back-to-back expenditure reductions

Governors and lawmakers are expected to reduce spending by at least 4% this fiscal year, on top of a 4.8% pullback last year, the study found. This is the first time that expenditures have declined in back-to-back years.

Based on preliminary projections, half the states plan to lay off workers in the current fiscal year, Pattison said in a conference call with reporters. "State governments consider layoffs or furloughs a last resort," he said.

The national recession and soaring unemployment rate, which topped 10% last month for the first time in 26 years, has wreaked havoc on state tax revenues. Some 42 states cut their fiscal 2009 budgets, and 33 states slashed spending for 2010.

Also, states hiked taxes and fees by a total of $23.8 billion, along with $7.7 billion in other revenue increases, for fiscal 2010.

The survey came a day after two other reports also depicted states’ grim financial situations. One, from the Center on Budget and Policy Priorities, said states need as much as $50 billion in additional stimulus funds to keep them from making severe cuts that could threaten the national economic recession and cost 900,000 people their jobs.

Meanwhile, the Pew Center on the States released the names of 10 states in the greatest economic peril.

Already, less than five months into fiscal 2010, several states are looking at additional budget cuts.

Rhode Island announced Tuesday that it is facing a revenue shortfall for the current fiscal year of $130.5 million. Gov. Donald Carcieri said the state must examine its aid to local governments, since it has already cut personnel and social service programs.

And in California, Gov. Arnold Schwarzenegger said Tuesday that his state is facing a budget gap of up to $7 billion. The state will likely announce across-the-board spending cuts in January.

"So we just have to hang in there, tighten our belts and live within our means," Schwarzenegger said.

Last month, Massachusetts Gov. Deval Patrick announced a plan to close a $600 million mid-year budget gap that includes $352 million in cuts across state government, limited revenues hikes and draining a $60 million surplus from the last fiscal year.

And earlier this week, New York Gov. David Paterson said the state would have to come up with an additional $10 billion in savings. He is cutting state agencies funding by 10%, and is proposing reducing $1.3 million in local assistance programs, $686 million in education funding and $471 million in health care spending.

"Frankly, we are running out of money," he said.  

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