Archive for November, 2008

China, India feel crisis; Brown seeks Gulf help (Reuters)

Saturday, November 1st, 2008 | Finance News

NEW YORK/LONDON (Reuters) –
Two Asian powerhouse economies felt the sting of the global financial crisis on Saturday as India cut its main short-term lending rate and China said it was bracing for a slowdown.

British Prime Minister Gordon Brown traveled to the Gulf in an appeal to oil-rich states to pour money into stabilizing the world financial system and help afflicted countries.

Other countries took steps to shore up their own economies. Russia moved 170 billion rubles ($6.41 billion) from a national fund to a state bank, and Russian shares rose in a special Saturday session.

And German Chancellor Angela Merkel urged German banks to tap a 500 billion euro ($638.9 billion) government rescue package. She and Brown will meet in London on Thursday.

The developments in the worst financial crisis in eight decades followed signs in the past week that world markets were stabilizing, with interbank rates falling and U.S. stocks posting their best week in 34 years.

But in Shanghai, a senior Bank of China executive said the impact of the crisis on China has started to appear.

China has seen a sharp slowdown in industrial profit growth and fiscal income, Executive Vice President Zhu Min said.

The global economy will likely enter recession next year with the United States, Europe and Japan posting negative growth, he said.

"That will have a huge impact on China," he said.

Zhu also said currency volatility was expected to add further pressure on China's banks, which have enjoyed robust profits for years as the country boomed. Earnings growth is now slowing as the economy cools from the impact of the crisis.

"The uncertainties in the world's currency markets have exposed the Chinese banking sector to higher foreign asset risk," Zhu told a financial conference.

ACTION ON LIQUIDITY FRONT

In India -- like China, a magnet for foreign investment in recent years as their economies roared -- the central bank cut its main lending rate for the second time in as many weeks to ease a cash squeeze and spur economic growth.

Analysts said the surprise move showed Indian concern that strains on its economy were quickly becoming more severe.

"These actions were necessary (and had) to be taken on the liquidity front ... the situation was getting worse," said Vikas Agarwal, a strategist at JP Morgan.

The central bank cut the repo rate, its main short-term lending rate, by 0.5 percentage point to 7.5 percent and banks' cash reserve requirements by 1 percentage point to 5.5 percent.

"The global financial turmoil has had knock-on effects on our financial markets; this has reinforced the importance of focusing on preserving financial stability," the bank said.

Policymakers around the world have slashed interest rates in recent weeks and injected huge amounts into their banking systems to try to combat the spillover effects of the global crisis, which is causing credit markets to freeze up and threatens to plunge the world economy into recession.

Britain's Brown, speaking before he left for the Gulf, said Saudi Arabia and other oil-producing states could contribute funds to the International Monetary Fund or other entities to ease the crisis.

"Their interest is in a stable energy price, not in the massive volatility we have seen where oil prices have shot up and then come down again. Their interest too is in a well-functioning global economy," Brown told Sky News.

Business minister Peter Mandelson, in Riyadh with Brown, said Europe should not discourage investment by foreign governments, the day after Britain's Barclays tapped Abu Dhabi and Qatar for the bulk of a $12 billion investment.

Brown's tour precedes a global summit in Washington on November 15 at which Brown and some other world leaders will press for reform in the international financial system.

Republican John McCain and Democrat Barack Obama, vying to succeed U.S. President George W. Bush in January, swept through battleground states before Tuesday's election.

Russia meanwhile placed 170 billion roubles ($6.41 billion) from its National Wealth Fund with state bank VEB as part of a plan which will allow for state purchases of shares and corporate bonds.

The state share purchases helped Russian shares rise sharply in a special session on Saturday, helping them to a 50 percent gain for the week.

SWISS CONCERNS

The Swiss National Bank said it was growing more concerned over Switzerland's economy.

"The situation has noticeably worsened because the financial crisis is clearly affecting the real economy," SNB Chairman Jean-Pierre Roth said in a newspaper interview.

"We have two elements which are not pointing in the right direction -- the nominal development in the franc and the three-month LIBOR rate, which is above our target," Roth told the Neue Zuercher Zeitung. "This is a big challenge for us."

The business outlook weakened in the United States, where the economic crisis has dominated the presidential campaign.

A U.S. Commerce Department report on Friday showed consumers cut monthly spending for the first time in two years in September, evidently bracing for hard times as jobs continue to disappear and credit conditions tighten.

As another week ended in the crisis, the Bank of Japan slashed interest rates and JPMorgan Chase & Co, the largest U.S. bank, temporarily halted home foreclosures and offered to renegotiate mortgages.

The Japan rate slash followed a cut by the U.S. Federal Reserve on Wednesday. The European Central Bank and the Bank of England are expected to do the same next week. (Reporting by Matt Falloon; Saikat Chatterjee, Samuel Shen, Edmund Klamann; Writing by Eddie Evans; Editing by Doina Chiacu)

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Chrysler halts Renault-Nissan talks, favors GM: report (Reuters)

Saturday, November 1st, 2008 | Finance News

DETROIT (Reuters) –
Talks on a deal to sell Chrysler LLC to Nissan Motor Co (7201.T) and Renault SA (RENA.PA) have halted because the No. 3 U.S. automaker's owner favors a deal with General Motors Corp (GM.N), The Detroit News reported on Saturday.

Citing sources familiar with the situation, the newspaper said no further talks have been scheduled between private equity firm Cerberus Capital Management LP (CBS.UL), which sees a deal with No. 1 U.S. automaker GM as financially more advantageous and better for the struggling U.S. auto industry.

In an earlier report, The Detroit News said the Nissan-Renault alliance had proposed buying 20 percent of Chrysler.

A spokesman for Cerberus declined to comment.

Earlier this week Nissan-Renault Chief Executive Carlos Ghosn dismissed reports of merger talks with Chrysler as speculation, adding that it did not make sense to risk cash in the current economic environment to form a strategic alliance.

GM and Chrysler have been in talks on a possible merger, but according to sources any deal will have to wait until after the U.S. presidential elections on Nov 4 as the Bush administration ruled out providing government funding for it.

(Reporting by Nick Carey, editing by Alan Elsner)

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Panasonic in talks to buy Sanyo Electric: sources (Reuters)

Saturday, November 1st, 2008 | Finance News

TOKYO (Reuters) –
Japanese electronics maker Panasonic Corp (6752.T) is in talks with Goldman Sachs (GS.N) and two other major shareholders of Sanyo Electric Co Ltd (6764.T) to buy a controlling stake in its smaller rival, company and financial sources said on Saturday.

Talks with Daiwa Securities SMBC, Sumitomo Mitsui Banking Corp and Goldman are at a preliminary stage and the firms have not entered into price negotiations, the sources said.

The three major shareholders combined hold nearly 430 million Sanyo preferred shares, each of which can be exchanged for 10 common shares. That would value them at about 621 billion yen ($6.31 billion) based on Friday's closing price for the common shares.

If a deal is reached to buy all their holdings, Panasonic, already the world's largest plasma TV maker, could become Japan's top electronics firm by sales.

Panasonic and Sanyo combined are expected to post 11.22 trillion yen ($114 billion) in revenue, according to their forecasts for the year ending March 2009, surpassing projected 10.9 trillion yen at Hitachi Ltd (6501.T), the country's current sales leader.

Acquiring Sanyo would put Panasonic in a leading position in the global market for rechargeable batteries, which is expected to grow strongly as the use of portable electronic devices and hybrid or electric vehicles expands.

"This appears to be the kind of deal where you add one and one and get three, instead of two. Their battery operations would truly be world-class," said Masayoshi Okamoto, head of trading at Jujiya Securities.

"Some Japanese companies are buying overseas firms to expand their operations abroad. But buying Japanese peers with strong products and consolidate the domestic industry, like what Panasonic is doing here, could be a short cut to profit and expansion."

The move would also allow Panasonic, sitting on cash and cash equivalents of about $10 billion, to gain a foothold in the fast growing solar energy market.

Panasonic spokesman Akira Kadota said nothing has been decided on the matter of Sanyo acquisition, and declined to comment on whether the company was in talks with the three Sanyo shareholders.

Daiwa Securities SMBC is a joint venture between Daiwa Securities Group (8601.T) and Sumitomo Mitsui Financial Group (SMFG) (8316.T), while Sumitomo Mitsui Banking Corp is Sanyo's main bank and an SMFG unit.

Sanyo's shares closed Friday at 145 yen, giving the company a market value of about 271 billion yen, not including the value of the preferred shares.

Sanyo issued 300 billion yen in preferred shares to the three companies in 2006 to help it restructure after it suffered a sharp downturn in earnings, hit by fierce competition and earthquake damage to a key microchip plant.

Restrictions on converting them to common stock and selling them will be lifted next March, making it easier for the three main shareholders to make an exit on their investments.

If converted into common stock, the holdings would give the them a stake of about 70 percent in the company.

Sanyo spokesman Hiroyuki Okamoto said the company has been looking into a variety of potential steps concerning preferred shares, but that nothing has been decided.

Sanyo is the world's No.1 supplier of lithium-ion batteries competing with Sony Corp (6758.T) and Panasonic. It is also the seventh-largest solar cell producer behind such rivals as Germany's Q-Cells (QCEG.DE) and Japan's Sharp Corp (6753.T).

Sanyo President Seiichiro Sano told Reuters last month the three major shareholders were unlikely to sell their stakes in it by March 2011 despite the global financial crisis.

(Writing by Nathan Layne and Kiyoshi Takenaka; Editing by Kim Coghill)

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