Indonesia Islamic Bond Sale Said to Draw $4 Billion of Orders

Indonesia Islamic Bond Sale Said to Draw $4 Billion of Orders
Share | Email | Print | A A A

By Shanthy Nambiar and Aloysius Unditu

April 16 (Bloomberg) -- Indonesia’s sale of five-year Islamic dollar bonds has attracted orders totaling more than $4 billion, according to two people familiar with the deal.

The Southeast Asian nation’s government plans to sell $650 million of the notes at a yield of 8.8 percent to 9 percent, less than initial guidance of 9.25 percent, said the people, who asked not to be identified.

Islamic bonds, known as sukuk, comply with Shariah law by using asset returns to pay investors instead of interest.

Indonesia’s foreign-currency debt is rated Ba3 by Moody’s Investors Service and BB- at Standard & Poor’s, three levels below investment grade and on par with Turkey. S&P has upgraded Indonesia five times since mid-2002 and yesterday said in a statement the nation’s ratings are “underpinned by continued improvements in the country’s public debt and fiscal position, and its enhanced external liquidity cushion built up over the past several years.”

Indonesia’s economy is expected to expand 4 percent to 4.5 percent this year as it shows “some resilience” to the global recession, Finance Minister Sri Mulyani said April 13. The government’s 71.3 trillion rupiah stimulus measures may lift consumer spending, which accounts for about two-thirds of the economy.

This latest sale will help support the rupiah, Emmanuel Ng, a Singapore-based economist at Oversea-Chinese Banking Corp., wrote in a research note today. He estimated the currency will trade in a 10,700-10,850 range today.

The rupiah traded 1.8 percent higher at 10,708 per dollar as of 1:14 p.m. in Jakarta, after earlier reaching a four-month high of 10,660. It has strengthened 12 percent since Feb. 26, when Indonesia raised $3 billion selling conventional debt.

---------------------------
Romania offers citizenship to 1m Moldovans

By Thomas Escritt in Chisinau

Published: April 15 2009 13:03 | Last updated: April 15 2009 19:12

The president of Romania has offered fast-track citizenship to up to 1m Moldovans, saying Bucharest could not stand idly by as an “iron curtain” descended on its eastern border.

The move, which would effectively give EU citizenship to almost a quarter of the population of Europe’s poorest state, comes amid rising tension over contested elections in Moldova this month.

Thursday sees the result of a recount that could hand outright victory to the ruling Communist party of Vladimir Voronin, a former Soviet general.

On Wednesday night Natalia Morari, the Russian journalist who used social networking sites and text messages to organise protests against the election result, was sentenced to 10 days’ house arrest.

“I have asked the government as a matter of urgency to change the citizenship law so we can facilitate and speed up the process of regaining citizenship for those Romanians and their families who lost it abusively,” Traian Basescu, Romania’s president, told parliament.

Romania’s move would give citizenship to anyone who has at least one grandparent who was once a Romanian national.

Moldova is divided between speakers of Slavic languages, many of them marooned after the fall of the Soviet Union, and speakers of Moldovan, a variant of Romanian, who tend to support the opposition. “We cannot accept that the Romanians across the Prut river are isolated from the rest of Europe,” Mr Basescu said.

Tensions have been mounting in the nation of 4.4m since elections on April 5 handed victory to the Communists, leaving them one seat short of the 61 needed to appoint a new president.

Three opposition parties say the election was rigged by padding out the electoral roll with the names of the dead and long-term émigrés.

The opposition fears the recount may favour the Communists, who are just 200 votes short of an outright victory. They are demanding to continue the electoral roll vetting process, which was suspended by a court decision on Wednesday night.

One western diplomat said there was evidence of multiple and fraudulent voting in two counties.

Vlad Filat, leader of the opposition Liberal Democrat party, criticised what Moldovans see as EU passivity in the face of human rights violations on its border. “We understand . . . they have to engage with Voronin, but the serious human rights abuses . . . are more urgent,” he told the Financial Times.

Hundreds of protesters have been arrested since peaceful protests spiralled into violence last week.

EU officials are understood to worry that a harder line might drive Moldova, which is heading towards bankruptcy and may need foreign aid this year, into the arms of Russia.

Mr Voronin, who is standing down after his second four-year presidential term, had close relations with Moscow until a split over the future of the breakaway province of Transdnistria. Opposition parties say his subsequent enthusiasm for European integration has been a rhetorical ploy.

--------------------------
【北ミサイル発射】米軍、最新鋭海上配備レーダー（ＳＢＸ）使用せず
2009.4.16 19:18

　【ワシントン＝有元隆志】北朝鮮の弾道ミサイル発射に際し、米軍が保有する最新鋭のミサイル追尾レーダーである「海上配備Ｘバンドレーダー（ＳＢＸ）」の使用が北方軍の展開要請にもかかわらず、ゲーツ国防長官に却下されていたことが１５日明らかになった。同日付の米紙ワシントン・タイムズが軍高官らの話として報じ、北方軍当局者も産経新聞に事実関係を認めた。

　ＳＢＸが補修作業中だったこともあるが、ミサイル発射に備えて展開させることが北朝鮮側を刺激し、６カ国協議再開に向けた交渉にも影響が出るのではとの懸念が政権内にあったという。

　米軍高官が同紙に語ったところによると、北方軍のレヌアート司令官はミサイルが米国や同盟国に向けて発射されることを懸念し、ＳＢＸの使用を求めた。しかし、オバマ政権の文民の高官らは「人工衛星打ち上げ」との北朝鮮の主張を受け入れたという。北方軍側も宇宙空間への発射が明確になったとして要請を取り下げた。

　ただ、元軍当局者らは仮にＳＢＸが使用されていたら弾道ミサイルの航跡など、より詳細な情報を入手できただろうとして、ゲーツ長官らの決定に疑問を投げかけているという。

　アラスカ州アダック島を母港とするＳＢＸは総額約９億ドル（約９００億円）をかけて２００５年に配備された。石油掘削用の建築物リグに改造を加え、上部に大型レーダーを搭載している。自力航行が可能で、必要に応じて移動する。５０００キロ近く離れた場所からもミサイルを探知できる。

　オベリング前国防総省ミサイル防衛局長は同紙に対して、青森県に配備されている地上型のＸバンドレーダーなどと比べ、３、４倍の探知能力があると指摘している。

----------------------
スイス最大の銀行が２四半期連続で最終赤字　米富裕層の預金流出で
2009.4.16 19:36

　【ロンドン＝木村正人】スイス最大の金融機関ＵＢＳは１５日開いた臨時株主総会で、１～３月期（第１四半期）に約２０億スイスフラン（約１７３０億円）の最終赤字の見通しを発表した。

　赤字は２四半期連続で、不良資産処理に伴う損失負担が響いた。ＵＢＳは米国の脱税捜査に関連して一部顧客情報を提供したのを契機に、富裕層からの預金流出が加速している。

　１～３月期の不良資産処理額は約３９億スイスフランにのぼった。昨年１０～１２月期の赤字は８１億スイスフランで、赤字額は大幅に縮小された。

　ＵＢＳは同日の総会でグリューベル最高経営責任者（ＣＥＯ）が退任し、ライバルの大手行クレディ・スイスから後任を招いた。同ＣＥＯは「ＵＢＳには不確かな要素が多く残されており、楽観できない」と述べ、大幅な人員削減計画を発表。それによると、２０１０年に全世界の従業員数を１１％以上削減して６万７５００人程度に絞るなど、総額３５億～４０億スイスフランのコストを削減する。ＵＢＳはこれまでに１万１１７０人の人員を削減している。

　英紙フィナンシャル・タイムズは、今回の損失でＵＢＳの自己資本比率が現在の１１％から１０％に下がる可能性を指摘している。ＵＢＳは、不良資産を分離するため公的資金の注入やスイス国立銀行（中央銀行）の融資を受けている。

　ＵＢＳでは、米国で米富裕層から預金を集めるため、資産隠しの悪質な手口を顧客に伝授していたことが発覚。米政府から米国内の営業資格停止を突き付けられた同行は、スイス銀行の守秘義務を緩和し、脱税を疑われる顧客情報の提供に応じた。これにより米富裕層の預金引き出しが相次ぎ、１～３月期に富裕層向け資産運用とスイス国内の銀行事業で総額２３０億スイスフランの資金が流出した。

-------------------------
ニカラグアの旅券所持　タイのタクシン元首相
2009.4.16 18:36
タクシン元首相の絵を掲げ、首相府から撤収する反政府派のデモ隊＝１４日午後、バンコク（共同）タクシン元首相の絵を掲げ、首相府から撤収する反政府派のデモ隊＝１４日午後、バンコク（共同）

　中米のニカラグア政府は１５日、海外逃亡中のタイのタクシン元首相がニカラグア政府の特別大使として同国発行の外交旅券を所持していることを明らかにした。ＡＰ通信などが１６日、報じた。

　タイ政府は１５日、元首相の旅券を１２日付で無効にしたと発表。国際刑事警察機構（ＩＣＰＯ）に国際逮捕手配書の発行を要請するなど、元首相の身柄確保に向けた動きを進めている。しかし、元首相の顧問弁護士は「複数の国の旅券を所持しており、問題はない」と説明していた。

--------------------------
UBS seeking to drop accounts for undeclared EU cash

30 mins ago
Reuters

* Print Story

Swiss bank UBS , under pressure from an international campaign against tax evasion, wants to drop accounts for undeclared cash from Europe Union clients, Sonntagszeitung newspaper reported on Sunday. Skip related content
Related photos / videos
The logo of UBS bank is seen at its office in Luxembourg Enlarge photo
Related content

* Obama urges Caribbean tax havens to be transparent
* Obama urges Carribean tax havens to be transparent
* OECD chief tells Swiss to face up to 'harder' tax climate
* Related Hot Topic: Tax

Have your say: Tax

Scaling back on the controversial accounts would be the most radical step so far by the bank in moves to curb its offshore business.

UBS, the world's largest wealth manager in terms of assets, is already exiting the offshore business for U.S. clients.

The paper, citing a high-ranked UBS manager, said the bank would separate out untaxed assets and try to get rid of them.

"UBS exits the lucrative business of undeclared money," ran the headline on the paper's story.

UBS spokeswoman Sabine Jaenecke declined to comment on the report. "We are assessing our crossborder business, but that is not new," she said. "Everything else is speculation, which we don't comment on."

The offshore business with EU clients is much bigger than with U.S. clients, although the bank does not disclose details on offshore accounts.

Sonntagszeitung said UBS clients from Germany, France, Britain and other EU countries would be moved to special units. They would no longer receive visits nor advice via telephone or email. Only a minimal service in Switzerland would be kept.

Swiss banks, especially UBS, have come under pressure as countries like the United States and Germany step up the fight against tax evasion.

Switzerland has recently relaxed its banking secrecy and agreed to cooperate more in cases of tax evasion.

UBS, which is struggling to recover from record losses and billions in writedowns due to the financial crisis, agreed in February to reveal details of some U.S. clients and said it would pay a $780 million (527.8 million pounds) fine to settle a U.S. tax fraud investigation alleging it helped clients dodge taxes.

U.S. authorities are suing UBS to try to obtain details of 52,000 undeclared accounts holding billions of dollars that they allege are held by the bank for U.S. clients.

Last week, UBS said it saw outflows of 23 billion Swiss francs ($19.91 billion) in its wealth management and Swiss banking business in the first quarter, mainly after the hand-over of the client data.

--------------------------
OECD chief tells Swiss to face up to 'harder' tax climate

Yesterday, 05:01 pm
AFP

* Print Story

OECD chief Angel Gurria told Switzerland to face up to a new "harder" international climate surrounding tax secrecy, in an interview published Saturday. Skip related content
Related photos / videos
OECD chief Angel Gurria Enlarge photo
Related content

* Tesco to double in-store phone shops to 100
* Geithner sees no new banking crisis
* Further ECB rate cut would be by 25 bps
* Related Hot Topic: Financial Crisis

Have your say: Financial Crisis

"When Switzerland raised objections, we understood but our reaction was to say: there's a new, much harder, climate. Rather than being offended, try to understand what it means," Gurria told the Swiss newspaper Le Temps.

The Swiss government moved to ease banking secrecy last month by seeking selective exchange of information with foreign countries, following months of pressure in a crackdown on tax evasion triggered by the financial crisis.

But Switzerland protested at being placed on the Organisation of Economic Cooperation and Development's 'grey' list of about 40 financial centres that "have committed to the internationally agreed tax standard, but have not yet substantially implemented" it.

Gurria suggested that the criteria for moving out of that section into the list of compliant states or territories were rather loose.

"My idea is to have proof that they act very quickly to fulfill their commitments," said the OECD chief.

"Even if a country still has zero treaties in six months, because of its political process, that won't mean nothing has been done."

"But when you have zero treaties, which is the case with Switzerland, it's rather academic to discuss whether the right figure is 10, 11 or 14," Gurria said.

Several territories on the OECD list, including Switzerland, are renegotiating dual taxation treaties with other countries. In the Swiss case, the first agreement is likely to be submitted to a nationwide referendum.

Switzerland is one of the 30 members of the OECD, an organisation of major industrialised countries.

-----------------------
Dubai’s ruler says the worst is over

By Simeon Kerr in Dubai

Published: April 19 2009 23:40 | Last updated: April 19 2009 23:40

The ruler of Dubai said on Sunday the government may still have to intervene to offer financial support to some economic sectors in the troubled Gulf emirate, but he believes that “the worst is over and behind us”.

The acknowledgement by Sheikh Mohammed bin Rashid al-Maktoum of the impact of the financial crisis is a shift from his previous statements that the emirate has been unaffected by the global financial crisis.

Sheikh Mohammed, answering questions in his capacity as the prime minister of the United Arab Emirates, said the economy would face slower growth this year. But he insisted that the government's action to support domestic banks and its stimulus packages had helped the economy “shift...from the crisis mode to the solution”.

“Increasing financial support to other business sectors is probable, pending the actual needs of each particular sector,” he said.

The online publication of his responses is a rare display of open public accountability in the Gulf. The ruler used the opportunity to play down claims that the economy was on the skids and deny ongoing rumours that he is in poor health.

He insisted that the UAE was well placed to bounce back. “The impact of the crisis on our economy was significant during the last quarter of 2008, yet it was not as harsh as on other major economies,” he said.

Dubai has witnessed a collapse in its real estate market and a slowdown in other important parts of the services-led economy, such as tourism and trade.

Spiralling debt and a lack of short-term funding forced the government to take out a $10bn loan from the central bank in February to prevent default and help pay government invoices.

Sheikh Mohammed said the loan was testament to the strength of the UAE federation, of which Dubai is the second largest member behind oil-rich Abu Dhabi.

Sheikh Khalifa bin Zayed Al Nahyan, the UAE's president and Abu Dhabi ruler, recently toured Dubai with Sheikh Mohammed in a public display of unity.

The ruler said the impact of the liquidity crisis on the emirate's $75bn-$80bn loan portfolio, which had mainly been used to fund infrastructure, would only have a temporary impact.

“All our projects under implementation have not ceased, and we are paying our loans and debts on time, and all suppliers and contractors have begun to receive their entitlements,” he said.

The impact of the $10bn federal loan was starting to be felt in the local economy, a top businessman said yesterday.

Abdul Aziz al-Ghurair, chief executive of Mashreq, Dubai's largest private sector bank, told the Financial Times yesterday that bankers were easing lending terms as confidence returned to the economy.

But he admitted that some payments to contractors were still delayed.

------------------------
Barclays hopes the worst is over for group

By Peter Thal Larsen in London

Published: April 9 2009 03:00 | Last updated: April 9 2009 03:00

When John Varley and Marcus Agius take the stage at Barclays' annual general meeting in a fortnight, the chief executive and chairman of the UK banking group will be hoping they are over the worst.

A few months ago, Barclays was fighting off speculation it would be forced to seek government help. Investors were still seething about the bank's decision to turn to Middle Eastern investors for £7bn ($10.3bn) in fresh capital last autumn, bypassing existing shareholders. Opposition politicians were raising questions about its aggressive tax structuring activities.

In the past few weeks there have been signs the storm is easing. Most notably, the Financial Services Authority last month concluded the bank had enough capital to withstand even a severe global economic downturn. The bank is close to boosting its capital reserves further by selling iShares, its exchange-traded funds subsidiary, to CVC, the private equity group. Barclays shares have trebled in value since touching 51.2p in late January. They closed yesterday at 157.8p, up 0.10p.

Even the prospect of a shareholder revolt aimed at Mr Agius has faded.

Barclays Capital - the cause of much suspicion and speculation during the credit crisis - is also one of the reasons for the bank's new bounce. Its opportunistic acquisition of the US assets of Lehman Brothers, combined with troubles at some rivals, have boosted revenues. The bank traded twice as much foreign exchange in the first quarter than it did in the same period two years ago. Fixed income trading volumes were up 65 per cent over the same period.

But there are still problems. First, the bank's capital ratios continue to look weak. Though Barclays' tier one capital ratio - a key measure of balance sheet strength - is roughly the same as HSBC's, its capital base includes a higher proportion of hybrid debt.

The iShares sale will help boost its equity capital. The bank could further boost its capital ratios by buying back debt instruments at a discount to face value, though it would have to be careful not to upset the investors who are large buyers of debt that Barclays Capital issues on behalf of other borrowers.

Some investors are concerned about packages of corporate loans whose value is protected by ailing monoline insurers. But people close to the bank say the FSA's stress test would have examined these exposures.

Barclays also needs to patch up relations with the British government. That is why in the next few weeks it is likely to sign up to commitments to new lending in return for increasing its use of the government's credit guarantee scheme.

If the recent revival lasts, Mr Varley's determination to keep Barclays clear of government intervention will have been vindicated.

But it is probably too soon for the bank to declare victory.

------------------------
Service sector data hint worst is over

By Daniel Pimlott

Published: April 4 2009 03:00 | Last updated: April 4 2009 03:00

The service sector declined at a slower pace in March than it has done for six months in another sign that the recession may be easing, according to data published yesterday.

The services purchasing managers' index, a closely watched survey of businesses from banks to restaurants, rose for the fourth month in a row and reached a level of 44.5 last month up from 43.2 in February. Any reading below 50 signals contraction.

However, business activity continues to fall just slightly less rapidly than it did in November, when the survey reached a record low for its 13-year history, and job losses are now accelerating.

"The unexpected firmness of this survey rounds out a week of data which, while by no means heralding recovery, hint at the worst of the downturn being behind us," said Richard McGuire, RBC Capital Markets strategist.

Evidence of a slowing contraction in the services industry comes after the purchasing managers' index for manufacturing and construction has also shown a less drastic rate of decline. Official services sector data from the Office for National Statistics has shown little sign of improvement in output, but is only available up until January of this year.

The ongoing declines in the private sector so far this year suggest the economy is likely to have shrunk at a similar pace in the first quarter as in the final three months of last year, which saw the sharpest quarterly drop in gross domestic product since 1980. But economists have been heartened that the recession has not become more pronounced, taking it as a signal that fiscal and monetary stimuli have been feeding through and that the downturn is near or past its trough.

The service sector survey yesterday showed a slowing decline in existing and new business and a pick up in expectations for work, but signalled that companies were cutting staff at the fastest rate since records began in 1996. Those businesses that did see an improvement in conditions said it had been achieved only through "aggressive sales techniques, advertising and . . . competitive rivals going out of business".

Karen Ward, an economist at HSBC, said: "Unemployment is going to remain a concern for the next few months, but the other activity indicators will show that the stimulus currently in place - in the form of lower interest rates, weaker sterling, and schemes to support the flow of credit into the real economy - are slowly starting to work."

------------------------
China set to invest again in Europe

By Tom Mitchell in Boao

Published: April 19 2009 22:54 | Last updated: April 20 2009 00:36

The head of China’s flagship sovereign wealth fund is looking to invest in Europe after expressing relief that snubs from the continent saved Beijing from embarrassing investment losses last year.

Lou Jiwei, head of China Investment Corp, said he was pleased he did not make a single trip to Europe in 2008 after EU officials expressed concerns about his fund’s transparency and intentions.

But speaking at the Boao Forum for Asia, China’s riposte to the annual World Economic Forum meeting in Davos, he said he was considering investing on the continent again, now that European officials have been humbled by the global financial crisis. “I have to thank these European officials,” Mr Lou said. “They saved me a lot of money. Now they come to me without conditions and I am beginning to consider making investments in Europe again.”

Mr Lou did not mention CIC’s experience in the US, where the fund made controversial – and costly – investments in Blackstone, the private equity group, and Morgan Stanley on the eve of the crisis.

His comments, made at the forum on the southern Chinese island of Hainan, reflect how China’s leaders are emboldened by their country’s stature as a rock of relative economic stability able to weather the global financial storm.

Topping a list of senior Chinese government officials and leaders speaking at the forum, premier Wen Jiabao was confident that the country’s economy was turning a corner, despite first-quarter growth of 6.1 per cent – the lowest since quarterly reporting started 17 years ago.

“China’s [stimulus] package is already paying off,” Mr Wen said at the forum’s main event. “The situation is better than expected.”

Liu Mingkang, chairman of the China Banking Regulatory Commission, added: “My view on the existing situation is cautious optimism. The potential of Chinese domestic consumption has been triggered.”

Mr Wen echoed the concerns he first voiced last month about the future value of China’s US dollar-denominated holdings, urging strengthened “supervision of the economic policies of the main reserve-currency economies and . . . the establishment of a diversified international monetary system”.

China has recently moved to increase the international profile of its own non-convertible currency, signing six bilateral swap agreements totalling Rmb650bn ($95bn) and announcing a trade settlement pilot project allowing selected companies in Hong Kong, Shanghai and Guangdong province to settle cross-border transactions in renminbi.

The project, details of which are still pending, could be extended in future to other overseas territories and countries, especially in south-east Asian nations where border trade with China has generated large pools of renminbi.

Zhou Xiaochuan, China’s central bank governor, declined to elaborate on his proposal last month to develop special drawing rights at the International Monetary Fund as an alternative reserve currency to the US dollar.

----------------------
Worst of recession over, says CBI

By Daniel Pimlott, Economics Reporter

Published: April 20 2009 00:25 | Last updated: April 20 2009 00:25

The bulk of the recession has already past, according to CBI forecasts, but a recovery is not expected to begin until the spring of 2010.

Estimates by the employers’ group suggest the first quarter of this year was the worst period of the recession so far, with a 1.8 per cent decline in output compared with a 1.6 per cent fall in gross domestic product in the final quarter of last year and a 0.7 per cent drop in the third quarter.

But that brings the fall in output to 4 per cent so far, which is about four-fifths of the total 5.1 per cent fall in GDP that the CBI expects.

“It is fair to say we are past the worst but it is too early to call this a recovery,” said Ian McCafferty, chief CBI economist.

Mr McCafferty said the “rate of contraction will moderate quite noticeably from the second quarter of this year” but forecast 2010 would see at best a fragile recovery that would not produce growth strong enough to reduce unemployment.

Signs of recovery were already evident among manufacturers, some of whom reported that the massive sell-off of inventories that caused much of the decline in GDP in the fourth quarter might be stabilising.

Meanwhile, there was anecdotal evidence that credit conditions had improved for businesses since January.

Combined with falling interbank lending costs and some signs that quantitative easing was having a positive effect, the economy was going through a slowing pace of decline, the CBI said.

It expects the economy to decline by 3.9 per cent in total this year, worse than the 3.3 per cent drop previously forecast, but close to estimates by the Bank of England, the International Monetary Fund and the Organisation for Economic Co-operation and Development.

“The evidence is still very tentative but there are some hopeful signs of stabilisation,” said Mr McCafferty.

The CBI expects the shrinking economy and mounting job losses to help drive up the public sector net borrowing requirement to £157bn this year and £172bn next year – its highest as a proportion of GDP since the second world war.

The forecast of a slowing pace of decline was echoed by the EEF engineering trade organisation.

“For the past six months manufacturers have been grappling with a collapse in global demand, but attention is now turning to preparing for the upturn,” it said.

------------------------
London urged to lead bonus reform

By Brian Groom, Business and Employment Editor

Published: April 19 2009 23:30 | Last updated: April 20 2009 00:01

Britain should take a lead in reforming the bonus culture for senior bank executives by adopting a less volatile form of incentive and requiring shareholders to approve remuneration advisers and their fees, a new report is to urge.

The proposals by the Policy Exchange, an influential centre-right think-tank, come amid a swathe of official moves to respond to public anger over the role bonuses have played in the financial crisis.

The Financial Services Authority has threatened to raise capital requirements for banks that reward short-term risk-taking. The Financial Reporting Council is reviewing the Combined Code, the corporate governance template for quoted companies, and the government has asked Sir David Walker, the former City watchdog, to review bank governance.

The Policy Exchange report – written by Peter Brown, a veteran compensation adviser and company chairman, and Helen Thomas, a research fellow – calls for redeemable convertible preference shares rather than common equity to be used in many long-term remuneration packages.

These would pay a fixed annual dividend for five years and, at the end of that time, could be converted into equity or redeemed for cash under a formula limiting the potential gains and losses.

The authors also argue that the appointment of remuneration consultants should be approved by a shareholder vote, as is done with auditors. At present the appointment is made by remuneration committees of company boards, which the authors say are prey to conflicts of interest since consultants retain their fees by proposing rewards that are beneficial to the board.

“These are simple and quick-to-implement recommendations and they can make real improvements to executive compensation schemes,” Mr Brown said. “It would be nice if Britain could take the lead and we could start to restore the City of London’s reputation.”

The report argues that incentives based on shares and options create poorly aligned incentives because they fluctuate with the market rather than the company’s performance. Options can also encourage executives to back risky takeover bids, because they raise equity value while at the same time triggering encashment.

Under the report’s proposal, executives could only cash the redeemable convertible preference shares early with the company’s agreement. The shares would pay an annual dividend of, say, 1.5 per cent. At the redemption date they could be converted into equity on the basis of two preference shares per ordinary share or redeemed for cash at a price set at the time of issue. This could limit the gains or losses to 50 per cent or less of the underlying equity price.

------------------------
Wealthy face ‘detailed’ tax scrutiny

By Vanessa Houlder

Published: April 20 2009 05:41 | Last updated: April 20 2009 05:41

The rich face closer scrutiny of their tax affairs after the launch of a Revenue unit this month, as the impact of Alistair Darling’s planned tax rises on their behaviour attracts fresh attention.

The Institute for Fiscal Studies, an independent think-tank, will on Monday publish research ahead of the Budget showing how the government’s room for manoeuvre on taxing the wealthiest is limited by likely changes in their behaviour. It expects those with incomes of more than £150,000 ($221,854) to respond to the new 45 per cent tax rate in ways that will significantly reduce the extra revenues raised.

The Revenue is in the throes of moving about 5,000 of its “most wealthy and complex customers” into a specialist unit that will be able to give their returns more expert scrutiny. Leonie Kerswill of PwC, the professional services group, said: “They can expect detailed reviews of their affairs.”

David Kilshaw, head of private client advisory at KPMG, said the move reflected a more sophisticated approach by the Revenue. “They are being much quicker at closing down loopholes. Before, they let things run.”

But he said wealthy clients would benefit from the Revenue’s efforts to gain a better understanding of them.

He said rich individuals were braced for more tax rises, particularly on bonuses, which were viewed as a “soft target”. “There must be a real worry that tax rates will rise.”

Revenue & Customs said: “We are seeking to understand better this group of customers and their particular needs. We want to make it easier for them to get things right. The new unit is being established so that HMRC can deal more effectively and efficiently with these customers.”

The need for revenue authorities to raise their expertise in the issues underpinning the tax affairs of the wealthiest will be underlined in a forthcoming report by the Organisation for Economic Co-operation and Development into compliance by “high net worth individuals”.

A response by the Chartered Institute of Taxation to the draft paper stressed the importance of addressing the affairs of the wealthiest individuals fairly and consistently. It said: “Those [high net worth individuals] are often very mobile and can relatively easily move their domestic and business relationships to lower tax jurisdictions.”

In January, the IFS said it expected a “substantial” behavioural response to the 45 per cent tax rate for incomes of over £150,000. “The very highest income earners will have the option of paying more money into pension funds to attract tax relief at 45 per cent or might emigrate from the UK, not migrate to the UK, work less hard or even retire earlier in response to this change.”

The IFS is particularly critical of the “spikes” in the tax schedule caused by the planned withdrawal of the income tax personal allowance from individuals with incomes greater than £100,000 in two stages from 2010-11. In effect, this creates two 60 per cent income tax bands – between £100,000 and £106,475, and between £140,000 and £146,475 – which is likely to distort the behaviour of affected taxpayers “quite considerably”.

------------------------
Biggest Money in Currencies Is Made Selling Options (Update1)
Share | Email | Print | A A A

By Ye Xie and Liz Capo McCormick

April 20 (Bloomberg) -- This year’s most profitable foreign-exchange trade is signaling increased optimism that the first global recession since World War II is easing.

Bets that currency swings will continue falling from record highs produced profits in each of the past five months for a 32 percent gain, the best performance for that length of time, according to ABN Amro indexes. The strategy was the only one of four currency tactics simulated by ABN that made money in the first quarter.

Currency fluctuations ebbed as global economies recovered from the turmoil that followed Russia’s 1998 default and the Sept. 11, 2001, terrorist strikes. Now, the JPMorgan Chase & Co. benchmark index of investor expectations for currency swings, known as implied volatility, has fallen to 14.4 percent from its 27 percent October record. The G7 Volatility Index’s decline since mid-January is the steepest three-month drop since its 1992 inception.

“Big currency moves are behind us,” said Maxime Tessier, chief of foreign exchange at Montreal-based Caisse de Depot et Placement du Quebec, Canada’s biggest pension fund manager, with C$120 billion ($98.6 billion) in assets. “The volatility spike has to unwind itself over time. Selling volatility has been the winning trade so far this year and will continue to work well.”

Past Experience

That may be good news for the global economy. Within a week of the 9/11 attacks, the JPMorgan index jumped to 13 percent from 11 percent. By April 2002, that gauge of expectations for U.S. dollar swings over the coming three months versus the yen, euro, pound, Swiss franc, Australian dollar and Canadian dollar had fallen to 8 percent as the U.S. recovered from a recession.

After Russia defaulted on $40 billion of debt in August 1998 during the Asian financial crisis, the index surged to almost 19 percent in October, from 10 percent in May. It had fallen by half when the global economy emerged from the meltdown the next summer.

Today, investors are becoming more convinced that unprecedented sums pledged by the world’s major economies, including $12.8 trillion from the U.S., will stem the worst financial crisis since the Great Depression. The U.S. economy will grow 0.3 percent in the third quarter, from a year earlier, according to the median forecast in a Bloomberg survey of 59 analysts. It probably contracted 5 percent in the first quarter and will shrink 2 percent in the second, the survey shows.

‘Good Description’

“FX vol tends to be correlated with the business cycle, and normally peaks after troughs in growth,” Goldman Sachs Group Inc. strategists led by London-based Thomas Stolper wrote to clients on April 8. “That appears to be a good description of the current situation.”

JPMorgan’s index remains elevated relative to historic levels, signaling continued demand for protection. The index, which usually moves in tandem with actual fluctuations, remains above 14 percent, a level it has breached only seven times at closing since its mid-1992 creation.

Expectations for swings in the U.S. dollar versus the Canadian dollar over the next two years are about 15 percent, compared with 14 percent for the next two months, suggesting investors see currency volatility remaining elevated, Bloomberg data show.

“Although volatility levels have peaked, they are still pricing in significant market uncertainty in the years ahead,” said Geoffrey Yu, a London-based foreign-exchange strategist at UBS AG, the world’s second-biggest currency trader. “So long as the banking system is still under stress, people will want protection. We are far from giving banks a clean bill of health, which means there will be more nasty shocks along the way.”

$4 Trillion in Losses

Since the start of 2007, the world’s largest financial companies have reported loan-related writedowns and losses of $1.3 trillion, about the size of Russia’s economy. Global losses may total $4 trillion, the International Monetary Fund will announce on April 20, according to an April 8 report in the Financial Times.

RBS Securities Inc. takes a different view. In an April 15 note to clients, it said exchange rates for the euro, yen and the dollar suggest there is little room for extreme swings because they are closer to their 10-year averages than any time since 1997.

Volatility expectations on three-month euro-dollar options fell to 14.09 percent today from 25.39 percent in December, the highest level since Bloomberg started compiling that data in 1998. Tessier predicted it will decline to about 11 percent.

‘Doing the Opposite’

“People are still willing to pay a premium for insurance against disaster, which is keeping implied volatility from falling too much,” said London-based Henrik Pedersen, chief investment officer at Pareto Investment Management Ltd. “That is probably why there is value in doing the opposite” by selling options, said Pedersen, whose firm oversees more than $46 billion. Traders use implied volatility to set options prices.

Goldman Sachs’ April 8 analysis concluded that actual volatility on one-year euro-dollar options, which stood at 15.7 percent on April 14, is higher than the bank’s economic model suggests it should be by 4.7 points. The deviation was the most since the mid-1970s, Goldman Sachs said.

Lower volatility typically follows the easing of monetary policy by 18 to 24 months, said Alan Ruskin, head of international currency strategy in North America at RBS in Greenwich, Connecticut, in an April 15 research note. The Federal Reserve lowered interest rates to a range of zero to 0.25 percent from 5.25 percent 19 months ago, in September 2007, in an attempt to stave off the recession as the housing market collapsed.

‘Reassuring Investors’

“I would expect volatility to continue to drop,” said Andrew Milligan, the global strategy chief at Standard Life Investments, which oversees $181 billion in Edinburgh. “We are still expecting to see a lot of policy statements reassuring investors that the governments are in charge, and we will see an upturn in economic activities.”

A so-called short volatility strategy, where investors sell options that protect buyers against currency swings, gained 32 percent from Nov. 1 through March 31, ABN’s Volatility Capture Style Index shows. That’s its best five-month performance since the index’s 1974 start and among the top dozen gains for that length of time in any of ABN’s four currency-trade gauges. The volatility strategy had lost a record 29 percent in October. Its 12.8 percent drop last year followed smaller drops from 2005 to 2007 -- its first multiyear losing streak.

Straddles, Strangles

Investors typically short volatility by simultaneously selling the right to buy and to sell a currency at set strike prices, known as call and put options. When volatility expectations fall, so does the price of that protection, and the seller makes money. Such strategies can use identical strike prices, known as straddles, or different ones, strangles, with the former being riskier.

An investor who on Jan. 2 sold $10 million worth of three- month euro-dollar option strangles with a call price of $1.5135 and a put price of $1.2921 would have reaped a $338,000 profit at the end of the first quarter as implied volatility fell to about 18 percent from about 23 percent, Bloomberg data show.

Momtchil Pojarliev, currency chief at Hermes Pension Management Ltd. in London, said he has been selling volatility since October, mainly with short strangles, which he considers “definitely the winning bet.” One of his positions is on the Canadian dollar versus the U.S. currency. Pajarliev, whose company oversees about $39 billion, predicted one-year implied volatility on the pair will drop 3 points to about 12 percent.

Carry Trade

Smaller fluctuations benefit another common currency strategy, the carry trade, where funds borrowed from countries with lower interest costs are invested in those with higher rates, allowing investors to pocket the difference. Low volatility decreases the chance that sudden moves will wipe out carry trade profits.

An increase in carry trades would boost currencies from higher-interest rate nations, such as the Australian dollar, and hurt legal tender from economies with lower rates, including the yen. Over the past two months, the dollar in Australia, where the central bank benchmark rate is 3 percent, has gained 18 percent to 70.86 yen in Japan, where the corresponding rate is 0.1 percent.

The Aussie lost 35 percent against the yen last year, when three-month volatility expectations on the pair more than tripled to a record 54 percent between January and October. It is now 27 percent.

In Vogue

Selling option volatility was in vogue after the 2001 recession ended until mid-2007. During that period, increased transparency by central banks and stable interest rates damped currency swings. The ABN volatility-strategy index’s best year was 2004, when it gained 26 percent.

JPMorgan’s volatility index for emerging markets rose to a record 35.8 percent in October, from about 10 percent in August, as currencies from Brazil’s real to Iceland’s krona weakened.

The volatility and currency depreciation caused Taesan LCD Co., which makes computer screen lights in Pyeongtaek, South Korea, to collapse in September as its currency derivative bets went awry. Gruma SAB, Mexico’s largest maker of corn flour for tortillas, reported a 11.1 billion peso ($844 million) loss in the fourth-quarter, in part from bad currency wagers.

“People got burned badly last year,” said Pojarliev of Hermes Pension Management. Now, “fear is disappearing. We are moving towards a normal environment,” he said. “We could see more normal levels in volatility.”

------------------------
Daimler, Porsche CEOs Head to Shanghai as China Sales Near U.S.
Share | Email | Print | A A A

By Bret Okeson

April 17 (Bloomberg) -- Daimler AG will skip this year’s Tokyo Motor Show, Nissan Motor Co. passed on Frankfurt, Europe’s largest car extravaganza and Porsche SE will bypass Detroit. All will be in Shanghai.

Porsche SE Chief Executive Officer Wendelin Wiedeking will unveil the new Panamera sports sedan in Shanghai. Daimler’s Dieter Zetsche, Volkswagen AG’s Martin Winterkorn and Toyota Motor Corp.’s Katsuaki Watanabe will also be there.

“The hope for every automaker in the world is riding on China,” said Ricon Xia, an analyst at Daiwa Institute of Research (H.K.) Ltd. in Shanghai. “No matter how many difficulties they are facing, they have to be here and the Shanghai Auto Show will be the show for the year.”

A record number of automakers will attend the Shanghai Motor Show, which starts on Monday, as China threatens to usurp the U.S. as the world’s biggest auto market. General Motor Corp.’s China sales surged to a record last month, at the same time its U.S. sales plunged 45 percent.

More than 1,500 companies will attend the show, the most since it started in 1985, said Wang Xia, an official with the organizer. More than 600,000 people are expected to attend the nine-day event at the Shanghai New International EXPO Centre, he said.

“We don’t have enough space and there are people still asking for more,” said Lawrence Lu, executive vice president of Shanghai International Exhibition Co. “A lot of foreign exhibitors can see the potential here.”

Booming Market

China’s vehicle sales have surged an average 20 percent a year in the past decade, making it the biggest market for GM and Volkswagen after their home countries. Still, vehicle ownership per person is one-third the world average and about the level of the U.S. in 1925 and Japan in 1965.

Passenger car sales jumped 10 percent in March to a record 772,400 after the government cut retail taxes and gave subsidies to help rural residents buy vehicles. The growth compares with a 37 percent plunge in the U.S. and a 32 percent decline in Japan.

Total auto sales in China may rise to more than 10 million this year, according to the government’s plan to help stimulate vehicle demand. In contrast, CSM Worldwide Inc. slashed its U.S. auto sales forecast for this year to 9.7 million, compared with 13.2 million in 2008 and its initial 2009 forecast of 10.7 million vehicles.

GM, whose U.S. sales plunged 49 percent in the first quarter, doubled its 2009 forecast for China’s market growth as tax cuts and subsidies revived demand. The carmaker will show 37 production and concept models at Shanghai. The company’s CEO, Fritz Henderson, canceled plans to attend the show, due to “business requirements,” GM said in an e-mail.

“General Motors has made a long-term commitment to China,” the automaker’s China president Kevin Wale said April 2. “Despite the challenges that GM and our industry now face, we believe our best years are ahead of us.”

Overseas Expansion

With China set to overtake the U.S. as the world’s largest auto market, Chinese carmakers are looking abroad. Geely Holding Group Co. has been in talks to buy Ford Motor Co.’s Volvo unit for more than a year, according to people familiar with the matter. Ford sold its luxury Jaguar and Land Rover brands to India’s Tata Motors Ltd.

In anticipation of rising sales, foreign automakers are expanding in China even as they close factories and fire workers elsewhere.

Volkswagen, which has invested a total of 6.8 billion euros ($9 billion) in China, aims to add at least four new models a year and double its number of dealers by 2018 to double sales to 2 million vehicles. The carmaker curbed German production in the first quarter and cut 16,500 temporary jobs worldwide.

GM, which plans to shutter 15 factories in the U.S. by 2013, expects to double its sales in China to more than 2 million vehicles a year during the next five years by adding more than 30 new and upgraded models.

Toyota’s Growth

Toyota, which slashed global production by 50 percent in February, still plans to open a factory in the northeastern city of Changchun with partner China FAW Group Corp, said Masahiro Kato, president of Toyota Motor (China) Investment Co.

The plant will increase the Toyota City, Japan-based automaker’s production capacity in China by 11 percent to 1 million vehicles a year.

The company also plans to boost the number of dealerships selling luxury Lexus vehicles in China by a third this year to about 60, said Godfrey Tsang, vice president of Toyota China.

Toyota, together with its partners, will have its biggest ever display at any Chinese auto show with 50 models, the company said in a statement.

-------------------------
German Social Democrats pitch higher taxes for rich

Saturday, April 18 10:12 pm
AFP

* Print Story

Germany's Social Democrats, lagging in opinion polls, called Saturday for higher taxes for the rich, and lower taxes for those less well off, as they prepared to fight September 27 elections. Skip related content
Related photos / videos
Vice-chancellor and Foreign Minister Frank-Walter Steinmeier of Germany's Social …More Enlarge photo

The proposals are highlighted in the electoral platform approved unanimously by Social Democratic Party (SPD) leaders ahead of its approval at a national party convention on June 14.

"It sets out a direction that we will need in this economically difficult year," said Frank-Walter Steinmeier, the SPD candidate for chancellor, who is currently Germany's foreign minister.

If the Social Democrats take the Bundestag (parliamentary) election, the highest tax rate for individuals earning more than 125,000 euros, or couples earning more than 250,000 euros, would go up to 47 percent from 45 percent.

The lowest tax rate of 14 percent, on the other hand, would be cut to 10 percent, Steinmeier said, adding that an estate tax sought by the left wing of the party had been rejected.

Germany is weathering its worst economic crisis in decades, but Chancellor Andrea Merkel's Christian Democrats and the allied Christian Socialist Union in Bavaria still enjoy a lead among voters.

They were favoured by 35 percent of respondents in the most latest opinion poll, for Stern magazine and RTL television, compared with 24 percent for the Social Democrats and 10 percent for the Greens.

------------------------
エンジェル税制、利用最多　08年度、新制度導入を契機に

　ベンチャー企業への投資を優遇する「エンジェル税制」を利用する企業が急増し、2008年度に利用企業の数が過去最高に達したことがわかった。新たなエンジェル税制が導入され、投資家が税優遇を受けやすくなったことが背景にある。個人がベンチャー企業に直接投資する額も急増。世界同時不況の逆風が吹くなかで、税優遇をきっかけに日本のエンジェル投資が上向きつつある。

　政府がエンジェル税制を創設したのは1997年度。制度は拡充されてきたが、利用は低迷していた。投資するベンチャー企業以外の株式を売却し、利益を得た個人投資家しか税優遇を受けられないことに原因があったとの指摘が多かった。(07:02)

----------------------
食料危機、再発防止へ全力　Ｇ８農相会合宣言骨子

　【チソンディバルマリーノ（イタリア北部）＝野見山祐史】主要8カ国（Ｇ８）の農相会合は19日、2日目の討議を終えた。投機資金による食料価格の乱高下抑止や、輸出規制など貿易制限の回避、増産を視野に入れた農業投資の促進を共同宣言の骨子に盛ることで大筋合意。昨年の食料危機の再発防止に全力をあげる決意を示す。また、食べ残しなど食料の無駄を抑制することを宣言に初めて盛る方向だ。

　20日に共同宣言をまとめ閉幕する。宣言をＧ８として出すか、それとも中国やインドを加えた16カ国の名前で出すのか意見が割れ、19日夜（日本時間20日未明）に結論を持ち越した。

　会合では途上国での人口増などを背景に食料危機の恐れは今後も残るとして、食料増産が不可欠との認識で一致。増産に向け投資情報を世界中で共有して投資効率を高めるほか、備蓄を増やすための具体策の検討を急ぐことで合意した。(19日 23:03)