Archive | Archive – world business

Snapshot on world business, October 2000

Latest: Chinese curb on Hutchison Whampoa port company, Singapore boosts r&d budget, $US2.4 billion in unpaid catalogue bills, AT&T plans breakup, Honeywell takeover.

26 October 2000

American rednecks reckoned Hutchison Whampoa’s takeover of the ports at both ends of the Panama Canal was part of a Beijing scheme to gain strategic influence in the Americas through the group’s chairman, Li Ka-shing. Now China itself is reported in the Far Eastern Economic Review to be curbing Mr Li’s influence. Hutchison Whampoa handled 25% of Chinese container traffic last year.

Singapore will raise its research & development budget from $S4 billion in the past five years to $S7 billion in the next five, with one-third of it earmarked to encourage corporate laboratories to set up in Singapore. The government also plans a move from broadbased to niche research.

25 October 2000

US retail chain Federated Department Stores’ catalogue division, Fingerhut, has $US2.4 billion of unpaid accounts, which it intends to auction.

As they grow bigger, so they can still be broken up: AT&T plans to cut itself in quarters. The piece to carry forward the old identity will be the business services division, which is biggest and most profitable.

23 October 2000

The next mega-deal in the US is said to be a $US45 billion one, in which General Electric takes over aircraft electronics company Honeywell International, after a $US40 billion takeover by United Technologies fell apart.

18 October 2000

Ishak Ismail, an associate of former Malaysian Deputy Prime Minister Anwar Ibrahim, is under more pressure two months after losing his job as chairman of Idris Hydraulic to Annuar Senawi, a nephew of the Finance Minister, Daim Zainuddin. Idris was one of the Asian groups hooked into investing in Auckland’s Britomart project by Jihong Lu’s Pacific Capital Assets. Ishak is still executive chairman of an Idris unit, Prime Utilities, and managing director of Malaysia’s biggest fast foods operator, KFC Holdings. Idris wants Prime to buy more of KFC but Ishak has resisted. In turn, Idris forced the deferral of a Prime meeting this week to re-elect Ishak and three supporters to the Prime board.

China expects economic growth to beat its 7% target this year, after a gradual slowdown since it hit 14.2% in 1992.

15 October 2000

Malaysia’s attempts to become more prominent were hit this week by British Airways, which decided to can flights to Kuala Lumpur, routing that traffic to Singapore. More pressure will come on Kuala Lumpur’s hub ambitions as Singapore adds its third terminal by 2006 and Bangkok upgrades. This is amid further woes for the whole of Asia, which is expected to see only $US15 billion of foreign capital flow into Asian equities this year, compared to $US96 billion last year. Harder to get to equals less traffic, higher costs, lower value.

10 October 2000

Japan’s 12th biggest life insurance company, Chiyoda Life, has filed for bankruptcy with total debts of Â¥2.94 trillion ($NZ67 billion). Japanese insurance companies have been paying an average 4% on investment policies bought in the 80s, but have had a negative spread over the past five years as their return on assets has averaged only 3%.

9 October 2000

China has drawn 80 African foreign and economic affairs ministers to a co-operation forum in Beijing, aimed at emphasising China is a champion of the developing world.

4 October 2000

Deposed Indonesian President Suharto’s youngest son, Tommy ( Hutomo Mandala Putra), has pleaded guilty to making an illegal swap of his company’s swamp for prime government land, been sentenced to 18 months’ jail and has asked for presidential clemency. The fate of his father’s corruption trial remains in the balance.

Most of Singapore’s listed companies failed a Singapore Business Times transparency test. Many are very good operators, but the test wouldn’t have had to be hard. In feudal versus transparency territory, feudal wins.

Taiwan’s Kuomintang premier, Tang Fei, has resigned and been replaced by Chang Chun-hsiung, of the ruling Democratic Progressive Party.

In the US, small windshifts are given monumental importance by the amount of gaze they’re given, so the tiny shifts in this or that indicator over the past six months has usually created an impression beyond its real significance. The comparisons are always month-on-month not same month year-to-year, and they usually whip a bit of seasonal adjustment in. The latest one to be counted is an index of leading economic indicators, which of course follows the course of all the components, and the weighting means it’s down. New home sales rose sharply in July but fell 3% in August.

North-eastern supermarket chain Grand Union, owner of 197 stores, ignored all the US up but is joining in the down, with its third Chapter 11 bankruptcy protection call since 1995. In 1998 creditors forgave $US600 million of debt. It lost $US307 million in the year to March.

2 October 2000

The possibility has receded, for perhaps another 18 months, of a US-European Union trade war over the US’ $US4 billion in annual subsidies through export tax breaks to major corporations. The two sides will go into a huddle for months, essentially to avert an all-out trade war, which means the US has won the argument, for a while at least.

The European Commission is due to approve, this week, new rules allowing European pension funds to invest 30% of their funds in currencies other than their own, and to raise to 70% the proportion that can go into equities. Germany and Austria allow only 35% in equities now. The next step will be tax relief for cross-border investment.

While Daewoo may miss its selloff deadline, South Korea’s largest carmaker, Hyundai, is planning to build a $US1 billion manufacturing plant in the US, to start production in 2003.

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Snapshot on world business, week to 27 May 2001

Latest: US gdp up 1.3% in Q1, inflation 3.3%, European gdp slows, Max from Montana offers free trade with a catch.

27 May 2001

US gross domestic product rose a real 1.3% in the March quarter after a 1% December quarter rise. The nominal rise was 4.6%, including 3.3% inflation, same as the first quarter of 2000. Inflation in the December 2000 quarter was 2%. Other factors in the inflation picture included fixed investment up 0.5% on December and up 5.9% on the first quarter of 2000 to $US1445.3 billion. Inventories fell for the first quarter in two years, the US remained in export deficit ($US412 billion, 9.3% up on a year ago), government spending at $1608 billion was up 2.7% on a year ago.

French gdp rose 0.5% in the first quarter, the slowest in two years. Germany’s gdp rose 0.4% for the quarter but was up 1.6% on a year ago, and Hong Kong’s rose 2.5% on a year ago.

Senator Max Baucus, a Democrat from Montana sheep country, has introduced bills proposing free trade agreements with Australia, New Zealand and South Korea, but with a catch: he wants to tie in labour and environmental standards. He pressed for punitive lamb tariffs last year and will take over chairmanship of the Senate Finance Committee after last week’s change in the balance of political power.

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Snapshot on world business, week to 14 April 2002

10 April 2002

New York State’s Attorney-general, Eliot Spitzer, has filed a 38-page affidavit in the state Supreme Court accusing Merrill Lynch & Co, essentially, of fraud on investors through the corrupt use & abuse of purportedly independent securities research. Since Mr Spitzer’s office began investigating stock recommendations by Merrill research analysts in June 2001, investigators have reviewed 30,000 documents –more than 100,000 pages — including thousands of emails, many showing private advice contradicted public releases. More firms are being investigated, said the chief of the state law department’s investment protection bureau, Eric Dinallo. The court document is a riveting — ex parte — revelation. The New York Times reported and business journal Breaking Views commented.

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Snapshot on world business, week to 3 November 2002

30 October 2002

If you thought you were having a bad day, try this… Qwest Communications International Inc will write off $US41 billion of goodwill (out of $US74 billion of total assets) by the end of the year. That’s a $US1400/customer writeoff.

29 October 2002

We’ve had a knowledge economy conference, plenty of fanfare, a few organisations set up to carry on the good work but little hard evidence that this country will beat the next in using this form of economic growth. New South Wales holds a knowledge economy conference at the Novotel, Sydney Olympic Park, on 11-12 November, organised by the state government’s Office of Western Sydney (population that side of Sydney 1.7 million). Looks like a talkfest that mightn’t go far, but developers have been strong on creating various techo business parks around Sydney so an infrastructure is in place to build on. While we think highest short-term price is better than long-term gain (I’m thinking of the tank farm and America’s Cup bases here), we’ll watch others create competitive industries ahead of us.

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Snapshot on world business, week to 4 November 2001

31 October 2001

A quote from Jim Grant, of US investment website Grant’s Investor: “Today, Americans believe in the S&P 500, but fear an epidemic. Forty-one times trailing net income holds no terrors for them, yet they live in dread of anthrax. Perhaps we [at Grant’s] are missing the point, but our anxieties are reversed.”

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Snapshot on world business, week to 8 June 2003

3 June 2003

Bill Bonner, of the Daily Reckoning newsletter (written by Americans in the US & Paris, and daily expressing concern at the state of the US economy): “So you figure it out, dear reader. Incomes are flat or falling. People have more debt than ever. The government has obligations equal to more than 400% of the total GDP…an economy that seems to be slouching toward Tokyo…and a printing press. Is this a good moment to buy stocks at 35 times earnings (the current P/E for the S&P) or bonds denominated in the currency of the world’s leading debtor…after 30 years of a credit boom?”

Regarding that printing press, it seems to me that if the US is printing more money than anybody else, net of productivity gains, its currency ought to be falling. That’s before you get to consider the state of its economy – the rise in debt, in particular – and make a judgment call. In exchange rate calculations the world has been using only the 2nd factor, ignoring the cheapening of the currency by the huge increase in supply. Am I right?

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Snapshot on world business, week to 18 March 2001

Latest: Coles Myer profit slashed, HIH Insurance in liquidation, UK Pru bids for American General, Buffett loses on insurance but makes out of investing premiums, Buffett on growth and valuation, Cisco sneezes over the world.

15 March 2001

Coles Myers Ltd reported net after-tax profit down 33.3% to $A196.4 million in the 26 weeks to 28 January on sales of $A12.3 billion, which were nominally up 5.5% when gst was excluded from the 2001 figures and wholesale sales tax was removed from the 2000 figures. Ebitda fell 14.5% to $A639.5 million. Retail ebit fell 25.9% to $A380.1 million and fell from 4.2% to 3.1% of sales. Abnormals after tax cut $A19 million from profit last year and $A38.4 million this year. Basic earnings/share after abnormals fell 35.4% to 16.4c, but the dividend was retained at A13.5c. Free cashflow was $A73 million ($A99 million), the return on investment 14.4% (16.8%), return on equity 12.7% (16.8%). The debt:equity ratio was down from 36.3% to 24.3%. Coles Myer is forecasting $A350 million net profit after tax for the full year, up from $A301 million, on after-tax operating profit of $A400 million ($A484 million in a 53-week year).

HIH Insurance Ltd has gone into provisional liquidation in Australia with $A800 million of debts. KPMG carried out a review of its operations, including discontinued businesses in Britain and the US which are still costing money, and has been appoint provisional liquidator.

13 March 2001

Next on the mega-mergers list is a $US26.5 billion scrip bid by Prudential plc of Britain for American General, to make it the sixth biggest insurer in the world.

Warren Buffett’s Berkshire Hathaway made $US3.3 billion last year, more than double 1999 earnings. The group’s reinsurance companies lost $US1 billion on insurance transactions, but by investing the premium “float” they got back $US1.9 billion from investments. Capital gains from investments rose from $US886 million to $US2.4 billion.

The forthright 20-page Buffett annual report is well worth a read (http://www.berkshirehathaway.com/letters/2000pdf.pdf). Try this piece on growth’s place in valuation (scroll down the side to page 12)… “Indeed, growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years. Market commentators and investment managers who glibly refer to ‘growth’ and ‘value’ styles as contrasting approaches to investment are displaying their ignorance, not their sophistication. Growth is simply a component, usually a plus, sometimes a minus, in the value equation.”

12 March 2001

Silicon Valley internet networking giant Cisco Systems will cut its fulltime global workforce by 7-11% (3000-5000 staff) and its temporary and contract staff by up to 75% of the current 4000 by the end of July, and will take a $US300-400 million one-off charge at the July balance date to pay for it. In the past two years Cisco has trebled its workforce, adding 30,000 staff globally. It share price is reeling: from a $US82 52-week high it’s just above $US20.

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Snapshot on world business, week to 9 September 2001

4 September 2001

The Bank of New Zealand’s owner, National Australia Bank, has taken an $A3.05 billion writedown hit from the US mortgage lending business it bought for $A1.7 billion in 1997, HomeSide Lending Inc. The writedown is broken down as $A755 million for wrong interest rate assumptions, $A1.436 billion for changes in other modelling assumptions, and $A858 million for goodwill. In July, NAB wrote off $A870 million on hedging losses. NAB now wants to sell the US company. HomeSide’s $US187 billion book makes it the sixth biggest mortgage servicing company in the US.

Brisbane-based accountancy group Harts Australasia, which now owns the Reeves Moses mortgage business in New Zealand, will report a full-year loss of $A17 million before abnormals and goodwill writeoff. It raised $A30 million in its March 2000 float, then lost $A18.4 million in the first half, including $A6 million of abnormals and $A4 million of goodwill writedowns. The full-year result will be released on 13 September.

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Snapshot on world business, week to 22 June 2003

18 June 2003

McConnell Dowell Corp Ltd’s full takeover (effected by schemes of arrangement) by its 63% shareholder, Aveng Ltd of Johannesburg, will go to a shareholder vote on 25 July and should be completed on 19 August. Shareholders are being offered $A1.54/share, though net asset backing is $A2.26/share. The independent directors said that in a winding down, shareholders would probably get back less than $A1.54/share. The company is still chaired by founding shareholder, Aucklander Jim Dowell. Aveng is the engineering segment of the former Anglovaal conglomerate, broken up in 1999. 44.5% of Aveng is owned by South Africa’s Public Investment Commissioner, and the Old Mutual and Liberty Life insurance companies. Its businesses are construction, steel & allied, and cement.

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Snapshot on world business, week to 10 December 2000

Latest: From detention to governor, Chinese toy with HK reputation, Philippines deficit balloons, bad Germans, Tokyo Sowa provisions suspect.

The Snapshots series have entered their third phase. It was obvious after a short period that, with too many items, they needed to be broken into monthly groups, at most. I’ve just counted the World Property items for November and found 51. So the next change is into weekly groups, along with the creation of an overall site Snapshot every week. Let me know if you think it’s good/bad.

7 December 2000

Indonesia’s central bank governor, Sjahril Sabirin, is back at his old job after the detention order that kept him under house arrest for six months expired. He still faces a corruption trial.

Three senior executives of mainland China-related Hong Kong food company Guangnan Holdings have been jailed for two to six years for fraudulent accounting, conspiracy to defraud and misappropriation. The company has debts of about $US6 billion, negative equity of $HK1.2 billion, and is being restructured. Its difficulties emerged after the spectacular 1998 collapse of Guangdong International Trust & Investment Corp. The trio embezzled more than $HK46 million of a subsidiary’s money and gambled it on the sharemarket on instructions of top management, and doubled book profits by fraudulent accounting and fabricated business transactions. The trial judge said such a scandal headed by mainland Chinese could jeopardise Hong Kong’s reputation as an international business centre.

As Philippines president Joseph Estrada heads into an impeachment trial, the country’s finance secretary, Jose Pardo, said the budget deficit this year could hit 126.5 billion pesos, nearly 10 billion pesos more than the International Monetary Fund’s worst-case scenario.

4 December 2000

American companies are delighted to be able to take over businesses worldwide, but reciprocation isn’t always well received. A South Carolina Democratic senator, Ernest Hollings, is firmly opposed to Deutsche Telekom’s involvement in the application by US mobile phone company VoiceStream Wireless Corp for wireless spectrum in an auction starting on 12 December. Deutsche Telekom, 56% owned by the German Government, has 11.5% of VoiceStream, is allowed 25% before it gets disqualified as a foreign bidder, but is said to be buying VoiceStream.

1 December 2000

Former Rothschild executive managing director Wilbur Ross’ Asia Recovery Fund has pulled out of buying Tokyo Sowa Bank, a deal which was not helped by the arrest of four former executives in May for cooking the books to make the accounts look healthy. Mr Ross agreed in June to buy the bank, which had a Â¥102 billion ($NZ2.25 billion) capital deficit. Provisions against loan losses have been at issue since then.

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