Archive | Archive – world business

Snapshot on world business, week to 9 June 2002

7 June 2002

The Enron/Andersen debacles/excesses are already having numerous major impacts on business accountability in the US, and many of the changes will flow through to New Zealand in the form of accounting practice standards or stock exchange requirements. A notable one from Nasdaq is a proposal to have a majority of independent directors on corporate boards. Same call was made here 15 years ago, maybe this time it’ll happen. The proposed Nasdaq rule changes are generally designed for bigger outfits than the standard NZ company, but include recommendations that compensation committees be composed entirely of independent directors, that there be a cooling-off period before former auditors of the company can serve on corporate audit committees, the scope of audit committee authority be expanded, continuing education for directors be strengthened, compliance methods be introduced to support corporate codes of conduct, and a requirement that non-US companies disclose if they’ve received waivers of corporate governance standards.

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Snapshot on world business, week to 14 October 2001

14 October 2001

A Standard & Poor’s report says the global junk bond default rate should hit 10% this year. In the first three quarters 121 companies defaulted on $US74.3 billion of debt, compared to 108 defaults in the whole of last year for a total $US34.3 billion.

Singapore’s economy shrank 5.6% in the third quarter and the Ministry of Trade & Industry has revised its annual forecast for the third time, now saying gross domestic product will contract by 3%.

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Snapshot on world business, week to 27 April 2003

24 April 2003

Agora’s Daily Reckoning newsletter notes that residential real estate has jumped from 23% to 31% of US household assets in 3 years, helped by the sharemarket fall, but that unsold home inventories are at their highest level since 1996. The median time a home is on the market has risen from 3.8 to 4.8 months in 6 months. In Denver, apartment vacancy rates are above 10%.

1 of the Daily Reckoning’s frequent correspondents, Calgary oil buff John Myers (son of a goldbug), editor of Outstanding Investments, reckons the oil price has to rise, and the US position in Iraq won’t change that. He says Saudi Arabia was happy with $US20/barrel in 1988; that equates to $US31 now, but conservative pricing is less likely. Non-Opec discoveries & reserves are dwindling; since the 1st well was drilled in 1861 900 barrels of oil have been burned, about half the amount discovered; consumption has reached 26 billion barrels/year and is rising.

Reports from New York & London suggest Deutsche Asset Management is about to take a position that institutions have long abdicated: it will take large stakes in prominent European companies and demand a place on the board to make executives manage in the interests of shareholders.

The board that writes US accounting rules has agreed companies should treat stock options for executives & employees as expenses, which has been strongly opposed by high-tech industries.

British building materials supplier Wolseley plc is talking to Pinault Printemps Redoute of France about buying its domestic construction supplies unit, Pinault Bois Materiaux, worth about €570 million.
Websites: Wolseley plc
Pinault Printemps Redoute

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Snapshot on world business, week to 4 March 2001

Latest: DaimlerChrysler slash and burn, Motorola slides, Sunbeam files Chapter 11, Case New Holland scores another loss, Euro steelmakers merge.

27 February 2001

DaimlerChrysler will cut its workforce by 35,000, or 20%, including 9500 (or 14%) at Mitsubishi, expects its revenue to fall 13% this year and said its operating profit could fall as much as 75%.

26 February 2001

The slide by US electronics company Motorola towards a first-quarter loss carries a warning for the property industry, though not so much in New Zealand because we’ve missed out on so much of the IT revolution. The boom-bust behaviour of internet stocks carries through to property — Motorola, looking to set up a Southern Hemisphere base, was courted only months ago in Christchurch and Auckland before settling on a new Australian development.

US household appliances maker Sunbeam has filed for chapter 11 bankruptcy protection, hoping to emerge in 6-9 months minus its overwhelming $US1.7 billion of bank debt and $US863 million of bondholder debt. Bank of America, First Union and Morgan Stanley will convert their loans to equity, term and convertible debt, and take charge of the company for the restructure.

Farm and construction equipment maker CNH (the entity resulting from the merger of Case in the US and New Holland in Europe, owned by Fiat of Italy) reported a $US102 million fourth-quarter net loss on $US2.2 billion revenue, down from a pro forma $US142 million loss on $US2.5 billion revenue a year earlier. Its loss for the year was $US269 million and it expects a loss about $US100 million better than that in 2001.

Three European steelmakers have agreed to form the world’s biggest steel group — Aceralia of Spain with 20.1%, Arbed of Luxembourg 23.4% and Usinor of France 56.5%. The all-share deal would see Usinor acquire the other two for 3.4 billion euros ($NZ7.2 billion) to form a group with 46 million tonne annual output and 30 billion euro sales.

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Snapshot on world business, week to 2 September 2001

Latest: US gdp adjusted down.

30 August 2001

US second quarter gross domestic product growth (annualised over the first quarter) has been revised downward from the figures issued a month ago, from 0.7% to 0.2%. Inflation was also revised down, from 2.3% to 2.2%. Consumption growth is at 2.5%, business inventories fell for the second successive quarter ($US27 billion in the March quarter, $US38 billion in the June quarter), business spending was revised downward from a 13.6% fall to a 14.6% fall.

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Snapshot on world business, week to 19 October 2003

19 October 2003

HSBC, the world’s 2nd biggest bank, will transfer 4000 British jobs to India, Malaysia & China. The bank has 55,000 staff in Britain.

Nabors Industries Ltd, biggest operator of oil drilling rigs in the US, has upset competitors by using 1 law to escape US taxes (it has a Bermuda address for tax, a Barbados office for its legal headquarters and working headquarters in Houston, Texas) – but now wants to use another law to qualify for business open only to American companies. The New York Times wrote about it, and didn’t question the notion that US-companies-only business should be OK or suggest that a lower cost might be worthwhile.

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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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