Financial Teasers 8 April 08

Top Stories

Will poor countries use commodities windfalls to diversify?

The huge price jump in agricultural and mining commodities is boosting the economies of the world's poor countries. Will they improve their economic future by investing the bounty? The lessons of the oil price boom of the 1970s suggest the answer depends on a country's political choices, says Pranab Bardhan, an economics professor at the University of California at Berkeley. International Herald Tribune (08 Apr.)

WaMu to stop offering mortgages through independent brokers

Washington Mutual plans to focus on offering mortgages through its retail bank branches as it puts an end to the wholesale side of the business. Legend Mortgage CEO Mitch Ohlbaum said a WaMu representative told him that Thursday is the last day to submit loan applications. Meanwhile, Washington Mutual appears set to receive a $5 billion cash injection from TPG. BusinessWeek (07 Apr.)

China to finance bulk of new Syrian oil refinery

China and Syria will team up to build an oil refinery in eastern Syria. China National Petroleum Corp. said an agreement the two countries signed last week calls for China to pay 85% of the cost to construct a refinery with a capacity of about 110,000 barrels a day. Forbes/Associated Press (08 Apr.)

Phase two of Novartis swoop for Alcon priced at $28B

Source: CNBCNovartis will become the world's biggest maker of eye-care products with a two-stage purchase of Alcon Inc. from Nestle SA. Novartis is buying 25% for $11 billion and has an option to buy another 52% for $28 billion. Nestle says it will use the money to reduce debt and expand its health-foods unit. CNBC (07 Apr.) , Bloomberg (07 Apr.)

Permira opens private equity office on U.S. West Coast
The U.K.-based private equity group Permira plans to expand its U.S. operations by opening a new West Coast office this year. The new location will focus on buying stakes in technology companies. Financial Times (07 Apr.)

Market Activity

Asian shares fall on profit-taking

Asian markets retrenched Tuesday as concerns of rising prices for crude oil and other raw materials hurt airline and steel stocks. Shares of Japanese financials declined when investors locked in profits after a strong run. Matt McKeith, head of equity dealing at First State Investments, called it a "breather" after "several good up days" for Asian shares. MarketWatch (08 Apr.)

Convertible issuance soars in Asia, falls elsewhere

Issuance of convertible bonds reached record levels in the Asia-Pacific region in the first quarter of 2008, according to Thomson Financial, but issuance dropped in the rest of the world. China was for the first time one of the top issuers, second only to the US, in part because of a $4.2 billion offer from Sinopec. Japan, Singapore and Malaysia also made the top 5. Financial Times (07 Apr.)

Other News

Percentage of firms with distressed debt hits 5-year high Financial Times (08 Apr.)
Alcoa Q1 profits cut in half by weak dollar, costly energy

Source: CNBCHigher energy costs and a weak dollar overcame a surge in the price of aluminum, cutting in half Alcoa Inc.'s first-quarter profit. The aluminum producer missed Wall Street's earnings expectations by 5 cents a share, but investors instead focused on high metals prices. "I think the fundamentals for aluminum could be quite strong over the next couple of years," said Brian Hicks, co-manager at U.S. Global Investors' resources fund. CNBC (07 Apr.) , Reuters (08 Apr.)

Economics

Rising wages, costs in Asia pushing inflation in West
Rising energy and labor costs have forced exporters even in poor countries to increase prices. While producers are passing on their higher prices, American consumers are able to buy less from exporting countries because of the falling value of the dollar. That contributed to U.S. consumers paying 4% more in the past year. But so far, Asian exporters have passed along only a portion of their costs. International Herald Tribune (07 Apr.)

Uptick in Indian wages, falling dollar turn IT services nearshore

North American companies are turning away from India as their offshore IT site in favor of the Western Hemisphere. A company used to be able to save 40% to 50% by hiring Indian firms to handle IT and other services, said Atul Vashistha, chairman at management consulting firm neoIT. But if the dollar keeps falling and Indian wages keep rising, that differential would shrink to 10%, he said. Spiegel Online (07 Apr.)
IADB lending mark shows Latin American expansionThe Inter-American Development Bank last year approved more loans and guarantees for projects in Latin America and the Caribbean since the debt crisis of 1999. "Much of the bank's lending last year was focused on investments that will help our members to deepen and consolidate the gains from booming commodity exports and growing trade with new markets in Asia," IADB President Luis Alberto Moreno said. Bloomberg (07 Apr.)

Vietnam's middle class becoming a prized market

Its emerging urban middle class could turn Vietnam into one of Asia's biggest consumer markets, said Tung Kim Nguyen, a partner at Indochina Capital. Investors attending the Credit Suisse Asian Investment Conference were told Vietnam's other advantages included political security, an appreciating currency and plans to privatize more state-owned firms.
FinanceAsia.com (08 Apr.)

Geopolitical/Regulatory

Financial officials call on governments to work together

Source: CNBCAhead of the Group of Seven meeting in Washington this week, several top financial leaders have called for a coordinated government effort to prevent another crisis and protect the global economy. So far, no firm proposals have emerged and U.S. officials have kept unusually quiet.
CNBC (08 Apr.) , CNBC/Reuters (08 Apr.)

Former SEC heads criticize proposed Bush revamp of agency

Three former leaders of the U.S. Securities and Exchange Commission say the Bush administration's proposed overhaul of financial regulation would weaken the agency. SEC chiefs under Presidents Reagan, Clinton and George W. Bush said it was wrong to change the SEC's approach to one that solves problems through informal discussions with market actors. "We have to have an enforcement approach," said David Ruder, an SEC chairman under Reagan. Bloomberg (08 Apr.)

Mortgage brokers oppose Fed rules on fee disclosure

The public comment period ends Tuesday for proposed Federal Reserve rules aimed at limiting abusive mortgage lending. One rule would bar mortgage brokers from receiving yield-spread premiums unless consumers state in writing that they understand their broker will be paid more for arranging their higher-rate loan. Mortgage brokers say the proposed Fed rules are unfair. MarketWatch (07 Apr.)

China allows banks to buy shares on U.S. markets

Chinese banks will be allowed to buy on U.S. stock markets for institutional investors, the country's banking regulator said. The banks also will be permitted to invest in U.S. mutual funds if they get approval from U.S. regulators, the China Banking Regulatory Commission said. Chinese banks are already allowed to direct money into markets in Hong Kong, Japan, the U.K. and Singapore. Financial News Online/Dow Jones Newswires (07 Apr.)

Financial Products

Technical standard sought for credit derivatives market

The scope of counterparty risk if Bear Stearns had collapsed last month, potentially scarring the $45 trillion credit derivatives market, galvanized regulators and bankers to fix flaws in the market's infrastructure. The New York Federal Reserve has pushed to computerize over-the-counter derivatives processing to improve the speed and accuracy. Many trades are still confirmed by e-mail, instant messaging and fax. Financial Times (07 Apr.)

Financial Teasers 4 April 08

Top Stories

Hedge funds face new threat as investors bail
First, banks started pulling hedge fund credit lines and demanding greater security against loans. Hedge funds were forced to sell assets and incur heavy losses. Now, investors are pulling out of the hedge funds, increasing the risk of more fire sales of assets to raise capital to meet withdrawals. Financial Times (03 Apr.)

Officials, executives defend their actions in Bear Stearns takeover
Testifying before the Senate banking committee, top Wall Street executives and federal officials for the first time publicly explained the negotiations that led to JPMorgan Chase buying
Bear Stearns. Officials from the Federal Reserve, SEC and Treasury defended their roles in the deal and the government's rescue of the investment bank's creditors. ClipSyndicate/Bloomberg (03 Apr.) , International Herald Tribune (04 Apr.) , Bloomberg (04 Apr.)

Late payments by U.S. borrowers reach 16-year high
A study by the American Bankers Association found that 2.65% of U.S. consumer loans were at least 30 days past due in the fourth quarter. That's up from 2.44% in the third quarter and from 2.23% in the fourth quarter of 2006. The results show that credit trouble has spread from mortgages into other types of debt. Reuters (03 Apr.)

Spike in food prices triggers panic in developing nations
The prices of rice, corn, wheat and other food staples have been rising the past couple of years, but recent spikes have sparked food riots in Morocco and Yemen and driven governments to radical steps to make sure they have enough. Egypt, for example, has banned rice exports for the next six months. Economists say the problem stems from farmers planting crops for biofuel rather than food. ClipSyndicate/Bloomberg (04 Apr.) , The Washington Post (04 Apr.)

Thailand denies rumors it will reduce rice exports: Thailand, the biggest exporter of rice in the world, is not planning to reduce rice exports, according to a government official. "We are confident that Thailand has ample supply for both domestic consumption and exports," said Apiradi Tantraporn, head of the Commerce Ministry's Foreign Trade Department. The Guardian (London)/Reuters (03 Apr.)

Venezuela plans tax on oil sales to boost revenues
Venezuela's Congress is expected this week to give initial approval to a tax measure that will take half of oil revenues above $70 per barrel, and 60% of revenues above $100 per barrel. "Because of high oil prices, oil companies have excessive earnings that go beyond reasonable levels of profitability," legislator Angel Rodriguez said. "One way to distribute them to our people, who are the owners of the oil, is to create this tax."
CNBC/Reuters (03 Apr.)

Moody's warns about Latin America's maturing corporate debt
Moody's Investors Service said the amount of corporate debt in Latin America that will mature in the last six months of this year will reach $6.8 billion, up from less than $2 billion in the first half of the year. If the debt market slump continues, the companies may have trouble refinancing. "Debt maturities should be the main area of focus for liquidity risk in the region," Moody's analysts wrote. The "big spike in maturities in the second half of the year will test investor appetites for Latin American credit and the ease of corporate access to alternative sources of financing." Bloomberg (03 Apr.)

Analysis: Asian banks to emerge from subprime crisis OK
Analysts say that Asian banks will face losses related to the U.S. subprime meltdown, but they won't be as severe as the losses hitting UBS, Merrill Lynch and Bear Stearns. "They are nowhere near as embroiled as the large U.S. and European banks," said Jason Rogers, a credit analyst at Barclays Capital. Reuters (04 Apr.)

Other News

Former UBS chief launches campaign to overhaul bank Financial Times (03 Apr.)

Merger set up tumultuous decade for Citi The New York Times (registration required) (03 Apr.)

Market Activity

Asian markets mostly down, Sydney inches up
Japanese stocks ended the week down and Australian shares were propped up by gains by oil and mining companies. Tokyo's Nikkei 225 Average fell 0.7%, South Korea's Kospi slid 0.2% and India's Sensex dropped 2.2%. Meanwhile, the S&P/ASX 200 in Sydney gained 0.2%. Markets in Shanghai, Hong Kong and Taipei were closed Friday for a holiday. MarketWatch (04 Apr.)

Collapse of auction-rate securities market hits student lenders
No student loan-backed municipal bonds were sold in the first quarter of 2008, a situation that hasn't occurred in nearly 40 years, according to Thomson Financial. The lack of debt sales by public student-loan agencies is a result of the collapse of the auction-rate securities market. Bloomberg (04 Apr.)

Samurai bond issuance soars to nearly $5 billion
Yen-denominated bonds issued in Japan by foreign institutions more than quadrupled from $1.12 billion in the first quarter of 2007 to $4.95 billion in the same quarter this year. The boost in issuance of Samurai bonds highlights the attraction to Japan as a funding source during the global credit crisis. Financial Times (04 Apr.)

Economics

Bernanke says full benefit of rate cuts not yet realized
Federal Reserve Chairman Ben Bernanke said the full effect of the Fed's recent reductions in interest rates has not yet been realized by the economy. "Further actions will have to depend on how the economy evolves and we are looking of course at both sides of our mandate, growth and inflation," Bernanke testified at a Senate hearing. ClipSyndicate/Bloomberg (03 Apr.) , Reuters (03 Apr.)

RBA governor indicates Australia's economy is slowing
Glenn Stevens, governor of the Reserve Bank of Australia, said he expects inflation to hover around 4%. "I can't tell you at what point (interest) rates can start to come down," Stevens said. "I can't even promise that they might not rise again." The bank believes the Australian economy may be slowing, but Stevens said more evidence is needed. Forbes/Associated Press (03 Apr.) , The Herald Sun (Melbourne, Australia) (04 Apr.)

Investment banks boost borrowing from discount window
The Federal Reserve reported Thursday that large Wall Street banks averaged more than $38 billion in daily borrowing from the Fed's discount window. That's up from just under $33 billion the previous week and $13.4 billion during the first week the lending facility opened to the investment banks. CNBC/Associated Press (03 Apr.)

Service sector, jobless reports point to economic slowdown
For the third consecutive month, the U.S. service sector contracted in March. Meanwhile, government data show that the number of workers applying for unemployment benefits jumped to the highest level since September 2005. The reports reinforce concerns that the U.S. economy is sputtering. ClipSyndicate/Bloomberg (03 Apr.) , Reuters (03 Apr.)

Geopolitical/Regulatory

EU finance officials meet to address economic woes
Finance ministers and central bankers from the 27 European Union nations are meeting in Slovenia today and Saturday to address a slowdown in the region's economy and climbing inflation rates. They will try to develop a joint response to these problems, and the 15 countries that use the euro will discuss the currency's rapid acceleration against the dollar. ClipSyndicate/Bloomberg (04 Apr.) , International Herald Tribune (03 Apr.) , Forbes/Associated Press (04 Apr.)

Financial Products

Credit Suisse launches first ETN from its new platform
Credit Suisse's first exchange-traded notes began trading on the New York Stock Exchange. The ETN is tied to the Credit Suisse Global Warming Index, which is made up of 50 top ranking stocks of companies that take on climate change. Credit Suisse is the seventh issuer to enter the American ETN market. Structured Products (03 Apr.)

Ethics

SEC accuses London-based Pentagon Capital of fraud
The SEC has filed a complaint against Pentagon Capital Management, a London-based hedge fund, and its CEO, Lewis Chester, for allegedly scheming to defraud U.S. mutual funds and investors. The suit claims Pentagon defrauded the funds through deceptive market timing and late trading. Lawyers for Pentagon said they are confident they have legal and factual defenses to the claim. Reuters (03 Apr.)

Marubeni, Lehman both say they are victims in scam
Lehman Brothers is suing Marubeni, an influential Japanese trading company, over an allegedly fraudulent banking scheme. The Japanese trading company says it, too, is a victim in the scam. This Financial Times article outlines the case, the players involved and the questions surrounding the deal. Financial Times (03 Apr.)

HDFIV Report Card @ 4 April 2008

Performance

Kuala Lumpur Composite Index ("KLCI") decreased from 1,256.54 (28 March 2008) to 1,221.98 (4 April 2008), representing a decrease of 2.8%. Hengdai Equity Fund IV ("HDFIV")'s registered a return of RM101.94 or 1.78%, down from 4.39% in the previous week. Reason for the decrease is due to the lower valuation of Malayan Banking Berhad and a larger capital base in view of the new shareholders and as well as the impact from 2nd month's inflow of capital.

So far, HDFIV is beating KLCI by 9.94%, consistent with 9.76% a week ago.

Purchase
No purchases during the week.

Sell
No disposals during the week.

Asset Allocation
With additional capital coming from new shareholders and 2nd month's inflow of capital, equity allocation has decreased from 71% to 42%. We are again holding back a comfortable cash buffer of 58%. This comfortable cash buffer will allow us to snap up some cheap stocks that took some beatings during this week. Hapseng Plantations Berhad is currently in my radar as the stock plummeted to one year low of RM2.57 on 3 April 2008. The stock recovered some lost ground by closing at RM2.65 today.

Note: Asset allocation shows the three main categories that our money lies in. The main category which we are expected to invest in to make the return that we wanted is Equities. Secondly, Fixed Income is in the form of fixed deposits that provides stable but low return. This second category provides small return when the cash is yet to be utilised for investment. As there is a lock-in period for fixed deposit such as at least for two months (if the amount is less than RM5,000), there is a need to maintain cash in the form of 'pure' cash, which is the third category. The set back of holding 'pure' cash ("Cash") is that we do not earn any return at all.

Financial Teasers 2 April 08

Top Stories

Lehman increases capital-raising to $4 billion
Shares of Lehman Brothers jumped nearly 18% after it boosted its capital-raising plan from $3 billion to $4 billion due to strong demand. The investment bank has apparently dispelled fears that it would suffer a fate similar to that of Bear Stearns, defying speculators who had bet on Lehman's demise. Financial Times (02 Apr.)

UBS to cut jobs after subprime losses of $37 billion
UBS chief executive Marcel Rohner said that the banking giant, which is losing its chairman, Marcel Ospel, had planned jobs cuts in investment banking and will announce the extent of those cuts, along with other measures, in the coming weeks. The Zurich-based bank revealed that losses stemming from the U.S. subprime meltdown have reached $37 billion -- far larger than the next most exposed banks, Merrill Lynch and Citigroup, with losses of $24 billion and $18 billion. Many in the market took the UBS disclosure as a sign that the worst of the credit crunch may be over. The Times (London) (02 Apr.) , Telegraph (London) (02 Apr.)

Denmark, Sweden to merge postal services, sell shares
In an effort to boost competitiveness, Sweden and Denmark are planning to merge postal services and then sell shares in the new company. "The logic behind the merger is based on the rapid changes in the market," said Maud Olofsson, Swedish industry minister. "Both companies today face three common challenges: European deregulation, more competition and electronic alternatives." Bloomberg (01 Apr.)

Companies pour money into Egypt, despite global turmoil
Despite the ongoing credit crisis and slowdown in Europe's economy, companies from Europe and the Persian Gulf are dropping money in Egypt, betting that a spending boom is just beginning. Analysts, however, warn that increasing inflation threatens to halt the boom. And while the growing middle class is enjoying Egypt's new prosperity, the benefits are not yet reaching the lower classes. Reuters (02 Apr.)

U.S. auto sales drop 8% in first quarter
Buyers steered clear of car lots in the U.S. in the first three months of 2008 as concerns about economic uncertainties led sales to drop 8% from the same quarter the previous year. In March, year-over-year sales were down 12%. General Motors posted an 18.9% drop in sales, Ford Motor's sales were down 14.2% and Chrysler was off 19.4%. ClipSyndicate/Bloomberg (02 Apr.) , BusinessWeek (01 Apr.)

"Grid parity" essential for solar power to thrive
During a panel discussion at Credit Suisse's Asian Investment Conference, a theory emerged that in order for solar power to be a cost-effective alternative for governments, "grid parity" with other energy sources is essential. Governments are struggling with whether to subsidize the nascent industry, but advocates of the technology say consumers will be willing to pay for it. FinanceAsia.com (02 Apr.)

Market Activity

Asian markets advance following rally on Wall Street
Speculation that the worst of the global credit crisis is over boosted Asian markets today. Tokyo's Nikkei 225 Average gained 4.2%, while the Hang Seng Index in Hong Kong jumped 3.2%. The S&P/ASX 200 in Sydney increased 2.6%, New Zealand's NZX 50 index was up 1.7% and China's Shanghai Composite climbed 0.6%. South Korea's Kospi gained 2.4% and Taiwan's Weighted Index advanced 2.2%. MarketWatch (02 Apr.)

Bursting of Shanghai's stock market bubble hurts small investors
In the span of two years, share prices in China soared more than 500%, triggering a frenzy of stock buying. A year ago, the market started to drop, and the Shanghai Composite index has plunged 45% since its high in October. Millions of small investors have become major casualties of the bursting of Shanghai's stock market bubble. Other parts of Asia, including India, Japan and Vietnam, are experiencing similar trends. The New York Times (registration required) (02 Apr.)

European exchanges face challenge as IPO market dries up
Visa's $16.9 billion IPO helped buoy the NYSE Euronext in the first quarter. European exchanges have not been so lucky. In Europe, just $700 million was raised through flotations in the first quarter, compared with $13.8 billion in the first quarter of 2007. Visa's exceptionally large transaction shows that capital is still available, despite the downturn in the market. Financial News Online (02 Apr.)

Economics

Asian Development Bank lowers economic growth forecasts
The global economic slowdown is hurting Asian exports and China's and India's expansions are cooling, leading to the Asian Development Bank's reduction in its growth forecasts for the region. The ADB predicts that Asia, not including Japan, will grow 7.6% in 2008, down from the 8.2% estimate in September. In 2007, Asian economies grew at a rate of 8.7%. Bloomberg (02 Apr.)

Congress to question Bernanke on his latest moves
Ben S. Bernanke, chairman of the Federal Reserve, will testify before two congressional committees this week, and he is expected to be questioned about the Fed's role in the
Bear Stearns rescue and other recent developments. "We want to know about precedent," said Sen. Charles Grassley, R-Iowa. "... People are willing to take chances if they think that the federal government is going to step in and bail them out all the time." Bloomberg (02 Apr.)

Japanese banks' overseas loans increase to 8-year high
A report from Nikkei reveals that outstanding overseas loans by Japan's banks reached an eight-year high at the end of February because of turmoil in the money markets. Non-Japanese companies are turning to banks because they are not able to raise capital on the financial markets. Financial institutions in the U.S. and Europe, meanwhile, are scrambling to shore up their balance sheets and have therefore reined in lending. Japan's banks, as a result, are able to choose the most promising companies and projects. MarketWatch (01 Apr.)

Geopolitical/Regulatory

Bush to push agenda at NATO summit, but success uncertain
At the NATO summit in Bucharest this week, President George W. Bush is expected to make some headway, although his status as a lame-duck president may hinder his success. Wess Mitchell, research director for the Center for European Policy Analysis, said Bush will likely win commitments of more ground troops in Afghanistan and may get the OK for a missile-defense project that includes facilities in Poland and the Czech Republic. However, Mitchell said, Bush will likely fall short in his bid to offer NATO membership to Ukraine and Georgia. The Christian Science Monitor (02 Apr.)

China calls cooperative bond with U.S. valuable
China's new government told Treasury Secretary Henry Paulson that it remains committed to regular, ongoing talks with the U.S., placing particular importance on the twice-yearly "Strategic Economic Dialogue." Paulson is working to accelerate the rise of the yuan and open China's markets to foreigners. ClipSyndicate/Bloomberg (02 Apr.) , CNBC/Reuters (02 Apr.)

Sources say Mugabe lost Zimbabwean presidency; next move unclear
Zimbabwean President Robert Mugabe was defeated in his bid for re-election over the weekend by Morgan Tsvangirai, leader of the opposition Movement for Democratic Change, according to sources familiar with the election. However, Mugabe has not yet released the results of the election. Some say the controversial leader is seeking a "safe exit," while others speculate he is trying to manipulate the outcome. AllAfrica Global Media/Business Day (02 Apr.)

EU again delays plans to update mutual fund framework
Charlie McCreevy, internal market commissioner for the European Union, said plans to update the legal framework for mutual funds, known as UCITS, are being delayed once again. EU officials are now seeking advice from national securities regulators. The result may be that the EU scraps the proposal. Reuters (02 Apr.)

SEC's entrance into "fair value" debate disappoints many
Bankers and insurers were eagerly anticipating news from the Securities and Exchange Commission that it would possibly rescind the use of "fair value" accounting, at least temporarily. Instead, the regulator asked the companies for more disclosure. "The SEC walked to the line but they backed away from it," said a senior insurance official. "It is fair to say there were strong hopes of something more." Financial Times (02 Apr.)

Financial Products

SocGen's ETF arm rolls out water-, energy-linked funds
Societe General's exchange-traded fund arm, Lyxor Asset Management, has launched two new funds. The Lyxor ETF World Water is tied to the World Water Index, made up of 20 stocks active in the three water-related areas: utilities, infrastructure and treatment. The Lyxor ETF New Energy follows the World Alternative Energy Index, which is also made up of 20 stocks. These stocks focus on renewable energy, decentralized energy supply and energy efficiency. Structured Products (01 Apr.)

Financial Teasers 1 April 08

Top Stories

UBS writes down $19 billion, plans capital-raising effort
UBS reported a $19 billion write-down on losses related to U.S. real estate, resulting in a net loss of more than $12 billion in the first quarter. Now, the Swiss bank plans to raise $15 billion through a rights issue of shares. Chairman Marcel Ospel will not seek re-election and is expected to be succeeded by Peter Kurer, who is currently the general counsel and a board member of UBS. ClipSyndicate/Bloomberg (01 Apr.) , International Herald Tribune/Reuters (01 Apr.)

IBM suspended from bidding for U.S. government contracts
The U.S. Environmental Protection Agency is investigating International Business Machines Corp. and has suspended IBM from seeking new contracts with all government agencies. The EPA is looking into whether IBM violated the government's ethical-bidding provisions on a bid submitted to the EPA two years ago. Reuters (31 Mar.)

Some U.S. farmers plan to switch from corn to soybeans
American farmers said they plan to significantly reduce the number of acres in which they plant corn and boost their soybean crops, according to a new government report. Doing so would likely alleviate worldwide shortages of cooking oil, which have driven up prices and adversely impacted poor countries. However, a smaller corn harvest would likely result in a boost in prices for meat in the U.S., as most corn is used to feed animals. International Herald Tribune/Reuters (01 Apr.)
N.Y. activist hedge fund Pardus halts investor redemptions
Pardus Capital Management LP, a New York-based activist hedge fund, is indefinitely suspending investor redemptions, according to a Wall Street Journal report. Meanwhile, the value of many of the hedge fund's holdings are dropping. Pardus is working to get several of the companies in which it owns stock to make changes. For example, the hedge fund has been trying to get Delta Air Lines and United Airlines parent UAL Corp. to merge. CNNMoney.com/Thomson Financial (01 Apr.)

Northern Rock's plan to repay government includes staff cuts
In its effort to repay £23 billion of the £24 billion it owes the U.K. government by the end of next year, Northern Rock plans to slash its staff by a third, reduce its balance book by half and drop 60% of its mortgage holders. Although it may raise the hopes of U.K. Chancellor Alistair Darling, Executive Chairman Ron Sandler's ambitious plan depends on the condition of the housing market and predicts losses for the next three years. Financial Times (31 Mar.)

Thousands of workers walk off job at Nike contract plant
Thousands of Vietnamese workers at the Taiwanese-owned Ching Luh plant that makes shoes for Nike walked off the job on Monday. The workers are demanding a 20% increase in their pay as consumer prices are soaring, officials said. The average monthly salary for the workers is $59. Google/Associated Press (01 Apr.)

Market Activity

Asian markets end mixed with Tokyo up, Shanghai down
Asian markets closed mixed today, with Japan, Hong Kong and New Zealand up and China, Indonesia and Taiwan down. The Nikkei 225 Average and Hong Kong's Hang Seng Index each gained 1.3% while the Korean Composite Index inched up 0.3% and New Zealand's NZX-50 advanced 1.8%. Meanwhile, Shanghai's Composite Index dropped 3%, Indonesia's Jakarta Composite fell 2.3% and the Weighted Price Index of the Taiwan Stock Exchange slid 0.6%. MarketWatch (01 Apr.)

Lehman to raise $3 billion to quiet talk of instability
Lehman Brothers Holdings plans to raise $3 billion through a convertible preferred share offering to put an end to questions about the bank's balance sheet. Demand for the offering appears strong. Several large institutional investors have already agreed to purchase at least $2.5 billion of it. Bloomberg (01 Apr.) , CNBC (31 Mar.) , Reuters (31 Mar.)

Issuance of equity-linked bonds plummets in first quarter
Issuance of equity-linked bonds survived the first part of the credit crunch, but the number of deals issued in the first quarter dropped 50% compared with the fourth quarter of last year, according to Dealogic. "Issuance has been hit in the past four to six weeks as sentiment has worsened among the hedge fund community, the traditional buyers of this kind of paper in Europe," said Rossitza Haritova, European convertibles analyst with Nomura. Financial Times (01 Apr.)

Criticism of cholesterol drugs hits shares of Schering, Merck
Shares of Schering-Plough Corp. plunged nearly 26%, while shares of Merck & Co. dropped about 15% after a panel of doctors recommended patients try older cholesterol drugs rather than Vytorin and Zetia. "Everyone is going to be watching [prescription] trends," said David Heupel, a portfolio manager with Thrivent Investment Management. "For the next month if not longer, it's all going to be about how quickly Vytorin and Zetia ... decline." Reuters (31 Mar.)

Economics

Reserve Bank of Australia holds interest rates at 7.25%
The Reserve Bank of Australia may raise interest rates in the near future, depending on upcoming inflation data, but for now the central bank has left rates at 7.25%, a 12-year high. Analysts expected RBA to hold interest rates steady as it needs more time to assess the effects of previous rate increases. ClipSyndicate/Bloomberg (31 Mar.) , The Sydney Morning Herald (01 Apr.)

Confidence among Japanese manufacturers continues to drop
A survey by the Bank of Japan shows the confidence of the country's large manufacturers has declined to a four-year low and the outlook for the next quarter is even more bleak. The data reinforce speculation that Japan's central bank may reduce interest rates this year. "The BOJ faces a difficult situation, with a growth slowdown coming at a time when consumer prices are rising," said Joseph Kraft of Dresdner Kleinwort. International Herald Tribune/Reuters (01 Apr.)

Geopolitical/Regulatory

Paulson plan seen as victory for investment banks
More than a year ago, Wall Street executives were expressing their concern about overregulation and the threat of excessive litigation as it was hindering America's ability to compete in the global financial stage. They urged Washington to ease up, and although they didn't get their wish then, they may get it now. The proposal from Treasury Secretary Henry Paulson may deliver streamlined regulation to Wall Street investment banks. The New York Times (registration required) (01 Apr.)

King warns of "radical change" in banking rules
Bank of England Governor Mervyn King said Monday that banks will likely face tougher rules following the credit crisis. In a speech to the Bank of Israel in Jerusalem, King said financial regulators and central banks are considering significant changes for Wall Street and the City. Telegraph (London) (01 Apr.)

Financial Stability Forum considers unorthodox strategies
At a meeting of the Financial Stability Forum, which is coordinating the global response to turmoil in the markets, participants discussed strategies to ease the credit crisis. The ideas include temporarily suspending capital requirements, purchasing mortgage-backed securities with public funds and recapitalizing the banks with taxpayer money. Financial Times (31 Mar.)

Gross expects increased regulation of investment banks
Bill Gross, manager of Pimco Total Return, said JPMorgan Chase's government-backed acquisition of Bear Stearns and the Federal Reserve's decision to allow investment banks to borrow from its discount window will result in increased regulation of Wall Street banks. The tougher regulations will cut into the profits of the investment banks, Gross said. FinancialWeek (31 Mar.)

FSA offers warnings about "green" market risks
The Financial Services Authority has issued a 37-page study about risks associated with the emissions-trading market. The risks include insufficient data, false claims about the green credentials of emissions-trading firms and investors being sold products that are not suitable for the market. Telegraph (London) (01 Apr.)

Financial Products

Merrill launches indexes tied to carbon-emissions markets
Merrill Lynch has developed a series of indexes that track the value of carbon-emissions credits, according to the firm's head of global commodities research, Francisco Blanch. The indexes are designed as investment vehicles and Merrill would like to see them used in exchange-traded notes or funds. CNNMoney.com/Investor's Business Daily (31 Mar.)

Ethics

French regulator to proceed with charges in EADS case
The Autorite des Marches Financiers, France's stock market regulator, said its investigation of insider trading at EADS, the parent of Airbus, will lead to charges. The regulator said it will notify those involved in the case and will "immediately" transfer the investigation to the prosecutors' office in Paris. Google/The Press Association (01 Apr.)