China's richest
announces $8bn film park
China's richest man, property developer Wang Jianlin, raised the curtain
on a planned 50 billion yuan ($8.17bn) "motion-picture city", which
he described as the biggest-ever single investment in the movie and television
industry.
Property developer Wang Jianlin, 58, founder of Dalian Wanda Group, was
surrounded by Hollywood stars John Travolta, Nicole Kidman and Catherine Zeta-Jones on Sunday
as he launched his most ambitious project yet in the picturesque coastal city
of Qingdao.
When completed in 2017, the Oriental Movie Metropolis will boast 20
sound stages, including the world's first underwater studio, a massive
convention and exhibition complex, a sprawling shopping mall with an indoor
amusement park and seven resort hotels.
The project also will include a yacht club with 300 berths.
"The Oriental Movie Metropolis is a major step in China's strategy to become
a global cultural powerhouse," Wang said.
It was not only crucial to the development of Wanda's entertainment
business, he added, but also an important step for building China's cultural brand.
For Wang, who was named by Forbes as China's richest man with
personal wealth of $14bn, the Qingdao project also
represents the latest move by Wanda Group to parlay its real estate and
shopping mall development into a leisure and entertainment empire.
Wanda Group, which is privately held, has invested in 72 Wanda Plazas
across China, along with 40 five-star hotels. The company also owns 6,000 movie
screens, 62 department stores and 68 karaoke centres.
More recently, the company has turned to offshore markets to expand its
real estate and leisure investment. Last year, Wanda closed its $2.6bn buy-out
of U.S. cinema chain AMC Entertainment. Wang this year also announced a $1.57bn
British investment that included the purchase of Sunseeker, Britain's largest luxury yacht maker by sales.
The Wanda chairman told Reuters earlier this month that he could afford
to spend as much as $5bn every year to buy foreign firms or assets.
In an interview on the sidelines of Sunday's ceremony, Wang said that he
expected Wanda Group revenue to increase to $30bn this year, and to continue to
increase by $10bn every year.
Wanda Group says it has total assets of $49.01bn and annual revenue for
2012 of $23.15bn.
"We will have more than $50bn in revenue two years from now,"
he said. "In 2020, we will have at least $100bn, even by conservative
estimates."
Offshore hotel investment is a major focus of the company's strategy.
"In the next eight to ten years, we will build high-end hotels in major
cities around the world," he said.
To reach the site of Oriental Movie Metropolis, which is planned as a
376-hectare, eight-phase development, it's necessary to drive about one hour
from downtown Qingdao past rows of upscale apartment complexes that appear
partially occupied.
Wang, who started his own film production company in recent months that
has met with mixed success, explained that movies were a "sunrise
industry" in China. He expects Wanda to
be among the world's leading 20 entertainment companies by 2016.
He declined to discuss financing for the new project, although he has
not ruled out the use of partners or of debt.
Japan's gaming
market: a world apart
The latest version of blockbuster videogame Grand Theft Auto may have
stoked a worldwide buying frenzy, but the ultra-violent offering is likely to
be a minnow in Japan's vast gaming market.
Shoot-em-up offerings from abroad often struggle to gain traction in the
multi-billon-dollar Japanese videogame sector where fantasy-style games reign
supreme and sell in the millions - though many in the West have not heard of
them.
They include the hugely popular Monster Hunter franchise, which has sold
23 million copies and counting since its debut a decade ago.
"But most of them were sold in Japan even though we did
make an English version," said a spokeswoman for game creator Capcom.
Language translation problems and cultural differences were among the
reasons cited for the struggles of foreign game operators in Japan, a rift that was
apparent as gamers flocked to the Tokyo Game Show this week.
Over 600 games titles were on offer at the four-day extravaganza that
wraps up Sunday.
Though Japan once dominated the worldwide market with the likes of Super Mario and Sonic
the Hedgehog, the country appears to be looking increasingly inward.
"The main trends of the videogame market in Japan are divided into
two categories: major worldwide successes like Pokemon, Final Fantasy or
Biohazard, and games that are specifically designed for core Japanese
gamers," said the Asia Trend Map institute, pointing to the
"overwhelming dominance of games made in Japan".
A blockbuster offering based on the popular comic book "Shonen
Jump" reflects a common theme in which many Japanese games are centred
around a character well known in multiple media platforms, from so-called manga
cartoons and movies to music and television series.
Namco Bandai's AKB 1/149 Renai Sosenkyo, a popular dating simulation
game, is the kind of title known to most at home but with little name
familiarity abroad -- AKB48 is the name of a well-known girl band.
"The title isn't suited to foreign markets," said Namco Bandai
spokesman Toshiaki Honda.
Even Japanese giant Sony is releasing its PlayStation 4 abroad before
its hits store shelves in Japan -- a first -- with
executives saying that titles expected to be hits at home won't be ready in
time.
Eiji Araki, senior official of mobile social game maker Gree, added:
"We've learned that characters and visuals favoured in the United States are different from those in Japan."
For some, the unique character of Japan's gaming market
encapsulates the country's so-called Galapagos Syndrome in which firms
concentrate almost solely on the domestic market.
The take up in Japan on Apple's iPhone and
Samsung's Galaxy smartphones trailed huge sales abroad as many mobile carriers
focused on homegrown flip-phone offerings.
While iPhone is now selling well in Japan, a ride on the Tokyo subway underscores
another unique aspect of the nation's gaming market -- a love of handheld
gaming devices.
Commuters on the city's vast transportation network are frequently seen
thumbing away on portable devices to pass the time while, at home, consoles
outpace the rising popularity abroad of playing games on personal computers
For one official at Japan's Computer
Entertainment Rating Organisation, the love of fantasy and role-playing games
in low-crime Japan stands in stark contrast to Grand Theft Auto's brutal depictions of
urban violence.
"Japanese consumers prefer family-use games to those with violent,
anti-social or extreme expressions of sexuality," she said.
A report by Internet firm GMO Cloud characterises the difference as
"self-escapism versus self-expression".
True or not, Grand Theft Auto is undoubtedly violent, especially when
compared to Nintendo's award-winning "Animal Crossing: New Leaf" in
which players take on the role of a mayor running a rural community.
By contrast, past versions of Grand Theft Auto have included simulated
sex with prostitutes and drunken driving, along with profanity-packed dialogue.
Carjacking, gambling and killing are the staples of a game in which players
take on the role of a psychopathic killer in fictional Los Angeles.
When Grand Theft Auto IV was released five years ago it blew away
videogame and Hollywood records by taking an unprecedented $500m in the week after its release,
and it shows few signs of slowing with the game's fifth incarnation released
days ago.
Despite its foreign pedigree, Hisakazu Hirabayashi, of Tokyo-based
consultancy firm InteractKK, said he still expects the newest Grand Theft Auto
to have relative success among Japanese consumers, at least "for a Western
game".
Jail terms over internet piracy
Spain can jail for up to six years the owners of websites that link to
pirated content under a measure it approved on Friday as it tries to keep off a
US list of countries where copyright is violated most.
Countries on the watch list could face trade sanctions from Washington. Spain was in danger of
finding itself back on after dropping off last year.
The amendment to the penal code, approved by the government, will affect
only those trying to make money from sites by linking to copyrighted material
provided illegally by third parties.
That includes making "direct or indirect profit" - for example
from advertising, the government said.
Spain previously only had the means to punish those who copied and
distributed copyrighted material but it did not pursue sites that linked to
providers of pirated music, films and television shows.
Users of the link-hosting sites will not face any punishment under the
new regulation.
Peer-to-peer file sharing sites and search engines are exempt from the
rules and will not face legal action.
"This is a real balance between protecting copyright and new
technologies," Spain's Justice Minister
Alberto Ruiz-Gallardon said at a news conference after a weekly cabinet meeting
on Friday.
Foreign investment in Myanmar surges
Myanmar has approved more foreign direct investment in the past five
months than all of last year, but companies setting up operations in the hot
frontier market face a growing problem: Southeast Asia's highest office
rental rates.
Myanmar has approved FDI projects worth more than $1.8bn from the start
of the fiscal year on April 1 to the end of August, compared with $1.4bn in the
whole previous fiscal year, Aung Naing Oo, a director general at the Ministry
of National Planning and Economic Development, told Reuters.
But he said he fears potential foreign investors will be turned away by
a severe shortage of office rental space.
The wave of investment comes as Myanmar's quasi-civilian government
implements political and economic reforms, initiated two years ago by President
Thein Sein, a former general who led the country out 49 years of military rule
and global isolation.
The European Union agreed in April to lift all sanctions on Myanmar, while the United States suspended sanctions in May last year and allowed U.S. companies to invest
through a general license. Some American executives have urged Washington to go further and
lift sanctions entirely.
Most of the approved FDI came from other Asian nations, said Aung Naing
Oo.
"Malaysia, which brought about $500m for manufacturing Nissan cars,
is the biggest investor during this fiscal (year) in terms of size followed by
Hong Kong and South Korea, who injected funds in the garment industry," he
said.
Nissan Motor Co plans to start a complete knock down production of its
cars in Myanmar with a Malaysian partner Tan Chong Motor Holdings Bhd, the
Japanese automaker said on Friday, becoming the first major global carmaker to
be assembling cars in the Southeast Asian country.
The rising tide of foreign investment is fuelling a property boom in the
commercial capital Yangon with the increasing demand for rental space feeding the highest office
rental rates of any Southeast Asian city, according to real-estate firm
Colliers International, which opened a branch in Yangon in July.
Colliers put the average rental rate in Yangon at nearly $80 per square metre,
compared to about $25 in Bangkok and $30 in Hanoi. At about $70 per square meter, even the affluent city-state of Singapore doesn't match Yangon, it said.
Scipio Services, a Yangon-based firm that helps foreign companies
establish themselves in Myanmar, puts prime office rental rates even higher. According to their survey,
commercial spaces in the few business towers available jumped from $50 per
square metre in mid-2011 to as much as $90 by May this year.
Skeletal
Some companies choose to rent houses and villas in lieu of office space,
said Brett Miller, Scipio Services' managing director. But residential rates
have also shot up, with villas ranging in price from $4,000 per month to $25
000, he said.
As a result, some companies "are coming in with a small
footprint," stationing only skeleton staff in the country, he said.
Other companies base executives in neighbouring Thailand and fly them to Yangon where they stay at hotels, said Tony Picon, Colliers' managing director
in Myanmar. "I call them the 'half-pats', spending around half their time in Yangon," he said.
Aung Naing Oo said the government is taking measures to increase the
supply of rental space.
"To solve the problem of the shortage of hotel and office
apartments, we are now encouraging investors in these sectors by approving
their proposals very speedily," he said.
Drastic rises in property prices are being driven partly by land
speculators. Miller at Scipio Services said the government could implement a
"holding tax" that would encourage landowners to either build on a
property or sell it to a developer.
Picon, however, was sceptical the government could enforce compliance.
"For tax on unused land, the owner could build something small and
say the land is being used," he said. "Overall I find using tax often
counterproductive especially when you have limited capacity within government
to enforce laws."
EU, Singapore take step
towards free trade deal TOWARDS FREE TRADE DEAL
The European Union and Singapore were set to bolster their economic relationship on Friday, by
initialling the bloc's first trade agreement with a South-East Asian country.
"We are pleased to present today one of the most comprehensive free
trade agreements ever negotiated, and to submit it to our respective
authorities for approval," the parties' chief negotiators, Rupert
Schlegelmilch and Keith Tan, said in a joint statement.
On the European side, the deal still needs to be endorsed by EU
governments and the European Parliament.
Singapore's Foreign Minister K. Shanmugam addressed that parliament at a
session in Strasbourg this month, and stressed Singapore's position as a "significant investment and trading partner of the
EU," the ministry said.
Singapore is the EU's largest trading partner in the Association of South-East
Asian Nations (Asean), with bilateral trade totalling $70.1bn in 2012.
The EU has said the free trade deal would boost its exports to Singapore by some €1.4bn over a decade, while Singapore could see its exports to the bloc increase by around €3.5bn.
"This is also the first step towards closer economic ties between
the two major integrated regions in the world, Asean and the EU, and their 1.1
billion citizens," the negotiators said.
The deal, first agreed in December, is the EU's first in South-East Asia.
Shanmugam said it "could act as a pathfinder for the EU's deeper
engagement" in the region, his ministry said.
The 28-member EU is also pursuing free trade agreements with Malaysia, Thailand and Vietnam. The bloc ultimately hopes to merge them into a single agreement with
the entire 10-country Asean.
"With their expanding middle class, the dynamically growing ASEAN
economies are key markets for Europe's exporters," said the European Commission, the EU's executive.
France to cut
fossil fuels by 30% by 2030
France will reduce use of fossil fuels by 30% by 2030 as part of a
strategy to halve overall energy use by 2050, President Francois Hollande
announced on Friday.
"I propose that we set a goal of reducing consumption of fossil
energy by 30% by 2030," Hollande said at a national conference on the
environment in Paris.
"We can make savings of $27 to 67bn in our energy bill by
2030," he said.
Hollande said that easing France's dependence on
fossil fuels was a core element of a plan "to reduce our overall energy
consumption by 50% by 2050."
But, he said, "let's not be dogmatic about this -- if we are little
bit off the mark, it won't be disastrous."
Hollande outlined several measures to help reach these goals, including
a reduction from 10 percent to five percent in value-added tax (VAT) to spur
energy efficiency in homes.
A draft law on "energy transition" will be put to parliament
in the first half of 2014, he added.
Madrid pushing
for mega casino
Madrid put pressure on Spain's central government on Thursday to push
ahead with a mega gambling resort outside the capital after delays caused by US
casino operator Las Vegas Sands seeking exemption from a national smoking ban
as a condition of a deal.
Madrid desperately wants the Eurovegas resort - slated to include six
casinos, 12 hotels and shops - to be built in the region to create employment
in a country with one of the highest unemployment rates in Europe.
"We must do everything in our power to prevent a deal like
Eurovegas slipping through our fingers," Madrid President Ignacio Gonzalez
told Onda Cero radio.
The deal has encountered delays because Sheldon Adelson, chief executive
of Las Vegas Sands, wants smoking to be allowed in the casinos to prevent gamblers
taking cigarette breaks outside which lowers takings for the operator.
"From what we understand from Adelson, there are still some
outstanding commitments from the Spanish government to be resolved,"
Gonzalez added, without elaborating.
Las Vegas Sands declined to comment on the matter on Thursday.
Gambling industry mogul Adelson told analysts in a presentation in London on Wednesday that the
company was waiting for a smoking ban in Spain to be overturned
before going ahead with the project.
The Spanish government is not keen to scrap the anti-smoking law which
came into force in January 2011 and prevents smoking in all public places
including bars, discos and workplaces.
Health Minister Ana Mato said on Wednesday that the government had to
protect the health of citizens, although she added that it was also a
government priority to create jobs.
UK watchdog
proposes pensions shake-up
A UK watchdog has unveiled proposals to shake up the £275bn ($439bn)
defined-contribution pensions market, parts of which offers poor value for
money for up to 5 million savers.
The Office of Fair Trading (OFT) has stepped in to increase confidence
in workplace pension schemes and bolster efforts by the British government to
get more people to save for retirement, relieving pressure on taxpayers.
Concerns over value for money, the ability of pensions to provide
meaningful retirement income and whether employers and trustees are choosing
the right pensions for staff, have discouraged many workers from parting with
their cash.
Now, the OFT and the Pensions Regulator have agreed to address these
issues and look at which trust-based schemes, currently managing around £10bn
of pensions savings, could be failing members in these ways.
They are also looking into high fees charged to members of older
contract and bundled trust schemes with around £30bn pounds of savings. The OFT
estimates that members in pre-2001 schemes pay annual management charges some
26% higher than members of schemes launched after this date.
"We have found problems in relying on competition to drive value
for money for savers in this market," OFT chief executive Clive Maxwell
said in a statement. He said the OFT had worked with government, regulators and
industry to agree a set of measures to help to ensure that savers get a better
deal.
The OFT also found employers often lack the experience or incentive to
assess value for money when deciding which pension scheme to choose for their
employees.
This problem could grow as a government-sponsored auto-enrolment
initiative, aimed at solving the country's retirement savings timebomb, rolls
out across Britain in the coming months, the OFT said.
To tackle these concerns, the Association of British Insurers has agreed
to an audit of bundled trust schemes and to help to set up independent
governance committees to increase scrutiny of pension schemes on behalf of
members.
"It is important to remember that the level of contribution and how
long someone works remain the most important factors in determining an
individual's overall retirement income," ABI chief executive Otto Thoresen
said.
The OFT has also recommended that the Department of Work and Pensions
increase transparency and comparability of pension scheme costs and quality in
order to make employers' selection process easier.
Adrian Boulding, Pensions Strategy Director at Legal & General has
called on the government to introduce a cap on the charges payable by pensions
savers in both new enrolment schemes and legacy workplace pensions.
"We firmly believe that no employees saving in a workplace pension
scheme should have to pay more than half a per cent a year of their retirement
savings pot whatever the size of the scheme and that low charge should be available
for legacy pension scheme members too," Boulding said.
Lee Hollingworth, partner at consultant Hymans Robertson said he hoped
planned reforms on how to improve quality of advice to savers wouldn't be lost
in a debate on fees.
"At the moment the system relies too heavily on savers engaging
with their scheme, but the majority of people are not equipped or interested in
becoming their own pension adviser," Hollingworth said.
He said savers needed clear information on what income they can expect
to retire on along with more hands-on direction on how to reach their
retirement target.
Last October, the government introduced automatic enrolment, requiring
employers to pay into a workplace pension scheme for all staff unless they opt
out. Automatic enrolment is being introduced over the next six years.
Defined contribution schemes are those where the size of the pension pot
is linked to the contributions made by the individual in their working life,
the costs of the scheme and the performance of the investments.
Onion prices sting India's central
bank
The aroma of frying onions from the Britannia restaurant might not
penetrate the office of India's central bank
governor Raghuram Rajan a block away, but like the eatery's customers, he can't
escape the soaring price of the pungent vegetable.
The price of onions has added to Rajan's already full plate as the new
head of the Reserve Bank of India (RBI) wrestles over
how to help stabilise the rupee currency and tackle inflation without further
dampening economic growth.
A former IMF chief economist, Rajan took over at the RBI on Sept. 4 in the middle of India's worst economic
crisis in 20 years. He will announce his first monetary policy review on
Friday.
The US Federal Reserve's surprise decision on Wednesday not to wind down
its massive monetary stimulus just yet helped the rupee to a one-month high on
Thursday, so inflation may have now moved up on his list of priorities.
In August, the cost of onions was 245% higher than a year earlier, while
other vegetables shot up 77%, driving headline inflation to a six-month high.
Onion prices have risen even further in September, prompting the government to
take steps to limit exports.
Eaten raw as a side dish, or blended into a vast array of curries,
onions play a prominent role in Indian cuisine and public anger rises quickly
whenever prices spike.
Price pinch
In Britannia, the pinch is being felt by customers who include employees
of the Reserve Bank, who drop by to lunch on steaming plates of its famous
Parsi berry pulav rice.
"Instead of one person eating one plate, two people are splitting.
And three people are dividing two plates," said Boman Kohinoor, the
91-year-old co-owner of the restaurant.
Much remains unchanged in Britannia, which was founded in 1923, 12 years
before India's central bank was set up. But the prices keep on rising.
The restaurant raised prices on its menu by between 30 and 50 rupees
($0.50-$0.80) earlier this year - a fragrant plate of rice-based chicken
biryani now costs 350 rupees - and Kohinoor said the soaring costs of
ingredients may force him to hike prices again by April.
With overall food prices up an annual 18% last month, Kohinoor's new
neighbour at the Reserve Bank will probably be careful not to stoke inflation
in other areas, despite calls from industry to cut interest rates and lower
borrowing costs.
But in reality there is little Rajan can do to prevent the volatility.
Erratic prices for perishable goods are routine in India, partly because the
majority of farms depend on the variable monsoon for rains. This year, a
drought followed by too-heavy rain affected supplies.
Consumers are also hostage to inadequate storage facilities and
transport bottlenecks - that together cause up to 30% of fresh produce to rot
before it reaches the market - and a distribution network in which many layers
of middlemen take cuts, forcing prices higher.
Whatever the causes, onion prices have political consequences in India -
in the 1998 New Delhi elections the Bharatiya Janata Party (BJP) was booted out
of office by the Congress party after prices touched 60 rupees per kilo.
The significance will not be lost on Prime Minister Manmohan Singh,
whose Congress party faces national elections by May. The Congress party local
government in Delhi and its rivals the BJP have been trying to out-do each other selling
the vegetable at below market rates from the back of trucks in the city.
Discount site Groupon offered onions at 9 rupees per kilogram earlier
this month, a discount of as much as 90%, advertising the deal with the image
of an onion in a jewellery case. Demand was so high its site crashed.
But Rajan, who had a lucky break on Wednesday when the US Fed decided not to
reduce the flow of cheap dollars that help drive investment flows to emerging
markets such as India, might soon be in for another reprieve.
Strong rains in the current monsoon season mean some are predicting a
bumper onion crop this year - and farmers are forecasting prices will drop
sharply over the next few weeks.
"Onion prices to ease in 2-3 weeks as fresh output arrives from Maharashtra, other states," agriculture
minister Sharad Pawar posted.
Italy seeks to
lure back foreign investors
The Italian cabinet on Thursday is set to unveil tax incentives,
consulting services and faster start-up rules for foreigners doing business in Italy, the first step in a
drive to lure more foreign investment to the euro-zone's third-largest economy.
The measures will be contained in a draft programme called
"Destination Italy", drawn up by ministries with input from
businesses including oil giant Eni SpA and intended to form the basis for
legislation later this year.
"Predictability on tax issues, authorisations and business rules is
what we want to give foreign investors," said Fabrizio Pagani, an economic
adviser to the prime minister who helped draft the measures.
Recession coupled with more deeply-rooted problems, such as high
corporate taxes and a labyrinthine justice system, have slowed foreign
investment.
Some $9.6bn was invested last year, down from an annual average of
$36.6bn in 2005-2007, a period that is
considered a good indicator of pre-crisis flows according to the United Nations
Conference on Trade and Development, a multilateral organisation that promotes
international trade.
The government hopes to help foreign investors by concentrating all
commercial lawsuits involving non-Italian firms into three cities - Milan, Rome and Naples - rather than have
cases scattered across the country.
It also hopes to introduce fast-track tax consulting for foreign companies
and to reduce the amount of time it takes businesses to obtain the paperwork
needed to build factories.
Prime Minister Enrico Letta's left-right coalition government has been
paralysed by infighting as it seeks to address Italy's worst postwar recession.
As an example of the challenges foreign investors face, the draft cites
a World Bank survey ranking Italy at 103 in the world in terms of how easy it is to get construction permits.
More specific measures include making it easier and cheaper for small
firms to access capital other than through bank loans, which have dwindled over
the past years, and tax breaks to encourage more smaller companies to seek
stock market listings.
It also confirms the government aims to provide, by the end of October,
a list of planned privatizations and reiterates a pledge to lower the tax
burden for companies.
"Too slow"
"Italy is too slow in giving the green light to foreign
investments, while uncertainties in the way fiscal rules are applied and the
length of judicial trials also keep foreign investors away," said Sandro
De Poli, head of General Electric in Italy and a member of the advisory
committee together with Eni.
GE has been one of the relatively small number of major foreign
investors in Italy since 1994 when it acquired Nuovo Pignone, a specialist in
machinery for the oil and gas industry. Last year, it bought the aviation unit
of Italian aerospace supplier Avio for $4.3bn.
Other companies have not been as successful. Energy giant British Gas,
for example, left the Italian market last year after having spent 10 years in a
fruitless effort to win a licence to build a regasification plant in southern Italy.
Spain attracted $28bn in 2012, three times the volume of Italy's foreign investment.
Despite Spain's crippling economic downturn and high unemployment, economists say the
country has embarked on more ambitious structural reforms, particularly to its
labour market.
The World Bank ranks Spain 44th in the world in
terms of the ease of doing business, compared to Italy's 73rd ranking. Germany ranks 20th and France 34th. One result:
French retailer Fnac plans to open 12 new stores in Spain by 2015, with an
investment of €100m, while it sold its Italian stores last year.
Car companies Renault-Nissan, Ford, Iveco and Seat have all announced
big investments for their Spanish plants, according to ICEX, the Spanish
institution that support foreign investments.
Luca Manzella, former CEO at British Gas Italia, now senior adviser at
Arthur D. Little, says the new measures envisioned by the government are a
start but there is a long road ahead in convincing investors back to Italian
shores.
"Dedicated desk and courts for foreign investors are a good idea
over the short-term, but it won't be enough," he said.
UK banks
allowed to cut cash holdings
Britain's eight top lenders can cut their cash reserves by a collective £90bn
($140bn) and use the funds to support economic growth, the Bank of England's new governor Mark Carney said on Wednesday.
Britain's lenders were forced to build up buffers of cash and UK government bonds far
earlier than required under a globally-agreed timetable.
The buffers help cushion them from short-term market shocks so they can
keep operating for a month even if markets freeze, as they did during the
2007-09 financial crisis.
UK government bonds, known as gilts, fell after Carney's announcement as
investors factored in the likelihood that the banks will sell off some of their
holdings.
Carney, in his maiden speech as governor of the Bank of England, said it "will help to underpin the supply of credit, since every
pound currently held in liquid assets is a pound that could be lent to the real
economy".
In a separate statement, the central bank's Prudential Regulation
Authority, which supervises UK lenders, said banks could scale back the
liquidity buffers on condition they have a separate, minimum core capital ratio
of 7% a new requirement.
The watchdog has said it expects the lenders to meet this capital ratio
by the end of the year after some had to take steps to find more capital.
The eight are: HSBC, Barclays, Co-op, Lloyds, RBS, Standard Chartered,
Santander UK and Nationwide.
The PRA is implementing a policy that the BoE's Financial Policy
Committee decided on in June. The policy would allow the four biggest banks to
scale back their liquidity buffers to 80% of where they should be if in full
compliance with the global Basel III accord, not due until 2018.
This would release £70bn but, by extending the change to the eight main
lenders, a further £20bn can potentially be released.
The British Bankers' Association said banks would be re-assessing how
much of the £90bn can be redeployed into lending to small and medium businesses
and households, as they are committed to doing.
No mission accomplished
The banks are under political pressure to increase lending to business
following criticism that they are focusing on home mortgages and consumer
credit rather than productive industry, encouraging a lop-sided economic
recovery.
The banks argue that lending levels reflect the amount of demand.
Carney signalled that banks face having to hold more capital against
mortgages if house price growth becomes unsustainable.
Like his predecessor Mervyn King, he insisted that well-capitalised
banks are in a better position to lend, saying U.S. banks have rebuilt
their capital bases and now lend far more than their British peers.
But Carney avoided some of King's harsh rhetoric towards the British
banks, striking a more conciliatory tone that was welcomed by Philip Hampton,
chairman of Royal Bank of Scotland, during a visit to Reuters.
"Most people like Mark Carney and they think they can do business
sensibly with him," Hampton said.
Britain's banks will face further capital requirements because of their
size or market dominance, but Carney said his task would be to manage this
transition "in a gradual way that supports continued confidence in
growth".
With a 7% core capital ratio, banks would be "adequately
capitalised" to start that transition, he said.
"There is no mission accomplished banner that the banking system is
fixed," Carney added.
Banks have been using cash and top-quality government bonds such as UK gilts in their
liquidity buffers. The PRA said on Wednesday that up to 40% of the buffers
could in future be in corporate bonds, shares and retail mortgage-backed
securities, giving them greater flexibility.
Corporate suicides highlight stresses
The suicides of two top executives in Switzerland has prompted calls for greater support for boardroom high-fliers.
Heavy workloads, frenetic schedules and extensive overseas travel has
obliterated the so-called "work-life balance" for many bosses and the
financial crisis has piled on the pressure with job cuts, fire sales and the
scramble to survive.
"It has always been tough at the top and it has always been lonely
at the top and certainly since the global financial crisis, it's got even
lonelier and even tougher," said executive mentor David CM Carter, author
of self-help book Breakthrough.
"That's why it's really important that those people at the top pay
attention to the need for balance," he said, pointing to entrepreneurs
such as Richard Branson and Bill Gates, who have teamed glittering careers with
a successful family life.
"They do hot air ballooning, they save the planet as well as
running their fantastic empires. They have holidays and hobbies or they focus
on their family and their relationships and on their health."
But career chief executives often face more pressure from shareholders
and their boards than company founders such as Branson and Gates.
And while they usually have a coterie of staff running around them,
chief executive officers often feel isolated by their position and the
high-stakes decisions they have to take. The need always to present a
"game face" can inhibit them from confiding in colleagues.
Zurich Insurance Group's chief financial officer Pierre Wauthier was
found dead at his home on Monday in what police said appeared to be a suicide.
Just weeks earlier, Carsten Schloter, the chief executive of telecoms
group Swisscom, killed himself.
The deaths shocked Switzerland's corporate community and have highlighted the sometimes lonely
existence of high-ranking executives.
In media interviews, Schloter expressed regret about the distance
between him and his three children in Germany, whom he saw far less frequently due to the breakdown of his marriage.
He also said he found it "difficult to unwind".
Executives often spend large amounts of time away from their friends and
family and it is not uncommon for bosses to live in a different city or even
country for work and commute home at weekends.
Schloter had also faced pressure after an acquisition he championed led
to €1.3bn euros of writedowns. More recently, Switzerland's competition body said it had opened a probe into Swisscom after a
rival suggested it abused its market position.
Burn out
Corporate over-achievers are often reluctant to seek help in managing
their professional burdens until too late, according to Jenny Gould, executive
coach and life coach with Oxford-based stress management and coaching company
STP Consultancy.
"Stress is something that's very insidious - you can deal with it
for quite a long time before you then begin to find yourself burning out from
it," she said.
In 2011, Lloyd's Banking Group Chief Executive Antonio Horta-Osorio took
a temporary leave of absence to recover from overwork, sleep deprivation and
exhaustion.
Horta-Osario was just eight months into his role at the bailed out
lender, where he had embarked on a large scale restructuring programme. He
returned after two months off.
"Stress is often caused by a lack of control and a lack of support.
If you feel like you can't control certain outcomes and don't have anybody to
discuss your worries and feelings with... that's potentially a toxic mix,"
Gould said.
In the past year, the chief executive of energy giant Shell has quit and
the chairman of luxury goods group Richemont has taken a year-long sabbatical
despite facing no obvious pressure to leave.
They cited a desire for a change of lifestyle or simply a break from the
life at the top.
But companies need to watch for signs that all staff, junior and senior,
are coping with their increasingly demanding roles.
Bank of America Merrill Lynch said last week it would review the working conditions for
junior employees after a 21-year old intern, Moritz Erhardt, died after
allegedly working 72 hours without sleep.
The cause of his death is not yet known.
Neil Shah, director at Stress Management Society, a non-profit
organisation dedicated to helping people tackle stress, said firms who turn a
blind eye to the pressures on overworked executives are exposing themselves to
commercial risk.
"We need to view stress as a health and safety risk hazard,"
Shah said. "In the UK, we are legally
required to risk assess for display screen equipment but you're not at this
stage legally required to assess for stress.
"This is a major issue not just causing, in the worst case
scenario, loss of life, but it has an impact on productivity, efficiency and
causes absences. Those are real financial costs."
UK patients
pay too much - watchdog
Private healthcare patients in Britain are paying too much because of a lack of competition, the country's
market regulator said in a ruling that could lead it to force some operators to
sell hospitals.
The Competition Commission (CC) said on Wednesday it had identified 101
private hospitals that faced little local competition, some of them in clusters
owned by one of the major hospital groups BMI Healthcare, Spire and HCA
International.
It could force operators to sell some hospitals in areas where they dominated,
it said, adding that it had pinpointed about 20 such sites.
Asked about the discrepancy between the two figures, a commission
spokesman said many areas had local monopolies or duopolies, so forcing sales
would make no difference.
The state-run National Health Service (NHS) is by far the leading
provider of treatment in Britain, where the market for privately funded healthcare was worth £6.4bn
($10bn) in 2011, according to consultants Laing and Buisson.
The major private hospital groups denied the assertion that they made
excessive profits from their dominance of the market, But Bupa, one of the
insurers which fund most private treatments through employee-medical insurance
schemes, welcomed the report.
Mark Jackson, special adviser at advisory and restructuring practice
Zolfo Cooper, said forced hospital sales would create uncertainty for lenders
and investors in the sector which was already under pressure from a decline in
the take-up of private medical insurance and an increase in lower-margin NHS work.
The CC said that the major health insurance groups, Bupa and AXA PPP,
did not have the power to fully offset the dominance of the big private
hospital groups.
Presenting the provisional findings of an investigation into the sector,
it said this dominance raised insurance costs for all private patients because
premiums, often paid by employers, are set nationally.
"The lack of competition in the healthcare market at a local level
means that most private patients are paying more than they should either for
private medical insurance or for self-funded treatment," said Competition
Commission chairman Roger Witcomb.
"The lack of available and comparable information, often less than
is available to NHS patients, also makes informed choices - which could help drive
competition - for these patients difficult."
HCA charges highest
BMI, partly owned by South Africa's Netcare and private equity group
Apax Partners, is the biggest private operator, with 69 hospitals, while Spire,
owned by private equity group Cinven, owns 38.
HCA International, owned by US group HCA Holdings , charged
significantly higher prices than other operators, the CC said, even allowing
for higher costs of running its six London-based hospitals.
The three operators also faced little competition from new entrants in
the market because of the high costs of setting up a hospital and flat demand
for private healthcare services in recent years, it said.
The top five healthcare providers, which also include Ramsay Health Care
UK and Nuffield Health, accounted for about 77 percent of the market by
revenue in 2010, according to a 2011 report by the Office of Fair Trading.
Smaller providers include Abbey, Aspen Healthcare, The London Clinic and The Horder Centre.
BMI said it disagreed with many of the findings of the investigation,
and said it did not "hold the whip hand" in its relationship with
insurers.
"We reject absolutely any assertion that BMI Healthcare and its
hospitals exercise market power or that we make excess profits at the expense
of patients," Chief Executive Stephen Collier said in a statement.
"The vast majority of BMI's 69 facilities, in a UK market with over
500 rival facilities, face very significant local competition from other
private hospitals and, increasingly, from the NHS."
HCA International said it was disappointed in some of the findings.
"London has witnessed a strong record of new entry and expansion of
private health providers in recent years, demonstrating that barriers to entry
are low," it said.
Spire disagreed with the CC's view that its hospitals faced little
competition, made excess profits and had a disproportionate bargaining power
over insurers.
"We believe these findings, and the remedies proposed, are based on
an unrealistic assessment of the markets in which we operate and the level of
investment necessary to operate a high-quality hospital," Chief Executive
Rob Roger said in a statement.
But insurer Bupa said the findings were good news for patients.
"By tackling the lack of competition that has damaged the sector for
too long, the Commission has understood the need for strong action and has put
patients first," said Damien Marmion, managing director of Bupa Health
Funding.
The Competition Commission's consultation is open until next month and a
final report will be published by April 2014.
Luxury housing to be built on painter's
grave
The burial place outside Moscow of the great Russian
artist Kazimir Malevich, famed for his avant-garde works of the early Soviet
era, has been paved over to make way for a luxury gated community, activists
said on Wednesday.
A new construction project in the village of Nemchinovka near Moscow was allowed to cover
the grave of the painter of the iconic "Black Square" composition,
despite tireless petitions, local activist Alexander Matveyev told AFP.
Matveyev heads the group "Nemchinovka and Malevich" which
researches the artist's life in the village and he said had provided
authorities with the precise coordinates of the location of the grave.
Several well-known Russian cultural figures flocked to Nemchinovka in
the 1920s, including Malevich and visionary Soviet filmmaker Sergei Eisenstein.
Malevich, an artist, sculptor and writer, who died in 1935 in what is now Saint Petersburg, was cremated and buried in Nemchinovka as
per his wishes. The exact location of the grave was lost during World War II.
By the late 1980s, the area was an agricultural field so a plaque was
erected on the edge of the field, about two kilometres away from the spot.
Two more decades passed before Matveyev and other activists in
Nemchinovka were able to pinpoint the exact coordinates through surviving
witnesses, radar equipment and military maps.
They even joined forces with German banker and Nemchinovka resident
Jochen Wermuth in 2011 to build a memorial and museum centre in the area, only
to see the area closed off by the construction company.
"The culture ministry ordered to stop construction works, but they
only stopped for a few hours," Matveyev said.
"Now the spot has been covered with concrete."
He said that the exact location of the grave has now been paved over and
is surrounded by housing which will form a gated community.
Moscow region culture official Oleg Rozhnov told RIA-Novosti news agency
this week that by the time the grave was precisely located, it was too late to
change the project, since "it was already inside the gated
territory".
But Matveyev dismissed this as misinformation.
Once a bucolic country setting lying just west of the capital,
Nemchinovka and the surrounding scenery that inspired Malevich is now covered
with gated communities and housing complexes populated by affluent Moscow commuters.
The website of the complex, called Romashkovo City, boasts a
"fenced territory and 24-hour video surveillance monitored by our own
security team". Residents access the premises via electronic keys and will
have their own private school and kindergarten.
Matveyev has now written to President Vladimir Putin asking to move the
grave beyond the premises to a plot of land that is still available, with the
dream of some day building a centre of avant-garde art.
"We need land to build the memorial," he said. "I think
Malevich would approve."
He added that not all was lost since the precise spot has no housing
built on top of it, just paving.
By the time of his death at 57 in 1935, Malevich had become a persona non-grata in the Soviet art
establishment which had returned to conservatism after the bold experiments of
the early 1920s. He had asked to be laid in a "Suprematist" coffin
shaped like a cross.
A Moscow crematorium burned his body, and his ashes were buried under his
favourite oak tree in Nemchinovka, marked with a black square.
In his will he asked that a monument on top of his grave contain a
telescope pointed at Jupiter.
Costs
threaten Merkel's energy overhaul
Angela Merkel's "green revolution" risks becoming a victim of
its own success.
Seduced by generous subsidies, Germans are embracing the ambitious
project with such fervour - installing solar panels on church roofs and
converting sewage into heat - that instead of benefiting from a rise in green
energy, they are straining under the subsidies' cost and from surcharges.
Merkel's ambitious experiment to wean Europe's biggest economy off nuclear and
fossil fuels is being closely watched around the world. Should it work, others
will follow. But her priority if, as expected, she wins a third term on
September 22 will be finding a way to cap the rising cost of energy.
"Germany's dilemma is how to keep industry's energy prices low enough to remain
competitive and meet ambitious (green) targets while also maintaining a
balanced budget," said Will Pearson, head of global energy at the Eurasia
Group in London. "Addressing these will pose a political challenge."
So attractive are the incentives, or feed-in tariffs, that the rapid
expansion of renewable power has driven up the surcharges which fund them and
are paid for by consumers. The charge rose by 47% this year alone.
Both households and industry are feeling the pain and exporters complain
that the energy shift has driven up power prices so much that their
competitiveness is being eroded.
Cost worries aside, polls show broad public support for the shift,
announced by Merkel after Japan's Fukushima disaster in 2011.
Responding to public fears, she accelerated Germany's nuclear exit and introduced targets for renewables to make up 35
percent of the power mix by 2020 and 80 percent by 2050.
Given that consensus, the struggling opposition finds it difficult in
the election campaign to present energy policies that differ significantly from
those of Merkel's conservatives.
No one advocates a dismantling of the project.
"The energy transformation is a bit like putting man on the moon -
it offers Germany huge opportunities for future decades. I have nothing against the
idea," said Peer Steinbrueck, the Social Democrat (SPD) candidate for
chancellor. "But Mrs Merkel is messing up the implementation and we will
change that."
The SPD, which introduced the first incentives for green energy more
than a decade ago when it ruled with the Greens, wants to help consumers by
cutting energy taxes.
Grass roots
While politicians squabble over how to keep a lid on costs - put at €1
trillion in the long run by the environment minister - voters are taking
matters into their own hands.
Take projects like GruenEnergie, a scheme launched two years ago by city
utility Stadtwerke Guetersloh in western Germany under which the local
cooperative bank and turbine maker Enercon each match citizens' investments in
a nearby wind park.
After just three weeks, it had raised enough, mainly from locals
offering between 1,000 and 25 000 euros, to fund a park which produces power
for 2 400 households a year. The project has expanded to buy a solar park in
eastern Germany.
Investors get dividends from the project linked to the guaranteed prices
paid for the power generated by the turbines
"Customers are motivated by an investment in green energy which is
considered trendy," said the utility's head of energy services, Uwe
Poeppelmann.
Such grass-roots activism is, say experts, one of the most striking
results of Merkel's energy shift.
Some 1.3 million solar photovoltaic units are on stream, mostly owned by
single households, and about 23,000 wind plants have been bought, mainly by
groups of farmers who club together.
However successful she has been at fostering a new culture, Merkel would
face tough decisions in a third term: namely how to reform a subsidy system
which is a victim of its own success.
Households take a direct hit on their electricity bills and do not
expect this year's jump in the surcharge to be the end of it - creating a
source of anxiety for voters.
"Surveys show people are concerned that the costs of the energy
transformation will drive down living standards," said Emnid pollster
Klaus-Peter Schoeppner.
Industry
Export-oriented German industry, already disappointed that shale gas is
being shunned due to environmental fears, is angry about high energy costs,
although exemptions help many firms in the cement, steel, paper and glass
sectors.
Although wholesale power prices have plunged by about a fifth this year
due to renewable supplies, end users have to pay the second highest prices in
Europe thanks to fees and charges.
"Energy-intensive industry, which employs over 900,000 people, will
have to leave Germany in the medium term if it does not get sustainably competitive energy
prices," said the head of the BDI industry association last month.
Utilities like E.ON and RWE, hit by plunging prices for wholesale power
which they sell, are also piling on pressure to reduce green incentives. Some
have threatened to shut thousands of megawatts worth of plants unless there is a
big rethink.
Merkel, who has promised to change but not abolish the incentive system
right after the election, faces a delicate balancing act to ensure renewables
continue to grow and keep consumers happy. Much will depend on her coalition
partner.
If she renews her alliance with the business-friendly Free Democrats,
who want a radical overhaul of the Renewable Energy Law, deep cuts to
feed-in-tarifs may come. But if she switches to a "grand coalition"
with the SPD, her scope may be smaller.
Whether her next coalition is centre right again or centre left, Merkel
is set to scale back exemptions from the renewable surcharge and grid fees, as
the European Union has urged.
She also needs to boost offshore wind, which was meant to be part of the
energy switch but has proved costly, and the power grid needs to be expanded by
up to 4 600 km and overhauled to cope with bursts of supply from renewables. But
some local communities fiercely resist more power masts.
Australian opposition outlines budget
savings
Australia's conservative opposition, heavily favoured in next month's
election, outlined A$31bn ($27.8bn) in savings on Wednesday and promised to
breathe new life into the economy by abolishing environment taxes polarising
voters.
But Prime Minister Kevin Rudd said the opposition planned big cuts to
key services and predicted voters would return to his Labor Party in the final
week of campaigning. Most polls give the opposition under Tony Abbott a 53 to
47% lead, enough to give them a sizeable majority in parliament.
Opposition finance spokesman Joe Hockey, who would become treasurer of
the world's 12th biggest economy if the polls prove true, said the
conservatives were determined to better Labor's spending record, seen as one of
Rudd's biggest electoral weaknesses.
"After six years of Labor getting every single budget number wrong,
enough is enough," Hockey told reporters. "The coalition is
absolutely committed to living within its means."
Labor, he said, had presided over a "dysfunctional" budget
after ousting the conservatives in 2007.
The opposition has long made the abolition of a "carbon" tax
on pollution and a tax on mining company profits the cornerstone of its bid to
drive Labor from office, blaming the carbon tax for pushing up the price of
electricity and other services.
Voters concerns over
budget cuts, jobs
But budget cuts and their impact on jobs amid a slowdown remain a major
concern among many of the 14 million voters. An Australian National University survey found jobs and
management of the A$1.5 trillion economy to be the most important issue.
Rudd told a campaign event that Abbott planned in secret to "cut,
cut and cut" health and education programmes, austerity measures that
could hurt confidence and propel the country into its first recession for a
generation.
"He is the master of the big cuts," the prime minister said.
He predicted Labor would make a big comeback despite the polls, as it
did in the 1993 election.
"Mr Abbott thinks he's a shoo-in," Rudd said. "I think
the Australian people don't like political leaders who arrogantly assume that
they have their vote already in the bag."
Hockey, a former financial markets lawyer, went out of his way to say
there would no cuts in social spending.
The conservatives, he said, would deliver a centrepiece promise of a
A$9.8bn paid parental leave scheme, paid for in part through abolition of
business compensation associated with the carbon and mining taxes to be
eliminated. A further A$5.2bn would be saved by axing 12 000 government jobs.
As well, the opposition would keep savings adopted by Rudd in a
pre-election budget statement that lowered growth forecasts to 2.5% from 2.75%
this fiscal year, and forecast the jobless rate rising to 6.25%.
The one exception would be Labor's cuts to tax breaks for the automotive
sector, still struggling to adjust to the Australian dollar's high levels in
recent years and local costs which prompted a pullout this year by Ford, he
said.
In response to the weakening economy, the Reserve Bank of Australia has
cut its benchmark interest rate to a record low of 2.5%, while a A$33bn drop in
tax revenue saw a forecast budget deficit this fiscal year of $A30.1bn,
returning to a A$4.0bn surplus by 2016-17.
Global demand for iron ore, coal and other natural resources supported
the economy for most of the past decade, but falling commodity prices and
slowing growth in China, the country's top
export market, have rattled confidence.
Hockey said the conservatives would more quickly wind back net
government debt, now expected to peak at 13% of GDP by 2014-15, or A$212bn, up
from the May forecast of A$191.6bn, or 11.4% of GDP in 2014-15.
"This is the most important election in a generation," he
said.
Libya seeks end
to crippling oil strikes
Libya is seeking a peaceful way to end oil strikes that have crippled its
crude exports but will take alternative action if needed, Prime Minister Ali
Zeidan said on Wednesday.
"We will take other measures if these peaceful measures do not
succeed," he told a news conference, without elaborating.
Libya's oil production has fallen to about a fifth of the highs reached
since its 2011 civil war due to a month-long disruption by armed security
guards who shut the country's main export ports.
Zeidan said he had talked to tribal leaders in the east, the focus of
oil sector disruption, and they rejected calls for partition of the country.
"They respect the legality and unity of the nation," he said.
Oil Minister Abdelbari al-Arusi on Tuesday blamed mainly non-oil workers
and agitators pushing for federalism in Libya for the strikes,
which he said had cost the country $2bn in lost revenues so far.
"These groups announced federalism and they don't recognise the
government nor the general national council," the minister said.
The oil ports of Es Sider, Ras Lanuf, Zueitina and Marsa al Hariga,
which are in the east where most of the country's oil production lies, remained
closed.
Zeidan said he hoped there would be a breakthrough soon in talks to
resolve the crisis but gave no indication of when oil output might be restored.
Libya's oil production has been cut to 250 000 barrels per day, he said, from
prewar levels of 1.6 million bpd.
The latest fall in Libyan output was caused by an armed group that shut
a pipeline linking the El Feel and El Sahara fields to ports late on Monday.
The two fields have a combined output capacity of around 500 000 bpd.
Zeidan said the eastern Hamada field was also closed. The field had been
pumping 10 000 bpd.
Swiss govt ready to sign tax deal
Switzerland said it is ready to end a long-running dispute with US prosecutors over
Swiss banks that have sheltered tax evaders, without disclosing any terms of
the deal.
The two governments have been at loggerheads over a tax evasion
crackdown which has ensnared around a dozen Swiss banks, is threatening a raft
of others, and earlier this year felled Wegelin, Switzerland's oldest bank,
following an indictment.
The Swiss government said on Wednesday the signing of the joint
statement with the US should enable Swiss
banks to resolve the dispute with the United States while complying with existing Swiss laws. It gave no further details,
and the finance ministry was absent at a weekly government press conference.
A Swiss newspaper reported the host of banks not yet under formal
investigation in the US could face fines of
as much as 50% of their American client assets. Government spokesperson Andre
Simonazzi said the terms and conditions of the programme would not be
immediately released, but would be communicated "as soon as
possible".
While Switzerland's banking lobby and a banking employees association welcomed the move,
a spokeswoman for the US justice department
didn't immediately comment on the Swiss statement.
The agreement deals mainly with a settlement for the roughly 100 Swiss
banks that had US clients, but are not yet being investigated by US justice
authorities.
"The SBA welcomes the positive outcome of the Federal Council's
decision, as this means that the final step towards a solution has been taken
and the US can now launch the programme," the SBA said in a statement.
Around a dozen banks are under US investigation,
including Credit Suisse, Julius Baer, the Swiss arm of Britain's HSBC, privately held Pictet and state-backed regional banks Zuercher
Kantonalbank and Basler Kantonalbank .
Several of those banks have said they are preparing information of
client withdrawals demanded by US investigators, after the Swiss government
said it would allow them to circumvent secrecy and privacy laws to do so.
Last week, a Swiss government source told Reuters the US government had
ratcheted up the pressure on Switzerland to strike a deal after the Swiss
parliament rejected an accord in June, tightening its negotiating terms after
the rebuff.
US pending
home sales drop in July
US pending home sales dropped for the second month in a row in July as
rising mortgage interest rates hit demand, an industry group said Wednesday.
The National Association of Realtors' index for pending sales of
previously owned homes, based on contract signings, fell 1.3% to 109.5 in July.
The index was 110.9 in June, after an
unexpectedly strong jump to 112.3 in May, its highest
level since December 2006.
The second straight monthly decline surprised analysts, who on average
had predicted the index would rise 0.2% in July.
Although the housing market is still rising - pending sales were up 6.7%
from July 2012 - higher mortgage rates are slowing the market, NAR said.
Lawrence Yun, NAR chief economist, downplayed the July figure, saying
"the modest decline in sales is not yet concerning."
"However, higher mortgage interest rates and rising home prices are
impacting monthly contract activity in the high-cost regions of the Northeast
and the West," he said.
The NAR data points to existing-home sales dipping in both August and
September, said Ian Shepherdson of Pantheon Macroeconomics.
"Mortgage applications and mortgage lending are now trending
downwards in the wake of the surge in mortgage rates over the past three
months, and housing transactions will follow," he said.
"We are inclined to see the May surge as a signal that people were
rushing to lock-in before rates rose further, rather than an indication of a
further sustained pick-up in sales."
G4S boss seeks over $900m for turnaround
G4S, the world's largest security services firm, plans to raise about
£600m by selling shares and assets as its new boss seeks to restore its
battered reputation by cutting debt and focusing on emerging markets.
Chief executive Ashley Almanza, a former executive at oil and gas firm
BG Group, was promoted from finance chief in June after a string of blunders by
his predecessor, including a failed takeover bid in 2011, a botched contract to staff the 2012 Olympic Games and a profit warning
in May.
He said on Wednesday he would give a detailed plan in November, but that
the initial measures he was putting in place should help to avoid a costly
credit-rating downgrade, improve profit margins and start to deliver tangible
benefits in 2014.
Panmure Gordon analyst Mike Allen welcomed Almanza's debut announcement
as chief executive. "We applaud the quick work undertaken by management to
re-structure the group and shore up the balance sheet," he said.
At 09:05 GMT, G4S shares were up 3.7% at 255.14 pence, the biggest rise by a UK blue-chip company and
reversing early losses. Shares often fall following the announcement of equity
fundraisings, as these cut earnings per share for investors.
G4S, which runs services from managing prisons and transporting cash to
guarding the Wimbledon tennis championships, aims to benefit from a trend among
cash-strapped governments and businesses to outsource security work.
However, it has come under pressure as governments in developed markets
in particular have cut back services.
The company said its first-half operating profit margin slipped to 5.5%
from 5.9% in the same period last year, reflecting a lost prison contract in
the Netherlands and squeezed pricing in Britain and elsewhere in Europe.
Net debt rose to £1.95bn as of June 30, some 3.2 times earnings before
interest, tax, depreciation and amortisation compared with a target of 2-2.5
times.
However the group, which wants to grow revenue in developing markets in Asia, Africa and Latin America from a third to half
of its total, said it had a global sales pipeline of 4 billion pounds. It did
not provide details, but noted strong demand from financial services, mining
and government sectors in Africa.
"G4S has excellent market positions, particularly in developing
markets and as a result of which we have very material growth opportunities,"
Almanza said.
Raising money
G4S, which leads rival Sweden's Securitas by sales, said it would place
140.9 million new ordinary shares representing up to 9.99% of its existing
share capital with new and existing investors via an accelerated bookbuild.
That equates to around £350m at current prices.
The company said its largest shareholder, Invesco, supported the placing
and intended to participate in it. Citigroup, JP Morgan and Barclays are joint
bookrunners for the share sale.
G4S also said it would sell a number of businesses, likely to be in
developed markets, which could raise up to £250m in the next year, and would
restructure other units in a group which spans 125 countries in order to
improve margins.
On Wednesday - and included in the asset sale total G4S said it had
agreed to sell its Canadian cash security and Colombia Data solutions businesses for £100m. The sale of its US business was ongoing,
it added.
G4S said it had taken a one-off charge of £180m following a review of
its assets and that it had started restructuring programmes including cutting
staff numbers and ending some lower-margin services in Britain, Ireland and
Europe at a cost of £30-35m over 2013 and 2014
Almanza declined to give an operating margin target.
First-half operating profit came in at £201m, little changed from a
restated £202m a year earlier, with turnover up 7.2% to £3.65bn.
The firm also named Misys's Himanshu Raja as its new chief financial
officer on Tuesday.
