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					                                                                                                                                                                                                                                         ARAB TIMES, FRIDAY, AUGUST 24, 2012
    BUSINESS                                                                                                                                                                                                                                                                             35

                                               S&P removes Egypt from CreditWatch, affirm ‘B’ rating                                                                                                                                                      A handout picture released by
                                                                                                                                                                                                                                                          the Egyptian presidency
                                                                                                                                                                                                                                                          shows Egyptian President
    Standard & Poor’s Ratings Services today               unchanged at ‘3’, indicating our expecta-               The negative outlook reflects our view                                                                                                 Mohamed Morsy (right),
    affirmed its long- and short-term foreign              tion of 50%-70% recovery in the event of a           that there is a one-in-three likelihood of a                                                                                              meeting with International
    and local currency sovereign credit ratings            default.                                             downgrade should political or social ten-                                                                                                 Monetary Fund (IMF) chief
    on Egypt at ‘B/B’. At the same time, we                   The ratings affirmation reflects our opin-        sions escalate once more. If this happened,                                                                                               Christine Lagarde on Aug 22,
    removed the ratings from CreditWatch,                  ion that a working relationship between the          the current short-term approach to policy-                                                                                                upon her arrival in Cairo for
    where they were placed with negative                   military and the dominant political group,           making would likely continue, and foreign                                                                                                 talks on the ‘Egyptian govern-
    implications on June 25, 2012. The outlook             the Muslim Brotherhood, is gradually being           exchange reserves would likely decline fur-                                                                                               ment’s plans to reform and
    is negative.                                           reached. In our view, this could pave the            ther absent foreign donor inflows.                                                                                                        relaunch the national econo-
       The transfer and convertibility (T&C)               way for an improvement in medium-term                   We placed our long-term foreign and                                                                                                    my, as well as a ‘loan request
                                                                                                                                                                                                                                                          of $4.8 billion (3.8 billion
    assessment is ‘B’ in line with the sovereign           policymaking. We therefore project that              local currency sovereign credit ratings on                                                                                                euros),’ the official news
    ratings. The recovery rating on the unse-              Egypt’s weak public sector finances and              Egypt on CreditWatch with negative impli-                                                                                                 agency said. (AFP)
    cured foreign-currency debt remains                    external position could stabilize.                   cations on June 25, 2012.

                                                                                                Euro zone likely to slip back into recession

Business surveys paint global picture of economic malaise
LONDON/BEIJING, Aug 23, (RTRS):                 November and well down from July’s             single currency area is now firmly in             said.                                          Exports from Taiwan, a key part of the            ties to further step up their policy accom-
The euro zone is on track for its second        final figure of 49.3.                          recession,” said Jonathan Loynes, chief              The euro zone economy shrank by 0.2         global technology supply chain, fell for a        modation is therefore growing.”
recession in three years, China’s once             Growth in the United States manufac-        European economist at Capital                     percent in the three months to June,           fifth straight month in July and South                China has been fine tuning policies to
booming manufacturing sector is con-            turing sector is also expected to have         Economics.                                        according to official data. Economists         Korea, home to major carmakers, com-              keep growth on track without releasing
tracting at a faster pace than previously       slowed in August. US data due at 1258             More worryingly, the downturn in               polled by Reuters last week predicted a        puter chip and flat-screen producers,             curbs on the property sector.
reported, and the United States is widely       GMT.                                           smaller euro zone economies is clearly            similar outcome for the current quarter,       recorded its sharpest export fall in July in          In contrast central banks in the devel-
seen as struggling to keep up its pace of          “The indicators taken as a whole indi-      taking root in the core. The flash com-           with no growth until the start of next         nearly three years.                               oped world have slashed interest rates to
growth.                                         cate a material slowdown in the pace of        posite PMI for Germany fell to a three-           year.                                             Six consecutive quarters of slowing            near zero and injected trillions of dollars
   Business surveys released on Thursday        the world economy,” said economist             year low, a fourth straight month of con-            Falling demand from debt-ridden             Chinese growth have also taken a toll             into the money supply in efforts to sup-
painted a global picture of economic            Philip Shaw at Investec.                       traction.                                         Europe, China’s single biggest export          on commodities markets, with falling              port growth.
malaise from Beijing to Berlin.                    The euro zone composite PMI, which             German economic growth slowed to               market, has put the Chinese economy            prices and an uncertain outlook                       The European Central Bank is expect-
   The euro zone economy will shrink            measures manufacturing and services            0.3 percent in the second quarter on a            under pressure, with the ripples now           prompting miner BHP Billiton to                   ed to cut rates by 25 basis points to a new
around 0.5 percent in the current quarter       together, was actually slightly better than    sharp drop in investment, adding to evi-          being felt across the world.                   shelve a $20 billion expansion project            record low of 0.5 percent when it meets
as the economic rot is even spreading           a month earlier, nudging up to 46.6 and        dence that it can no longer be relied on             “It’s very hard to put a positive spin on   in Australia.                                     next week, but analysts say that will do
through Germany, the region’s largest           just pipping forecasts for it to hold          to pull the euro zone out of a deep               anything within the (China) data. Bottom          “Today’s PMI report is a clear                 little to stimulate lending.
and strongest economy, Markit’s                 steady at July’s 46.5. But was still its       slump, data showed earlier on                     line - a very poor update,” said Robert        reminder that the slowdown is not yet                 The US Federal Reserve is likely to
Purchasing Mangers’ Index (PMI) sug-            seventh month in a row below 50, the           Thursday.                                         Rennie, chief currency strategist at           over and that the Chinese economy is still        deliver another round of monetary stimu-
gested.                                         dividing line between contraction and             “Another reminder that a chronic               Westpac Bank In Sydney.                        too shaky to recover without ongoing              lus “fairly soon” unless the economy
   It came on the heels of the HSBC Flash       growth.                                        lack of economic growth in the euro                  Japan said on Wednesday that exports        policy stimuli,” said Nikolaus Keis at            improves considerably, minutes from the
China manufacturing PMI falling to 47.8            “August’s flash euro zone PMI does          zone will continue to impede efforts to           slumped the most in six months in July as      UniCredit.                                        US central bank’s latest meeting suggest-
for August, its lowest level since              nothing to challenge the notion that the       bring the debt crisis to an end,” Loynes          shipments to Europe and China tumbled.            “The pressure on the Chinese authori-          ed.

           Chinese cos keen to tap American mkt

    China investment in US
                                                                                               US jobless claims rise; new
    rises despite differences
    WASHINGTON, Aug 23, (AP): US
    presidential candidates talk tough on
    fighting what they see as China’s
                                                by Japan proved unfounded. Today,
                                                Japanese-affiliated        companies
                                                employ about 700,000 Americans.
                                                                                               home sales up 3.6% in July
    unfair trade policies, but Chinese             As a strategic and emerging mili-
    companies are investing more than           tary rival of the US, however, China                                                 ‘Unemployment data indicate sluggish labor market’
    ever in the US and supporting thou-         brings with it more baggage. China
    sands of American jobs.                     still restricts foreign investment in
       Investment from China is set to hit      much of its own economy. Many of               WASHINGTON, Aug 23, (RTRS): The number of Americans                                              tion bid. Republican challenger Mitt Romney is trying to focus voters’ attention on a
    record levels in 2012, with two sepa-       its biggest companies looking to                                                                                                                lofty unemployment rate that has dogged Obama’s presidency.
    rate billion-dollar deals in shale oil      invest abroad are state-controlled.            filing new claims for jobless benefits unexpectedly rose last                                       Many economists think the Federal Reserve could unveil a new bond buying pro-
    and gas, a struggling chain of movie           Cybersecurity is also a major con-          week while US manufacturing improved only slightly in                                            gram to prop up economic growth as soon as its next meeting Sept 12-13, although an
    theaters and other major ventures in        cern because of repeated reports of            August, worrisome signs for an economy struggling to create                                      improvement in hiring this month could make that less likely.
    the works. Its cash-rich companies          cyber-attacks on Western companies                                                                                                                 “Jobless claims continue to indicate ... a sluggish labor market,” said Peter Cardillo,
    have expanded their presence here in        and government departments origi-              enough jobs.                                                                                     an economist at Rockwell Global Capital in New York. “The numbers also strengthen
    the past three years, keen to get clos-     nating from China. That has dented               Initial claims for state unemployment benefits rose 4,000 to a seasonally                      the hand of the Fed to aid the economy with more stimulus.”
    er to the lucrative American market         the prospects for its telecommunica-           adjusted 372,000, the Labor Department said on Thursday.                                            However, Cardillo and other economists said the slow pace of healing in the labor
    and tap US know-how.                        tions and technology giants.                     The data keeps pressure on President Barack Obama ahead of his November re-elec-               market doesn’t necessarily point to immediate action by the Fed.
       The jobs created far from offset            Attempts by Huawei, a private                                                                                                                                                                   A separate report by financial informa-
    what American politicians and some          Chinese company founded by a for-                                                                                                                                                               tion firm Markit showed some of the
    economists see as the millions of jobs      mer army officer, to acquire 3Com in                                                                                                                                                            weakest growth in the manufacturing sec-
    lost because of China’s currency            2008 and failing US computer com-                                                                                                                                                               tor in the last three years, held back by a
    policies and theft of intellectual prop-    pany, 3Leaf Systems, in 2011 were                                                                                                                                                               slowdown in hiring and sluggish overseas
    erty. Also, Chinese investment, espe-       floored by security concerns.                                                                                                                                                                   demand for American goods.
    cially in telecommunications and               US lawmakers have often weighed                                                                                                                                                                               Expansion
    other sensitive businesses, isn’t           into the debate. The House
    always welcome.                             Intelligence Committee is investigat-                                                                                                                                                                Markit said its US “flash” manufactur-
       But the growth in investment             ing Huawei, one of the world’s                                                                                                                                                                    ing Purchasing Managers Index edged up
    underscores how the relationship            biggest suppliers of telecoms gear,                                                                                                                                                               to 51.9 in August from 51.4 in July. A
    between the US and China is more            and its rival, ZTE, examining their                                                                                                                                                               reading above 50 indicates expansion.
    complicated than depicted on the            ties to the Chinese government. It is                                                                                                                                                                Despite the weakness, the August read-
    campaign trail. Cheap Chinese prod-         also probing reports that ZTE is sup-                                                                                                                                                             ing beat analysts’ expectations and
    ucts have benefited American con-           plying surveillance equipment to Iran.                                                                                                                                                            marked the first monthly increase since
    sumers, and China’s massive pur-                                                                                                                                                                                                              March.
                                                                 Probe                                                                                                                                                                               That reinforces the idea that economic
    chases of Treasury securities have
    helped finance the US budget deficit.          Lixin Cheng, CEO of the                                                                                                                                                                        growth in the United States will pick up in
    And while Chinese investment in the         American arm of ZTE, says the com-                                                                                                                                                                the second half of the year after a sluggish
    US is barely off the starting blocks        pany has cooperated in the probe but                                                                                                                                                              spring. Even so, growth is still expected to
    given the size of its economy, some         denies that ZTE is influenced by the                                                                                                                                                              be lackluster. “The US economy is slowly
    believe it could become a major             Chinese government. (The company                                                                                                                                                                  turning the corner ,” said Robbert Van
    source for American jobs.                   is state-owned but has a portion of its                                                                                                                                                           Batenburg, head of global research at
       “There’s a huge amount of igno-          shares publicly traded). He describes                                                                                                                                                             Louis Capital Markets in New York.
    rance in the US market place of how         the allegations as “noise coming                                                                                                                                                                     Despite the increase in new claims
    to take advantage of potential              from guys who don’t want competi-                                                                                                                                                                 filed last week, the data on layoffs a lso
    Chinese investment,” said Larry             tion here so they can protect their                                                                                                                                                               had a silver lining.
    Morrissey, independent mayor of             market share.”                                                                                                                                                                                       The data covers the same week looked
    Rockford, Illinois, a city of 150,000          But Cheng says handset sales have                                                                                                                                                              at by the government for its monthly
    which hosts three major Chinese             been rising and he remains bullish on                                                                                                                                                             measure of employment, and showed a
    companies. While money is tight in          the company’s prospects in supplying                                                                                                                                                              slight drop in layoffs from the survey
    the US, he said, Chinese firms want         American mobile network carriers,                                                                                                                                                                 week last month, which is a mildly posi-
    to invest and have the funds to do it.      which account for about 90 percent                                                                                                                                                                tive signal for hiring in August.
       But in the presidential campaign,        of handset sales in the US                                                                                                                                                                           The four-week moving average for
    China seems to attract only negative           Pin Ni, president of the American                                                                                                                                                              new claims, a measure of labor market
    attention.                                  arm of the private Wanxiang Group, an                           A sold sign stands in front of a home for sale on Aug 22, in San Francisco, California. (AFP)                                     trends, was 368,000 last week. That was
       “They steal our intellectual proper-     auto parts and renewable energy manu-                                                                                                                                                             a slight increase from the prior week, but
    ty rights. They block access to their       facturer that has close to 6,000 employ-                                                                                                                                                          still 2.1 percent lower than in the second
                                                ees in the US, said negative views of                                                                                                                                                             week of July.
    markets. They manipulate their cur-
    rency,” Republican vice presidential        China and political tensions between                             ‘Quantitative easing is still very much on the table’                                                                               That week, the government surveyed
    candidate Paul Ryan told supporters         the two governments deter some com-                                                                                                                                                               employers and concluded 163,000 new
    in Ohio last week. He accused               panies. Yet in reality, he said, that’s lit-                                                                                                                                                      jobs were created in July — an improve-
    President Barack Obama of allowing
    China to treat him like a “doormat”
    and vowed Mitt Romney would
    crack down on China cheating.
                                                tle impediment to doing business.
                                                   Ni set up Wanxiang America from a
                                                home office in Mt. Prospect, Illinois,
                                                in 1994, essentially as a sales outlet
                                                                                               Fed signals new action soon                                                                                                                        ment from the prior three months though
                                                                                                                                                                                                                                                  the unemployment rate still ticked higher
                                                                                                                                                                                                                                                  to 8.3 percent.
                                                                                                                                                                                                                                                     “No signs here that there’s been a
                                                for the parent company. It now has 27          WASHINGTON, Aug 23, (AP): Federal                 accommodation would likely be warrant-         gram open-ended so it could continue to buy       notable pick-up in layoffs, and (that)
                   Deeper                       manufacturing facilities across 14                                                                                                                                                                would suggest to us that moderate job
                                                                                               Reserve officials signaled Wednesday              ed fairly soon unless incoming informa-        bonds until it saw a significant decline in the
       Obama, who has sought deeper             states, annual revenues of more than           that they may be ready to launch a new            tion pointed to a substantial and sustain-     unemployment rate, now at 8.3 percent.            growth continued in August,” said Ellen
    ties with China, says his administra-       $2 billion, and supplies most of the           bond buying program when they next                able strengthening in the pace of the eco-        An open-ended bond-buying program              Zentner, an economist at Nomura
    tion has nevertheless stepped up            major American auto manufacturers.             meet in September.                                nomic recovery.”                               would represent a major shift in Fed pol-         Securities in New York.
    trade complaints, and announced one         He said that only about 10 percent of             The goal would be to try to lower long-           Paul Ashworth, chief US economist at        icy, noted Michael Gapen, an economist               The government will release its
    in response to Chinese tariffs on US        the parts it supplies in America are           term interest rates to encourage more bor-        Capital Economics, said that wording           at Barclays.                                      employment report for August on Sept. 7,
    auto exports during a campaign trip         now sourced from China.                        rowing and spending.                              signaled that the Fed won’t be satisfied          Even if the Fed announces another round        and policymakers at the Federal Reserve
    to Ohio in July.                               “Our labor costs are higher (in the            Minutes of the July 31-Aug. 1 policy           by the modest improvements the econo-          of bond purchases, some economists have           will scrutinize the data for signs the econ-
       But the administration, as well as       U.S) but our overall costs are lower           meeting released Wednesday don’t explicit-        my has made recently.                          questioned how much it might help. They           omy is improving. Economists at
    the Republican-supporting US                because it’s more efficient here,” he          ly say what action the Fed would most like-          “Quantitative easing is still very much     note that mortgage rates and other key bor-       Barclays said the claims data was consis-
    Chamber of Commerce, are actively           said.                                          ly take. But they hint that the central bank is   on the table,” Ashworth said.                  rowing rates are already near record lows.        tent with payroll growth of 150,000.
    seeking Chinese investment. They               Mayor Morrissey said Wanxiang               preparing to begin more bond buying.                                                                After its August meeting, the Fed                 Minutes from the Fed’s July 31-Aug. 1
    want to capitalize on the ambitions of      had acquired a struggling auto parts              The minutes show that Fed officials
                                                                                                                                                                  Target                        announced no changes in its policies. But         policy review, released on Wednesday,
    state-owned and private Chinese             manufacturer in Rockford. Attracted            spoke at the meeting with increased                  The minutes also show many officials        in a statement afterward, it appeared to          showed the central bank is likely to deliv-
    companies to expand from the devel-         by the Chinese company’s long-term             urgency about the need to provide more            favor pushing the timetable for any            signal a growing willingness to take fur-         er another round of monetary stimulus
    oping world to developed countries.         commitment to the US, Rockford                 help for the still-weak US economy.               increase in record-low short-term rates        ther steps to boost the economy if it             “fairly soon” unless the economy
       The private Rhodium Group,               chose Wanxiang to develop a $12.5              Many felt further support would be need-          beyond the Fed’s current target of late 2014   doesn’t improve. The Fed noted that               improves considerably. The US economy
    which closely tracks Chinese foreign        million solar panel manufacturing              ed “fairly soon” unless the economy               at the earliest. Some economists think the     growth had slowed in the first half of the        faces a number of threats, including the
    direct investment, or FDI, puts the         plant employing 60 people, and a large         improved significantly.                           target will be extended to mid-2015.           year. In particular, it pointed to lackluster     looming possibility the government will
    total attracted to the US since 2000 at     solar power farm, as part of the city’s           The Fed has already sought to drive               Reaction in the stock and bond markets      job growth and consumer spending.                 raise taxes and cut spending. That is
    $20.9 billion. It predicts that Chinese     strategy to attract more green business.       down long-term rates by buying more               was positive but muted. The Standard &            The issue of whether the Fed will              already hurting business sentiment.
    companies could invest between $1              Two other major Chinese firms               than $2 trillion in Treasury bonds and            Poor’s 500 stock index, down most of the       announce any major moves in September                A separate report from the Commerce
    trillion and $2 trillion internationally    have investments in Rockford, includ-          mortgage-backed securities in two previ-          day, finished essentially flat. The price of   was thrown into some doubt by econom-             Department showed sales of new single
    by 2020 and a significant chunk             ing Dalian Machine Tool Group which            ous rounds of bond purchases. The pur-            gold rose, as it sometimes does when           ic improvements since its last meeting.           family homes edged 3.6 percent higher in
    could come to the US                        acquired Ingersoll Production Systems          chases are called “quantitative easing.”          investors think the Fed will pump more         Gains have been made in such areas as             July but prices fell, giving mixed signals
       “Chinese firms are arriving at the       and employs 100 people. Rockford is               Based on the minutes, David Jones,             money into the economy. Gold hit $1,657        hiring, housing and consumer spending.            about the strength of a fledgling recovery
    inflexion point at which it makes sense     also in talks with Wanxiang about              chief economist at DMJ Advisors, said he          an ounce, its highest level since May.            Many analysts are looking to a speech by       in the country’s housing market.
    for them to be developing more of a         plans to modernize the city center.            thought the likelihood of further quantita-          The Fed releases minutes of its private     Bernanke on Aug. 31 at an annual Fed con-            Europe’s festering debt crisis also
    commercial presence in the United              “A lot of American cities are com-          tive easing had risen from evenly split to        discussions three weeks after each meet-       ference in Jackson Hole, Wyoming, to pro-         menaces the global economy. Business
    States and Europe,” said Daniel Rosen,      pletely on the sidelines,” said                as high as a 70 percent chance that the           ing. After it meets in September, Fed pol-     vide further guidance on any new actions.         surveys released on Thursday painted a
    partner at the New York-based group.        Morrissey, who has made several                Fed will make that move when it meets             icymakers will also update their econom-          In the view of some analysts, the Fed          global picture of economic malaise from
       While China is still far from emu-       trade missions to China. “I don’t see          Sept 12-13.                                       ic forecasts, and Chairman Ben Bernanke        might still want to put off any major new         Beijing to Berlin.
    lating the outward expansion of             many cities, especially cities of our             “I believe the Fed is signaling in very        will hold a news conference.                   bond-purchase program so it would have               The euro zone economy will shrink
    Japanese companies into the United          size, doing what we are doing, of              clear terms that a third round of bond pur-          Ashworth and some other economists          something in reserve in case the economy          around 0.5 percent in the current quarter,
    States the 1980s, this could be a           being proactive and looking to                 chases will be approved at the September          said the minutes suggested that if the Fed     goes off a “fiscal cliff” at the end of the       with weakness even spreading through
    formative example. Fears then that          exploit the opportunities there are for        meeting,” Jones said.                             does launch a new bond buying program, it      year. That’s when tax increases and deep          Germany, the region’s largest and
    the US economy might be dominated           Chinese investment.”                              In the minutes, the Fed noted, “Many           won’t set a target amount, as it has in the    spending cuts will take effect unless             strongest economy, Markit’s Purchasing
                                                                                               members judged that additional monetary           past. Rather, the Fed could keep a new pro-    Congress reaches a budget agreement.              Mangers’ Index suggested.

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