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					                                                                                                                                                                                                                              ARAB TIMES, TUESDAY, JULY 19, 2011
    BUSINESS                                                                                                                                                                                                                                                                    39

                                     STC Q2 net up                                                        Egypt cbank                                                                           ‘Egypt pound still looks vulnerable’

    Saudi Telecom Co (STC) reported a 9 percent increase                          Egypt’s central bank said it will offer 1 billion              Egypt’s pound still looks vulnera-        government is in place, which               quarter. The government has inter-
    in second-quarter net profit, beating forecasts, accord-                      Egyptian pounds ($167.95 million) in seven-                    ble. Supporting the currency so far       should happen later this year.              vened in the foreign exchange mar-
    ing to a statement issued on Monday.                                          day repurchase agreements in the money                         has been a costly strategy. Along            The pound has fallen just 2.6 per-       ket directly, and is widely believed to
       STC made a net profit of 2.256 billion Saudi riyals                        market on Tuesday at a fixed rate of 9.25 per-                 with a decline in tourism and for-        cent against the dollar since the start     be doing so indirectly.
    ($601.6 million) in the three months to end-June, com-                        cent.                                                          eign direct investment, foreign           of the year despite a huge slowdown            Letting the currency move in a
    pared to 2.062 billion riyals in the same period a year ear-                     The central bank introduced the weekly repo                 exchange reserves have shrunk             in growth expectations. Barclays            controlled slide would help boost
    lier, said the statement posted on the bourse website.                        agreements in March to keep short-term inter-                  around 40 percent or by roughly           Capital forecasts that the Egyptian         growth and allow interest rates to
       Analysts surveyed by Reuters expected on average the                       est rates under control after a popular uprising               $16 billion. But the decision may         economy grew 1.4 percent in the fis-        decline. But Egypt can’t afford to let
    firm to post a net profit of 1.99 billion riyals for the quarter.             ousted President Hosni Mubarak.                                have helped avert a bigger capital        cal year that ended in June, down           the pound fall too much. It would
       The company proposed to pay a dividend of 0.5 riyal                           Last week it offered repos worth 6 billion                  flight. Furthermore, it makes sense       from 5 percent last year. And Egypt’s       make imports more expensive and
    per share for the second quarter, it said in another                          pounds and accepted the same amount it had                     for the central bank to carry on          balance of payments deficit widened         increase inflation — the headline
    statement. (RTRS)                                                             offered. (RTRS)                                                down that path until a new elected        to a record $6.1 billion in the last        rate is already 11.8 percent. (RTRS)

                                                                                   ‘China lacks sufficiently dispersed shareholding structure’

Fitch warns of ‘weaknesses’ in Chinese companies
BEIJING, July 18, (Agencies): Ratings            and its closest peers.”                       currently undertaking the job that China’s   “sufficiently dispersed shareholding         over how to oversee the auditing of US-        report that issued “red flags” to Chinese
agency Fitch warned Monday of “wide-                The Fitch report, which screened 35        underdeveloped capital market is not         structure” and “quality information for      listed Chinese companies. Possible             companies based on their governance or
spread weaknesses” in Chinese corporate          companies it rates for governance issues,     doing: that of challenging Chinese man-      shareholders”.                               accounting problems at such companies          accounting risks.
governance and a lack of “quality infor-         comes amid growing scrutiny of over-          agement to adopt higher standards,” it          Hong Kong’s Securities and Futures        have overshadowed fundraising efforts             “Fitch does not expect the flow of
mation” for shareholders after a spate of        seas-listed Chinese firms due to allega-      said.                                        Commission said last week it was “look-      both in the US and in China.                   accusation and investigations to slow
accounting scandals overseas.                    tions of accounting irregularities and           Fitch said its ratings for Chinese com-   ing into the matter” of the report.             Short-sellers have been targeting some      down in the near term, particularly if
   Chinese companies were at “above              other problems.                               panies were clustered around the “BB            Fitch said last week it was reviewing     US-traded Chinese companies, driving           short-selling is involved,” the report said.
average” risk of being accused of fraud             The US Securities and Exchange             level and below” — meaning a low cred-       the 35 Chinese companies that it assigns     their share prices sharply lower amid          Short-sellers profit by borrowing stock to
— sometimes wrongly — which could                Commission has halted trading of several      it quality — and at investment grade and     credit ratings to after a spate of allega-   doubts about the accuracy of financial         sell and then buying it back when the
hamper their attempts to raise money,            Chinese firms this year, accusing them of     higher for the mainly state-owned com-       tions of corporate fraud at other China      statements filed with regulators.              price drops so they can return it to the
Fitch said in a report on Chinese corpo-         violations like keeping two sets of books     panies.                                      companies.                                      In some cases, the companies have           lender and pocket the difference.
rate governance.                                 or failing to disclose that their auditors       The ratings take into account China’s        The report highlights recent worries      fought back, complaining that the accusa-         “Some of the accusations will be legit-
   “Some of the accusations will be legit-       had quit.                                     “underdeveloped legal system and docu-       over accounting irregularities at Chinese    tions of accounting fraud or other prob-       imate, some will be erroneous; many will
imate; some will be erroneous; many will            Fitch said the flow of “accusations and    mentation standards, distinct business       companies that were sparked by claims of     lems were unfounded. But in others, reg-       be a mixture. All will have the potential
be a mixture,” Fitch said.                       investigations” was not expected to slow      practices and weak corporate gover-          fraud at some that are listed in the US.     ulators have suspended or delisted the         to present liquidity problems for an indi-
   “All have the potential to present liq-       down in the near term.                        nance”, it said.                                US and Chinese finance officials met      companies or started investigations.           vidual issuer and its closest peers,” the
uidity problems for an individual issuer            “It seems that overseas investors are         Fitch also noted that China lacks a       last week to try to resolve differences         Also, last week, Moody’s released a         report said.

           Rate on 10-yr Italian bonds spikes
                                                                                               No policy consensus as Europe
    European debt fears
    hit markets after tests                                                                    ‘limps’ toward Greece summit
    LONDON, July 18, (Agencies):                 percent, and Germany’s Deutsche
    Worries that Europe’s debt crisis will       Bank dropped 3.4 percent. The
    spread to Italy and Spain spooked            retreat wasn’t just isolated to coun-                                                         No clarity on bond buy-back and swap
    investors Monday after stress tests          tries that use the euro - Britain’s
    into the continent’s banks failed to         Barclays fell 3.6 percent.
    ease tensions ahead of an emergency             The worry in the markets is that           BRUSSELS, July 18, (RTRS): Government officials and com-                                  be reached on a way for private owners of Greek government bonds — banks, insurers
                                                                                                                                                                                         and other investors — to contribute to the bailout by taking cuts in the face value of
    meeting of EU leaders.                       this week’s meeting will fail to come         mercial bankers remained divided over competing policy pro-                               their holdings.
       In afternoon trading, most of             up with concrete measures to deal             posals on Monday as Europe struggled to put together a sec-
    Europe’s main stock markets were             with Greece amid growing signs of a                                                                                                       Fears that the rescue might fail, leading eventually to a disorderly debt default by
    sharply lower, with bank shares hit          split between the European Central            ond bailout for Greece and prevent the region’s debt crisis                               Greece, pushed the euro down against other currencies while the government bond
    particularly hard, while the euro fell       Bank and the German government in                                                                                                       yields of highly-indebted euro zone states rose. Italy’s 10-year yield climbed 0.2 per-
                                                                                               from spreading.                                                                           centage point to a euro-era high.
    0.6 percent to $1.4041.                      particular.
       In a sign that contagion fears have          German       Chancellor      Angela           French government spokeswoman Valerie Pecresse said she believed a sum-                  Paul de Grauwe, a professor of international economics at Leuven University in
    not been allayed by last week’s              Merkel, who will be at the summit,            mit of the euro zone’s 17 national leaders scheduled for Thursday in Brussels             Belgium who has informally advised European Commission President Jose Manuel
    European bank stress test results,           has been pressing for the involve-            would agree on a rescue of Greece, supplementing a 110 billion euro ($154 bil-            Barroso, said politicians had delayed taking decisive action on Greece for so long that
    yields on Italian and Spanish bonds          ment of the banks in the bailout.             lion) bailout launched in May last year.                                                  their options were narrowing fast.
    ratcheted up, in contrast to most other         But the ECB’s president, Jean-                But after three weeks of preparatory talks, it was unclear whether a consensus could     “I’m afraid to hope. I still hope, yes, but I’m not optimistic,” he said.
    large economies.                             Claude Trichet, insists the central                                                                                                                                                        “We’ve had solutions in the past, but
       The rate on ten-year Italian bonds        bank would not accept defaulted                                                                                                                                                         we haven’t grasped them. Now it’s too
    spiked up 0.25 percentage point to           Greek bonds as collateral, potentially                                                                                                                                                  late for some of those solutions to work
    5.92 percent, having earlier jumped          cutting off funding for Greece’s                                                                                                                                                        any more; the opportunity has been lost.”
    above 6 percent, even though the             banks.                                                                                                                                                                                     Officials are wrestling with a range of
    Parliament backed an austerity pack-            “If a country defaults, we will no                                                                                                                                                   proposed schemes for Europe’s bailout
    age designed to get the public               longer be able to accept its defaulted                                                                                                                                                  fund, the European Financial Stability
    finances back on an even keel. The           government bonds as normal eligible                                                                                                                                                     Facility, to finance a voluntary buy-back
    Spanish rate rose 0.15 percentage            collateral,” he said in an interview                                                                                                                                                    or swap of Greek bonds, or possibly both.
    point to 6.23 percent.                       with Financial Times Deutschland.                                                                                                                                                       The schemes would be conducted at a
       Last Friday’s stress tests have so           Trichet added that governments                                                                                                                                                       discount to the bonds’ face value, helping
    far been met with a degree of skepti-        would then be responsible to provide                                                                                                                                                    to reduce Greece’s 340 billion euro
    cism by investors, partly because            their own backstop for the Greek                                                                                                                                                        mountain of sovereign debt.
    they did not take into account any           financial system if the country is con-
    sovereign default.                           sidered to be in default on its debts.                                                                                                                                                                 Schemes
       The banks were required to reveal            The ECB said Monday that it had                                                                                                                                                        But all of the schemes could face tech-
    their exposure to shaky government           made no effort last week to prop up                                                                                                                                                    nical and legal obstacles, in some cases
    debt but analysts said it would have         bond markets through its securities                                                                                                                                                    requiring the approval of national parlia-
    been better if the European Banking          purchase program, the 16th straight                                                                                                                                                    ments in the euro zone. Other proposals
    Authority had simulated the impact           week it has left the measure idle.                                                                                                                                                     still appear to be on the table; Germany’s
    of a default in its test scenarios to bet-      The euro and global stock markets                                                                                                                                                   Die Welt newspaper reported that govern-
    ter judge the system’s strength.             fell while the borrowing costs of Italy                                                                                                                                                ments were considering a levy on banks
       “On the face of it, the tests high-       and Spain, two eurozone nations in                                                                                                                                                     as a way to involve private creditors in
    light that the European banking sec-         the line of fire, soared to euro-era                                                                                                                                                   rescuing Greece.
    tor is in better health than expected,       record levels amid debt contagion                                                                                                                                                         An official of a major euro zone gov-
    although crucially investor concern          fears.                                                                                                                                                                                 ernment who is familiar with the talks
    will remain over the credibility of the         With fears growing that the crisis                                                                                                                                                  said he had not heard of a proposal for a
    tests given that the tests did not           could reverberate across the world,                                                                                                                                                    bank levy, but added: “There are at the
    include an assessment of the impact          US Treasury Secretary Timothy                                                                                                                                                          moment so many proposals that you can-
    of sovereign defaults,” said Lee             Geithner urged European leaders to                                                                                                                                                     not rule out anything.”
    Hardman, an analyst at the Bank of           “work more forcefully to contain the                                                                                                                                                      An official European Union source
    Tokyo-Mitsubishi UFJ.                        risk of an escalating crisis in Europe.                                                                                                                                                told Reuters that it was likely the EFSF
       Only eight of the 90 banks tested            “They have the capacity to manage                                                                                                                                                   would be used to lend money to Greece
    failed and were pushed to raise 2.5          this in a way that doesn’t add to the                                                                                                                                                  to buy back its own bonds. But this by
    billion euros ($3.5 billion); five were      broader burdens in the global econo-                                                                                                                                                   itself would not nearly be enough to solve
    from Spain, two were Greek and one           my and of course we want them to do                                                                                                                                                    the problem.
    was Austrian. Sixteen barely passed,         that,” he told the US financial net-                                                                                                                                                      Guntram Wolff, deputy director of the
    however, and may face pressure to            work CNBC.                                                                                                                                                                             Bruegel think tank and until earlier this
    strengthen their finances by raising            Merkel has made clear she wants a          Striking taxi drivers block central streets in Athens, during a protest on July 18. Taxi drivers are angry at plans to liberal-          year a senior economist at DG Ecfin, the
    new capital - the idea behind the            deal on the table by Thursday after           ize their tightly-regulated profession, as part of the country’s fiscal recovery program that has already spurred months of              European Commission unit handling the
    exercise.                                    she forced EU president Herman Van                                                protests from other affected professional groups. (AP)                                               crisis, said a buy-back might cut Greece’s
                    Battle                       Rompuy to cancel plans for a meet-                                                                                                                                                     debt by as little as 20-30 billion euros.
                                                 ing last Friday following a turbulent                                                                                                                                                     Analysts have estimated the debt
       Shoring up the banks is a key part
    of Europe’s battle against its govern-
                                                 week in the markets.                                            Sept 15 deadline set for EU bank fee transparency                                                                      would have to be roughly halved, to 80
                                                    She stressed on Sunday that the                                                                                                                                                     percent of gross domestic product, to
    ment debt crisis, since a default by         summit was “urgently necessary” but                                                                                                                                                    make it manageable in the long run.

                                                                                               Come clean on fees: Barnier
    Greece or another ailing country             added: “I am only going if there’s an                                                                                                                                                     A bond swap might have more impact
    could inflict losses on banks, requir-       outcome.”                                                                                                                                                                              but Wolff said he did not think Europe
    ing government bailouts and choking                                                                                                                                                                                                 was close to agreeing on a large-scale
    off credit to the economy.                                Optimistic
                                                                                                                                                                                                                                        swap. German insurance giant Allianz,
       Greece is expected to be deemed in           Her spokesman took a more opti-                                                                                                                                                     for example, has suggested that private
    default by credit rating agencies if         mistic tone on Monday.                        BRUSSELS, July 18, (RTRS): Banks             ed a recommendation, a non-binding           the customer to deposit and withdraw
                                                                                               in the European Union have until mid-        request for member states to crack down      cash, receive payments such as                 investors write off 25-30 percent of their
    banks take losses in a second bailout           “The government is working on all                                                                                                                                                   Greek debt via a swap, German media
    for the country. On Thursday, EU             levels with all its strength on prepar-       September to come clean on fees they         on restrictions used by banks as an          salaries, issue payment orders, make           reported; the market prices of many
    leaders will hold an emergency meet-         ing for Thursday a good result, a             charge customers or face mandatory           excuse to reject account applications.       payments through direct debits and buy         Greek bonds are now near half of face
    ing to discuss the terms of such a deal.     decent result, a result that sends out a      transparency rules.                            About 30 million people over 18            goods and services online.                     value.
       The stress tests required banks to        strong and clear signal to the mar-              “We think the fees should be easy to      years old in the EU do not have a bank          Overdrafts would not be allowed                “What we’re talking about down the
    show they could maintain a financial         kets,” spokesman Steffen Seibert              understand across the board, with com-       account, with up to 7 million turned         because this would mean credit was             road is the need for a massive reduction
    buffer in a downturn: at least 5 per-        said.                                         parable fees charged for comparable          down because of poor credit history, no      being given, which requires credit his-        in the debt burden and they are just not
    cent of loans, bonds and other invest-          “Confident that this will be possi-        services. That is not the case today,”       proof of income or failing to meet resi-     tory checks.                                   ready to do that yet,” Wolff said.
    ments. Regulators required disclo-           ble, the chancellor is planning her                                                        dency requirements, the Commission                                                             “It will require some form of substan-
    sure of a large amount of data on            trip to Brussels,” he said.                   Michel Barnier, the bloc’s financial                                                         The EU executive had said it would
                                                                                               services commissioner, told a news           said in a statement.                         propose a draft law to make it manda-          tial debt restructuring and you have to see
    banks’ finances to allow analysts to            Germany’s insistence on making                                                                                                                                                      who is going to take the hit, will it be the
    make their own conclusions on the            the private sector share the pain in a        conference.                                                   Accept                      tory for banks to offer basic accounts,
                                                                                                  Full transparency on fees would                                                        but opted for a non-binding recommen-          taxpayers or will it be the banks? To carry
    sector’s health - since the EU could-        new bailout, even if its means caus-                                                          “This recommendation does not state                                                      out such a move you need to prepare, and
    n’t bring itself to consider the possi-      ing a Greek debt default, has put             make it easier for customers to com-         that payment service providers will          dation because it gives member states
                                                                                               pare charges and switch to a cheaper                                                      more flexibility to tackle the hurdles to      they don’t have the time to prepare before
    bility of default.                           Berlin in deep disagreement with the                                                       have to accept any application from an                                                      Thursday.”
       Royal Bank of Scotland analysts,          European Central Bank and other               account, helping drive down the high         individual in any case — it focuses on       opening an account.                               German Chancellor Angela Merkel said
    for instance, said that if all the banks     eurozone nations.                             charges seen in some EU states.              what is strictly necessary to enable            European consumers’ organisation            on Sunday that while this week’s summit
    had to account for the fallen value of          An EU official said that Germany              “I am disappointed with the response      consumers to use payment services,”          BEUC said Barnier has missed a gold-           was “urgently necessary”, she would only
    distressed bonds now on their books,         had yet to hammer out differences             from European banks with the request I                                                    en opportunity to help citizens by back-       attend if lower-ranking officials had
    57 of the 90 tested would have to            with the ECB and other eurozone                                                            the Commission said.
                                                                                               put to them a year ago asking for more          “It will assess the situation in one      tracking on his promise of legislation         already prepared a clear rescue plan. “I
    raise Ä91 billion ($130 billion) in          states but that Van Rompuy would              transparency,” Barnier added.                                                             on bank accounts.                              will only go there if there is a result.”
    capital to meet a tougher 7 percent          never have called a summit of the 17                                                       year and propose any further measures
                                                                                                  If banks don’t take his request seri-     as necessary, including legislative             “Too often we have seen that self-             As part of the second bailout, officials
    capital buffer.                              eurozone leaders if a deal were                                                                                                                                                        have also been looking at other measures
       Still, German and Spanish officials       impossible.                                   ously by Sept. 15, Barnier will take         measures,” the Commission added.             regulation and voluntary measures in
                                                                                               “legislative action with a view to intro-       The Commission said consumers             the financial sector do not work. Going        to help Greece including up to 60 billion
    said they did not see the need for              “Van Rompuy would not have                                                                                                                                                          euros of additional emergency loans from
    their banks to raise more capital and        called a summit if he had not                 ducing more standardisation across           should be able to open a basic bank          down this route again is a waste of
                                                                                               European markets”.                                                                        time,” BEUC Director General                   European        governments       and     the
    questioned the assumptions of the            received enough signals from the big                                                       account at an unspecified reasonable                                                        International Monetary Fund; steps to
    tests. Germany had two banks that            countries, and Germany in particular,            Banks must give clear terminology         charge irrespective of where they live       Monique Goyens said in a statement.
                                                                                                                                                                                                                                        recapitalise Greek and European banks;
    barely passed and Spain had seven.           that there was enough on the table to         on what customers are charged for and        or their financial circumstances.               Kay Blair, vice-chair of Britain’s          and ways to stimulate Greek economic
       Amid the uncertainty, bank shares         negotiate” an agreement, the official         how much, Barnier said, as he gave              It only covers people who are legally     Consumer Panel, was also not opti-             growth.
    across Europe took a hammering.              said.                                         lenders a year to make it easier for         resident in the EU and need an account       mistic, saying: “In the UK there is a             The EU source said there was a basic
    Italy’s Banco Popolare, which barely            French Budget Minister Valerie             everyone to open a cheap basic account       for personal, not business or profes-        long track record of voluntary agree-          agreement on extending the maturities
    passed the test, was down 6.7 per-           Pecresse voiced cautious optimism             anywhere in the 27-nation bloc or face       sional, use.                                 ments in the financial services sector         and lowering the interest rates for bailout
    cent; France’s Credit Agricole fell 3.6      that a deal will come through.                legislation in this area too.                   A basic payment account is defined        failing to deliver good consumer out-          loans extended to Greece, Ireland and
                                                                                                  The EU executive on Monday adopt-         by the Commission as one that allows         comes.”                                        Portugal.

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