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					                                                                                                                                                                                                                              ARAB TIMES, SATURDAY, AUGUST 20, 2011
BUSINESS                                                                                                                                                                                                                                                                              35

                                                                                                                                                                         Sky challenged over pay-TV movie dominance
Britain’s Competition Commission                  This, in turn, meant that con-          tion.                                         ment: “BSkyB continues to believe                bid for the company when a tabloid              ment was negative but not a real
set out measures to make the pay-               sumers found little alternative to Sky       The regulator said it was inviting         that no regulatory intervention is               newspaper phone hacking scandal                 surprise.
TV movie market more competitive                Movies for new blockbuster films, it      responses to possible remedies that           required and that consumers benefit              caused national outrage.                           The ultimate outcome may be
and break Sky’s stranglehold, a fur-            said.                                     would be intended to enable more              from high levels of choice, value and               James Murdoch, BSkyB’s chair-                similar to the unwinding of Sky’s
ther blow to the broadcaster that is              “Sky’s control of this content on       firms to secure pay-TV rights from            innovation across a wide range of                man, is under increasing pressure               exclusive rights to show Premiership
struggling to placate investors after           pay TV enables it to attract more         the major six Hollywood studios.              providers.”                                      over the scandal, and News Corp                 football, put in place last April, said
News Corp’s bid fell through.                   pay-TV subscribers than its rivals           Possible changes include restrict-            It added that it would continue to            executives are starting to think about          Patrick Yau at brokerage Peel Hunt.
   The regulator said on Friday Sky’s           and having more subscribers               ing the number of studios from which          engage with the commission.                      the possibility that he may leave,              “Movies and sport are the key rea-
large subscriber base gave it an                increases further its advantages          Sky could licence first rights, restrict-        Last month, the satellite broadcaster         sources told Reuters on Thursday.               sons subscribers come to Sky, so
advantage that meant potential                  when bidding in the next round for        ing the nature of those rights, or forc-      said it would pay out 1 billion pounds              BSkyB shares were down 3 per-                this will be a blow to the business.”
rivals found it difficult to bid success-       pay-TV movie rights, and so it goes       ing Sky to offer rival movie channels         ($1.6 billion) in a share buyback and            cent to 615 pence at 0750 GMT,                     Regulator Ofcom first referred the
fully for the rights to first-run               on,” said Laura Carstensen, who           to its subscribers.                           dividend boost, as it tried to soothe            their lowest level since June 2010,             case to the Competition Commission
Hollywood movies.                               headed the commission’s investiga-           BSkyB said in a separate state-            investors after News Corp dropped its            with analysts saying the announce-              in August 2010. (RTRS)

                                                                                                                                            Undeclared assets hidden in Swiss banks
    Shares fall into liquidity black holes

Wall Street investors                                                                    Swiss, UK in final phase of tax talks
                                                                                         GENEVA, Aug              19,    (Agencies):    same time,” the spokesman added.                  the solution, said the spokesman.                    According to German media, between

flee as stocks drop                                                                      Switzerland is in the “final phase” of nego-
                                                                                         tiations with Britain over a tax accord on
                                                                                         undeclared assets hidden in Swiss banks, an
                                                                                         official told AFP Friday.
                                                                                                                                           With France, “there has not been any
                                                                                                                                        contact for a few months,” said the
                                                                                                                                        spokesman who noted that Paris is sceptical
                                                                                                                                        about Bern’s proposals.
                                                                                                                                                                                             The deal concluded between Berlin and
                                                                                                                                                                                          Bern on Aug 10 requires Swiss banks to
                                                                                                                                                                                          pay two billion francs (1.91 billion euros,
                                                                                                                                                                                          $2.6 billion) to German tax authorities to
                                                                                                                                                                                                                                            130 and 180 billion euros are hidden in
                                                                                                                                                                                                                                            Swiss banks. These assets could therefore
                                                                                                                                                                                                                                            net up to 54 billion in taxes.
                                                                                                                                                                                                                                               Meanwhile, France has rebuffed for now
Continued from Page 34                                                                      “We are in the final phase of negotia-         In Paris meanwhile, France said that the       regularise any hidden assets of German tax-       a Swiss offer to tax French citizens’ assets
                                                                                         tions. We should conclude them in a few        Swiss proposals “posed a problem for us           payers.                                           stashed in Swiss accounts modelled on a
their capital-raising business overseas to places like Hong Kong, which would be         weeks,” said the spokesman for Bern’s          with regard to French tax rules, but it is an        In future, all investment income and cap-      recent deal with Germany, a budget min-
another blow to Wall Street.                                                             chief negotiator.                              object of discussions.”                           ital gains arising from assets held by            istry source said on Thursday.
   “The market we are operating in is markedly different from five years ago,” says         Switzerland has so far been only negoti-       Italy has also shown little interest in the    German taxpayers would also be covered               Switzerland and Germany agreed earlier
Andrew Lo, a professor of finance at the MIT Sloan School of Management, who             ating such deals with two countries —          system put forward by Switzerland, called         by a withholding tax of 26.375 percent.           this month to tax money stashed by German
frequently writes on hedge fund trading strategies and markets. “We are seeing           Germany, with which it concluded an            Rubik, which envisages a fixed tax rate for          To prevent new undeclared funds from           citizens in secret Swiss accounts in a deal
extraordinary emotional reactions from central banks, politicians, regulators and        agreement last week, and Britain.              the hidden assets but which safeguards the        entering Swiss banks, German authorities          that was seen as setting a template for other
investors. That kind of reaction is not conducive for building long-term wealth. We         “It’s a complex subject, we did not want    anonymity of the account-holders.                 would be able to request information on           pacts between Switzerland and other coun-
have an environment that is highly unstable.”                                            to negotiate with too many countries at the       Greece, however, has shown interest in         suspected tax cheats.                             tries.
   One might say Wall Street is a bipolar market that veers from despair to eupho-
ria with each passing news headline.

                                                                                         British govt borrowing drops
   Over the past several weeks, stocks
prices have swung widely based on a
range of factors: the perceived progress            S&P plunges
of European leaders in dealing with the
eurozone debt crisis; the fears of a dou-
ble-dip recession in the United States;         ‘Death cross’

                                                                                         by more than expected in July
the fallout from Standard & Poor’s
downgrade of US debt; and whether
the Federal Reserve will embrace a              rocks Wall St.
new round of easy money to jumpstart
the economy.                                    Continued from Page 34
   L. Randall Wray, a professor of eco-            Pado says the selling all
nomics at the University of Missouri-           started when the S&P 500
Kansas City, says much daily trading in         broke through the 200-day
stocks is like a self-fulfilling prophecy.      moving average and a sup-                                                                    PFI model comes under attack in UK
“What matters is what the markets               port level of 1,250 on the
think not what people in the markets            index. He says, “that started
believe,” says Wray. “Traders are con-          the capitulation to the down-
stantly trying to guess how daily events        side that we saw in the mar-             LONDON, Aug 19, (Agencies): British state borrowing tumbled                                         The figure, which excludes the effects of financial interventions, compared with net bor-
                                                ket overall.”                            by more than expected in July, boosted by its banking sector levy                                rowing of £3.5 billion in July 2010.
might affect other market participants.”                                                                                                                                                     Market expectations had been for borrowing of about £2.5 billion, according to analysts
                                                   The beauty (or flaw) of
   This guessing game is largely being          technical analysis is that it            and improving local government finances, official data showed                                    polled by Dow Jones Newswires.
driven by super-fast computers with
algorithmic programs designed to react
                                                tells traders when to buy or             on Friday.                                                                                          The banking sector levy raised around £660 million in the month, while the public purse
                                                sell without regard to corpo-               Public sector net borrowing — the government’s preferred measure of the pub-                  was also bolstered by higher corporation and sales taxation revenues.
to headlines and overall market trading         rate earnings or arguments
patterns. The Tabb Group, a financial           over how to solve Europe’s               lic finances — slid to just £20 million ($33 million, 23 million euros) in July, the                Britain’s Conservative-Liberal Democrat coalition government introduced the levy earli-
markets’ research firm, estimates that          sovereign debt woes. So the              Office for National Statistics (ONS) said in a statement.                                        er this year in a major austerity plan aimed at slashing a record public deficit that was inher-
during the frenetic week of Aug 8,              silver lining of a precipitous
high-frequency trading firms and                                                                                                                                                                                                            ited from the previous Labour administra-
                                                drop in stocks is that it could
strategies accounted for 65 percent of          be a signal for markets to go                                                                                                                                                               tion.
the daily trading volume in the United          up.                                                                                                                                                                                            Taxation receipts jumped 5.6 percent last
States.                                            “By selling off, the market                                                                                                                                                              month to £52.3 billion after the government
   The power of the machines over               is now discounting the bad                                                                                                                                                                  ramped up sales tax to 20 percent at the start
trading is one reason why technical             news,” said Carter Worth,                                                                                                                                                                   of the year.
analysis, often pooh-poohed as Wall             chief market technician at                                                                                                                                                                     The ONS added that corporation or busi-
Street alchemy, is gaining more believ-         Oppenheimer & Co in New                                                                                                                                                                     ness tax receipts increased by £1 billion to
ers among traders. There’s more inter-          York.                                                                                                                                                                                       £8.6 billion in July, while local government
est than ever in computer programmers              Another factor technical                                                                                                                                                                 expenditure moved into a surplus of £1.1
                                                analysis focuses on is                                                                                                                                                                      billion.
who can write algos to simply buy and           volatility and there has been
sell stocks whenever the S&P hits a                                                                                                                                                                                                            A Treasury spokesman said the official
                                                a lot of that lately. In fact,                                                                                                                                                              data continued to show “deficit reduction
predetermined target, or some                   one measure of volatility
bizarrely-named trading pattern such as                                                                                                                                                                                                     taking effect with the public finances in bal-
                                                doubled in three days and                                                                                                                                                                   ance in July”.
a “Death Cross” forms on screens.               on Aug 8, when the S&P 500
   Some of the surge in volatility is also                                                                                                                                                                                                     But he added that the government need-
                                                fell 6.66 percent, the volatili-                                                                                                                                                            ed to stick to its cost-cutting plans amid
attributed to a growing legion of               ty index closed at its highest
money managers who frequently trade             level since the market bot-
                                                                                                                                                                                                                                            ongoing turmoil on global financial mar-
exchange-traded funds - which are bas-          tomed in March 2009.                                                                                                                                                                        kets over soaring sovereign debt in the
kets of stocks, indexes and other assets           “It highlights how extreme,                                                                                                                                                              United States and in the eurozone.
- as a way to hedge their positions.            how one-sided it was,” said                                                                                                                                                                    “Events have shown with the US ratings
   “There’s a different dynamic now             Craig Peskin, co-head of                                                                                                                                                                    downgrade and continued turbulence in
because of the pervasiveness of high-           technical analysis research                                                                                                                                                                 Europe, it is vital that the government sticks
frequency traders and hedge funds,”             at MF Global in New York,                                                                                                                                                                   to this plan,” added the Treasury
says John Longo, chief investment               who noted that every stock                                                                                                                                                                  spokesman.
strategist at MDE Group, which man-             in the S&P 500 declined on                                                                                                                                                                     For the first time in history, Washington
                                                Aug 8. “Everyone was treat-                                                                                                                                                                 was stripped of its triple-A credit rating ear-
ages $1.3 billion in assets. Longo, also        ing everything equally.”
a finance professor at Rutgers Business                                                                                                                                                                                                     lier this month by Standard & Poor’s.
                                                   Some likened what they                                                                                                                                                                      Despite the July improvement, Capital
School in New Jersey, adds: “The                were seeing in the market to
down-5-percent one day, up-5-percent                                                                                                                                                                                                        Economics economist Samuel Tombs said
                                                last year’s flash crash, when                                                                                                                                                               the government would likely miss its bor-
the next day volatility wouldn’t have           the Dow Jones Industrials
happened in the past.”                                                                                                                                                                                                                      rowing target of £122 billion for the
                                                plunged nearly 1,000 points                                                                                                                                                                 2011/2012 year, which runs until next
   The trouble for ordinary investors is        in 20 minute. Except this
that there are no good market forecasts                                                                                                                                                                                                     March, as the ONS revised other data.
                                                time, it appears to be a flash
for predicting what might spark a liq-          crash in slow motion.                                                                                                                                                                          “Borrowing for previous months was
uidity black hole. Fear about the United                                                                                                                                                                                                    revised up, so on current trends it will over-
States and European countries slipping                                                                                                                                                                                                      shoot the ... full-year forecast of £122 bil-
back into recession is a legitimate con-        Critics of high-frequency trading                                                                                                                                                           lion by around £10 billion. This overshoot
cern that could have real impact on cor-     firms argue that the May 6, 2010 “flash                                                                                                                                                        largely reflects the weakness of tax
                                                                                         A city worker walks over London Bridge in central London, on Aug 18. London’s main stock index slumped by more than
porate profits and stocks. But when          crash,” in which the Dow Jones              5.0 percent in Thursday afternoon trade as more weak US data intensified worries that the global economy was heading                               receipts,” said Tombs.
traders act on those fears at lightning      Industrials plunged 1,000 points in less                            for another sharp downturn, dealers said. (AFP) See Markets Page 39                                                           Meanwhile, a report by British lawmak-
speed it can result in seemingly irra-       than 20 minutes, was caused in part by                                                                                                                                                         ers on Thursday criticised the funding
tional sell-offs.                            an absence of liquidity or traders mak-                                                                                                                                                        structure behind many schools and hospi-
   Take the scary 6.66 percent drop in       ing markets in stocks. While securities
                                             regulators have never identified a sin-
                                                                                                             Firm pledges 2.5 pence maiden interim dividend                                                                                 tals, saying that Public Finance Initiatives
                                                                                                                                                                                                                                            (PFI) are not value for money, and projects
the S&P500 on Aug 8. On that first
trading day after the credit rating arm      gle cause for the flash crash, they have                                                                                                                                                       must be paid for upfront by the govern-
of S&P stripped the US of its vaunted
Triple AAA debt rating, all 500 stocks
in the index closed the day in the red.
   The selling was so ferocious that
                                             noted that the rapid collapse of stock
                                             prices was exacerbated by some high-
                                             frequency trading firms turning off
                                             their computers and not making trades.
                                                                                         UK fund Jupiter eyes EU, rich clients                                                                                                                 Higher borrowing costs since the credit
                                                                                                                                                                                                                                            crisis means that PFI projects are an
                                                                                                                                                                                                                                            “extremely inefficient” method of financ-
shares of McDonald’s Corp, for                  Some are starting to worry about the                                                                                                                                                        ing, according to a new report from a
                                                                                         LONDON, Aug 19, (RTRS): Fund                   funds.                                               Jupiter shares were down 2.8 percent           Treasury Select Committee.
instance, fell 3.5 percent to $82.11,        impact on ordinary investors of the rise    manager Jupiter put a brave face on the           “I think we are at relatively early            at 1040 GMT, trading at 190.7 pence,
even though the fast-food giant report-      of the machines and all these unfore-                                                                                                                                                             In Britain, PFI has been used to build
                                                                                         financial market turmoil that has rattled      stages in the European investment                 underperforming the FTSE 250 index                everything from roads to prisons, with a
ed a 5.1 percent climb in same-store         seen consequences. These Wall Street        its core British customers, saying it was      habit where people are moving from                down 1.8 percent.
sales for July, higher than analysts had     professionals wonder whether events                                                                                                                                                            total of 339 deals worth $76.5 billion proj-
expected.                                    like the flash crash and the frenzied       pushing ahead with plans to expand in          cash and a bond culture to increase                  Analysts at Peel Hunt gave Jupiter a           ects from 2005-2009, according to the
   Such selling with no regard to cor-       trading of this month will push average     Europe and attract more wealthy                their weighting to equity over time...            ‘buy’ rating saying “the longer-term              infrastructure Projects Database, with the
porate fundamentals makes the notion         investors further away from stocks and      clients.                                       we have seen it in Germany in the last            attractions of Jupiter’s model remain -           model now widely exported.
of stock picking seem quaint.                into low-yielding money market funds           Jupiter, one of the UK’s largest retail     few years.”                                       strong brand, consistent flows and high              The PFI model, which uses private capi-
   Keith Wirtz, chief investment officer     and bond funds.                             investment fund managers with around              In the UK, Jupiter is looking to               margins.”                                         tal to build public infrastructure, has failed
at Fifth Third Asset Management, with           “The last 10 years have been a night-    84 percent of assets invested in equi-         increase its private client business.                Market conditions, however, “have              in its central promises of not effectively
$18 billion in assets, says the indis-       mare in this business,” says Dave           ties, said on Friday that first-half net          “It could range from the private               clearly changed” since the end of June,           transfering the risk of the project to the pri-
                                                                                         inflows to its funds fell to 676 million                                                                                                           vate sector, and getting a good deal for tax-
criminate selling means “good stocks         D’Amico, president and chief market                                                        client and wealth management fit of a             Peel Hunt said. Global stock markets              payers, said the report.
are going down at the same pace as bad       strategist     at     Braver     Capital    pounds ($1.1 million) from 814 million         big bank ... we see it as a growth area           have tumbled in recent weeks on fears
                                                                                         a year earlier.                                                                                                                                       It advocates much stricter criteria for PFI
stocks.”                                     Management, which has $575 million                                                         in the UK and in Europe as well,” he              of another recession and fresh concern            funding, taking projects onto the balance
   Karolyi says the waves of wholesale       in customer money. “People distrust            Investor confidence had taken a             said.                                             over the euro zone debt crisis.                   sheet and abolishing “perverse incentives”
selling driven by liquidity black holes      Wall Street at one of the highest rates I   knock and “significant uncertainty                Bonham Carter also identified long-               Jupiter’s first-half pre-tax profit rose       to use PFI.
are not just the byproduct of the over-      can remember.”                              remains,” it said.                             term trends likely to favour the busi-            to 37.3 million pounds from 14.6 mil-                If all PFI liabilities were included in the
computerization of trading, it’s the end        Evidence of that distrust is already        “Sentiment is definitively more             ness, such as pension reforms in the              lion pounds a year earlier.                       National Accounts, the Office for Budget
result of too much “group think” by          apparent. Over the past two weeks,          nervous, it would be surprising if it          UK that will make workers save more,                 The company is diversifying its                Responsibility estimated that national debt
institutional traders.                       retail investors pulled $17.4 billion out   wasn’t. I would be quite amazed,”                                                                                                                  would rise by £35 billion ($57.5 billion)or
   He says Wall Street first saw this in     of US equity mutual funds, according                                                       including a move to automatically                 product range, having launched at the
                                                                                         Chief Executive Edward Bonham                  enroll workers over 22 in a pension               end of last year funds in convertible             2.5 percent of GDP.
August 2007, when dozens of quant            to Lipper, a mutual fund information        Carter told Reuters in an interview.                                                                                                                  “The markets will have already fac-
hedge funds suffered big losses at the       service. Investors have been backing                                                       plan.                                             bonds and total return strategies,
                                                                                            Rival fund house Henderson forecast                                                           although Bonham Carter said it will               tored this in, in large measures, I would
start of the financial crisis because the    away from stocks for some time, with
                                                                                         a near-term decline in investment from                           Culture                                                                           expect,” Chairman of the Treasury Select
algos they employed were all buying          many retail investors missing out on a                                                                                                       remain focused mainly on equity, long-
                                                                                         retail clients, when it published results         “I think savings are structurally pick-        only funds.                                       Committee, Andrew Tyrie MP told
and selling the same securities. This        sizable chunk of the 5,000 point surge
flawed thinking by some of Wall                                                          earlier this week.                             ing up and that is a very strong positive            Conditions for new products launch-            Reuters.
                                             in the Dow Jones Industrials since the                                                                                                                                                            “We can’t carry on as we are, expect-
Street’s brightest math geeks was an         markets bottomed in March 2009.                Jupiter is pushing ahead with medi-         in our business in the longer term. The           es are “particularly hostile,” he said.
                                                                                         um-term plans to diversify its client          UK is behind the US by about at least                                                               ing the next generation of taxpayers to
early warning sign of even worse group          According to Strategic Insight, a                                                                                                                           Assets                          pick up the tab,” he said, as the govern-
think to come with regards to the value      mutual fund consulting firm, stock          base, seeking more wealthy investors           five or 10 years where people have a
                                                                                         and expanding into Europe.                     greater tendency to invest in mutual                 Jupiter said its private equity team           ment grapples with a record peacetime
of securities backed by subprime mort-       mutual funds in 2009 took in about $85                                                                                                                                                         budget deficit.
gages.                                       billion as the markets were beginning          The moves “over the course of this          funds,” Bonham Carter said.                       running 90 million pounds of assets has
                                                                                                                                           Jupiter pledged its first interim              left to join another company. Jupiter                He added that new infrastructure and
   Karolyi says his research, which will     to rise. In comparison, a record $425       year and into next year,” will start with                                                                                                          services should be paid for directly, as a
be officially published later this year in   billion was invested in low-yielding        a new office in Switzerland, Bonham            dividend since floating on the stock              will earn one-off management fees of              capital project.
The Journal of Financial Economics,          bond mutual funds.                          Carter said.                                   market last year after pretax profit              3.2 million pounds in the second half of             “The PFI system we inherited was ...
has found the phenomenon of liquidity           This trend of retail investors prefer-      Continental investors, who tradition-       more than doubled in the half-year to             the year as a result of the move.                 nothing more than a ploy to keep expensive
black holes is spreading beyond the US       ring bonds over stocks continues to this    ally favour investment in bonds, are           end-June.                                            Assets under management remained               projects off the balance sheet,” said an aide
to other stock markets. That is prob-        day, even as the yield on the 10-year       becoming more open to putting their               The fund manager will pay a 2.5                at 24.8 million pounds — the figure for           to the Chancellor. “That’s why we are
lematic because the effects of liquidity     US Treasury hit 1.98 percent on             money in stocks, he added, a trend             pence interim dividend, in line with              the five months to end-May announced              reforming it.” The Treasury said last month
black holes can be profound.                 Thursday.                                   Jupiter hopes to harness with its core         expectations of analysts at Numis                 in June. Jupiter had 19.8 billion pounds          it was aiming to save £1.5 billion across its
                                                                                         offering of equity-focused mutual              Securities.                                       at June-end 2010.                                 495 PFI projects in England.

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