(Bloomberg) -- The Australian Securities and Investments Commission will allow short selling of financial stocks from today after an eight-month ban gave banks, insurers and property-related stocks cover to boost their capital levels.
Macquarie Group Ltd., Goodman Group and Suncorp-Metway Ltd. were among companies that took advantage of the shorting ban to sell shares while shielded from “bear raids,” where successive short sales drive stock prices lower. Financial stocks slumped in Sydney trading.
“Bear raids were a concern in particular for companies with overleveraged balance sheets and vulnerable business models,” said Prasad Patkar, who helps manage about $850 million at Platypus Asset Management in Sydney. “Firms that needed to repair their balance sheets were able to do so without fear of their shares being targeted.”
Australian companies have raised $21 billion in equity sales this year, according to a Financial Times report citing Dealogic research.
ASIC banned short selling of all stocks in September as part of international efforts to contain stock market declines after Lehman Brothers Holdings Inc. collapsed and companies from Babcock & Brown Ltd. to Fortescue Metals Group Ltd. complained their shares were being manipulated. In November, the regulator lifted the ban on all but financial companies.
The prohibition, which was due to expire on May 31, was lifted from 10 a.m. today, the regulator said in an e-mailed statement. Australia’s benchmark stock index has rallied 17 percent since hitting a five-year low on March 6, a day after the financial shorting ban was last extended.
Market Conditions
“ASIC has reviewed market conditions and considers that the balance between market efficiency and potential systemic concern has now moved in favor of the ban being lifted,” it said in the statement. “ASIC will not hesitate to reimpose the ban immediately and without consultation if it considers market conditions warrant such action.”
Australia permanently outlawed so-called naked short selling, with a few exemptions, in November, when it lifted the ban on covered short sales for most non-financial companies. The ban on short selling financial stocks was extended in January and then again in March.
South Korea said on May 20 it would lift a ban on short selling non-financial stocks starting June 1, saying the market had stabilized. Short-sale restrictions on banks, brokerages and other financial shares would continue while those companies raised capital and cleaned up their balance sheets, the Financial Services Commission said.
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Sunday, 24 May 2009
Wednesday, 20 May 2009
Google CEO says won't buy newspaper
(Reuters) - U.S. Internet search engine operator Google (GOOG.O) has decided against acquiring a newspaper, the Financial Times reported, citing the company's chief executive and chairman, Eric Schmidt.
Google had considered buying a news publication but is now unlikely to do so because potential targets are either too expensive or have too many liabilities, the FT quoted Schmidt as saying in an interview with the paper's online edition.
A newspaper acquisition is also unlikely because Google is "trying to avoid crossing the line between technology and content," the paper quoted Schmidt as saying.
There has been speculation that cash-rich Google could take advantage of a dip in advertising revenues to buy out struggling news organisations, with the New York Times (NYT.N) seen as a potential target.
Read more here
Google had considered buying a news publication but is now unlikely to do so because potential targets are either too expensive or have too many liabilities, the FT quoted Schmidt as saying in an interview with the paper's online edition.
A newspaper acquisition is also unlikely because Google is "trying to avoid crossing the line between technology and content," the paper quoted Schmidt as saying.
There has been speculation that cash-rich Google could take advantage of a dip in advertising revenues to buy out struggling news organisations, with the New York Times (NYT.N) seen as a potential target.
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Obama to sign credit card crackdown into law
(Reuters) - President Barack Obama was expected to sign into law on Friday a package of sweeping new limits on credit card interest rates and fees that won final approval from the U.S. Congress on Wednesday .
In a major victory for the president and congressional Democrats, the House of Representatives voted 361-64 to approve the so-called "credit cardholder bill of rights".
Taking full effect in February 2010, the bill would sharply restrict credit card issuers' ability to raise interest rates on cardholders' existing balances; to charge certain fees; and to slap cardholders with unreasonable penalties.
The bill will hurt the profits of major card issuers such as Citigroup, Bank of America, JPMorgan Chase and Capital One, analysts said.
It represents the first of several reforms on banking and market rules expected from the administration as it tightens regulatory oversight in hopes of preventing another financial crisis like the one now pounding economies worldwide.
A White House official said Obama will sign the bill at a ceremony scheduled for 1500 EDT on Friday.
The bill could hit home with more consumers than any other economic initiative the Obama administration has launched so far, with some experts predicting a broad restructuring of how credit cards are priced, managed and marketed.
Read more here
In a major victory for the president and congressional Democrats, the House of Representatives voted 361-64 to approve the so-called "credit cardholder bill of rights".
Taking full effect in February 2010, the bill would sharply restrict credit card issuers' ability to raise interest rates on cardholders' existing balances; to charge certain fees; and to slap cardholders with unreasonable penalties.
The bill will hurt the profits of major card issuers such as Citigroup, Bank of America, JPMorgan Chase and Capital One, analysts said.
It represents the first of several reforms on banking and market rules expected from the administration as it tightens regulatory oversight in hopes of preventing another financial crisis like the one now pounding economies worldwide.
A White House official said Obama will sign the bill at a ceremony scheduled for 1500 EDT on Friday.
The bill could hit home with more consumers than any other economic initiative the Obama administration has launched so far, with some experts predicting a broad restructuring of how credit cards are priced, managed and marketed.
Read more here
New U.S. derivatives rules could make odd partners
(Reuters) - New U.S. rules for the trading of derivatives could drive market enemies into each other's arms, as dealers and exchanges look to strike more partnerships to yield shared profits from the revamped landscape.
The Obama administration's proposals, announced last week, favor exchange and clearinghouse operators because they require "standardized trades" to move onto exchanges, and require all over-the-counter derivatives to be cleared by regulated central counterparties.
That would effectively transfer a very lucrative business from derivatives dealers, blamed by many for the financial crisis, to exchanges and clearinghouses, which have touted their durability since markets plunged last year.
They have long waged a tug-a-war for control over where derivatives trade, with the dealers' private OTC market mostly dominant. The new regulations may force the dealers and exchanges to work more closely together.
"There were already initiatives underway to have exchanges partner with dealers, and this helps accelerate what was already underway," Matthew Lavicka, managing director of cash equities at Goldman Sachs & Co, which is among the top U.S. derivatives dealers, told Reuters on Wednesday.
Goldman and several other big banks own a 50-percent equity stake in IntercontinentalExchange's clearinghouse for credit default swaps. Dealer backing pushed ICE to the fore of clearinghouses looking to clear U.S. CDS, default-insurance products blamed for worsening the crisis.
The world's biggest exchanges, including CME Group Inc, NYSE Euronext and Nasdaq OMX, have sought partnerships with dealers and other big OTC players who would drive business to their derivative clearinghouses and exchanges.
"You can't just build it and have them come," said Larry Leibowitz, head of U.S. markets and global technology at New York Stock Exchange parent NYSE Euronext. "We've been launched in Europe for a while and people aren't really using it," he said of the company's five month-old European CDS clearer.
OTC MARKET DOMINANT -- FOR NOW
Broker-dealers earn money from trading or facilitating the trade of derivatives, instruments that derive their value from other assets. Because the $194 trillion U.S. OTC market eclipses the $7 trillion exchange-traded market, exchanges have salivated at the prospect of grabbing a bigger slice.
But they have had little success because derivatives are tailored specifically for those who trade them, and exchanges typically trade standardized products for wider consumption.
The Obama administration's plans, meant to avoid a repeat of the financial meltdown that sparked a global recession, could change the equation.
"A lot of what was signaled there was that the administration was trying to get the regulators, the sellside, the buyside and the exchanges all to work together," said Rick Redding, CME Group's managing director of products and services.
"I think directionally, it was telling the market participants they need to work in a more collaborative way to come up with solutions," he said on Wednesday in an interview on the sidelines of a conference hosted by Fox-Pitt Kelton here.
An OTC derivatives trade is a private agreement between two parties. Regulators want to install a clearinghouse between those trades to act as a central counterparty that would guarantee the obligations if any participant defaults.
Read more here
The Obama administration's proposals, announced last week, favor exchange and clearinghouse operators because they require "standardized trades" to move onto exchanges, and require all over-the-counter derivatives to be cleared by regulated central counterparties.
That would effectively transfer a very lucrative business from derivatives dealers, blamed by many for the financial crisis, to exchanges and clearinghouses, which have touted their durability since markets plunged last year.
They have long waged a tug-a-war for control over where derivatives trade, with the dealers' private OTC market mostly dominant. The new regulations may force the dealers and exchanges to work more closely together.
"There were already initiatives underway to have exchanges partner with dealers, and this helps accelerate what was already underway," Matthew Lavicka, managing director of cash equities at Goldman Sachs & Co, which is among the top U.S. derivatives dealers, told Reuters on Wednesday.
Goldman and several other big banks own a 50-percent equity stake in IntercontinentalExchange's clearinghouse for credit default swaps. Dealer backing pushed ICE to the fore of clearinghouses looking to clear U.S. CDS, default-insurance products blamed for worsening the crisis.
The world's biggest exchanges, including CME Group Inc, NYSE Euronext and Nasdaq OMX, have sought partnerships with dealers and other big OTC players who would drive business to their derivative clearinghouses and exchanges.
"You can't just build it and have them come," said Larry Leibowitz, head of U.S. markets and global technology at New York Stock Exchange parent NYSE Euronext. "We've been launched in Europe for a while and people aren't really using it," he said of the company's five month-old European CDS clearer.
OTC MARKET DOMINANT -- FOR NOW
Broker-dealers earn money from trading or facilitating the trade of derivatives, instruments that derive their value from other assets. Because the $194 trillion U.S. OTC market eclipses the $7 trillion exchange-traded market, exchanges have salivated at the prospect of grabbing a bigger slice.
But they have had little success because derivatives are tailored specifically for those who trade them, and exchanges typically trade standardized products for wider consumption.
The Obama administration's plans, meant to avoid a repeat of the financial meltdown that sparked a global recession, could change the equation.
"A lot of what was signaled there was that the administration was trying to get the regulators, the sellside, the buyside and the exchanges all to work together," said Rick Redding, CME Group's managing director of products and services.
"I think directionally, it was telling the market participants they need to work in a more collaborative way to come up with solutions," he said on Wednesday in an interview on the sidelines of a conference hosted by Fox-Pitt Kelton here.
An OTC derivatives trade is a private agreement between two parties. Regulators want to install a clearinghouse between those trades to act as a central counterparty that would guarantee the obligations if any participant defaults.
Read more here
Lehman Brothers questioned over securities sales
(Reuters) - Regulators have questioned former Lehman Brothers Holdings (LEHMQ.PK) executives over their marketing of auction-rate securities, the Wall Street Journal reported, citing people with knowledge of the matter.
Prosecutors from the U.S. attorney's office in Brooklyn and Securities and Exchange Commission lawyers have interviewed several former Lehman employees about the securities, to try to determine whether these people defrauded customers, the newspaper said.
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Prosecutors from the U.S. attorney's office in Brooklyn and Securities and Exchange Commission lawyers have interviewed several former Lehman employees about the securities, to try to determine whether these people defrauded customers, the newspaper said.
Read more here
Fed mulled increasing debt purchases in April
(Reuters) - The Federal Reserve said on Wednesday it saw modest improvements in the U.S. economy last month, but it still saw big risks and left open the possibility of increasing its purchases of mortgage-related and government debt to keep credit flowing and spur recovery.
Despite a pickup in household and business confidence that Fed officials saw helping to steady spending when they met in late April, they viewed the evidence as too tentative to erase risks facing the recession-mired economy.
The policy-makers cut their forecasts for economic growth over the next three years and debated whether they should further ramp up planned purchases of mortgage agency and government securities, minutes of their April 28-29 meeting said.
The Fed in recent months has turned to asset purchases as a means to keep credit flowing since running out of scope to further lower benchmark interest rates after bringing them down to close to zero percent last year.
"Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery," the minutes of the Federal Open Market Committee's meeting said.
"All members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases," they added.
In fresh quarterly forecasts, the Fed projected the U.S. economy would contract by between 1.3 percent and 2.0 percent this year, with the unemployment rate rising to between 9.2 percent and 9.6 percent.
In January, the Fed had forecast a milder contraction of between 0.5 percent and 1.3 percent, with the jobless rate rising to between 8.5 percent and 8.8 percent.
U.S. stocks fell on the gloomier economic forecast, while debt prices rallied on the prospect the Fed could boost its securities purchases.
"The tone of the minutes is a little more optimistic, and the forecasts are a little more pessimistic," said Christopher Low, chief economist for FTN Financial in New York.
The minutes showed the Fed staff last month had offered a sunnier forecast than the policy-makers, with the staff revising up their outlook for economic activity. They anticipated that growth would expand at a rate well above its potential in 2011 and that the unemployment rate would decline significantly.
"Key factors expected to drive the acceleration in economic activity were the boost to spending from fiscal stimulus, the bottoming out of the housing market, a turn in the inventory cycle from liquidation to modest accumulation, and ongoing gradual recovery of financial markets," the minutes said.
Read more here
Despite a pickup in household and business confidence that Fed officials saw helping to steady spending when they met in late April, they viewed the evidence as too tentative to erase risks facing the recession-mired economy.
The policy-makers cut their forecasts for economic growth over the next three years and debated whether they should further ramp up planned purchases of mortgage agency and government securities, minutes of their April 28-29 meeting said.
The Fed in recent months has turned to asset purchases as a means to keep credit flowing since running out of scope to further lower benchmark interest rates after bringing them down to close to zero percent last year.
"Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery," the minutes of the Federal Open Market Committee's meeting said.
"All members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases," they added.
In fresh quarterly forecasts, the Fed projected the U.S. economy would contract by between 1.3 percent and 2.0 percent this year, with the unemployment rate rising to between 9.2 percent and 9.6 percent.
In January, the Fed had forecast a milder contraction of between 0.5 percent and 1.3 percent, with the jobless rate rising to between 8.5 percent and 8.8 percent.
U.S. stocks fell on the gloomier economic forecast, while debt prices rallied on the prospect the Fed could boost its securities purchases.
"The tone of the minutes is a little more optimistic, and the forecasts are a little more pessimistic," said Christopher Low, chief economist for FTN Financial in New York.
The minutes showed the Fed staff last month had offered a sunnier forecast than the policy-makers, with the staff revising up their outlook for economic activity. They anticipated that growth would expand at a rate well above its potential in 2011 and that the unemployment rate would decline significantly.
"Key factors expected to drive the acceleration in economic activity were the boost to spending from fiscal stimulus, the bottoming out of the housing market, a turn in the inventory cycle from liquidation to modest accumulation, and ongoing gradual recovery of financial markets," the minutes said.
Read more here
Tuesday, 19 May 2009
GM bankruptcy plan eyes quick sale to government
(Reuters) - If General Motors Corp files for bankruptcy, as widely expected, its healthy assets will be quickly sold to a new company owned by the U.S. government, a source familiar with the situation said on Tuesday.
The source, who was not cleared to speak with the media and would not be identified, said the U.S. government would pay for the assets by assuming the automaker's $6 billion of secured debt and forgiving the bulk of the $15.4 billion of emergency loans that the U.S. Treasury has provided to GM.
The government is negotiating the terms on which it will assume GM's secured debt and might make an the offer to holders of the debt that is far superior to the one made to Chrysler LLC's secured lenders, the source said.
Chrysler filed for bankruptcy in April and has proposed paying its secured lenders about 28 cents on the dollar.
The new GM is likely to distribute stock in the company to GM's unions in return for concessions on wages and benefits, the source said.
The percentage of stock given to the unions, bondholders and other creditors whose debt is not repaid by new GM has not been determined, the source said.
In addition, the government would extend a credit line to the new company, the source said.
The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.
The government has given GM until June 1 to restructure its operations to lower its debt burden and employee costs as sales have plummeted in recent years.
DELPHI, HENDERSON
GM will likely take on some of the operations of its bankrupt supplier Delphi Corp to make sure it gets needed auto parts throughout its reorganization, according to the source. The company is currently negotiating terms with Delphi's estate, the source said.
Delphi, a former unit of GM, has been operating in bankruptcy since 2005.
The board of the new company would be established with the tacit approval of the government. Fritz Henderson, who took the helm of GM earlier this year after the government pushed out Rick Wagoner, will head the new company, the source said.
Setting up a new company to buy the healthy assets is aimed bringing operations out of bankruptcy as quickly as possible. GM is concerned that consumers might not be willing to make a major purchase from a bankrupt company, fearing it would not honor warranties or provide service.
Chrysler is employing a similar strategy in its bankruptcy. The smaller automaker is selling its operations to a group that will be managed by Italian automaker Fiat and wants to have the strongest operations out of bankruptcy in 60 days.
Read more here
The source, who was not cleared to speak with the media and would not be identified, said the U.S. government would pay for the assets by assuming the automaker's $6 billion of secured debt and forgiving the bulk of the $15.4 billion of emergency loans that the U.S. Treasury has provided to GM.
The government is negotiating the terms on which it will assume GM's secured debt and might make an the offer to holders of the debt that is far superior to the one made to Chrysler LLC's secured lenders, the source said.
Chrysler filed for bankruptcy in April and has proposed paying its secured lenders about 28 cents on the dollar.
The new GM is likely to distribute stock in the company to GM's unions in return for concessions on wages and benefits, the source said.
The percentage of stock given to the unions, bondholders and other creditors whose debt is not repaid by new GM has not been determined, the source said.
In addition, the government would extend a credit line to the new company, the source said.
The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.
The government has given GM until June 1 to restructure its operations to lower its debt burden and employee costs as sales have plummeted in recent years.
DELPHI, HENDERSON
GM will likely take on some of the operations of its bankrupt supplier Delphi Corp to make sure it gets needed auto parts throughout its reorganization, according to the source. The company is currently negotiating terms with Delphi's estate, the source said.
Delphi, a former unit of GM, has been operating in bankruptcy since 2005.
The board of the new company would be established with the tacit approval of the government. Fritz Henderson, who took the helm of GM earlier this year after the government pushed out Rick Wagoner, will head the new company, the source said.
Setting up a new company to buy the healthy assets is aimed bringing operations out of bankruptcy as quickly as possible. GM is concerned that consumers might not be willing to make a major purchase from a bankrupt company, fearing it would not honor warranties or provide service.
Chrysler is employing a similar strategy in its bankruptcy. The smaller automaker is selling its operations to a group that will be managed by Italian automaker Fiat and wants to have the strongest operations out of bankruptcy in 60 days.
Read more here
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