Citi hires new equity strategy head in Australia

July 28, 2010 By Leave a Comment

July 27 (Reuters) – Citigroup (C.N) has hired Tony Brennan as its new head of equity market strategy in Australia, capping a year-long hiring spree that the group said will help it maintain market share.

Brennan, who was poached from Deutsche Bank (DBKGn.DE), was rated number two in Australia and number three in Asia in consultant Peter Lee & Associates’ ranking of equity strategists.

Citigroup said it needed to beef up in Australia after slashing jobs globally in 2008 as the global financial crisis hit, while rivals who were slower to cut jobs maintained their strong positions in Australia, which dodged a recession.

“So we found ourselves in the first half of 2009 at a competitive disadvantage — right strategy globally, wrong strategy in Australia,” Bruce Rolph, Citigroup’s head of investment research and analysis for Australia and New Zealand told Reuters.

The group launched a hiring spree a year ago focused on nabbing research analysts in metals & mining, energy, health care and real estate investment trusts (REITs) and financials.

Competitors such as CLSA and Nomura have also been snapping up analysts, but Rolph said Citi Australia was supported by its top five brokerage market share over 20 years, its capacity to invest in technology and global distribution platform.

“If you’re in that middle ground where you’ve got 3-5 percent market share, half a research team and you’ve got a bit of a technology spend, you are going to have difficulty,” he said.

“You’ve either got to really specialise or you’ve got to play the big global game.”

Citigroup ranked fourth behind Deutsche, UBS (UBSN.VX) and Macquarie (MQG.AX) in the first half of 2010, with a brokerage market share of 8.8 percent, handling A$124 billion ($112 billion) worth of trades.

That share is up slightly from 8.3 percent in the same period last year, when it ranked fifth, according to Australian Securities Exchange data.

CLSA’s market share in the first half of 2010 was 0.5 percent, while Nomura’s was 0.15 percent.

Citi did not have a specific market share target, but Rolph said its “natural” market share would be 9-11 percent.

Over the last year, Citigroup has snared JP Morgan’s (JPM.N) health care analyst, Alex Smith, and the REIT team from Credit Suisse.

More recently, in metals and mining, it hired David Haddad from RBC and a former strategist from top global miner BHP Billiton (BHP.AX)(BLT.L) Craig Sainsbury. It has also picked up analysts from fund managers, including Hugh Dive from Investors Mutual to cover building materials and chemicals. (Editing by Ed Davies)

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UPDATE 1-Polish Millennium loosens credit policy in H1

July 28, 2010 By Leave a Comment

WARSAW, July 27 (Reuters) – Bank Millennium BIGW.WA, one of Poland’s lenders hardest hit by the global financial crisis, said on Tuesday it had loosened its credit policy in the first half on an improving economic environment.

The bank, which is controlled by Portugal’s Millennium bcp (BCP.LS), slammed the brakes on its lending more than a year ago after interbank markets dried up and the Polish zloty tumbled, hurting its credit book, which included a large number of foreign currency mortgages.

“The change of the economic situation confirmed by the economic indicators and the improved condition of corporations in the first quarter of 2010 allowed for a change in internal credit policy of the bank taken on at the turn of 2008 and 2009,” Millennium said.

The bank, which boosted its capital by 1 billion zlotys ($318 million) at the beginning of this year, said its first half net profit rose to 138 million zlotys from 21 million in the same period of 2009 thanks to lower bad loan provisions and stronger revenue.

Analysts expected Millennium to earn 134 million zlotys, according to a Reuters poll of nine analysts.

Millennium is the first Polish lender to report results after the second quarter.

It did not break out a quarterly earnings figure for the three months ending in June, but according to Reuters calculations it stood at 70 million zlotys.

Millennium shares have risen 13 percent this year compared with a 7 percent gain of Warsaw’s banking index .BNKI. ($1=3.142 Zloty) (Reporting by Chris Borowski; editing by Simon Jessop)

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Australia’s Charter Hall to launch A$200 mln fund

July 28, 2010 By Leave a Comment

July 27 (Reuters) – Australia’s Charter Hall (CHC.AX) is launching a A$200 million ($180.5 million) industrial property fund, an executive from the property firm said on Tuesday, in a sign of recovery in the unlisted retail market previously hit by redemptions.

Charter Hall, which earlier this year bought Macquarie Group’s (MQG.AX) real estate business, hope to raise as much as A$110 million in the next two years from retail investors with a target of buying a portfolio of assets of up to A$200 million with debt, Richard Stacker, chief executive officer for Charter Hall’s direct property business, told a briefing. The closed-end fund will aim to deliver an average annualised yield of 8.7 percent.

The unlisted retail market was one of the sectors hardest hit by the global financial crisis with many funds frozen, but some high net-worth clients remain keen to get steady income returns from property, he said.

Stacker said raising new funds “would definitely be a challenge” but some self-managed pension funds targeting high-net worth individuals were seeking such investments.

He also said demand for unlisted property products was firm, with the listed property trusts trading at a discount and seeing volatile sessions.

Charter Hall has more than A$10 billion assets under management through listed and unlisted vehicles.

Demand for industrial space was picking up in Australia and Grade A warehouse rents were expected to rise 3 to 4 percent each year for a few years from 2011, Kevin Stanley, executive director for CB Richard Ellis, told the same briefing.

(Reporting by Eriko Amaha; Editing by Ed Davies)

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UBS nominates Joseph Yam for election to its Board of Directors

July 24, 2010 By Leave a Comment

UBS has nominated Joseph Yam, founder and former Chief Executive of the Hong
Kong Monetary Authority, for election to the Board of Directors at the bank’s
Annual General Meeting on 28 April, 2011.
ZURICH & BASEL, Switzerland–(Business Wire)–
Regulatory News:
UBS: (NYSE:UBS)(SWX:UBSN)

Joseph Yam founder of the Hong Kong Monetary Authority, the de facto central
bank of the Hong Kong Special Administrative Region, served as its Chief
Executive for more than 16 years until his retirement in September 2009.

Yam enjoyed a distinguished career in the Hong Kong civil service spanning
nearly 40 years. Among his numerous achievements are helping to establish Hong
Kong`s linked exchange rate system in 1983, shepherding the Hong Kong financial
system through the return to Chinese sovereignty in 1997, as well as managing
the challenges posed by the Asian financial crisis of 1997-1998 and the global
financial crisis of 2008-2009.

In recognition of his achievements, Yam has received many awards and honours,
including the Hong Kong Special Administrative Region’s Grand Bauhinia Medal
(GBM) in 2009, and Gold Bauhinia Star (GBS) in 2001, as well as the Euromoney
Central Banker of the Year award in 1997, and Commander of the Most Excellent
Order of the British Empire (CBE), in 1995.

Commenting on Yam’s nomination, Kaspar Villiger, Chairman of the Board of UBS,
said: “We are delighted to have an individual of Joseph Yam’s rare experience
and achievements join our board. Joseph’s presence will significantly expand the
geographic diversity of the board, and provide powerful additional impetus to
the growth of our already market leading investment bank and wealth management
businesses in Asia Pacific.”

With Yam’s election to the Board, the maximum number of twelve seats will be
filled.

UBS

CV of Joseph Yam

Joseph Yam (1948) holds a social sciences degree from the University of Hong
Kong. He was principally responsible for dealing with economic and monetary
affairs throughout the course of his almost 40-year long career in the Hong Kong
civil service. He served as the Deputy Secretary for Monetary Affairs between
1985 and 1991, and as Director of the Office of the Exchange Fund between 1991
and 1993, before establishing the Hong Kong Monetary Authority, where he was
Chief Executive for over 16 years.

Since his retirement in September 2009, Yam has taken up various appointments,
including Executive Vice President of the China Society for Finance and Banking,
a society managed by the People’s Bank of China; Distinguished Research Fellow
of the Institute of Global Economics and Finance at the Chinese University of
Hong Kong; and Chairman of the Board of Macroprudential Consultancy Limited, a
company he established to provide advice to financial regulatory authorities. He
sits on the International Advisory Councils of a number of government and
academic institutions. Yam has just been elected, and pending regulatory
approval will be appointed, to the Board of Directors of China Construction
Bank.

2010 – Distinguished Research Fellow, Institute of Global Economics and Finance, Chinese University of Hong Kong
Chairman of the Board, Macroprudential Consultancy Limited

Member of the Board, China Construction Bank (pending regulatory approval)
2009 – Executive Vice President, China Society for Finance and Banking,
The People’s Bank of China
1971 – 1997 Hong Kong Government
1997 – 2009 Hong Kong Special Administrative Region Government

1993 – 2009
Chief Executive, Hong Kong Monetary Authority
1991 – 1993 Director, Office of the Exchange Fund
1985 – 1991 Deputy Secretary for Monetary Affairs
1982 – 1985 Principal Assistant Secretary (Monetary Affairs)
1979 – 1982 Principal Assistant Secretary (Economic Services)
1977 – 1979 Senior Economist
1976 – 1977 Economist
1971 – 1976 Statistician

In addition to his Bachelor’s degree in Social Sciences from the University of
Hong Kong, Yam’s academic awards include a number of honorary doctorate degrees
and honorary professorships. Yam has also received many awards in recognition of
his work. In 1995, he was appointed Commander of the Most Excellent Order of the
British Empire (CBE) and in 2009, was awarded the Hong Kong Special
Administrative Region’s Grand Bauhinia Medal (GBM), the highest award under the
Hong Kong honors and awards system. Yam was also named Central Banker of the
Year by Euromoney in 1997.

Cautionary Statement Regarding Forward-Looking Statements:

This release contains statements that constitute “forward-looking statements”.
While these statements represent UBS`s expectation concerning the development of
its business in the Asia Pacific region, actual results could differ materially
from UBS`s expectations for reasons including economic and market developments,
changes in financial regulation, UBS`s ability to retain and attract key
employees and competitive factors. In addition, our future results could depend
on other factors that we have previously indicated could adversely affect our
business and financial performance which are contained in our past and future
filings and reports, including those filed with the US Securities and Exchange
Commission (SEC). More detailed information about those factors is set forth in
documents furnished by UBS and filings made by UBS with the SEC, including UBS`s
Annual Report on Form 20-F for the year ended 31 December 2009. UBS is not under
any obligation to (and expressly disclaims any obligation to) update or alter
its forward-looking statements, whether as a result of new information, future
events or otherwise.

UBS AG
Media Relations
Tel. +41-44-234 85 00
www.ubs.com

Copyright Business Wire 2010

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UPDATE 1-Saudi Dar Al-Arkan Q2 net falls on lower land sales

July 21, 2010 By Leave a Comment

RIYADH, July 20 (Reuters) – Saudi-based real estate developer Dar al-Arkan 4300.SE said second-quarter earnings fell by almost 30 percent on declining sales of building-ready land, its main revenue source.

Second-quarter net profit was broadly in line with analysts forecasts at 437 million riyals ($117 million), down 29.3 percent from 618.3 million riyals a year earlier, Saudi Arabia’s largest property developer by market value said in a statement to the Saudi bourse.

Analysts surveyed by Reuters had expected on average net profit of 431 million riyals.

“The decline in second-quarter net profit… is due to a decrease in the areas of sold land,” the company said without giving any figures.

Land sales generate the the bulk of revenues and profit for the firm: They accounted for 90 percent of its revenues during the first quarter and 96 percent of its gross profit for the period.

The repercussions of the global financial crisis have led to a drop in the amount of liquidity that goes into land speculation in Saudi Arabia, resulting mainly in a decline in the volume of transactions, industry sources say.

By end-June, earnings per share fell to 0.77 riyals down from 0.97 riyals a year earlier while net operating income fell 26.4 percent to 492 million riyals. (Reporting by Souhail Karam; Editing by Andrew Callus)

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BAY STREET-Bank of Canada is the least of TSX’s worries

July 19, 2010 By Leave a Comment

TORONTO, July 18 (Reuters) – The Bank of Canada’s rate hike campaign should not hurt Canadian stocks as badly as past tightening cycles, given that only moderate moves are expected and rates will remain near record lows for some time.

Markets are betting on a 25 basis point increase on Tuesday, which would bring the central bank’s key interest rate to 0.75 percent. Last month Canada became the first Group of Seven industrialized nation to raise rates following the global financial crisis. BOCWATCH

But analysts say the tightening, and other hikes expected to follow, will have little impact on the TSX composite index .GSPTSE. Instead, traders and money managers will be focused on the health of the global economic recovery.

“This move in interest rates — and those that will come for a while here — I don’t think are going to fill the financial markets with dread or have a huge impact on the stock market at all. What they really point to is some return to normalcy,” said Bob Gorman, chief portfolio strategist at TD Waterhouse.

Traditionally it’s bad news for stock markets when central banks take away the punch bowl of easy money. Higher borrowing costs typically slow the economy, cut into corporate profits and increase the appeal of some competing fixed-income investments.

Most vulnerable are rate-sensitive sectors like utilities, banks and other financial institutions, as well as high dividend stocks like many found in the telecoms sector.

But analysts say this tightening cycle is less worrying for stocks, pointing out that interest rates remain low in absolute terms. The central bank cut its key rate to a record low 0.25 percent in April 2009 in an aggressive response to the financial crisis and resulting recession.

A recent Reuters poll showed the overnight rate is expected to rise to just 1.25 percent by year end and to 2.5 percent by the end of 2011. Even then, rates will be lower than they were in early 2008. POLL20 [CA/POLL]

By comparison, the central bank raised rates by 2.5 percentage points from late 2004 to mid-2007, lifting its key rate to 4.5 percent. [ID:nN01107326]

“We’re going to shift from an extraordinarily accommodative monetary policy to something that is getting closer to normal,” said Gorman.

However, he cautioned that Canadian stocks could retreat in the near term if the central bank were unusually hawkish.

BIGGER WORRIES FOR INVESTORS

While rates staying close to historic lows may be supportive for Canadian stocks, market watchers said this is overshadowed by the global economic outlook.

This concern has been fueled by a string of tepid U.S. data and minutes from a U.S. Federal Reserve policy meeting, released on Wednesday, that said additional steps may be needed to shore up the soft U.S. economy.

These come on top of fears about the recent euro-zone debt crisis and slowing growth in China, a major customer for the many natural resource firms listed in Toronto.

“Three quarters of our market is impacted by what’s going on in the global economic environment,” said Murray Leith, director of research at Odlum Brown in Vancouver.

“Our equity markets, day to day and over the long term, are going to take their cue from the health of the global economy and not so much what the Bank of Canada does.”

Investors will also take their cues in the near term from Canadian and U.S. corporate results. Heavyweight companies reporting over the next few weeks include Encana (ECA.TO), Teck Resources (TCKb.TO), Potash Corp (POT.TO), Suncor Energy (SU.TO) and Barrick Gold Corp (ABX.TO).

“The impact, good or bad, is going to come from corporate earnings,” said Serge Pepin, head of investments at BMO Investments Inc.

While equity investors may give the Bank of Canada limited attention next week, it will remain the major focus for currency and fixed-income markets. With the actual rate decision all but certain, traders are expected to focus the tone of the accompanying statement.

If the bank signals increased concern about global risks or the pace of the country’s rebound, the Canadian dollar could slide. But if the bank sticks to its bullish outlook, the currency could head higher.

“You might get a bounce or some strength out of the Canadian dollar if the comments are hawkish and the bank governor signals more aggressive hikes going forward,” said Francis Campeau, broker at MF Global Canada, in Montreal.

($1=$1.06 Canadian) (Reporting by Jennifer Kwan; editing by Jeffrey Hodgson and Rob Wilson)

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UPDATE 1-Australia govt holds poll lead as campaign gears up

July 19, 2010 By Leave a Comment

SYDNEY, July 18 (Reuters) – Australian Prime Minister Julia Gillard is on course for a narrow win in an Aug. 21 election, an opinion poll showed on Sunday, as the economy, border protection and population swiftly emerged as key campaign issues.

Support for the ruling Labor party has rebounded since Gillard, Australia’s first female prime minister, was appointed three weeks ago. Seeking to take advantage of her lead and a robust economy creating jobs, she called an election on Saturday.

But the poll is set to be tight with conservative opposition leader Tony Abbott only needing nine more seats to form a government with four independents, or 13 to take office outright.

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“I genuinely believe this election is on a knife-edge,” Gillard told reporters in Brisbane, adding jobs, the economy and a return to budget surplus could be deciding factors.

A new opinion poll released on Sunday showed the Labor government maintaining a slim lead over the opposition. The Galaxy poll put Labor on 52 percent compared to 48 percent for the conservative opposition.

But the survey showed that the government will have to rely on support from Greens’ voters to ensure victory.

The opinion poll gave Gillard a strong 55 percent to 32 percent lead over Abbott as preferred prime minister.

Financial markets are not expected to react much to the election given there is little to choose on core economic policy.

Despite Labor steering the economy through the global financial crisis and avoiding recession last year, opinion polls show voters view the opposition as better economic managers.

Abbott pledged that interest rates, which have risen six times to 4.5 percent, would be lower if he came to power after accusing the government of boosting debt and living costs.

ASYLUM SEEKERS, MINING TAX

He also accused the government of wasteful spending and pledged to stop the flow of boatpeople heading to Australian waters, a sensitive issue particularly in crowded city areas.

“I think people are right to be concerned about those who arrive unsafely, without papers,” Abbott said on local TV, claiming Australia had become “a soft touch” over boatpeople.

Gillard has proposed a possible East Timor regional asylum processing centre to stop boatpeople arriving in Australia, although Dili has given the plan a cool response. Abbott plans to reopen Pacific island detention camps.

Last month, the asylum seeker issue saw the ruling Labor party lose a key state by-election in western Sydney.

Gillard said the numbers arriving by boat were not large, but “we shouldn’t label people as racist or intolerant or red neck or some other word because they are concerned about boats”.

In her first major campaign speech, Gillard rejected former Prime Minister Kevin Rudd’s “big Australia” idea that could have seen the nation’s population doubling from 22 million now.

“I don’t think we want to hurtle down the track to a population of 36 million or 40 million,” said Gillard, who replaced Rudd in a Labor party coup last month.

Abbott also sought to rekindle a debate over the government’s watered down new mining tax, which he said would give Australia’s mining sector the highest tax rate in the world.

“You do not speed up the slow lane by slowing down the fast lane,” he said, referring to talk of a two-speed Australia with the resource-rich states of Western Australia and Queensland benefiting more than others from high mineral prices.

Abbott has vowed to dump the tax, which the government has said will raise A$10.5 billion ($9.12 billion) from 2012.

(Additional reporting by Michael Perry; Editing by Jeremy Laurence)

Filed Under: International News Tagged With: , , , , , , , , , , , , , , , , , , ,

Australia govt holds poll lead as campaign gears up

July 19, 2010 By Leave a Comment

SYDNEY, July 18 (Reuters) – Australian Prime Minister Julia Gillard is on course for a narrow win in an Aug. 21 election, an opinion poll showed on Sunday, although issues such as border protection and population will be key in the campaign.

Support for the ruling Labor party has rebounded since Gillard, Australia’s first female prime minister, was appointed three weeks ago. Seeking to take advantage of her lead and a robust economy creating jobs, she called an election on Saturday.

But the poll is set to be tight with conservative opposition leader Tony Abbott only needing nine more seats to form a government with four independents, or 13 to take office outright.

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A new opinion poll released on Sunday showed the Labor government maintaining a slim lead over the opposition. The Galaxy poll put Labor on 52 percent compared to 48 percent for the conservative opposition.

But the survey showed that the government will have to rely on support from Greens’ voters to ensure victory.

The opinion poll gave Gillard a strong 55 percent to 32 percent lead over Abbott as preferred prime minister.

Financial markets are not expected to react much to the election given there is little to choose on core economic policy.

Despite Labor steering the economy through the global financial crisis and avoiding recession last year, opinion polls show voters view the opposition as better economic managers.

Abbott accused the government of wasteful spending and pledged to stop the flow of boatpeople heading to Australian waters, a sensitive issue particularly in crowded city areas.

“I think people are right to be concerned about those who arrive unsafely, without papers,” Abbott said on local TV, claiming Australia had become “a soft touch” over boatpeople.

Gillard has proposed a possible East Timor regional asylum processing centre to stop boatpeople arriving in Australia, although Dili has given the plan a cool response. Abbott plans to reopen Pacific island detention camps.

Abbott also sought to rekindle a debate over the government’s watered down new mining tax, which he said would give Australia’s mining sector the highest tax rate in the world.

“You do not speed up the slow lane by slowing down the fast lane,” he said, referring to talk of a two-speed Australia with the resource-rich states of Western Australia and Queensland benefiting more than others from high mineral prices.

Abbott has vowed to dump the tax, which the government has said will raise A$10.5 billion ($9.12 billion) from 2012.

Political commentators say that the conservative voter base had strengthened under Abbott but highlight a significant number of swing voters.

“Tony Abbott has many pluses as a leader but he frightens some people. His views turn off some voters and he has always had trouble with women voters,” said John Warhurst, professor of political science at the Australian National University.

Abbott is a socially conservative Catholic, and is opposed to same sex marriages and abortions.

In contrast, Gillard does not believe in God, is unmarried but has a long-time partner, and is childless.

(Additional reporting by Michael Perry; Editing by Jeremy Laurence)

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Australia PM puts economy at heart of re-election

July 16, 2010 By Leave a Comment

July 15 (Reuters) – Australian Prime Minister Julia Gillard sought to sell her Labor government’s economic credentials on Thursday, warning that the conservative opposition’s policies could risk a robust economy.

In her first major economic speech since becoming prime minister on June 24, Gillard set out her platform for re-election at polls expected within months, centering on job creation.

“I believe a strong economy is the foundation of everything else that as prime minister I want for this great country of ours,” Gillard told the National Press Club in Canberra.

“As prime minister I will make my economic judgments based on what gives Australians the best opportunity for access to work.”

The government, on course for a narrow election victory according to opinion polls, tweaked its economic forecasts on Wednesday, predicting robust commodity prices due to Chinese demand will ensure the budget returns to surplus in 2012/13, far ahead of most other rich nations.

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It also forecast unemployment would fall to 5 percent in 2010-11 and 4.75 pct in 2011-12.

Gillard said the economy had emerged from the global financial crisis stronger than many other developed nations due in part due to the government’s A$52 billion ($46 billion) stimulus package in 2009.

“I say to the Australian people, now is not the time to take risks with the Australian economy,” said Gillard, Australia’s first female prime minister who appears far more at ease dealing with the media than her predecessor Kevin Rudd.

“It is a time for prudent and careful economic management, not a time to take risks with a Liberal Party that got it wrong on the global financial crisis, that opposed (stimulus) action to support Australian jobs and that would have allowed hundreds of thousands of jobs to be destroyed.”

Gillard said a new mining tax, which is forecast to raise A$10.5 billion in revenue from 2012, would fund a cut in corporate tax and a rise in pensions but would be dumped by conservative leader Tony Abbott if he was elected.

“Remarkably, my opponent would deny Australians these benefits because he is refusing to accept the tax that our biggest mining companies have agreed to pay,” she said.

PM SELLS ECONOMIC CONSERVATISM

Economic management is traditionally a major issue in Australian elections. And while Australia’s healthy economy, in its 17th year of growth, should be a winning ticket for the government, voters still believe the opposition has the edge in economic management, according to opinion polls this week.

The opposition, which ruled for 12 years before Labor was elected in 2007, is also committed to achieving a budget surplus, and has said it would put downward pressure on interest rates, cut debt and cap spending.

But it differs from the government over its opposition to a new mining tax and a planned carbon price to fight climate change.

Despite her left-wing background, Gillard has sold herself as an economic conservative, dismissing concerns her government would be an old-style, big-spending Labor administration.

Gillard said growth in spending would be capped at 2 percent a year once the economy was growing above trend.

She also said Australia could not rely solely on its resource sector for future economic prosperity, warning doing so could create a two-speed economy of haves and have nots.

“Australia today is a great beneficiary of the economic growth in China and the demand for our mineral resources in our region. But if anyone thinks that gives us a free ticket to easy prosperity, they are mistaken,” she said.

She said a re-elected Labor government would push for micro-economic reforms to ensure Australia remained a competitive and modern economy, but also provided social dividends.

“The microeconomic challenges of the future are not a simplistic choice between the market and the state,” said Gillard.

“Simply applying the extreme free-market medicine of liberalisation and privatisation without thought or care is not a solution. Maintaining an instinctive hostility towards the public sector and all it provides is equally wrong.” ($1 = 1.131 Australian Dollar) (Editing by Ed Davies and Sugita Katyal)

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Thai c.bank sees more policy tightening

July 16, 2010 By Leave a Comment

July 15 (Reuters) – The Bank of Thailand is likely to tighten monetary policy further after Wednesday’s rate increase, Deputy Governor Bandid Nijathaworn said on Thursday.

“Yesterday’s policy rate rise will probably not be the only one … There is a chance that the rate will move higher in the future,” he told reporters.

“But we cannot tell what level it will go to, depending on economic indicators and inflation,” Bandid said.

The central bank raised its policy rate by 25 basis points to 1.50 percent from a record low of 1.25 percent on Wednesday, the first increase since the global financial crisis, citing the recovery in the economy and rising inflationary pressure across Asia. [ID:nSGE65103A]. (Reporting by Boontiwa Wichakul; Writing by Orathai Sriring; Editing by Alan Raybould)

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UAE’s ADIB launches $5 bln sukuk issuance program

July 15, 2010 By Leave a Comment

July 14 (Reuters) – Abu Dhabi Islamic Bank ADIB.AD plans to raise as much as $5 billion through the sale of Islamic bonds, or sukuk, under a trust certificate issuance program detailed in a July 8 prospectus.

The second-largest lender in the United Arab Emirates posted the prospectus on the London Stock Exchange on Tuesday, listing HSBC (HSBA.L) as the lead arranger on the Islamic bond program.

State-controlled ADIB did not provide a reason for the sukuk issuance program, but the bank, like many other UAE financial institutions, has been forced to take provisions against bad loans amid the global financial crisis and turmoil over Dubai World’s [DBWLD.UL] restructuring.

In addition, ADIB’s chief executive said in April that the bank is planning to expand in retail banking, with a target of 70 branches across the UAE by the end of the year compared with 55 at the end of the first quarter.

ADIB said in a separate statement on Wednesday that it has postponed its board of directors meeting to approve second quarter earnings. The meeting, originally scheduled for later Wednesday will now take place on Sunday. (Reporting by Shaheen Pasha; Editing by Andrew Callus)

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Asia tech shares rally on Intel earnings

July 15, 2010 By Leave a Comment

(Reuters) – Shares of Asian chip and PC makers jumped on Wednesday on strong results from global technology bellwether Intel Corp (INTC.O), pointing to potential upside for the sectors in quarterly reports due in coming weeks.

Samsung Electronics Co (005930.KS), the world’s top maker of DRAM memory chips, was up 3.3 percent, while leading contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW) was up 1.7 percent. Acer Inc (2353.TW), the world’s No.2 PC brand, was up 6.3 percent at a three-week high.

“Intel has given investors that boost of confidence they need,” said Angela Hsiang, an analyst at KGI Securities in Taipei. “While there are still broad fears about the wider economy, investors were looking for an excuse to buy and Intel provided that.”

On Tuesday, after the U.S. market closed, Intel, the world’s largest chipmaker and a dominant supplier of PC chips, posted margin and revenue forecasts that blew past Wall Street expectations, helping lift its shares 7.1 percent in extended trade.

The strong forecast helped raise expectations that technology spending could remain strong even as broader fears about the Euro zone, a jobless U.S. recovery and a cooling of Chinese growth weigh on the sector.

“People are beginning to think the second half may not be as bad as they’d feared and this is boosting Toshiba Corp (6502.T) and the technology sector as a whole,” said Takeo Miyamoto, an analyst at Deutsche Bank in Tokyo.

Asia’s top technology companies such as TSMC and Samsung Electronics are likely to see revenue grow by about 35 percent in the second quarter from a year earlier, according to Thomson Reuters data, coming off a weak 2009 that was hard hit by the global financial crisis.

Trading volume was strong on most counters. By 12:14 a.m. ET, about 23,000 Acer shares had changed hands in Taipei trade, its highest level in more than a month. In Seoul, almost 500,000 Samsung Electronic shares were traded, its highest since late June.

Other technology plays also posted strong gains.

Within the DRAM sector, Japan’s Elpida Memory Inc (6665.T) was up 3.2 percent, while South Korea’s Hynix Semiconductor Inc (000660.KS) was up 2.4 percent. Contract chipmakers United Microelectronics Corp (UMC) (2303.TW) and Semiconductor Manufacturing International Corp (SMIC) (0981.HK) were up 2.1 percent and 3.9 percent, respectively.

Other PC issues also rallied, with Lenovo Group (0992.HK) up 4.1 percent at a three-week high and Asustek Computer Inc (2357.TW) up 2.4 percent.

“The key now is to look at Microsoft Corp (MSFT.O) and International Business Machines Corp’s (IBM) (IBM.N) earnings in the next two weeks,” Hsiang said. “If those come out strong, we’re probably in line for a strong rally.”

The second half of the calendar year is usually the stronger season for most technology brands as students prepare to return to school after the summer holiday and ahead of the peak year-end shopping season.

Despite the buoyant mood, some analysts warned that the party could be short-lived if oversupply and a faltering economy lead to a weaker pricing environment that could weigh heavily on the company margins and revenue.

“I remain more cautious about the third-quarter outlook as chip prices are seen weakening in the second half,” said Han Seung-hoon, an analyst at Korea Investment & Securities.

Samsung is set to report its quarterly earnings on July 30, while TSMC is due to report on July 29. Acer and Lenovo typically report their June quarter results in August.

(Additional reporting by Baker Li in Taipei; Jungyoun Pafrk in Seoul and Isabel Reynolds in Tokyo; Editing by Chris Lewis)

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PREVIEW-Temasek may reveal shift to resources, leadership plan

July 7, 2010 By Leave a Comment

SINGAPORE, July 6 (Reuters) – Singapore wealth fund Temasek Holdings [TEM.UL] is expected to show the extent of its portfolio shift towards the resources sector and may provide clues about leadership changes when unveiling its annual report on Thursday.

The world’s eighth-largest and the city-state’s second-biggest sovereign wealth fund, behind the Government of Singapore Investment Corp [GIC.UL], may respond to speculation that Singapore wealth funds are in talks with BP Plc (BP.L)(BP.N) to take a strategic stake in the oil major as it struggles with a devastating oil leak in the Gulf of Mexico.

Temasek declined to comment on the speculation on Tuesday.

With S$172 billion ($123.6 billion) in assets as of end-July 2009, Temasek could also reveal it fared better in the year ended March 31 after assets fell 30 percent in the prior year as the global financial crisis struck.

It has been expanding aggressively into energy, commodities and agriculture. Financials and telecoms, however, still account for the biggest share of its holdings.

“Temasek’s move to resources is consistent with its goal of catering to Asia’s emerging middle class,” said Melvyn Teo, director of the BNP Paribas Hedge Fund Centre at Singapore Management University.

“Demand for resources will go up because of emerging economies like China but there is only so much supply, so prices will go up over time.”

The fund’s recent investments include convertible preferred stock in U.S. natural gas firm Chesapeake Energy (CHK.N) and India’s GMR Energy, and shares in Canadian platinum producer Platmin PPN.O.

Singbridge, a wholly owned unit of Temasek, may invest in a $16 billion agricultural project in northeastern China that will produce corn and soybean for Chinese consumers and export pork, beef and dairy products to countries such as Japan, Korea and Singapore. [ID:nSGE64K0DY]

According to Temasek’s report for the year ended March 2009, the fund held about 5 percent of its assets in energy and resources, unchanged from March 2008. That proportion could have risen to around 8 percent by March 10 involving additional investment of about $4 billion, analysts said.

In 2009, investments in financial services comprised 33 percent of the fund, while telecommunications and media made up 26 percent.

The tightly controlled fund, whose sole shareholder is Singapore’s Ministry of Finance, came in for criticism last year over its loss-making investments into Western banks such as Bank of America/Merrill Lynch (BAC.N) and Barclays (BARC.L) and the departure of foreigners from its management team.

But things would have looked better for Temasek during the latest year as stock markets improved. MSCI’s world equity index .MIWD00000PUS jumped 56 percent in the 12 months to March 2010, while the MSCI Asia ex-Japan index .MIAPJ0000PUS gained 74 percent.

NEW MANAGERS

Temasek may, at the briefing on its 2009/2010 annual report, provide cues about when current CEO Ho Ching, the wife of Singapore Prime Minister Lee Hsien Loong, is expected to step down and who her successor might be.

Ho was scheduled to leave Temasek in October last year but her designated successor, former BHP Billiton (BHP.AX) (BLT.L) CEO Charles Goodyear, left the Singapore state investor in July citing differences in strategy. [ID:nSIN521289]

In March, senior managing director Michael Dee, an American, also stepped down, leaving its management team mostly Singaporean. [ID:nSGE62F02J]

Temasek said in May that former Singapore Exchange (SGXL.SI) CEO Hsieh Fu Hua will join Temasek as executive director and president in August to assist Ho in areas such as talent development and succession planning.

Dilhan Pillay Sandrasegara, the former managing partner of WongPartnership, Singapore’s biggest law firm, will join as head of portfolio management, Temasek added.

Both are Singaporeans.

The state investor may also shed more light on how how it plans to build Seatown, a multi-billion-dollar investment firm it set up earlier this year with staff seconded from Temasek.

Sources said Seatown aims to raise funds from external investors to earn fees as well as show foreign governments that Temasek was a financial investor with no political agenda. Seatown, the English word for Temasek, will in time allow ordinary Singaporeans to co-invest with the firm. [ID:nSGE61902N]

“I really hope to see more information about Seatown, as it adds an extra dimension to how Temasek is set up,” said SMU’s Teo. ($1=1.392 Singapore Dollar) (Additional reporting by Saeed Azhar, Editing by Raju Gopalakrishnan and Muralikumar Anantharaman)

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China gives itself high marks for managing reserves

July 7, 2010 By Leave a Comment

July 6 (Reuters) – China expressed confidence on Tuesday that it could achieve stable, long-term returns on its $2.45 trillion stockpile of official currency reserves.

The State Administration of Foreign Exchange said it was confident in Europe’s ability to overcome its current financial difficulties but added that it was keeping a close eye on its investments in the Fannie Mae and Freddie Mac, the two U.S. government-sponsored housing finance agencies.

SAFE said it had not invested in the shares of Fannie and Freddie — a source of concern for Chinese Internet commentators.

SAFE said China had not taken big losses on its portfolio during the global financial crisis. Book gains from rising asset prices outweighed valuation losses caused by the appreciating yuan, the agency said on its website, www. safe.gov.cn. (Reporting by Zhou Xin and Simon Rabinovitch; Writing by Alan Wheatley; Editing by Jonathan Hopfner)

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Swiss stocks – Factors to watch on July 1

July 2, 2010 By Leave a Comment

ZURICH, July 1 – The following are some of the main factors expected to affect Swiss stocks on Thursday:

NOVARTIS (NOVN.VX)

Novartis AG said it expects to close its buy of a majority stake in U.S. eyecare group Alcon (ACL.N) in the late third quarter or fourth quarter, paving the way for it to take full control of the group.[ID:nLDE65T2IM]

For more, click on (NOVN.VX)

ECONOMY [M-CH]

* June Purchasing Managers’ Index at 0715 GMT

COMPANY STATEMENTS [CNR-CH]

* Meyer Burger (MBTN.S) said it had cancelled a 29 million euro ($35.48 million) contract with Spanish-based Pevafers after steps of a large project could not be carried out as planned due to the global financial crisis.

EQUITY RESEARCH [CH-RCH]

FOR COMPANIES TRADING EX-DIVIDEND, PLEASE CLICK ON:

.EX.S for all Swiss stocks

.EXSMI.S for blue chips

.EXNSMI.S for other stocks

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New Australian PM pledges to end mine tax row

June 26, 2010 By Leave a Comment

(Reuters) – New Australia Prime Minister Julia Gillard pledged to end a mining tax row as soon as possible after spending her first day in power speaking to world leaders and assuring Washington of Canberra’s commitment to Afghanistan.

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The Labor government appointed Gillard as prime minister on Thursday, fearing defeat at elections later this year as voters deserted incumbent Kevin Rudd over his handling of the tax row and a failed climate policy.

Global miners such as BHP Billiton and Rio Tinto say a planned 40 percent “super profits” tax will damage the resource-dependent economy which underpinned Australia through the global financial crisis.

“My priority obviously is that we deal with the question of the mining tax,” Gillard told a news conference.

“It has caused us uncertainty. I think that uncertainty has caused anxiety for Australians. I want to make sure Australians get a fair share of our mineral wealth, but we want to genuinely negotiate.”

Deputy Prime Minister and Treasurer Wayne Swan signaled on Friday the government was open to renegotiate the tax headline rate. Miners want the tax scrapped or for the government to lower the 40 percent headline rate and raise the 6 percent profit threshold to 12 percent.

No fresh mine tax talks are expected before Gillard’s new cabinet is sworn in and with Swan at the G20 meeting until Wednesday.

Global miner Xstrata Plc on Friday called on Gillard to exclude existing projects from the proposed tax.

“We will participate in those negotiations in good faith but believe that it is of the utmost importance that negotiations are concluded as rapidly as possible to avoid further damage to the industry’s growth prospects in Australia,” Xstrata said in a statement to Reuters.

WORLD LEADERS

Gillard, Australia’s first female prime minister, said she had also spent her first morning as leader, “introducing” herself to other world leaders, including U.S. President Barack Obama.

“I fully support the current deployment and I indicated to President Obama that he should expect to see Australia’s efforts in Afghanistan counting,” she said.

Australia has about 1,500 troops in Afghanistan and will start to reduce troop numbers in two to four years after Afghan forces take over security operations in Uruzgan province.

Sixteen Australians have been killed in Afghanistan since late 2001. An opinion poll published on Monday found 61 percent of those surveyed believed Australia should withdraw its troops, while 24 percent believed troop numbers should be maintained.

Gillard is also not expected to shift policy toward China, Australia’s largest trade partner and a big buyer of commodities such as iron ore and coal.

Unlike her predecessor Rudd, a Mandarin-speaking former diplomat, Gillard has little foreign policy experience and is expected to rely more on current Foreign Minister Stephen Smith. However, analysts said could also appoint Rudd as her foreign minister.

Miners welcomed Gillard’s appointment, but called for a “sign of good faith” that the government was genuine in its desire to resolve the tax row.

“This is a major breakthrough as previous negotiations were never serious,” said Macarthur Coal Chairman Keith De Lacy.

But De Lacy said that in order to demonstrate good faith the government needed to remove A$12 billion ($10.41 billion) in mining tax-related revenue from the forward budget estimates.

“It is not possible to negotiate in good faith with a big hairy monster like that looking over your shoulder,” said De Lacy.

“In return the mining industry would be fair dinkum (genuine) in its desire to negotiate a fair return for the use of the non-renewable resources that belonged to all Australians.”

(Additional Reporting Michael Perry and Jim Regan in Sydney; Editing by Ed Davies)

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Yuan hits post-revaluation high ahead of G20 summit

June 26, 2010 By Leave a Comment

SHANGHAI, June 25 (Reuters) – The yuan CNY=CFXS climbed on Friday to its highest since its July 2005 revaluation after the central bank set the daily reference rate at a post-revaluation high in an apparent goodwill gesture ahead of the G20 summit.

But trade was sluggish with market players cautious over how much the yuan could appreciate in the near term, despite a gain so far of 0.5 percent in the first week after China’s weekend announcement of a depegging from the dollar, marking the biggest weekly gain since December 2008.

Weekly volatility in the spot yuan rate versus the dollar hit its highest since mid-2008, when China repegged the yuan to the dollar to help ease the impact of the global financial crisis on its economy.

Spot yuan’s range for the week ran to 416 pips and averaged more than 200 pips per day, compared with moves of only a few pips per day during the two-year dollar peg. [ID:nTOE65M062]

Many dealers expect two-way volatility to remain the norm after China’s weekend currency policy reform, although the yuan’s rise will not likely be enough to satisfy U.S. lawmakers and other critics who want the yuan to rise as much as 40 percent. China is not expected to accept such a demand.

“Beijing told us that any appreciation would be gradual, and that is what is happening, with the reference rate for the yuan against the dollar today set little more than half a percent stronger than where it was last Friday,” said Brian Jackson, strategist with Royal Bank of Canada in Hong Kong.

“But the rest of the G20 was not born yesterday, and there may be some suspicion that the move over the last week was just window-dressing to take the exchange rate issue off the top of the agenda at this weekend’s summit,” he said.

“To reduce the risk of trade tensions, we will need to see further yuan gains in the days and weeks ahead.”

A Reuters poll of 33 economists projected that China would be true to its word and prevent a sharp rise in the newly unshackled yuan, with a median forecast of a 2.4 percent rise over the next year from the level before depegging. [ID:nSGE65L01H]

The yuan gave up some early gains to trade at 6.7926 to the dollar at midday, still up from Thursday’s close of 6.7997 but lower than Friday’s central bank mid-point of 6.7896, which was up sharply from Thursday’s mid-point of 6.8100. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Full coverage [ID:nCHINATAKE] PDF on yuan: r.reuters.com/fuk43m Yuan microsite: china.thomsonreuters.com/yuan/ Yuan graphics: r.reuters.com/byq23m Insider TV

-- Yuan to rise before G20 link.reuters.com/jes92m

-- Yuan shows confidence link.reuters.com/hyc33m

-- Some see delay tactic link.reuters.com/xad33m ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

MIXED SIGNALS

U.S. administration officials and some lawmakers appear to have differing views over the initial rise in the yuan.

U.S. President Barack Obama said in Washington on Thursday that China had made progress by announcing greater currency flexibility, but it was too early to tell if the yuan’s rise would be enough to help rebalance world growth.

“We did not expect a complete 20 percent appreciation overnight, for example, simply because that would be extremely disruptive to world currency markets and to the Chinese economy,” Obama said. [ID:nN24164984]

A U.S. lawmaker said on Thursday, however, that the United States should keep open a bill that would pressure China to raise the value of its currency.

“I think we need to keep that legislation on the burner. I think whether we act on it will be affected by what China does,” House of Representatives Ways and Means Committee Chairman Sander Levin told reporters. [ID:nN24134208]

China announced over the weekend that it would allow the yuan’s exchange rate to move more freely but it has made it clear that its currency reform would be gradual and controllable.

It is widely believed in the domestic market that China will not make any further concessions and that fresh pressure from U.S. lawmakers would very likely backfire due to more volatile market and economic conditions since the global financial crisis.

The euro zone’s debt woes have cast doubt on the pace of China’s economic recovery, reminding Beijing how vulnerable the world’s third-largest economy is to a global slowdown.

Chinese economists often argue that Western critics underestimate that vulnerability, especially given how far China’s per capita income lags developed countries.

They say it may be inappropriate to apply Western standards to the currency of a country whose per capita GDP is only one-20th that of the United States.

Caution about Beijing’s stance was reflected in the offshore forwards markets. Benchmark dollar/yuan one-year non-deliverable forwards (NDFs) rose to 6.6750 bid by midday from Thursday’s close of 6.6670, with implied yuan appreciation over that period falling to 1.72 percent from 2.14 percent the previous day. (Editing by Edmund Klamann)

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Australia’s Alinta receives preliminary bids-sources

June 23, 2010 By Leave a Comment

June 22 (Reuters) – BHP Billiton Ltd (BHP.AX)(BLT.L) and Origin Energy (ORG.AX) are among parties which have submitted preliminary bids for Australia’s Alinta Energy (AEJ.AX), according to people familiar with the process.

Saudi Arabia’s Acwa Power International, French utility GDF Suez (GSZ.PA) and Canadian diversified services Group ATCO (ACOx.TO) have also put in bids, the sources said Tuesday.

The debt-laden Alinta owns stakes in 12 power stations across Australia and New Zealand and is Western Australia’s largest gas and electricity retailer.

But the group has been struggling with high leverage and crippling interest costs since the global financial crisis. It has an outstanding A$2.7 billion ($2.37 billion) loan, and needs to repay a minimum A$250 million by March 2011 under new terms struck in December. NM Rothschild & Sons is advising the lenders.

Origin has teamed up with Australia pipeline operator APA Group (APA.AX) and Japan’s Marubeni Corp (8002.T) to submit a consortium bid for the entire portfolio, three sources said.

ATCO Power, a wholly owned subsidiary of ATCO, operates a 86 MW gas-fired power project in Karratha, located in northern Western Australia.

BHP had expressed interest in Alinta’s Newman and Port Hedland power stations, which supply power to its iron ore production facilities in the Pilbara region in Western Australia, the sources said.

Preliminary expressions of interest were received about two weeks ago, sources said.

Public relations officials at Alinta, BHP, Origin and APA declined to comment.

Officials at Marubeni, Acwa and GDF were not immediately available to comment.

UBS, which is advising Alinta on the asset sales, declined to comment.

Alinta is also pursuing a re-capitalisation of the company with Macquarie Capital Advisers and UBS advising.

The company’s directors are being advised by Lazard to oversee the entire process.

The debt has attracted interest from distressed debt funds and proprietary trading desks of investment banks. WestLB last week sold a A$50 million tranche of debt at 75 cents, said the sources.

The German bank joins other lenders such as Commonwealth Bank of Australia and Suncorp Metway who have previously sold in the secondary market.

Two banking sources expressed scepticism that Alinta would find a bidder for the assets at the right price because it would be too difficult getting a majority of the debt holders to agree. Breaking up assets would also be tricky.

“Many have not bought in low enough to get a good return. Because the debt sits across all of the assets it is very hard to sell off individual assets,” a banking source said.

Another source with direct knowledge of the process denied media reports that Origin had acquired any of Alinta’s debt. (Additional reporting by Sonali Paul; Editing by Ed Davies)

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NZ watchdog secures record payout to fund investors

June 23, 2010 By Leave a Comment

June 22 (Reuters) – New Zealand’s competition watchdog has secured a record compensation deal for investors over allegations that ANZ National Bank (ANZ.AX) and ING misrepresented the risk involved in two retail funds. A total of NZ$45 million ($32 million) will be paid to investors affected by the freezing of two ING funds in March 2008, in return for waiving legal action, the Commerce Commission said on Tuesday.

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At the time they were frozen, the funds were worth about NZ$533 million, and together had around 15,000 individual investors.

“In the Commission’s view, representations made by ANZ and ING concerning the degree of investment risk in the funds were likely to be misleading in that the actual risk was understated,” Commerce Commission Chairman Mark Berry said in a statement.

ANZ, which owns the New Zealand business of Dutch financial group ING (ING.AS), has said it already made available more than NZ$500 million to investors in the funds, after it offered a settlement in 2009.

“We apologise to those investors who felt we had misinformed them,” ANZ National Bank’s Acting Chief Executive Steven Fyfe said in a statement.

“While we do not agree with all of the Commission’s views we do agree that it is in the best interests of investors to avoid a lengthy court process,” Fyfe said.

Both the ING Diversified Yield Fund and ING Regular Income Fund invested largely in collateralised debt obligations, which were exposed to the U.S. subprime lending market, which collapsed, triggering the global financial crisis. ($1=NZ$1.41) (Reporting by Adrian Bathgate; Editing by Ed Davies and Ian Geoghegan))

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Scenarios: Where next for China’s yuan?

June 21, 2010 By Leave a Comment

(Reuters) – China has vowed to resume currency reform by increasing the yuan’s flexibility, indicating that it will end a 23-month-old peg to the dollar.

China

But it has said little about what this means in practice.

Below are scenarios for how Beijing will manage the exchange rate in the coming weeks.

GRADUAL APPRECIATION

* Probability: Most likely

In its announcement, the central bank said that exchange rate reform would be gradual, ruling out both major appreciation and a one-off revaluation.

The strength of China’s economic recovery gave policymakers the confidence to end the peg that had helped cushion the economy from the global financial crisis, but they remain worried that external demand is still not on a solid footing, especially with European debt worries in the background.

Nevertheless, China needs to allow the yuan to rise, even if it is in tiny steps, to prove that it is serious in its commitment to make the currency more flexible. U.S. Treasury Secretary Timothy Geithner stressed that Beijing’s actions would speak louder than words.

Under this scenario, the central bank could use its setting of the yuan’s daily reference rate to nudge the exchange rate up by modest amounts each day, for example from 6.8260 per dollar to 6.8250 per dollar, for a few months until the global economic picture becomes clearer.

Any rally in global equity markets and yuan forwards may fade out quickly and even reverse as disappointment sets in that China’s reform is not more radical.

TWO-WAY VOLATILITY

* Probability: Possible

In explaining how yuan reform will proceed, the central bank said it will increase the exchange rate’s flexibility and ensure that it could both rise and fall depending on market conditions.

For a long time, China has wanted to introduce more two-way risk into the exchange rate. In theory, traders will no longer be able to assume that the yuan can only move in one direction — up.

In the past, the yuan rarely fluctuated more than 0.1 percent in intraday trading, even though the trading band permitted a rise or fall of 0.5 percent against the dollar each day. Beijing will be more determined to increase volatility this time, to discourage the hot-money inflows that accompanied its steady appreciation from 2005 to 2008.

Li Daokui, an academic adviser to the central bank, said that a sustained fall in the euro against the dollar could also lead to a decline in the yuan against the dollar.

In other words, on days when the dollar is falling globally, Beijing may push the yuan up slightly. When the dollar is strong, the Chinese currency may pare these gains.

But marked depreciation of the yuan would infuriate lawmakers in Washington, auguring poorly for a trade dispute.

And given the widespread belief among investors that the yuan is undervalued, it will be hard to counter the view that the currency remains a one-way bet from a longer-term perspective, even if the day-to-day ride may be bumpier.

BIG EARLY GAINS

* Probability: Unlikely

Viewed abstractly, there is a strong rationale for allowing a major appreciation of the yuan right out of the starting blocks.

Speculators may be tempted to pour money into China to benefit from a stronger yuan, but if Beijing moves the yuan up quickly enough, many may conclude that they have missed the best opportunity and so stay away.

Similarly, hawks in the U.S. Congress are ready to pounce if China only tip-toes toward a stronger yuan.

But the government will be loath to push the yuan up too aggressively. Politically, it would look like an embarrassing about-face, having sworn off a one-off appreciation.

And concerns about the health of the global economy are real enough to dissuade Beijing from making a move that might prove too disruptive.

STATUS QUO

* Probability: Least likely

China’s announcement that it was resuming yuan reform seemed calculated to disarm critics of its currency regime before a Group of 20 summit this coming weekend in Canada. If Chinese leaders are risk-takers — and nearly all evidence suggests they are not — then they might gamble that words alone will be powerful enough.

Keeping the yuan locked at about 6.83 to the dollar would please hard-liners at home who have accused Beijing of capitulating to foreign pressure.

And there is an economic justification for the status quo. The yuan’s exchange rate against a basket of currencies has risen strongly in recent months even as it has remained pegged to the dollar, simply because of the broad strength of the U.S. currency.

But continuing the peg would infuriate U.S. lawmakers and strip China of any goodwill it earns from its promise to make the yuan more flexible.

The announcement alone implies that China’s top leaders have forged a consensus to break the peg launched in July 2008. Any maintenance of it now would be a massive surprise.

(Reporting by Aileen Wang, Zhou Xin and Simon Rabinovitch: Editing by Neil Fullick)

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