European shares edge down ahead of Basel III rules

LONDON: European shares edged lower on Friday, , Sept 10 with Deutsche Bank down on talks it plans to raise capital, while other banks pared losses as concerns over capital requirements eased ahead of the release of the Basel III rules.

The pan-European FTSEurofirst 300 index closed 0.1 percent lower at 1,081.02 points, retreating from its highest closing level since late April on Thursday.

Falls were kept in check by gains in German auto makers BMW , Daimler and Volkswagen, which rose 1.6 to 3.6 percent, helped by data showing exports from the auto sector rose 40.8 percent year-on-year in the first half of the year, compared with 17.1 percent overall export growth.

Deutsche Bank shed 4.6 percent after two people familiar with the matter said Germany's top lender was considering a capital increase to bolster its balance sheet as Basel III capital requirements are finalised.

The STOXX Europe 600 banking index was down 0.5 percent, but bounced off earlier lows as analysts said fears over the implications of the Basel Committee's new bank capital rules, to be announced on the weekend, might have been overdone.

The Basel Committee of central bank and regulatory officials agreed a proposal for tougher new global bank capital rules on Tuesday but is keeping the details confidential until Sunday.

"There is a feeling that the rules are not going to be as harsh as previously thought. The need to raise capital is more of a medium-term concern, and the market isn't too worried about that at the moment," said David Jones, chief market strategist at IG Index.

Across Europe, Britain's FTSE 100 added 0.1 percent, Germany's DAX shed 0.1 percent and France's CAC 40 was up 0.1 percent.



CASH CALLS

The German banking association said the Basel Committee would probably require banks to have a Tier 1 capital ratio of 6 percent, up from 4 percent, and expects Germany's 10 biggest banks could need 105 billion euros ($141 billion) of additional capital under the revamp of the banking rules.

German banks Commerzbank and UniCredit were down 2.5 and 0.2 percent, while peers Royal Bank of Scotland, Societe Generale and BNP Paribas bucked the trend to rise 0.7 to 0.8 percent.

National Bank of Greece also launched a rights issue this week, and more lenders in Greece, Spain, Portugal and Italy could tap investors for funds, analysts said.

"Deutsche is the strongest, and it's going first -- who's behind them?" said Philip Isherwood, equity strategist at Evolution Securities in London.

Miners came under pressure from lower metals prices, with copper falling on concerns about tighter policy in top consumer China. BHP Billiton, Anglo American, Rio Tinto, Xstrata and ENRC fell 0.3 to 1.2 percent.

Spain's Gas Natural fell 4 percent after French utility GDF Suez sold its entire 5.01 percent stake through a block trade for a total of 540 million euros ($685 million).

On the upside, drugmaker Novartis added 1.7 percent after winning its first approval for multiple sclerosis (MS) tablet Gilenya in Russia, raising hopes of U.S. Food and Drug Administration (FDA) approval later this month. - Reuters

PM, Susilo agree to review existing mechanism to enhance ties

PUTRAJAYA: Prime Minister Datuk Seri Najib Tun Razak contacted Indonesian President Susilo Bambang Yudhoyono and extended Aidilfitri greetings to the president and Indonesian people, saying Malaysia valued their friendships.

The phone conversation, which lasted about 10 minutes, took place during the Aidilfitri open house which Najib hosted at Seri Perdana, the prime minister's official residence on Friday, Sept 10.

He told reporters that during the conversation they agreed to review existing mechanisms to further strengthen the bilateral ties.

The prime minister stressed that Malaysia would continue to work on maintaining close relations with Indonesia.

"Malaysia will ensure ties are intact although there are groups staging demonstrations in front of the Malaysian embassy (in Jakarta).

"What is important is, we cannot allow any party to undermine our very meaningful relations," he said.

Najib said it was also important for both sides to work on restoring the relations to a stronger foundation.

The prime minister stressed that both sides needed a better mechanism to ensure no recurrence of incidents which could jeopardise bilateral relations.

To a question, Najib said they both agreed on the importance of educating the peoples of both countries on the need to respect each other's sentiments.

"The peoples of both countries should look into a future that is more meaningful for everyone," Najib said.

Both sides also agreed to move forward to thrash out border issues, he added.

On another note, the prime minister told Susilo that there were thousands of people attending the open house, hosted by him and his cabinet colleagues, and that among them were Indonesians.

"I also conveyed to SBY (Susilo) that several Indonesians here have expressed the hope that he could ensure bilateral relations remain intact," he said.

Najib's wife Datin Seri Rosmah Mansor as well as the two deputy foreign ministers, Senator A. Kohilan Pillay and Datuk Richard Riot, were present when the prime minister made the call. - Bernama

Dollar, stocks rally on rising Chinese imports

NEW YORK: The euro and U.S. dollar rallied on Friday, Sept 10 after strong import data from China raised optimism about global growth, while stocks edged higher, buoyed by the economic outlook and rising oil prices.

The dollar rose nearly 1.2 percent on the day and the euro gained against the Swiss franc as the safe-haven currency came under selling pressure due to the rise in risk appetite.

Chinese imports jumped in August, a sign of potential stronger domestic demand in an economy that is a major driver of global growth.

Imports rose 35.2 percent in from a year earlier, easily beating July's 22.7 percent rise and market forecasts of a 26.1 percent gain, General Administration of Customs data showed.

Risk aversion also eased on news that Dubai World had reached a deal to restructure its liabilities, helping ease renewed fears about Dubai's debt woes..

Gold dropped 1 percent as the dollar moved back into positive territory and global stocks reversed early losses to trade slightly higher as U.S. stocks rose after the open, the sixth day of gains in the last seven sessions.

"There has been strong risk assumption on the China data overnight," said John Doyle, senior currency strategist at Tempus Consulting in Washington.

MSCI's all-country world equity index rose 0.1 percent, aided by higher U.S. stocks.

But European shares retreated from four-month highs as bank shares slipped ahead of the Basel Committee meeting and on a report that Deutsche Bank plans to raise up to 9 billion euros ($11.4 billion) in a stock offering.

Shortly after 11 a.m. EDT, the Dow Jones industrial average gained 40.79 points, or 0.39 percent, to 10,456.03. The Standard Poor's 500 Index rose 5.59 points, or 0.51 percent, to 1,109.77. The Nasdaq Composite Index gained 7.26 points, or 0.32 percent, to 2,243.46.

Worries in August that the U.S. economy was poised to slip back into recession have waned as economic data, while still sluggish, has beat consensus forecasts since September began.

"After spending the better part of the summer pricing in fears of a double-dip recession, the market is going to start pricing the fact that (it) most likely doesn't come about," said Art Hogan, chief market analyst at Jefferies Co in Boston.

U.S. crude oil rose 2 percent to more than $75 a barrel due to the shutdown of a major pipeline, but a leading forecaster said demand would remain tepid.

The International Energy Agency said global oil demand growth was expected to increase a little this year but slip in 2011 and that fuel consumption could be much weaker if the world economy slows.

U.S. light sweet crude oil rose $1.48 to $75.73 a barrel. Brent crude gained 30 cents to $77.77.

A leak forced Enbridge to shut down the biggest pipeline supplying Canadian oil to refineries in the U.S. Midwest and to a key storage hub in Oklahoma.

U.S. Treasury prices fell as investors reduced their holdings of safe-haven government bonds after a record supply of higher-yielding corporate bonds this week.

The benchmark 10-year U.S. Treasury note was down 11/32 in price to yield 2.80 percent.

December Bund futures slipped to a session low, tracking U.S. Treasuries lower.

Copper eased as the market fretted about tighter policy in top consumer China, but strong metals import data from the country helped support prices.

Spot gold prices rose $3.25 to $1,246.80 an ounce. - Reuters

Nokia replaces CEO Kallasvuo with Microsoft's Elop

HELSINKI/LONDON: Nokia has hired Stephen Elop, a Canadian Microsoft executive of Silicon Valley pedigree, to replace its embattled chief executive and renew its drive to compete with Apple.

The world's top cellphone maker said Olli-Pekka Kallasvuo, who presided over a halving in Nokia's market value to about $37 billion during his four years in charge, would hand over to Elop on Sept. 21. Nokia shares rose as much as 6.9 percent on the news on Friday, Sept 10.

Underlining the scale of the change at the Finnish company, long-term executive and chairman Jorma Ollila said he would step down "soonest".

Elop, 46, has risen rapidly over the past five years from chief executive of San Francisco Web software maker Macromedia to chief operating officer of Juniper Networks to head of Microsoft's Business Division, which makes Office software.

Under Kallasvuo, who will get a severance payment of 4.6 million euros ($5.8 million), Nokia has struggled to keep up with rivals such as Apple and Google in smartphones, the most profitable and fastest-growing part of the cellphone market.

At a Helsinki news conference, Elop said: "My job is ... to ensure that we are meeting the needs of our customers, while delivering superior financial results."

The conference was broadcast live on Finland's main television and radio channels, demonstrating the strength of national interest in the 145-year-old company, which dominates the Nordic nation's economy.

Elop's appointment is a major shift for Nokia; he will be the first non-Finn to run the company, and eight of the current 10 executive board members are Finns.

Investors and pundits had urged Nokia to bring in an outsider, ideally an American, to help the company regain a reputation for "cool" it has largely lost to Apple's iPhone and a host of other phones built around Google's Android software.

Ollila said the company had been looking for a new CEO since May.

The Finnish company has lacked a hit smartphone model since its N95 model launched in 2006, has failed to ignite much excitement around its new Web services and has performed particularly weakly in the United States.



DAUNTING TASK

Elop told the news conference it was too early to talk about what changes he would make but said North America was a critically important market and would be "an area of emphasis".

Ollila said of Elop: "His strong software background and proven record in change management will be valuable assets as we press harder to complete the transformation of the company."

Nokia shares were up 4.1 percent at 8.06 euros at 1124 GMT, helping lift the European technology index 0.6 percent.

"They have had problems for a long time and have been behind the curve on trends for the past few years. I think it could be good to get new influences, thoughts and ideas," said Inge Heydorn, fund manager at Sentat Asset Management.

"Elop faces a daunting task. Nokia has lost its leadership in high-tier phones and has struggled with the rise of Internet-led services," said Ben Wood, head of research at UK-based telecoms analyst firm CCS Insight.



DESIGN PRINCIPLES

Elop should bring to Nokia an understanding of the design principles that have driven Apple's success, as well as of the telecoms network industry in which Nokia's troubled Nokia Siemens Networks plays.

Before joining Microsoft, he spent several years in Silicon Valley, rising to become chief executive during seven years at Macromedia, a San Francisco software maker whose graphics and Web development tools were favoured by Apple developers.

Macromedia made the Flash video and Dreamweaver software, which were retained by Adobe as key products when it bought Macromedia for $3.4 billion in 2005.

At Microsoft, Elop helped steer the company towards online versions of programs such as Word, Outlook and Excel that users could access from anywhere and even use on mobile devices, a major step for a company founded on installed software.

He was also credited with successfully managing the launch of Microsoft's Office 2010 suite earlier this year.

Microsoft and Nokia are long-time collaborators, and in August last year formed an alliance to bring Office applications such as Outlook e-mail to Nokia devices.

Microsoft's Business Division has traditionally been one of its two biggest and most profitable units, along with the Windows division. Last fiscal year it made $18.6 billion in sales, almost 30 percent of the company's total.

Elop will now find himself in charge of a company with sales of 41 billion euros and 124,000 employees worldwide. - Reuters

Greek economy slump hurts revenues, jobs

ATHENS: Greece's austerity measures are hurting revenues and hindering deficit-cutting efforts while joblessness mounts, data showed as Prime Minister George Papandreou was set to spell out economic policy on Saturday, Sept 11.

Heavy debt payments and weak revenues weighed on the budget amid a deepening recession, with the pace of deficit reduction for the first time falling behind a full-year target rate in the eight months to August, fresh data showed on Friday.

"Our road is long and none of us are allowed to relax," Prime Minister George Papandreou said in the northern city of Thessaloniki, where he is expected to make a major economic policy speech on Saturday.

Unions are planning protest rallies against the socialist government's cuts in pensions and public sector pay, and more than 4,000 police have been deployed in Thessaloniki to safeguard against possible violence this weekend.

Eight months into the year, budget revenues are growing at a snail's pace of 3.3 percent compared to a targeted 13.7 percent annual clip, despite a series of tax increases that included a rise in the VAT rate to 23 percent.

As a result, the budget deficit of the country's central government shrank at an annual 32.2 percent pace to 14.49 billion euros ($18.38 billion), less than the 39.5 percent rate of reduction targeted for 2010 as a whole.

"Based on the deficit reduction so far and on expectations of revenues and expenditures to December, the end-year target of a 39.5 percent deficit reduction in 2010 compared to 2009 will be met in full," the finance ministry said.

STOCKS DOWN

Stocks added to losses after the data, with the Athens bourse's benchmark index shedding 1.4 percent. Greek shares are down 26 percent so far this year.

Greece is scrambling to cut its deficit to 8.1 percent of GDP this year from 13.6 percent in 2009 in exchange for 110 billion euros of continued emergency funding by the International Monetary Fund and euro zone peers to avoid default.

"Risks have shifted from the side of expenditures to revenues. This is the government's struggle -- to grow revenues amidst a recession," said Eurobank economist Gikas Hardouvelis.

"There is no room for higher taxes, more hikes would choke those who are paying the state's revenues. The solution is clamping down on tax evasion and improving the tax collection mechanism," he added.

With the economy contracting by 3.7 percent year-on-year in the second quarter, rising unemployment is another headache for the socialist government, which needs to stay the course of fiscal consolidation amid growing discontent. Data on Friday showed the jobless rate rose by three percentage points year-on-year in June to 11.6 percent, with the backwash of the crisis increasingly felt in the real economy.

Earlier this week mid-sized construction firm Attikat filed for bankruptcy protection while Lambrakis Press, the country's biggest newspaper group, said it shut down its book publishing division to stop bleeding cash.

Rising joblessness is more acute in the younger age groups. Last week Defence Minister Evangelos Venizelos said he is considering extending the military service of conscripts who have no work upon discharge.

"I am in commerce since 1960 and never thought we would go through something like this. Sales are down 60 percent in just one year," said Tasos Trivolis, 70, owner of a clothing store in central Athens. "The real economy cannot take this, unemployment will rise much more."

With fiscal targets pressing, the situation leaves little room for handouts and relief as Papandreou is about to make a state of the economy address in Thessaloniki and offer hope for exiting the crisis while unions grow more restive.

"These figures are quite worrying and show the labour market in dire straits. Unfortunately, we believe that things are going to get worse before they get better," said economist Diego Iscaro at IHS Golbal Insight.

"The labour market is expected to deteriorate further during the coming months as firms trim their workforces and are reluctant to hire workers in the face of falling demand and shrinking profit margins," he said. - Reuters

Obama taps Goolsbee as top White House economist

WASHINGTON: President Barack Obama on Friday, Sept 10 named Austan Goolsbee as the new head of the White House Council of Economic Advisers, promoting a longtime adviser from his inner policy circle.

"He's not just a brilliant economist, he's someone who has a deep appreciation of how the economy affects everyday people," Obama said at a news conference.

Goolsbee, who has been chief economist to Obama's Economic Recovery Advisory Board, chaired by former Federal Reserve chief Paul Volcker, has been closely involved in the policy process.

The appointment ensures continuity within Obama's economic team as the president tries to lift the faltering economy, and as speculation swirls around the future of other senior White House players, particularly the president's chief of staff, Rahm Emanuel.

The CEA is a key source of economic policy advice for the president and its chair plays a leading role in explaining the White House's economic message, an important job on Obama's behalf as anxiety over the outlook saps his approval ratings.

Goolsbee, 41, had been the strong favorite to replace outgoing chair Christina Romer after she announced her return to academia.

"She was part of the team that helped save this country from a depression," Obama said.

The appointment will not require Senate confirmation since Goolsbee already has been confirmed as a member of the CEA.

Already a familiar face on financial news television, Goolsbee is an effective communicator and respected economist and will likely be a persuasive advocate for Obama's approach to the economy as voters weigh the choice between Democrats and Republicans in November.

He has been a particularly visible presence this week explaining the president's latest proposals to boost growth and hiring.

POLICY PITCHMAN

Obama is trying to ease unemployment stuck near 10 percent amid slowing growth, with voter unease over the economy threatening punishment for his Democrats in congressional midterm elections on Nov. 2.

A longtime adviser to Obama who is on leave from his job as University of Chicago economics professor and holds a PhD from the Massachusetts Institute of Technology, Goolsbee has earned Obama's confidence and is well-liked by the president's inner circle, which could make him influential.

"I have complete confidence he's going to do an outstanding job," Obama said.

Nearly two years into Obama's presidential term, speculation about other changes in the White House team is mounting, particularly concerning Emanuel following the surprise decision of Chicago Mayor Richard Daley to not seek reelection. Emanuel has made no secret of his desire to be Chicago's mayor one day.

In addition to naming the next head of the CEA, Obama is also expected to announce soon his pick to lead the newly created consumer financial protection bureau. The leading candidate for this slot is consumer advocate Elizabeth Warren. - Reuters

Asia stocks hit 4-month high, yen slides

HONG KONG: Asian stocks rose to a four-month high on Friday, Sept 10 as some investors were inspired by positive U.S. and Japanese economic data to pick out bargains, with the shift to riskier assets weighing on the yen.

The yen's yield disadvantage has also been growing this week, following upside surprises in U.S. and Australian economic figures, handing dealers an incentive to join any selloffs of the Japanese currency.

"The market is on a relief rally as key U.S. data, such as jobs and trade from the U.S., came out better than expected," said Hong Soon-pyo, an analyst at Daishin Securities in Seoul.

"The data gave the market more assurance about where the global economy is headed," Hong said.

U.S. stocks posted modest gains on Thursday as recent data eased concerns that the U.S. economy might be sliding back into recession, although sentiment was fragile as investors fretted over the health of European banks.

An upward revision to Japan's second-quarter GDP, though widely expected, added to investor confidence in Asia, market players said.

Also on Friday, China reported stronger-than-expected import growth in August, indicating a possible rebound in domestic demand, and a 34.4 percent rise in exports year-on-year.

The import data reduced the politically sensitive trade surplus ahead of U.S. Congressional hearings next week on whether to punish Beijing for what many in Washington see as an unfairly undervalued yuan.

The Chinese data also bolstered currencies of major commodity exporters such as Australia, helping the Aussie dollar hold near a four-month high of $0.9227.

Still, risk taking has not become overwhelming by any stretch. Economists keep ratcheting down U.S. economic forecasts, corporate executives sound cautious and some of Europe's banks may need more capital soon.

Tokyo's Nikkei share average rose 2 percent, with exporter Canon Inc the biggest gainer on the day, up 5.9 percent. The index is on its way to its biggest week increase since the week of July 11.

The MSCI index of Asia Pacific stocks outside Japan rose 0.4 percent to the highest since May 4, with the technology sector leading the pack.

The index is up nearly 11 percent in the quarter, on track for the largest gain since the third quarter of 2009.

The U.S. S P 500 index overnight rose 0.5 percent and broke above its 100-day moving average, a medium-term obstacle, revealing its 200-day moving average only 1 percent away as the next significant barrier.

YEN

The yen suffered from traders closing out of short-term bets on the currency and hastening its decline.

The U.S. dollar rose 0.5 percent to 84.23 yen, pulling further from a 15-year low around 83.32 yen hit on Wednesday.

The U.S. dollar index, which measures its trade-weighted value compared with six other major currencies, rose 0.2 percent , climbing above its 55-day moving average, a technical obstacle the index has struggled to overcome in the last three weeks.

Investors betting on the yen have grown concerned about the moves in bond spreads that have gone against the Japanese currency. Overnight a lower-than-expected reading of U.S. initial jobless claims pushed up Treasury yields.

The spread of U.S. 10-year Treasury yields over Japan has widened 6 basis points this week, the biggest weekly gain since July 2010. Australian 2-year yields have shot up 22 basis points above same maturity Japanese yields this week, the largest increase since March 2010.

"Of course this could prove to be a false break (particularly given doubts surrounding the fall in initial jobless claims) but we would note U.S. yields appear to have been basing for a number of weeks now," Jonathan Cavenagh, strategist with Westpac in Sydney, said in a note.

"Hence if the yield spread continues to move in favour of the USD then USD/JPY is a good buy at current levels."

U.S. crude oil futures jumped more than 50 cents to near $75 a barrel after a leak forced the shut down of the biggest pipeline supplying Canadian oil to refineries in the Midwest.

Gold fell $2.52 an ounce to $1,245.75 an ounce, holding near a 1-week low hit the previous session. - Reuters

Equity inflows pick up, but cash allocations grow-EPFR

HONG KONG: Equity funds posted the biggest weekly inflows in more than a month in early September, reflecting some comfort with the global economic outlook, though fresh cash allocations showed the limits of risk taking, EPFR Global data showed on Friday, Sept 10.

Stock funds tracked by the fund research firm absorbed an aggregate $8.43 billion, during the week to Sept. 8, the most in six weeks. Bond funds also saw new money, taking in $4.13 billion.

Despite the evidence of investors' money being put to work, money market funds, an equivalent of cash, saw inflows for the fifth time in the past seven weeks.

U.S. exports and manufacturing activity have had surprisingly positive readings, improving the confidence of economies and companies in the supply chain. However, consumer spending and employment remain weak and appetite for riskier assets may remain suppressed until they also show some strength.

EMERGING MARKET EQUITY FUNDS

Confidence in emerging markets has been a constant in the post-financial crisis world.

This fund group in aggregate had $1.87 in inflows in the latest week, with Global Emerging Market funds extending their inflow streak to 15 weeks.

Latin America-focused funds did the best, attracting a 25-week high of $190 million.

Asia ex-Japan and Europe, Middle East Africa funds saw modest inflows.

DEVELOPED MARKET EQUITY FUNDS

U.S. equity funds chalked up weekly inflows of $6 billion, accounting for three quarters of global equity inflows, driven by buying of large cap ETFs, mid cap blended funds and value funds.

However, year-to-date, U.S. equity funds have had net redemptions of $30.3 billion.

Europe equity funds had inflows of more than $1 billion, though year-to-date outflows still total $11.6 billion.

Japan saw small outflows of $101 million.

SECTOR FUNDS

The picture was mixed at a sector level.

The cyclical energy sector took in $252 million, bringing 2010 inflows to $1.6 billion, the third highest after commodity and consumer goods sector funds.

However, defensive sectors also did well. Flows into healthcare funds were at a five-week high and utilities sector funds had inflows for the eighth time in the past nine weeks.

BOND FUNDS

Emerging market bond funds saw inflows but they were the lowest since early June. Inflows into emerging market local currency bond funds slipped to a 14-week low.

Tolerance for risk was evident in junk bonds. High yield bond funds had $700 million in inflows for the week, bringing year-to-date inflows up to $10.6 billion.

Global and U.S. bond funds pulled in $1.31 billion and $2.01 billion, respectively.

Flows into U.S. bond funds were influenced heavily by buying of municipal debt as investors search for assets that offer reasonable yields and some protection from the tax increases expected in 2011. - Reuters

Wall St buoyed by upbeat economic data

NEW YORK: U.S. stocks rose on Thursday, Sept 9 as stronger-than-expected jobs and trade data helped lift optimism about the economic recovery, although sentiment was fragile as investors fretted over European banks.

Financials, hit hard in the August downturn, were among top gainers as new U.S. claims for unemployment benefits fell to a two-month low, while the trade deficit narrowed sharply in July. JP Morgan Chase Co rose 2.5 percent to $40.10.

"The recovery is not falling apart and continued growth is the most likely outcome," said Zach Pandl, economist at Nomura Securities International in New York. "This is generally a bond negative and positive for stock prices."

However, defensive sectors such as healthcare, utilities and telecommunications services were also among top gainers in a sign investors remain cautious. The S P healthcare index rose 1.2 percent, with Pfizer Inc up 1.3 percent to $16.77.

Volume was light and trading volatile as some traders were off for the Jewish new year holiday in an already slow week shortened by Monday's Labor Day holiday.

The Dow Jones industrial average gained 28.23 points, or 0.27 percent, to 10,415.24. The Standard Poor's 500 Index rose 5.31 points, or 0.48 percent, to 1,104.18. The Nasdaq Composite Index added 7.33 points, or 0.33 percent, to 2,236.20.

Earlier, the S P 500 touched a one-month high above 1,110 after data showed new claims for unemployment insurance fell to their lowest level in two months last week, while the U.S. trade deficit narrowed sharply in July.

But some expressed skepticism over the data as a Labor Department official said some states had been unable to submit claims in time because of the Labor Day holiday, resulting in the department's making estimates for them.

Deutsche Bank shares came under pressure because it is considering a capital increase of up to 9 billion euros ($11.43 billion) to bolster its balance sheet as Basel capital requirements are finalized, two people familiar with the matter said.

The sources said the capital increase would also allow Deutsche Bank to raise its stake in Deutsche Postbank, in which it already owns a stake of just under 30 percent. Deutsche Bank declined to comment.

Its shares fell 3.2 percent to $59.99 in New York.

"The Street seems to be confused about whether it's due to sovereign exposure or their take out of Postbank," said David Lutz, managing director of trading, Stifel Nicolaus Capital Markets in Baltimore.

But helping shares in the U.S. financial sector, veteran banking analyst Richard Bove said at least 17 U.S. banks with more than $10 billion in assets could emerge as possible takeover targets. They included Zions Bancorp, up 2.6 percent to $20.31, and Capital One Financial up 0.8 percent to $39.40.

The S P 500 has risen for six of the last seven sessions. Technical analysts continue to point to a bullish inverse "head and shoulder" formation in the index with a "neck line" at 1,130 that could signal a potential break out to around 1,250.

"The frustrating sideways action in the S P 500 and many developed markets belies a burgeoning build-up of bullish demand, which holds the potential to power prices significantly higher over the final stanza of 2010 and well into 2011," wrote Auerbach Grayson analyst Richard Ross in a research note.

Adobe Systems jumped 12.1 percent to $32.86 after Apple Inc said it is easing restrictions for building iPhone and iPad applications, a move that should allow for the use of third-party tools such as Adobe's Flash software.

The Dow's gains were limited by McDonald's Corp, which dropped 2.3 percent to $74.37 after its August sales in Europe were softer than expected.

eBay sees expanding China cross-border trade

HANGZHOU, China: Internet commerce giant eBay Inc said on Friday, Sept 10 it expects cross border trade over its network from China to grow 80 percent this year to $4 billion, as smaller companies look to export their wares.

"There's enormous opportunity for small- and medium-sized businesses in China to sell outside China," eBay's CEO John Donahoe told Reuters at an event in China hosted by Alibaba Group, parent of leading Chinese consumer e-commerce site Taobao.com and B2B site operator Alibaba.com.

"The Internet allows those factories, manufacturers to sell directly to consumers outside of China," he said.

Donahoe's appearance at the Alibaba event marked the completion of a circle of sorts for eBay in China, bringing together top executives of the U.S. giant and its former China archrival Taobao.

EBay made its grand splash into China in 2003, when it paid $180 million for EachNet, the country's then-leading online auction site.

Taobao was a relative latecomer to the game at that stage, but rapidly gained ground on eBay by offering its services for free, in sharp contrast to the U.S. company that charged fees for transactions, listings and other services.

The pair engaged in a war both on the net and in the media, which ended in 2006 when eBay, rapidly losing share to a rising Taobao, put its eBay EachNet business into a joint venture run by Hong Kong-listed media company Tom Group, in what most considered a withdrawal from the market.

Since then, eBay has decided to focus on cross-border trading, mostly involving smaller export-oriented merchants and manufacturers selling their products abroad, leaving the domestic market to companies such as Taobao.

China's business-to-business e-commerce market was worth 1.6 billion yuan ($235.9 million) last year, as Web commerce in the country has surged fuelled by buyers tapping the Internet for better deals from more suppliers in the nation's highly fragmented distribution network.

Donahue said eBay's joint venture deal with Tom will expire next year, but that his company has not decided what it will do with the venture after that.

"The reality is we haven't spent much time contemplating or worrying about it yet," he said.

On a global basis, Donahue said mobile trading of goods is another fast growing area for eBay, with the company expecting $1.5 billion in volume over its application for Apple's iPhone this year.

The company's PayPal electronic payments unit expects to record about $500 million in mobile transactions over the same period, he added.

"Many merchants are now building mobile apps," he said.

The Internet commerce giant in July posted a second-quarter profit that beat Wall Street estimates, helped by a record performance of PayPal and marketplace division sales in Europe.

But the company also warned that a stronger U.S. dollar would hurt its full-year results, and it trimmed the high end of its 2010 forecast.

Loh& Loh, JV partner secure RM828.33m Terengganu hydro project

KUALA LUMPUR: Loh Loh Corporation Bhd and its joint venture partner Sinohydro Corporation Ltd have received the letter of acceptance from Tenaga Nasional Bhd for the RM828.33 million Hulu Terengganu hydroelectric project.

Loh Loh said on Thursday, Sept 9, work on the project would be within 130 days after the receipt of the letter of acceptance.

Sinohydro Corporation Ltd-Loh Loh Constructions Sdn Bhd Joint Venture is an unincorporated joint venture between Sinohydro Corporation Ltd and Loh Loh Constructions Sdn Bhd, a unit of Loh Loh.

FTSE falls as retailers slide on weak outlook

LONDON: Britain's top share index fell on Thursday, Sept 9 as retail stocks dropped on downbeat comments from Home Retail and Wm Morrison Supermarkets, outweighing a rise in banks ahead of the BoE's rate decision.

By 0739 GMT, the FTSE 100 was down 4.65 points, or 0.1 percent at 5,425.09, having closed up 0.4 percent, at 5,429.74.

Home Retail, Britain's No. 1 household goods retailer, fell 2.1 percent after it forecast a 20-25 percent reduction in first-half profit, with sales at its Argos stores continuing to fall as low-income shoppers cut back spending.

The announcement triggered a sell-off among the retailers, with Kingfisher and Marks and Spencer down 1.6 and 1.2 percent respectively.

Wm Morrison Supermarkets, Britain's fourth-biggest grocer, fell 4.3 percent after it said it will open convenience stores and may sell groceries online as it seeks to broaden its growth avenues in what it expects to remain a tough market this year.

Mid-cap British music, books and games retailer HMV Group fell 11.3 percent, having soared ahead on Wednesday, as it reported a 10.6 percent fall in sales for the first quarter as the soccer World Cup distracted customers from DVDs and books.

"This is a shoe that has been waiting to drop for some time," said Jeremy Batstone-Carr, strategist at Charles Stanley, said.

"Given the extent to which consumers are retiring debt rather than living on credit and bunkering down ahead of what Nick Clegg (UK Deputy Prime Minster) described as 'choppy and uncertain times ahead' this is all going to have an adverse affect on discretionary spending."

After a fairly directionless first half of the week there will be plenty of macroeconomic data on Thursday for investors to chew on.

UK July trade data is due at 0830 GMT and is expected to show the trade deficit widened from the previous month, while at 1100 GMT the Bank of England is expected to keep interest rates on hold at 0.5 percent for the 18th month running.

All 60 economists in a Reuters poll forecast no change in rates on Thursday and most said they expect no rise until the second quarter of 2011 at the earliest.

COMMODITY FALLS

Energy and mining stocks showed some weakness following recent strength and weighed by falls in commodities, which softened after a sell-off overnight in China.

On the upside, banks gained, having been on the back foot recently on worries over the health of the European economic recovery.

Lloyds Banking Group, up 1.2 percent, was among the top risers after agreeing to sell its stake in housebuilder Crest Nicholson to U.S. investment company Varde, continuing to shed non-core assets and refocus on its core lending activities.

The UK bank was also helped by Barclays Capital which raised its rating to "equalweight" from "underweight".

ARM Holdings, which has been mentioned as a potential bid target, extended recent gains, up 3.3 percent.

The chipmaker also unveiled its cortex-a15 mpcore processor, which won its first licensee, Texas Instruments. - Reuters

SP Setia unit to buy land in Johor for RM169.26m, planned GDV RM1.5b

KUALA LUMPUR: SP Setia Bhd's unit is buying 259.1 acres of land in Johor for RM169.26 million cash to replenish its land bank as the Setia Indah Johor development was at its tail-end.

S P Setia said on Thursday, Sept 9 its unit Setia Indah Sdn Bhd had entered into a conditional sale and purchase agreement with from Kelana Ventures Sdn Bhd to acquire the land.

Based on a preliminary feasibility study and revised layout plan, the proposed development is expected to have a gross development value of RM1.5 billion. Development was expected to start by end of 2011 and span over eight years.

"However, it is currently too preliminary to ascertain the total development cost, the expected completion date of the development and the expected profits to be derived from the development of the land," it said.

S P Setia said the acquisition would be wholly in cash from internally generated funds and/or external borrowings.

It said the acquisition would enable the company to continue to benefit from the strong branding it had achieved in that locality. It is also in line with the group's wider strategy of continuing to acquire strategically located prime land in Johor Bahru, it said.

The company said site was near other matured developments such as Taman Mount Austin and Taman Daya and hence also offered several important advantages, in particular the sustained potential demand from upgraders in the area desiring to move-up to larger, newer and better designed houses.

"Another source of demand is from young adults planning to move out of their parents' homes without having to leave the comforts of the local support network that they have grown accustomed to.

"Further, the existing population of the surrounding matured housing projects will also form the core catchment area for the proposed development's commercial components," it said.

S P Setia was confident that the proposed development of mixed residential and commercial project on the land would be well received, and contribute positively to its future earnings and cash flow.

"The proposed development will also ensure S P Setia's continuing presence and efforts in building residential properties in Johor," it said.

UK watchdog fines Goldman Sachs $27 million

LONDON: Britain's financial watchdog slapped a 17.5 million pounds ($27 million) fine on Goldman Sachs on Thursday , Sept 9 for inadequate disclosure of a U.S. probe into the Wall Street powerhouse.

The fine -- one of the biggest ever imposed in Britain -- was related to Goldman's troubled Abacus mortgage-security product, which resulted in the investment bank being investigated by the U.S. Securities Exchange Commission (SEC).

In July, Goldman agreed to pay $550 million to settle civil fraud charges over how it marketed the Abacus subprime mortgage product, ending months of negotiations that rattled the bank's clients and investors.

The Abacus product was marketed by French banker Fabrice Tourre. Tourre, who had dubbed himself as "Fabulous Fab", denied allegations that he or the bank had misled investors over the high-risk Abacus product.

Britain's Financial Services Authority said on Thursday that Goldman had not adequately informed it of the American investigation into the Abacus affair.

"Goldman Sachs International did not set out to hide anything, but its defective systems and controls meant that the level and quality of its communications with the FSA fell far below what we expect of an authorised firm," FSA director Margaret Cole said in a statement.

In a seven-word response to the FSA fine, a Goldman Sachs spokeswoman said: "We're pleased the matter is resolved." - Reuters

OECD urges stimulus due to slowing economic recovery

PARIS (Reuters) - The global recovery looks to be slowing more than expected as growth weakens in the world's rich economies, and monetary stimulus should be extended or stepped up if the slowdown proves more than momentary, the Organisation for Economic Co-operation and Development said on Thursday, Sept 9.

The OECD forecast growth across the G7 group of major economies to average an annualised 1.4 percent in the third quarter and 1.0 percent in the fourth, down from 3.2 and 2.5 percent in the first and second quarters respectively.

It forecast annualised U.S. growth rates of 2.0 and then 1.2 percent in the third and fourth quarters, after 1.6 percent in the second quarter and 3.7 percent in the first quarter.

"Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously anticipated," it said.

"It is not yet clear whether the loss of momentum in the recovery is temporary ... or whether it signals greater underlying weaknesses in private spending at a time when public support is being removed," the Paris-based organisation said.

For Germany, France and Italy combined, the OECD forecast expansion to plunge to an annualised 0.4 and 0.6 percent respectively in the third and fourth quarters of the year, from 5.1 percent in the second quarter.

Germany's economy, which grew 2.2 percent quarter-on-quarter in the second three months of 2010, or an annualised rate of nearly 9 percent, would expand just 0.7 percent in annualised terms in the third quarter, it predicted.

For Japan, it forecast 0.6 and 0.7 percent annualised GDP rises in the third and fourth quarters respectively, mildly better than a second-quarter figure of 0.4 percent annualised.

For Britain, the OECD predicted 2.7 percent and 1.5 percent annualised growth in the third and fourth quarters after a second-quarter rise of 4.9 percent annualised versus the previous quarter.

The OECD's latest forecasts were limited to forecasting GDP developments in figures for the G7 countries, but it did add that growth remained robust in large emerging market economies.

On the downside, the OECD said there was a risk that weak house prices and high unemployment could restrain recovery in domestic consumption.

"If the ongoing slowdown is temporary, the appropriate policy response would be to postpone withdrawal of monetary stimulus for a few months while maintaining planned budget consolidation," OECD chief economist Pier Carlo Padoan said.

"On the other hand, if the slowdown reflects longer-lasting forces bearing down on activity, additional monetary stimulus may be needed in the form of quantitative easing and commitment to close-to-zero policy interest rates for a long period," he said.

"Where public finances permit, planned fiscal consolidation could be delayed," he said in a written statement. - Reuters

M'sia slips 2 spots to 26th in global competitiveness

KUALA LUMPUR: Malaysia slipped two notches to rank 26th on the World Economic Forum's (WEF) global competitiveness report (GCR) 2010/2011, but demonstrated improvement with a score of 4.88 out of 7 in the overall competitiveness index compared with 4.87 last year, with a relatively stable performance since 2009.

In its country profile highlights, WEF said the four-year decline in the quality of institutions that pushed Malaysia from 17 in to 43 had finally come to a halt, with the country remaining stable at 42nd place this year.

The main drag within this pillar remains the security situation (80th, up five places), said WEF on Thursday, Sept 9.

"In order to improve its competitiveness further, Malaysia will need to improve its higher education system, with particularly low enrollment rates at the secondary and tertiary levels. "It would also be well served by encouraging greater technological adoption, particularly the use of ICTs, for productivity enhancements," said the WEF.Among Asia Pacific countries, Malaysia ranked ahead of China, Thailand, India, Indonesia and the Philippines. Commenting on Malaysia's ranking, Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said the country scored the highest in the Legal Rights Index, together with Hong Kong SAR and Singapore. Malaysia also scored high on the Strength of Investor Protection, where it ranked fourth after New Zealand, Singapore and Hong Kong SAR, he said in a statement on the same day.

"While we acknowledge that there are a number of areas for improvement, we are happy to see that the Report highlights a number of positive elements about the Malaysian economy. "Malaysia is assessed to have a well-developed financial market development with ease of financing through local equity, ranked 11th (GCR2009-2010: 15th) and ease of access to loans, 10th (GCR2009-2010: 13th)," he said. Venture capital availability, soundness of banks, and transparent regulation of security exchanges had also contributed to financial market development in Malaysia, he said. The Report noted that while Malaysia was ranked 26th, the country had a well-developed financial market (7th) and an efficient goods market (27th). Malaysia also does relatively well in more complex categories, which matter the most for advanced economies, namely business sophistication (25th) and innovation (24th), boding well for the future, according to the report. "On the other hand, there are also some good suggestions coming from the Report on areas where we have to improve. Four main pillars adversely affecting Malaysia's ranking are Higher Education and Training, ranked 49th (GCR2009-2010: 41st); Institutions, ranked 42nd (GCR2009-2010: 43rd); Technological Readiness, ranked 40th (GCR2009-2010: 37th); and Labour Market Efficiency, ranked 35th (GCR2009-2010: 31st). "I am glad to note that the government has already launched nationwide initiatives on tackling these issues" said Mustapa. He said that among the proactive measures undertaken by the government to enhance Malaysia's competitiveness are the New Economic Model (NEM), which emphasises the achievement of high income, the Government Transformation Programme (GTP) to enhance government efficiency, and the implementation of initiatives under the Tenth Malaysia Plan.

"As these initiatives begin to take effect, we can expect to see improvements in Malaysia's overall competitiveness in the near future" he said.

The GCR's competitiveness ranking is based on the Global Competitiveness Index (GCI), developed for the World Economic Forum by Sala-i-Martin and introduced in 2004. The GCI is based on 12 pillars of competitiveness, providing a comprehensive picture of the competitiveness landscape in countries around the world at all stages of development. The pillars are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.Switzerland topped the overall rankings in The Global Competitiveness Report 2010-2011, released today by the World Economic Forum ahead of its Annual Meeting of the New Champions 2010 in Tianjin. The United States fells two places to fourth position, overtaken by Sweden (2nd) and Singapore (3rd), after already ceding the top place to Switzerland last year. The WEF said that in addition to the macroeconomic imbalances that have been building up over time, there has been a weakening of the United States' public and private institutions, as well as lingering concerns about the state of its financial markets. "The Nordic countries continue to be well positioned in the ranking, with Sweden, Finland (7th) and Denmark (9th) among the top 10, and with Norway at 14th. "Sweden overtakes the US and Singapore this year to be placed 2nd overall. The United Kingdom, after falling in the rankings over recent years, moves back up by one place to 12th position," said the WEF. WEF said China (27th) continues to lead the way among large developing economies, improving by two more places this year, and solidifying its place among the top 30. Among the three other BRIC economies, Brazil (58th), India (51st) and Russia (63rd) remain stable, it said. Several Asian economies performed strongly, with Japan (6th) and Hong Kong SAR (11th) also in the top 20. In Latin America, Chile (30th) is the highest ranked country, followed by Panama (53rd) Costa Rica (56th) and Brazil.Several countries from the Middle East and North Africa region occupy the upper half of the rankings, led by Qatar (17th), Saudi Arabia (21st), Israel (24th), United Arab Emirates (25th), Tunisia (32nd), Kuwait (35th) and Bahrain (37th), with most Gulf States continuing their upward trend of recent years. In sub-Saharan Africa, South Africa (54th) and Mauritius (55th) feature in the top half of the rankings, followed by second-tier best regional performers Namibia (74th), Botswana (76th) and Rwanda (80th).

Petronas sells 5% interest in Australia's Gladstone LNG to Total

KUALA LUMPUR: Petroliam Nasional Bhd has sold a 5% interest in Australia's Gladstone Liquefied Natural Gas (GLNG) to Total for an undisclosed sum.

The disposal of the 5% stake on Thursday, Sept 9, reduced Petronas' effective stake in GLNG to 35%. GLNG is an integrated development that includes coal seam gas production and processing facilities, onshore pipelines and LNG plant facilities.

GLNG produces LNG using coal seam gas sourced from the GLNG gas fields in the Bowen and Surat Basins in Queensland, Australia.

According to statement issued by Australian energy pioneer Santos to the Australian Stock Exchange on Thursday, Santos said it was selling its 15% interest in GLNG to Total for A$650 million.

Santos also said Petronas had also entered into an agreement to sell a 5% interest in GLNG to Total.

"Upon completion of the Santos and Petronas sale transactions, the ownership structure of GLNG will be: Santos 45%; Petronas 35%; Total 20%," it said.

Total is one of the world's largest LNG companies with interests in eight producing LNG projects and one under construction. In 2009, it had total LNG sales of 8.8 million tonnes.

Total president and chairman Christophe de Margerie said Total was teaming up with Santos for its expertise in gas production in Australia and with Petronas for its experience in marketing LNG in Asia.

"Total will bring to the project its experience in successfully managing major projects such as the construction of gas liquefaction plants, and its capacity to market LNG to the Asian market," he said

GLNG had on Thursday also signed a binding heads of agreement for the sale of 1.5 million tonnes per annum (mtpa) of LNG to Total for 20 years commencing 2014.

The agreement provides for 1 mtpa of the contracted volumes to be delivered from GLNG train 1 and 0.5 mtpa from train 2.

In addition, GLNG and Petronas have increased the contracted volumes to 3.5 mtpa under their previously announced binding heads of agreement.

The agreement provides for 2.3 mtpa of the Petronas contracted volumes to be delivered from GLNG train 1 and 1.2 mtpa from train 2. Other key terms of the agreement remain in place including the 20 year term.

"The Total and Petronas binding agreements now provide for the sale by GLNG of 5 mtpa of LNG in aggregate, underpinning the development of a two train project. The combined value of the GLNG offtake agreements exceeds A$100 billion," it said.

Santos chief executive officer David Knox said he was delighted that Petronas had increased its offtake from 2 mtpa to 3.5 mtpa with offtake from both trains 1 and 2.

Following the revised joint venture structure and increased LNG offtake obligations on Petronas (under the binding heads of agreement), Petronas will no longer make additional payments to Santos upon reaching final investment decisions for expansion trains.

Muhibbah secures RM56m Penang Port crane job

KUALA LUMPUR: Muhibbah Engineering Bhd has accepted a contract from Penang Port Sdn Bhd for the design, assembly and delivery of eight cranes for about RM56 million.

The company said on Thursday, Sept 9 the rail mounted gantry cranes would be delivered over 26 months.

"The contract is expected to contribute positively to the earnings and net assets of Muhibbah group for the current and future financial years," it said.

In a recent report, Kenanga Investment Bank research said the outlook for Muhibbah "is bright provided Muhibbah can collect its receivables from Asian Petroleum Hub otherwise provisions would have to be made for doubtful debts".

Excluding the Penang Port contract, Muhibbah had RM2.53 billion order book remaining as at June 30, 2010 made up of RM1.6 billion in infrastructure, RM450 million in cranes and RM484 million in ships.

Kenanga Research said Muhibbah continued to be active in bidding for projects and just won a RM124.4m contract to construct an offshore marine centre in Tuas, Singapore.

"We have lowered our FY10 and FY11 net profit by 17% and 11% to RM46m and RM52.1m respectively factoring in slower recognition of profit from the Asia Petroleum Hub project.

"Maintain BUY with a target price of RM1.35 (previously RM1.80) using a sum of parts RNAV. Rerating catalyst for the stock is the payment of its outstanding receivables. The stock is only trading at a low PER of 8x and 7x for FY10 and FY11," it said.

Positive manufacturing data boosts KLCI

KUALA LUMPUR: Positive manufacturing data provided the boost for Bursa Malaysia in the half-day trading session on Thursday, Sept 9 and also in line with the positive key regional markets.

The market is closed in the afternoon session for Hari Raya Aidilfitri and resumes next Monday, at 9am.

The Statistics Department said the industrial production index (IPI) for July rose 3.2% on-year, underpinned by stronger manufacturing growth while the June IPI was revised to 9.3% on-year. It said the increase in July was due to the increases in manufacturing (7.2%) and electricity (4.4%).

At 12.30pm, the FBM KLCI was up 3.64 points to 1,437.78. Gainers beat losers by 402 to 162, while 280 counters traded unchanged. Volume was 449.65 million shares valued at RM861.12 million.







Nikkei 225

+0.93%

9,108.80











Hang Seng Index

+0.55%

21,204.47











Singapore's Straits Times Index

+0.11%

3,014.60











Shanghai Composite Index

-1.03%

2,667.60











Taiwan's Taiex

-0.20%

7,835.27

































At Bursa, consumer stocks were among the major gainers due to the dividends paid out.

Nestle rose 70 sen to RM42 after Maybank Investment Bank Research reiterated its Buy call at a discounted cashflow-based target price of RM43.86 on earnings growth of 10%-14% per annum in the 2010-12 period.

BAT added 52 sen to RM47.72. Anticipating an increase in indirect taxes for the tobacco industry soon, BAT expressed hope the Budget 2011 proposals would reflect a moderate and gradual excise increase regime in view of the widespread presence of smuggled cigarettes in Malaysia.

F N gained 38 sen to RM14.28 while Tan Chong and KFCH were up 27 sen each to RM5.30 and RM3.08.

Ibraco rose 23 sen to RM1.20, PacificMas was up 20 sen to RM4.73, Supermax added 19 sen to RM4.83 while Naim rose 18 sen to RM3.59.

Tasek was the top loser today and fell 25 sen to RM6.50,, BLD Plantation down 11 sen to RM4.20 while Cahya Mata Sarawak and Far East Corp fell 10 sen each to RM2.43 and RM6.70.

Timecom was the most actively traded counter today with 13 million shares done. The stock rose 1.5 sen to 63 sen. Other actives included KNM, Linear, IOI Corporation, Tejari, Axiata, LCL Corp and Carotech.

Global semiconductor manufacturing billings surge 240% y-o-y in 2Q10 to US$9.11b

KUALA LUMPUR: Worldwide semiconductor manufacturing equipment billings surged 240% year-on-year (y-o-y) in the second quarter of 2010 to US$9.11 billion (RM28.3 billion), said SEMI, the global industry association for companies that supply manufacturing technology and materials to the world's chip makers.

In a statement on its website on Sept 8, SEMI said the 2Q billings were 22% higher than the first quarter billings this year.

Meanwhile, worldwide semiconductor equipment bookings were US$11.68 billion in the second quarter of 2010, said SEMI.

The figure is 296% more than the same quarter a year ago and 24% greater than the bookings figure for the first quarter of 2010, it said.

The data is gathered jointly with the Semiconductor Equipment Association of Japan (SEAJ) from over 100 global equipment companies that provide data on a monthly basis.

#Flash* July industrial production index up 3.2% on-yr, up 1.7% on-month

KUALA LUMPUR: The industrial production index (IPI) for July rose 3.2% on-year, underpinned by stronger manufacturing growth while the June IPI was revised to 9.3% on-year.

The Statistics Department said on Thursday, Sept 9 the increase in July was due to the increases in manufacturing (7.2%) and electricity (4.4%). However, the mining output fell 5.9%.

"Month-on-month, the IPI increased 1.7%. The cumulative index for the period of January-July 2010 increased 9.7% as compared with the same period of 2009," it said.

FBM KLCI rises ahead of holidays

KUALA LUMPUR: The FBM KLCI snapped its losing streak on Thursday, Sept 9, and rose in line with most key regional markets after the higher overnight closing at Wall Street.Market sentiment improved after a successful auction of Portuguese debt eased concerns about the credit-worthiness of weaker European economies, according to Reuters.

Portugal raised ?1.04 billion (RM4.12 billion), helping soothe fears about government funding in Europe. Poland's sale of five-year bonds also saw solid demand, it said.US stocks rose as banking shares gained ground, while a key European index, the FTSEurofirst 300, rose 1% to a four-month closing high, said Reuters.At the regional markets, Japan's Nikkei 225 was up 0.79% to 9,095.52, Taiwan's Taiex added 0.25% to 7,871.15, the South Korean Kospi Index gained 0.41% to 1,786.46, Singapore's Straits Times Index was up 0.18% to 3,016.76 while Hong Kong's Hang Seng Index opened 0.4% higher 21,166.17.

On Bursa Malaysia, the FBM KLCI rebounded in early trade and was up 2.41 points to 1,436.55 at 10am, snapping its four-day losing streak.

Gainers led losers by 246 to 98, while 195 counters traded unchanged. Volume was 132.17 million shares valued at RM183.97 million.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi said that the FBM KLCI could be in a quiet mode today with some blue chip bargain hunting movements apparent ahead of the Hari Raya holidays. "Trade with a relevant stop-loss on each stock for a short to medium-term time frame. Blue chip stocks may remain firm despite the pre-Hari Raya holiday profit taking activities. "However, mid-cap and lower stocks may be weaker ahead of this week's extended holiday weekend," Lee said in a note to clients on Sept 9. Among the top gainers at mid-morning, BAT rose 30 sen to RM47.50, Cycle Carriage Bintang was up 13 sen to RM4.98, KFCH added 12 sen to RM2.93 while Century and Tan Chong rose 11 sen each to RM1.73 and RM5.14. Meanwhile, MAHB, PPB and Hap Seng Plantations added 10 sen each RM5.50, RM16.88 and RM2.36, respectively. Among the decliners, Cahya Mata Sarawak and QSR Brands fell nine sen each to RM2.44 and RM4.31, Poly Glass Fibre fell six sen to 30 sen, YTL Corp down five sen to RM7.49, Hunza Properties down four sen to RM1.35 while New Hoong Fatt fell three sen to RM2.32.

Linear was the most actively traded stock with 6.91 million shares done. The counter rose four sen to 27.5 sen.

Other actives included LCL Corp, Ramunia, TMC Life Sciences, Transmile and IOI Corp.

Tan Chong up on CKD deal

KUALA LUMPUR: Tan Chong Motor Holdings Bhd's share price rose on Thursday, Sept 9 after its unit Tan Chong Industrial Equipment Sdn Bhd signed an exclusive completely knocked-down (CKD) franchise and distribution agreement with Xi'an Silver Bus Corp.

At 9.20am, Tan Chong was up 12 sen to RM5.15 with 75,700 shares traded.

Tan Chong said the 10-year deal involved the assembly and distribution of CKD buses under the Silver Bus brand in Malaysia and other countries that may be agreed on by Tan Chong Industrial Equipment and Silver Bus.

"The assembly and distribution of Silver Bus vehicles will be carried out using the existing business structure of TCIE thus enabling it to expand its product range into Chinese luxury coaches with minimal capital expenditure investment," it said.

#Today's Diary* What to expect on Sept 9, 2010

Launch of 101010 in conjunction with the 10/10/10 Global Work Party organised by Waterfall Explorers Sdn Bhd at Fitness First Outlet, The Curve, Mutiara Damansara, PJ, Selangor at 2pm.#br# #br#

FBM KLCI snaps losing streak

KUALA LUMPUR: The FBM KLCI regained some lost ground in early trade on Thursday, Sept 9 and was up 2.45 points to 1,436.59 at 9.05am, lifted by gains that include KLK, AMMB and DiGi.

Gainers led losers by 92 to 30, while 61 counters traded unchanged.KLK was the top gainer and was up 14 sen to RM17.18; Tan Chong added 12 sen to RM5.15, MAHB up 10 sen to RM5.50, AMMB rose nine sen to RM5.92 while DFZ Capital added seven sen to RM3.72.Meanwhile, Lafarge was up five sen to RM7.60 while Sunway City and DiGi rose four sen each to RM3.72 and RM24.90.Glovemakers continued to slide with Hartalega losing 12 sen to RM4.58 and Top Glove down six sen to RM5.52.Other decliners included Tanjong, Hunza, PLUS and Genting Plantations.

George Kent up on RM1b bids

KUALA LUMPUR: George Kent (M) Bhd shares rose in early trade on Thursday, Sept 9 after The Edge FinancialDaily reported that the company was bidding for more than RM1 billion worth of domestic and overseas projects for its infrastructure investments, water and construction division.

At 9.30am, George Kent was up two sen to RM1.21 at 9.30am with 56,000 shares traded.

It expects this division to be the main income generator for the group in the near future.

OSK Research upgrades Gamuda to Trading Buy, TP RM4

KUALA LUMPUR: OSK Research said it recently met up with Gamuda to discuss the proposed mass rapid transit (MRT) for Kuala Lumpur and saw strong incentives for the MRT to be implemented,.

It said on Thursday, Sept 9 that consultants are currently studying its feasibility and the results should be known by month-end.

"We see strong incentives for the MRT to be implemented, driven by the rakyat's needs and political will. Securing the tunneling portion would enhance Gamuda's value by 28 sen a share, which we think is likely. We continue to see the MRT generating more positive news. Upgrade to TRADING BUY," it said.

OSK Research said while it had not factored in any earnings impact from the MRT, it revised upwards its FY11-12 forecasts by 7%-13% by incorporating higher margins for its existing jobs and stronger property sales, which were the main takeaways from our recent meeting.

"Our revised SOP (sum of parts) based TP of RM4 implies a FY11 PER of 20.5 times, still below its historical average of 22x forward PER. Continued positive news on the MRT should serve to further rerate the stock. The year before the Double Track job was awarded, Gamuda was trading at an average forward PER of 27.1 times," it said.

OSK Research revises downwards Eng Tek earnings forecast

KUALA LUMPUR: OSK Research has revised downwards the earnings forecast for Eng Teknologi (Engtek) after the management guided for a sequential profit before tax drop of 22% to RM10 million for 3QFY10 while 4QFY10 PBT is expected to come in at RM11 million.

"Based on the guidance, we are revising downwards our FY10 and FY11 earnings forecasts by 9%. Our fair value on the stock is accordingly revised lower," it said. Its target price was RM1.73 compared with its previous RM1.90.

OSK Research said in line with the cautious 3Q10 outlook from Western Digital, Engtek's management expects the company's 3QFY10 revenue to contract by 3.5% q-o-q before rebounding by about 8% q-o-q in a seasonally strong 4QFY10.

However, due to the stronger RM against US dollar, 3QFY10 PBT is expected to drop more than revenue, by about 22% q-o-q.

"Management now expects 4QFY10 PBT to come in at RM11m compared with RM10m in 3QFY10. This means that Engtek is on track to record its third consecutive contraction in q-o-q earnings, which are also at risk of shrinking further in 4QFY10," it said.

Market to remaim lacklustre: HLG Research

KUALA LUMPUR: HLG Research expects the FBM KLCI to remain lacklustre and within a tight trading range for the half-day trading session on Thursday, Sept 9.

HLG Research said on Thursday, Sept 9 the current consolidation will likely continue next week in another holiday-shortened week (closed on Sept 16 for Malaysia Day), as investors adopt a wait-and-see strategy in the short term after the recent strong surge.

It said on the upside, the benchmark must penetrate above the recent high of 1,441.8 with a stronger volume of around 1.0 billion shares to restore its bullish momentum towards 1,450, followed by 1,472 (76.4% FR from top 1,525 and low of 1,300).

Major support levels are situated around 1,425 (10-day SMA), 1402 (20-day SMA) and 1,388 (30-day SMA).

For Wall Street, the Dow Jones Industrial Average is likely to trade range bound within 10,000 to 10,500 in the near term ahead of the major FOMC meeting on Sept 21 and the September quarterly reporting season.

RHB Research maintains Underperform on Wah Seong

KUALA LUMPUR: RHB Research Institute has reiterated that while it is generally positive on the long-term prospects for Wah Seong Corp Bhd, but FY10 looks to be a significantly weak year and re-rating catalysts are likely to only emerge in FY11.

"Post earnings revision, we revise our fair value down to RM1.79/share (from RM1.89/share) based on an unchanged 13 times PER. We thus maintain our Underperform call on the stock," it said.

RHB Research said on Thursday, Sept 9 it recently met up with management and came away with a bleaker outlook for the rest of FY10.

Current oil and gas contract flows, especially for fabrication jobs, remain slow even though new development projects appear to be on the table.

"We thus suspect 3QFY10 earnings will again be weak and potentially similar to 2Q results," it said.

RHB Research said it trimmed its FY10-12 net profit estimates again, this time by 17.9%, 5.1% and 3.9% respectively.

"Our cuts are extensive on FY10, as we expect it to be a very weak year. Our cuts are mainly to the pipecoating/ pipe-manufacturing and engineering division's revenue. We have also eased the FY11-12 engineering division's PBT margins assumptions to 17% and 19% respectively (from 19% and 21%) as it could take more time for the division to recover.

"However we upgraded the pipe-coating division's FY10-12 PBT earnings to 19%, 20% and 21% respectively, from 18%, 19% and 20% previously as the management has guided for better margins from the Gorgon project," it said.

AmResearch maintains Buy on Lion Industries

KUALA LUMPUR: AmResearch is maintaining a Buy call on Lion Industries Corp Bhd (Lion Ind) - with fair value lowered from RM2.35 a share to RM2.30 a share based on an unchanged 10% discount to its revised sum-of-parts value of RM2.6 a share.

It said on Thursday, Sept 9 that near-term, sequential earnings are likely to weaken as steel demand contracted during the June-July period.

"We expect margins for its Hot Briquetted Iron (HBI) division to be compressed in 1QFY11," it said.

AmResearch said Lion Industries believes its earnings outlook should improve moving into 2HFY11.

On demand side, there have been tentative signs of a rebound in regional steel orders - especially from Vietnam. It also said Lion Industries' HBI operations should get a kick from rising scrap prices by 1H 2011.

"We project Lion Industries' FY12F earnings to turnaround (+33% YoY) at RM388 million against an estimated 3% contraction in FY11F. Valuations remain attractive at FY11F-12F PEs of only 3x-4x against a net gearing position of 17%. There is also potential room for capital management initiatives once the balance RM60 million in LICB bonds are fully paid by year-end," it said.

#Stocks to watch:* George Kent, Puncak Niaga, BCorp, Tan Chong

KUALA LUMPUR: While key Asian markets may stage a recovery on Thursday, Sept 9 after the firmer overnight close on Wall Street, trading on Bursa Malaysia is expected to rather quiet as trading will be closed for the afternoon session in conjunction with the eve of Hari Raya Aidilfitri.

US and European stock markets rose on Wednesday, as worries about Europe's debt problems eased, allowing the euro to recover part of Tuesday's losses.

The Dow Jones industrial average closed up 46.32 points, or 0.45%, at 10,387.01, while the Standard Poor's 500 Index rose 7.03 points, or 0.64%, to 1,098.87. The Nasdaq Composite Index finished with gains of 19.98 points, or 0.9%, at 2,228.87.

At Bursa Malaysia, stocks could consolidate in thin trade ahead of the long weekend for the Hari Raya holidays. Trading on the equities market will be closed from 12.30pm onwards; and derivatives trading will be closed from 12.45pm onwards. Clearing Settlement and Depository services will continue and close as usual on Thursday. The Exchange will resume operations on Monday, Sept 13.

Economic data to be released on Thursday include the July industrial production index, July manufacturing sales value and jobs.

Economists said July IPI rose 5.7% on-year compared with 9.4% on-year in June. They said annual growth in factory output is likely to have slowed further in July from June's performance due to export growth easing and dissipating low-base effects from 2009.

Stocks to watch include George Kent (M) Bhd, Puncak Niaga Holdings Bhd and water-related companies in Selangor, Berjaya Corp Bhd and Tan Chong Motor Holdings Bhd.

The Edge FinancialDaily reports in the Thursday edition that George Kent is bidding for more than RM1 billion worth of domestic and overseas projects for its infrastructure investments, water and construction (IWC) division. It expects this division to be the main income generator for the group in the near future.

Meanwhile, the Malaysian Rating Corporation Bhd (MARC) has downgraded the ratings of 10 debt notes issued by players in the Selangor water sector and cautioned of further downgrades in the absence of progress in industry restructuring.

Those issuers affected were Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Puncak Niaga Holdings Bhd and Syarikat Pengeluar Air Selangor Sdn Bhd (SPLASH).

The ratings agency said the recent regulatory and operating environment uncertainties had challenged the perception of strong implicit government support and highly predictable cash flow the water sector has historically enjoyed.

"This may have negative long-term implications for similar private-initiated infrastructure financings in the future, particularly from the angle of investor receptivity," it said.

MARC said urgent intervention by the federal and/or state government of Selangor was required to prevent a freefall of the current ratings in the following months.

Berjaya Corp Bhd and Ribhan Nurhidayah Contractor's joint bid for Brunei's energy efficient waste management system was unsuccessful. BCorp said the tender, which was submitted to the Brunei Economic Development Board, was unsuccessful.

Tan Chong Motor's unit Tan Chong Industrial Equipment Sdn Bhd has signed an exclusive completely knocked-down (CKD) franchise and distribution agreement with Xi'an Silver Bus Corp.

Tan Chong said the 10-year deal involved the assembly and distribution of CKD buses under the Silver Bus brand in Malaysia and such other countries as Tan Chong Industrial Equipment and Silver Bus may agree.

"The assembly and distribution of Silver Bus vehicles will be carried out using the existing business structure of TCIE thus enabling it to expand its product range into Chinese luxury coaches with minimal capital expenditure investment," it said.

Fed's Fisher says more easing may be futile

DALLAS: The Federal Reserve's recent decision to buy more Treasury bonds does not signal the U.S. central bank is on the verge of another round of easing, a top Fed official said on Wednesday, Sept 8.

Dallas Federal Reserve Bank President Richard Fisher told Reuters in an interview that in his view, only a financial system shock or some other unforeseen circumstance should push the Fed into doing more.

When the Fed last month began reinvesting proceeds of maturing mortgage-backed securities in U.S. Treasuries, some investors thought it was only a matter of time before the central bank went further.

Asked if further easing was in the cards, Fisher said "not necessarily."

Instead, Fisher, speaking in his 14th floor office surrounded by photos of himself with well-known figures like Queen Elizabeth, German Chancellor Angela Merkel and Sir Paul McCartney, said the decision was meant to avoid a "passive tightening" in which the Fed's balance sheet shrank.

Fisher said the recovery is still sufficiently weak to warrant ultra-low interest rates for the foreseeable future. He said he expects U.S. gross domestic product to grow at around a 2 percent annual rate in the second half of the year.

"That's not what we want. It's not robust enough to create a lot of jobs," Fisher said, recounting childhood memories of his father's recurring job losses. "The recovery is anemic, it's sort of listless."

The view that growth is slower than the central bank would like was also voiced on Wednesday by Minneapolis Fed President Narayana Kocherlakota.

Speaking to business leaders in Missoula, Montana, Kocherlakota described the recovery as "modest."

Kocherlakota's economic forecast was slightly more upbeat than Fisher's. He expects economic growth of 2.5 percent in the second half of this year and 3 percent in 2011.

WHITES IN RECOVERY'S EYES

Since the financial crisis of 2008, the Fed has lowered interest rates to almost zero and has flooded the banking system with liquidity by buying more than $1.7 trillion in housing-related and U.S. government debt.

In recent months, as the U.S. economic recovery appeared to falter, talk of the potential need for further Fed action has dominated the markets. Fisher suggested investors might be getting ahead of themselves, even if their forecasts for rates to remain low for a long time are on the mark.

"There is not going to be tightening until we see the whites in the eyes of the recovery," Fisher said. "That's a given in my book. People want to be certain that we're in a recovery mode before policy gets tightened."

By the same token, the Fed also should not take further easing action, which in the absence of another major shock would at best be futile and at worst stoke the threat of future inflation, he said.

"If we do our job, that alone does not solve the pathology in the economy. The economy is sick. It's suffering from employment anemia. There's a lack of vitality. We can do only so much," Fisher said.

Kocherlakota, for his part, estimated that more than a quarter of the U.S. unemployment rate is due to mismatches between workers' skills and locations and the jobs available. He said this is a problem that the central bank is ill-equipped to tackle.

"The mismatch problems in the labor market do not strike me as readily amenable to the kinds of monetary policy tools currently available to the Fed," he said.

Like Fisher, Kocherlakota will rotate into a voting seat on the Fed's policy-setting Federal Open Market Committee next year.

Fisher blamed political jostling in Congress for uncertainty about policy, causing businesses to be reluctant to hire new workers.

"The question is how much can the Fed do, and how much can the rest of the guys do?" Fisher said. "I think the Fed's done a lot. And I think it's time for the rest of the guys to get their act together." - Reuters

Shell to sell stakes in Brazil offshore oil blocks

RIO DE JANEIRO: Global oil company Royal Dutch Shell unveiled plans on Wednesday, Sept 8 to sell its stake in four Brazilian offshore blocks, including a field in the vast deepwater subsalt region.

The company said it would sell its stakes in the BS-4, BM-S-8, BM-S-45 and BM-ES-28 blocks. The projects also include investment by Brazil's state oil company Petrobras, U.S.-based Chevron, Portugal's Galp and Brazilian miner Vale.

"Shell reaffirms that it continues to see Brazil as a key area for exploration and production," the company said in an e-mailed statement. "This initiative has no impact on our vision for Shell's future growth and development in the country."

Shell's action comes as the government seeks congressional approval to revamp the nation's oil laws to increase state control of Brazil's new-found oil wealth. Shell has also diversified into biofuels in Brazil, seeking a foothold in ethanol production in one of that fuel's largest producers.

The company holds 20 percent of the BM-S-8 block in the subsalt region that includes the Bem-Te-Vi discovery. The region is a vast area of deep water oil deposits that are buried under the ocean's floor beneath a layer of salt.

Analysts believe the area could hold 50 billion to 100 billion barrels of oil.

Shell has 15 blocks in Brazil including the Parque das Conchas and Bijupira and Salema fields that are already in production.

Earlier this year it signed a binding agreement with ethanol company Cosan that will create Brazil's No. 3 fuel distributor with estimated annual sales of $21 billion that will also explore international ethanol and sugar opportunities.

Shares of Shell rose 0.6 percent to 1814.50 pence in London. - Reuters

GLOBAL MARKETS-Stocks, euro rise on Europe relief

NEW YORK: U.S. and European stock markets rose on Wednesday, Sept 8 as worries about Europe's debt problems eased, allowing the euro to recover part of Tuesday's losses.

Oil prices tracked stocks higher even as low liquidity in equity markets suggested investors were still cautious.

Market sentiment improved after a successful auction of Portuguese debt eased concerns about the credit-worthiness of weaker European economies. On Tuesday, fears about European banks had driven down global stocks and the euro.

Uncertainty about the global economic recovery continued to haunt investors, however, keeping the safe-haven yen near a 15-year high against the dollar and testing the Bank of Japan's resolve to curb currency gains.

"The Portuguese debt auction was perceived well and has helped the market," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

"But there is still uncertainty about the global economies and the markets are reacting positively or negatively to minor news as they can't get the answer to the bigger questions. The market is within a trading range and there are wild intraday swings," he added.

MSCI's All-Country World index rose 0.36 percent, supported by gains in Europe and in the United States, but pressured by losses in developing countries. The MSCI stock index for emerging markets fell 0.16 percent.

U.S. stock markets recovered part of the losses seen on Tuesday, when its three major stock indexes slid more than 1 percent.

The Dow Jones industrial average closed up 46.32 points, or 0.45 percent, at 10,387.01, while the Standard Poor's 500 Index rose 7.03 points, or 0.64 percent, to 1,098.87. The Nasdaq Composite Index finished with gains of 19.98 points, or 0.9 percent, at 2,228.87.

Banking shares gained ground, one day after being hit by concerns about the health of their European peers. JPMorgan Chase rose 2.19 percent, Bank of America climbed 1.21 percent, and Wells Fargo ended up 1.2 percent.

In Europe, the FTSEurofirst 300 index rose 0.96 percent to a four-month high of 1,072 points.

Shares in BP rose 1.3 percent after it issued a report shifting much of the blame for the Gulf of Mexico oil spill -- the worst in U.S. history -- onto its contractors Transocean and Halliburton.

In Japan, however, the benchmark Nikkei stock index ended down 2.18 percent, as the strong yen hurt prospects for exporters.

EURO REBOUNDS, YEN HOLDS

The euro recovered against the dollar after Portugal's successful bond auction made its Tuesday slump appear overdone.

The European single currency climbed 0.28 percent against the greenback to $1.2718, after tumbling about 1.5 percent on Tuesday.

"People have gravitated tentatively back towards the equity market. That has helped the euro to climb off its lows," said Dean Popplewell, chief strategist at FX brokerage OANDA in Toronto. "Investors are still relatively uneasy about the financial situations in Europe."

Another factor helping the euro rise was Ireland's finance ministry saying nationalized lender Anglo Irish Bank will be split into a funding bank and an asset recovery bank to wind down its assets.

"Just the (Irish) announcement bought a little relief rally" in the euro, said John McCarthy, director of foreign exchange trading at ING Capital Markets in New York. "But people are looking to sell the euros in substantial rallies as issues such as sovereign debt in the euro zone have not gone away."

Even as European debt fears eased somewhat, lingering concerns about the global economic recovery kept intact the safe-haven appeal of the yen.

The Japanese currency remained practically stable against the dollar, at 83.83 yen per greenback. Earlier on the session, the dollar fell to as low as 83.34 yen on electronic trading platform EBS, its lowest since 1995.

Despite the strength of the yen, Bank of Japan Governor Masaaki Shirakawa reiterated his reluctance to return to quantitative easing. He indicated, however, that the central bank was weighing its options, while Finance Minister Yoshihiko Noda again warned he would take decisive action if necessary.

"Not surprisingly, more rhetoric from Japanese policymakers has been unleashed, though the legitimacy of such talk is still in question until we see some actual action," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto.

Higher stocks caused benchmark 10-year U.S. Treasuries to fall 16/32 of a point in price, pushing their yield up to 2.6537 percent.

U.S. light crude oil rose 78 cents, or 1.05 percent, to $74.87 per barrel. - Reuters

Greek recession deeper than thought, outlook bleak

ATHENS: Greece's austerity-hit economy shrank at a faster pace than previously thought in the second quarter, casting doubt on government hopes that the future path of a protracted recession will be relatively mild.

Gross domestic product (GDP) in the debt-laden country declined at an annual pace of 3.7 percent in the second quarter, compared with a previous flash estimate of 3.5 percent, statistics service (ELSTAT) said on Wednesday, Sept 8.

The economy shrank 1.8 percent quarter-on-quarter, by far the biggest quarterly decline since it began contracting in the fourth quarter of 2008.

Markets are watching closely for signs of a steeper downturn that may undermine Greece's aims of slashing the budget deficit to below 3 percent of GDP in 2014 from 13.6 percent last year and to return to markets for funding sometime next year.

The GDP reading, following a 2.3 percent year-on-year decline in the first quarter, suggests the EU/IMF's forecast of a 4 percent recession this year is more realistic than the Greek government's hopes that recession will be shallower than that, between 3 and 4 percent, analysts said.

"I'd say that 4 percent looks like an optimistic scenario now," said Diego Iscaro, an analyst at IHS Global Insight. "The second half of the year will be worse, that is when the full impact of austerity measures will be felt," he added.

Household spending eroded at a record annual clip of 4.2 percent in the second quarter, hurt by wage cuts and tax hikes adopted in exchange for a 110 billion euro EU/IMF bailout.

Greece has cut public sector wages by 15 percent and pensions by 10 percent. At the same time, value-added tax has risen by 4 percentage points to 23 percent and other consumption taxes by a third as the government struggles to plug its budget holes.

Investment dropped by 18.6 percent as firms, especially in construction, slash projects and shed workers to cope with the downturn.

On Monday, mid-sized construction firm Attikat filed for bankruptcy protection. On Tuesday, Lambrakis Press , the country's biggest newspaper group, said it shut down its books publishing division to stop bleeding cash.

European recovery is doing little to help Greek exports and tourism receipts, ELSTAT's figures showed. Exports of services, mainly receipts from foreign tourists, dropped in value by 7 percent while sales of products abroad declined by 2.3 percent as Greek firms continue to suffer from low competitiveness vis-a-vis foreign rivals.

"It is rather disappointing to see exports contracting by an overall 5 percent," said Platon Monokroussos, an economist at EFG Eurobank.

The slump would have been even deeper had austerity not also hurt imports, which declined by 13.5 percent, economists said. "Falling imports was the only support to GDP in the second quarter," said Nikos Magginas, an analyst at the National Bank of Greece.

China Mobile falls as Vodafone sells $6.5 bln stake

HONG KONG: China Mobile shares fell the most in a year on Wednesday, Sept 8 after Vodafone sold its stake in the company for $6.5 billion, nearly double what it paid, but analysts expect the stake sale to have no major impact on the Chinese firm.

Vodafone's lock-up period on its 3.2 percent stake in the world's largest mobile carrier by subscribers recently expired, and though the company signaled it would sell, the timing had been unclear.

"We see a short term impact on the stock but in the longer term it removes the overhang," said Kelvin Ho, an analyst at Yuanta Securities.

The sale was part of Vodafone's new strategy to exit non-strategic minority investments, which analysts and investors believe have weighed on Vodafone's overall value in recent years.

Vodafone has minority stakes in operators in Poland, France and India which it might also look to sell.

China Mobile shares fell as much as 4.1 percent and closed down 3.8 percent, its biggest single day drop in more than a year. More than 740 million shares traded against an average daily volume of 21 million shares in the past 30 trading days.

Vodafone shares were down 0.4 percent in a London market up 0.3 percent. The company said it plans to return most of the proceeds to shareholders and repay some debt.

Analysts welcomed the disposal, which came earlier than expected, but said the announcement may focus investors attention on other assets such as the 44 percent holding in France's SFR and the 45 percent stake in Verizon Wireless.

Both of those will be harder to sell because there is only one buyer in each case.

"The China Mobile exit is unlikely to soften pressure on management to also deliver on other asset sales," Jefferies analyst Jerry Dellis said. "Expect focus on SFR to intensify."

CHINA GROWTH SLOWS

The bidding process for the shares began on Tuesday and a banking source told Reuters the books for the share placing closed earlier on Wednesday and the stock allocation was still taking place.

Despite China's position as the world's biggest mobile market with nearly 800 million subscribers, growth for China Mobile and its rivals, China Unicom and China Telecom, has been slowing as revenue from voice calls declines amid increasing cellphone penetration rates.

"China Mobile and Vodafone have established close co-operation in business and technology areas since 2000. Both side will continue to cooperate in these areas in the future," China Mobile said in a statement.

Last month, China Mobile reported a 7 percent rise in quarterly net profit to 32 billion yuan.

"China Mobile's prospects depend on when it is going to get a go-ahead for LTE," said Eric Wen, an analyst at Mirae Asset Securities.

Long Term Evolution (LTE), the evolution of its current 3G networks, is not expected to boost sales significantly, but will lower operating and expansion costs.

China Mobile aims to launch LTE in 2012, analysts said.

Telefonica SA has about 8.4 percent of China Unicom and said in June it would raise its stake in the Chinese company to 10 percent this year.

SHARE PLACING

Vodafone, the world's largest telecommunications operator by revenue, was selling 642.9 million China Mobile shares at HK$79.20 each, representing a 3.4 percent discount to the stock's last close of HK$82 on Tuesday, according to a term sheet. That was the low end of the range that underwriters gave for the sale.

UBS, Goldman Sachs and Morgan Stanley were handling the placing.

The shares were selling to institutional investors in Asia, Europe and the Middle East, sources said, without identifying any buyers.

Goldman Sachs analysts said Vodafone's share sale came a bit earlier than expected. The investment bank maintained its buy rating and target price of HK$93 for the stock after the deal. - Reuters

FUND VIEW-Beer, tyres and luxury key to emerging markets

LONDON: European companies selling beer, luxury watches and winter tyres are among those best placed to benefit from exposure to fast-growing emerging markets, the manager of a Blackrock fund said on Wednesday, Sept 8.

Russia is seeing a very strong recovery after a sharp recession in 2009, Alister Hibbert, manager of the 400 million pound ($618 million) Blackrock European Dynamic fund said at a press briefing.

He said Finnish winter tyre maker Nokian Renkaat was an example of a company that would be able to benefit from a fast-recovering market for foreign-produced cars.

"Russian banks have been starting to extend credit to showrooms again, and that is leading to new models being brought in, and demand is up strongly," said Hibbert, who highlighted a 40 percent year-on-year growth in demand for sales of foreign branded cars in Russia.

Another company benefiting from the improved economic situation in Russia is Danish brewer Carlsberg, the he said.

In the year to end-August, the fund returned 17.72 percent, which was 28.3 percentage points above its peers, according to data from Lipper, a Thomson Reuters company.

Hibbert said companies with exposure to China also offered interesting opportunities.

"Industrialisation is a one-off opportunity, and Chinese consumption as a percentage of GDP is increasing," he said.

Denmark's Novo Nordisk, the world's biggest maker of insulin, is set to benefit from the creation of a welfare state in the world's most populous country, he said.

The world's largest watch maker Swatch Group, which has "amazing pricing power", also looks set to benefit from a rapidly growing appetite for luxury goods in China and other Asian markets, Hibbert said, adding that the fund was overweight the luxury goods sector.

The fund has a heavy overweight in industrials, and Hibbert said compressor and machinery maker Atlas Copco was an "outstanding" company. - Reuters