World Bank chief warns of spreading crisis

WASHINGTON: Protectionism and populist policies in the developing world could rise as countries face increasing head winds from a growing European sovereign debt crisis and a weakening economic recovery in the United States, World Bank President Robert Zoellick said on Thursday, Sept 22.

Zoellick warned another crisis was building at a time when the budgets of many developing economies had not fully recovered from the 2008 financial storm, adding to their fiscal strains.

He told Reuters in an interview more than half of developing countries' budgets have deteriorated by 2 percent of gross domestic product since 2007, and more than 40 percent of developing nations now have government deficits in excess of 4 percent of GDP.

"If the situation deteriorates further, then developing countries' growth could turn down, their asset prices could drop and then their non-performing loans could increase," Zoellick said.

"With these pressures and prospects we have to anticipate possible protectionist pressures, beggar-thy-neighbor policies and a risk of a retreat to Populism," he added.

While he still believed advanced economies could avoid a double-dip recession, Zoellick said his concerns were growing unless they acted forcefully to tackle their problems.

"A crisis made in the developed world could become a crisis for developing countries," he said. "Europe, Japan and the United States must act to address their big economic problems before they become bigger problems for the rest of the world.

"Not to do so would be irresponsible," he added.

Developing economies, he said, had grown more resilient over the past decade and were in a better position to withstand another crisis but they were still concerned about the spillover effects from troubled advanced economies.

Some of the largest impacts to poorer countries would be felt through a decline in global demand, which would affect trade and commodity prices.

Zoellick said $6.1 trillion was wiped out globally in stock market declines over the past couple of months, which is equivalent to 10 percent of global GDP.

A meeting of finance leaders from emerging market economies -- China, India, Russia, South Africa and Brazil -- in Washington on Thursday called for 'decisive action' by advanced countries to tackle the deterioration in their economies.

"The best role for the BRICS countries is the same as the best role for any country, which is to focus on what they need to do at home to get through the current financial dangers and to move on to long-term growth," he said.

Zoellick said he was paying close attention to consumer and business confidence in emerging economies. - Reuters

HP names Whitman CEO, Apotheker out

SAN FRANCISCO: Hewlett-Packard Co named former eBay Inc Chief Executive Meg Whitman its president and CEO, replacing the harshly criticized Leo Apotheker in a bid to restore investor confidence in the U.S. TECHNOLOGY [] company, Reuters reported on Thursday, Sept 22.

The decision was made without a formal CEO search and piled renewed criticism on the board, which Wall Street has been blamed -- at least in part -- for the storied Silicon Valley's recent missteps.

Whitman, an Internet retail expert with a mixed track record, is not an obvious choice to revive HP, analysts said. The failed California gubernatorial candidate transformed eBay from a few dozen employees in 1998 into a global Internet retail powerhouse, but the final years of her reign were marked by sputtering growth, intensifying Wall Street criticism and a string of unwise acquisitions, including of Skype.

While her elevation surprised many with its seeming hastiness -- for the second time, internal candidates such as enterprise chief David Donatelli were passed over -- Apotheker's ejection had been a matter of time.

He becomes the third straight HP CEO shown the door.

"Some might be saying maybe Meg Whitman isn't the right person, either. She's not a hardware person," said Auriga analyst Kevin Hunt. But HP "just needs someone to set the direction."

Analysts had speculated that Apotheker's departure might presage a backtracking on major decisions taken during his 11-month term. But HP reassured investors on a conference call on Thursday that the board was not changing strategy again.

Whitman said HP remained committed to completing a review of its PC division before the year ends, and expected to close the pricey $12 billion acquisition of British software maker Autonomy Corp Plc as planned.

HP's shares closed down 4.8 percent at $22.80, wiping out much of Wednesday's 6.6 percent gain.

"We would view any decision not to conduct a comprehensive search of internal and external candidates for a permanent CEO role as unsatisfactory and unnecessarily hasty," Sanford Bernstein analyst Toni Sacconaghi, who has been openly critical of HP's board, wrote in a note earlier on Thursday.

HP Chairman Ray Lane dismissed such concerns. He said the board chose Whitman after serious consideration and that her strong communication and operational execution skills made her the best candidate.

QUESTIONS?

In less than a year on the job, Apotheker, formerly SAP AG CEO, slashed HP's forecasts for three straight quarters and struggled to reverse a 50 percent plunge in the share price.

The storied Silicon Valley computer maker is fighting to restore its crumbling credibility. Whitman has to galvanize growth at a company that gets more than a third of its revenue from a slowing European economy, and is struggling to offset sliding PC revenue with services and software.

"We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead," said Lane, who moved from non-executive chairman to executive chairman on Thursday.

Whitman's record at eBay came under scrutiny during her failed campaign for California's governorship. Analysts question whether her stewardship of eBay prepared her to steer a sprawling enterprise and computer giant.

The billionaire is credited with catapulting eBay into the upper echelons of a then-nascent e-commerce arena, and taking it public. But critics note she pushed hard to acquire Internet telephony service Skype, beginning a long and ultimately fruitless attempt to wring value from it. EBay eventually unloaded it, and it ended up with Microsoft Corp.

Her successor, John Donahoe, spent years engineering a turnaround and trying to rekindle stalled growth.

"While we believe she has proven to be a very capable manager helping grow eBay from a start-up into one of the largest Internet companies, we think an ideal candidate for HP should have extensive experience in the enterprise market," Stern Agee analyst Shaw Wu said in a client note.

Better choices would include HP enterprise chief Dave Donatelli and PC head Todd Bradley, two names that had also made the rounds in Silicon Valley for the top job after Mark Hurd's ouster in August 2010, he added.

On a more personal level, opponents and media on the campaign trail last year raised questions about Whitman's fierce temper and imperious manner with employees, and even about her integrity after it emerged that the wealthy former CEO had employed an illegal alien maid. - Reuters

U.S. equity funds see $4.6 bln in outflows -Lipper

NEW YORK: Investors withdrew $4.6 billion from domestic equity funds in the week ended Sept. 21, but added $2.9 billion in international stocks, data from Thomson Reuters' Lipper showed on Thursday.

The bulk of the outflow in domestic equity funds came from exchange-traded funds, suggesting that institutional money fled in a week marked by the downgrade of Italian debt, renewed concerns about Greek debt and sour economic news.

All equity funds combined suffered $1.65 billion in net outflows.

Investors' optimism that Europeans were moving to resolve the region's long-simmering debt crisis and that the Federal Reserve would move to avert economic recession had lifted global markets at the beginning of the five-day period.

"I don't think investors really had the time to have a meltdown," said Tom Roseen, a Lipper senior analyst in Denver.

'My takeaway from this was it could have been a lot worse, as far as outflows go."

But the mood darkened after the Fed said on Wednesday that the U.S. economy faces "significant downside risks."

"The everyday investor felt pretty good for most of the week," Roseen said. "However, the active traders, those were the guys moving the market."

The outflow from domestic ETFs was $4.3 billion, while from domestic non-ETFs, the outflow was just $271 million.

Roseen said the data suggests retail investors are staying conservative, through selective stock selection and staying invested in equities, while continuing to buy municipal bonds.

ETFs also accounted for the bulk of money flowing into international equity funds, at $2.8 billion. Only $101 million flowed into non-ETF international equity funds.

Taxable bond funds took in $2.9 billion, almost evenly divided between ETF and non-ETF funds. Municipal bond funds took in $296 million, almost 93 percent going to non-ETFs.

Money market funds had $15.9 billion in outflows.

Lipper's weekly fund flows data are compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds. ' Reuters

''

Market's 3 percent fall suggests deepening worry

NEW YORK: Stocks plunged on Thursday, Sept 22 extending a selloff to four days, as policymakers' failure to arrest global economic stagnation sent markets spiraling downward.

The heavy volume of Thursday's plunge signaled investors are selling in anticipation of more losses. Wall Street's "fear gauge," the CBOE Volatility Index, jumped 12 percent, giving the index its biggest 2-day percentage spike in a month as investors protected against more losses to come.

Energy and materials shares were among the hardest hit areas on worries of slowing worldwide demand. Signs of a slowdown in China fed those fears.

"It's tough to find anything that is a positive catalyst for the market, either domestically or internationally," said TD Ameritrade Chief Derivatives Strategist J.J. Kinahan.

The Dow Jones industrial average dropped 391.01 points, or 3.51 percent, to 10,733.83. The Standard & Poor's 500 Index lost 37.20 points, or 3.19 percent, to 1,129.56. The Nasdaq Composite Index slid 82.52 points, or 3.25 percent, to 2,455.67.

Weak data from China followed an unsettling outlook about the U.S. economy from the Federal Reserve on Wednesday in stoking recession fears. The previous session's losses were sparked after the Fed said it saw "significant downside risks" facing the economy.

China's once-booming manufacturing sector contracted for a third consecutive month, while the euro zone's dominant service sector shrank in September for the first time in two years.

Those searching for positive market signs could point to the benchmark S&P 500 index holding above 1,120, seen as a key technical support level which could trigger more selling if broken.

"We haven't seen the market completely tilt just yet, so that does show there is some resilience. There is some fresh capital on the sideline and people aren't necessarily hitting the panic button," said Joseph Greco, managing director at Meridian Equity Partners in New York.

"If we tested 1,100 -- that is where we could see a really sharp decline from there."

Volume of about 13.24 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq was well above the daily average of 7.8 billion and the highest since August 10.

U.S. crude oil futures tumbled more than 6 percent, the biggest one-day percentage drop in six weeks. For details, see

The PHLX oil service sector index tumbled 6.6. Schlumberger slid 6 percent to 61.22. The S&P materials index fell 5.5 percent, with miner Freeport-McMoRan Copper & Gold Inc off 9.7 percent to $32.14.

Banks also lost ground with the KBW bank index off 2.7. Citigroup shares were down 6.1 percent to $23.96. The Fed's plan to lower long-term rates will compress margins for banks that borrow at short-term rates and lend at longer-term rates. The declines also came a day after Moody's cut debt ratings for big lenders.

FedEx Corp, considered to be an economic bellwether, slumped 8.2 percent to $66.58 after the world's No. 2 package delivery company pared its outlook for the full year.

In addition to the statement on Wednesday, the U.S. central bank detailed additional stimulus measures to help push down long-term rates. Investors worried the latest plan would have little effect on lending and that there appeared to be few solutions to sluggish worldwide demand.

Near the close, traders exchanged about 1.10 million option contracts in the S&P 500 Index as 2.69 puts were in play for each call, according to Trade Alert. That put-to-call ratio was higher than the 22-day moving average of 1.77.

Declining stocks outnumbered advancing ones on the NYSE by 2,724 to 343, while on the Nasdaq, decliners beat advancers 2,230 to 353. - Reuters

Warnings mount on euro crisis, BRICS mull more aid

WASHINGTON: World leaders and finance chiefs on Thursday, Sept 22 pushed Europe to quell its debt crisis and big emerging economies said they might provide more money to help stop the chaos from spreading.

As finance ministers and central bankers gathered for talks amid growing concern about sharply slowing growth and plunging stock markets, the leaders of seven big economies stressed the need to contain the euro zone crisis.

"Euro zone governments and institutions must act swiftly to resolve the euro crisis and all European economies must confront the debt overhang to prevent contagion to the wider global economy," the leaders of Australia, Canada, Indonesia, Britain, Mexico, South Africa and South Korea wrote in an open letter to France, chair of the Group of 20 leading economies.

Separately, officials from the so-called BRICS countries, including heavyweights China, Brazil and India, said they would consider giving more funds to the International Monetary Fund to boost global stability.

But India issued a reminder that developing countries were not in a position to bail out richer economies.

"We represent a group of countries where there is (an) enormous amount of demand for resources at home for poverty reduction," Reserve Bank of India Governor Duvvuri Subbarao told a joint BRICS news conference in Washington.

The euro area crisis has put a strain on the IMF's resources. With key economies teetering on the edge recession, more countries could seek emergency loans, quickly depleting its capital.

An internal IMF staff report obtained by Reuters last week showed that the fund could comfortably lend out another $390 billion without endangering its balance sheet. But in a worst-case scenario, it may face demands for $840 billion -- an increase of $200 billion from staff estimates made in June.

Highlighting the growing role of the BRICS in the world economy, China's central bank governor said major emerging markets should boost domestic demand to take up some of the slack caused by weakness in the United States and Europe.

"In today's crisis period, internal demand of each economy is important, and we should find a way to enlarge internal demand in our economy," Zhou Xiaochuan said.

But he made no mention of repeated U.S. calls for Beijing to let the yuan currency rise faster.

As stock prices around the world fell on fears of a new economic slump, U.S. Treasury Secretary Timothy Geithner voiced optimism that Europe would devote more of its own resources to backstop euro area governments and banks under stress.

"I am very confident they're going to move in the direction of expanding (their) effective financial capacity," he said. "They're just trying to figure out how to get there in a way that is politically attractive."

French Finance Minister Francois Baroin said giving more clout to Europe's new bailout mechanism, the European Financial Stability Fund, could be done but was not top of his agenda.

"The main issue (for the euro zone) is reducing deficits as quickly as possible. Leveraging the EFSF is not a priority for now, we could eventually consider how to leverage it to give it more systemic firepower."

ECB WARNS EURO IN DANGER

In Frankfurt, a European Central Bank study on Thursday warned the entire euro currency project was now in peril.

The study, perhaps the most stern warning about the euro's future from a central banker, was a parting shot from ECB chief economist Juergen Stark, who resigned this month after opposing the bank's purchases of troubled countries' bonds.

"Greatly increased fiscal imbalances in the euro area as a whole and the dire situation in individual member countries risk undermining stability, growth and employment, as well as the sustainability of (Europe's Economic and Monetary Union) itself," said the research paper, which was published by the ECB but not endorsed by it.

G20 finance ministers will meet for dinner in Washington on Thursday to discuss the crisis, but they have no plans to issue a communique to outline a response.

That may be disappoint investors who are alarmed about the inability of policymakers to tackle jointly the world's economic problems as they did at the height of the financial crisis in 2008 and 2009.

World stocks plunged on Thursday as investors worried about the grim global growth outlook including data pointing to a slowdown in China, one of the world's key economic engines.

European stocks fell over 4.5 percent and the Dow Jones Industrials closed down over 3.5 percent.

Investors flooded into the safe haven of U.S. Treasury debt, pushing yields to new lows a day after the Federal Reserve, warning the U.S. economy faced significant risks, announced a new plan to keep lending rates low.

The European Union's monetary affairs commissioner, Olli Rehn, did not rule out the possibility of a Greek debt restructuring but vowed European leaders would not allow an uncontrolled default nor Greece leaving the euro zone.

In Athens, Prime Minister George Papandreou said further austerity measures were vital to Greece, even as workers striking in protest shut down the country's transport system.

"There is no other path. The other path is bankruptcy, which would have heavy consequences for every household," he said.

BANKS IN FOCUS

The crisis has raised pressure on European banks, particularly in France, which are heavily exposed to Greece and other troubled euro zone sovereigns. Baroin said any liquidity problems for Europe's banks were addressed by a move by global central banks to set up new liquidity facilities last week.

The IMF has pressed for a recapitalization of European banks but has faced opposition from bank executives and EU governments who have said balance sheets are sound.

Europe's banking regulator denied a Financial Times report that it would force 16 weaker, mid-tier banks to raise capital more quickly after they came close to failing European stress tests last year.

France's biggest bank, BNP Paribas denied a Reuters report that it was in talks with the Gulf state of Qatar on taking a stake in the bank. - Reuters

Two ex-directors of Multicode Electronics jailed, fined

KUALA LUMPUR: Two former directors of Multicode Electronics Industries (M) Bhd were jailed after they were found guilty of committing criminal breach of trust (CBT) involving over RM26 million of funds belonging to the company.

The Securities Commission said on Thursday, Sept 22, the Kuala Lumpur Sessions Court found Gordon Toh Chun Toh, a Singaporean, and Datuk Abul Hassan Mohamed Rashid guilty of CBT under section 409 of the Penal Code.

Toh was sentenced to 12 years imprisonment and Abul Hassan received a jail sentence of six years. Toh was also ordered to pay a fine of RM1 million, in default two years imprisonment.

Judge Datuk Jagjit Singh said 'A pre-meditated white collar scandal executed with precision within T+3 is how I would sum up the whole case'.

He stressed that the sentences imposed on the two must send a strong message to offenders and would-be offenders that crime does not pay.

Jagjit Singh also pointed out that the victim, Multicode, is a public listed company which lost millions as a result, causing its public shareholders to suffer as well.

He said that for the business and commercial sector to flourish, the corporate environment must be free of white collar crimes.

To recap, Toh and Abul Hassan were charged in the Sessions Court in Kuala Lumpur in March 2009 with having engaged in an act which operated as a fraud on Multicode by causing the uplifting of fixed deposits belonging to Multicode under section 87A of the Securities Industry Act 1983.

An alternative charge of CBT was preferred at the same time under section 409 of the Penal Code.

The prosecution called a total of 31 witnesses over the period of the trial.

Berjaya Land 1Q net profit dn 28% at RM56m

KUALA LUMPUR: BERJAYA LAND BHD [] posted a 28% decline in net profit at RM56.08 million in its first quarter ended July 31, 2011 from RM77.89 million a year ago due to lower profit contribution from the hotels and recreation business.

It said on Thursday, Sept 22 that revenue was 2.1% higher at RM1.00 billion compared with RM978.94 million. The pre-tax profit was RM94.80 million, down 15.6% from RM112.40 million. Earnings per share were 0.04 sen compared with 0.89 sen.

'The increase in revenue was mainly contributed by the gaming business via BERJAYA SPORTS TOTO BHD []'s principal subsidiary, Sports Toto Malaysia Sdn Bhd and the higher property sales registered by the property development business.

Berjaya Land said the drop in group pre-tax profit for the quarter under review was mainly due to the lower profit contribution from the hotels and recreation business due to lower occupancy rates resulting from lower tourist arrivals and lower sales from the MICE sector.

There was also an impairment of available-for-sale quoted equity investments and unfavourable changes in fair values of quoted equity investments.

However, the decline was partly mitigated by the higher profit contribution registered by the gaming business mainly attributed to lower prize payout compared to a year ago and the gain on disposal of a subsidiary company.

'In addition, the preceding year corresponding quarter's results included an exceptional gain on disposal of an associated company amounting to about RM53.2 million,' it said.

Jakarta plunges 8.9%, biggest fall since Oct 2008

SINGAPORE: Indonesia stocks plunged 8.9 percent on Thursday, Sept 22 their worst drop since the 2008 financial crisis, as concerns over the struggling rupiah currency and fears over the global economy battered a market that had been the region's best performer.

Jakarta's stock index shed 328.35 points to its lowest close since Jan. 24, its biggest single-day percentage loss since Oct. 8, 2008, at the height of the financial crisis.

The region's best performer last year, which attracted $1.6 billion of inflows to August on top of $2.4 billion in 2010, suffered outflows of $94.3 million on Thursday as worries over the weaker rupiah prompted panic selling.

"It's mainly because of internal currency issues with the rupiah seen weakening above 9,000," said Pardomuan Sihombing, head of research at Jakarta-based Recapital Securities.

"There is panic selling in stocks both from local and foreigners due to the weakening of rupiah and that will cause capital outflows. Firms with dollar exposure, especially importers including Indofood and Astra, will be affected," he said.

Indofood and Astra closed down 13 percent and 9.5 percent respectively.

Exchange authorities dismissed suggestions panic had taken hold.

"We're monitoring conditions. If there is one side that is panic selling, we will stop [trading]. But, for now, there's no panic selling," said Eddy Sugito, listing director at the Indonesia Stock Exchange.

"We will suspend trading if it falls 10 percent or more."

''

REGIONAL CURRENCIES, STOCKS UNDER PRESSURE

The dollar rose to a seven-month high against major currencies as a broad sense of aversion to risk swept through financial markets. The U.S. Federal Reserve set the ball rolling on Wednesday when it launched "Operation Twist", a plan to lower borrowing costs by selling or not renewing short-term debt in

favour of longer bonds.

Emerging Asian currencies are expected to weaken further after the Fed's move, although moves by regional authorities are seen as slowing down the pace of their falls, dealers and analysts said.

Despite the worries, the Indonesian currency edged up on Thursday as the central bank intervened through buying government bonds in "large amounts" to stabilize the rupiah.

Other Southeast Asian markets also lost ground as a gloomy outlook for the U.S. economy by the Federal Reserve put a spotlight on risky emerging-market investments.

Thailand fell 3.8 percent to its lowest close since March 3, Singapore was off 2.6 percent to its 15-month closing low, the Philippines hit a near six-month low with a 2.6 percent fall, while Malaysia shed 2.2 percent to end at a more-than one-year low.

Thailand suffered foreign outflows of $87.9 million and Malaysia saw a net offshore selling of $48 million on Thursday.

The gloomy economic outlook after the Federal Reserves comments a day earlier drove World stocks to a more than one-year low. World stocks measured by MSCI fell as much as 2.4 percent to a new one-year low, while the more

volatile emerging-markets stock index was down 4.7 percent for by 0952 GMT.

The MSCI Asia Pacific ex-Japan index was trading 5.4 percent weaker at its lowest level since July 2010 by 0956 GMT.

Financial stocks led falls in the region with Indonesia's largest lender, Bank Mandiri , the biggest micro lender Bank Rakyat Indonesia , and fourth biggest lender by assets Negara Indonesia slumped more than 13 percent each.

Bangkok's Siam Commercial Bank was off 3.4 percent and Singapore's DBS was down 2.1 percent.

Shares of Singapore property stocks tumbled on fears that developers may soon start cutting prices in the face of slowing sales. CapitaLand fell 4.2 percent and City Developments lost 2.9 percent. - Reuters

SapuraCrest awards US$227m contract to Cosco for 2 ships

KUALA LUMPUR: SAPURACREST PETROLEUM BHD []'s unit TL Offshore Sdn Bhd has issued two letters of awards to Cosco'' Nantong Shipyard Co. Ltd to build two ships costing a total of US$227 million.

SapuraCrest said on Thursday, Sept 22, Cosco was to build two pipe-lay cum heavylift offshore CONSTRUCTION [] vessels.

It said the contract price for the first ship was US$116.75 million and the second was for US$110.25 million. The delivery date was 28 months and 26 months.

'The acquisition will enable TLO to capitalise on the positive outlook in the installation of pipelines and facilities (IPF) segment in the oil and gas industry,' it said.

SapuraCrest said with the deployment of these vessels, TLO would be able to boost its market share by growing the revenue stream within its existing core business. After delivery, the ships would deployed for marine construction contracts for major oil companies.

MAA Holdings gets shareholders's nod to sell insurer

KUALA LUMPUR : MAA HOLDINGS BHD [] has obtained its shareholders' approval to dispose its core business Malaysian Assurance Alliance Bhd (MAAB) for RM344 million to Zurich Insurance Co Ltd, which values MAAB at 1.36 times book value.

MAA Holdings'' chairman Tunku Datuk Yaacob Tunku Abdullah'' said on Thursday, Sept 22 although the price tag for MAAB wass considered very low, due to the high capital adequacy requirement sets out by Bank Negara for insurance business, the group's shareholders decided that it is better to dispose MAAB.

He said going forward, MAA Holdings would focus on its takaful business under MAA Takaful Bhd and its asset management business under MAAKL Mutual Bhd.

However, the profit margin for asset management business is considered low, but the group intends to grow its asset value under management which currently stands at RM1 billion to grow its profit.

At the EGM, shareholders approved MAA Holdings name change to MAA Group.'' It will be structured to become an asset management holding company, to acquire stakes in other companies at reasonable price, and later sell it at a rather expensive price.

Tunku Yaacob liken the group's business going forward as more 'like a trader'.

He did not discount any corporate activities to acquire another business to boost the group's profitability going forward, as the current profits derived from its 70% owned MAA Takaful and 75% owned MAAKL Mutual were relatively small compared to profit derived from MAAB prior to the disposal.