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The number of high net-worth individuals in Asia Pacific slumped 14 percent in 2008 and they lost over a fifth of their wealth, leading to only cautious moves from cash back into stocks this year, Merrill Lynch and Capgemini said on Tuesday.

The financial crisis spurred a flight to safe assets, with cash holdings higher than in other regions at 29 percent and a surge in demand for gold, especially in China and Thailand, Merrill Lynch and Capgemini said in their Asia-Pacific Wealth Report 2009.

“We expect them to remain cautious,” said Eng Huat Kong, head of South Asia at Merrill Lynch wealth management.

“Allocation to cash has certainly reduced and they have begun to get back into the equity market,” he said at a briefing.

The annual report said despite last year’s setback, the region will be one of the fastest drivers of growth among such millionaires, predicting compound annual growth of 8.8 percent in the wealth of this group until 2018.

The report expected Asian economic growth to be more than double that of world growth next year at 3.5 percent. Many policymakers from South Korea to the United States say growth-supporting policies need to be maintained to avoid the risk of a double-dip recession.

“If there is another crisis, the impact will not be as dramatic as last year,” Kong said.

The report said the region’s wealthy are concentrated in Japan and China, which together made up 72 percent of the total, up slightly from the previous year as they saw milder losses than those in many other countries pay day loan lenders.

QUESTIONS FROM CLIENTS

By the end of last year India only made up 4.2 percent of the $7.4 trillion of wealth held up this group, defined as those with $1 million or more in investable assets.

The high net worth populations in India and Hong Kong saw the biggest pullback in 2008, on sharp falls in market capitalization, slumping housing prices and a drop in global demand for exports.

Overall exposure among the regions’ wealthy to equities shrank to 23 percent at the end of last year and real estate holdings edged up to 22 percent.

Asia’s wealthy are more often first-generation entrepreneurs willing to take on more risk and actively trade for high returns, compared to the older inherited wealth in Europe and North America, private bankers say, but the report said it expected cautious asset allocation in the short term and a more balanced approach in the long run.

The wealth management industry is in the midst of unprecedented change as volatile financial markets and the erosion of bank secrecy challenges traditional business models. “Clients are asking more questions, making sure they are dealing with the right institution and banker,” said Kong.

“International banks will still have the key market share.” 

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Tengzhong, a little-known Chinese machinery maker that has agreed to buy GM’s Hummer brand, said on Monday it has begun to seek regulatory approval for the deal, aiming to close the purchase by early 2010.

Sichuan Tengzhong Heavy Industrial Machinery, which first announced its intent to buy Hummer in June, has been in touch with the Chinese government after signing a landmark deal to acquire the brand last week, a company spokeswoman said.

“We have started communicating with the relevant regulatory bodies and will continue to support the application process in accordance with the requirements,” she said, adding that Tengzhong hoped to close the deal late this year or early 2010.

She did not specify which government bodies Tengzhong had contacted. China’s Ministry of Commerce has authority over the deal while the National Development and Reform Commission would have to approve any new major investment in the country, such as building a new manufacturing base.

She said Tengzhong would also explore opportunities to set up a Hummer manufacturing base in China targeting the Chinese market.

The deal must also be approved by U.S. regulators.

SENTIMENT SWITCH

Initial sentiment toward the sale was negative in China, with many questioning why a Chinese firm with no experience running a major Western brand would want to buy a struggling name known for its large gas-guzzling vehicles.

But the mood has turned more neutral since then, with regulators saying such purchases should be allowed when they make commercial sense saving account payday loan.

Tengzhong aims to gain a globally known brand, intellectual property, a trademark and manufacturing expertise from the deal.

The purchase agreement with General Motors Co, signed on Friday, underscores the fast rise and global ambitions of the Chinese auto industry, populated by a wide range of fast-growing, aggressive car makers such as Geely Automobile, SAIC Motor Corp and BYD.

It marks the first time that Chinese investors have stepped in as major buyers into the distressed U.S. auto industry, and comes after China surpassed the United States to become the world’s largest auto market.

A source close to Tengzhong previously told Reuters that the Hummer business would be sold for about $150 million, far less than GM’s earlier estimate that the brand could fetch more than $500 million.

Under the deal, Lumena Resources Corp Chairman Suolang Duoji would hold 20 percent of the investment vehicle buying Hummer. Tengzhong would hold the remaining 80 percent.

Hummer has its origins in a multipurpose vehicle known as the Humvee that was used by the U.S. military. GM bought the brand in 1999 and its sales peaked in 2006, but they have been hit hard since then by a slumping U.S. economy and higher gas prices.

(Editing by Edmund Klamann)

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As third quarter earnings season takes off, bigger is better.

With the U.S. economy emerging from recession, large cap stocks are set to have a stronger third-quarter earnings season than their mid and small cap counterparts, which are expected to rebound at a slower pace.

This goes against the usual trend when the economy emerges from recession, analysts say. Often, smaller companies recover more rapidly as the economy expands.

This time, large caps have several factors working in their favor. The weakness of the dollar helps multinationals that export product overseas, and also provides them a favorable currency translation.

Government assistance in the credit markets also drove down borrowing costs for big financials, set to report another quarter of strong profits.

And statistical comparisons with year-ago results will be flattering for large caps devastated in the second half of 2008.

So while mid and small cap firms may prove more flexible if an economic rebound takes hold, their bigger brothers appear better equipped to weather a slow-plod recovery.

“Especially in the financials, the small cap space still seems to have its issues in terms of earnings, and so that is going to be a pretty big drag in terms of the profit numbers,” said Steve DeSanctis, small-cap strategist at Bank of America Merrill Lynch in New York. “You’re getting probably more of a recovery in the large-cap earnings.”

BIG COMEBACK

Expectations that small and mid cap companies would recover first is apparent in the performance of the shares easy pay day loans.

Since hitting 12-year lows on March 9, small and mid cap stocks have led the recovery, with the S&P MidCap 400 index .MID rising 72.4 percent and the S&P SmallCap 600 index .SML jumping 76.5 percent. In comparison, the S&P 500 index .SPX has gained 57.8 percent.

But third and fourth quarter estimates favor the large cap names. According to data from Thomson Reuters, third-quarter earnings for large cap stocks are expected to decline 25.3 percent. By contrast, Bank of America-Merrill Lynch researchers predict a decline of 26.6 percent for midcaps and almost 31 percent for small caps.

The earnings collapse in the second half of 2008 hit large cap names harder than smaller stocks. Mid caps, in particular, have a heavy exposure to the energy and materials sectors, which were stronger in the second half of 2008, Bank of America-Merrill Lynch noted.

The majority of the large cap profit recovery is expected to be provided by financial stocks, as analysts project a 56.9 percent increase in earnings from a year-ago, when profits were crippled by the near-collapse of the banking system.

Smaller financials have also been under pressure for their exposure to commercial real estate, which may hamper their quarterly profits. 

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The increasing use of dark pools, or venues where stock trades are hidden from public view, is a growing concern for regulators, the Chairman of the U.S. Securities and Exchange Commission said on Thursday.

While there were legitimate reasons for market participants to maintain anonymity and engage in trading without moving the market, dark pools may lower the quality of publicly available information, Mary Schapiro said in a speech at the IOSCO Technical Committee Conference in the Swiss city of Basel.

“The SEC is considering whether the dark pools need more light,” Schapiro said.

Dark pools allow traders, especially of large blocks of stock, to hide their intentions and avoid moving share prices. They have gained traction over the last decade as the average size of trades dramatically decreased on the transparent exchanges bad credit pay day loans.

The United States has some 40 such venues, but dark pools have also grown in Europe and elsewhere.

Schapiro said some pools were not dark to all market participants but rather transmitted electronic messages to select individuals that could convey valuable information about their available liquidity.

This could lead to significant private markets that excluded public investors, she said.

“Such a two-tiered market would be inconsistent with the fundamental principles of fairness and efficiency that guide U.S. market structure policy,” Schapiro said.

(Reporting by Sven Egenter; editing by John Stonestreet)

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Investors eager to cash in on the prospect of a revival of merger & acquisition (M&A) activity could see their efforts go to waste as access to financing remains a major obstacle hampering bids.

Analysts urge caution against being too quick to buy into M&A target plays on the prospect of sweetened bids or successful deals, as holding on to them may be of little value in the long run in the absence of catalysts to drive M&A activity.

Equity markets were given a boost by the revival of long-mooted bid plans, including a $16.7 billion bid by Kraft Foods Inc for Cadbury Plc and Abbott Laboratories’ $6.6 billion bid for Solvay SA’s pharmaceutical unit.

Last Thursday, Cisco Systems Inc offered to buy Norwegian video-conferencing equipment maker Tandberg ASA for $3 billion, the latest in a rash of corporate takeovers after a lean period of a year and a half during the financial crisis.

The prospect of a sweetened bid has helped Cadbury’s share appreciate almost 41 percent since the Kraft plan was first mooted in early September as investors sought to cash in on a revised offer for the confectionary firm.

Analysts, however, argue many would-be bidders face a bumpy ride in securing financing for M&A deals, leaving investors with little prospect for making gains on the back of enhanced bids.

“The heavily leveraged debt finance vehicles which were used to fund M&A activity up until summer 2007 are just not there any more,” said Peter Dixon, economist at Commerzbank. “Nobody is prepared to load up on debt and banks are very wary of finance.”

M&A HYPE

Despite the hype surrounding the re-emergence of M&A deals, global activity remains low. The value of deals fell 54 percent to $369.3 billion in the third quarter from the same quarter in 2008, according to Thomson Reuters data.

Howard Wheeldon, partner at BGC Partners, said he did not expect a real resurgence until well into 2010.

“Funding remains difficult, with rights issues for acquisition purposes acceptable if properly reasoned as a sensible consolidation opportunity, but only to a much lesser extent for strategic reasoning,” Wheeldon said.

As European shares had 45 percent of their value wiped out at the height of the financial crisis at the end of 2008, the argument that stocks were cheap gained supporters.

By August last year, stocks in the DJ Stoxx 600 index .STOXX were trading on just 6.8 times historic earnings, according to Thomson Reuters data. Since then they have clawed back to trade at around 14 times, near levels seen before the crisis first struck in June 2007, casting doubt over the argument that target companies are still cheap.

“Markets are well overvalued right now given the immediate outlook and prospects … a mini bubble if you like and one that at some point is bound to burst,” said Wheeldon.

Still, the prospect of M&A has the ability to further boost markets to drive higher as bid talk hots up. 

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Dow Chemical Co said on Monday it would begin selling a new rooftop shingle next year that converts sunlight into electricity — and could generate $5 billion in revenue by 2015 for the company.

The new solar shingles can be integrated into rooftops with standard asphalt shingles, Dow said, and will be introduced in 2010 before a wider roll-out in 2011.

“We’re looking at this one product that could generate $5 billion in revenue by 2015 and $10 billion by 2020,” Jane Palmieri, managing director of Dow Solar Solutions, told Reuters in an interview.

The shingle will use thin-film cells of copper indium gallium diselenide (CIGS), a photovoltaic material that typically is more efficient at turning sunlight into electricity than traditional polysilicon cells.

Dow is using CIGS cells that operate at higher than 10 percent efficiency, below the efficiencies for the top polysilicon cells — but would cost 10 to 15 percent less on a per watt basis.

Dow Solar Solutions said it expects “an enthusiastic response” from roofing contractors for the new shingles, since they require no specialized skills or knowledge of solar systems to install.

The new product is the latest advance in “Building Integrated Photovoltaic” (BIPV) systems, in which power-generating systems are built directly into the traditional materials used to construct buildings.

BIPV systems are currently limited mostly to roofing tiles, which operate at lower efficiencies than solar panels and have so far been too expensive to gain wide acceptance.

Dow’s shingle will be about 30 to 40 percent cheaper than current BIPV systems.

The Dow shingles can be installed in about 10 hours, compared with 22 to 30 hours for traditional solar panels, reducing the installation costs that make up more than 50 percent of total system prices.

The product will be rolled out in North America through partnerships with home builders such as Lennar Corp and Pulte Homes Inc before marketing is expanded, Palmieri said.

Dow received $20 million in funding from the U.S. Department of Energy to help develop its BIPV products.

The company also produces fluids used in concentrated solar systems, in which sunlight is used to generate heat that produces steam to power a turbine.

In addition, it supplies materials used to help manufacture photovoltaic panels and increase their efficiency.

Dow shares were up 4.4 percent at $24.67 on the New York Stock Exchange in afternoon trading.

(Reporting by Matt Daily, editing by Dave Zimmerman and Gerald E. McCormick)

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One steady bit of good economic news: Inflation remains near zero. So who would want to pay extra these days to add a dose of inflation protection in their portfolio?

Plenty of people. It turns out sales are hot for Treasury Inflation-Protected Securities, a common hedge against rising prices known by their acronym TIPS.

New money from investors and market gains have boosted total assets in mutual funds investing in TIPS nearly 36 percent so far this year, according to Morningstar Inc.

It’s part of a broader shift by many investors who have been scared away by stocks, despite the market’s hefty rebound from its March low. They’ve been piling into the greater safety of bonds, and TIPS — while not without risk — are about as safe as you can get.
The value of the underlying investment in TIPS rises with inflation, providing an additional layer of protection beyond what Treasury bonds offer.

Hardly anyone expects inflation to re-emerge as a big threat anytime soon, so TIPS aren’t necessarily the best short-term investment. But historically low interest rates and the federal government’s growing deficit are expected to drive prices higher, especially once the economy truly gets back on its feet and spending rebounds.

Here are some common questions and answers about TIPS:

How do TIPS work?

Introduced by the government in 1997, TIPS are a type of Treasury bond — investments that are super-safe, provided you believe the government will continue to make good on its credit obligations.

TIPS adjust their yield based on changes in the Consumer Price Index. The principal in TIPS adjusts every six months. The so-called "coupon" rises when inflation grows, and decreases in the less-likely instance of deflation. When the bond matures, you’re paid the adjusted principal or the original principal, whichever is greater. TIPS are sold in maturities of five, 10 and 20 years.

Investors in "nominal" Treasury bonds get a fixed rate of return if they hold the bonds until they mature. For example, 10-year Treasury notes are now yielding about 3.32 percent per year.

On the other hand, 10-year TIPS are yielding 1.55 percent, which doesn’t seem so good, until you consider what havoc inflation might wreak fast pay day loans. The difference — or "break-even rate" — between those two numbers is 1.77 percentage points. That suggests investors are expecting inflation will average 1.77 percent per year over the next 10 years. So if inflation exceeds that amount and erodes Treasuries’ current 3.32 percent yield, TIPS investors will be glad they paid for the protection.

Inflation had historically averaged 2 to 3 percent until falling to near zero when the market tanked last fall and deflation fears set in.

How have TIPS’ values held up lately?

Inflation and interest rate expectations are constantly changing, which is reflected in the prices traders are willing to pay for TIPS. Lately, TIPS have generally been seen as a good deal. Mutual funds investing in TIPS have returned an average of 8.63 percent so far this year, according to Morningstar. That puts TIPS in the middle of the performance pack among fixed-income fund categories.

How can I buy TIPS?

TIPS are available for purchase from the Treasury at http://www.treasurydirect.gov to avoid brokerage fees. If you’re not sure you can keep the bond until maturity and are nervous about managing your investment over time, you can buy into a mutual fund that focuses on TIPS, or an exchange-traded fund. Like TIPS mutual funds, TIPS ETFs hold baskets of TIPS with varying maturities but can be traded like a stock.

TIPS appear to carry little risk. Is that the case?

Any bond is subject to risk from rising interest rates, and TIPS are no exception. If the Fed boosts interest rates faster than inflation grows, or before inflation sets in, TIPS’ values will erode.

They also can be hit in a falling market, as happened last fall. Many institutional investors had to come up with cash to meet clients’ orders to pull out their money, forcing them to sell their most liquid investments. TIPS often fit the bill, and massive TIPs sales reduced prices. But as seen this year, they’ve bounced back.

Source

Canwest Global Communications Corp. is denying a published report that it is putting its big-city daily newspapers across the country on the auction block and one of its senior executives has lined up financial backers to make a bid.

"The papers are not for sale," said Canwest spokesman John Douglas in a phone interview.

"The papers are part of the Canwest company and this story is pure speculation."

He was referring to a report today by Canwest (TSX: CGS) rival The Globe and Mail that said Paul Godfrey, CEO of Canwest's National Post daily in Toronto, has been approached by private equity funds that want to buy some or all of the Winnipeg media company's papers.

While the newspaper assets aren't officially up for sale at this point, the news report, which cites unidentified sources, said that they're expected to hit the auction block within two months.

Godfrey had little to say about the report, when contacted by The Canadian Press.

"As far as I'm concerned… I'm employed at Canwest and I'm loyal to Canwest," Godfrey said. "I have nothing further to say than that."

Godfrey, the businessman who orchestrated a buyout of the former Toronto Sun Publishing Corp and helped bring major league baseball to Toronto, has been known for taking an unconventional, but successful, approach to reworking the media landscape.

He took the reins at the National Post in January after leaving his role as president and CEO of the Toronto Blue Jays.

"Godfrey knows newspapers, and he also knows how to take newspaper chains private and then break them up and sell the assets, restructure them and make them insanely profitable again," said Duncan Stewart, director of research and analysis at DSam Consulting.

"From that perspective this makes a lot of sense."

A major sale of the Canwest papers would make the company look much like it did 20 years ago before it purchased the group of prominent big city publications like the Ottawa Citizen, the Calgary Herald, and both Vancouver dailies.

Back then, Canwest focused primarily on its broadcast television assets, run through Global TV.

Canwest's bought the former Southam chain nearly a decade ago for more than $3 billion at the top of the market. Those same assets would fetch far less than that now with the North American newspaper industry facing rough economic times, continued losses and industry-wide consolidation.

DBRS senior vice-president Chris Diceman said a sale of the newspapers wouldn't impact the D-rating that the ratings agency has on Canwest's debt.

He estimates that Canwest could sell its newspapers division, which excludes the National Post, for between $800 million to $1 billion – which is four to five times the company's annual earnings before interest, taxes, depreciation and amortization, a non-standardized accounting tool used by most companies.

"A recapitalization, or a sale that would likely lead to cents on the dollar, would not put (Canwest) back in a position of rectifying that default," he said lowest fee payday loans.

Diceman added that the newspaper division at current market prices would probably only bring in enough money to pay Canwest's secured creditors, which leaves little or no remaining cash for subordinated noteholders.

But selling the newspapers could still be a pivotal move in rescuing a company which has been struggling to repay $2.5 billion owed to its creditors.

Canwest has managed to restructure its operations and finances without seeking court protection from creditors, even though it has defaulted on debt payments.

To survive, the company has been reselling pieces of the business to show lenders that it's making progress on reworking its operations.

Most recently it sold off its majority stake in Australian broadcaster Ten Network Holdings, in addition to past sales of its E!-branded TV stations and U.S. political magazine The New Republic.

"Like the Ten Network sale, this would represent a significant contribution to the bottom line which would offset their debtload, and give them the financial breathing room they so desperately seek at this point in time," said Carmi Levy, an analyst at AR Communications Inc.

"If it comes to fruition, it will be another significant step in Canwest's journey toward, if not financial freedom, then at least financial survival."

Levy said that Godfrey has a solid track record with media companies, which would likely help him secure support from the financial community.

"He understands the business from the inside and out, both journlaistically as well as financially," Levy added.

"He is well-respected by both of those constituent groups, which is absolutely critical here. The last thing Canwest wants is to simply spin off these assets and then watch them spin into oblivion."

Despite the denial of a sale from Canwest representatives, the company's shares closed the session dramatically higher than they have been for months.

Canwest shares ended at 27 cents, up 6.5 cents or more than 30 per cent, amid heavy trading on the Toronto Stock Exchange. Earlier, the stock hit 30 cents, which was the highest intraday price since May 21.

The company is controlled by the Asper family through their special voting shares, though they're expected to lose that status as part of the restructuring process.

Canwest has also outsourced some of its advertising production work done in Calgary and Regina to a company with operations in India and the Philippines. The company also inked a distribution contract with Quebecor Inc. (TSX:QBR.A, TSX:QBR.B), publisher of the Sun Media papers, which has one carrier delivering competing newspapers in some cities.

On Thursday, the National Post announced a deal to share content with the publicly funded Canadian Broadcasting Corporation. Most of the news content under the agreement would only be republished on their websites.

Source

The Washington Post and Bloomberg will start a service in January to distribute a selection of their news to newspapers, Websites and other subscribers, a day after the Post ended a similar arrangement with Tribune Co’s Los Angeles Times.

The service, “The Washington Post News Service with Bloomberg News,” also will produce a business page on washingtonpost.com that includes news from the Post and Bloomberg’s website, the companies said on Thursday.

The decision to start the news service comes as Bloomberg may be trying to broaden its reach beyond its base of financial clients who read its news on Bloomberg terminals.

In a sign of this, the company is the likely front-runner to buy BusinessWeek magazine from McGraw-Hill, sources familiar with the situation have told Reuters.

Bloomberg makes a limited amount of its news available to the public on its website, but restricts much of it to its clients as well as newspapers and other news sources that pick up its stories.

The Post’s news also will be featured on Bloomberg’s professional service, the companies said.

The news service, which begins on January 1, 2010, will feature 120 stories a day, along with photos, graphics and other story elements.

Financial terms of the service were not disclosed. Thomson Reuters Corp competes with Bloomberg in providing news and financial data.

A day earlier, the Post said it would end a 49-year-old wire service that it started with the Los Angeles Times. Washington Post Co Vice Chairman told subscribers in a memo that it made sense to proceed separately.

(Reporting by Robert MacMillan; editing by Carol Bishopric)

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U.S. mortgage applications fell last week despite the lowest loan rates in four months, the Mortgage Bankers Association said on Wednesday, in another sign that housing will likely recover slowly from its three-year plunge.

Home loan applications fell a seasonally adjusted 2.8 percent in the September 25 week, driven down by a 6.2 percent drop in demand for purchase loans and a 0.8 percent decline in refinancing requests.

Borrowing costs inched closer to record lows, with average 30-year rates dipping 0.03 percentage point to 4.94 percent.

The 30-year rates were the lowest since the week ended May 22, at 4.81 percent, after hitting an all-time low of 4.61 percent in March, according to the industry group. A year ago, before intensive government interventions, 30-year rates averaged 6.33 percent.

For a related chart of mortgage rates, right click on the code: and select “Related Graph.”

Signs of life have emerged in both home sales and prices, helped by government stimulus programs including an $8,000 first-time home buyer tax credit.

The outlook for housing is split, however. Some in the industry predict another sales slide if the tax credit is not renewed and others say there will be a gradual recovery slowed by the usual winter sales malaise.

“We’re going to see another leg down, and if we lose the tax credit it will be a significant leg down,” said John Burns, president of John Burns Real Estate Consulting in Irvine, California.

The main concern is “shadow inventory,” or the stockpiles of homes held by banks or those about to go into foreclosure but yet to be put on the market, he said.

“The one really positive surprise recently has been falling mortgage rates,” and rates at 5 percent or less next year “could definitely help engineer a soft landing,” said Burns.

Another concern is that the first-time buyer credit siphoned demand from next year’s spring sales season, with buyers rushing purchases before the tax incentive disappears.

Existing-home sales in August fell for the first time in four months, but were at the second-highest pace in almost two years. Sales of new houses were below forecasts but up in August for the fifth straight month.

PRICES YET TO BOTTOM

Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, does not expect another leg down in home sales but is not convinced that prices have hit bottom because of the large inventory of unsold homes.

Home prices rose in July for the third straight month, surpassing forecasts and bolstering the case for housing stability, based on the Standard & Poor’s/Case-Shiller indexes reported on Tuesday. 

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