Brazil probes 13 banks for Schahin, Petrobras operations: report

JAN 12, 20166:17 AM

[BRASILIA] Brazil's federal tax authority and prosecutors are investigating 13 foreign and local banks for possible financial crimes intermediating loans to Brazilian engineering conglomerate Grupo Schahin, newspaper O Estado de S Paulo reported on Monday.

The banks under investigation include Itaú BBA - the investment-banking unit of Itau Unibanco Holding SA, - Banco Bradesco SA, Banco Santander SA, HSBC Holdings Plc, Deutsche Bank AG, Banco Votorantim SA and other smaller Brazilian institutions, Estado reported, citing a tax office document.

The authorities are investigating whether the banks could be accused of money laundering for being originators, underwriters or managers of loans to Schahin. Schahin is currently under investigation by Brazilian authorities for potential fraudulent operations that prosecutors allege benefited the ruling Workers'Party through state-run oil firm Petroleo Brasileiro SA.

In a statement, Itaú BBA said that it participated alongside the other banks in Grupo Schahin's debt restructuring process in 2009, which included a transaction backed by receivables from Petrobras. The operation was in full compliance with the law and market regulations, the statement said, adding that Itaú BBA will collaborate with authorities.

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Bradesco's press office said it could not comment on operations or positions of its clients because of bank secrecy rules. HSBC said it did not receive any official information about being under investigation. HSBC added that it always collaborates with authorities when requested. Deutsche Bank declined to comment.

Representatives at Brazil's federal prosecutors' office and other banks under investigation did not immediately respond to requests for comment. Other banks named in the Estado report are Banco Bonsucesso SA, Banco Fibra SA, Banco ABC Brasil SA, BicBanco SA, Banco Pine SA , Banco Tricury SA and Banco Rural SA.

Prosecutors say the engineering branch of the Grupo Schahin, Schahin Engenharia, was awarded a contract to operate a drill ship for Petrobras in exchange for the bank canceling loan repayments for Jose Carlos Bumlai, a friend of former president Luiz Inacio Lula da Silva.

Bumlai was arrested on Nov 25 and charged with loan fraud on Dec 14.

Dozens of executives from Brazil's top construction and engineering firms have been charged with bribery and money laundering, and about 50 politicians are being investigated for receiving kickbacks off Petrobras contracts.

REUTERS

    
 

Nations vow better intel sharing to halt terror attacks

JAN 12, 20166:58 AM

[THE HAGUE] Foreign ministers and diplomats from over 50 nations on Monday bowed to calls for greater information sharing to stop extremists slipping across borders to carry out attacks, making concrete pledges to plug dangerous intelligence lapses.

The participants unveiled a raft of resolutions after a day-long meeting at the headquarters of the European police agency Europol in The Hague.

"We all agree that we need to share information better, smarter and faster," Dutch Foreign Minister Bert Koenders told a press conference.

Intel sharing "has to be more precise including in such areas as the interruption of travel plans and the financing of terror plans".

"We made specific agreements between foreign intelligence units, concrete cooperation between financial institutions and law enforcement agencies," he said.

This included launching a "knowledge hub" consisting of a team of experts who will gather all information "in one place about foreign terror fighters including who they are, their background, what their travel plans are, what routes they are taking and their relationship with organised crime," Mr Koenders said.

In the wake of the November 13 Paris attacks, allegedly masterminded by a Belgian-born extremist, Belgian Foreign Minister Didier Reynders had admitted that more must be done.

"Intelligence services must get used to not only collecting information, but to sharing it," he told AFP on the sidelines of the talks hosted by The Netherlands.

"We are doing it more and more among European services, but there is still work to be done," he acknowledged.

While there was a lot of bilateral cooperation, Mr Reynders said it was not happening "in a very structured fashion between very many states."

Held as part of the Global Counter Terrorism Forum and the Global Coalition to Counter ISIL, an alternative acronym for the Islamic State group, the talks took place nearly two months after the Paris attacks which killed 130 people.

And they come as The Netherlands begins its six-month rotating presidency of the European Union.

"What we face today is terrorism 2.0. Like a virus, it adapts to survive and becomes more resilient," Mr Koenders said earlier.

"We are not dealing with the stereotypical terrorist we see in the movies. The type that can be defeated by a one-man army like Bruce Willis in Die Hard."

The talks come after months of deadly attacks staged by the Islamic State jihadist group, which has captured a swathe of territory in Iraq and Syria attracting thousands of foreign fighters to its ranks.

Speaking to AFP, France's European Affairs Minister Harlem Desir said coordination was crucial.

"Today the whole international community needs to work together to fight against terrorism," he said.

Countries are often wary of sharing hard-won intelligence with other nations with which they may not have such good relations.

But Mr Koenders insisted the key was "mutual trust." There was little point in the Netherlands freezing assets of suspected extremists, if they could just go across the border into another European country and withdraw cash, he argued.

Mr Harlem, speaking later to reporters, said countries needed to share lists of foreign fighters so they could be traced and tracked.

Mr Koenders warned however that the scores of people flocking to join IS were not really "foreign fighters." "I think the uncomfortable truth is that they are not foreign at all. They may be foreigners in the countries where they are going," he said.

"But in reality they are our compatriots, our acquaintances, classmates of our kids."

Mr Koenders revealed on Sunday that 42 names - 39 people and three organisations - were now on the Dutch terror blacklist, with the number doubling in just one year.

AFP

    
 

Merkel under pressure as Cologne police detail assaults

German Chancellor Angela Merkel faced growing pressure to harden her line on refugees on Monday as the first extensive police report on New Year's Eve violence in Cologne documented rampant sexual assaults on women by gangs of young migrant men. 

PHOTO: EPA

JAN 12, 20166:29 AM

[BERLIN] German Chancellor Angela Merkel faced growing pressure to harden her line on refugees on Monday as the first extensive police report on New Year's Eve violence in Cologne documented rampant sexual assaults on women by gangs of young migrant men.

Cologne police said at least 11 foreigners, including Pakistanis, Guineans and Syrians, had been injured on Sunday evening in attacks by hooligans bent on revenge for the assaults in the western city.

Interior Minister Thomas de Maiziere condemned those attacks and warned against a broader backlash against refugees following the events in Cologne, which have deepened scepticism towards Ms Merkel's policy of welcoming migrants.

The right-wing Alternative for Germany (AfD) party seized on the latest developments to attack the chancellor while members of her own conservative party warned that integrating the hundreds of thousands of migrants who arrived last year would fail if the influx were not stopped immediately. "If the influx continues as it has, then integration can't work," said Carsten Linnemann, a lawmaker in Ms Merkel's Christian Democrats (CDU). "If we get another 800,000 or a million people arriving this year, then we won't be able to do this," he added, playing on Ms Merkel's optimistic "we can do this" mantra.

Speaking on Monday evening, Ms Merkel said Europe was"vulnerable" because it was not yet in control of the situation as it would like to be.

In the eastern city of Leipzig, well over 2,000 anti-Muslim LEGIDA protestors took to the streets, their ranks swelled by anger over the Cologne attacks. They yelled "Merkel needs to go!" and one carried a sign featuring Merkel wearing a hijab and the words: 'Merkel, take your Muslims with you and get lost'.

A police spokeswoman said there was a roughly equal number of counter-demonstrators.

A report from the Interior Ministry in North Rhine-Wesphalia (NRW) state, where Cologne lies, said 516 criminal complaints had been registered, 237 of which were of a sexual nature.

A separate report from the Cologne police gave graphic descriptions of the crimes, listing case after case of women surrounded by gangs of men who put their hands in the victims'pants and skirts, grabbed them between the legs, on the buttocks and the breasts, often while stealing their wallets and cell phones.

A total of 19 suspects have been identified, all foreigners.

NRW Interior Minister Ralf Jaeger spoke of "serious failures" by the police, who were significantly outnumbered but never called for reinforcements.

He also criticised them for refusing to communicate in the days after New Year's Eve that the vast majority of the perpetrators were people with migration backgrounds, blaming this on misguided "political correctness". "More than 1,000 Arab and North African men gathered on New Year's Eve near Cologne cathedral and the main train station. Among them were many refugees that came to Germany in the past months," Mr Jaeger told a special parliamentary committee in NRW. "After alcohol and drug excesses came the excesses of violence, peaking with people who carried out fantasies of sexual power." A survey conducted by polling group Forsa for RTL television showed 60 per cent of respondents saw no reason to change their attitude towards foreigners after the assaults. About 37 per cent said they viewed foreigners more critically.

In Leipzig, Olaf Schwermer, one of the LEGIDA protestors, said he was concerned about more attacks if borders were not closed and migrants not deported: "What happened in Cologne only gave us a taste of what's about to come," he said.

Elsewhere in the city around 250 right-wingers, probably football hooligans, were detained after they set bins on fire, damaged property and set off fireworks, a police spokeswoman said.

Mr Jaeger said the sexual assaults had come mainly from North Africans who had traveled to Cologne from other cities, but he too warned against a broader backlash against migrants. "To label certain groups, to stigmatise them as sexual criminals, would not only be wrong, it would be dangerous," he said. "Those people who make a direct link between immigration and violence are playing into the hands of right-wing extremists." Police officer Norbert Wagner told a news conference that rocker and hooligan gangs had published an appeal on the Internet on Sunday to join them in "violence-free strolls"through Cologne, when in fact they were prowling for foreigners.

Among the victims were six Pakistanis, three Guineans and two Syrians. Witnesses had also seen another man of African origin being attacked, but his identity was unclear because he had not contacted authorities, Wagner said.

No arrests have been made. Local police are beefing up their presence in downtown Cologne in the coming days The Cologne police force has also set up a 100-strong team to investigate the New Year's Eve attacks and survey exchanges on social media in the run-up to the night.

Ms Merkel has repeatedly resisted pressure to introduce a cap on the number of migrants entering Germany, arguing this would mean shutting the borders, a step that would doom Europe's Schengen free-travel zone.

She has talked tougher in recent months, vowing in December to "measurably reduce" arrivals and promising at the weekend to give authorities more powers to crack down on migrants who commit crimes, including deporting them.

But her opponents have been swift to blame her for the events in Cologne. "Anyone who opens the borders wide must know that they are bringing Tahrir Square to Germany," leading AfD politician Dirk Driesang said, referring to the square in Cairo that was the scene of protests and sexual assaults in 2011.

REUTERS

      

China FX reserve sell-off to soon move beyond US Treasuries: BAML

JAN 12, 20167:29 AM

[LONDON] The unwinding of China's foreign exchange reserves could soon extend beyond US Treasuries, with US corporate and euro zone sovereign bonds among the assets most vulnerable to selling from Beijing, Bank of America Merrill Lynch said on Monday.

China sold a record US$510 billion of FX reserves last year to counter the damaging impact on an already decelerating economy from the surge of capital fleeing the country.

The lion's share of that came from US$292 billion sales of US Treasury debt, followed by US$92 billion sales of US stocks, US$3 billion of US agency bonds and US$170 billion of non-US assets, according to BAML estimates.

China increased its U.S. corporate bond investments by US$44 billion last year to US$415 billion, BAML strategists estimated, adding that it won't be long before investors turn their attention to other assets Beijing could potentially sell. "In the next two months I would still say Treasuries. But if the pressure continues beyond that, it's non-US assets, and in the US space it's definitely corporates and agencies," said Shyam Rajan, rates strategist at BAML in New York.

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Mr Rajan and his colleagues estimate that China's US$3.33 trillion FX reserves comprise US$1.15 trillion non-US assets (mostly short-dated euro-denominated bonds), US$415 billion U.S. corporate bonds, US$212 billion in agencies, US$266 billion stocks and US$1.29 trillion of Treasuries.

Selling across these bonds may not automatically trigger a sharp rise in their yields though, Rajan said, pointing to the experience of Treasuries in the latter part of last year when swap spreads moved below zero. "The way to trade the reserve flow story is through relative value trades, such as the swap spread tightening in Treasuries. I would imagine it plays out the same way in other markets too," Mr Rajan said.

Last year's record unwind brought China's total FX reserves to a three-year low of US$3.33 trillion. Most analysts expect that to be depleted further this year.

JP Morgan estimates that capital flight from China since the second quarter of 2014 has totaled US$930 billion, while credit ratings agency Fitch on Monday put the figure at over US$1 trillion.

US investment bank Morgan Stanley on Monday joined Goldman Sachs in lowering its forecast for the Chinese yuan, citing the ongoing flow of capital out of the country and need for a weaker currency to support the economy.

REUTERS

    
 

'China scare' the new normal for stock markets in 2016

The same factors that hogged investor fears in 2015, in particular the slowing Chinese economy, expected to persist this year

By

Anita Gabrielanitag@sph.com.sg@AnitaGabrielBT

Merely into its sixth trading day of the year, the stock market's new normal in 2016 appears to be getting old. 

PHOTO: EPA

 Horrific start

JAN 12, 20165:50 AM

Singapore

MERELY into its sixth trading day of the year, the stock market's new normal in 2016 appears to be getting old. China-sparked bleeding equities, falling oil prices, geopolitical rifts and higher US interest rates - all the very same scares of 2015 look set to persist.

"The start of 2016 brings a sense of deja vu . . . equity markets are jittery and bond yields are trading lower," said Citi Research.

On Monday, Asian bourses once again found themselves awash in red. Singapore's benchmark Straits Times Index tumbled 42.4 points or 1.5 per cent to finish at 2,708.85 - some 24 per cent lower from its April 2015 high of 3,550.

Chinese equities also extended their slump, with the Shanghai Composite plunging 5.3 per cent, while Hong Kong's Hang Seng shed 2.8 per cent.

The beating suffered by equities has spared none; so far this year, Chinese stocks are down 15 per cent; broader Asia, including Japan, down 3-7 per cent, while US and European stocks have fallen roughly 6 per cent.

AXA Investment Managers attributed global stock markets' "horrific start" to two events - the China "scare" and mounting tensions between Iran and Saudi Arabia.

The question on everyone's mind is whether the meltdown is overdone and the general response to that appears to be "yes", not least because there ought to be comfort that China is armed with a great deal of arsenal to prop up its economy.

China is not on the verge of collapsing, said AXA Investment Managers: "The sell-off will soon appear as what it really is - a scare. Growth is slowing, profits are squeezed and deleveraging is painful - yet, this is neither new nor unmanageable."

However, given the delicate backdrop of the global economy, investors don't seem to need a big shock to run for the hills as has been the case in this year's trading so far.

For those intent on staying invested over these volatile times, "careful" and "selective" behaviour is what analysts advise, or in other words - head for the never-run-out-of-favour dividend stocks.

China has become the biggest trigger for the market rout this year after Beijing moved to further devalue the yuan to kick-start a slowing economy as the currency has risen against major global currencies, making its exports less competitive. That has come at a cost.

"Using currency depreciation to stimulate growth is a double-edged sword," said Kamel Mellahi, Warwick Business School's professor of strategic management. "A weaker yuan will help boost the country's sagging exports and help economic growth, but it will also increase the risk of capital flight, making investment in the stock market less attractive."

Last week, circuit breakers were used to halt trading twice following the Chinese markets' erratic plunge, but it drew criticism and was blamed for causing more panic. This in turn led to a rout in global markets.

Mr Mellahi suggests that investors get used to more wild swings in the Chinese stock market as the world's second largest economy undergoes a "very delicate transition".

But it's not the Chinese equities, where easily spooked herd-like retail investors make up a large portion of trades, that is the big concern - moreover, most economists shun the view that the stock market reflects China's economic cycle - but it's the currency.

Granted, the change in China's foreign-exchange policy (to devalue the yuan) is not "unreasonable" given that it has appreciated by 25-30 per cent against most other currencies since 2010, say analysts.

The big worry however is the impact of the "competitive devaluation" on other currencies, global inflation and China's demand for commodities, said ABN Amro.

Also, while the US Federal Reserve is expected to raise its rates again in March, it is also expected to closely watch for signs of stability in the Chinese currency which accounts for a significant 23 per cent of the trade-weighted dollar.

Citi Research pointed out that despite some similarities to early 2015, there are a number of things that make it more nervous now.

"Although the FOMC (US Federal Open Market Committee) has now engaged, it has not removed uncertainty," said Citi, elaborating that the shift in its reaction to global events and market moves has arguably reduced transparency.

The other factors, it added, include a "broken" emerging markets' growth model (they cant fend off external shocks with fiscal policy as countries are not tolerant of higher public debt while credit policy may not help given the already high rise in credit stock) and China's growth prospects.

While much of China's slowdown woes - albeit soft versus a hard landing - are not unexpected, the recent rout in Chinese equities has caused alarm.

"The solution here is for Chinese policymakers to get in control again. Experience suggests that they will, but this could take some time as to some extent it's a trial-and-error process," said ABN Amro
.

Iran sees Opec lack of member quotas as contributing to glut

JAN 12, 201612:00 AM

[DUBAI] The lack of production quotas for individual Opec members means none can be held accountable if they pump too much crude, according to Iran's Oil Minister Bijan Namdar Zanganeh.

"You cannot hold any country responsible for how much they produce," Zanganeh said in an interview in Assaluyeh, Iran, where he inaugurated parts of the South Pars natural gas project. The Organization of Petroleum Exporting Countries hasn't published formal country production quotas for seven years.

Brent crude prices dropped for a third year in 2015 and have tumbled another 12 per cent this year. Opec, which supplies about 40 per cent of the world's oil, effectively abandoned output limits in December, potentially worsening a glut created after producers from the US to Russia and Saudi Arabia pumped more than demand warranted.

Iran is preparing to boost production and exports as it nears the end of sanctions that crippled its economy and choked off oil sales. Sanctions will end "in a few days" and the coming year will be one of "economic revival," President Hassan Rouhani said Monday in a speech. 

Zanganeh has said that Saudi Arabia and other Opec members that gained sales when Iranian exports were curtailed should cut production to make room for Iran's expected increase in output.

"What the ministers do in the organization mostly amounts to consultation" because decisions are made at higher political levels in some member countries, Zanganeh said in the interview.

The global oversupply is due to Opec's failure to reach consensus on production ceilings, he said in Assaluyeh, according to the Iranian oil ministry's news agency Shana.

Zanganeh and Rouhani attended the inauguration of phases 15 and 16 of the South Pars gas project Monday.

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