Australia cracks down on foreign property buyers with fines, jail terms

PUBLISHED ON MAY 2, 2015 4:19 PM

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Tony Abbott, Australia's prime minister, speaks during a news conference at Parliament House in Canberra, Australia, on Monday, Feb 9, 2015. -- PHOTO: BLOOMBERG

PERTH (REUTERS) - Foreign investors who illegally buy houses in Australia and agents that enable them face hefty fines and prison terms of up to three years under new penalties announced on Saturday aimed at cooling soaring property prices.

The new and expanded punishments come in the wake of rising foreign investment in Australian real estate and widespread evidence of abuse of current laws that prevent foreign buyers from purchasing existing homes.

"We want to ensure that illegal foreign investment is not unnecessarily driving up prices," Prime Minister Tony Abbott told reporters in Sydney, where house prices have risen by about a third in the past three years.

"We want to maximise the opportunities for Australians to buy a home at the best possible price."

ADB says will maintain standards when cooperating with AIIB

PUBLISHED ON MAY 2, 2015 6:08 PM

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The Asian Development Bank (ADB) said on Saturday that it was ready to work with the China-led Asian Infrastructure Investment Bank (AIIB) so long as standards were met, while also announcing changes to boost its own lending capacity by billions of dollars. -- PHOTO:BLOOMBERG

BAKU (Reuters) - The Asian Development Bank (ADB) said on Saturday that it was ready to work with the China-led Asian Infrastructure Investment Bank (AIIB) so long as standards were met, while also announcing changes to boost its own lending capacity by billions of dollars.

China has said 57 countries have signed up to become founding members of the AIIB, but so far the United States has chosen to remain outside the bank, seen as a rival to the US-dominated World Bank.

Giving reasons for not joining, the United States has cited what it called a lack of transparency, doubts about lending and environmental safeguards, and concerns over Beijing's influence.

Japan, which has a lead role in the ADB, has also cited a lack of transparency at the Beijing-based AIIB for not joining by a March 31 deadline, but has said that it would be desirable for the ADB to work with the AIIB.

Britain's boring election reaches gripping finale

3 May10:40 AM

[LONDON] After a sterile campaign that has turned many people off, Britons take to the polls on Thursday in a too close to call general election that could trigger an unprecedented bout of political instability.

The vote could help decide whether Britain stays in the European Union and whether Scotland remains in Britain, as well as putting some of Westminster's biggest names out of a job.

"This is the tightest election in living memory," said Professor Philip Cowley of Nottingham University. "It will almost certainly see the biggest change in the British party system in over 100 years." Prime Minister David Cameron's Conservatives have been virtually tied with Ed Miliband's Labour in opinion polls for months and both have fought risk-averse campaigns largely avoiding actual voters.

Mr Cameron, 48, has shown more passion in the last 10 days of the campaign, saying he feels "pumped" and "bloody lively" after being criticised for his uninspiring style.

Mr Miliband, 45, has exceeded expectations with a string of assured performances which challenged his reputation as a geek who struggles to connect with voters.

But polls suggest neither the centre-right Conservatives nor centre-left Labour will win the election outright.

That would trigger days or even weeks of haggling as both sides fight to persuade smaller parties to support them in government.

Millions of Britons will cast their ballots on Thursday in polling stations including churches, primary schools, hairdressing salons and even pubs.

If one party wins more than half of the House of Commons' 650 seats, it can form a government alone and that party's leader becomes prime minister.

However, this looks like being the third election since 1929 where Britain will get a hung parliament, in which no one party has a majority.

That will bring to the fore smaller parties, who could play a key role in determining who governs Britain.

The pro-independence Scottish National Party (SNP) looks set to win most of Scotland's 59 seats, up from just six.

Although an SNP-led campaign for Scottish independence was defeated in a referendum last year, the party has seen its support surge since then under new leader Nicola Sturgeon.

The SNP is willing to back a Labour minority government but Miliband has ruled out any deal with them while not excluding accepting their support on a vote-by-vote basis.

The Conservatives claim that could hasten Scottish independence as the SNP extract concessions from Labour in return for their support.

Mr Cameron's Conservatives could again team up with the centrist Liberal Democrats, with whom they have been in a coalition government since 2010.

But LibDem support has plunged in the last five years and leader Nick Clegg, who led them into the coalition, could lose his seat.

Nigel Farage's UK Independence Party (UKIP) could be prepared to support the Tories but only looks set to win a few seats.

Experts say Britain will look quite different after the election depending on whether the Conservatives or Labour get in, even as a minority government.

One of the biggest campaign issues has been what to do about a budget deficit of nearly £90 billion (S$181 billion).

Both the main parties want to eliminate it but Labour would do so by increasing taxes on the rich, while the Conservatives want to cut welfare spending by a further £12 billion.

Paul Johnson, director of the Institute of Fiscal Studies (IFS), a research body, said there were "genuinely big differences in our view on economic and fiscal matters - the biggest choice the British electorate has seen in a generation." At Westminster, life in a minority government would be tough.

Even if the system of fixed-term parliaments, introduced in 2011, does curb instability, the new administration could experience difficulties in passing legislation.

Another Cameron term would have the added complication of a referendum on EU membership which he has promised by 2017 if he wins.

Cameron could also face a leadership challenge from a figure like London Mayor Boris Johnson after announcing he does not want to stay in Downing Street beyond 2020.

"Like going into jail and handing the other party the key" is how Mr Cowley described a minority government.

Britain's prime minister could soon be yearning for life on the outside.

AFP

  
 

Buffett: stock prices would be high if rates were 'normal'

3 May8:22 AM

[OMAHA, Nebraska] Billionaire investor Warren Buffett said that stock prices would appear expensive if interest rates normalised from their ultra-low levels. "If we get back to normal interest rates, stocks at these prices will look high," said Buffett, speaking at the annual shareholders' meeting of his sprawling conglomerate Berkshire Hathaway Inc.

Mr Buffett, one of the world's most famous investors, is widely followed for his advice on finance and life. While he often emphasizes the importance of not basing long-term investing decisions on short-term economic expectations, his views on the US and global economies carry significant weight well beyond Berkshire Hathaway's shareholders.

Regarding the Federal Reserve's loose monetary policy, Mr Buffett said he could not have predicted that rates would remain this low for this long without becoming a problem. "So far, I have been wrong on interest rates. It's so hard for me to see how, if you toss money from helicopters that eventually you don't have inflation, but we haven't." The Fed is currently weighing raising rates from their near-zero levels of the financial crisis era, even as questions remain about the strength of growth in the world's biggest economy.

The current US economic environment will not influence potential acquisitions at Berkshire Hathaway, Mr Buffett added.

Berkshire tends to hold companies for decades - or forever, as Mr Buffett has said in the past - making the short-term economic outlook less valuable as a predictor of a company's success than longer-term trends. "Any company that has an economist certainly has one employee too many," he added.

He also said about the greenback: "I think the dollar will be the world's reserve currency 50 years from now." Nevertheless, Mr Buffett praised China as a rising superpower, saying the country's population had "found a way to unlock their potential." Charlie Munger, Berkshire Hathaway's vice chairman, echoed that sentiment, noting China's drive against corruption and its relationship with the United States. "It's very important that we like and trust one another," Mr Munger said.

China surpassed Japan to become the world's second-largest economy in 2010. US President Barack Obama has "pivoted" to Asia, placing much of the focus of American foreign policy on that continent as China becomes more influential on the world stage.

Mr Buffett noted problems in the United States, as well, including concerns about income inequality. "I don't have anything against raising the minimum wage but I don't think we can do it in a significant enough way without creating a lot of distortions." He said he favours using the earned income tax credit to help struggling households.

REUTERS

    
 

Buffett celebrates 50th year at Berkshire

3 May6:24 AM

[OMAHA, Nebraska] Berkshire Hathaway Inc shareholders on Saturday celebrated Warren Buffett's 50th anniversary running the conglomerate, as the billionaire expressed optimism the company would thrive over the long haul, even after he's gone.

Mr Buffett and his second-in-command Charlie Munger fielded hours of questions from shareholders, analysts and journalists at Berkshire's annual meeting, including some that leaned toward the business practices of firms that Berkshire owns or works with, such as Brazil's 3G Capital.

The meeting had a more festive air this year, with one of the more than 40,000 people expected to attend shouting out "Warren and Charlie, we love you" at the start of the main event of what Mr Buffett calls "Woodstock for Capitalists." "It's not Disneyland, it's Warrenland," said David Rolfe, chief investment officer of Wedgewood Partners Inc.

Berkshire holds more than 80 companies including the Burlington Northern railroad, Geico car insurance, Benjamin Moore paint, Dairy Queen ice cream, Fruit of the Loom underwear, and See's candies, and owns more than US$115 billion of stocks.

It's breadth and depth, which includes US$63.7 billion of cash, has given Berkshire a strong balance sheet that Mr Buffett said will help it thrive should the economy, propped up by low interest rates that many expect to rise soon, heads south. "We will be very willing to act if economic turbulence of any kind occurs, and will be prepared, and most people won't be," he said. He denied that Berkshire needed special oversight by having become too big to fail.

Mr Buffett gave no hints about who would succeed him, though he said he would not want someone whose sole background is in investments to become chief executive.

Mr Buffett said experience in operations is very important. "I would not want to put someone in charge of Berkshire with only investing experience and not any operational experience," he added.

He also offered ringing praise for the turnaround at Burlington Northern, Berkshire's largest non-insurance unit, which was plagued last year by service delays. "The improvement has been huge, and I want to thank Matt Rose and Carl Ice for their really extraordinary performance," he said, referring to the railroad's executive chairman and chief executive.

Mr Rose, considered by some a potential Berkshire CEO candidate, was not mentioned by Mr Buffett in his annual letter, which led some to believe his standing had been lowered.

Other potential candidates for the CEO job include insurance executive Ajit Jain, whose decision to join Berkshire three decades ago was hailed by Mr Buffett as was one of the "luckiest"events he experienced, and Berkshire Hathaway Energy chief Gregory Abel, who answered a question over renewable energy.

Ken Shubin Stein, founder of Spencer Capital Management LLC in New York, said the idea a CEO should have an operational background "makes sense since the CEO needs to work with the investment team and understand their use of capital for investments, versus using the capital for investing in acquisitions."

As is usually the case, no major controversy has been hanging over Berkshire.

But Mr Buffett did get two questions that led him to praise 3G Capital, which critics say ruthlessly cuts jobs at companies it acquires. In 2013, Berkshire and 3G bought H.J. Heinz Co, which is now buying Kraft Foods Group Inc. "The 3G people have been successful in building marvelous businesses," Mr Buffett said. "I don't know of any company that has a policy that says we're going to have a lot more people than they need." Mr Buffett also defended Berkshire's Clayton Homes manufactured homes unit, which was criticised in a recent Seattle Times article for predatory sales practices that can trap low-income borrowers in homes they cannot afford. "I make no apologies whatsoever for Clayton's lending terms," he said, adding that Clayton itself faces losses when borrowers default.

Berkshire's annual meeting is Omaha's top annual draw other than baseball's College World Series - reflected in hotel rooms that can fetch more than US$400 a night and often sell out nearly a year in advance.

Devoted and sleep-deprived shareholders began lining up outside the venue hours before doors opened at 7 am (CDT).

Kyle Cleeton, a research analyst for an investment firm, may have gotten there first, saying he showed up at 10 pm the night before. "I wanted to be first in line," he said. "You're not sure how many more years you're going to have." Bill Guenther, a state forester from Brattleboro, Vermont, said, "I'm one who likes a good seat." He arrived at 1:04 am despite having last year suffered a major foot injury when he collided with another shareholder as he tried to get that good seat. "My girlfriend said, 'You're not going to do this again,'and I said, 'I have to, it's the 50th year.'"

REUTERS

    
 

Nepal earthquake: No possibility of finding more quake survivors

Nepal's government ruled out the possibility Saturday of finding more survivors buried in the rubble from last weekend's massive earthquake as it announced the death toll had risen to 6,621. 

PHOTO: AFP

2 May10:36 AM

[KATHMANDU] Nepal's government ruled out the possibility Saturday of finding more survivors buried in the rubble from last weekend's massive earthquake as it announced the death toll had risen to 6,621.

"It has already been one week since the disaster," home ministry spokesman Laxmi Prasad Dhakal told AFP.

"We are trying our best in rescue and relief work but now I don't think that there is any possibility of survivors under the rubble." As well as updating the death toll, Mr Dhakal put the number of injured at 14,023.

The 7.8-magnitude quake, which was the deadliest in Nepal for more than 80 years, devastated vast swathes of the country when it erupted around midday last Saturday and reduced much of the capital Kathmandu to ruins.

While multiple teams of rescuers from more than 20 countries have been using sniffer dogs and heat-seeking equipment to find survivors in the rubble, no one has been pulled alive since Thursday evening.

More than 100 people were also killed in neighbouring India and China.

AFP

For all coverage on the Nepal earthquake, click here

    
 

McDonald's to reveal comeback recipe: what options are on table?

Steve Easterbrook is preparing for his biggest moment as McDonald's Corp's new leader on Monday, when he unveils a much-anticipated plan to put the shine back on the Golden Arches. 

PHOTO: AFP

2 May7:02 AM

[NEW YORK] Steve Easterbrook is preparing for his biggest moment as McDonald's Corp's new leader on Monday, when he unveils a much-anticipated plan to put the shine back on the Golden Arches.

The company veteran, who was elevated to chief executive officer in March, is confronting the chain's worst sales slump in more than a decade. And the challenges have been particularly pronounced in McDonald's home market. US same-store sales dropped 2.1 per cent last year, the biggest decline since at least 2000.

Still, investors are optimistic about what Easterbrook has to say. McDonald's stock climbed 3.1 per cent on the day it first announced plans for the presentation, the biggest jump in almost two months.

Monday's proceedings get under way at 7 a.m. Chicago time, when the company plans to release a video message. A statement will follow at 7:30 a.m., with a conference call at 10 a.m.

Here are five topics that investors and customers may be looking for Easterbrook to address.

REAL ESTATE

McDonald's shares rose in March when hedge-fund manager Larry Robbins said the company could unlock at least US$20 billion in value by converting to a real estate investment trust. McDonald's owns 45 per cent of the land and 70 per cent of the buildings for its restaurants and could add US$25 to its share price by putting those holdings in a Reit, Mr Robbins said.

That wasn't the first time the idea has been floated, but McDonald's has given no indication it wants to go that direction. For one thing, the company generates billions in profit from the rent it charges franchisees. The fast-food chain spread across the US during a time when land was cheaper and more abundant, and it may not be eager to split off this valuable asset.

REFRANCHISING

Is it time to follow Burger King's lead?

McDonald's biggest burger competitor has increasingly sold its company-owned restaurants to franchisees - a process known as refranchising. Of Burger King's approximately 7,300 locations in the US and Canada, less than 1 per cent are owned by the company. Compare that with McDonald's, which still owns about 10 per cent of its 14,300 US locations.

Mark Kalinowski, an analyst at Janney Capital Markets, suggested in a recent note that McDonald's could pursue "meaningfully more refranchising in the US and abroad" as part of its turnaround.

RELATIONSHIP BUILDING

One immediate challenge for Easterbrook: repairing the ties with the company's franchisees. A recent Janney survey found that the relations between McDonald's and its independent operators has hit a nadir. Without franchisee cooperation, it will be tough for Easterbrook to get traction for his initiatives, including plans to bring McDonald's customisable burger platform, Create Your Taste, to as many as 2,000 US locations this year.

DOWNSIZING AMBITIONS

Create Your Taste is expected to cost more than US$100,000 per restaurant, and some franchisees are concerned about the price tag. But there are signs that Easterbrook may be downsizing the program. McDonald's is testing a platform called Taste Crafted, which lets diners customise burgers and chicken sandwiches with fewer options than Create Your Taste. It also works at the drive-thru, which accounts for 60 per cent of McDonald's sales, according to Kalinowski. The simpler approach will be cheaper for franchisees to implement, he said.

FIX THE FOOD

Since taking over, Easterbrook has announced that McDonald's will stop serving chicken raised with some antibiotics. The company also recently started offering "artisan" grilled chicken and premium sirloin burgers - attempts to stem the exodus of younger consumer to higher-end chains like Chipotle. But these additions come with a price. Franchisees and analysts have said the McDonald's menu is bloated, and that the glut has slowed down service.

McDonald's eliminated seven sandwiches in the first quarter, but it still has about 40 more items than it did in 2007. Having fewer, better-selling items is key. Reigniting sales growth ultimately comes down to getting more customers into restaurants, and that starts with fixing the food.

BLOOMBERG

    
 

Far East Orchard moves into student housing with acquisition of UK properties

By

Anita Gabrielanitag@sph.com.sg@AnitaGabrielBT

1 May8:32 PM

Far East Orchard has acquired a portfolio of student accommodation properties within Shieldfield, Newcastle upon Tyne, England for £40.9 million (S$83 million) to extend and diversify the reach of its overseas property portfolio in Europe.

The freehold properties comprise two land sites for development into purpose-built student accommodation, an existing student accommodation, and another student accommodation undergoing development which is expected to be completed in the second half of this year.

"This move represents several milestones to develop our position as a leading regional real estate player," said FE Orchard group chief executive and managing director Lui Chong Chee in a statement.

It marks an expansion of the firm's property development beyond Singapore into Europe and an extension of development capabilities into the student housing sector in the UK.

"As the UK student accommodation market has been structurally undersupplied, we plan to contribute and provide high quality purpose built student housing. In addition, this new asset class opens a door to stable capital growth in one of Europe's major property markets," said Mr Lui.

Newcastle upon Tyne is ranked as a first tier University City, according to a Savills report last year on UK student housing and is also the commercial, educational and cultural focus for the North-east region of England.

The properties are well-located within walking distance of educational institutions such as Northumbria University, Newcastle University Business School and Newcastle College, said the firm in an announcement to the Singapore Exchange.

The purchase price was based on independent valuation on each of the properties and factors such as location, potential source of rental income and recent transacted property prices in the vicinity.

The acquisition is not expected to have a material impact on the group's consolidated net earnings per share and consolidated net tangible assets per share for the current financial year ending December 2015.

    
 

Berkshire profit climbs 9.8% on insurance investments, railroad

BC-BRK-EARNS c.2015 Bloomberg News By Noah Buhayar and Sonali Basak (Bloomberg) - Warren Buffett's Berkshire Hathaway said first-quarter profit climbed 9.8 per cent on higher investment income at insurance operations and results from the BNSF railroad. 

PHOTO: REUTERS

2 May6:57 AM

[NEW YORK] Warren Buffett's Berkshire Hathaway said first-quarter profit climbed 9.8 per cent on higher investment income at insurance operations and results from the BNSF railroad.

Net income rose to US$5.16 billion, or US$3,143 per share, from US$4.71 billion, or US$2,862, a year earlier, Omaha, Nebraska-based Berkshire said Friday in a statement. Operating earnings, which exclude some investment results, were US$2,583 per share, beating the US$2,373 estimate of three analysts surveyed by Bloomberg.

Investors are gathering in Omaha this weekend for Berkshire's annual meeting and to help Buffett, 84, celebrate his golden anniversary running the company. When he took control five decades ago, it was a struggling textile maker. He gradually transformed Berkshire into a sprawling conglomerate with operations that now include insurers, utilities, manufacturers, retailers and one of the largest US railroads.

"He's got good, capable managers" running a stable of profitable businesses, said Cliff Gallant, an analyst at Nomura Holdings Inc. "His high-class problem is figuring out what to do with the cash." Profit was helped in last year's first quarter by a one- time gain of about US$900 million on Phillips 66 stock. Berkshire swapped the shares during that period for one of the oil refiner's businesses. The transaction was designed to limit Berkshire's tax bill on its investment gain.

It also fit in with Buffett's strategy to own more businesses outright. In the earlier part of his career, he built Berkshire's value by having insurance units invest in stocks like Coca-Cola Co and Washington Post Co that later surged.

The mix of subsidiaries at Berkshire gives it broad exposure to the US economy. The billionaire has frequently highlighted the prospects for businesses in the country, and wrote in a letter to shareholders in February that its market economy would "continue to work its magic." He cautioned that the gains wouldn't come in a smooth manner.

Recent data suggest the US is hitting some speed bumps. Gross domestic product sputtered to a near halt in the first quarter, expanding at a 0.2 per cent annualised pace, Commerce Department figures showed Wednesday in Washington. The weaker- than-forecast result was driven by severe winter weather and a slump in exports and business spending.

Berkshire is showing little sign of pulling back. The company's US$15 billion outlay on plant and equipment in 2014 set a record, and Buffett said there will be more opportunities to spend in the US this year. The capital budget at the railroad alone is US$6 billion in 2015.

The billionaire also continues to buy more businesses. Last year, he agreed to purchase Van Tuyl Group, a network of car dealerships, as well as battery-maker Duracell.

Packaged Foods And he's been using Berkshire's cash hoard to help finance deals. In 2013, he partnered with buyout firm 3G Capital to take ketchup maker H.J. Heinz private. Then, in March, Heinz announced that it was buying Kraft Foods Group Inc. with stock and US$10 billion in additional funds from Berkshire and 3G.

The transaction is poised to create a packaged-food colossus with more than US$25 billion in revenue. Buffett's firm will own a little more than a quarter of the business.

The deals have been a bright spot for Berkshire even as some of Buffett's stock picks faltered. American Express Co and International Business Machines Corp, two of the biggest holdings, have slipped more than 10 per cent in the last year. Coke is little changed in the last 12 months.

Berkshire's own shares have come down from their record high in December. Class A shares have slipped 4.5 per cent to US$215,800 from the end of last year.

BLOOMBERG