Australian regulator says no signs of misconduct around A$ trading

Australia's securities regulator said on Monday it could not find any signs of market misconduct in trading of the local dollar moments ahead of recent central bank interest rate decisions. 

PHOTO: BLOOMBERG

4 May8:04 AM

[SYDNEY] Australia's securities regulator said on Monday it could not find any signs of market misconduct in trading of the local dollar moments ahead of recent central bank interest rate decisions.

Last month the Australian dollar spiked up in the minute prior to the announcement of a rate decision, when the Reserve Bank of Australia surprised some by not cutting the cash rate.

The moves have been described as suspicious and led to suspicion of possible manipulative trading. "Preliminary findings reveal moves in the Australian Dollar ahead of the announcement to be as a result of normal market operations in an environment of lower liquidity immediately ahead of the RBA announcement," the Australian Securities & Investment Commission (ASIC) said in a statement. "The reduction in liquidity providers is a usual occurrence prior to announcement in all markets. Much of the trading reviewed to date was linked to position unwinds by automated trading accounts linked to risk management logic and not misconduct."

REUTERS

    
 

South Korea March adjusted current account surplus falls vs Feb

South Korea March adjusted current account surplus falls vs February

South Korea's current account surplus fell in March after hitting a record high in February on a seasonally adjusted basis, but remained at a high level on lower costs for importing oil, central bank data showed on Monday. 

PHOTO: BLOOMBERG

4 May8:02 AM

[SEOUL] South Korea's current account surplus fell in March after hitting a record high in February on a seasonally adjusted basis, but remained at a high level on lower costs for importing oil, central bank data showed on Monday.

The current account surplus in March fell to a preliminary US$9.32 billion from a revised US$10.77 billion in February, the Bank of Korea data showed. It was still higher than an average surplus of US$7.92 billion for the past one year.

In the financial account, Asia's fourth-largest economy saw a net outflow of US$11.02 billion in March, sharply up from an outflow of US$5.54 billion in February, the data showed.

REUTERS

    
 

China conglomerate Fosun to merge insurer in US$1.84b deal

Fosun International Ltd, the investment arm of China's biggest closely held conglomerate, is planning a US$1.84 billion merger with Ironshore Inc after buying the shares it doesn't already own in the Bermuda-based insurer. 

PHOTO: REUTERS

4 May7:22 AM

[HONG KONG] Fosun International Ltd, the investment arm of China's biggest closely held conglomerate, is planning a US$1.84 billion merger with Ironshore Inc after buying the shares it doesn't already own in the Bermuda-based insurer.

Fosun's unit Mettlesome Investment 2 will combine with Ironshore to boost its presence in the insurance business, the Shanghai-based company said in a statement to the Hong Kong stock exchange on Sunday. The company completed the acquisition of a 20 per cent stake in Ironshore, it said in February.

Fosun Group is backed by Chinese billionaire Guo Guangchang, who calls himself a student of Warren Buffett, and has been on an acquisition spree ranging from Australian energy companies to New York city office buildings. The US market is "vibrant" and Fosun has "many deals" under discussion even after asset prices went up "a lot," MR Guo said in an interview at Bloomberg's headquarters in New York last month.

"The group has been endeavoring determined efforts in establishing insurance as its core business and developing insurance as one of the key growth engines," Fosun International said in its stock exchange filing. "This acquisition will bring synergies for both parties in prevention of currency risks, expansion of assets allocation and cooperation in reinsurance business."

Fosun International earned about 13 per cent of total revenue from its insurance business in 2014, according to data compiled by Bloomberg. Steel contributes the most revenue at about 45 per cent. The company also has a presence in property development and pharmaceuticals.

The merger consideration will increase at the rate of 8 per cent per annum from Dec 31, 2014 until the deal's completion, to a maximum of US$2.1 billion, Fosun said. Ironshore, which provides broker-sourced specialty commercial property and casualty coverage, had net assets of US$1.84 billion as of last year.

The deal is subjected to regulatory approval and may be terminated prior to March 31, 2016, according to the statement. Ironshore will continue as the surviving company and become an indirect, wholly-owned subsidiary of Fosun after the merger.

Fosun has spent almost US$25 billion on overseas acquisitions since 2010, according to data compiled by Bloomberg. Deals include French resort operator Club Med and Raffaele Caruso SpA, an Italian maker of US$3,300 men's suits. It also bought 60-story One Chase Manhattan Plaza in New York, which it renamed 28 Liberty and uses as its US head office.

BLOOMBERG

    
 

Startups try to challenge Google, at least on mobile search

Europe's competition regulator filed antitrust charges against Google on the belief that the company's search business had become so powerful that it was pretty much impossible to compete with. 

PHOTO: REUTERS

4 May7:13 AM

[SAN FRANCISCO] Europe's competition regulator filed antitrust charges against Google on the belief that the company's search business had become so powerful that it was pretty much impossible to compete with. But don't tell that to Bobby Lo.

Mr Lo is the founder of Vurb, a startup in San Francisco's bustling downtown that has a new kind of search engine designed for mobile phones. The idea is to take several common queries - restaurants, movies - and group them into snippets of information and apps for related actions.

Mr Lo is one of a growing number of entrepreneurs who are betting that the rise of mobile phones has created an opportunity to do something that once seemed unthinkable: challenge Google in search.

After a decade in which entrepreneurs and investors steered clear of Google's home turf, venture capitalists have plowed hundreds of millions of dollars into dozens of search startups because they say they believe the Internet giant cannot dominate search on mobile devices the way it has on personal computers.

"There has been no great solution for mobile search," Mr Lo said.

Venture capitalists financed 27 search companies in 2014 and 33 the year before - the two most active years on record, according to CB Insights, whose data on the venture capital industry goes back to 1999. The biggest jump has been in mobile search companies, according to a report CB Insights released in March, particularly companies that use "deep links" to connect mobile applications the way websites are linked on the Web.

Search is still a tiny startup category, especially compared to red-hot services like ride-hailing or grocery delivery.

"But as the spate of early-stage investments in mobile search matures, the area could see funding totals increase as well as the entrance of more startups," CB Insights said in its report.

Each of these search companies has a slightly different take.

Quixey, which has raised US$135 million in venture capital, according to CB Insights, features a traditional-looking search box that helps people find information inside apps, as well as functions, such as a button to order a cab.

A company named URX is trying to link apps so that people can perform related actions by hopping between them. Other ideas include putting search inside mobile messaging systems or creating new home-screen applications that use past behavior to predict what a user might want next - a concept Google has invested in already.

"If you ask 100 people whether search is broken or not, 99 would say Google is perfect, it's everything I need," said John Lilly, a partner at Greylock Partners, which has backed a search startup called Jack Mobile. "But if you ask them, 'How are you going to figure out what you want to watch on TV tonight or where are you going to dinner?' they would say Google wouldn't know that, that's not search." So while people do not think search is broken, it can be improved, Lilly said.

Not surprisingly, many of these companies have Google connections. URX was founded by a former Google employee and is backed by Google Ventures, the company's venture capital arm. Bento, a home-screen application that recommends apps and services based on a user's past preferences, was founded by a former YouTube executive who also worked at Google Ventures.

Others share more tangential relationships that underscore how far Google, with its investments in self-driving cars and biotechnology, has strayed from its original business. In the second-story bedroom of a Kansas City, Kansas, house wired with Google's Google Fiber Internet service, an entrepreneur named Mike Farmer is developing Leap.it, a visual search engine whose results are full of pictures and cued-up videos.

"The very moment you believe that the game is over is the very moment that the environment exists to introduce something completely new," Mr Farmer said.

Behind the new companies is a conviction that people use mobile phones so differently than they do desktop and laptop computers that the search business is ripe for an overhaul.

"Anytime there is a platform change, everything is up for grabs," said Keith Rabois, a partner at Khosla Ventures, which has backed a mobile search company called Relcy. "No entrepreneur would start, and nobody would fund, a new search product for the Web." The most obvious difference with mobile is that people have their phones with them all the time, giving search companies lots of contextual clues - like location - for what they might want. That is the main idea behind Vurb.

When someone uses Vurb to search for a movie, it returns a single page with reviews, cast members and nearby theaters, along with links to buy tickets and the option to call a cab. When a user searches for an old movie, the service fetches streaming applications like Netflix.

"If I'm searching for a movie, chances are I want to do a couple of things related to that," Mr Lo said.

Mobile also has several special challenges for an entrenched player like Google. With its constellation of apps and competing operating systems, mobile is a highly fragmented universe, making it harder for one company to index all of the most relevant information the way Google has indexed the Web.

Also, the answer to many of the most common - and lucrative - queries is neatly structured inside popular applications like Yelp, the local directory service, making it easier to create focused search products that are unlikely to sink Google but could give it "a thousand tiny leaks," said Jeremy Kressmann, an analyst at eMarketer who covers the search business.

Smartphone users in the United States are projected to spend 81 per cent of their time in mobile applications this year, and 19 per cent on the Web, according to eMarketer.

This has also benefited Google, which owns the world's largest mobile operating system, Android, as well as many of the most popular apps, like YouTube. On Wednesday, at an event for advertisers in New York, Susan Wojcicki, chief executive of YouTube, said the online video service reached more 18-49-year-olds on mobile phones than any cable network did on television.

Of course, Google has no plans to cede its hold on search. The company has amassed 30 billion "deep links" so that its search engine can return information from apps as well as the Web, and it has been a serial acquirer of startups with promising new technologies. And the company's engineers are busy reimagining its search business for mobile phones.

"Whenever you have a platform shift, you kind of figure out what are the right interfaces," said Aparna Chennapragada, director of product management in Google's search business.

The company's biggest bets have been a voice-searching tool, along with Google Now, an application that tries to predict what users are looking for by showing a stack of cards with timely information, using cues such as upcoming events in the user's emails or recent activities on mobile apps and the Web.

Like her startup competitors, Ms Chennapragada is still unsure exactly what people want.

"Google Now is such an early effort," she said. "We're still trying to figure it out."

NYT

    
 

Execs close to Charter reach out to Time Warner Cable on merger: WSJ

Top executives close to Charter Communications Inc have reached out to management at Time Warner Cable Inc to discuss a possible merger of the cable operators, the Wall Street Journal reported on Sunday. 

PHOTO: BLOOMBERG

4 May6:55 AM

[NEW YORK] Top executives close to Charter Communications Inc have reached out to management at Time Warner Cable Inc to discuss a possible merger of the cable operators, the Wall Street Journal reported on Sunday.

John Malone, chairman of Charter's biggest shareholder Liberty Broadband Corp called Time Warner Cable's Chief Executive Officer Rob Marcus "in recent days" to express Charter's interest in pursuing friendly deal talks, people familiar with the matter told the Wall Street Journal.

The report comes after the companies' bitter exchanges that ended with Time Warner Cable rejecting Charter's unsolicited approaches last year, when Time Warner had found a white knight in Comcast Corp.

Last week, Reuters reported that Time Warner Cable was open to merger discussions with Charter after Comcast's US$45 billion bid for TWC failed, according to people familiar with the matter.

On May 1, Charter reported a bigger quarterly loss, hurt by costs related to the failed deal between Comcast and Time Warner that involved assets Charter was planning to buy.

REUTERS

    
 

Greece cites progress in talks with EU/IMF lenders, aims for May deal

Negotiations between Greece and its international lenders over reforms to unlock remaining bailout aid have made headway and an agreement could be closer this month, a government official said on Sunday. 

PHOTO: EPA

4 May6:56 AM

[ATHENS] Negotiations between Greece and its international lenders over reforms to unlock remaining bailout aid have made headway and an agreement could be closer this month, a government official said on Sunday.

"There were very important steps made at the Brussels Group (talks) which bring an agreement nearer," the official said, declining to be named. "All sides aim for an agreement at a Brussels Group level within May."

The talks between technical teams from Athens and EU/IMF/ECB lenders are expected to resume on Monday, the official said after the country's chief negotiators met with Prime Minister Alexis Tsipras.

REUTERS

    
 

Japan to increase investment in Asian infrastructure

Japanese Finance Minister Taro Aso said on Sunday his country's government will increase investment in Asian infrastructure at a meeting of the Asian Development Bank (ADB), according to Kyodo News. 

PHOTO: AFP

4 May7:18 AM

[TOKYO] Japanese Finance Minister Taro Aso said on Sunday his country's government will increase investment in Asian infrastructure at a meeting of the Asian Development Bank (ADB), according to Kyodo News.

Mr Aso did not immediately disclose the size of the investment, according to Kyodo. The move could put Japan at loggerheads with China, who is also setting up a new development lender devoted to infrastructure projects in Asia.

Mr Aso said he wants to set up a new framework for financial cooperation between the ADB and the Japan International Cooperation Agency, Kyodo reported. "We want to encourage infrastructure investment that will contribute to high-quality economic growth in Asia," Mr Aso said, according to Kyodo.

The ADB is holding its annual meetings in Baku, Azerbaijan. One question that is hanging over the event is how the ADB will cooperate with the China-led Asian Infrastructure Investment Bank (AIIB).

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 U.S.-dominated World Bank.

Japan, which has a lead role at the ADB, has also chosen to not joint the AIIB, citing concerns that its lending practices may not be transparent.

REUTERS

    
 

China insuring US$16 trillion deposits means more bond risk-reward

China started an insurance system for its more than 100 trillion yuan (S$21.3 trillion) of bank deposits on May 1 and the bond market is already preparing for the next step: the end of interest rate controls. 

PHOTO: REUTERS

4 May6:42 AM

[BEIJING] China started an insurance system for its more than 100 trillion yuan (S$21.3 trillion) of bank deposits on May 1 and the bond market is already preparing for the next step: the end of interest rate controls.

Banks, which hold the majority of corporate bonds in the world's second-biggest economy, are currently limited to paying 30 per cent more than a benchmark deposit rate. That cap is very likely to be done away with this year, central bank Governor Zhou Xiaochuan said March 12.

While Premier Li Keqiang is pushing to reduce the role of the government in financial markets, he must ensure those reforms don't lead to financial contagion that worsen economic growth already the weakest since 1990. China had two landmark debt failures in April when Baoding Tianwei Group Co became the first state-owned firm to renege on onshore notes and Kaisa Group Holdings Ltd became the first property developer to default on dollar-denominated securities.

"The deposit insurance system is part of the government's preparation for more credit defaults," said Li Ning, a bond analyst in Shanghai at Haitong Securities Co, the nation's third-biggest listed brokerage. "Interest-rate liberalization may have a big impact on the bond market as banks' borrowing costs can't fall, which will in turn prevent bond yields from declining in the coming two to three years because banks are the biggest bond investors."

Here are some questions bond investors are asking:

1. How do the reforms fit into the government's strategy of allowing market forces to play a greater role in the bond market?

China's total government, corporate and household debt load as of mid-2014 was US$28 trillion, according to McKinsey & Co. That's equal to 282 percent of the country's total annual economic output. While authorities will allow failures at companies like Tianwei, they must ensure the number of firms reneging on obligations doesn't spread rapidly.

China on Dec 19 set up China Trust Protection Co, a fund to support troubled trust firms, as repayment risks accumulated in the 13 trillion yuan industry, according to the official Xinhua News Agency. The China Securities Regulatory Commission said in January corporate bonds rated less than the top grade can't be sold to individual investors with less than three million yuan in financial assets.

The CSRC's stricter requirements are also part of preparations for more defaults, along with the establishment of the deposit insurance system, according to Haitong Securities' Li. "After the launch of the deposit insurance mechanism, we may see defaults or bankruptcies of smaller banks within five years," he said.

2. As deposit rates are eventually allowed to go up, how will that affect bond yields?

The introduction of deposit insurance to shield savers was among policy makers' prerequisites for freeing up interest rates, a long-term goal that can be traced back to 1993 when the Communist Party drafted a market-oriented reform blueprint.

The central bank will probably adjust benchmark rates as it implements further reforms, with the ultimate effect of letting the market better gauge risk so that more creditworthy companies pay less for funds, according to Chen Kang, a Shanghai-based analyst at SWS Research Ltd, a unit of Shenwan Hongyuan Group Co.

"Chinese banks are likely to face higher deposit rates and therefore could invest in higher yielding assets, such as high- yield bonds," Mr Kang said. "But in reality, the People's Bank of China is likely to lower rates to smooth the transition, so banks may not in the end have to pay higher deposits. Together with other factors, including additional PBOC rate cuts, eventually we'll see lower risk free rates and higher risk premiums, which is a sign of a maturing bond market."

3. How will these reforms affect the bond-buying behaviour of banks?

More than 90 per cent of notes in China are traded on the interbank market, making lenders the dominant investors in corporate debt. In making bond investments, they draw on local- currency deposits that totaled 122 trillion yuan as of February.

As lower-tier banks have smaller loan businesses, any increase in deposits due to the assurances brought by the insurance program may flow into bond purchases, according to Standard & Poor's.

"After the deposit insurance scheme becomes effective, small city or rural banks may have less pressure to acquire deposits through aggressive pricing because depositors may feel comfortable in putting their money in those banks given the insurance," said Qiang Liao, a banking analyst at S&P in Beijing. "Together with their limited competitiveness in the loan market, this could mean those banks will have to allocate more funds in bond investments, especially in high-yield bonds."

4. Would bankruptcy of a small bank trigger systemic fallout?

The failure of a small rural bank in a remote city that has very little business with other financial institutions wouldn't trigger systematic risk, according to Moody's Investors Service.

"The Chinese government can use deposit insurance to support small depositors without bailing out the bank," said Christine Kuo, a Hong Kong-based senior credit officer at Moody's. "On the other hand, if the bank has very extensive interbank businesses, that can cause contagion." Small banks may have to pay more when they sell bonds or when they borrow money from other financial institutions, she said.

"Credit risk premium for small banks will be increasing because other financial institutions understand the failing for small banks is increasing," Ms Kuo said. "When they deal with such banks, they would require higher interest rates."

BLOOMBERG

    
 

PM Lee expected to announce Singapore terminal location for high-speed rail link to KL

Najib in Singapore for leaders' retreat

PM Lee expected to announce Singapore terminal location for high-speed rail link to KL

By

Lee U-Wenleeuwen@sph.com.sg@LeeUwenBT 

Mr Najib and Mr Lee at the Singapore Sports Hub last August. Aiming to foster warmer bilateral relations, their meeting this week will be their sixth retreat since their first one back in 2007. 

ST FILE PHOTO

4 May5:50 AM

Singapore

THE Singapore government is said to have decided on which of three possible locations to site the Republic's terminal station for the proposed high-speed rail link with Malaysia. An announcement is expected when the two countries' leaders meet here this week.

Malaysian Prime Minister Najib Razak, who is due for a two-day visit, will have a retreat with Prime Minister Lee Hsien Loong on Tuesday.

At a joint press conference after their meeting, Mr Lee is likely to reveal where Singapore intends to build its terminal station, having announced last year that there were three options: Tuas West, Jurong East, and the city centre.

Malaysia has already confirmed that its terminal will be in Bandar Malaysia, about 5km from the landmark Petronas Twin Towers in the heart of the country's capital Kuala Lumpur.

The Bandar Malaysia project is a planned 200-hectare mixed development that will sit on land in an existing military airbase in Sungai Besi.

The plan is to complete the mammoth rail project, estimated at 320-340km long, by 2020. Some sources, however, told The Business Times that it could bust that deadline by two years.

Once the train service starts, passengers will be able to travel between Singapore and KL in just 90 minutes, compared to about 4-5 hours by car.

At the previous retreat in Putrajaya last year, the two prime ministers also said that their countries were exploring a new initiative: a single border checkpoint with both Singapore and Malaysia housing their Customs, Immigration and Quarantine (CIQ) complexes at one location.

Mr Lee's last meeting with Mr Najib was a week ago in KL and Langkawi, when Malaysia hosted the Asean Summit meetings.

At the opening of the new chancery of the Singapore High Commission in KL, Mr Lee said: "If we can get the high-speed rail going and running, this will be a very important project which will foster closer ties between our peoples. Then we can come up, have lunch, and go back down to Singapore again."

Singapore-Malaysia bilateral links are strong, and this will be the sixth retreat between Mr Lee and Mr Najib since their first one back in 2007.

According to a statement from Singapore's Ministry of Foreign Affairs on Sunday, the annual retreat is a "key bilateral platform" for the prime ministers to drive relations forward.

Mr Najib will be in Singapore together with his wife Rosmah Mansor and a high-level delegation comprising many members of his Cabinet and senior officials.

Mr Lee's team of ministers will include Deputy Prime Minister and Home Affairs Minister Teo Chee Hean.

The Singapore leader will host a private dinner for Mr Najib and their wives on Monday evening. The retreat proper begins on Tuesday, with the prime ministers and their delegations meeting for bilateral discussions on various issues.

After the retreat, Mr Najib is due to deliver the keynote address at the Economic Society of Singapore's annual dinner at Shangri-la Hotel, an event that Mr Lee will also attend along with many policymakers, economists, business leaders and academics.

This visit will be Mr Najib's second to Singapore in six weeks. He was previously here in late March to pay his respects to the late founding prime minister Lee Kuan Yew at Parliament House.