Finance & Business World

China’s central bank said it will use market tools to control lending growth and affirmed a “moderately loose” monetary policy to support the nation’s economic recovery.

The People’s Bank of China will “emphasize the use of market tools instead of quantity controls to guide appropriate growth in money supply and lending” in the second half, Deputy Governor Su Ning said in a statement posted on the bank’s Web site late yesterday.

Shanghai’s benchmark stock index fell for a second day on speculation credit will tighten. China has pushed up money- market rates in open-market operations in the past month and resumed one-year bill sales as policy makers seek to restrict funds for stocks and real-estate investment without derailing a 4 trillion-yuan ($585 billion) economic stimulus plan.

“The market has accepted that it’s only a matter of time before the PBOC takes some serious actions,” said Li Wei, an economist at Standard Chartered Plc in Shanghai. “Everybody knows new loans growth is going to slow in the second half. In the first half, the monetary policy was extremely loose, now the policy has already changed.”

The Shanghai Composite Index slid 1.2 percent as at 11:30 a.m. local time. The benchmark dropped 5 percent yesterday after a report that two of the nation’s biggest banks set ceilings on new loans, spurring concern credit growth will slow. China’s overnight money-market rate rose for the first time in more than a week on speculation the availability of credit is tightening.

Top Priority

The central bank’s statement, which reiterated earlier comments, came hours after the biggest drop in the benchmark stock index in eight months yesterday. Last week, the bank said it would use monetary-policy tools to guide “appropriate” growth in credit, work to control loan risks, and maintain a “moderately loose” monetary policy unique business cards.

“To continue to foster the relatively smooth and fast economic development is the top priority,” Su said at a recent meeting at the Shanghai branch of the central bank, according to the latest statement. The central bank should “maintain continuity and stability in macro-economic policy and strictly stick to the moderately loose monetary policy,” he said.

China’s credit growth will slow from the “unsustainable” pace seen this year to about 15 percent in 2010 as a strengthening economy reduces the need for loan support, Goldman Sachs Group Inc. said in a note dated yesterday.

Lending Spree

Chinese banks, which advanced a record 7.37 trillion yuan of new loans in the first half, created the equivalent of two Indian banking industries and stoked concerns that loan quality may drop, Goldman Sachs analysts led by Roy Ramos said.

The lending spree, encouraged by the government to support its stimulus package, has also fanned concerns that asset bubbles will form, and prompted the nation’s banking regulator to call on lenders to control the flow of credit several times since last week.

Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp., the nation’s two largest lenders by assets, aim to cap their new loans at 200 billion yuan in the second half, 21st Century Business Herald reported today, citing people it didn’t identify.

M2, the broadest measure of money supply, rose a record 28.5 percent in June from a year earlier, after a 25.7 percent gain in May. China’s economy expanded 7.9 percent in the second quarter as the nation became the first major economy to rebound from the global recession.

–Ye Xie, Judy Chen, Stephanie Phang. Editors: John McCluskey, Paul Panckhurst.

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U.K. homebuyers are clinching smaller discounts on property prices as the housing market stabilizes, the Royal Institution of Chartered Surveyors said.

Around 60 percent of surveyors questioned in May said that the gap between asking prices and selling prices narrowed, while it widened in a survey last August, London-based RICS said today. Homes are now selling at an average of 11 percent below the asking price.

The report adds to evidence that the British housing market has endured the worst of the crash in the biggest recession for a generation. RICS said last week the market may be “stabilizing” and mortgage lenders Halifax and Nationwide Building Society said house prices jumped in May.

Improved sentiment “is reflected in a narrowing in the gap between asking prices and selling prices,” Brigid O’Leary, an economist at RICS, said in an e-mailed statement classic car insurance. “The housing market will still be challenged by an uncertain economic backdrop, the threat or rising unemployment and continued restrictions on mortgage finance.”

U.K. home sellers raised asking prices in May by the most in more than a year, according to Rightmove Plc, the operator of Britain’s biggest property Web site.

RICS based the report on the responses to questions it occasionally adds to its monthly house-price survey that was last published on June 9.

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Vietnam should phase out subsidies to bank lending as “rapid” credit growth threatens to stoke inflation, the World Bank said.

The central bank will probably bear at least 17 trillion dong ($956 million) in costs from subsidizing loans as part of the government’s stimulus measures, the World Bank said today in a report. Total lending under the program has reached 332 trillion dong, the State Bank of Vietnam said June 5.

“The interest-rate subsidy scheme, which played an important role in the initial phase of the stimulus policy, has lost its justification,” the World Bank said in a report written by economists led by Dinh Tuan Viet and Martin Rama. “Credit is growing rapidly again.”

Sharp credit growth, as well as increases in commodity prices, may drive up inflation, according to the agency. Economic growth probably bottomed in the first quarter, when gross domestic product expanded 3.1 percent, the World Bank said.

Total outstanding banking loans increased 15 percent through mid-May from December, Deputy Prime Minister Nguyen Sinh Hung told the National Assembly last month. Lower interest rates have helped revive the construction industry and domestic consumption, the Washington-based World Bank said.

“Once the figures for the first half of 2009 become available, it might be good to pause and reflect on whether sustaining economic activity should remain the single priority,” Viet and Rama wrote in the report, released at a conference in the Central Highlands city of Buon Ma Thuot.

Inflation Threat

The extra stimulus spending is “likely to have enduring macroeconomic effects in terms of greater inflation levels, increased budget deficits and increased pressure on the current- account and exchange rate,” said a separate report by the United Nations Development Program business cards design.

Inflation slowed in May to an annual rate of 5.6 percent, the lowest since 2004 and down from 28.3 percent in August.

“There are constraints on how much domestic finance can be raised, as shown by the recent experience with bond issuances,” the World Bank said. “There are also indications that upward price pressures are resurfacing.”

Vietnam’s State Treasury last week failed to sell 1 trillion dong of bonds. The lending subsidies are stifling appetite for Vietnamese bonds, HSBC Holdings Plc said last month.

The World Bank recommended Vietnam set a target for loan growth that would avoid quickening inflation. The government should also watch for an increase in bad debt, the agency said.

The bulk of the loans channeled under the program are from state-owned banks, the International Monetary Fund said in April.

“Policy lending is vulnerable to favoritism, may result in an inefficient allocation of resources and could eventually affect the quality of bank portfolios,” the World Bank said. “There are already some indications of an increase in the share of non-performing loans.”

Moody’s Investors Service last month said it was reviewing four Vietnamese banks, including the second-biggest by assets, for a downgrade, citing lower interest rates and the probability of a higher default rate.

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Sales of previously owned homes picked up in April, an industry group reported on Wednesday, as buyers went looking for bargains and lower-priced houses.

But there were more troubling notes in the housing figures. Home sales are still sluggish compared with a year ago, and the glut of unsold single-family homes, townhouses and condominiums swelled last month, suggesting that a sharp imbalance remains between the supply of housing and demand among potential buyers.

The median home price nationwide climbed slightly, to $170,200 in April from $169,900 in March, the group reported. Prices, however, were down from $201,300 in April a year ago.

Across the country, existing home sales rose 2.9 percent in April from a month earlier but were down 3 classic car insurance.5 percent from a year ago, the National Association of Realtors reported.

Although potential buyers are getting back into the housing market, enticed by low prices and some of the lowest mortgage rates in years, economists and housing specialists worry that foreclosures will continue to grow and could swamp the market.

"Because foreclosed properties will likely be released into the market over the rest of the year, it is critical that distressed homes be quickly cleared from the market," Lawrence Yun, chief economist of the National Association of Realtors, said in a statement.

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The Bank of England hired the most staff in more than two decades last year and raised the budget for its bonus pool as the financial crisis stretched resources and stressed out officials.

The number of full and part-time employees rose by about 6 percent in the year to February to 1,857, the first “significant” addition since 1987, the U.K. central bank said in its annual report published in London today. It also lifted the budget for the bonus pot to 8.1 percent of salaries from 7 percent in the previous year.

“The increase in staff numbers was due to the extra workload brought on by the bank’s new responsibilities,” the bank’s non-executive directors said in the report. “In recognition of the exceptional workload over the past year, the bank increased its bonus and special payments budget.”

The Bank of England grappled with the near-collapse of HBOS Plc and Royal Bank of Scotland Group Plc, brought interest rates to a three-century low and began unconventional policy measures to fight Britain’s worst recession for a generation. The staff increase contrasts with the rest of London’s financial services industry, where companies may cut thousands of jobs this year.

The directors have “been concerned about pressures on staff, particularly on key individuals in the markets and banking areas” and have raised questions on whether “actions were being taken to recruit and redeploy staff and to manage the risks associated with the exceptional levels of stress in many parts of the organization,” the report said pay day loan lenders. The committee said it’s satisfied that the issues are being managed effectively.

Job Cuts

Financial services companies may cut about 29,000 jobs this year before employment growth resumes in 2010, the Centre for Economics and Business Research forecast on April 20.

The Bank of England’s balance sheet more than doubled to 147.9 billion pounds ($226 billion) as of the end of February from 72 billion a year earlier as loans and advances to banks increased. The central bank expanded its three month money- market operations and introduced dollar auctions to improve the flow of credit in the economy.

King’s salary rose 2.5 percent to 297,920 pounds, while pay for former deputy governors Rachel Lomax and John Gieve increased by the same amount, to 246,338 pounds. Charles Bean took over from Lomax on the same salary, the report said. None received bonuses.

The bank’s four external members of the monetary policy committee, who serve three-year terms on Treasury appointment and work on a part-time schedule, were paid 96,478 pounds and an extra 30 percent to make up for exclusion from the bank’s pension fund.

King may seek to consult more with bankers as part of an enhanced communication strategy, according to the report.

“The governor’s program of regular contacts with financial sector participants will be expanded over the coming year,” the report said.

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International demand for long-term U.S. financial assets rose in March as China added to its portfolio of Treasury securities, according to government data.

Total net purchases of long-term equities, notes and bonds rose a net $55.8 billion, compared with buying of $22 billion in February, the Treasury said today in Washington. Including short-term securities such as stock swaps, foreigners bought a net $23.2 billion, compared with net selling of $91.1 billion the previous month.

Investors worldwide have sought a haven from global market turmoil by buying U.S. Treasury securities, which last year posted the best returns since 1995. The government securities gained 14 percent in 2008, according to Merrill Lynch’s U.S. Treasury Master Index. So far this year, the index has declined.

“As the economy gradually exhibits signs of improvement, foreign appetite for U.S.-denominated securities improves,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York. “Even in this difficult environment, the U.S. remains the safe haven.”

The U.S. Treasury and the Federal Reserve pledged $12.8 trillion to drag the economy out of its longest recession since the 1930s and restore confidence in the global financial system. The Fed and other central banks of the industrial world, in turn, have lowered interest rates to near zero in the aftermath of the credit crisis.

Beat Forecasts

The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac, which buy mortgages.

Before today’s report, economists predicted investors would buy a net $32.5 billion of long-term securities in March, according to the median of eight estimates in a Bloomberg News survey.

Net foreign purchases Treasury notes and bonds were $55.3 billion in March compared with purchases of $21.6 billion a month earlier no fax payday loans.

China remained the biggest foreign holder of U.S. Treasuries, after its holdings rose 3.2 percent to $767.9 billion in March. Japan, the second-largest holder, reported holdings rose 3.7 percent to $686.7 billion.

The Treasury’s last report showed China’s purchases of U.S. securities rose weeks before Chinese officials questioned whether such investments were safe.

China ‘Worried’

People’s Bank of China Governor Zhou Xiaochuan in March urged creation of a “super-sovereign reserve currency” after Chinese Premier Wen Jiabao said he’s “worried” a weaker U.S. dollar might hurt China’s investment. The U.S. needs China to sustain its purchases to fund billions’ worth of programs aimed at reviving the economy about 70 percent of which reflects consumer spending.

Still, China’s purchases slowed in February and most were in short-term Treasury bills.

Timothy Geithner will make his first trip to China as Treasury secretary next month, the Treasury said May 12. In a semiannual report on foreign-exchange policies released April 15, Geithner refrained from labeling China as a currency manipulator.

A bipartisan group of lawmakers, led by Democratic Senator Debbie Stabenow of Michigan and Republican Jim Bunning of Kentucky, on May 11 announced plans to revive legislation to press China to raise the value of its currency, the yuan, by threatening to raise tariffs.

Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac continued to slide, with net sales of $15.6 billion after net buying of $1.1 billion.

Net foreign purchases of U.S. equities were $13.2 billion in March, after net purchases of $5.1 billion the previous month. Investors bought a net $3.5 billion in U.S. corporate debt in March, the report showed.

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South Africa’s gold and foreign currency reserves probably rose for a third consecutive month in April as a stronger rand made it cheaper for the central bank to buy dollars.

Gross reserves increased to $34.4 billion from $34.1 billion, according to the median estimate of two economists surveyed by Bloomberg. The Pretoria-based central bank will publish the data on its Web site at 8 a.m. on May 8.

The rand surged 10 percent against the dollar in April, after gaining 11 percent in the previous month, enabling the Reserve Bank to add to reserves. The central bank is under pressure to build reserves to cover rising import requirements, efforts that were undermined since last year by the global financial crisis.

“The bank is likely to take full opportunity of the stronger exchange rate as the current rally may not last,” said Danelee van Dyk, an economist at Standard Bank Group Ltd., Africa’s largest bank. “Foreign exchange purchases are expected to have been more robust than they have been over the past few months.”

Among other economic statistics, Investec Asset Management will today publish its Purchasing Managers Index, which fell to a record low of 36 in March.

The National Association of Automobile Manufacturers of South Africa will release vehicle sales data tomorrow, along with the latest business confidence index from the South African Chamber of Commerce and Industry.

Unemployment

Statistics South Africa is also due to publish first- quarter unemployment data tomorrow. The 21.9 percent jobless rate is the highest of 62 countries tracked by Bloomberg payday cash advance.

On the political front, South Africa’s National Assembly will convene in Cape Town on May 6 for the first time since April 22 elections for the swearing in of 400 legislators from 13 political parties. The legislature will then elect the country’s new president.

African National Congress President Jacob Zuma is virtually assured of securing the post, having been nominated by the ANC, which controls 66 percent of the parliamentary seats. The president’s inauguration is set to take place on May 9.

In corporate news, Sappi Ltd., the world’s largest maker of glossy paper, will report second-quarter earnings tomorrow, while Nedbank Group Ltd. is due to publish first-quarter profit on May 7.

Gold Fields Ltd., the world’s fourth-largest producer of the metal, and Harmony Gold Mining Co., Africa’s third-biggest gold producer, will publish third-quarter earnings this week. The gold price has gained 4.5 percent in the first three months of the year.

Markets

Last week, the benchmark FTSE/JSE Africa All Share Index added 2 percent, snapping three consecutive weeks of declines and paring its drop this month to 0.1 percent.

Government bonds fell in the week, with the yield on the R157 bond, due September 2015, adding 18 basis points, or 0.18 percentage point, to 8.12 percent. Yields move inversely to bond prices.

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Daimler will raise 1.95 billion euros ($2.67 billion) in fresh capital through the sale of a 9.1 percent stake to Abu Dhabi’s Aabar Investments PJSC AABAR.AD, the two companies said on Sunday.

Some 96.4 million new shares will be issued to Aabar for a price of 20.27 euros each through a 10 percent capital increase that excludes subscription rights for existing shareholders.

The dilution means Emirate of Kuwait stake shrink to 6.9 percent from a previous 7.6 percent, and Aabar would eclipse it as Daimler’s largest investor.

“We are delighted to welcome Aabar as a new major shareholder that is supportive of our corporate strategy,” Daimler Chief Executive Dieter Zetsche said in a statement.

“We look forward to working together to pursue joint strategic initiatives,” he added.

Daimler has repeatedly been a subject of takeover speculation in the past since it is one of the only major carmakers in the world without a protective shareholder.

Some analysts therefor have believed the massive crisis in the auto industry might encourage Daimler to boost its size via an acquisition or a cross-shareholding with another rival such as BMW.

Formerly called Aabar Petroleum Investments Company PJSC and founded in early 2005, the Abu Dhabi-based company explored oil and gas in Southeast Asia before selling off in 2008 core units like Pearl Energy Limited and Dalma Energy LLC that it had only acquired a couple of years earlier no fax cash advance.

ELECTRIC CAR COOPERATION

Aabar has since branched out into real estate and financial services, recently buying AIG Private Bank for 407 million Swiss francs ($363.7 million) in equity and debt and taking a 3.3 percent stake in Italian toll road operator Atlantia, formerly known as Autostrade.

A fraction the size of Daimler, Aabar has total assets of some $922 million and a market cap of just 1.58 billion dirhams.

While Abu Dhabi Investment Company (ADIC) and Mubadala Development Company were among the founding investors, Aabar is now controlled by the Abu Dhabi state-owned International Petroleum Investment Company (IPIC).

“Daimler is an iconic brand and a financially strong company with a reputation for excellence worldwide,” Aabar Chairman and IPIC managing director Khadem Al Qubaisi said in a statement. “We are delighted to have received the opportunity to be making this investment.”

Daimler and Aabar also plan to cooperate three different areas: electric vehicles that would reduce carbon emissions, developing innovative compound materials to be used in automotive manufacturing, and social projects in Abu Dhabi to educate young talent for positions in the car industry.

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The Federal Reserve’s $1 trillion program to jump-start consumer and business lending is encountering resistance from investment firms over a new law that would make it harder to bring in employees from overseas.

Lawmakers inserted rules into last month’s stimulus legislation that prevent firms from replacing fired U.S. workers with foreign employees if they get funds under rescue programs. Hedge funds, insurers and companies considering joining the plan may balk at hurdles involved in bringing in foreign talent.

The central bank has already delayed introduction of the Term Asset-Backed Securities Loan Facility, or TALF, which was first announced in November and originally scheduled to start last month. A further postponement or a limit to the number of investors participating would hamper the goal of thawing the market for securities backed by consumer and business loans.

“We need to be a little careful about how much we micromanage these financial institutions,” said Clay Lowery, a former assistant Treasury secretary, who is now a managing director of the Glover Park Group in Washington.

The securities industry’s main trade group alerted members to the issue on March 13, six days before the rescheduled start of the TALF.

Companies that apply for a visa on behalf of a foreign worker can’t dismiss employees in similar positions 90 days before and 90 days after requesting the visa, and have to prove they attempted to recruit a U free credit report.S. worker first.

Visa Burden

The Fed is working with the Homeland Security Department’s U.S. Citizenship and Immigration Services to provide guidance on the issue.

The law applies the restrictions to any recipient of funds under section 13 of the Federal Reserve Act. The TALF and most other Fed lending programs were authorized under that section.

The visa provision adds a burden to what participants already expected to be a slow start to the TALF, which is aimed at reviving the market for securities backed by auto, education, credit-card and small-business loans.

Fed Chairman Ben S. Bernanke and Treasury Secretary Timothy Geithner are counting on investors such as hedge funds to use cheap Fed loans to buy the securities, helping lenders lower rates and loosen other terms on new loans to consumers and businesses. The Treasury is funding 10 percent of the TALF loans from the $700 billion financial-rescue fund.

The New York Fed, which is administering the TALF, starts accepting applications for loans through the program today at 10 a.m. Originally the Fed planned a two-hour window for applications, then announced March 13 that the period would be extended until 5 p.m. on March 19, saying participants requested more time to complete documentation.

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NEW YORK – Amazon.com Inc. says its fourth-quarter profit rose nine per cent and beat analysts' forecasts.

Amazon had called the holiday season its "best ever," and its earnings report today backed up the idea that it is not being hurt by cutbacks in consumer spending.

The Seattle-based online retailer said its quarterly profit was US$225 million, or 52 cents per share paydayloans.com.

That was better than the 39 cents per share expected by analysts polled by Thomson Reuters.

Revenue rose 18 per cent to $6.7 billion, exceeding analyst estimates for $6.4 billion.

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