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14 Mar, 2008

deVere Insight– 14th March 2008

VIEWS– In this edition we feature the Outlook from JP Morgan at




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The dollar fell below 99 yen and hit a record low against the Euro after Bear Stearns said a worsening cash position forced the Wall Street firm to secure emergency financing.

News that the New York Federal Reserve and J.P. Morgan Chase were to provide funds for the fifth-largest U.S. investment bank signalled more credit turmoil to come and added to investor fears that the economy is in for a long recession.

"People are starting to talk about whether this is a signal of a systematic problem in the U.S. banking sector, and that's why we're seeing selling of dollar across the board," said Greg Salvaggio, currency trader at Tempus Consulting in Washington.

The question on traders' minds now, said Omer Esiner, a market strategist at Ruesch International in Washington, is "which of the other big firms out there need similar funding."

The dollar plunged to 98.91 yen, its lowest level in 12½ years, before edging back to 99.310 yen, down 1.1%. It was down nearly 11% against the yen so far in 2008.

The Euro hit $1.5688, an all-time high, before easing to $1.5669, up 0.2%. The dollar fell below parity with the Swiss franc for the first time ever, trading at 0.9976 francs, according to EBS, before easing to 0.9984 francs.

Analysts said the dollar is likely to remain on the ropes because the Fed may have to do much more to ease market nerves, either by cutting interest rates even more aggressively or by taking additional measures to inject liquidity 

"It wouldn't surprise me if the Fed signals some more aggressive action or if something happens over the weekend," Salvaggio said. "And the dollar is going to bear the brunt of that. I think we very possibly could see the Euro at $1.60."

In addition to providing funds to Bear Stearns, the Fed this week announced plans to lend $200 billion to primary dealers and accept various mortgage debt as collateral.

Futures markets are now pricing in a 50% chance that it cuts benchmark interest rates next week by a full percentage point to 2%. Coming into the session, expectations were for a smaller cut to 2.25%.

Divyang Shah, a currency strategist at Commonwealth Bank in London, said the Fed may cut again after its March 19 meeting but added that "other scenarios should not be ruled out in the current environment."

U.S. economic data on Friday did no favours for the dollar, either. The Reuters/University of Michigan consumer sentiment index fell to a fresh multi-year low. A separate report showed underlying inflation unchanged in February.

"The Fed has turned a blind eye to inflation in hopes that slower growth would bring prices back in line, and this report allows it to maintain that policy," said Michael Woolfolk, currency strategist at the Bank of New York Mellon.

Coming into the session, talk that central banks could stage a coordinated effort to prop up the dollar for the first time in more than a decade had lent modest support to the U.S. currency.

But Japanese officials, who are worried a strong yen will hurt exports and undercut corporate profits, have so far stuck to verbal protests rather than intervene to weaken the yen. Next week, markets will focus on the subprime crisis and Tuesday's Fed meeting. 

"The only real question is how aggressively the Fed cuts on Tuesday. While the data might warrant a larger move, we are calling for a 75-bp cut, in line with the futures strip," said CIBC World Markets in Toronto.

It added that a restraining factor is still inflation. "The market breathed a sigh of relief at Friday's CPI, but strong oil prices and the dollar's weakness point to less cheery numbers ahead."

DUBAI - The weak dollar and the flow of investment money into commodities have pushed oil prices to a fresh record so more pumping from OPEC would have done little to stop the surge, a senior OPEC delegate said on Sunday.

The Organization of the Petroleum Exporting Countries (OPEC) left its output steady at a meeting earlier this month despite calls from consuming countries for more oil to halt the record rally. The price hit a peak of $111 a barrel on Thursday.

"What can you do?" the senior delegate told Reuters. "Prices are completely ignoring the fundamentals of supply and demand. Even if we had increased (at the meeting), I don't think it would have changed anything. It is financial speculators, the weak dollar and funds driving the price."

OPEC officials have long insisted factors beyond their control are fuelling oil's rally.

The producer group, supplier of more than a third of the world's oil, would not react to speculative oil price movements when market fundamentals were balanced, the OPEC governor of the United Arab Emirates said on Sunday.

"OPEC does not look at prices," UAE OPEC Governor Ali al-Yabhouni told Al Arabiya television. "We look at market fundamentals: Supply, demand and inventories. Predicting prices is difficult because they are not (moving) because of market fundamentals. There is a lot of speculation."

Crude futures have jumped about 15% this year in part due to a steep decline in the U.S. dollar, which has helped push up the nominal value of all commodities prices in the currency.

Crude and gasoline inventories in the world's largest energy consumer the United States were rising, an indication that oil market fundamentals were not behind the price rise, the senior delegate said. U.S. gasoline inventories hit their highest levels for 15 years last week, according to U.S. government data.

In its monthly report on Friday, OPEC said it was pumping more than enough to keep consumers satisfied and a potential U.S. recession could hit demand for its crude. OPEC had no plans to call an emergency meeting to discuss output policy before the next scheduled meeting in September, Yabhouni said.

Ministers could confer if necessary on the sidelines of producer-consumer talks in Rome in April, the senior delegate said.

"I don't know if they will, but they can meet there and make a decision if they need to," the delegate said.

NEW YORK - U.S. stocks tumbled on Friday as an emergency rescue of Bear Stearns orchestrated by the Federal Reserve revived fears about a deepening global credit crunch, triggering a massive sell-off in shares across the board.

Stocks plummeted after the New York Fed and JPMorgan Chase & stepped in with short-term financing for Bear Stearns Cos, the fifth-largest U.S. investment bank. Before the opening bell, Bear Stearns shocked Wall Street when it said its cash position had unravelled in the past 24 hours.

Bear Stearns stock sank as much as 50% before closing down 45.9% at $30.85. The Standard & Poor's financial index fell 4.1% as investors feared a massive unwinding of Bear Stearns investments could trigger a financial calamity.

"It's a crisis of confidence. Who would have ever thought that Bear Stearns would basically have a bank-type run on it when their balance sheet at one time was relatively healthy?" said Richard Steinberg, president and chief investment officer of Steinberg Global Asset Management Ltd. in Boca Raton, Florida.

Sentiment was further eroded as the U.S. dollar plunged to a record low against the Euro and fell below 99 yen for the first time in 12½ years, while the price of heating oil climbed to a record $3.68 a gallon.

Exposure to the escalating housing crisis prompted Moody's Investors Service to downgrade the debt of Washington Mutual to one notch above junk status.

The Dow Jones industrial average dropped 194.65 points, or 1.60%, to end at 11,951.09. The Standard & Poor's 500 Index shed 27.34 points, or 2.08%, to 1,288.14. The Nasdaq Composite Index slipped 51.12 points, or 2.26%, to 2,212.49.

Although all three indexes finished the day sharply lower, they did trim some of their losses from their session lows in morning trading when the Dow was down 2.5%, the S&P 500 was down 2.8% and the Nasdaq was down 2.6%. 

Friday's losses wiped out much of Tuesday's gains when the market enjoyed its best day in five years following the Fed's move to expand a lending program and accept a broader base of securities, including mortgages bonds whose value has dropped, as collateral.

For the week, though, the Dow managed to finish with a gain of 0.5%, while the S&P 500 fell 0.4% and the Nasdaq was unchanged.

Bear Stearns Chief Executive Alan Schwartz said in a conference call at midday that concerns among customers and lenders got to the point where a lot of people wanted to get their cash out. Before the opening bell, the firm said its liquidity position had deteriorated significantly in the last 24 hours.

Top drags included shares of Lehman Brothers Holdings, which fell 14.6%to $39.26; Citigroup Inc, which slid 6% to $19.81, and JPMorgan Chase, which lost 4.1% to $36.54 on the New York Stock Exchange. Washington Mutual plunged 12.9% to $10.57.

After the news about Bear Stearns, U.S. interest-rate futures showed the market fully expects that the Fed, the U.S. central bank, will cut short-term benchmark interest rates by 75 basis points, or three-quarters of a percentage point, at its scheduled rate-setting meeting on Tuesday.

This would bring the federal funds rate target down to 2.25% from the current 3%, following cuts by the Fed totalling 2.25 percentage points since mid-September.

The credit woes overshadowed earlier tame inflation data. The U.S. Labour Department said cheaper transportation and energy costs helped keep consumer prices in check in February after a period of run-ups that had heightened concern over inflation.

Exxon Mobil fell 1.3% to $85.91 as the price of oil edged down from Thursday's jump to a record price of $111 a barrel. Trading was active on the New York Stock Exchange, with about 1.86 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.51 billion shares traded, above last year's daily average of 2.17 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of 5 to 1 and on the Nasdaq, by more than 3 to 1.

EUROPE - The U.S. economy lost the title of "world's biggest" to the Euro zone this week as the value of the dollar slumped in currency markets.

Taking the gross domestic product of both economies in 2007, the combined GDP of the 15 countries which use the Euro overtook that of the United States when the European currency surged to a record high of more than $1.56 per Euro.

"The curious outcome of breaching this latest milestone is that the size of the Euro zone's annual output has now exceeded that of the U.S.," the economics department of Goldman Sachs, the Wall Street investment bank, said in a note to clients.

Taking official estimates of 2007 GDP, $13,843,800 billion for the United States and 8,847,889.1 billion euros for the Euro zone, the economy of the latter passed the United States once converted into dollars, shortly after the Euro topped $1.56.

The dollar sank to $1.5688 per Euro late in European trading hours on Friday, at which rate the Euro zone's 2007 GDP equates to $13,880,568.4 billion.

The 2007 GDP estimates are as published by the U.S. Commerce Department's Bureau of Economic Analysis and provided to Reuters on request for the Euro zone by Eurostat, the European Union's statistics office.

JAKARTA - Indonesia's third-largest mobile phone firm, PT Excelcomindo Pratama Tbk EXCL.JK, said on Sunday it may raise its free float of shares to above 10% in the second half of 2008.

The company is also in the final stage of appointing a financial adviser and my pick JPMorgan, President Director Hasnul Suhaimi said.

"The appointment of the financial adviser will be made by the end of March," Suhaimi told reporters. The company has less than 1% of its outstanding shares owned by individual investors.

Telekom Malaysia holds 66.99% of Excelcom, while Malaysian state investor Khazanah Nasional Bhd controls 16.81%. In December, Emirates Telecom ETEL.AD bought 15.97% stake in Excelcom from its founding firm, Rajawali Corporation, for $438 million.

Excelcomindo's user base jumped 62% last year to 15.5 million, outpacing the 40% growth of the overall market, and closing the gap with number two player, PT Indosat Tbk ISAT.JK, whose cellular subscribers’ base grew 47% to 24.5 million in 2007.

ZURICH - Subprime-struck Swiss bank UBS urged management to keep a close tab on costs at a meeting in Berlin last week, a spokesman said on Sunday, but denied speculation of a radical strategy change.

Chief Executive Marcel Rohner had urged management to optimise internal processes, cut out redundancies, closely monitor external costs and delay projects where possible, a spokesman for the bank said.

"We want to clearly raise efficiency and improve the cost/income ratio. We want to consistently carry out our cost management," the spokesman said.

But he denied a report in a Sunday newspaper that said UBS -- which has already written down $18.4 billion in subprime assets, had disclosed new risky positions on its balance sheet, this time from U.S. municipal bonds.

Bank shares plummeted on Friday after the Federal Reserve and JPMorgan Chase came to the rescue of Bear Stearns with emergency funding after a sudden cash crunch, in a sign the global credit crisis is far from over.

The UBS spokesman also denied that the bank, Europe's worst victim from the credit crisis by far, had launched a plan at the meeting to divest its investment bank and concentrate on its core wealth management business. "UBS's strategy is unchanged," he said.

The spokesman also denied that there were plans for a further capital injection after UBS secured 13 billion Swiss francs ($10.44 billion) in new capital at an emergency shareholder meeting last month.

With credit markets showing no sign of recovering, analysts and investors have widely speculated that UBS may discover more holes in its balance sheet, forcing it to return to shareholders and ask for a second lifeline. Separately, UBS on Friday denied market speculation that it was seeking a buyer for its U.S. wealth management unit.

FRANKFURT - Bilfinger Berger is interested in buying DeTe Immobilien, the facility management unit of Deutsche Telekom, its chief executive has told a German newspaper.

"We are basically interested," Herbert Bodner told the Westdeutsche Allgemeine Zeitung, adding that the company would consider major acquisition if the price was reasonable. DeTe Immobilien had sales of almost 1 billion euros ($1.3 billion).

Rival Hochtief said in January it was also keen on the company. Bilfinger is Germany's second-biggest construction group after Hochtief.

TOKYO - Major Japanese automakers are changing their production plans in North America as the economy there slows, with Honda Motor Corp even halting truck production in Canada, the Nikkei business daily said on Saturday.

Carmakers have been hit particularly hard by recent signs of a possible recession in the United States, and the dollar's fall against the yen has helped push their shares sharply lower.

Honda will stop making pickup trucks in Canada at the start of next year, switching such production from a plant in Ontario to a plant in Alabama, and instead increase production in Canada of small cars that are selling well, the Nikkei said.

Toyota Motor Corp will decrease production at a plant in Indiana by roughly 10 percent, while Nissan Motor Co is already decreasing production at two U.S. plants. Japanese exporters, such as car makers, suffer when the yen strengthens as Japanese goods become less competitive overseas and the strong yen eats into profits when they are repatriated.

But the Nikkei reported that several firms, including Nissan and Mitsubishi Motor 7211.T, plan to take advantage of the cheaper dollar to expand their exports from the United States. Mitsubishi Motor plans to export U.S.-made cars to China and the Middle East, and expand its exports to Russia, while Nissan plans to expand exports to the Middle East.

MOSCOW / ST PETERSBURG - Russian oil firm Gazprom Neft said on Saturday it did not expect organic growth of oil production this year, although output would raise by 14%due to acquisition of a new asset.

Gazprom Neft's president Alexander Dyukov told reporters the firm expected its oil production to reach 49 million tonnes (981,300 barrels per day) this year versus 43 million tonnes (863,500 bpd) produced last year.

The increase will be provided by firm's purchase of 50%of the 12 million tonnes per year (240,000 barrels per day) oil producer Tomskneft last year from oil major Rosneft.

Rosneft bought the unit at a state auction to sell assets of bankrupt oil firm Yukos last year.

"We have managed to stop production decline at Tomskneft and are going to stabilise output at 11.5-12 million tonnes per year," Dyukov said adding that slight production increase is possible at the unit this year.

Gazprom Neft, Russia's fifth-largest oil producer, has been fighting declining production since its former owner, billionaire Roman Abramovich, sold the firm, then called Sibneft, to the gas giant in 2005.

Last year's production was flat to the 2006 output. The company approved last year a development strategy, which envisages production growth to at least 80 million tonnes by 2020.

The firm said earlier this month it would raise capital expenditure by 36%to 89 billion roubles for this year to increase stagnating output.

HONG KONG - China's Shenhua Energy Co Ltd , the world's top coal producer by market value, lagged forecasts by posting a 16.6% rise in 2007 earnings after it cranked out 16% more of the hydrocarbon.

Analysts are upbeat on its outlook for 2008 as strong demand for coal from China, the world's top consumer of it, and a shortage of supply push prices higher.

Shenhua said in a statement on Sunday that it expects supply and demand for coal in China will be balanced this year, with volume and prices fluctuating at high level.

There could be seasonal tight supply in the Asia Pacific market so that spot coal prices will fluctuate at high levels and contract coal price is expected to increase, it added.

The company, which launched domestic A-share issue last year, is now in a prime position to invest in power and transportation, and buy mines in China or overseas as growing demand for electricity pushes Asian coal prices to record highs.

Shenhua posted net profit of 20.58 billion yuan ($2.90 billion) last year, up from 17.64 billion yuan in 2006.

That lagged an average forecast for 22.1 billion yuan from 22 analysts polled by Reuters Estimates.

Armed with $8.9 billion cash from its IPO, Shenhua has said it is in talks to buy coal mines in Indonesia and Australia, two of the world's largest coal shippers. 

GENEVA - Switzerland's foreign minister was travelling to Tehran on Sunday to sign a natural gas purchase contract between Iran and a Swiss utility, a deal she said could help ease Europe's dependence on Russian gas.

Micheline Calmy-Rey would also meet Iran's Foreign Minister Manouchehr Mottaki and other officials to discuss Iran's human rights record and ongoing international concerns about the country's nuclear programme.

The gas deal between Elektrizitaetsgesellschaft Laufenburg and the National Iranian Gas Export Company (NIGEC) does not violate United Nations or U.S. sanctions imposed on Iran, Calmy-Rey said.

"This contract does not violate any of the sanctions," she told journalists before her departure at Geneva airport. "It is planned that natural gas from Iran together with natural gas from Azerbaijan will one day feed into a gas pipeline running from Greece via Albania to Italy," the Swiss foreign ministry said in a statement.

EGL said last year it had completed a 25-year deal with NIGEC to deliver 5.5 billion cubic metres of gas per year to Europe through a pipeline scheduled to be complete in 2010.

The energy group at the time declined to disclose the value of the deal, but said it was above 10 billion euros ($13.32 billion) and below 22 billion euros, depending on a number of factors such as the price of energy.

Calmy-Rey said she had been invited by Iran to visit and sign the deal. She said it was in Switzerland's strategic interest to diversify its source of energy supplies.

"We decrease our dependence, and the dependence of Europe, on Russian gas," she said. 

QATAR /DUBAI - Qatar Gas Transport Co QGTS.QA (Nakilat), which ships liquefied natural gas, posted its biggest quarterly profit on record in the fourth quarter on returns from funds it plans to use to expand its fleet and higher oil prices.

Nakilat has ordered 54 tankers to carry LNG, which is gas chilled to liquid to make transportation easier. It has asked shareholders to pay 50%of its 5.6 billion riyal ($1.54 billion) share capital in December 2006 to fund expansion.

"The rise in profit is because of interest from banks...and also the jump in oil prices," said Bashar Issa, analyst with Dlala Brokerage and Investment Holding, explaining the surge in income. Oil rose to an all-time high of $111 a barrel on March 13.

Net income in the fourth quarter to Dec. 31 surged 619%to 40.48 million riyals ($11.13 million) compared with 5.63 million riyals in the year-earlier period.

Dlala Brokerage and Investment Holding had forecast Nakilat would make 41.05 million riyals in the fourth quarter, according to a Reuters survey of analysts in December.

Nakilat posted profit of 128.8 million riyals in 2007 compared with 44.9 million riyals in 2006, it said in a statement on the bourse Web site, without giving quarterly data. Earnings per share rose to 0.23 riyals in 2007 compared to 0.16 riyals in 2006, it said.

Set up in 2004, Nakilat plans to own as many as 56 LNG and four liquefied petroleum gas tankers by 2010, the company said in February 2007.

Nakilat's fourth-quarter profit was its highest on record, going back to the third quarter of 2005. Shares of Nakilat closed 1.57%down.

Qatar can produce as much as 31 million tonnes per year of LNG.

Qatar, the world's third-largest holder of natural gas reserves, plans to more than double LNG production to 77 million tonnes per year by 2010.

Nakilat's managing director, Muhammad Ghannam, could not be reached for immediate comment, while investor relations manager Peter Nicholson was not able to comment on the results.

TOKYO - Japan's benchmark Nikkei average closed at a more than 2½ year low on Friday as the dollar fell back below 100 yen, dragging exporters such as Toyota Motor Corp with it.

Sumitomo Realty & Development Co Ltd and other property firms extended losses after a research firm said on Thursday that sales of new apartments in Tokyo fell to a 15-year low for February.

The dollar slid below 100 yen, falling to 99.84 yen, down 0.8% on the day and back near a 12-year low of 99.77 yen hit on Thursday. It later bounced back over 100 yen.

"Market sentiment has been thoroughly chilled, so now it's really sensitive to any negative factors," said Katsuhiko Kodama, a senior strategist at Toyo Securities. "Selling is inviting more selling."

The Nikkei fell 4.2% for the week and has lost 20% so far this year.

Worries about global credit markets lingered despite a report from Standard & Poor's that said write-downs for large financial institutions are likely past the halfway mark, a report that boosted Wall Street. Market players cited rumours of more hedge fund failures.

"Until we get the scale of the subprime losses verified, this whole thing will just keep dragging on. The only thing that can really help is for the U.S. government to inject public funds into shaky financial institutions," Kodama added. 

Market players said that nobody was buying despite the fact that the Nikkei remains extremely cheap, citing a raft of factors that include reluctance on the part of institutional investors to buy as the March 31 end of the business year nears, and worry about whether Wall Street's gains are sustainable.

The political feud over who succeeds Bank of Japan Governor Toshihiko Fukui, whose term expires in less than a week, has also cast a pall over the market.

"Given the current world financial market turmoil, the fact that his successor has yet to be chosen is pretty bad," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"I don't think central banks will intervene in the market, but this is a time when they need to be in close touch with each other, so not having a governor really doesn't look very good."

The Nikkei closed down 1.54% at 12,241.60, its lowest close since Aug. 10, 2005. The broader TOPIX closed down by 1.9% at 1,193.23, also its lowest close since early August that year.

Many exporters slid, with carmakers such as Toyota and Honda Motor Corp the biggest drags on the Nikkei by volume weight as worries grew about how the strong yen will affect earnings.

A strong yen makes Japanese products less competitive abroad and eats into profits when they are repatriated.

Toyota slid 3.1% to 5,090 yen and Honda was down 4.4%at 2,810 yen. Sony Corp slipped 2.3% to 4,200 yen.

Hitachi Ltd fell 3.7% to 679 yen. Just after the close, it said that it cut its 2007/08 group net forecast to a loss of 70 billion yen from a profit of 10 billion yen.

Property shares were battered by a report from the Real Estate Economic Institute, which said the number of new apartments put up for sale in the Tokyo metropolitan area came to 3,460 units in February, down 28% from a year earlier and the sixth straight monthly decline.

It was also the lowest level for that month since 1993, after Japan's economic bubble popped.

Sumitomo Realty & Development tumbled 5.3%to 1,523 yen, while Daiwa House Industry Co Ltd fell 5.7% to 917 yen.

The real estate subindex was the second-biggest loser among the subindices, falling 3.9%.

In one of the market's few bright spots, some paper mills -- among the importers who benefit from the stronger yen -- rose.

Mitsubishi Paper Mills Ltd rose 4.4% to 190 yen, but Nippon Paper Group erased earlier gains to end flat at 218,000 yen.

Trade jumped, with 3.15 billion shares changing hands, compared with last week's daily average of 2.05 billion. The jump in trade was due to the settlement of index futures and options at the open.

Nikkei futures and options contracts expiring in March likely settled at 12,518.65, market participants said, citing estimates by local brokerages.

Declining shares beat advancing ones by nearly six to one.

DUBAI - The economy of the United Arab Emirates grew by 7.4% in 2007 on the back of robust non-oil sectors and high oil prices, the economy ministry said on Sunday.

Non-oil sectors contributed 65% of the gross domestic product (GDP), amounting to 455 billion dirhams (124 billion dollars), while high crude prices allowed oil revenues to account for 35% of GDP, it said in a report carried by WAM news agency.

"This is a positive indicator that the government policy of establishing a diversified economy is successful," the Economy Minister Sultan bin Saeed al-Mansouri said.

Manufacturing contributed 13% of the GDP while services represented around 40%of the economic output, the report said.

In nominal terms, the economy grew 16.5%, reaching 698 billion dirhams (190 billion dollars), it said. In 2006, the UAE economy grew by 23.5%in nominal terms and 9.4% in real terms.

A ministry report in January had expected the UAE's non-oil sector to grow by 21% in 2007, making up 65% of GDP.

The UAE has the world's fifth largest proven reserves of crude oil, 97.8 billion barrels, and ranks fourth among the members of the Organisation of Petroleum Exporting countries (OPEC). It also ranks fourth in terms of global gas reserves with 212 trillion cubic feet of natural gas.

MEXICO CITY - Mexican stocks suffered hefty losses on Friday as an emergency rescue of a top U.S. bank orchestrated by the Federal Reserve revived fears about a global credit crunch, while Mexican bonds rallied.

The benchmark IPC index fell 2.20% to 29,048.51 points, dragged further down by a steep drop at cement maker Cemex.

The peso was about flat, weakening 0.01% to 10.754 per dollar at the central bank close. Traders in Mexico City said liquidity problems at Bear Stearns had heightened worries that a crisis in the U.S. housing and credit markets could deepen further.

Shares of Bear Stearns, one of Wall Street's biggest firms, lost nearly half their value, sparking volatile trade in Mexico as investors tried to absorb the stunning news of an unusual investment bank rescue involving the Federal Reserve.

But in debt trading, bond prices jumped as worries about the U.S. economy combined with data showing a slight easing in U.S. inflation pressures to boost expectations of a big interest rate cut at the next meeting of the U.S. Federal Reserve on March 18.

The benchmark 10-year government peso bond rose 0.416 of a point to bid 101.644, pushing its yield down 6 basis points to 7.51%.

"Investors are getting in now as the spread with U.S. interest rates should widen next week," one bond trader said.

Mexican monetary policy expectations also fed the bond rally after the central bank held interest rates steady but said there was an increased risk that the Mexican economy will slow more than expected, traders said.

In local stock trading, Cemex shares plunged 6.97% to 28.17 pesos after disappointing results forecast for the first quarter, traders said. The company's U.S.-traded shares fell 7.52% to $26.08.

Shares of America Movil, Latin America's biggest mobile phone operator, shed 1.43% to 31.64 pesos. Its U.S.-traded shares lost 1.57% to $58.84. Copper miner Grupo Mexico's shares dropped 3.82% to 71.05 pesos.

Mexican markets will be closed on Monday to commemorate the birth of Mexican president Benito Juarez.

HONG KONG - Hong Kong stocks piled on more losses on Friday, adding to the last session's sell-off, as investors remained on edge following more bad news about credit markets, while top Asian oil refiner Sinopec Corp sank on record crude prices.

China plays hit near two-month lows as investors now fear heavyweight Sinopec may face losses hit by a double blow of high input prices and government caps on prices of some refined products. But Hongkong Electric hit a record high, leading the surge in Hong Kong utilities as investors sought safe havens.

Overnight gains on Wall Street boosted the market early in the session, the rise eventually evaporated in volatile trade.

"It's a lack of confidence in the rally in the U.S. overnight, inspired by the S&P, who were complicit in the whole mess, giving triple A ratings to terrible debts," said Matt McKeith, head of equity dealing at First State Investments. "We're continually disintegrating here, the news seems to be getting worse, you can see the stress in oil, gold prices, and the yen."

The benchmark Hang Seng Index closed down 0.35, or 64.5 points, at 22,237.11 for a weekly loss of 1.2%. The China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, slid 1.7%, or 202.64 points, to 11,891.42, earlier hitting its lowest level since Jan. 22. For the week, the index fell 5.7%, the worst weekly performance since mid-December.

Mainboard turnover was HK$88.3 billion (US11.3 billion) compared to Thursday's HK$106.8 billion. The U.S. rallied on Thursday after Standard & Poor's said write-downs for large financial firms were likely past the halfway mark. The dollar fell back towards a 12-year low versus the yen on Friday as investors feared U.S. credit troubles would worsen and its economy would slow further.

Also, an affiliate of U.S.-based buyout firm Carlyle Group has defaulted on about $16.6 billion of debt and expects its lenders to seize remaining assets as the global credit crunch tightens around leveraged investors. Sinopec sank 4.6% to HK$6.68. Beijing has imposed price freezes on refined oil products, even as crude topped $110.

China is seeking to rein in inflation which in February hit near-12-year highs. On Thursday, Sinopec denied a newspaper report which said it would probably make a loss in the first half of this year. China Railway Construction (1186.HK: Quote, Profile, Research) fell 6.7% to HK$11.2 as investors sought to book the first-day gains of its highly anticipated but ultimately disappointing debut. Among utilities, Hongkong Electric jumped 6% to HK$49.3. The stock has gained nearly 15% in the span of a week as investors turn risk averse. HK Gas and Electric leapt 4.1% to HK$22.7.

Worries about further China tightening sent mainland property developers down. China Overseas Land and Investment tumbled 5.2% to HK$11.64 in heavy trade. Guangzhou R&F Properties Co Ltd slid 5% to HK$17.60.

MADRID - A client bought 21.5 million shares in Banco Pastor, worth 8.2% of the Spanish bank's capital, by mistake, M&B Capital Advisers said on Friday. M&B, which carried out the trade in three blocks, said the client meant to deal in a different security.

GOLD - Gold raced to an historic peak above $1,000 on Friday as the dollar's plunge to record lows on weak data and deepening financial market troubles in the United States boosted bullion's safe-haven appeal.

Bear Stearns shares tumbled as much as 50% on news liquidity problems prompted the investment bank to secure financing from JPMorgan Chase and the Federal Reserve Bank of New York.

"This whole fear of the credit crisis being far from over seems to escalate on a daily basis," Daniel Hynes, metals analyst at Merrill Lynch, said. "That has been a key driver of gold over the last couple of months. So this announcement just adds fuel to that fire."

Spot gold surged as high as $1,007.10 an ounce; it was at $996.90/997.70 by New York's last quote at 2:15 p.m. EDT (1815 GMT), up from $991.00/991.80 late on Thursday.

Gold, seen as a safe haven asset, has gained more than 20% this year on top of a 32% gain in 2007.

U.S. gold futures set a record high of $1,009 an ounce. The most active contract for April delivery GCJ8 on the COMEX division of the New York Mercantile Exchange settled up $5.70 at $999.50 an ounce. 

DUBAI - Dubai Properties, master developer and a member of Dubai Holding, on Saturday revamped its corporate structure and announced the establishment of a new holding company - Dubai Properties Group (DPG).

Through this restructuring, the company has consolidated its current operations into distinct business units, and brought them under one umbrella organisation. The new group structure comprises six business units focusing on real estate verticals such as hospitality, property services, international investments, engineering and real estate development.

Each entity will operate as a stand-alone business subsidiary within DPG, individually accountable for the unit's management systems, strategic planning and business results.

DPG plans to seek investment opportunities on a global scale, launching an aggressive expansion and diversification drive to double its investment portfolio up to Dh700 billion over the next three years.

"We are confident the new organisational framework of Dubai Properties Group will significantly contribute to our long term strategic objectives, which are in line with Dubai Holding's vision and Dubai's strategic goals. We have launched three new entities as the first initiative, which will be followed by more futuristic plans," said Hashim Al Dabal, Chairman of Board of Directors, DPG.

In addition to Dubai Properties, the new group structure comprises Salwan, Injaz, Dubai Asset Management, Dubai Retail and Dubai Hospitality.

Salwan will provide property management services to all DPG's entities as well as other organisations. It will run several operations for its commercial and residential stakeholders, including strata and property management, sales and leasing of properties, Mazad Auction House, and property advisory services.

Injaz is mandated with the creation of fully-integrated sustainable communities based on green building guidelines. The Dubai Asset Management Company will have three subsidiaries, including the Dubai Security Group, offering specialised security services for the first time in Dubai in cooperation with Dubai Police.

Dubai Retail will focus on constructing shopping malls. Dubai Hospitality will endeavour to drive the hotel industry and play a holistic role in studying sectoral market trends.

JOHANNESBURG - A R1.5 billion soya bean processing facility that is being planned at Coega in the Eastern Cape is expected to stimulate a five-fold increase in local soya bean output once it is up and running.

Geoff Mordt, Rainbow National Renewable Fuels (RNRF) managing director, said last week that the firm was speaking to emerging farmers in the Eastern Cape, as well as commercial farmers in the Free State and Mpumalanga, about supplying the 1 million tons of soya beans the firm would require.

The Coega soya bean facility is expected to have a turnover of R4.5 billion.
During the plant's construction 800 jobs would be created, and once the operation was running 350 people would be permanently employed.

A further 725 manufacturing jobs would be created as a result of the venture. The company also said it expected to generate "thousands of new jobs" in the agricultural sector as a result of extra soya bean demand it would generate.

RNRF is hoping to produce 800 000 tons of soya bean meal and 250 000 tons of soya bean oil, of which a portion will be used to manufacture soya biodiesel and 25 000 tons of pharmaceutical glycerine.

NAIROBI - British American Tobacco (BAT) will spend Sh100 million to comply with the national Tobacco Control Act, which comes into force in four months.

The money will be spent on developing new packaging, removal of tobacco related branding on materials in outlets and communication with industry stakeholders.

BAT Kenya Managing Director, Mr Nicolas Maistre, said the company is committed to complying with the new law and is undertaking necessary steps as required by July 8.

"It was a positive step for the company and the industry in general and we hold the expectation that its implementation will reign in illicit trade as it operates under the radar of regulation," he said.

Maistre, who is also the general manager for BAT East Africa, was speaking at a media briefing on the Tobacco Control Act at a Nairobi hotel on Wednesday. Also present was Corporate Affairs for BAT Sub-Saharan Africa Area, Mr Keith Gretton.

The Tobacco Control Act assented to by the President last year seeks to ban tobacco advertising, promotion and sponsorship. It also prohibits the sale of cigarettes to minors and lays out measures to make it more difficult for people under 18 to buy cigarettes, such as banning single stick and vending-machine sales.

Maistre said though some of the provisions of the law are harsh while others require more clarification to assist in implementation, it represents a reasonable regulation for the country.

The law, he added, also helps in supporting the company’s self regulating initiatives which began in 2000 when it introduced The International Marketing Standards and the Youth Smoking Prevention programmes.

SHANGHAI - Chipmaker Cirrus Logic Inc said it will eliminate about 30 positions in China during the fourth quarter and record a charge as it plans to close its Shanghai unit.

The Austin, Texas-based company said it planned to close Caretta Integrated Circuits, which it acquired in December 2006, as the unit's operations were no longer aligned with its strategic plan. In a regulatory filing, Cirrus said it expects the closure to be completed on March 29 and that it will record a total charge of about $11 million to $13 million. Shares of the company closed at $5.44 Friday on Nasdaq.

KAMPALA - The construction of Bujagali hydro electric dam is ahead of schedule, an official with Bujagali Energy Ltd (Bel) Mr Kenneth Kaheru has said. “The contractor (MS Salini) is already ahead of schedule and the progress is measurable,” Mr Kaheru told members of the Parliamentary
committee on Natural Resources.

The committee headed by Mr Emmanuel Dombo was in Kikubamutwe at the site of the construction. Currently there about 600 workers employed at the site. He said at its peak, more than 1,000 will be recruited with 200 expatriates both locally and internationally.

Mr Kaheru said that unlike in other places where dams have been constructed before, only 80 hectares of additional land will be flooded at the completion of the dam. Mr Dombo said they had seen a lot of excavation taking place but the ultimate goal is the power. “Our country needs power and that is what we are waiting for”.

He said the ministries of Energy and Works should work together to have another bridge constructed at the site. “We need a second bridge and this should be the way to go”, he said after Mr Kaheru revealed that a bridge will be constructed across but without a road.

MADRID - U.S. bank Merrill Lynch & Co has overcome its most serious problems stemming from the global credit crunch but has not eliminated all, its chief executive was quoted as saying.

In an interview with Spain's El Pais newspaper published on Sunday, Merrill CEO John Thain also reiterated recent comments that Merrill would not need to seek more outside capital to bolster its balance sheet.

The bank announced a $9.83 billion loss for the fourth quarter, the worst in its 94-year history, reflecting about $16 billion of mortgage-related write-downs and adjustments.

"Our balance sheet still has some risk positions, so we still haven't eliminated them completely but none of these positions is of a magnitude that we saw at the end of the last quarter," Thain said in the March 6 interview, the same day the bank said it would cut 650 jobs as it stopped making subprime mortgages via its First Franklin Financial Corp unit.

"We have carried out an enormous cleaning of our credit portfolio. We have more capital than we need, so we can say to the market that we don't need more injections. We can confirm that we have tackled the problem."

Although difficult to estimate how long the credit crunch would last, Thain said he thought it would continue for "at least" another six to 12 months. Merrill's CEO added that, in his view, the U.S. Federal Reserve's series of interest rate cuts would do little to help the financial sector.

"The problem is not the price of money but the availability of credit and the lack of confidence. As such, to merely lower interest rates is no use at all".

BEIJING - The Hisense Group, owner of Hisense Electric Co., a top Chinese TV and appliance maker, is forecasting group sales to more than double by 2010 to 100 billion yuan ($14.1 billion), the chairman said on Saturday.

The group posted sales growth of over 20%last year to 46.9 billion yuan, helped by the purchase of a significant stake in Guangdong Kelon Electrical 000921.SZ in 2006, group Chairman Zhou Houjian, told reporters.

"Growth will continue to be powered by white goods and electronics," Zhou said, on the sidelines of the nation's annual Parliament meeting.

Group member Qingdao Hisense Air-conditioning Co. took a 26.4% stake in Kelon about two years ago. The group relies on the domestic market for 80% of sales, and is looking actively at overseas expansion but acknowledges a significant technological gap still to overcome.

"We need to upgrade our technology and product quality in order to expand in the future," Zhou said.

The group was open to strategic partnerships with foreign manufacturers, but was not currently in talks and could close that technology gap with in-house research, he said. The group spends about 5% of sales on research and development, he added. 



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