Telkom says in talks with Vodafone and MTN

South Africa's Telkom (TKGJ.J: Quote, Profile , Research) said on Monday it was in talks with Britain's Vodafone (VOD.L: Quote, Profile , Research) and MTN (MTNJ.J: Quote, Profile , Research), sparking talk it wants to sell its fixed-line business and its stake in mobile phone operator Vodacom.

Telkom gave no further details. Vodafone and MTN -- sub-Saharan Africa's biggest mobile phone operator -- said separately the talks were at a "very preliminary stage".

"We've said before that we are interested in increasing our stake in Vodacom," Vodafone spokesman Mark Percy said. Vodafone and Telkom jointly own Vodacom, South Africa's top mobile phone operator.

Telkom shares rose as much as 10.68 percent, before closing 8.39 percent firmer at 190.99 rand. MTN fell 2.57 percent to 106 rand.

The Sunday Times reported at the weekend Telkom was close to selling its 50 percent stake in Vodacom to Vodafone. It also said MTN and a private consortium were bidding to acquire Telkom's fixed-line assets.

"We view the news positively and await the outcome of the discussions eagerly," said Brian Molefe, the chief executive of Public Investment Corporation, which owns close to 15.7 percent of Telkom.
Source : http://today.reuters.co.uk

HSBC pays $6.3bn for KEB stake

HSBC, the world’s fourth-largest lender, has signed a contract to buy a 51 per cent stake in Korea Exchange Bank for $6.3bn. The deal, if completed, will catapult HSBC into the top ranks of Asia’s third-largest banking market.

The agreed price is significantly higher than the markets were expecting – discussions were understood to be in the range of $5bn-$5.5bn – and underscores HSBC’s belief that KEB is its last chance to snap up a Korean bank.

However, the deal faces numerous hurdles, not least that the regulator has declared the sale can not take place while court cases involving Lone Star, the current majority owner of KEB, continue.

Under the deal signed on Monday, HSBC offered Won18,400 per share for Lone Star’s 51 per cent stake in KEB, valuing the acquisition at $6.3bn.

The price will rise by Won380 per share, or $133m, if the deal is not completed by January 31 next year, but the whole agreement will expire on April 30 if the sale has not taken place.

HSBC will now commence 40 days of due diligence on KEB, followed by a further five-day period during which time either side can terminate the agreement.

Stephen Green, HSBC group chairman, said: “Our stated strategy is to focus on expanding HSBC’s presence in important growth economies, particularly in Asia, Latin America and the Middle East and to maintain our capital strength to allow us to take advantage of strategic opportunities. This prospective acquisition reflects that strategy.”

The deal would also “reinforce our position as Asia's number one international bank,” Mr Green said.

The sale is based on conditions including regulatory approval from Korea’s Financial Supervisory Commission and the Fair Trade Commission; no adverse changes to KEB; and no deviation in KEB’s agreed management strategies.

However, Kim Dae-pyung, deputy governor of the Financial Supervisory Service, last month said that Lone Star would not be able to sell its controlling stake in KEB until all court cases involving the US private equity fund’s 2003 acquisition of the lender are resolved.

Lone Star was investigated for alleged involvement in artificially lowering the price at which it bought KEB in 2003, but was cleared by the state Board of Audit and Inspection of any wrongdoing. Former KEB and government officials remain under investigation for their role in pricing the 2003 deal.

Lawyers say there is no legal reason the fund should be prohibited from selling its stake in the bank as Lone Star has been cleared. The FSS does not appear to have the ability to block the deal, only to delay regulatory approval, they say.

But the KEB sale remains a highly political issue – ordinary Koreans were shocked that a foreign “vulture fund” will walk away with $4bn in tax-free profits, thanks to a double-taxation treaty between Korea and Belgium, where Lone Star’s investment vehicle is registered.

With presidential elections looming in December, many analysts say the cases will remain on hold until next year.
Source : http://www.ft.com

Oil continues higher on worries over hurricane Felix, OPEC output

Oil continued higher on ongoing worries hurricane Felix might disrupt supplies in Mexico, and continued speculation OPEC will not raise production when it meets in September.

Twenty-one out of 23 analysts polled by Thomson Financial said the cartel was likely to keep production levels unchanged at its Sept 11 meeting on worries that the current market turmoil might crimp oil demand.

'OPEC is like everyone else. It is going to wait for more clarity before they make any decisions on policy,' said Alaron analyst and trader Phil Flynn.

Meanwhile, traders were tracking hurricane Felix, which developed into a potentially catastrophic category 5 storm overnight, as it swept through the southern Caribbean towards Mexico's Yucatan peninsula and the Bay of Campeche.

'Oil production operations in the region have not been affected yet, but companies will remain alert and precautionary shut-downs could occur in the next few days,' said analysts at Barclays (nyse: BCS - news - people ) Capital.

At 2.49 pm, London's benchmark Brent crude contracts for October delivery were up 67 cents at 73.36 usd per barrel.

Meanwhile, New York crude contracts for October delivery were up 43 cents at 74.47 usd per barrel in electronic trades. The New York Mercantile Exchange was closed Monday for the Labor Day holiday.

Oil prices rallied a couple of weeks ago when hurricane Dean, the first hurricane of the Atlantic season, struck Mexico's Yucatan Peninsula before crossing into the southern Gulf of Mexico and shutting down Mexican output.

Although forecasters do not expect Felix to veer as far north as Dean, and therefore miss US oil installations in the Gulf of Mexico, there is always the risk that the hurricane will change course.

Even if it does not, Petromatrix analyst Olivier Jakob says oil operators in the region will still need to make decisions on precautionary evacuation of oil fields, just as they did with hurricane Dean.

Atlantic storms aside, analysts say oil is still benefiting from a new plan announced Friday by US President George Bush to help borrowers hit by the recent mortgage crisis.

The plan, which came alongside reassuring comments from Fed chairman Ben Bernanke, have helped ease market concerns that oil demand might wane if the US mortgage crisis and related global lending crunch ends up crimping growth.

Deutsche Bank (nyse: DB - news - people ) analyst Joel Crane said traders have taken the comments by top US government officials as indicating the country is intent on dealing 'forcefully with the mortgage situation... and the global credit crunch'.

The credit crunch, which has helped take oil off an all-time record of 78.77 usd a barrel hit on Aug 1 in New York, is affecting all commodity markets at present.

As regards oil, fears that consuming countries will cut back on crude purchases if the credit crunch worsens are making OPEC members ever more intent on leaving output levels unchanged at their September meeting.

As a result, US crude stocks are starting to decline rapidly from relatively high overall levels.

The US Energy Department said last week that crude stocks fell by almost 3.5 mln barrels in the week ending Aug 24, in part because of a large decline in imports.

The agency also reported that gasoline inventories fell by 3.6 mln barrels on the week, leaving overall stocks well below the lower end of the average range for the time of year.
Source : http://www.forbes.com

The Fed to the rescue II: Waiting for the other shoe to drop

In my column two weeks ago, “The Fed to the rescue,” I discussed the US Federal Reserve Bank’s cutting of the discount rate, the rate it charges for giving direct loans to banks, from 6.25 percent to 5.75 percent.

The Fed’s action was directed at the turmoil in financial markets that resulted from the sub prime mortgage crisis (see my column “The emergence of the Turkish mortgage market.”) However the financial markets, regarding the discount rate cut as temporary relief, have been expecting the Fed to drop the other shoe by cutting the target federal-funds rate -- the interest rate banks charge each other for overnight loans to meet reserve requirements -- by at least 0.25 percent from 5.00 percent, to complete its rescue mission. The target federal-funds rate has a much more important effect on the US economy than the discount rate, by determining the prime lending rate US banks charge their preferred customers, which in turn becomes the benchmark interest rate for all other consumer and business loans. That rate, in turn, can have an effect on short-term interest rates and exchange rates globally.

The Fed has not yet dropped the other shoe, despite persistent global financial instability driven by increasing risk aversion and uncertainty about the damage caused by the sub prime mortgage debacle. But it has implicitly signaled its pragmatic position and addressed again the concerns of financial markets through a much-anticipated speech Fed Chairman Ben Bernanke gave last Friday morning, at the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Wyoming, during a high-level international meeting of central bankers and economists to discuss recent developments in the housing and housing finance markets. Bernanke devoted most of his speech, titled “Housing, Housing Finance, and Monetary Policy” -- his first public statement in six weeks -- to reviewing the causes of the US housing market crisis and its sub prime-mortgage-securitization based, contagiously destabilizing effects on global financial markets within the historical context of the US housing and housing-finance markets. What most people really cared about, however, was not the former economics professor’s lecture (with 15 references and 10 footnotes) on the evolution of the US housing and housing-finance markets. It was his explanation of the rationale behind the Fed’s recent actions to ease turbulence in financial markets and his hinting at what follow-up actions it might take, especially the cutting of the federal-funds target rate soon.

Bernanke acknowledged that financial market stability was one of the Fed’s major objectives: “Well-functioning financial markets are essential for a prosperous economy. As the nation’s central bank, the Federal Reserve seeks to promote general financial stability and to help to ensure that financial markets function in an orderly manner.” He also warned, “It is not the responsibility of the Federal Reserve -- nor would it be appropriate -- to protect lenders and investors from the consequences of their financial decisions.” He also told the financial markets not to expect a “Bernanke put,” similar to the “Greenspan put,” which refers to former Fed Chairman Alan Greenspan’s lowering of short-term interest rates in previous financial crises. (A put is an option that gives the holder of the option the right, for a premium, to sell a security at a predetermined price within a given period.) Bernanke weakened his stern position, however, with the following statement: “But developments in financial markets can have broad economic effects felt by many outside the markets and the Federal Reserve must take those effects into account when determining policy.”

So, please give us a clue, Mr. Chairman, as to under what conditions, if not when, the Fed would cut the target federal-funds rate. Well, the Fed would look at the condition of the real economy, which was doing reasonably well: “The incoming data indicate that the economy continued to expand at a moderate pace into the summer, despite the sharp correction in the housing sector.” Given the extraordinary turbulence and uncertainty in financial markets, however, the Fed would not be bound by its business-as-usual methods of following and correcting the course of the real economy: “However, in light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation. Consequently, we will pay particularly close attention to the timeliest indicators, as well as information gleaned from our business and banking contacts around the country.” In plain words, the Fed would be flexible and pragmatic and might cut the target federal-funds rate just to be on the safe side -- for the sake of the real economy (the Main Street) but not Wall Street -- when its Federal Open Market Committee, which decides the target, meets on Sept. 18.

US financial markets acknowledged this hopeful message with across-the-board rallies on the day of Bernanke’s speech. On Friday US stock prices went up and bond prices went down by amounts revealing traders’ cautious optimism, but not giddy exuberance. The markets also factored in the Bush administration’s encouraging announcement, also made on Friday, that the Federal Housing Administration would help ameliorate the sub prime mortgage crisis by limiting the number of foreclosures and helping borrowers with adjustable interest rates to refinance their mortgages.

The most recent monthly data show US core consumer inflation to be under control, well within the Fed’s one to two percent implicit target, and US consumer confidence to be slightly weakening, conditions reinforcing the chances of a federal-funds target rate cut next month. Although futures contracts traded on the Chicago Board of Trade -- through which traders bet on the expected monthly average effective federal-funds rate -- have already priced in a quarter percent target rate cut for next month, economists disagree on whether the Fed would actually cut its target. I still do not expect the “Bernanke put” to follow in the steps of the “Greenspan put,” if conditions in financial markets do not drastically worsen and the US real economic growth does not slow down suddenly, for the following reasons: (1) The most recent quarterly data on US economic growth show surprisingly robust performance. (2) The Bush administration has begun to address the sub prime mortgage crisis from the viewpoint of borrowers. (3) The fact that banks have significantly reduced their borrowing last week from the Fed’s discount window, after the Fed made its loans more available and attractive two weeks ago, indicates that credit markets have already calmed down considerably. If necessary, the Fed could cut the discount rate again, bringing it down closer to the current target federal-funds rate, to ease credit tightening. (4) Dr. Bernanke has to live down his early unsavory reputation as “Helicopter Bernanke,” for having suggested as a professor that the Fed could drop money from a helicopter to help prevent a potential deflation. (5) He must also rectify the Fed’s impaired rectitude arising from his predecessor’s laxness in easing credit for too long -- which is blamed for many of the present credit market problems -- to contain earlier financial crises. Bernanke, who has been at the helm of the Fed for less than two years, has to secure his reputation as an inflation hawk by embracing the financial markets with tough love. I hope that he will not be a clone of Greenspan, whose indulgent love for the financial markets left behind an increasingly questionable legacy after being adulated by some hyperbolically as “the greatest central banker of all time.”
Source : http://www.todayszaman.com

Energy Futures Waver, Gas Prices Rise

Energy futures fluctuated Thursday, buffeted by slower-than-expected economic growth figures and Wednesday's government report of a sharp decline in inventories.

Selling by investors to lock in profits from the previous day's rally also pressured prices, analysts said.

Gas prices at the pump, meanwhile, climbed again overnight. Retail prices, which typically lag the futures market, are rising as retailers buy gasoline to supply drivers over the coming Labor Day weekend.

"People are expecting the one last surge in demand," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass.

But longer-term demand concerns remain. Second-quarter gross domestic product rose 4 percent in the second quarter, slower than many analysts had expected. And jobless claims rose unexpectedly last week to the highest level since spring.

"The concern is that we're going to see some weakness," Lynch said.

Energy investors worry that a slower economy means less demand for oil and gasoline.

Light, sweet crude for October delivery fell 29 cents to $73.22 a barrel on the New York Mercantile Exchange, while September gasoline fell 4.13 cents to $2.0595 a gallon. Both contracts alternated between gains and losses.

Gasoline and oil futures rose sharply Wednesday after the government reported surprisingly large declines in inventories of both on an unexpected drop in refinery activity.

In London, October Brent crude fell 33 cents to $71.80 a barrel on the ICE Futures exchange.

At the pump, meanwhile, gas prices rose 1.1 cents overnight to a national average of $2.769 a gallon, according to AAA and the Oil Price Information Service. Gas prices peaked at $3.227 in late May as refineries struggled to produce enough gas to meet peak summer driving demand.

With the summer almost over, refiners are switching over to produce more heating oil, analysts say. That has some analysts worried anew about gasoline inventories, which are at 2-year lows. But others think the inventory drop is a natural reaction by refiners to lower anticipated fall demand.

"We would not get too concerned about gasoline right now," wrote MF Global UK Ltd. analyst Edward Meir in a research note. "The U.S. driving season is officially ending after one 'last hurrah' this coming weekend."

Retail prices are responding in part to the futures market, where prices has risen over the last week in response to lower gasoline supplies. But contributing to higher prices is buying by retailers anticipating a jump in demand over the holiday weekend, analysts said.

In other Nymex trading, heating oil futures fell 1.09 cents to $2.031 a gallon, and natural gas futures rose 8.9 cents to $5.67 per 1,000 cubic feet after the government reported that inventories rose by 43 billion cubic feet last week, slightly less than analysts were expecting.

Natural gas supplies are at record levels, which has kept prices below year-ago levels. Heating oil inventories, on the other hand, are lower than they were a year ago, which has driven prices higher. The result could be lower heating bills this winter for natural gas customers, and higher bills for heating oil customers.
Source : http://www.forbes.com

FEATURE-US immigrants worry as families face deportation

When 300 U.S. immigration agents surrounded the chicken processing plant where Danny Alvarez-Reyes works, he did the only thing he could think of: he gave his coat to a scared friend determined to hide in the walk-in freezer.

Alvarez-Reyes, 27, works legally at the Koch Food plant near Cincinnati and could only watch as co-workers were rounded up during a raid on Tuesday that netted 160 illegal workers.

But after an exhausting day trying to help his friends' families, Alvarez-Reyes was still worried about the five co-workers he watched hide in the giant freezer.

"I don't know if they ever got out, that's all I want to know," he said, gathering with friends at a neighborhood taco restaurant to rehash the trauma of the day and trade rumors about who will be deported.

A day after one of the largest workplace immigration raids in Ohio, the Hispanic community in Cincinnati's suburbs was scrambling to track down missing family members and arrange care for children whose parents were caught up in the raid.

U.S. Immigration and Customs Enforcement said the raid was the culmination of a two-year investigation of Koch Foods, suspected of knowingly hiring undocumented workers. The company said it was cooperating.

"Koch Foods is committed to complying with all immigration laws, and we look forward to resolving this matter quickly," it said in a statement.
Source : http://today.reuters.com

No US dollar sell-off, Chinese central bank official says

China sought yesterday to dampen speculation it will conduct a massive sell-off of US dollar holdings, with a central bank official saying the US dollar remains a mainstay of its foreign exchange reserves.

In an interview carried by the government's Xinhua news agency, an unnamed official with the People's Bank of China said US dollars and government bonds are "an important part of China's foreign reserve investments."

China's US$1.3 trillion in foreign exchange reserves are the largest in the world and are believed to be comprised largely of dollar assets, potentially giving Beijing enormous sway over the dollar's value worldwide.

A report in the British newspaper the Daily Telegraph last week that quoted Chinese government economists as saying China would dump its dollar holdings in the event of a trade war with Washington added to jitters in stock markets already unnerved by volatility in US share markets.

Xinhua said the central banker's remarks were intended to counter reports in Western media that China "is threatening to carry out a sell-off of US dollars."

The People's Bank does not disclose the composition of its foreign exchange reserves, which have swelled in recent years as China's exports surged and investors poured money into the country to profit from an economy now in its fourth straight year of double-digit growth.

But the reserves have become a political issue both within China and between Beijing and Washington. As the US dollar has fallen in value, the People's Bank has come under pressure to diversify its holdings to maintain the value of the reserves and improve returns.
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Source : http://www.taipeitimes.com

Bancroft Wrangling Intensifies

As a Monday deadline neared for the Bancroft family to decide on Rupert Murdoch's $5 billion offer for Dow Jones & Co., last-minute wrangling by family members and their trustees intensified.

Family lawyers were scrambling Friday to change the voting structure of the biggest Bancroft trust so it would better reflect the views of all the beneficiaries. The trust's overseers include Christopher Bancroft, a prominent family member who has been outspoken in his opposition to the deal. The restructuring could dilute Mr. Bancroft's influence over the stock now held in the trust.

On Friday, another key family trust seen as an important swing vote was planning to oppose the deal, according to a person familiar with the situation. The trust, overseen by a Denver law firm, holds 9.1% of Dow Jones's voting stock and is seen as a seller but wants a higher price.

Meanwhile, several family members engaged via email in an intense exchange about their legacy, their past stewardship of Dow Jones, and the ramifications of voting against the deal. The family met last Monday in Boston to hear presentations about the deal and have been asked to make a final decision by Monday.
Source : http://online.wsj.com