Sept. 6 (Bloomberg) — China’s bank regulator said the lending growth will be “more stable” in the second half of this year after a reduction in the ratio of non-performing debt in the first six months.

“In the second half of this year, the loan growth will be more stable, and we’re monitoring this very closely,” Liu Mingkang, the head of the China Banking Regulatory Commission, told reporters today at a meeting of global central bankers in Basel, Switzerland.

Loans surged in the first six months of this year after the central bank scrapped quotas limiting lending in November to support the government’s 4 trillion yuan ($586 billion) stimulus package. The central bank has left interest rates and banks’ reserve requirements unchanged this year, stepping up bill sales last month to soak up some of the extra cash in the financial system.

China’s loan growth is “quite OK; very reasonable. It’s coming down, but still quite good,” Liu said. “We saw the non- performing stock reduced and the ratio reduced even though we had an expansion of loans in the first half.”

Bank lending in China fell to 355.9 billion yuan in July, less than a quarter of June’s level. New loans in August may be 200 billion yuan, Caijing Magazine reported Aug. 31.

‘Regulatory Tools’

China will study the use of “regulatory tools” to adjust bank lending after the nation had a record 7.37 trillion yuan of new loans in the first half, Deputy Central Bank Governor Su Ning said at a forum in Shanghai on Sept. 5.

China’s record credit expansion, which helped economic growth rebound to 7.9 percent in the second quarter, also raised concerns that bank loans have been diverted and used to buy shares and real estate, fueling gains in stock and property markets.

The bank regulator said Sept. 3 it will implement stricter capital requirements for lenders, forcing them to deduct holdings of subordinated bonds issued by other lenders from their supplementary capital. That change will be implemented “over the course of several years,” it said.

Regulators are still making changes to the draft rules on subordinated bond holdings, China Banking Regulatory Commission Vice Chairman Jiang Dingzhi said at the Sept. 5 forum in Shanghai. The rules are being implemented to ensure capital quality and improve risk management, after the capital adequacy ratio of Chinese banks fell in the first half, Jiang said.

By Rob Delaney
Source: Bloomberg

S.Mahalingam executive director and CFO of TCS said the company is seeing the first signs of a revival of the global economy. He, however, declined to say whether this was the end of the global recession.

Like the most IT companies, TCS has also been severely hit by the global recession. It has experienced a number of project cancellations since September 2008. “As the recession spread across the globe and sunk deeper, a number of customers were canceling their projects with us but lately we see an arrest in this,” said Mahalingam.

But customers remain cautious and are showing discretion in their spending, he said.

Mahalingam said TCS followed a policy of diversification in revenues that has helped in these rough times. Besides the company has also followed the same policy in terms of geography and has been focusing on emerging markets like the BRIC countries for growth.

“India has been a strong market for us besides the other BRIC countries and that has payed off,” said Mahalingam.

On the employee front, he said even though there is a freeze on hiring fresh staff, the company has honored the offer made to 24,500 people earlier.

TCS has seen a strong growth in retail, pharma, utilities verticals over the last few months.

New Delhi: The government can raise about Rs.80,000 crore ($16.6 billion) by divesting stake in public sector units, says an industry lobby report.

“Dilution of stake in leading public sector units alone could fetch at least Rs.80,000 crore,” the report by Associated Chambers of Commerce and Industry (Assocham) said, adding that this amount could be used to bring down the fiscal deficit burden.

To overcome the immediate deficit, the government may have to borrow Rs.2.4 trillion crore from the market by September, it added.

Even a 10 percent dilution in public sector giants could fetch Rs.60,000 crore and a 20 percent dilution would still leave the government in control of these units, Assocham said.

“NTPC alone could fetch Rs.68,000 crore if the government stake is reduced from 89.5 percent to 51 percent. The four power sector giants together could give Rs.98,000 crore,” it added.

It urged the government to adhere to the Fiscal Responsibility and Budget Management (FRBM) Act, maintain a low tax regime and introduce goods and services tax (GST) by next April to narrow the deficit.

The FRBM Act was enacted in 2003 to bring in fiscal discipline, and imposes limits on fiscal and revenue deficits.

“There is no need for accepting a long-term fiscal deficit and deviation from FRBM goals,” Assocham added.

New Delhi: The impact of the global economic downturn has begun to thrive and India’s chances to successfully glide over the tide remain positive. The country has been ranked third by a study, among the most promising country to survive the economic crisis.

The rankings are based on the Servcorp International Business Confidence Survey, which was conducted to understand the business morale and impact of the economic downturn. Australia has been voted as the best place to be during these recessionary times by international business people, followed by China. The third position is held jointly by India and Singapore while Hong Kong and Canada are in the fifth and sixth place respectively. As per international businessmen the other most promising countries include Japan, Qatar, New Zealand, Malaysia, Sweden, Vietnam, Netherlands, U.S., Indonesia, South America, France, Belgium, England, Korea, South Africa, Austria, Taiwan, Czech Republic, Germany, Ireland, Lebanon, Russia, UAE, Brazil, Morocco, Philippines, Scotland, Sri Lanka, Syria and Thailand.

The survey pinpointed that developing nations have emerged favorites among international businessmen as places which are best placed to tide over the recession. The rankings enlisted 36 countries and 21 countries among the 36 are emerging economies.

New Delhi: The Indian economy will recover from the slowdown in the second half of 2009-10, thanks to the strong domestic market and improving financial sector, investment bank Goldman Sachs said Monday.

“We expect a recovery in activity in the second half of fiscal 2009-10, led by a pick-up in domestic demand amidst the loosening financial conditions,” Tushar Poddar, an economist with Goldman Sachs, said Monday.

“The positive surprise coming from domestic activity data, excess liquidity in the system, a substantial easing of financial conditions, declines in some key interest rate spreads, and the removal of election uncertainty suggest that activity will pick up in the second half,” he added.

According to him, the positive cues were reflected in the stock markets.

“Markets seem to be driven by both domestic and global factors. The Sensex increased 21 percent month over month, outperforming the S&P by 8 percent,” Poddar said.

Foreign institutional investment (FII) rose to $1.8 billion in April after falling $1.2 billion in March and the rupee appreciated 2.3 percent against the dollar, he said.

According to Poddar, the key risk is “the formation of an unstable coalition and the ratcheting up of long bond yields due to greater borrowing by the government to finance the post-election budget”.

Washington: U.S. President Barack Obama is leaving no stone unturned in his effort to bring the ailing American economy back on track. Keeping his promises, Obama has announced an end to the years of tax incentives to those U.S. firms which create jobs overseas in places like Bangalore. And instead, the incentives would now go to those creating jobs inside the U.S., in places like the Buffalo, a city bordering Canada in upstate New York.

Announcing the international tax policy reform, Obama said, “We will stop letting American companies that create jobs overseas take deductions on their expenses when they do not pay any American taxes on their profits. We will use the savings to give tax cuts to companies that are investing in research and development here at home so that we can jump start job creation, foster innovation, and enhance America’s competitiveness.”

The new tax laws are expected to hit badly the countries like India, China and Philippines, where U.S. companies have been outsourcing their work. Chastising the current taxation system, Obama said, “It’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.”

The U.S. President further said, “The way we make our businesses competitive is not to reward American companies operating overseas with a roughly two percent tax rate on foreign profits; a rate that costs taxpayers tens of billions of dollars a year.”

Obama wants U.S. companies to remain most competitive in the world. “But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens,” he argued.

Announcing a set of proposals to crack down on illegal overseas tax evasion, close loopholes, and make it more profitable for companies to create jobs here in the U.S., Obama said his series of tax reforms would save $210 billion in the next 10 years.

NEW YORK: Investors are back to worrying about banks.

Long-present unease about soured loans bubbled over on Monday after Bank of America Corp. said it set aside $13.4 billion to cover lending losses, even as it posted a profit for the first quarter, and as anxiety grew about the results of the government’s “stress tests” to determine if banks will need more government bailout money.

While Bank of America and other big banks like Citigroup Inc. have fared better so far this year than many believed they would, nervousness is growing now over the massive losses from defaulting loans that are yet to come. On Sunday, White House chief of staff Rahm Emanuel said some banks will need help.

Financial stocks suffered some of the day’s worst declines: Bank of America plunged 24.3 percent and Citigroup fell 19 percent. Those two components of the Dow Jones industrial average contributed to a daily loss in the index of 290 points, or 3.6 percent. That was the biggest Dow drop since early March, before the market’s big rally from nearly 12-year lows.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said traders are skeptical about bank earnings and believe the better-than-expected profit reports may be disguising problems.

“They’re looking at bank numbers and are saying they are not that great,” Saluzzi said.

Traders have been looking for some pullback ever since the Dow jumped 24 percent from its early March lows. But that pullback could end up being more significant than a mere correction if the market cannot shake its concerns about banks. With the stress test results expected in early May, the market is likely to see more volatility.

Worries about banks’ debt problems were aggravated by news reports that their lending remains tight and that the government may swap its debt in banks for ownership stakes as its $700 billion bailout fund runs down.

Because of the central role lending plays in keeping businesses of all kinds going, investors have been hunting for signs of a recovery in banks before they get more optimistic about the broader economy.

The market has been encouraged by early indications that a government drive for lower interest rates has been helping banks step up lending, but investors are still sensitive to any signs of trouble — including the comments from Emanuel and senior White House adviser David Axelrod, who said some banks “are going to have very serious problems.”

Energy and materials companies also fell along with the prices of key commodities they rely on, such as crude oil.

The market declines were broad and deep, outweighing what would otherwise be positive news about a step-up in deal activity. After a deal with IBM Corp. didn’t work out, troubled technology company Sun Microsystems found a buyer in Oracle, a leading maker of business software, while PepsiCo Inc. said it would bid $6 billion to buy its two biggest bottlers.

The Dow fell 289.60, or 3.6 percent, to 7,841.73.

Broader stock indicators also lost ground. The Standard & Poor’s 500 index fell 37.21, or 4.3 percent, to 832.39, and the Nasdaq composite index fell 64.86, or 3.9 percent, to 1,608.21.

About 10 stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 6.79 billion shares, down from 7.1 billion shares on Friday.

Concerns about the sustainability of bank earnings weighed on financial stocks. Citigroup Inc. lost 71 cents to $2.94; JPMorgan Chase & Co. fell $3.57 or 10.7 percent to $29.69 and American Express Co. fell $2.83 or 13 percent to $18.98.

Jeffrey Frankel, president of Stuart Frankel & Co. in New York, said the retreat in financial stocks is welcome after their massive gains from early March - he said too sharp a rise could endanger a long-term advance. Many bank stocks have doubled in only weeks.

“These banks have had a tremendous run,” Frankel said. “Now you’re hearing the bearish camp speak up a little bit.”

Investors are also cautious about financial after The New York Times reported that the government might be forced to find ways to stretch the $700 billion allocated for the government’s bank rescue fund by converting the government’s loans into common stock. Such a move would give the government a controlling stake in banks and hurt existing shareholders by reducing the value of their shares.

Separately, The Wall Street Journal reported that banks receiving government bailout money are having a hard time making loans.

Wall Street was more upbeat about the Oracle deal, which carries a 42 percent premium to Sun’s Friday closing stock price of $6.69. Sun jumped $2.46 or 36.8 percent to $9.15, Oracle slipped 24 cents or 1.3 percent to $18.82.

Beverage and snack maker PepsiCo offered to acquire Pepsi Bottling Group and PepsiAmericas in a move to cut costs. Pepsi lost $2.27 or 4.4 percent to $49.86 while Pepsi Bottling jumped $5.53 or 22 percent to $30.73 and PepsiAmericas surged $5.16 or 26 percent $25.04.

In earnings news, drug maker Eli Lilly & Co.’s first-quarter earnings rose 24 percent on higher sales of the antidepressant Cymbalta and as costs for Humalog, a form of insulin Lilly makes, remained flat. Shares slipped 76 cents or 2.3 percent to $32.99.

Light, sweet crude fell $4.45 to $45.88 a barrel on the New York Mercantile Exchange. That helped send Occidental Petroleum Corp. down $3.76 or 6.3 percent to $55.88, while Dow Chemical Co. fell $1.12 or 8.9 percent to $11.48.

In other market moves, the Russell 2000 index of smaller companies fell 26.88, or 5.6 percent, to 452.49.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.84 percent from 2.95 percent late Friday. The yield on the three-month T-bill fell to 0.12 percent from 0.13 percent.

The dollar was mostly higher against other major currencies. Gold prices rose.

Overseas, Japan’s Nikkei stock average rose 0.19 percent. Britain’s FTSE 100 fell 2.5 percent, Germany’s DAX index fell 4.1 percent, and France’s CAC-40 fell 4 percent.

SHANGHAI: Chinese stocks slipped 1.24 per cent in heavy trade on Tuesday, knocked by a drop in financial, energy and metals shares as renewed concerns about the financial crisis weighed on stock and commodities prices overseas.

The Shanghai Composite Index ended the morning at 2,525.638 points after rising to an eight-month closing high on Monday.

Losing Shanghai A shares outnumbered gainers by 573 to 319, while turnover in Shanghai A shares rose to 85.8 billion yuan ($12.6 billion) from Monday morning’s 68.2 billion yuan.

A jump in bad loans at Bank of America, the largest US bank, rekindled fears about the state of the banking sector globally and pushed prices of industrial commodities such as oil and copper sharply lower.

US stocks slid more than 3 per cent on Monday while Hong Kong’s Hang Seng Index fell 3.5 per cent.

Manufacturing sector to be hit by slowdown for some more time, it says. A survey conducted by the Reserve Bank of India (RBI) has estimated that the Indian economy would grow at less than 6 per cent during the current financial year, the slowest expansion since 2002-03.

The median forecast of professional forecasters’ survey estimated that the economy would grow by 5.7 per cent during the current financial year and also revised the growth projections for 2008-09.

According to the Central Statistical Organization’s advance estimates, GDP is projected to grow by 7.1 per cent in 2008-09. This would be the slowest growth since 2002-03, when the economy grew by 4 per cent. For three successive years up to 2007-08, GDP rose at a rate of over 9 per cent.

Agriculture, which is projected to grow at 3 per cent during the current financial year, provides a silver lining of sorts with services and industrial growth expected to moderate.

During the current financial year, imports and exports are projected to contract by 4 per cent and 8.4 per cent respectively. This indicates that the manufacturing sector would continue to feel the impact of the global slowdown for some more time.

The only good news is that there are signs of the economy bottoming out. During April-June, the GDP is expected to rise by 5.3 per cent, before improving to 5.6 per cent in the second quarter. The Indian economy is expected to grow at 6.2 per cent in the third and 6.5 per cent in the fourth quarters. During the third quarter of 2008-09, the Indian economy grew by 5.3 per cent as against 7.7 per cent in the first half.

While RBI expects inflationary pressure to remain low during the current financial year due to low commodity prices globally, it also points out that high food prices have kept consumer price inflation at elevated levels. During January-February, inflation based on consumer price indices has hovered around 9.6-10.8 per cent as against 7.3-8.8 per cent in June 2008.

Pointing to more pain for companies, the forecasters’ survey estimated the growth in corporate profit to fall to single-digit rates.

In addition, the quarter-ahead expectations survey on industrial performance conducted by RBI projected all-round deterioration during April-June 2009. Only 11.2 per cent of the respondents said that the overall business situation would be better and 8.4 per cent said the financial situation would be better.

“In sum, the Indian economy has experienced some loss of growth momentum with major drivers of growth witnessing moderation,” RBI said in its pre-monetary policy assessment today.

While savings and investment rates are expected to decline during 2008-09, RBI said the fiscal stimulus packages announced by it and the government would help arrest the moderation and revive consumption and investment with some lag. Besides, it said that the balance of payment position remained sustainable in the context of the present level of foreign exchange reserves and external debt.

Among the positives, the central bank, which is due to announce the annual policy statement for 2009-10 tomorrow, said that foreign exchange reserves continued to remain at comfortable levels, and would ensure stability, despite falling by $59 billion over the last 12 months.

New York: Downturn-ridden U.S. economy continues to fall further and the number of job losses is getting bigger every month. As per a report by ADP employer Services, private employers in the country have cut a record 742,000 jobs in March over 706,000 job-cuts in February.

According to the analysts, the big drop foreshadows a huge decline in the non-farm payroll reading in the government’s employment report that will be released on Friday.

“It’s a terrible number. It is almost a loss of three quarters of a million jobs which is possibly the highest we have seen so far over the length of this crisis,” said Matt Esteve, foreign exchange trader with Tempus Consulting in Washington.

After the news of the huge job losses in March, U.S. stock futures and the dollar have fallen, while U.S. treasury bonds regained some of their lost ground.