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Dec 13, 1999

  1. International
  2. Finance
  3. Industry
  4. Policy
  5. Trade
  6. Gulf

Global forex trading volumes fall

Trading volumes on the foreign exchanges, the world's biggest market, fell this year for the first time since the Bretton Woods fixed exchange-rate regime broke down in the 1970s, people in the industry said.

A report by Goldman Sachs said anecdotal evidence showed foreign exchange volumes have fallen to below $1.3 trillion a day from peaks of about $1.5 trillion reported by the Bank for International Settlements in 1998.

The ACI, the foreign exchange industry's umbrella organisation, said the figures were in line with the reports it was hearing from its global membership.

The main culprits blamed by Goldman for the decline in currency trading volumes range from the introduction of Europe's single currency in January to the sustained fall in inflation rates around the world in recent years.

The news will increase gloom in an industry which has seen the number of jobs and market players slashed as a result of a long series of mergers and acquisitions and the emergence of new trading technology.

"This is likely to have been the first such decline since floating foreign exchange markets started and time will determine whether this is a new trend," said Jim O'Neill, chief currency economist at Goldman Sachs.

He said the bank's analysis was based on flows observed from different parts of the industry as well as data from EBS, the electronic broking system for foreign exchange dealing.

Heering Ligthart, president of the ACI, said initial investigations by individual banks also pointed to a 20 to 30 per cent decline in global forex trading volumes.

SEC opens up trade in Big Board shares

The Securities and Exchange Commission (SEC) unanimously approved a rule that opens up trading in the shares of New York Stock Exchange companies, spurring market competition and lowering costs to investors.

The new rule gives all of the regulated stock exchanges, like Nasdaq and other non-NYSE members, full access to trading Big Board stocks by expanding the Intermarket Trading System, an electronic order-routing system that links the exchange markets that trade listed securities.

The ITS was created in 1978 and later expanded to Nasdaq market makers who trade listed stocks over the counter, otherwise called third market makers.

Currently, members of the National Association of Securities Dealers, the parent of Nasdaq, can only trade stocks listed on the Big Board after April 26, 1979. The SEC approval expands that to the stocks of companies listed before that time, like General Electric Co and International Business Machines Corp.

Besides ensuring that customers get the best price regardless of the market in which their order was executed, automated stock trading systems known as Electronic Communications Networks, or ECNS, will ultimately benefit from move by the SEC, lawyers said.

One of the barriers the ECNs face in trading NYSE stocks— Rule 390 — is on its way to becoming a thing of the past. Last week, the NYSE's board voted to scrap the rule that said NYSE members firms can only use traditional exchanges to trade stocks listed on the Big Board before 1979.

ECNs these days are capturing about 30 per cent of the volume in Nasdaq-listed stocks but a far smaller percentage of the action in NYSE companies.

Malaysian bank plan hits barrier

A public quarrel has broken out between Malaysia's third largest bank and a politically powerful shareholder over a merger plan, raising new questions about the nation's ambitious bank consolidation programme.

The spat between RHB Bank Bhd and Malaysian Resources Corp Bhd (MRCB) highlights pitfalls facing dozens of financial institutions as they scramble to meet a January 21 deadline for submitting merger plans to the central bank.

It has also revived talk the merger programme is vulnerable to fallout from a bitter split between Prime Minister Mahathir Mohamad and his jailed former deputy Anwar Ibrahim, and stirred speculation the central bank may end up imposing its will.

The row reached the public's ears on Tuesday when MRCB said it objected to RHB Bank's plan to become one of the core banks to emerge from the nationwide merger programme. MRCB chief Abdul Rahman Maidin said the merger proposal would dilute MRCB's stake.

MRCB has a 22.7 per cent stake in Rashid Hussain Bhd (RHB) the cornerstone of Abdul Rashid Hussain's financial empire. RHB owns 57 per cent of RHB Capital the parent of RHB Bank.

Nomura to expand in Europe, U.S.

Just a year after taking the axe to its overseas business, Nomura Securities Co Ltd reversed course and said it would use soaring stock market revenues to expand aggressively in the United States and Europe. Nomura, Japan's biggest brokerage house, said it would boost the capital of its American and European arms as part of a drive to strengthen its wholesale operations worldwide.

It plans to increase the capital of Nomura Holding America by $550 million to about $1.18 billion and to pump 55 billion yen ($536 million) into Nomura Europe Holdings, boosting its capital to around 160 billion yen.

EU creates single legal framework for e-trade

European Union trade ministers approved a long-awaited law creating a single legal framework for electronic commerce in a bid to help the 15-nation bloc match U.S. progress in the burgeoning sector

"The Council has just reached political agreement on the electronic commerce directive. There will now be a more clear legal framework for the shopping mall of the future," Erkki Virtanen, Finland's state secretary for trade and industry, said. "Its importance cannot be overstated."

The law sets out a minimum set of rules for buying and selling goods over the Internet and electronic networks and aims to create legal certainty for companies which will not have to comply with the individual laws of all 15 EU countries.

Instead they will be regulated by the so-called "country of origin" principle which means they will only be subject to the laws in the country where they are operating.

Dutch plan to sell reserves hit gold mart

The Dutch central bank said it would sell 300 tonnes of gold over five years, unnerving the market and sending prices to a two-month low.

The plan, to replenish the bank's cash reserves following a transfer of five billion guilders ($2.28 billion) to the government, knocked 1.5 per cent off bullion prices in the first minutes after the announcement.

Prices shed $4 to around $275 per ounce after the announcement, even though the plan was in line with a pact by European central banks to limit gold sales.

The market had hoped that the central banks would not take advantage of the full 2,000 tonne limit over five years they had set in September to end uncertainty about additional unloading following British and Swiss sales, dealers said.

Clarity over how much gold the 15 European central banks will sell helped spot prices bounce back to around $277 by midday but they closed in London weaker at $276.

Mergers & Acquisitions

News Corp—Healtheon: Media giant News Corp Ltd and Healtheon/WebMD Corp said they had formed a $1 billion programming and marketing partnership under which News Corp will take a 10.8 per cent stake in the online health information and transaction network.

BSkyB—KirchPay TV: Rupert Murdoch's BSkyB made a long-awaited breakthrough into Europe's biggest television market when it agreed to take a 24 per cent stake in Germany's KirchPayTV for 2.9 billion marks ($1.48 billion).

AT&T: Confirming weeks of speculation that AT&T Corp would tap its booming wireless business to boost its stock value, the No. 1 U.S. long distance telephone company said it plans to sell a portion of the unit in what would be the largest U.S. initial public offering.

Vodafone—Mannesmann: Vodafone AirTouch PLC intends to submit its formal takeover offer to Mannesmann AG shareholders this month, financial daily Handelsblatt reported citing a Vodafone spokesman.

BellSouth—France Telecom: BellSouth Corp plans to block France Telecom's 5.75 bln stg bid for control of RWE AG's and Veba AG's E-Plus Mobilfunk GmbH mobile telecommunications unit, the third biggest phone operator in Germany, the Financial Times reported.

Fuji Heavy—GM: Fuji Heavy Industries Ltd, maker of Subaru cars, confirmed it is discussing an alliance with General Motors Corp in which GM will buy a stake in the company.

Bank of Scotland—NatWest: Bank of Scotland is to publish its integration plans for National Westminster Bank PLC under its hostile merger proposal at 11:00 am GMT, according to a spokesman for the bank said.

India to alter power sector 

India is working on a blueprint to completely reform its power sector in the next five years, Power Minister Rangarajan Kumaramangalam said.

The minister did not give details of the plan. But he said his ministry would soon meet state chief ministers and power ministers to build a consensus on pushing the reforms through.

The country's power sector is directly administered by state governments and the federal government only issues guidelines.

Japanese GDP falls in third quarter

Japan's economy put the brakes on growth in the July-September period after showing surprising strength over the first half of the year, data showed, but economists say the road to economic recovery remained intact.

The government said gross domestic product—the broadest measure of activity in the world's second-largest economy—fell an inflation-adjusted 1 per cent in July-September from the previous quarter after rising over the first six months of 1999.

Euro expected to dip further

Europe's single currency, the euro, which has dipped briefly below parity with the dollar for the first time since it was launched, could drop further in the short term, analysts said.

The euro broke the symbolic one-dollar barrier twice last week, dropping to an all-time low of $0.9990 during London trading on Friday, after it hit $0.9995 in New York the day before.

U.S., EU to push ahead with farm trade talks

The United States and the European Union said they would push ahead with new world farm trade talks next year despite the collapse on Friday of efforts to launch broader negotiations.

But in a sign of how difficult those talks could be, EU officials said progress made at the World Trade Organisation meeting in Seattle this week would not necessarily lay the basis for beginning new negotiations.

"There's no commitment at all and therefore there's nothing on the table, " EU Franz Fischler told reporters. "We have to launch new negotiations now on Article 20 (of the.1994 Uruguay Round pact) and we have to start from the very beginning."

In a major setback, WTO members failed to reach agreement on Friday for launching a new round of talks on agriculture, services and other potential areas such as industrial tariffs and competition and investment rules.


Terrified residents of the Chechen capital ran the gauntlet to flee as Russia shrugged off international criticism of its warning to abandon Grozny or risk death while at the same time suggesting it may soften its stance.

IMF-Russia deal at hand

The International Monetary Fund wants Russia to meet promises on transparency and banking sector before it decides to release part of a $4.5 billion loan, media chief Thomas Dawson said.

Dawson told a news briefing that agreement was close. "The broad macroeconomic performance of the economy has been satisfactory, but there are a number of structural issues," he said. 

Japan, ECB douse hopes of G7 action

Japan and the European Central Bank quashed any lingering expectations that the world's top three central banks would cooperate to boost the wilting euro and curb the rampant yen.

The Bank of Japan (BoJ), which fought a lone battle this week in the currency markets to hold back the yen by buying dollars and euros, conceded it would be difficult for the United States to join in currency intervention.

And the ECB chief, Wim Duisenberg, strongly reinforced market perceptions that the bank is unconcerned about the European currency, which slid on Friday below $1.00 for the first time.

Central banks are known for acting when least expected, but Friday's public comments offered no hints of looming concerted intervention by the Group of Seven leading industrial powers.

BOJ governor Masaru Hayami told parliament that the strong U.S. economy, with its appetite for imports, has caused the nation's current account deficit to balloon to some four per cent of gross domestic product.

Sage profits rise

Sage Group PLC revealed year to September pretax profits rose 56 pct to 74.3 mln stg from 47.6 mln stg last year on the back of a strong second six months boosted by contributions from Peachtree and Tetra, its recent acquisitions.

City of London

The City of London has not been disadvantaged by the UK's failure to join the euro and has prospered since the currency's launch, the governor of the Bank of England said, according to the Financial Times.

Internet technology

Nortel Networks Corp and Sega Enterprises Ltd spinoff ISAO Corp said Nortel will provide the internet technology to enable more than 5,000 on-line players to compete in the same game simultaneously using Sega's Dreamcast system.

Boeing wins El Al order

El Al said it awarded Boeing Co an order for three 777-200 aircraft, without commenting on the subject of a possible purchase of A300-200s from Airbus Industrie.

Supercomputer orders

NEC Corp said it has won two major orders for supercomputers from research institutes in Switzerland and Singapore, confirming an earlier report in the Nihon Keizai Shimbun.

World oil production fell by 250,000 bpd in Nov

World oil production averaged 73.9 million barrels per day in November, 250,000 barrels per day less than in October, as a result of a drop in output from OPEC countries, the International Energy Agency IAE said on Wednesday.

In its monthly oil market report, the IEA said that OPEC output fell by 700,000 barrels per day to 28.65 million barrels per day in November as a result of production restrictions which members had imposed to help support prices. Compliance with OPEC production targets moved back to 89 percent in November from 83 percent in October, the agency said.