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Dec 27, 1999

  1. International
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Merges & Acqusition

Japan banks: Three Japanese banks that will be merging to create the world's largest financial institution rolled out plans to create a world player and avoid the consolidation woes seen in other mega-mergers. The banks, Industrial Bank of Japan Ltd (IBJ), Fuji Bank Ltd and Dai-Ichi Kangyo Bank Ltd (DKB), said they would hold equal stakes in a new holding company to be called Mizuho Holdings Inc. Mizuho is a Japanese word that refers to young rice plants.

AOL—MapQuest: America Online Inc said it will buy MapQuest.com Inc. an online mapping company in an all-stock deal valued at about $1.1 billion that bolsters the world's largest Internet services company's push into locally targeted interactive services.

Wells—National Bancorp: Wells Fargo & Co said it agreed to buy National Bancorp of Alaska Inc. the oil-rich state's largest bank and one of its corporate icons, for about $907 million in stock.

GM—Daewoo: General Motors Corp is still best positioned to take over debt-laden Daewoo Motor Co despite South Korea's plan to sell the automaker at a limited auction, analysts said.

Interpublic—NFO: Interpublic Group of Cos Inc. the world's second-largest advertising group, has agreed to buy ailing market research firm NFO Worldwide Inc in a stock deal valued at about $580 million that rescued NFO as the company warned of weak earnings.

Telewest—Flextech: Cable operator Telewest and programme maker Flextech set out the terms for a merger to create a new force in Britain's rapidly changing television industry.

P&U—Monsanto: U.S.-Swedish drugs group Pharmacia & Upjohn Inc (P&U) and U.S. life sciences company Monsanto Co were reported to be in talks over a merger but P&U declined comment.

Abbott—Alza: Health care companies Abbott Laboratories Inc and Alza Corp have called off their $7.3 billion merger after failing to resolve regulatory concerns.

Banco Bilbao Vlzcaya—Argentaria: A merger to create one of Europe's ten biggest banks got the final go-ahead when shareholders in Banco Bilbao Vlzcaya and Argentaria approved their long-expected tie-up.


Jobless rate in Korea hits two-year low

South Korean unemployment fell to its lowest level in nearly two years in November but the figures mask a rise in temporary workers and increasing labour unrest as the economy powers out of its worst recession in decades. The National Statistical Office (NSO) said seasonally adjusted unemployment for November fell to 4.7 per cent, the lowest since January 1998 when it was 4.2 per cent.

Fed keeps U.S. rates unchanged

The Federal Reserve left key U.S. interest rates unchanged at its last meeting this year and said it was keeping its monetary policy options open as the economy enters the new millennium.

The announcement leaves the federal funds rate on overnight bank loans at 5.5 per cent, where it has been since the last of a three-step rate rise in November. The less significant discount rate on direct Fed loans remains at 5.0 per cent.

Germany announces further tax cut

German Finance Minister Hans Eichel announced plans to bring forward income tax cuts to 2001 to complement a major reform to the corporate tax system.

Eichel also announced plans to cut income tax further after the next general election in 2002 but said Germany would stick to its long-term goal of balancing the budget by 2006.

Korean reforms will go on: Kim

Hold the champagne was the message for South Koreans from President Kim Dae-jung.

Kim told top business leaders that the country had suffered bone-cutting pain to wrench its economy and companies back on course but the government would stay the course of reform, including privatising state-run firms.

'We must not grow complacent just because the IMF era is over," Kim said, referring to a $58.35 billion bailout that the International Monetary Fund led for South Korea in 1997 when the economy was on the brink of default.

Kim came to power in February 1998 and has spearheaded a campaign to turn the nation's sprawling conglomerates into smaller, stronger companies focused on core businesses.

Those efforts have seen sweeping changes as firms absorbed and swapped subsidiaries.

Before the crisis some of the companies were expanding with debt-to-equity ratios over 500 per cent" said Lim Songhak, an economist at LG Investment and Securities.

Kim's administration has set year-end guidelines for affiliates at top conglomerates to trim the ratios to below 200 per cent.

The watchdog Financial Supervisory Commission said the ratio of the biggest business groups — Hyundai, LG, Samsung and SK—would average less than 200 per cent.

"The important thing is how many competitive companies there are, not how many companies," Kim told more than 100 executives invited for lunch at the presidential Blue House.

Analysts said the troubled Daewoo Group which fell from being a national success symbol to the biggest. corporate debtor ever in July when creditors injected emergency funds and began steps to dismantle it, proved Kim was right to stress reforms.

Japan unveils $825b budget to fuel growth

Japan's Finance Ministry submitted its largest ever budget, saying the 85 trillion yen ($825 billion) spending plan was essential for a recovery in the world's second largest economy despite fears of spiralling debt.

The budget for the year starting next April assumes the economy will expand by one per cent over the period, a forecast which is largely in-line with the thinking of most private economists and up from projected growth of 0.6 per cent this year.

Cautioning that Japan cannot continue a spending spree that has produced the world's biggest debt burden, Finance Minister Kiichi Miyazawa said the budget would help achieve one of the government's most prized goals—a self-sustaining recovery.

"We would like to contribute to the economic recovery, since we have not yet achieved the initial goal of (a self-sustainable recovery) that Prime Minister Keizo Obuchi set a year ago," he told a news conference.

This looks particularly important with general elections due in less than a year, economists said.

Discretionary spending—the largest component in the budget and targetting everything from social security, education and science to defence and public works—is set at a record 48.09 trillion yen, up 2.6 per cent from this year.

To finance the budget, which is up 3.8 per cent from the current year, the government will issue a record 85.87 trillion yen in Japanese government bonds (JGBs) .

With tax revenue hovering at low levels due to slack economic activity and large tax cuts in recent years, the government plans to finance 38.4 per cent of the budget by selling bonds, up from 37.9 per cent for this year's initial budget.

When including bonds sold to finance two supplementary budgets for the current fiscal year, the amount of government spending financed through the debt market rises to 43.4 per cent, a record high.

South Africa mart bounds to record high

Year-end celebrations came early to the South African bourse yesterday as the benchmark index closed at its highest level yet, crowning a twomonth rally that showed few signs of fading before the new millennium. Brushing aside Y2K fears investors chose instead to look to an anticipated sprint in the stock market in 2000, underpinned by expectations of a sustained period of low inflation in the emerging economy and signals of a rebound in commodity prices.



Morgan Stanley: Securities firm Morgan Stanley Dean Witter & Co posted record quarterly and full-year results. Morgan Stanley earned $1.6 billion, or $2.84 per diluted share, in the quarter ended November 30. That was up 33 per cent from a $1.2 billion profit, or $2.07 a share, in the year-ago quarter.

Nike: Athletic footwear and apparel giant Nike Inc said its earnings rose more than 50 per cent in the latest quarter. The company said its net income rose to $107.5 million or 38 cents a share, from $68.9 million, or 24 cents a share, a year ago.

ARM joins FTSE 100 blue chips

ARM, just another upstart technology company a mere two years ago, joined the revered ranks of British bluechip companies in the FTSE 100 index, and its shares promptly set a new record high.

With fellow computing newcomer CMG Plc, ARM Holdings Plc—which designs tiny chips that run most of the world's cellphones—will bolster the still thin ranks of technology companies in the index, which amends its make-up once a quarter.

Pension funds and institutions eager to boost weightings in technology stocks by backing a proven winner piled into ARM on Friday, when it rose 19 per cent, and again.

China lifts its growth

Surging exports to the rest of Asia will help lift China's economic growth to eight per cent next year after a 7.3 per cent expansion in 1999, government economic planners now believe.

The upgraded forecast from the State Development Planning Cornmission, reported in the China Daily, follows a sharp rise in exports in the second-half of this year.

The planning commission anticipates exports will rise by 6.1 per cent this year, sharply up from last year's 0.5 per cent. November exports were up 28 per cent over the same month in 1998.

China's exporters have been given a major boost by the much stronger-than-expected recovery of other Asian economies, which has gathered momentum over the last few months.

On the back of the rising export trend, the commission is now expecting growth next year to reach eight per cent—a full percentage point higher than it was forecasting as recently as October.

Singapore eases dollar restrictions

Singapore has loosened restrictions on the Singapore dollar in domestic debt and equity markets but analysts urged wider policy easing for the city state to achieve its aim of becoming a leading financial hub.

In a move welcomed by investors and banks as part of the island's efforts to develop its capital markets, the Monetary Authority of Singapore (MAS) recently relaxed restrictions on the use of the Sing in domestic fixed income and stock markets.

U.S., EU hope to launch new round of trade talks

The United States and the European Union said on Friday they hoped to launch a new round of global trade talks next year, but Washington warned that negotiations would fail if the EU refused to back down on agriculture and other issues.

Two weeks after World Trade Organisation (WTO) talks collapsed in Seattle, the United States and the EU issued a joint statement calling for a new trade round and for greater cooperation between the world's two largest trading powers.

But U.S. Trade Representative Charlene Barshefsky dispelled any hopes that a compromise was near, saying it would be impossible to launch a new round if Europe refused to overhaul its trade agenda.

South Korea approves $82b budget

South Korea's National Assembly approved a 92.66 trillion won ($82 billion) budget for fiscal year 2000 that features election-year goodies for fishermen, farmers and local infrastructure.

The 2000 budget also shows a deficit equivalent to 3.4 per cent of gross domestic product, the third straight year spending is scheduled to exceed revenues. The budget is up 4.7 per cent over this year's spending plan, a Ministry of Budget and Planning statement said.

Political interests were accommodated ahead of next April's general elections.

World Bank still on 'red alert' over Asia

Asia's growth rates over the next decade will depend more than anything on how governments privatise the huge volume of assets acquired as a result of the region's financial crisis, a senior World Bank official said on Tuesday.

Jean-Michel Severino, vice-president for East Asia and the Pacific, said the bank was cautious about the region, whose economic success was not assured despite its current rapid recovery.

"We are staying on red alert," Severino told a seminar on the lessons to be learned from the currency chaos two years ago that plunged East Asia into a deep recession.

He said the region stood at a crossroads, with politicians in a number of countries unsure what model of economic management to adopt now that the immediate crisis was over.

Microsoft loses Excel name battle in Sweden

A Swedish appeals court Tuesday ruled that US computer giant Microsoft does not hold sole rights to the Excel name, Swedish news agency TT reported.

The appeals court rejected a 1996 suit brought by Microsoft against a small Goeteborg computer software company named Excel AB since 1983, five years before Microsoft launched its Excel database programme.

Turk minister sees $7.6 bln 2000 privatisation

Turkey's state minister responsible for the economy, Recep Onal, said on Thursday the government aimed to achieve revenue of $7.6 billion from privatisation next year and planned to borrow more than $5 billion abroad.

Onal said he saw 1999 year-end wholesale inflation between 57 and 58 percent and consumer prices between 64 and 65 percent up on the year. The announcement came hours after the International Monetary Fund approved a $4 billion stand-by loan to Turkey to support the government's 2000-2002 anti-inflation economic programme.

Japan sees l pc growth next year

Japan gave a cautious forecast of one per cent economic growth for the year to March 2001, just as the government is in the final stages of compiling a budget that is expected to drive debt to record levels.

Tokyo sees private demand next year replacing public spending as a key driver for the economy, but it also is showing signs of being reluctant to pull the plug on stimulus too early as it did earlier this decade when the economy slipped back into recession.

EU opens probe into UK aid to Rover

The European Commission launched a formal investigation into the British government's 141 million ($227.3 million) aid package for BMW AG's Rover car plant at Longbridge in England.

The EU's executive body said it would investigate regional aid which makes up the lion's share of the planned British subsidy for Rover, but it approved a further 11 million of government training assistance for the Longbridge plant.

BMW said in June it would invest 10 billion German marks ($5.16 billion) in its Rover subsidiary over five years after securing the aid package. It will build a new series of R25 and R45 medium-sized Rover cars at Longbridge, near Birmingham.