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Oct 09 - 15, 2000

Global investment surges

As billion-dollar mergers and acquisitions mushroom across the globe, cross-border direct investment by multinational companies could surpass $1 trillion this year, after surging 27.5 per cent to $865 billion in 1999, the United Nations Conference on Trade and Development said Tuesday.

UNCTAD also said in its World Investment Report 2000 report that direct investment prospects in Asia are bright, following a 9 per cent jump in cross-border direct investment to $106 billion in 1999.

Cross-border investment in Latin America jumped 21 per cent to $90 billion, as privatization paved the way for an influx of funds.

Direct cross-border investment flows into developed countries surged 32 per cent to $636 billion last year, while investors pumped $208 billion into projects in developing countries, a 16 per cent increase from a year earlier.

Britain was the largest outward investor, shelling out $199 billion in 1999.

One of the main drivers of such investments is mergers and acquisitions. Some 24,000 merger and acquisition deals were sealed last year with a completed value of $2.3 trillion, the report said.

Of those deals, 109 "mega-deals" with a value of more than $1 billion, accounted for more than 60 per cent of the total value of cross-border deals.

While investment in Asia grew on the whole last year, funds to China dropped by nearly 8 per cent to $40 billion.

Investment in Japan, meanwhile, quadrupled to $13 billion as Japanese companies invested less overseas.

"This mirrors strategic changes in Japanese companies, which are increasingly viewing M&As as a means to revitalize and restructure," the report said.

US House clears H-IB visa bill

The bill designed to increase the number of US visas for educated and technically qualified foreigners that was approved by the Senate on Monday also cleared the House of Representatives on Tuesday night.

Early approval by President Clinton was said on Wednesday to be virtually certain.

The bill, earlier mired in wrangling between the Democrats and Republicans, advanced first in the Senate, on a vote of 96 to 1. On Tuesday night, only hours after it had passed the Senate, the measure was cleared as well by the House, with Republicans setting aside their differences on the issue.

The legislation was passed by the House on a voice vote and was opposed by only one senator, Ernest F. Hollings, a South Carolina Democrat who is known as a job protectionist.

The bill raises, the number of H-1B visas to 195,000 from the existing 115,000 for the next three years. Each visa will cost $500. Foreigners employed by US universities and research organizations are exempt from the 195,000 ceiling. Visas fees are expected to bring in $450m in the next three years.

Under the bill, the Immigration and Naturalization Service would be able to issue the 195,000 H-1B visas a year for each of the next three years to foreign-born workers with college degrees and special skills. Each visa will be good for six years, although it must be renewed after the first three years.

Foreign investors barred from China dotcom auction

China's first auction of dotcoms yielded only one successful sale as foreign investors were barred from participating, organizers revealed on Saturday.

The auction, held in Beijing this week, was aimed at helping cash-strapped start-up companies raise finance.

But 20 foreign companies that registered to attend as buyers were barred in a sign that China's Ministry of Industry remains reluctant to allow foreign ownership of the potentially lucrative Internet market.

The 20 companies included firms from the United States, Britain, Hong Kong, Taiwan, South Korea and Germany, organizers said.

They were among a total of 52 registered buyers. Two hundred sellers registered but after weeding out companies deemed to lack potential, organizers allowed only 35 web sites and six domain names to go up for sale on the auction floor.

The only successful sale made was that of a nine-month-old legal services company www.elawchina.com. Twenty per cent of the company was purchased by a Shenzhen Internet service provider, Shenzhen Technology and Trade Inc., for US$1.8 million.

US, EU agree on handling tax disputes

The United States and the European Union have agreed on procedures for handling a dispute over a US tax break scheme for exporters in a bid to reduce tensions in the explosive row, the EU said on Saturday.

The World Trade Organisation (WTO) ruled earlier this year that the US Foreign Sales Corporation (FSC) scheme, which provides billions of dollars in tax breaks for exporters, was an illegal export subsidy and gave Washington until October 1 to reform it.

But the EU says US legislation reforming the scheme, now before Congress, still breaks world trade rules, raising the possibility Brussels could seek compensation or impose billions of dollars of sanctions on U.S. products.

The EU-US agreement, reached after several days of talks in Brussels, does not tackle the underlying dispute.

European techs slump

Europe's main markets were mixed at the start of trading Friday as tech shares fell in step with their U.S. counterparts, although the U.K.'s benchmark index edged higher.

London's FTSE 100 inched up 0.1 per cent to 6,389.6, led by network equipment maker Marconi (MNI). In Paris, the CAC 40 blue chip index was nearly 0.1 per cent lower at 6,330.03, with data network operator Equant (PEQU) slipping 1.8 per cent. Frankfurt's electronically traded Xetra Dax slipped 0.3 per cent to 6,874.45, led by a 1.3 per cent drop in Europe's largest software maker SAP. The SMI in Zurich was up 0.1 per cent and Amsterdam's AEX was little changed. The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 0.2 per cent, with its technology sub-index shedding 0.8 per cent.

In the currency market, the euro rose against the dollar to 87.13 U.S. cents from 86.92 ents in New York late on Thursday.

In the U.S. Thursday, the Dow Jones industrial average fell 0.5 per cent, or 59.56 points, to 10,724.92, while the Nasdaq composite index shed 1.5 per cent, or 51.44 points, to 3,471.66.

Asian down as techs slide

Tumbling tech shares took their toll on Tokyo and Singapore's markets Friday, as most Asian markets headed lower, although Taipei's main index bounded higher as the Taiwanese government pumped money into the market.

In Tokyo, the Nikkei 225 average fell 0.7 per cent to end at 15,994.24, burdened by declines for market heavyweights Fujitsu and NEC.

Singapore's Straits Times Index tumbled 1.9 per cent to 1,957.77 by the end of the morning session. Hong Kong's Hang Seng index was closed for a public holiday.

In Taipei, the Taiwan Weighted index rose 5.4 per cent to close at 6,353.67 as the government continued to tap its 500 billion Taiwan dollar ($16 billion) state stabilization fund. Market sentiment also improved after a cabinet reshuffle.

Australian shares closed lower as the weak Australian dollar weighed on the market. The S&P/ASX 200 index fell 0.5 per cent to 3,293.5.

ECB airs surprise rate hike

The European Central Bank unexpectedly raised its leading interest rate by one-quarter point Thursday, against a backdrop of gathering inflation pressures aggravated by a weak euro and high oil prices. The ECB, which sets monetary policy for the 11-nation euro zone, lifted its minimum bid rate to 4.75 per cent, its sixth rate rise this year. Higher rates make it more expensive for consumers and companies to borrow money, which tends to curb spending and ease inflationary pressures.

BoE holds rates steady

The Bank of England held its leading interest rate steady Thursday, as expected, judging that inflation pressures remained cool enough as U.K. economic growth continued to slow amid a recent weakening in the pound's value against other currencies.

The announcement, the first of two interest-rate decisions in Europe Thursday, left the BoE's official lending rate at 6 per cent for the eighth straight month. The European Central Bank was poised to announce its decision on rates for the 11-nation euro zone about 1/2 hour later.

Fed leaves rates steady

The Federal Reserve decided Tuesday to leave interest rates unchanged, but indicated that inflation is still a risk, stoking fears that future rate increases may be in store.

Analysts had widely expected that the Fed would take no action on interest rates, amid growing signs the U.S. economy is beginning to slow. The Fed's decision marks the central bank's third consecutive policy meeting with no rate hike, following a series of six rate increases since June 1999 that lifted the key federal funds rate by 1.75 per centage points to 6.5 per cent.

SmithKline in Block race

SmithKline Beecham PLC is a leading contender to buy Sensodyne toothpaste maker Block Drug Co. for about $1.2 billion, seeking to add the U.S. company's oral hygiene products to its Aquafresh, Macleans and other toothpaste brands, the Wall Street Journal reported Friday.

U.S. Treasurys rise

U.S. Treasurys rose Thursday as easing crude oil prices soothed inflation concerns, but gains were tempered ahead of a key jobs report traders expect will confirm that economic growth is moderating.

U.S. crude oil prices extended declines from 10-year high above $37 a barrel two weeks ago to just above $30 a barrel, easing a potential inflation threat that pushed up long-term bond yields some 0.25 per centage points in September.

10-year notes rose 7/32 to 99-4/32, as their yield, which moves inversely to the price, dropped to 5.87 per cent. Inflation-wary 30-year bonds rose 19/32 to 104-27/32, yielding 5.90 per cent.

Two-year notes were flat at 99-31/32, yielding 6.01 per cent, while five-year notes rose 4/32 to 103-14/32, yielding 5.89 per cent.

Mortgage rates decline

Long-term mortgage rates slipped to their lowest level for the year as markets reacted to the non-action by the Fed at its latest policy meeting. The 30-year fixed-rate mortgage, the industry benchmark, averaged 7.83 per cent for the week ending Oct. 6. The average for a 15-year fixed-rate mortgage (FRM) was 7.50 per cent. One-year adjustable-rate mortgages (ARMs) this week averaged 7.21 per cent.

Boeing gets $1.2bn order

Continental Airlines Inc., the No. 5 U.S. airline, said Thursday it ordered 15 Boeing Co. 757-300 single-aisle aircraft in a deal valued at $1.2 billion at list prices.

New jobless claims rise

The number of Americans filing new claims for unemployment benefits rose to 299,000 last week from a revised 289,000 the prior week, the government reported Thursday.

Eleven bidders

The U.S. Energy Department announced agreements Wednesday with 11 companies and brokers to take 30 million barrels of oil from the government's emergency reserve with deliveries to be completed by the end of November.

The 11 bidders agreed to return a like amount of crude, plus a 1.56 million barrel premium, late next year. No money was exchanged.

Factory orders rebound

Orders placed with U.S. manufacturers rebounded modestly in August, powered by strong demand for aircraft and electronic components, according to government figures released Wednesday.

The Commerce Department reported that factory orders rose 2 per cent in August to a seasonally adjusted $382.5 billion, reversing a downwardly revised 8.1 per cent drop in July.

NYSE won't bid for LSE

New York Stock Exchange Chairman Richard Grasso said Thursday the Big Board would not make a hostile bid for the embattled London Stock Exchange (LSE).

Swedish stock exchange operator OM Gruppen on Tuesday extended its unsolicited $1.2 billion bid to buy the London Stock Exchange, insisting it has made "good progress" in wooing shareholders of the company that runs Europe's largest stock market.

Japan confidence rises

A closely watched survey of business confidence in Japan showed strong improvement Tuesday, signalling that the world's second-largest economy is rebounding from its worst slump in decades.

The Bank of Japan's "tankan" survey of business confidence improved to plus-10 in the July-September quarter from plus-three in the April-June period.

It was the seventh-consecutive quarter of improvement and the second-straight quarter that the index climbed into positive territory, meaning more business executives expressed optimism about the future than were pessimistic.

Japan warns Apple

Japan's anti-monopoly watchdog, the Fair Trade Commission (FTC), said on Tuesday it issued a warning to the Japanese unit of Apple Computer Inc. over suspected fixing of retail prices.

The FTC said in a statement it thought Apple Japan pressured retailers not to sell its iMac desktop and iBook notebook computers below retail list prices.

Ship lines hike rates

Pacific Ship lines carrying goods from Asia to the United States are planning to raise freight rates by more than 20 per cent next year.

Vodafone's China stake

Vodafone Group PLC will become a strategic investor in China Mobile (Hong Kong) Ltd. by buying $2.5 billion of shares in the Chinese mobile-phone operator's planned sale of stock, the U.K. wireless company said Wednesday.

The deal is part of an alliance covering management and technology sharing, giving Vodafone a way into a market that has been largely off limits to overseas investors, while also helping to build China Mobile's international reach.

Danish banks tie the knot

Danske Bank, Denmark's leading financial company, announced Monday a 26.1 billion crown ($3.1 billion) all-stock takeover of No. 3 RealDanmark, creating the Nordic region's largest bank by assets.

China enacts sweeping rules

China published sweeping new regulations on Internet companies on Monday that limit international investment, require strict surveillance against "subversive" content and threaten to close down any unlicensed firms.

The rules, passed by China's cabinet two weeks ago and published in the official Xinhua Daily Telegraph on Monday, are sure to send shockwaves through the country's fledgling Internet industry, which is heavily dependent on international capital.