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Apr 02 - 08, 2001

'China's economy to grow 7.3pc in 2001'

The World Bank on Thursday said it predicts China's economy will grow only 7.3 per cent this year, compared with 8.0 per cent last year, due partly to a global slowdown.

World Bank officials said the global market trend is less favourable this year than last year and a slowdown in exports from China is expected as a result.

Sectors that will be most affected include textile and garments, toys, sports equipment and sports goods, as well as electronic goods, they said.

But China's economy this year is still expected to be the fastest growing in the East Asia and Pacific region, where most countries will experience growth of three to seven per cent, World Bank officials said during a news conference to present the bank's half-yearly report on the region.

China's growth in exports will not be as strong as last year, but still would be slightly better than other countries, said World Bank economist Masahiro Kawai.

The Chinese government has set a target of 7.0 per cent annual economic growth for the next five years, and has predicted China's economic growth will come in between seven and eight per cent this year.

The bank's vice president for the region, Jemal-ud-din Kassum, said China's growth forecast for the next five years is achievable, and added it is appropriate for China to continue its proactive fiscal policy, which has included the sales of billions dollars of treasury bonds.

The World Bank has earmarked US$3.0 billion in loans on 30 projects in China from 2002 to 2004.

Half of the projects will be in the country's western region, a mostly undeveloped, impoverished area largely populated by ethnic minorities, including Uighurs and Tibetans.

Malaysian PM unveils $789 million package

Prime Minister Mahathir Mohamed unveiled Tuesday a $789 million supplementary budget to shore up the Malaysian economy amid a US slowdown.

Mahathir also announced a string of new measures to encourage domestic consumption, and plans to liberalise regulations on equity, property and asset investment by foreigners.

For one year from April, employees' contribution to the state retirement fund will be cut from 11 to nine per cent. The government will also abolish a 50 ringgit tax on credit cards imposed since 1997.

A new 500 million ringgit entrepreneur rehabilitation and development fund would be set up to improve financing for small and medium-sized industries.

The premier said that the government has to take "preemptive measures" to sustain the growth momentum in anticipation of adverse effects of a US slowdown on Malaysia's exports and economic prospects.

The announcement however led the stock market to close down 0.9 per cent Tuesday.

The premier said the government would seek parliament's approval to increase development spending by three billion ringgit, in addition to the 28.8 billion approved under the 2001 budget.

This would raise gross domestic product (GDP) by 1.1 per cent, he said.

The government has forecast GDP to grow 7.0 per cent this year but the premier said the figure was being revised and would be announced by the central bank Wednesday.

The federal government's 2001 budget deficit of 4.9 per cent of gross national product "might rise a little bit" following the additional spending, he added.

European Union hints at new global role

European Union leaders on Saturday signalled a new global role for the 15-nation bloc and said they were ready to provide economic leadership to a faltering world economy.

Ending a two-day summit, they said the eurozone was ready to pull other nations out of slow growth and also take on a stronger peacemaking role in the Balkans, Middle East and the Korean peninsula.

"Europe is making strong progress. We have the euro and a defence identity. This is very different from five to 10 years ago," said French President Jacques Chirac.

"Europe is the world's growth locomotive," said German Chancellor Gerhard Schroeder. As the new administration in Washington signalled a more hands-off foreign policy, EU governments seemed ready to take on the mantle of the world trouble-shooter.

ECB rate cut a close call

The European Central Bank may leave interest rates on hold later Thursday, although the bank has given the green light for a rate cut soon.

Economists at HSBC say there is a 40 per cent chance the bank will cut rates on Thursday and a 70 per cent chance it will do so on April 11. Bear Stearns set the odds at 55:45 in favour of a cut this week.

Klaus Friedrich, chief economist at Dresdner Bank, told that he was concerned that the bank may cut rates, which would be the first in nearly two years, because the eurozone economy was showing signs of strength.

"The European economy is relatively strong and has not been impacted by the U.S. weakness," Freidrich said. "Inflation is still above the Bank's target rate we're not out of the wood yet."

Nasdaq off 64% from high

A year-long technology stock selloff continued Thursday with the Nasdaq composite index tumbling to a 29-month low, putting it 64 per cent below last year's record high.

The Nasdaq composite index fell 33.56 points, or 1.8 per cent, to 1,820.57. That's the Nasdaq's worst finish since Nov. 2, 1998, when it closed at 1,800.91. The index has now fallen more than 3,000 points from its record high reach 12 months ago and would need to rise 177 per cent, or nearly triple, to recoup those losses.

The Dow Jones industrial average rose 13.71 to 9,799.08. The Dow's levels are more encouraging. The index is more than 400 points above its lowest levels of the year, hit last week, and remains the only major index not in bear market territory. The Standard & Poor's 500 dipped 5.34 to 1,147.95.

Caspian oil pipeline

Kazakhstan's Prime Minister opened an oil pipeline from the giant Tengiz field to the Russian port of Novorossiisk on Monday, giving the Central Asian producer its first direct link to international markets.

The line is the first stage in an ambitious programme to ship crude from the Caspian, the world's largest undeveloped oil reserve, and which could transform Kazakhstan into one of the world's major oil exporters over the next decade.

Until the 1,580 km (982 mile) Caspian Pipeline Consortium line came onstream with an initial capacity of 560,000 barrels per day, Kazakhstan had to export nearly all its crude through the Russian pipeline network.

Sri Lankan reserves at $1bn

Sri Lanka gross foreign exchange reserves stood at about $1 billion at the beginning of March, down slightly from $1.043 billion at the end of December, a central bank official said on Monday.

Tokyo, Hong Kong stocks rise

Markets in Japan, Hong Kong and Singapore all enjoyed sizable gains Friday morning.

Japan's Nikkei 225 average ended the morning up 2.45 per cent at 13,392.89. Investors said it had fallen too far Thursday, when it dropped 5 per cent.

Hong Kong stocks were up 0.8 per cent Friday morning. The Hang Seng Index was up 0.7 per cent at 12,784.01 on thin volume.

Australian shares opened flat on Friday. The benchmark S&P/ASX200 was down 0.2 per cent to 5,821.97.

Markets in South Korea and Taiwan were also down slightly. The Kospi was off 0.4 per cent in morning trade to 521.85. Taipei's Taiex was down 0.2 per cent to 5,821.97.

Singapore's Straits Times index was making good headway. In morning trade, it rose 2.7 per cent to 1,671.42.

Mortgage rates edge up

As U.S. markets continued their roller coaster ride this week, mortgage rates remained stable and upcoming economic numbers may help determine whether this oasis of stability can be sustained.

The 30-year fixed rate mortgage (FRM) averaged 6.91 per cent, up slightly from 6.89 per cent a week earlier. The average for the 15-year FRM this week is 6.46 per cent, also up slightly from last week's 6.44 per cent. One-year Treasury-indexed adjustable-rates mortgages (ARMs) averaged 6.19 per cent, down from last week's 6.22 per cent.

Treasurys up and down

U.S. Treasury bond prices were mixed Thursday, as U.S. equity prices finally fell after an up-and-down day and traders looked ahead to economic data due next week.

Two-year Treasury notes were up 3/32 to 100 even, yielding 4.24 per cent. Five-year notes were up 2/32 at 104-20/32, yielding 4.62 per cent. Benchmark 10-year notes were unchanged at 100-6/32, yielding 4.98 per cent. Thirty-year bonds were down 8/32 at 98-14/32, yielding 5.48 per cent.

Europe ends mostly higher

Europe's main bourses ended higher on Thursday, after upbeat corporate news lifted 'old economy' stocks, wiping out markets' earlier losses.

In Paris, the CAC 40 blue-chip index edged up 0.2 per cent to close at 5,157.92, led by network provider Equant (PEQU) and bank Credit Lyonnais (PCL).

Frankfurt's electronically traded Xetra Dax rose 0.9 per cent to reach 5,870.98 in late trade, with Hypovereinsbank (FHVM) and drugmaker Schering (FSCH) topping gainers.

London's FTSE 100 slipped 0.5 per cent to end at 5,588.4, with Anglo-American fund manager Amvescap (AVZ) and business telecom firm COLT Telecom (CTM) each dropping around 6.6 per cent.

The SMI in Zurich rose 1.1 per cent and Milan's MIB30 climbed 1.7 per cent. In Amsterdam the AEX index ended unchanged.

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, edged up 0.3 per cent.

U.S. growth slows

The U.S. economy grew at a 1 per cent annual rate in the fourth quarter, the government said Thursday, a bit slower than previously thought and the weakest performance in 5-1/2 years.

Gross domestic product (GDP), the broadest measure of the nation's economy, was revised down from the government's 1.1 per cent estimate a month ago as companies, faced with slower growth in consumer spending, curtailed production.

Jobless claims drop

The number of new jobless claims in the United States dipped significantly last week, the government said Thursday, but still was nearly 100,000 more than a year ago.

The Labor Department said new claims for state unemployment benefits dropped 20,000 to 362,000 for the week ended March 24 from a revised 382,000 the prior week. Labor measured new claims at 267,000 in the March 25, 2000 week.

Malaysia's corporate reforms

Malaysia's corporate reforms would progress further this year to improve competitiveness, the central bank said on Wednesday.

In its 2000 annual report, Bank Negara Malaysia said the exercise would move beyond financial restructuring to increased operational restructuring to enhance the overall competitiveness of the economy.

It said efforts were being made towards divestment and greater focus on core activities to counter rising vulnerability to shocks due to problems such as over-gearing and over-diversification.

Despite the high cost of restructuring, businesses need to understand that this is important to ensure the sustainability of the business entity, it said.

It said the Corporate Debt Restructuring Committee as of January had 12 outstanding cases to be resolved with total debts of $3.18 billion.

Mergers & Acquisitions

UPC—PrimaCom: United Pan-Europe Communications and PrimaCom agreed on Thursday to merge their German cable units, giving UPC 52 per cent of the new venture.

Allianz—Dresdner: German insurer Allianz is in talks to take over partner Dresdner Bank for about $21 billion, according to reports on Thursday.

Sage—Interact: Sage Group, the UK accounting software maker, offered $282 million in cash and debt on Wednesday for Nasdaq-listed Interact Commerce.

SES—GE: Luxembourg's Societe Europeene des Satellites agreed on Wednesday to buy General Electric's satellite unit for $5 billion in stock and cash.

J&J—Alza: Johnson & Johnson Tuesday agreed to buy drug maker Alza Corp. for about $10.5 billion in stock, giving J&J access to new drugs and technology for administering medicines in innovative ways.

Tetra—Sidel: Tetra Laval, the Swedish packaging giant, on Tuesday offered 1.7 billion euros ($1.5 billion) to acquire French packaging-machine maker Sidel.

Nasdaq—Easdaq: Nasdaq, the world's second-largest stock exchange, agreed on Tuesday to buy 58 per cent of Easdaq, the ailing pan-European exchange.

SingTel—Optus: Singapore's largest company Singapore Telecommunications has offered $8.6 billion (Australian $17.2 billion) for Australian communications company Cable & Wireless Optus Ltd.

LSI—C-Cube: Chipmaker LSI Logic Corp. said Monday it will buy digital video and audio company C-Cube Microsystems for $878 million in stock, adding strength to LSI's multimedia entertainment business.

Shell—Barrett: Shell Oil Co., a unit of Royal Dutch/Shell Group, continued to defend Wednesday its $1.8 billion takeover attempt of Barrett Resources Corp. but is now willing to negotiate.

Abbott offers HIV drugs

Abbott Laboratories Inc. on Tuesday said it will offer two anti-HIV drugs and a test for the virus in Africa at no profit to the health-care products maker, following the lead of other drugmakers who have offered free or cut-rate AIDS medicines.


ATI: ATI Technologies, said it lost $26.1 million, or 11 cents per share, during the quarter ended Feb. 28.

Tiscali: Tiscali, Europe's No. 2 ISP, said on Wednesday it made a loss in 2000. The Italian Internet service provider's pretax loss, excluding the acquisition of World Online that was completed in December, widened to 187.9 million ($168 million) from a loss of 9.5 million in 1999.

Walgreen: Drugstore chain Walgreen Co. on Monday said its second-quarter profit rose 24.3 per cent. The Deerfield, said its net income for the quarter, ended Feb. 28, was $297 million, or 29 cents a share.

Bush pushes for large tax cut this year

President Bush on Tuesday took issue with a Democratic push for an immediate tax rebate, saying the "winded but fundamentally strong" U.S. economy needs more than a one-time tax cut.

"Immediate tax relief is good news. But tax relief that gets yanked away next year is not such good news," said Bush in a speech at the Kalamazoo Chamber of Commerce, outlining his 10-year, $1.6 trillion tax cut and views of the economy.

Bush repeatedly cited the decline of the Dow Jones and Nasdaq stock averages as a way of emphasizing the nation's economic slowdown started well before he took office.

Saying the economy needs an immediate stimulus, the president called for a tax cut retroactive to January 1. He did not give specific figures, but it was clear he wants a large tax cut for this year.

Banks toughen lending

U.S. banks kept toughening their lending terms in March as the economy weakened and some top-grade loans began to deteriorate, weakening chances of loan repayment, the Federal Reserve said Monday.

"Overall, the responses indicated that business lending conditions at banks had tightened further since early January, while demand for business loans waned," the supplementary issue of the U.S. central bank's periodic survey of senior loan officers concluded.