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Police beat customers at crisis-hit Afghan bank

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Afghan security forces used batons on unruly customers scrambling to withdraw their savings from a branch of the graft-hit Kabulbank, the country’s biggest private financial institution.

Officers from the National Security Directorate struggled to maintain control of up to 200 people outside one branch in the capital as desperate customers tried to take out money ahead of a three-day Muslim holiday.

The crisis in Afghanistan’s top private bank developed after the company’s top two directors quit amid unproven media allegations of corruption.

The central bank ordered the assets of Kabulbank’s former chairman Sher Khan Farnood and chief executive officer Khalilullah Fruzi to be frozen, together with those of several other shareholders and major borrowers.

Witnesses saw officers of the National Security Directorate beat several people among queues of angry customers.

“It’s Eid, we need money for food, clothes, candy,” said Hameed Iqbal, a customer in air force uniform.

“They said all the bank branches would be open, they lied. I’m extremely angry,” he said.

Corruption is one of the most common complaints from ordinary Afghans and Washington fears widespread graft is boosting the Taliban-led insurgency and complicating efforts to strengthen central government control so US and other foreign troops can begin withdrawing.

Another customer who identified himself as Rahim, blamed the government for the crisis at the bank.

“If they do not listen to us we will break all the windows of Kabulbank, we will loot all the branches and even … the presidential palace,” said Rahim, who said he was a cook in a government office.

Kabulbank’s include 250,000 state employees and it also handles salaries for the Afghan security forces. Witnesses saw an NSD officer beating at least one man wearing a police uniform.

Sayed Hammad, a 38-year-old grocery store owner, said he had heard on television on Tuesday that all Kabulbank branches would be open instead of just the single branch in Kabul. He said he wanted withdraw $3,000 and close his account.

“I used to trust the bank but not anymore,” Hammad said. “You put your money in you don’t know if you’ll get it out.”

At the start of the month, US media reported the central bank had taken control of Kabulbank, forcing Farnood and Fruzi to resign and ordering the chairman to hand over $160m worth of luxury villas bought with bank funds in Dubai.

The Afghan government and the central bank governor have both rejected the allegations, denying that the central bank had stepped in and saying Farnood and Fruzi had stepped aside in line with new financial regulations.

South Africa’s COSATU calls on ANC to tighten FX rules

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South Africa’s biggest union federation COSATU, a partner of the ruling ANC party, has called for a reversal of measures taken to relax foreign exchange controls and taxing short-term capital flows.

The positions laid out in an economic policy paper put pressure on the ruling African National Congress to reconsider its foreign exchange and economic policies.

COSATU said the ANC’s policies in the past ten years had failed to create employment. It called for job creation to be the primary mandate of the South African Reserve Bank.

Sarkozy to press currencies role for G20

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At first sight, it is easy to dismiss such grand designs as a futile drive, in the Gaullist and dirigiste tradition, to curb the power of the dollar and shackle free markets.

But Sarkozy’s agenda may appeal to the emerging economies of China, India, Brazil and Russia, irked by the dollar’s hegemony, while offering sufficient incentive to draw in the US and Britain, despite their belief in floating exchange rates.

It also has a domestic payoff for a president hoping to leverage his international statesmanship to revive his battered popularity, and neutralise a highly popular potential rival, ahead of a tough 2012 re-election campaign.

For Washington, discussing currencies in the wider forum of the G20 rather than the inner sanctum of the Group of Seven industrialised economies – the US, Japan, Britain, France, Germany, Italy and Canada – may offer the advantage of engaging trade powerhouse China in exchange rate cooperation.

The US believes the yuan is undervalued, giving China an undue advantage in exporting to the west.

Beijing has rejected any international discussion of its foreign exchange policy to date. It even blocked an attempt by G20 leaders in June to praise in their communique its decision to allow greater flexibility in the yuan’s exchange rate.

In an August 25 speech airing his ideas, Sarkozy suggested that the proposed discussion of a new global monetary order might start with a seminar of experts in China.

Diplomats expect this to feature prominently when Chinese President Hu Jintao visits Paris.

“What is desirable and indeed necessary today is to put in place instruments to avoid excessive currency volatility, the accumulation of imbalances and the quest for ever bigger foreign exchange reserves by emerging countries which have faced sudden and massive withdrawals of international capital,” Sarkozy said.

Some French officials have talked of a possible agreement on trading ranges for currencies, along the lines of the 1985 G5 Plaza Agreement. But Sarkozy stressed in his speech he was not advocating a return to fixed exchange rates.

Economy Minister Christine Lagarde said France would use its G20 chair to discuss proposals for wider use of International Monetary Fund special drawing rights (SDRs) as a global reserve currency – an idea mooted by China’s central bank chief.

Russia too wants an alternative to the dollar’s role as a global unit of account, while India and Brazil, among others, have sought to conduct more foreign trade in national currency.

French officials believe such a discussion would be of a sufficiently long-term nature to be unthreatening to the United States, while providing political cover for China, which has two-thirds of its reserves in dollars, to inch forward in letting the yuan appreciate.

Beijing is keen to diversify its holdings and reduce its dollar dependence over time without precipitating a sharp fall in the US currency that could destabilise the international financial system and devalue its own assets.

It could also provide political cover for European countries to accept an inevitable reduction in their representation at the IMF to make room for the emerging economies, and possibly pool the eurozone’s seats at the table.

“If the French can declare at the end of their year in the chair that they have laid the foundations of a new international monetary order and advanced the reform of the IMF, it will be a success for Sarkozy,” said an expert advising Paris on its G20 presidency, who spoke on condition of anonymity.

Heavyweight challenger
It would also help Sarkozy wrest ownership of financial reform from IMF Managing Director Dominique Strauss-Kahn, a potential Socialist contender for the French presidency in 2012.

The IMF is working on new lending instruments for economies hit by crises not of their own making, such as a precautionary credit line for good performers, meant to discourage emerging economies from accumulating excessive currency reserves.

For domestic reasons, Sarkozy does not want Strauss-Kahn – a former French finance minister – to be credited as the saviour of the world economy.

There are many possible pitfalls in Sarkozy’s path.

The US may refuse to go along with any discussion of currencies in the G20. European partners such as Germany and Britain may also prove unhelpful.

China, India and Russia may decline to take greater responsibility for unwinding financial imbalances which they feel are not their fault.

Further spasms in the eurozone debt crisis and a weak economic recovery may undermine Europe’s ability to set the agenda. But that won’t stop Sarkozy trying to set a Gallic stamp on the international financial system.

Barroso says EU economic recovery gathering pace

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Economic recovery is gathering pace in the European Union and growth this year will be higher than initially forecast, according to European Commission President Jose Manuel Barroso.

In a policy speech to the European Parliament in the French city of Strasbourg, the head of the EU executive said structural reforms must be accelerated in the next 12 months and the 27 countries in the bloc must show solidarity.

“Europe must show it is more than 27 different national solutions. We either swim together, or sink separately,” he said.

The latest official forecasts put growth in the EU at one percent in 2010 and estimated growth in the 16 countries that use the euro would be 0.9 percent this year.

Revised forecasts are expected to be announced later this month, officials SAY.

Countries in the EU and the eurozone have been struggling through a debt crisis this year. Barroso said he saw a willingness among governments to accept stronger financial and fiscal monitoring.

He said the bloc, which represents more than 500 million people, must now tackle the imbalances between the countries with strong economies and those performing less well.

Zambia raises 2010 GDP forecast to 6.6%

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Zambia has raised its 2010 economic growth forecast to 6.6 percent from a June forecast of 5.8 percent after a higher than expected performance in the first half of the year, Finance Minister Situmbeko Musokotwane has announced.

“We adjusted the growth forecast to 6.6 percent from 5.8 percent because we now know that mining, agriculture and tourism all performed better than we had expected,” Musokotwane said at a media briefing.

Musokotwane said Zambia’s economic growth between 2011 and 2013 should average 6.5 percent per annum partly due to a global recovery over the period.

Zambia in June cut its growth forecast for 2010 to 5.8 percent due to the possibility of sluggish recovery but senior Treasury officials said growth was still likely to come in above the new forecast.

GDP growth in Africa’s largest copper producer was previously forecast at seven percent this year and eight percent in 2011.

The overall budget deficit between 2011 and 2013 was expected to widen to an average 3.5 percent of GDP compared with 2.5 percent in the 2008-2010 period mainly due to spending in infrastructure and the social sector.

To fund that expenditure, Musokotwane said Zambia would borrow $2bn, raising the debt ratio to 14.9 percent of GDP from 9.1 percent, which was still sustainable.

“We will borrow both locally and internationally and some of this money will come from multilateral lending institutions,” secretary to the treasury, Likolo Ndalemei told reporters when pressed for details.

Musokotwane said the government had not changed its end-of-the-year inflation target of eight percent and it expected CPI to remain in single digits between 2011 and 2013.

“These projections are premised on food prices and the exchange rate remaining stable,” Musokotwane said.

The central bank has previously said a strong kwacha will help contain inflation and mitigate the impact of a recent 26 percent rise in power prices.

BOJ not doing enough on deflation

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The Bank of Japan is not doing enough to fight deflation and one possibility is for the central bank to buy more government bonds, a campaign aide to a ruling party powerbroker challenging Prime Minister Naoto Kan said.

But lower house lawmaker Banri Kaieda, an aide to Ichiro Ozawa, also said that the BOJ alone could not rescue Japan from deflation and that the central bank’s remaining policy options were limited.

Ozawa is challenging Kan in a Democratic Party of Japan (DPJ) leadership election on September 14 but the outcome is too close to call. The winner will likely be prime minister by virtue of the party’s majority in the powerful lower house.

“It is not enough,” Kaieda told reporters in an interview on Monday when asked if the BOJ was taking sufficient action against deflation.

“But it’s clear that this issue will not be resolved with just the BOJ’s policies alone,” said Kaieda, who is part of a group of lawmakers advising Ozawa on policies.

Ukraine signs $950m China loan for railway link

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Ukraine has secured a $950m loan from China to build a railway link between Kiev and the capital’s main airport and has hired a Chinese company for the project, the Chinese People’s Daily newspaper said on Friday.

Ukrainian President Viktor Yanukovich, who arrived in China on Thursday for a state visit – the first by a Ukrainian leader – has already signed the loan agreement.

During the visit “an agreement was … signed securing China’s credit support to a 30km railway project and construction of auxiliary facilities for an airport in Ukraine’s capital, Kiev,” the newspaper said.

“The railway project, contracted to a Chinese firm, will cost $950m and construction will begin next year,” it said, adding that the project would take three years to complete.

German president raises pressure on divisive banker

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German President Christian Wulff has increased pressure on the
Bundesbank to dismiss its contentious board member Thilo Sarrazin,
arguing that the central bank needed to limit damage to Germany’s
reputation.

Sarrazin has divided Germany with criticism of the country’s large
Muslim community, and outspoken remarks asserting that Jews have a
particular genetic makeup, sparking calls from politicians that the
central bank should fire him.

Speaking to N24 television, Wulff hinted that this might be the best
course of action, as a newspaper reported the bank’s board had decided
to sack Sarrazin, but that no official decision had yet been made.

“I think the board of the Bundesbank can do quite a lot so that this
debate does not damage Germany – in particular internationally,” said
Wulff, who would have to approve Sarrazin’s dismissal if the board voted
for it.

The Berliner Zeitung daily said the bank’s board was no longer debating
whether to remove Sarrazin, but rather how to do so. The Bundesbank
declined to comment on the report.

The central bank can only remove Sarrazin on the grounds of serious
misconduct. Both the 65-year-old and the bank have repeatedly stated his
comments on race and religion are not linked to his role at the
Bundesbank.

Germany’s Jewish community has been strongly critical of Sarrazin and a
US Holocaust survivors’ group said it would lobby for Sarrazin to be
removed from the Bundesbank.

“Holocaust survivors from Israel, Europe, Australia, and the Americas
will approach the German embassies in some two dozen countries to demand
the immediate removal of Thilo Sarrazin,” said Elan Steinberg, Vice
President of the American Gathering of Holocaust Survivors and their
Descendants.

“Sarrazin’s racist comments have not only offended us as victims of Nazi
Germany’s brutalities, but are blackening the morally upright position
of modern day Germany.”

Japan dilemma as economic dependence on China grows

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Japan’s growing dependence on China for growth grates with concerns over its expanding military reach, deepening a dilemma over how to engage with its giant neighbour even as the two trade places in economic rankings.

But while the interdependence raises the risks for the world’s second- and third-biggest economies if relations sour, it also boosts incentives to keep ties on track.

“It raises the stakes,” said Jeffrey Kingston, director of Asian studies at Temple University’s Tokyo campus.

“But … Japan has a clear interest in developing better political and diplomatic relations precisely because of the greater economic interdependence.”

News that China had surpassed Japan as the world’s second-biggest economy in the second quarter grabbed global headlines in August, underscoring China’s rise and deepening pessimism over whether Japan can even keep third place.

Even more telling is Japan’s deepening dependence on China’s dynamism for growth in a mature economy plagued with an ageing, shrinking population and a shortage of policy solutions.

Japan’s exports to China topped those to the US last year, accounting for nearly 20 percent of all its exports.

That figure will probably rise to 35 percent by 2026, when China will likely oust America from the top global spot, said Chi Hung Kwan at Nomura Institute of Capital Markets Research.

Japan’s direct investment in China has also soared, exceeding 70 percent of its investment in North America last year, with more and more goods being made for local sale, not export.

“For Japanese companies, China is becoming more and more important, not just as the workshop of the world, but as the market of the world,” Kwan said at a luncheon with reporters.

Sino-Japanese relations, long plagued by China’s memories of Tokyo’s wartime aggression and present rivalry over resources and territory, have warmed since a deep chill in 2001-2006, when then-premier Junichiro Koizumi visited the Yasukuni Shrine, seen by Beijing as a symbol of Japanese militarism.

At the end of August, a delegation of Japanese cabinet ministers met their Chinese counterparts in Beijing for high-level economic talks – the third such annual dialogue – and agreed on the need to work together for global growth.

Wary
But even as economic ties deepen, Japan is increasingly wary of China’s intentions as it spends more of its wealth on defence and shows growing willingness to project military power.

A survey by the China Daily in August showed that 52.7 percent of Chinese respondents saw Japan as a military threat, while 70.8 percent of Japanese felt the same about China.

“Japan’s military budget has been stable for 20 years and China’s military budget has grown 20 times in the past 20 years,” said Shinichi Kitaoka, University of Tokyo professor who advised the conservative Liberal Democratic Party (LDP) government that was ousted last year by the Democratic Party of Japan (DPJ).

“The big gap may create some imbalances and is already creating imbalances in the East China Sea and South China Sea.”

While a panel of experts advising the government as it undertakes a major review of defence policies gave a nod to such concerns, the wording was restrained, a reflection of Japan’s dilemma as it balances economic interests with security worries.

“Japan’s security position requires an extremely delicate policy. On the one hand, it is important to make sure that the cost of unfriendly, non-peaceful behaviour is very costly … and there has to be a very robust defence posture together with the United States,” said Chikako Kawakatsu Ueki, a Waseda University professor.

“At the same time, if you are talking about China, everyone knows that China’s well-being as an economic power is important to Japan, to the United States, the region and the globe.”

The dilemma is a delicate one for Japan’s ruling Democratic Party, which swept to power for the first time a year ago, ousting the LDP after more than 50 years of almost non-stop rule.

The party pledged in its campaign last year to forge a more equal relationship with security ally Washington while improving ties with Asian neighbours including China, sparking concerns in some US circles that it was tilting towards Beijing.

“China is becoming more and more important to Japan year in and year out. Everyone accepts that. The debate is how best to handle this – engagement or constraint,” said Phil Deans, a professor of international affairs at Temple in Tokyo.

“The pressure to pursue both strategies is increasing which is making the contradictions more obvious.”

Experts say Japan, distracted by its own economic woes and internecine strife in the ruling party, will likely respond with a mix of reliance on the US military deterrence and beefing up its own forces within the elastic constraints of a pacifist constitution, while pursuing better diplomatic ties with Beijing.

“There are three decisions they can make: contain China, engage China or … just live in a really uncomfortable situation and hope they don’t end with the worst of both worlds,” Deans said. “I think maybe they can live in this very difficult place.”

Russia home to wealthiest expats, Eurozone lags

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Russia, Saudi Arabia and Bahrain are home to the wealthiest expats, with Eurozone countries falling behind when it comes to paying for foreign expertise, according to a survey of expats.

The third annual report commissioned by HSBC Bank International found finances among expats were generally positive with two-thirds, or 66 percent, saying they have more disposable income to save and invest since moving abroad.

But the survey found expats in Russia, Saudi Arabia, Bahrain, the UAE and Singapore enjoyed the greatest wealth overall, having higher salaries, more disposable income and more luxury items like swimming pools, properties and yachts.

Expats in Russia topped the list for the second consecutive years with a third, or 36 percent, reporting earnings of over $250,000 a year – compared to two-thirds, or 62 percent, of expats in Spain earning below $60,000.

HSBC spokeswoman Lisa Wood said the survey, conducted by research company GfK, showed the wealth gap was widening between the east and west, with expats in emerging economies leaving their counterparts in the Eurozone behind.

“The BRIC economies have fared well over the last year and as a result we’ve seen that these expat locations are particularly strong when it comes to expat finances,” Wood said in a statement.

“Eurozone countries were the worst-performing when looking at purely financial criteria and subsequently all featured in the bottom quartile of our league table.”

Wood added it was not surprising that ongoing volatility in the Eurozone region was a major contributor to this and was driving expats to seek jobs in countries with higher salaries.

The Expat Economic survey, part of HSBC’s Expat Explorer Survey of 4,100 expats from 100 countries, ranked 25 countries on scores linked to annual income, monthly disposable income, and a measure of defined luxuries.

When it came to salaries, the survey found that about 13 percent of expats globally earned $250,000 a year or more.

Russia topped this table followed by Singapore and Bermuda with 32 percent and 27 percent of expats respectively earning this amount.

Mainland Europe took the lowest positions on the table.

While only one quarter, or 26 percent, of global expats on average earn less than $60,000, the survey found 62 percent of expats living in Spain earn below that amount, 47 percent of expats in France and the Netherlands, and 45 percent in Germany.

But Wood said this could largely be explained by the high number of expats who choose to retire in mainland Europe.

One in five expats say they are able to pay off debt while working abroad but workers in Britain and Australia are most likely to be accumulating more debt, at 11 percent and nine percent respectively.

Double-dip fears hit stocks, yen near 15 year high

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World stocks fell on Tuesday in markets dominated by concerns the US economy is sliding back into recession, prompting further flows into safe-haven assets.

The yen – favoured for carry trades at times of economic stress – hovered back near 15-year high against the dollar after investors brushed off Japan’s attempt to weaken the currency, the Swiss franc soared against the euro and dollar, and yields on benchmark German government bonds hit record lows.

Mounting US economic concerns are likely to draw investors away from riskier assets and push up the yen, keeping pressure on Japan to intervene directly in currency markets for the first time in more than six years. Crude prices, seen as a proxy for world economic growth, also came under pressure, extending losses so far in August to 6.5 percent and staying on track for their biggest monthly decline since May.

World stocks measured by the MSCI All-Country World Index lost 0.7 percent. The index is down 4.1 percent in August and was headed towards its worst monthly performance in three months.

Tokyo’s Nikkei average shed 3.6 percent, its worst daily drop in three months, after the Bank of Japan’s move the day before to boost cheap loans to commercial banks failed to curb the yen’s strength.

US stock index futures eased 0.3 to 0.4 percent, indicating a weaker start for Wall Street ahead of the minutes of the Federal Reserve’s last meeting on August 10. On Monday, US shares fell 1.4 to 1.6 percent.

In Europe, the FTSEurofirst 300 index dropped one percent and the Thomson Reuters Peripheral Eurozone Countries Index fell 0.7 percent.

“We’ve have had a string of weak numbers, and now even second-tier economic data can have a big impact on the market,” said Joost Van Leenders, investment specialist allocation and strategy at BNP Paribas Investment Partners in Amsterdam.

“We’re still ‘underweight’ equities because of the economic outlook. We’ve been expecting a slowdown in the second half of the year with the boom from inventories and stimulus spending fading, and it has actually been a bit worse than we had anticipated.”

The VDAX-NEW volatility index, Europe’s main barometer of investor anxiety, rose 2.7 percent. The higher the volatility index, the lower investors’ appetite for risk.

Yen near 15 year high
The dollar was down 0.2 percent at 84.42 yen, not far from its 15-year low of 83.58 hit last week. The US currency fell 2.4 percent against the Japanese currency this month after sliding 2.2 percent in July.

“Japan’s ministry of finance is sending signals that is willing to intervene but clearly people remember its struggle with intervention a few years ago,” said Simon Derrick, head of currency research at Bank of New York Mellon.

“If they don’t intervene when the yen is at 84, when will they do it? Once its goes to all time lows? I think their resolve of staying away from intervention will be tested.”

Japanese Finance Minister Yoshihiko Noda repeated on Tuesday that the government would take decisive action on currencies – usually seen as code for intervention – when necessary, but reaction in the market was limited. The yen has gained more than nine percent versus the greenback so far this year.

The euro fell to an all-time low against the Swiss franc, which also hovered close to a seven-month high against the dollar.

Yields on benchmark 10-year German Bunds hit record lows at 2.085 percent, while those on 10-year US Treasuries slipped two basis points to 2.5108 percent, hovering near 18-month low.

In the commodity market, oil lost 1.3 percent to trade below $74 a barrel, while copper dropped 0.7 percent but was still up 1.5 percent this month.

Seadrill sees growth and M&A after Q2 beat

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Norway’s Seadrill Ltd, the world’s number two deepwater oil rig group, is ready to throw its weight around now that the Gulf of Mexico oil spill has made life harder for smaller players.

“We see the current market volatility as a good opportunity to look for investment opportunities,” the group controlled by shipping tycoon John Fredriksen has announced while reporting forecast-beating quarterly results.

Seadrill said the world’s worst offshore oil spill from British oil major BP’s Macondo well in the Gulf of Mexico increased the emphasis on operational experience, making it more challenging for new rig operators.

“The board is of the opinion that this could open up for further consolidation of the ultra-deepwater rig market,” Seadrill said.

The offshore oil drilling sector has long been seen as ripe for takeovers, and conditions created by the oil spill should accelerate deals.

Most drillers smaller than the US “big three” – Transocean Ltd, Diamond Offshore Drilling Inc and Noble Corp – could be targets, investment bankers say.

Ingolf Gillesdal, an analyst at Nordea Markets, said Seadrill is better suited than most to weather the market setback from April’s deepwater blowout in the Gulf.

“They should be better positioned now within the segment than before the spill because of their newer equipment and size,” he said.

“They have an average fleet age of four to five years, versus 18 to 20 years by the competition,” said Gillesdal, referring to competitors such as Transocean and Pride.

Floaters booked
Seadrill said third-quarter results would likely show good growth after a bigger-than-expected rise in second-quarter earnings. Its third-quarter performance will be enhanced by four new rigs entering service and by a high fleet utilisation rate.

“All our deepwater floaters have secured employment throughout 2011, something that insulates us against any near-term volatility in this market segment,” it said.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) in the three months to the end of June rose to $493m from $438m a year earlier, beating the $471m average estimate in a Reuters poll of analysts.

One trader said the quarter was somewhat flattered by the inclusion of one full month of results from acquired company Scorpion Offshore, but earnings were still better than expected.

Independent News revenue rises, advertising improves

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Irish publishing group Independent News & Media has posted its first revenue growth in more than two years as recovering advertising pushed first-half sales up eight percent.

Pretax profit excluding one-off items rose 39 percent.

The Dublin-based group has had to sharpen its focus on titles in Ireland, as well as in South Africa, New Zealand and Australia, after selling its UK newspapers and interests in Indian media this year to help secure its future.

Chief Executive Gavin O’Reilly said Ireland – which emerged from the eurozone’s longest recession in the first quarter but is still in the midst of a crippling banking crisis – now had “two economies”, with the retail half getting on better.

“What people have to realise is that there is more to the Irish economy than builders and bankers,” O’Reilly told reporters.

“In terms of retail and brand activity, we are seeing a much improving trend there. It’s not all doom and gloom and there is some consumer activity.”

The group said it increased market share in Ireland – where it publishes the Irish Independent and Sunday Independent – and O’Reilly added that advertising trends were nearing a bottom and would return to growth in 2011.

“(This) marks a turning point for the group and provides evidence that earnings have stabilised in what has been a very difficult market,” Simon McGrotty, analyst at Davy Stockbrokers, wrote in a note, referring the to Irish division.

Reiterates guidance
INM, which swapped debt for a large equity stake and disposed of other assets last year to pay back an overdue bond, said revenue to June 30 rose to 656.5 million euros ($834.5m), ahead of the 650.5 million expected by three analysts polled by Reuters.

Improving readership and advertising in titles like The New Zealand Herald – the country’s largest newspaper – saw the group’s Australasian division generate more than half of revenues for the first time.

That improvement was flagged to investors last week when the chief executive of APN News & Media, in which INM holds a 32.2 percent stake, said the advertising recovery in the region was “well and truly under way.”

INM, which said June and July’s soccer World Cup failed to deliver any material lift to revenues in South Africa, added that overall revenue performance, profits and advertising trends continued to improve since the end of June.

It reiterated its expectation for operating profit to improve for the full year in line with expectations after an uplift of almost 30 percent in the first half.

Three analysts surveyed by Thomson Reuters I/B/E/S expect operating profit to rise by the same amount to 230 million euros for the full year.

Fragile Romania goverment fights to defend IMF reforms

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Painful cost cuts and tax rises have eroded support for Prime Minister Emil Boc’s centrist coalition. His opponents want tax cuts and could even topple the eight-month-old government.

Whether Boc’s government survives or not, a divided parliament is likely to prevent much-needed reforms and leave Romania struggling to meet its commitments under a 20 billion euro bailout deal led by the IMF.

Coming on top of opposition elsewhere in eastern Europe to IMF-mandated reforms, the situation will keep investors on edge through the coming months.

“A new season of political battles starts. We will see more blood than ever,” independent political analyst Cristian Patrasconiu said. “The main risk is that balance of power may dramatically change.”

The government has pushed through unpopular measures including public wage cuts of 25 percent, axeing thousands of state jobs and hiking value added tax by five percentage points.

Support for Boc’s Democrat-Liberals has plummeted to record lows at about 13 percent. A nationwide survey by pollster INSOMAR in late July showed 51 percent of respondents in the European Union’s second poorest member want a new government.

Elections are only due in late 2012, however, and it seems unlikely the opposition Social Democrats (PSD) – who claim to have gathered one million signatures nationwide against the government – would want to force an early vote or put together another complicated coalition at such difficult times.

“A no-confidence motion satisfies all parties. It will not pass,” said Guy Burrow at consultancy Candole in Bucharest.

“But the opposition shows it tried and the government has another opportunity to emphasise some of the difficult things it is doing,” Burrow said. “No other party wants power quite yet.”

IMF rescue, leu at risk
The economy contracted by more than seven percent last year and should shrink again after the VAT hike, leaving once-booming Romania with one of the slowest recoveries in eastern Europe.

Boc’s first big test is in early September with a final vote on the VAT hike to one of the highest rates in the Europe.

Analysts predict a tight vote, as some of Boc’s allies have rebelled against his policies and could again team up with the opposition, which is only 19 short of a majority.

Discontent in government ranks has reached such a point that some may even defect permanently in the coming weeks, shifting the whole balance of power.

It is another sign of mounting opposition in eastern Europe to IMF-mandated reforms and rescinding the VAT hike would probably send the leu currency and stocks plunging and even prompt review of debt ratings, analysts said.

Hungary’s government said on Tuesday it would resume talks with the IMF and the EU in the autumn to bridge differences over a loan programme.

Talks about the review of an existing 2008 loan agreement collapsed unexpectedly last month, triggering a plunge in Hungarian assets.

A power shift in Romania would fuel concerns about whether the government can rein in its fiscal shortfall, targeted at 6.8 percent of GDP this year, and may even derail the whole rescue deal.

While most analysts believe the government can defend the VAT hike, there is still a significant risk of defeat.

“If they do reject it then we might not get a (1.2 billion euro) disbursement from the European Commission,” said Nicolaie Alexandru-Chidesciuc, chief economist at ING Bank in Bucharest.

“And the IMF deal is off-track,” he said. “Given fiscal consolidation is hit, then the central bank might allow considerable leu weakening to 4.4-4.5 per euro.”

Weaker government
If the government wins the VAT vote, it still faces a challenging few months and may try a small scale reshuffle before the winter in a bid to appease popular discontent.

The PSD, who say they would push for a re-negotiation of the IMF deal including scrapping Romania’s flat profit and income tax, are riding high at nearly 40 percent in opinion polls.

The party would probably prefer to wait out the coming troubles and target a working majority of its own in 2012, as wider coalitions in 20 post-communist years have a history of internal bickering and dysfunction.

“Is the PSD forcing the Democrat-Liberals to govern until their disappearance,?” said Cotidianul newspaper editorialist Petru Berteanu. “The longer they stay in opposition the greater the chances for a good result in the general elections.”

Dubai World prized assets on sale to cut debt

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Dubai World is prepared to sell prized assets including previously ringfenced ports firm DP World in a bid to raise as much as $19.4bn to repay creditors, a document obtained by reporters shows.

The document, presented on July 22 to creditors at Dubai’s lavish Atlantis Hotel, also revealed that the state-owned conglomerate’s debt stood at $39.9bn, higher than the widely expected mid-$20bn range.

Dubai World, battling to win creditor support for a restructuring by October 1 in order to start cleaning up its balance sheet, warned a sale of assets right now would generate a maximum of $10.4bn, according to the document, which was obtained recently.

“DW (Dubai World) lender recoveries (will be) significantly enhanced if DW is given time to rebuild and realise value over a five to eight year horizon,” the document said.

Rami Sidani, head of investment at Schroders Middle East, said the level of debt was “much larger” than anticipated and was surprised key assets were now potentially on the block.

“Now we’re talking about almost $20bn of asset sales. That is negative news. The surprise is that it is talking about the asset sales of Jafza (Jebel Ali Free Zone) and DP World, which have been perceived as strategic assets,” he said.

The midpoint of the range that Dubai World expects to raise from selling assets is $17.6bn, the document showed.

“(That) is pretty ambitious and if DW cannot meet that there is increased likelihood of further support from the Dubai government which could be negative for Dubai sovereign risk,” said Okan Akin, corporate debt strategist at RBS in London.

Among the prized assets also slated for sale are stakes in luxury retailer Barney’s, the Atlantis Hotel and casino operator MGM Resorts International, within the plan to raise up to $7.6bn in five years.

The conglomerate also identified Jebel Ali Free Zone and Dubai Maritime City (DMC) and Dry Docks World among “strategic assets” that may yield up to $11.8bn within eight years.

In a sign of the deep overhaul that Dubai World has committed to, the company will appoint a new managing director and chief financial officer. But Aidan Birkett, the officer in charge of its restructuring will remain in place until December.

The document also showed Dubai developer Nakheel has $10.9bn of bank debt and will receive key assets from parent company Dubai World after separation.

Market reaction was muted, with the cost of insuring five-year Dubai debt against default (CDS) edging four points higher to 460 basis points, Markit data showed.

Battling for a deal
The Dubai government has agreed to take a hit on its claims against the firm, leaving $14.4bn in bank debt outstanding that the company said it will be able to repay.

When Dubai World’s Birkett held the meeting with creditors in July, a source told reporters that the conglomerate was ready to use a special tribunal in order to hear disputes over the payment plan if they balk at the terms.

A deal has already been agreed with core lenders representing 60 percent of the loans, but Dubai World needs two-thirds acceptance to be able to take the deal to the tribunal in the event of a rebellion.

As a further incentive to creditors burnt by the group’s ambitious expansion in boom times, Dubai World is offering bankers a “consent fee” of between $150,000 and $800,000 for agreeing to the proposed plan, the document showed.

The restructuring plans involves repayment over five to eight years, with interest of between one percent to 3.5 percent.

Dubai World’s private equity arm, Istithmar which owns most of the overseas assets, is expected to raise a maximum of $4.5bn over a five year period. A short-term disposal plan will generate as much as $2bn, it said.

The total debt figure of $39.9bn did not include $11bn of Istithmar’s non-recourse asset level debt and $2bn of Infinity debt.

Dubai World has previously said its Istithmar World portfolio and Infinity investment were ringfenced from its debt proposal agreed by a core group of bankers in May.

“It is not easy to rebuild confidence (in Dubai) in a short span of time. We need to see more practical steps, new rules and regulations come to the market,” said Samer al-Jaouni, general manager of Middle East Financial Brokerage Co.

“Foreign investments have dramatically been affected. I believe by doing more practical steps – not only comments or promises – confidence can be really rebuilt.”