Soaring land prices hurt FDI, business

Dhaka, April 26: Soaring land prices and hassles in land acquisition deter inflows of foreign investment and the expansion of local businesses as well, according to two international organisations.

The land issue has made the country's development challenges more critical as Bangladesh faces two other major challenges -- how to upgrade infrastructure and ensure a large and skilled workforce.

"Availability of land for the public and private sector projects is emerging as a major challenge," said Asian Development Bank in a report published this month.

Also, Moody's Investors Services that rated Bangladesh Ba3 for 2011 last week found land acquisition remains problematic and the registry is in need of reforms.

"These impede the quicker realisation of larger inflows of foreign direct investment," said Moody's 2011 sovereign report on Bangladesh.

Bangladesh has received only $697 million of foreign direct investments (FDI) during the first 10 months of 2010 against registrations for $3.05 billion during the year, according to Board of Investment (BoI). In 2009, FDI inflow into Bangladesh was $700 million. Inadequate land and industrial plots and a lack of utilities are the major reasons behind the slump in the FDI inflows.

Local businessmen are also feeling the pinch of the soaring land prices.

A private commercial bank has bought a piece of land (21 katha) in Gulshan at Tk 150 crore last year to set up its headquarters.

"Land has become priceless in Gulshan. Sellers demand around Tk 10 crore a katha," said a businessman, claiming that it was Tk 3 crore a year ago.

The situation is more or less the same in the industrial areas, such as on the Dhaka-Mymensingh or Dhaka-Narsingdi roads.

Iftekhar Uddin Farhad who runs an export-oriented ceramics factory on Dhaka-Mymensingh road under Gazipur district said now a bigha of land is being sold at Tk 1 crore - Tk 1.5 crore, which was just Tk 30 lakh a year ago.

"Acquisition is more critical than the price. One has to deal with local extortionists and politicians in addition to corrupt land officials," said Farhad.

A study led by economist Dr Abul Barkat in 2007 found that growing population, rising per capita income and high rate of income growth have intensified the competition for accumulating the fixed asset (land) in Bangladesh.

The study also said massive migration from rural to urban areas has been putting immense pressure not only on urban facilities, but also poses a threat to proper use of the land. Inflows of remittances have also contributed to a soaring land price in recent years.

Banks' speculative financing also made the land price costlier in the past few years. Moody's Investors Services also found that the central bank at the end of 2010 curbed bank lending for speculative land purchases.

AK Azad, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), urged the government to address the land price issue to avoid negative impacts on industrialisation.

"Higher land prices affect the overall production costs," said Azad.

He said businessmen and remitters buy land speculating manifolds return from the fixed asset with no risk.

"The government should ban the use of black money into land and impose higher tax to contain the price," said Azad.

According to government documents and individual researchers, over 150 million people live in around 14 million hectares of areas in Bangladesh. Per capita land is less than 25 decimal and out of which, only 15 decimal is farm land.

Source: The Daily Star

Projects to get buyer's credit from India

New Delhi, April 26: India said it will provide buyer's credit for projects in Bangladesh in a bid to boost bilateral trade.

Buyer's credit is the credit received by an Importer (buyer) from overseas lenders for payment of his imports. Buyer's credit is generally given on the understanding that the project developers would source equipment or technology from the credit-giving country.

"We will provide buyer's credit for projects in Bangladesh," said Indian Commerce Minister Anand Sharma on his return from Dhaka on Sunday.

Although the minister did not disclose the amount, it is believed that India may extend around $100 million.

Source: The Daily Star

Cabinet okays separate co for coal-based power

Dhaka, April 26: The cabinet on Monday approved a proposal for establishing the Coal Power Generation Company of Bangladesh Limited under the Bangladesh Power Development Board.

The Power Division placed the proposal at a weekly meeting of the cabinet presided over by the prime minister, Sheikh Hasina.

'The government has approved the proposal for establishing a company for coal-based power as the cost of power generation from gas or oil is much high,' the prime minister's press secretary Abul Kalam Azad told reporters after the meeting.

A Power Division official told New Age that the company would be formed aiming at generating 20,000MW of electricity by 2030 through setting up of coal-fired power plants.

The company will have a capital of Tk 8,00 crore and it will implement a series of power plants in the public and private sectors, he said.

The BPDB chairman would be the chief of the company while the 10-member board of directors would run it, he said.

A PDB official told New Age that the company would deal with coal-based power plants that would be installed under public-private partnership and under a joint venture with India's NTPC.

He said that the company would form a 50-50 partnership with NTPC to install a 1,320MW coal-based power plant in Khulna.

'We wanted to form a separate company to deal with NTPC and to give the joint venture a corporate look which is not possible under PDB,' he said.

The government recently signed a memorandum of understanding with India for setting up the coal-based plant under a joint venture.

Source: New Age

Increase in supply pushes down paddy price

Dhaka, April 26: With harvesting picking up and supply of new stock increasing on the market, price of paddy has started falling, market sources said.

Learning from farmers that yield of paddy has been very much satisfactory this year, market observers predict that price will continue to falling in the coming weeks.

At Abadpukur Bazar in northern Naogaon district on Tuesday, per maund or 37.3-kg of new stock od paddy of Jira-Miniket variety sold between Tk 800 and Tk 810.

In Naogaon and other major northern rice producing districts, new stock of paddy of boro varieties started arriving in the market just a week ago with Jira-Miniket price selling Tk 900 per maund.

As harvest had picked up, price of new stock of Jira-Miniket has dropped by Tk 100 per maund, said Belal Paikar, an Abadpukur trader. 'There is report in the market that farmers are having a very good yield in early harvesting. Hence a further fall on paddy price is rational as supply will  increase.'

At Abadpukur, midium grade and new stock of Parija-Paijam variety paddy sold on Tuesday between Tk 650 and Tk 660 with the price remaining almost the same over the week.

At Ashunagj on Tuesday, coarse Hira verity of paddy was traded between Tk 520 and Tk 550 [per maund of 40-kg] while medium grade BR-28 sold between Tk 660 and Tk 680.

'Price trend is mixed here as increased supply has pushed down the price of coarse variety rice by Tk 20-30 per maund in a week,' said Shanjoy Mohajon, a trader.

Shaheen Mia, another Abadpukur trader, observed that fall in the price of coarse paddy will be at lesser rates compared to that for the finer varieties of paddy. 'Framers have cultivated more land for finer varieties as their demand and price have been increasing sharply in recent years.'

Ashabuddin Mia, a trader at Kathpatto in Munshiganj, near Dhaka, said their market stated seeing arrivals of new stock of boro for the last four or five days.  At Kathpatti medium grade BR-28 variety of paddy price was Tk 650 but on Tuesday it declined to Tk 630.

Widespread harvesting of Boro, which accounts for nearly two-thirds of the country's rice output, starts after mid-April and continues till the end of June.

Decline in Boro production last year, because of damage to Haor crops and comparatively low yields in many other major rice-producing districts, resulted in a sharp and continuous rise in rice prices after the last Boro season.

The government claimed that the production target of 1.85 crore tonnes of Boro rice was achieved in 2009-10 fiscal year, but agro-economists and market observers said that production loss was 5 to 10 lakh tonnes. Extensive damage to crops in Haors and lower yields in many areas of the country last year caused a decline in output.

The government targeted cultivation of Boro on 47.20 lakh hectares but its revised estimate shows that the planted area increased to 49 lakh hectares. Boro output is estimated at 1.86 crore tonnes for the current 2010-2011 fiscal year.

Officials at the agriculture ministry said that they had received reports on the good condition of the standing Boro crop across the country and they hoped for a bumper harvest if nothing untoward takes place in terms of weather.

Source: New Age

DCCI urges removal of bureaucratic tangles to attract more FDI

Dhaka, April 26: Bureaucratic complexities faced by the foreign investors while making investment in any sector should be removed urgently for attracting foreign direct investment, DCCI president Asif Ibrahim said on Monday.

He said absence of continuity in public policies, burden of excessive ill-managed regulations and corruptions are the bottlenecks for which investors face loss and these barriers would have to be removed to ensure overall macro economic stability in the country.

Asif Ibrahim came up with this observation at a consultation meeting on 'Private Sector Assessment Study' at the conference room of the Dhaka Chamber of Commerce and Industry.

Keystone Business Support Company Ltd chairman and chief executive officer and North South University professor M Fouzul Kabir Khan presented the keynote paper in it jointly organised by the DCCI and Keystone Business Support Company Ltd.

The DCCI president said all businessmen of the country were not bankrupts or loan defaulters. Companies which borrow from banks work diligently and pay back the banks are not recognised at all.

He also said that they wanted to invest further but were constrained by high rates of interest of project loan by banks.

He called upon ADB to select 60-70 companies in Bangladesh and give those loans at 6 per cent to 7 per cent rate of interest.

He emphasised on energy security, business-friendly environment, institutional capacity improvement, improvement of governance, skilled labour force, increased domestic finance flow, continuity of policy and improved law and order situation to increase the GDP of the country.

Asif Ibrahim stressed on development of infrastructure to grab China plus One Strategy. It is unwise to increase the rate of interest right now as more businesses are coming our way, he mentioned.

Professor Khan said the present public private partnership initiative was not working at the desired level. He called upon to identify the bottlenecks for which PPP could not be more effective.

DCCI senior vice-president TIM Nurul Kabir requested the ADB to come forward for the development of IT and skill development of this sector in Bangladesh.

Source: New Age

Tea board head office demanded in Moulvibazar

Moulvibazar, April 26: Leaders of the Moulvibazar Chamber of Commerce and Industries have demanded that authorities should shift the head office of the Bangladesh Tea Board from Chittagong to Moulvibazar.

'We want the head office of the board to be shifted to Moulvibazar as the district is the main tea producing area of the country,' said MA Ahad, president of the MCCI, at a meet the press held at the MCCI office on Sunday.

He said the Bangladeshiya Cha Sangsad, an organisation of the tea garden owners, had supported the MCCI's another demand for establishing a tea auction shed at Srimongal of the Moulvibazar district.

There are two land custom ports in Moulvibazar district, Ahad said adding that the Monu River of Moulvibazar needed to be dredged urgently for easy transportation of goods.

He also suggested establishing two more land ports at Kurma and Dholaighat of the Moulvibazar district and setting up a wholesale market in the district headquarters.

Source: New Age

Robi deploys Oracle database machine

Dhaka, April 26; Robi, an Axiata Group company, has successfully deployed the Oracle Exadata Database Machine X2-2 to power its custom built data warehouse in support of their business.

Robi replaced HP-based platform and EMC storage servers with Oracle Exadata Database Machine X2-2 to optimise its data query process and perform management analytics more efficiently, said a news release on Monday.

Robi expects that the data warehouse will improve the external services offered to its customers, as well as reap a better return on the IT investment.

Source: New Age

Siemens Bangladesh gets new MD, CEO

Dhaka, April 26: Siemens Bangladesh Ltd has recently appointed Shouvik Bhattacharya as its new managing director and chief executive officer.

He is succeeding Michael Schuermann who has completed his tenure in Siemens Bangladesh and moved on to new responsibilities in Siemens AG, Germany, said a news release.

'His (Bhattacharya) vast knowledge of the electrical and electronics business combined with more than 25 years of extensive experience in South Asian markets will be a great benefit for the company,' said Siemens South Asia Cluster chief executive officer Armin Bruck.

Source: New Age

PBL re-elects chairman, vice-chairman

Dhaka, April 26: Hafiz Ahmed Mazumder has been re-elected as chairman and Habibur Rahman as vice-chairman of the board of directors of Pubali Bank.

The election was held at the 818th board meeting held after the 28th annual general meeting of the bank in Dhaka on Sunday, said a news release.

Hafiz Ahmed Mazumder is a lawmaker and industrialist. Habibur Rahman is a businessman the sponsor director of Green Delta Insurance, the release said.

Source: New Age

Global wellness brand opens office in Dhaka

Dhaka, April 26: VLCC Health Care Ltd, a leading wellness brand in Asia, yesterday launched operation in Bangladesh with a promise to introduce its flagship health care and beauty products and services to serve the largely untapped market.

"We know there is a huge gap between supply and demand in Bangladesh for wellness products and services, and we have the solutions," said Sandeep Ahuja, managing director of VLCC, at a press conference at Dhaka Sheraton Hotel.

Ahuja, who inaugurated the centre in Gulshan earlier in the morning, said VLCC would set up two more outlets in Bangladesh in the next 12 months.

Over the last few years, Bangladesh has turned out as a destination for global wellness industry, thanks to a vast population, rising disposable incomes, increasingly demanding and stressful work-place conditions and sedentary lifestyles.

"So, we are looking at Bangladeshi market aggressively," Ahuja said.

Delhi-based VLCC is a pioneer in the global wellness arena. The brand has a network spread of over 237 locations across 102 cities in eight countries including India, the UAE, Oman, Bahrain, Qatar, Nepal, Sri Lanka and Bangladesh.

The firm employs 7,000 employees including doctors, nutritionists, dietitians, psychologists, counselors, physiotherapists, nurses and therapists, and served over one crore customers since its inception in 1989.

In Dhaka, it has already employed 40 people, all of them are Bangladeshi, at its centre in Gulshan and spent $5 lakh in the last six months, said Rajat Mathur, vice president of VLCC international business.

The spending is part of the $15 million VLCC has set aside to make its footprint in three Asian markets -- Bangladesh, Nepal and Sri Lanka. Of the money, about 40 percent will come to Bangladesh, said Ahuja.

More people will be employed as investment pours into Bangladesh to expand its business, said Mathur, also the head of the Bangladesh centre.

The wellness company operates in three areas -- slimming, skin and hair care; education and training; and manufacturing and personal care products.

The wellness treatments available at VLCC centres include de-stressing, detoxification, cleansing, deep relaxation, anti-aging, weight and inch loss, guidance in the area of nutrition and exercise.

Providing high-end services from ayurveda to a host of international massages, from anti-ageing facials to dermatological solutions, from hair solutions to pedicures or manicures, VLCC offers an array of therapies that address the health and beauty needs of every individual.

Ahuja said the VLCC personal care business offers over 100 herbal and ayurvedic skin-care, hair-care and body-care products. Of those, 60 percent will be available in Bangladesh at its centre as well as other stores in the market.

He said VLCC also plans to set up an institute for beauty and nutrition to train new talent, in view of the rapidly growing wellness industry and the corresponding demand for trained professionals.

Source: The Daily Star

Pubali Bank re-elects top brass

Dhaka, April 26: Pubali Bank re-elected Hafiz Ahmed Mazum-der as chairman at the bank's 818th board meeting in Dhaka on Sunday.

The meeting also re-elected Habibur Rahman as vice chairman, the bank said in a statement yesterday.

Member of the Parliament, Mazum-der established "Hafiz Mazumder Education Trust" for the development of the education sector.

Rahman is the sponsor director of Green Delta Insurance, Delta Hospital and Delta Medical Centre.

Source: The Daily Star

New MD for Jennys International

Dhaka, April 26: MA Quader has recently joined Jennys International as managing director, the company said in a statement yesterday.

Prior to joining the post, Quader has been serving Bata Shoe Company (Bangladesh) Ltd for the last 32 years in the retail and marketing department, the statement added.

Source: The Daily Star

Cement makers fortify foothold

Life becomes more delightful than ever for Sulaiman Babu, a 41-year old construction-material shop owner in Badda. His sales figure has steadily risen ever since an elected government came into power at the beginning of 2009.

"The construction projects started to go on in full swing after the government was sworn in early 2009. This change in power has eliminated the slow pace of the industry's growth that lasted for two years when the caretaker government had been on a crackdown on corruption," he said.

The sale of construction material, such as cement, went down, and small sellers like Babu had nothing to do but wait. Neither the real estate sector nor the government undertook any development projects during the two-year time.

Babu said the situation changed for the better after the government took initiative to develop large infrastructure projects, such as Padma Bridge, the elevated expressway and other road projects.

"From then on, we started getting orders from both the government appointed contractors and also from the realtors."

These days, Babu's clients include the roads and highways contractors for the Kuril flyover, and other renowned realtors, such as Purbachal.

The demand for cement, a binder that sets and hardens independently and can bind other materials together, has grown manifold in the last two years. It grew 21 percent alone in 2010, said industry insiders.

To meet the growing demand, most of the top manufacturers are set to expand their production capacity further.

At present, leading cement brands, including Shah Cement, Crown, Fresh, Scan, Ruby, King, Modina and Unique Cement are expanding their production capacities to grab a bigger share of the growing market.

According to the industry insiders, expansion is taking place in multiple ways -- developing factory capacity by importing new machinery and strengthening backward linkages to boost production.

In the last two years, the cement industry received around Tk 2,000 crore in investment on expansion and transport facilities, said insiders.

To support expansion, a huge investment is needed to set up a cement factory unit with backward and forward linkages.

The backward and forward linkages refer to the transportation of raw materials and shipment of finished products with the help of a company's own transportation chain, in which, oceangoing vessels are included.

Meghna Group that produces Fresh Cement is halfway done in raising its capacity by 4,000 tonnes a day, which would take its daily production to 11,000 tonnes.

Heidelberg, which makes cement under the brand names of Scan and Ruby, is likely to increase its capacity by 2,000 tonnes a day, while Bashundhara, manufacturer of the King brand cement, will enhance capacity by 1,000 tonnes.

Also, MI Cement that makes Crown brand has completed more than 60 percent of its expansion works, including building infrastructure and bringing in new machinery.

Alamgir Kabir, managing director of MI Cement Factory, said his company will increase capacity by 3,000 tonnes a day to reach its optimum level.

"We have completed more than 60 percent of the total expansion works, and we hope to go for production by September. We are optimistic that raising the capacity will help us reduce our cost of production," said Kabir, also a vice president of Bangladesh Cement Manufacturers' Association (BCMA).

He said the company has allocated a total of Tk 110 crore for its expansion.

In addition, MI Cement is building a concrete ready-mix plant near Buriganga river and a plant that will make cement bags as part of its plan to develop backward linkage, Kabir said.

The company has completed 80 percent works on constructing four ships to carry clinker, a basic raw material to make cement, from port to factory. In future, the company will boost exports of the Crown brand cement to Northeastern India.

Local manufacturers started producing cement mainly from the late 1990s. The market was completely import-dependent before then.

At the same time, multinational companies also came in and began operations.

At present, Bangladesh is self-sufficient in cement. There are around 55 companies, of which, a total of 35, including the multinational cement manufacturers, are in commercial production.

These companies are capable of producing 1.85 crore tonnes of cement a year, while the annual demand was 1.5 crore tonnes in 2010, according to BCMA data.

Cement consumption stood at 1.3 crore tonnes in 2009 and one crore tonnes in 2008. Dhaka and Chittagong account for nearly 65 percent of total consumption.

Cement consumption rose three times higher in just a decade-- between 1999 and 2009. The per capita consumption was just 22 kilograms in 1999, which reached over 65 kilograms in 2009, shows BCMA data.

According to the market people, Shah Cement, Crown, Holcim, Heidelberg, Seven Circles, Fresh, Cemex and Lafarge, are the market leaders.

The government's infrastructure projects, such as flyover, airport, bridge and monorail, where cement will be a basic raw material; real estate companies and individuals are the main consumers of cement, the manufacturers said.

Apart from that, the steady growth in sales also inspired regional and multinational conglomerates to invest in the country's cement sector.

Last week, Indian conglomerate Aditya Birla Group launched its cement brand, UltraTech, in Bangladesh.

Dev Banerjee, country head of Bangladesh operations of UltraTech Cement, said Bangladesh's growing construction sector encouraged the company to come in.

"Bangladesh is an emerging market with immense potential. It requires construction of a huge number of infrastructure facilities. For that, the necessity of quality construction materials comes in," he said at the launch.

Aditya Birla Group acquired Dubai-based ETA Star Cement Company in April last year, and, by extension, the local operation of Emirates Cement in Bangladesh.

Although the cost of acquisition was not disclosed, the enterprise value of the deal works out to around Rs 1,700 crore (approximately $382.06 million), according to a report published in Times of India on April 30, 2010.

Source: The Daily Star

New name in cement, with new promises

Bangladesh's growing economy and its booming construction section have prompted Indian giant Aditya Birla Group to launch its cement brand, UltraTech, in Bangladesh.

"The cement business is a great business to be in, and Bangladesh has enormous potential for growth. I believe that UltraTech is uniquely positioned to capitalise on these developments, given its unique brand values and customer orientation," said Vivek Agarwal, chief executive of international business of UltraTech.

Earlier, Aditya Birla Group acquired Dubai-based ETA Star Cement Company in April last year, and, by extension, the local operation of Emirates Cement in Bangladesh.

Even though the UltraTech boss refused to disclose the size of investment in Bangladesh, it was reported in the Times of India that the enterprise value of the deal would be around Rs 1,700 crore (approximately $382.06 million).

In conversation with The Daily Star, Agarwal pledged to introduce the latest in technical know-how and an environmentally sound manufacturing process during its stay in Bangladesh.

"We'll add value to the Bangladeshi cement market through technological innovation. The methods to grind clinker or add gypsum or handle fly ash always differ from company to company."

Agarwal said: "We have already brought our technical know-how, which would help us make a difference."

Its plant in Muktarpur, Munshiganj, has a production capacity of 2,000 tonnes a day. The company introduced equipment that would prevent fly ash, an ingredient to make cement, from polluting the environment.

The company will also manage to meet its own energy requirements. It has set up a 10 megawatt captive power plant inside the factory. The company will produce half a million tonnes of cement a year in Bangladesh.

Agarwal is optimistic about good market response from the already self-sufficient market.

"See, the buying behaviour and product features are almost identical in markets between India and Bangladesh. Since we have a very good reputation in Sri Lanka, Bahrain, UAE and India, we hope that we'll win this market as well," he said confidently.

UltraTech will import clinker from India and UAE, he said.

The company has 11 integrated plants and one white cement plant in India, one clinkerisation plant in UAE, 15 grinding units -- 11 in India, 2 in UAE, one in Bahrain and Bangladesh each -- and five terminals -- four in India and one in Sri Lanka.

In 2009, the group was ranked among the top six great places for leaders in the Asia-Pacific region, in a study conducted by Hewitt Associates, RBL Group and Fortune magazine.

Source: The Daily Star

Asian stocks, commodities fall as Fed meeting looms

Reuters, HONG KONG, April 26: Silver tumbled on Tuesday and Asian shares pulled back from recent three-year highs in a bout of profit-taking before the Federal Reserve meeting this week where investors are seeking clues on when it plans to begin exiting its ultra-easy monetary policy.

The drop in silver, triggered by an options expiry later in the day, spread to the gold and oil markets with U.S. crude futures dropping more than a $1 after Saudi Aramco's chief executive said the kingdom was not comfortable with current oil prices.

"There is some risk reduction because the market wants to watch if Bernanke will say anything about a change of stance," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments.

"Any change of stance is highly unlikely."

Fed Chairman Ben Bernanke will hold the first news conference ever by a Fed chief after the two-day policy committee meeting ends on Wednesday.

The euro also slipped after European Central Bank Governor Jean-Claude Trichet said that a strong dollar is in the interest of the United States, though the prospects of widening interest rate differentials between the Fed and the ECB may check losses for the single currency.

Equity markets across the region were in the red with Japan's Nikkei (.N225) ending down more than 1 percent. Shares outside Japan (.MIAPJ0000PUS), which last week hit their highest level since early 2008, were down about 0.8 percent.

European shares were set to start weaker, tracking falls on Wall Street and in Asia, with key indices set to open 0.3-0.5 percent lower.

Credit markets, too, reflected the overall cautious sentiment with credit spreads widening slightly as the broader market was wary of a heavy pipeline after a recent flood of issuances.

Issuance of dollar-, euro- and yen-denominated bonds from Asia ex-Japan have already exceeded $30 billion year-to-date, clearly ahead of the pace set in 2010, which saw record issuance of more than $83 billion.

AND THE WINNER THIS MONTH IS..

South Korea's KOSPI (.KS11) dipped 0.4 percent after hitting yet another record high earlier, though it is set to outperform regional indices in a big way this month.

The KOSPI's near 5 percent rise in April has been led by automakers and chipmakers with the former benefiting from the production hit suffered by Japanese competitors in the wake of last month's earthquake and tsunami and the latter getting a boost from strong earnings by Intel and Apple.

While the broader market appeared overbought on some technical indicators, automakers offered attractive valuations, with Hyundai Motor shares trading at 10 times its 12-month forward price earnings multiples, compared with Toyota's (7203.T) around 21, according to Starmine data.

EXTENDED PAUSE

In currency markets, the greenback came under a bit of selling pressure versus the yen in early trade but losses were limited on expected dollar demand from Japanese asset management firms as a number of investment trusts, or toushin, are due to be launched on Tuesday.

Trade was volatile as investors were reluctant to make big bets before the April 26-27 Federal Open Market Committee meeting while rate markets reflected that any tightening measure was going to be a long slow grind.

In fed fund futures markets, the contract expiring in December 2011 has fully priced in a target interest rate of 0.25 percent, the top end of the central bank's current rate range of zero to 0.25 percent but the January 2012 contract only implied a slim 6 percent chance of another hike to 0.5 percent.

Such bets on a glacially slow increase in rates have kept traders interested in buying U.S. Treasuries, pushing the 10-year U.S. yield down more than 20 basis points from this month's highs of 3.36 percent, despite a recent warning of a ratings cut by ratings agency Standard & Poor's.

China's Minmetals bows out to Barrick Gold's Equinox bid

Reuters, HONG KONG/SYDNEY, April 26: China's Minmetals Resources bowed out of the battle for copper miner Equinox Minerals on Tuesday, saying Barrick Gold Corp's C$7.3 billion ($7.68 billion) bid was too rich.

Canada's Barrick, the world's largest gold miner, announced its agreed offer for Equinox on Monday, seeking to tap surging demand for copper from China and other developing economies that has pushed prices up more than sevenfold in the past eight years.

Minmetals, a unit of China's largest metals trader, said it could not justify paying so much and would seek other opportunities.

"Competing with Barrick at these prices would, in our view, be value destructive for (our) shareholders," Andrew Michelmore, Minmetals' chief executive, said in a statement.

Investors punished Minmetals' cautious approach, sending its shares plunging 12 percent in Hong Kong.

Barrick's offer is at a rich valuation of more than 14 times Equinox's 2010 earnings before interest, tax, depreciation and amortization of $523 million.

Equinox, a global miner listed in Canada and Australia, owns the Lumwana mine in Africa's rich Zambian copper belt and most of the Jabal Sayid project in Saudi Arabia.

A weaker-than-expected capital raising by Minmetals in Hong Kong last week prompted speculation it might not have the funding in place to formally launch the unsolicited C$6.3 billion offer it announced earlier this month.

Minmetals, which said it had a 4.2 percent stake in Equinox, is majority controlled by state-owned China Minmetals Non-Ferrous Metals Co Ltd, so could potentially have tapped Beijing for funding. Traditionally, however, state-owned Chinese firms do not get drawn into bidding wars.

UNIQUE OPPORTUNITY

Barrick Chief Executive Aaron Regent had earlier highlighted his company's strong balance sheet and access to debt when asked about responding to potential rival bids.

"We put what we think is a fair offer on the table and the Equinox board and management think so as well and we have their endorsement. If there is another bid coming we will have to wait and see," Regent told reporters on a conference call.

Barrick offered to buy Equinox for C$8.15 a share, an 8.7 percent premium over its Thursday closing price. The all-cash bid is 16 percent higher than Minmetals' earlier offer.

Equinox shares jumped 11.6 percent in Toronto on Monday and closed at C$8.37, only about 2.6 percent higher than Barrick's offer, indicating investors were split of a higher offer emerging.

Barrick shares dropped more than 6 percent as investors questioned whether it was overpaying and whether a big move into the industrial metal would make the stock less attractive to those seeking exposure to gold prices.

In Australia, markets were closed for a public holiday.

Equinox had previously called Minmetals' original C$7-a-share offer a low-ball bid. On Monday, it said it believed the Barrick bid was superior in terms of price and its likelihood of completion.

Minmetals, which has a current market value of only about $2.2 billion, raised about $500 million last week, selling fewer shares at a lower price than planned.

"China has too much hot cash and the state policy is to encourage domestic companies to go out buying resources," Zibo Chen, an analyst at Kingsway Financial Services Group said ahead of Minmetals' statement. "Even if they fail this time, the company will continue to seek opportunities overseas," he said.

COPPER/GOLD FOCUS

Barrick would use about half of the $4 billion in cash they have on their balance sheet to fund the deal, Regent said. The balance would be funded with debt, revolving credit facilities and new bonds.

Regent, who has a background in base metals, sees the takeover bid as an opportunity to gain access to the Zambian copper belt at a time when copper prices are expected to keep climbing to fresh records. London copper hit an all-time high above $10,000 a tonne in February and traded near $9,700 on Tuesday.

Barrick will double its position in copper with the acquisition while reducing its exposure to gold to 80 percent from a current 90 percent.

Regent said the company's focus remained on copper and gold and that it was not planning on expanding into other commodities at this stage.

Equinox's Lumwana mine is Africa's third-largest copper operation by production and the Jabal Sayid development is due to start production next year.

Silver trims losses, snaps rally ahead of option expiry

Reuters, SINGAPORE, April 26: Silver prices trimmed a fall on Tuesday that had ended the precious metal's surge to a record high, as option traders sold back metal to cover risks ahead of options expiry later in the day.

Spot silver prices had exploded in Monday's session, soaring to within 17 cents of the 1980 record high as options sellers bought silver when key strike levels at $45 and $50 came under threat of exercise.

"People are watching out for options expiry," said Yingxi Yu, an analyst at Barclays Capital.

"There are decent-sized open interests at the strike levels of $40, $45 and $50. When there are large positions, it tends to suggest that prices may sway to those levels on options expiry."

U.S. silver futures tumbled as much as 5.4 percent to $44.61 an ounce, and gained some lost ground to $45.52 by 0615 GMT. The contract rallied to $49.82 in the previous session, a hair off their record high of $50.35.

Spot silver lost 3 percent to $45.50, ending a 9-session winning streak and headed for its biggest daily loss in more than a month.

"The market will remain very nervous, and we'll see how it goes after option expiry," said a trader in Singapore, who expected prices to move around the current level.

Spot gold fell 0.6 percent to $1,499.60 an ounce, after a seven-day record-setting rally that pushed prices to $1,518.10 on Monday.

U.S. gold also lost 0.6 percent to $1,500.10.

There is high open interest at key strike levels of $1,500 and $1,520 on COMEX gold, which will keep prices stable until at least later in the day, traders also said.

Investors are eyeing the U.S. Federal Reserve's policy setting meeting, which kicks off later on Tuesday, for clues to its policy stance.

Ben Bernanke is set to give on Wednesday the first regularly scheduled news briefing by a Fed chief in the bank's 97-year history.

"The market will be watching out for any signs of what the Fed is going to do at the end of the second round of quantitative easing," said Yu of Barclays.

"If Bernanke remains dovish, as he has been, it will provide indication that monetary policy will not be tightened significantly in the second half, which is pretty favorable for precious metals."

The dollar (.DXY) edged up on Tuesday, but is still seen wobbly, even after the euro slipped on remarks from the European Central Bank Governor Jean-Claude Trichet that a strong dollar is in the interest of the United States.

Platinum group metals fell in tandem with gold and silver. Spot platinum fell off a seven-week high of $1,836.74, down 1.1 percent to $1,799.24.

Spot palladium shed 0.7 percent to $752.50.

States face growing pension gaps

Reuters, WASHINGTON, April 26: U.S. states are short $1.26 trillion in paying for public employee pensions and other retirement benefits, a gap that grew 26 percent in one year and will take many more years to wipe out, according to a report released on Tuesday.

A total of 31 states had pensions that were underfunded in fiscal 2009, the latest year for which data is available, up from 22 states a year earlier, the Pew Center on the States reported.

The financial crisis in 2008 crushed many pension funds' investments, just as historic budget woes forced governments to cut contributions to those funds.

The combination "made a serious problem even worse," said Susan Urahn, the Pew Center's managing director.

In fiscal 2009, which for most states began in July 2008, states were short $660 billion for future pension payments and $604 billion for other retiree benefits, namely healthcare.

Growing unfunded pension liabilities on top of still daunting state budget gaps are a top concern of Wall Street rating agencies and investors in the $2.9 trillion municipal bond market. Most states are legally bound to pay retirees benefits, and they must make up for any investment loss from their already depleted treasuries or by borrowing.

Pensions are deemed "underfunded" when they are unable to pay at least 80 percent of liabilities.

Preliminary data for fiscal 2010 shows that pension funding levels of 10 states deteriorated further, while just three registered increases, Pew found.

"Overall, these results suggest that while states benefited from better returns in fiscal year 2010, the legacy of the financial crisis ... will remain an issue for years to come," Pew said in the report.

Last year, Pew found states were short $1 trillion in fiscal 2008 on promises to retirees, using data that came from before the financial crisis.

States typically assume an 8 percent annual return and their pension plans suffered a median 19.1 percent drop in their assets' market value in fiscal 2009, Pew said. One critic said the lagging data does not reflect the improvement in current conditions.

"Given where we are in time now, talking about 2009 numbers just isn't useful. The world has changed in the last 18 months," said Hank Kim, executive director of the National Conference of Public Employee Retirement Systems. "The market has come roaring back."

On Monday, Kim's group released a survey of 216 public pension funds showing the average return over the last year was 13.5 percent.

Illinois consistently has had the lowest pension funding level among states, one that worsened to 51 percent in fiscal 2009 from 54 percent in fiscal 2008, according to the Pew report. In fiscal 2010 and 2011, the state sold $7.16 billion of taxable bonds to raise money for its annual pension payments.

A year ago, Governor Pat Quinn signed into law a pension reform measure reducing benefits for new state workers, which he said would save more than $200 billion over nearly 35 years. The U.S. Securities and Exchange Commission is looking into "communications" by the state regarding potential savings or reduced contributions to pensions resulting from the law.

Five other states, including cash-strapped Rhode Island, have funding levels of less than 60 percent, according to Pew. Conversely, New York's pension is 101 percent funded, followed by Wisconsin at 100 percent and Washington at 99 percent.

States must increase their contributions when returns are low. From 2000, when the systems were well funded, to 2009 these payment requirements grew 152 percent, putting pressure on states to take dollars away from other spending areas.

Of late, Republicans in the U.S. Congress have pressed states to assume investment return rates closer to 4 percent, which they consider "riskless."

Using assumptions that private pension plans rely on, which are linked to returns on corporate bonds of about 5.22 percent, Pew found the pension shortfall for states could be as much as $1.8 trillion. By relying on a rate based on a 30-year Treasury bond, Pew found the states' shortfall could be $2.4 trillion.

Netflix profit rises, but outlook disappoints

Reuters, NEW YORK, April 26: Netflix Inc (NFLX.O), the top movie rental service, issued an earnings outlook that fell short of expectations and provided fresh ammunition to critics of its sky-high stock price.

Shares of Netflix fell 5 percent after its report, a sign that anything less than perfect performance will not suffice for a company whose stock has nearly tripled over the past year and become a target of short-sellers.

Netflix reported first-quarter earnings and revenue that surpassed expectations -- and it built up its subscriber base to more than 23 million customers -- but it was the company's earnings outlook that caught the attention of investors. [nN25211548]

"Netflix is very much a momentum stock," said Brett Harriss, an analyst with Gabelli & Co. "We didn't get a blockbuster quarter and guidance was a little light."

Specifically, Netflix said it would likely earn between 93 cents and $1.15 a share in the second quarter, compared with analyst expectations of $1.19 a share.

One concern analysts pointed to was Netflix's international business, considered critical to its growth over the next several years. So far, it has entered Canada, where it now has just over 800,000 subscribers after seven months of business.

But expansion in Canada -- and plans to move into other markets -- comes at a cost. The company expects to post a $50 to $70 million operating loss in its international business during the second half of the year, steeper than the $50 million it previously forecast.

Atul Bagga, an analyst with ThinkEquity, said concerns about Netflix's outlook and the money it is investing in its international business were overblown. "In my view, that opportunity is just getting going," he said.

Netflix has raised expectations by producing out-sized subscriber additions quarter after quarter. Netflix ended the first quarter with 23.6 million subscribers, more than Comcast Corp(CMCSA.O), the largest U.S. cable company.

In the first quarter of 2011 it added 3.3 million domestic subscribers, nearly double the number added during the period a year ago, highlighting its success in its transition from a mail-order business to one that increasingly delivers its movies and TV shows over the Web.

To attract more customers, Netflix has built its streaming offerings through a rush of content agreements. Recent ones include a Lionsgate deal for "Mad Men," a Fox deal for "Glee," and a pact with CBS that adds shows such as "Cheers and "Frasier."

Netflix made an aggressive move into securing its own content, purchasing the rights for the original series "House of Cards," starring Kevin Spacey. The company said that it planned two to three more "similar but smaller deals."

The cost of buying content to stream online is perhaps the biggest worry around Netflix; it could quickly erode margins. The company said U.S. operating margins would be about 14 percent in the second quarter -- its stated target number -- but predicted that spending on streaming content would "increase substantially."

Chief Executive Reed Hastings acknowledged that competition to secure content for online distribution is heating up. "There is a substantial level of competition, as you would expect, not only among online players but against cable networks."

He also said that negotiations for content were civilized, despite barbs thrown at Netflix by the high-profile media executives such as Time Warner Inc's (TWX.N) Jeffrey Bewkes [nN01172027].

"There isn't any animosity -- it's only a question of is our check big enough?" Hastings said during a call following earnings.

Netflix posted earnings of $60.2 million, or $1.11 a share -- up from $32.3 million, or 59 cents per share, in the period a year ago. The earnings were 3 cents better than analysts' average forecast of $1.08 a share.

Revenue rose 46 percent to $719 million, which again surpassed analysts expectations of $703.6 million, according to Thomson Reuters I/B/E/S.

Netflix shares fell to $238.20 following the earnings report, after closing at $251.67, down 55 cents, during the regular Nasdaq session.

Canon Q1 profit declines 5 percent, cuts annual outlook

Reuters, TOKYO, April 26: Canon Inc (7751.T) reported a 5 percent fall in quarterly operating profit and cut its annual outlook to below market expectations as it copes with the effects of Japan's earthquake, which has hit suppliers and hobbled production.

Profits at Canon, which competes against Sony Corp (6758.T) and Nikon Corp (7731.T) in cameras and Xerox Corp (XRX.N) and Ricoh Co Ltd (7752.T) in copiers, have been under pressure as it has been unable to resume full production at some plants.

Canon, the world's largest maker of digital cameras, said on Tuesday its operating profit came to 82.5 billion yen ($1.0 billion) in January-March, against 86.84 billion yen in the same quarter a year earlier.

That is above an average estimate of 77.1 billion yen in a poll of three analysts taken after the quake by Thomson Reuters I/B/E/S.

Canon lowered its operating profit forecast for the business year to end-December to 335 billion yen from its earlier estimate of 470 billion. This is below an average estimate of 396.5 billion yen in a poll of six analysts taken after the quake by Thomson Reuters I/B/E/S.

By Monday's close, the company's shares had fallen about 7 percent since the quake versus a nearly 6 percent decline in the benchmark Nikkei average (.N225).

Shares of Canon closed 0.9 percent lower at 3,495 yen before the results announcement, tracking a 1.2 fall in the Nikkei.

Nasdaq and ICE doubt NYSE-D.Boerse cost savings

Reuters, NEW YORK, April 26: Nasdaq OMX Group and IntercontinentalExchange warned NYSE Euronext investors to be "highly skeptical" of the additional cost savings that the NYSE says will result from its friendly merger with Deutsche Bourse.

Nasdaq (NDAQ.O) and ICE (ICE.N) are hoping to thwart the Deutsche Boerse (DB1Gn.DE) deal, having offered $11.2 billion to buy NYSE (NYX.N) after Deutsche Boerse and NYSE agreed to a $9.9 billion merger.

NYSE Euronext Chief Executive Duncan Niederauer raised the estimate of potential cost savings from the Deutsche Boerse deal by about a third, to some 400 million euros ($580 million), a spokesman said on Sunday.

Twice this month, NYSE's board of directors have rejected the bid by Nasdaq and ICE as too risky and lacking value, and backed the German bourse's lower offer on grounds it will produce a better strategic fit.

Nasdaq and ICE said on Monday that the newly found cost savings were not the result of "sharpening a pencil, but an unexplained shift in strategy."

The U.S.-based exchange operators also noted that shareholders have not been offered an increase in price.

Niederauer's new estimate puts the cost and revenue benefits in the NYSE Euronext-Deutsche Boerse deal closer to the $740 million in synergies that Nasdaq and ICE see in their rival bid for NYSE.

The struggle for control of the iconic Big Board and the NYSE's handful of bourses across Europe could redraw ownership of many of the world's key stock and futures markets, as a merger frenzy grips the exchange industry.

Also on Monday, Nasdaq and ICE also came under fire from a prominent U.S. lawmaker worried about job losses that would come with their proposed cost cuts.

The impact of the proposed deal on jobs in the New York City area would be "a major consideration in judging any potential transaction," U.S. Sen. Charles Schumer of New York wrote in a letter to Nasdaq CEO Robert Greifeld and ICE CEO Jeffrey Sprecher.

Schumer said NYSE officials had privately told him that a merger with Nasdaq and ICE would result in a loss of 1,000 to 1,100 U.S. jobs, including roughly 800 in the New York City area.

When Nasdaq and ICE unveiled their unsolicited bid on April 1, Greifeld did not say how severe the job losses would be, though he said he would keep the NYSE trading floor on Wall Street.

Also on Monday, the U.S. Department of Justice, which will need to sign off on the merger and is reviewing it, asked Nasdaq for more information and documentary material. Justice Department spokeswoman Gina Talamona declined to confirm or comment on the government's second request for information from Nasdaq but said "our investigation is ongoing."

The tug-of-war for NYSE Euronext has raised questions about which deal is better for shareholders given the price disparity between the two proposals and the antitrust hurdles that could yet derail each of them.

NYSE shareholders are meeting on Thursday for their annual vote on the company's directors. The shareholder vote on the NYSE-Deutsche Boerse deal is expected on July 7.

NYSE Euronext shares closed regular trading on Monday down 0.7 percent at $38.76 and Nasdaq OMX Group shares ended down 1.1 percent at $27.23.

Nintendo CEO: alliances with other firms may be needed

Reuters, TOKYO, April 26: Nintendo said on Tuesday that alliances with other companies may be necessary, a day after the game maker reported its second straight fall in annual profit and said it would launch a successor to its aging Wii console.

"I now regret that we didn't tie up with someone outside the company to market the Wii. If we had done that, the fate of the Wii might have been different," Chief Executive Satoru Iwata said at a conference for investors and analysts.

"Now I am aware that we should not rely too much on ourselves. You will see what I mean by this when we market the 3DS and the Wii in the future."

UBS sees money pour back in as rebuilds trust

Reuters, April 26: UBS (UBS.N)(UBSN.VX) appeared to put the financial crisis behind it, with money pouring back into its core wealth management arm in the first quarter, although its investment bank struggled to regain momentum.

The Swiss bank, whose client inflows of 11.1 billion Swiss francs ($11.55 billion) far outstripped forecasts after they were flat the previous quarter and following big outflows in the first half of 2010, acknowledged it still had more to do.

"Taking into account the state of the market, our result... was satisfactory. Nevertheless, it falls short of our overall ambitions for the firm," Chief Executive Oswald Gruebel and Chairman Kaspar Villiger said in a letter to shareholders.

Gruebel said on Tuesday the increase in net new money confirmed "the return of client trust and confidence" in the world's second-largest wealth manager. The bank has seen clients withdraw nearly 400 billion francs in recent years after it was bailed out following huge writedowns on toxic assets and was hit by U.S. charges that it helped wealthy Americans dodge tax.

"It looks like a high quality set of numbers," said Matthew Clark of Keefe Bruyette & Woods. "In wealth management it looks like things are back to normal. UBS has caught up with its peer group in terms of gross margin and net inflows."

UBS said it had had strong inflows in the Asia Pacific region and emerging markets as well as from the ultra wealthy, although it continued to see outflows in Europe, where countries have been chasing tax evaders using secret Swiss accounts.

UBS said wealth management's gross margin on invested assets rose by 6 basis points to 98 basis points.

FOCUS ON FICC

UBS reported a pretax profit of 835 million francs at its investment bank, up from 100 million the previous quarter, but down 30 percent year-on-year as revenues from fixed income currencies and commodities (FICC) fell 17 percent.

Gruebel's plans to turn around the investment bank -- which made the massive losses that almost felled UBS -- is under scrutiny after an exodus of top bankers and an admission he underestimated the challenge of reviving fixed income.

UBS said it expected to see some improvement in a number of business lines in the investment bank, despite constraints imposed on some of the FICC businesses by a focus on controlling risk. It also noted the competition for talent and recent base salary increases will put some pressure on the cost base.

At U.S. rival Morgan Stanley (MS.N) investment banking was the biggest reason for a steep earnings decline in the first quarter, with fixed-income trading the main source of that drop.

UBS said the disaster in Japan, unrest in North Africa and the Middle East and the ongoing euro zone debt crisis had dampened usually strong first-quarter client activity.

Some analysts have said Gruebel will have to revise his target for a pretax profit of 15 billion Swiss francs from late 2012, but he said last month he would only review the figures once there was more clarity on new capital rules.

Chief Financial Officer John Cryan told journalists on a conference call UBS was not deviating from those targets today although the bank would monitor the regulatory environment.

Gruebel has said stiff Swiss standards -- which the government sent to parliament last week and could be approved this year -- could force UBS to move units abroad.

"We remain concerned that the international regulatory environment increasingly lacks consistency," Villiger and Gruebel said, adding they would monitor the effect of rules on the corporate structure and take appropriate action when needed.

UBS is not paying a dividend for 2010 or for some time to come as it retains earnings to meet the tough new requirements.

China raises capital requirement for top five banks

Reuters, BEIJING, April 26: China has increased capital requirements for its five biggest banks above the minimum 11.5 percent mark to guard against risks in the banking sector, Bloomberg reported on Tuesday.

Citing three sources with knowledge of the matter, Bloomberg said Industrial & Commercial Bank of China (601398.SS) (1398.HK), the world's biggest bank by stock market value, was told last month to have a capital adequacy ratio of at least 11.8 percent.

Three other rivals of Industrial & Commercial Bank of China were told the same, with Agricultural Bank of China (601288.SS) (1288.HK) as the exception -- it was told to have a ratio of 11.7 percent.

The three other top Chinese banks are China Construction Bank (601939.SS) (0939.HK), Bank of China (601988.SS) (601988.SS)(3988.HK), and Bank of Communications Co Ltd (3328.HK) (601328.SS).

An official in the press office at the China Banking Regulatory Commission, contacted by Reuters on Tuesday, denied that capital adequacy ratios had been raised for the banks.

A document obtained by Reuters in February showed China's banking regulator could raise the capital adequacy ratio for banks to as high as 14 percent.

A 14-percent level would be 250 basis points above the minimum 11.5 percent mark, and would be implemented as an additional counter-cyclical requirement if the regulator thinks credit growth is abnormally strong.