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TODAY'S BRIEFS
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Investment
China may buy
Portuguese bailout bond
A senior fund official said
that Asian investors,
including the Chinese
government, will be a "strong
proportion" of investors in
Portuguese bail-out bonds when
they are auctioned off in
June, the Financial
Times reported.
The statement came from Klaus
Regling, chief executive of
the European Financial
Stability Facility, who added
that China was "clearly
interested" in investing, if
only in the interests of
diversifying its portfolio.
"[Asia] is a region that has
money to invest in the rest of
the world," he said. "...They
look at us and come to the
conclusion that it's a good
way to diversify." China is a
current holder of Portuguese
and Greek sovereign debt, and
made undisclosed investment in
an Irish bailout bond auction
in January.
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Tech,
Media & Telecom
Yahoo and
Alibaba talks advance
Yahoo! (YHOO.NYSE) senior
officials say they have made
"significant" progress in
talks to ensure that the firm
is compensated for a spinoff
secretly made by Alibaba, a
company in which it is part
owner, Bloomberg
reported. Yahoo has been in
negotiations after it emerged
that Alibaba spun off Alipay,
the firm's payment business,
to a company largely owned by
Alibaba Group CEO Jack Ma last
summer without the consent of
Yahoo, which owns about 43% of
the group. Alibaba cited
Chinese law that limits
foreign ownership of payment
firms like Alipay. Yahoo CEO
Carol Bartz said that
"Alibaba's management has been
very committed and
cooperative" during the
negotiations. The Alipay
division of the conglomerate
is reckoned to be worth some
US$5 billion.
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Banking
& Finance
S&P issues
warning on Chinese banks
Standard & Poor's (part
of McGraw Hill, MHP.NYSE) said
that a tighter monetary policy
would squeeze profits at
China's banks, the Wall
Street Journal
reported. "Inflation and a
possible economic slowdown
stemming from tightening
measures could lead to a spike
in credit losses over the next
two to three years," the
report said. "Chinese banks'
profitability could slip in
the remainder of 2011 and drop
further in the next two
years." The report added that
the country's largest banks
would likely fare better than
smaller banks, due to higher
capital buffers. The warning
comes amid a flurry of recent
downward revisions on China's
broader economy by the likes
of Goldman
Sachs (GS.NYSE) and the
Organization for Economic
Cooperation and Development
(OECD).
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Markets
Longtop faces
securities fraud lawsuit
Embattled Chinese firm
Longtop Financial Technologies
(LFT.NYSE) has been sued by an
investor claiming that the
firm overstated profits and
deliberately covered up
weaknesses, Bloomberg
reported. The suit, filed by
Joe Mikus, seeks compensation
for shareholders who suffered
losses when reports emerged
that the firm had doctored its
financial statements, sending
its share price tumbling 33%
on April 26. Deloitte
resigned as the firm's
auditor this week, and the US
Securities and Exchange
Commission (SEC) launched a
probe. Longtop went public in
2007, with an
IPO underwritten by
Goldman Sachs (GS.NYSE) and
Deutsche Bank (DB.NYSE,
DBK.FWB). The case comes
against a background of
increasing scrutiny of
US-listed Chinese firms,
including an official SEC
investigation of reverse
takeovers made by mainland
companies.
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Banking
& Finance
Chinese banks
may use derivatives to hedge
risk
The China Banking Regulatory
Commission (CBRC), the
nation's banking regulator,
has proposed allowing banks to
use credit derivatives to
hedge risk, the Wall
Street Journal
reported. If implemented, the
new rules would allow China's
banks to adopt hedging
practices that are standard
across the US and Europe. The
unnamed source said that the
CBRC proposal could allow
banks to offset their credit
derivative positions against
assets. In theory, the new
products should allow the
banks to reduce their overall
risk profiles. Yet many within
the CBRC remain cautious, and
banks will likely be required
to obtain approval for each
deal. Last November Chinese
banks launched a version of
credit-default swaps, another
risk mitigation product, but
liquidity in the market has
since dried up.
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Law
& Regulation | Manufacturing
China
pressures Hon Hai to improve
safety
The Chinese State Council's
Taiwan Affairs office said
that Hon Hai Precision
(HHPD.LSX; also traded as
Foxconn, 2038.HK, 2317.TWSE)
needs to improve its safety
record after an explosion at
one of its Chengdu factories,
the Wall
Street Journal
reported. The statement came
in a briefing by Fan Liqing,
the organization's
spokesperson, who said that
the Chinese government views
the explosion as a
"product-safety accident," and
that the Taiwanese firm should
"draw lessons from the
accident" to improve its
safety record. While the
remarks were relatively mild,
it is a rare government rebuke
of one of the largest
manufacturing firms operating
in China. Hon Hai has come
under fire from labor groups,
alleging that the firm had
been warned before the
explosion that better
ventilation systems were
needed at its Chengdu
facilities. The explosion is
being blamed on the
accumulation of combustible
dust in the plant.
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