Case study on Najibnomics

Eddy said: Freakonomics? Hell no, it's something else.



KUALA LUMPUR - THE Harvard Business School in Boston will undertake a case study on Prime Minister Datuk Seri Najib Tun Razak?s courageous and bold initiatives to tackle the financial crisis.

The case study, to be used as a subject in the core curriculum of the macro-economic module, will be a capstone on how crisis is transmitted internationally.

It will also discuss how a country that has sound fundamentals and good regulations could withstand an international crisis.

The country is known for consolidating the banking, insurance and financial institutions following the 1998 currency crisis, said the Harvard Business School Alumni Club of Malaysia in a statement yesterday.

Besides highlighting Najib?s bold economic reforms, the Harvard study would also focus on the various economic liberalisation moves, measures taken to prepare the country for the Asean Free Trade Agreement and World Trade Organisation negotiations, said alumni president Tan Sri G. Gnanalingam.

'Harvard will also bring to attention how the country positions itself on free trade agreements with other countries and how its economic zones are poised for further foreign direct investment attractions.

'We in the alumni are proud to be associated with such a work as the study will become part of the syllabus programme and will be taught to thousands of international students.

'Moreover, students at Harvard will hear about what the Government and Bank Negara Malaysia have done since the 1998 crisis to regulate and stabilise the economy,' said Mr Gnanalingam.

The previous case study on Malaysia published in April 2002, 'Malaysia ? Capital and Control' written by Rawi Abdelai and Laura Alfaro, has been one of Harvard?s most successful case studies.

It analysed the political economy of capital controls in Malaysia during the 1997/98 Asian financial crisis.

It has been taught in every class for the last seven years not only to Harvard Business School students taking a masters degree in business administration but also to senior managers who attended executive programmes. -- THE STAR/ANN

Xerox to Acquire ACS in $6.4 Billion Deal

Eddy said: Hmmm.. what do you think, Sir?

By KEVIN KINGSBURY

Xerox Inc. agreed to buy business-services provider Affliiated Computer Services Inc. in a deal initially valued at $6.4 billion, as the copier company follows other technology giants in increasing its services revenue.

Xerox, based in Norwalk, Conn., has suffered from declining sales of copiers and printers, and the accompanying diminishing uses of ink, toner and paper. The deal for Dallas-based ACS is expected to triple Xerox's services revenue to an estimated $10 billion next year from 2008's $3.5 billion.

The move also represents the first bold move by Xerox Chief Executive Ursula Burns, who took over on July 1. Ms. Burns called the deal "a game-changer" for her company.

Xerox's agreement comes a week after Dell Inc. agreed to buy information-technology service provider Perot Systems Corp. for $3.9 billion. The sector's recent merger activity -- which includes Hewlett-Packard Co.'s purchase last year of Electronic Data Services -- leaves Accenture PLC, Computer Sciences Corp. and Unisys Corp. as some of the larger services companies still independent.

Based on the closing prices Friday, Xerox's deal values ACS shares at $63.11 each, a 34% premium to Friday's closing price and 55 cents below the stock's record high set in February 2006. Holders would get $18.60 and 4.935 shares of Xerox for each ACS share. Xerox also will assume $2 billion of ACS debt and issue $300 million of convertible preferred stock.


ACS's purchase price is similar to the $6.2 billion offer made two years ago by Cerberus Capital Management. Some investors objected early to the proposal, reasoning that the board could get a more lucrative offer. But such a bid never materialized, and Cerberus pulled its offer, citing turmoil in credit markets.

ACS eventually requested the resignations of five independent directors.

The combined Xerox-ACS company would have $22 billion of annual revenue, $17 billion of which would come in on a recurring basis. As much as $400 million in synergies are projected to be realized in the first three years after the deal's closing, slated for the first quarter.

ACS President and CEO Lynn Blodgett said, "We also know that for ACS to expand globally and differentiate our offerings through technology, we need a partner with tremendous brand strength and leading innovation. Xerox offers that and more to bring our business to the next level while strengthening theirs."

ACS has grown over its more than 20 years into a 74,000-person company with a broad product pipeline that includes consulting. That breadth has insulated ACS from a broad downturn in information-technology spending, allowing the company to snap up smaller companies and hire new employees. It serves the commercial and government sectors through long-term contracts.

About a quarter of ACS's revenue comes from the health-care sector, which includes commercial and government contracts. At an investor day earlier this month, ACS was confident that it could increase its Medicaid contracts as well as benefit from a push for more electronic health records, according to a J.P. Morgan research note.

Xerox makes printers for offices and large-scale production, but garners most of its sales from its services businesses, which include maintenance contracts, printing supplies and lease revenues. The recession has exacerbated weak demand for printers, and results have been muted by a strong dollar as much of the 54,000-employee company's revenue comes from overseas.

Nonetheless, Xerox is perceived to be in solid shape – and certainly much stronger than the near-bankrupt condition that Anne Mulcahy assumed in July 2001 when she became CEO.

The obligations of rating agencies

Eddy: The thoughtless following of rating agencies is just the same with a bank blindly following their internal risk models. Why you never expect to see this coming? Perhaps the followers believe that rating agencies are another group of entity with the "Too Big to Fail" nature? :D

---

By Mustapha Kamil.

Rating agencies just can't issue an opinion and then skate scot-free, says the chief investment officer of CalPERS

WHAT was said by the chief investment officer of The California Public Employees' Retirement System (CalPERS) last Wednesday was interesting and somewhat made sense.

Speaking to Bloomberg and of the suit CalPERS is undertaking against rating agencies, Joseph Dear said: "They (rating agencies) just can't issue an opinion and then skate scot-free, even if they're totally wrong, which they were with respect to these securities".

CalPERS was taking action against three bond rating agencies for the US$1 billion (RM3.58 billion) loss the pension fund suffered as a result of what it calls "wildly inaccurate" risk assessments by the rating agencies. Besides CalPERS, other investors who suffered massive losses in the subprime meltdown crisis has also commenced legal actions against rating agencies.

Whatever the outcome of these litigations will be interesting as any one of them may form a precedent for future cases.

So far, there has been no known successful action taken against rating agencies.

But rating agencies are not the only ones that issue some form of advice on investments. Stockbroking firms do too when their research arms make calls on stocks.

Investment banks do too when they issue advice on corporate moves to minority shareholders and sometimes, there is a grey area where even the financial press may find itself in.

In the past, rating agencies in the US have successfully argued that they were protected by the first amendment in the American constitution, just as the press are when newspapers publish indices, as they were merely issuing opinions on securities.

But such argument is being challenged by lawyers who essentially said there is a limit to the protection the first amendment accord to the likes of rating agencies.

The American courts are clear on this, in that when a rating agency rates only securities it is hired to rate or when the agency itself participated in the structuring of the security (such as in the Collateralised Debt Obligation debacle) and if such security was privately placed instead of offered to the general public, then the protection accorded by the First Amendment would be lost.

Stockbroking firms too are expected to follow development in these suits against rating agencies closely as the outcome could have a bearing on them too. And so too would the financial press in their role in disseminating information that may assist investors make their investment decisions.

Perhaps, the absence of malice would be a strong defence on the part of rating agencies and stockbroking firms as do fair comment on the part of journalists.

But the litigations against the rating agencies have just begun and even if they succeeded in mounting a strong defence, it remains to be seen whether they can escape other charges irate investors like CalPERS may pile on them.

There are always other possible suits, including perhaps, for negligence.

Reports: Freddie Mac official found dead

Eddy said: Holy Cow! One downed, how many else to drop?

Broadcast reports say Freddie Mac official found dead

WASHINGTON (AP) -- David Kellermann, the acting chief financial officer of Freddie Mac, was found dead at his home Wednesday morning in what broadcast reports said was an apparent suicide.

WUSA-TV and WTOP Radio reported that David Kellermann was found dead in his Northern Virginia home. The 41-year-old Kellermann has been Freddie Mac's chief financial officer since September.

Sabrina Ruck, a Fairfax County police spokesman, confirmed to The Associated Press that Kellermann was dead, but she could not confirm that he committed suicide.

Kellermann's death is the latest blow to Freddie Mac, a government controlled company that owns or guarantees about 13 million home loans. CEO David Moffett resigned last month.

McLean, Va.-based Freddie Mac and sibling company Fannie Mae, which together own or back more than half of the home mortgages in the country, have been hobbled by skyrocketing loan defaults and have received about $60 billion in combined federal aid.

Kellermann was named acting chief financial officer in September 2008, after the resignation of Anthony "Buddy" Piszel, who stepped down after the September 2008 government takeover. The chief financial officer is responsible for the company's financial controls, financial reporting and oversight of the company's budget and financial planning.

Before taking that job, Kellerman served as senior vice president, corporate controller and principal accounting officer. He was with Freddie Mac for more than 16 years.

'Worst of UK recession is over,' says CBI

By Catherine Boyle

The CBI said today that the worst of the UK recession was over but warned that there would be no recovery until this time next year.

The business group said that the recession worsened more quickly than expected in the first three months of 2009.

It expects the speed at which the economy is contracting to slow in the second half of this year.

However, the recovery is predicted to be “slow and fragile”, with growth in GDP beginning again in spring 2010.

The Ernst & Young ITEM club also predicted a recovery in spring 2010 but said that there would be a tough road ahead as unemployment rises above three million.

The CBI expects the number of jobless people to peak at 3.25 million in 2010.

Peter Spencer, ITEM’s chief economic adviser, said: “Although one or two positive signs have started to appear, we face another12 to 18 months of serious grief.”

The forecasts emerged two days before the Budget, which is expected to include moves to slash public spending by £15 billion.

Alistair Darling, the Chancellor, is predicted to say that UK output will shrink by at least 3 per cent this year.

The CBI has revised its GDP growth predictions for 2009 from -3.3 per cent to -3.9 per cent to reflect the worse than expected contraction of -1.8 per cent for the first quarter of 2009.

It expects that aggressive monetary policy, a weaker pound, low inflation and fiscal support packages will combine to help the rate of UK GDP decline slow through 2009 and make a fragile improvement to reach quarter-on-quarter growth of 0.2 per cent in April to June 2010.

There is also some comfort in its prediction that the economy will have shrunk by a total of 5.1 per cent by the end of this recession, less than the cumulative 5.9 per cent seen in the early 1980s recession.

Yet the average UK consumer is expected to continue to cut back on spending, with household consumption forecast to drop by 3.4 per cent this year and 0.4 per cent in 2010 as low inflation and job worries keep average earnings growth weak throughout 2009.

The ITEM Club says that consumption will fall by almost 4 per cent as people become more concerned about savings.

The CBI expects businesses to cut down on investment in the face of the recession, with business investment predicted to shrink by 9.3 per cent in 2009 and a further 3.4 per cent in 2010.

Richard Lambert, the Director-General of the CBI, said: “The UK economy remains deeply troubled, and the first quarter of this year has been tougher than expected. Firms have been running down their stocks of completed goods, and that is having a real impact on output, jobs and investment. Anxious consumers are spending less and building a savings buffer.

“Given falling tax revenues, the shrinking economy and alarming levels of government debt, we urge the Chancellor to avoid any further major fiscal boosts in the Budget. Budget measures should be targeted on jobs and investment, with a focus on efficiency savings and public service reform.”

Vince Cable, the Liberal Democrat Treasury spokesman, said: “It is futile to get involved in a forecasting competition.

“All we can sensibly discuss is what is actually happening. That is unemployment growing rapidly, more and more families struggling to pay their mortgages, the growth of negative equity and an unrelenting budget deficit.

“We are undoubtedly in the middle of a major economic crisis, compounded by the reluctance of banks to lend.

“No amount of spinning by Government can avoid these simple, brutal economic facts which the Budget has to address.”



->

Partying Like It’s 2008

Germany is one of the worst-hit economies in the developed world. So why is everybody so calm?

By Stefan Theil

The economic crisis has taken its toll in Europe. Governments in the Czech Republic, Hungary and Latvia have collapsed. Violent street protests have erupted in France and Britain. Yet Germany remains unfazed. While its economy is forecast to contract by 5.3 percent this year—compared with 4 percent in the U.S., 3.7 in Britain and 3.3 in France—Germans are remarkably angst-free about their prospects.

When spring temperatures finally arrived in late March, Berlin's sidewalk restaurants were packed. Its roads were choked with shiny convertibles tanked up on newly cheap gasoline. Consumer spending has held up; March auto sales were up 40 percent over last year, thanks to the €2,500 government trade-in incentive that came with Germany's fiscal-stimulus plan. Only 13 percent of Germans tell pollsters their personal finances might be affected by the crisis. A long-planned protest in Berlin in late March managed to attract only a few thousand antiglobalization activists and left-wing fringe types. "Why Is It Still So Quiet?" the Frankfurter Allgemeine newspaper asked in a recent headline, intrigued by the idea that the country's citizens might be sitting out the grimmest recession in 60 years.

The main reason that most Germans have yet to feel affected by the crisis is, to put it simply, that they haven't been affected. Unemployment, at 8.6 percent in March, only began to creep up in December when it was at 7.4 percent, and is still near lows last seen in the early 1980s. German banks were among the biggest speculators in toxic U.S. assets, but that has had few repercussions for ordinary Germans. They saw neither a bubble in real-estate prices (in fact, they're a nation of renters) nor a boom in credit-fueled consumer spending, the implosion of which is now hurting the United States, Britain, Ireland and Spain. Though German stocks are down 41 percent from their 52-week highs (versus 39 percent for the Dow Jones), it affects few private households, as few Germans own stocks directly. For their retirement they depend on state pensions and life-insurance policies, whose returns (and risks) don't show up on monthly statements.

What's more, most Germans seem to be enjoying a sweet spot they haven't seen in decades. Even with the recent jump, joblessness is still far below its 2005 peak of 12.6 percent. After years of cost-cutting and wage restraint, unions finally negotiated some raises; the latest round of pay hikes was the highest in 13 years. Plummeting energy prices and a stimulus tax cut have brightened the mood as well.

The good times may last a little while yet. Even as the recession begins to bite—mainly via a sudden collapse in Germany's exports, which account for some 40 percent of GDP—its impact will be muffled. Germans trust their welfare state to cushion the blows in a way unimaginable in the United States. Most workers are eligible for benefits, and few of them have to worry about losing their health insurance.

Jobs are slow to disappear, in part due to worker protections. Layoffs in Germany's hard-hit export industry—orders in such key sectors as cars or machinery are down by about 50 percent—have been kept artificially low, thanks to a newly expanded government subsidy that is paying 50,000 companies to keep more than 1 million workers on the payroll even though they no longer have work to do.

Moreover, with a national election coming up in September, Chancellor Angela Mer-kel's coalition government is desperate to tide over the job market, as are big German companies, which fear that massive layoffs might lead to a big win for a left-wing coalition. "Every German company will try not to lay off workers before the election," says Daimler public-affairs executive Martin Jäger.

Also helping Germans keep their cool: the attitude that whatever happens, they've probably been there before. Germans have endured worse than the 11.6 percent unemployment predicted for 2010 by the OECD, and have been through long phases of economic stagnation as recently as the 1990s and early 2000s. Paradoxically, many Germans may now sleep even easier, especially among the nearly 50 percent who receive government benefits, pensions or civil-service salaries. With the reversal of the political winds, welfare-state reform no longer seems on anyone's agenda. On the contrary, some benefits were expanded as part of the country's stimulus program.

The rosy mood will be tested in the coming months as insolvencies and layoffs start to hit harder, and could turn truly sour should the German exports fail to bounce back next year as expected. But until then, Europe's biggest economy won't let a little downturn spoil the day.

Fed to banks: Keep mum on stress test results

Eddy said: I'm not happy, with this news and previous one dealing with the mark to market rules. It seems like the US government is going backward to regularize the information flows. Hopefully this is just temporary measure.


Fearing weak banks will be singled out, Fed tells all not to discuss stress test results

Daniel Wagner, AP Business Writer

WASHINGTON (AP) -- Federal regulators have told the nation's largest banks to keep quiet about their performance on government stress tests. They fear investors could punish companies with nothing to brag about.

In letters to the 19 banks undergoing tests of their financial strength, regulators told the companies not to disclose their performance during upcoming earnings announcements, according to industry and government officials who requested anonymity because they are not authorized to discuss the process.

The order was the latest in a series of government moves designed to keep good news about strong banks from dooming others to a downward spiral of falling share prices and financial weakness. If banks receiving the highest marks trumpet their results, the fear is investors might push down share prices of those companies that make no such announcements.

Government officials want to announce the results all at once, at the end of the month.

The stress tests are a centerpiece of the Obama administration's ongoing effort to stabilize the banking industry. They subject the banks' books to a series of negative scenarios, including double-digit unemployment and further drops in home values.

The test results will help regulators determine which banks are strong enough with current subsidies, which need more money from the government or private investors, and those not worth saving.

The letters follow public statements from bank executives about the tests, including Wells Fargo & Co. Chief Executive Richard Kovacevich's calling the process "asinine." Bank of America Corp. CEO Kenneth Lewis and Citigroup Inc. CEO Vikram Pandit both have alluded to strong performance on separate, internal stress tests in recent memos seeking to build employee confidence.

Lewis also told reporters last month he expects Bank of America to pass the government's tests.

Wells Fargo has received a $25 billion government bailout; Bank of America and Citigroup each received $45 billion.

Spokesmen for the Federal Reserve, Bank of America and Citigroup would not comment on the issue. Wells Fargo spokeswoman Julia Tunis Bernard said the company doesn't comment on discussions with regulators.

The letter echoes earlier government moves to use strong banks as cover for those that need more help. For example, then-Treasury Secretary Henry Paulson forced the nine largest banks to take capital injections all at once last fall so the neediest banks wouldn't be stigmatized.

The Securities and Exchange Commission on Wednesday opened a public debate on how to prevent downward pressure on stocks from investors betting against their performance -- a practice called "short selling." Critics of the practice, including many in the financial industry, blame short sellers for causing much of the panic that engulfed financial markets last fall.

Industry groups also have groused about regulators forcing healthy banks to take bailouts. Some smaller banks already have returned the government's money -- plus interest -- because they were unhappy with new conditions Congress had imposed. Large banks, including JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc., have said they want to return the bailout money as soon as possible.

Beleaguered RBS cuts 9,000 jobs

LONDON, England (CNN) -- Royal Bank of Scotland has announced plans to cut up to 9,000 jobs in the next two years -- of which 4,500 will be in the UK.

Fred Goodwin is apparently considering a voluntary reduction to his annual $933,000 pension.

The bank, of which the UK government bought a 70 percent stake after it posted a record loss for 2008 of £24.1 billion ($34.6 billion), is cutting the staff under plans to save £2.5 billion ($3.7 billion) over the next three years.

RBS added that the actual number of jobs lost was likely to be "significantly lower" due to natural turnover and voluntary redundancies.

RBS chief executive Stephen Hester said the job losses were needed to put the bank back on its feet "as soon as practicable."

"Unfortunately, that means taking difficult decisions about jobs as well as taking many other cost reduction actions.

"We want to be as open and transparent as possible and are announcing these plans at the earliest possible opportunity so that our employees can prepare for the future," he said.

The bank has already announced plans to cut 2,700 jobs this year and warned at its annual meeting last week that this was "not the end of the story."

Last week RBS chairman Philip Hampton made a strong apology for the bank's mistakes. In not so veiled comments he also laid the blame at the feet of Fred Goodwin, who retired after the government's multi-billion pound bailout last year. Watch consternation at Goodwin's £16 million pension fund »

The size of Goodwin's pension -- estimated at £650,000 ($933,000) a year for life -- has provoked outrage but Hampton indicated that RBS's former boss was now considering taking a voluntary reduction.

In a statement released ahead of the group's AGM Friday, Hampton said the "past was done" and could not be changed.

"Only a tiny minority of staff in RBS were in any way responsible for the major credit market losses we suffered in 2008. It is remarkable that there were only a few hundred people responsible in the relevant segments of our businesses chiefly in the financial centers of London, Amsterdam and New York, most of whom have now left the group.


"I don't think there can be any doubt that the key decision that led RBS to its difficulties was the acquisition of ABN AMRO (Goodwin led the nearly $90 billion purchase). That is the painful reality that we can now do nothing to change."

Hampton said the bank had been embarrassed by a series of stories but it was now time to move on.

Dell offers VSS to 5,000 M’sian staff

Written by Regina William

GEORGE TOWN: Dell Malaysia is offering a voluntary separation scheme (VSS) across the board to all 5,000-odd employees in Malaysia in line with efforts to reduce its global workforce by 10% or 8,800 jobs.

Late last month, Dell Inc announced a 48% decline in net income to US$351 million (RM1.3 billion) for the fourth quarter of its financial year 2009 (4QFY09) from US$679 million a year earlier.

Sources told The Edge Financial Daily that employees had been informed of the decision and had until the end of the month to make their decisions on whether to take up the offer.

When contacted, Dell Malaysia confirmed that under the Malaysian initiative, the VSS had been offered to all the 5,000 Malaysian staff on Penang island, Bukit Tengah in the mainland and Cyberjaya. However, the actual number of staff that Dell Malaysia targeted to let go is not known.

The Penang Manpower Department also confirmed that it had been informed by Dell of the VSS.

A Dell Malaysia spokesperson said the move was part of its efforts to reduce its global workforce. “This is part of Dell’s ongoing initiative to remain competitive by enhancing our efficiency and underlying cost structure. This action is a prudent and deliberate part of Dell’s ongoing focus on competitiveness.

“We recognise the impact that this action will have on employees, and are working to minimise consequences. Affected employees will be offered competitive severance packages, including career counselling and outplacement services. All actions will be consistent with applicable local laws and practices.”

Dell will, however, continue to hire people with specifically required skills and invest in areas that provide value to customers and enhance its capabilities, the spokesperson said.

“We are continuously reviewing our business model and taking actions that enhance our efficiency and underlying cost structure. We will adjust accordingly and prudently to remain competitive during and after the current challenging economic environment,” the spokesperson added.

During a conference call with Asia- Pacific journalists at the end of last month, Steve Felice, president of Dell’s small and medium business, said that the job cuts in Asia would be “minor” in the overall scheme of Dell’s global operations.

With a 16% decline in revenue for its fourth quarter ended Jan 30, rumours had been rife that Dell would close its facility in Penang or sell its operations to contract manufacturers. Dell is also said to have outsourced 70% to 80% of its operations in Penang.

Felice had said then that there would be no plant closures besides the two which were being closed in Ireland, shedding 1,900 jobs from April and another 800 to 900 jobs in Austin in the US.

However, on March 11, it was reported that an assembly plant in North Carolina would be next on Dell’s cost cutting moves resulting in more layoffs.

Meanwhile, apart from the planned layoffs, it’s business as usual for Dell.

In a statement yesterday, Dell introduced the new Adamo (derived from the Latin word meaning to fall in love) brand, with the launch of the world’s thinnest laptop, priced from RM7,399. It is available for pre-order at www.adamobydell.com with shipping to start March 26.

Dell's net income dips 48 pct; may cut jobs

New Delhi: IT giant Dell reported an 48 per cent decline in net income and said it could cut jobs in the Asia-Pacific region as its plans to save USD four billion to tide over the economic slowdown.

The US-based firm's net income dipped 48 per cent to USD 351 million for the quarter ended January 31, 2009, against USD 679 million in the same period last year.

Without specifying the quantum of job cuts and the geography, Dell President (Small and Medium Business) Steve Felice said in a teleconference, "The job cuts were minor in South Asia as this region has a professional talented pool and going ahead though I can't comment on the exact number, I anticipate it to be minimal."

Asked if the company was looking at cutting workforce at its Bangalore facility, Felice said, "I cant comment on the specifics. The Bangalore facility has the second largest population (headcount) globally."

The company's revenue stood at USD 13.42 billion in the quarter ended January 31, 2009 as against USD 15.98 billion during the same period a year ago, a decline of 16 per cent.

HSBC's profit slumps 70%, 6,100 US jobs cut

LONDON - Asian and European banking titan HSBC revealed on Monday that it needs nearly 18 billion dollars of new capital to withstand the financial crisis and announced 6,100 US job cuts after a profits collapse.

The bank reported a 70-percent plunge in annual net profits last year and said it hoped to raise 12.5 billion pounds (17.8 billion dollars, 14.2 billion euros) in a record British rights issue.

HSBC, based in London, had been regarded as one of the more robust global banks as crisis devastated many top lenders around the world, and has refused British government financial assistance in contrast to some of its rivals.

"The world today faces exceptionally challenging economic circumstances," HSBC chief executive Michael Geoghegan said in the earnings statement.

"2008 was a very difficult year for the financial sector, and 2009 will be no less so, as the global downturn intensifies."

The bank also said that its bad debts surged to almost 25 billion dollars (20 billion euros) last year, mainly as a result of the collapse of the US subprime housing market. HSBC added and that it would shut most of its HFC and Beneficial branches in the United States.

Global markets have been in the doldrums for more than a year on worries about access to credit, stemming from the dire state of the US housing market and unwise lending.

HSBC was one of the first banks to warn of the problems among products linked to the subprime or high-risk US mortgage sector. Last September, it scrapped a six billion dollar deal to buy a major South Korean bank after the financial crisis cut asset values worldwide.

On Monday, HSBC said net profits tumbled to 5.728 billion dollars in 2008 compared to 19.133 billion dollars in 2007 as the global financial crisis took its toll.

HSBC added that it was slashing its annual dividend by 29 percent to 64 US cents per share.

The group's share price plunged 12.2 percent to 431.25 pence in London morning trade, mainly on news that the bank had to go cap-in-hand to raise fresh capital from shareholders.

"After talk of the need for raising cash was dismissed as recently as December last year this is a rather large slice of humble pie, and investors will wonder why such a supposedly well-capitalised bank is slashing the dividend and choosing to raise more cash of record-breaking proportions," said Martin Slaney, head of derivatives at GFT in London.

"If nothing else this serves to underline just how severe the global economic contraction is."

HSBC said it would offer investors five new shares at a heavily-discounted 254 pence each for every 12 they already owned.

"In this difficult environment, we missed our profitability targets," HSBC chairman Stephen Green said on Monday.

"The coming 12 months will be difficult. We expect parts of Asia, the Middle East and Latin America to continue to outperform Western economies, but to be constrained by the global downturn."

HSBC's difficult past year was largely a result of losses totalling 15.5 billion dollars at the group's American personal finance unit.

"The significant deterioration in US employment and economic outlook in the fourth quarter of 2008 were the primary factors in causing us to write off all the remaining goodwill carried on our balance sheet in respect of our Personal Financial Services business in North America," it said.

"It is now clear that models of direct personal lending that depend on wholesale markets for funding are no longer viable.

"In light of this, we have taken the difficult decision that, with the exception of credit cards, we will write no further consumer finance business through the HFC and Beneficial brands in the US and close the majority of the network," added HSBC.

- AFP/ir

HP Plans to Cut Pay for 300000 Workers Worldwide

Eddy said: The company is making money and yet planning to take away the fair share from its employees. Constrast this to the scene where the top executives in US government rescued or bail out banks with wide opened hands waiting for a fat bonus, apparently to be forked out by tax payers. Sadistic right?

Speaking of Corporate Social Responsibility....

Well, if I'm the shareholder of such company, why would I stop the company from doing so? They are merely try to make sure the company earnings are sustained and so to get their contract renew or better share price performance. Happy for shareholder, sad for (committed) employees. Life's cruel.

HP has announced that it wants to cut the pay of about 300,000 workers across the world. The largest union in the UK called Unite is saying that it is astonished that HP would try to cut the pay of so many workers.

The reason for the astonishment is that HP is not in the red, the company is still turning a profit with a revenue growth of 1% compared to last year. Gross profits were reportedly GBP1.3bn. According to a Unite spokes man HP says any pay cuts in the UK will be with employee agreement.

Peter Skyte a spokesman for Unite said, "UK employees who have made a key contribution to the doubling of the HP services revenue and borne the brunt of redundancies in Europe will be astonished that a company that is increasing revenue and still making substantial profits is seeking a pay cut from its UK workforce. Whilst the basic pay of senior executives is being cut, they will more than make up any reduction in basic pay by increases in their executive bonuses brought about by reductions in everyone else's basic pay."

Via Unite