Interview: Standard & Poor's debt ratings
>> the philippines debt ratings have been cut by standard & poor’s. the move came after president gloria arroyo failed to get lawmakers to pass tax increases needed to narrow the nation’s budget deficit. shobi pereira joins us with more. what steps did standard & poor’s take?%
>> the s&p cut the long-term foreign currency rating to double-b-minus from double-b, and the local currency rating to double-b-plus from triple-b-minus. the foreign currency rate suggest three levels below investment grade. the foreign currency rating is also the lowest it’s been since june 1993 and on par with brazil, turkey and vietnam. cathy?
>> what exactly is it that president bush arroyo hasn’t done that prompted the move from s&p?
>> in july, arroyo asked congress to approve eight tax changes. the president wanted to boost taxes by 80 billion pesos or $1.4 billion u.s. a year. lawmakers have so far approved one of her proposals. the philippine government announced yesterday that it failed in 2004 to meet its tax collection target for the sixth time in seven years. s&p does say it has a stable outlook on its philippine rating. the ratings company said that deficits are expected to remain high over the medium term in light of persistently weak revenue collection and the company says that failure to adhere to a credible fiscal strategy could pressure the rating. cathy?
>> what’s been the reaction from investors after this move?
>> desmond sune, an asset manager in singapore, says the rating cut is bad news to the bond market and although it had been expected, he’s not buying the nation’s debt because the government has, in his words, serious fiscal problems. a lower rating may increase the nation’s borrowing costs because investors will ask for a bigger premium when buying the nation’s debt. the philippines is the only asian nation to have had its debt rating cut over the past two years. ratings have been raised in eight other countries, including malaysia, india and indonesia. that’s it for now, cathy.
>> thank you, shobi. indonesia says it may need as much as $150 billion for new roads, power plants and other projects. reconstruction in areas devastated by the december 26 tsunami could cost an additional $4 billion. the government plans to finance around $60 billion of infrastructure spending from its own funds and bank loans. southeast asia’s largest economy is cogating on foreign -- counting on foreign investments. corruption concerns have stimied foreign investment in indonesia, totalling $10 billion last year, down 75% over the past nine years. hewlett-packard will sell new computers based on intel’s itanium processors. hewlett-packard chief executive officer carly fiorina will announce new versions of the integrity series computers tuesday. hewlett-packard and intel are going after the most lucrative part of the market with powerful computers. companies use those to manage databases and perform complex tasks. gartner research says hewlett-packard has 28% of the market for server computers in the third quarter, trailing i.b.m.’s share of 32%. u.s. automakers, including general motors and ford motor, are expected to report the worst quarterly profits this week among the members of the s&p 500 index. analysts expect first-quarter earnings for automotive companies to drop 26% from the same period a year earlier, citing increased competition from asian competition, higher healthcare costs and rising interest rates. g.m. and ford are among s&p 500 companies to release results in the first week of earnings reports this year. continental airlines gets $9 million in cost cuts to avoid millions in losses this year. the fifth biggest airline agrees on wage and benefit cuts for some non-union workers. the cuts for 12,000 ticket counter, gate and operations employees take effect february 28, including unspecified changes to wages, overtime rules, pensions and holiday compensation. the airline reports fourth-quarter earnings thursday. continental shares have fallen 43% in the past 12 months. airbus plans to unveil the world’s largest passenger plane later today. the 555-seat airbus a 380 will surpass boeing’s 747 in size. airbus says it already has orders for 139 of the jets and planes to win as many as 700 contracts for the a380 in the next two decades. it has a wing span of 262 feet, is 73 meters long and ways 569 ton when is fully loaded for takeoff. after the break, coal demand is rising. we’ll discuss the outlook for coal prices.
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Listen Interview: Australian market and Tokyo market
led by miners like b.h.p. we’ll go to our sydney reporter in just a minute for a preview. the dollar trades near a five-year low against the yen in asia. volume is thin. traders are declining to bet ahead of a u.s. treasury report of foreign purchases of foreign assets. the economy may not attract enough investment to compensate for its current account deficit. intel is reorganizing five business units from two, which may indicate a change in direction for intel. otellini becomes chief executive in may and may push the company into new markets like wireless devices and consumer electronics. global stocks rise led by miners and electronics like samsung. european and asian benchmarks advance. u.s. markets were closed for the martin luther king jr. day holiday. china airlines and five other taiwan carriers sign up to operate non-stop lunar new year charters to china. the airlines bet the largely symbolic flight may lead to money-making regularly scheduled service in the future. the flights will be an expanded version with carriers participating for the first time. instead of having to stop in a third country, the non-stop flights will be required to merely pass through hong kong’s airspace. taiwan’s businesses have been pressing the governments to open talks on regularly scheduled direct flights. a government official says china’s investment in factories and homes and fixed assets is growing too fast. the government spokesman says it needs to step up efforts to cool expansion and inflation saying “we need to enhance and improve the country’s macro economic controls.” the comment was made in a speech to the economic forum in china yesterday. china’s premier hu jintao made the changes. monday, the benchmark asx 200 added .4%, expanding its recent record. australian miners advanced to a three-month high on the price of copper. we’ll go to stewart kelly, our stock reporter in sidney. with the u.s. markets closed, what will u.s. investors look for ahead of the markets open in sydney.
>> the benchmark index futures are up .33% today. in the absence of direction from the united states, investors are looking at markets in europe and asia where indexes rose on optimism demand growth will lift corporate profit. shares of rio tinto group rose 2.6% on the london stock exchange yesterday. that’s after yet another positive broker report. you may remember deutsche bank a.g. raised its earnings estimates for rio tinto on friday. today, it was morgan stanley and credit suisse first boston. morgan stanley raised profit estimates for b.h.p. billiton and rio tinto group saying iron ore prices may rise 1/3 this year. also, credit suisse first boston raised its estimates for iron ore prices 35%, also raising its rating for b.h.p. to neutral from underperform. catherine?
>> any other stocks that we should keep our eye on today?
>> keep your eye, in particular, on foster’s group limited. its shares may fall again today after falling nearly 7% yesterday. that’s after a negative broker report here in sydney. foster’s shares yesterday fell 6.7% after it said it would take over its next biggest rival, southcorp limited. merrill lynch today released a report saying it viewed the potential takeover negatively saying that they were inherent risks for foster’s to take over southcorp and they reduced their rating for foster’s to neutral from buy. that’s all from me, catherine, enjoy your day.
>> thank you. more instability in iraq. less than two weeks before legislative elections. ron madison joins us from tokyo with the story.
>> insurgents kill 14 members of iraq’s security forces north of baghdad. the u.s. military says seven iraqi soldiers died when rocket-propelled grenades hit their vehicle. another seven were killed when a car bomb blew up at a checkpoint. iraq says a cousin of saddam hussein controls as much as $7 billion, which is used to finance these attacks. interim prime minister iyad allawi has said assaults by insurgents will not derail elections planned for later this month. and iraqis around the globe register to take part in their homeland’s first independent election in nearly 50 years. expatriots from sydney, australia, to washington, d.c., started registering for the country’s january 30 legislative election. poll organizers say as many as a million people are expected to put down their names. many iraqis say they have been waiting for this chance to vote.
>> basically we’ve been waiting for this, in election for so long. and we have to―we have to participate in the election. we have to use our right for the election and we have to vote.
>> those living in iraq will cast their ballot on january 30. those living abroad will be able to vote from january 28 through the 30. the palestinian authority approves a security plan to stop a surge in attacks on israeli targets. a cabinet spokesman says the plan includes more security at crossing points between israel and gaza. here we see palestinian president mahmoud abbas meeting with a delegation of israel’s parliament in ramallah. six israelis has been killed in bombings and gun fires since abbas was elected. a united nations report calls on nations to boost foreign aid 55% next year, saying countries including the united states need to give $135 billion if they hope to half halve world poverty in 10 years. the report calls for more efficient aid delivery, saying only 30 cents of everiated dollar―aid dollar reaches people in poor nations.
>> thank you, ron. coming up, no new taxes in the philippines but the country suffers a cut in debt ratings. those two facts are directly related. details coming up.
