Big Banks Brace for Credit Rating Downgrades

Moody’s Investors Service has begun notifying some big banks that their credit ratings may get cut as early as this afternoon.

The calls started going on in the last hour or so, according to people briefed on the matter but not authorized to speak on the record. With ratings changes, Moody’s typically reaches out to the banks a few hours before it publicly announces anything, giving them a chance to process the information.

Moody’s, one of that nation’s largest ratings agencies, announced in February that it would assess the credit of 17 global financial companies for potential downgrades, including Goldman Sachs and Bank of America. Morgan Stanley, which was hit hard in the financial crisis, could be the most vulnerable. The agency has warned it could cut the bank’s ratings by three notches, leaving it two levels above junk and below some of its rivals.

Moody’s did not respond to requests for comment. While Moody’s has started notifying the banks for prepare for rating changes this afternoon, the timeline for the agency’s actions is unclear.

A downgrade can have serious implication for a bank’s bottom line, potentially increasing the cost of borrowing and eroding the confidence of customers and lenders. Trading partners may opt to move their business elsewhere.

Shares in the nation’s biggest banks began falling more sharply in early afternoon trading on Thursday, as investors anticipated the potential downgrades.

Five institutions — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley — were all down by more than 1 percent. Morgan Stanley was down 1.5 percent. Hardest hit were Bank of America and Citigroup, which had fallen 2.6 percent. JPMorgan was down 1.5 percent, while Goldman was down 2.3 percent.

While Europe remains a pressure point with audits showing that Spanish lenders may need another $78 billion, it was the prospect of action by Moody’s that appeared to be weighing on the bank stocks.

Investors began tweeting about a report by Sky News’s Mark Kleinman this morning, saying that Moody’s was expected to make its long-awaited announcement about bank ratings after the market closed on Thursday.

source: nytimes.com

Italian Brands Tap Asian Markets

MANILA, Philippines — While Italy remains “a place of style and inspiration,” in an increasingly globalizing retail environment, its brands are now looking East for expansion. The Italian casualwear chain Liu Jo, for example, is setting up more stores in different Asian territories for further brand growth.

“A lot of big companies now realize that when you need to grow, you have to come to Asia because it’s booming,” says Marco Marchi, one of the brand’s founders. “We also believe that the Asian region is currently the tiger of the world economy.”

The brand has put up Liu Jo Asia Pacific Limited, a division that specializes in penetrating Asian markets. Liu Jo opened its first Philippine store in 2010, in Ayala Center Cebu.

Fernando Fornaciari, managing director for Liu Jo Asia Pacific Limited, agrees that Asia is a burgeoning continent, but it’s “not just because the opportunities [for growth]” are in Asia recently. “We also want to build something that can grow and be stable in the long run,” adds Fornaciari.

In catering to a foreign continent, it seems that Fornaciari and his team are still observing what kind of merchandise fits properly into the Asian region. Women’s wear and ladies’ accessories remain core retail factors, aspects that the brand prefers to keep its business focus on for the time being.

Marchi recognizes that men worldwide are spending again for fashion, but the subject of menswear in Asian countries like the Philippines is still subject for conscientious evaluation. “We know that there’s good potential [for men’s items in Asia] but we have to be 100 percent sure [of it] first. We want to anticipate things for the meantime so maybe [we’ll bring menswear here] next year,” says Fornaciari.

Marchi and Fornaciari consider investing in the Philippines, though, as a viable measure, as they are enthusiastic about the brand’s local development despite “a small presence of Italian brands” in the country.

While most foreign brands venture into the Philippines by building stores in Metro Manila first, Fornaciari says that the first Liu Jo shop in the Philippines opened in Ayala Center Cebu last 2010 instead in order to discern a more diverse set of shoppers, which consists of Filipinos along with tourists from different countries like Japan and Russia.

“Cebu is an important international city,” relates Fornaciari. “There are a lot of international tourists in Cebu, so [it was a good opportunity for us] to [observe] local customers and foreign consumers as well. Metro Manila has a lot of foreigners but they’re expats, so they’re mostly [in the country just] for business.”

“Cebu is known as a tourist destination. Many international customers are familiar with Liu Jo and this presence supports our international visibility,” adds Marchi. Reception has been positive, with accessories representing 40 percent of total sales in the Cebu boutique.

Marchi and Fornaciari, who recently visited Metro Manila and Cebu, reveal that the brand is now ready to expand into Metro Manila. Liu Jo recently opened its accessories boutique at The Podium mall in the Ortigas business district, while a Liu Jo store is set to be launched at the Glorietta shopping center in Makati City later this year.

Marchi and his brother Vannis established Liu Jo in 1995, in the knitwear district that is Carpi, Italy. The aim is to sell clothes that are “in tune with the latest trends” for “feminine and confident” women. As Marchi relates, the brand’s name came from the words “Liu” and “Jo,” nicknames that he and a former girlfriend gave each other years ago, “and today it stands for my desire to convey a natural taste for beautiful things. It has been our [brand's] good luck charm over the years.”

Eventually, Liu Jo’s product portfolio extended into junior and baby wear, beachwear, underwear, shoes, accessories, and menswear. Possibilities for worldwide awareness are created through opening stores abroad, airing video commercials with an international mileage, and even starring supermodel Kate Moss for its recent Spring-Summer 2012 campaign.

Forward-thinking Italian companies, as Marchi puts it, also address heightening global presence through an extensive distribution network. A Liu Jo press note reveals that the brand currently has “over 190 mono-brand points of sales and almost 4,500 multi-brand stores ensuring the presence of the brand in 35 countries in [three] continents (Europe, Africa, and Asia).”

source: mb.com.ph

PHL stocks climb on Wall St. gains, North Korea rocket crash

Philippine shares climbed 1 percent in moderately active trading Friday, with market sentiment carried by gains overnight on Wall Street and North Korea’s failed rocket launch Friday morning.

While the market continued to move within the 4,990-5,100 consolidation window, it reacted positively to the failure of North Korea’s rocket launch and the 180-point advance of Wall Street stocks in New York overnight, said Harry Liu, president of Summit Securities Inc.

The main PSEi gained 50.52 points or 1 percent to close at 5,097.30.

More than 1.498 million shares valued at P5.716 billion changed hands during the morning and afternoon sessions.

However, decliners outpaced advancers 83 to 78 with 47 issues closing unchanged.

Most issues that gained were index stocks that carried the PSEi higher.

Asian markets shrugged off a rocket launch by North Korea before they opened, according to a Reuters report.

South Korea's Defense Ministry said the rocket exploded in the initial minutes of flight, and then fell in 20-odd pieces off South Korea's west coast, it added.

Overnight on Wall Street, the Dow Jones industrial average closed up 181.19 points, or 1.41 percent, at 12,986.58.

The Philippine market needs a couple of weeks of consolidation, because there is still a bit of nervousness about US, China and European economic numbers, said Summit’s Liu.

The goal is to breach the 5,100 resistance level. “Then we’ll see more aggressive market plays,” he added. —GMA News

source: gmanetwork.com

Obama And Romney Talk Economic

WASHINGTON (AP) – President Barack Obama and Mitt Romney; striding into the long battle for the White House – are peddling vastly different stories about the American economy, and the outcome of the November election depends on which of them recession-battered American voters decide to believe.

The economy finally is showing signs of a fragile but sustained recovery, and that is good news for Obama, whose poll numbers are ticking upward and who holds an early polling lead over Romney. But there are 6 1/2 months remaining before the election and untold foreign, domestic and economic challenges yet to reveal themselves.

For now, Obama is faced; barring a sudden economic acceleration, with trying to prove a negative, to convince voters of his argument that things would have been far worse had he not administered a massive stimulus to the economy as he took office three years ago in the midst of a near financial meltdown and raging job losses.

He continues exhorting Americans to not forget that their economic pain was the fault of former President George W. Bush. While polls show most Americans accept that argument, they can't help but remember that they felt the pain of the country's crushing economic downturn; the deepest since the Great Depression, on Obama's watch. He has said he expected he would be a one-term president were he not able to right the economy before the upcoming election.

Then there's the massive increase in the national debt, now above $15 trillion, part of it piled up to pay for the Obama stimulus. Can he convince a nation that has tightened its belt, scouring the household budget for even the smallest non-essential spending, of his vigilance with the federal government's purse strings in a second term?

For his part, Romney is hammering Obama as fiscally inept, directly responsible for the laggardly recovery and solely to blame for the skyrocketing US debt.

Romney, the former governor of Massachusetts and multimillionaire businessman, insists he knows how the economy operates, would have pulled it out of the staggering downturn more quickly and will be an experienced and steady hand, ready to curb deficit spending and rapidly create jobs to bring down unemployment.

Thus, on the key issue of the economy; the one most important to voters as the long campaign stretches toward election day on November 6, both Obama and Romney are left trying to sell unproven and not provable hypotheticals.

Simply put, Obama claims he saved the nation from falling into the economic abyss; Romney says Obama to fault for the country's laggardly recovery and massive debt.

James Broussard, a professor at Lebanon Valley College and a Republican who is chairman of the Pennsylvania special interest group ``Citizens Against Higher Taxes,'' says voter worries about the debt ``will give Romney a powerful second line of attack.''

But he acknowledges the strength of the Obama argument that he was indispensable for the ongoing recovery.

Broussard's advice to Obama: ``He's got to say `Don't judge me on where we are. Judge me on where we came from and remember it was the Republicans who put us there. Do you want to keep the guy that got us out of the catastrophe or a return of the Republicans who put us into it.'''

He said he wouldn't bet one way or the other on the outcome.

``Obama is right, we were going off a cliff when he came in,'' he said. ``Romney is right in saying this has taken too long because of Obama.

It all depends on the specifics, said Mac Clouse, the director of the Reiman School of Finance at the University of Denver.

``If one of them comes up with concrete ideas, that could be a big plus in this election. If we can take things on more than just their word or good faith; that would make sense. They are going to have to come up with some pretty creative ideas,'' he said.

In that regard, polls show a majority of Americans back Obama's push for higher taxes on wealthy Americans, the so-called Buffett rule that Obama has been pushing in recent campaign stops.

The tax increase Obama wants; one that would cut the national debt but not on the massive scale needed, is named for billionaire Warren Buffett. He famously said it was wrong that his tax rate was lower than that paid by his secretary.

source: mb.com.ph