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October 5, 1998
G-7 to Explore Proposal For Contingency Fund
By MICHAEL M. PHILLIPS and NICHOLAS BRAY
Staff Reporters of THE WALL STREET JOURNAL
WASHINGTON -- The Clinton administration revealed its plan to stanch the global economic meltdown, including a new preapproved credit line for countries that fall victim to investor panic despite their sound economic policies.
With financial chaos rolling over Asia and Russia and threatening Brazil as well, the U.S. put forth a wish list that sharpens some old tools and offers some new initiatives, but adds no new money to the international response to the crisis.
The key element is a new preapproved contingency fund under the International Monetary Fund, a proposal that finance ministers and central bankers from the Group of Seven leading industrialized nations agreed to "explore" at their meeting Saturday night. The G-7 gave a warmer endorsement to U.S. calls for more multilateral lending to battle poverty and fix troubled banking systems, as well as a U.S. plan to use multilateral guarantees to encourage private investors to put their money back into emerging markets.
The IMF proposal is likely to prove the most controversial element of the U.S. initiative.
France and Britain, meanwhile, submitted their own proposals for beefing up the IMF and strengthening the global supervision of financial markets. And Japan announced plans for a $30 billion package to aid its hard-hit Asian neighbors, while promising to pump public funds into a rescue operation for its own battered banking system.
No New Monetary Measures
No new monetary measures were announced, but U.K. Chancellor of the Exchequer Gordon Brown said the G-7 agreed on "a new commitment to coordinated action." This would involve both short-term measures to sustain growth and long-term reform of the world's financial system, he said. The G-7 countries are the U.S., Japan, Germany, France, Britain, Italy and Canada.
Whether the new consensus will be sufficient to restore investors' shattered confidence in international equity markets remains to be seen. Rather than just talking, said the chairman of one of Germany's leading banks, HypoVereinsbank's Albrecht Schmidt, the U.S. and European countries need to demonstrate their willingness to act.
"Inflation is no longer the risk" in the world economy, Mr. Schmid told a news conference timed to coincide with the meeting of G-7 finance ministers and central bankers. To head off a rout in financial markets that could push the world economy into recession, a further reduction in both U.S. and German interest rates is needed, he said.
The U.S. Federal Reserve already cut rates by a quarter of a point last week, but Mr. Schmidt said it could easily make a further cut of as much as a full percentage point. As for Europe, he said, it's not enough to lower rates in Italy, Spain and Ireland to the levels in Germany and France. "People should be thinking of lowering these rates as well."
U.K. Rate Cut?
G-7 finance ministers and central bankers declined to comment on the outlook for U.S. and European interest rates, but a first move could come as early as this week, when the Bank of England's monetary policy committee holds its monthly meeting to review U.K. rates. After a succession of increases over the past 18 months, some analysts expect the U.K. central bank to start lowering rates.
On the broader international front, a key element of the U.S. proposals is a new tool for the IMF, a sort of preapproved credit card for countries that already follow prudent economic policies but whose currencies could nonetheless come under pressure because of investor panic.
On Saturday, some of the G-7 finance ministers and central bankers expressed their cautious support of the plan. "I think it is a good idea," French Finance Minister Dominique Strauss-Kahn said. "But obviously it will need technical studies."
While other IMF loans require borrowing countries to agree to implement often-austere economic policies before they get loans, the new tool would be for countries whose policies the IMF already judges to be sound. U.S. officials declined to spell out details, such as how eligible countries would be chosen, and Mr. Strauss-Kahn acknowledged that it probably would involve a "subjective approach."
No Country in Mind
But he added that he would prefer this type of approach to providing money to a country which accepts the conditions attached to such assistance but then fails to observe them. U.S. officials insist the new contingency fund isn't designed with any particular country in mind, but it closely matches what Latin American governments have called for recently, and both Brazil and Argentina are likely early applicants.
"This initiative is going to strengthen the IMF's capacity to work in a pre-emptive fashion, so this will be positive for countries like Argentina," said Pablo Guidotti, Argentina's treasury secretary. "But the main responsibility, of course, is for each country to do the right policies."
U.S. Treasury officials say they don't expect the crisis to succumb immediately to the new initiatives, even if they're implemented. But the plan is the culmination of an intense search for an effective response to the global crisis, and represents the U.S. administration's best shot.
"I really have no doubt in my mind that the world can and will work its way out of this, but for that to happen each of us has to do our part," U.S. Treasury Secretary Robert Rubin said after the G-7 gathering. "What this meeting was really about was each of us doing our part, and I came out with a very good feeling around the energy around that commitment.">>>>
Sector ---- telecommunications:
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October 5, 1998
Investors Rush to Buy Swisscom
In Shares' First Day of Trading
An INTERACTIVE JOURNAL News Roundup
In the year's largest initial public offering by a European company, shares of the Swiss telecommunications concern Swisscom AG traded Monday for the first time on the Swiss Exchange, while its American depositary receipts debuted on the New York Stock Exchange in an IPO valued at about $6 billion.
Swisscom priced 22 million American depositary receipts at a share price of $25.30, the lower end of the estimated price range of $23.80 and $29.60. Each ADR represents 10 regular shares. The ADRs opened Monday at $28, 11% above the offering price, and were at $27.50 in late morning trading on the New York Stock Exchange.
In Zurich, Swisscom closed at 376.50 Swiss francs, up 1.50 francs, or 10.7%, from the IPO price, while the Swiss Market Index fell 2.5%.
The offering, which represented 30% of the company, gave Swisscom a market value of more than $20 billion, based on recent prices.
Underwriters -- worried about volatile markets and aware of France's weekend decision to postpone the sale of 5% of France Telecom -- Sunday set the issue price of Swisscom at a modest 340 francs ($250.24) a share, at the low end of the range indicated in September.
The offering is the biggest IPO in Europe so far this year and Switzerland's biggest share issue ever.
Traders said that many institutional investors waited until the first trading day to buy Swisscom shares against the backdrop of global stock-market turmoil.
The good prices the telecommunications company fetched on its first trading day "shows that we have set the right price for Swisscom," Chief Executive Tony Reis said.
The issue was three times oversubscribed, the company said.
The intrinsic value of each Swisscom share had been estimated by analysts at 415 francs to 435 francs. With revenue in excess of 10 billion francs, Swisscom enjoyed a monopoly of the Swiss telecom market until it was opened fully to private competition Jan. 1. Although competition is expected to become fierce as more international rivals seek a foothold in the lucrative Swiss market, Swisscom has a substantial head start that Swisscom Chief Executive Tony Reis, a former top executive at International Business Machines Corp., said he is confident of building on.>>>>
Home-front:
ubiquity.net
Ubiquity is a private company with Celtic House Investment Partners as its largest shareholder and Dr Terence Matthews, Chairman & CEO of Newbridge Networks Corporation, as Chairman of the Board of Directors. The Company is a Newbridge Networks Affiliate, Sun Internet Associate, Catalyst Partner, JavaSoft ISV and are leaders in JAVA development to the telecommunications industry.
Your missiion, should you agree to accept it, is to put the three together. :))
Later --
Pat |
