HK shares rise 4.78 pct on U.S. bank aid plan

Hong Kong shares ended 4.78 percent higher on Monday as the U.S. government's latest plan to help banks get rid of toxic assets helped revive investor appetite for risk.

The benchmark Hang Seng Index .HSI closed 613.9 points higher at 13,447.42.

The China Enterprises Index .HSCE of top mainland firms rallied 6.2 percent to 7,959.91.

Mitsubishi UFJ to cut 1,000 jobs, close 50 branches

Japan's biggest bank Mitsubishi UFJ Financial Group, struggling to return to profit, said Monday that it would cut 1,000 jobs and close 50 branches over three years in a bid to cut costs.

The megabank will shed the jobs through retirement and reducing hiring, said a company spokesman who declined to be named.

The bank will also shut down about 200 automated teller machines, he said.

"This is part of our efforts to streamline our operations in order to maximise the effect of our merger," the spokesman said, denying the cuts were prompted by the global financial crisis.

MUFG was formed in October 2005 through a merger between Mitsubishi Tokyo Financial Group and UFJ Holdings.

The bank, which bought a chunk of troubled Wall Street titan Morgan Stanley last year, lost 42 billion yen (437 million dollars) in the nine months to December, hit by slumping stock markets and the credit crunch.

Daimler saved by Middle Eastern wealth fund

A sovereign fund controlled by the oil-rich sheikhs of Abu Dhabi has become the biggest shareholder in Mercedes owner Daimler, guaranteeing its independence and future with a €1.95bn (£1.8bn) capital injection.

Aabar Investments, wholly owned by the emirate government and funded with oil money, will pay €20.27 per share for a 9% stake in the carmaker. The share issue will not be open to other shareholders - including long-standing investor Kuwait Investment Authority, the world's oldest sovereign fund, which has a 6.9% stake.

Daimler's flagship Mercedes brand is haemorrhaging sales, cash and profits. Having ended its disastrous 10-year marriage with Chrysler two years ago, the company has been consistently linked to a potential merger with German rival BMW.

Both premium carmakers have seen sales plunge by a quarter or more in the credit crunch as consumers shun luxury products. The news of the Middle East investment came as India's Tata launches the world's cheapest car, the "one lakh" or $2,000 Nano, after a six-month delay.

Dieter Zetsche, Daimler's chief executive, said the deal with Aabar Investments, announced late last night, would give the group extra flexibility to invest in new automotive technologies - such as electric vehicles and lighter compoound materials.

Mercedes models, despite the growing use of more fuel-efficient models, emit greater emissions of greenhouse gases than BMW. The rivals have teamed up with General Motors to develop new hybrid models linked to modern lithium-ion batteries but are substantially behind the curve compared with Japan's Toyota, Honda and Nissan.

European car firms are struggling to assert their future independence in the face of the worst downturn for more than 50 years. There are forecasts that only two or three of the current crop of 10 or so will survive. The French government has controversially bailed out Renault and Peugeot Citroen, while General Motors's German unit, Opel, is seeking a state-backed €3.3bn rescue plan which would see it and Britain's Vauxhall break away from the rest of GM.

Group says IRS audits of wealthy have plummeted

The Internal Revenue Service has counted auditing the wealthy among its top priorities and successes in recent years, yet the rate of such tax probes dropped significantly in 2008, according to a report by a Syracuse organization that tracks government data.

Using IRS figures, the report by Transactional Record Access Clearinghouse calculated at least a 19 percent drop in the audit rate of people with incomes of $1 million or more between 2008 and 2007 - a statistic confirmed by the IRS.

Beyond that, however, the two organizations' interpretations of these statistics diverge.

TRAC sharply criticized the tax agency in its report out today, noting the IRS had to revise downward the number of millionaire audits it recorded in two earlier years by as much as 35 percent. TRAC also questioned the IRS' methods of accounting and reporting its data.

The IRS, however, explained the revisions of its 2006 and 2007 audits as the result of a "regrettable" coding error that affected its published reports but not its operations. The agency maintains it still holds the scrutiny of millionaire tax returns as a high priority.

The decline in audits for the wealthy took place at the height of the real estate boom and at a time when returns submitted by people with incomes of $1 million or more were increasing, said Susan B. Long, co-director of TRAC.

"They [the IRS] have been really boasting about the need to increase the attention paid to high-income groups," Long said. "The public should know, is the agency achieving its stated goals? What are the facts?'"

TRAC said the IRS had published conflicting figures regarding millionaire audits recently. Using some of these figures, TRAC calculated the decline in such audits may have fallen by 36 percent - far more than the IRS' acknowledged drop of 19 percent.

Long wants to know whether the coding errors affected the IRS' ability to track the audits.

The IRS rejects the criticism. "In addition to our normal responsibilities on service and enforcement, we had to get 117 million additional payments to taxpayers," Bruce I. Friedland, an IRS spokesman said of 2008. "We had a tight budget and slight staffing declines in key enforcement positions."

The IRS says TRAC misinterpreted the data when it concluded that the drop in millionaire audits might be as high as 36 percent.

Tata Nano, World’s Cheapest Car, Won’t Help Pay Debt

Ratan Tata, head of India’s biggest diversified group, is having trouble trading up from his 100,000 rupee ($2,000) car to a new stable of Land Rovers and Jaguars.

Tata Motors Ltd. will begin taking orders next month for its Nano, the world’s cheapest car, after a failed effort to build a new factory for the vehicle delayed production. The low price and late sales mean the car won’t generate enough revenue to refinance by June $2 billion of a bridge loan Tata used to buy Land Rover and Jaguar from Ford Motor Co.

“It won’t solve the cash-flow problem they are having right now,” said Vaishali Jajoo, an analyst at Angel Broking Ltd. in Mumbai. “They will have to take more debt.”

Pushed into its first loss in seven years last quarter, Tata Motors will only build 30,000 to 80,000 Nanos in the fiscal year starting April, according to analysts. Moody’s Investors Service and Standard & Poor’s downgraded the automaker due to slowing sales of the U.K. luxury units and the need to fund the $2.4 billion purchase from Ford last year.

The company has $915 million of bonds and loans due by 2012, according to Bloomberg data. Sales of trucks and buses, the company’s traditional models, have plunged as economic growth in India cools.

“If you try too many things, you may fail,” said Edwin Merner, president of Tokyo-based Atlantis Investment Research Corp., which manages $3.1 billion. Tata Motors needs “deep pockets to pour in money” into revive Jaguar and Land Rover, he said.

Debt Costs

“Tata Motors is progressing on the refinancing options and in discussions with banks,” Tata Motors spokesman Debasis Ray wrote in an e-mailed response to questions.

The extra yield over government bonds of similar maturity that investors demand to own Tata Motors $490 million convertible bond due in 2012 surged to 3,164 basis points as of March 20, up from 483 basis points on June 2, when the acquisition of Land Rover and Jaguar was completed, according to data compiled by Bloomberg.

Last year, the carmaker began offering the public 11 percent annual interest on three-year deposits as it tried to raise cash. It was the first time in 13 years Tata Motors had turned to the public for funds.

Bookings

Tata Motors will begin accepting bookings for the car between April 9-25 and deliveries will start in early July, Ratan Tata said at a press conference in Mumbai today. The company will guarantee prices for the first 100,000 units. Customers must pay deposits of 95 percent of the car’s price, Managing Director Ravi Kant said at the same event.

Tata said it’s too early to comment on break-even for the Nano project.

Tata Motors shares gained as much as 8.1 percent to 173.85 rupees and changed hands at 167.7 rupees at 2:51 p.m. in Mumbai. The shares have gained 4.9 percent this year.

The company’s plan to start selling the Nano in the last quarter of 2008 was delayed after the company had to shift the location of its factory due to protests by farmers losing their livelihood.

Tata Motors will make profit from the Nano only when annual sales cross 350,000 units, according to India Infoline Ltd. analyst Jatin Chawla, who wrote a report titled ‘The Nano Effect.’ The project will be profitable in three years, he said.

The abandoned factory in eastern India had an annual capacity of 250,000 Nanos.

Family on a Scooter

The company’s factory at Sanand in western Gujarat state will have the same initial annual capacity when it opens by the year-end. The company will supply initial demand from other factories.

Tata, 71, a Cornell University-trained architect, decided to develop the car when he saw a family on a scooter. Almost seven motorcycles are sold for every car in India, a nation of 1.1 billion people. The company first showed the 623-cc car in January 2008. Tata Motors will announce details of the booking process in Mumbai March 23.

As sales in the U.S., Japan, and Europe tumble, Toyota Motor Corp., the world’s largest carmaker, Renault SA, France’s second-biggest automaker, and other automakers plan to build cars for the middle class in emerging markets. Indian annual light vehicle sales will surge to about 2.8 million units by 2014 from about 1.72 million last year, according to Tim Armstrong, director of Global Insight Inc. The Nano could account for as many as 450,000 of that, he said.

Toyota has an early prototype for a model that may be able to compete with the Nano, President Katsuaki Watanabe said in Detroit last year. Renault and Nissan Motor Co. have teamed up with Bajaj Auto Ltd., India’s second-largest motorcycle maker, to build a $2,500 car. They are targeting a middle class population of 50 million in India, where incomes have doubled in the last eight years.

The Nano may end up selling as many as 2 million units annually in 10 years according to India Infoline’s Chawla, who estimates that the cost of owning the Nano may be about $4 a day.

“The only formula that works with the masses in India is compelling value-for-money offering,” Chawla said.

Asian Stocks Rise on Hopes for Treasury Plan

Stock markets in Asia rallied Monday as hopes for the beleaguered American financial system overcame concerns about the still-dire outlook for the global economy.

The gains — more than 3 percent in Japan, Taiwan and India, and more than 2 percent in South Korea, Singapore and Australia and 4.3 percent in Hong Kong — were the latest in the past two weeks as investors around the world took heart from plans by the Obama administration to stabilize the American banking system and from news from leading financial institutions like Citigroup that the year had begun well.

On Monday, the Treasury secretary, Timothy F. Geithner, will announce the details of the administration’s long-awaited plan to purchase troubled assets and remove them from the balance sheets of banks, spurring banks to lend more money to consumers and companies.

Hopes that this plan would begin to resolve the troubles at big financial institutions and set the stage for a gradual recovery in the real economy helped markets across Asia accelerate Monday.

The benchmark Nikkei 225 index in Japan, where markets had been closed for a national holiday on Friday, rose 3.4 percent to a seven-week high.

Banks were among the main beneficiaries, with the top Japanese lender, Mitsubishi UFJ Financial Group, jumping 4.7 percent, Sumitomo Mitsui Financial Group 7.3 percent and Mizuho Financial 5.3 percent.

Mitsubishi UFJ announced it planned to close 50 branches and cut 1,000 jobs to slim down its operations as Japan’s recession and the sharp fall in the stock market eroded its earnings.

Still, analysts remained divided as to whether the rallies seen around the world this month represented a sustained recovery or not.

Many caution that the economic outlook — and thus the outlook for a recovery in corporate earnings — remains dim. Exports, the mainstay for many Asian economies, have slumped, while domestic spending in many parts of the region remains anemic.

A Japanese government survey released Monday showed big Japanese manufacturers were much more pessimistic about business conditions in the first three months of 2009 than they were in the previous quarter. The tankan, a closely watched quarterly survey by the Bank of Japan, which will be released on April 1, also is expected to make for grim reading.

“Is the new bull market starting?” asked analysts at Citigroup in Hong Kong in a research note on about Asia, excluding Japan, on Monday. “We remain skeptical — no one knows if this is a bear or a new bull market.”

Others have begun to turn cautiously optimistic.

Garry Evans, Asia strategist at HSBC in Hong Kong, in a note last week said that “history shows that bear markets end when monetary policy is eased aggressively and the banking system is sorted. The former has now happened; the latter may soon. There seem more upside than downside for stocks.”

“We understand the taboo in the U.S. on nationalizing banks, but we see the chances of a comprehensive bailout plan as quite high now,” Mr. Evans said.

Goolsbee To AIG Execs: Give The Money Back

Appearing on Face The Nation Sunday, Austan Goolsbee, a member of the White House Council of Economic Advisors, told CBS News' Harry Smith that while the President is angered at the bonus situation at AIG, "We don't want to govern out of anger."

Asked how the White House plans to recover taxpayer money lost in the retention bonuses given to AIG executives (including some not retained by the company), he said President Obama is "going to look at what comes out of the House, what comes out of the Senate, see what ideas we have. At the least there is public pressure and there should be public pressure on those people at A.I.G. who aren't being paid for performance but are being paid for having lost $170 billion.

"Give the money back," Goolsbee said.

Goolsbee said the president is aware of the severity of the breach of public trust caused by the AIG scandal.

"It's one thing to be a gambler and to gamble with your own money. But here they're gambling with the retirement accounts of our parents and the college funds of our children."

Companies receiving bailouts "would not exist if it weren't for the U.S. Government. Now that makes them different than some of the other institutions which I'm sure we'll talk about with the financial rescue. But we can't let our anger over mistakes that happened last year block the fact that we've got to save the economy."

Goolsbee confirmed that the White House toxic asset plan will be released tomorrow, and in a quick preview he told Smith, "the basic idea is outlining the details of a public-private partnership so that we leverage money from the government with the private sector, so that the government doesn't get in the business of overpaying for assets and things like that."

The economic advisor was skeptical of the theory that private sector business would be turned off by the amount of government involvement in the Obama administration's plan.

"What we saw this week and what we have seen in our discussions with people is that if you lay out clear rules that are responsible, people want to participate if there's a business reason to participate. In this circumstance where we're trying to encourage the private sector to participate, that's going to be treated totally differently than companies like AIG or Fannie Mae where they are only in business because the government saved them."

He argued, however, that the President does not advocate putting controls on executive compensation.

"The president has, for more than a year, been calling for financial regulatory reform. And the centerpiece of that regulatory reform is to prevent the $170 billion bailout of AIG type where a life insurance company morphs into a hedge fund, turns into a loss that is too big to fail and the government has to come in. The point of regulatory reform is to prevent that," he said.

"Everybody has skin in the game" Goolsbee said, describing the relationship between private and public companies and the government.

Finally, he said that the gloomy Congressional Budget Office's economic forecast was "much more pessimistic about the long-run strength of the U.S. economy" than were those of private analysts and the White House.

Goolsbee reiterated that Mr. Obama is committed to cutting the deficit in half by the end of his term while investing in health care, clean energy and education. "He'll be working with Congress and he's outlined a budget program and these principles of making those three key investments and cutting the deficit in half, and I believe he's going to be able to do that," Goolsbee reasoned.