16/07/2012 World Business Report


16/07/2012

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trees and blocked roads. Now for the latest financial news.

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Hello and a warm welcome to World Business Report. The headlines:

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Were Barclays trade as told to lie about bank borrowing costs? An

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executive faces tough questions from MPs today.

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Could the UK economy experience an Indian summer? A leading think tank

:00:32.:00:42.
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predicts a consumer-Leadburn is telecom equipment manufacturer are

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plunging following a profit warning and an investigation.

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Good to have you with us. Other banks could face fines more than a

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$450 million Barclays received over the interest-rate fixing scandal.

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That's the warning from the bank in a memo from employees. Meanwhile, a

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former top executive at Barclays will today be grilled on his role

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in trying to manipulate the rate that banks used to borrow money

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from each other. He has already resigned and is thought to have

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talk trade has to lie about the Bank's borrowing costs. British MPs

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will also hear evidence from Lord Turner, their head of the UK

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financial regulator. It's becoming another long

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procession to confession in front of MPs. Two weeks ago came the

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former boss of Barclays, Bob Diamond. He expressed shock that

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his traders had been trying to manipulate lending rates. When I

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read the e-mails I got physically ill. It's reprehensible behaviour.

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Then came the Bank's chairman, who had to tell Bob Diamond that he

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ought to go. You were handing him a loaded revolver, won't you? Today,

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Lord Turner, the head of the Financial Services Authority, will

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give evidence. He's already accused Barclays of aggressive behaviour.

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As the regulator, he will face questions of his own. There is also

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another former Barclays executive - why did he apparently misinterpret

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a message from the Bank of England by telling trade is to

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underestimate the Bank's borrowing costs? There are two versions of

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events. The first is that, you know, he misinterpreted what was going on.

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The second is that he twisted it. I think that his evidence will leave

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the world and, indeed, the investigators, to try and make a

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better judgement about which of those it was. Even after today,

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many questions about this affair will remain unanswered. Though the

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issue was raised four years ago, why has the problem taken so long

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to tackle? How many other banks across Europe, the US and Japan

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have been doing the same thing? Can the reputation of banks ever now be

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restored? It's not just lawmakers in Britain

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who are concerned. He is a reminder of what's at stake. The committee

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that sets the rate is made up of 16 international banks based in London.

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They each submit a daily interest rate, which is what they are having

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to pay in order to borrow cash from other banks. The four highest and

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the four lowest submissions I then disregarded. To arrive at the day's

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rate is based on the average of the remaining eight. It means that if

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Barclays was acting alone it would have had very little ability to

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influence the rate. Hence this is a global scandal that could involve

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major US, Canadian, Japanese and European lenders that also make up

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the committee that sets these rates. Rate rigging is not the only

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scandal to rock the world. From occupy Wall Street in St Paul's in

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London and even Hong Kong, today, HSBC is launching legal action in

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an attempt to remove anti-capital as protesters who have cared that

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at its Asian headquarters for the past nine months. -- camped out.

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This is the entry to the headquarters of the HSBC in Hong

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Kong. Activists have been here for nine months... It is fair to say

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that the occupier movement has failed to gain as much traction in

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Asia as the rest of the world. That is, in large part, because the 2000

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and make financial crisis claimed far fewer victims in this part of

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the world. -- 2008. Here in Hong Kong, it has found support because

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of rising property prices and income problems. Two problems some

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people blame on the capitalist system. The court will decide who

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owns this space. If the judge decides that HSBC owns this

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passageway then the eviction process is expected to start very

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shortly. Reporting from Hong Kong.

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That's... The temporary buffer of a 9% capital ratio should become

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permanent. Because of the European crisis, banks need to be adding

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cash to their reserves, some say. Banks have boosted capital by a

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combined 94 billion euros. Credit-card companies Visa,

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MasterCard and some major US banks will pay over 7 billion dollars in

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a settlement that is considered the largest of its kind. The case has

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been going on for seven years, over the firms colluding to fix the fees

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that customers pay for credit and debit card payments.

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The United Arab Emirates has began operating a key overland oil

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passageway which bypasses the Strait of Hormuz. Iran has

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threatened to close the straight at its mouth. It has a handling

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capacity of 1.5 million barrels of crude per day.

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Could this be a bit of good news? In their latest forecast, the

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earnest and young think tank predict an Indian summer for a

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Britain's economy towards the end of the year. Will this be enough to

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pull the UK out of a double-dip recession? I am joined by the chief

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economic and -- economic adviser from...

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Why were we experience a better second half? A obviously it's not

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just the weather that's been bad. We've been hit by all sorts of

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economic conditions as well. Bad weather has also depressed spending

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on the high street. As we move into the second half of the year, as you

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have said, inflation will fall. That will mean that people's

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spending power will go up for the first time in 2-3 years. We have

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been looking at situations where spending power has been dropping.

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What has pushed down the inflation? The most obviously, petrol prices.

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The world oil price has fallen back to around $100. The fuel duty

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increase has been delayed as well. Food prices, though, could be an

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issue, couldn't they? We have been seeing on the market that corn and

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soya bean prices are rising rapidly because of the terrible weather we

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have had this summer perfecting the crops.

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That is a worry, but it really is for later in the year.

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What about the Olympics? What impact might they have?

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That is also a boost in factor. When you have a situation like that

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where people are spending, you're looking for a trigger. We think the

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Olympics could be the starting gun for this consumer boom.

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You talk about a consumer boom. Obviously we are in the midst of a

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double-dip recession at the moment. Why do you think we will be so

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willing to spend that money, given the fact that unemployment is very

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high, there's a lot of concern about the future next year as well

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- it's not looking so good. There's the eurozone, a dark cloud.

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A lot of family simply don't have the cash - they can't actually

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borrow. If they have the extra cash, they will spend it. A lot of other

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families have been trying to cut back on debt. They have been doing

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it successfully. The debt to income ratio has dropped from about 1.75

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to 1.5. The fundamentals are in place.

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Let's just hope you are right. Nice to hear some positive news,

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isn't it? Let's look at what's going on in

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China, because they're second largest telecoms equipment maker is

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warning their second half profits will be dropping by 80%. Let's go

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to Singapore with the details. What's going wrong?

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First of all, you have stiff competition and the US

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investigation into its sales. The firm said that tougher competition

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in the mobile phone business has got the company's profit margin

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falling. Also due to the European debt crisis, it has forced the

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company to take a foreign exchange loss in the second half, compared

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to one year earlier. There is also an FBI investigation over the sale

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of bad US computer equipment and its alleged attempts to cover it up.

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The probe will adversely affect the company's ability to bid for

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overseas projects. Moving forward, that will impact its stock in the

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Hong Kong stock exchange - it's down nearly 17%.

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Thanks very much. Let's show you the markets as well

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in Asia. Japan is closed today for a public holiday. The numbers you

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will see on your screen, I hope, if you look at Japan - don't be fooled,

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that was last week's close. The rest are open and trading. Beryl

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headed higher, which is good news. Given a boost by various things --

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they are all... Wen Jiabao has been talking over the weekend while

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