Money world

After three decades as the favored car of Cuban nomenklatura, the austere, Russian-built Lada has spotted a Chinese rival in its rear-view mirror.

Ministers, communist officials and police are switching their Ladas, with its stiff manual steering, for the smooth hydraulics of the Chinese-made Geely CK, a modern sedan that symbolizes the island’s new alliance with Beijing.

China, now Cuba’s second-largest trading partner behind only Venezuela, has shown an ability to quickly penetrate and dominate markets around the world with many of its products.

But Cubans say their love for Ladas, which are probably the most visible legacy of the country’s Cold War alliance with the Soviet Union, will keep the cars on Cuban roads.

“I do not think it will be easy to displace the Lada,” said David Pena, a 39-year old mechanic who recently founded Cuba’s Russian Automobile Club. “For us this car is like a family member.”

Cuba is well known for the vintage American cars that prowl its streets, relics of pre-revolutionary Cuba and rolling tributes to the islanders’ mechanical inventiveness.

But the truth is they are greatly outnumbered by Ladas, of which there are an estimated 100,000 in Cuba, compared to somewhere around 60,000 of the old U.S. cars.

The Geelys, based on a Daewoo design and powered by a 1.5-liter engine licensed from Toyota Motor Corp, have begun showing up with increasing frequency on Havana streets.

They have a sleek and stylish look and come with air conditioning, electric windows and CD players.

The Chinese cars are so far showing up in very limited numbers, as government vehicles and rental cars, but their ranks are expected to increase in a sign of China’s growing economic relationship with Cuba and business interests on the island.

Geely, China’s biggest privately owned car maker whose worldwide strategy has been founded on exporting low-cost vehicles, shipped more than 1,500 cars to Cuba this year through June, the Miami Herald reported on its website.

CULT OBJECT

But the no-frills Lada, based on the Fiat 124 from the 1960s, has become a cult object in Cuba for both its utility and its enduring presence.

Pena and dozens of other Lada die-hards gather every month in Lenin Park on the outskirts of Havana to talk about and show off their cars.

The Soviet Union took Cuba under its wing in 1961, two years after Fidel Castro rose to power in a 1959 revolution, and until its implosion in 1991 showered the communist-led island with billions of dollars in subsidies and goods, including the Lada. 

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South Africa’s trade account may have been balanced last month as companies increased imports to replenish stocks, adding to signs that the economy is recovering from its first recession in 17 years.

Exports equaled imports in August, according to the median estimate of nine economists surveyed by Bloomberg. The country had a 400 million rand ($54.1 million) trade surplus in July, as three consecutive quarters of economic contraction caused manufacturers and retailers to curb orders from abroad.

“We see the economy coming out of recession in the third quarter thanks to the start of a strong inventory build-up,” said Peter Attard Montalto, an emerging markets economist at Nomura International Plc in London. “The drawdown in inventories over the cycle so far has been very violent and as manufacturers start to look forward and see a rosier global picture” they will import more.

South African Reserve Bank Governor Tito Mboweni left the bank’s benchmark interest rate unchanged at 7 percent on Sept. 22, after cutting it six times since December, saying he expected “growth to rebound in coming quarters.”

The economy contracted 3 percent in the second quarter, after tumbling 6.4 percent in the first, while non-farm job losses slowed to 67,000 from 179,000 over the same period, government data show. Manufacturing contracted an annual 13.7 percent in July, its slowest pace in four months, another indication that the recession may have bottomed out.

The South African Revenue Services will report the trade data at 2 p.m. on Sept. 30. Trade figures are often volatile, reflecting the timing of shipments of oil, diamonds and other commodities.

Import Collapse

South Africa posted three consecutive trade surpluses through July as domestic demand collapsed. Imports fell to a low of 39.4 billion rand in May from a record 74.4 billion rand in July, 2008. They picked up to 39.8 billion rand in June and 44 billion rand in July.

The drop back into a trade deficit may be accelerated by this year’s 28 percent rally in the rand against the dollar, which has undermined exports.

The “sustained rand strength mutes much of the benefits of improved global demand,” Gina Schoeman, an economist at Macquarie First South Securities in Johannesburg, said in a note to clients.

Over the past five years, the ratio of exports to GDP rose to 35.4 percent from 26.7 percent, while the ratio of imports rose to 38.5 percent from 27.1 percent.

“There is increased demand from Asia in particular, as they rebound rapidly from this crisis,” said Attard Montalto, who forecast a trade gap of 2 billion rand. “I think we shall see a pretty strong export number combined with an even higher import number” in August.

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Last month, Missouri gambling regulators essentially put the President Casino’s license up for grabs.

Now the company that owns the casino is crying foul.

Pinnacle Entertainment has asked a state appeals court in Kansas City to overturn a ruling by the Missouri Gaming Commission that said Pinnacle must reapply for a license if it hopes to move the President or replace or repair the aging Admiral Riverboat on which it sits.

That ruling, Pinnacle argues in an appeal filed Thursday, essentially revokes the President’s license — one of just 13 allowed in the state — because it ties the casino to the Admiral, which is widely expected to fail its next Coast Guard inspection in July. Pinnacle would like the court to overturn the decision and give it time to fix the President.

It is the latest step in a long discussion over what to do with the casino, which Las Vegas-based Pinnacle bought for $45 million in 2006 as part of its development of Lumi

New orders for long-lasting U.S. manufactured goods fell unexpectedly in August, dropping by their biggest margin in seven months, following a plunge in commercial aircraft orders, the government reported on Friday.

The Commerce Department said durable goods orders tumbled 2.4 percent, the largest decline since January, after rising by a revised 4.8 percent in July. New orders for July were previously reported to have increased 5.1 percent.

Analysts polled by Reuters forecast orders rising 0.5 percent in August. Compared with the same period last year, new orders were down 24.9 percent.

Durable goods orders are a leading indicator of manufacturing activity, which in turn provides a good measure for overall business health.

U.S. stock index futures fell on the report, while government bond prices rose.

“This is a bit of a reality check for people. It means there is more to be done and we are not out of the woods yet,” said Doug Roberts, chief investment strategist at Channel Capital Research.com in Shrewsbury, New Jersey.

The data coming on the heels of a report on Thursday that showed a surprise drop in existing home sales in August was a reminder that recovery from the worst recession since the 1930s would be uneven. Doubts linger over its sustainability as consumer spending remains constrained by a weak labor market.

Non-defense aircraft and new parts orders plunged 42.2 percent in August, likely reflecting a drop in civilian aircraft orders received by Boeing. New orders for transportation equipment dropped 9.3 percent.

New durable goods orders excluding transportation were flat in August, after rising for three straight months, the department said. Analysts polled by Reuters had expected new orders, excluding transportation to rise 1.0 percent, after a 1.1 percent increase in July.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, unexpectedly fell 0.4 percent in August. Analysts polled by Reuters had expected core capital goods to increase 1.3 percent.

The prior month was revised to show a 1.3 percent drop, previously reported as a 0.3 percent fall.

Durable goods inventories fell 1.3 percent in August after dropping 1.1 percent the prior month and declining for eight consecutive months. Shipments fell 1.4 percent after two months of straight gains. Shipments rose 2.2 percent in July.

(Reporting by Lucia Mutikani; Editing by James Dalgleish)

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The Toronto Star, Canada’s largest daily, has increased its dominance as the most-read newspaper and newspaper website in the Greater Toronto Area, despite difficult times for the North American news industry as a whole.

The fall 2008/spring 2009 figures released yesterday by NADbank, the research arm of the Canadian newspaper industry, show the Star’s readership in the key "read yesterday" category was up by 4.8 per cent, compared to the same period last year.

The survey also showed that the Star increased its print and online readership by 2.6 per cent.

Its website, thestar.com, had the largest increase in readership of all Toronto newspaper websites versus the fall 2007/spring 2008 period.

"We are extremely pleased with these results," said Star publisher John Cruickshank. "They indicate that the efforts by everyone at the Star and thestar.com to produce a quality newspaper and an informative and lively website are being favourably received by readers of all ages throughout the Greater Toronto Area."

The numbers from NADbank, the Newspaper Audience Databank, show that an average of 974,000 people in the GTA read the weekday print edition of the Star each day, up from 929,500 last year and now more than double that of any other Toronto-area newspaper.

They also show that thestar.com grew its online weekly readership by 15.6 per cent to 684,200 people, making thestar.com the most read newspaper website in the GTA.

Cruickshank pointed out that newspaper readership in Toronto has been comparatively steady over the past year – despite the economic recession and a subsequent decline in advertising revenues – because newspapers still deliver "the kind of quality content that consumers want and need."

NADbank figures show that the paper’s competitors in the GTA did not fare as well as the Star.

The "read yesterday" category indicated that the Toronto Sun’s daily print readership in the GTA area fell by almost 53,000 – roughly 11 per cent.

The Sun’s weekly online readership was also down, more than 13 per cent, as was its combined print and online readership, which was down 9.6 per cent.

For The Globe and Mail, daily print readership in the GTA was up 2.7 per cent, to 407,200. The Globe’s weekly online readership was up 17.6 per cent.

The National Post also saw a modest print readership increase of 0.5 per cent, or 1,100 people, which put it at 206,600 daily readers in the GTA.

The Star’s Saturday readership – currently 1.16 million – was down 2 per cent from a year earlier. But the Star’s combined print and online reach grew by 2.6 per cent, which increased the Star’s weekly reach to exceed 50 per cent of the total GTA adult audience.

"Our ability to connect with readers and online users will continue to distinguish the Star from its competitors," Cruickshank said. "That’s why advertisers can feel confident that the choices they make with the Star and thestar.com will continue to deliver significant results."

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Palm Inc shares jumped to their highest level in nearly two years on Tuesday, fueled by short covering and renewed speculation that the smartphone maker may be a takeover target.

Shares of Palm jumped to a session high of $17.50 on the Nasdaq, a gain of nearly 10 percent, helped by market talk that bigger rival Nokia was interested in Palm.

Representatives for both Nokia and Palm declined to comment on the rumors.

The merger chatter, along with anticipation of a successful secondary stock offering, may have sparked short sellers to cover positions, driving the stock higher, analysts said.

“It could make sense,” said analyst Shaw Wu of Kaufman Brothers, referring to the possibility of an acquisition by Nokia. “The other thing that is powering Palm’s stock is a short squeeze. The stock is pretty heavily shorted. Its probably a combination of both.”

As of June 30, Palm’s short interest was some 47.2 million shares, or about 33 percent of its outstanding stock and 17 percent above short interest in the middle of last month.

Palm has a high percentage of short-seller investors, who bet on a share price decline but move to cover themselves if they see signs that a stock will rise instead.

For years, Palm, a pioneer in handheld computers and multimedia phones, has been talked about as a potential takeover target. Its recent report on solid sales of its new Pre model and the introduction of a new handset — the Pixi — have proven encouraging, after months of speculation about product plans for its operating system, called webOS.

Potential suitors, analysts say, include rivals such as Motorola Inc and Nokia, and technology companies that may be eyeing the phone market, such as Dell Inc, Cisco Systems and Hewlett-Packard Co.

Palm would give Nokia a leg up in the North American market, where it has lagged, and perhaps bolster its smartphone strategy, analysts say. However, integration of the two companies would not be smooth.

“From a technology point of view it would not add anything significant to Nokia,” said Hannu Rauhala at Pohjola. “They would be buying some clientele, but it’s always better to win clients than to buy clients.”

Palm may also be a risky move, since it has revamped its product lineup and executive offices, and lost money for more than two years. Perhaps more important, it is pricey — analysts suggest it could command a price of more than $3 billion, even though its annual revenue is less than $1 billion.

“Buying Palm doesn’t guarantee success,” said Shaw Wu. “Everything has a price and at the right price it could make sense. But the last thing (they want) is overpaying for something that is far from a guarantee.”

(Reporting by Franklin Paul, additional reporting by Tarmo Virki in Helsinki, editing by Matthew Lewis)

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China has quietly eased restrictions on its citizens traveling from Guangdong province to Macau, sending casino stocks soaring on Monday as industry executives bet on record October earnings in the world’s hottest gambling market.

Shares in Galaxy Entertainment and Melco International jumped around 9 percent, and SJM Holdings was up more than 6 percent, while the broader Hang Seng stock index fell 0.7 percent.

Alarmed that some Guangdong residents were gambling too much in neighboring Macau, China last year imposed new rules limiting them to two trips a year to the former Portuguese enclave.

But the authorities began easing up on the rule as early as two months ago, and noticeably loosened the restriction at the start of this month, said top executives at two of Macau’s six casino licensees, speaking on condition of anonymity due to the sensitivity of the situation.

“The latest version is (they can travel to Macau) once a month out of Guangdong,” said one of the executives. “Gaming revenues for the first two weeks of the month have been good.”

The other executive forecast that October — a high travel season for Chinese because of the October 1 Golden Week holiday — could see record monthly casino revenues, in part due to the relaxing of the visa rules.

Macau’s six casino operators include U.S. giants Las Vegas Sands and Wynn Resorts, along with home-grown players Galaxy and SJM Holdings and joint ventures Melco Crown and a casino jointly operated by MGM Mirage.

“We’re seeing repeat customers coming back more regularly than previously,” said an executive at one of the six operators insurance quotes. “It’s been occurring for two and a half months, but they probably lightened up even more since September 1.”

Macau has rocketed on to the global gambling stage in recent years following reforms earlier this decade that saw an end to a previous monopoly and awarding of licenses to multiple players, boosting competition.

The market grew 57 percent in 2007 alone, fueled by a huge influx of mainland Chinese, who now make up about 65 percent of casino visitors.

GOLDEN OCTOBER

Macau generated HK$105.6 billion ($13.5 billion) in gross gaming revenues in 2008, more than double the HK$46.7 billion generated by the Las Vegas Strip during the same period, according to a prospectus from Wynn Macau, the Macau assets of Wynn Resorts, which is preparing an IPO in Hong Kong.

But Beijing clamped down on mainland visitors to Macau in the middle of last year amid a proliferation of stories of officials illegally gambling away millions of dollars in government funds.

That clampdown, combined with the global financial crisis, sent a chill through Macau, with gaming revenue down 12.5 percent in the first half of the year.

The return of Chinese tourists and an improving economy helped Macau post record casino revenue in August. 

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Ballpark — A mildly pungent jalape

OTTAWA–Canadian banks may be required to defer some executive bonuses, Finance Minister Jim Flaherty said on Friday, as he outlined new rules aimed at discouraging excessive risk-taking and preventing future financial crises.

Flaherty told reporters that Canadian regulators were in the process of implementing guidelines laid out earlier this year by the Financial Stability Board (FSB) – made up of G20 central bankers, regulators and finance ministry officials.

“One of the major things is to spread out bonuses so that bonuses are not paid for short-term profit, which was one of the issues that led to the crisis in the past year,” he said.

“That's our position.”

It was not immediately clear whether Canada would make the bonus deferrals obligatory or voluntary.

Next week's G20 summit in Pittsburgh is set to focus on tougher financial regulations. European Union leaders agreed on Thursday to seek curbs on bankers' bonuses at the meeting. Canada has been opposed to an absolute cap on bankers' pay.

Flaherty said Ottawa was looking forward to another report by the FSB due in coming days, and would study its recommendations on financial regulation.

Even though Canadian banks have been famously solid throughout the financial crisis – and bonuses are not a contentious issue domestically because banks have not had bailouts – Flaherty said he was committed to fulfilling whatever new global standards emerge.

“There's always a risk of being complacent. I can tell you we're not complacent. I deal with the regulators very often, including this morning, and I know where we are in terms of our institutions in Canada and it's a good story,” he said.

Flaherty will attend the Pittsburgh summit along with Prime Minister Stephen Harper.

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MONTREAL–Bombardier may be able to avert additional layoffs beyond what have already been planned, following a 22-plane order from American Airlines valued at more than US$770 million.

AMR Corp. (NYSE: AMR) announced Thursday that its American Eagle regional subsidiary has signed a letter of intent to exercise options for the for CRJ-700 regional jets as part of a US$2.9 billion financing package.

Deliveries of the aircraft are scheduled to begin in mid-2010. Although the value is estimated based on list prices, the airline is believed to have received a healthy discount.

The airline also plans to add a first-class cabin to its existing fleet of 25 CRJ-700 aircraft.

This is the first of several orders that may materialize over the coming weeks following an intense Bombardier campaign to boost its order book to avert being forced to reduce its production of the aircraft.

Bombardier Aerospace president Guy Hachey said this week that he hopes the efforts will materialize in orders by the end of October.

Analysts said the early signs of recovery in commercial orders will be welcomed, although there remains concern about the impact on Bombardier from a decline in demand for business jets, which are sold to non-airline companies guaranteed high risk personal loans.

Bombardier is in the process of laying off 4,360 employees as it reduces production of business and commercial aircraft. Regional jets, which are sold to airlines, are estimated to account for 1,200 of the layoffs.

David Newman of National Bank Financial said the order should help to avert a further production cut for CRJs next year.

"Clearly this order, which management intimated was sorely needed to prevent further production cuts and layoffs beyond that currently planned, should provide some comfort," Newman wrote in a report.

While the order is welcome, Cameron Doerksen of Versant Partners said it doesn't change his forecast for Bombardier.

"We still believe that lower deliveries (and margins) of business jets will be the primary driver of profitability in the aerospace division through fiscal 2011," he wrote in a report.

On the Toronto Stock Exchange, Bombardier shares gained one cent at C$4.85 in morning trading.

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