Business and Finance

Sri Lanka’s central bank Governor Nivard Cabraal kept benchmark interest rates unchanged at a five-year low to spur investments and aid economic growth after the end of a 26-year civil war.

The Central Bank of Sri Lanka left the reverse repurchase rate at 9.75 percent, the Colombo-based bank said. The repurchase rate was also maintained at 7.5 percent. The economy will expand more than 6 percent this year, Cabraal said in a Bloomberg Television interview today.

“The rate is sufficient to stimulate growth as well as ensure that any risk of inflation is also curtailed,” Cabraal said. “We need not have any fear” of inflation now, he said.

The island’s biggest companies including John Keells Holdings Plc and Aitken Spence & Co. are expanding their hotel and shipping businesses to take advantage of a rebound in the $41 billion economy. President Mahinda Rajapaksa is holding an election two years before his mandate expires after the defeat of the Liberation Tigers of Tamil Eelam rebels in May helped push growth above 4 percent in the third quarter.

“Growth will likely take off, especially in the second half of the year, with rates and inflation still low,” said Bimanee Meepagala, an analyst at NDB Aviva Wealth Management Ltd., the nation’s biggest non-state fund.

The benchmark stock index rose 0.1 percent at 9:35 a.m. in Colombo. The Sri Lankan rupee traded at 114.15 to the dollar compared with 114.26 yesterday, according to Bloomberg data.

Close Election

“Markets, especially equities, are waiting for direction after the election, Meepagala said. “The rate decision was mostly expected. There will be some volatility leading up to the elections as it’s expected to be a very close race.”

Sri Lanka’s benchmark stock index, the Colombo All-Share Index, jumped 125 percent last year, outperforming the rest of Asia and trailing only Russia worldwide, on prospects of an economic rebound in the Indian Ocean island.

The country’s inflation rate was 4.8 percent in December, less than half that in January 2009. Today’s rate decision took into consideration a potential pickup in inflation, Cabraal said in the interview before the central bank policy statement.

“Projections of inflation for 2010 indicate benign inflationary pressures, enabling inflation to be in single digits by year end,” the central bank said in the statement.

Faster Growth

The economy may grow 7 percent in 2010, the fastest pace in four years, spurred by company investments and construction of new roads, ports and power plants, Cabraal said Jan. 4.

“The central bank wants loan books to grow and money to flow into the economy,” Saminda Weerasinghe, research manager at Acuity Stockbrokers Pvt. in Colombo, said before the report. “Inflation pressures aren’t that great.”

John Keells, Sri Lanka’s biggest diversified company, said in November it will invest about $100 million to build new resorts to benefit from a tourism revival after the war.

Aitken Spence, Sri Lanka’s biggest operator of resorts, plans to expand its hotel and shipping businesses while Commercial Bank of Ceylon Plc, the nation’s biggest private lender by assets, aims to extend more loans in the northern and eastern regions, which were recaptured from the Tamil Tigers.

Rajapaksa scheduled presidential elections to be held on Jan. 26, betting the economy’s recovery will boost his popularity.

Cabraal has kept interest rates unchanged for two straight months. He lowered the central bank’s reverse repurchase rate by 75 basis points and the repurchase rate by 50 basis points in November. A basis point is 0.01 of a percentage point.

“We have seen a sharp increase in lending during the past month which indicates to us there is stimulation taking place,” Cabraal said. “If we find there is a bubble being formed or too much liquidity being created, then we would think it’s time for us to increase the rates. But we haven’t seen any such danger right now.”

The International Monetary Fund, which granted Sri Lanka a $2.6 billion aid package in July, expects the island’s economic growth and credit demand to pick up.

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Retailers placed a lot of hope on the Thanksgiving weekend gift buying this year, but merchants failed to get the big sales boost they were seeking.

According to monthly same-store tracker Thomson Reuters, overall sales rose just 0.5% last month versus its forecast for a 2.1% increase. The figure does not include leading retailer Wal-Mart Stores (WMT, Fortune 500), which reports sales on a quarterly basis.

The firm tracks same-store sales, or sales at stores open at least a year, for such large national chains as J.C. Penney (JCP, Fortune 500), Macy’s, Target (TGT, Fortune 500) and Gap (GPS, Fortune 500).

Still, the marginal increase is an improvement over last year’s steep 7.8% decline in November.

"The fundamentals for many Americans are still weak," said Scott Hoyt, senior director of consumer economics with Moody’s Economy.com.

"Unemployment is more than 10%, wages are not growing, the effects of the stimulus measure designed to boost spending have worn out and no more are coming," he said.

Among these factors, the biggest overhang on consumer spending is the job market, Hoyt said. "Consumer spending will turn when the job market improves," he said.

Some specialty sellers were hit especially hard. Among them same-store sales at teen clothing chain Hot Topic fell 11.7%. last month. Analysts had expected a decline of 8.1%, according to sales tracker Thomson Reuters.

Children’s Place, a seller of clothing and accessories for young kids, suffered a 13% drop in its same-store sales versus expectations for a 1% increase.

Sales at another youth merchandise chain Abercrombie & Fitch (ANF) slumped 17%

Elsewhere, total sales at No. 1 warehouse club operator Costco (COST, Fortune 500) rose 6% compared to a forecast for an increase of 8.1%. Target, the No payday loans with no fax. 2 discounter after Wal-Mart, said its sales declined 1.5%.

"Sales were slightly below our expectations as softer results in the first three weeks of the month were substantially offset by better-than-expected sales during our post-Thanksgiving Two-Day sale," Gregg Steinhafel, CEO of Target Corporation, said in a statement.

"For the month overall, comparable store transactions were positive and inventories remain well-controlled, giving us confidence in our ability to perform well during the holiday season in what continues to be a challenging economic environment," he said.

Sales at department store chain J.C. Penney declined 5.9%, which the company said was in line with its expectations of a decline between 4% to 7% while sales at Macy’s fell 6.1%.

But there were a few bright spots. Limited Brands, parent of Victoria’s Secret and Bath & Body Works chains, increased its same-store sales by 3% in November and high-end seller Nordstrom logged a 2.2% gain in its sales last month.

November is a critical month for retailers since it marks the start of the year-end holiday shopping season, typically on Black Friday, the day after Thanksgiving.

November and December together can account for 50% or more of merchants’ annual sales and profits for the full year.

Although many Americans have had a year to absorb shocks to the economy and to their own household budgets, industry watchers say continued job losses and stagnant income growth are forcing most consumers to keep shopping with extreme caution.

Given that context, the National Retail Federation (NRF) expects holiday sales to decline 1% this year, a improvement from last year’s 3.4% drop in sales for the season. 

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Dubai World’s debt problems are a wake-up call that the economic recovery is still fragile and that there are still risks, OECD Secretary General Angel Gurria told Reuters.

Gurria said the incident had reminded markets of growing debt concerns, something that should prompt governments to be cautious in withdrawing from large stimulus measures to boost growth after the worst global recession in decades.

Dubai spooked financial markets last week when it said two flagship firms, Dubai World and its Nakheel unit, planned to delay repaying billions of dollars in debts.

Dubai World “is a reminder of the fragility of the recovery process and that fact that it is still in its infancy and that there are still downside risks,” Gurria told Reuters during a summit of Ibero-American leaders in Portugal. “It’s a property development gone bad, but a big one.”

He said governments should “keep their guard up,” and err on the side of caution when deciding to cut stimulus packages.

“It’s better to stay a little longer than to withdraw too early,” Gurria said. “There is now also this parallel concern that debt is accumulating at a very fast speed and that obviously is a problem because markets are also getting very tense about that.”

Dubai has alerted markets to those risks in recent days as have growing budget deficits in some countries, such as Greece which saw a widening of its bond spreads last week.

Gurria said the downturn was taking its toll on balance sheets.

“So you are having a lot of pressure on many balance sheets because of market related portfolios, that are not subprime, they weren’t wrong in the beginning, but they are getting sour because of the economic situation in general,” he said.

Gurria also warned of the growing risks of the so-called carry trade, whereby investors borrow funds in a currency with low interest rates or countries such as the United States to finance investments in countries with higher-yielding assets like China, driving prices higher.

“There is a danger of creating a bubble, because if you have a very large flow into a relatively stable number of assets you create inflation in the prices that is not consistent with the real change in value of the assets,” he said.

He said assets such as Chinese stocks had risen much more than many other markets because of this process.

“You can create artificially high prices which can then with one piece of bad news or one movement in the exchange rate or interest rates suddenly burst, and that is when you have a disorderly adjustment,” Gurria said.

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The U.S. trade deficit widened in September by an unexpectedly large 18.2 percent, the most in more than 10 years, as oil prices rose for the seventh straight month and imports from China bounded higher, a U.S. government report showed on Friday.

The monthly trade gap grew to $36.5 billion, from a slightly revised estimate of $30.8 billion in August. Wall Street analyst had expected the shortfall to grow modestly in September to around $31.65 billion.

Both U.S. exports and imports had their best month since December 2008. But in a sign of renewed U.S. economic growth, imports grew 5.8 percent in September, the biggest monthly gain since March 1993, while exports rose 2.9 percent.

Imports of industrial supplies and materials showed the biggest gain, suggesting that U.S. manufacturers are ramping up for production.

The average price for imported oil leapt to $68.17 per barrel and imports from the Organization of Petroleum Export Countries increased to $11.9 billion in September, both the highest since November 2008.

The closely watched U.S. trade deficit with China widened 9.2 percent to $22.1 billion as imports grew 8.3 percent to $27.9 billion, both also the highest since November 2008.

The overall U.S. trade deficit, including with China, has fallen significantly this year in response to the worst economic downturn in decade faxless payday loans.

But the gap with China narrowed just 15.9 percent in the first nine months of the year, compared with much bigger declines for Canada (79.6 percent), the European Union (42.0 percent) and OPEC (71.8 percent).

That has reinforced ideas that China’s currency remains overvalued against the dollar, giving Chinese companies an unfair trade advantage.

President Barack Obama is expected to raise concerns about China’s exchange rate regime when he meets with Chinese leaders next week in Beijing. On Friday he was in Japan for talks before heading to Singapore for this weekend’s annual summit meeting with leaders of the Asia Pacific Economic Cooperation forum.

With U.S. unemployment the highest in 26 years, Obama has said he would press for a rebalancing of world economic growth where countries in Asia would open their markets to more American goods and rely less on exports to the United States and more on their own domestic demand.

(Reporting by Doug Palmer, Editing by Neil Stempleman)

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The college application process that dominates senior year for many high school students is always stressful, but this year it’s even worse.

A report from the College Board shows that college costs continue to rise far faster than parents’ salaries: In-state public schools are pushing $20,000 a year and it costs double that to attend the average private college.

At the same time, college savings account balances have fallen, other costs have risen as many parents face unemployment, debt problems and other financial challenges. And more students than ever are applying for college, providing increased competition for the most coveted seats and scholarship programs.

Feel discouraged yet? Don’t be. Instead, remember that there are many, many paths to happiness and success that don’t run through Harvard yard or Yale’s central campus or even straight through any four-year program.

Go out and talk to folks in their mid 20s, and you’ll discover many, many people in great jobs and happy relationships who transferred into (and out of) those top name brand schools, took pre-college breaks, started at community colleges, finished at their state schools or took myriad other routes to their current situations.

So avoid worrying and avoid the stress-spewing mother (you know who she is) who waits for you in the parking lot at all of the soccer games wanting to know how your kid is doing on his apps.

Instead, focus on taking a practical, educated and smart approach to the whole college applications and financial aid process that will get your kid into a college he’s happy with and that will give you a payment strategy that won’t bankrupt either one of you.

To do that, focus on finances from the start. Here’s how:

– Have your child apply to a broad list of schools, including multiple schools that compete with each other for students. Don’t just consider state colleges and universities, because many private schools have larger endowments from which they can make bigger grant awards. When considering the list of schools, don’t look only at the academic or social issues, look at their budgets. One new college planning site, www.wisechoice.com , offers students and their families estimates of how much aid they are likely to get from every school they put on their list. They calculate this based on the aid awards the schools have given in the past.

– Do a rough cut of your family finances. Use the estimated financial aid calculators here to see how much money your family will be expected to contribute to tuition, room, board and expenses. If it’s an entirely unrealistic amount, based on what you’ve got in savings and how much you expect to earn over the next few years, start making alternative plans fast payday loan no faxing. These could include lining up other sources of money, such as a home equity line of credit or a loan from Grandma, or they could be alternative academic plans, such as having your child focus on schools that pay large amounts of merit aid, which is based on the student’s accomplishments and not on family need.

– Be ready to get the financial aid numbers in early. Send those aid applications in before the end of January, even if you have to later revise some answers. Schools tend to be more generous with financial aid awards early in the season. Position your 2009 income to be as low as possible before the end of the year is out. That includes deferring any bonuses or extra income you expect to make until 2010, taking tax losses and sending in any extra deductible health-care or tax payments before the end of the year. It could help your family qualify for financial aid for the 2010-2011 school year.

– Consider lots of alternatives. Community colleges are among the best. Even students who attend top-flight colleges have figured out they can take some of their basic required courses at a local two-year school and save on tuition. Most community colleges have agreements with state university systems; if you get reasonable grades in the first two years of community college you can transfer automatically into the flagship four-year school. That will save you money and give you time to decide on a major and build savings for the last two years. Other alternatives worth considering: Take a year off between high school and college to work and save money; squeeze four years of college into three or three and a half; attend college part time and work full time, or sign up for a four-year combined bachelor’s/master’s program.

– Plan to make the investment fit the projected results. A quick glance at Payscale.com (here) will reinforce what you probably already know: Starting salaries for engineers and scientists are a lot higher (roughly $60,000) than they are for liberal arts grads and social workers (under $40,000). And most social workers need to go on to collect their master’s degree to progress in their career. While the post-graduate paycheck may not be the most important consideration in a college plan, it is worth looking at in deciding how much debt to get into. Federal student loans do offer special repayment options for people who go into low-paying fields, but if you expect graduate school to be in the future, don’t spend every penny on undergraduate school.

(editing by Gunna Dickson)

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Procter & Gamble Co posted a quarterly profit well ahead of analysts’ forecasts and said it has modestly higher expectations for growth in the industry even as consumers continue to remain cautious.

P&G’s pantry of products have been pressured for months, as shoppers try cheaper brands than Pampers and Tide, and eschew indulgences such as Hugo Boss cologne and SK-II face cream.

The world’s largest household products maker earned $3.31 billion, or $1.06 per share, in the fiscal first quarter that ended on September 30, compared with a profit of $3.35 billion, or $1.03 per share, a year earlier best payday advance.

Analysts, on average, expected P&G to earn 99 cents per share, according to Thomson Reuters I/B/E/S.

Net sales fell 6 percent to $19.8 billion, with declines in every category ranging from beauty to snacks and pet care.

Organic sales, which exclude the impact of currency fluctuations, acquisitions and divestitures, rose 2 percent. P&G had predicted such sales would be flat to down 3 percent.

(Reporting by Jessica Wohl, editing by Maureen Bavdek)

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Merrill Lynch veteran Robert McCann, the new head of UBS’s loss-making U.S. wealth management unit, said he had no plans to sell the business that was battered by a high-profile tax row.

McCann, who led the wealth management business at Merrill Lynch until early this year, took up his $850,000-a-year post at the Swiss bank on Tuesday and vowed to rebuild trust at its American unit.

He had been courted by UBS Chief Executive Oswald Gruebel since July and sued his former employer to enable him to join a rival.

The U.S. wealth division of UBS was hit by 5.8 billion Swiss francs ($5.8 billion) of client withdrawals in the second quarter of this year, as the bank fought a bruising tax case with U.S. authorities, and analysts say it is still suffering.

That has prompted some to speculate that UBS might eventually want to sell the business - a proposition that McCann rejected.

“I had to go to court against two of my former employers to be able…to work with UBS,” McCann said. “I would have not done that if the whole goal was to sell the company.”

McCann, said he would unveil his new strategy for the unit in the first quarter of 2010 but already expected to make selective cost cuts. His aim was to have a more nimble and more cost-efficient structure, he said.

The 51-year-old executive said he would take a performance-related bonus that his base salary would be

$850,000.

During a court hearing in his case against Bank of America, which bought Merrill Lynch, McCann said he had to give up a bonus that could have topped $5 million.

Speaking from a hotel room in mid-town Manhattan just before he took up the new job, McCann told reporters he was “excited” at the prospect of joining the Swiss wealth management giant and that he got on very well with Gruebel from the start.

“We immediately established a chemistry between the two of us,” he told reporters.

The new U.S. wealth chief will report to Gruebel and be a member of UBS’ executive board. McCann said his predecessor, Marten Hoekstra, is leaving UBS.

Analysts welcomed McCann’s appointment, which had been widely expected.

“We believe McCann has the managerial capacity needed to revise and restructure the U.S. wealth management Americas business to become more profitable,” said Vontobel analyst Teresa Nielsen, adding it would still be possible to spin off the unit. 

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South Korea’s economy expanded at the fastest pace in seven years, stoking speculation the central bank will raise borrowing costs for the first time since the collapse of Lehman Brothers Holdings Inc.

Gross domestic product increased 2.9 percent in the third quarter from three months earlier, when it grew 2.6 percent, the central bank said in Seoul today. That was the fastest pace since the first quarter of 2002 and compared with a median estimate of 1.9 percent growth in a Bloomberg News survey. From a year earlier, GDP rose 0.6 percent.

South Korea has led a regional rebound with China and Singapore as companies including Hyundai Motor Co. and Samsung Electronics Co. reported surging profits, boosted by exports. South Korea may become the second Group of 20 nation after Australia to raise its benchmark interest rate since the height of the global financial crisis, BNP Paribas SA said this month.

“The bigger-than-expected GDP number definitely adds more weight for an interest-rate increase,” said Go You Sun, an economist at Daewoo Securities Co. in Seoul, who had previously forecast the central bank to raise rates early in 2010. “The number today made a clear basis for the Bank of Korea to justify a rate increase.”

Record Profit

Hyundai, South Korea’s largest automaker, posted record third-quarter net income of 979.2 billion won ($827 million). Hynix Semiconductor Inc., the world’s second-largest computer- memory chipmaker, on Oct. 23 reported its first quarterly profit in two years on higher prices.

The nation’s Kospi stock index climbed 1.4 percent at 11 a.m. in Seoul, taking the year’s gains to 48 percent. The won was little changed against the U.S. dollar at 1,181.55, having risen 20 percent in the past 12 months.

Policy makers around the world are debating how quickly to withdraw monetary and fiscal stimulus measures to secure economic recoveries while avoiding an acceleration in inflation.

Bank of Japan policy makers this week are forecast to consider an announcement ending their purchases of corporate bonds in December, and economists including those at Credit Suisse Group AG predict China’s central bank will begin restraining credit growth in that country by year-end.

The Federal Reserve has already announced a phase-out of some of its emergency programs, while retaining a commitment to keep interest rates near zero for an “extended period.”

Health of Economy

South Korea’s government says an unwinding of expansionary policies would be “premature,” while central bank Governor Lee Seong Tae said last week keeping rates at a record-low for too long isn’t healthy for the economy.

Low interest rates have spurred consumer borrowing, with bank lending to households expanding for a seventh straight month in August before falling in September.

“I don’t think keeping rates too low for too long is good,” Lee told lawmakers at a parliamentary audit on Oct. 23. He said earlier this month a rate increase will be “more than” the usual 25-basis-point move.

South Korea’s exports gained 5.1 percent in the third quarter from the previous three months, when they rose 14.7 percent, today’s report showed. Corporate investment in factories and equipment climbed 8.9 percent, compared with a 10.1 percent in the second quarter.

Private Consumption

Private consumption advanced 1.4 percent from the second quarter. Government spending fell 0.8 percent and construction investment dropped 2.1 percent.

South Korea’s rebound comes as Singapore raised its 2009 economic forecast after gross domestic product expanded for a second consecutive quarter in the three months through September. China’s economy expanded at 8.9 percent in the third quarter, the fastest pace in a year as stimulus spending and record lending growth helped the nation lead the world out of recession.

Sales at South Korea’s major department stores rose in September for a seventh straight month and exports fell at the slowest pace in 11 months in September. Manufacturers’ confidence climbed to the highest level in two years, earlier reports showed.

Kia Motors Corp., South Korea’s second-biggest automaker, posted record profit in the three months to Sept. 30 as global stimulus measures boosted demand for cars. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, said earlier this month operating profit more than doubled to as high as 4.3 trillion won in the same period.

The central bank and the government have upgraded their economic forecasts for this year. Finance Minister Yoon Jeung Hyun said early this month the economy is likely to contract less than 1 percent in 2009 and Governor Lee says he shares that view.

To prevent the economy from sliding into a recession, the central bank cut the benchmark interest rate by 3.25 percentage points between October and February to a record-low 2 percent and the government boosted spending.

The Bank of Korea will meet on Nov. 12 to review borrowing costs. South Korea hasn’t had a rate rise since August 2008.

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Many of the world’s wealthiest investors remain traumatized by the losses they sustained during the financial crisis and are clutching on to safe, low-yielding assets rather than taking any risks.

Wealth managers say that even after a 75 percent rise in world stocks since March, a lot of clients’ money has yet to move. Investors have, in the words of one strategist, become “structurally risk averse.”

That is prompting investment managers to seek creative ways to unleash funds held in safe cash positions, and may be the key to sustaining this year’s rally in stocks and riskier assets.

Managers are enticing clients with guarantees of investment capital or by offering other rewards to make losses less likely.

It is a phenomenon similar to that seen in 2002-03 when investors were reeling from the bursting of the internet stocks bubble. So some may even have been twice burned.

How much is tied up is difficult to ascertain. Fund tracker EPFR Global reckons that some 94 percent of the net flows to U.S. money market funds it tracked in 2008 has already exited.

But going further back, it says U.S. money funds that report weekly took in a net $191 billion in 2007 as a whole. That suggests that the cash unwinding of the past two years is at most only two thirds through.

“There is a lot of juice,” said Michael Dicks, head of research and investment strategy at Barclays Wealth no fax no teletrack payday loan. “Even if they went half way from where they are now to where they were pre-crisis, that would produce a significant amount of momentum.”

PROTECT ME

Today’s problem for investment managers — who, of course, get their fees from clients making money and moving around assets — is that the stock market crash was so harsh that many investors are almost terminally gun-shy.

World equities did, after all, fall some 60 percent from peak to trough.

“Clients are still nervous — less so than they were a year ago but (they) are only getting back into markets very selectively,” said Phil Cutts, director at RBC Wealth management.

To combat this and the ultra-low rates paid on cash accounts, investors are being offered products that provide some form of protection or at least a sweetener to get them to dip back into risk.

Cutts’ RBC, for example, is touting a capital-guaranteed BRICs currency fund. Principal is returned in full if the Brazil, Russia, India and China basket — divided equally between real, ruble, rupee and yuan — underperforms the dollar.

But if it rises, investors get the principal plus the return on the basket. RBC then adds an additional 20 percent of the return. 

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Coca-Cola Co reported a third-quarter profit that topped Wall Street estimates by a penny, helped by higher sales volume and cost cuts.

The world’s largest soft drink maker said on Tuesday that net income rose slightly to $1.90 billion, or 81 cents per share, from $1.89 billion, or 81 cents per share, a year earlier.

Excluding a charge, Coca-Cola earned 82 cents per share. Analysts on average were expecting 81 cents, excluding items, according to Thomson Reuters I/B/E/S.

Net operating revenue fell 4 percent to $8.04 billion.

Sales by volume rose 2 percent.

Coke’s broad geographic footprint, especially in developing markets such as India and China, is helping it weather a slowdown in the United States.

The company’s shares were down 0.4 percent at $54.60 in trading before the market opened.

(Reporting by Martinne Geller; Editing by Lisa Von Ahn)

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