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GM’s sales drop in August highlights automaker divide in China

BEIJING General Motors Co (GM.N) reported on Monday its biggest drop in China sales in five months for August as global automakers struggle with a deepening economic slowdown and slumping equities in the world’s largest auto market.

Vehicle sales for GM and its joint venture partners fell 4.8 percent year-on-year in August, while Ford Motor Co (F.N) and Nissan Motor Co Ltd (7201.T) also reported contracting sales for the month, highlighting the divide between winners and losers in the Chinese market.

The figures contrast sharply with last week’s major sales gains for Toyota Motor Corp (7203.T), Honda Motor Co Ltd (7267.T) and Mercedes maker Daimler AG DIAGn.DE in China, demonstrating the importance of having fresh, in-demand products to entice buyers.

China’s economy is forecast to grow at its slowest pace in a quarter of a century this year. Mainland stock markets have tumbled roughly 40 percent since mid-June after a sharp run-up that began late last year.

Mercedes offers a fresher lineup than key luxury competitors in China, having revamped many of its models more recently than Audi AG (NSUG.DE) and BMW AG (BMWG.DE) and helping to lift its deliveries last month by 53.1 percent.

And in the past year, Honda and Toyota have released hot-selling sports utility vehicles (SUVs), a segment that IHS Automotive predicts will grow by more than 20 percent this year in defiance of the auto market’s slowdown.

Automakers like GM are now trying to play catch-up.The U.S. automaker launched a new SUV in July under its Baojun budget brand, but the marquee’s nearly three-fold sales growth year-to-date hasn’t been enough to lift the company’s relatively flat 2015 sales.

The sales numbers of GM, Ford and Nissan bode poorly for overall market sales in August. Industry sales for the January to July period were up only 0.4 percent on a year-on-year basis, according to the China Association of Automobile Manufacturers (CAAM). CAAM is set to release August data on Thursday.

In July, CAAM slashed its sales growth forecast for 2015 by more than half to 3 percent, saying the stock market crash depressed consumer sentiment.

Volkswagen AG (VOWG_p.DE) is the top-selling passenger car maker in China with roughly 18 percent market share in 2014, followed by GM and Hyundai Motor Co (005380.KS).

(Reporting by Jake Spring; Editing by Muralikumar Anantharaman)

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India rejects patent on Pfizer’s arthritis drug

MUMBAI India has again denied Pfizer Inc a patent on its rheumatoid arthritis drug tofacitinib, the latest setback for a multinational drugmaker seeking to enforce its intellectual property rights in the country.

Pfizer sought a patent that covers an important chemical formulation of the active compound in the medicine, but the Indian Patent Office said the company would have to establish that the compound for which it is seeking a patent is therapeutically more effective than the active compound.

“The invention disclosed and claimed in the instant application … is not considered as an invention under the provisions of the Act,” Bharat N S, an assistant controller at the patent office, wrote in an order dated Sept. 3.

Pfizer is reviewing its options for further action, a Mumbai-based company spokesman said in an emailed statement.

Drug patents have become a thorny issue for global drugmakers seeking to expand in India’s fast-growing healthcare market.

Companies including Pfizer, Bayer and Roche have in recent years struggled to retain exclusivity on drugs in India, and have blamed patent laws they say are designed to favor the local industry.

India, however, has said its drug patents policy is designed to ensure medicines remain affordable for the country where less than 15 percent of the population has health insurance.

India’s patent office had rejected Pfizer’s application to patent tofacitinib in 2011, but was ordered to reconsider the decision by the Intellectual Property Appellate Board, after Pfizer appealed.

(Reporting by Zeba Siddiqui; Editing by Miral Fahmy)

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German industrial output up in July, strongest gain so far in 2015

BERLIN German industrial output rose in July at its fastest pace so far this year, data from the Economy Ministry showed on Monday, suggesting Europe’s largest economy powered ahead at the beginning of the third quarter.

Factories produced 0.7 percent more goods than in the previous month, the ministry said. That was the strongest increase since December, but it missed the Reuters consensus forecast for a 1.0-percent rise.

The June figure was revised up to a 0.9-percent drop from a previously reported 1.4-percent fall.

“Overall, the slightly positive trend in the industrial sector is continuing,” the ministry said in a statement, adding that order books were filled thanks to strong demand from abroad and that companies remained confident.

(Reporting by Michael Nienaber; Editing by Paul Carrel)

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BlackRock’s buyout arm sees opportunities in China real estate

HONG KONG The private equity arm of BlackRock Inc (BLK.N) is ready to increase its exposure to Chinese commercial real estate as it sees good entry points following recent weakness in the economy and credit environment, an executive of the U.S. money manager said on Monday.

John Saunders, Head of Asia-Pacific Real Estate at BlackRock, told Reuters the fund would target mass-affluent shopping malls and Grade A and B offices in China’s first-tier and selective second-tier cities.

“We see the current malaise as a good entry point that we believe will throw up some good opportunities,” Saunders said in an interview at his office in Hong Kong’s central business district.

BlackRock, which is the world’s biggest asset manager, oversees about $8 billion in property investments in Asia.

(Reporting by Clare Jim and Denny Thomas; Editing by Anne Marie Roantree and Muralikumar Anantharaman)

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Oil prices fall on global glut fears, slowing U.S. jobs growth

SINGAPORE Oil prices fell on Monday as oversupply concerns, a firmer dollar and lackluster U.S. non-farm payrolls data weighed on global markets, but a rebound in Chinese stocks after a two-day holiday helped prop up prices.

The long Labor Day holiday in the United States may also lead to thin trading until U.S. markets open in the next session.

“I think there is a bit of investor relief China’s stock market opened relatively firm,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.

China’s main indexes rose on Monday in the first trading after a two-day holiday during which further restrictions on futures trading were announced.

Oil prices have seesawed in recent weeks due to turmoil in global stock markets after a devaluation of its currency and weaker economic data raised concerns about a slowing Chinese economy.

A surprise build in U.S. crude inventories and fears of a global oil glut, a stronger dollar and uncertainty on a possible interest rate hike when the U.S. Federal Reserve policymakers meet next week all weighed on sentiment, Spooner said.

“There is a 30 percent probability attached (by investors) to a September (rate) increase,” Spooner said.

Brent crude for October delivery LCOc1 fell 37 cents to $49.24 a barrel as of 0656 GMT, after ending the previous session down $1.07, or 2.1 percent. The European benchmark fell almost 1 percent last week.

U.S. crude for October delivery CLc1, also known as West Texas Intermediate, was down 32 cents at $45.73, after settling 70 cents down, or 1.5 percent, in the previous session.

“U.S. non-farm payrolls turned out weaker than expected, causing oil prices to fall on anticipations of a weaker economy,” Singapore’s Phillip Futures said in a note on Monday.

U.S. jobs data on Friday showed non-farm payrolls increased 173,000 last month compared with economists’ forecasts of a 220,000 gain.

A surprise gain in U.S. crude stocks of 4.7 million barrels in the week to Aug. 28, the biggest one-week rise since April, added to worries of an oil glut.

That was despite the number of U.S. oil rigs falling by 13 to 662 last week, according to Baker Hughes data, the first decline in rig counts in seven weeks.

“If we continue to see cuts in production it may be a constructive development” for oil prices, Spooner said.

A firmer U.S. dollar .DXY also hurt oil prices by making the commodity more expensive for holders of other currencies.

Investors are now waiting for second-quarter Eurozone GDP growth figures on Tuesday to give oil further direction.

(For a 24-hr chart on Brent, click here: here)

(For a 24-hr chart analysis on U.S. oil click here: here)

(Editing by Tom Hogue and Biju Dwarakanath)

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Tesco sells South Korean unit to MBK-led group for $6.1 billion

LONDON Britain’s Tesco (TSCO.L) has agreed to sell its South Korean unit to a group led by private equity firm MBK Partners for $6.1 billion, it said on Monday, in its first major disposal since it hit financial difficulties.

Seeking to raise funds to revitalize its domestic business, Tesco said it would sell Homeplus, its biggest overseas unit, to a group of investors led by MBK and including the Canada Pension Plan Investment Board, Public Sector Pension Investment Board and Temasek Holdings [TEM.UL].

The world’s third largest retailer has been looking to make disposals after a slowdown in its home market led to a string of profit warnings and the reduction of its credit status to junk.

Tesco said under the terms of the deal it would receive 4 billion pounds ($6.07 billion) in cash. After adjustments for tax and transaction costs, the net cash proceeds will be around 3.35 billion pounds.

Reuters had previously reported that MBK was the preferred bidder for Homeplus, however the involvement of the Canadian Pension Fund was new.

“This sale realizes material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet,” said Tesco Chief Executive Dave Lewis.

(Reporting by Kate Holton; editing by James Davey)

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Bad loans haunt Greek banks seeking new start

ATHENS Turned down for a 10,000 euro ($11,100) loan, George Sarris is one of hundreds of thousands of small business owners shunned by Greek banks.

Pointing to the parliament building overlooking his small cafe in Athens’ Syntagma Square, the 35-year-old blames Greece’s turbulent politics for the troubles of its banking system.

“It took three years for the country to come close to turning around,” said Sarris, referring to modest economic growth in the second half of 2014, which has since halted.

“After the January 25 elections it all went downhill. Now things are bleak. For me, there is no salvation here.”

This is the background against which Greeks head to the polls again on Sept. 20, the country’s fifth elections since its debt crisis started in 2009. The snap poll was triggered by the resignation of leftist Prime Minister Alexis Tsipras, whose agreement to an 86 billion euro bailout cost him the parliamentary majority of his coalition government.

Six months of wrangling with creditors had led to a 40 billion euro deposit run, culminating in Greek banks being shut and capital controls enforced at the end of June.

Greek banks were badly wounded and limited the little lending they did even further, fearful about their exposure to loans many borrowers may never be able to pay back.

This fear of a rise in so-called non-performing loans (NPLs) is a deterrent not only to the banks, but also to potential investors whose money is needed to recapitalize them.

While banks have reopened and capital controls have somewhat eased, small business owners such as Sarris, who account for about 75 percent of private sector jobs, are starved of credit.

“All our suppliers have stopped accepting credit. Everyone is short on cash. I still pay salaries, but I’m behind on my taxes…My business is down 35 percent this year and I don’t want to lose more customers,” said Sarris.

The immediate outlook for Greece is equally bleak.

Along with its lenders, Athens expects gross domestic product to contract 2.3 percent this year and another 1.3 percent next year before the economy bounces back. These projections are in the ECB’s baseline scenario in a health check of Greek banks, a banker with knowledge of the matter said.


The deal struck by Tsipras includes a recapitalization of the banks. However, interviews with some of the sector’s top executives, as well as international investors, suggest this will not be sufficient on its own to kick start lending.

“The economy’s return to growth and its funding from the banking system will be affected by a number of factors, including political stability, the implementation of bailout reforms, a successful conclusion of the first review in October and the completion of banks’ recapitalization with private investor participation,” Fokion Karavias, Chief Executive of Eurobank (EURBr.AT), one of Greece’s top four banks, said.

The banks’ needs will be known once asset quality reviews, currently underway, and subsequent “stress tests”, are completed, likely by the end of October. The latest bailout, the country’s third, allocates up to 25 billion euros for bank recapitalization, although bank insiders say the figure is more likely to be in the 10 billion to 15 billion euro range.

Bank executives who spoke to Reuters on condition of anonymity also say there is likely to be little difference in the health of the four top lenders – National Bank of Greece (NBGr.AT), Alpha Bank (ACBr.AT), Eurobank and Piraeus Bank (BOPr.AT) – although National Bank is seen as somewhat stronger because it has assets in the Balkans and Turkey.

But convincing private investors to put their money into the banks will be a major test of confidence.

The more private investor money – from U.S. hedge funds, private equity firms and other specialist investors – that can be raised, the less bailout money will be needed.

A Greek bank rescue fund financed by Greece’s creditors pumped 25 billion euros into the banks in exchange for shares in 2013 and already holds majority stakes in National Bank, Piraeus Bank and Alpha Bank, and a 35 percent stake in Eurobank.

Meanwhile private investors who injected 3 billion euros into Greek banks in the 2013 recapitalization, and bet another 8.5 billion euros on them last year, now face dilution.

“Now international investors have to be won over again,” said Apostolos Gkoutzinis, who leads law firm Shearman Sterling LLP’s European capital markets group and advised Piraeus Bank on its previous 1.75 billion euro recapitalization.


The biggest deterrent is not lost deposits, which have been covered by the European Central Bank-controlled ELA, or even the banks’ pummeled share prices, which some see as a buying opportunity. It is loans that could turn bad, spelling higher than expected capital shortfalls.

Greek banks are estimated to have had more than 100 billion euros of exposure to such bad loans in the first quarter of 2015, some 40.8 percent of their loan books.

To address this, the banks tried to sell some of them last year, mostly those to companies, which account for the majority of their bad loans. Piraeus Bank put together a deal to sell corporate loans to private equity firm KKR Co LP (KKR.N) under which Piraeus would have continued to administer the loans. But this unraveled when Syriza came to power.

One option raised has been to set up a “bad bank”, to give the banks a clean sheet. While this puts more taxpayer money at risk it may be Greece’s best option to attract international investors, and get banks lending again.

Another solution to the bad loan problem proposed privately by Greek bank executives is the sale of contingent convertible debt (CoCos) as part of the recapitalization. These bonds convert to equity and act as a cushion if a bank’s capital falls below a set level. Investors are paid higher rates for the risk.

“How likely is it that further capital raisings might be needed in the future? Will the Greek banks be capitalized enough to sustain those kinds of bond payments and grow their businesses? If they don’t, then those bonds could be high risk,” said Justin Craib-Cox, a fund manager at Aviva Investors.

Time is tight to find a solution which will protect bank depositors. If the bank recapitalization is not completed by the end of the year, which is possible given political uncertainty, then the European Union’s Bank Recovery and Resolution Directive becomes enforceable. This could mean losses for unsecured depositors with more than 100,000 euros in their accounts.

If, on the other hand, a new government is quickly formed that sticks to the terms of the bailout, the European Central Bank could start buying Greek bonds, lowering the financing costs of its banks and making such “haircuts” less likely.

“The single largest difference between Greece’s banking system and those of other European countries is the political and economic uncertainty, which makes a huge difference in the way you can price things,” said Brad Palmer, executive vice president at Sankaty Advisors LLC, which invests in bad loans.

(Additional reporting by Sinead Cruise and Steve Slater in London; Editing by Alexander Smith)

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World’s top 300 pension funds see assets pass $15 trillion: study

LONDON The combined assets of the world’s largest 300 pension funds grew more than 3 percent in 2014 to a new high of more than $15 trillion, driven by retirement saving in North America and Europe, a study showed on Monday.

Ageing populations in the developed world have spurred pensions saving, while governments have provided incentives to encourage citizens to save more to avoid poverty in old age.

North America had the highest five-year combined compound growth rate of around 8 percent, according to the study, compiled by specialist newsletter Pensions Investments (PI) and consultants Towers Watson.

Growth in Europe over the same timeframe was more than 7 percent, and in Asia Pacific was around 4 percent, said the study, based on sources such as the PI 1000, a list of the top 1,000 U.S. pension funds, as well as figures from annual reports, websites, and direct communication with pension fund organizations.

“While liabilities have also ballooned, this still represents a significant increase in savings wealth,” said Chris Ford, global head of investment at Towers Watson.

Yet the decline of defined benefit funds in so-called “final salary” schemes was also shown in the study, which found such funds accounted for 67 percent of total assets, down from 75 percent five years ago.

Defined contribution (DC) assets, where the size of the retirement pot is dependent on market moves, grew the most, by almost 5 percent, it added, followed by defined benefit at almost 4 percent.

As a result, the funds represent around 43 percent of global pension assets, the study said.

(Reporting by Simon Jessop and Carolyn Cohn; Editing by David Holmes)

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Asia subdued as China stocks see-saw after trading resumes

TOKYO Asian stocks were subdued on Monday, lacking clear direction as Shanghai shares see-sawed in and out of the red after the Chinese markets resumed trading following a four-day long weekend.

Spreadbetters forecast Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI opening a touch higher in a rebound from Friday’s steep losses.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.7 percent.

The index had already dropped earlier in the session following Friday’s Wall Street slide, triggered after the August U.S. jobs report failed to give a clear view on the Federal Reserve’s interest rate hike.

Japan’s Nikkei .N225 was down 0.1 percent after hitting a 7-month low. South Korea’s Kospi .KS11 dipped 0.2 percent and Australian stocks shed 0.7 percent.

Chinese stocks once again took center stage when markets reopened after closing over Thursday and Friday as Beijing celebrated 70 years since the end of World War Two.

Shanghai shares .SSEC initially rose as much as 1.8 percent following remarks over the weekend by regulators aimed at calming the market, but the index was last down 0.8 percent after bobbing in and out of the red.

China’s policymakers and regulators tried to soothe jittery markets, promising deeper financial market reforms and stressing the economy was showing signs of stabilizing.

U.S. stock indexes dropped more than 1 percent on Friday after a mixed August jobs report did little to quell investor uncertainty about whether the Federal Reserve will hold off from hiking interest rates this month.

Non-farm payrolls increased 173,000 last month, fewer than the 220,000 that economists polled by Reuters had expected. But the unemployment rate dropped to 5.1 percent, its lowest in more than seven years, and wages accelerated.

“The jobs report itself was good. The U.S. economy is recovering, and it should be good for the Japanese economy if we didn’t have worries about China,” said Yoshihiro Okumura, an analyst at Chibagin Asset Management in Tokyo.

Previously strong expectations that the Fed will tighten this month have weakened somewhat on the global markets turmoil and emerging worries over China’s economy and its potential impact on global growth.

The dollar was on the back foot against its peers with Friday’s U.S. jobs data inadequate to give a definitive clue to the Fed’s rate hike timing.

The U.S. stood at 119.39 yen JPY= after sliding from a peak of 120.19 on Friday. The euro rose 0.1 percent to $1.1143 EUR= following up an overnight bounce from a low of $1.1090.

Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, reckoned the dollar could slip back to 118 yen, if not a little further.

“With steep equity losses before the weekend, and the prospects of more volatility from China, which re-opens after being closed September 3-4, leaves the dollar vulnerable to additional losses,” he wrote.

“These concerns likely outweigh the prospects of additional easing by the Bank of Japan, which many continue to see as likely as early as next month.”

The dollar index, a gauge of the greenback’s strength against a basket of key currencies, was little changed at 96.295 .DXY after losing 0.2 percent overnight.

The Australian dollar, used as a liquid proxy of China trades, fell to a fresh 6-1/2-year low of $0.6892 AUD=D4 early on Monday.

Investors have been aggressive sellers of the Aussie in recent weeks, in large part due to heightened concerns about a hard landing for the Chinese economy. China is Australia’s top export market.

In commodities, crude oil fell on a lingering supply glut and as the ambiguous U.S. jobs data clouded global demand prospects.

U.S. crude oil futures CLc1 were down 0.8 percent at $45.70 a barrel and Brent crude dropped 1 percent to $49.14 a barrel LCOc1.

(Reporting by Shinichi Saoshiro; Additional reporting by Ayai Tomisawa in Tokyo; Editing by Eric Meijer)

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