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Live. Good morning. Welcome to

the program. I'm Sue Lannen. In

business today - no detours.

General Motors heads for

certain bankruptcy. Asset play

- ANZ builds its war chest for

the Asian operations of RBS.

And sitting on the dock -

riding out the downturn in a

popular Hong Kong tourist spot.

Those stories shortly. First

markets. let's take a quick look at the

For more on the market action

I'm joined by Chris Weston from I'm joined by Chris Weston

IG Markets. Good morning,

Chris. Wall Street lost most of

yesterday's gains? Exactly.

positive with Yesterday's session was pretty

positive with the consumer

confidence up but last night we

saw the S and P down 1.9%, it

closed at the lows again, very

disappointing, trading at 89 wn

at the close. Looking at the

bond and debt market, we saw

yields on a 10-year, up around

18 basis points, the Government

buying assets on long-term

treasuries and having no effect

at all, just expanding their

balance sheet, very negative

for recovery. We saw the FDIC

putting a number of banks on

its troubled list which sent

financials as a sector down

3.8%, GM down 20%, the

shareholders not liking the

debt for equity shop. The,

market finished on its lows

which is negative and a

negative lead for our market.

There was positive

economicidate ow out of the US,

sales of existing homes rose? Yes, that's right. They rose

more than expected. We saw

existing home sales 4.68

million which did support the

market for most of the session,

we were in positive territory

for a good part of it. We've

seen foreclosure auctions,

house prices drop and yesterday

we saw it down 19.1%. We've

seen people trying to pick up

the houses at bottom prices and

we've seen discount buying.

That's helped pick up the pace

on home sales which is positive

for the economy. We need to see

these existing homes being sold

so house prices can stabilise.

If we look at commodities, oil

has increased above US $63 a

barrel, that's the first time

in six months. Correct. We saw

it trade up to just over the 64

levels and from a technical

point of view very, very

positive. We saw it trade above

the 200-day moving average

which is very positive and

helped it move higher. We saw

the Saudi oil Minister saying

he sees oil around $75 by

year-end, pretty much in line

with where most brokers will be

putting it. That helped oil

trade higher. Since the close

we're trading around $63 a

barrel. What do you expect from

regional markets today? It's

going to be quite a weak

session. Again the Australian

market held back by the ANZ

capital raising. We saw the ASX

opening around 3754 and the

cash rate down around 35 points

from yesterday's close,

financials coming into the

spotlight, we expect them down

1 to 2%. We got weak leads from the US. We expect materials to

be down, we're expecting BHP

Billiton down 1.5%. The Nikkei

we're looking for it to open

lower around 9345. The rest of

the Asia Pacific region, the

hang seng and a number of China

on a holiday today so we're expecting weak numbers from

those markets. Thank you.

Let's take a look at what's

happening in currencies and


Bondholders are pushing

General Motors to the brink of

bankruptcy. In what was GM's

hope of restructuring a debt

for equity swap for bondholders

was rejected, pushing the

filing that could come in the company closer to a bankruptcy

next few days. GM's board of

directors will meet later this

week to decide its move. The

deal fell apart because GM

couldn't convince people like

Hal John. In 2002 the Saint Lewis businessman bought

several hundred thousand

dollars of GM bonds for his two

daughters. I believed in the

company. It was a great

institution. I believed in

their future and that's why I

bought the bonds. GM insisted

bondholders like John walk away

from their investment said for

a pittance. Most refused. In

terms of my investment this is

probably 4 cents in the dollar.

It's agreeings s, outrageous,

it defies any kind of

explanation. The deal's collapse means bankruptcy is

imminent. The company that

emerges will be owned largely

by the US Government which may

spend up to 50 billion more

than GM. In return it will own

about 70% of the company, the

UAW up to 20%, bondholders and investors the rest. In bankruptcy it's often the case

that everyone's unhappy.

Bankruptcy is a situation where

there's never enough money to

go around. That includes union

workers giving up $10 billion

GM owes their retiree health

plan. Ift rrts a crying shame

we put in 35 years and turn

around and they're just cutting

us just like that. Union

retirees face imminent cuts in

medical benefits, dental and

vision cover on July 1. It's

like a nightmare. You wake up

and everything's gone. Dealers

too stand to lose. Hundreds

that GM cut loose have fewer

legal options to fight in

bankruptcy. For taxpayers, due

to be the new owners, it is a

giant gamgle. The Government dozen want to have direct

representation on the board of

directors but going forward

there will always be the

elephant in the room. General motors rrz has already received

$20 billion in Government

loans, can could get up to

another 50 million in

bankruptcy. Will that

investment ever pay off? That

could be the $70 billion

question that takes many years

to answer. Australia's 4th

biggest lendser the favourite

to buy the Royal Bank of

Scotland Asian assets. The ANZ

banking group raised almost $2

billion yesterday by selling

new shares to fund

acquisitions. The move

significantly boosts ANZ's

balance sheet and gives it

significant fire power in its

bid to become a regional

banking giant. With the other

big banks already having gone

back to their shareholders for

billions of dollars, it was

only a matter of time before

ANZ followed suit. Something

conceded by chief executive

Mike Smith at the bank's last

profit result. Capital is

about when you need it you have

opportunity comes to raise it to raise it or when the

you should do. Both need and

opportunity are behind ANZ's

move. Need because the bank is

bidding for some of the Asian

assets of Royal Bank of Scotland and opportunity

because ANZ share s price has

risen strongly in recent months

as confidence has returned to

the shark. It's more about the

tame table of the astharts

looking to bid for or some pre

bid conditions as to why

they've gone now and there have

been some large capital

raisings over the last few

weeks and at some point that

window will close. IG Markets

analyst Chris Weston believes

ANZ has a nervous eye on its

capital position. The tier one

ratio probably is at the shy

end of the other freeze

situation at the moment and we

know the situation is expected

to deteriorate. If you look at

the economic situation and some

of the metrics there, they're

expected to get worse. There

are some who think ANZ has

brought forward it capital

raising because of ASIC's

surprise earlier-than-expected

lifting of the ban on

short-selling of financial

stocks but Donald William says

the threat of attacks from

hedge funds hasedesed. I think

people are underweight

financials and I think the big

gains from selling financials

short have been made but also

the underlying conditions for

the financials are

improving. The institutional

placement is being made at

$14.40 a share which is a

discount of just 7.5% to

Tuesday's closing price of

$15.57. It's one of the

smallest discounts on a

placement since financial

markets began to implode 18

months ago. It's an indication

the risk appetite of investors

hagone up and it's an

indication of improving markets

and improving confidence

generally. While ANZ was shoring up its balance sheet

and promoting its latest

expansion plans, Queensland-based Suncorp Metway

was revealing how it's still being buffeted by the global

financial crisis. Third-quarter

bad debt charges were $136

million with total impaired

loans up 26% to 1.2 billion and

the company has warned that for

the full year its bad debt

charges will be higher than previously expected. New

demands from China are

threatening the iron ore

pricing system that's worked

for decades. The country's

steel makers have rejected a

33% cut in iron ore prices

dictated by a deal agreed

between Rio Tinto and Nippon

steel. The deal would normally

dictate the benchmark price for

the global industry but China

is insisting on a cut of more

than 40%. The move highlights

the pressure on the annual

contract negotiation in place

for 40 years. The system is

coming undone as more Chinese

steel companies and big miners

look to market pricing. Mining

industry leaders in Australia

say the recent pickup in demand

from China for iron ore may not

be sustainable. BHP Billiton

chief executive Marius Kloppers

and others say recent buying

may not have been based on

fundamentals and they expect

any return to growth to be slow

and protracted. His predecessor

didn't like gazing into crystal

balls but Marius Kloppers was

willing to reach for his at a

key minerals industry

conference continuing in

Canberra. The chief exec tf of

BHP Billiton was cautiously

optimistic. In the medium

term, we don't expect a sharp

rebound in overall world

economic activity, in fact we

probably believe as a company

that the economic recovery will

be both slow and protracted. Mr

Kloppers also questioned the

sustainability of the recent

pickup in demand for

commodities from China and said

China's current buildup of

stocks did not entirely reflect

underlying demand and was tied

to China's massive $900 billion

economic stimulus package.

What is still unclear, despite

all of the positive signs, is

the ability of the stimulus

package to offset the effects

of the decreased exports. That

caution is shared by aus

minerals' chief executive.

We're seeing, I think, maybe

some of the thes in terms of

what's converted through to

prices, maybe some of that's

overblown. Certainly we hear

the Chinese Government is

buying stocks, strategic

stockpiles. So that's not consumptionyism think that's

where the apparent demand is

probably higher than the real

demand. But global resource

analyst Tim Goldsmith has no

doubts about the demand in

China. I don't think the

mining boom stopped, I think it

got masked by other events. I

think we've still got the

industrialisation of half the

world's population. That's a

100 to 200 year gain and we're

only 13 years into it. We do

see stabilisation in the next

six months as the OECD finds

its base level, restock ing

commences and as China's

restocking exercise evens

out. Marius Kloppers avoided

talking about iron ore price

negotiations and speculation

that his company is in talks

with Rio Tinto but he did weigh into the carbon emissions

debate, saying that the best

benefits will come from early

action but on a global level.

Alliances to tackle this

problem will need to cross

national and cultural

boundaries but the developed

world has a clear leadership

responsibility in achieving a

global approach. Greg Combet

has told the conference that

the Government is determined to

press ahead with its Emissions

Trading Scheme despite the

legislation facing defeat in

the Senate. I can assure you

that the Government is not

engaging in posturing here. The

Prime Minister and the entirety

of the Government are committed

to this important economic and

environmental reform and we

will prosecute it. Anglo Coal

Australia boss and minerals

council member Seamus French,

says the Government has not

listened to the industry. Why

they choose to ignore the lead

set by the European Union and

US in taking a more measured

approach to introduction of a

carbon economy, they have seen

fit to ignore all the facts

presented to them, they

continue to ignore all the fact

and continue down their path

that they've been on regardless. And as far as the

mining industry is concerned,

that path is filled with

uncertainty. China will cut

capital requirements for some

fixed asset investment projects

to support the recovery under

way in the region's second

biggest economy. The economic

picture is mixed with exports

still weak and many not convinced that the

economy...China's economy is

still sputtering but on the

streets there are signs of

life. This is one of Beijing's

busiest construction markets.

There's lumber here, household

goods, plumbing and much, much

more. When the economic crisis

hit, China's construction

industry took it particularly

hard, construction projects

across Beijing were halted leaving thousands of migrant

workers out of a job ask these

vendors low on business. Mr Hu

says he's been peddling marble

for years and this is the worst

slump he's seen. "There are

fewers clients here than

before. There used to be a lot

more people," he says. This

woman's shop sells anything and

everything for bathrooms.

"Fewer home sales mean less

demand for renovation materials

and for toilets. People only

come to buy a new one when the

old one breaks," she says.

Everything is interconnected,

they all agree, but lately

things seem to be looking up.

Recently the demand for stones

has been climbing, says Mr H

irk,, are I do think the

economy is recovering. So some

merchants are feeling more optimistic. China's property industry is starting to turn

around. People are buying and

building new homes again. Many

credit China's massive stimulus

package for giving the economy

a much-needed boost but shop

owners know any good news may

not last so, like most

practical Chinese, they say

they'll be grateful for good

times but prepared for the bad.

Many would say the global

financial crisis has virtually

ended any chance of finance and

economic integration across

Asia. Others argue economicint

graingedz could work and

provide more financial

stability with China and the US

at the helm. One man who

supports integration is

Fariborz Moshirian, professor

of finance at the University of

NSW. What do you see as the benefits of economic ingration

in Asia? First of all, let me

say that financial and economic

integration is a process and

not an event and naturally,

China will have great incentive

to address here structure of

the mix in her economy as part

of the process of financial and

economic integration. It will

also assist to over concentrate

imbalances in the US and China

which, as some commentators

have argued, has been one of

the key factors which

contributed to the current

global financial crisis. What

are those main bottlenecks in

China and the rest of the

region? Well, we know that

China should reform her finance

services sector, banking,

insurance. She has to address

the telecommunications and a

small business finance and we

also know that if they have

better social safety nets they

can increase domestic

consumption which will assist significantly both Chinese

economy as well as our region. Hasn't the global financial

crisis ended all hopes of

financial integration in Asia?

We saw what happens when

contagion spreads, it almost

brought down the world's

financial system. Well, that

is true but at the same time we

need to note that the world has

changed and we are learning

from the current global

financial crisis that if

countries can work together and

particularly remove financial

barriers amongst themselves,

the region can become much

stronger and more effective in

dealing with crises such as the

one that we facing. It will be

difficult though, won't it?

Look how hard it was to get the

Europeans to agree. Well, the

European case is a good example

because we know that large

countries like Germany and

France, were suspicious of each

other. We know that the smaller

countries in Europe were

suspicious of larger countries

and we know the differences we

had in Europe amongst 27

countries that we are talking

about and yet the economic and

financial if sentives led them

to become more integrated and I

think with Asian experience now

in the 21st century, we should

accept that there are more good

will amongst Asian countries

despite their cultural

differences, as well as per

capita income, to work closely

together as we are trying to address the current global

financial crisis. Now do you

think that China would need to

float its currency if

integration went ahead? Well,

this is one of the requirements

of any process of financial

integration where China will be

required to move from fixed

exchange rate to flexible

exchange rate and come up with

more competitive exchange rate

and I think that in itself

could assist, as I said

earlier, the current problem of

trade imbalances between the US

and China. Quickly, if we turn

to the Australia free trade

negotiations, will they ever

get off the ground? They've

been going for four years and

13 rounds of talks. Well, that

is true, that any negotiation

is slow when it comes to free

trade, but what we know is that

Australia would like to have

more access in financial

services in China as China has

interest in our mining

sector. But China's already signed a free trade agreement

with New Zealand. Is there

really any incentive for it to

sign a deal with Australia?

Well, what we know is that

Australia is a very

resource-rich country and we

know that China has great

incentive in entering into our

mining sector, at the same time

our financial services industry

can largely benefit from free

access into insurance and

banking sector in China and I

think if we can link the free

trade with investment in both

countries it will be very

beneficial for both parties,

never the Les, the process will

be slow. OK, Fariborz Moshirian

from the University of NSW,

thanks for joining 'Business

Today'. Thank you. Australia's

biggest petrol refiner, Caltex,

is angling to become a major

force in the petrol market but

at what cost to drivers? If

regulators agree, Caltex will

buy more than 300 Exxon Mobil

service stations. The news has

raised concerns about less

competition and higher petrol

prices. Could these be the

ultimate losers in a deal

between two big oil companies?

Motoring groups think so.

Small number of players with

large market share each,

there's always a potential for

the consumer to get the raw end

of the price deal and that

concerns us. Caltex is buying

almost half the country's Mobil

stations, most of them on the

eastern seaboard, for $300

million. Caltex petrol is sold

at 1700 petrol stations around

the country, including the

Woolworths-run outlets. It says

this deal won't be part of its

alliance with Woolworths and

that enhances competition.

Today the big players are

Coles, Woolworths and BP. With

this acquisition that puts us

on a par with those three which

means we've got four strong

players. Motoring groups and

some in Canberra don't accept

that logic. Prices are not

going to fall. In the long run

prices are going to go up.

No-one centralise said a

marketplace to give the

consumer a better deal. Caltex

says it won't control the

market place. It claims its

market share will be on par

with two other big players

after the takeover but

independent analysts Fuel Track

sees this as a more accurate

picture, leaving Caltex with an

effective market share

approaching 50%. It's a

blocking strategy by Caltex to

prevent any serious want ins

gaining a scale of operation in

the retail market that would

allow them to com-Pete effectively against those

duopolies. Motoring groups are

putting their faith in the

competition regulator the ACCC

which must approve the deal.

Japanese retail investors have

poured around $2.5 billion into

mutual funds in the biggest day of fund launches this year. Investors were given the

opportunity to invest in a

total of 14 funds covering

semiconductor firms and banks.

Nomura Holdings, Japan's

biggest brokerage, was heavily

involved in the capital

raising, marketing all but one

of the funds on offer. And

Toshiba has tapped the market

for $3 billion to offset a

record annual lost. Japan's

biggest chip-maker sold 870

million shares, an indication

analysts say that investors'

appetite for risk is

increasing. Hong Kong fishing

village Sai Kung is a favourite

for locals and tourists alike

for its seafood cuisine and

coastal boat trips. It's also a

barometer for the health of

Hong Kong's economy. This

restaurant manager told me he's

seeing less than half the

business he used to. On the

worst days, only 10 of his 200

tables are full. "We can all

see the stock market is

climbing," he says, "But in the

dining industry I don't see any

signs of a rebound. We can't

even talk about a recovery."

Hong Kong unemployment is

currently at a 3-year high,

with food services and

construction among the worst

hit sectors. Summer's a crucial

time for this coastal town. The

people here normally rely

heavily on tourists coming from

Hong Kong as well as the rest

of the world, but now the

businesses here are worried.

This boat owner makes his

living renting out his boat for

cruises and fishing trips. He

says bookings are down 60% from

a year ago. "In May," he tells

me, "I was getting fewer and

fewer telephone inquiries and

everyone haggles on price." The

residents here say that you

could gauge the health of the

economy based on hoy busy this

restaurant strip is and judging

by the number of people we've

seen here today, these businesses are suffering. In

fact a lot of the business

owners that we spoke to here

said they feel the impact of

Hong Kong's worst recession in

a decade and don't see signs of

recovery. And now let's take a

look at what making headlines

around the region - the

'Financial Times' company and

markets page leads with news

that the impending sale of the

Royal Bank of Scotland's Asian

assets could drag on for

months. And the Wall Street

journal reports on why General

Motors bondholders rejected a

debt for equity deal and how

that will impact the company's

attempts to stave off

bankruptcy. That's all for

today. Joan us again tomorrow

if you'd like to look back at

ourfort views go to our website

at Wall Street Australia today.

We'll love to hear from you.

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