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Live. Good morning and welcome

to the program. I'm Alicia

Barry. In 'Business Today', the

IMF says the world's in a great

recession with few growth

prospects. Tough conditions -

latest data shows businesses

and jobs in Australia under

pressure. And opportunity

knocks - the Chinese investors

snapping up bargains in

America. Those stories are

coming shortly but first let's

take a quick look at the market


For more on the market action

I'm joined by Chris Weston from

IG Markets. Chris, we've seen

the strongest close on Wall

Street this year. Run us

through the session. We saw

the Dow finish 5.8% higher

which is fantastic for our

market as well. Certainly a lot

of traders in the US thought

the US market had been over

sold by the most in 50 years so

people were looking for a

short-term bounce and that's

what we got. We were looking

for good news to pile into

stocks. We got the news from

Citigroup saying they had potentially made a profit in

the first quarter and saw the

huge overhaul of regulation by

Ben Bernanke which saw the

momentum trade higher and the

Dow e closed up 5.8% in the

end. Let's look at the profit

news from Citigroup. What can

you tell us? Wee talking about

a company that's made losses in

the five previous consecutive

quarters totaling about $37.5

billion. A note was sent out to

employees saying they'd already

achieved about $19 billion in

revenue between January and

February and that compares to

21 billion in the previous time

this year and that's why we saw

their share price rally. We've

also heard from US Federal

Reserve chairman Ben Bernanke,

what's he calling for this

morning? An overhaul of the financial infrastructure to

curb any future crises going

forward. He wants a global

coordinated effort. He stressed

the importance of finding new

ways of handling the big

institutions deemed too big to

fail. That's why we saw big

rallies on the banks , seeing

JP Morgan and Bank of America

up double digits. What does

this news mean for regional

markets today? Its going to be

a fantastic day's trade,

especially from the ASX. We're

calling had ASX up about 80

points to open 3264. The Asian

markets should follow suit, the

hang seng opening 4% higher

around 121 frieth and the

Nikkei around 7358. It should

be a good day's trade. How are

oil and gold fairing? Last

night we saw gold down 2.8%,

the down trend has continued

there. It's trading below the

$900 an ounce mark, certainly

oil follow ed suit as well,

down 3%. A lot of people trying

to position themselves ahead of tonight's inventory report

expected to show an increase in

stockpiles of half a million

barrels. Is there any economic

data out there for investors to

lookforeward to today? I

briefly mentioned the inventory report which should have a

material bearing on the oil

price and therefore the stock

market tomorrow. We've got the

Australian Westpac consumer

sentiment figures out about

10:30, home loan figures out at

11:30. We've got

Germanificatory orders later

and the Euro should move on the

back of that and in Japan we've

got core machine orders which

should be looked at in terms of

how the Nikkei is going to

perform for the rest of

today. That was Chris Weston

from nar IG Markets there. Now

let's take a look at what's

happening with currencies and


The head of the International

Monetary Fund is now calling

the global economic crisis the

great recession. At a meeting

of African leaders in Tanzania,

the IMF's managing director

Dominique Strauss-Kahn says the world's economy will shrink this year for the first time

since the end of World War II.

He says it's the worst

performance in most people's

lifetime and the world must not

forget continents like Africa

as the economic turmoil

deepens. There have been commitments by different parts

of the world to provide new

resources to the IMF. Already

part of this commitment has

materialised. I am thinking

about $100 billion loaned by

Japan. Mr Strauss-Kahn is

hoping to secure more donations

to developing nations from the

G20 summit next month. And US

Federal Reserve chairman Ben

Bernanke has called on

Governments to draw up a

comprehensive strategy to

combat this global recession.

The IMF's been warning about.

Speaking ahead of awalk sum, Ben Bernanke warned there would

be no susanable recovery until

steps were taken to stabilise

the international financial

system. We must have a

strategy that regulates the

financial system as a whole. In

a holistic way not just at its

individual components.

Particular strong and effective

regulation of banking

institutions, although

necessary for reducing systemic

risk are not fish by themselves

to achieve this aim. He also

acknowledged the US failed to

properly manage a flood of

capital over the past decade

and a half and highlighted the

disparity in the level of

savings between western nations

and east Asian economies. A

chronic lack of savings

relative to investment in the

United States and some other

industrial countries combined

with an

Retailers are hoping

consumers will spend more this

time and everything's a

marketing opportunity. By

linking our marketing program

to the Federal Government's

stimulus package we're trying

to encourage people to spend

it. So avoid the crowds, go

shopping. Chinese officials

have painted a gloomy outlook

for the country's export

reeling from a collapse in industries which are already

demand from their major trading

partners. The Minister for

commerce confirmed China's

trade fell again in February

and the outlook for the coming

months is fairly negative. The

slump in demand for China's

exports has left many companies

manufacturing, many economists for thine Chinese exports in the downbeat short-term outlook migrant workers. Looking beyond having a severe impact on admitted the recession is Chinese Government also 1.6% since last year. The Consumer Price Index has fallen with stock piles of goods. The

makers have taken aggressive coming decades. Chinese policy power world growth over over convinced its economy will help and commentators remain

Australian national community, Yiping Huang, about the situation there. He says he's positive China is on target to ajunct professor at the economist for city group, now spoke to the former chief Asia policy decisions. Recently I

reach 8% growth this year. I

think there are two reasons

behind it. The first reason I

think people have been very

pessimistic about a slowing

down in production activities

but in part that exaggerated by

the commodity prices slowing

down and the commodity is

becoming less robust. Producers

are slashing their invent irz

so that slows the production activities much more than

otherwise would be suggested by

underlying amount as in the

economy. The main reason we are

confident China can achieve 8%

growth and the Government's

ability and willingness to mobilise resources to support

the growth and they did it 10

years ago, we think they can do

it again. Now the country's $585 billion stimulus package

has focused on infrastructure

spending. Do you think this is

the best policy choice for both

maintaining social stability

and sustaining rapid growth?

Probably not. The massive

stimulus package can support 8%

growth as I mentioned earlier,

but the difficulty, I think, is

the 8% growth may not be able

to create the kind of jobs that

China needs at the moment, ie

the unemployment rate probably

will rise over time and that

means the social stability can

be at risk and the reason why

the Government is so keen in

supporting strong growth, 8%

growth, is because they are

concerned about social

stability and slower job

creation so if that cannot be

ensured then there is a

question whether you should

spend all the money on infrastructure or actually you

spend more money on social

welfare system and so on which

you will have a more direct

impact on social stability. The

other point obviously is when

you spend all the money on

infrastructure, China's

overinvestment problem will

rise and there is a deepening

question about the weaker

consumption. If consumption

cannot pick up, growth and

stability is an issue. It would

be much, much better if you

spent more money on social

welfare system. Maybe you have

to accept slightly below 8%

growth but over time that will

be supportive of both social

stability in the near term and

also growth and stability in

the long run. We've also seen

China call for cooperation from

the US to fight the global

downturn. Do you think it's

worried about protectionist rumblings from Washington? I

think that's a key issue, I

think for the policy makers in

China, because the way the

Chinese economy grew during the

past three decades and

hopefully it will continue to grow in that

grow in that fashion, open-door

policies are very important and

open-door policy was a link to

the globalisation trend that

dominated the global economy

during the last several decades

so that will be a critical

condition for China to continue

strong growth in the coming

decades and the key risk

obviously is rising

protectionism, particularly

because of the crisis and

because of the rising

because of the rising

unemployment rate in the US

which would lead to some

political support to the

sentiment of protectionism.

That will be a key risk for the

Chinese growth in the coming

decades but also a key risk for

the global economy as well. And

how do you think the Chinese

will respond to these

protectionist concerns they

have? They are trying very

hard in cooperating with the US

hard in cooperating with the US

and I think the first step they

undertook was to have the high

level dialogue with the US

officials. Looking more broadly

at the global financial crisis,

what are the implications of

Chinese policy responses for

global markets including

markets for commodities,

currencies and other financial

assnets Obviously, if China can maintain strong

can maintain strong growth,

that will be very important for

the global economy and

particularly for the commodity

markets. For instance, we

expect China can maintain 8%

growth and the second quota

could be a turning point for

the Chinese economy. At the

moment the economy is slowing

but for two reasons that could

change during the first

quarter. The first reason is

because the inventory

adjustment could be over by the

adjustment could be over by the

end of this quarter and the

second reason is the stimulus

package can start having an

impact from the second quart.

How do you expect this global

financial crisis will change

the structure of the global

economy? The American

households now start to save

moneyurg that means that their

consumption will probably be

less resilient than before and their current account

their current account deficit

will slightly be smaller. That

will have a significant impact

for economies like China and possibly Australia because

China's export market may be

more limited in the coming

years than the years we just

passed. Second difference is

the risk of premiums being very

high at the moment because of

the crisis and it probably will normalise in the coming

normalise in the coming years

but the risk premium won't go

back to the levels as low as

what we saw a couple of years

ago which means capital is

going to become more expensive

in the coming years. The third

difference I think is also very

important, is if the first two

are true then Asian growth and

the Chinese growth can recover

once the crisis is over but we

are not going to see the growth rates that we

rates that we saw a couple of

years ago, ie for China growth

may not return to 12% for quite

a while but may stay at between

8 and 9%, will still be pretty

strong. So finally then, has

the current crisis brought

around a change in attitude

that highly leveraged risky

methods to achieve growth is

just not sustainable? We need

to distinguish the short-term response and the long-term

response and the long-term response. The short-term

response obviously is because

this risk that the crisis was

directly contributed by too

much borrowing, too much

proposing the asset market and

so on so the adjustment will be

done in the reverse, in the

opposite direction and probably

will be over-done, but over

time I think people, once the

time I think people, once the

economic conditions are

normalised, we will still start

to see again borrowing

activities but what we need to

keep in mind, and particularly

that's relevant for the

regulators, that when the

economy is booming, when the

asset market is booming, they

needed to keep a close eye on

the risk associated with their

prosperity, particularly

deleveraging and borrowing

deleveraging and borrowing activities. Yiping Huang,

thank you.

Well, times like these

present astute investors with

opportunities and there are

still plenty of millionaires in

China who have available

capital and the battered US

housing market is firmly in

housing market is firmly in

their sights. Packing for his

first trip to America, this man

is not heading to the US for

business or fun, he's house

hunting. It's good time, he

says, to buy property in the

US. It's Los Angeles, San Francisco, Las Vegas, New

York. This Beijing lawyer and a

few dozen other well-to-do Chinese signed up

Chinese signed up for a real

estate tour of the US. Many

wealthy Chinese, flush with

cash, are looking for investment opportunities so why

not buy a second home here in

China? Because the Chinese

like a good deal. With the US

housing market down double

digits they're coming here,

shopping for a bargain. This

is a 2-bedroom... Looking to

spend between $500,000 and $1 million, these potential buyers

have looked at everything from

foreclosed homes to high-rise

condoes with a view of that all

American icon, the statue of

liberty. For others not ready

to jump on a plane to the US,

American brokers are setting up

shop inside China with models,

DVD tours and brochures. Which

property do you think is more

preferable to you? I think this one.

this one. I think Chinese are

the clever ones. They are

coming now. We are down in

prices. We're not down in

values. They're buying. For

Americans, battered by a

disastrous housing market, that

may not be a bad thing. We

love it, we welcome it.

Remember how scared we were of

the Japanese buying out New

York City? Look, welcome to

the Chinese. Mr Yin thinks New

York is very cool. Will he buy

a piece of America? He wants

to sleep on that but with more

than 3.5 million homes for sale

in the US, he may be just the

beginning of a wave of Chinese

buyers. Many companies are in

survival mode, mergers and

acquisitions haven't dried up

alt, in fact some see it as the

best time to buy or be bought. Two

Two big US drug makers have

agreed to merge in a $41

billion deal, while there's

also been a smattering of small

tech deals in recent weeks.

It's called a defensive merger,

the joining of two competitors

to fend off other suitors. It

also means the two can make

massive cost cuts and put more

marketing power behind their

complimentary products. That's

the so-called industrial logic

and why three potential drug

mergers, one hostile, had been

launched this year alone.

Merchant banker Victor Basta

says more deals like Merck's

$41 billion offer for

Shering-Plough will happen this

year. These are the sort of

deals which can only really be

done during a downturn because Shering-Plough was trading at

twice the price not too long

ago and you can only justify a

deal and make it this attract

frve the Merck shareholders at

times like this when the markets are so

depressed. Companies that want

to merge may find it easier because private equity has pull

out of the merger business for

now. During 2006/2007 there,

was more private equity money

invested than during the entire

previous history of the private

equity industry, just those two

years. The hangover, the

morning-after effect is huge.

Who has stepped in? Just look

at the banks, the so-called forced mergers where the

Government has had a strong

hand. In the UK, the

competition commission, the

rules were waved and for the

HBOS Lloyds merger and if you

look today, news is

look today, news is breaking

that Fortis BNP Paribas have

agreed to tie up and that's got Government intervention as

well. This does not mean M and

A is going gangbusters. Guthrie

says Europe M and A was down

50% in value terms last year.

Not a surprise really since

many deals with valued by

collapsing share price but

deals between airlines, banks

and more drug makers are on the

cards this year.

cards this year. Well, changes

to the way Australian companies

must now report profits are

confusing investors and in many

cases no longer reflect

business performances. Company

directors and the financial services industry say mark to

market accounting is making

reports less transparent and

are now pushing for change. Bad

badbed is the chairman of

listed property group Stockland

which recently reported a

which recently reported a

half-year profit of $128

million but in the same

accounts was a half-year loss

of 726 million. It's getting

increasingly difficult to

understand the true underlying

performance of companies from

the statutory reports and their

balance sheets. It's even

getting difficult for

professionals to understand it,

including I might add,

experienced company directors

Financial and even experienced Chief

Financial Officers. According

to Stockland' accounts, the

$128 million underlyingic

profit which reflects normal

business operations turn under

to a $726 million loss after mark to market adjustments

which in a falling market are

mostly asset write-downs. The

adjustments were forced on

Stockland by international

accounting standards. All

companies are suffering from

the same sprB that is their

accounts are becoming less and

less transparent to ordinary

investors and therefore it's

incumbent on directors, I

think, to explain in the management discussion section

of the directors' report, what

they think the true performance

of the company is and explain why they have made the

adjustments they have from the

statutory report to what they

say is the underlying profit.

Which is why the

Which is why the institute of

company directors and the

financial services institute of

Australasia have released a

discussion paper urging all

companies to standardise the

way they report profits.

They've recommended underlying

profit be reported and then,

like Stockland, reconcile to

net profit. We want to ensure

they do this consistently from

year to year, that they include

both the negative and positive

aspects and ensure they have a

full disclosure as to how they

got from statutory reporting

profit to the underlying

figure. For investors like Geoff Wilson at Wilson Asset

Institute of Company Directors Management, Finsia and the

are heading in the right

direction. What we need is

consistency so you can look at

a result, you can see the

headline figure might show

significant asset write-downs

and then you can quickly

reconcile between that and the

underlying profit. Geoff Wilson

says one of the biggest

problems at the moment is that

big unrealised losses being

forced on to companies are

cutting returns to

shareholders. With the current

situation, if a company doesn't

have profit in that period or

losses its retained earnings

from a significant asset

write-down, it can't pay a

dividend out, where in the US

and in the UK you actually can

pay dividends. It's the concept of mark to market which is

leading to most of the

write-downs and Graham Bradley

says the result is often far

removed from reality. It is

based on a theory that there's

always a ready market for

pretty nearly every a asset

including financial assets. Now

in times like this when there

is a sudden freezing of credit

markets, it's become clear that

there isn't always a liquid

market so mark to market

becomes impossible. But

nonetheless, Stockland had to

do that and while last year

that led to a big loss, in the good years net profit was

vastly inflated which Graham

Bradley says was equally

unrealistic. And now let's take

a look at what making headlines

around the region. The Standard

reports on fears deflation

could take hold with China's

two key price indicators, the

Consumer Price Index and pricer

price index turning negative. The 'Financial Times' says global stock markets rallied on

the back of a 5% gain on Wall

Street sparked by good news

from Citigroup. The Wall Street

journal looks at calls from

Federal Reserve chairman Ben

Bernanke for a regulatory

overhaul in order to avert

future financial crises. That's

all for this edetion of

'Business Today' but if you

would like to look back over

any of our interviews, please

visit our website.We do look

forward to your feedback. I'm

Alicia Barry. Thanks for

joining me. Enjoy your day. Closed Captions by CSI