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Business Today -

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Good morning. Welcome to the

program. I'm Whitney

Today' - recovery Fitzsimmons. In 'Business

Today' - recovery signs. China

cease it's getting a

significant boost from its

stimulus package. Cash call.

Loyal investors ready for

HSBC's rightses issue. And the

expanding market for Indian and

Australian films. First, a look

at the markets.

I'm joined by Juliette Saly

from CommSec. Good morning.

Wall Street was closed wraudly

lower late last week. It

certainly was. It was all to do

with profit taking and also the

expiry of the futures contract.

Banking and tech stocks hashedest hashedest hit. The Dow down by

122 points or more than 1.5%.

However over the course of the

week the Dow actually put on

1%. The broader share mark was

up more than 1.5% and the

Nasdaq was up by around 2% and

that marks the best

back-to-back weekly gains we've

seen on Wall Street in more

than 10 months. Moving over to

Europe - luxury car maker

Daimler was a new investor.

What can you tell us? The world's second world's second largest luxury

car maker Daimler has announced

plans to sell $2.7 billion US

worth of stock to Abu Dhabi's

Arba Investments. That will

make it the company's second

biggest shareholder. Abu Dhabi

will now have a 9.1% stake.

It's hoped this sell will help

Daimler survive the auto industry

industry crisis. Oil eased by

1% on Friday. The gold price

also easeed on Friday but it

had run up by 3% over the

course of the week so only a

little easing there. Gold off

by about $2.50. It's now at

$956 US an ounce. Moving on to

currencies - the pound has currencies - the pound has

posted its biggest gain against

the greenback. What else can

you tell us? We saw the euro

and commodity link currencies

give up a bit against the

greenback over Friday. The

Japanese yen also eased. The

euro now worth about $1.36

American. We have the

Australian dollar a lot higher

against the greenback. It's

worth about 69 US cents and the

Kiwi justened 56 US cents. Kiwi justened 56 US cents. The

Japanese yen meanwhile buying

96 yen to each US dollar. What

does this mean for regional

markets today? We've already

seen New Zealand's share market

open slightly lower, down by a

third of 1%. Our share market

expected to ease as well. We

had a bit of a softer day on

Friday, but the fact we have

seen weakness in commodity

price and alsobacking stocks

offshore is likely to take away

from the local market today.

The futures pointing to a The futures pointing to a drop

of 20 points or about .6 of 1%.

In Japan we should see a

better day. Japan eased by a

third of 1% on Friday but it's

looking like it will claw back

some ground today due to a

predicted rise in export so the

Nikkei pointing to a gain of

about 20 points. Thanks for

the update. Thanks, Whitney.

happening Now let's look at what's

happening with currencies and commodities.

confident Chinese authorities remain

confident that stimulus

spending will boost the economy

enough to achieve the

government's projected growth

target this year. The State

Council researches group says

the recent stimulus package add

such 1.9% to economic

expansion. China's government

is battling to boost growth

amid tumbling exports, rising unemployment, falling house

prices and the risk of higher

recently says the loan defaults. The World Bank

recently says the nation's

economy is showing early signs

of stabilising as government-backed investment

counters a slump in exports.

China is targeting 8% growth in

2009 as economies from the US

to Japan contract in recession.

The Obama administration

administration is facing

another major test of financial

credibility with the US

Treasury unveiling a plan to

soak up hundreds of billions of

dollars in toxic assets. dollars in toxic assets. The

Treasury will create a

government body called the

public investment corp, funded

by as much as $100 million to

buy troubled bank loans and

assets. It's hope the public

private investment program will

help unfreeze credit markets.

It's part of a larger push to

increase lending and support

economic recovery. Other

determine elements include tests to

determine banks's

recapitalisation needs, tighter

regulation of hedge funds.

Meanwhile, the push to bring in

a retrospective tax on bonuses

paid to AIG executives is

losing a little steam. The Bill

has run into delays in the US

Senate amid concerns the tax

may have unintended

consequences which could harm

recovery efforts. But the level

of public anger over the

pay-outs at the embattled

insurer remains high. An old

bus carrying a load of

community activists toured the

lavish homes of AIG executives

who received


bonuses. Give back the bonus!

Private security guards stopped

them at the driveway. You might have noticed that things are

not going very well for the

rest of us. The lifestyles of

the rich and infamous, the tour

was called. The government has

owned an 80% stake in AIG since

September. So taxpayers feel

they have a right to hold these

responsible. The anger should executives personally

be directed at Wall Street, the

system of compensation that

these bonuses reflect, these

individuals are like the driver

at the wheel of a truck that

has gone out of control. has gone out of control. The Connecticut Attorney-General

boldly named some of them,

publicising a list on his web

site, despite warnings by AIG's

chief that they've received

death threats. All the exec tip

ofs and their families should

be executed with piano wire

around their next. Blum men

thaul says he is concerned

about the safety and privacy of

AIG employees. The only names AIG employees. The only names

made public have already been

publicly report t. The

backlash to the bonuses has

turned into a witch-hunt, and

even threatens to undermine the

recovery effort. Pointing out a

group of executives that you're

expecting to help turn this

around and fix the issues that

are there and holding them out

and saying "Thou shalt not

receive bonuses" seems to be a

harsh way to throw the baby out

with the bathwater. Some of

the executives, including the

ones visited by the tour bus,

had already pledged to return

their bonuses and increasingly

feel like they've become

scapegoats for public anger.

It's tipped to be a volatile

day on the Hang Seng as trading

begins in a new HSBC rights

issue. The bank wants to

rebuild its safe haven

advantage over its rivals and

restore shareholder confidence. restore shareholder confidence.

A morning ritual for Patrick

Lowe, checking stock prices at

his broker's office, in

particular, HSBC. This

60-year-old Hong Konger has

spent the past 40 years

building up a portfolio of

6,000 of the bank's

shares. TRANSLATION: When I

first began working after I

graduated, I didn't know about

investing, but HSBC was the safest bet. It

safest bet. It was stable and

secure. That's a view you hear

a lot in Hong Kong. It's not

just a bank, it's not just an

investment, it's part of the

fabric of this former British

colony. Right on these current

premises back in 1865, the bank

open t its doors for the first

time, just 24 years after the

Territory itself was founded.

It was the first bank to issue It was the first bank to issue

local bank notes. It was one of

the first banks to return to

Hong Kong after Japanese

occupation in the Second World

War. And it was a key financial

backer for the young

entrepreneurs of the 50s and

60s, people like Li Kha Shing,

now Asia's richest man but this

relationship has hit a rough

patch in the global financial

crisis. A local TV announcer actually broke down

actually broke down in tears as

she broke the news HSBC was

down 24% in a single day. HSBC

hadn't been immune. In fact,

its US operation was heavily

exposed to the subprime crisis.

But its share price had escaped

relatively lightly until March

9, when it went into freefall

after it said it would have to

raise more than $17 billion by selling new

selling new shares to support

its balance sheet. Local

radio host Hyugn Hu Fai describes the reaction among

its listeners. That really

hurts the feelings and the

psyche of the long Quong people because we feel that the whole

world is falling down. HSBC's

stock price has since recovered

nearly 40% but the question

now: has the

now: has the roll er coaster

ride changed the outlook of its

loyal shareholders? Not Patrick

Lowe. He is planning on buying

the new says. He wants to pass

them on to his children. "I

believe it can recover from the

crisis. I want to give my children a good future."

When global equity markets

were rallying, we saw big bets being made and resulting

returns but in many cases,

little account was taken of the

risk or uncertainty associated

with the long-term outlook. So

as we see markets slump around

us attention has been brought

to the shortcomings in

corporate governance, ethics

strategy and risk management. The International Actuarial

Association is calling for stronger global stronger global financial risk

management. To look at this I'm

joined by Michael Sherris the

head of actuarial studies at

the Australian School of Business. Michael Sherris,

welcome to 'Business

Today' Good morning. How much

of a factor was ignoring risk

in the financial crisis we're

seeing now? Can you run us

through the failures? Clearly,

ignoring risk has been an

important factor, but what

that's been more important is

just not quantifying the

effects of that

effects of that risk. So we've

seen lending in the subprime market where risks have been

taken in terms of the ability

of borrowers to repay but also

on the back of that the credit

derivative market becoming very

large with large leverage bets

being taken. This is like

insurance where these companies are providing insurance on

credit risk. It costs a small

premium but there is a premium but there is a big

exposure to large downside

risk. You say this risk and

factored inasmuch as they uncertainty weren't necessarily

needed to be. What about the

research and investment

decisions? In the research

investment decision side of

things there has been I guess a

lack of consideration of the

downside, the extreme event

stress for happenings that can cause

stress for these companies, and

this has not been reflected in the way they price the business

in the way their hold capital

against these risks. So the

process has not captured these.

There has been a failure in the

risk management process and

also in the governance in these

organisations. Alright. Let's look specifically at one case

that's been at the headlines,

this new collapse of the

insurer AIG. It's certainly in

the spotlight at the moment. the spotlight at the moment.

What do you make of this and

what should've been done

differently? The AIG case is

very interesting. It was driven

by the AIG financial products

division and this seems to have

slipped through the regulatory

cracks. So it wasn't captured

by some of the regulatory

frameworks in the banks and the

insurance areas and they were

taking fairly large risks in

terms of providing credit

protection for banks,

they were taking in particularly in Europe, and so

they were taking in premiums,

it looked like an attractive

business to be in, but of

course there were very large

downside risks that weren't

factored in. So when we saw the

credit crisis come on and a lot

of banks getting into financial

trouble, this impacted on the

contracts they'd sole and there

were billions of dollars of

face value that they'd taken on

and this had a passive impact

on their balance sheet. Moving forward then does say that in on their balance sheet. Moving

the regulation situation, just

recently, risk was taken nearly

as seriously as it should've

been. What do you see happening

in future then? In terms of the

regulatory framework we have

now, there's I guess a

disconnect across the different

forms of intermediary, the

insurers and the banks. We need

to see a much more consistent

framework of regulation across

have a banks and insurers. We already

have a framework in terms of

the three pillars in the Basil

2 and the Solvency 2 regulations being implemented

around the world. That's a nice

framework to use as a basis but

its components need a lot of

work. In terms of pillar 1

where we're seeing the need nor

much better modelling, much better setting better setting of capital to

reflect the risks and also a

focus of an enterprise-wise

assessment of risk. In the

pillar 2 we have regulator y

oversight but we need a more

independent review of the

capital requirements and the

organisation of these matters.

We need more disclosure about

the risk these companies are

taking on, the capital they taking on, the capital they

hold so they --

there can be an external

assessment of their

position. Insurance risk has

always been a major area for

actuaries to focus on. What are

the other areas that are being

closely scrutinised now? Our

profession has for a long time

realised the importance of a

broader risk approach rather

than just insurance risk. But financial risk and enterprise than just insurance risk. But

risk management now has become

very important to the way

actuaries think about the business they're involved with.

ACTEW wear Rhys are also

becoming increasingly involved

in banks and financial wealth

management more generally.

This is particularly so in

Australia. The way they're trained and how they think

about ris sk a broader risk

analysis across the enterprise allowing for both insurance and financial financial risk. The other side

of insurance risk is there's a

lot of extreme catastrophe-type

events that have to be concerned about and in

financial risk we're realising

these catastrophe events happen

as well. We don't have nust the

recent crisis to worry about,

if we look back in time, we see many examples of these

catastrophe events in financial

markets. The other side of that

is the dependence, the

modelling of risks in a

portfolio and the benefits from portfolio and the benefits from diversification. A lot of

portfolio theory that's used to

look at modelling of portfolios

relies on some diversification

benefit. When things go wrong

we realise that this is not

always the case and that risks

can work in an adverse way

together. So understanding

these modelling issues is also very important, and something

that the actuaries have been

involved with in the running of

the insurance business. Unfortunately, we'll have Unfortunately, we'll have to

leave it there but thank you

for your time today. Thank you

very much.

With the Indian film

industry basking in the

post-Oscars glow of 'Slumdog Millionaire', foreign film

companies are looking for co-production opportunities. Australian film-makers and

their Indian counterparts are discovering creative and economic synergies economic synergies which will

hopefully pay dividends at the

box office. It was a golden

moment that thrust Indian film

into the global spotlight. And

the Oscar goes to ... 'Slumdog

Millionaire'. 'Slumdog

Millionaire''s Oscar triumph

has sparked a lot of interest

in similar core productions.

Now Australia -- co-productions. Now Australia

is focusing on the creative resources of one of the resources of one of the its

biggest trading partners. India

is the world's second largest

film producing country on

earth. You can get anything

that you need done there, and

for remarkably cheap costs.

'The Waiting City' is the first

Australian film shot entirely

in India and is due to hit

screen later in the year. Jamie Hilton is the Australian

pitfalls of producer of the drama about the

pitfalls of adoption. He wasn't

banking on the success of

'Slumdog Millionaire'. He says

it's just been good

timing. We're in the fortunate

position now that India is

quite topical right now. The

$3.2 million film used a

mixture of Indian and

Australian crew. But he says

he's unsure what benefits

flowed back into the local

economy. There's certainly a

demand for two-way trade. demand for two-way trade. At

the moment there's a lot of

one-way activity going on and a

lot of people setting up or

using small facilitation

companies either here or over

there to get what they need to

get and then go home. This man

works as a fixer setting up

shoots for Indian and

Australian producers. He's

involved with around $100

million wort of projects. While Australia's Australia's locations have

proved attractive to Indian

film-makers, he says there's

also an easy working

relationship on set. I think

it's a cultural thing. It's a

cultural thing more in the work

culture. All my Indian

colleagues find it far more

easy and relaxing to work with

Australian film cruise and

personnel than they do with

their Hollywood or the British counterparts. The commercial

success of films like 'Hey success of films like 'Hey

Baby', shot entirely in Sydney,

don't just provide a short-term

economic boost, but encourage

future projects. While

there's a huge amount of Indian funds flowing into the

Australian economy, there's

still minimal Australian

investment in producing films

in India. As such, the

Australian Government has

identified it as a major export


Austrade says it's a $15 Austrade says it's a $15 billion market. Bollywood makes

more than 1,000 movies a year,

and so far, Australia has

participated in just 11. This

man feels closer collaboration

between Indian and Australian

film studios would also bring

greater economic benefits. It'd

be a huge win/win situation.

The only thing is to The only thing is to make them

and force them to look at each other. Hindering cooperation

is the absence of a co-production treaty which

allows the combination of

grants and incentives from each

country. I know that there are

people who've called a co-production treaty between

India and Australia. I think

that's probably going to work

well for people who've got,

say, really big-budget films. say, really big-budget films.

But for the sort of smaller

producers making independent

films in Australia or films

that in India would be called

parallel films, their arthouse

equivalent, I'm not sure it

makes that much of a difference. Location and

finances aside, all agree the

drawcard of a compelling story

will find an audience anywhere in the world. The The restaurant business can

be a tough one especially when

statistics show increased

spending at the supermarket as

we entertain more at home. But

one of Australia's top chefs

says it's not the economic downturn or the critics which

are keeping him awake at night,

but rather, the anticipated

changes to Australia's

workplace laws.

I think I love eating. That's

the key. Every plate I design I

want to eat it. For me, that's

probably the greatest pleasure

in cooking . You just gotta be

very basic in working out food

costs, beverage costs, labour

costs and rental costs. If you

can get all of those figures

and facts under control, and

price your product at the right

point to the right market, there's money to be there's money to be made. And

then you just have to get bums

on seats. Shannon Bennett

opened his high-end restaurant

in inner city Melbourne nine

years ago at the age of

24. Starting my own business at

that age was a huge learning

curve. Moving to the CBD was

probably the biggest move I

have ever made. For me, it was

about I need to spend some

money, I need to go into the money, I need to go into the

CBD where there is more lunch

trade, there is more buzz,

there is more traffic and I can

get a better facility to

enhance my product.

Recognition quickly followed

with the restaurant famously

Garnering the top ranking of

three hats before being demoted

to two hats for one year. Food critics are interesting. They're the bane of my life!

But at the same time, you need

them. There is some sort of

effect on your business, there's no doubt there's no doubt about that.

It's normally the new part of your clientele you want to try

to bring in. I think when we

dropped a chef's hat briefly a

couple of years ago, we

actually felt it had a positive

impact on our business. It

brought a new light on our

business and actually started

to remind customers we were out

there. I certainly wouldn't

want to try to test that again.

The young chef expand ed his brand

brand to a cafe and bistro when

more space became available at

the restaurant's city

location. I realised there is

room for us to develop and sort

of downgrade our ideas on our

recipes and still offer the

same quality ingredients but

less labour involved and much

simpler products. If was very

worried when we opened the

bistro how that would affect our lunch trade at Vu De

Monde, but surprisingly, our

spend in Vu De spend in Vu De Monde increased

and it enabled people that had difficulty getting into Vu De

Monde to lunch for the

corporate area to come. In the

spend jumped up by 3% per

person. Shannon Bennett is

confident he can steer all his

ventures safely through a recession. Current economic times will be tough for

restaurants but it will be in

several ways. Our market share

has shrunk but there's still

disposable income out there disposable income out there and

there's that past income that

human nature has it that we

have to eat and we like to enjoy eating out.

I have great fears about

moving into the current

economic times with the new

industrial relations laws

coming through particularly in

the penalty areas. It's going

to be a tough one. I think

they'll put the industry back

about 10 years in terms of training and a

training and a lot of

restaurants will say it's too

hard. And walk away. Table 4 is

for 1 o'clock, first time for

four people. The restaurateur

says his industry's benefitted

greatly from the current system

the. In France, it's about

... We can actually work with

each individual employee and

work out hours that suited

them, work out salaries that

suited the business and the individual,

individual, also work out

measured goals . So that now

sort of has to go by the

wayside. We've toned down the

amount of staff we have.

Despite those reservations the

Vue's stable now includes a

restaurant in Amman and further

growth plans remain on the

table. I'm not that fearful of expanding. I don't believe in

debt. When you do have debt, debt. When you do have debt,

you let part of your business

go. I could see us moving into the bistro market possibly in

Sydney and then taking a step

back. There will only ever be

one Vu De Monde. For me, Vu De

Monde still has a long way to


Now let's look at what's

making headlines around the

region. The 'Standard' reports

a Hong Kong-based financial con

glom rate has told senior staff

to expect a big bonus despite having

having been forced to lay off

up to 10% of its work force

since November. The Financial

sometimes says Timothy Geithner

is due to unveil a plan to take

hundreds of billions of toxic

pass sets off banks' balance

sheets. And the 'Wall Street

Journal' also looks at US

Government plans for a three

pronged approach to rid the

financial system of toxic

assets due to be announced

today. That's all for this

edition of 'Business Today'. If

you would like to look back

over any of our interviews,

please visit our web site. We

look forward to your feedback.

I'm Whitney Fitzsimmons. Thanks

for joining me. Enjoy your day.

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