European Business News (EBN), 96-10-04

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated 10:15 October 4 CET

CONTENTS

[01] Deutsche Telekom plans to list shares on Tokyo Stock Exchange

[02] Markets expects US unemployment to show slight gain for September

[03] Japan to take Jakarta to WTO over car policy

[04] Credit Lyonnais earnings grow in first half

[05] Santer says substantial number of EU states will join EMU at the start

[01] Deutsche Telekom plans to list shares on Tokyo Stock Exchange

The Tokyo Stock Exchange said it has filed a request to the Ministry of finance to list the German telelcommunications giant's shares on the exchange's second section market. Deutsche Telekom plans to offer newly issued shares to the public in an auction between Oct. 25 and Nov. 14. The number of shares to be offered hasn't been determined yet. The company reportedly hopes to raise about $800 million in Japan.

Daiwa Securities Co. is the lead arranger of the offer. Later today, Deutsche Telekom will release a detailed timetable for its privatisation when it publishes its preliminary US sales prospectus and its only German sales prospectus. But many details, such as the number of shares to be offered and their price range won't be announced until October 22.

Current valuations of the company's shares range anywhere from 20 marks to 30 marks apiece ($13.10 to $19.65). Many analysts say the likely figure won't fall below the 25-mark level. And some banks expect to see Deutsche Telekom's shares outperform the DAX Index of 30 blue-chip shares over the medium term.

In June, Deutsche Telekom said its 1995 net profit jumped 47% to 5.3 billion marks from the year earlier on a 3% sales rise to 66.1 billion marks.

[02] Markets expects US unemployment to show slight gain for September

The markets are anxiously awaiting the data for more signposts indicating the direction the American economy is taking. But some investors say that this report could be somewhat less key than others. They reason that there will be another complete data cycle, including unemployment, before Federal Reserve policy makers meet again on November 13. An increase of 150,000 or less in today's report would reinforce the belief that US economic growth remains moderate, posing little risk of an increase in the inflation rate, said Mike McClure, head of government-securities trading at Zions First National Bank.

That would suggest 'there's no need for the Fed to tighten credit at its next policy meeting. The Fed's policy makers, who kept rates unchanged at their meeting last week, 'basically cast their fate to the optimistic side and will have to keep their fingers crossed that these numbers are consistent with the action they took,'

said Robert Brusca, chief economist at Nikko Securities. Yesterday the Labor Department reported jobless claims for the week ending September 28 were at their highest level in three months. But the data was in line with forecasts. And a Commerce Department report showed that factory orders took their biggest dive in 3 1/2 years.

Both reports suggested that the economy is decelerating, which diminishes the prospect that the Federal Reserve will tighten monetary policy at the next meeting.

[03] Japan to take Jakarta to WTO over car policy

The US and the European Union will also file complaints with the world trade watchdog about the car programme. The complaints follow confirmation that cars assembled in South Korea had cleared Indonesian customs tariff- free as national cars. Under Jakarta's car policy, domestically owned automakers can enjoy tariff and luxury sales tax exemptions it they boost the local content ratio to 60% in three years.

At the moment, a joint venture between PT Timor Putra Nasional, controlled by President Suharto's youngest son, and Kia Motors Corp. of South Korea is the only company that enjoys the privileged status.

The venture is allowed to assemble its Timor cars at Kia plants and export them to Indonesia duty- free for one year until its local plants are ready. Some 4,000 Timor cars have arrived in Indonesia and more are on their way.

Japan argues that the policy violates the WTO's most favored nation status and national treatment principles by favoring South Korean cars, and contravenes the Trade-Related Investment Measures accord by linking tax privileges to local content requirements.

[04] Credit Lyonnais earnings grow in first half

The figure also included 560 million francs that the government paid back to Credit Lyonnais as partial reimbursement for below-market loans in 1995.

That reimbursement is due to the government's decision last week to relieve Credit Lyonnais from having to offer the government below-market interest rates for the state's bailout plan of the bank. The results came a week after the French government decided to scrap a bailout plan setup in 1995 which forced the bank to offer the below-market rates. The bank would have lost 3 billion francs due to that financing arrangement over the full year.

Operating profit before provisions rose 20% to 4.2 billion francs. Chairman Jean Peyrelevade said he hoped Credit Lyonnais would break even this year, given that the provision for layoffs in France was at least 75%, if not completely, paid. The bank plans to cut 5,000 jobs in France by the end of next year, or 14% of its total French workforce. Credit Lyonnais may have to take a bit more provisions for the job cuts if the government doesn't approve the bank's early retirement requests.

'We're over the Alps and back in the pack' of a bike race, Peyrelevade said. 'This is the first time since I joined the bank (late in 1993) that I can report an improvement in operating income,' Peyrelevade noted. Credit Lyonnais lost 21 billion francs between 1992 and 1994, and its bailout is expected to cost the French government as much as 100 billion francs.

Peyrelevade also said he welcomed the state's decision last week to attempt to accelerate the sale of the state-owned bank to the private sector, initially projected for the year 2000 or beyond. He noted, however, that the bank would need a capital increase from the state before suitors would be willing to come in. The cash would preserve or improve the bank's debt ratings, which he said were now 'borderline' for an international bank. In addition, he noted that some clients were worried about the bank losing state backing, and that they needed to be reassured.

Peyrelevade declined to estimate the amount of money the government should pour in, noting only that each one-point improvement in the bank's Cooke ratio, or total equity-to-loans ratio, costs between 7 billion and 8 billion francs. Credit Lyonnais's ratio currently stands at 8.7%, or about a half-point below most of its competitors, but its tier-one, or hard core, ratio of cash on hand is only 4.5%. Peyrelevade said no other state aid was needed.

He also reiterated earlier statements that the bank would sell non- strategic assets and money-losing operations in order to improve the Cooke ratio, but he stopped short of detailing the assets involved. He also declined to comment on the possibility that the sale of those assets would lead to one-time losses.

He noted, however, that the bank's commercial operations in France continued to be weak, although the outlook for risk provisions for small- business loans appeared to have improved after worsening throughout the first quarter of the year.

Peyrelevade also noted that Credit Lyonnais wouldn't have to make additional provisions for its 2.5- billion-franc loan exposure to Eurotunnel following an accord reached Monday between the heavily indebted Channel Tunnel operator and its creditor banks.

[05] Santer says substantial number of EU states will join EMU at the start

Santer was speaking at the conclusion of an official five-day visit to Japan, during which he met with Japanese political and business leaders.

He stressed the importance of monetary union, saying it would contribute to the international monetary system by promoting international economic and currency stability. Santer praised Japan's 'strong, effective, and constructive' relations with Europe. But he called for further deregulation of Japanese industries in order to promote greater access of European firms to the Japanese market.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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