Financial life in a big town

China’s super-rich have bounced back from the financial crisis with a vengeance, and China now has more known dollar billionaires than any other country bar the United States, according to a new report released on Tuesday.

The annual Hurun Report said China has 130 known dollar billionaires, up from 101 last year. The number in the United States is 359 while Russia has 32 and India 24, according to Forbes magazine.

China’s rich are getting richer, with the average wealth on the list $571 million, up almost one-third from last year, said compiler Rupert Hoogewerf.

“With the greatest wealth destruction in the west of the last 70 years, we’ve seen China buck the trend and the wealth seems to be still growing,” Hoogewerf told Reuters on the sidelines of an event to unveil the 2009 rich list.

“They’ve put the credit crunch behind them,” he said. “The key driver has been urbanization. You’ve got all these cities being built, and that requires property developers, iron and steel manufacturers. The latest thing is cars.”

Topping the list was Wang Chuanfu, chairman of electric car and battery maker BYD Co Ltd in which U.S. billionaire Warren Buffett holds a stake, with an estimated personal wealth of $5.1 billion. He was also the fastest riser from last year, up 102 places.

Second place went to Zhang Yin and family, owner of paper recycler Nine Dragons Paper, while in third place was Xu Rongmao and family, owner of Shimao Property Holdings Ltd

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Huang Guangyu, who founded GOME Electrical Appliances Holdings Ltd and owns unlisted property businesses, sank to 17th place from the top position he held last year. He is currently being probed for alleged financial irregularities.

Hoogewerf said the actual number of dollar billionaires could be higher than estimated.

“Either they are super-discreet, or perhaps they haven’t come to the surface,” he said. “Having said that, the transparency of wealth … is now very much in the open. There’s many more listed companies.”

Hoogewerf said people who probably should have been listed, but about whose wealth not enough in known, included Liu Chuanzhi, chairman of the world’s No. 4 PC maker Lenovo, and Chen Feng, founder of Hainan Airlines.

China’s ruling Communist Party once condemned entrepreneurs and private business people as capitalist exploiters, but now welcomes them since late reformist leader Deng Xiaoping began landmark economic reforms in the 1970s.

One third of the people on the 1,000-name rich list are estimated to be Party members, according to the report.

Still, one famous name fell off the list this year — NBA basketball player Yao Ming, who has struggled with a foot injury for the last few months.

(Editing by Sugita Katyal)

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Several U.S. companies have awarded stock options to top executives while engaged in merger negotiations, the Wall Street Journal said, citing an academic research paper and its own review of company filings.

The practice of awarding options, though legal, has resulted in the target company’s executives reaping a bigger payout when the deal is closed, the paper said.

The paper said its survey of company filings found stock options had been awarded to executives in a half dozen large mergers since 2007, including Adobe Systems Inc’s deal to buy web analytics firm Omniture Inc and Walt Disney Co’s purchase of Marvel Entertainment Inc banks issue payday loans.

Marvel and Omniture could not be immediately reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Clarence Fernandez)

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Citigroup Inc will sell its Phibro energy trading business to Occidental Petroleum Corp, allowing the bank to defuse a battle with regulators over a $100 million pay package for the unit’s star trader.

Citigroup is shedding a business that has generated profit by taking big risk, while oil and gas producer Occidental is venturing into new territory after long trading conservatively. Occidental was drawn to a bargain, analysts said.

The price of the transaction was not disclosed, but Occidental said its net investment would be only about $250 million and that it was paying roughly the net asset value of the business. Analysts concluded that Citi had sold Phibro for a pittance.

Andrew Hall, the unit’s star trader, will invest in the business alongside other executives, and his 2009 compensation will be paid out in future years based on the unit’s performance.

Hall, who famously collects contemporary art that he houses in a castle in Germany, has become a lightning rod for criticism over Wall Street compensation.

The Obama administration’s “pay czar,” Kenneth Feinberg, who is reviewing compensation at major bailout recipients, would have struggled to change Hall’s 2009 pay package because he lacks legal authority over long-standing contracts, according to people familiar with the matter.

Feinberg pressed Citigroup to fix the problem, and to reduce Hall’s pay in future years, people familiar with the matter said, making Hall unlikely to stay.

Phibro has been profitable in recent years but has lost money in the past. In 1998, Citigroup put the unit on the auction block because of its wildly fluctuating profits, but the bank never found a buyer.

Government regulators have particular sway over Citigroup, which has yet to repay a $45 billion taxpayer bailout and is roughly one-third owned by taxpayers on line pay day loans.

Last month Citigroup Chief Executive Vikram Pandit said publicly that $100 million was too much for an employee to earn, given the bank’s circumstances.

“When the government is an owner and Congress and regulators are looking over (CEO Pandit’s) shoulder when he writes a check, then he has to be trembling if he writes a $100 million check,” said Holland & Co President Michael Holland, who worked with Hall in the 1990s.

Citigroup said the sale was not material to its earnings. Hall and his team trade out of a former dairy farm in Westport, Connecticut. The Phibro unit operates almost completely separately from the rest of Citigroup, meaning that removing it should have no impact on the bank’s other businesses, including its commodities trading business for clients, people familiar with the matter said.

The sale of Phibro would be the latest in a series of divestitures by Citigroup. Earlier this year it sold a controlling stake in its Smith Barney retail brokerage to rival Morgan Stanley, as it faced pressure from regulators to raise capital and overhaul operations.

Citigroup considered many options for its Phibro business, ranging from spinning it off to opening it to outside investors, people familiar with the matter have told Reuters.

Citigroup shares were down 1 cent at $4.64 in afternoon trade, while Occidental was off 43 cents, or 0.5 percent, at $79.66. 

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Liz Claiborne Inc said on Thursday that its namesake apparel line would be sold exclusively at J.C. Penney Co Inc department stores, and it expects a profit from its Liz Claiborne wholesale brands in 2010, sending its shares up more than 12 percent.

The company also said television shopping network operator QVC would have exclusive rights to sell the Liz Claiborne New York line by celebrity designer Isaac Mizrahi. The shift, which begins with the fall 2010 line, means department stores will no longer sell that brand’s apparel, merchandise and home products.

The moves come as Liz Claiborne tries to turn around its business, which has suffered in the recession as retailers place fewer orders for its clothes or sell them at steep discounts.

In September, the clothing and accessories maker hired turnaround firm Alvarez & Marsal on a “short-term basis” to help it improve operations and cash flow.

Under the deal with J no fax pay day loan.C. Penney, the Claiborne and Liz Claiborne brands will be sold only through J.C. Penney, also beginning with the fall 2010 line.

The agreement can run up to 10 years. After five years and again after 10 years, Penney can acquire the trademarks and other Liz Claiborne brands for use in the United States and Puerto Rico.

Under the QVC deal, Liz Claiborne will receive royalty payments on net sales of the Mizrahi-designed line, which will be more high-end.

Liz Claiborne Inc will receive design service fees and royalties as a percentage of sales, plus gross profit-sharing with guaranteed minimums.

Liz Claiborne shares were up 12.5 percent at $5.85 in early New York Stock Exchange trading.

(Reporting by Brad Dorfman, editing by Gerald E. McCormick and Lisa Von Ahn)

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A year ago today, Royal Bank of Scotland Group Plc and HBOS Plc were close to collapse, causing a chain reaction that could have ended with riots in U.K. cities, security analysts and economists said.

Bank failures would have forced the government to cancel police leave and deploy troops as the breakdown of the financial payments system threatened the ability of utilities to provide essential services, said David Livingstone, a fellow at the Royal Institute for International Affairs in London, a former adviser to the government’s Cobra crisis response committee.

“You are talking about a situation with mass disorder and panic,” the former Royal Navy officer said in an interview. There would be “riots, pandemonium, everyone fending for themselves.”

Chancellor of the Exchequer Alistair Darling, Bank of England Governor Mervyn King and Financial Services Authority Chairman Adair Turner met at 5 p.m. on Oct. 7, 2008, and readied a 250 billion-pound ($398 billion) rescue for the banks in the 16 hours before they opened for business the following day. In response to a Freedom of Information Act request from Bloomberg News one year on, the Treasury declined to say if it had a contingency plan for the two banks, then or now.

Releasing such information would probably “have a destabilizing effect on financial markets,” damage the government decision-making process and cause commercial harm to the banks involved, the Treasury said in a letter.

“In the current economic climate, economic perception, even if totally misconceived, is important and has the capacity to alter market behavior,” the government said. “To confirm or deny whether or not the information is held, either in relation to the banks mentioned in your request or more generally” would hurt the banks and the U.K.’s economic interests.

‘Catastrophic’ Costs

The crisis last year was the worst Britain had faced in peacetime, Darling told the British Broadcasting Corp. last month. The two banks were not “confident they could get to the end of the day,” on Oct. 7, King told the same program.

“You would have had unmitigated panic and a bank run,” said Tom Kirchmaier, a fellow at the London School of Economics. “People would not have been able to buy bread. The cost to the economy would have been catastrophic.”

RBS and HBOS, then in talks to be taken over by Lloyds TSB Group Plc, had more than 35 million business and individual customers with 475 billion pounds of deposits, 22 percent of the U.K. total, held at about 3,250 branches.

‘Contagious Effects’

“If RBS hadn’t been propped up as it was, in practice it would have been nationalized the following week,” former Bank of England deputy governor John Gieve said in a Bloomberg Television interview. “If RBS, HBOS, Lloyds had gone down, that would have had huge contagious effects throughout the rest of the world.”

The failure of Edinburgh-based RBS and HBOS would have had a domino-effect with customers seeking to take out their deposits from other lenders and causing a wider run on U.K. banks, said Vicky Redwood, an economist at Capital Economics Ltd.

“Trust in the banking system would have completely collapsed” and would have generated civil unrest, said Redwood. “People would have been rushing to take their money out of the other banks and you would have been heading back to the depression era.”

In Iceland, occasionally violent protests erupted for months after the government’s nationalization of Glitnir Bank hf and the country’s two other biggest banks in October. The crisis caused Iceland to become the first western country to seek International Monetary Fund assistance in 32 years. Even so, the banks remained open for business.

Government Rescue

British government rescue packages announced on Oct. 8, 2008, Oct. 13, 2008 and Jan. 19 stabilized the financial system. RBS, HBOS and Lloyds TSB Group Plc accepted a 37 billion-pound government bailout and a further 200 billion pounds was made available by the government to improve liquidity, boost capital and absorb writedowns. The government also pledged to insure 585 billion pounds of toxic assets.

British banking shares rose 1.8 percent in the year from Oct. 13, 2008 to Oct. 5, 2009, according to the FTSE 350 Banks Index. The index has more than doubled since its low on March 9. The FTSE 100 index of leading stocks gained 18 percent in the same period.

Even so, the financial sector “is not out of the woods,” Michael Geoghegan, chief executive officer of HSBC Holdings Plc, Europe’s biggest bank, told investors at a conference organized by Bank of America Merrill Lynch on Sept. 29.

‘Back to Normal’

British banks have only recognized 40 percent of a likely $604 billion in writedowns from 2007 to 2010, and earnings won’t be sufficient to offset this, the IMF said Sept. 30. A sluggish economy and rising unemployment will add to loan losses, it said.

“Trust has returned, but there is too much trust and people are taking risks blindly,” said LSE’s Kirchmaier. “If you look at the market, people assume it is back to normal, but there are huge risks in the system.”

These remain, according to Simon Maughan, an analyst at MF Global Securities Ltd. in London. Banks have yet to cut debt sufficiently after balance sheets expanded rapidly during the boom, while regulatory demands for increased capital are “cosmetic,” he added.

“The problem was way too much money in the system and a demand for yield,” Maughan said. “Very little has changed” and banks may be laying “the groundwork for the next crisis.”

The banking crisis was the symptom of an unsustainable asset-price boom “that began when western monetary authorities began to believe that inflation was dead,” said David Sayer, head of retail banking at KPMG. Restricting bankers’ bonuses won’t be enough to stop it happening again, he said.

The banking industry is now engaged in “a period of significant transformation and change,” HSBC’s Geoghegan said last month. “These changes in themselves, if not sensibly introduced in a rational and unemotional way, may well trigger a further crisis of confidence at this fragile time,” he said.

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American Express Co President Alfred Kelly will leave the company early next year to seek an opportunity as a chief executive elsewhere, the credit card issuer said on Monday.

Kelly, 51, joined American Express in 1987 and in recent years has been responsible for the company’s consumer and small business card franchise. He has been president for the last two years.

“In the context of discussions we have had about longer-term plans for the organization, Al made clear to me that he wanted the opportunity to run a company as chief executive,” American Express CEO Kenneth Chenault said in a statement.

“Given my own plans for the coming years, we both agreed that was not likely to happen at American Express in the short term.”

Bank of America Corp, the largest U.S. bank, is currently looking for a chief executive, after CEO Kenneth Lewis announced he will leave the company by year-end.

Analysts said it was unlikely Kelly would get the CEO post at Bank of America. Kelly has not been previously mentioned as a candidate to lead the Charlotte, North Carolina-based bank.

American Express, the largest credit card company by revenue, also announced the creation of a new global services organization — including customer service, technologies, operations, business processing and information management — and a new enterprise growth organization to increase fee revenue and drive growth into new payment business.

Steve Squeri, who has been in charge of technologies and corporate development, will lead the global services group. American Express said it was recruiting a manager from outside to lead the enterprise growth division.

The company also combined its global consumer, small business and network businesses under Vice Chairman Ed Gilligan.

American Express was the fastest growing credit card company between 2003 and 2007 as it relaxed lending standards. But it paid a heavy price when the bubble burst and bad loans rose to record highs.

Still, the company is the only large credit card issuer that remained profitable during the financial crisis. Earlier this year, it repaid a $3.4 billion government bailout it received during the peak of the financial meltdown.

However, the lender, which makes money every time a client swipes its card, faces headwinds as frugal consumers spend less and new regulations limit credit card fees and interest rates.

American Express shares rose 66 cents to $33.15 in late-morning trading on the New York Stock Exchange. The stock was up before the news of Kelly’s resignation.

(Reporting by Juan Lagorio, editing by Gerald E. McCormick and John Wallace)

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In the 1980s, when stocks mostly surged, a few mutual fund managers became the equivalent of rock stars.

Tops among them: Peter Lynch, who racked up average annual returns of a remarkable 29 percent over a 13-year run.

Lynch did it at Fidelity Magellan, which continued to grow after he left in 1990. What once was the world’s largest fund swelled from $13 billion to nearly $110 billion a decade later. Assets peaked three years after the fund shut its doors to new investors because it became so big it was hard to manage effectively.

So where is Magellan now? It’s at $24 billion, and struggling to draw investors who fled in droves after years of mediocre performance. Magellan is still big by any standard, but it’s merely Fidelity’s fourth-largest stock fund.
"I don’t worry about too many assets now," says current manager Harry Lange, who took over in late 2005.

Magellan reopened to new investors early last year, but those who gave it a try were disappointed. The fund’s 2008 plunge? Forty-nine percent — steeper than the market’s nearly 39 percent decline. Blame bad bets on dogs like AIG and Wachovia — financial companies that Lange held on to for too long.

But Lange is turning things around, thanks to a sharp departure from his predecessor’s style. Where Robert Stansky was criticized for too closely mirroring broader markets, Lange has tilted the fund heavily in favor of growth stocks — companies whose comparatively steep share prices are backed by expectations that earnings will keep growing rapidly. He’s eased out of cheaper value stocks with steadier earnings, and takes a go-anywhere approach in keeping with the fund’s namesake 16th century explorer. Nearly one-quarter of Magellan’s holdings are international stocks.

Many of the same bets on riskier stocks that weighed Magellan down last year are lifting it in 2009. It’s up 35.6 percent, easily topping the nearly 17 percent gain for its benchmark, the Standard & Poor’s 500, and beating nearly nine of 10 of its peer funds.

So is it time to climb back aboard Magellan? Only if you’re willing to commit to a fund whose penchant for racy stocks makes it unusually volatile.

This year, the fund expanded its already substantial stake in recently hot technology stocks — its second- and third-largest holdings are specialty glass maker Corning Inc. (up 62 percent this year) and semiconductor maker Applied Material (up 34 percent). It’s also favored hard-hit fare like home builder Toll Brothers (down 8 payday loan.8 percent) and big banks — Magellan’s most recent list of top 10 holdings included Bank of America, J.P. Morgan Chase, Wells Fargo and Goldman Sachs.

Lange has turned Magellan into "a fund for optimists," according to Morningstar’s lead Fidelity analyst, Christopher Davis.

"If you look at its portfolio, it’s positioned for an economy that’s improving," Davis says, noting an absence of such defensive favorites as Wal-Mart and Procter & Gamble.

Lange says this year he’s slightly eased off his leaning toward growth stocks but still heavily favors the category. Though value stocks outperformed growth for an eight-year run after the dot-com bubble deflated early this decade, the pendulum swung back to growth last year — financial stocks that were hit so hard last year are mostly in the value category. Growth’s ranks include plenty of tech names that have recently fared well.

Lange still likes tech because of its big stake in emerging markets, where consumers in countries like China and India continue to drive growing demand for gadgets including mobile phones from makers like Nokia, Magellan’s top holding. He figures that trend will continue giving growth an edge over value. "I’m pretty confident that growth will be as strong in the next six to 12 months," Lange says. "There are a lot of people out there who think after that, it will be a sluggish recovery. I’m more bullish than that."

As for his fund’s choppiness, Lange acknowledges that with his growth-oriented style, "it’s pretty tough not to have volatility in these unusual times."

Even with this year’s strong results, winning back investors who fled Magellan has proved tough. Lange is still trying to shake the cumulative record of the last 10 years, a period when Magellan posted an average annual loss of 1.2 percent, slightly worse than most of its peers.

"This is not your grandfather’s Magellan fund," says Jim Lowell, a former Fidelity employee who runs an independent newsletter, FidelityInvestor.com, that evaluates the company’s funds.

Lowell currently recommends Magellan but says it’s no longer appropriate as a core retirement holding for investors who are looking for the broad exposure it once offered. Instead, Magellan is geared toward those seeking more growth exposure in an otherwise diversified portfolio.

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PHILADELPHIA–The head of Time Warner Inc. says he's not interested in making a bid for NBC Universal. That could strengthen the hand of Comcast Corp. as it explores whether to buy a controlling stake in the parent of the NBC network and Universal Studios.

At a conference Friday in Washington, D.C., Time Warner CEO Jeff Bewkes said an investment in NBC Universal doesn't make sense for his company.

Time Warner is already whittling the slate of films it puts out each year no teletrack payday loan. Time Warner, which owns HBO, CNN and other cable networks, could have a better fit with NBC Universal's cable networks, but Time Warner says it's not interested in those assets either.

Philadelphia-based Comcast is in talks to take a 51 percent stake in NBC Universal if General Electric Co. spins the unit out.

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Network equipment maker Cisco Systems Inc struck a deal to buy Norwegian videoconferencing company Tandberg for $3 billion in a bid to dominate the high-growing market of corporate video communications.

Analysts said the move ratchets up competition, and possibly more deals among video conferencing providers like Hewlett-Packard Inc and Polycom, and underscores Cisco’s focus on video conferencing which enables workers everywhere to interact with colleagues and customers online.

The acquisition of Tandberg, a market leader in video conferencing, helps Cisco fill the gap between its high-end TelePresence video meeting service for executives and its WebEx online meeting software used by millions of office workers.

Tandberg offers a variety of desktop and other mid-range products. Its units sell for around $7,500 each, while Cisco’s TelePresence units cost about $250,000.

Jefferies analyst Bill Choi said the combined company would have close to 50 percent market share, and the deal would help Cisco speed up growth of its video business.

“We always expected Cisco to move downstream and this acquisition accelerates its time-to-market by at least 18 to 24 months,” Choi said.

Cisco sees video conferencing driving sales of routers and switches, which help direct Internet traffic and are its traditional bread and butter. Online, high-resolution video requires ample bandwidth as well as advanced network equipment to ensure smooth connections.

“They realize that if they don’t find new purposes for the network they’re going to get commoditized,” said Gartner analyst Ken Dulaney.

Tandberg said its board has recommended the Cisco offer to its shareholders and Chief Executive Fredrik Halvorsen said major shareholders had voiced support for the cash offer of 153.50 Norwegian crowns ($26.49) a share. Halvorsen will continue to lead the unit if the acquisition goes through.

GROWING MARKET

Shares of Tandberg, which had almost doubled in value this year on takeover speculation, closed 11 percent higher at the offer price of 153.5 crowns on Thursday. Cisco’s shares fell 45 cents, or 1.91 percent, to close at $23.09 on Nasdaq.

Video conferencing has taken time to gain traction, but faster Internet speeds and pressure to cut corporate travel have helped boost adoption in recent years. Cisco last quarter said revenue from TelePresence nearly doubled from a year earlier, even as router revenue fell 27 percent.

Cisco estimates the total value of collaboration tools, including everything from videoconferencing to conference calls to Google Apps, to be worth about $34 billion.

Most analysts said a rival bid was not expected, although they did not rule it out. Potential suitors include HP, which is also active in Web collaboration. The market has also linked telecoms gear maker Ericsson with Tandberg.

DnB NOR Markets in a report on Thursday cited Juniper, International Business Machines Corp, Sony Corp and Siemens. 

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Las Vegas casino company Wynn Resorts raised $1.63 billion after pricing its Asian IPO at the top of its indicated range, a sign that demand is still strong for certain offerings despite a glut of Asian stock deals.

Wynn Macau, the fourth-largest global IPO this year, now faces the challenge of its Hong Kong trading debut, where several new listings have been battered by increasingly selective investors.

Wynn Macau sold 1.25 billion shares Hong Kong-listed shares at HK$10.08 each, according to two sources with direct knowledge of the deal but were not authorized to speak publicly about it.

The IPO’s range was HK$8.52-HK$10.08, with Wynn selling 25 percent of the business to the public.

But some brokers said the high price may make a strong debut more difficult for Wynn.

“The valuations are really high and market sentiment is not that good now,” said Conita Hung, head of equity research for Delta Asia Financial Group. “I don’t expect this to be a good one.”

On a 2010 enterprise value to earnings before interest, tax, depreciation and amortization ratio (EV/EBITDA), Wynn Macau trades around 16 times, much higher than Macau gambling tycoon Stanley Ho’s flagship casino firm SJM Holdings’ 7.5 times, according to Credit Suisse analyst Gabriel Chan.

The Macau gambling sector EV/EBITDA average trades at around 14.5 to 19.4 times, Chan said.

“It’ll get a big hit,” said Linus Yip, strategist at First Shanghai Securities, referring to the Wynn Macau debut. “The main concern is the price range.”

“MCC had set its price at the middle of its range, but it still fell below the issue price. Valuations for Wynn are definitely still a concern.”

The dismal debut of Metallurgical Corp of China (MCC), a building and engineering firm, last week has weighed heavily on investor sentiment for new share offerings in Hong Kong.

Wynn’s successful sale also puts pressure on arch-rival Las Vegas Sands, which plans to raise billions of dollars through a public offering in Hong Kong at the end of November or early December.

NOW THE HARD PART

The Wynn Macau offer is especially important given the deal’s potential impact on the company’s flagship Las Vegas operations. Wynn is hoping a high valuation through the Hong Kong listing will boost valuations at its other divisions.

U.S. casino operators, grappling with high debt levels and a recovering economy, are hoping to boost valuations through spinoffs in China’s gambling hub, Macau, the former Portuguese colony located an hour away from Hong Kong by ferry. 

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