Top Stories

• Bonds indicate economy on mend after Lehman collapse
  The collapse of Lehman Brothers in September sent shock waves through financial markets, but bond traders worldwide said the bankruptcy and its fallout are fading away. Indicators, including falling money-market rates, reduced mortgage costs and more corporate-bond sales, all point to an economic recovery. Bloomberg (04 May.)

• Ministers across Asia establish emergency liquidity fund
  At the sidelines of the annual meeting of the Asian Development Bank, 13 Asian nations announced a $120 billion emergency liquidity fund, called the Chiang Mai Initiative. Japan and China, including Hong Kong, said they will each contribute $38.4 billion. South Korea will provide $19.2 billion, while other Asian countries will provide the rest. The nations are allowed to tap the fund to deal with the financial crisis. During the meeting, ADB President Haruhiko Kuroda urged the countries to develop their debt markets to help the region avoid another financial crisis. The Wall Street Journal (04 May.) , Reuters (03 May.)

• ADB to slowly increase borrowing from capital markets: Mikio Kashiwagi, treasurer of the Asian Development Bank, said the bank plans to borrow roughly $10 billion from international capital markets through bond issues and private placements. “At this stage, we would rather stay at this $10 billion borrowing program, given the market conditions,” he said. However, the ADB has plans to significantly boost its lending program, and as lending grows, so will the bank’s borrowing, Kashiwagi said. Reuters (03 May.)

• Officials: Obama’s hard line on Chrysler might help GM deal
  U.S. President Barack Obama’s economic team said the reorganization of General Motors is going to be a much bigger and more complex challenge than rescuing Chrysler, but the officials hope Obama’s tough stance on Chrysler will help the government deal with GM. “The threat of bankruptcy is very important in the negotiations with the bondholders and the dealers and others,” said David E. Cole, chairman of the Center for Automotive Research. “Without a clear and present danger to them, they won’t make a reasonable deal.” The New York Times (02 May.)

• Fund managers, analysts stay levelheaded about swine flu
  Though the number of confirmed swine flu cases continues to climb, analysts and fund managers are urging investors to remain calm, but cautious. “While there is reason for concern, the experience with SARS and bird flu highlighted that worst-case pandemic fears don’t usually come to pass,” said Shane Oliver, chief economist and head of investment strategy at AMP Capital Investors in Sydney. AsianInvestor.net (04 May.)

• Board-level focus on risk management benefits Spain’s banks
  BBVA, Santander and other Spanish banks have risk committees that meet regularly to review loans and discuss other risks. The country’s larger banks have managed to withstand the credit crunch better than many of their European competitors. This focus on risk is seen as one factor in their success. The Spanish banks’ approach is being admired by regulators, other banks and market participants. Financial Times (03 May.)

• Study: Independent directors should watch risk issues: Banks should give more attention to developing independent board members with financial expertise and give them a stronger role in risk management, according to a review of corporate governance by the consultancy Nestor Advisers. In the future, banks will need to require nonexecutive directors to do a lot more work and limit activities that might interfere with the directors’ duties to the bank, the consultancy said. Financial Times (03 May.)

• Distressed assets expected to attract new investors
  Because hedge funds that previously focused on distressed assets are facing significant challenges, the asset class is attracting a new breed of investors. Sovereign-wealth funds, private banks, boutique finance firms and institutional investors are expected to step up as the financial landscape continues to change. FinanceAsia.com (04 May.)

Market Activity

• Asian shares rally as signs of economic recovery emerge
  Shares in Shanghai and Hong Kong posted large gains as markets across Asia advanced Monday. After being closed since Wednesday, Indian shares soared to extend an eight-week run. Hong Kong’s Hang Seng Index surged 5.5%, Taiwan’s Taiex jumped 5.6% and China’s Shanghai Composite added 3.3%. Australia’s S&P/ASX 200 rose 3%, South Korea’s Kospi climbed 2.1% and New Zealand’s NZX 50 was up 1.7%. Markets in Japan were closed. The Wall Street Journal (04 May.)

Economics

• Economists think U.S. unemployment has hit 25-year high
  During April, joblessness in the U.S. likely reached its highest level in 25 years, economists said. For the fifth consecutive month, employers slashed 600,000 or more jobs, bringing the unemployment rate to 8.9%, according to the median estimate of economists surveyed by Bloomberg News. The Boston Globe/Bloomberg (04 May.)

• Maryland, Virginia eager for trade with Cuba
  Trade-promotion agencies in Maryland and Virginia are moving swiftly to be ready when the U.S. takes down its barriers to doing business with Cuba. Relaxed rules on trade with Cuba already made it possible for Virginia’s agricultural sector to boost exports to the country from less than $1 million to more than $40 million in five years. The Washington Post (04 May.)

• IMF: South Korea’s fiscal deficit among lowest in G-20
  Despite South Korea’s tax cuts and stimulus spending, the nation’s fiscal deficit this year will be 3.2% of its GDP, less than half of the 6.6% average for the Group of 20 countries, the International Monetary Fund said. In the G-20, only Australia, Brazil, Indonesia and South Africa will have lower deficits than South Korea, the IMF said. The Korea Herald (Seoul) (04 May.)

Geopolitical/Regulatory

• Job prospects grim for Britain’s Class of 2009
  The number of students in the U.K. nearing graduation who have already lined up employment dropped to a 15-year low as the nation’s Class of 2009 faces a deeply troubled economy and rapidly rising joblessness. Nearly two-thirds of the students surveyed by High Fliers Research do not expect to get the kind of job normally filled by college graduates. Reuters (29 Apr.)

• Australia’s central bank likely to warn of 1-year recession
  The Reserve Bank of Australia is expected to announce that the nation will be in a recession for as long as a year. The central bank is meeting this week to decide on interest rates, which are already at record lows. Economists are divided in their predictions about whether the bank will lower rates. The Australian (04 May.)

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