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FURTHER YEN RISE WOULD HURT JAPAN ECONOMY, SUMITA

Bank of Japan Governor Satoshi Sumita said a further yen rise would have adverse effects on the Japanese economy. He told Japanese business leaders the Bank of Japan will continue to take adequate measures, including market intervention, to stabilize exchange rates if necessary, in close cooperation with other major industrialized nations. He said the current instability of exchange rates will not last. Six major nations - Britain, Canada, France, Japan, the U.S. And West Germany - agreed in Paris last month to act together to hold currencies stable. Sumita said the Bank of Japan will continue to pursue adequate and flexible monetary policies while watching economic and financial developments in and outside Japan. He said the decision to cut the discount rate on February 20 was a hard choice for the Bank because monetary conditions had already been sufficiently eased. To prevent a resurgence of inflation, the Bank will take a very cautious stance regarding developments stemming from easy credit conditions, he said. He said the latest discount rate cut to 2.5 pct should stabilize exchange rates and expand domestic demand. Commenting on the dollar's fall below 150 yen, Sumita reiterated he cannot find any specific reason for the currency's weakness. The market undertook speculative dollar selling by reacting to overseas comments by monetary authorities and trade tension, he said. Sumita repeated that the Japanese economy may gradually recover in the latter half of the 1987/88 fiscal year ending April 1, 1988, provided exchange rates stabilize. REUTER 

JAPAN VTR AND TV EXPORTS FALL IN FEBRUARY

Japan's video tape recorder (VTR) exports fell to 1.73 mln sets in February from 2.01 mln a year earlier for the fourth successive year-on-year drop, Finance Ministry customs-cleared export statistics show. But February exports were up from 1.34 mln in January. Cumulative exports in the first two months of 1987 totalled 3.07 mln sets against 3.73 mln a year earlier. Exports to the U.S. Fell to one mln sets in February from 1.26 mln a year earlier, and those to the European Community (EC) fell to 232,275 from 263,009. In the EC total, shipments to West Germany fell to 97,633 from 100,218 a year earlier and those to the U.K. Fell to 32,652 from 53,020. Colour television exports fell to 343,315 sets in February from 416,832 a year earlier for the 16th consecutive year-on-year drop, bringing cumulative exports so far this year to 588,720 against 769,874 a year earlier. February exports compared with 245,405 in January. Exports to the U.S. Fell to 1.01 mln sets from 1.12 mln a year earlier and those to the EC fell to 33,763 from 67,955. Shipments to China fell to 39,858 from 53,925. REUTER 

DEMOCRAT LOSES BID TO WIN CONTRA AID ACCOUNTING

Senate Democratic leader Robert Byrd yesterday failed to win the 60 votes needed to force a Senate vote on a bill demanding President Reagan account for U.S. Aid to the Nicaraguan Contras, including millions of dollars diverted to the rebels from U.S. Arms sales to Iran. Following the defeat, Byrd said he would drop his effort, ending congressional manoeuvring over the 40 million dlr final instalment of a 100-million-dlr aid package approved last year for the contras. Without congressional action to stop it, the aid became legally available to the Contras last weekend. REUTER 

EC LINKS AGRICULTURAL TRADE TALKS TO OTHER REFORM

The European Community (EC) considers talks on agricultural trade reform to be inseperable from talks on other trade reform in the present GATT round, Willy de Clercq, external relations commissioner of the EC, said. He told reporters here the EC would not bow to pressure to reach an early, seperate agreement on agricultural trade. He said the EC wanted to stick to the four-year schedule agreed by members of the General Agreement on Tariffs and Trade (GATT) in Punta del Este, Uruguay, last year. That included agricultural trade liberalisation for the first time in the lengthy program to re-negotiate the GATT. Other trade issues being discussed in the current GATT round include reform of trade in merchandise and services. De Clercq is on his way to China after attending a two-day conference for 22 GATT trade ministers held in New Zealand. Several of those ministers criticised the EC for what they saw as restrictive agricultural trade practices and called for urgent reforms. U.S. Trade representative, Clayton Yeutter, also said it was important agreement on agricultural trade reform was reached as early as possible. But de Clercq said the GATT program had been reached after long and hard negotiations, and the EC did not want changes. "We just want to stick to the agreement which was reached, and that was very clear -- that the new round would be one undertaking. It is a global negotiation with no two tracks, no fast track, no slow track. It has just one track, the track - and that's all," de Clercq said. "If you start selecting priorities, your priority is not my priority. We say that agriculture is urgent, but it's not the only urgent thing," he said. He said the Punte del Este agreement had taken eight months to prepare and eight days of negotiations. REUTER 

VIETNAM'S ARMY ORDERED TO GROW MORE FOOD

Vietnam has ordered its army to grow more food to ease shortages and meet economic recovery goals set for 1990. The army newspaper Quan Doi Nhan Dan, monitored here, said soldiers must work harder to care for rice, vegetables and other crops endangered by the present unusually hot weather. The paper said the 1.6-mln strong regular army contributed less than one pct to the nation's 18.2 mln tonne food output. North Vietnam has set a 1990 food target of 23 to 24 mln tonnes. REUTER 

LINDE TURNOVER UP IN FIRST TWO MONTHS OF 1987

Engineering group Linde AG's <LING.F> world group turnover rose to 518.6 mln marks in the first two months of 1987, 5.2 pct more than in the same 1986 period, management board chairman Hans Meinhardt said. But world group incoming orders fell 2.2 pct to 587.3 mln marks, Meinhardt told the annual news conference. Excluding exchange rate movements, world group turnover rose 8.9 pct and incoming orders increased 1.0 pct. Linde expects satisfactory results and increased sales this year but Meinhardt gave no detailed forecast. Domestic group 1986 net profit rose to 105.79 mln marks from 80.71 mln. Meinhardt said domestic group turnover rose 6.7 pct to 394.1 mln marks in the first two 1987 months against the same period last year but incoming orders fell 5.2 pct to 456.6 mln. Linde will ask shareholders at the annual meeting on May 13 to raise authorised share capital by a maximum 30 mln marks nominal for the issue of share warrant bonds with a maximum issue volume of 200 mln marks. Linde's authorised share capital currently stands at a nominal 49.6 mln marks. Meinhardt said the authorisation would give the company the necessary flexibility in case Linde needed additional funds for acquisitions. He declined to give further details. While world group turnover rose 7.2 pct to 3.88 billion marks in 1986, incoming orders were barely changed at 3.91 billion marks. Meinhardt said without the sharp appreciation of the mark against major trading partner currencies, incoming orders would have been four pct above the prior year's level. World group turnover in heavy plant construction rose 7.4 pct to 777 mln marks, but incoming orders dropped 5.7 pct to 739 mln marks in the wake of the dollar and oil price plunge. World sales for technical gases rose 5.1 pct to 1.05 billion marks and incoming orders gained 5.2 pct to 1.05 billion marks. Meinhardt said Linde strengthened its market position in the refrigeration sector, with particularly strong turnover and order gains in Austria, Italy and Norway. World group sales in the sector fell 2.5 pct to 493 mln marks, but incoming orders rose 2.5 pct to 513 mln marks. The fork lift truck and hydraulic sector saw world group sales rising 12.4 pct to 1.52 billion marks and incoming orders gaining 8.0 pct to 1.57 billion marks. Domestic group turnover rose 8.2 pct to 2.93 billion marks and incoming orders increased 1.9 pct to 2.92 billion marks. The company was producing at full capacity in 1986. REUTER 

LINDE AG <LING.F> 1986 YEAR

Domestic group net profit 105.79 mln marks vs 80.71 mln Turnover 2.93 billion marks vs 2.71 billion Incoming orders 2.92 billion marks vs 2.86 billion Order book at end December 2.28 billion vs 2.37 billion Tax payments 104.98 mln marks vs 88.67 mln Depreciation of fixed assets 107.25 mln marks vs 150.75 mln New investment in fixed assets 148.88 mln vs 148.22 mln Dividend already announced 12 marks vs 11 DVFA earnings per share 32.22 marks vs 27.54 marks Shareholders annual meeting May 13, dividend date May 14 World group turnover 3.88 billion marks vs 3.62 billion Incoming orders 3.91 billion marks vs 3.91 billion New investment in fixed assets 247 mln marks vs 252 mln No world group profit figures given Parent company net profits 95.04 mln marks vs 74.91 mln Turnover 2.28 billion marks vs 2.14 billion REUTER 

PACIFIC DUNLOP ANNOUNCES AIDS PROTECTION DISCOVERY

Pacific Dunlop Ltd <PACA.ME> said studies by its <Ansell International> latex-product unit have shown a commonly-used spermicidal cream kills the AIDS virus. Ansell regional director Chris Humphrey told a news conference the cream, already used in a condom brand as additional contraceptive protection, killed on contact the virus causing AIDS (acquired immune deficiency syndrome). The discovery meant sexually active people could have a second level of protection against AIDS if a condom ruptured during sex, Humphrey said. "This is the best available protection against AIDS next to abstinence," he said. But David Pennington, the head of Australia's government sponsored AIDS taskforce, said the use of the cream provided a slight safeguard but was no great breakthrough. Pennington said that in the event of a condom rupturing semen was likely to travel beyond the cream's range. Humphrey said the studies, commissioned by Ansell from Nelson Gantz of the University of Massachusetts and Fred Judson of the University of Colorado, showed nonoxynol-nine destroyed the AIDS virus present in 100 pct of rupture tests. But he said it was not known whether nonoxynol-nine was as effective in sexual situations. He stressed it was neither a cure nor a vaccine for AIDS. Humphrey said nonoxynol-nine had been used for about 20 years as a spermicidal cream without side-effects. Analysts have attributed much of the rise in Pacific Dunlop's share price from 3.87 dlrs at the beginning of the year to a high of 5.36 dlrs to expected growth in its condom business. It closed today eight cents down at 4.67 dlrs. REUTER 

BANK OF NEW ZEALAND SHARES TO BE LISTED NEXT WEEK

<Bank of New Zealand> (BNZ) shares will be listed on the New Zealand Stock Exchange next week, probably on Tuesday, the BNZ said. "We look forward to the challenge of public accountability through the open market," it said. BNZ, previously wholly owned by the state, issued 103 mln shares to the public in February, or nearly 13 pct of its capital, to raise 180.25 mln N.Z. Dlrs. The publicly held shares will not have voting rights. The government will retain 87 pct of the BNZ's capital, a total of 800 mln ordinary shares. REUTER 

JAPAN SEEN CUTTING APRIL BOND COUPON FROM FIVE PCT

The underwriting syndicate expects the Finance Ministry to propose a 0.2 to 0.3 percentage point cut in the coupon of the 10-year government bond to be issued in April from the five pct March issue, underwriting sources said. The expected proposal is likely to await passage of a provisional budget for 1987/88 starting April 1 by the Lower House of Parliament on March 30, the sources said. Issue volume is likely to be 1,200 to 1,400 billion yen against 475 billion in March, they said. Projected issue price is around par against 99.50 for the March bond, they said. REUTER 

SINGAPORE RULE CHANGES SEEN HAVING LITTLE IMPACT

Revisions to the by-laws of the Stock Exchange of Singapore to be introduced on April 1 will have little impact on the market, brokers and analysts said. One analyst did say, however, that the removal of fixed commissions on transactions in government securities and Asian currency bonds would increase trading volume, because most deals before were transacted directly between clients. One change will allow stockbroking firms to advertise, but brokers said this would not have much effect because most corporate clients already know the market well. Many remisiers (brokers' agents) and dealers criticised the exchange for not taking the opportunity to abolish or cut transfer fees on remisiers moving to other firms. One remisier said the transfer fees inhibit an efficient broking system because they restrict brokers' movements. But most remisiers welcomed the amendment to replace cash deposits with bank guarantees for business transactions. Where an extra deposit is needed, it can in future be either in cash or in securities approved by the exchange. Other remisiers felt the new rule that they must report all transactions involving 50,000 dlrs or more to the exchange was unnecessary. Another revision says broking firms are not allowed to improve a buying and selling quote by more than one bid during the last five minutes of trading. REUTER 

TRADE SURPLUS CUT WOULD BENEFIT JAPAN - SUMITA

Bank of Japan Governor Satoshi Sumita said it is in Japan's national interest to make greater efforts to reduce its trade surplus. He told business executives the most important issues for the world economy are the correction of international trade imbalances and a solution to the world debt problem. To this end, Japan and the U.S. Must make medium- and long-term efforts to alter economic structures which have expanded the trade gap between the two nations. World economic growth and therefore an expansion of debtor countries' export markets are needed to solve the debt issue, he added. REUTER 

VIOLENCE REPORTED IN ECUADOR GENERAL STRIKE

At least 14 people were injured and many arrested in clashes during a one-day general strike called by Ecuadorean workers to protest against austerity measures imposed after a major earthquake on March 5. Interior Minister Luis Robles said the worst violence was in Quito, where demonstrators threw rocks at a luxury hotel and a number of banks. Over 80 people in eight cities were detained for stoning police, attacking troops, damaging buildings and setting fire to cars, he said. The casualty and damage toll is expected to rise as detailed reports reach the capital from the provinces. Labour leaders said they shut down all of Ecuador's industrial plants, but Labour Minister Jorge Egas said of the country's 900 largest factories only 86 were closed, 32 were partially working and the rest operating normally. The strike, called by leftist unions and declared illegal by the government, was aimed at pressing the administration to scrap an austerity program adopted on March 13 following an earthquake that killed up to 1,000 people and caused an estimated billion dlrs in damage. REUTER 

PHILIPPINE DEBT TALKS PROCEED WITH NARROWER FOCUS

The latest round of talks between Philippine officials and the country's commercial bank creditors on the rescheduling of 9.4 billion dlrs worth of debt are still proceeding, but with a narrower focus, Philippine Finance Secretary Jaime Ongpin said. He told a press briefing Wednesday that Manila has dropped a two-tier interest payment offer, which would have given banks a higher return if they took partial payment in new Philippine investment notes (PINs) instead of in cash. "The PINs proposal has been laid aside.... The discussion is now on pricing (of just the cash payments)," he said. Foreign banking sources in Manila said on Tuesday that the Philippines had raised its basic interest rate offer to 7/8 over the London interbank offered rate (LIBOR) but Ongpin would not discuss details of the pricing negotiations. He also refused to speculate on when an overall agreement might be reached. The talks have been going on for more than three weeks. Manila originally offered to pay interest in cash at 5/8 over LIBOR or in a mixture of cash and PINs -- tradeable, dollar-denominated, zero coupon notes that could potentially yield up to one point over LIBOR. The PINs option was subsequently modified to guarantee at least a 7/8 point spread over LIBOR but many bankers still had grave reservations, seeing it as a possible precedent for other large debtors to avoid paying interest in cash. The PINs proposal has now been left on the table as a separate option for those banks, which might want to fund their own investments in the Philippines or sell the notes in the secondary market, Ongpin said. Under Manila's plan, the PINs would be redeemable at full face value in Philippine pesos to fund local equity investments at any time prior to their six-year maturity date. While the commercial banks had their doubts about the PINs proposal, Ongpin said there was great interest on the part of certain investment banks which are already active in the secondary market for sovereign debt. Unlike current debt/equity schemes, Ongpin said, the PINs would include no government fees and would be free from "administrative hassles." He said about six investment banks had been approached and four had replied so far. One even showed interest in buying 45 mln dlrs worth of notes, he said. Ongpin said that by funding current interest payments in the secondary market through the PINs scheme, the Philippines could conserve at least one to 1.5 billion dlrs of foreign exchange reserves during its planned seven-year restructuring period. REUTER 

GARCIA SAYS PERU NOT TRYING TO EXPORT DEBT STANCE

Peruvian President Alan Garcia said his government was not trying to convince other nations to follow its decision to limit foreign debt repayments. "We do not want to export a model," Garcia told a press conference at the end of an official two-day visit to Mexico yesterday. He was referring to Peru's policy of limiting payments on its 14 billion dlr debt to 10 pct of its export earnings. Peru's attitude contrasts with that of Mexico, which followed a more conciliatory route and last week signed a 7.7 billion dlr loan package with its creditor banks. Since it decided to put a ceiling on debt payments, Peru has been barred from International Monetary Fund lending. Despite their different approaches to debt, Garcia and Mexican President Miguel de la Madrid issued a joint declaration yesterday calling the foreign debt problem an "expression of the present unjust international economic order." But the declaration said that no Latin American debtors' club was about to appear. "We affirm the sovereignty of our economic decisions and the capacity for mobilising our own resources," it said. The two presidents also signed a variety of agreements aimed at boosting trade and tourism between their countries as well a number of technical cooperation pacts. Garcia was scheduled to return to Lima tomorrow. REUTER 

SUPREME COURT UPHOLDS AFFIRMATIVE ACTION FOR WOMEN

The U.S. Supreme Court upheld affirmative action programmes designed to promote women in the workplace yesterday, handing President Reagan's civil rights policy a major defeat. Tn a 6-3 decision, the court held that the civil rights laws allow employers to take the gender of workers into account to improve female representation in the workforce. The Reagan administration had charged that affirmative action is reverse discrimination. The case involved the 1980 promotion of a female road yard clerk, Diane Joyce, over a more qualified male, Paul Johnson. REUTER 

ECONOMIC SPOTLIGHT - HONG KONG'S MORE ACTIVE ROLE

Hong Kong's government has long kept intervention in the economy to a minimum in the belief that when it comes to business, businessmen generally know best. But the government is slowly being forced to take a more active economic role, partly to face the challenge from fast growing economies like South Korea and Taiwan and economic powerhouse Japan, businessmen said. The government announced this month it will spend six mln H.K. Dlrs over the next two years to encourage electronics firms to send engineers for training overseas. The engineers will learn design of application specific integrated circuits (ASIC) used in products ranging from personal computers to high-technology toys that talk. The government has funded vocational training before but this will be its first such program aimed at bringing back advanced technology from overseas. Government officials told Reuters that other areas in the electronics sector are being considered for similar treatment. Hong Kong's key electronics industry last year accounted for exports of 61 billion H.K. Dlrs, though the total includes sales of electrical machinery and other items. Officials said that this key sector, second only to textiles in terms of exports, needs high technologies already available in neighbouring economies if it is to compete. "Belatedly, we realize there are some technologies which can't be taught here," said K.Y. Yeung, Director of Industry. A study by U.S. Research firm Dataquest Inc last year showed that Hong Kong's share of U.S. Consumer electronic imports had fallen to 3.5 pct in 1985 from 6.4 pct in 1983. South Korea, Taiwan and Japan all take a more active role in guiding economic development and policy makers are worried that perhaps some assistance -- albeit limited -- is needed. "This is perceived to be an area of development for Hong Kong," said Lawrence Mills, director-general of the Federation of Hong Kong Industries. "Many industrialists think government should be more actively concerned with this area." Hong Kong likes to call its policy "positive non-intervention," meaning that it helps industry mainly by maintaining economic stability and ensuring that needed roads and harbour facilities are in place. It offers no special tax incentives for foreign investors, believing that its low corporate profits tax of 18 pct and personal income tax of 16.5 pct are sufficient. But the government has been forced to gradually take a more active role in the economy. In the last three years it has stepped in to aid seven problem banks, taking over three of them, to protect depositors whose funds were not insured. It has also expanded the powers of its banking and securities commissions to police these key economic sectors. Industry officials said manufacturers need help acquiring expensive new technology, especially when returns on investment are years away. "This is only a small start but it will help make this technology more readily available," said an engineer with a major U.S. Electronics firm in Hong Kong. Texas Instruments Inc <TXN> and Motorola Inc <MOT> of the U.S. And Japan's Toshiba Corp <TSBA.T> already conduct ASIC design work in Hong Kong, while a handful of firms have committed funds for capital-intensive production. Under the industry department program, companies would be funded to train engineers overseas but those employees would be required to apply their new skills locally for an as yet unspecified period. "We want to promote ASIC design and eventually production in Hong Kong," said Yeung of the Industry Department. Some industrialists said it will take more than a training program to keep electronics manufacturers competitive in the years ahead. Government officials said most manufacturers in the industry are small scale, employing fewer than 100 people. These firms will not be able to afford expensive technology development programs, industry officials said. The program has raised concerns that government may one day veer too far from its policy of minimal intervention. "They've reached the right decision," said Mills of the Federation of Industries. "But the fear (among some firms) is it might be a slippery slope towards interference." REUTER 

GULF ESCORTS STILL UNDER DISCUSSION - WEINBERGER

No action has been taken yet on the Reagan Adminstration's offer to escort Kuwaiti oil tankers through the Gulf, but the issue is being discussed, U.S. Secretary of Defence Caspar Weinberger said. The offer was made to Kuwait in light of Iran's deployment of Chinese-built missiles to cover the entrance to the Gulf. Weinberger told reporters prior to a speech at Texas Christian University that he did not think Iran and the United States were moving towards a potential conflict, adding that the Straits of Hormuz at the mouth of the Gulf were still "free water." REUTER 

SRI LANKA TO LAUNCH APPEAL FOR DROUGHT AID

Sri Lanka will appeal to its major aid donors for at least 21 mln dlrs in financial support to help it overcome the country's worst drought in 26 years. Government officials told Reuters that letters detailing the extent of the drought would be sent this week to the 14 countries that gave some 700 mln dlrs in development aid to Sri Lanka last year. These include Australia, Canada, Japan, Britain, the U.S. And West Germany. Officials in the Finance and Planning Ministry coordinating the aid request said Sri Lanka wanted the money over a six-month period. Foreign Minister Tyronne Fernando last week briefed representatives of aid-donor countries and international relief agencies on the drought and made a general appeal for help. The state had disbursed 800,000 dlrs by February for the most badly affected districts, but the Finance and Planning Ministry officials said no further relief was available from the budget. REUTER 

MIYAZAWA SAYS MAJOR NATIONS ACTING ON PARIS ACCORD

Finance Minister Kiichi Miyazawa said major nations are taking action to stabilise exchange rates in line with their agreement in Paris last month, government sources said. Miyazawa told an Upper House session the six nations -- Britain, Canada, France, Japan, the U.S. And West Germany -- are abiding by the Paris accord. The six agreed to cooperate to stabilise exchange rates at around current levels. Miyazawa said he wishes to attend a meeting of seven major nations (G-7) expected just before the IMF/World Bank Interim Committee meeting in Washington starting on April 9. The sources quoted Miyazawa as saying Japan is trying to prevent a further rise of the yen. Japan is taking the matter seriously, he added. Asked if the six nations had agreed to stabilise the dollar at about 153 yen, the rate prevailing at the time of the Paris talks, Miyazawa declined to give specific figures and said any mention of specific rates would create an "unexpected situation." REUTER 

U.S. HOUSE PANEL APPROVES 400 MLN DLRS FOREIGN AID

The House of Representatives Appropriations Committee yesterday approved 300 mln dlrs in economic aid for four Central American states, 50 mln dlrs to black-led states neighbouring South Africa and 50 mln dlrs in military assistance for the Philippines. The programmes, part of 1.3 billion dlr supplemental budget request by the Reagan administration to restore funds cut earlier by Congress, must be approved by Congress. The committee rejected the administration's request for 21.6 mln dlrs as the U.S. Contribution to U.N. Peace-keeping troops in Lebanon. The 300 mln dlrs will go to El Salvador, Honduras, Guatemala and Costa Rica while another 12 mln dlrs was allocated to replace the earthquake-damaged U.S. Embassy in San Salvador. The 50 mln dlrs approved for a "Southern Africa" initiative is part of a larger programme promised by the Reagan administration last year when it tried unsuccessfully to block sanctions approved by Congress against South Africa's white-minority government. REUTER 

ECONOMIC SPOTLIGHT - TOKYO EARTHQUAKE AFTERSHOCKS

The possibility that a major earthquake will strike Tokyo, causing corporate and financial ruin, haunts the worst nightmares of many insurers and bankers polled by Reuters. The Japanese capital is shaken by hundreds of small tremors every year, but last week's biq quake in western Japan, which measured 6.9 on the open-ended Richter scale, was a timely reminder that the big one could come at any time. Another on Tuesday registering a preliminary 6.5 on the scale struck the Sea of Japan coast northwest of Tokyo. A widely accepted theory by the late seismologist Kawasumi Hiroshi states that major quakes occur in cycles averaging 69 years. Tokyo was last laid flat in 1923 by a tremor reading 7.8, raising the spectre of another within five years. Seismic experts at Shizuoka, one of three areas near Tokyo considered quake-prone, say they expect a major earthquake within the next few years. Added to such fears is the fact that no developed nation has suffered a major quake since the far-reaching changes in the last two decades which have bound the global economy into a complex, fragile, interdependent financial network. "We are reaching a dangerous time. Insurance companies are starting to worry about how to cover the large losses," said Hatsuho Narita, a manager at the British Insurance Group. "It's a theme that has worried a lot of people. It's difficult to put a figure on it, but the impact on all world markets would be considerable," Brian Waterhouse, a banking expert at brokerage James Capel in Tokyo, told Reuters. What would happen? Consider that Tokyo and its six surrounding prefectures account for up to 40 pct of Japanese gross national product, or some six pct of world GNP. Some economists believe that in the immediate aftermath of a Tokyo quake, the yen would rise against sterling because of the large amount of reinsurance which would fall due in London. But it would plunge against other currencies. This would worsen the dramatic loss of value in land and assets in the Tokyo area. Banks would be left holding hundreds of billions of dollars in worthless mortgages and loans. Bankers estimate that 50 to 70 pct of city and regional banks' loan exposure is to smaller business, which would most likely lose all in a quake. Up to nine pct of their exposure is in housing and consumer loans, they said. Many smaller banks and some larger ones would go to the wall, bankers polled by Reuters said. The government, aware that insurance claims would be huge, has set a payout ceiling of 10 mln yen per private house. In Tokyo, 100 mln yen buys only a very modest residence. In addition, the insurance industry has formed the Japan Earthquake Reinsurance Co to cover housing to a total of 10 billion dlrs, 80 pct of it government-guaranteed. However, insurers said the industrial sector, which has no government backing, is a more dangerous risk. Japanese insurers said they are finding it increasingly difficult to find reinsurance abroad. "Overseas firms are now very alert to earthquake insurance risks," said Tahashi Kumakiri, Foreign Department head at the Japan Non-life Insurance Association. Due to limited world insurance capacity, the Finance Ministry recommends a coverage limit of 15 to 30 pct of Japanese firms' total insurable value. Even so, one insurer believes that local firms reinsure up to 80 pct of their quake cover overseas, most of it through Lloyds of London. Some of this reinsurance is then reinsured again, compounding the risks should the money suddenly be called in. Foreign entities in Japan are allowed 100 pct quake cover but foreign insurers now set a limit of 60 pct. Industrial cover is confidential but official figures show that in fiscal 1985/86 ended March 31, Japan did about half a billion dlrs of overseas reinsurance business in fire cover, most of which is quake-related. Bankers said the destruction of underlying assets and repatriation of huge amounts of Japanese overseas investment would seriously affect overseas stock and bond markets. Japanese institutions buy a net 10 billion dlrs or so of foreign bonds a month, much of it U.S. Treasuries, and are purchasing more and more U.S. And European stocks. The value of foreign holdings of Japanese securities would nosedive. Japan would need huge amounts of money over a long period to rebuild, which would block out developing nation creditors from existing capital resources, the bankers said. Loss of central computers would mean billions in lost transactions, bankers noted. Oil traders said crude prices would plummet as imports fell by up to half from some three mln barrels per day now. REUTER 

Hoechst AG 1986 world group pretax profit 3.21 billion marks vs 3.16 billion

AIDC ISSUES FIRST AUSTRALIAN DLR MEDIUM TERM NOTES

The Australian Industry Development Corp (AIDC) said it issued 20 mln Australian dlrs of five-year notes in London. The notes, issued in denominations of 50,000 dlrs, were part of a 10-year, one billion U.S. Dlr multicurrency facility established last December, it said in a statement. Medium-term Euronotes had previously only been issued in U.S. Dlrs, it said. The AIDC last week said it issued under the same facility the first of several five mln Australian dlr-denominated Euro-commercial paper tranches in Asia. Dealers for the one billion U.S. Dlr borrowing program were the AIDC, <Credit Suisse First Boston Ltd>, <Merrill Lynch International and Co>, <Morgan Stanley International>, <Salomon Brothers International Ltd> and <Swiss Bank Corp International Ltd>, the AIDC said. <Citibank N.A.> was the issuing and paying agent. REUTER 

MAZDA DOES NOT PLAN TO MAKE SPORTS CARS IN U.S.

Mazda Motor Corp <MAZT.T> has no plans to produce sports cars in the U.S., A company spokesman said. A Japanese daily paper said Mazda would switch production of its RX-7 sports car, which is popular in the U.S., To the U.S. Over the next three years to minimise losses caused by the yen's rise against the dollar. Mazda's wholly owned subsidiary <Mazda Motor Manufacturing (USA) Corp> (MMUC) in Flatrock, Michigan, is due to start producing Mazda 626 saloon cars from September at an annual rate of 240,000, the company said on March 2. One of Ford Motor Co's <F> Japanese distributors, <Autorama Inc>, said recently it was considering importing the MMUC-manufactured cars. The imported cars will all bear Ford name plates but those sold in the U.S. Will carry Mazda insignia. Ford will take 60 to 70 pct of the cars produced by MMUC while the rest will be sold through Mazda's own U.S. Sales network, the spokesman said. Mazda Motor Corp is owned 24 pct by Ford. REUTER 

KAWASAKI TO INCREASE MOTORCYCLE OUTPUT

Kawasaki Heavy Industries Ltd <KAWH.T> will increase output of motorcycles, dune buggies and jet skis to 380,000 units in the year starting April 1 from 303,000 a year earlier, a company spokesman said. Exports in 1987/88 are forecast to jump to 335,000 from 271,000 a year earlier, while domestic sales will rise to around 45,000 from 32,000, he told Reuters. Of these, exports to the U.S. Will rise to 150,000 from 120,000 a year earlier. The company also plans to lift motorcycle production at its wholly owned U.S. Subsidiary <Kawasaki Motor Manufacturing Corp> to 1985/86 levels of 75,000 from 67,000 in 1986/87. REUTER 

BANK OF FRANCE LAUNCHES MONEY MARKET INTERVENTION TENDER - OFFICIAL

HOECHST AG <HFAG.F> YEAR 1986

Year ended December 31. World group pretax profit 3.21 billion marks vs 3.16 billion. Turnover 38.01 billion marks vs 42.72 billion. World group turnover comprised domestic sales 10.83 billion vs 10.80 billion, foreign sales 27.18 billion vs 31.92 billion. Parent pretax profit 1.82 billion marks vs 1.62 billion. Turnover 14.09 billion vs 15.35 billion. Parent turnover comprised domestic sales 6.47 billion vs 6.84 billion, foreign sales 7.62 billion vs 8.51 billion. Parent investment in fixed assets 960 mln marks vs 831 mln. Depreciation of fixed assets 935 mln marks vs 847 mln. Investment in new participations 2.53 billion marks vs 294 mln. REUTER 

GERMAN TRADE, CURRENT ACCOUNT DATA DUE TODAY

The Federal Statistics Office will today publish trade and current account figures for February, a spokeswoman said in reply to queries. In January the current account surplus provisionally narrowed to 4.9 billion marks from 8.5 billion in December. The provisional January trade surplus narrowed to 7.2 billion marks from a record 11.6 billion marks the month before. In February 1986 the current account had shown a 6.85 billion mark surplus and the trade account a 6.84 billion surplus. REUTER 

BANK OF FRANCE LAUNCHES MONEY MARKET TENDER

The Bank of France said it set a money market intervention tender today to inject funds to the market against first category paper. Money market sources said the surprise announcement might herald a quarter percentage point cut in the central bank intervention rate from the 7-3/4 pct level set March 10, but they added such a cut was relatively unlikely. The intervention rate was cut from eight pct on March 10 after being raised from 7-1/4 pct on January 2 to head off speculative pressure against the franc. Dealers said market fundamentals could justify a further easing, but a combination of technical factors and renewed currency uncertainties surrounding the dollar had put short-term upside pressure on interest rates in recent sessions. Call money rose yesterday to 7-7/8 eight pct from 7-3/4 7/8 pct. Today it was first indicated at 8-1/8 1/4 before easing on news of the tender to 7-13/16 7/8 pct. Technical factors making for a slight shortage of liquidity in the market included the settlement yesterday of the latest monthly treasury tap stock tender, on March 5, market sources said. REUTER 

BP says it will tender for remaining 45 pct of Standard Oil at 70 dlrs a share cash

CHINA PROJECTS 1987 BUDGET DEFICIT INCREASE

China will have a budget deficit of 8.017 billion yuan in calendar 1987 compared with a 7.08 billion deficit in 1986, Finance Minister Wang Bingqian said. He told the National People's Congress, the State Council has decided to cut nearly all 1987 budgetary expenditures by 10 pct from the 1986 level. He said expenditures for the past two years have been inflated. Investment by localities in capital construction in 1987 must fall by 50 pct from the 1986 level and state firms must cut their losses by 30 pct, he said. China will use 14.6 billion yuan in foreign loans in 1987, up from 7.87 billion in 1986, Wang said. It must cut back on investment in capital construction, especially construction outside the state plan, he said. Funds must go into energy, transport, telecommunications, raw and semi-finished materials and not into non-production sectors. "In view of the country's financial difficulties this year, it has been decided that seven billion yuan of the budgetary allocation for capital construction will be raised by the People's Bank through loans and the issuing of bonds," he said. Wang said all localities and departments must strictly confine their 1987 capital investment to the amount set out in the state budget, a 50 pct reduction from 1986 levels. He said that because of financial difficulties, the state cannot increase spending on culture, education, science and public health in 1987 at the same rate as over the past few years. Expenditure in those sectors will rise by two pct. The only allocations not to be affected by the general 10 pct cutback are subsidies for price rises, repayment of principal and interest on domestic and foreign loans, funds for the disabled and spending for other social relief. Wang said state firms must cut their total losses by 30 pct from the 1986 level, overhead expenses by 10 pct and raw material consumption by two pct. Commercial firms must cut their deficits by 20 pct and running costs by two pct. He said violations of financial and economic discipline are common, including tax evasion, false accounting, embezzlement, theft, extravagance and accepting and offering bribes. Such practices "have reached very serious proportions in some areas, departments and units" and must be dealt with seriously, he said. Wang said 11.4 billion yuan worth of foreign loans have been arranged according to the 1986-90 plan, with 3.2 billion going to pay for foreign equipment in the Baoshan steel plant near Shanghai. He said China is running no risk in using more foreign loans, provided it prepares careful feasibility studies, borrows only what it can repay and uses the loans only to develop production in priority sectors. Wang said China plans to levy new taxes on the use of arable land for non-farm purposes starting this year. Half the revenue generated will go to the state and half to localities to be used in the development of agriculture. The only new spending is 11 billion yuan to be used to cover tax reductions and increased subsidies for big and medium-size state firms and textile and other light industries. The money will also pay for increases in the state purchasing prices of some grain, cotton and oil-yielding crops, he said. REUTER 

BP TO OFFER 7.4 BILLION DLRS FOR STANDARD SHARES

British Petroleum Co Plc <BP.L> said it intended to make a tender offer for the 45 pct of Standard Oil Co <SRD.N> it does not already own at 70 dlrs a share cash, for a total of 7.4 billion if the offer is fully accepted. The offer would be made through its <BP North America Inc> unit and was intended to commence not later than April 1. The offer would not be conditional on any minimum number of shares being tendered. BP said in a statement the 70 dlr a share price was based on its own valuation as well as those of its financial advisers. It took into account reviews of both public and non-public information. Standard closed in New York last night at 64-7/8 dlrs, down 1-3/4 dlrs. BP shares dropped on the announcement to 877p from 888p at last night's close. About a third of the cash payable would be met from BP's own resources. The remainder would come from new borrowings, partly from banks under a four-year committed revolving credit facility and partly from a a new U.S. Dlr commercial paper programme. The company said it was in the course of arranging these facilities. BP Chairman Sir Peter Walters said that the group's investment in Standard was its largest single asset. Full ownership would enable investment and operating decisions to be made without the limitations of a minority interest. BP also believed the acquisition represented the optimum use of its financial resources. It was confident oil prices were likely to remain within a range sufficient to justify the investment. Walters added that it also felt that, due to management changes in 1986, Standard could now operate successfully even in a lower oil price environment. Standard's net assets at end-1986 were 7.02 billion dlrs and in the year it reported a loss of 1.08 billion dlrs before tax and before an extraordinary item of 608 mln dlrs. Analysts said that the move by BP had come as a surprise. One noted that it was not immediately clear why the group should spend so much money buying a company it already controlled. BP could also have bought up the remainder of Standard shares considerably cheaper had it moved six months ago. It was also unclear what effect the tender would have on the U.K. Government's recent announcement that it intended to dispose of its remaining 31.7 pct stake in BP sometime in the 1987/88 financial year, analysts said. Analyst Paul Spedding of brokers Kleinwort Grieveson noted that any effect on the government sale of its stake in BP would depend on the reaction of the markets. The deal would probably push BP's gearing up to around 59 pct from 20 pct currently, he said. However, with the likelihood that oil prices would not repeat last year's rapid drop the prospects for Standard returning to profitability this year -- and BP benefitting from its cash flow -- were good. Standard was a high cost oil producer, the analysts noted. Spedding noted that it needed about 12 dlrs a barrel to make money, and at about 15 dlrs a barrel revenue from production and its downstream activities would push it comfortably into surplus. BP initially took a stake in Standard following the discovery of oil in Alaska's Prudhoe bay in 1969. BP had inadequate distribution facilities in the U.S. While Standard, which was strong on marketing and refining, was short on crude oil. The analysts said that BP had promoted a major management reorganisation of Standard in the past year. The probability that much of the shake-up at Standard was now complete was one possible factor behind the timing of the tender offer, Spedding said. BP's willingness to take hard decisions such as major balance sheet write offs and the sale of assets had been well received in the markets. The lower costs that should now be possible -- especially after the rationalisation of the loss making minerals division -- should allow the benefits of an oil price recovery to come straight through to 1987 profits without being cut back by other sectors. REUTER 

HOECHST RAISES PROFITS ON LOWER SALES

Hoechst AG <HFAG.F> said in a statement it increased its pretax profits in 1986 despite a fall in turnover due to lower foreign sales. The lower sales were due to the fall in the dollar and other currencies against the mark. Other factors were pressure on selling prices because of a sharp fall in the prices of crude oil and petrochemical raw materials and the sale of polystyrene business in the U.S. And Netherlands. World group pretax profit rose to 3.21 billion marks in 1986 from 3.16 billion in 1985, with sales falling to 38.01 billion from 42.72 billion. Within group turnover, foreign sales fell to 27.18 billion marks in 1986 from 31.92 billion in 1985, a drop of 14.9 pct. The statement made no mention of net profit figures. Hoechst will announce its dividend proposal on April 23. In the first quarter of this year sales were hit by the cold weather at the start of the year. If the dollar continues at present low levels, 1987 sales will again be below the previous year, although in volume terms they are unchanged from 1986, Hoechst said. Sales of paints and dyes, fibres, sheeting and information technology all rose in 1986 but plant construction sales fell. Hoechst attributed its good results to the performance of the parent company, other units in West Germany, and to <American Hoechst Corp>. Improved earnings in the U.S. Largely reflected the restructuring of styrene and polystyrene activities. Roussel Uclaf <RUCF.PA> and most domestic non-consolidated partners did not perform as well as in 1985. Hoechst attributed the 12 pct rise in parent company pretax profits to 1.82 billion marks above all to a rise in earnings from interest and holdings in other companies, and a fall in extraordinary costs. The fall in raw material prices was not enough to compensate for the decline in turnover due to lower prices and currencies, Hoechst said. The bulk of the 2.53 billion marks investment in new projects, up from 294 mln marks in 1985, went on the capital increase of Hoechst Capital Corp in connection with the acquisition of <Celanese Corp>. Celanese was merged with American Hoechst in February to form <Hoechst Celanese Corp>. REUTER 

Danish overnight money market rate cut to 10 pct from 10.5 - central bank

BHP NET SEEN AROUND 600 MLN DLRS FOR NINE MONTHS

Australia's largest company, The Broken Hill Pty Co Ltd <BRKN.S> (BHP), is expected to report a net profit of around 600 mln to 620 mln dlrs tomorrow for the first nine months ended February 28, share analysts polled by Reuters said. This would be well below the 813.0 mln dlrs earned in the first three quarters of 1985/86. In the full year ended May 31 1986 the group earned a record 988.2 mln dlrs. The analysts estimated that the group would report a third quarter net in the region of 200 mln to 220 mln dlrs, against 238.6 mln a year earlier and 220.3 mln in the second quarter. BHP's earnings in the first half ended November 30 amounted to 397.0 mln dlrs, sharply down from 589.3 mln a year earlier. The analysts predicted that BHP will report an upturn in petroleum earnings compared with the first quarter, reflecting some improvement in crude oil prices from the Bass Strait fields, but these gains would be offset by lower mineral and steel earnings. They said the mineral group has been hit by lower coal prices and shipments to Japan while the steel division has been affected by industrial and production problems. The analysts noted that the third quarter is normally BHP's lowest-earning period owing to a number of seasonal factors, and they predicted a sharp rise in fourth quarter net to around 300 mln dlrs. One key factor in the fourth quarter is expected to be a tax break of some 70 mln dlrs for the investment allowance on capital expenditure in the steel division, they said. They said they saw BHP's full year earnings at around 900 mln to 920 mln dlrs. They added that such a decline from 1985/86 would be no surprise, noting BHP has said that it would be difficult to equal its record 1985/86 net profit. REUTER 

BP units seek five billion dlr revolving credit to support Standard Oil tender

INDIAN PLANT SIGNS FIRST ALUMINA EXPORT CONTRACT

An unnamed Norwegian firm agreed to buy 100,000 tonnes of alumina a year from a refinery in eastern Orissa state due to start operations in the next 12 months, a Commerce Ministry official told Reuters. He said the state-owned National Aluminium Co, which owns the plant, and the state-owned Mineral and Metals Trading Corp signed its first long-term export agreement with the company, but gave no further details. Of the plant's 800,000 tonnes annual capacity, 425,000 will be smelted into 218,000 tonnes of aluminium and the remaining 375,000 will be exported, the official said. REUTER 

FRIED. KRUPP GMBH <KRPG.D> YEAR 1986

Provisional world group 1986 third party turnover 15.9 billion marks vs 18.5 billion. Third party incoming orders 15.5 billion vs 16.9 billion. Orders on hand at end-1986 9.1 billion vs 10.3 billion. Workforce at end-1986 68,043 vs 67,402. REUTER 

NORDIC INVESTMENT BANK HAS ZERO COUPON BOND

The Nordic Investment Bank is issuing a zero coupon 100 mln Australian dlr bond due April 24, 1992 priced at 53-1/2 pct for an effective yield at launch of 13.33 pct, lead manager Chemical Bank International Ltd said. The bond will be available in denominations of 1,000 and 10,000 dlrs and will be listed in Luxembourg. Fees comprise 3/4 pct selling concession and 1/2 pct for management and underwriting. REUTER 

LUCAS INDUSTRIES PLC <LUCS.L> HALFYEAR ENDED JAN 31

Shr 22.9p vs 26.9p. Interim div 2.6p vs same. Pre-tax profit 40.0 mln stg vs 38.0 mln. Net profit before minorities 29.6 mln vs 30.9 mln. Turnover 825.0 mln vs 791.6 mln. Trading profit 52.8 mln stg vs 52.5 mln. Related companies profit 3.1 mln vs 1.4 mln. Interest payable 12.3 mln vs 14.6 mln. Reorganisation and redundancy costs 3.6 mln vs 1.3 mln. Tax 10.4 mln vs 7.1 mln. Minorities 1.5 mln vs 2.4 mln. Extraordinary charges 1.3 mln vs 34.2 mln. REUTER 

BP UNITS SEEK FIVE BILLION DLR REVOLVING CREDIT

BP International and BP North America are seeking a five billion dlr, four year syndicated credit facility in support of British Petroleum Co Plc's tender offer for the 45 pct of Standard Oil Co it does not already own, Morgan Guaranty Trust Co of New York said as arranger. The facility, to be guaranteed by British Petroleum Co Plc <BP.L> is probably the largest credit facility ever arranged in Europe, bond analysts said. Full terms will be announced either later today or tomorrow morning. BP said earlier it planned a tender offer for the 45 pct of Standard it does not already own for 70 dlrs a share cash. The financing being arranged by Morgan Guaranty will take the form of a fully committed revolving credit. As announced earlier, BP also is arranging a U.S. Commercial paper program in connection with the tender and part of the revolver will be used to support that program. The exact size of the U.S. Program has not been decided and the dealers have not yet been chosen. The credit facility will also allow the borrower to issue cash advances with maturities of one, three or six months through a tender panel, which will be comprised of banks committed to the facility. Despite the unprecedented size of this euromarket facility, Morgan Guaranty said that it was being syndicated only among BP's relationship banks. As a result, banks were being offered lead manager status at 200 mln dlrs, co-lead management at 125 mln and manager at 75 mln. Although pricing on many credit facilities has become extremely fine in recent years because of the keen competition to win mandates, Morgan Guaranty said banks would be compensated fairly since this is a special purpose facility which must be completed quickly, with signing expected in about 10 days. REUTER 

EUROFIMA LAUNCHING 40 MLN SWISS FRANC NOTES

Eurofima of Basle is launching 40 mln Swiss francs of six year notes with a 4-3/8 pct coupon and 100.25 issue price, lead manager Zurich Cantonal Bank said. Payment is due April 22. REUTER 

CLUB MEDITERRANEE <CMI.PA> - YEAR ENDED OCTOBER 31

Parent company 1986 net profit 202.55 mln francs vs 171.31 mln Dividend 13.02 francs vs same, including 4.34 francs tax credit. (Note - company earlier reported consolidated net profit 315.9 mln francs vs 302.08 mln and consolidated attributable profit of 293.3 mln vs 266.6 mln.) REUTER 

U.K. MONEY MARKET LIQUIDITY POSITION EXPECTED FLAT

The Bank of England said it has forecast a flat position in the money market today. Among the main factors, maturing assistance and take-up of treasury bills will drain 545 mln stg and a rise in note circulation 35 mln stg but the outflow will be offset by 490 mln stg exchequer transactions and bankers balances above target 70 mln. REUTER 

EC SUGAR TENDER SEEN AS FURTHER CONCESSION

The rebates granted at yesterday's EC sugar tender represent a further concession to producers' complaints that they are losing money on exports outside the bloc, trade sources said. They said the maximum rebate of 45.678 European currency Units (Ecus) per 100 kilos was 0.87 Ecus below what producers claim is needed to obtain the equivalent price to that offered for sales into intervention. The rebate at last week's tender was 1.3 Ecus short of the level producers thought necessary and that of the previous week was 2.5 Ecus below this level. But the sources said producers who have offered a total of 854,000 tonnes of sugar into intervention in an apparent attempt to persuade the Commission to set higher maximum rebates have given no formal indication to the Commission that they intend to withdraw these offers. The French and German operators involved would be able to withdraw the offers up to five weeks after April 1 when the sugar will officially enter intervention stores. The five-week period is the normal delay between sugar going into intervention and payment being made for it. EC officials have said that if the Commission has to buy the sugar, it is determined immediately to resell it, a move which could drive down market prices further. REUTER 

German Feb current account surplus 6.6 billion marks (Jan surplus 4.8 billion) - official

German February trade surplus 10.4 billion marks (Jan surplus 7.2 billion) - official

GERMAN CURRENT ACCOUNT SURPLUS WIDENS IN FEBRUARY

West Germany's current account surplus widened to a provisional 6.6 billion marks in February from a slightly downwards revised 4.8 billion in January, a spokeswoman for the Federal Statistics Office said. The trade surplus in February widened to a provisional 10.4 billion marks from 7.2 billion in January, she added. The Statistics Office had originally put the January current account surplus at 4.9 billion marks. The February trade surplus was well up on the 6.84 billion mark surplus posted in the same month of 1986. But the current account surplus was down slightly from the 6.85 billion surplus recorded in February 1986. A Statistics Office statement said the widening of the February current account surplus compared with January was due to seasonal factors. Neither the trade nor current account figures are seasonally adjusted. February imports, measured in terms of value, totalled 32.11 billion marks, a decline of 10 pct against February 1986 but a rise of 5.5 pct against January. Exports in February, also in value terms, totalled 42.56 billion marks, 0.5 pct less than in February 1986 but up 13 pct compared with January. The Statistics Office said it was not yet able to calculate the real change in exports and imports in February. But for comparison purposes it noted that in January the average value of imports had fallen 15 pct year-on-year while the average value of exports had declined by only 4.4 pct. Within the current account, the services account had 300 mln marks deficit, supplementary trade items a 200 mln mark surplus while transfer payments posted a 3.7 billion mark deficit. Taking the first two months of 1987 together, imports in value terms fell 14 pct to 62.6 billion marks compared with a year earlier. The value of exports totalled 80.2 billion marks, a decline of 7.4 pct against the same months of 1986. The resulting trade surplus of 17.6 billion marks for January/February compares with a cumulative surplus of 14.1 billion marks in the year-ago period. The cumulative current account surplus for January and February 1987 totalled 11.3 billion marks against 11.4 billion marks a year earlier, the Statistics Office said. Bank economists said the rise in the February trade surplus reflected an improvement in the terms of trade as well as seasonal factors. The Federal Statistics Office said earlier this week that February import prices fell 0.7 pct against January while export prices were unchanged. "The rise in the nominal figures masks a lower export trend that is not expected to change for several months at least," said an economist. He said the nominal trade surplus for 1987 as a whole is likely to fall only slightly from the record 112.2 billion marks in 1986 but other economists said the surplus could fall to around 80 billion marks. An economist at the Bank fuer Gemeinwirtschaft (BfG) in Frankfurt said a two-month comparison of trade figures gave a more accurate picture of West Germany's trade position. He noted the 17.6 billion mark surplus for January and February together was lower than the 21.6 billion mark surplus posted in November and December. "The trend is clearly lower," he said. This economist, who declined to be named, said the February rise was also partly explained by special factors in January, when there had been a number of public holidays as well as extremely cold weather, both of which hindered trade. REUTER 

MONTREAL TRUSTCO ISSUES CANADIAN DOLLAR EUROBOND

Montreal Trustco Inc is issuing a 100 mln Canadian dlr, 8-1/2 pct bond due May 6, 1992 at 101 pct, lead manager Societe Generale said. The non-callable issue is of unsecured, unsubordinated debt. Denominations are of 1,000 and 10,000 Canadian dlrs and listing is in Luxembourg. Payment date is May 5. Fees are 1-1/4 pct for selling, 3/8 pct for underwriting and 1/4 pct for management including a 1/8 pct praecipuum. REUTER 

KEATING REVISES DOWN AUSTRALIAN GROWTH FORECAST

Treasurer Paul Keating forecast economic growth at slightly under two pct in the financial year ending June this year, down from the 2.25 pct forecast contained in the 1986/87 budget delivered last August. Australia's terms of trade also fell, by 18 pct, over the past two years, he told Parliament. Terms of trade are the difference between import and export price indexes. Despite the figures, the budget forecast of about 1.75 pct annual growth in employment would be met, Keating said. Unemployment is currently at 8.2 pct of the workforce. "This government is dragging Australia through a trading holocaust the kind of which we have not seen since the Second World War," Keating said. "We are not pushing this place into a recession. We are not only holding our gains on unemployment, we are bringing unemployment down," he said, adding that the government had help the country avoid recession. REUTER 

TAIWAN'S SAVINGS AT RECORD HIGH

Taiwan has over one trillion Taiwan dlrs in savings, official statistics show. Figures released yesterday show all forms of savings by individuals and public and private firms, including bank deposits, certificates of deposits and bond's, are running at about 37 pct of gross national product (GNP). GNP rose by 14.35 pct in 1986 to 2.74 trillion dlrs. Taiwan's strict foreign exchange controls and lack of incentives to invest abroad mean its huge export earnings are mainly deposited in bank savings accounts, earning below four pct interest each year. REUTER 

SHORT-DATED SAUDI RIYAL RATES FIRM IN QUIET MARKET

Short-dated Saudi riyal interest rates firmed but other rates were steady in quiet trading, dealers said. "Day-to-day money is a bit tighter," one trader said. Overnight rose two points to six pct, while most quotes for tomorrow/next and spot/next were 1/2 point higher at around six, 5-1/2 pct. The periods were essentially steady at 5-7/8, 5/8 pct for one month, 6-1/2, 3/8 pct for three, and 6-7/8, 11/16 for six months. The spot riyal stood at 3.7500/05 to the dollar after 3.7506/09 yesterday. REUTER 

JAPAN BEEF PRICE SUPPORT CUT WILL NOT RAISE DEMAND

Japan's plan to cut beef intervention prices for the fiscal year starting April 1 will not boost demand because of strict supply controls and a complex distribution system, Japanese and U.S. Industry sources said. "Government beef policy protects farmers rather than meeting consumers' demands and the cutback ... Is too marginal," a Housewives Association of Japan official said. Despite mounting U.S. Pressure on Japan to open farm markets, beef is strictly controlled by the government, which maintains a price stabilisation zone to protect farmers. Under the plan, expected to be announced this month, the standard or bottom price of castrated wagyu -- known as marbled beef -- will be set at 1,370 yen per kilo for 1987/88 against 1,400 now, and the ceiling at 1,780 yen against 1,820. The standard price of other beef, mainly produced from dairy steers, is set at 1,020 yen against 1,090 and the ceiling at 1,325 against 1,420. Ministry officials said the semi-government Livestock Industry Promotion Corp (LIPC) conducts buffer stock operations to help keep wholesale beef prices within the intervention price zone. The LIPC is allowed to import most beef, with the amount set by the government under a quota system. When wholesale prices go above the ceiling, the LIPC releases its beef stocks, both domestic and imported, and buys locally produced beef when prices are below. But the LIPC has often been criticised for releasing beef stocks when the prices are higher than the ceiling. Phillip Seng, Asian Director of the U.S. Meat Export Federation, told Reuters the two pct cut in prices is a step toward closing the gap with European Community prices, about half those in Japan. But Seng said the cut will not benefit consumers or U.S. Meat exporters because of Japan's rigid and complicated distribution system and strict supply control by the LIPC. The Housewives Association official said retail beef prices are high mainly because of distribution problems and high production costs, as well as poor operations by the LIPC. American meat packers see Japan as a promising market. F.C. Beatty, of U.S. Packer John Morrell and Co, told the Japan Times beef cuts, which sell for 1.20 to 3.00 dlrs a pound in the U.S., Are sold at 15 to 30 dlrs in Japan. But Seng said the cut will not benefit consumers or U.S. Meat exporters because of Japan's rigid and complicated distribution system and strict supply control by the LIPC. The Housewives Association official said retail beef prices are high mainly because of distribution problems and high production costs, as well as poor operations by the LIPC. American meat packers see Japan as a promising market. F.C. Beatty, of U.S. Packer John Morrell and Co, told the Japan Times beef cuts, which sell for 1.20 to 3.00 dlrs a pound in the U.S., Are sold at 15 to 30 dlrs in Japan. But industry sources said it is unclear how much demand will pick up if retail beef prices drop following any sharp reduction in intervention prices. U.S. Agriculture Secretary Richard Lyng said this week he will ask Japan to remove all beef import restrictions when he visits here next month. In 1984, Japan decided to increase its beef import quota by 9,000 tonnes a year until March 31, 1988. In 1987/88, the quota will rise to 177,000 tonnes from 168,000 in 1986/87, ministry officials said, adding Japan wants to keep self-sufficiency in beef at around 70 pct. REUTER 

FOREIGN FIRMS HOPE TO JOIN JAPAN TELECOM COMPANY

One of two rival firms seeking to enter Japan's international telecommunications market said it will offer a stake in the company to 10 foreign firms. President of <International Telecom Japan Inc> (ITJ), Nobuo Ito, decline to specify what share the firms would take, but told Reuters they would not participate in its management. ITJ and <International Digital Communications Planning Inc> (IDC), in which both Cable and Wireless Plc <CAWL.L> and Pacific Telesis Group <PAC.N> own 20 pct stakes, are set to merge into a new entity to compete against <Kokusai Denshin Denwa Co Ltd> (KDD). The Ministry of Posts and Telecommunications has urged the two rival firms to merge so KDD would have only a single competitor. The ministry has also rejected foreign management. Japan's law limits foreign ownership of any new international telecommunications entrant to 33 pct, so C and W's and Pacific's stakes could be three pct in the merged firm, sources said. Those seeking to join are General Electric Co <GE.N>, Ford Motor Co <F.N>, <Citibank NA>, BankAmerica Corp <BAC.NYSE>, <Shearson Lehman Bros Inc>, <Saloman Brothers>, <Asia Boeing Computer Service>, Unisys Corp <UIS.N>, <Societe Generale> and Deutsche Bank AG <DBKG.FRA>. The merger plan has been criticised for excluding foreign firms from a meaningful position in the market. The U.K.'s Prime Minister Margaret Thatcher, U.S. Secretary of State George Shultz, U.S. Commerce Secretary Malcolm Baldrige and U.S. Trade Representative Clayton Yeutter have all expressed such opposition. Japanese Prime Minister Yasuhiro Nakasone will draft a reply to the criticism following further discussion, a Posts and Ministry official said. REUTER 

U.K. OILMEAL/VEG OIL PRODUCTION ROSE IN 1986

The U.K. Produced 820,400 tonnes of oilcake and meal and 431,000 tonnes of crude vegetable oil in calendar 1986, Ministry of Agriculture figures show. They compare with 785,800 tonnes of oilcake and meal and 407,400 tonnes of crude vegetable oil produced in 1985. Total oilseeds crushed rose to 1.27 mln tonnes from 1.21 mln in 1985. REUTER 

BNP PLANS 100 MLN H.K. DLR CD ISSUE

Banque Nationale de Paris Hong Kong branch is planning a 100 mln H.K. Dlr certificate of deposit issue with BT Asia Ltd as lead manager, banking sources said. They said this is the first capped FRCD issue in Hong Kong. It is in two equal tranches. Tranche A, which matures January 9, 1993, is payable April 9 this year. Tranche B, which matures September 15, 1992, is payable April 15. Interest on both tranches is 1/8 percentage point over three months Hong Kong interbank offered rate, subject to a 14-3/8 pct ceiling. Management fee is 25 basis points. The CDs will be issued at par in denominations of 100,000 dlrs each. REUTER 

PHILIPPINES TO PUT 100 STATE FIRMS UP FOR SALE

The head of a Philippine panel charged with selling the non-performing assets of government financial institutions said some 100 state-owned companies would also be put up for privatisation. But David SyCip, chief executive trustee of the Asset Privatisation Trust (APT), told a meeting of financial executives the APT has not yet received a list of the firms. "I believe lead investor groups, people who see long-term potential, are willing to buy such companies in full and do a hands-on job of running them," SyCip said. SyCip said open bidding would be used to sell all assets handled by the APT. He said bidding would be either open-priced, if there were enough serious contenders, or the APT would set a target price for acquisition. He added that the target price did not constitute a rigid floor. "What we consider an acceptable price is a price at which an investor will earn an adequate return," he said. SyCip said the bulk of the APT's current work relates to the non-performing assets of the state-owned Development Bank of the Philippines (DBP) and the Philippine National Bank (PNB). The APT was set up in January. SyCip said about 75 pct of the 400-odd assets that the DBP and the PNB are handing over to the APT are still in the form of financial assets. "In some cases financial assets have been converted into physical assets by foreclosures. They are fairly cut and dried because we are dealing with mostly whole production facilities like textile or food-processing plants," he said. "Financial assets are more complicated. The only recourse is to foreclose, gain titles, and try to sell the asset, but the laws here tend to favour the debtors," he added. SyCip said although the APT is protected from prosecution by its charter, many debtors are tying up the panel with litigation. "If you see some of the situations we have to work our way through you will see that our symbol, a Gordian knot, is an apt illustration," he said. SyCip said the PNB has not succeeded in foreclosing on 16 of the 17 sugar factories it wants to sell because of the high costs involved. "When you do your arithmetic you realise that if you did foreclose your recovery would be only a fraction of the asset's book exposure," he said. SyCip said the APT was not worried about whether associates of former President Ferdinand Marcos, who originally owned many of the bankrupt companies, would buy them back through the privatisation scheme. "We just look at the bottom line, which is to monetise these assets to the maximum degree possible," he said. "We are selling for cash, it is not our concern where it comes from." He said he had told cabinet ministers sceptical about the identities of buyers that "Marcos cronies" could easily put up legitimate fronts if they were specifically barred from bidding for assets on the block. "I told them if I am paid 20 mln pesos in 100-peso bills, all with identical serial numbers and they look like genuine legal currency, then I would accept them'," SyCip said. He said some participants in the government's debt-equity swap scheme were interested in buying non-performing assets with the pesos they receive from such deals. The problem is government regulations slow down approval of debt-equity plans and the APT normally demands full payment within 15 days. "The Central Bank and Monetary Board could also look at investment funds earmarked for non-performing asset purchases," he said. "It would greatly facilitate matters." SyCip said last month the APT hoped to recover about 24 billion pesos of the assets' total worth of 108 billion. President Corazon Aquino announced earlier this month that proceeds from the sale of APT-controlled assets would be used to finance the government's land reform program, which aims to distribute about 9.7 mln hectares of land to poor peasants. Asked why the APT did not favour Filipino buyers, SyCip said: "How much money has the country to lose because of this 'Filipinos first' slogan? How many people have become millionaires and then forgotten the Philippines and put their money in the United States or Australia?" REUTER 

SINGAPORE LAWS TO LIBERALISE LOCAL CAPITAL MARKET

Parliament passed laws increasing the amounts and frequency of treasury bill issues and allowing the government to raise up to 35 billion dlrs through issues of registered stock, bearer bonds and book-entry securities. Both steps are aimed at establishing a wider domestic capital market as part of Singapore's plans to expand its financial sector, Finance Minister Richard Hu said. Banking sources said the new government securities market, scheduled to have been launched on March 2, had been delayed pending legislative approval of these bills. The 35 billion dlrs maximum which may be raised under the Development Loan Bill (1987), against a ceiling of 15 billion under current laws, is expected to satisfy demand for government securities over the next four years, Hu said. He said 6.1 billion dlrs of the 15 billion has so far been raised as development loans. The rest will be used up when bonds are issued to absorb advance deposits of 13.9 billion dlrs from the Central Provident Fund (CPF), a mandatory pension savings scheme. Workers and employers contribute a respective 25 pct and 10 pct of a worker's salary to the CPF, which had funds totalling 29.3 billion at end-1986. Regular government securities issues are needed to meet the demand of banks, insurance companies, other financial institutions and corporate and individual investors, Hu said. The Monetary Authority of Singapore (MAS) had said it planned to launch trading by issuing taxable instruments grossing seven billion dlrs in the first year and a gross 38 billion dlrs of paper over the next five years. Funds raised in excess of the government's budgetary needs will not be channelled into increased spending, but will be recycled back to the financial system, largely through the MAS, Hu said. Hu said the current government securities market is rudimentary, with the CPF holding three-quarters of the outstanding debt and banks, discount houses and insurance companies holding the rest. "The concentration of securities in the hands of such long-term holders has left little scope for trading activity," he said. "Moreover, the maturity of the bonds, mostly 20 years, was not attractive to other investors who might have been expected to deal more actively in the market. The infrequency of bond issues exacerbated the lack of liquidity necessary for the development of a market," Hu said. Hu said these obstacles have been resolved and regular issues of government securities will be made, initially carrying terms of up to five years and market-related yields. The minimum denomination is 1,000 dlrs for notes and bonds -- aimed at individual investors -- and 10,000 dlrs for the treasury bills, which are directed at corporate investors. Eight primary and registered dealers have undertaken to make markets in order to ensure liquidity, he said. Hu said while the new government securities market will be essentially domestic, non-residents are free to invest, but interest earned will be subject to withholding tax. Hu said under the new Treasury Bills (Amendment) Bill, all book entries of borrowings through treasury bill issues must be made in records maintained by MAS. Hu said that instead of physical certificates having to travel back and forth at each transaction, with side trips to the MAS for registration, the MAS will maintain a computerised system for updating records in a central register. Commercial banks and primary and registered government securities dealers will each have two securities accounts with the MAS, one for their own holdings and the other for holdings on behalf of all their customers, Hu said. All trades will be reflected daily in changes in these accounts, Hu said. "These institutions will in turn act as custodians of government securities for their customers, rendering each an individual accounting of his holdings." Hu said the new system will cut storage and handling costs and paper work, reduce the danger of loss, theft, destruction and counterfeiting, and permit greater speed and efficiency in handling large volumes of transactions. REUTER 

SIEMENS SEES SALES NEAR 52 BILLION MARKS THIS YEAR

World group turnover of Siemens AG <SIEG.F> should rise to 51 or 52 billion marks in the current year to September 31 after a 19 pct upturn in the first five months, management board chairman Karlheinz Kaske said. Siemens reported world group turnover in 1985/86 of 47.02 billion marks. Kaske told the annual shareholders meeting turnover rose to 21.2 billion marks in the first five months of 1986/87, about 19 pct above the same year-ago period. The rise was mainly due to payment in January for a West German nuclear power station which led to a jump in domestic sales of 36 pct. In the first five 1986/87 months, turnover abroad showed a three pct increase, Kaske said, without giving figures. In the same period incoming orders rose five pct to 21.8 billion marks against the same 1985/86 period. For the year as a whole incoming orders should rise between one and two billion marks to around 51 or 52 billion. Apart from payments for the nuclear power station, the communications and telecommunications sectors in particular should contribute to growth this year, Kaske said. But it was not possible to make a profit forecast for 1986/87 because of uncertainty about the direction of the dollar, Kaske said. Siemens already reported that first quarter 1986/87 group net profit fell marginally to 296 mln marks from 298 mln in the same period in the previous year. Turnover in the first five months rose particularly strongly in the installations and automotive technology, communications and telecommunications sectors, but components and energy and automation showed a sharp decline. Kaske said domestic orders rose to 10.2 billion marks in the first five months of this year, or nine pct above their level in the same 1985/86 period, boosted in particular by orders for the fully owned Kraftwerk Union AG subsidiary. Foreign orders grew one pct to 11.6 billion marks. An increase in orders through newly acquired subsidiaries abroad was balanced by the decline in the dollar. While the installations and automotive technology sector showed a sharp rise in orders, energy and automation and communications orders were below the level achieved in the same period of 1985/86. Telecommunications orders remained at roughly the same level. Kaske said investments were expected to remain around six billion marks in 1986/87 after a 50 pct increase the previous year. Research and development were likely to rise 13 pct to 6.1 billion marks or around 12 pct of turnover. REUTER 

KRUPP HAS SATISFACTORY 1986 RESULTS

The Fried. Krupp GmbH <KRPG.D> steel and engineering group said it had a satisfactory 1986 despite a provisional 12 pct fall in total group sales to 18.1 billion marks from 20.7 billion the previous year. Third party turnover declined to 15.9 billion from 18.5 billion in 1985 while orders slipped to 15.5 billion marks from 16.9 billion, it said in a preliminary statement. Despite these figures, which reflected the dollar's weakness against the mark and oil and raw materials price falls, it said 1986 was a satisfactory year. The reason was the continued expansion of the machinery and plant sector, which accounted for 42 pct of total sales. Krupp added that some areas of the mechanical engineering business achieved notable growth rates and acquisitions had underpinned machinery and component activities. An orders decline in the steel and, in particular, the trading and services sectors, affected the group's total order figures. However, "all business sectors contributed to the positive results achieved in 1986," Krupp added, without giving details. Domestic orders decreased by five pct to 9.6 billion marks from the previous year and foreign orders fell 14 pct to 5.9 billion, it said. Foreign business accounted for 38 pct of orders against 40 pct in 1985. Orders received by the machinery and plant sector, 11 member companies which comprise the core area of the group, rose by four mln marks last year to 6.9 billion, Krupp said. The group's orders in hand amounted to 9.1 billion marks at end-December 1986 from 10.3 billion at the start of the year. Orders received by the steel sector last year decreased by three pct to 6.2 billion marks from 1985, it said. The steel market weakened increasingly over the year, mainly because of exchange rate movements, the deterioration in foreign trade and a downturn in a number of customer industries. The difficult market for sections and flats of quality steel depressed order tonnages by around seven pct, Krupp said. But special steel boosted by strong demand for stainless cold-rolled flats, grew by five pct in tonnage terms. REUTER 

JAPANESE SCIENTISTS DEVELOP AIDS DETECTION MATERIAL

Japanese scientists say they have developed a material which can help detect the killer disease Aquired Immune Deficiency Syndrome (AIDS). Leading Japanese AIDS scientist professor Naoki Yamamoto told Reuters he and other scientists working at Yamaguchi University in southern Japan have been testing the material's ability to filter the AIDS virus from blood since last April and produced successful results. He said the material, a tube made from a cellulose membrane, could only be used to diagnose AIDS sufferers and not cure them. The share price of Asahi Chemical Company<ASAT.T>, which plans to market the product in about a year's time, rose sharply but ended the day only 27 yen higher at 905 yen a share. The cellulose tubes, which Asahi will market under the name Bemberg Microporous Membrane (BMM), can also separate the virus of the kidney ailment hepatitis and may be applied to diagnosing polio sufferers, vice-president of Asahi Chemical, R. Yumikura said. Ashai will supply BMM for research purposes soon. Shares of companies even remotely related to the fight against AIDS have risen on the Tokyo stock market since the first Japanese woman died of the disease in Kobe in January. REUTER 

NO PESSIMISM FOR GERMAN EXPORTERS, MINISTRY

Firms need not be pessimistic about export prospects even though foreign markets have become more difficult because of the mark's strength the Economics Ministry said. The ministry's parliamentary state secretary Ludolf Georg von Wartenberg, told a business conference German exports could start rising again in real terms during 1987, reversing the lower export trend which emerged in mid-1986. But even if the turnaround did not occur, there would be no need to worry about the economy as long as the weakness of exports did not affect currently good domestic demand. Von Wartenberg said consumer demand remained quite good but noted there had been a cooling in the investment climate. "This is certainly a reason for heightened watchfulness but not for stimulative steps," he said. The best way for Bonn to help its exporters is to work actively to promote free world trade, he added. Von Wartenberg said the economy still had good export opportunities. Price alone was not the only factor in international competitiveness, he said, adding German firms have a reputation for high quality standards, prompt delivery times and good service. Von Wartenberg said the government was in a difficult position on its trade figures. It faced international pressure to reduce its trade surplus, but West Germans were worried about the effect of the mark's strength on the country's exporters. Reports about the trade surplus, especially overseas, tended to concentrate on nominal trade figures, which rose to a record 112.2 billion marks in 1986, he said. But this rise was due entirely to the lower value of imports caused by the decline of both the dollar and oil prices. German exports have in fact been falling in real terms for sometime, he said. REUTER 

MONETARY AUTHORITIES SAID TO LOSE CREDIBILITY

The monetary authorities of the major industrialised countries lost their credibility this week as the dollar was sold off despite pleas from ministers and widespread central bank intervention, dealers said. The dollar's fall below 150 yen, which follows last month's Paris currency stabilisation agreement by the U.S., Japan, West Germany, Britain, France and Canada, is a dramatic reversal of the success of the Group of Five (G-5) 1985 New York Plaza meeting to weaken the dollar, they said. The G-5 and the market agreed in 1985 that the dollar was overvalued but this time the market and the authorities are on different sides, dealers said. Apparent confusion in the ranks of the G-5 nations has encouraged the market to challenge the authorities despite concerted intervention by the central banks of the United States, Japan, Britain and West Germany, they said. Pleas by Japanese Finance Minister Kiichi Miyazawa for action to stabilise the dollar were matched over the weekend by comments by U.S. Treasury Secretary James Baker that there was no target zone for the dollar. The dollar was sold anyway. Yesterday's comment by Baker that he stood by the Paris accord did nothing to reverse sentiment, dealers said. The intervention, backed by remarks by Fed Chairman Paul Volcker and Japanese central bank governor Satoshi Sumita, which a few months ago would have brought the dollar fall to a halt, has done little but slow the rate of its decline, they noted. The situation has again raised the question of whether intervention can succeed against the trend in today's huge currency markets. Dealers said the market's cool response to intervention reflected a basic oversupply of dollars. "This means that the current dollar selling is not of a sheer speculative nature but backed by real demand," said Koichi Miyazaki, deputy general manager at Sanwa Bank. Dealers said the dollar will remain weak despite the intervention and it is only a matter of time before some operators try to push it below 148 yen. The dollar closed in Tokyo today at 149.40 against New York's 149.30/40. Its record low was 148.40 in Tokyo last Tuesday. Dealers said the dollar will gain only temporary support to rise above 150 yen toward early April when the Group of Seven industrial nations meets to discuss currencies again. The market expects the seven nations (the Paris six plus Italy) to try to agree on another way to stabilise currencies apart from intervention, a chief dealer at a U.S. Bank said. Dealers said they were unsure what other methods could be used and they are sceptical anyway about how long the Paris accord nations, particulary the U.S., Will remain willing to prevent a further dollar fall given the continuing high U.S. Trade deficit, especially with Japan. Further pressure from a protectionist U.S. Congress for a lower dollar is also limiting Washington's options, they said. The market now thinks the central bank action is to slow the dollar fall, not to push it back over 150 yen, said Tadahiko Nashimoto, manager at Long Term Credit Bank of Japan. Another bearish factor for the dollar is expected large forward dollar sales from April to June for export bills falling due for Japanese exporters from April to September. The exporters had delayed in expectation of a further yen depreciation, dealers said. Yesterday's request to 30 trading houses by the Ministry of International Trade and Industry to restrict dollar sales looks ineffective in light of this real demand, they said. The market is also anticipating active institutional dollar sales to hedge currency risks on bond holdings from the new business year starting April 1, dealers said. "The market seems to have established a new dollar trading range between 147 and 149 yen," one dealer said. The dollar traded between 151 and 153 yen after the Paris accord on February 22 and 150 yen was then considered the low end for the dollar against the yen, he said. Some dealers now believe that if the dollar falls below 148 yen, it will pick up renewed downward momentum and slide to 145. REUTER 

AUSTRIA MAKES TWO BILLION SCHILLING NOTE ISSUE

Austria is making a two billion schilling issue of floating rate treasury notes carrying interest of 1/8th of a point over the three-month Vienna Interbank Offered Rate (VIBOR), lead manager Oesterreichische Laenderbank AG [OLBV.VI] said. The issue, to be made at par, carries a placing fee of 20 basis points and will be listed in Vienna, a Laenderbank official told Reuters. The issue will have an initial three-year life and the issuer has the right to make two three-year extensions and a further one-year extension to 1997. Payment and closing date is April 23 and redemption will be on the same date at the end of each of the periods. The notes, in one mln schilling denominations, may not be offered in Austria, Britain or the United States. REUTER 

FRANCE'S CAECL ISSUES THREE BILLION FRANC BOND

Caisse d'Aide a l'Equipement des Collectivites Locales (CAECL) is issuing a three billion franc two-tranche domestic bond, the lead managers said. The first two billion franc tranche at a fixed rate of 8.90 pct is led by Credit Lyonnais, Banque Indosuez and Union de Garantie et de Placement, with Credit Lyonnais as book-runner. The non-callable, 13 year and 80 days bond is issued at 100.419 pct. Payment date is May 28 with the first coupon payment in 1988. The second one billion franc, variable-rate tranche is led by Banque Indosuez, Credit Lyonnais and UGP, with Indosuez as book-runner. The 12 year 94 day bond is issued at 98.672 pct. Interest is based on average state bond yields (TME), with a margin of less 0.24 pct on the basis of TME at 8.45 pct. Payment date will be May 28 with the first coupon payment in 1988. REUTER 

UK FEB TRADE DEFICIT 224 MLN STG VS DEFICIT 527 MLN IN JAN - OFFICIAL.

U.K. FEB CUURENT ACCOUNT SURPLUS 376 MLN STG VS JAN SURPLUS 73 MLN - OFFICIAL.

MALAYSIAN CENTRAL BANK SEES HIGHER 1987 GROWTH

Gross domestic product (GDP) growth in 1987 is expected to grow by between 1.5 and two pct, up from one pct in 1986, the central bank said. The forecast compares with the one pct GDP growth forecast made by the Treasury last October. Bank Negara also said in its annual report that gross national product (GNP) is expected to grow by 3.5 to four pct, after declining 7.3 pct in 1986. It said that a turnaround in investor confidence since last November had been spurred by a moderate improvement in oil and commodity prices and a rise in manufacturing exports. Growth in 1987 is expected to come from the anticipated rise in export earnings if the industrialised countries sustain their average GNP growth at 2.5 to three pct, it added. Bank Negara said its forecast assumes that crude oil will average 15.50 dlrs a barrel, rubber at 210 cents a kilo, palm oil at 850 ringgit a tonne, tin at 17 ringgit a kilo and a rise of 12 pct in manufacturing exports. It said Malaysia's international terms of trade will turn around to rise by two pct in 1987 after declining 12 pct in 1986 and five pct in 1985. "In 1987, income will be higher, private consumer spending is likely to recover and expand... The budget will remain under strict control... The resource gap in the government's finances on current account will be bridged over the near term," Bank Governor Jaafar Hussein said in the report. The current account deficit is expected to narrow to 1.19 billion ringgit in 1986 or 1.8 pct of GNP from 1.79 billion or 2.5 pct of the GNP the previous year. The bank forecasts the inflation rate will increase by 1.5 pct, after its 0.7 pct rise in 1986. REUTER 

U.K. VISIBLE TRADE DEFICIT NARROWS IN FEBRUARY

Britain's visible trade deficit narrowed to a seasonally adjusted provisional 224 mln stg in February from 527 mln in January, The Trade and Industry Department said. The current account balance of payments in February showed a seasonally adjusted provisional surplus of 376 mln stg compared with a surplus of 73 mln in January. Invisibles in February were put provisionally at a 600 mln surplus, the same as in January. Seasonally adjusted, imports rose in February to 7.16 billion stg from 6.73 billion in January. Exports rose to a record 6.93 billion last month from 6.20 billion in January. Trade Department officials said the improvement in Britain's current account contrasted with most private forecasts and they attributed much of the strength to imports rising less quickly in February than might otherwise have been expected. The Department said exceptionally cold weather in January reduced exports that month and that there had been an element of catching up in the February figures. The seasonally adjusted volume index, base 1980, a guide to underlying non-oil trade, showed exports rising to 131.0 from 114.6 in January and imports rising to 142.2 from 136.5. The value of British oil exports in February rose to 751 mln stg from 723 mln in Jnauary while oil imports rose to 425 mln from 352 mln. The Department said the upward trend in non-oil export volume continues and the underlying level of non-oil import volume seems to have stablised. The Departnment said exports to the U.S. May be benefiting from fluctuations in the mark and yen exchange rates. REUTER 

LUCAS SEES CONTINUED GROWTH IN SECOND HALF

Lucas Industries Plc <LUCS.L> said its underlying performance would continue to improve in the second half but profits would be restrained by low activity in U.K. Commercial vehicle and tractor markets as well as in North American electronics. The company earlier reported a two mln stg rise in pretax profit to 40 mln in the six months to end-January. The figure was some five mln below forecasts and Lucas shares dropped sharply to 557.5p at 1130 GMT from last night's close of 590p. It said it would continue with plans for all its activities to be internationally competitive and profitable. Costs of restructuring, reorganisation, employee training and retraining, particularly in the UK automotive businesses, together with high research and development spending would affect profits in the short term. But Lucas said it was exploiting growth opportunities in automotive markets, especially in vehicle breaking and engine management systems. Recent acquisitions in North America had strengthened Lucas Aerospace and Lucas Industrial systems. REUTER 

IWC ups Soviet grain 1986/87 import estimate three mln tonnes to 29 mln - official

IWC lifts 1986/87 world wheat, coarse grain estimate one mln tonnes to record 1,377 mln

ECONOMIC SPOTLIGHT - SWISS BANKING SECRECY

Swiss lawyers have largely headed off an attempt to restrict banking secrecy and curb their powers to act for clients despite the new, revised code of banking conduct agreed by the Bankers' Association this week, analysts said. The "laundering" of drug and "insider dealing" money and controversy over accounts of the ousted Philippine and Haitian Presidents have hurt the standing of Swiss banks recently and strained international relations, particularly with the United States. Critics said the new code fell well short of demands for reform, doing little to close a key loophole in the requirement that banks know the identity of their customers. The Social Democratic party, a member of the ruling four-party coalition, which forced an unsuccesful 1984 referendum to curb banking secrecy, complained the code still fell short of the legal controls they wanted. "It looks a slight improvement on paper, but the same tricks will still be possible in practice," Felix Meier, a senior party official, told Reuters. In contrast, Swiss lawyers are happy with the new code. "Apart from a few nuances, we are very pleased with the agreement," said Max Oesch, a senior official of the Swiss Lawyers Federation, which has fought a long campaign to prevent any curbs on lawyers' ability to act for their clients. "It has shown that the 4,000 Swiss lawyers who do a good job should not be punished for the sake of getting at the one or two black sheep." The role of lawyers has been at the centre of long running discussions on the renewal of the so-called "convention of diligence," a voluntary code of banking conduct introduced in response to a major banking scandal here in 1977. With secrecy back in the public eye due to the Ferdinand Marcos case and a Swiss bank link to the recently busted "Pizza Connection" international heroin ring, officials at the Banking Commission said earlier this year they wanted a tightening of rules on anonymity. However, the changes in the new code, which comes into operation in October, have been minor. Clients will still be able to keep their identity secret from the banks provided their lawyer pledges that the relationship with his client "is not only of a temporary nature" and involves provision of other legal services. The Lawyers' Association said this part of their business is very minimal anyway. In the majority of cases, people had perfectly legal private or commercial reasons for not wanting the bank to know their identity, Oesch said. The Banking Commission, despite its earlier demand for a virtual abolition of the loophole, also said it was happy with the new code. However, critics complain that the agreement does not go far enough to restrict the role of lawyers and could still be circumvented by criminals. "No other group in society is allowed to regulate itself as much as the banks," complained Meier of the Social Democrats. "I hope that the Banking Commission exercises its proper control function." However, other parts of the agreement won praise. In particular, banks will also now be required to demand the identity anyone doing more than 100,000 Swiss francs worth of business with them, even if they do not have an account at the bank. Until now, the threshold was 500,000 francs. Peter Kluser, head of the National Bank's legal department, which had argued for a lower limit, said the move could help combat the use of banks to "launder" or hide the criminal origin of money. The new code also clarifies the legal status of a tribunal able to impose heavy fines on banks which do not respect the code. REUTER 

MONTREAL TRUSTCO ISSUES CANADIAN DOLLAR EUROBOND

Montreal Trustco Inc is issuing a 100 mln Canadian dlr, 8-1/2 pct bond due May 6, 1992 at 101 pct, lead manager Societe Generale said. The non-callable issue is of unsecured, unsubordinated debt. Denominations are of 1,000 and 10,000 Canadian dlrs and listing is in Luxembourg. Payment date is May 5. Fees are 1-1/4 pct for selling, 3/8 pct for underwriting and 1/4 pct for management including a 1/8 pct praecipuum. REUTER 

LIBYANS APPEAR TO BE PULLING OUT OF CHAD

Libyan forces appear to be withdrawing from their last stronghold in Chad after suffering defeats at the hands of French-backed government troops, according to officials in both the U.S. And France. In Washington, a State Department spokesman told reporters "we have no reason to doubt that Libyan forces are leaving Faya Largeau," Libya's main garrison in Chad. The French Defence Ministry said it could not confirm the departure of the Libyan troops, but an official said "it is extremely likely. They are deprived of air cover and supplies, and their morale must be zero." REUTER 

TRADE SURPLUS CUT WOULD BENEFIT JAPAN - SUMITA

Bank of Japan Governor Satoshi Sumita said it is in Japan's national interest to make greater efforts to reduce its trade surplus. He told business executives the most important issues for the world economy are the correction of international trade imbalances and a solution to the world debt problem. To this end, Japan and the U.S. Must make medium- and long-term efforts to alter economic structures which have expanded the trade gap between the two nations. World economic growth and therefore an expansion of debtor countries' export markets are needed to solve the debt issue, he added. REUTER 

ALSTHOM AWARDED 900 MLN FRANC PAKISTANI DEAL

French heavy engineering group Alsthom <ALSF.PA> has won a 900 mln franc contract from Pakistan to supply four 100 MW gas turbines, the company said in a press release. The turbines are for the electricity generating plant at Kot-Addu, in central Pakistan and are expected to be operational at the end of 1988. REUTER 

COMMISSION APPROVES RAINBOW/PROGRESSIVE MERGER

The Commerce Commission has approved a proposed merger between <Progressive Enterprises Ltd> and <Rainbow Corp Ltd>, Rainbow said in a statement. The merger involves the formation of a new company <Astral Pacific Corp Ltd> which will acquire all shares in both companies on a one-for-one share exchange basis. Rainbow earlier this week lifted its stake in Progressive to 52 pct from 44 pct. The statement said a new private company, <Transcapital Corp Ltd>, fully owned by Rainbow directors Craig Heatley, Gary Lane and Ken Wikeley, will purchase this stake for an undisclosed cash sum. The Commission has also approved Transcapital acquiring up to 45 pct of Astral Pacific, Rainbow said. <Brierley Investments Ltd>, which has been a frequent critic of the merger, launched a full bid for Progressive at 4.20 N.Z. Dlrs a share last Monday. REUTER 

VIOLENCE REPORTED IN ECUADOR GENERAL STRIKE

At least 14 people were injured and many arrested in clashes during a one-day general strike called by Ecuadorean workers to protest against austerity measures imposed after a major earthquake on March 5. Interior Minister Luis Robles said the worst violence was in Quito, where demonstrators threw rocks at a luxury hotel and a number of banks. Over 80 people in eight cities were detained for stoning police, attacking troops, damaging buildings and setting fire to cars, he said. The casualty and damage toll is expected to rise as detailed reports reach the capital from the provinces. Labour leaders said they shut down all of Ecuador's industrial plants, but Labour Minister Jorge Egas said of the country's 900 largest factories only 86 were closed, 32 were partially working and the rest operating normally. The strike, called by leftist unions and declared illegal by the government, was aimed at pressing the administration to scrap an austerity program adopted on March 13 following an earthquake that killed up to 1,000 people and caused an estimated billion dlrs in damage. REUTER 

U.K. MONEY MARKET FORECAST REVISED TO DEFICIT

The Bank of England said it revised its estimate of today's money market shortfall to around 350 mln stg from a flat position. REUTER 

IWC LIFTS WORLD GRAIN OUTPUT ESTIMATE TO RECORD

The International Wheat Council (IWC) lifted its estimate for 1986/87 world wheat and coarse grain production by one mln tonnes to a record 1,377 mln, compared with 1,351 mln tonnes the previous season. In its monthly market report, the IWC said it is leaving unchanged its forecast of world wheat production for the coming 1987/88 season at between 520 and 530 mln tonnes against a record 534 mln in 1986/87. The one mln tonne upward revision in 1986/87 wheat production reflects several minor adjustments. The IWC raised the 1986/87 coarse grain trade figure two mln to 87 mln tonnes. It left wheat trade unchanged at 86 mln. The IWC 1986/87 estimate for world trade in wheat and coarse grain is thus estimated two mln tonnes higher at 173 mln against 169 mln the previous season with the forecast three mln rise in Soviet imports offset by small reductions elsewhere. The IWC said the area harvested for wheat in 1987/88 is likely to be down from last year as low world prices and restrictive national policies measures begin to take effect. At least four of the five major exporters expect to see a drop in wheat sowings without offset in other countries. There is still potential for even higher average wheat yields but the IWC said there are increasing signs world output may level off. Although it is still early to assess the coarse grain outlook, the IWC said barley acreage is likely to fall in the European Community but increase in Canada. U.S. Maize area is expected lower but oat sowings could rise. After damage to its maize crop last year, the Soviet Union plans to expand this area by as much as 50 pct to over six mln hectares in a year when many frost damaged wheat fields are likely to be resown to this and other spring crops. Improved weather and a further increase in the use of intensive cultivation methods could therefore see a marked rise in Soviet maize output in 1987, the IWC said. Any reduction in world coarse grain output would be bolstered by the large carryover stocks from 1986/87, the IWC said. It left its estimates of wheat and coarse grain stocks at endof different marketing years unchanged at 178 and 210 mln tonnes, respectively, against 160 and 167 mln a year earlier. After record world durum wheat production of 218.8 mln tonnes last season, the IWC said there are already signs of another large crop this coming season with higher output expected in the EC, Canada, the U.S. And North Africa. REUTER 

BANK OF JAPAN BUYS SMALL QUANTITY DOLLARS -DEALERS

The Bank of Japan was thought to have bought a small amount of dollars at around 149.30/40 yen, dealers said. The dollar fluctuated marginally after the small-scale intervention, believed to total several tens of mlns of dlrs, they said. Large-scale buying by foreign banks or by a life insurance company earlier pushed the dollar upwards, they said. Trading was not very active and dealers were watching for further central bank intervention to smooth out any sharp movements, but underlying dollar sentiment is still bearish. REUTER 

U.K. TRADE FIGURES BUOY HOPES OF INTEREST RATE CUT

The release of U.K. February trade data showing that the current account surplus was a provisional 376 mln stg, up from a 73 mln surplus in January, has boosted hopes of an early cut in interest rates, analysts said. Market forecasts had been for a worse outcome, with expectations of a deficit in visible trade averaging about 750 mln stg, against the official figure of 224 mln stg, sharply narrower than January's 527 mln deficit. "The figures are unreservedly good," Chase Manhattan Securities economist Andrew Wroblewski said. Sterling rebounded on the trade figures, reversing a weaker morning trend, to stand at 72.1 pct of its trade weighted index against a basket of currencies at midday, unchanged from yesterday's close but 0.3 points above the 1100 GMT level. The market had feared that a deteriorating non-oil trade pattern would undermine international support for sterling, which has been the motor behind the recent fall in U.K. Interest rates. Money market sources said the market had begun to doubt that a widely expected drop in bank base lending rates to 9.5 pct from the present 10.0 pct was really on the cards. But sentiment now looks to have turned about again. There now looks to be no danger that the Chancellor of the Exchequer Nigel Lawson's forecast of a 1987 current account deficit of 2.5 billion stg will be exceeded, Wroblewski said. Seasonally adjusted figures showed imports rose in February to 7.16 billion stg from 6.73 billion in January. Exports rose to a record 6.93 billion from 6.20 billion. However, Chris Tinker, U.K. Analyst at brokers Phillips and Drew said the faster rise in exports than imports would prove partly aberrational in coming months. He forecast the Chancellor's Budget tax cuts would increase consumer expenditure on imported goods. However, Warburg Securities economist Ian Harwood said his firm was sharply revising its 1987 current account deficit forecast in the light of the latest data, cutting one billion stg off the expected full year total to about 1.75 billion stg. He said news of strong growth in exports of non-oil goods confirmed recent bullish surveys among members of the Confederation of British Industry. The growth in imports appears to be flattening, even if January's bad weather had curbed consumer spending on overseas goods and import-intensive stock building among manufacturers, Harwood said. U.K. Government bonds, or gilts, surged by more than 1/2 point on the better-than-expected news, as earlier worries about the figures evaporated. Sterling peaked at a high of 1.6075 dlrs, before settling to a steady 1.6050 about 1300 GMT, nearly a cent higher than the European low of 1.5960. However, analysts noted that the turnabout in market sentiment still looks highly vulnerable to political news. Morning weakness in sterling and the gilt market was largely attributed to a newspaper opinion poll showing that the Conservative government's support was slipping. LONDON, March 26 - The Bank of England said it provided 15 mln stg in assistance to the money market this morning, buying bank bills in band two at 9-13/16 pct. Earlier the Bank revised its money market liquidity forecast from a flat position to a deficit of around 350 mln stg. REUTER 

ECC APPROVES MONTEDISON/HERCULES VENTURE

The European Community Commission said it had approved the creation of Himont, a company in which Montedison SpA <MONI.MI> of Italy and Hercules Inc <HPC.N) are major shareholders, after requesting changes in the two partners' plans for the venture. Twenty pct of the capital of Himont, in which Montedison and Hercules originally planned to take 50 pct stakes, has been floated publicly and marketing and production agreements have been modified on the Commission's advice, it said. Himont, which is incorporated in the U.S., Groups the two firms' assets in the polypropylene sector. The modified agreements include the abandoning by Hercules and Montedison of all their direct activities within the EC in the downstream market of Himont. The EC authority said the modifications meant that the creation of Himont did not appear to lead to restrictive coordination of activities between Hercules and Montedison, nor did their respective market shares give them a dominant position. The Commission must approve such link-ups between competitors under EC competition rules. REUTER 

EC SELLS BUTTER STOCKS TO SOVIET UNION

The European Community today sold 181,500 tonnes of ageing butter to the Soviet Union at a special knockdown price, a spokesman for the EC Commission said. He said the EC's Dairy Management Committee accepted bids from operators to export the butter, mainly from intervention stores in Belgium, West Germany and the Netherlands, at a price of 21.1 European currency units per 100 kilos. The butter was bought into Community stores at 313.2 Ecus per 100 kilos. The sales are part of the EC's process of attempting to run down its butter surplus. REUTER 

GERMAN NET CURRENCY RESERVES RISE

West German net currency reserves rose by 300 mln marks in the third week of March to 82.0 billion, following a fall of 5.4 billion marks in the previous week, the Bundesbank said. Non-currency reserves were unchanged at about 2.5 billion marks, bringing net monetary reserves to 84.5 billion. REUTER 

WORLD BANK CHIEF CONCERNED ABOUT BRAZIL ECONOMY

World Bank president Barber Conable said he was concerned about the state of Brazil's economy and urged the country to come up with a plan soon to put its economic house in order. "I am very concerned about the Brazilian economy," he told reporters after a news conference in Tokyo. He said Brazil had caught the attention of the world with its decision last month to stop paying interest on its loans from commercial banks but warned it not to sqaunder the time it gained by failing to come up with a new economic program. Brazil's decision jolted the world's financial community as the country is 108 billion dlrs in debt, including some 68 billion owed to commercial banks. Brazilian Finance Ministry sources said in Brasilia yesterday that the country was preparing a new economic strategy designed to ensure domestic economic growth. Despite mounting domestic and overseas pressure, Brazil has said repeatedly that it will not go to the International Monetary Fund (IMF) for help in drawing up a new plan for fear that will only throw its economy into recession. Conable said the country may be able to get away with not going to the IMF for help, but will need an IMF-type economic program if it wants to regain the confidence of lenders. Outsiders like the World Bank are reluctant to suggest possible solutions to Brazil's economic problems because of the delicate political situation there, he added. While the World Bank has a role to play in helping Brazil, it canot replace the IMF as an overseer of the economy, Conable said. He added that the Fund can be very flexible in its dealings with developing countries, adjusting its approach to the political realities. Brazil still seems willing to talk to the Fund under the annual discussions that all IMF members undertake, Conable said, adding that this could partially solve the current stalemate. During his news conference, Conable said the World Bank backed U.S. Treasury Secretary James Baker's Third World debt initiative, which calls for stepped up lending to heavily indebted Third World countries adopting economic policies. "The World Bank believes the Baker initiative is the best approach," he said. "Debt forgiveness is difficult to design in any fair way and also will tend to discourage further investment and development." He cited the recent multi-billion dollar debt package for Mexico, the Third World's most indebted country after Brazil. "Will it work?" he asked. "We don't know...But we think it more likely to work than any of the alternatives suggested." Conable, who is here to meet government and business leaders, expressed confidence that Japan will make increasing use of its huge trade surplus to help developing countries. "We are quite confident Japan will make an increasing investment in development because of their willingness to support institutions like ours in increasing ways with each passing year," he said. REUTER 

ITALIAN TREASURY ANNOUNCES CERTIFICATE OFFER

The Italian Treasury said it would offer an undetermined amount of 10-year variable-coupon certificates (CCTs) at a rate unchanged on that of the preceding offer in late February. The Treasury said that, unlike the previous offer, the amount had not been prefixed. It would be in line with market demand unless this was considered excessive. The CCTs will be priced at 99.00 pct for an effective net annual yield on the first coupon, payable April 1, 1988, of 9.85 pct. Subsequent yields on the certificates will be calculated by adding 0.75 point to average rates on short-term Treasury bills. Subscriptions to the issue open April 1 and are scheduled to close April 7. The Treasury said it reserved the right to close the issue early. REUTER 

GUINNESS PEAT HAS CASH ADVANCE FACILITY

Guinness Peat Group Plc <GNSP.L> has arranged to receive a 125 mln dlr five year cash advance facility, said Barclays de Zoete Wedd Ltd and Guinness Mahon and Co Ltd as joint arrangers. The two firms said the terms of the facility will be reviewed after the third year with a view to considering extension by a further two years. The facility will include a tender panel to bid for multi-currency cash advances at a maximum rate of 0.1875 pct over the London Interbank Offered Rate. The facility will incorporate an underwriting fee of 0.10 pct in addition to a fee of 0.05 to 0.10 pct depending on the participation amount. In addition, Barclays and Guinness Mahon have been named joint dealers for a complementary 100 mln dlr euro-commercial paper program. Funds will be used to refinance the cost of the recent Forstmann-Leff Associates acquisition as well as for general corporate purposes. REUTER 

SUMITOMO BANK HAS 500 MLN STG CD PROGRAM

Sumitomo Bank Ltd said it established a 500 mln stg certificate of deposit (CD) issuance program, arranged by Morgan Grenfell and Co Ltd. Dealers will be Morgan Grenfell, Lloyds Merchant Bank Ltd, Samuel Montagu and Co Ltd, Salomon Brothers International Ltd, Sumitomo Finance International and S.G. Warburg and Co Ltd. Maturities will be between seven days and five years and paper will be issued in denominations of 250,000, 500,000 and one mln stg. REUTER 

CURRENCY EXCHANGE LOSS PUSHES MALAYSIA'S DEBT UP

An exchange loss of 7.6 billion ringgit in 1986 pushed Malaysia's outstanding external debt up to 50.99 billion ringgit, from 1985's 42.3 billion, the Central Bank said in its annual report. Bank Negara said although Malaysia's net borrowing dropped in 1986, its external debt rose due to the 30 pct appreciation of the basket of currencies against which the ringgit is pegged. The basket comprises principally the U.S. Dollar, yen, mark, Swiss franc, French franc, sterling, guilder, Canadian and Singapore dollars, it added. Bank Negara said growth in external debt, which declined progressively from a peak of 58 pct in 1982 to 13.6 pct in 1985, rose by 20.2 pct in 1986. Malaysia's debt serving ratio of 17.6 pct of its exports in 1986 is within the prudency limit of 20 pct, Bank Negara Governor Jaafar Hussein told reporters. REUTER 

IWC SAYS EFFECT OF LOWER SUPPORT PRICES LIMITED

Efforts by governments to control wheat surpluses by cutting support prices have met with only partial success, the International Wheat Council (IWC) says in its latest monthly report. Faster results could be achieved by a policy of reducing both price and areas, as employed in the United States, the IWC says in a survey of support prices in the five main wheat exporters - Argentina, Australia, Canada, the EC and the U.S. In some countries, for example Australia and Argentina, which are highly dependent on wheat shipments for export income, there may be problems in reducing production. A policy of cutting wheat production could lead to unemployment, with job prospects outside agriculture limited. Alternative crops may offer inferior returns which could then lead to lost export revenue and balance of payments problems. The IWC outlines three courses of action open to governments in wheat exporting countries. They could continue to support prices in the hope that when the world economy improves demand for wheat will rise and surpluses wil be reduced or eliminated. Alternatively, support could be limited to wheat which could be easily sold, without needing to be stored for a long period. This option may prove to be the most politically unattractive and would result in many producers abandoning wheat production, the report said. The third option would be for governments to distinguish between the commercial and social aspects of agriculture, possibly varying support prices according to farm size or overall production. The IWC review covers support prices in the major exporting countries since 1982. At some time during that period all the producers cut support prices in response to growing surpluses. These changes did not always result in lower export subsidies as on several occasions currency fluctuations more than offset lower prices in the domestic currency. For example between 1985/86 and 1986/87 the EC intervention price for bread wheat fell from 209.30 to 179.44 European currency units (Ecus). It dollar terms, the currency in which most export transactions are denominated, the intervention price however rose to 193 dlrs from 168. The high cost of supporting farm prices has put a strain on national exchequers and some governments are now searching for ways to cut expenditure, the report says. The proportion of world wheat output produced by the five major exporters declined in the period covered by the survey from 40 pct in 1982 to 35 pct in 1987. This was partly due to increased production in China and India. The period saw an upward trend in yields, although this was countered in the Argentina, the U.S. And Australia by lower acreages. In Argentina a reduction in the sown area of about 20 per cent was put down to low prices causing producers to switch to other enterprises, particularly livestock while lower U.S. Acreages are attributed to official incentives. REUTER 

SANDOZ HAS 50 MLN DLR EURO-CP PROGRAM

Sandoz Corp, a U.S. Subsidiary of Sandoz AG, is establishing a 50 mln dlr euro-commercial paper (CP) program, Morgan Guaranty Ltd said as one of the dealers. The other dealer is Swiss Bank Corp International Ltd and Morgan Guaranty Trust Co of New York is issuing and paying agent. Paper will have maturities between seven and 183 days and will be issued in global and definitive form. REUTER 

U.S. TREASURY'S BAKER OPPOSES TAX INCREASE

U.S. Treasury Secretary James Baker said that he opposes a Federal tax increase to help reduce the budget deficit and favors spending cuts instead. "I don't think it's (a tax increase) is a very good idea and I'm quite confident that President Reagan doesn't think it's a very good idea," Baker said in an interview on Cable News Network's "Moneyline" television program. He said U.S. taxpayers are taxed at a rate of 19 pct of GNP which is traditionally where it has been, but the Federal Government is spending at a rate of 24 pct of GNP. Baker said spending cuts are clearly the best way to cut budget deficits. Baker said he opposed a stock transactions tax proposed by House Speaker Jim Wright, D-Tex, or other special taxes. "The stock transfer tax would be a particularly unfortunate approach to take," the Treasury Secretary said. He said the United States has some of the most efficient capital markets in the world and new taxes would impair efficiency. On the international front, Baker said banks must do more lending to developing countries. He was questioned about this after the Standard and Poor's Corp downgrading today of the debt of six major money center bank holding companies, largely because of their heavy developing nation loan exposure. Baker said that developing countries must adopt free market economic policies such as in the United States. He said capital flows will be required to support the needed reforms in the economic systems of those countries. The money must come either through equity or debt and Baker said that developing nations' "investment regimes do not support enough equity investment, so you've got to have some debt there." Commenting on the U.S. trade deficit, Baker said "I think you're going to see a 15 to 20 billion dlr reduction this year." Reuter 

PHILIPPINE DEBT TALKS PROCEED WITH NARROWER FOCUS

The latest round of talks between Philippine officials and the country's commercial bank creditors on the rescheduling of 9.4 billion dlrs worth of debt are still proceeding, but with a narrower focus, Philippine Finance Secretary Jaime Ongpin said. He told a press briefing Wednesday that Manila has dropped a two-tier interest payment offer, which would have given banks a higher return if they took partial payment in new Philippine investment notes (PINs) instead of in cash. "The PINs proposal has been laid aside.... The discussion is now on pricing (of just the cash payments)," he said. Foreign banking sources in Manila said on Tuesday that the Philippines had raised its basic interest rate offer to 7/8 over the London interbank offered rate (LIBOR) but Ongpin would not discuss details of the pricing negotiations. He also refused to speculate on when an overall agreement might be reached. The talks have been going on for more than three weeks. Manila originally offered to pay interest in cash at 5/8 over LIBOR or in a mixture of cash and PINs -- tradeable, dollar-denominated, zero coupon notes that could potentially yield up to one point over LIBOR. The PINs option was subsequently modified to guarantee at least a 7/8 point spread over LIBOR but many bankers still had grave reservations, seeing it as a possible precedent for other large debtors to avoid paying interest in cash. The PINs proposal has now been left on the table as a separate option for those banks, which might want to fund their own investments in the Philippines or sell the notes in the secondary market, Ongpin said. Under Manila's plan, the PINs would be redeemable at full face value in Philippine pesos to fund local equity investments at any time prior to their six-year maturity date. While the commercial banks had their doubts about the PINs proposal, Ongpin said there was great interest on the part of certain investment banks which are already active in the secondary market for sovereign debt. Unlike current debt/equity schemes, Ongpin said, the PINs would include no government fees and would be free from "administrative hassles." He said about six investment banks had been approached and four had replied so far. One even showed interest in buying 45 mln dlrs worth of notes, he said. Ongpin said that by funding current interest payments in the secondary market through the PINs scheme, the Philippines could conserve at least one to 1.5 billion dlrs of foreign exchange reserves during its planned seven-year restructuring period. REUTER 

TREASURY'S BAKER SAYS HE STANDS BY PARIS PACT

Treasury Secretary James Baker said he stood by the Paris agreement among leading industrial nations to foster exchange rate stability around current levels. "I would refer you to the Paris agreement which was a recognition the currencies were within ranges broadly consistent with economic fundamentals," Baker told The Cable News Network in an interview. "We were quite satisfied with the agreement in Paris otherwise we would not have been a party too it," he said. Baker also noted the nations agreed in the accord to "co-operate to foster greater exchange rate stability around those levels." He refused to comment directly on the current yen/dollar rate but said flatly that foreign exchange markets recently tended "to draw unwarranted inferences from what I say." Baker was quoted on British Television over the weekend as saying he has no target for the U.S. currency, a statement that triggered this week's renewed decline of the dollar. "I think the Paris agreement represents evidence that international economic policy co-ordination is alive and well," Baker said. The Treasury Secretary stressed however it was very important for the main surplus countries to grow as fast as they could consistent with low inflation to resolve trade imbalances. He added that Federal Reserve Board chairman Paul Volcker has also "been very outspoken" in suggesting main trading partners grow as fast as they can. Reuter 

TREASURY'S BAKER DECLINES COMMENT ON VOLCKER

Treasury Secretary James Baker declined to comment on whether President Reagan would reappoint Paul Volcker to a third term as chairman of the Federal Reserve Board. "I spent four years and two weeks in the White House job refusing to comment on personnel matters," he said in an interview with the Cable News Network. "I'm not going to change now." But Baker did say Volcker has "done a tremendous job" and added they get on "extremely well", both when he was White House chief of staff and during his term at Treasury. When asked whether he differed with Volcker on international economic policy, Baker said "there's really no difference of opinion between us with respect to these matters." In other comments, Baker said he did not think a tax rise was a good idea and nor did President Reagan. But he believed Congress would enact some spending cuts. "The minute you say raise taxes, all restraints on spending go by the board." He once again pointed out that taxes were 19 pct of gnp but spending was at 24 pct, a statistic he used to argue strongly for spending cuts. reuter 

GERMAN ANALYSTS SEE GOLD RISING IN 2ND HALF 1987

The price of gold bullion is likely to rise in the second half of the year on increased private investor demand, West German analysts said. Gold could rise as high as 500 dlrs per ounce later this year, said Peter Witte, director of Westdeutsche Landesbank Girozentrale's trading division, after a presentation by the U.S. Mint to promote its gold and silver Eagle series coins. "A lot will depend on oil prices and developments on stock exchanges," Witte said, adding he saw gold positioned for further rises once it breaks out above 450 dlrs. Gold was fixed this morning in London at 411.30 dlrs. Despite current strong interest in gold mine stocks, many investors still want to buy physical gold, Witte said. Interest in gold mine stocks may also wane if stock exchange rallies under way in many countries start to waver. Hermann Strohmeyer, vice president of Commerzbank AG's foreign exchange trading and treasury department, said gold is poised to rise to 460 to 470 dlrs an ounce in the second half of this year. The price is unlikely to fall much below 380 or 390 dlrs an ounce, and probably will continue in a range between 380 and 430 dlrs in the first half of this year, he said. REUTER 

CAMBRIAN AND GENERAL NOTES RELISTED IN LONDON

<Cambrian and General Securities Plc> said the London Stock Exchange has restored the listing of its 50 mln dlrs of secured floating rate notes dated 1992 at the company's request. The notes are fully secured and therefore have a prior claim over Cambrian's assets in the event of other claims arising from litigation, it added. Dealings in Cambrian's securities have been suspended since late 1986 following the disclosure of insider trading activities by former chairman Ivan Boesky. Cambrian officials were not immediately available for further comment on today's statement. REUTER