Today's top stories from Report on Business :
U.S. debates mortgage finance
U.S. officials are debating the best system of mortgage finance. Those involved agreed at a hearing today that the system be overhauled, and grappled with how best to deal with Fannie Mae and Freddie Mac, the troubled mortgage giants. Treasury Secretary Timothy Geither told the House Financial Services Committee that the two companies should neither be completely nationalized by the U.S. government, nor killed, but that the country needs a new system by which "we preserve the good but end what was too risky," according to Bloomberg News. Mr. Geithner also warned about proceeding too fast, given the state of the housing market, the Wall Street Journal reported, saying officials must be "very careful that we're still helping to facilitate this process of recovery while we transition."
U.S. home sales slide
The hearing came just after new numbers showed sales of resale homes in the United States fell 0.6 per cent in February, less than expected but marking the third consecutive month of decline and reinforcing concerns about the state of the U.S. housing market. Prices also fell. However, the picture was mixed across the country as sales rose in the U.S. northeast and midwest but fell in the south and west. "Until we can see a steady and significant increase in the number of jobs being created, bringing down the jobless rate, the housing sector is going to be in for another rough ride," BMO Nesbitt Burns senior economist Jennifer Lee said. Read the story
Home prices to hit record, Scotiabank says
Bank of Nova Scotia projects average house prices in Canada will rise 8 per cent this year to a record $345,000, continuing what has been a remarkable rebound from a short recessionary slump. Economist Adrienne Warren said in her Global Real Estate Trends report today that home sales are forecast to reach 510,000, up 10 per cent from last year but still shy of the record set in 2007. Housing starts, meanwhile, are projected to jump to 190,000 from 149,000. Ms. Warren also forecasts strong demand, and prices, through the spring as buyers rush to beat Ottawa's tighter mortgage standards and the introduction of the harmonized sales tax in Ontario and British Columbia. But "this should give way to more subdued activity in the second half of the year, as higher interest rates and higher home prices erode affordability." Read the story
Quadra, FNX strike merger deal
Quadra Mining Ltd. and FNX Mining Co. , two mid-tier players in Canada, are joining forces in a $1.5-billion (U.S.) merger that they say is just the start. The proposed new Quadra FNX Mining Ltd. would have a market capitalization of $3.5-billion, with assets in Canada, the United States and Chile. The two companies, which announced the deal this morning, see growing into a far larger concern with "the critical mass to be a leading industry consolidator." The merged company would produce about 300 million pounds of copper and 150,000 ounces of precious metals next year, with projected revenue of $1.5-billion. Under the deal, which must be approved by shareholders at meetings expected in May, FNX shares would be exchanged for 0.87 of a Quadra share, leaving the latter's shareholders owning about 52 per cent of the merged company.
"Management indicates an ambition to continue to grow through M&A, with an emphasis on copper but not excluding other base metals," said UBS Securities Canada analyst Onno Rutten. "We believe that the combined entity would also be better positioned for developing and consolidating Sudbury assets (if any become available). In our view, the operational risk profile … remains fairly high, partially offset by improved asset diversification." Read the story
Shell, CNPC in new venture
Royal Dutch Shell and China National Petroleum Corp. are becoming quite the energy team. Shell and PetroChina, CNPC's subsidiary, are already bidding for Arrow Energy of Australia, and together running a natural gas field in China's Shaanxi province. Today, Shell and CNPC announced plans to develop other natural gas fields in Sichuan province under a 30-year deal. For China, the move represents yet another move in its global quest for resources, while for Shell it's yet another entry point into the vast Chinese market. Read the story
Will CRTC's TV ruling stick?
Scotia Capital analyst Jeff Fan questioned today whether yesterday's CRTC ruling, which gives conventional TV broadcasters the right to begin charging for their signals, will stand given several hurdles and issues. The Canadian Radio-television and Telecommunications Committee found that CTV, Global Television and other private networks should be compensated for their signals by the distributors, the cable and satellite carriers. The federal regulator also said it is asking the Federal Court of Appeal to rule on its jurisdiction in asking the companies to negotiate compensation. The ruling is worth a lot to the broadcasters, and a setback to the carriers, but only if it sticks.
"On the surface, this order is negative for cable operators as it could either raise their content costs and/or subscriber fees," Mr. Fan wrote today, but he cited reasons why the decision might still fail, and why the financial impact remains unclear:
• The CRTC may not have the power needed, and a court decision could take up to year.
• Not all conventional stations will negotiate, choosing instead to live with the existing structure.
• There is a chance Ottawa could overturn the decision, as it did in the Globalive case late last year.
• The compensation to broadcasters can, under the order, be monetary and/or non-monetary.
Related
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Governments didn't help much, think tank says
The Fraser Institute says federal stimulus spending didn't really do all that much to bring the economy out of its slump. Other economists have cited stimulus measures and the extraordinary actions of the Bank of Canada for helping to get the country back on its feet, and some now see a stronger recovery than originally forecast. But the Vancouver-based think tank said in a study today that government spending and infrastructure investment added just 0.2 percentage points to economic growth between the second and third quarters of last year, and nothing from the third to the fourth. Rather, private sector investment and higher exports were the "driving forces," it said. "Although the federal government has repeatedly claimed credit for Canada's improved economic performance in the second half of 2009, Statistics Canada data show that government spending and investment in infrastructure had a negligible effect on the country's improved economic growth," one of the co-authors of the study, senior economist Niels Veldhuis, said in a statement. Read the story
India moves on infrastructure
Weak infrastructure has long held back India's economy, and its government appears determined to fix the situation. At a conference in New Delhi today, Finance Minister Pranab Mukherjee said he wants to see spending on infrastructure basically doubled to $1-trillion (U.S.) over five years, according to the Reuters news agency. The government will allow private sector companies to issue special bonds, a move aimed at bringing pension funds into the system. "Our experience shows that private participation in infrastructure development is indeed a feasible proposition and can help expand infrastructure much faster than it would have relying only on public resources," Prime Minister Manmohan Singh told the conference, Reuters reported.
Lions Gate rebuffs Icahn
Lions Gate Entertainment today rejected a hostile bid by Carl Icahn. Mr. Icahn is bidding $6 (U.S.) a share for the company, or about $575-million. Lions Gate, based in Vancouver but with operations in California, has won critical claim for the Oscar-winning Precious: Based on the Novel 'Push' by Sapphire. Read the story
How wealth, luxury homes have fared
Toronto still ranks among the top 10 cities as a good place for the world's wealthy, though it has slipped two notches in an annual ranking. Toronto fell to 10th position from eighth last year in a study by Knight Frank LLP and Citi Private Bank that measures "the locations that matter to the global tribe of footloose wealthy and influential." The 2010 Wealth Report measures economic activity, political power, knowledge and influence and quality of life.
The study also showed that prime real estate, measured over more than 55 regions, fell an average 5.5 per cent last year, though Toronto almost held its own as luxury homes slipped just 0.5 per cent in value. Shanghai properties gained the most, at 52 per cent, while those in Dubai fell the greatest, down 45 per cent.
"The impact of the financial crash has not been as hard on the typical ultra-high-net-worth buyer of prime property," the study said. "This has meant that many wealthy owners of property are again looking for investments."
Added Liam Bailey, Knight Frank's head of residential research: "Residential investment makes a lot of sense over the long-term. In most locations supply of property either keeps pace or falls short of demand. Most high-net-worth investors tend to cluster around the best locations in the world, which provides its own support."
The study also noted the erosion of wealth brought on by the crash, as high net worth individuals, as they're known, declined around the world. "But the fact that asset prices have recovered strongly since mid-2009 means we can expect the numbers to recover relatively rapidly," the study said.
From today's Report on Business
CRTC rules TV networks can charge for their signals
No sale: Realtors' plan gets bad review
Health plan not painful to U.S. business