Biz People

Roach: US on the way to recession

The US is heading for a recession and the rest of the world would be "dead wrong" to think this will not impact on growing Asian economies, said Morgan Stanley senior executive Stephen Roach.

In an interview with Sky News in Australia, Roach (right), who is chairman of the investment bank and trading firm's Asian arm, said the US Federal Reserve Bank would "most assuredly" cut interest rates again soon to boost the economy, following last week's 25 basis points reduction.

"The US is going into recession," he said. "They (the Federal Reserve) have a lot more work to do. They could cut their policy short-term interest rate by one to one-and-a-half percentage points over the next nine to 12 months."

"What is interesting, and potentially disturbing, is that the rest of the world just doesn't think this is a big deal any more," he said of the potential of a US recession.

"There is a view that the world is somehow decoupled from the American growth engine.

"I think that view will turn out to be dead wrong, and this is a global event with consequences for Asia and Australia."

'Worst not over' for banking

Credit Suisse is well positioned as the credit crisis continues, having cut its exposure, but the worst of the turmoil is not over for the sector, the Swiss bank's head was quoted as saying.

The bank was well protected against any further trouble in subprime mortgages, while its bigger exposure in corporate finance was more transparent and carried less risk, Chief Executive Brady Dougan said.

"There are fields such as corporate mortgages and credit for corporate takeovers where we are clearly more exposed. We will need some more patience there," Dougan told Switzerland's Tages-Anzeiger newspaper.

"Credit Suisse is well positioned in the current situation, and we are very confident about the mid- and long-term prospects. However, I wouldn't say the worst is over yet with the same degree of confidence," Dougan added.

Tycoons to go separate ways

Russian billionaire Mikhail Prokhorov said he and former business partner Vladimir Potanin (right) need to speed up negotiations on how to divide their assets.

Potanin and Prokhorov have been in talks since January on how to split their jointly held assets. Their holding company, KM-Invest, owns 8 percent of Russia's largest miner OAO GMK Norilsk Nickel, and 7.6 percent of its biggest gold producer, OAO Polyus Gold, as well as Prof-Media, real-estate developer Open Investments and lender Rosbank.

"We can't tolerate this limbo any more," Prokhorov said. "I'm sick of it. It's time we started doing business."

Prokhorov is proposing a public sale of assets at a market price.

Potanin and Prokhorov will have a right of first refusal to buy the assets.

(China Daily 12/18/2007 page16)