U.S. firms less optimistic, but will still invest in China: survey

WASHINGTON, Wed Oct 10, 2012 – Many U.S. companies are less optimistic about doing business in China even though sales there are still rising, and most of those firms are planning to increase investment, according to an annual survey of business executives released on Wednesday.

“The China market continues to deliver sales growth and profitability for U.S. companies, but rising costs, increasing competition, and persistent market access and regulatory barriers are tempering the optimism of U.S. companies doing business with China,” the U.S.-China Business Council said.

Forty-five percent of the 111 companies surveyed said they were less optimistic than three years ago about the business environment in China, compared to 26 percent that were more optimistic and 29 percent that were unchanged in their view.

At the same time, 89 percent, the highest ever in the seven-year history of the business group’s member survey, said they made a profit in China in 2011 and two-thirds said their revenues grew by at least 10 percent.

The survey comes amid growing U.S. frustration that many parts of China’s economy remain off-limit to foreign investment 11 years after it joined the World Trade Organization. China also is preparing for a once-in-a-decade leadership change that could keep any new economic openings on hold for a while.

It was taken before the House of Representatives Intelligence Committee urged American companies on Monday to avoid doing business with China’s leading telecoms equipment manufacturers, Huawei Technologies Co. and ZTE Corp. because of security concerns.

The panel’s recommendation has raised fears of possible Chinese retaliation against U.S. firms.

While two-thirds of survey respondents said they planned to increase investment in China in the next 12 months, 17 percent said they had halted or delayed investment plans.

Job-creating foreign investment in U.S. lags, investment group says

WASHINGTON, Thu May 10, 2012 – Foreign investment in the United States is ebbing and beefing it up is critical for economic growth as each job at a foreign company’s U.S. unit supports three others, the Organization for International Investment said on Thursday.

A complex U.S. tax code and increasing global competition are curbing business development here by foreign companies. That trend is worrisome because foreign firms generally pay salaries to U.S. workers that exceed the industry average. This type of foreign investment, in turn, drives up employment and consumer spending.

“The global investment pie around the world has been getting larger, but our slice of that pie has been getting smaller as well as the share of GDP that foreign investment in the U.S. represents,” Nancy McLernon, president and chief executive officer of the OFII, told Reuters in an interview.

Based in Washington, the OFII is a 21-year-old nonprofit business association representing about 160 U.S. companies with foreign parents.

In its first study of the ripple effects of foreign investment in the United States, the OFII said U.S. subsidiaries account for 21 million jobs directly and indirectly – or 12.2 percent of total employment. The OFII study, conducted by PricewaterhouseCoopers LLP, is scheduled for release later on Thursday.

Every dollar paid directly by foreign companies’ U.S. units supports an added $2 in total U.S. compensation to supply-chain workers and companies that benefit from paycheck spending.

But the United States attracted just about 17 percent of global investment in 2009, down sharply from over 41 percent in 1999, McLernon said, citing another OFII study in October.

With unemployment still above 8 percent, the study drives home what the United States is losing out on, she added.

Macquarie eyes $2 billion North American infrastructure fund: sources

NEW YORK, Mon Apr 2, 2012 – Australia’s Macquarie Group Ltd., the world’s largest manager of infrastructure assets, is preparing to raise a $2 billion infrastructure fund in 2012, its third focused on the United States and Canada, people familiar with the matter said.

Macquarie, which has averaged gross internal rates of return of more than 20 percent in its North American infrastructure investments, is planning to start fundraising this year, as its second $1.6 billion North American infrastructure fund was fully invested, the people said.

Macquarie declined to comment.

Typically seen as a champion of private investment, the United States lags behind Europe and Australia in the privatization of infrastructure such as roads, tunnels and bridges, according to the Organization for Economic Co-operation and Development, which in a September report called the U.S. infrastructure market “immature.”

Political bickering at state and local levels, multilayered planning bureaucracy, opposition by labor unions and consumer groups to privatization, and a competitive municipal bond market have historically conspired to limit the role of direct private investments in U.S. infrastructure.

Macquarie is betting on a vibrant market for privatized infrastructure assets set to change hands. Of the major U.S. infrastructure deals completed in 2010 and 2011, 64 percent were transactions in the secondary market, according a February report by PricewaterhouseCoopers.

To be sure, Macquarie has also proved successful in bidding for the few new assets on the market. It was behind the largest U.S. infrastructure deals of the last two years — a $2.1 billion project to build and operate commuter rail lines to Denver International Airport and a $1.7 billion upgrade

Massachusetts subpoenas Bank of America documents

BOSTON – Massachusetts securities regulators said on Friday that they were subpoenaing Bank of America for documents to determine if the lender knowingly overvalued assets in certain investment products.

Local investors lost about $150 million in investment vehicles structured by Banc of America Securities LLC, said William Galvin, the state’s top securities regulator.

Now his office is asking the Charlotte, N.C.-based bank to supply documents for its activities involving collateralized loan obligations.

The CLOs include LCM VII Ltd. and Bryn Mawr CLO II Ltd., which were structured by the bank and sold to investors in 2007.

Galvin, who has been especially aggressive in looking into how big banks hurt small investors during the housing crisis and financial crisis, said he wanted to find out if the issuer “was knowingly overvaluing assets in the portfolio to get them off their books and onto investors.”

The news comes one day after Bank of America and other large lenders agreed to a $25 billion settlement over alleged foreclosure abuses.

There was no immediate comment from Bank of America.

The company’s shares were down 1.2 percent at $8.08 in afternoon New York Stock Exchange trading.

Fidelity money fund clients react negatively to SEC proposals

BOSTON – Fidelity Investments, the largest money-market fund manager, recently warned U.S. regulators that more than half of its money fund clients would move all or some of their assets out of the investments if the net asset value of the funds was allowed to fluctuate.

The warning comes as the U.S. Securities and Exchange Commission weighs controversial proposals to add more regulation to the $2.7 trillion money-market fund industry. SEC Commissioner Mary Schapiro has been pushing for more reserves and to do away with the money funds’ fixed $1 net asset value.

The industry vehemently opposes more regulation.

On Tuesday, the Wall Street Journal reported that Federated Investors Inc.  Chief Executive Christopher Donahue plans to sue the SEC if the new regulations interfere with his firms’ ability to do business. Federated manages about $256 billion of money-market fund assets.

Meanwhile, in a February 3 letter to the SEC, Fidelity General Counsel Scott Goebel shared the Boston-based company’s research on how investors might react to potential reforms. Fidelity had $433 billion in money-market fund assets under management at the end of 2011, representing 10.9 million accounts among retail and institutional investors.

Reforms being considered by the SEC “could spark retail and institutional investors to pull significant amounts of assets out of money-market mutual funds, leading to unintended consequences for the financial markets and U.S. economy,” Fidelity said.