GOVERNMENT WARNED ON OVERVALUING NAMA ASSETS - The view from abroad on the country's economic situation is still not great. 'Dire land' ran across the top of yesterday's Financial Times, 'battered' banks were referred to by Reuters, and words like salvage and collapse in Bloomberg's coverage of NAMA, Irish banks and assessments of the Irish economic picture.

The European Central Bank got in on the act, and while saying that the National Asset Management Agency should restore confidence to the banking system it warned the Government not to overpay for the €90 billion of property loans its buying from the banks through NAMA. It says the success of NAMA rests on its getting the valuations right, but that NAMA should restore confidence to the banking system. NAMA is taking over 18,000 loans by 1,500 borrowers in an attempt to cleanse the banks of their toxic debt. Finance Minister Brian Lenihan has said that even with NAMA, Irish banks could still need more cash - possibly even a majority government shareholding.

The ECB said, in an opinion published on NAMA last evening, that the preference in the draft NAMA legislation for the long-term economic value of assets, rather than current market values, needs careful consideration. It cautioned against creating 'inappropriate incentives' from the banks' side as to the use of the scheme, managing to keep an eye on that banks that they do in fact lend to business, and not just us NAMA to rebuild their balance sheets.

Justin Urquhart Stewart, of Seven Investment Managers in London, says the banking problem is not just an Irish problem but a global one, with very similar issues happening at the UK banks as well - shortage of lending and an inability to be able to write things off effectively. He says it is vital that NAMA properly pays for some of the distressed assets and does not overpay for them, which would create unrealistic valuations when it is widely known that property values have fallen by as much as 50% from their peak. He says that prices are still going to be very soft in the near future.

He says the establishment of NAMA is being seen as good news by the City of London. He says that if it was not set up, it would be causing a lot more concern. He says there is a need for someone to step in and act as the bank of last resort - on condition that lessons are learned from NAMA especially in terms of the overweight position that was being taken purely on property assets.

The analyst says he would not be against the idea of nationalising the banks, and says that he would be in favour of suspending the banks' shares, restructuring the banks and separating the poor assets from good assets. He says that this is how things have been done in the past and Europe has a history of rescuing failed banks.

On share prices, Mr Urquhart Stewart says that September is known as the season of storms - and not just the meteorological ones. He says that the last few months have seen a strong rally on stock markets worldwide, based on the 'fantastic stimulation of steroids' from governments globally, especially China. He says the world is coming out of recession into recovery and that is a lot more difficult. He says that while a recovery is underway, words like 'insipid' and 'anaemic' are likely to be written about Ireland.


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MORNING BRIEFS - If its bid for comic book company Marvel Entertainment goes through, Disney will inherit about 5,000 comic book characters for the media giant's movies, television, action figures and amusement parks. Disney says it is particularly interested in bringing some of the lesser-known characters to the forefront. Disney is to buy Marvel Entertainment in a shares and cash deal valued at €2.7 billion euro.

*** China's massive manufacturing sector kept up its steady recovery last month, according to two surveys today. The two indices, compiled from polls of executives who buy manufactured goods, rose to a 16-month high as companies continued to benefit from the stimulus of the equivalent of a 400 billion euro spending programme. The purchasing managers' index and another index from HSBC rose to a 16-month high in August output, new orders, imports and employment all showed strength.

*** Oil is at about $70 a barrel, after a 4% fall overnight, as Chinese stocks recovered their poise following manufacturing sector data that suggested China's economic recovery was on track. Later today oil should get a further boost from the release of a key gauge of US manufacturing activity in August and weekly crude inventory data, both of which are expected to show a gradual rebound in the US economy and oil consumption.

*** On the currency markets this morning, the euro is trading at $1.4354 cents and 88.06 pence sterling.