CYPRUS MOVE RESULTS IN FALLING CONFIDENCE AND RUSSIAN ANGER - Asian stocks rebounded today, with the Nikkei in Tokyo up 2%, as fears abated that Cyprus could plunge Europe back into crisis. Hong Kong's Hang Seng index rose by 0.4% and the Shanghai Composite index was 0.3% higher. Cypriot authorities today rush to renegotiate the terms of a €10 billion bailout by moving to scrap its controversial levy on small account holders and instead taking more from bigger depositors and businesses. The parliamentary vote on the rescue deal was postponed twice and is now scheduled to take place today. In an attempt to win over the handful of votes needed, the Cypriot President suggested lowering the rate on smaller depositors to 3%, while those with over €500,000 would lose 15% and those in between would get a 10% cut.
Justin Urquhart Stewart, of Seven Investment Management in London, says while there is no real contagion in the markets to the news from Cyprus, people now perceive a threat to their accounts which results in a lack of confidence. He says the main depositors in Cyprus are the locals, a big community of ex-pats, and a lot of Russian investors. The Russians have a big influence on the Cypriot banks and are very annoyed at the latest turn of events, seeing it as an attack on them. He says the move shows that you can have government action to tax people's accounts without any warning. But he adds that a warning would result, of course, in a run on the banks.
Describing Cyprus as a very ''odd country'' in the euro zone, the analyst says that it makes up just 0.2% of the euro zone and is really a very minor player. It is having a disproportionate impact because of the size of its bloated banking system, and the high level of money laundering and corruption, which have simply been ignored for too long. While the banks remain closed for the next couple of days, he says that transfers can be blocked - another reason for the Russian anger.
MORNING BRIEFS - UTV Media has reported pre-tax profits of £21m sterling for last year down from £23.3m in 2011. Group operating profit was £23.9m, down from almost £27m. Group revenue for the year was £1.5m lower at £120.1m. The media group owns nine Irish radio stations, including LMFM and FM104. It said in its results statement that TV and radio revenues were hit by difficult economic conditions in Ireland. On advertising the statement said that the positive effect of the Euro 2012 football tournament in the first six months was replaced by a lacklustre performance around the Olympics in the second half of the year. Generally, a stronger advertising market in the first half of last year softened in the second six months, it said.
*** The world's second biggest toymaker by revenue - Lego - is to build its first factory in Asia to meet demand for its products in the region. The privately owned Danish firm will start building a factory in Jiaxing, China, next year. When it opens in 2017 it will only supply parts to Asia, which is set to become the world's biggest market for toys. Lego sales have almost tripled since 2007 and Asia has played a big part in its success, as its annual sales have increased by more than 50% in recent years.