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The Czech capital market, roundly criticised for a lack of transparency, needs an independent regulator, but it is not a panacea for all of the market's woes, a senior Finance Ministry official said on Tuesday.
"Let's not be seduced by the illusion that as soon as an independent securities committee is created that the Czech capital market will become more refined overnight," Jan Veverka of the ministry's capital markets supervisory department told a conference in the Czech capital.
"All it (the body) will do is create better conditions for the changes which can contribute to the market's gradual refinement," he added.
Both foreign and domestic investors have complained that poor legislation and a lack of enforcement of rules that do exist make the Czech capital market one of Eastern Europe's most opaque.
The soured outlook by investors has helped pull the Prague Stock Exchange down some 16 percent over the past two months, with predictions of further losses if rules do not change quickly.
One of the biggest problems is that legislation allows for near complete secrecy of off-market deals -- where an estimated 70 percent of trading takes place -- making it difficult for investors to determine fairly-valued shares prices.
Veverka said when the laws governing securities trading here were devised "parliament...discarded the concept of regulation which would have given broad powers to the embryonic supervisory system out of fear that it might have abused these powers and impeded the process of creating a market economy".
Coupled with this, he said, was the need to allow for a flood of ownership changes in the market as the mass voucher privatisation put shares in nearly 2,000 firms onto the market in a matter of months.
Now, he said, rules must be put in place to shift trading toward the main markets to bring about more transparency.
"Where trading takes place can be changed most effectively by ensuring an increase in the quality of the market's services and an end to the conditions which enable the kind of trading which is characterised by large price discrepancies," he said.
Veverka called for a raising of the debate on creating a U.S.-style SEC oversight body "to a much higher level and preparations should be made for the creation of this body".
But he added: "Monitoring deals and indentifying suspicious prices or other phenomena indisputably belongs to the work of the stock market, and the market must act as a strong support to the supervisory work of the independent committee".
-- Prague Newsroom, 42-2-2423-0003
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Sweden beat the Czech Republic 3-0 in a World Cup ice hockey game on Thursday, setting up a showdown for European group supremacy against Finland and leaving the reigning world champions searching for answers.
The fast-skating Swedes seized control of the game from the opening faceoff, forcing the Czechs to take several early penalties and keeping its vaunted offense in check.
Toronto Maple Leaf winger Mats Sundin opened the scoring midway through the first period when he sped around the Czech defense and pulled Dallas Stars' goalie Roman Turek across the crease before sliding the puck between the netminder's legs.
The Swedish National Hockey League (NHL) connection struck again early in the second frame when Washington Capital defenseman Calle Johansson blasted a slapshot from the blue line past a screened Turek with only 57 seconds gone.
Turek, voted best goalie at the world championships for the past two years, was once again screened when a weak shot from Jonas Bergqvist found the bottom corner of the net to close out the scoring for the undefeated Swedes.
The Czechs came into the tournament riding high after capturing the world title in Vienna in May, but have lost the first two games of the tournament and are in danger of crashing out despite having their version of the "Dream Team".
With the addition of Pittsburgh Penguins duo Jaromir Jagr and Petr Nedved, Montreal Canadiens sharpshooter Martin Rucinsky and the core of the world championship team in tact, the Czechs were looking to prove they belonged at the pinnacle of the hockey world.
The match at Prague's Sports Hall was to be a homecoming of sorts for the Czechs, their first home game since beating Canada 3-2 in a thrilling world championship final on a last minute goal.
But after a demoralising loss to Finland in its tournament opener on Tuesday, and another listless effort on Thursday, Czech fans had had enough, pelting the Czech bench with beer cans near the end of the game.
Even Czech coach Ludek Bukac, a veteran coach with almost 30 years behind the bench, was left searching for an answer to his sputtering offense and the team's lack of dynamism.
"The Swedes played well, you've got to hand it to them. But the fact that we didn't score at home is not a very good showing," he said.
Added Jagr: "We aren't that bad, but our performance is not showing it."
Bukac, who has often expressed his disdain for bringing in players who have talent but not team spirit refused to comment on whether he would invite the same team back if he could do it all again.
But with nine players on the roster with seven or less of national team games under their belts, the Czech players know they must come together quickly, or face the embarassment of failing to win in what is touted as the true battle for hockey supremacy.
"We've got to concentrate on winning against Germany and moving on to the next round, nothing else," added Robert Reichel, who recently re-signed with the Calgary Flames after playing one year in Germany.
The win allows Sweden to keep pace with group leaders Finland, who have also won both their games so far but have a better goal difference.
The two teams meet on Sunday in Stockholm while the Czechs must regroup and beat winless Germany in Garmisch-Partenkirchen on Saturday to move into the quarterfinals next week in North America.
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The fall in the Czech trade deficit to 10.5 billion crowns in September from 14.5 billion in August buoyed market sentiment, and the goods imported show industrial restructuring is on track, analysts said on Thursday.
Czech Statistical Bureau (CSU) data released earlier showed the January-September trade shortfall hit an all-time high of 110.7 billion crowns, far surpassing the full 1995 deficit of 95.7 billion crowns.
But the September shortfall, the smallest one-month deficit this year, surprised analysts, who had forecast on average a gap of 13 to 15 billion crowns.
"I'm happily surprised. I think it's a relatively optimistic figure, though not so good as to make us revise our full year forecast," said Martin Kupka, an economist at Patria Finance, which has forecast a 150-160 billion crown deficit at year-end.
The CSU said September imports rose 15.2 percent year-on-year, the same as in August, while exports rose 5.9 percent after a 6.4 percent increase in August.
It added that strong growth in machinery and transport equipment imports continued, accounting for 38.3 percent of total imports.
Analysts said they were encouraged by the rise in this sector as these imports are needed to restructure industry, allowing it to produce more competitive goods for export.
The crown also reacted positively, dipping slightly on the release of the figures but quickly regaining its losses as the market digested the statistics.
The crown was trading at 26.939 to the dollar at 0840 GMT after opening at 26.945. The rate implies a deviation from the midpoint of the currency basket of +2.87 percent, after the central bank's Wednesday fixing at +2.80 percent.
"The market is pleased with the figures for sure, they seem to bear out estimates that slowly, the structure and size of the deficit is getting better," said one local forex dealer.
" don't think the crown itself will benefit too much from the numbers, but it certainly should not weaken," he added.
-- Prague Newsroom, 42-2-2423-0003
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Czech paper concern Sepap Group a.s. on Friday said its nine-month net profit fell as a shutdown of its main paper mill, coupled with a downturn in the paper cycle bit into its bottom line.
Sepap said its nine-month net profit, calculated according to international accounting standards, fell to 188.4 million crowns from 520.4 million over the same period in 1995, while revenues slumped to 3.94 billion crowns from 5.34 billion.
The firm said results from the third quarter only had stabilised after a first half industry downtrend, though "the planned annual shutdown of the Steti mill lowered earnings by virtue of the expected higher maintenance costs associated with the stoppage".
"Overall, Sepap year-end ernings are expected to rise and show a slight improvement over third quarter levels," a company statement said.
The Steti mill, which accounts for some three-quarters of the group's revenues and profits, saw its pre-tax profits plummet to seven million crowns.
Comparative figures were not immediately available, but the mill's nine-month 1995 gross profit was some 95 million crowns.
"The market place is sending mixed signals for the fourth quarter. Anticipated price increases have not taken hold at the anticipated levels in all of the pulp and paper grades," the statement said.
It added that the group's second biggest subsidiary, newsprint maker ROTO, "continued to produce good results in a market that is weakening".
ROTO showed a nine-month pre-tax profit of 149 million crowns on sales of 1.25 billion crowns.
Last year, Sepap was the center of a heated battle for control between Bahamas-based investor Michael Dingman and Swedish forestry concern Assidoman.
Dingman, who controls 48 percent of Sepap through his Daventree Ltd investment company, won the battle, but later accepted Assidoman's role as a strategic partner in the paper industry. The Swedish firm holds a 39 percent stake in Sepap.
-- Prague Newsroom, 42-2-2423-0003
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Czech shares rallied on Monday following the coalition government's win in weekend Senate elections, but analysts said the rise was due more to a technical correction than to a change in investor sentiment.
The Prague Stock Exchange's PX50 index rose 0.82 percent on the day, spurred by gains to seven of the eight most-capitalised shares.
Brokers, however, were muted in their optimism that the rally would last more than a few days, saying the centre-right government's strong showing was expected and already built into the market last week.
"Basically, this is a technically-led rally, I don't think it has a basis to do with Senate elections," said Jay King of the brokerage Wood and Company.
Added another local trader: "You're not seeing real volumes here you're just seeing prices being pushed up in anticipation of year-end, and without a doubt it is domestically driven. Foreigner investors are still on the sidelines."
The minority coalition of Prime Minister Vaclav Klaus took 52 of 81 seats in the newly-created upper house of parliament, following the second round of voting, well ahead of the centre-left opposition Social Democrats which took 25 seats.
The Senate is a mostly advisory body with limited legislative powers, but the election was the first test at the polls for Klaus since his coalition lost its lower house majority in general elections in June.
But a thin turnout -- just over 30 percent of the electorate cast their ballots -- made it hard for the three-party coalition government, which lost its lower house majority in June, to claim it had recaptured voters' hearts.
The Prague bourse has been hard hit in recent months -- falling some 17 percent since September -- with most investors shying away from the a market characterised as opaque at best, and little regard for minority shareholder rights.
And analysts said that the election would probably not bring about a new push for changes to securities laws within the coalition, a condition that is necessary to lure back participants.
"I'm a little sceptical about the possibility that the Senate will help bring in changes," said Pavel Sobisek of Zivnostenska Banka.
"I think there will be a lot of pressure from market participants on the government to do something...but I have not seen any signs of a change in attitude of the coalition with respect to this topic."
Analysts said that the market should take some heart however, in statements made by Klaus following the vote when he said he saw no reason to call early elections for the lower house, which should keep the market stable in the near future.
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Markets across Eastern Europe
remained mired in an autumn slump this week, with analysts
saying they see little impetus on the horizon to break the
bearish trend.
Stock Exchanges in Warsaw, Prague, Bratislava, Bucharest,
Zagreb and Ljubljana all lost ground on the week, while
Budapest bucked the trend, rising slightly though it appeared
to lose steam by week's end.
PRAGUE
Not even a strong showing by the centre-right governing
coalition in Senate elections at the weekend could break the
Prague Stock Exchange out of its current slump, as the PX50
index dipped 0.8 points on the week to close Thursday at 509.3.
Analysts said that while the coalition of Prime Minister
Vaclav Klaus may feel heartened by the showing which gave him a
majority to the Czech upper house, which will have little
power, investors are still put off by poor market regulation.
"I'm a little sceptical about the possibility that the
Senate will help bring changes to the market," said Pavel
Sobisek of Zivnostenska Banka.
"I think there will be a lot of pressure from market
participants on the government to do something...but I have not
seen any signs of a change in attitude of the coalition with
respect to this topic."
Investors have long complained that market regualtion and
legislation in the Czech Republic is weak, providing little
protection for minority shareholders.
WARSAW
The Warsaw Stock Exchange stayed virtually flat this week
and analysts were divided over the market's direction.
Some said the bourse could extend its three-week horizontal
trend as no fresh signals were in sight. "We are still in a
horizontal trend and...I see no factors which could help create
a clear direction for the market," said Mateusz Andrzejewski,
an analyst at Pekao SA brokerage.
But others saw the generally positive economic climate as
an impulse strong enough that it could help the bourse climb
above 14,000 points next week.
Analysts said a senior central bank official's comment on
Tuesday on a possible rise in interest rates next year was
bringing some uncertainty to the bourse but was unlikely to
signficantly hurt prices.
BUDAPEST
Hungarian shares, triggered by last Thursday's government
decision to hike energy prices, started off the weekend
strongly, but ran out of steam by mid-week.
Oil and gas company MOL led the charge, but dealers said
its weakening on Thursday could be a harbinger for the bourse.
"MOL turned around today (on Thursday), that is a warning
sign," said New York Broker's Kalman Schuszter. "Sellers are
stronger now." The BUX index closed on Thursday at 3,674.61, up
3.1 percent from Monday's open.
BRATISLAVA
Slovak share prices continued their freefall over the
course of the week, in a rampant bear market that has seen the
Bratislava Stock Exchange lose about 25 percent since the end
of August.
The 12-share SAX index fell 12.49 points on the week to
close at 161.82 on Thursday.
Dealers said the silver lining to the bourse's woes may be
that prices are becoming so cheap, foreign investors will soon
be lured back.
BUCHAREST
Scant demand kept volumes modest at both weekly sessions in
Bucharest, with turnover low and most prices edging down or
staying flat.
The unofficial VAB index inched down from the previous
session by 1.1 percent to 294.2 points, while the BIG index
eased 1.07 percent to 293.41.
Fertiliser maker Azomures SA dominated trading,
while newcomer, an oilfield equipment maker, put on
a poor show.
ZAGREB
Croatian stocks were mostly lower in dwindling trade and
analysts said they could see no end to the bearish period as
big buyers continue to shy away from the market because of
political developments.
Croatia has been shaken by a wave of strikes, and last week
Zagreb saw its biggest protest in years.
LJUBLJANA
Political concerns were also apparent in Ljubljana this
week, with investors waiting for a new prime minister to be
named, probably in the second half of December.
"The market will be uneasy until it is clear who will form
the new government," one trader said. The SBI index fell 6,7
points from MOnday's open to close on Thursday at 1,145.5.
Although the Liberal Democrats of current Prime Minister
Janez Drnovsek were the strongest single party in the November
general election, winning 25 out of 90 parliamentary seats,
they are facing a loose alliance of rightist "Spring" parties,
who got 45 seats.
CLOSE WEEK'S CHANGE 1996/HIGH 1996/LOW
NOV 28 NET PCT
CESI 1,391.77 - 11.12 -0.79 1,544.70 959.24
PRAGUE 509.3 -0.8 -0.16 582.0 425.9
WARSAW 13,696.7 -26.4 -0.2 15,078.7 7,725.2
BUDAPEST 3,674.61 +110.66 +3.1 3,728.58 1,557.91
BRATISLAVA 161.82 -12.49 -7.17 226.34 150.4
VAB-Index 294.2 -4.83 -1.6 879.29 285.3
BIG-Index 293.41 -4.96 -1.6 820.9 284.29
LJUBLJANA 1,145.5 -6.7 -0.6 1,589.18 891.93
All-time highs: CESI 1,544.70 (Sept 2/1996); WIG 20,760.3
(March 8, 1994); SBI 1,598.02 (June 28/1994); PX50 1,002.4
(April 7/1994); BUX 3,728.58 (Oct 17/1996); SAX 402.3
(Feb/1994). ($=3,570 lei)
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The three-party coalition of right-wing Czech Prime Minister Vaclav Klaus won a majority of seats on Saturday in run-off elections to parliament's new upper house, the Senate.
But the premier's own party won fewer seats than expected after dominating the first round last week and voter turnout was dismal despite an appeal for Czechs to cast their ballots from President Vaclav Havel.
With all 81 constituencies declared, the coalition parties secured 52 seats in the Senate, the very existence of which many Czechs have questioned.
The result marked a turnaround for the coalition, central Europe's last centre-right government, which lost its majority in the more powerful lower house, the Chamber of Deputies, six months ago.
Klaus's own Civic Democratic Party (ODS) won 32 seats ahead of the strongest opposition party, the Social Democrats, with 25.
The Christian Democrats, a junior coalition partner, took take 13 seats while the third party in the government, the Civic Democratic Alliance, won seven.
The little-reformed Communists clinched two seats and two went to independents.
"I welcome the fact that the governing coalition took two-thirds of the senatorial seats, and that's a huge victory over the opposition," said Klaus, who sits in the lower house along with all other government ministers.
"The result in the second round isn't any surprising victory, but on the other hand the real fact that ODS has about 40 percent of the senators I would have to mark as successful."
The Central Election Commission reported that second round turnout was around 30 percent, lower even than the 35 percent registered in the first round held on November 15-16.
The centre-left Social Democrats, whose strong gains in June lower house elections stripped the coalition's majority, were saved the embarassment of a Senate dominated solely by their arch-rivals from Klaus's party.
"I am pleased that Senate will be a place of democratic discussion, and never the place of arrogant domination of one or another political party," Milos Zeman, the chairman of the Social Democrats and the lower house, told reporters.
Zeman's party has been beset by internal bickering since June, but the results of the run-offs -- between the top two first-round candidates in constituencies where nobody won more than half the vote -- could have been worse for the opposition.
"Most importantly the Senate won't be one-coloured or two-coloured as was expected, but multi-coloured," said analyst Jiri Pehe of Prague's Open Media Research Institute.
Before the second round, Havel appealed to Czechs to turn out in far greater numbers for the sake of the credibility of the new upper house but opinion surveys showed many had no interest.
The Senate elections had been billed as key to the future of Klaus's coalition. But analysts say that with turnout so low, the Senate results have little significance.
Klaus, an architect of economic reform, repeatedly accused the Social Democrats of conspiring with the Communists to turn back the clock on reform, and his supporters were galvanised by the coalition's June setback.
| 1 |
Britain's Tim Henman emerged on Friday as the only seed to advance to the semifinals of the $475,000 Czech Indoor Open.
In the day's opening match, seventh seeded Henman downed second seed Wayne Ferreira 6-4 6-3, while fifth seed Todd Martin was edged out by Germany's David Prinosil 7-6 7-6 and sixth seed Michael Stich lost to Czech Martin Damm 5-7 6-4 6-4.
Czech Petr Korda rounded out the final four with his win over Davis Cup team mate Jiri Novak 6-1 6-0. Korda now faces another Davis Cupper in Damm. Henman will square off against Prinosil in the other semifinal on Saturday.
Reigning Ostrava champion Ferreira, ranked seventh in the world, never looked comfortable against Henman, the more aggressive of the two for most of the match.
He failed to gain a single break point all match while the 22-year-old Briton broke serve late in both sets.
Henman's win avenged his loss to the South African in Toronto earlier this year, and he said he had taken notes from that match on to court on Friday.
"In Toronto, Ferreira was dictating the points -- serving very well and hitting forehands very well -- so today I tried to be very aggressive and, when I had an opportunity, move forward," said Henman, ranked 26th in the world.
Local favourite Damm, a finalist at the Beijing Open last week showed little signs of jet lag in spoiling Stich's 28th birthday. After losing the first set, Damm scored crucial breaks in the ninth game of the final two sets to take the match.
For Martin, defeat was especially painful as he could have gained valuable ground on Ferreira in the race for the final spot at the ATP Tour championship in Hanover at the end of the season.
The American currently sits 199 points behind the South African. A semifinal berth would have eaten 37 points out of that lead while a place in the finals would have almost halved Ferreira's advantage.
Prinosil, ranked 58th in the world, profited from a Martin double fault at 5-5 in the first set tiebreak and took a 4-0 lead in the second set tiebreak on the way to sealing victory.
Martin said: "I realise I didn't help my cause at all but we've got two of the biggest tournaments coming up and I think whoever does really well in those events should probably play themselves into a position at Hanover.
Martin, Stich and Ferreira both play next week in Stuttgart, where the winner gains 370 tour points, 200 more than the winner here.
The tournament's organisers said on Friday that they expect Becker will also be fit to play. In a move to accomodate the Australian Open champion, his first round match has been put back until Wednesday.
| 1 |
Czech telephone operator SPT Telecom a.s. on Thursday said its nine-month gross profit hit 6.0 billion crowns, in line with analysts predictions and likely to have little effect on the firm's share price.
SPT said in a statement that revenues for the first three quarters totalled 23.3 billion crowns, nearly equal to the 26.4 billion crowns in total revenues for 1995.
SPT's 1995 full year gross profit was 7.0 billion crowns. All figures are calculated according to International Accounting Standards (IAS).
SPT shares closed down six crowns at 2,879 on the Prague Stock Exchange on Thursday, though dealers said the results came out after trading ended for the day.
"The figures were basically in line with our estimates. Margins are pretty much the same as they were in the first half so I think the company is in a good position for future growth," said Alex Marcek an analyst at Patria Finance.
The statement added the number of lines installed accelerated in the third quarter, putting the year-to-date figure at 272,000 lines and the overall installed base at 2.67 million lines.
"The company is confident that it will achieve its 1996 target of over 400,000 new set lines," the statement said.
SPT, of which a Dutch-Swiss consortium comprised of PTT Netherlands and Swiss Telecom bought a 27 percent stake last summer, is aiming to increase the network by another 500,000 lines in 1997, and 650,000 in 1998.
The statement said that investment expenditures for the first nine months totalled more than 20 billion crowns, "more than the full year 1995 capital expenditure.
"If they hit the target of 400,000 new lines it would be a pretty good base as far as revenues are concerned," said one local telecom analyst.
Analysts said that the figures would probably not have an immediate effect on SPT's share price, since the entire Czech capital market is in a downturn as investors avoid a market they characterise as plagued with a lack of transparency.
Company officials have been adamant that SPT would not pay a dividend before 1998, as profits would still have to be ploughed back into the network's modernisation.
-- Prague Newsroom, 42-2-2423-0003
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Czech telephone operator SPT Telecom a.s. on Thursday reported a nine-month gross profit of 6.0 billion crowns, in line with forecasts, and said outlays for investment rose significantly in the period.
"The figures were basically in line with our estimates. Margins are pretty much the same as they were in the first half so I think the company is in a good position for future growth," said Alex Marcek an analyst at Patria Finance.
The company's gross profit for all of 1995 was 7.0 billion crowns. SPT used International Accounting Standards in calculating its profit.
In a statement, the company said revenues totalled 23.3 billion crowns, nearly equal to the 26.4 billion crowns for 1995.
SPT said outlays for investment in the nine-month period exceeded 20 billion crowns or more than the total for 1995.
A Dutch-Swiss consortium of PTT Netherlands and Swiss Telecom, which bought a 27 percent stake in SPT from the government last summer, has effective day-to-day control of the firm. The consortium paid $1.32 billion for its stake.
SPT said it installed more telephone lines in the Czech Republic in the third quarter, bringing the year-to-date figure to 272,000 lines. SPT now has a total of 2.67 million lines.
"The company is confident that it will achieve its 1996 target of over 400,000 new set lines," the statement said. The company is aiming to increase its network by another 500,000 lines in 1997, and 650,000 in 1998.
SPT is the only telephone line operator in the country. There are also two GSM mobile phone operators, but they do not install hard lines.
"If they hit the target of 400,000 new lines it would be a pretty good base as far as revenues are concerned," said one local telecom analyst.
SPT shares closed down six crowns at 2,879 in after-bourse trading in Prague.
The company didn't comment on its dividend policy. SPT has said in the past that it doesn't plan to pay a dividend before 1998.
-- Prague Newsroom, 42-2-2423-0003
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Germany's David Prinosil ended rising British star Tim Henman's bid for his first ATP Tour victory on Saturday, while Czech Petr Korda halted compatriot Martin Damm's quest for his second final appearance in two weeks.
Prinosil beat Henman 6-4 6-3 in the semifinals of the $475,000 Czech Indoor Open and Korda followed with a hard-fought 4-6 6-3 7-5 victory against his Davis Cup team mate.
Seventh seed Henman, who had not lost a set all week, looked shaky on his groundstrokes early, but stayed in contention with his strong serve, firing seven of his 11 aces in the first set.
But in the 10th game of the match, Henman's serve failed him, his double fault giving the German triple break point.
Henman, who has now reached seven semifinals but never gone further, fought back with a service winner and then an ace, but as he has done all week, Prinosil blasted a brilliant return to take the point and set.
The British number one recovered to gain two break points of his own in the third game, but failed to come up big when he needed to.
Prinosil, who was born near here in Olomouc before emigrating to Germany, then took control.
Henman said: "I didn't serve well at the right times. I felt confident coming into the match, (but) I just didn't really make anything happen today. It was just a case of not really having a good day at the office.
"I'm disappointed to have lost because I thought it was a good opportunity to make my first final. Bar this match, I've played very well this week and am confident going into Stuttgart and Paris."
Prinosil said: "I served very strongly today and just tried to play within myself, not get too excited and lose my concentration. No matter what happens tomorrow, this tournament has been a great success for me."
Damm also looked on the bright side, viewing his appearance in the final last Sunday in the Beijing Open and this week's march to the semifinals as two of the best weeks of tennis he has ever played.
Victimns on the way have included world number three Michael Chang and ex-Wimbledon champion Michael Stich.
For Korda the win came as a relief following claims in the local media that he could no longer hold his nerve in big matches.
The former world number five has suffered several injuries in the past two years, dropping to 49th in the rankings.
"I felt a lot of pressure at the beginning of the match and I've never seen Martin play that well, but I think I also showed that I am still capable of playing tennis at the highest level," said Korda, who won his first tournament in two seasons at the Qatar Open earlier this year.
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The Czech September trade deficit is expected to grow by between 13 and 15 billion crowns after a 14.7 billion crown monthly deficit in August, a Reuters poll of Czech economists showed on Wednesday.
Czech trade figures for the first nine months are scheduled to be released by the Czech Statistical Bureau (CSU) at 0900 local time (0700 GMT) on Thursday.
Most economists surveyed said they expect steady growth in the deficit and few surprises.
"It's still too early to talk about a period of stabilisation in the deficit, I think that will come in 1997 when imports level off and exports strengthen," Boris Gomez, an analyst at ING Barings told Reuters.
Whatever the deficit in September, the nine-month trade gap is sure to be a record, after the January-August figure reached 100.9 billion crowns, more than all of the 1995's total shortfall of 95.7 billion crowns.
The January-September 1995 trade deficit was 62.3 billion crowns.
Most analysts agreed a 13-15 billion September gap would be in-line with prevailing trends, and on target for the estimated deficit of 150-160 billion crowns.
Analysts say the trade balance has been hurt by a downturn in the economies of western Europe earlier in the year, and a the effects of a recovery of demand in western Europe have yet to make an impact.
The government and central bank, however, has repeatedly ruled out a devaluation of the crown to boost exports.
Analysts point to mid-1997 as a crucial time in which the import wave -- which is aimed at modernising industries -- must show results in productivity growth and competitiveness.
Economists said the deficit could be financed this year, but might pose problems in the second half of 1997.
-- Prague Newsroom, 42-2-2423-0003
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The Prague Stock Exchange suffered one of its biggest one-day falls on Friday as foreign interest waned because of a lack of market transparency.
Four of the PSE's five largest issues fell sharply in active trading, pulling the Reuters RPIX index down nearly three percent to 1,052.
Long-criticised for its lack of transparency and regulation, analysts say Friday's loss was yet another sign that investors, especially foreigners, are pulling out of the market having grown tired of failed promises of reform.
"There's just a total lack of interest in this market," said Jan Sykora of Wood and Company.
"Fundamentally, companies look pretty cheap, but the lack of foreign interest and Czechs fearing the possibility of a devaluation and looking abroad (mean) you don't have that much buying interest."
Under the Czech Republic's Securities Act, which was devised to handle the logistics of the government's massive voucher privatisation scheme, the Securities Registry (SCP) is bound by law to provide services such as moving securities to and from client accounts.
Since the SCP does not reveal any details of transactions, including prices and volumes, brokers have taken to the SCP because of its privacy and faster settlement process.
The problems have restrained the PSE which sees on average $4-$6 million of stock changing hands each day, compared with $15 million turnover in Warsaw, where the market has a capitalisation of just $3 billion.
"Unambiguously, a notable portion of foreign investors are not satisified with the current state of the Czech capital market," said Miroslav Nosal of Patria Finance.
In April, parliament approved a series of market reforms to compel companies and fund managers to be more open and accountable. A key element tackles the chronic problem of slow and irregular reporting of company earnings and actions.
The PSE has taken several steps to brings more transparency to the market, but some analysts say that the process is taking too long.
In mid-September, the Prague Stock Exchange pledged to improve the state of the market, stressing in particular the need for the early creation of an independent watchdog.
But many analysts were disappointed by the lack of strong enforcement requirements, as market supervision is still kept in the hands of a small, under-resourced Finance Ministry department.
And some question whether there is even the political will here to change the market, or if a few regulations will be enough to change the attitude of many market participants.
"The problem isn't only with market regulations. I don't feel the political will which can bring change and prevent frauds.," Markus Winkler, manager of the Discover Europe Investment Fund was quoted in the daily Mlada Fronta Dnes as saying on Friday.
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Senate runoff elections on Friday and Saturday should have little impact on Czech capital markets, as investors focus on macroeconomic fundamentals, not political influences.
Analysts said last weekend's first round of voting gave a mild boost to the Czech crown and the Prague Stock Exchange, and unless results from the second round of voting on Friday and Saturday vary greatly, little further boost should be seen.
"Provided that nothing drastic happens, it's pretty much a non-starter from a foreign investor point of view. I think that for the markets, it will be pretty much a non-event," Jay King, of Wood and Company, told Reuters.
In the first round of voting last weekend, Prime Minister Vaclav Klaus's right-wing Civic Democratic Party (ODS) posted a strong result, capturing over 36.5 percent of the national vote, an increase of some six percent from June lower house elections where his coalition lost its majority.
The opposition Social Democrats were second with 20.3 percent. The rest of the vote was thinly split among coalition parties and the Communists but only 35 percent of the electorate voted.
Of the 81 Senate seats, the ODS won three outright in the first round and 76 of their candidates go into the runoff, compared with 48 for the CSSD. In 47 constituencies, the runoff is a straight fight between the two main parties.
Analysts said that with the two main parties assured of dominating the Senate, a body which will have limited powers anyway, little change appears imminent for the country's economic, or political course.
"Our expectation is ODS gaining somewhere around half of the total, and including the rest of the coalition it might be well over 50 seats. I don't think there should be any surprises," said Radek Maly, an economist at Citibank Prague.
Following last weekend's vote, the PSE, mired in a two month long slump began to edge higher, gaining some four percent over the week.
But dealers said the gains were based more on weak local buying than a change in sentiment from key foreign investors.
The crown too, ratcheted up slightly after the first round of voting, but has since steadied at 2.9 percent stronger than its dollar/mark basket midpoint.
Some analysts said foreign investors might be tempted, as they were the previous week, to play on a strong Klaus victory early on Monday, but any gain based on the political situation would be short lived.
"There may be some bias toward a stronger Czech crown," said Petr Korous, a dealer at Ceskoslovenska Obchodni Banka. "There's no other factor, more or less the basic impulse for that (a stronger crown) was really because of the elections, and then the subsequent recovery of the capital markets."
Citibank's Maly added: "I wouldn't foresee any major changes in the fixed income market. The fixed income market is rather less sensitive to these political events than is the FX (foreign exchange) market."
-- Prague newsroom (42 2) 24 23 0003
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East European bourses were mostly higher this week with the Warsaw Stock Exchange leading the way, hitting a 30-month high before easing slightly on profit-taking.
Budapest, Zagreb, Bratislava, Ljubljana and Sofia also posted gains, while markets in Prague and Bucharest lost ground in listless trading.
The Central European Share Index (CESI), which measures the performance of Prague, Budapest and Warsaw blue-chip stocks, dipped 0.29 percent to 1,486.55 points.
WARSAW
Polish shares on Friday extended Thursday's falls due to profit-taking, after a four-session, 2.7-percent rise on the back of gains on western bourses.
Analysts said the market could slip below 14,800 points before picking up toward the middle of next week as firms release their September earnings reports.
"It looks like we'll have falls for a few sessions, with the first support line at 14,800 points possibly broken," said Grzegorz Pindur, an analyst at Bank Staropolski brokerage.
The main market's all-share WIG index closed at 14,920.4 points, up 244.5 points or 1.7 percent from Friday's close.
PRAGUE
The Prague Stock Exchange continued to limp through October, yet to record an advancing session, with little hope in sight for a turnaround as investors shun a market plagued by a lack of transparency.
The PX50 index closed at 542.4 on Friday, down 13.1 points, or 2.36 percent.
"I think the budget first reading passing is too weak a signal but it is definitely positive. There are still structural problems to be solved before investors get more confident in this market," said Karel Ruzicka of ING Barings.
Foreign investors have long-complained that Czech capital markets are plagued by weak securities legislation that allows for secretive transactions. An estimated 70 percent of all market activity takes place off-market.
BUDAPEST
The Budapest Stock Exchange closed the week at an all-time high, boosted by the release of some positive macroeconomic figures. On Friday the BUX index closed at 3,639.68 points, up 31.67 from last Friday's close.
"Price rises were not very significant but they may mark the beginning of a modestly bullish trend," said Robert Agoston of Daewoo Securities. "These macroeconomic data triggered price increases."
Hungary released wide range of macroeconomic data this week, including the central bank's preliminary current account, trade gap, reserve and inflation data, in addition.
BRATISLAVA
The Bratislava Stock Exchange (BSE) also suffered through another week of sluggish trading, though a jump on Friday appeared to bear out broker predictions of signs that activity was gradually reviving.
The 12-share SAX index fell through the 200 level at mid-week, but then rebounded slightly to close at 203.82 points on Friday, up from Monday's open at 200.32 points.
"We have witnessed some fresh players on our market over the past few days, and the good thing is that the ratio between foreign and domestic investor seems to be well-balanced," said Libor Briska of Creditanstalt.
BUCHAREST
Thin interest from retail investors, who dominate the bourse, drove most share prices down this week.
Two independent indices fell to year-lows at both weekly sessions as investors awaited fresh listings to the currently traded 13 stocks.
Last week, the bourse said 11 companies had applied for listing but did not say when they would join trading.
The VAB index fell 1.5 percent to 291.7 points on Thursday and the BIG index dipped 1.6 percent to 289.98 points.
SOFIA
Two corporate issues traded higher on the Bulgarian stock market this week amid low investor interest.
The 13-share Reuter All Bulgaria Stock Index (RABSI) closed at 41.28 points, up 0.26 from last Thursday due to the rise of RIF' third issue and TBS Hotels second issue.
TIRANA
Tirana's Stock Exchange this week recorded a 100 million leks transaction in 364-day treasury bills on Monday but no bonds changed hands on Thursday.
The Savings Bank sold 100 million leks worth of 364-day T-Bills to the National Commercial Bank on Monday, the first of Tirana's Stock Exchange (TSE) two weekly sessions.
The finance ministry on Thursday offered 800 million leks worth of 91-day t-bills, 400 million leks of 182-day t-bills and one billion leks in 364-day t-bills.
ZAGREB
Croatian stocks forged ahead throughout the week, ending mixed on Friday as selected hoteliers closed slightly lower after recording new highs during the week. Traders said growing supply will stabilise prices next week.
LJUBLJANA
Slovenian shares jumped 18.5 percent this week, pushing the index up 202.6 points to 1,299.70 as investors snapped up shares of newly-privatised companies. Traders said the market was likely to continue its recent bull run.
OCT 11 WEEK'S CHANGE 1996 HIGH 1996 LOW
CLOSE pts pct
CESI 1,486.55 -4.18 -0.29 1,544.70 959.24
WARSAW 14,920.4 +244.5 +1.7 15,078.7 7,725.2
PRAGUE 542.4 -13.1 -2.36 582.0 425.9
BUDAPEST 3,639.68 +31.67 +0.87 3,639.68 1,557.91
BULGARIA 41.28 + 0.26 +0.63 55.48 40.61
BRATISLAVA 203.82 +3.50 +1.75 226.34 150.4
LJUBLJANA 1,299.70 +202.6 +18.5 1,589.18 891.93
All-time highs: WIG 20,760.3 (March 8/1994); BUX 3,639.68 (Oct 4); RABSI 112.2 (April 27/1994); PX50 1,002.4 (April 7/1994); SAX 402.3 (Feb/1994); SBI 1,598.02 (June 28/1994), CESI 3,634.80 (Oct 7/1996).
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Shares on most central and eastern European bourses gained ground this week though there were some indications the upturn may be short-lived.
Exchanges in Prague, Warsaw, Budapest, Bratislava and Bucharest all rose, while Zagreb and Sofia traded mixed. Ljubljana was the one gray cloud, posting slight losses.
The Central European Share Index (CESI) which reflects the price movements of 50 selected Czech, Polish and Hungarian shares, firmed 66.11 points.
PRAGUE
Czech share prices were mostly steady on the Prague Stock Exchange throughout the week, with little movement expected soon as the holiday season slowly winds up.
The PX50 index edged up 3.6 points from Monday to close at 568.6 on Thursday.
Leading trading were SPT Telecom and Komercni Banka, though SPT's movements were largely characterised as "accounting procedures" that saw the issue gain as much as 102 crowns one session, only to lose the same amount the following day.
"The final price (of SPT) was not the real market price, but because average prices are not used for the close, it gives an artificial final number," said Jan Sykora of Wood and Company. SPT closed on Thursday at 3,340 crowns.
Dealers have long-complained that some market participants consistently manipulate prices on the bourse, a fact that to cloud foreign investor perceptions of the Czech market.
WARSAW
Polish shares on Thursday rose for the sixth consecutive session but analysts said stronger selling after price-fixing showed the market was losing steam and made it unclear if the growth trend would continue.
"It seems we now have a tug-of-war between buyers and sellers," said Krzysztof Rogalski, an analyst at Bank Staropolski SA brokerage.
But some analysts said a real growth trend had already begun, sparked by firms releasing better July earnings at the start of the week. The WIG index closed at 13,597.4 points, up 892.7 points or 7.0 percent from last Friday's close.
Analysts said recent systematic gains in higher turnovers by several large-cap stocks was a good sign that could help return the market toward this year's July 5, 14,282.2-point high next week.
BUDAPEST
Prices rose at both of this week's sessions as market participants returned after holidays on Monday and Tuesday.
The rest of the market strengthened as investors were cheered because the U.S. Federal Reserve had left interest rates steady.
"It's certainly due to the fact the U.S. investors put money into the east European emerging markets," Peter Haas of Postabank Securities said. "Optimism seems to have spread over investors after the danger of a rate hike was eliminated."
The BUX index closed on Thursday at 3,370.23, up 198.79 points over last Friday.
BRATISLAVA
The Bratislava Stock Exchange (BSE) saw a week of listless holiday trading, with the ongoing struggle for strategic control over the country's largest investment fund, VUB Kupon, dominating floor trading.
The 12-share SAX index posted several year-highs over the week, peaking at 226.34 points on Tuesday, and closing at 223.75 points on Thursday, slightly firmer from Monday's open.
"This week was a transparent example, showing how the index is often far off from real trends on the market," Dusan Sykora of ING Barings said. "The SAX has been reaching top levels, while only a few trades were concluded on the bourse on low volumes," he added.
SOFIA
No corporate issues traded for a third week in a row on the Bulgarian stock market as investors turnede their attention to treasuries and foreign currency.
Only the Sofia Stock Exchange (SSE) operated this week after the Bulgarian Stock Exchange (BSE) went into a summer recess on August 5. The BSE will resume trading on September 2.
The 13-share Reuter All Bulgaria Stock Exchange Index (RABSI) closed at 41.31 points, unchanged from last Thursday.
BUCHAREST
Romanian share prices posted gains this week on the back of healthy half-year earnings reports by several firms but trading, dominated by retail investors, was modest in volume.
Overall turnover fell by almost 30 million lei to 68.5 million on Thursday.
The unofficial VAB Index -- a value-weighted index of all stocks computed by Vanguard SA securities -- closed at 371 points, 8.20 points or 3.5 percent up on the week. Its base was 1,000 points when it was created last November.
ZAGREB
Croatian stocks were mixed though the summer lull seemed to be nearing an end as big buyers became more active, boosting prices and prompting broker predictions of a steady rise in the weeks to come.
Most active was Zagrebacka Banka which gained 130 kuna since last Tuesday, but other companies including foodprocessor Podravka also registered an increase of prices.
LJUBLJANA
In Ljubljana, share prices, eased 0.4 percent as the SBI index fell 4.31 points to 980.60.
Financial consultancy Finmedia was the leading decliner, falling 4.9 percent, while the biggest gainer were prefered shares of bank Dolenjska banka, firming 10.4 percent.
CLOSE WEEK'S CHANGE 1996 HIGH 1996 LOW
AUG 22 NET PCT
CESI 1,495.58 +66.11 +4.62 1,483.76 959.24
PRAGUE 568.6 +3.6 +0.64 586.6 425.9
WARSAW 13,597.4 +892.7 +7.0 14,282.2 7,725.2
BUDAPEST 3,370.23 +198.79 +6.27 3,380.53 1,557.91
BRATISLAVA 223.75 +0.51 +0.23 226.34 150.4
SOFIA 41.31 0.00 +0.00 55.48 41.05
LJUBLJANA 910.74 -4.31 -0.47 1,589.18 910.74
All-time high: CESI 1,483.76 (July 5/1996); SBI 1,598.02 (June 28/1994); WIG 20,760.3 (March 8/1994); BUX 3,380.53 (July 8/1996); PX50 1,002.4 (April 7/1994); RABSI 112.2 (April 27/1994); SAX 402.3 (Feb/1994).
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Top seed Goran Ivanisevic cruised to a 7-6 6-4 win over Romania's Adrian Voinea in the first round of the Czech Indoor Open on Monday.
In the only other match involving a seeded player on the opening day, Britain's Tim Henman overpowered Sweden's Nicklas Kulti 7-6 6-4.
Both players took advantage of the fast carpet court, blasting service winner after service winner to demoralise their opponents.
Ivanisevic, ranked fifth in the world, started slowly against world number 42 Voinea, before pulling away in the middle of the tie break and never looked back.
"It's always tough to play in a new hall and the carpet here is much faster than last week in Vienna," said Ivanisevic who hit 14 aces.
"But this was good preparation though because the tournament has so many top players. To win it will take at least one win over a top 10 player."
Ivanisevic's is scheduled to play the winner of Tuesday's match between Czech Petr Korda and Ecuardor's Nicolas Lapentti and could also have to get past third seed Boris Becker and eighth seeded Czech Bohdan Ulihrach it he is to reach Sunday's final.
Henman also used his dominating serve to wear down Kulti.
"It was a tough match but I think I should have taken the first set before the tiebreak," said Henman. "He fought back well but I felt more comfortable in the second set.
"I enjoy playing a tough match right from the start, it focuses you very quickly."
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The Prague Stock Exchange hit a new year-high on Thursday as major banking issues broke out of a recent slump to spur the bourse higher.
Komercni Banka and Ceska Sporitelna, the country's two largest banks both posted strong gains to help push the PX50 index up 3.3 points, or 0.58 percent, to a 1996 high of 574.9.
Overall, advancing issues narrowly outpaced decliners by 320 to 298, with 192 holding steady. Total volume remained steady at 916,194 shares on turnover of 648.3 million crowns.
Komercni, a likely recipient of attention from investors looking to enter the Czech market after an announcement of its inclusion into the Morgan Stanley index, jumped 99 crowns to close at 2,439.
Meanwhile, savings bank Ceska Sporitelna also posted a strong gain of 16 crowns to 351.
"The inclusion of the Czech Republic in the Morgan Stanley index should help boost issues like Komercni," said Jan Sykora of the brokerage Wood and Company.
Earlier in the day, Sporitelna CEO Jaroslav Klapal announced the bank expects 1996 net profit to total 2.1 billion crowns, while gross profit will hit at least 6.1 billion.
Klapal added that he expected the bank would pay a higher dividend in 1996 than its five crown per share dividend for last year.
"Gross profit, before the creation of reserves and payment of taxes could be slightly above 6.1 billion crowns," Klapal said. "We are counting on dividends for this year will be higher than that of last year."
Sporitelna's 1995 after-tax profit, calculated according to Czech accounting standards, plummetted to 263 million crowns from a previous 980 million crowns after the bank provisioned heavily for risky loans.
The bank's 1995 gross profit was 9.17 billion crowns but the bank assigned almost an identical sum, 9.13 billion, to its reserves covering "classified" loans -- those whose likelihood of recovery ranges from doubtful to hopeless.
Klapal did not say whether his forecasts were calculated according to Czech or international accounting standards, which vary mainly in terms of allowable write-offs and depreciation costs.
Even though analysts agreed that the financial situation of the bank was markedly better this year than it was last year, they said shares of the bank were overvalued.
Analysts say they are closely watching what appears to be a strong acquisition of shares in Sporitelna by the usually secretive Czech investment group Motoinvest and the rival bank Investicni a Postovni Banka a.s.
"The attractiveness of (Sporitelna) could greatly drop if Motoinvest took a more significant share in management," said Richard Podpiera analyst at the investment house Atlantk FT.
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Czech paper concern Sepap Group a.s. on Friday said its nine-month net profit fell as a shutdown of its main paper mill, coupled with a downturn in the paper cycle bit into its bottom line.
Sepap said its nine-month net profit, calculated according to international accounting standards, fell to 188.4 million crowns ($7 million) from 520.4 million over the same period in 1995, while revenues slumped to 3.94 billion crowns from 5.34 billion.
The firm said results from the third quarter only had stabilised after a first half industry downtrend, though "the planned annual shutdown of the Steti mill lowered earnings by virtue of the expected higher maintenance costs associated with the stoppage".
"Overall, Sepap year-end earnings are expected to rise and show a slight improvement over third quarter levels," a company statement said.
The Steti mill, which accounts for some three-quarters of the group's revenues and profits, saw its pre-tax profits plummet to seven million crowns.
Comparative figures were not immediately available, but the mill's nine-month 1995 gross profit was some 95 million crowns.
"The market place is sending mixed signals for the fourth quarter. Anticipated price increases have not taken hold at the anticipated levels in all of the pulp and paper grades," the statement said.
It added that the group's second biggest subsidiary, newsprint maker ROTO, "continued to produce good results in a market that is weakening".
ROTO showed a nine-month pre-tax profit of 149 million crowns on sales of 1.25 billion crowns.
Last year, Sepap was the centre of a heated battle for control between Bahamas-based investor Michael Dingman and Swedish forestry concern Assidoman.
Dingman, who controls 48 percent of Sepap through his Daventree Ltd investment company, won the battle, but later accepted Assidoman's role as a strategic partner in the paper industry. The Swedish firm holds a 39 percent stake in Sepap.
-- Prague Newsroom, 42-2-2423-0003 ($ = 26.86 Czech Crowns)
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The Prague Stock Exchange suffered one of its biggest one-day falls ever on Friday, as waning foreign interest due to a lack of market transparency continues to run roughshod over the beleaguered bourse.
Four of the PSE's five largest issues fell sharply in active trading, pulling the Reuters RPIX index down nearly three percent to 1,052.
Long-criticised for its lack of transparency and regulation, analysts say Friday's loss was yet another sign that investors, especially foreigners, are pulling out of the market having grown tired of failed promises of reform.
"There's just a total lack of interest in this market," said Jan Sykora of Wood and Company.
"Fundamentally, companies look pretty cheap, but the lack of foreign interest and Czechs fearing the possibility of a devaluation and looking abroad (mean) you don't have tha much buying interest."
Under the Czech Republic's Securities Act, which was devised to handle the logistics of the government's massive voucher privatisation scheme, the Securities Registry (SCP) is bound by law to provide services such as moving securities to and from client accounts.
Since the SCP does not reveal any details of transactions, including prices and volumes, brokers have taken to the SCP because of its privacy and faster settlement process.
The problems have restrained the PSE which sees on average $4-$6 million of stock changing hands each day, compared with $15 million turnover in Warsaw, where the market has a capitalisation of just $3 billion.
"Unambiguously, a notable portion of foreign investors are not satisified with the current state of the Czech capital market," said Miroslav Nosal of Patria Finance.
In April, parliament approved a series of market reforms to compel companies and fund managers to be more open and accountable. A key element tackles the chronic problem of slow and irregular reporting of company earnings and actions.
The PSE has taken several steps to brings more transparency to the market, but some analysts say that the process is taking too long.
In mid-September, the Prague Stock Exchange pledged to improve the state of the market, stressing in particular the need for the early creation of an independent watchdog.
But many analysts were disappointed by the lack of strong enforcement requirements, as market supervision is still kept in the hands of a small, under-resourced Finance Ministry department.
And some question whether there is even the political will here to change the market, or if a few regulations will be enough to change the attitude of many market participants.
"The problem isn't only with market regulations. I don't feel the political will which can bring change and prevent frauds.," Markus Winkler, manager of the Discover Europe Investment Fund was quoted in the dsaily Mlada Fronta Dnes as saying on Friday.
-- Prague Newsroom, 42-2-2423-0003
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Czechs cold-shouldered their newly-created Senate on Saturday, turning out in record low numbers for elections which were supposed to be a key test for the minority government of Prime Minister Vaclav Klaus.
The apathy suggested that the real winners might not be Klaus's Civic Democratic Party (ODS) or the opposition Social Democrats, but the far-right Republicans who boycotted the Senate elections and told fellow Czechs to follow suit.
Unofficial figures from the two-day first round, which ended on Saturday, indicated that turnout would be well under 40 percent, by far the lowest in the four parliamentary elections held since the 1989 fall of communism.
Opposition Social Democrat leader Milos Zeman bewailed Czechs' apathy towards the upper house, but predicted that turnout would improve in the second round on November 22-23.
"I think that no party can be happy with the low election turnout, because people that don't turn out for the Senate elections are giving up their civic rights, the right to vote, the right to decide," Zeman told reporters.
No national figures were available immediately after the polls closed at 2.00 p.m. (1300 GMT).
But preliminary, unofficial data from some of the 81 constituencies showed Klaus's centre-right ODS doing well against a bleak background on turnout.
In the Western city of Plzen, turnout was just 36 percent with the ODS candidate expected to face a Social Democrat in the second round, the Czech news agency CTK reported.
If no candidate wins more than half the vote in the first round, the top two candidates go through to the runoff.
In the northern mining town of Most, turnout was 26 percent with the ODS candidate leading trade union leader Richard Falbr, who is running for the Social Democrats.
Pundits have billed the Senate elections as an indicator of whether the Czech Republic can break out of a political impasse following inconclusive lower house polls which stripped Klaus's conservative coalition of its majority last June.
But the apparent low turnout, which compares with 76.4 percent in June, seems a vindication of the Republicans and their leader Miroslav Sladek.
Sladek regards the Senate as a waste of time and money. "They had nowhere to dump the political zombies so they established the Senate," he told a recent anti-election rally, adding that it "would be lazy, useless and expensive".
Conventional wisdom has been that if ODS did well in the Senate Klaus might provoke early lower house polls to regain the coalition's majority. If ODS lost to the Social Democrats, however, he could be forced to resign after seven years leading economic reform as finance minister and since 1992 as premier.
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Czech share prices rallied following the coalition government's win in weekend Senate elections, but analysts said the rise is due more to a technical correction than a change in investor sentiment.
The Prague Stock Exchange's PX50 index rose 0.86 percent at the bourse's daily price fixing, spurred by gains to seven of the eight most-capitalised shares.
Brokers, however, were muted in their optimism that the rally would last more than a few days, saying the centre-right government's strong showing was expected and already built into the market last week.
"Basically, this is a technically-led rally, I don't think it has a basis to do with Senate elections," said Jay King of the brokerage Wood and Company.
Added another local trader: "You're not seeing real volumes here you're just seeing prices being pushed up in anticipation of year-end, and without a doubt it is domestically driven. Foreigner investors are still on the sidelines."
The minority coalition of Prime Minister Vaclav Klaus took 52 of 81 seats in the newly-created upper house of parliament, following the second round of voting, well ahead of the centre-left opposition Social Democrats which took 25 seats.
The Senate is a mostly advisory body with limited legislative powers, but the election was the first test at the polls for Klaus since his coalition lost its lower house majority in general elections in June.
But a thin turnout -- just over 30 percent of the electorate cast their ballots -- made it hard for the three-party coalition government, which lost its lower house majority in June, to claim it had recaptured voters' hearts.
The Prague bourse has been hard hit in recent months -- falling some 17 percent since September -- with most investors shying away from the a market characterised as opaque at best, and little regard for minority shareholder rights.
And analysts said that the election would probably not bring about a new push for changes to securities laws within the coalition, a condition that is necessary to lure back participants.
"I'm a little sceptical about the possibility that the Senate will help bring in changes," said Pavel Sobisek of Zivnostenska Banka.
"I think there will be a lot of pressure from market participants on the government to do something...but I have not seen any signs of a change in attitude of the coalition with respect to this topic."
Analysts said that the market should take some heart however, in statements made by Klaus following the vote when he said he saw no reason to call early elections for the lower house, which should keep the market stable in the near future.
-- Prague Newsroom, 42-2-2423-0003
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Third seed Boris Becker withdrew from the $475,000 Czech Indoor Open on Thursday because of a recurring wrist injury.
Becker, who tore a ligament in his right wrist during the third round at this year's Wimbledon, was in pain after training and dropped out of his scheduled second round match against Czech Martin Damm.
"Boris said his wrist was too sore and that he would not be able to play this evening," ATP Tour Supervisor Gayle Bradshaw said.
On Wednesday evening, Becker cruised to a 6-3 6-4 victory over Denmark's Frederik Fetterlein. During the match he held his wrist several times.
The world number six tried to return to the circuit last month but the injury forced him to retire from the first round in Bucharest, lose in the second round in Basle and withdraw from Lyon two weeks ago.
Becker's absence has set back his plan to qualify for a record 12th appearance at the season-ending ATP Tour championship. He currently trails South African Wayne Ferreira for the eighth and final spot in Hannover.
Second seed Ferreira scraped through to the quarter-finals in Ostrava with a 7-6 5-7 7-5 victory over Dutch qualifier Joost Winnink.
Ferreira, ranked seventh in the world, was stretched to the limit by Winnink. Their absorbing baseline battle ended in the 12th game of the deciding set when Winnink's backhand let him down on three successive occasions.
Although Becker was ranked only third for Ostrava behind Goran Ivanisevic and Ferreira, it was clear most fans wanted to watch him.
Barely 1,000 saw Ivanisevic's first round against world number 42 Adrian Voinea. A tournament record 10,000 watched Becker defeat Fetterlein, ranked 156.
Seventh seed Tim Henman reached the last eight with a 7-6 7-5 victory over British Davis Cup team mate Greg Rusedski.
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The Czech trade deficit jumped sharply in October, rising nearly 16 billion crowns ($600 million), but analysts were not alarmed by the rise, which was in line with their full year forecasts.
The Czech Statistical Bureau (CSU) said on Tuesday the trade gap for the first 10 months of the year hit a record 125.5 billion crowns, up from a revised 109.6 billion crown shortfall for January-September.
The CSU, the Ministry of Industry and Trade and some analysts have predicted the deficit -- inflated by economic slowdown with the country's main trading partner, Germany -- will finish the year at a record 150-160 billion crowns.
"The figures are developing according to forecasts. It's clear that the year-end deficit will be 150-160 billion crowns," said Kamil Janacek, chief economist at Komercni Banka.
"I'm not surprised by the jump since the economic revival of Germany will only show up in export growth in the first half of next year, not in one or two months," he added.
The CSU said in a statement that imports in the first ten months of the year rose by 14.4 percent year-on-year, down from 15.2 percent in the first nine months, while exports rose by 5.2 percent after a 5.9 percent increase in January-September.
It added that strong growth in machinery and transport equipment imports continued, growing by 19.1 percent year- on-year and accounting for 38.3 percent of total imports.
Analysts said they were encouraged by the rise in this sector because the imports were needed to restructure industry, allowing it to produce more competitive goods for exporting.
"The trend seems unchanged. The financing of future economic growth is being done with imports, especially in the heavy machinery sector," Boris Gomez, an analyst at ING Barings said.
Martin Kupka of Patria Finance added -- "The country is still clamouring for machinery and raw materials which are necessary for industrial restructuring."
Prime Minister Vaclav Klaus, a monetarist-economist, has said the record trade deficit is "not tragic", adding it has come partly from a temporary foreign investment wave.
The Czech crown reacted indifferently to the trade figures on Tuesday, hovering around three percent above its dollar/mark basket parity, where it was for most of Monday.
The crown was trading at 26.919 to the dollar at 1230 local time (1130 GMT).
The rate implies a deviation from the midpoint of the currency basket of +3.09 percent, after the central bank's fixing earlier on Tuesday at +3.00 percent.
"The market is neither alarmed nor pleased with the figure. If the deficit hits the forecast level, I doubt we will see any significant change in the currency's value," said one local forex dealer.
-- Prague newsroom, 42-2-2423-0003 ($1=26.78 Czech Crown)
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The Czech Republic and Spain played out a scoreless draw in their World Cup group six qualifier on Wednesday, in a match that never lived up to expectations.
The Czechs were facing their first big test since they reached the Euro 96 final, while Real Madrid's teenage striker Raul was looking to spark a depleted Spanish attack in his first full international.
Both sides opened their World Cup campaigns last month with high-scoring victories over the two weakest teams in the group, Spain winning 6-2 in the Faroe Islands and the Czechs thrashing Malta 6-0.
But Yugoslavia have already collected three wins and Slovakia two against the same two hapless victims and neither team could afford to give ground in Prague.
Like two heavyweights feeling each other out in the early rounds, both teams started tentatively, waiting to pounce on the other's mistakes.
The Spaniard's were the first to flinch when Kaiserslautern striker Pavel Kuka's cross found an unmarked Karel Poborsky just outside the crease. But the Manchester United midfielder failed to control the ball, wasting what would turn out be one of the game's few good scoring chances.
Next it was the Czechs turn to falter. Newcastle United goalkeeper Pavel Srnicek, winning his first cap in over a year, tried to clear the ball, but hit attacker Alfonso Perez and watched helplessly as it rolled just wide of the net.
The Czechs picked up their play in the second half, putting Spain on their heels for the rest of the game.
"I don't think we lost points tonight because they are such an excellent team. They played strongly in the defence and its too bad we missed out on the two great chances we had," said Czech striker Patrik Berger.
Teams:
Czech Republic: 1-Pavel Srnicek, 2-Radoslav Latal, 3-Jan Suchoparek, 4-Pavel Nedved (15-Martin Frydek, 86th), 5-Miroslav Kadlec, 6-Michal Hornak, 7-Jiri Nemec, 8-Karel Poborsky (17-Vladimir Smicer, 58th), 9-Pavel Kuka, 10-Patrik Berger, 11-Radek Bejbl
Spain: 1-Andoni Zubizarreta, 2-Abelardo Fernandez, 3-Sergi Barjuan, 4-Rafael Alkorta, 5-Miguel Angel Nadal, 6-Fernando Hierro, 7-Raul Gonzalez, 8-Luis Enrique Martinez, 9-Guillermo Amor (18-Ismael Urzaiz, 76th), 10-Julen Guerrero (14-Josep Guardiola, 52nd), 11-Alfonso Perez (15-Roberto Rios, 73rd)
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It's a Snip, bidding to become the ninth horse to win two years in succession in the 106-year history of the Pardubice steeplechase, leads a British raid to this city east of Prague on Sunday.
Last year's winner, one of a trio of British horses expected for the controversial four-and-a-quarter mile event (6.9 km), has the considerable advantage from the saddle of Richard Dunwoody, one of the world's most accomplished jump jockeys.
The Pardubice, a unique test of man and horse, includes a series of demanding obstacles and has been compared to the Grand National at Aintree, a race Dunwoody has won twice.
Race organisers have made the course easier in recent years, including modifying the daunting Taxis jump with its tough, high, wide fence and deep ditch.
This and various other changes among the other 30 jumps followed massive protests and the embarassing 1993 outcome when only one horse managed to finish.
A total of 21 horses have died in the Pardubice over the years.
Rounding out the trio of British challengers looking to win part of the 2.5 million crown ($92,000) purse are Irish Stamp and Veleda II.
Irish Stamp, to be ridden by Norman Williamson, has a clear chance and is rated considerably higher in England than It's a Snip, although the latter's proven ability over the course will be a major factor.
Of the others, Polish-trained Scater is also expected to make a bold show.
Despite its long history, the Pardubice has only recently regained its former status.
"In the past everyone in Britain knew of the enormously difficult course but they didn't have much interest," said Nigel Miller, one of the organisers who has worked to bring the British contingent here.
"But this year, one of the biggest hits of the season is to come here for a two-day trip to one of the most historic races around."
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The Czech trade deficit jumped sharply in October, rising nearly 16 billion crowns, but analysts said they were not alarmed by the rise which is inline with their full year forecasts.
The Czech Statistical Bureau (CSU) said on Tuesday the trade gap for the first 10 months of the year hit a record 125.5 billion crowns, up from a revised 109.6 billion crown shortfall for January-September.
The CSU, the Ministry of Industry and Trade, and most analysts, however, have predicted the deficit -- accelerated by an economic slowdown with the country's main trading partner, Germany -- will finish at a record 150-160 billion crowns.
"The figures are developing according to forecasts. It's clear that the year-end deficit will be 150-160 billion crowns," said Kamil Janacek, chief economist at Komercni Banka.
"I'm not surprised by the jump since the economic revival of Germany will only show up in export growth in the first half of next year, not in one or two months," he added.
The CSU in a statement said that imports rose by 14.4 percent year-on-year for the 10-month period, down from 15.2 percent for January to September, while exports rose by 5.2 percent, down from 5.9 percent for the first nine months.
It added that strong growth in machinery and transport equipment imports continued, growing by 19.1 percent year- on-year and accounting for 38.3 percent of total imports.
Analysts said they were encouraged by the rise in this sector, saying that imports of this nature are needed to restructure industry, allowing it to produce more competitive goods for exporting.
"The trend seems unchanged. The financing of future economic growth is being done with imports, especially in the heavy machinery sector," Boris Gomez, an analyst at ING Barings told Reuters.
Added Martin Kupka of Patria Finance:"The country is still clamoring for machinery and raw materials which are necessary for industrial restructuring."
Prime Minister Vaclav Klaus, a monetarist-economist, has said the record trade deficit is "not tragic" saying it has come in part from a temporary foreign investment wave.
The Czech crown reacted indifferently to the trade figures, hovering around three percent above its dollar/mark basket parity, where it was for most of Monday.
The crown was trading at 26.919 to the dollar at 1230 local time (1130 GMT).
The rate implies a deviation from the midpoint of the currency basket of +3.09 percent, after the central bank's fixing on earlier on Tuesday at +3.00 percent.
"The market is neither alarmed nor pleased with the figure. If the deficit hits the forecast level, I doubt we will see any significant change in the currency's value," said one local forex dealer.
-- Prague newsroom, 42-2-2423-0003
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Third seed Boris Becker, fresh from his first title since injuring his wrist at Wimbledon, cruised to a 6-3 6-4 victory over Denmark's Frederik Fetterlein in the Czech Indoor Open on Wednesday.
Fifth seed Todd Martin also had an easy time in his second round match, downing Italian Cristiano Caratti 6-4 6-1, while eighth seeded Czech Bohdan Ulihrach was not as fortunate, falling 6-4 6-2 to Davis Cup team mate Jiri Novak.
A slightly tired-looking Becker, who won the CA Trophy in Vienna on Sunday, looked rusty at times, missing easy volleys. But his booming serve and crisp groundstrokes kept Fetterlein, ranked 129th in the world, permanently on the back foot.
"I have good days and bad days with my hand...it was sore in the match but I managed to fight through it and hopefully it will be alright tomorrow," said Becker who needed just over an hour to defeat his opponent.
The world number six tried to return to the circuit last month, but recurring problems with the ligament he tore in a third round match at Wimbledon forced him to retire from the first round in Bucharest, lose in the second round in Basle and withdraw from Lyon two weeks ago.
His return to form may be just enough to earn the 28-year-old a record 12th appearance at the ATP Tour Championships at the end of the year. Becker currently trails South African Wayne Ferreira, seeded second in Ostrava, by only 46 points for the eighth and final spot in Hanover.
Martin, ranked 11th in the world, also had little trouble disposing of Caratti, needing just 49 minutes for his straight sets win.
For Ulihrach, meeting a Davis Cup team mate for the second consecutive day proved too much, as he put up little resistance to Novak.
The previous day Ulihrach beat Daniel Vacek, ranked one spot below him at 36th, but could not recapture the service return which propelled him into the second round against Novak, ranked 40th.
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Wimbledon champion and fourth seed Richard Krajicek crashed out of the first round of the Czech Indoor Open on Tuesday, losing 6-4 6-3 to Germany's David Prinosil.
Second seed Wayne Ferreira of South Africa also had a rough ride but eventually overcame Italy's Renzo Furlan 7-5 4-6 6-3 while sixth seed Michael Stich of Germany cruised past Australian Sandon Stolle 7-6 6-2.
Krajicek, whose parents emigrated from then Czechoslovakia to the Netherlands when he was a child, struggled to bring his booming serve under control from the outset, failing to mount a sustained attack against Prinosil, ranked number 58 in the world.
"I'm not very happy with the way I played, and David returned my serve very well, and my second serve was off," said Krajicek who served up only seven aces and six double faults.
Former Wimbledon champion Michael Stich found the going much easier, taking a close first set before overpowering world number 71 Stolle in the second set.
After crashing out of the first round in each of his last two tournaments, world number seven Ferreira looked shaky at times, committing a rash of unforced errors that left the match even after two sets.
But another early exit for the South African would have seriously jeopardised his chances of qualifying for the ATP Tour World Championship in Hanover, Germany at the end of the year.
"It's always a tough match against Renzo, he has a game that is suited well against mine," said Ferreira, who currently holds the eighth and final spot for Hanover with Boris Becker, scheduled to play in Ostrava on Wednesday, just 46 points behind.
Fifth seed Todd Martin easily disposed of Slovakia's Jan Kroslak 6-3 6-4 and eighth seed Bohdan Ulihrach fought back in the last set to defeat his Czech Davis Cup team mate Daniel Vacek 6-2 3-6 7-5.
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Germany's David Prinosil, in a homecoming of sorts, overwhelmed Czech Petr Korda 6-1 6-2 in the final of the $475,000 Czech Indoor Open on Sunday.
The 23-year-old German, who was born near here in Olomouc and emigrated to Germany when he was 14, took control of the match from the beginning, keeping Korda off balance with his booming serve and crisp groundstrokes.
As was the case all week, Prinosil used his deft return of service as an offensive weapon, seizing on both break points he had to take the first set in just 22 minutes.
It was more of the same in the second set, with world number 49 Korda taking more chances, but failing to unsettle the German, who was playing in only his second final on the tour after he won in Newport last year.
Korda was on the verge of breaking Prinosil in the fourth game, but the world number 58 blasted four straight service winners to take the game, and then ripped two crosscourt forehands to break in the fifth and seventh games in a match that lasted just 50 minutes.
"If someone told me I wouldn't lose a set all week, I would have said they were crazy. I don't think I have ever played this well," said Prinosil, who enjoyed straight set victories over Wimbledon champion Richard Krajicek, American Todd Martin and Briton Tim Henman on his way to the final and a prize of $64,000.
Korda said: "I was a little drained from yesterday's match and he hit the ball well. The points were short, which gave me little chance to take control of the match."
Korda needed two hours late on Saturday to defeat Davis Cup team mate Martin Damm in three sets while Prinosil beat Henman in just 56 minutes.
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The party of right-wing Czech Prime Minister Vaclav Klaus took a solid lead in Senate election run-offs on Saturday, but turnout was dismal despite an appeal to vote from President Vaclav Havel.
With almost half the 81 constituencies declared, Klaus's Civic Democratic Party (ODS) had won 19 seats in the new upper house, ahead of the opposition Social Democrats with eight.
The Christian Democrats, a junior partner in Klaus's centre-right coalition, put in a strong perfomance to take seven while the third party in the government, the Civic Democratic Alliance (ODA) won two.
Turnout was just 30.5 percent, lower even than the 35 percent recorded in the first round of the Senate polls on November 15 and 16, the Central Election Commission said.
Before the second round, Havel appealed to Czechs to turn out in far greater numbers for the sake of the credibility of the new upper house.
The Senate elections had been billed as key to the future of Klaus's coalition, which lost its lower house majority in elections six months ago. But analysts say that with turnout so low, the Senate results have little significance.
Finance Minister Ivan Kocarnik, an ODS member, forecast that the government parties would take control of the Senate.
"It is clear that the coalition is leading at the moment and I think they still will be after the final results are out," Kocarnik told reporters, predicting that the ODS would win between 33 and 40 seats.
Analysts had forecast that voter apathy would benefit the ODS which is well-organised and well-funded by big business.
Its supporters, largely more affluent Czechs who have benefited from Klaus's free market reforms since the 1989 fall of communism, have been galvanised by the coalition's loss of its majority in the lower Chamber of Deputies in June.
Klaus, an architect of economic reform, repeatedly accused the Social Democrats of conspiring with the little-reformed communists to turn back the clock on reform.
Scepticism is widespread among Czechs and Klaus himself has questioned the need for the Senate, which was written into the Czech Republic's new constitution when Czechoslovakia split at the end of 1992, but is only now being elected.
The Social Democrats have said they would scrap the Senate if they ever achieved the three-fifths majority in the lower Chamber of Deputies needed to change the constitution.
Klaus toned down his scepticism as voting neared but only Havel has appeared enthusiastic about the idea.
Before the run-offs -- for the top two first round candidates in constituencies where no one won more than half the vote -- Havel appealed to citizens to turn out in much greater numbers for the sake of the Senate's legitimacy.
-- Prague newsroom (42 2) 24 23 0003
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The Prague Stock Exchange on Tuesday, buoyed by financial sector share gains, continued to rebounds from its recent slump, closing higher for the third consecutive session.
Komercni Banka, IPB, Ceska Sporitelna and Zivnostenska Banka all gained ground as the PX50 index edged up 2.5 points, or 0.47 percent, to 537.1.
The Reuters RPIX index, measuring the seven continuously- traded equity issues on the bourse, climbed five points to 1,095.
Overall, 188 shares rose on the day, while 121 lost and 74 held steady. Total volume was 701,356 shares on turnover of 721.14 million crowns.
For IPB, which rose 15 crowns to 331, it was the second consecutive five percent gain, the maximum allowed by the bourse in a session, after the government said it would be the first of the big four banks to undergo privatisation.
On Friday, Finance Minister Ivan Kocarnik gave investors the signal they had been looking for when he said that a strong foreign strategic partner would be the most likely beneficiary of any sell off.
Since the announcement, Nomura and ING Bank have been rumoured as the frontrunners in any bid to participate in the selloff. The government holds about a 30 percent stake in IPB.
"If you were to bring in a foreign partner such as the caliber of the two banks mentioned, that addresses questions that have been hovering around IPB on its perceived lack of corporate structure and transparency," said Jay King of Wood and Company.
The bank has been widely-criticsed for being the least transparent of the four major Czech banks in its dealings, especially a recent spending spree that has seen it quietly buy large stakes in several firms.
Several utilities also fared well at the fixing, with Stredoceska Energetika, Prazska Teplarenska, Severomoravksa Energetika, Jihomoravska Energetika and Elektrarny Opatovice all rising.
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A Czech central bank scheme to buy doubtful debts of smaller banks and restore stability to the banking sector has attracted interest from about 10 banks, the Czech news agency reported on Wednesday.
CTK, quoting central bank spokesman Martin Svehla, said that of the 13 banks allowed to participate in the plan, the number that had expressed an interest in joining "is nearing 10".
Central bank officials were not immediately available for comment.
The Czech National Bank (CNB) outlined the programme in mid-October followed the failure of Kreditni Banka in August -- the 11th bank in which the CNB had intervened -- and the politicisation of the case which had undermined confidence especially in small banks.
Under the plan, participating banks must follow strict conditions and allow the central bank to make management changes where needed. CNB officials said the programme was not aimed at resolving a problem at any one bank.
The plan will be open to all small private banks with total paid-in capital of 12.5 billion crowns ($458.5 million) and total assets of not more than 30 billion crowns.
The state-run Konsolidacni Banka would buy the banks' doubtful assets at face value.
The banks will be required to buy back the assets after around five to seven years, again priced at their nominal value, minus credits recovered by Konsolidacni from the debtors in the meantime.
Banks seeking to participate will be held to strict requirements which include sticking to a three-year stabilisation plan and an agreement to attain an eight percent capital adequacy ratio.
Banks also must maintain cost controls, profitability and liquidity as well as agreeing to frequent reviews by the central bank.
The maximum purchase of debt by Konsolidacni can total up to 110 percent of a single bank's paid-in capital, meaning a maximum exposure for the state of 13.7 billion crowns in total if all eligible banks participated.
The programme is voluntary based on a contract with the CNB, and the central bank said it would not reveal which banks elected to participate.
Banks eligible include Ekoagrobanka, Union Banka, Evrobanka, Prvni Mestska Banka, COOP Banka, Pragobanka, Plzenska Banka, Foresbank, Bankovni Dum Skala, Moravia Banka, Universal Banka, Zemska Banka, and Banka Hana.
Money for the scheme is to come primarily from state- controlled Konsolidacni Banka and if necessary from the CNB itself. A newly created unit of Konsolidacni, Ceska Financni s.r.o., will administer the programme.
Any losses from the programme are to be covered by the National Property Fund (NPF), the state privatisation agency.
-- Prague Newsroom, 42-2-2423-0003
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Boris Becker withdrew from the Czech Indoor Open on Thursday because of a recurring wrist injury, while top seed Goran Ivanisevic crashed out to Czech Petr Korda 7-6 6-2.
Becker, who tore a ligament in his right wrist at the Wimbledon championships this year, was in pain after training and dropped out of his scheduled second round match against Czech Martin Damm.
"Boris said his wrist was too sore and that he would not be able to play this evening," ATP Tour Supervisor Gayle Bradshaw said.
On Wednesday Becker had held his wrist several times during his 6-3 6-4 victory over Denmark's Frederik Fetterlein.
The world number six tried to return to the circuit last month but the injury forced him to retire from the first round in Bucharest, lose in the second round in Basle and withdraw from Lyon two weeks ago.
Becker's absence has set back his bid for a record 12th appearance at the season-ending ATP Tour championship. He currently trails South African Wayne Ferreira for the eighth and final spot.
Ivanisevic, who has already qualified for the tour finale, lives and dies by the serve.
But he was outgunned by Korda who served 10 aces and only one double fault, while Ivanisevic managed only nine aces along with five double faults.
"He surprised me the way he played, he served well and returned very well. I double-faulted at 5-5 in the tie break which hurt," said Ivanisevic.
"I didn't return well, I didn't take any chances on his second serve. I didn't know whether to stay back or come in and when you're not sure what to do then it's no good."
Second seed Ferreira scraped through to the quarter-finals with a 7-6 5-7 7-5 victory over Dutch qualifier Joost Winnink.
Ferreira, ranked seventh in the world, was stretched to the limit by Winnink. Their absorbing baseline battle ended in the 12th game of the deciding set when Winnink's backhand let him down on three successive occasions.
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The Czech September trade deficit should hold steady at around 14 billion crowns after a 14.7 billion crown monthly deficit in August, a Reuters poll of Czech economists showed on Wednesday.
Czech trade figures for the first nine months are scheduled to be released by the Czech Statistical Bureau (CSU) at 0900 local time (0700 GMT) on Thursday.
Most economists surveyed said they expect steady growth in the deficit and few surprises.
"It's still too early to talk about a period of stabilisation in the deficit, I think that will come in 1997 when imports level off and exports strengthen," Boris Gomez, an analyst at ING Barings told Reuters.
Whatever the deficit in September, the nine-month trade gap is sure to be a record, after the January-August figure reached 100.9 billion crowns, more than all of the 1995's total shortfall of 95.7 billion crowns.
The January-September 1995 trade deficit was 62.3 billion crowns.
Most analysts agreed a 13-15 September gap would be in-line with prevailing trends, and on target for the estimated deficit of 150-160 billion crowns.
The foreign exchange and money markets are expected to show little reaction over the figures, as long as they do not vary greatly from the estimates.
Analysts say the trade balance has been hurt by a downturn in the economies of western Europe earlier in the year, and a the effects of a recovery of demand in western Europe have yet to make an impact.
CSU figures show import growth was exceeding export growth by about 15 percent versus just over two percent over the last three months.
The government and central bank, however, has repeatedly ruled out a devaluation of the crown to boost exports.
Analysts point to mid-1997 as a crucial time in which the import wave -- which is aimed at modernising industries -- must show results in productivity growth and competitiveness.
Economists said the deficit could be financed this year, but might pose problems in the second half of 1997.
-- Prague Newsroom, 42-2-2423-0003
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Second seed Wayne Ferreira and fifth seed Todd Martin both went down to straight set defeats in the $475,000 Czech Indoor Open quarterfinals on Friday.
In the day's opening match, Ferreira lost 6-4 6-3 to Britain's Tim Henman, seeded seventh in the tournament, while Martin was edged out by Germany's David Prinosil 7-6 7-6.
Ferreira, ranked seventh in the world, never looked comfortable against Henman, who was the aggressor for most of the match.
The 22 year-old Brit avenged his loss to Ferreira in the round of 16 in Toronto earlier this year, and said he took notes from that match onto the court on Friday.
Henman managed to break Ferreira late in both sets, while the South African failed to gain a single break point in the macth.
"In Toronto Ferreira was dictating the points, serving very well and hitting forehands very well so today I tried to be very aggressive and when I had an opportunity, move forward," said Henman, ranked 26th in the world.
For Martin, the loss was especially painful since he could have gained valuable ground on Ferreira in the race for the final spot at the ATP Tour Championships in Hannover at the end of the season.
The American currently sits 199 points behind the South African, and a semifinal berth would have eaten 37 points out of the lead, while a place in the finals would have cut Ferreira's advantage by almost half.
Prinosil, ranked 58th in the world, took advantage of a Martin double fault at 5-5 in the first set tiebreak, and then jumped out to a 4-0 lead in the second set tiebreak, a hole the American could not pull himself out of.
"I realise I didn't help my cause by at all, but we've got two of the biggest tournaments coming up and I think whoever does really well in those events should probably play themselves into a position at Hannover," Martin said.
Martin was helped this week by Boris Becker's recurring wrist injury which forced him out of the Ostrava tournament after the first round.
All three players will compete next week at Stutgart, where the winner will receive 370 tour points, more than double the 170 points to be awarded to the winner at Ostrava.
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Third seed Boris Becker on Thursday withdrew from the $475,000 Czech Indoor Open due to a recurring injury to his right wrist.
Becker, who tore a ligament in the wrist during a third round match at this year's Wimbledon, trained on Thursday morning, but afterward complained of pain in his wrist.
He later told ATP officials that he would not play his second round match against Czech Martin Damm later on Thursday.
"Boris said his wrist was too sore and that he would not be able to play this evening," ATP Tour Supervisor Gayle Bradshaw told Reuters. He did not elaborate.
On Wednesday evening, Becker cruised to an easy 6-3 6-4 victory over Denmark's Frederik Fetterlein.
During the match he held his wrist several times, and appeared to be favouring it again at practice on Thursday morning. Becker immediately left the training court for his hotel. He was not available for comment
"I have good days and bad days with my hand...it was sore in the match but I managed to fight through it and hopefully it will be alright tomorrow," Becker said after the match on Wednesday.
The world number six tried to return to the circuit last month, but recurring problems with the wrist forced him to retire from the first round in Bucharest, lose in the second round in Basle and withdraw from Lyon two weeks ago.
Becker's withdrawal puts a serious dent in the 28 year old's plans to qualify for a record 12th appearance at the ATP Tour Championships at the end of the year. He currently trails South African Wayne Ferreira, seeded second in Ostrava, by only 46 points for the eighth and final spot in Hannover.
It also comes as a blow to tournament organisers. Though he was only ranked third in the tournament behind top seed Goran Ivanisevic and Ferreira, it was clear most of the tickets sold were by fans hoping to catch a glimpse of the German.
Barely 1,000 fans came out to watch Ivanisevic's first round match against world number 42 Adrian Voinea. In contrast, a tournament record crowd of some 10,000 watched Becker defeat the Fetterlien, ranked 156 in the world.
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Investors, fed up with a lack of transparency and the poor performance of the Czech equity market, are turning to the country's less opaque debt market, buoyed by favourable interest rates and economic data.
The Prague bourse has been caught in a downward spiral -- the official PX50 index has lost almost 18 percent in the past two months -- that analysts say won't end before the New Year.
But while bears maul the equities market, they say bulls are quietly finding greener pastures in Czech debt.
"The bond market is pretty bullish and the outlook is good. Rates have been tending down and people are positive especially in the longer maturities which are looking more attractive," said Michael Gartner, a debt analyst at ING Capital Markets.
Estimated daily bond turnover has grown to 900 million to one billion crowns, equal to turnover on the Prague stock exchange, from 500 million a year ago.
"The bond market is becoming even more important for foreign investors because they can get reasonable prices," said Alojz Lacko, a bond trader at Patria Finance.
Reasonable prices are something investors, foreign and domestic, have long complained they cannot find on the equities market where insufficient legislation has pushed an estimated 70 percent of trading into murky off-market dealing, and trampled minority shareholder rights.
Many strategic and speculative investors have taken advantage of the opaque system to buy up large stakes in firms without prices or counter-parties being made public until long after the deal has been made.
Bourse and Finance Ministry officials have stepped up their campaign in recent months to assure investors tighter, more stringent rules for trading will be introduced. But analysts say the moves appear to be too little, too late for investors who are turning away from Czech equities.
"Investors are really put off by the (trading) practices here and frankly, it will be hard to lure some back. But we don't have these problems in the debt market, and a lot are turning their attentions there," said one local trader.
ING's Gartner said investor motivation for entering the debt market is in many ways different from equity investments. Investor fears of having the carpet pulled out from under them by an off-market takeover deal are non-existent.
"The bond market is completely transparent because prices are transparent. It's a good market: it works, it's liquid, foreign investors, domestic investors, pension funds, investment funds all participate on an even field," he said.
A recent spate of positive economic indicators has further buoyed the market.
Inflation, one of the lowest in the region, eased further in October with the year-on-year rate standing at 8.7 percent.
The central bank's war on a burgeoning money supply has also borne fruit recently, with the expansion of the key M2 year-on-year rate falling to 13.2 percent at the end of August, just below its 14-17 percent target.
Although investor sentiment has traditionally been bearish on East European bonds because of currency risks, high taxation and political and economic instability, analysts say these factors are less significant in the Czech Republic.
While rates may be higher in neghbouring Poland and Hungary, the markets are very illiquid, especially in local currency corporate issues.
But with the strength and stability of the crown the Czech market is attractive because an investor can add a play on the local currency, and have little fear of currency risk since it is tied closely to the mark.
Traders say the government has also helped by easing currency exchange laws to help foreign investors repatriate their holdings. Foreigners may repatriate interest income on bonds as well as income from selling or redeeming them.
-- Prague newsroom (42 2) 24 23 0003
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Markets across Eastern Europe remained mired in an autumn slump this week, with analysts seeing little on the horizon to break the bearish trend.
Stock exchanges in Bratislava, Bucharest, and Zagreb all lost ground on the week, while Prague and Warsaw held steady. Budapest and Ljubljana bucked the trend, rising slightly, although it appeared neither would see a sustained upturn in the near future.
PRAGUE
Not even a strong showing by the centre-right governing coalition in Senate elections at the weekend could break the Prague Stock Exchange out of its current malaise, as the PX50 index inched up 0.3 points on the week to close at 510.4.
Analysts said that while the coalition of Prime Minister Vaclav Klaus may feel heartened by the showing which gave him a majority to the Czech upper house, which will have little power, investors remain put off by poor market regulation.
"I'm a little sceptical about the possibility that the Senate will help bring changes to the market," said Pavel Sobisek of Zivnostenska Banka.
"I think there will be a lot of pressure from market participants on the government to do something...but I have not seen any signs of a change in attitude of the coalition with respect to this topic."
Investors have long complained that market regulation and legislation in the Czech Republic is weak, providing little protection for minority shareholders.
WARSAW
The Warsaw Stock Exchange stayed virtually flat this week and analysts said it could extend its three-and-a-half-week horizontal trend next week as no fresh signals were in sight.
"We are still in a horizontal trend and...I see no factors which could help create a clear direction for the market," said Mateusz Andrzejewski, an analyst at Pekao SA brokerage.
But other analysts saw the generally positive economic climate as an impulse strong enough to help the bourse climb next week above 14,000 points.
Analysts said the central bank deputy head's Tuesday comment on a possible rise in interest rates next year was bringing some uncertainty to the bourse but was unlikely to signficantly hurt prices.
BUDAPEST
Hungarian shares started off the weekend strongly, boosted by a government decision to hike energy prices, but they ran out of steam by the middle of the week.
Oil and gas company MOL led the charge, but dealers said its weakening on Thursday could be a harbinger.
"MOL turned around today (on Thursday), that is a warning sign," said New York Broker's Kalman Schuszter. "Sellers are stronger now." The BUX index closed on Friday at 3,700.99, up 2.12 percent from Monday's open.
BRATISLAVA
Slovak share prices continued their freefall on the Bratislava Stock Exchange which has lost about 25 percent since the end of August.
The 12-share SAX index fell 10.33 points on the week to close at 163.98 on Friday.
Dealers said the silver lining to the bourse's woes may be that prices are becoming so cheap that foreign investors will soon be lured back.
BUCHAREST
Scant demand kept volumes modest at both weekly sessions in Bucharest, with turnover low and most prices edging down or staying flat.
The unofficial VAB index inched down from the previous session by 1.1 percent to 294.2 points, while the BIG index eased 1.07 percent to 293.41.
Fertiliser maker Azomures SA dominated trading, while newcomer, an oilfield equipment maker, put on a poor show.
ZAGREB
Croatian stocks were mostly lower in dwindling trade and analysts said they could see no end to the bearish period as big buyers continue to shy away from the market because of political developments.
Croatia has been shaken by a wave of strikes, and last week Zagreb saw its biggest protest in years.
LJUBLJANA
Political concerns were also apparent in Ljubljana this week, with investors waiting for a new prime minister to be named, probably in the second half of December.
"The market will be uneasy until it is clear who will form the new government," one trader said.
Still, the SBI index rallied on Friday to close at 1,160.1, up 0.7 percent on the week.
Although the Liberal Democrats of current Prime Minister Janez Drnovsek were the strongest single party in the general election, winning 25 out of 90 parliamentary seats, they are facing a loose alliance of rightist "Spring" parties, who got 45 seats.
CLOSE WEEK'S CHANGE 1996/HIGH 1996/LOW
NOV 29 NET PCT
CESI 1,395.46 -6.36 -0.45 1,544.70 959.24
BUDAPEST 3,700.99 +76.89 +2.12 3,728.58 1,557.91
PRAGUE 510.4 +0.3 +0.01 582.0 425.9
WARSAW 13,789.9 +119.4 +0.9 15,078.7 7,725.2
BRATISLAVA 163.98 -10.33 -5.93 226.34 150.4
VAB-Index 294.2 -4.83 -1.6 879.29 285.3
BIG-Index 293.41 -4.96 -1.6 820.9 284.29
LJUBLJANA 1,160.1 +7.91 +0.7 1,589.18 891.93
All-time highs: CESI 1,544.70 (Sept 2/1996); WIG 20,760.3 (March 8, 1994); SBI 1,598.02 (June 28/1994); PX50 1,002.4 (April 7/1994); BUX 3,728.58 (Oct 17/1996); SAX 402.3 (Feb/1994). ($=3,570 lei)
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A strong showing in runoff Senate elections at the weekend may breathe new life into the Czech governing coalition, but it will do little to resuscitate the country's dormant capital market, analysts said on Sunday.
The minority coalition of Prime Minister Vaclav Klaus took 52 of 81 seats in the newly-created upper house of parliament, following the second round of voting, well ahead of the centre-left opposition Social Democrats which took 25 seats.
The Senate is a mostly advisory body with limited legislative powers, but the election was the first test at the polls for Klaus since his coalition lost its lower house majority in general elections in June.
But analysts said that while the news could have been worse for investors, the strong centre-right showing does nothing to solve the maladies which continue to plague the market.
"I think the market's reaction will be fairly positive, but in a few weeks time it will probably have settled down into acknowledging that this has not changed the situation of the past four or five months at all," Charles Robinson of the research house HILFE told Reuters.
"It has just not made it worse," he added.
The coalition's strong showing in the first round of voting last week helped spur domestic investor interest, pushing the market up in its wake.
Analysts said, however, that with this fillip already built into prices, stocks will probably not rise too much further in the near future.
The Czech crown also gained some ground against its dollar/mark basket on the back of the first round results, but it too should not rise significantly on the final outcome of the vote, they added.
"It seems that the final results of the elections reflect the current structure of the political situation here so I don't expect any significant changes or amy development as a result of it," said Miroslav Nosal of Patria Finance.
Analysts said that until legislation is tightened to bring about more market transparency and stronger minority shareholder protection, key foreign investor interest will remain low.
"I think there has been a result built into the market from the good Senate results last week, and everyone expected that the coalition would win this second round," said one analyst.
"There are still other difficulties that will keep the market relatively depressed such as a lack of regulation that will keep foreign investors away. This is a more important issue over the medium-term than the Senate elections."
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Czech equity and forex markets pushed higher on Monday, buoyed by a strong showing by Prime Minister Vaclav Klaus's rightwing Civic Democratic Party (ODS) in the first round of Senate elections at the weekend.
But analysts warned profit taking and uncertainty leading up to a second round of voting this weekend will temper gains.
The Prague Stock Exchange, mired in a two-month long slump that has felled the bourse by some 16 percent, jumped 10.1 points, or 2.08 percent, at its daily price fixing to 496.8.
Brokers expressed muted optimism at the prospect that the rise was long-term, saying that domestic investors looking for a quick rise to profit from, and not key foreign investors were at the heart of the gain.
"There is very little foreign institutional buying as a result of the elections. It's mainly domestic buying. This was just the first round and the (vote) isn't won yet," said Jan Sykora of the brokerage Wood and Co.
Lubomir Vystavel of ING Barings added: "We had expected some speculation on the outcome of the elections.
Vystavel said the upsurge could continue into next week and beyond if ODS sustains its strong position in the second and final round next weekend, adding that the results may give cause for the long awaited rebound in Czech equities. "It is quite likely that this is the start of a trend," he said.
The crown also strengthened on the back of the election result, gaining around 0.3 percentage points to three percent above its dollar/mark basket in early trading, before settling at around +2.9 percent.
"Some of those who pushed the crown up in early dealing took profits, so its dropped slightly on the index," said Petr Korous, a trader at Ceskoslovenska Obchodni Banka.
"There will be some bias toward a stronger crown in the coming days but I don't think there will be any major move -- the majority of the move was seen already today," he added.
The central bank fixed the crown at 2.96 percent above the basket midpoint on Monday, after fixing it at +2.45 percent on Friday.
In what was billed as a key test of the minority coalition government, Klaus's ODS party took a commanding 36.47 percent of the first round vote, with the opposition Social Democrats (CSSD) trailing on 20.27 percent.
The result was a major improvement for the ODS, which won only 29.6 percent in elections to the lower house in June when a strong Social Democrat performance of 26.4 percent stripped Klaus's three-party coalition of its majority.
The rest of the vote was thinly split among coalition parties and the Communists.
The strong ODS showing was tempered though by poor turnout as only 35 percent of the electorate voted.
Of the 81 Senate seats, Civic Democrats won three outright in the first round and 76 of their candidates go into next weekend's runoff.
The CSSD meanwhile, will send only 48 candidates into the second round of voting slated for Friday afternoon and Saturday morning.
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Britain's Tim Henman emerged on Friday as the only seed in the $475,000 Czech Indoor Open semifinals.
Seventh-ranked Henman overcame second seed Wayne Ferreira 6-4 6-3.
But fifth seed Todd Martin was edged out by Germany's David Prinosil 7-6 7-6 and sixth seed Michael Stich lost to Czech Martin Damm 5-7 6-4 6-4.
Czech Petr Korda completed the final four with his 6-1 6-0 demolition of Davis Cup team mate Jiri Novak and now faces another Davis Cup player in Damm. Henman plays Prinosil in Saturday's other semifinal.
Reigning Ostrava champion Ferreira, ranked seventh in the world, never looked comfortable against Henman, the more aggressive of the two for most of the match.
He failed to gain a single break point all match while the Briton broke serve late in both sets.
Henman's win avenged his loss to the South African in Toronto earlier this year, and he said he had taken notes from that match on to court on Friday.
"In Toronto, Ferreira was dictating the points -- serving very well and hitting forehands very well -- so today I tried to be very aggressive and, when I had an opportunity, move forward," said Henman, ranked 26 in the world.
Local favourite Damm, a finalist at the Beijing Open last week, spoiled Stich's 28th birthday. After losing the first set the Czech scored crucial breaks in the ninth game of the final two sets.
For Martin, defeat was especially painful as he could have gained valuable ground on Ferreira in the race for the final spot at the ATP Tour championship in Hanover at the end of the season.
The American currently sits 199 points behind the South African. A semifinal berth would have eaten 37 points out of that lead while a place in the finals would have almost halved Ferreira's advantage.
Prinosil, ranked 58th in the world, profited from a Martin double fault at 5-5 in the first set tiebreak and took a 4-0 lead in the second set tiebreak on the way to sealing victory.
Martin said: "I realise I didn't help my cause at all but we've got two of the biggest tournaments coming up and I think whoever does really well in those events should probably play themselves into a position at Hanover."
Martin, Stich and Ferreira both appear next week in Stuttgart, where the winner gains 370 Tour points, 200 more than the winner here.
The German tournament's organisers said on Friday they expect Boris Becker will be fit to play, despite a wrist injury which forced him to retire here.
In a move to accommodate Becker, his first round match has been put back to Wednesday.
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The Czech monthly trade deficit eased in September to 10.5 billion crowns from 14.5 billion in August, buoying market sentiment which had not expected the lowest single month total since January.
The Czech Statistical Bureau (CSU) on Thursday said the January-September trade shortfall hit an all-time high of 110.7 billion crowns, far surpassing 1995's full year deficit of 95.7 billion crowns.
Despite the fact that the overall deficit continues to break records, analysts said they were surprised by September's development. A Reuters survey of local analysts conducted on Wednesday had forecast a 13-15 billion crown monthly trade gap.
"I'm happily surprised. I think it's a relatively optimistic figure though it is not so good to make us revise our full year forecast," said Martin Kupka, an economist at Patria Finance, which has forecast a 150-160 billion crown deficit at year-end.
The CSU in a statement said that imports rose by 15.2 percent year-on-year, the same as in the previous month, while exports rose by 5.9 percent, after a 6.4 percent increase in August.
It added that strong growth in machinery and transport equipment imports continued, accounting for 38.3 percent of total imports.
Analysts said they were encouraged by the rise in this sector, saying that imports of this nature are needed to restructure industry, allowing it to produce more competitive goods for exporting.
The crown also reacted positively, dipping slightly following the release of the figures, before quickly regaining its losses as the market digested the statistics.
The crown was trading at 26.939 to the dollar at 1040 local time (0840 GMT) after opening at 26.945.
The rate implies a deviation from the midpoint of the currency basket of +2.87 percent, after the central bank's fixing on Wednesday at +2.80 percent.
"The market is pleased with the figures for sure, they seem to bear out estimates that slowly, the structure and size of the deficit is getting better," said one local forex dealer.
But, he added: "I don't think the crown itself will benefit too much from the numbers, but it certainly should not weaken."
-- Prague Newsroom, 42-2-2423-0003
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It may be only the second qualifier on the long road leading to the 1998 World Cup but the Czech Republic and Spain are approaching Wednesday night's European group six match as though it were a battle for the final.
For the Czechs it will be the first big test since they reached the Euro 96 final, while Spain are expected to give Real Madrid's teenage striker Raul Gonzalez his first cap in the hope that he will give them badly-needed scoring power.
Both sides opened their campaigns last month with high-scoring victories over the two weakest teams in the group, Spain winning 6-2 in the Faroe Islands and the Czechs thrashing Malta 6-0.
But Yugoslavia have already collected three wins and Slovakia two against the same two hapless victims and neither the Czechs nor Spain can afford to give ground in Prague.
"(The Spanish) are explosive and technically very sound. This game's made all the more important because a loss will make it a difficult trip for either side," Czech midfielder Karel Poborsky of English premier league Manchester United said.
Victory alone will satisfy Spain's veteran goalkeeper Andoni Zubizarreta. "I would not be happy with a draw, we want three points," he said.
Czech coach Dusan Uhrin has named 16 of the 19-strong squad which caused a surprise by reaching the final of June's European championship in which they lost to Germany.
They include in-form midfielder Patrik Berger, who scored six goals in 10 days for English premier league Liverpool last month.
"Spain is obviously a strong team but we showed in London that we can play anybody," Berger said.
While the Czechs are looking to build on recent success, Spain are rebuilding and plugging holes where necessary.
Raul, 19, who scored twice against the Czechs in the quarter-finals of last season's European under-21 competition, is Real Madrid's top scorer even after being moved into a supporting role by new coach Fabio Capello.
"There are some players absent...It's the right moment to pick Raul," Spain manager Javier Clemente said.
Clemente had been strongly criticised for sticking by veteran forward Julio Salinas instead of choosing Raul.
Neither Salinas nor injured striker Kiko Narvaez are on the trip but Kiko's Atletico Madrid team mate Jose Luis Caminero is fit and is expected to be given the role of playmaker in the starting line-up.
With Spain likely to face problems in the air, tall defender Roberto Rios and striker Ismael Urzaiz have been called into the squad for the first time.
Of the seven players chosen from the multi-billion peseta Barcelona line-up, midfielder Guillermo Amor, defender Abelardo Fernandez and striker Juan Pizzi have not played regularly this season under new coach Bobby Robson, a former England manager.
By contrast utility man Luis Enrique Martinez has blossomed since moving to Barcelona from Real Madrid.
Teams (from):
Czech Republic - Petr Kouba, Pavel Srnicek; Miroslav Kadlec, Lubos Kubik, Tomas Repka, Michal Hornak, Jan Suchoparek; Radoslav Latal, Jiri Nemec, Karel Poborsky, Pavel Nedved, Patrik Berger, Radek Bejbl, Pavel Novotny, Martin Frydek, Richard Dostalek; Pavel Kuka, Vladimir Smicer, Radovan Hromadko.
Spain - Andoni Zubizarreta, Santiago Canizares; Roberto Rios, Alberto Belsue, Rafael Alkorta, Fernando Hierro, Miguel Angel Nadal, Agustin Aranzabal, Sergi Barjuan, Abelardo Fernandez; Guillermo Amor, Josep Guardiola, Luis Enrique Martinez, Julen Guerrero, Jose Luis Caminero, Juan Pizzi, Raul Gonzalez, Alfonso Perez, Ismael Urzaiz.
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The Prague Stock Exchange on Tuesday, buoyed by financial sector share gains, continued to rebound from its recent slump, closing higher for the third consecutive session.
Komercni Banka, IPB, Ceska Sporitelna and Zivnostenska Banka all gained ground as the PX50 index edged up 2.5 points, or 0.47 percent, to 537.1.
The Reuters RPIX index, measuring the seven continuously- traded equity issues on the bourse, climbed five points to 1,095.
Overall, 188 shares rose on the day, while 121 lost and 74 held steady. Total volume was 701,356 shares on turnover of 721.14 million crowns.
For IPB, which rose 15 crowns to 331, it was the second consecutive five percent gain, the maximum allowed by the bourse in a session, after the government said it would be the first of the big four banks to undergo privatisation.
On Friday, Finance Minister Ivan Kocarnik gave investors the signal they had been looking for when he said that a strong foreign strategic partner would be the most likely beneficiary of any sell off.
Since the announcement, Nomura and ING Bank have been rumoured as the frontrunners in any bid to participate in the selloff. The government holds about a 30 percent stake in IPB.
"If you were to bring in a foreign partner such as the caliber of the two banks mentioned, that addresses questions that have been hovering around IPB on its perceived lack of corporate structure and transparency," said Jay King of Wood and Company.
The bank has been widely-criticsed for being the least transparent of the four major Czech banks in its dealings, especially a recent spending spree that has seen it quietly buy large stakes in several firms.
Several utilities also fared well at the fixing, with Stredoceska Energetika, Prazska Teplarenska, Severomoravksa Energetika, Jihomoravska Energetika and Elektrarny Opatovice all rising.
-- Prague Newsroom, 42-2-2423-0003
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Senate runoff elections on Friday and Saturday should have little impact on Czech capital markets, as investors focus on macroeconomic fundamentals rather than political influences.
Analysts said last weekend's first round of voting gave a mild boost to the Czech crown and the Prague Stock Exchange, and unless results from the second round of voting on Friday and Saturday vary greatly, little further movement should be seen.
"Provided that nothing drastic happens, it's pretty much a non-starter from a foreign investor point of view. I think that for the markets, it will be pretty much a non-event," Jay King, of Wood and Company, said on Thursday.
In last weekend's voting, Prime Minister Vaclav Klaus's right-wing Civic Democratic Party (ODS) posted a strong result, capturing over 36.5 percent of the national vote, an increase of some six percent from June lower house elections where his coalition lost its majority.
The opposition Social Democrats (CSSD) were second with 20.3 percent. The rest of the vote was thinly split among coalition parties and the Communists.
Only 35 percent of the electorate voted in the elections.
Of the 81 Senate seats, the ODS won three outright in the first round and 76 of their candidates were to go into the runoff, compared with 48 for the CSSD. In 47 constituencies, the runoff is a straight fight between the two main parties.
Analysts said that with the two main parties assured of dominating the Senate, a body which will have limited powers anyway, little change appears imminent for the country's economic, or political course.
"Our expectation is ODS gaining somewhere around half of the total, and including the rest of the coalition it might be well over 50 seats. I don't think there should be any surprises," said Radek Maly, an economist at Citibank Prague.
Following last weekend's vote, the PSE, mired in a two month long slump began to edge higher, gaining some four percent over the week.
But dealers said the gains were based more on weak local buying than a change in sentiment from key foreign investors.
The crown too, ratcheted up slightly after the first round of voting, but has since steadied at 2.9 percent stronger than its dollar/mark basket midpoint.
Some analysts said foreign investors might be tempted, as they were the previous week, to play on a strong Klaus victory early on Monday, but any gain based on the political situation would be short lived.
"There may be some bias toward a stronger Czech crown," said Petr Korous, a dealer at Ceskoslovenska Obchodni Banka. "There's no other factor, more or less the basic impulse for that (a stronger crown) was really because of the elections, and then the subsequent recovery of the capital markets."
Citibank's Maly added: "I wouldn't foresee any major changes in the fixed income market. The fixed income market is rather less sensitive to these political events than is the FX (foreign exchange) market."
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Czechs cold-shouldered their newly-created Senate on Saturday, turning out in record low numbers for elections which were supposed to be a key test for the minority government of Prime Minister Vaclav Klaus.
Early results showed candidates of Klaus's Civic Democratic Party (ODS) ahead in the few constituencies declared so far but without the majority of the vote needed to win outright, meaning they will face the runner-up in a second round.
Foreign Minister Josef Zieleniec, an ODS vice chairman, welcomed the results but warned supporters against overconfidence. "I'm very happy that several of our candidates have moved into the next round," he told reporters.
But he added: "I warn you, add up all the votes for all of the candidates and think how they will go in the second round. The situation is not as rosy as it may appear from the numbers of ODS candidates that are moving into the next round."
With three of the 81 constitunecies officially declared, the striking statistic was the turnout figure which ranged from 26.36 percent in the northern mining town of Most to 29.78 in one constituency in the industrial city of Ostrava.
One official of the Central Electoral Commission, Ales Kaspar, forecast that turnout nationwide would be by far the lowest in the four parliamentary elections held since the 1989 fall of communism. "According to optimistic expectations, the turnout could be between 30 and 40 percent," he told Reuters.
This suggested the real winners might not be ODS or the opposition Social Democrats, but the far-right Republicans who boycotted the Senate polls and told Czechs to follow suit.
Opposition Social Democrat leader Milos Zeman bewailed Czechs' apathy towards the upper house, but predicted turnout would improve in the second round on November 22-23.
"I would like to remind all voters who criticise our country that by not voting they do not have the right to criticise the government. They have only the right to criticise themselves," said Zeman, who is speaker of the lower house.
But he added: "I firmly believe that in the second round, participation will be markedly higher because then it is a choice between the two strongest candidates," he said.
Share dealers welcomed signs that ODS, which has led free-market reform in recent years, would do well.
"The early results appear pleasantly good for ODS. To me, if these continue, it could be a good result for the market," said Jan Sykora of Prgaue brokerage Wood and Co.
Pundits have billed the Senate elections as an indicator of whether the Czech Republic can break out of a political impasse following inconclusive lower house polls which stripped Klaus's conservative coalition of its majority last June.
But the apparent low turnout, which compares with 76.4 percent in June, seems a vindication of the Republicans and their leader Miroslav Sladek.
Sladek regards the Senate as a waste of time and money. "They had nowhere to dump the political zombies so they established the Senate," he told a recent anti-election rally, adding that it "would be lazy, useless and expensive".
One complaint among voters was that many of the Senate candidates were unknown as government and opposition leaders all sit in the lower Chamber of Deputies. Few Czechs have much idea of what the Senate will do.
Conventional wisdom has been that if ODS did well in the Senate Klaus might provoke early lower house polls to regain the coalition's majority. If ODS lost to the Social Democrats, however, he could be forced to resign after seven years leading economic reform as finance minister and since 1992 as premier.
But Jiri Pehe, research director at the Open Media Research Institute (OMRI), said these theories may not be valid.
ODS is better at mobilising its supporters than the Social Democrats when interest is low. A big ODS win on a low turnout might therefore not be representative for lower house polls.
"If there is a low turnout, even if Klaus wins, I think that it would be very difficult for the ODS to know the real mood of the country," he said.
-- Prague newsroom (42 2) 24 23 0003
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The Czech Republic and Spain played to a scoreless draw in their World Cup group six qualifier on Wednesday, in a lacklustre match that failed to live up to its marquee billing.
The Czechs were facing their first big test since they reached the Euro 96 final, while Real Madrid's teenage striker Raul Gonzalez was looking to spark a depleted Spanish attack in his first cap.
Both sides opened their World Cup campaigns last month with high-scoring victories over the two weakest teams in the group, Spain winning 6-2 in the Faroe Islands and the Czechs thrashing Malta 6-0.
But Yugoslavia have already collected three wins and Slovakia two against the same two hapless victims and neither team could afford to give ground in Prague.
Like two heavyweights feeling each other out in the early rounds, both teams started tentatively, waiting to pounce on the other's mistakes.
The Spaniard's were the first to flinch when Kaiserslautern striker Pavel Kuka's cross found an unmarked Karel Poborsky just outside the crease. But the Manchester United midfielder failed to control the ball, wasting what would turn out be one of the game's few good scoring chances.
Next it was the Czechs turn to falter. Newcastle United goalkeeper Pavel Srnicek, making his first cap in over a year, tried to clear the ball, but hit attacker Alfonso Perez and watched helplessly as it rolled just wide of the net.
The Czechs picked up their play in the second half, putting Spain on its heels for the rest of the game.
But veteran Valencia goalkeeper Andoni Zubizarreta held his ground on Pavel Kuka's dangerous turnaround blast from just outside the penalty spot, and then robbed Jan Suchoparek in the dying minutes of the game, stopping the midfielder's drive from three metres away to keep the game scoreless.
"I don't think we lost points tonight because they are such an excellent team. They played strongly in the backfield and its too bad we missed out on the two great chances we had," said Liverpool sensation Patrik Berger.
Added Spanish coach :"Raul played very well and I'm pleased with our team. Both teams could have one this match, and I'm content with the result though we would have liked to have taken three points."
Teams:
Czech Republic - 1-Pavel Srnicek, 2-Radoslav Latal, 3-Jan Suchoparek, 4-Pavel Nedved (15-Martin Frydek, 86th), 5-Miroslav Kadlec, 6-Michal Hornak, 7-Jiri Nemec, 8-Karel Poborsky (17-Vladimir Smicer, 58th), 9-Pavel Kuka, 10-Patrik Berger, 11-Radek Bejbl
Spain - 1-Andoni Zubizarreta, 2-Abelardo Fernandez, 3-Sergi Barjuan, 4-Rafael Alkorta, 5-Miguel Angel Nadal, 6-Fernando Hierro, 7-Raul Gonzalez, 8-Luis Enrique Martinez, 9-Guillermo Amor (18-Ismael Urzaiz, 76th), 10-Julen Guerrero (14-Josep Guardiola, 52nd), 11-Alfonso Perez (15-Roberto Rios, 73rd)
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Czech shares rallied on Monday following the coalition government's win in weekend Senate elections, but analysts said the rise was due more to a technical correction than to a change in investor sentiment.
The Prague Stock Exchange's PX50 index rose 0.86 percent at the bourse's daily price fixing, spurred by gains to seven of the eight most-capitalised shares.
Brokers, however, were muted in their optimism that the rally would last more than a few days, saying the centre-right government's strong showing was expected and already built into the market last week.
"Basically, this is a technically-led rally, I don't think it has a basis to do with Senate elections," said Jay King of the brokerage Wood and Company.
Added another local trader: "You're not seeing real volumes here you're just seeing prices being pushed up in anticipation of year-end, and without a doubt it is domestically driven. Foreigner investors are still on the sidelines."
The minority coalition of Prime Minister Vaclav Klaus took 52 of 81 seats in the newly-created upper house of parliament, following the second round of voting, well ahead of the centre-left opposition Social Democrats which took 25 seats.
The Senate is a mostly advisory body with limited legislative powers, but the election was the first test at the polls for Klaus since his coalition lost its lower house majority in general elections in June.
But a thin turnout -- just over 30 percent of the electorate cast their ballots -- made it hard for the three-party coalition government, which lost its lower house majority in June, to claim it had recaptured voters' hearts.
The Prague bourse has been hard hit in recent months -- falling some 17 percent since September -- with most investors shying away from the a market characterised as opaque at best, and little regard for minority shareholder rights.
And analysts said that the election would probably not bring about a new push for changes to securities laws within the coalition, a condition that is necessary to lure back participants.
"I'm a little sceptical about the possibility that the Senate will help bring in changes," said Pavel Sobisek of Zivnostenska Banka.
"I think there will be a lot of pressure from market participants on the government to do something...but I have not seen any signs of a change in attitude of the coalition with respect to this topic."
Analysts said that the market should take some heart however, in statements made by Klaus following the vote when he said he saw no reason to call early elections for the lower house, which should keep the market stable in the near future.
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Investors smiled on the bourses of central and eastern Europe as brightly as the summer sun this week, though there were some indications these may by little more than fair-weather friends to the markets.
Exchanges in Prague, Warsaw, Budapest, Bratislava and Bucharest all gained ground, while Zagreb and Sofia traded mixed. Ljubljana was the one gray cloud, posting slight losses.
The Central European Share Index (CESI) which reflects the price movements of 50 selected Czech, Polish and Hungarian shares, firmed 66.11 points.
PRAGUE
Czech share prices were mostly steady on the Prague Stock Exchange throughout the week, with little movement expected soon as the holiday season slowly winds up.
The PX50 index edged up 3.6 points from Monday to close at 568.6 on Thursday.
Leading trading were SPT Telecom and Komercni Banka, though SPT's movements were largely characterised as "accounting procedures" that saw the issue gain as much as 102 crowns one session, only to lose the same amount the following day.
"The final price (of SPT) was not the real market price, but because average prices are not used for the close, it gives an artificial final number," said Jan Sykora of Wood and Company. SPT closed on Thursday at 3,340 crowns.
Dealers have long-complained that some market participants consistently manipulate prices on the bourse, a fact that to cloud foreign investor perceptions of the Czech market.
WARSAW
Polish shares on Thursday rose for the sixth consecutive session but analysts said stronger selling after price-fixing showed the market was losing steam and made it unclear if the growth trend would continue.
"It seems we now have a tug-of-war between buyers and sellers," said Krzysztof Rogalski, an analyst at Bank Staropolski SA brokerage.
But some analysts said a real growth trend had already begun, sparked by firms releasing better July earnings at the start of the week. The WIG index closed at 13,597.4 points, up 892.7 points or 7.0 percent from last Friday's close.
Analysts said recent systematic gains in higher turnovers by several large-cap stocks was a good sign that could help return the market toward this year's July 5, 14,282.2-point high next week.
BUDAPEST
Prices rose at both of this week's sessions as market participants returned after holidays on Monday and Tuesday.
The rest of the market strengthened as investors were cheered because the U.S. Federal Reserve had left interest rates steady.
"It's certainly due to the fact the U.S. investors put money into the east European emerging markets," Peter Haas of Postabank Securities said. "Optimism seems to have spread over investors after the danger of a rate hike was eliminated."
The BUX index closed on Thursday at 3,370.23, up 198.79 points over last Friday.
BRATISLAVA
The Bratislava Stock Exchange (BSE) saw a week of listless holiday trading, with the ongoing struggle for strategic control over the country's largest investment fund, VUB Kupon, dominating floor trading.
The 12-share SAX index posted several year-highs over the week, peaking at 226.34 points on Tuesday, and closing at 223.75 points on Thursday, slightly firmer from Monday's open.
"This week was a transparent example, showing how the index is often far off from real trends on the market," Dusan Sykora of ING Barings said. "The SAX has been reaching top levels, while only a few trades were concluded on the bourse on low volumes," he added.
SOFIA
No corporate issues traded for a third week in a row on the Bulgarian stock market as investors turnede their attention to treasuries and foreign currency.
Only the Sofia Stock Exchange (SSE) operated this week after the Bulgarian Stock Exchange (BSE) went into a summer recess on August 5. The BSE will resume trading on September 2.
The 13-share Reuter All Bulgaria Stock Exchange Index (RABSI) closed at 41.31 points, unchanged from last Thursday.
BUCHAREST
Romanian share prices posted gains this week on the back of healthy half-year earnings reports by several firms but trading, dominated by retail investors, was modest in volume.
Overall turnover fell by almost 30 million lei to 68.5 million on Thursday.
The unofficial VAB Index -- a value-weighted index of all stocks computed by Vanguard SA securities -- closed at 371 points, 8.20 points or 3.5 percent up on the week. Its base was 1,000 points when it was created last November.
ZAGREB
Croatian stocks were mixed though the summer lull seemed to be nearing an end as big buyers became more active, boosting prices and prompting broker predictions of a steady rise in the weeks to come.
Most active was Zagrebacka Banka which gained 130 kuna since last Tuesday, but other companies including foodprocessor Podravka also registered an increase of prices.
LJUBLJANA
In Ljubljana, share prices, eased 0.4 percent as the SBI index fell 4.31 points to 980.60.
Financial consultancy Finmedia was the leading decliner, falling 4.9 percent, while the biggest gainer were prefered shares of bank Dolenjska banka, firming 10.4 percent.
CLOSE WEEK'S CHANGE 1996 HIGH 1996 LOW
AUG 22 NET PCT
CESI 1,495.58 +66.11 +4.62 1,483.76 959.24
PRAGUE 568.6 +3.6 +0.64 586.6 425.9
WARSAW 13,597.4 +892.7 +7.0 14,282.2 7,725.2
BUDAPEST 3,370.23 +198.79 +6.27 3,380.53 1,557.91
BRATISLAVA 223.75 +0.51 +0.23 226.34 150.4
SOFIA 41.31 0.00 +0.00 55.48 41.05
LJUBLJANA 910.74 -4.31 -0.47 1,589.18 910.74
All-time high: CESI 1,483.76 (July 5/1996); SBI 1,598.02 (June 28/1994); WIG 20,760.3 (March 8/1994); BUX 3,380.53 (July 8/1996); PX50 1,002.4 (April 7/1994); RABSI 112.2 (April 27/1994); SAX 402.3 (Feb/1994).
| 1 |
The three-year-old partnership between British Airways Plc. and USAir Group Inc., already severely damaged by a potential competing alliance, moved closer toward collapse on Thursday when USAir said it was cancelling a key marketing agreement between the two carriers.
Arlington, Va.-based USAir said it will end the carriers' code-sharing agreement and sever the link between their frequent flier programmes as of March 29, 1997.
Code-sharing is a marketing agreement in which airlines share passengers and extend their reach to destinations they do not typically serve. Over the past several years, dozens of airlines have entered into such pacts.
In announcing the move, USAir cited the British carrier's proposed alliance with American Airlines, a unit of AMR Corp., that would link cargo and passenger services of the two powerhouse carriers.
USAir, which is 24.6 percent owned by British Airways, has fiercely opposed the British Airways-American partnership and sued both carriers, saying that they would dominate the trans-Atlantic market. A hearing on the suit is scheduled for Friday in the U.S. District Court for the Southern District of New York.
"Clearly, it's difficult to simultaneously sue a partner and cooperate with a partner," said Samuel Buttrick of PaineWebber.
British Airways had no immediate comment on the action taken by USAir.
Although the relationship had certainly turned rocky, most analysts had expected USAir not to sever its relationship with the British carrier until the proposed British Airways-American pact was finalised.
The proposed alliance has raised antitrust concerns, awaits regulatory approvals and is tied to other aviation issues between the United States and Britain.
British Airways and American have argued that the deal would lead to greater competition on the routes because it would only go ahead if Britain and the United States agreed to a so-called "open skies" pact.
Although surprised by the move, industry analysts said it will have little impact on USAir, which received far less revenue from the alliance than did British Airways.
At the time the partnership began in 1993, USAir was a money-losing airline that desperately needed to reduce costs and expand its global presence.
British Airways invested $400 million under the partnership, but refused to pump any more money in the carrier because of its poor financial performance.
Since then, USAir's financial position has improved amid healthier times for the airline industry, but its costs are still higher than other major U.S. carriers.
"At the time the alliance was made, USAir received the cash which it needed, but today, it doesn't need it," said Glenn Engel of Goldman Sachs.
USAir's future plans are now more uncertain with the decision to sever ties with British Airways, especially because chief executive officer Stephen Wolf has stressed that he wants to expand USAir's transatlantic presence.
"I'm a little mystified. They don't have anything to replace it with yet," said Donaldson Lufkin & Jenrette analyst James Higgins.
| 39 |
The U.S. food industry, besieged by years of slow growth, wants to whip up new business from people who don't cook.
Armed with a new study that predicts consumer spending on ready-made foods will accelerate in the next 10 years, food firms are reaching out to a generation that doesn't know the difference between baking powder and baking soda.
"Consumers aren't looking anymore for a cake mix. They want the slice of cake," said John Gray, executive director of the International Foodservice Distributors Association, which helped fund the study released this week.
Industry executives this week said they are developing fresh strategies to feed 18-to-24 year olds -- a generation that grew up with working mothers and microwave ovens.
"Cooking from scratch is diminishing: many consumers in 2005 will never have cooked a meal from basic ingredients," said the study by consulting firm McKinsey & Co Inc titled "Foodservice 2005: Satisfying America's Changing Appetite."
The study confirms trends that food manufacturers and food distributors already are seeing: harried consumers bypass the fresh meat and spice aisles of a supermarket in favor of sections selling barbecued chicken and ready-made salad.
The study projects the food industry will grow 1.6 percent per year to nearly $800 billion a year by 2005. The foodservice sector is expected to capture nearly all of the anticipated incremental sales, pegged at $100 billion.
"There is going to be a whole new plethora of different foodservice opportunities," said William Eacho, president and chief executive officer of Atlantic Food Services, a Virginia-based foodservice distribution company.
Tomorrow's supermarkets are expected to have drive-up windows where consumers can buy ready-made meals.
Executives also envision stores that group food by meal categories so that shoppers can head right to the breakfast aisle instead of wandering throughout the store.
The changes are expected to be especially challenging for food manufacturers, who may see shelf space for their products shrink as stores provide more ready-made products.
Nabisco Holdings Corp already is experimenting with ways to ensure its products are not lost in the shuffle. The maker of items such as Oreo cookies and Grey Poupon mustard wants to leverage its brand popularity into ready-made meals.
"As a major food manufacturer, we ought to have our fair share of that growth," said Henry Lambert, president of Nabisco's food service company.
That may mean developing a Grey Poupon-based sandwich spread for supermarket sandwiches or working with a dessert manufacturer to sell individual slices of cheesecake that contain Oreo cookies, Lambert said.
And demand for those kinds of products is expected to grow as consumers spend less time preparing meals. Industry experts estimate people now spend about 20 minutes preparing a meal versus two hours of preparation time about 50 years ago.
"The meal is not the social setting of the evening anymore. It's a nuisance," said Robert Stauth, chairman and chief executive officer of food distributor Fleming Cos Inc.
| 39 |
One day after rival bidders sent its stock on a rollercoaster ride, Conrail Inc was set Tuesday to formally consider a $9 billion takeover offer from Norfolk Southern Corp.
The company's board of directors was widely expected to reject the unsolicited Norfolk Southern offer in favor of a friendly $8.4 billion deal with CSX Corp.
"My guess is, at this point, that they stick with the CSX proposal," said Brian Routledge of Prudential Securities .
Conrail's board was slated to meet Tuesday ahead of a Wednesday deadline to respond to the Norfolk Southern offer.
A Conrail spokesman declined to comment on the timing of its decision, but Wall Street experts expected the company to issue an announcement on Wednesday.
Conrail agreed on Oct. 15 to be bought by CSX in a cash and stock transaction valued at $8.4 billion, or $92.50 per share. Norfolk launched its $100-per-share bid on Oct. 23.
Since then, Norfolk Southern and CSX have vehemently attacked each other's offers and landed in court.
The CSX-Norfolk Southern relationship between took a new twist Monday when the companies announced they were holding discussions about their bids, but offered conflicting accounts about the talks. Uncertainty about those talks prompted sharp stock declines on Monday.
Industry experts said Conrail is likely to defend the lower CSX bid by citing the strategic benefits of the transaction and the lack of potential legal problems associated with the friendly deal. Legal expoerts have said that Pennsylvania takeover law could impede a Norfolk Southern acquisition of Conrail.
Experts also speculated that Conrail may try to convince CSX to sweeten its offer in an attempt to appease shareholders who may be upset by the rejection of a higher bid.
Railroad industry experts have said that CSX likely cannot afford to match Norfolk Southern's $100 cash offer, but may be able to restructure the bid to increase the cash portion of the transaction.
"I think it is a strong likelihood that any positive reaction from Conrail's bid toward the Norfok Southern bid will force CSX to sweeten their bid," said Carole Neely of Brown Brothers Harriman.
| 39 |
An independent shareholder advisory firm recommended Thursday that investors of Conrail Inc. reject a key provision in the railroad's proposed acquisition by CSX Corp.
Maryland-based Institutional Shareholder Services, which provides corporate analyses to institutional clients, suggested that shareholders defeat a proposal that would permit CSX to pursue its proposed $8.5 billion stock and cash transaction.
In making the recommendation, senior analyst Peter Gleason noted Norfolk Southern Corp.'s rival $10 billion cash bid that has been rejected by Conrail.
"We believe that all shareholders should be treated equally in any merger transaction, and because of NS's higher offer currently outstanding, we do not believe it would be in shareholders' best interest to opt out of the fair price provision at this time," Gleason wrote in a 16-page report.
Conrail investors are being asked to waive a Pennsylvania law that requires an all-cash payment by CSX, which already has bought 19.9 percent of Conrail in a cash tender offer.
In October, CSX and Conrail announced a merger that calls for CSX to buy Conrail in a cash-and-stock deal.
CSX is offering to pay $110 in cash for 40 percent of Conrail's outstanding shares. Based on Thursday's closing stock prices, the remaining 60 percent would be bought for about $83 per share.
Although Norfolk Southern has submitted a higher all-cash bid, Conrail contends the CSX offer is a better fit.
Institutional Shareholder Services disputed that argument, saying that both potential combinations would create an East Coast railroad powerhouse.
"However, CSX's front-end loaded, two-tiered takeover does not treat all Conrail shareholders fairly, and the lock-ups provided in the agreement have denied Conrail shareholders the possibility of accepting a higher payment for their shares," Gleason wrote.
Under the agreement between Conrail and CSX, Conrail would be prohibited from entering a pact with another company before July 1997.
"The only thing prohibiting the higher offer from being presented to sharheolders are the barriers erected by Conrail to ensure the company merges with CSX," Gleason wrote.
CSX declined to comment on the report. Conrail also did not have any immediate comment.
Conrail has scheduled a special shareholder meeting for Dec. 23 to consider a waiver of the Pennsylvania law.
Institutional Shareholder Services, which held meetings with Conrail and Norfolk Southern, also recommended that shareholders reject a Conrail request to adjourn the meeting if more votes are needed to ensure passage of the waiver.
"In this case, shareholders already have the information they need to make their voting decisions. Once their votes have been cast, there is no justification to spend extra money to continue pressing shareholders for more votes," Gleason wrote.
The shareholder advisory firm also said the Conrail-CSX union could run into trouble from the Surface Transportation Board, the federal regulatory agency overseeing railroads.
"Although Conrail and CSX believe STB approval and/or concessions will not create significant problems, we see the competitive issues as a major concern, and do not share Conrail's belief that STB approval of the transaction is assured," Gleason wrote.
He also noted that many shareholders expect CSX and Conrail to amend their pact to sweeten the stock portion of their proposed transaction.
"Conrail has indicated that it has had discussions with CSX about raising the back end of the consideration to make the offer more equitable to shareholders, but no decisions have been made to date," Gleason wrote.
He also noted that Norfolk Southern would likely raise its rival offer if CSX sweetened its deal.
Separately on Thursday, the Port Authority of New York and New Jersey said it planned to intervene in any Conrail merger and would hire a consultant to analyse the impact of any transaction.
| 39 |
A financial agreement between Barney's Inc. and Hong Kong-based Dickson Concepts International Ltd. will open the door to potential bidders for the famed New York luxury retailer.
Speculation about interested buyers has been rampant ever since Barney's filed for bankruptcy nearly a year ago.
Under a pact announced Tuesday, Barney's will pay Dickson up to $1 million to complete its financial review of Barney's and Dickson will submit a recapitalization proposal for the retailer.
In return, Barney's, which has been operating under bankruptcy protection since January, will make the financial information available to other prospective investors.
"We have the basis by which another investor can look at the information from that due diligence," said Barney's spokeswoman Sandra Sternberg.
Dickson and Saks Holdings Inc. previously have expressed interest in privately held Barney's. Neiman Marcus Group Inc. and Canada's Holt Renfrew also have been cited by industry experts as potential bidders.
Barney's has repeatedly said that it is not for sale but wants to talk with potential investors.
The pact with Dickson must be approved by the bankruptcy court, which may consider the issue as early as next week.
Officials at Saks, Neiman Marcus and privately held Holt Renfrew could not be reached for comment.
But Japanese retailer Isetan Co. Ltd., which is tangled in court with Barney's over a soured business arrangement, said it was not interested in buying Barney's.
"I don't think we're considering it right now. We're sitting on the sidelines," said spokesman Yasuo Okamoto.
Saks and Isetan joined forces in July to explore a plan for Barney's, but they never reached terms on a proposal.
Although Barney's has shuffled management to help turn around the troubled retailer, it is still viewed as weak in the luxury retail sector even as other companies are performing well.
Analysts, however, think a new owner or partner can breathe new life into the company.
"It can be viable going forward. It needs to be trimmed down and it needs merchandising talent," said Howard Eilenberg of Johnson Redbook Service.
Founded in 1923 by Barney Pressman and operated under the leadership of his grandsons Robert and Gene, Barney's has long been plagued by a reputation for weak management.
| 39 |
Mattel Inc president Jill Barad said the proposed acquisition of Tyco Toys Inc is not expected to face antitrust problems and should fuel earnings in the first year of the transaction.
"The market shares are still low even when you look at the category breakdowns," she said in a telephone interview.
Mattel, the nation's largest toymaker, earlier announced plans to buy third-place Tyco in a stock transaction valued at about $755 million. The combined market share of the companies would be less than 20 percent of the overall toy market.
Barad said the deal includes a topping fee of $40 million, which would payable to Mattel if another company lured Tyco with a higher bid. It also calls for a break-up fee of $15 million if the transaction were not completed within a year.
The transaction is expected to be completed in the first half of 1997.
Barad declined to specify anticipated cost savings associated with the transaction, saying "there are a lot and they cover many categories." She also said it was too early to assess the potential impact of the deal on Tyco's workforce.
Barad said she approached Tyco about a transaction on Sept. 29 in a solitary meeting with Tyco chief executive officer Gary Baughman. Representatives of both companies met again on Oct. 14.
The proposed transaction would significantly boost Mattel's position in the boys' toy market - an area that it sought to expand earlier this year with an unsolicited bid for number two toymaker Hasbro. However, Mattel was forced to withdraw that offer after its proposal ran into fierce opposition on antitrust grounds.
"We really believe that the boys' toy business is a very important one. We have never had big market share in that category," Barad said.
Any overlap in specific markets is not expected to be large enough to create antitrust concerns, Barad said.
For example, she noted Mattel's Hot Wheels holds a nine percent market share position in the "wheels" toy category and Tyco holds a 10 percent stake with Matchbox.
"It's very fragmented," Barad said, adding that the wheels category will become even more crowded as Hasbro emerges with a new product line.
| 39 |
The next stop for railroad industry consolidation is likely to be a Philadelphia courtroom, where a judge next week may decide if Norfolk Southern Corp can block a proposed union between Conrail Inc and CSX Corp.
Wall Street's attention turned to the Nov. 18 hearing after Conrail on Wednesday rejected a $10 billion offer from Norfolk Southern and reaffirmed its commitment to the CSX transaction, without revising terms of the $8.5 billion pact.
It was the second time that Conrail rebuffed an offer from Norfolk Southern that topped the CSX transaction.
Although Conrail shares rose earlier this week on the view that CSX would sweeten terms of the pact for a second time, analysts and traders expressed little surprise that the deal was not revised.
"I think that CSX is probably awaiting the outcome of the court challenge next week," said Brian Routledge of Prudential Securities.
In rejecting the Norfolk Southern bid, Conrail and CSX also dangled the prospect of a sweeter deal in front of shareholders, but made no promises. The two companies said they are pursuing talks about increasing the value of the transaction once the deal is consummated.
Shareholders have expressed unhappiness with the Conrail-CSX deal, which is a cash and stock transaction that values Conrail at about $93 per share. Norfolk Southern has offered to buy Conrail for $110 per share in cash.
According to Pennsylvania corporate law, Philadelphia-based Conrail is permitted to act in the interest of groups other than shareholders in determining the best partner. Conrail has contended that a union with CSX is a better strategic fit despite Norfolk Southern's higher offer.
"They have an iron-clad contract and they're just waiting to get into court," one arbitrager said about CSX and Conrail.
U.S. District Court Judge Donald Van Artsdalen has scheduled a hearing for next Monday to consider Norfolk Southern's suit to block the Conrail-CSX merger.
Meanwhile, Norfolk Southern said it was not surprised by the latest rejection of its offer and accused Conrail's board of ignoring its fiduciary responsibility.
Norfolk Southern ran a full-page advertisement in the New York Times and Wall Street Journal on Wednesday, urging shareholders to support its bid.
| 39 |
Conrail Inc. Wednesday revised its takeover agreement with CSX Corp. to give shareholders more cash in the proposed railroad merger valued at nearly $8.5 billion.
The new terms immediately drew fire from investors who said the value of the cash-and-stock deal remained well below that of the rejected offer from unwelcome bidder, Norfolk Southern Corp.
Philadelphia-based Conrail, which announced its original offer on Oct. 15, said its board had considered the merits of the rival bids and reaffirmed that a merger with CSX was a superior strategic combination, despite the higher offer from Norfolk Southern.
"Our two companies have now agreed to significantly increase the value to be received by the Conrail shareholders, and Conrail's other constituencies will continue to get tremendous benefits resulting from the CSX merger," Conrail Chairman David LeVan said in a statement.
A source close to the companies said the Conrail board met until late Tuesday night and the two companies then hammered out the new agreement in the early morning hours of Wednesday.
A merger of CSX and Conrail would create one of the largest transportation companies in the world, including a rail system with some 29,000 miles (47,000 km) of track in 22 eastern states.
Under the revised offer, Richmond, Va.-based CSX will pay $110 cash per share for 40 percent of Conrail shares instead of the previous amount of $92.50. The remaining 60 percent will be exchanged at the original ratio of 1.85619 CSX shares for each Conrail share.
Based on CSX's current stock price, the deal values Conrail shares at about $93 each, or $8.46 billion compared with the original pact of $8.42 billion, market sources said.
Norfolk Southern has offered to pay $100 a share in cash, or $9.1 billion, for all of Conrail's outstanding shares.
CSX Chairman John Snow said the company's decision to raise its cash offer followed an analysis that identified at least $730 million in cost savings in a CSX-Conrail combination -- $180 million more than originally anticipated.
"Clearly, the combination of CSX and Conrail provides the best overall package of benefits to our constituencies, including customers, the communities we serve, and the public-at-large," Snow said.
But Conrail stockholders expressed opposition to the deal in a conference call with investors and Wall Street analysts. They said the new terms effectively offset recent erosion in CSX's stock price and do not significantly raise the value of the transaction.
"Some of the shareholders were really angry and said this was being crammed down their throats," said one expert on takeovers who listened to the conference call.
Other sources who participated in the call said several investors threatened to tender their shares for $110 and then vote against the proposed merger.
In addition to the price of the CSX deal, investors were also unhappy with a three-month extension of the time in which Conrail is locked into the deal. The revised pact says Conrail cannot withdraw or agree to a competing bid before July 12.
"It's an outrage. This thing is now locked up tighter than ever," said another participant.
Norfolk Southern, meanwhile, reaffirmed its offer and said it was reviewing its options.
Wall Street analysts said they expect Norfolk to raise its bid for Conrail in an effort to ignite more shareholder unrest with the proposed Conrail-CSX merger.
They speculated that Norfolk Southern could raise its $100 per share bid by as much as 10 percent without hurting its balance sheet or the benefits of a merger.
"If they raise their bid, it will be the icing on the cake. It will take a bid that is superior and widen the gap further," said Carole Neely of Brown Brothers Harriman & Co.
"I think the price is getting rich, but I think there is at least a 50-50 chance they come back at least one more time," said Brian Routledge of Prudential Securities.
In addition to the new terms, Conrail also cancelled its shareholders' meeting scheduled for Nov. 14 and said a new meeting would be held in mid-December.
It also said that, under the amended terms, CSX's tender offer's expiration date and withdrawal and proration rights were extended until midnight Nov. 20.
| 39 |
Loewen Group Inc., the target of a $2.9 billion hostile bid by rival Service Corp. International is letting state authorities help mount its takeover defense.
So far, seven states, stretching from Hawaii to Pennsylvania, have launched antitrust investigations into the proposed transaction that would unite the two largest funeral service companies in North America, and Loewen has been quick to publicize their probes.
It is a defense strategy that has helped thwart other takeovers and mergers as states grow more more aggressive in challenging large transactions.
"The states are serious. Many of them have become quite knowledgable," said Dennis Yao, a former member of the Federal Trade Commission and now an antitrust expert at the Wharton School of the University of Pennsylvania.
But while state probes can certainly cause trouble for a friendly or hostile takeover, merger and antitrust experts said those investigations have rarely killed a deal.
"As a defense, it's got limited usage. It's hard to guarantee" that it will be effective, said Steven Wolitzer, co-head of mergers and acquisitions at Lehman Brothers.
Instead, the probes tend to be most successful when the states team up with federal agencies to fight a deal. In the Loewen case, the proposed transaction also is being investigated by a Canadian agency.
Early this year, state authorities were credited with helping to scuttle toymaker Mattel Inc.'s unsolicited bid for rival Hasbro Inc.
And, in April, state and federal complaints about antitrust implications of a friendly merger between drugstore giants Rite Aid Corp. and Revco D.S. Inc. led to the collapse of that deal.
States typically become involved in mergers that would impact consumers, such as in the retail or banking sectors.
Since rejecting Service Corp.'s bid, Loewen has used the state probes as part of its defense against the unwanted bid. Last Monday, Vancouver-based funeral services company announced that Pennsylvania was the latest state to launch an investigation of the proposed deal.
Pennsylvania officials said they had been unaware that Loewen had issued a news release about its probe.
"Loewen believes that the genie is out of the bottle in terms of government interest and there certainly is a precedent of attorney generals' looking at the situation and raising concerns, which ultimately derail those kinds of offers," said a spokesman for Loewen, adding that the company has been surprised by the level of state interest.
Loewen also has filed a federal antitrust lawsuit against Service Corp.
For its part, Service Corp. has rejected the antitrust argument and said that any potential problem could be resolved by divesting controversial properties.
Industry experts estimate a combined Service Corp-Loewen would hold a 10 percent market share in the highly fragmented industry.
Pennyslvania, California and New York are considered the most aggressive states in challenging mergers.
Pennsylvania has stepped up its merger probes since 1994 and so far has investigated 17 transactions this year compared with 13 in 1995 and far fewer in the merger boom of the 1980s, said Carl Hisiro, head of the antitrust section at the Pennsylvania attorney general's office.
Merger experts also said that state attention to big mergers typically intensifies in an election year, when officials are trying to convince voters that they are committed to protecting public interest.
| 39 |
Mobil Corp, widely credited with the most aggressive cost-cutting program of all U.S. oil companies, is not resting on its laurels.
The Fairfax, Va-based oil giant told analysts on Monday that it has implemented $760 million of cost savings so far this year as part of a $1.3 billion plan and expects the remaining $540 million to fall into place soon.
Furthermore, Mobil also expects to save at least another $300 million on an annualized basis by 1999 by streamlining purchases of everything from raw materials to computers.
Mobil discussed cost-savings details after it posted a 10 percent decline in third quarter operating income due to a host of unfavorable conditions, including weak refining and marketing profits. A company spokesman confirmed the figures.
Industry analysts dismissed the earnings drop, saying Mobil's stock price had already reflected the poor industry fundamentals. Instead, Wall Street appeared more intrigued with the company's future cost-cutting plans.
"They have done an excellent job and I think they are determined to maintain the cost cutting," said Jack Aydin of McDonald & Co Securities Inc.
Some investors already have expressed concern about Mobil's ability to keep up its aggressive pace.
"People are wondering if they have squeezed everything out of the cost structure that they can and if their magic touch is over," said Smith Barney analyst James Falvey, who upgraded Mobil to a buy rating from outperform on Monday.
Chairman Lucio Noto sought to allay any concerns.
"Since we are in a very competitive industry that has significant price volatility, changes in the way we run our business are essential if we are to compete in the long term," Noto said in a news release about the company's earnings.
Although Mobil is not expected to announce a major restructuring plan anytime soon, future savings are anticipated from purchasing and technology.
"Everybody has cut a lot of the fat and even some of the muscle," said John Parry, analyst at energy consulting firm John S. Herold Inc.
And Mobil is likely to soon start reaping benefits of its joint venture with British Petroleum Co Plc that calls for the merger of their downstream operations in Europe.
The success of the joint venture will likely impact Mobil's plans for future savings as other firms also pursue similar pacts. Texaco Inc, Royal Dutch Shell Group and Star Enterprise are now exploring joining downstream operations. Star is a venture of Texaco and Saudi Arabia's state oil firm.
If other companies pursue such ventures and the BP pact is successful, analysts said Mobil eventually may seek a downstream partner in other parts of the world.
"I think the easy part of the cost cutting and restructuring has been announced. The key is going to be to remain on top of it," Aydin said.
| 39 |
Conrail Inc. and CSX Corp. so far have convinced the courts that their $8.6 billion merger plan should proceed, but they still need to win over unhappy shareholders who favour Norfolk Southern Corp.'s higher rival bid.
Lawyers and financial advisers were expected in the next few days to consider several plans aimed at persuading investors to approve a crucial measure needed for the deal.
Meanwhile, CSX said Thursday that its $110 cash tender offer for 19.9 percent of Conrail shares, which represents the first part of its plan to buy Conrail, was oversubscribed.
The proposed stock and cash transaction has angered many investors, who prefer an all-cash $10 billion offer by Norfolk Southern, based in Norfolk, Va.
Philadelphia-based Conrail has rejected the Norfolk Southern offer of $110 a share, saying the union with CSX provides more strategic benefits.
But Norfolk Southern refused to give up, on Thursday extending its tender offer through midnight EST on Dec. 16. The offer had been set to expire Friday.
Norfolk Southern said earlier it would also continue to pursue its legal case seeking to block the planned merger.
CSX said that as of Thursday afternoon about 1.4 million Conrail shares had been tendered and not withdrawn pursuant to Norfolk Southern's offer.
Sources close to the companies said no final decision has been made about how to woo Conrail shareholders, but options include sweetening the stock portion of the deal or setting a "collar" to guard against price volatility.
They will also consider revising the deal's terms to accelerate payment to investors, according to the sources, who did not want to be identified.
The two companies could also decide to keep the terms unchanged, betting that shareholders will ultimately choose the CSX offer over Norfolk Southern's bid, which cannot be formally considered by Conrail until July.
"There's only one thing they can do and that's to sweeten the offer. I don't know how they're going to get enough votes if they don't," said Thom Brown, managing director at investment firm Rutherford, Brown & Catherwood Inc., which holds some 50,000 shares of Conrail.
Richmond, Va.-based CSX and Conrail declined to comment on their plans but acknowledged last week they were discussing increasing the value of the pact upon its consummation.
Sources close to the companies said there is no rush to make a decision, noting that Conrail can easily postpone the shareholder vote that is now slated for mid-December.
CSX and Conrail won a significant victory this week when a U.S. District Court judge denied a request by Norfolk Southern to block the CSX-Conrail deal. An appeals panel also declined to block the first step of the deal.
Norfolk Southern, meanwhile, withdrew its motion for an expedited appeal of the federal court ruling that allowed CSX to buy the 19.9 percent stake in Conrail since the tender offer expired at midnight Wednesday.
But a Norfolk Southern attorney said the company will continue to pursue its legal case seeking to block the Conrail-CSX merger.
"We will continue with the litigation," attorney Steven Rothschild said.
A group of Conrail shareholders pursuing a lawsuit and appeal similar to Norfolk Southern's did not withdraw their motion for expedited appeal. The group urged the court Wednesday to hear an expedited appeal and "sterilize" the 19.9 percent Conrail stake by preventing CSX from voting it at a shareholders meeting needed for the merger to occur.
Because Pennsylvania corporate law prohibits a company from buying more than 20 percent of another company in a cash tender offer, shareholders will be asked in mid-December to approve a measure that would permit CSX to buy 40 percent.
The CSX-Conrail transaction calls for CSX to buy 40 percent of Conrail shares for $110 per share in cash and exchange the remaining 60 percent for CSX stock.
Sources close to the company said Conrail and CSX were well aware of the potential difficulties in winning the necessary votes.
Industry experts believe shareholders may be more willing to approve the 40 percent measure if they were guaranteed more favourable terms for the stock portion of the deal.
"They can't get the vote until they improve the back end of the deal and they know that," one takeover specialist said.
Meanwhile, Conrail stock tumbled, reflecting the expiration of CSX's tender offer. The stock fell $2.25 to $94.625 on the New York Stock Exchange.
Based on Thursday's stock price, the Conrail-CSX transaction values shares of Conrail at about $95.10 each. The stock portion of the deal would be exchanged at a value of about $85.15 for each Conrail share.
| 39 |
A financial agreement between Barney's Inc and Hong Kong-based Dickson Concepts International Ltd will open the door to potential bidders for the famed New York luxury retailer.
Speculation about interested buyers has been rampant ever since Barney's filed for bankruptcy nearly a year ago.
Dickson and Saks Holdings Inc previously have expressed interest in privately held Barney's. Neiman Marcus Group Inc and Canada's Holt Renfrew also have been cited by industry experts as potential bidders.
Barney's has repeatedly said that it is not for sale but only wants to talk with potential investors.
Under the pact announced Tuesday, Barney's will pay Dickson up to $1 million to complete its financial review of Barney's and Dickson will submit a recapitalization proposal.
In return, Barney's, which has been operating under bankruptcy protection since January, will make the financial information available to other prospective investors.
"We have the basis by which another investor can look at the information from that due diligence," said Barney's spokeswoman Sandra Sternberg.
The pact with Dickson must be approved by the bankruptcy court, which may consider the issue as early as next week.
Officials at Saks, Neiman Marcus and privately held Holt Renfrew could not be reached for comment.
But Japanese retailer Isetan Co Ltd, which is tangled in court with Barney's over a soured business arrangement, said it was not interested in buying Barney's.
"I don't think we're considering it right now. We're sitting on the sidelines," said spokesman Yasuo Okamoto.
Saks and Isetan joined forces in July to explore a plan for Barney's, but they never reached terms on a proposal.
Although Barney's has shuffled management to help turn around the business, the troubled retailer is still viewed as weak in the luxury retail sector even as other companies are performing well.
However, analysts think a new owner or partner can breathe new life into the company.
"It can be viable going forward. It needs to be trimmed down and it needs merchandising talent," said Howard Eilenberg of Johnson Redbook Service.
Founded in 1923 by Barney Pressman and operated under the leadership of his grandsons Robert and Gene, Barney's has long been plagued by a reputation for weak management.
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The three-year-old partnership between British Airways and USAir Group Inc, already severely damaged by a potential competing alliance, moved closer toward collapse on Thursday when USAir said it was cancelling a key marketing agreement between the two carriers.
Although surprised by the move, industry analysts said it will have little impact on USAir, which received far less revenue from the alliance than did British Airways.
British Airways still retains a 24.6 percent stake in Arlington, Va-based USAir.
USAir said it would end its code-sharing pact and frequent flier programs with British Airways on March 29, 1997.
Code-sharing is a marketing agreement in which airlines share passengers and extend their reach to destinations they do not typically serve. Over the past several years, dozens of world airlines have entered into such pacts.
The USAir move cames amid increasing hostility between it and its British partner. British Airways earlier this year announced plans to form a massive alliance with powerhouse AMR, parent of American Airlines Inc.
The move infuriated USAir, which promptly sued the two carriers and contended that their planned pact would undermine the USAir-British Airways partnership.
Although the relationship had certainly turned rocky, most analysts had not expected USAir to sever the tie until the proposed British Airways-AMR pact was finalized. That proposed alliance has raised antitrust concerns, awaits regulatory approvals and is linked to other aviation issues.
"Clearly, it's difficult to simultaneously sue a partner and cooperate with a partner," said Samuel Buttrick of PaineWebber.
British Airways said in London that it would continue to work with USAir until the pact is terminated.
At the time the partnership began in 1993, USAir was a money-losing airline that desperately needed to reduce costs and expand its global presence. British Airways invested $400 million under the partnership, but refused to pump any more money in the carrier because of its poor financial performance.
Since then, USAir's financial position has improved amid healthier times for the airline industry, but its costs are still higher than other major U.S. carriers.
"At the time the alliance was made, USAir received the cash which it needed, but today, it doesn't need it," said Glenn Engel of Goldman Sachs.
USAir's future plans are now more uncertain with the decision to sever ties with British Airways, especially because chief executive officer Stephen Wolf has stressed that he wants to expand USAir's transatlantic presence.
"I'm a little mystified. They don't have anything to replace it with yet," said Donaldson Lufkin & Jenrette analyst James Higgins.
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The proposed union of Boeing Co and McDonnell Douglas Corp dramatically raises the stakes for survival in the defense industry, which already has experienced intense consolidation.
Global players, including Northrop Grumman Corp, Raytheon Co and Hughes Electronics Corp, are expected to seek partners in a new cycle of mergers.
"This has broken an uneasy truce in the defense industry," said Jon Kutler, president of Quarterdeck Investment Partners Inc, which specializes in aerospace and defense.
Although the pace of defense mergers recently has slowed from the booming levels of early 1996, the Boeing-McDonnell Douglas combination is expected to trigger a resurgence of activity, industry experts said.
"This transaction establishes a level of scale that is going to urge additional consolidation. It's clearly going to drive us toward, instead of eight or 10 large firms, three or four mega-corporations," said James Schwendinger, director of Deloitte & Touche's aerospace and defense practice.
Northrop Grumman is viewed as a leading buyer of defense electronics properties. Shares of the company jumped 1-3/4 to 81-1/8 on views that the Boeing-McDonnell Douglas transaction may speed up its acquisition plans.
"All of a sudden, the scale of Northrop Grumman has been diminished by this merger," said one defense industry source who did not want to be identified.
Formed in 1994 from a union between Northrop and Grumman Corp, the company earlier this year bought Westinghouse Electric Corp's defense business for $3.6 billion in one of the biggest defense deals of 1996.
A spokesman for Northrop Grumman declined to comment on merger activites, but noted that electronics is a growing part of the company's business.
"We have clearly embarked on a strategy of transforming the company from primarily an airplane builder to electronics," said Tony Cantafio.
Meanwhile, current defense industry leader Lockheed Martin Corp, which early this year bought Loral Corp for $9.1 billion, is viewed as well-positioned to compete against the new and larger Boeing. Lockheed Martin said in a statement on Monday that ongoing industry consolidation is vital.
"They've gone from being king of the hill to having to share it. They're in an extremely strong position," Kutler said of Lockheed Martin.
The defense sector already has seen several consolidation cycles due to declines in federal spending. But those deals were dwarfed by the latest $13.9 billion merger announced on Sunday.
Industry experts said prices and bidding is expected to intensify for attractive properties, noting that reported seller Hughes Electronics is likely to benefit. Industry sources previously targeted McDonnell Douglas as a potential buyer of Hughes.
A spokesman for Hughes could not be reached for comment, but the company previously has said in an SEC filing that it would consider acquisitions and consolidation.
Hughes is a unit of General Motors Corp.
The Boeing-McDonnell Douglas combination also is expected to trigger consolidation around the globe.
"This may set the stage for a whole new set of (buyers) from Europe," said Thomas Gallagher, head of the aerospace division at CIBC Woody Gundy, who expects cross-border consolidation in Europe to intensify.
"The key dimension of defense today is scale. This business takes a huge amount of investment," Gallagher said.
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Raising the stakes in the escalating battle for Conrail Inc., Norfolk Southern Corp. on Friday sweetened its hostile bid for the railroad to $10 billion in cash.
Norfolk Southern's original offer of $9.1 billion was already higher than a proposed $8.5 billion transaction planned between Conrail and CSX Corp., but the new bid of $110 per share further widened the gap.
"Our increased offer demonstrates our total commitment to this combination," Norfolk Southern Chairman David Goode said in a statement.
Philadelphia-based Conrail said it would review the new offer, but noted that it previously had determined the union with CSX was a better fit.
On Wednesday, Richmond, Va.-based CSX and Conrail revised the terms of their planned cash and stock transaction to give shareholders more cash. The Conrail-CSX union values Conrail shares at about $93.
Shares of Conrail jumped $3.375 to $96.375 on the New York Stock Exchange.
Wall Street earlier this week had speculated that Norfolk Southern would raise its bid to as much as $110 per share in the hope of igniting unrest with Conrail shareholders, some of whom already have expressed dissatisfaction with the CSX deal.
Industry sources also said Conrail was unlikely to be swayed from its planned merger with CSX.
Instead, they said the outcome of the bidding war was increasingly likely to be decided by Conrail's shareholders, who will ultimately determine if the railroad should strike the $8.5 billion deal with CSX when there is a $10 billion offer on the table.
"Nothing has changed. I think a lot will depend on what happens with the shareholder vote," said Jeff Medford of William Blair & Co.
Shareholders are considered key to the Conrail-CSX transaction because Pennsylvania corporate law prohibits CSX from buying more than 20 percent of Conrail shares in a tender offer without their approval. CSX is seeking to acquire 40 percent of Conrail shares in a cash tender offer, with the remaining 60 percent to be exchanged for stock.
A shareholder meeting is scheduled for mid-December.
Takeover experts, who have been among the most vocal opponents of the Conrail-CSX deal, said that Norfolk Southern would further strengthen its position by aggressively urging Conrail shareholders to defeat the CSX transaction.
"It's got to be like Bob Dole's marathon, but with a more successful conclusion," said one, referring to the 96-hour campaign blitz launched by the losing U.S. presidential candidate in the days before this week's election.
Goode declined to be specific about Norfolk Southern's plans to woo Conrail shareholders.
"The numbers in our bid speak for themselves. It should be readily apparent that it's a superior offer. We're willing to talk to all of the constituencies involved, including shareholders and others who are interested in this and we are doing that," he said in a telephone interview.
Norfolk Southern said its latest offer of $110 a share was superior to CSX's bid because it was not contingent on regulatory approval and would provide immediate cash payment to Conrail shareholders.
Wall Street experts said Conrail and CSX, which already revised the terms of their transaction once, may feel pressured to again increase the portion of cash in their deal. However, most industry experts do not expect a revised bid to top the offer made by Norfolk Southern.
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Revco D.S. Inc is expected to leverage its size and experience to overcome the host of problems that pushed regional drugstore chain Big B Inc into a deal with the Ohio-based drugstore giant.
Industry experts said Revco is well-placed to capture profits in the southeast by taking advantage of Big B's underused distribution center and closing overlapping stores in Georgia.
"Revco will be able to integrate Big B really quickly," said Eric Bosshard of Midwest Research-Maxus Group.
The two companies on Monday said that Big B had accepted a sweetened acquisition offer from Revco in a cash transaction valued at $380 million, or $17.25 per share.
It is the latest in a string of recent acquisitions in the drugstore industry. Just two weeks ago, Rite Aid Corp agreed to buy West Coast-based Thrifty PayLess Inc for $1.4 billion.
Big B initially fought a takeover by Revco, rejecting its unsolicited bid of $15 per share last month and inviting interested parties to submit formal offers.
Like many other regional drugstores, Big B was burdened by problems that have accompanied the burgeoning clout of managed health care and huge discount retailers.
Big B's profit margins began to tumble last year due to difficulty in calculating the impact of lower prescription prices paid by managed care providers. Although it invested heaviliy in a new computer system to better track profit margins, people familiar with the company have said its newly-expanded distribution center is operating at only 60 percent of capacity.
One of its first steps will be to assess store overlap, especially in Georgia where Revco operates 180 stores and Big B has 160 stores.
"Once they get the distribution and the stores together, it will be a real profit center for Revco," said John Strauss of investment advisory firm Strauss Financial Group.
Revco has said that the acquisition will boost its earnings in the first year of the combination.
After some haggling about terms, Revco signed a confidentiality agreement, took a peek at Big B's books and apparently liked what it saw.
The Big B board met over the weekend and accepted the new and higher offer from Revco. Details of other offers were not immediately known, although Eckerd Corp was viewed as a potential bidder.
Eckerd declined to comment.
Revco's expanded southeast presence is expected to lead to heightened competition with Eckerd, CVS, a unit of Melville Corp, and Thrift Drugs, a unit of J.C. Penney Co .
The deal with Big B was seen as a significant acquisition for Revco which earlier this year was involved in a failed transaction with Rite Aid. The two companies had signed a pact for Rite Aid to buy Revco for $1.8 billion, but the deal collapsed after regulators expressed concern that the union would raise consumer prices.
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CSX Corp. and Norfolk Southern Corp. said Monday they had entered discussions about their rival offers to buy Conrail Inc.
The two railroads did not disclose the specific nature of their talks, but Conrail's stock fell on views that the discussions would dampen the prospects of a bidding war for the Philadelphia-based railroad.
A source familiar with the companies said the discussions began late last week, continued through the weekend and into Monday.
Richmond, Va.-based CSX last month struck an agreement to buy Conrail in a $8.4 billion cash and stock transaction that valued Conrail at $92.50 per share. Norfolk Southern soon launched its own bid of $100 cash per share, or about $9 billion.
Since then, the two companies have been locked in a fight over their rival offers and taken the matter to court.
CSX, which said Norfolk Southern initiated the talks, said the discussions concerned "a possible sale by the post-merger CSX/Conrail of certain material assets."
Meanwhile, Norfolk Southern sought to quell speculation that it would abandon its bid for Conrail, saying that it was committed to its offer and has secured more than $15 billion to finance the proposed acquisition.
Norfolk Southern said the talks were started by CSX, adding that they were aimed at promoting competition.
"Our willingness to talk to CSX at its suggestion is consistent with my previously announced position that Conrail cannot be acquired by either CSX or NS without a plan to maintain a balanced competitive structure for Eastern railroad service. While I am heartened by CSX's willingness to discuss these matters, we have no reason to believe that Conrail is prepared to accept that reality," said Norfolk Southern Chief Executive Officer David Goode (corrects from Dean Goode).
A battle for Conrail is viewed as being rife with difficulties for all the companies. Although Norfolk Southern has a higher offer on the table, analysts have said that Pennsylvania's corporate takeover law could be an obstacle to its proposed acquisition.
"This is not a good time to be having a long, drawn-out fight. The quicker they get to this, the better," said analyst Anthony Hatch of NatWest Securities.
Conrail shares had partly recovered from the early steep fall by afternoon, trading down $2 per share at $92.25 on NYSE. CSX rose $1.625 to $44.625 and Norfolk Southern gained $1.125 to $90.50, also on the NYSE.
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Conrail Inc. and CSX Corp. so far have convinced the courts that their $8.65 billion merger plan should proceed, but they still need to win over unhappy shareholders who favour Norfolk Southern Corp.'s larger bid.
Lawyers and financial advisors were expected in the next few days to consider several plans aimed at persuading investors to approve a crucial measure needed for the deal.
Meanwhile, CSX said Thursday that its $110 cash tender offer for 19.9 percent of Conrail shares, which represents the first part of its plan to buy Conrail, was oversubscribed.
The proposed stock and cash transaction has angered many investors, who prefer an all-cash $10 billion offer by Norfolk Southern, based in Norfolk, Va.
Philadelphia-based Conrail has rejected the Norfolk Southern offer of $110 a share, saying the union with CSX provides more strategic benefits.
Sources close to the companies said no final decision has been made about how to woo Conrail shareholders, but options include sweetening the stock portion of the deal or setting a "collar" to guard against price volatility.
They will also consider revising the deal's terms to accelerate payment to investors, according to the sources, who did not want to be identified.
The two companies could also decide to keep the terms unchanged, betting that shareholders will ultimately choose the CSX offer over Norfolk Southern's offer, which cannot be formally considered by Conrail until July.
"There's only one thing they can do and that's to sweeten the offer. I don't know how they're going to get enough votes if they don't," said Thom Brown, managing director at investment firm Rutherford, Brown & Catherwood Inc., which holds some 50,000 shares of Conrail.
Richmond, Va.-based CSX and Conrail declined to comment on their plans, but acknowledged last week that they are discussing increasing the value of the pact upon its consummation.
Sources close to the companies said there is no rush to make a decision, noting that Conrail can easily postpone the shareholder vote that is now slated for mid-December.
CSX and Conrail won a significant victory this week when a U.S. district court judge denied a request by Norfolk Southern to block the CSX-Conrail proposal. An appeals panel also declined to block the deal's first step, but will consider Norfolk Southern's request for an expedited appeal.
Because Pennsylvania corporate law prohibits a company from buying more than 20 percent of another company in a cash tender offer, shareholders will be asked in mid-December to approve a measure that would permit CSX to buy 40 percent.
The CSX-Conrail transaction calls for CSX to buy 40 percent of Conrail shares for $110 per share in cash and exchange the remaining 60 percent for CSX stock.
Sources close to the company said Conrail and CSX were well aware of the potential difficulties in winning the necessary votes.
Industry experts believe shareholders may be more willing to approve the 40 percent measure if they are guaranteed more favourable terms for the stock portion of the deal.
"They can't get the vote until they improve the back-end of the deal and they know that," one takeover specialist said.
Meanwhile, Conrail stock fell sharply on the New York Stock Exchange, reflecting the expiration of CSX's cash tender offer for the first 20 percent of Conrail's shares at $110 per share. Shares of Conrail fell $2.375 to $94.50.
Based on Thursday's stock price, the Conrail-CSX transaction values shares of Conrail at about $95.10 each. The stock portion of the deal would be exchanged at a value of about $85.15 for each Conrail share.
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Dataset Description
The dataset is the subset of RCV1. These corpus has already been used in author identification experiments. In the top 50 authors (with respect to total size of articles) were selected. 50 authors of texts labeled with at least one subtopic of the class CCAT(corporate/industrial) were selected.That way, it is attempted to minimize the topic factor in distinguishing among the texts. The training corpus consists of 2,500 texts (50 per author) and the test corpus includes other 2,500 texts (50 per author) non-overlapping with the training texts.
- Homepage: https://archive.ics.uci.edu/ml/datasets/Reuter_50_50
- Repository: https://archive.ics.uci.edu/ml/datasets/Reuter_50_50
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