India needs big rate cut to lift econ - ICICI chief

NEW DELHI (Reuters) - Interest rates in India have to come down by another 2-3 percentage points in order to stimulate demand in the economy, ICICI Bank chief K.V. Kamath said on Tuesday.

The Reserve Bank of India has taken a string of measures over the past few weeks to improve liquidity and boost growth, cutting its key lending rate -- the repo -- by 150 basis points to 7.5 percent and lowering banks' reserve requirements.

HSBC says to shed 500 jobs in Asia

HONG KONG (Reuters) - HSBC will lay off 500 staff in Asia, 90 percent of which will be in Hong Kong, due to deteriorating economic conditions and its cautious outlook for 2009, spokesman Gareth Hewett said on Tuesday.

This will be HSBC's second round of layoffs in the region. In September, HSBC said it was cutting 1,100 jobs in its investment banking operation, or 4 percent of the unit's total, including about 100 in Hong Kong, where the bank's Asian unit is based.

The 450 Hong Kong jobs that will be cut represent 2 percent of the bank's workforce in the city.

Taiwan plans to issue shopping vouchers to boost GDP

TAIPEI (Reuters) - Taiwan plans to give $2.5 billion in shopping vouchers to consumers to help boost its export-dependent economy, suffering in the global slowdown, Premier Liu Chao-shiuan said on Tuesday.

The plan, still subject to parliamentary approval, will likely contribute 0.64 percent to the island's $390 billion gross domestic product (GDP) in 2009, Liu said. Some analysts said the impact could be smaller.

"The global tsunami is spreading and we will have to go through a period of economic chill. We have to resort to the extreme at an extremely difficult time like that," Liu told a news conference.

Liu said every individual in Taiwan's 23 million population would get T$3,600 ($101), costing the government T$82.9 billion. Previously, local media had speculated only low-income households would be eligible for the scheme.

Some analysts expressed mixed views on the programme.

"It's a fairly novel plan. There are not many Asian countries that are actually providing coupons," said Rob Subbaraman, an economist at Nomura in Hong Kong.

"My feeling is the risk would be the contribution to growth will be lower than that."

The plan is part of government efforts to boost the domestic economy. Others include T$122.6 billion worth of subsidies and tax cuts and another T$58.3 billion in infrastructure spending.

Taiwan's economic growth will likely slow this year. A handful of economists expect the export-led economy next year to even shrink due to deepening fears of a global recession dampening consumer sentiment.

In October the consumer confidence index fell to a 7-year low, reflecting a plunging stock market and weak purchases of durables, data from Taiwan's National Central University showed.

The economic-boosting measures will likely cause Taiwan's fiscal deficit to widen and exceed 2 percent of GDP this year and next, from only 0.1 percent last year.

BSE Sensex falls 3.8 pct as global gloom deepens

MUMBAI (Reuters) – The BSE Sensex fell 3.8 percent on Tuesday, taking its losses to 15.2 percent over five consecutive sessions, as prospects of a global recession and massive job cuts at Citigroup rattled investors.

Promises by the finance minister the government will take steps to stimulate the economy to offset the impact of the global slowdown failed to soothe the sentiment.

Financials led by ICICI Bank, the country's second-largest lender, led the fall taking cues from its peers in regional markets that dropped on fears an economic downturn could spark defaults.

The stock fell 6.8 percent to 360.75 rupees, its lowest close in three weeks.

Top lender State Bank of India slipped 5.1 percent to 1,108.30 and the sector index dropped 4.5 percent.

The 30-share BSE index shed 3.81 percent, or 353.81 points, to 8,937.20, its lowest close since Oct. 27 when it hit a three-year low of 7,697.39.

"There is consistent selling pressure. The consensus is building the market would test its previous low," said Rajesh Jain, chief executive at Pranav Securities.

All but one of the index component fell, while in the broader market losers overwhelmed gainers in a ratio of almost 3:1 on moderate volume of 226.8 million shares.

The index fell as much as 4.5 percent in early deals and is down 56 percent so far in 2008 making it one of the worst performers in Asia.

"We will take steps to stimulate the domestic economy to compensate for the downside caused by the downturn in the world economy," Finance Minister Palaniappan Chidambaram told the World Economic Forum's India Summit on Tuesday.

He said India was likely to end the year with a satisfactory growth rate, despite the downturn in advanced economies, although he declined to put an exact number on the expected rate.

"Next year, we will bounce back to a much better growth rate," he said, adding growth could reach 9 percent by the second half of fiscal 2009/10.

Analysts were sceptical.

Securities firm Macquarie said India's growth outlook faced downside risks due to the global financial crisis and gross domestic product (GDP) growth was seen slowing this fiscal and

the next.

"On our current forecast, GDP growth is poised to fall to a seven-year low of 6.0 percent in 2009/10, from an estimated 7.2 percent in 2008/09," Macquarie analyst Rajeev Malik said in a note released on Monday.

Export-driven outsourcing firms such as Infosys Technologies fell 4.2 percent to 1,180.95 rupees and Wipro shed 8.8 percent to 229.85 rupees on the shockwaves in the global financial sector, which provides a bulk of their revenue.

"There's some more downside left to the market as we have still not reached the bottom," said K.K. Mital, head of portfolio management services at Globe Capital.

Citigroup on Monday announced plans to cut 52,000 jobs globally and HSBC added to the employment gloom on Tuesday, saying it would cut a further 500 staff in Asia, mostly in Hong Kong, due to deteriorating economic conditions.

"We keep hearing bad news from the global financial majors as well as regulators and experts as the global financial and economic crisis escalates," brokerage India Infoline said.

"This is unlikely to go away in a hurry and will cap any sharp movement on the way up," it said.

The broader 50-share NSE index closed down 4.2 percent at 2,683.15.


STOCKS THAT MOVED

* Automotive Axles fell 11.1 percent to 112 rupees after it said it would shut down operations for at least a week due to slow demand.

* Binani Industries fell 18.9 percent to 32.45 rupees after it cancelled a plan to swap its shares with Binani Zinc and Binani Cement.


MAIN TOP THREE BY VOLUME

* GVK Power & Infrastructure on 16.1 million shares

* Suzlon Energy on 10.3 million shares

* Unitech on 7.2 million shares

Pepsi Bottling to cut jobs, trims forecast

NEW YORK (Reuters) - The Pepsi Bottling Group Inc announced restructuring plans on Tuesday that would eliminate some 3,150 jobs and cut its forecast for full-year earnings due to weaker foreign currencies.

It said its multiyear restructuring plan should yield $150 million to $160 million in annualized pretax savings when completed, starting with savings of about $70 million in 2009.

In the United States and Canada, Pepsi Bottling said it would streamline its selling and service organization and supply chain infrastructure, moves that would affect about 750 jobs. Plans to close plants and distribution centers in Mexico would affect 2,200 jobs there.

Similar actions in Europe will affect about 200 jobs, the company said.

The company expects cumulative charges from the plan of $140 million to $170 million, with a charge of 27 cents to 32 cents per share expected in the fourth quarter of 2008.

Pepsi Bottling said it now expects earnings per share of $2.20 to $2.26 for the full year, compared with a previous view of $2.32 to $2.38, due to foreign currency changes and a higher-than-expected interest cost on a recent bond issue.

Including its restructuring plan and an asset impairment charge, it forecast full-year earnings of 62 cents to 73 cents per share.

Govt ban on 4 commodity futures may go end-Nov

MUMBAI (Reuters) - Trading in four commodity futures in India may resume after a temporary ban lapses at the end of November, the futures market regulator said on Tuesday.

The government had suspended trading in soyoil, chickpea, rubber and potato futures in May under pressure from its then leftist allies who blamed the futures trade for surging prices.

The ban was initially for four months but was later extended till November.

"If the government doesn't intervene, they go," B.C. Khatua, chairman of the Forward Markets Commission (FMC), told reporters on the sidelines of an industry meeting. "There is no case for continuing it."

He said the FMC was preparing a status report on the commodities market for the government and would urge the resumption of trading in the four commodities.

"Inflation has come down below 10 percent... things are looking good," said Yashwant Bhave, secretary in the Consumer Affairs Ministry. "It is up to the FMC to decide on resuming trade."

The FMC comes under the purview of the Consumer Affairs Ministry.

Inflation rate in early November fell to 8.98 percent, the lowest in almost six months and sharply off an early August peak of 12.91 percent.

IMF says more countries seek help, banks struggle

LONDON (Reuters) - The International Monetary Fund (IMF) said on Tuesday the number of countries seeking help to cope with a spreading economic crisis was growing every day.

Japan's economy minister said recession in the world's second-biggest economy could last longer than feared. Measures of inflation fell sharply in the United States and Britain, paving the way for further interest rate cuts.

A decision by Ford Motor Co to sell its controlling interest in Japan's Mazda Motor Corp illustrated the alarm gripping America's auto industry and the impact of U.S. troubles on economies well beyond its frontiers.

The banking sector, seat of a crisis now inflicting a sharp slowdown across the globe, also showed the strain. Britain's Barclays altered fund-raising plans to quell shareholder anger and profits in Japan's largest bank tumbled.

The crisis has spread steadily in recent weeks beyond the major developed countries, with states from Ukraine and Iceland to Pakistan seeking help from the IMF.

"It is true to say that because of globalisation the amount which the IMF is asking for is increasing, and increasing rapidly, and the list of countries asking for some support is increasing every day," IMF Managing Director Dominique Strauss-Kahn told a news conference on a visit to Libya.

He said earlier this week his organisation was likely to need at least $100 billion in extra funding over the next six months in order to help countries out of the mire.

The deepening economic gloom prompted shares to slide.

U.S. stock futures pointed to a weak start on Wall Street. European shares fell 1.2 percent and Japan's Nikkei shed 2.3 percent.

BANK BONUSES CUT

Barclays, facing shareholder ire following a decision to take 5.8 billion pounds from Middle East investors on terms tougher than the British government offered, cancelled this year's executive bonuses, as U.S. investment bank Goldman Sachs and Swiss bank UBS have done.

It also said Qatar Holding LLC and Sheikh Mansour Bin Zayed Al Nahyan would each make up to 250 million pounds ($372.9 million) of reserve capital instruments available to existing shareholders -- effectively offering the prospect of enjoying some of the higher rates of return agreed to Gulf investors.

Barclays, one of the four biggest UK banks, had declined to accept any capital from the government under a 37 billion pound bailout, wary of conditions imposed on their operations.

Japan's biggest bank, Mitsubishi UFJ Financial Group, announced first half profit had tumbled 64 percent and stuck to its recently lowered full-year forecast.

Australia's biggest investment bank, Macquarie Group, said it was heading for its first fall in annual profit in 17 years.

HSBC added to the employment gloom, saying it would cut a further 500 staff in Asia, mostly in Hong Kong, due to deteriorating economic conditions and caution about next year.

Citigroup Inc, the second biggest U.S. bank, revealed plans on Monday to cut 52,000 jobs by next year, the second-largest corporate lay-off plan in history.

INFLATION WANING

U.S. producer prices declined by a record 2.8 percent in October after energy prices slumped, showing pipeline inflation pressures receding sharply although a key measure of core inflation at the farm and factory gate rose more than forecast.

In Britain, already officially in recession, headline inflation dropped to 4.5 percent in October from 5.2 the previous month.

The larger than expected fall heightened expectations of a substantial cut in the UK's 3.0 percent interest rate next month to stimulate the economy and temper growing fears of deflation, following a dramatic 1.5 percentage point cut this month.

In a further sign of the crisis spreading to the broader economy, major British retailer John Lewis Partnership's department store sales fell 14 percent year-on-year in the latest week.

Politicians are seeking ways of stimulating demand, possibly by tax cuts, while others resort to more innovative measures.

Taiwan said it would issue shopping vouchers worth T$3,600 ($108) to its citizens. Premier Liu Chao-shiuan said the plan was expected to contribute 0.64 percent to GDP.

In Washington, lawmakers argued over a proposal by Senate Democrats for a $25 billion bailout loan for the auto industry to stave off an even wider economic collapse.

"The reason people think failure could be cataclysmic is that there are so many companies that are tied to the auto industry," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co.

Automakers have been hit by a collapse in consumer spending, triggered by a housing crash and worsened by rising unemployment. Officials say even with major stimulus measures in place, it will take a long time for the U.S. economy to recover.

"There's going to be stress in the capital markets for a number of months here because housing prices are still declining and I think it's moved beyond housing," Treasury Secretary Henry Paulson said at a conference.

Paulson and Federal Reserve Chairman Ben Bernanke will testify to Congress later on the $700 billion U.S. bailout plan.