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DJIA 16209.13 À 0.66% Nasdaq 4292.97 À 0.69% Stoxx Eur 600 338.19 À 0.62% FTSE 100 6865.86 À 0.41% DAX 9708.94 À 0.54% CAC 40 4419.13 À 0.87% Euro 1.3743 À 0.14% Pound 1.6639 À 0.07% Beauty Counter on the Go PERSONAL JOURNAL 25 EUROPE EDITION VOL XXXII NO 18 $1.75 (C/V) - KES 250 - NAI 375 - £1.70 WSJ.com TUESDAY, FEBRUARY 25, 2014 EU, U.S Scramble to Find Aid for Kiev Western Officials Say Swift Action Is Needed to Avoid Financial Crisis But Face Thicket of Rules, Hurdles FugitiveLeader Faces Charges Of ‘MassMurder’ BRUSSELS—Europe and the U.S grappled with how to pull together billions of dollars in financing for Ukraine to fend off its economic collapse in the aftermath of weeks of political crisis and violent street protests KIEV—Ukraine’s acting government on Monday issued an arrest warrant for ousted President Viktor Yanukovych and said it was opening a criminal case into the “mass murder” of civilians stemming from violent clashes in the capital last week that left dozens dead Talks between Kiev, Brussels and Washington come amid allegations that the government of former President Viktor Yanukovych, who fled Kiev to an unknown location, raided the government’s coffers before being removed from power over the weekend “The treasury has been plundered, the country has been bankrupted,” Arseniy Yatsenyuk, one of the opposition leaders and a former foreign minister, said Monday, according to Interfax news agency Amid Ukraine’s increasingly dire financial situation, European Union negotiators are facing a thicket of rules governing how the 28-nation bloc can lend money to prop up its neighbors The EU and the U.S want the International Monetary Fund involved to force long-delayed reforms from Kiev in exchange for cash But IMF programs can take weeks to negotiate, while Ukraine may Inside Thinking small: RBS bankers are making the tea and loading the packing cases as they get down with the customers Business & Finance 15 Turkish Finance Minister Mehmet Simsek, in an article for The Wall Street Journal, says Turkey will rise above fear Opinion .14 By Lukas I Alpert, Andrey Ostroukh, Alan Cullison and James Marson The Interior Ministry’s acting head, Arsen Avakov, wrote on his Facebook page that Mr Yanukovych is believed to be in Crimea, a southern region dominated by ethnic Russians that serves as home to Russia’s Black Sea naval fleet A ministry official who declined to be named verified the post “As of this morning, a criminal case has been opened based on the mass murder of civilians Yanukovych and some other officials have been put on the wanted persons list,” Mr Avakov wrote He said Mr Yanukovych is believed to have left his native Donetsk late Saturday and arrived in Crimea on SunPlease turn to page 10 Reuters By Matthew Dalton, Andrey Ostroukh and Laurence Norman not have that long “We have to help them soon—this month, next month,” said Elmar Brok, chairman of the European Parliament’s foreign affairs committee, who was in Kiev meeting with Ukrainian officials “Hopefully everyone is flexible to that.” The U.S., the U.K and some other European officials said the IMF is best placed to provide aid to Ukraine U.S Treasury Secretary Jacob Lew backed IMF aid for Ukraine, after speaking by phone with IMF chief Christine Lagarde and Mr Yatsenyuk, a U.S Treasury official said "Such support could be provided quickly once requested by the new government,” U.K Foreign Secretary William Hague said Meanwhile, Ukraine’s acting finance minister said in a statement Monday that the government would seek a loan from the U.S and Poland within one to two weeks By the end of 2015, Ukraine hopes to raise some $35 billion from the IMF and Europe to revamp the economy and repay its foreign debt But to get that aid, a yet-to-beformed government would have to carry out unpopular measures that were shot down by Mr Yanukovych and other Ukrainian authorities Those measures include allowing the currency to dePlease turn to page 11 A woman studies a wanted poster in Kiev on Monday seeking the whereabouts of Viktor Yanukovych, the ousted Ukrainian president He was believed to be in hiding in the southern Crimea province Not everyone wants the return of Tymoshenko 10 Opinion: The West must stop Putin’s interference 12 Zuckerberg: WhatsApp Is Worth It BY SAM SCHECHNER AND JONATHAN CHENG BARCELONA—Mark Zuckerberg has a message for doubters of Facebook Inc.’s acquisition of mobile-messaging service WhatsApp Inc.: $19 billion was cheap The FaceMOBILE book chief execWORLD utive said MonCONGRESS day that the five-year-old mobile application was worth more than Facebook agreed to pay for it last week, because the app is a rare platform that has the potential to reach over a billion users In a question-and-answer session here at the yearly Mobile World Congress, Mr Zuckerberg said that other messaging apps are already monetizing their users at $2 to $3 a head Meanwhile WhatsApp, with little revenue so far, is on a trajectory to grow quickly from 450 million users to over a billion, Mr Zuckerberg said “The reality is that there are very few services that reach a billion people in the world They’re all incredibly valuable, much more valuable than that,” Mr Zuckerberg said, referring to the price tag, which included $16 billion in cash and stock and $3 billion in restricted stock units What’s more, WhatsApp is soon to offer voice calling to its users, the startup’s cofounder and chief executive said at a separate event in Barcelona on Monday Jan Koum said during a speech at Mobile World Congress that WhatsApp would first release a version of the voice service for Apple Inc.’s iPhone and Google Inc.’s An- droid platforms, followed by services for Microsoft Corp.’s Windows Phone, as well as some phones by BlackBerry Ltd and Nokia Corp He also said the WhatsApp voice product would “focus on simplicity” as it has with its text-based messaging service With its move into voice calls, WhatsApp will now compete more directly with Microsoft’s Skype service, which began as a platform for Please turn to page 18 More coverage of Mobile World Congress 18,19 | Tuesday, February 25, 2014 AM IM UK SW FR IT SP TK BR PL IS AE GR THE WALL STREET JOURNAL PAGE TWO What’s News— i i i i i i World-Wide n State-controlled Royal Bank of Scotland is going to extensive pains to appease its owners and customers after six years of withering criticism 15 n Italy’s new prime minister, Matteo Renzi, was expected to win two confidence votes this week and begin implementing his coalition’s ambitious agenda n Novartis is distancing itself from the era of Daniel Vasella, the former chairman whose controversial exit package blemished the Swiss pharmaceutical company’s image 15 n China’s yuan hit a fourmonth low, sparking expectations that years of gains may be nearing an end 15 n Samsung unveiled an updated flagship smartphone that reflects an attempt to eschew flashy features—and to keep the price competitive 18 n Mining in the Arctic has proved a quixotic quest for all but a few tenacious miners like Agnico Eagle-Mines 17 n HSBC said flat revenue and higher operating costs weighed on profits last year, adding to concerns about the bank’s prospects 20 Agence France-Presse/Getty Images Business & Finance n Ugandan President Yoweri Museveni signed into law an antigay bill, setting the stage for a showdown with Western donors and rights activists opposed to the legislation ‘It’s really important to us to assert conservative solutions, because so many people are hurting,’ Rep Eric Cantor says n China’s property market is showing its strongest signs of a cool-down, as price growth eases, credit for many developers dries up, and some cut prices at new projects Cantor Pushes the GOP To Spell Out Its Agenda n A Russian court sentenced seven activists to prison terms ranging from 30 months to four years after they were convicted of being involved in a “mass riot” during an antiKremlin protest in 2012 [ Capital Journal ] BY GERALD F SEIB n Thai Prime Minister Yingluck Shinawatra vowed not to resign amid continuing antigovernment street protests n Sony Corp is rolling out a new smartphone loaded with its most advanced camera and audio technologies 19 n Afghans mourned 21 soldiers killed in a Taliban attack as details emerged about an incident that sparked a wave of outrage in the country n Jewelers and traders in India are exploiting a legal loophole and using Indians who are coming home after working in other countries to ferry the gold into India 22 n U.S Rep John Dingell, a Democrat who is dean of the House and the longest-serving member of Congress in history, is retiring after serving more than 58 years in the House Getty Images What’s Online Very Handy: Samsung Gear2 on show Monday at the Mobile World Congress in Barcelona Breaking news and analysis from the MWC: WSJ.com/mobileworld Rep Eric Cantor wants Republicans to stop thinking of themselves as simply the opposition party, and to start acting more like the alternative party Such a distinction is important, but difficult to realize As is often the case when a party doesn’t occupy the White House, Republicans have become far more comfortable simply being against what President Barack Obama is for, rather than doing the tougher work of agreeing on precisely what they would differently To some in the party’s more conservative quarters, in fact, even calls for targeted government action are reflexively being read as unwanted calls for big-government action, and an unnecessary distraction from attacks on the health law championed by the president But in an election year in which Republicans are asking voters to give them full control of Congress, the need to be for something and not simply against lots of things becomes crucial “Our members are going to get very excited if we can provide alternatives, not just be a party that’s against whatever the president is for,” Mr Cantor, the House majority leader, said in an interview “It doesn’t mean we’re not going to prosecute the case against the president’s agenda in the form of a public debate.” This quest has taken the form of a series of speeches and writings in recent weeks in which the Mr Cantor has sought to define what Republicans—at least House Republicans—ought to stand for The effort started a year ago, when he delivered a speech at the American Enterprise Institute that laid out arguments for, among other things, charter schools and school choice, and a federal law that would enable working parents to convert overtime into comp time Last month, at a retreat of House Republicans, Mr Cantor presented a broad agenda that he described as “An America That Works.” In it, he urged Republicans to embrace reforms in federal job-training programs, while also pushing more predictable ideas for easing regulations on energy and manufacturing, and tax reductions on the middle class He again made a push for more charter schools, but also urged the GOP to generate ideas for reducing the cost of college education And then, this month, he gave a speech at the Virginia Military Institute on national-security issues in which he called for more aid for Syria’s rebels, more economic sanctions on Iran, a reversal of some planned defensespending cuts and completion of a free-trade pact in Asia In some ways, though, the question hanging over all this is the giant, complicated question of health care Like virtually every Republican in sight, Mr Cantor has called for repealing the Affordable Care Act But the harder part for Republicans is spelling out how they would replace it “Honestly, I think Obamacare is on borrowed time,” Mr Cantor says “We may have an opportunity for an alternative to be put in place.” But there isn’t agreement among congressional Republicans on whether to participate in attempts to modify the law or on any single alternative to take its place House Republicans presented a plan back in 2009 that would allow insurance companies to sell policies across state lines and expand use of state-based highrisk insurance pools to help people with pre-existing conditions find insurance More recently, the conservative House Republican Study Committee offered its own plan, using tax deductions to help individuals buy health insurance, and last month three Republican senators released their own All have similarities, but aren’t identical Mr Cantor says simply: “Our conference is working on that.” His bigger problem is that, to get to this kind of agenda, House Republican leaders have been trying to move past the arguments about spending and debt that have left Congress tied in knots for the last two years and sent perceptions of Republican leadership sliding downward Yet many in the party’s teaparty and conservative wings seem more interested in remaining focused on opposition Look at the website of Heritage Action, the new political-action arm of the Heritage Foundation think tank, and you get a visual image of this impulse On the group’s list of recommended votes on key congressional issues, the first seven items are all calls for votes against something The group urged ‘no’ votes on raising the debt ceiling, on passing the farm bill, on reforming flood insurance, on a new federal spending plan, on extending unemployment benefits for the long-term unemployed, on a new budget outline and on the confirmation of Janet Yellen as chairwoman of the Federal Reserve Mr Cantor clearly doesn’t want that to be the totality of the GOP message: “It’s really important to us to assert conservative solutions, because so many people are hurting.” SUBSCRIBE TODAY CALL +44 (0) 20 3426 1313 VISIT wsjeuropesubs.com/wsje THE WALL STREET JOURNAL EUROPE (ISSN 0921-99) 222 Grays Inn Road, London, WC1X 8HB FOR ISSUES RELATED TO SERVICE: CALL +44 (0) 20 3426 1313 EMAIL subs.wsje@dowjones.com WEB service.wsje.com Advertising Sales worldwide through Dow Jones International Frankfurt: 49 69 29725 390; London: +44 20 7573 4060; Paris: 331 40 17 17 01 Printed in Belgium by Concentra Media N.V Printed in Germany by Dogan Media Group / Hürriyet A.S Branch Germany Printed in Switzerland by Zehnder Print AG Wil Printed in the United Kingdom by Newsprinters (Broxbourne) Limited, Great Cambridge Road, Waltham Cross, EN8 8DY Printed in Italy by Telestampa Centro Italia s.r.l Printed in Spain by Bermont S.A Printed in Israel by Jerusalem Post Group Printed in Turkey by Dunya Super Veb Ofset A.S Printed in Poland by Polskapresse Printing Division Registered as a newspaper at the Post Office Trademarks appearing herein are used under license from Dow Jones & Co ©2013 Dow Jones & Company All rights reserved Editeur responsable Tracy Corrigan M-17936-2003 Registered address: Avenue Cortenbergh 60, 1040 Brussels, Belgium THE WALL STREET JOURNAL Tuesday, February 25, 2014 | NEWS BY TAMER EL-GHOBASHY CAIRO—Egypt’s military-backed interim prime minister and his cabinet abruptly resigned Monday, easing the way for the nation’s popular defense chief to run for president and further solidify his power Prime Minister Hazem el-Beblawi, in his announcement on live state television, gave no reasons for the decision by the interim cabinet to step down after eight months in office, saying only that “reform cannot take place through the government alone.” Interim President Adly Mansour said in a statement he had accepted the resignations but gave no indication of when a new government would be assembled While the interim caretaker government was expected to be dissolved, the timing of the resignations raised questions about their motivation Some observers said the military rulers might have engineered the move to sidestep the scorn for Egypt’s myriad social and economic problems “This government didn’t have any political role and didn’t offer suggestions to solve the current crisis,” said Abdel Moneim Aboul Fotouh, a presidential candidate in 2012 and a frequent critic of the militaryled ouster of Egypt’s first democratically elected president in July Egypt has been hit by a wave of rare winter blackouts, cooking-gas shortages and mounting labor strikes in recent weeks And Mr Beblawi has been criticized by some politicians and pro-military media for his delay in declaring the Muslim Brotherhood a terrorist organization following an upsurge in insurgent attacks on army and police installations, and most recently a group of South Korean tourists On the other hand, the designation was also roundly criticized by rights groups and Western governments as politically motivated The government presented no evidence of the Brotherhood’s involvement in attacks, while militant groups have claimed responsibility There was no immediate comment on the resignations from Field Marshal Abdel Fattah Al Sisi, Egypt’s popular military chief who is expected to easily win election as Egypt’s next president when voting takes place later this spring Field Marshal Sisi has yet to announce his bid, but has received a critical endorsement from the military council he leads Some observers said, however, that with Egypt’s economy faltering and the public’s discontent rising, the shake-up may benefit Field Marshal Sisi “This is overdue and needed because of the unpopularity of the cabinet in the street,” said an official familiar with the matter “There needs to be a positive change before presidential elections are held and actual results people can see.” Analysts said the move could give Field Marshal Sisi room to influence the next cabinet before his expected run for president while an interim president is in office, sparing him the political fallout if they fail to meet the demands of an increasingly frustrated population “This will be the first time that we’ll be seeing his designated choices in place but they will be ap- pointed by Mansour,” Josh Stacher, an Egypt expert at Kent State University, said of the next cabinet “It’s a very nice sleight of hand.” In his televised statement, Mr Beblawi said the cabinet had sought to stabilize Egypt after Mohammed Morsi, the nation’s first democratically elected president and a top Brotherhood official, was forced from power on July by the military amid large demonstrations against the Islamist-run government “We made every effort to get Egypt out of the narrow tunnel in terms of security, economic pressures and political confusion,” he said After the announcement, Hossam Eissa, the departing deputy prime minister and higher education minister, said he and other cabinet members were “relieved” by their decision to resign, which came during a regularly scheduled cabinet meeting European Pressphoto Agency Egypt’s Prime Minister, Cabinet Abruptly Resign Departing Prime Minister Hazem el-Beblawi is seen leaving the government headquarters in Cairo after he announced his resignation on Monday | Tuesday, February 25, 2014 THE WALL STREET JOURNAL EUROPE NEWS Center-Right In Germany Puts Backing On Juncker European Pressphoto Agency BY GABRIELE STEINHAUSER Italy’s new premier, Matteo Renzi, delivers a speech to the Senate in Rome on Monday hours before the body was to hold a confidence vote on his government Italy’s Renzi Pledges ‘Boldness’ BY CHRISTOPHER EMSDEN AND GIADA ZAMPANO ROME—Matteo Renzi spoke of “haste and boldness” as primary attributes of his new government before a confidence vote on Monday, pledging that the Italian state would pay down all of its commercial arrears and focus on improving the country’s schools The 39-year-old Mr Renzi, sworn in Saturday as Italy’s youngest prime minister after leading a party revolt against his predecessor, wants to deliver swiftly on an ambitious agenda, which is expected to include measures to tackle the country’s soaring unemployment rate and reignite growth in Italy, which is struggling to exit its longest recession since World War II Setting out his governing agenda in a speech to the Senate, the former mayor of Florence established three primary pledges: a doubledigit cut to Italy’s payroll tax rates, the creation of guarantee funds to boost lending to small companies, and paying down all of Rome’s arrears to suppliers, a move that would provide Italy’s private sector a cash boost Mr Renzi was expected to win a confidence vote in the Senate scheduled for later in the day, though the exact size of his majority remains to be seen The premier explicitly courted lawmakers from the opposition Five Star Movement during his speech Last year, Italy promised to pay down €40 billion ($54.9 billion) of those debts and achieved just over half of that in 2013 Total arrears— and Mr Renzi insisted he would pay all of them—may be more than €100 billion, according to some estimates Paying down those arrears would have no impact on Italy’s budget deficit, but it will raise the country’s public debt under European Union accounting rules Mr Renzi also dwelled at length on what he said was the urgent need for school repairs around the country, an effort he said would cost several billion euros He urged lawmakers to free themselves of “cultural subalternity,” or inferiority to Europe, and a widespread perception that the bloc’s rules are too bureaucratic “We need to dream bigger,” he said Mr Renzi said Italy’s influence over EU processes and affairs would be enhanced if lawmakers agreed to rapid approval of his reform measures—including changes to labor and electoral laws—before July 1, when Rome takes over the EU’s rotating presidency His proposed institutional reform would also change the nature of the Senate, turning the upper legislative chamber into an assembly of local government representatives with limited sovereign powers “I hope I am the last prime minister ever to have to ask for your confidence,” said Mr Renzi, who at 39 wouldn’t be eligible to hold office in the Senate Referring to his demand for radical change, as well as to his ascent to power through a party vote rather than a national election, Mr Renzi added: “If we fail, it will be all my fault.” On Friday, Mr Renzi unveiled a new cabinet that represented a mix of change and continuity With 16 ministers, the cabinet is leaner than that of his predecessor Enrico Letta, who was forced to resign earlier this month Half of the new ministers are women and several of them are under 40 But six were also members of the Letta government, a decision that could expose Mr Renzi to criticisms of falling short on his promises to make a clean break with the past For the key Economy Ministry, Mr Renzi picked Pier Carlo Padoan, 64, chief economist of the Organization for Economic Cooperation and Development BRUSSELS—Chancellor Angela Merkel’s Christian Democratic Union and its Bavarian sister party, the Christian Social Union, on Monday endorsed former Luxembourg Prime Minister Jean-Claude Juncker to lead Europe’s center-right into European elections in May The CDU-CSU endorsement means their delegates are expected to vote for Mr Juncker at the European People’s Party congress in March, making Mr Juncker a clear favorite ahead of Former Latvian Premier Valdis Dombrovskis, who entered the EPP race last week Mr Juncker “is an outstanding European with whom we want to campaign together for a strong EPP in the European Parliament,” Peter Tauber, the CDU’s general secretary, told reporters in Berlin For May’s European Parliament elections, European parties for the first time are selecting lead candidates that they say should also become contenders for president of the European Commission However, EU leaders, including Ms Merkel, have in the past said that there is no direct link between lead candidates and the top post in the EU’s executive The CDU’s Mr Tauber made no reference to the commission in his remarks But Markus Ferber, a member of the CSU’s board, took a clearer line “Yes of course,” Mr Ferber said when asked whether the CSU wanted Mr Juncker to become commission president “Among all the candidates, we believe Mr Juncker to be the most capable,” Mr Ferber said He pointed out Mr Juncker’s experience in dealing with other European leaders and institutions during his time as Luxembourg prime minister and his “ability to build bridges” between the bloc’s rich and poor members The European Socialists have already selected Martin Schulz, currently president of the European Parliament, as their lead candidate A recent aggregate poll from all 28 EU countries gave the Socialists a narrow lead over the EPP in the May vote Iceland Protesters Want EU Referendum BY LÁRA HILMARSDÓTTIR AND CLEMENS BOMSDORF REYKJAVIK—Some 3,500 people gathered outside the parliament in Reykjavik on Monday to protest the Icelandic government’s backtracking from its election promise to hold a national referendum on whether to seek European Union membership, a move also creating friction within the government that has been in power for less than a year The protest meeting was called after the two parties leading the government coalition said Friday that the small island nation will withdraw its EU membership application without holding a referendum on the issue “I’m protesting betrayals of the election promises that the parties that are now in power made They pulled out from their promise as soon as they were in power,” said 23-year old Bjarki Guðmundsson, a music student who took part in the protest outside the Althingi “I’m against EU membership but I think the people should have the last say,” he said The center-right Progress Party and Independence Party said Friday they had agreed on a proposal to withdraw the application that was submitted by a previous government in 2009 A parliamentary debate on the issue was postponed Monday, but lawmakers will probably debate the bill Tuesday, and “a vote is expected within the next couple of weeks,” said Urður Gunnarsdottir, a Foreign Ministry spokeswoman The EU-skeptic government suspended accession talks in Septem- ber, after coming to power in the spring of 2013 on an election platform that included putting the EU membership issue in the hands of Icelanders in a referendum Friday’s agreement sparked controversy among the public and opposition MPs, but the government is also facing criticism from within its own ranks The Independence Party, while generally EU-skeptic, also has vocal supporters of an Icelandic EU membership One of them, Vilhjálmur Bjarnason, a member of parliament, said Iceland should finish the membership application negotiations, and then bring the issue to the nation in a referendum Mr Bjarnason added that his party “needs to consider the different views of its members.” Political scientist Eirikur Berg- mann, a professor at Bifrost University in Iceland, said the government parties’ move is a clear breach of a main election promise “Already, large parts of the public are unhappy and support for the coalition is decreasing,” Mr Bergmann said While Mr Bjarnason said he wouldn’t leave the Independence Party over the issue, Mr Bergmann said some members from the EUfriendly faction of the party could take that step Since the membership application was submitted in 2009, much of the discussion in Iceland has centered around possible exceptions from EU regulations, particularly regarding fisheries The most recent polls, from January, indicate strong opposition to an Icelandic membership, with 60.3% against it and 39.7% in favor Agence France-Presse/Getty Images Luxembourg’s Jean-Claude Juncker THE WALL STREET JOURNAL Tuesday, February 25, 2014 | EUROPE NEWS Russia Court Sentences Seven Activists BY OLGA RAZUMOVSKAYA MOSCOW—A Russian court sentenced seven activists to prison terms ranging from 30 months to four years after they were convicted of being involved in a “mass riot” during an anti-Kremlin protest in 2012 An eighth defendant received a suspended sentence Critics at home and abroad have said the case was politically motivated All eight defendants were found guilty on Friday of taking part in what police described as mass riots Pope Begins Overhaul Of Financial Structures BY LIAM MOLONEY ROME—Pope Francis on Monday began the first significant overhaul of the Vatican’s financial structure by creating a powerful department that will control economic and administrative activities, as he aims to reshape the Holy See bureaucracy to tackle the needs of the 21st century The pontiff established a new secretariat for the economy to run the Vatican’s finances more efficiently, slim down existing structures and improve transparency and oversight of its accounts Since his election last year, he has made a priority of overhauling the Vatican’s administration, known as the Curia, and its finances The new secretariat aims also to improve the support available for programs destined to assist the poor and marginalized, the Vatican said “Like a faithful and prudent manager who has the task of carefully looking after what has been entrusted to him, the Church is aware of her responsibility to protect and manage her assets,” said Pope Francis in the order that established the new secretariat The new secretariat, which will be headed by Australian Cardinal George Pell, will report directly to the pontiff It will have authority over all economic and administrative activities within the Holy See and the Vatican City State—the world’s smallest country nestled in the center of Rome The secretariat will be guided by a council of 15 members, made up of eight cardinals or bishops and seven lay experts from across the globe The emphasis on picking professional experts is of particular importance in attempting to bring the financial practices of the 2,000-yearold church in line with current systems “This will greatly assist the Holy See in improving budgetary management and adopting modern-day practices that will be more easily monitored and understood,” said Francesco Cesareo, president of Assumption College in Worcester, Mass The pope’s decision follows meetings last week in which cardinals discussed financial, economic and administrative matters These cardinals have also been picked to discuss a new constitution to run the Vatican on Bolotnaya Square in central Moscow during a rally just before President Vladimir Putin’s inauguration in May 2012 Investigators had accused the defendants of trying to overthrow the government and destabilize the country The longest sentence of four years was still below the six years in prison prosecutors had requested The only female activist in the group received a suspended sentence of three years and three months Defense lawyers told the Interfax news agency that they would be appealing the court’s decision Kremlin spokesman Dmitry Pes- kov was quoted by Interfax as saying the Bolotnaya case defendants are free to seek a presidential pardon, which would be reviewed in accordance with Russian law Around 200 people who had come to the court building to support the defendants were detained for disturbing public order by police, a representative for Moscow police told Interfax Human-rights activists immediately asked for the defendants’ release Vladimir Lukin, Russia’s state-appointed human-rights ombudsman, was quoted by Interfax as saying the sentences were “too harsh” and that he would support an appeal Former Finance Minister Alexei Kudrin, who has often criticized the current government, described the sentences as “another example of excessive and selective punishment,” on his official Twitter account The case occurred months after a wide-ranging, Kremlin-backed amnesty led to several high-profile political prisoners being set free in late December ahead of the Winter Olympic Games in Sochi Those released included two members of the punk group Pussy Riot and several other activists charged in connection with the 2012 clash with police Russia’s bestknown prison inmate, former Yukos oil tycoon Mikhail Khodorkovsky, was also pardoned that month Human-rights activists have said they feared that Russia would begin a crackdown on political opponents after the Winter Olympic Games Arrests and detentions resumed during the Sochi Games with environmental activist Yevgeny Vitishko being sentenced to three years in prison for violating his parole by swearing in public Members of Pussy Riot were also briefly detained in Sochi Confidence to expand That’s what participants in international commerce can achieve when they’re smart about managing risk And smart managers work with CME Group, the world’s leading derivatives marketplace Companies doing business around the world partner with us to manage virtually every kind of risk Changing currency valuations, energy costs, interest rate fluctuations, commodity shifts – whatever the risk, we help the world advance beyond it Learn more at cmegroup.com/advance How the world advances CME Group is a trademark of CME Group Inc The Globe logo is a trademark of Chicago Mercantile Exchange Inc All other trademarks are the property of their respective owners Copyright © 2014 CME Group All rights reserved | Tuesday, February 25, 2014 THE WALL STREET JOURNAL U.S NEWS Pentagon’s Budget Plan Shifts Priorities BY DION NISSENBAUM AND JULIAN E BARNES WASHINGTON—Defense Secretary Chuck Hagel is proposing a new budget plan designed to turn the military’s attention from the long ground war in Afghanistan toward emerging cyberthreats from China and increasing challenges from al Qaeda-affiliated groups in Africa The Pentagon road map, sure to face fierce resistance from across the political spectrum, calls for reducing the military’s reliance on manpowerheavy troop buildups, investing instead in more agile special forces and cyberwarriors In unveiling the first Pentagon budget to bear his imprint, Mr Hagel is calling for cutting back the size of the Army to a level opposed by some top generals, curtailing construction of a new class of Navy ships cherished by top admirals and scrapping an Air Force plane used to protect U.S forces in Iraq and Afghanistan Instead, Mr Hagel proposes injecting more money into changes defense officials say will make for a more adaptable and innovative military that is better ready to respond to changing threats Mr Hagel wants to pare the size of the active-duty military by 13% and the reserve force by 5% But he is looking to boost the size of U.S Special Forces by nearly 6% by adding about 3,000 personnel to the kinds of teams that killed Osama bin Laden in Pakistan, rescued an American aid worker in Somalia and freed U.S commercial sailors captured by pirates off the coast of East Africa “This is a time for reality,” Mr Hagel said Monday in unveiling the $496 billion budget plan “This is a budget that recognizes the reality of the magnitude of our fiscal challenges, the dangerous world we live in, and the American military’s unique and indispensable role in the security of this country and in today’s volatile world.” Congress has the final say on the Pentagon budget and must approve most of the recommendations in it The full details of the proposed budget will be included in President Barack Obama’s budget plan to be unveiled next week The proposal will be submitted to Congress, which will weigh the Pentagon’s proposals over the course of the year Every major element of the spending plan is certain to face opposition from powerful groups, governors and lawmakers who have different ideas for how the Pentagon should spend its money Veterans groups and their congressional supporters are preparing to battle Mr Hagel’s call to curtail spending on military benefits that consume a significant portion of the Pentagon budget Influential lawmakers are expected to oppose Mr Hagel’s proposal to eliminate the entire military fleet of about 300 A-10 “Warthog” jets, widely admired as a plane key to helping U.S ground forces in battle And Congress is likely to reject Mr Hagel’s call for creating a commission to examine the closure of military bases across the country But Pentagon officials said Monday if Congress doesn’t make those cuts, other spending would have to be curtailed Artists Help Bridge Divide Between Cuba and the U.S Associated Press BY ARIAN CAMPO-FLORES Democratic Michigan Rep John Dingell, the longest-serving member of Congress ever, has decided not to seek re-election Dingell to Retire From House BY REBECCA BALLHAUS WASHINGTON—Democratic Rep John Dingell, dean of the House and the longest-serving member of Congress in history, is retiring after serving more than 58 years Mr Dingell, 87 years old, said in prepared remarks to a Michigan business group that he had “always known that when the time came that I felt I could not live up to my own personal standard for a Member of Congress, it would be time to step aside for someone else to represent this district.” In the speech, he had harsh words for Congress, calling it a “great disappointment to everyone.” And he said the blame was with lawmakers and voters “There will be much blaming and finger pointing back and forth, but the members share fault, much fault; the people share much fault, for encouraging a disregard of our country, our Congress, and our governmental system,” he said Mr Dingell first won his House seat in 1955, through a special election held after the death of his father, who had held the seat since 1933 As the longest-serving member of the House, he swears in the House speaker at the beginning of every Congress Mr Dingell’s tenure in Congress became the longest in history in June 2013, when he broke the record held by the late Democratic Sen Robert Byrd of West Virginia Since Congress convened in 1789, there have been just 26 lawmakers who served 40 years or more in the House Mr Dingell is the head of the pack, with fellow Michigan Democrat Rep John Conyers fifth on the all-time list Mr Dingell has been involved in some of Congress’s most celebrated achievements, including Medicare, the 1990 Clean Air Act, the Affordable Care Act and the 1964 Voting Rights Act—which, he said in an interview in June, was the “single most important vote I cast.” His retirement is the latest in a series of departures of “old bulls” who have been the House’s pillars of liberal legislating That group includes California Democrats Henry Waxman and George Miller, who this year announced they wouldn’t run again With Mr Dingell’s departure, Mr Conyers, now in his 25th term, will become the longest-serving member of Congress Mr Conyers began his tenure in 1965 From 1981 to 1994, and then from 2006 to 2008, Mr Dingell was chairman of the Energy and Commerce Committee The businessfriendly congressman was a staunch defender of the auto interests in his district in Detroit’s working-class suburbs, and those interests increasingly put him at odds with the Democratic caucus’s commitment to tougher antipollution standards He frequently stood in the way of proposals to more rapidly increase federal gasoline-mileage standards and supported less-aggressive proposals to curb greenhouse gases, including carbon dioxide His stance contributed to his ouster as chairman in 2008, when he was successfully challenged by Rep Waxman Still, under Mr Dingell’s leadership, the committee passed legislation removing more than 8.6 billion tons of carbon dioxide from the atmosphere and requiring that a percentage of the country’s electricity be generated by renewable energy sources The committee also widely broadened the scope of its investigations, targeting Pfizer Inc., the generic-drug industry and Stanford University, among others Known as an intimidating presence on oversight committees, Mr Dingell was known for his “Dingellgrams,” information requests that signaled investigations Mr Dingell also worked on legislation to improve the safety of drinking water, to address leaking underground storage tanks and to improve air quality Michigan Democratic Sen Carl Levin praised the lawmaker’s “rare combination of legislative skill, determination, hard work and generosity of spirit,” and his “tireless advocacy” on behalf of the state Rep Gary Peters, another Michigan Democrat, said, “Whether you measure by years of service, laws passed or service to constituents, the United States Congress will never again see a legislator leave as an indelible a mark as John D Dingell.” Rep Fred Upton (R., Mich.), current chairman of the Energy and Commerce Committee, said in a statement that “it has been a real pleasure working closely with ‘Big John’ through the years on a number of issues facing our country.” His wife, Debbie Dingell, 60, is said to be considering a bid for the seat, which is likely to stay in Democratic hands Ms Dingell is chairwoman of the Wayne State University board of governors and previously served as a senior executive at General Motors Co for more than 30 years President Barack Obama won the district with about two-thirds of the vote in 2012 KEY WEST, Fla.—Five years ago, the cross-border collaboration of the Cuban artistic trio known as the Merger would have been unthinkable With two members living in Havana and the third in Miami, they traverse the Florida Straits roughly once a month to work on their steel and Plexiglas sculptures They show their works regularly at art fairs in Florida and draw buyers from across the U.S.—all despite the fivedecade-old American trade embargo against Cuba An exhibit featuring the three— Mario González, Niels Moleiro and Alain Pino—along with seven other Cuban artists opened last week at five cultural institutions here The show, called One Race, the Human Race, is the counterpart to an exhibit that had its debut last month at the Museo Nacional de Bellas Artes in Havana, featuring pieces by Mario Sanchez, a deceased CubanAmerican artist who lived in Key West Organizers say it is the first example of a cultural exchange between art institutions, as opposed to art galleries or fairs, in the two countries The dual exhibits underscore the growing cultural ties between the countries, facilitated by each loosening travel restrictions in recent years The result is a growing thaw in relations at the grass-roots level, even as rhetoric between the two governments remains largely hostile “These are the first steps toward a rapprochement,” Mr González said “We can’t be neighbors 90 miles away and not get along.” In recent weeks, debate over U.S.-Cuba relations flared once again, in part because of a poll by the Atlantic Council in Washington that found that a majority of Americans, and an even higher percentage of residents of Miami-Dade County, Fla., which is heavily Cuban-American, favored normalized relations with Cuba In 2000, 62% of Cuban-Americans in Miami-Dade favored continuing the embargo in a poll by Florida International University A fundamental policy change is unlikely any time soon, given the need for congressional approval and stiff opposition of Cuban-American lawmakers, said Guillermo Grenier, a sociology professor at FIU “So what is left is clearly on the cultural level,” he said While cultural exchanges between the nations have occurred periodically for decades, they have become more frequent after recent government moves In 2011, the Obama administration loosened restrictions on educational and cultural travel to the island, and last year, it extended the duration of nonimmigrant visas for Cubans to five years from six months, and allowed for multiple entries Meantime, Cuba last year eliminated the need for its citizens to obtain exit visas to travel overseas and extended the period they could stay abroad to two years from 11 months According to Cuban government data, the number of U.S citizens, excluding Cuban-Americans, who traveled to the island rose to 98,000 in 2012 from 42,000 in 2008 The eased rules have allowed more American painters, playwrights and musicians to travel to Cuba to collaborate on shows Meanwhile, a variety of companies are organizing educational and cultural tours aimed at exposing Americans to Cuba’s culture Cristobal Herrera for The Wall Street Journal Cuban artistic trio called the Merger, with one of their works in Key West, Fla THE WALL STREET JOURNAL Tuesday, February 25, 2014 | WORLD NEWS BY ARIES POON AND FANNY LIU TAIPEI—Taiwan’s government, running a budget deficit for the sixth straight year, is considering increasing taxes on high-income earners and financial institutions, as the export-dependent economy is showing more signs of picking up Finance Minister Chang Shengford said Monday the government is looking at raising the top rate of income tax to 45% from 40% on individuals whose annual taxable income exceeds 10 million New Taiwan dollars (US$329,161) Additionally, the administration is considering an increase in the business-tax rate on banks and insurers to 5%, a level it was at before the 2008 financial crisis, from the current 2% The government is also looking at reducing tax credits individuals can claim if they are subject to both income and dividend taxes “This is only fair,” Mr Chang said at a news conference “The government is trying to establish a concept of ‘feedback tax,’ and let a small number of high-earning individuals and sectors give back to the community and propel the economy forward.” Taiwan is joining other economies in raising taxes on the wealthy France’s constitutional court in December approved President Franỗois Hollandes millionaire tax, a 75% tax rate on individuals who earn more than €1 million ($1.37 million) U.S President Barack Obama is also expected to unveil a proposal to increase taxes on high-income earners when he announces his 2015 budget, The Wall Street Journal reported Thursday Taipei has been spending more than it collected since 2009, pumping dollars into infrastructure projects and social-welfare programs while the economy was weighed down by weak exports Mr Chang said tax revenue, if all proposed increases kick in, should be boosted by up to NT$90 billion 90 billion New Taiwan dollars a year, around 5% of the government’s tax income last year The plans come after the government last Tuesday projected 2.82% economic growth for this year, the fastest in three years but still below the average 3.3% annual growth over the past five years Improving exports to developed economies have led companies in Taiwan to increase investments and raise wages in recent months, although a slowing Chinese economy remains a continuing concern Taiwan has no external debt, but the central government owes its own citizens NT$5.192 trillion New Taiwan dollars (US$171 billion) as of the end of January Rolling government notes and bonds are about 36.8% of the average gross domestic product over the previous three years, according to government data The island’s public debt level, while already close to its statutory ceiling of 40.6%, is lower than many Asian countries such as Japan and Singapore Mr Chang said Monday the government has no plans to raise the debt limit Beijing Rejects Modi’s ‘Expansionist’ Comments BY BRIAN SPEGELE BEIJING—China’s Foreign Ministry on Monday played down a longsimmering border dispute with India, brushing off a blunt comment by the front-runner to become India’s next prime minister that Beijing is set on territorial expansion Over the weekend, Indian opposition leader Narendra Modi traveled to an area near the country’s disputed Himalayan border with China— over which the two fought a border war in 1962—and warned Beijing to abandon its territorial ambitions He said that China “will have to leave behind its mind-set of expansion.” Chinese Foreign Ministry spokeswoman Hua Chunying denied that China has expansionist tendencies and described the territorial dispute with India as a complex and sensitive matter “left over from history.” “I want to say that you can all see in history China has never actively launched a war of aggression to invade and occupy one inch of territory,” said Ms Hua The comments by Mr Modi followed growing apprehension across Asia over China’s ambitions Regional leaders have criticized Beijing for what they view as aggressive measures by China to establish control over contested territories, some of which are strategically important and rich in resources Ms Hua’s comments were muted compared with the rhetorical barrage her agency has directed in recent weeks toward Japan and its leader, Shinzo Abe While rejecting Mr Modi’s claims, Ms Hua also stressed the “joint efforts” taken by both sides to work through the dispute, which is centered on remote Himalayan borderlands Observers are watching China’s approach to relations with India, particularly given recent overtures by Japan’s government to bolster ties with New Delhi Following a January meeting between Mr Abe and Indian Prime Minister Manmohan Singh, the countries pledged to more closely work together for stability and peace in the face of a changing strategic environment Harsh V Pant, an expert on China-India relations at King’s College London, said China has toned down its rhetoric against India in anticipation of a new Indian government At the same time, he said, Beijing is concerned about India’s newly forming partnerships with Japan and others in the region “China might be calculating that further pushing India into the arms of its regional adversaries might not be in its best interest, at least in the short term,” he said Concerned about a backlash among smaller Asian nations fearful of China’s rise, Beijing has pledged better relations with its neighbors, particularly those in Southeast Asia But growing assertiveness by Chinese security forces, including an increasingly capable navy, in disputed waters in the South China Sea has further strained ties Reuters Taiwan Eyes Higher Taxes on Wealthy A worker smashes concrete for recyclable materials at a demolition site near new homes in Taiyuan, Shanxi province Data Hint at Cooling Of China’s Properties BY ESTHER FUNG SHANGHAI—China’s red-hot property market is showing its strongest signs yet of a cool-down, as price growth eases, credit for many developers dries up, and some start to cut prices at new housing projects The potential slowdown could be welcomed by Beijing, which for more than four years has tried to cool the market to keep the high cost of housing from becoming a political and social problem But a sharp slowdown could hit the Chinese economy just as growth is slowing, and Beijing is looking for ways to keep it steady The latest sign came on Monday, as new home price acceleration in China’s biggest cities showed its first slowdown in a year It follows indications from banks and developers that lenders are treating the sector with increasing caution amid worries about possible bad loans On Monday, China’s Industrial Bank Co confirmed that it stopped issuing some new loans to property developers In some markets, developers are also worried about an oversupply of homes Developer DoThink Group last week said it cut prices by 12.2% at its North Sea Park project in the eastern Chinese city of Hangzhou to 15,800 yuan ($2,592) per square meter from 18,000 yuan per square meter It said on its website late last week it started discounting apartments at its 12tower high-rise project, which had been on sale in phases since April 2012 Analysts said the price cuts in Hangzhou and in the nearby city of Changzhou are an indication that those places have an oversupply of housing, which could spread to larger cities “The risk in the property sector is currently underappreciated, and the price cuts in Changzhou and Hangzhou are worrying signals worth investor attention,” said Nomura economist Zhiwei Zhang in written comments Easing Market Average change in new home prices in 70 Chinese cities 10% Year to year Month to month –2 2011 ’12 ’13 ’14 Sources: National Bureau of Statistics; WSJ calculations The Wall Street Journal “A sharp slowdown in property investment is possible and would increase systemic risks,” Mr Zhang wrote He added that the sector’s “contribution to GDP growth has been critically important over the past five years, and the government may not have the proper policy tools to manage a situation where oversupply eventually causes property prices to fall, particularly in third- and fourth-tier cities.” Shares of property developers were sharply lower Monday Shares of China Vanke, the nation’s largest property developer by revenue, closed 6.6% lower, and Poly Real Estate Group fell 8.5% The Shanghai Composite Index ended down 1.8% China has been grappling with a resurgent property market in big cities that has resisted government curbs aimed at reining in high prices The boom has also contributed to growing supplies of new homes in smaller cities, raising concerns about a sharp drop in prices and deteriorating loan quality Average new-home prices in 70 Chinese cities rose about 9% in January from a year earlier, according to Wall Street Journal calculations based on data released on Monday by the National Bureau of Statistics While that figure shows China’s housing market remains frothy, it also marks a drop from December’s 9.2% rise as well as November’s 9.1% rise The results released Monday marked the first slowdown since home prices began surging in January 2013, after a sluggish 2012 “The oversupply situation has a greater bearing on slowing down the property market this year The current liquidity tightness is unlikely to last into the second half, because economic growth isn’t that great,” said Nicole Wong, a property analyst at CLSA “Propertyprice growth this year will decelerate, and in some cities, there will be price cuts.” Industrial Bank, a midsize lender, said on Monday in a filing to the Shanghai Stock Exchange that it had halted some types of property loans until the end of March, when it will unveil new policies The bank said the move is aimed at “adjusting its asset structure and to better serve the real economy.” Banks have periodically tightened lending to developers; the last time was in 2010-12 when the government worried that easy credit was helping drive up prices Worries about a slowing economy led to a loosening in early 2013 Now banks are growing cautious about lending to developers, especially those active in smaller cities that face an oversupply of housing, and Beijing is concerned about a buildup of debt and unoccupied housing In Changzhou, the developers of a 21-tower project announced discounts last week Prices were reduced to an average of 7,000 yuan per square meter, with some units selling for 5,380 yuan per square meter, down from an 11,000-yuan price tag in December, according to data from property broker SouFun Holdings One of the developers, Agile Property Holdings, didn’t respond to requests to comment —Grace Zhu in Beijing contributed to this article | Tuesday, February 25, 2014 THE WALL STREET JOURNAL WORLD NEWS Thai Leader Obstinate as Crisis Persists BANGKOK—Thai Prime Minister Yingluck Shinawatra vowed again on Monday not to resign amid continuing pressure from antigovernment street protests, while the army chief reiterated that the military has no plan to intervene to end the political stalemate Antigovernment protests here have entered their fourth month as demonstrators try to topple Ms Yingluck’s administration Protesters have recently targeted companies linked to her family, especially those associated with her older brother, telecom tycoon and former Prime Minister Thaksin Shinawatra “I have to protect democracy and my best to hand it over to the new government,” Ms Yingluck told reporters “Whatever happens, I will perform my duty until the last minute.” Protesters believe Mr Thaksin, who was ousted in a military coup in 2006, still runs the country from behind the scenes They want to set up an unelected interim government to pin back the influence of populist politicians such as the Shinawatras Fears of clashes between rival political groups have raised concern that Thailand’s armed forces may be compelled to step in Thailand’s army chief, though, said Monday that the military intends to keep out of the conflict, urging rival factions to talk through their differences and find a peaceful solution “The military doesn’t want to use force and weapons to fight against fellow Thai people who have different political viewpoints,” Gen Prayuth Chan-ocha said in a tele- Reuters BY WARANGKANA CHOMCHUEN Antigovernment protesters on Monday pushed ahead with their campaign to topple the prime minister’s government vised broadcast Gen Prayuth warned that the country’s political impasse is worsening and is more complex than a similar conflict in 2010, when supporters of Mr Thaksin gathered in Bangkok to demand the elections that ultimately brought Ms Yingluck to power Gen Prayuth urged government and security officials to find the people responsible for the attacks, some of whom he said were linked to the violence leading up to the protest crackdown in 2010 He also asked protesters not to overtake state offices or use weapons against security officials Three people—a woman and two young children—were killed and dozens injured in a grenade blast near a protest in one of the city’s busiest shopping districts on Sunday That explosion came after attackers fired on a political rally in Trat province, 290 kilometers east of Bangkok, and threw explosive devices into the crowd, killing a 5- year-old girl A policeman who was shot in the head during clashes between the police and protesters last week was pronounced dead on Monday Twenty people have died and more than 700 have been injured since the protests began On Monday, a group of protesters rallied in front of a cable television station run by Mr Thaksin’s son, while others entered state compounds to pressure officials to abandon work There was little police presence after the country’s Civil Court last week barred the government from using force to disperse protesters Ms Yingluck’s government is also facing legal threats Thailand’s National Anti-Corruption Commission last week said it would charge her with negligence for continuing a rice price-support program despite warnings of financial losses and corruption She was summoned to appear over the charges of alleged neglect of duty on Thursday If Ms Yingluck were found guilty, she would be suspended from duty and would face an impeachment trial in Thailand’s partially elected Senate Ms Yingluck has repeatedly denied corruption allegations, defending her flagship rice subsidy—which has incurred paper losses of up to $8 billion to date—as being designed to raise incomes in rural areas Leaders of the mass-membership “Red Shirts” movement, supporters of the Shinawatra family and their policies, said Sunday that they would protect Ms Yingluck’s government from being overthrown by protesters, judges or other independent agencies After a pro-Thaksin government was removed from power for alleged election violations, tens of thousands of Red Shirt members converged in Bangkok in 2010 to demand a new vote, occupying much of the city center for nearly two months More than 90 people were killed in those clashes between protesters and security forces, with the vast majority of the dead being Red Shirt members BY NICHOLAS BARIYO KAMPALA, Uganda—Ugandan President Yoweri Museveni signed into law a controversial antigay bill, setting the stage for a showdown with Western donors and rights activists opposed to the legislation Although the bill has won praise in Uganda, especially among religious groups, human-rights activists have decried the measures to curb what Mr Museveni has called “abnormal” behavior Hundreds of jubilant antigay activists took to the streets of the capital, Kampala, on Monday, shortly after the president signed the bill into law The president, who signed the bill at the State House just outside Kampala, said it represented a response to Western activists who promoted gay rights in the country “This law was provoked by arrogant and careless Western-based groups that are fond of coming into our schools to recruit our young children,” he said in a televised speech shortly after signing the bill “Can somebody be homosexual purely by nature without nurture? The answer is: ‘No.’ ” On first conviction for so-called homosexual acts, offenders face a 14-year prison sentence Subsequent convictions for “aggravated homosexuality,” which include homosexual acts committed by an HIV-positive person, could bring a penalty of life in prison The United Nations agency on HIV/AIDS, UNAIDS, warned last week that the Ugandan law could compel homosexuals to shun HIV testing and treatment to evade arrest Only around 30% of the nation’s 35 million people have been tested, according to government data Western donors—including the U.S., Canada and European Union— have warned that the law could jeopardize Uganda’s foreign aid, upon which the country relies for at least $2 billion every year Maria E Burnett, a senior researcher at Human Rights Watch, said that by signing the bill into law, Mr Museveni has dealt a “dramatic blow” to freedom of expression and association in the country She warned that the legislation would distract police from more important tasks “By signing this bill, Museveni has not only let down gay Ugandans; he has also failed the very constituencies he claims to be protecting, including children,” she said Not all opposition has come from Western countries South African retired Archbishop and Nobel Prize Laureate Desmond Tutu appealed for Mr Museveni not to sign the bill, “criminalizing acts of love.” Mr Museveni, a Christian, this month said he would sign the bill, after citing a report from Ugandan medical experts who said homosexuality isn’t “genetic but a social behavior.” The U.S.-based medical group Infectious Diseases Society of America said that Mr Museveni was relying on “outdated and discredited science” to justify his decision to sign the bill “Current, evidence-based find- ings show that the law will have as devastating an impact on public health as it will on human rights,” the group said Uganda ranks 10th among the countries with the highest HIV/AIDS prevalence in Africa More than two million Ugandans are infected with HIV/AIDS, according to U.N data The latest move by Uganda reinforces an already tough stance among African governments against homosexuality A same-sex relationship is considered taboo in many African societies, and it is illegal in around two-thirds of countries on the continent In some countries such as Sudan and Mauritania, along with southern Somalia, homosexual acts are punishable by death In January, Nigerian President Goodluck Jonathan signed into law a bill that makes homosexuality a criminal offense The law has spurred mass arrests of homosexuals A colonial-era law in Uganda already criminalizes homosexuality Lawmakers say the new bill will strengthen the existing one by including new prohibitions to bar “promotion of gay rights and punish anyone who funds or sponsors homosexuality.” An original version of the bill introduced in 2009 proposed a maximum penalty of death for homosexual acts, though this was withdrawn following international criticism The White House said Mr Museveni’s decision to sign the bill into law reflects poorly on the country’s commitment to protecting human rights Associated Press Uganda Clamps Down on Gays Soldiers’ caskets are draped with Afghan flags during Monday’s funeral service Outrage in Afghanistan BY NATHAN HODGE AND HABIB KHAN TOTAKHIL KABUL—Afghans on Monday mourned 21 soldiers killed in a Taliban attack as new details emerged about an incident that sparked a wave of popular outrage in the country Early Sunday, militants staged a coordinated assault on an Afghan army outpost near the area of Shirghaz, in the Ghaziabad district of eastern Kunar province In the course of an hourslong battle, a group of 40 Afghan soldiers fought against insurgents armed with heavy machine guns and mortars, Afghan military officials said Help was late to arrive: The attackers seeded a nearby road with mines to slow the arrival of a column of reinforcements, and the Afghan troops on the ground were un- able to call in time for air support from the U.S.-led coalition, Afghan and coalition officials said All told, 21 soldiers were killed, three were wounded and four were missing, officials said The Afghan army handed over the bodies of the dead soldiers to family members in a somber ceremony at the country’s national military hospital Monday morning The dead, carried in caskets draped with Afghan flags, were borne away by honor guards in parade uniform as senior Afghan officials looked on and military band played a funereal march In a speech, Afghan Defense Minister Bismillah Khan Mohammadi blamed “foreign supporters and foreign intelligence agencies” for helping to coordinate the attack, shorthand that Afghan officials often use to refer to neighboring Pakistan THE WALL STREET JOURNAL Tuesday, February 25, 2014 | WORLD NEWS Ally of Venezuelan Leader Joins Critics CARACAS, Venezuela—Venezuela President Nicolás Maduro, buffeted by protests against his administration, encountered the first criticism from within his ruling coalition Monday when a state governor criticized the government’s crackdown on a growing student movement José Vielma Mora, a governor from the western state of Tachira and member of the ruling United Socialist Party, told a Caracas radio station that he opposed how the security forces have cracked down on students in that state The protests that have roiled the country began in Tachira three weeks ago, with students first demonstrating to protest rampant crime The protests then spread to cities nationwide, as hundreds of thousands of people joined the rallies to voice anger over a dysfunctional economy, high inflation and corruption “I am against putting down a peaceful protest with weapons,” the governor said in an interview with Onda, the radio station “No one is authorized to use violence.” He characterized the government’s deployment of heavily armed security forces and the use of Russian Sukhoi fighter jets that roared over the Tachira capital of San Cristobal as excessive and unnecessary Mr Vielma also said he had ordered the replacement of a local general from the National Guard for his rough handling of the protesters The governor later said in a televised interview in Caracas that he still backed the Socialist Party and remained loyal to Mr Maduro But he didn’t back away from his criti- Agence France-Presse/Getty Images BY KEJAL VYAS AND EZEQUIEL MINAYA A man passes a burning barricade in Caracas on Monday after more protesters were injured in clashes over the weekend cism of the government’s handling of the protests in Tachira, where they have been particularly large and unruly Mr Vielma’s comments are particularly bracing in Venezuela because he is among the first to have joined Mr Maduro’s predecessor, Hugo Chávez, when he rose up against the government in a failed 1992 coup Mr Vielma, a member of the military like Chávez, participated in the attempted coup, which was put down but which made Chávez a household name Six years later, Chávez won office and his leftist movement was swept into power The governor also told the radio station that he opposed the imprisonment of Leopoldo López, a 42year-old politician from the affluent east of Caracas who had surrendered to authorities Feb 18 after being accused of having incited protesters on Feb 12 in clashes that left three people dead “One issue for peace is that all of the people who are prisoners for political reasons—send them home,” Mr Vielma said The governor stressed that he hadn’t broken with the government but noted that others in the progovernment coalition “are calling me a coward.” His interview seemed to energize people such as José Luiz Nunez, 45, a chauffeur who was protesting Monday in Caracas “Look, the members of their own government are doing an about-face,” Mr Nunez said “The government knows that this country is a disaster They are scared.” The governor’s comments came Mexican Arrest Shifts Focus to ‘El Mayo’ MEXICO CITY—The capture of Mexico’s most-wanted drug-cartel boss puts the spotlight on Ismael “El Mayo” Zambada, an alleged partner in the Sinaloa cartel, analysts and government officials said Mr Zambada—who analysts said is known for keeping a low profile and comes from an older generation of drug capos that was less violent than newer drug kingpins—was the alleged mentor for Joaquín “El Chapo” Guzmán, who is in a maximum-security prison following his Saturday arrest in the beach resort of Mazatlán Mr Zambada, 66 years old, who has confirmed in the past that he is in the drug trade, has survived and thrived for decades through ties to a variety of trafficking organizations and his businesslike approach, analysts said “Mayo is the natural heir,” said Guillermo Valdés, who served as Mexico’s intelligence director from 2007 to 2011 “He’s not on the spotlight, he’s not been chased by the media, he’s a leader with strong decision capabilities, strategic vision and a lower profile than El Chapo.” Mr Zambada has maintained a high degree of autonomy despite his strong ties to the Sinaloa cartel and is closely allied with Juan José “El Azul” Esparragoza, who is a key negotiator in the drug underworld, said George Grayson, a professor at The College of William & Mary and expert on the Mexican drug trade Mr Esparragoza hasn’t commented Agence France-Presse/Getty Images BY LAURENCE ILIFF AND JOSÉ DE CÓRDOBA Marines transported alleged drug boss Joaquín ‘El Chapo’ Guzmán on Saturday on that characterization The U.S government indicted Mr Zambada for drug trafficking in 2003 and has offered $5 million for information leading to his arrest, and the Mexican government is aggressively pursuing him with help from U.S law-enforcement agencies The U.S government says Mr Zambada’s organization is capable of moving multiton quantities of cocaine and marijuana and multikilogram quantities of heroin One of the keys to Mr Zambada’s survival has been his relatively restrained use of violence and his constant efforts to keep the peace, Mr Grayson said Newer cartels, including the Zetas, La Familia and the Knights Templar, have engaged in bloody turf wars that have weakened them and left them no match for the Sinaloa Cartel In a 2010 interview in the Mexican newsmagazine Proceso, Mr Zambada portrayed himself as a family man in love with the countryside He was quoted as saying that he was saddened over the extradition of his son, Vicente, or “El Vicentillo,” who is awaiting trial in the U.S For the magazine interview, the heavyset Mr Zambada posed for the cover photo wearing a dark baseball cap pulled down to his nose and sporting a thick handlebar mustache Not all analysts agree that Mr Zambada is up to the job of filling the vacuum created by El Chapo’s capture “People tend to forget that this guy is a great-grandfather,” said Alejandro Hope, an analyst with the Mexican Competitiveness Institute “He’s 66, he’s in poor health, he’s on the run He’s definitely not the future of the organization It may be Chapo’s sons, but we really don’t know.” Mexican President Enrique Peña Nieto’s gain from the capture of Mr Guzmán may be short-lived if Mr Zambada’s rule is challenged by younger lieutenants or rivals who may see in Mr Guzmán’s capture an opportunity to take over drug routes and strongholds, some analysts say Bruce Bagley, an expert on Latin America and drug trafficking at the University of Miami, said the capture will markedly increase violence For instance, he said, bloodshed could rise in strategic cities such as Tijuana and Ciudad Juárez These cities were once among the most violent in Mexico “It could be a return to the bad old days in Tijuana and Ciudad Juárez,” said Mr Bagley “I fully expect there will be fighting for those cities and the transportation routes that come up across Mexico from the Pacific coast through Guatemala, which will place the organization in considerable conflict.” Mr Bagley said he believes there will be a sharp increase in violence in Central America as well, as the impact from the capture ripples outward “The killing fields in Central America will get bloodier,” he said —Santiago Pérez contributed to this article as Attorney General Luisa Ortega announced that a total 13 people have died in the protests since they began At least one has taken place in Tachira On Monday, there was no end in sight to the demonstrations, though Mr Maduro had said the day before that they appeared to be losing momentum In Caracas, antigovernment protesters set up barricades across the city, using tree trunks, trash and debris to close off roads Demonstrators in other cities also blocked roads, leaving traffic in knots Demonstrators reeled off a litany of complaints about the government and said they were trying to pressure Mr Maduro into releasing Mr López, the opposition leader Mr López, now being held in a military jail on the outskirts of the capital, has denied committing any crime “We are barricading the streets to bring the city to a halt and it has been successful,” said Luisa Malave, 23, a recent university graduate “We are out here because of all the problems of the country, the crime, the shortages, the lack of opportunity.” A fellow protester, Carlos Fronterotta, 26, who is studying to be an accountant, said demonstrators were enraged by the government crackdown That, he said, has given the protests momentum “We have been repressed in a way that you can only describe as a dictatorship,” he said “We have been left blind without media outlets reporting the news I have never been part of protests before, but I just felt like I need to be part of the marches.” Whether to Try ‘El Chapo’ in U.S Is Open Question Both the U.S and Mexican governments would like to extradite captured drug lord Joaquín “El Chapo” Guzmán to the U.S to face charges on drug-trafficking, officials from both governments said But there’s only one problem: The drug lord, who escaped from a maximum-security Mexican prison in 2001, is halfway through serving a sentence in Mexico, making it awkward—and legally questionable—to extradite him to the U.S “I don’t think Mexico wants to keep the guy,” said a person close to the administration of Mexican President Enrique Peña Nieto “Just imagine how embarrassing it would be if he escaped again.” But an official from Mexico’s Attorney General’s office said Mr Guzmán should first finish the sentence he was serving when he escaped from prison in 2001 before an extradition request from the U.S could be considered Mr Guzmán also faces about 20 new charges in Mexico, including drug trafficking, homicide and being a member of an organized crime group, Mexican prosecutors said The prosecutors said Mr Guzmán on Sunday made an initial statement at the maximum security prison where he is being held House Homeland Security Chairman Michael McCaul (R., Texas) on Sunday called for Mr Guzmán to be extradited to the U.S to stand trial —Siobhan Hughes and David Luhnow 10 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL UPHEAVAL IN UKRAINE Former Leader Gets a Chilly Welcome KIEV, Ukraine—Yulia Tymoshenko was Ukraine’s most prominent political prisoner, so it seemed a perfect political moment when she was suddenly released from prison on Saturday and sped to Kiev’s main square As Ms Tymoshenko, 53 years old, headed to the square to address the crowds who had just ousted the president, her welcome was hardly one befitting a hero “Yulia Vladimirovna, remember who made this revolution,” a volunteer security officer admonished her through the window of her car Ms Tymoshenko’s sharp tongue and political savvy made her the face of Ukraine’s 2004 revolution But during her two stints as prime minister the economy stumbled and she faced allegations of graft and mismanagement She denied the allegations, but her rival, Viktor Yanukovych, was elected president For many of the thousands of protesters who spent the past three months on Kiev’s main square trying to drive Mr Yanukovych from office, memories of Ms Tymoshenko’s tenure were fresh, and they still taint many of the veteran politicians who now seek to lead Ukraine A crowd of around one hundred Getty Images BY JAMES MARSON Former Ukrainian Prime Minister Yulia Tymoshenko addresses the crowd in Kiev’s Independence Square after being freed from prison on Saturday people gathered outside Parliament on Sunday to demand a new crop of leaders “We all understand that [politicians] are the same Swapping one for the other is dangerous,” said Tetyana Karmaiska, a 52-year-old company director who held a poster with an arrow pointing from Ms Tymoshenko to Mr Yanukovych and the phrase: “People died for that.” “We need new people in power We need a total renewal,” said Inna Andriyishina, a 37-year-old consultant Speaking to the thousands on the central square here Saturday, Ms Tymoshenko gave a characteristically fiery speech, calling on Mr Yanukovych to come to the square to face the people The half-hour speech, which came minutes after an open-air funeral service for protesters killed in the unrest, struck some as being at odds with the somberness of the occasion, even when she appeared to choke back tears to speak of men who died behind flimsy shields Aides said Ms Tymoshenko, who uses a wheelchair because of back pain and had indicated she would travel abroad for medical treatment, has changed her mind On Sunday, she said she wouldn’t put herself forward as a candidate for prime minister Still, there were signs she was preparing a political comeback Her longtime right-hand man, Oleksandr Turchynov, was elected speaker of parliament and confirmed as acting president over the weekend Ms Tymoshenko spoke by phone with German Chancellor Angela Merkel, EU enlargement commissioner Stefan Füle and Senator John McCain, her party said Ms Tymoshenko’s style represents the kind of politics that protesters were campaigning against during months of demonstrations She was a wealthy businesswoman in the 1990s who ran United Energy Systems of Ukraine, a wholesale supplier of Russian gas to Ukrainian companies She shot to prominence as a leader of the 2004 Orange Revolution, a street protest that thwarted Mr Yanukovych’s first run at the presidency With her firebrand speeches and blond peasant braid, she became the darling of the crowds But the pro- Western government, with Viktor Yushchenko as president and Ms Tymoshenko as prime minister, soon fell into bickering, hampering promised reforms to the country’s sclerotic economy and corrupted administration In 2009, she negotiated with Mr Yanukovych to form a coalition government under which he would be president, elected by parliament, and she would be prime minister Mr Yanukovych pulled out of the agreement at the last minute At the start of 2010, when Moscow cut the flow of gas to Ukraine over a payment dispute, she flew to Russia to meet with President Vladimir Putin, cementing a relationship that protesters now view with suspicion After losing a close presidential runoff to Mr Yanukovych, she was jailed for seven years in 2011 on charges of abuse of office in connection with the Russian gas deal During her 2½ years in prison her popularity waned and she was eclipsed by other opposition leaders, including boxer-turned politician Vitali Klitschko Despite her powerful speeches, energetic campaigning, and steely determination, some say her time may have passed “It’s probably not a good thing if she runs,” said one of her advisers “But who’s going to tell her?” Continued from first page day, where he stayed in a privately run sanitarium, avoiding state-run facilities and his presidential dacha Upon learning that the acting parliament had ousted him from the presidency, Mr Yanukovych hastily left the sanitarium and headed to a regional airport but never arrived there, Mr Avakov said Instead, he decided to stay at a private home with his security detail He then Tug of War The European Union and Russia have vied for influence in Ukraine in recent decades Aug 24, 1991 Ukraine declares independence from Soviet Union January 2005 Viktor Yushchenko defeats Viktor Yanukovych for the presidency after pro-democracy protests known as the Orange Revolution force a rerun of disputed vote February 2005 Yushchenko ally Yulia Tymoshenko becomes premier February 2010 Yanukovych defeats Tymoshenko in presidential election March 2010 Yanukovych’s party forms new ruling coalition Feb 20, 2013 The EU and Ukraine agree on a trade and political-association pact Nov 21, 2013 Yanukovych pulls out of planned EU pact in favor of closer ties with Russia, provoking pro-Europe Ukrainians to protest Source: Staff reports asked his guards whether they wanted to leave or stay with him, and some left with their weapons Mr Yanukovych and the remaining guards then piled into three cars and drove away, switching off all forms of communication His current whereabouts were still unknown as of late Monday The transformation of Mr Yanukovych from the country’s elected leader to a hounded fugitive has been stunning in its speed after his loyalists in parliament broke ranks in response to police firing on protesters in Kiev on Thursday One member of his political party called an opposition leader, urging a vote to end the violence “We’re under sniper fire We can’t get there,” replied the opposition leader, deputy parliament speaker Ruslan Koshulinskiy, according to a person who heard the comments As darkness fell and the shooting ebbed, opposition lawmakers made it to the legislature, proposing a proclamation ordering security services to stop firing on protesters and withdraw At about 10 p.m., the vote passed by a slim majority Its effect was enormous and immediate Police who didn’t want to shoot protesters now had official sanction to back off The episode shows how Mr Yanukovych was abandoned in droves by his closest political allies, driving him out of power and into hiding On Sunday, Ukraine’s parliament confirmed an interim leader: a new parliament speaker injured last week by a police stun grenade Mr Yanukovych’s political party on Sunday condemned his “cowardly flight,” declaring the pro-Russian president personally responsible for Ukraine’s ills, including “the loss of human life, an empty treasury, huge European Pressphoto Agency Yanukovych Sought For ‘Mass Murder’ Activists paid respects to protesters killed in clashes in Kiev last week after police were armed with combat weapons debts, shame in the eyes of the Ukrainian people and the world.” In Kharkiv, a city near the Russian border where Mr Yanukovych never showed up to speak to a group of supporters, even longtime allies are keeping their distance “He has passed into history now,” said Gennady Kernes, Kharkiv’s mayor “I don’t know where he is I don’t go to the sauna with him.” Like many autocratic governments, Mr Yanukovych’s was more fragile than it seemed While some of Ukraine’s regions saw clashes Sunday, fears that his supporters could spark an instant civil war appeared to fade Officials in Moscow appeared dumbfounded by his quick collapse, calling back Russia’s ambassador from Kiev late Sunday for “consultations.” When police began killing dozens of protester with live ammunition on Thursday, many lawmakers began to feel pressured to something because the EU finally indi- cated it was ready to join the U.S in imposing sanctions on Ukrainian officials deemed responsible for the violence Thursday night’s vote was “a Rubicon,” said Mykola Rudkovskiy, a member of Mr Yanukovych’s Party of Regions “People understood the situation could swing in any direction, including a command to special forces to destroy thousands of people and sink the whole country.” At first, a fistfight broke out when a pro-government deputy said the vote should be delayed until Friday Lawmakers in Mr Yanukovych’s party said they were being threatened in text messages to oppose a withdrawal The mood calmed when another lawmaker proposed a minute of silence in honor of protesters and police killed in the violence Parliament’s vote to stop firing on protesters squeezed Mr Yanukovych, who was locked in negotiations Thursday night with opposition leaders and European foreign ministers who came to Kiev to force the two sides into a deal In a marathon session at the Ukrainian president’s administrative offices in the capital, diplomats threatened both sides Mr Yanukovych was told he would be a world-wide outcast if there was more violence Opposition leaders were told they risked more bloodletting Parliament then swung back into motion In quick-fire votes, the opposition and the ruling party voted to roll back constitutional changes that handed the president more powers Protesters received amnesty Lawmakers voted by a huge majority to fire Mr Zakharchenko, the top enforcer for Mr Yanukovych, and in favor of a law freeing former Prime Minister Yulia Tymoshenko, a bitter political foe of Mr Yanukovych She was jailed in 2011 —Katya Gorchinskaya contributed to this article 14 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL OPINION [ Americas ] BY MARY ANASTASIA O’GRADY The bloodshed in Caracas over the past 12 days brings to mind the 2009 Summit of the Americas in Port of Spain, where President Obama greeted Venezuelan dictator Hugo Chávez with a huge grin and a warm handshake A couple of months later the State Department attempted to force Honduras to reinstall pro-Chávez president Manuel Zelaya, who had been deposed for violating the constitution Brows were knitted throughout the Americas Why did the U.S president favor the Venezuelan dictator, protégé of Fidel Castro, over Honduras, which still had a rule of law, press freedom and pluralism? Fast forward to last Wednesday, after four peaceful student-protesters had been confirmed as having been killed by the government’s armed minions Mr Obama took notice, pronouncing the brutality “unacceptable.” That must have been comforting to hear amid the gun shots and pummeling on the streets of Caracas That same night the government of Nicolás Maduro—Chávez’s handpicked successor—unleashed a wave of terror across the country According to Venezuelan blogs and Twitter posts, the National Guard and police went on a tear, firing their weapons indiscrimi- nately, beating civilians, raiding suspected student hide-outs, destroying private property and launching tear-gas canisters Civilian militia on motor bikes added to the mayhem The reports came from Valencia, Mérida, San Cristóbal, Maracaibo, Puerto Ordaz and elsewhere, as well as the capital Venezuela has promised 100,000 barrels of oil per day to Cuba, and in exchange Cuban intelligence runs the Venezuelan state security apparatus The Cubans clearly are worried about losing the oil if their man in Caracas falls Cuba is worried about losing 100,000 barrels of oil per day if its man in Caracas falls Opposition leader Leopoldo López, who heads the Popular Will political party, spent several years building a network of young recruits around the country Last week’s unrest is a testament to that organization, and it is why the 42-year-old Mr López is now behind bars In Ukraine, the European Union has pressured the government to reach a compromise with the opposition Venezuelans are getting no such help from the neighbors Only Colombia, Chile and Panama have objected to the crackdown The rest of the hemisphere doesn’t have even a passing interest in human rights when the violations come from the left The Organiza- tion of American States is supposed to defend civil liberties, but since Chilean Socialist José Miguel Insulza took the OAS helm in 2005, it has earned a disgraceful record as a shill for Cuba Venezuelans seeking change face daunting odds The crowds in the streets of Caracas in recent days have not been significantly bigger than in many prior-year protests, including 2002, when a march in Caracas almost unseated Chávez This time the repression has been fierce Besides injuries and death, hundreds have been detained and it would not be surprising if many are given long sentences Mr Maduro needs scapegoats for the violence he unleashed Iván Simonovis, the former head of the Caracas Metropolitan Police, has been a political prisoner since 2004 Chávez made him take the fall for the 17 people killed in the April 2002 uprising even though video evidence points to chavista snipers Photos of the once-fit policeman, frail and gravely ill from the inhuman circumstances of his long incarceration, are chilling Another problem is the division within the opposition The governor of the state of Miranda, Henrique Capriles, represented a broad coalition of anti-chavista parties when he ran for president in 2013 But when he conceded to Mr Maduro amid strong evidence that the election had been stolen, Mr López and other members of the opposition broke with Capriles supporters Reuters Behind the Turmoil in Venezuela Antigovernment demonstrators in Caracas, Feb 22 Students have also been hamstrung by a communications blockade The government controls all Venezuelan television and radio airwaves When the violence broke out, it forced satellite providers to drop the Colombian NTN channel Internet service has been cut in many places Getting the very poor on board for a regime change is a challenge Some still see chavismo as their government, even if they have no love for Mr Maduro and suffer from high inflation Others don’t dare speak out, for fear of losing state jobs or their lives The barrios are terrorized by the chavista militia Mr Maduro says he will use every weapon to quell the unrest On Friday afternoon the son of a Venezuelan friend sent me photos from Caracas of troops massing at the Francisco de Miranda air base in the middle of the city The Cu- ban-backed Venezuelan high command, Cuban intelligence (the country is thick with agents) and plainclothes militia will play rough On the other hand, the government is bankrupt, and food and other shortages will get worse Mr Maduro may pacify Caracas, but food is harder to find in the interior of the country than in the capital It is there that the fires of rebellion, burning for the first time under chavismo, might race out of control Many army officers come from lower-middle-class families, and it is not clear that they will stand by and watch large numbers of civilians being slaughtered Many resent the Cuban occupation What comes next is hard to predict But no one should underestimate Cuba’s comparative advantage: repression Write to O’Grady@wsj.com Turkey Will Rise Above Fear In his inaugural address on March 4, 1933, U.S President Franklin D Roosevelt famously asserted his “firm belief that the only thing we have to fear is fear itself.” Speaking against the backdrop of the Great Depression and the social and economic devastation that it caused, FDR wisely defined fear as “nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Much of the capital flight from emerging markets amounts to what Roosevelt dubbed ‘nameless, unreasoning, unjustified terror.’ Roosevelt’s words are of special interest in our time The U.S Federal Reserve's “tapering,” the reduction and eventual halt of liquidity injections, that began last December has now lead to a panicky withdrawal of capital from emerging markets Some of this represents a natural and not unexpected correction But much of the capital flight amounts to what President Roosevelt would have dubbed “nameless, unreasoning, unjustified terror.” Similar to many emerging economies, Turkey has not been spared the current turmoil helped us generate an avThe situation is aggravated erage annual economic by events that are pergrowth rate of 5% over the ceived as having increased past 10 years and create Turkey’s country-specific nearly five million jobs political risk factors since 2007—despite the As a result, since midonset of the global finanDecember the Turkish lira cial crisis has depreciated by around Furthermore, we have 7% against the U.S dollar taken important steps to Treasury bonds have risen improve the quality of our by around 70 basis points institutions Despite all the and the country’s stocks news about the recent corhave lost roughly 20% of ruption probes, perception their value of corruption has declined However, I consider markedly over time Acthese developments to be cording to Transparency an overreaction by the International, Turkey’s cormarket ruption-perception rank First, despite the curimproved to 53rd out of rent political turmoil in 177 countries in 2013, from Turkey, political stability is 65th out of 102 countries not at stake Recent polls in 2002 Surely, there is suggest that the ruling Jusroom to improve, and we tice and Development (AK) will continue to so The Turkish economy has experienced average annual Party has public support Prudent macroeconomic growth of 5% over the past 10 years between 40% and 50% for policies and structural reupcoming local elections in forms have had benefits, March Second, for more than 10 ative to the euro zone’s Maastricht such as attracting about $134 bilyears Turkey has pursued struccriteria In 2013, our fiscal deficitlion of foreign direct investment tural and macroeconomic reforms, to-GDP ratio was just one-third of since 2003 That is nine times the providing a basis for strong and the euro zone’s convergence target value of Turkey’s cumulative FDI sustainable growth of 3%, and our debt-to-GDP ratio in the 1980-2002 period Since the AK Party took office was almost half of the 60% target To be sure, the relatively high in 2002, we have reduced the genAs of the third quarter of 2013, current-account deficit has been a eral government fiscal deficit to only five out of the 18 countries soft spot for Turkey during the re1% of GDP from 10.8% in 2002 that use the euro met the Maascent “tapering” turmoil However, During that period, public-sector tricht debt criteria Among those, Turkey’s freely floating exchange debt fell to 35% of GDP from 74% only two small economies—Estorate will serve as an automatic These are enviable figures from nia and Luxembourg—had better stabilizer the perspective of most countries ratios than Turkey In addition, Turkish banks are In fact, we have outperformed relThese prudent policies have safe and sound They have capitalGetty Images BY MEHMET SIMSEK adequacy ratios far in excess of international requirements As of the end of 2013, our banks’ average capital-adequacy ratio was 15.3%, nearly twice the 8% threshold mandated under Basel II regulations The changing international environment has led to higher costs in refinancing external debt However, Turkey’s external position is much better than feared Households are long in foreign exchange assets by nearly $190 billion Moreover, and by virtue of our domestic regulation, households may not borrow in foreign currency Turkey’s banking sector has a tiny open foreign-exchange position of $600 million While the corporate sector has an open foreign-exchange position of $170 billion, only $17 billion of that is shortterm debt We will continue to maintain and improve upon our robust policy framework and, with time, capital will return After all, investors will continue to search for opportunities in well-diversified emerging markets All of this paints a much brighter picture of Turkey’s economic prospects than current market volatility suggests In building this strong economic foundation, Turkey is well placed to “convert retreat into advance,” as President Roosevelt would have said Mr Simsek is the minister of finance of the Republic of Turkey Pound/Euro 0.8259 À 0.07% Yen/$ ¥102.45 g 0.26% Global Dow 2473.91 À 0.37% Gold 1338.30 À 1.09% Oil 102.82 À 0.61% Carl Icahn Accuses eBay Of Lapses in Governance China’s yuan hit a four-month low Monday, dragging down other currencies in the region and fueling speculation that years of gains may be nearing an end In a sign that global investors are retreating from bets on further appreciation, the offshore yuan, which is freely traded, fell to the same level as its onshore counterpart, which is strictly controlled The yuan is entering its second week of declines triggered by a surprise move by the central bank to guide it lower Analysts say China is aiming to force out speculators seeking to profit from gains in the currency, and to stem heavy inflows from abroad that flood the country with excess cash and hurt efforts to curb credit UBS AG, one of the world’s biggest currency traders, said the central bank’s recent moves signal a change in policy “The Chinese government appears to want increased flexibility in the yuan’s exchange rate, rather than continued strengthening,” UBS economist Wang Tao said “The era of steady [yuan] appreciation may be drawing to a close.” She said exporters were feeling the pain from a currency that had been rising until recently, and forecast a largely stable yuan for the rest of the year at about 6.1 per dollar The dollar was trading at 6.0984 yuan late Monday, compared with 6.0913 on Friday A higher number means a weaker Chinese yuan The People’s Bank of China sets a daily reference rate for the yuan, allowing it to trade 1% higher or lower each day The drop in the currency comes as concerns mount over slowing growth in the world’s second-biggest economy and signs of rising financial stress Property stocks were slammed Monday on news that developers in two cities in eastern China had started to cut prices of new homes in a bid to spur sales, raising fresh concerns about the health of the market “The shift in [yuan] dynamics was mainly driven by several factors: weakening economic outlook, policy shift and technical adjustment by market investors,” analysts from J.P Morgan said Monday The yuan’s slide is having ripple effects on currencies in other Asian nations with close trading ties to China The South Korean won hit its lowest level in more than two weeks against the U.S dollar The currencies of Singapore and Taiwan also had heavy selloffs last week Please turn to page 22 THE WA L L STR E ET JOU RNAL europe.WSJ.com RBS Works for Master, Clients BY MAX COLCHESTER LONDON—Last summer, Adrian Eady, a banker with Royal Bank of Scotland Group PLC, was nearly crushed hauling a crate of feta cheese off a forklift truck in a North London warehouse A few months earlier, the statecontrolled bank sent Mr Eady to wear an apron and serve cappuccinos in a cafe Before that, he was selling novelty greeting cards in a shop Following a political uproar over a lack of bank lending to small businesses, 81%-government-owned RBS created its “Working With You” program All RBS corporate bankers must spend at least two days a year working for a customer free of charge “We anything they ask,” says Mr Eady “If they say ‘make the tea,’ then we make the tea.” It is an example of the extensive pains RBS is taking to try to appease its masters and customers after six years of withering criticism for everything from excessive pay for executives and top bankers to a lack of small-business lending Efforts to patch things up with British politicians are kicking into higher gear after the government pushed out the bank’s chief executive last year and took a more proactive role calling the shots at the bailed-out bank The new CEO, Ross McEwan, publicly agreed with U.K Chancellor of the Exchequer George Osborne’s view that RBS must refocus on its U.K retail and corporate market RBS hired former Bank of England Daniella Zalcman for The Wall Street Journal BY FIONA LAW HEARD ON THE STREET 28 RBS Relationship Director Adrian Eady helps load a Cyprofood customer’s order during a visit to the London company official Andrew Large, who produced a 95-page report on how it could better at small-business lending This week, the bank will present a new strategy aimed at cutting back office costs, slimming its global footprint and restructuring its corporate bank It is unclear how long the peace will last British Prime Minister David Cameron recently threatened to personally veto any overall pay increase for RBS bankers this year Under new European rules, banks must get shareholder approval to pay bonuses of as much as twice the fixed salary UK Financial Investments Ltd., which manages the RBS stake on the government’s behalf, is still weighing what to do, according to people familiar with the matter Perhaps more damaging are allegations by a government adviser that the bank is failing its customers RBS, like its peers, faces rampant complaints that it isn’t lending enough to small businesses and is hampering economic growth The adviser, Lawrence Tomlinson, alleged to a parliamentary committee that RBS forced several small businesses into default to seize their assets for a profit “It seems to be systematic to me,” said Mr Tomlinson RBS denies this allegation Given the public debate over small-business lending, RBS is taking action to shake up its corporate Please turn to page 20 Novartis Scales Down Following Vasella BY MARTA FALCONI ZURICH—Novartis AG is distancing itself from the era of Daniel Vasella, the former chairman whose controversial exit package blemished the Swiss pharmaceutical company’s image when he stepped down a year ago In November, Novartis struck a $1.68 billion deal to sell the bulk of its diagnostics business to a Spanish company, the first indication it would slim down the sprawling portfolio of businesses Dr Vasella had assembled over two decades A month later, Novartis said it was scrapping plans to build a training center next to his lakeside estate outside Zurich, a project Dr Vasella had shepherded for four years The company, which is based in Basel, also has disbanded two board subcommittees he had established to oversee its finances Chief Executive Joe Jimenez says more changes are on the way as Novartis focuses on businesses where it can achieve scale “We are now at a stage where we can look at our entire portfolio and look at how Reuters Traders See End to Era Of Steady Yuan Gains 10-year Treasury g 5/32 yield 2.750% U.S Industries Feel Burn From Chill BUSINESS & FINANCE 16 Tuesday, February 25, 2014 3-month Libor 0.23435 Daniel Vasella, above last year, turned Novartis into a health-care conglomerate we’re positioned for the next 10 years,” Mr Jimenez said in an interview last fall Novartis’s efforts to emerge from Dr Vasella’s shadow mark a sea change for the company, which he transformed into a health-care conglomerate after engineering the merger of Sandoz AG and Ciba- Geigy AG in 1996 His goal: to diversify into businesses ranging from vaccines to generic drugs to insulate Novartis from the ups and downs of the brand-name pharmaceutical business, where revenue can plunge when drugs lose patent protection Now, the company’s leaders are unraveling that empire They say they plan to sell or pursue joint ventures for Novartis’s over-the-counter drugs, animal-health-products and vaccines businesses Its other three businesses—pharmaceuticals, eye care and generics—each generate revenue of at least $10 billion a year and are ranked No or No in their respective fields Novartis’s divestiture plans are likely to be discussed Tuesday, as the company convenes its first annual meeting without its former chairman, who left Switzerland last year for the U.S For decades, Dr Vasella, who declined to comment for this article, was one of Switzerland’s highestprofile businessmen As chairman and chief executive until 2010, he led Novartis’s purchases of U.S vaccine maker Chiron Corp for $7.5 billion and eye-care company Alcon Inc for $51.6 billion Dr Vasella, now 60 years old, also steered Novartis into the generics business, broadening the number of drugs in its portfolio through acquisitions By 2012 that had helped to cement the company’s position as Please turn to next page 16 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL BUSINESS & FINANCE Icahn Fires Broadside at eBay BY LAUREN POLLOCK BY MANUELA MESCO Reuters Activist investor Carl Icahn accused eBay Inc of lapses in corporate governance, including conflicts of interest on the online marketplace’s board Mr Icahn last month disclosed that he held a 2% stake in eBay He said he was prepared for a proxy fight to win two seats on the board and to push the company to separate its PayPal unit But Mr Icahn said he subsequently determined that a proxy fight shouldn’t be necessary to change the board “In any sane business environment, these directors would simply resign immediately from the eBay board, either out of pure decency or sheer embarrassment at the public exposure of the extent of their selfserving activities,” he said Monday The San Jose, Calif., company said Mr Icahn “cherry-picked old news clips and anecdotes out of context to attack the integrity” of its top executives “As we are sure our other shareholders would agree, we prefer to engage in more constructive and substantive discussions of why, in our view, PayPal and eBay are better together,” eBay said “Instead, Mr Icahn unfortunately has resorted to mudslinging attacks against two impeccably qualified directors.” Mr Icahn said that at least two directors are directly competing with eBay, one is demanding that eBay cease hiring the most talented employees, another is routinely funding competitors, at least two appear to have put their own financial gain in conflict with their fiduciary responsibilities to stockholders and the chief executive “seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability.” Investor Carl Icahn, seen earlier this month, said that some directors of online marketplace eBay have conflicts of interest Mr Icahn cited director Marc Andreessen’s purchase of stakes in two former eBay units and said that an investor group he was a part of preempted a planned initial public offering of Skype and bought 70% of Skype for less than what eBay had paid to acquire it The online video and voice chat company later was acquired by Microsoft Corp Mr Icahn also questioned Scott Cook’s place on the board as the founder and a current director at Intuit Inc., which competes with PayPal in payment processing But the “best question,” Mr Icahn said,” is where Chief Executive John Donahoe has been during this process The investor questioned Mr Donahoe’s ability to make crucial decisions about the future of PayPal Mr Icahn suggested that separating the core eBay and PayPal businesses would highlight the value of the operations, which currently is masked by a conglomerate discount Separating the business also would foster innovation and help PayPal attract necessary talent, he said He urged shareholders to vote for his proposal to separate PayPal and for his director nominees The PayPal unit, which has about 143 million users, is on pace to overtake eBay’s namesake marketplace in sales, accounting for 41% of total revenue in the latest quarter Revamping the unit has been a particular focus for eBay as it battles startups such as Square Inc for control of customers’ digital wallets EBay last month said its prediction of a weak holiday season came true, reporting sales at the low end of its expectations The company in October said consumers seemed “tentative about spending,” in part because of the two-week government shutdown, heading into the final three months of the year The period typically constitutes approximately 30% of the company’s annual revenue Novartis Backs Away From Vasella’s Empire Continued from previous page Europe’s largest drug maker, up from fifth in 2004, according to consulting firm IMS Health With patents on some of its bestselling products expired or set to expire, a factor that has weighed on its stock, Novartis is looking for ways to reignite its profit growth Over the past year, the company’s shares have risen more than 15%, well short of AstraZeneca PLC’s stock-price run-up of nearly 36% and crosstown rival Roche Holding AG’s 26% gain In November, Novartis took its first step to slim down, selling a blood-transfusion diagnostics business to Spain’s Grifols SA Dr Vasella had viewed the business as the company’s springboard into general diagnostics Among its next moves, traders and investors have speculated that Novartis might consider swapping LVMH Buys A 45% Stake In Italian Design Firm its animal-health unit for an overthe-counter drug business, which would eliminate one of its smaller businesses while bulking up another Novartis has declined to comment Some investors don’t think the new strategy will move the needle much on Novartis’s performance Its Consumer Health division, which includes animal-health and overthe-counter medicines, generated around 7% of Novartis’s sales in 2013, compared with 56% for its flagship pharmaceutical unit “The businesses in question are relatively small compared with Novartis’s total sales,” said Philippe Comby, a New York-based investment manager at Swiss Helvetia Fund Inc., which owns around 600,000 Novartis shares Further disposals or asset swaps are unlikely to be game-changing, he says The company, meanwhile, is looking to smooth relations with Swiss politicians and its investor base after a proposed $77 million exit package for Dr Vasella brought it unwanted publicity last February The company slashed the hefty payout after intense criticism from investors and the public But the flap “had a significant impact on the company’s reputation,” said Mr Jimenez, the CEO, adding that the impact “will take time to unwind.” Since then, the company has sought to distance itself from Dr Vasella in many ways In its recent annual report, it explicitly stated that, as the company’s honorary chairman, Dr Vasella would receive no pay and have no influence on the board or management “It strikes me as a deliberate attempt to officially call the end of the Vasella era at Novartis,” said Florian Wettstein, director of the Institute for Business Ethics at Switzerland’s University of St Gallen In January, the company disbanded two board subcommittees that had given Dr Vasella and the board more power over many financial decisions One panel oversaw all financial reporting, while the other was responsible for evaluating any transactions valued at $50 million to $500 million Novartis also is looking to dispose of around 12.4 acres of land once earmarked for a $110 million management-training center near Risch, the village south of Zurich where Dr Vasella lived for many years In December, Novartis said it had decided to consider cheaper alternatives closer to Basel As an immediate neighbor, the former chairman was granted the right to buy the acreage if plans for the center didn’t go through LVMH Moët Hennessy Louis Vuitton SA said it is investing in Marco de Vincenzo’s Italian fashion house, the latest move by the luxury-goods company to build a portfolio of young designers to grapple with an industrywide slowdown LVMH will take a 45% stake in Marco de Vincenzo, leaving its namesake founder with the remaining 55%, a person familiar with the matter said LVMH didn’t disclose financial details of the deal The purchase is further evidence that Delphine Arnault, the daughter of LVMH Chairman Bernard Arnault, is racing to secure a new generation of fashion talent for the company LVMH recently took stakes in British shoe maker Nicholas Kirkwood and designer J.W Anderson “We are convinced that together we will develop successfully his brand,” Ms Arnault said in a written statement Monday “This new partnership is in the DNA of LVMH, which has always supported young designers.” France-based LVMH long has sought to use a wide portfolio of rising brands to offset slack in other labels But booming demand for labels such as Céline and Kenzo has been no match for a slump at flagship Louis Vuitton, where sales have stagnated as consumers wearied of its ubiquitous logo bags Against that backdrop, luxurygoods companies such as LVMH and France’s Kering SA have been on the hunt for the next big names in fashion Mr de Vincenzo has been designing accessories at Fendi, an Italian brand controlled by LVMH, for more than a decade He started his own line in 2009 while continuing to design for Fendi and has shown his collections in Milan He presented his latest line during Milan Fashion Week, which ended Monday, with colorful outfits, graphic prints and black leather Small and midsize Italian fashion houses often consider selling stakes to fund growth, open stores or improve distribution and negotiating power—or simply because they have no heirs ready to take over Krizia SpA on Monday said that it had been acquired by China’s Shenzhen Marisfrolg Fashion Co., which will support the Italian ready-to-wear brand’s expansion in Asia by opening stores in Beijing and Shanghai INDEX TO BUSINESSES Businesses This index of businesses mentioned in today’s issue of The Wall Street Journal is intended to include all significant reference to companies First reference to the companies appears in bold face type in all articles except those on page one and the editorial pages Agnico-Eagle Mines 17 AK Steel Holding .28 Apple 18 AstraZeneca .16 Barrick Gold 17 BHP Billiton 17 CF Industries Holdings 28 Citigroup 20 Cyprofood 20 Deutsche Bank 20 eBay 16 Facebook .1 General Motors 17 Google 18,19 Grifols .16 HSBC .20,22,28 HTC 18,19 Huawei Technologies .18 Intuit 16 J.P Morgan Chase 20 Kering .16 Krizia 16 LG Electronics 18 LVMH Moët Hennessy Louis Vuitton .16 Microsoft .16,19 Nokia 19 Nordstrom 25 Norilsk Nickel 17 Novartis 15 Rio Tinto 17 Roche Holding 16 Royal Bank of Scotland Group 15 Samsung Electronics 18,19 Scania .28 Shenzhen Marisfrolg Fashion 16 Sony .18,19 Square 16 UBS 15,20,28 U.S Steel 28 Volkswagen 28 Corrections Amplifications Readers can alert the London newsroom of The Wall Street Journal to any errors in news articles by emailing wsjcontact@wsj.com or by calling +44 (0)20 7842 9901 Volvo 28 Wells Fargo 22 THE WALL STREET JOURNAL Tuesday, February 25, 2014 | 17 BUSINESS & FINANCE Rio Tinto’s Walsh Still Faces Challenges BY ALEX MACDONALD Mining Success Rio Tinto has seen its stock rise since Sam Walsh took the helm Share performance of selected miners since Mr Walsh was appointed Chief Executive Officer of Rio Tinto on Jan 17 2013 10% Rio Tinto 2.8% BHP Billiton -4.9% Glencore Xstrata -11.3% Anglo American -18.9% –10 –20 –30 Bloomberg News LONDON—After a year at the helm of Rio Tinto PLC, Chief Executive Sam Walsh has trimmed the mining’s giant’s ballooning debt, sold off noncore assets and promised to slash capital spending 38% over the next two years In a year when the shares of most mining peers have fallen sharply, Rio stock is up almost 3% since Mr Walsh took over in January 2013, succeeding CEO Tom Albanese Mr Albanese stepped aside after Rio wrote down more than $14 billion in assets, stemming from big aluminum and coal asset purchases made at the top of the market It was the biggest in a series of charges taken by some of the world’s largest mining companies, as a decadelong commodities boom and deal frenzy came to a sudden halt In the shakeout that followed, bosses at six of seven of the world’s biggest publicly listed miners by market capitalization stepped down The world’s top 40 mining companies, from BHP Billiton Ltd to Barrick Gold Corp., wrote down a total of $45 billion in 2012, according to PricewaterhouseCoopers Miners have shed assets and employees, slashed costs and scaled down project ambitions It now falls to Mr Walsh—64 years old and a 23-year veteran at Rio—to steer the world’s secondlargest miner by market value through that new landscape A for- –40 Sam Walsh said he hopes his contract is renewed when it expires in 2015 mer auto executive who helped turn around the Australian unit of General Motors Co., Mr Walsh said in an interview that he’d like the board to consider keeping him on when his contract expires in 2015 “I would be very happy to go on, extend my term,” Mr Walsh said “On the other hand, if someone better comes along in the interim, that’s fine, too…I would like to meet them, but that’s a different matter.” He still faces a number of challenges before then He has promised steep cost cutting and reduced capital expenditure over the next two years He slashed net debt by $4 billion in the final six months of last year, to $18.1 billion That came as Rio announced or completed $3.5 billion worth of noncore assets sales during the year But he has also publicly taken the for-sale sign off two other big assets—Rio’s diamonds operations and one of its aluminum businesses And he has failed so far to find a buyer willing to pay enough for Rio’s Canadian iron-ore business, a process he started around last year In the interview, he said he doesn’t need to sell more assets “If somebody wants to offer a big check, that’s fine But we don’t need to actually sell any of our major assets,” he said Another key challenge is that Rio is more heavily exposed to a single 2013 Source: FactSet commodity—iron ore—than any of its major peers Iron ore represented nearly 90% of the company’s earnings last year Despite that reliance, he has expanded Rio’s flagship iron-ore mines in Australia’s Pilbara region, albeit at a more measured pace Iron ore prices have remained resilient in recent years But many analysts expect growth in China— the world’s biggest buyer—to ebb Mr Walsh said he can’t anything about the company’s reliance on iron ore “We are what we are,” he said “You can’t turn back history, and if having too much iron ore is a problem, then it’s not a bad problem to have,” he said ’14 The Wall Street Journal Without further asset sales on the horizon, Mr Walsh is cutting costs He cut $2.3 billion in operating cash costs in 2013 He is also slashing capital spending, promising to reduce outlays to $8 billion in 2015, down from $17.6 billion last year He said he also has empowered managers to find other savings on the shop floor Rio’s energy division, which produces coal and uranium, set up a “war room” in Brisbane, Australia, where planners reduced this year’s forecast for fuel usage at its Australian coal operations by calibrating truck engines, upgrading components for its old trucks, and reduced revolutions during idling Mining for Gold in Canada at Minus 45 Celsius BY ALISTAIR MACDONALD AND JOHN W MILLER MEADOWBANK GOLD MINE, Nunavut—Gold miner Alain Belanger contends with 120 kilometer an hour winds, winter temperatures so cold they have cracked the steel on his 287-ton excavator and white-out blizzards that halt mining for days This open-pit mine west of Canada’s Hudson Bay had such steep construction and operating costs— flying workers in and out, stocking a year’s worth of food, employee turnover and battling snow drifts that can reach eight feet—that the project is unlikely to break even over the long haul, Agnico-Eagle Mines Ltd executives now concede As the world warms, miners dream of unlocking trillions of dollars in diamonds, gold, nickel and other metals in the Arctic, a treeless cap that spans northern parts of Canada, Alaska, Russia and Scandinavian countries So far, it has proved a quixotic quest for all but a few tenacious miners like Agnico “We know there is extreme wealth in the Arctic,” said Agnico’s Chief Executive Sean Boyd in an interview “The reality, though, is you have to have a lot going for you to get it out the ground.” Meadowbank recently has been worth it The mine where Mr Belanger labors for two-weeks at a stretch was Agnico’s star performer last quarter, generating more cash than any of the company’s six other mines and contributing to its second year of record gold production But more than 200 Arctic mining projects that have been announced in recent years lie either abandoned or in an early planning stage, according to data from by Raw Materi- als Group Only six mines now operate in North America’s vast arctic Some of the world’s largest miners are putting off Arctic projects as metal prices have weakened Gold now trades about $1,350 an ounce, down from $1,850 in 2011 Some have flown into Meadowbank to better assess the risks and determine whether Arctic resources can be within their reach and wherewithal “The question they [have to] ask is whether they want to take the Arctic on,” Mr Boyd said Early on, Agnico officials estimated they could dig gold at Meadowbank for about $450 an ounce But after it opened in 2010, costs quickly ballooned to $1,000 an ounce In the latest quarter, costs had fallen to $637 an ounce The company expects to shave costs by another $8 an ounce this year Agnico’s recent success was hard fought, and includes US$1.2 billion in write-downs It has changed how it operates: Rock is now stockpiled, so when a blizzard halts mining, the mills can still work To cut down on fuel usage, the mine uses exhaust from the massive electricity generators to help heat the camp Overall fuel use, the biggest single expense, has fallen to 51,127 gallons (193,537 liters) a day from 54,700 gallons in the fourth quarter of 2012 Savings: $1.2 million “In the Arctic, if you make a mistake it is going to hit you very hard,” said Jean Beliveau, the mine’s general manager In 2011, after a fire destroyed Meadowbank’s kitchen, most of its 550 employees had to be flown out until a replacement kitchen arrived from Phoenix Total cost of the incident was $18 million For Agnico and other arctic miners, the biggest problem is the lack of ports, road and rail links Agnico Eagle needed to build a $50 million, 110 kilometer highway The road is the longest in Nunavut, which covers an area the size of Mexico but is home to only 32,000 people The mine has an eight-week window to bring a year’s worth of food and other supplies before Hudson Bay freezes, including 200,000 eggs and 2,500 liters of ketchup Anything that has been forgotten or in need replacing must be flown in at a cost of $6 a kilogram The few standouts in these harsh environments are those that have well-established ports and knowhow, such as Russia’s MMC Norilsk Nickel and Sweden’s LKAB The successes include Arctic mines built by slave labor under Stalin in the 1930s, and now operated by Norilsk “There is a certain culture there, and people get used to working in very difficult conditions,” said Norilsk CEO Vladimir Potanin in an interview last year One lesson Agnico learned was how to better incorporate native Inuit workers It upgraded numeracy and literacy skills, improved training and offered more career advancement to keep locals on the job All have helped reduce turnover to 7% last year from 25% in 2011 Nunavut resident Billie-Jo Van Eindhoven, 27, was a kitchen worker for two years before she landed a job driving a 17-foot-high truck, ferrying rock out of the pit “It’s a good paying job,” said Ms Van Eindhoven Base pay for truck drivers starts at 65,400 Canadian dollars and can go up to C$97,500 a year In the bleak landscape of snow and rocks, Mr Belanger, a 55-yearold shovel operator, sees few signs of the global warming that is predicted to make Arctic mining easier Equipment operators start at C$88,600 a year and can earn up to C$130,100 His giant steel shovels, which scoop up 24 tons of rock and gold ore, have cracked in the cold Exposure of bare flesh can lead to almost immediate frostbite As he talks, geology technicians nearby clamber over piles of newly blasted rock in minus 45 degree Celsius (-49 Fahrenheit) temperatures, marking gold bearing ores Giant trucks carry 120-tons of rock that can contain an average of $1,258 worth of gold ore After going through a large crusher, several mills and a chemical process to separate gold from rock, the ore is melted to produce 31-kilogram gold bars Each bar is 85% pure and worth about $1.2 million What tempted the Toronto-based company to take the risk is high quality ore here A ton of earth from Meadowbank contains more than three times the amount of gold as from an average Canadian mine Meadowbank may not ever recover its initial costs, but Agnico hopes to apply the lessons learned from operating in this inhospitable climate to a nearby project with even richer ores The dream of wild riches may not be realized here, but it lives on 18 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL MOBILE WORLD CONGRESS Latest Samsung Phone Returns to Basics Core Features Like Battery Life and Photo Capabilities Are Enhanced as Company Seeks ‘Competitive Pricing’ BY JONATHAN CHENG Samsung’s New Galaxy Waterproof and dustproof A rundown of key specs of the Galaxy S5, which goes on sale in April Samsung hasn’t changed its plastic-casing, but claims the S5 is both waterproof and more dust-resistant Better camera A 16-megapixel camera This is a boost from its previous 13-megapixel camera It also has capability to record video in 4K high definition, as new phones from Sony and LG Faster processor The 2.5-gigahertz processor is faster than the 1.6-GHz (Samsung chip) or 1.9 GHz (Qualcomm chip) processors in the S4 Source: the company The Wall Street Journal some consumers, who have come to expect dramatic new features with each new iteration of devices from Samsung and rival Apple Unlike with the previous model, Samsung didn’t play up the smartphone’s software capabilities beyond an expanded suite of fitnessand health-related apps A model version of the Galaxy S5 seen by The Wall Street Journal featured Google’s applications prominently, a contrast to Samsung’s decision to drop Android for its latest generation smartwatch, the Gear 2, which was also publicly unveiled in Barcelona “People are easily excited about all this ‘disruptive’ and ‘latest technology,’ and we are working on this too,” Ms Lee said “But our philosophy is to listen to consumers.” Fingerprint sensor 5.1” scr e en BARCELONA—Samsung Electronics Co., eager to maintain its lead in global mobile-phone sales, on Monday unveiled an updated flagship smartphone that reflects a deliberate attempt to eschew flashy, but little-used, new features—and to keep the price competitive Instead of going for the wow factor, Samsung executives said the company wanted to enhance core features that improve everyday use, like photo-taking, battery life, download speeds and protection against water and dust Indeed, one of the few new features on the Galaxy S5 is a fingerprint sensor—something already available on the latest Apple Inc iPhone The Galaxy S5, which runs on Google Inc.’s Android operating system, will go on sale April 11 and features a more powerful camera, a slightly larger 5.1-inch screen and supports faster download speeds than its predecessor In a nod to the pressures from low-cost rivals, Samsung executive vice president Lee Younghee said in an interview ahead of the launch that the company would push for “competitive pricing” of the device Ms Lee said Samsung is striving for the “optimal mix of feature set and pricing point,” declining to elaborate on price Samsung will have to slash the price to compete with some of its rivals The 16-gigabyte version of the previous Galaxy S4 model sold for about $600 at Verizon Wireless without a contract By contrast, Motorola Mobility’s Moto X with equivalent memory costs $399 without a wireless contract in the U.S The Moto X comes from the Motorola handset business, which is currently owned by Google Inc but is in the process of being sold to China’s Lenovo Group Ltd Analysts say the lack of bold innovations will likely disappoint Bigger screen, same resolution The 5.1-inch screen is a slight increase from the S4’s screen but it comes with the same resolution of 1920 x 1080 pixels In line with the lower-key approach, Samsung’s event Monday was held on the sidelines of Mobile World Congress here, a bustling annual confab where it has had to compete for attention with a host of competitors The event stands in contrast to last year’s launch of its flagship smartphone, which was announced at a lavish private event at Radio City Music Hall in New York The device’s most unique feature is one that rival Apple introduced in its iPhone 5S last year: a fingerprint scanner that allows a user to unlock their phone with the swipe of a finger Samsung also added several camera functions typically found on the digital SLR cameras used by professional photographers En- Zuckerberg: Deal Was Worth It ramp” Internet service, with free access to some services like Facebook Mr Zuckerberg also reiterated his view that the U.S government had “blown it,” when it came to being transparent about its surveillance activities, following leaks from former U.S National Security Agency contractor Edward Snowden The subject, however, did keep coming back to Facebook’s deep pockets Asked if he was prepared to make another run at messaging-service Snapchat, which Facebook had explored buying last year, Mr Zuckerberg chuckled “After buying a company for $16 billion,” he said, “you’re probably done for a little while.” Getty Images Continued from first page computers but also offers messaging and voice calls over mobile phones Mr Koum said the voice product would “use the least amount of bandwidth, and we optimize the hell out of it.” Speaking about the Facebook deal, Mr Koum said that WhatsApp wouldn’t change He alluded to Instagram, the photo-sharing service that was acquired by Facebook in 2012 “There are no plans to change anything that we with the product today,” he said Mr Koum said that WhatsApp was likely valuable to Facebook because “we both want to make the world more connected,” though Mr Koum stressed that WhatsApp wanted to know “as little as possible” about its users, including details such as a user’s name Mr Zuckerberg didn’t focus on the WhatsApp acquisition during a 45-minute-long discussion in Barcelona Monday He spoke mostly about a Facebook-led coalition that aims to push operators to connect poor people in emerging countries to the Internet, by offering “on- A swipe-enabled fingerprint sensor is the biggest change from the Galaxy S4, but consumers who had been anticipating an iris-scanner will be disappointed The iPhone 5S already has a fingerprint sensor Mark Zuckerberg spoke on Monday at the Mobile World Congress in Barcelona hanced wireless capabilities, meantime, would boost download speeds by nearly five times in some cases, the company said Samsung said it also has beefed up the phone’s waterproof and antidust capabilities That may not be enough to resonate with consumers at a time when smartphone growth starts to level off and as a raft of Chinese competitors produce cheaper smartphones that look similar According to market research firm IDC, China accounted for one out of every three smartphones shipped around the world in 2013, equaling 351 million units But recently, the surge in growth has started to slow as smartphones already account for more than 80% of China’s total phone sales, IDC said At the Mobile World Congress where Samsung unveiled its device, a number of its rivals, including Sony Corp., Huawei Technologies Co., LG Electronics Inc and HTC Corp., all introduced competing devices that also played up more powerful cameras and longer battery life in bodies that look more like Samsung’s Sony, for one, unveiled its Xperia Z2 smartphone hours ahead of Samsung Monday, loaded with its most cutting-edge camera and audio technologies As a result of the heightened competition, Samsung has seen its profit growth slow The company reported its first quarterly decline in operating profits in two years in the fourth quarter The worry for Samsung is a lack of sales drivers, analysts say Wearable devices, which Samsung launched in three varieties on Monday, haven't yet proven to be mainstream products, though entries in the market by companies like Apple and Google, expected later this year, could change that Samsung’s new wearable devices, which include the flagship Gear and a fitness band called Gear Fit, remain limited in their functionality—so much so that Samsung is marketing them as companion products to its smartphones The Gear drops the “Galaxy” name in a nod to the fact that it is not powered by Google’s Android software Instead, the smartwatch runs on Tizen, a rival operating system that Samsung has backed prominently Analysts said the “back to basics” approach—as Samsung called the new phone Monday—could fall flat with the public “If it’s just about replacing the current device with a more powerful one, it’s not going to be enough for consumers,” said Thomas Husson, an analyst at Forrester Research “Beyond the specs, expectations are now increasing for Samsung, now that they’re the leader People expect them to lead in terms of innovation.” Windows, Nokia Phones Get BlackBerry Messenger BY SIMON ZEKARIA BlackBerry Ltd said Monday it will make its messaging service BlackBerry Messenger, or BBM, available to Windows Phone and Nokia X smartphone customers in coming months “BBM continues to grow in popularity as millions of people use our mobile platform for chatting and connecting with friends or colleagues,” said John Sims, BlackBerry’s president of global enterprise solutions Waterloo, Ontario-based BlackBerry launched BBM in 2005 The service runs on Android-powered phones, Apple Inc.’s iPhone and BlackBerry devices BBM will be available from the Windows Phone store this summer BBM for Nokia X will be available from the Nokia store when the Nokia X platform launches Windows maker Microsoft Corp is in the process of completing a $7 billion takeover of Nokia’s phone business At the Mobile World Congress trade show in Barcelona, Nokia unveiled its low-end Nokia X smartphone, the first in a new family of phones running Google Inc.’s Android software Meanwhile, the BlackBerry executive in charge of software design and one of the key drivers behind its current operating system has left BBM, launched in 2005, has been available on Android-powered phones, iPhones and BlackBerry devices the company, the latest in a string of executive departures under the new leadership of Chief Executive John Chen Don Lindsay, BlackBerry’s vice president of user experience since 2009, left the company in January, according to a person familiar with the matter THE WALL STREET JOURNAL Tuesday, February 25, 2014 | 19 MOBILE WORLD CONGRESS SonyCranksUpCamera Nokia Takes Wraps Off Android Phone InItsLatestSmartphone BY SVEN GRUNDBERG High Stakes in Mobile After Company Pulls Plug on PC Business The new phone uses an ultrahigh-definition technology known as 4K Sony handsets now have a 3.8% global share by shipments, while Samsung and Apple Inc together hold a 47% share, according to research firm IDC Sony sells more than half of its handsets in Japan and Europe, while its presence is tiny in the U.S with just one carrier distributing its phones Its market share in China last year was just 0.5%, according to Canalys, another research firm Sony’s new flagship phone—the Xperia Z2, unveiled Monday in Barcelona—comes with a larger and brighter 5.2-inch display, curved edges and a slimmer body than the previous model With two speakers and a noise-canceling headset, Sony says users should get quality sound, even on noisy trains and buzzing Long Climb 73.3 mm Sony trails in the global smartphone market Share of shipments, 2013 Samsung 31% Apple 15 Huawei 4.8 LG 4.7 Lenovo 4.5 Sony 3.8 Source: IDC The Wall Street Journal planes Sony also showed off its slick new Xperia Z2 tablet, which it claims to be the slimmest and lightest waterproof tablet with a 10.1inch display But the new phone’s highlight is a camera that uses an ultrahigh-definition technology known as 4K for its horizontal resolution of roughly 4,000 pixels Sony and other electronics makers like Samsung are trumpeting 4K as the key ingredient in their nextgeneration television sets In Sony’s new Xperia Z2, 4K video lets users capture and watch details normally too small to see, even though the handset display uses a lower resolution, said Kichiro Kurozumi, vice president overseeing Xperia’s product planning, in an interview in Tokyo ahead of the mobile show But the Z2 isn’t the only phone that takes video in 4K: Samsung’s Galaxy Note 3—a phablet that is bigger than a smartphone but not quite a tablet—launched in September also had 4K video capabilities; LG’s newest phablet with a 5.9-inch display, the LG G Pro 2, unveiled Sunday, boasts 4K video capture too And consumers don’t always gravitate toward high-end features In 2003, Sony released a high-end home audio and video brand called Qualia, which failed to gain traction and was shut down after three years Instead, it was the lower-fidelity Apple iPod that became a megahit Even Samsung’s recent attempts to spur sales with everything from curved-screen smartphones to the Galaxy Gear smartwatch haven’t done much to spark demand Analysts also say many users may not want to shoot high-resolution video on their phones, because it eats up battery life Others may Sony Sony Corp is rolling out a new smartphone loaded with its most advanced camera and audio technologies But will the cutting-edge, high-tech features really help the phone sell? That question is a key one for Sony as well as a host of bigger rivals like Samsung Electronics Co., which are showing premium smartphone models at the Mobile World Congress in Barcelona this week The makers are hoping to woo consumers to top-end phones with bigger displays and better cameras, as a host of new rivals spurs competition and pushes prices of cheaper models below $100 The stakes are even higher for Sony, which earlier this month said it would pull the plug on its unprofitable personal-computer business, effectively doubling down on smartphones and tablet computers Sony Chief Executive Kazuo Hirai is banking on mobile devices to drive profits in its struggling electronics business, as well as to restore its fading reputation for cool gadgets Results so far are mixed: Sales at Sony’s mobile-products segment, which included PCs, jumped 40% from a year earlier and made up about 22% of total revenue during the nine months through December Yet Sony also reduced its smartphone sales target by 4.8% for the year through March, citing slowerthan-expected demand in China and Europe 146.8 mm BY KANA INAGAKI Bells and Whistles Features of the Sony Xperia Z2 u Larger display (5.2 inches), curvier edges and slimmer body than previous model u Pixels per inch: 428 u Weight: 163 grams (5.75 ounces) u Cameras: 20.7 megapixels (rear); 2.2 megapixels (front) u Video capture: 4K (3840 x 2160p) not be able to see the difference in resolution quality on such a small device “Innovation on the smartphone itself has pretty much reached a plateau,” said IDC research manager Ramon Llamas “A lot of times, the experiences tend to look the same.” To hedge their bets, premium handset makers are introducing cheaper models Sony is launching in April a more affordable model called Xperia M2 with a 4.8-inch screen and high-speed network capabilities But the low-end market is fast becoming crowded with Chinese and other Asian brands offering cheap devices that work on speedy, fourthgeneration cellular networks Competition will get fiercer after Lenovo Group Ltd completes its purchase of Google Inc.’s Motorola handset business “The scary part about smartphones is that a hit product can instantly flip the industry,” Sony’s Mr Kurozumi said “Both Lenovo and Motorola have the ability to come out with such a product so it is a threat for us.” HTC Goes Midprice to Lift Phone Sales BY SVEN GRUNDBERG BARCELONA—HTC Corp on Monday unveiled a new midprice handset, in a bid by the unprofitable company to boost sales volumes with a lower-priced offering The Taiwanese company—traditionally seen as a high-end phone maker—has pledged that lowerpriced handsets would be a major focus this year, and that it would venture into price bands that it had previously considered too low, as it struggles to compete with low-cost handsets from a raft of Chinese phone makers HTC Chief Executive Peter Chou said the new HTC Desire 816 is a part of this effort, although the company didn’t immediately specify the phone’s retail price “There’s a huge opportunity in the middle of the market People are looking for affordable smartphones that don’t compromise,” Mr Chou said The Android-running Desire 816 sports a 5.5-inch screen, fourthgeneration network capability and a quad-core processor It is set to start shipping next month The company hasn’t given up on highend phones and said it would unveil the successor to its HTC One flagship device at an event in New York on March 25 BARCELONA—Nokia Corp took the wraps off its low-end Nokia X smartphone, the first in a new line of phones running Google’s Android software designed to boost the Finnish company’s eroding position in developing markets Priced at €89 ($122) excluding carrier subsidies and taxes, the smartphone hits an attractive pricing level in places such as India, Indonesia and Russia, and fills a hole in Nokia’s product portfolio Nokia also released two other Android-powered devices, the Nokia X+, priced at €99, and the XL, with a larger screen, at €109 Amid the rise in popularity of the Android operating system, thousands of developers are making third-party software for the platform The main benefit of the Nokia X range is that they are able to run these apps, said Timo Toikkanen, the head of Nokia’s mobile phones unit Still, betting on one of its main competitors’ software is a risky move for the Finnish device maker, which in early 2011 actively opted out of working together with Google Inc.—whose Android OS powers popular phones made by Nokia competitors like Samsung Electronics Co.—in favor of backing Microsoft Corp.’s smartphone push The phone also comes weeks ahead of the expected closure of Microsoft’s $7 billion takeover of Nokia’s phone business “Three years ago, this would have been the perfect move, but not anymore,” said Francisco Jeronimo, an analyst with Interna- tional Data Corp “What if these Androids are a hit, and Nokia starts to ship tens of millions of them? What message will that give developers, consumers and investors about the viability of the Windows Phone platform?” With Windows Phone sales off to a shaky start, Nokia’s board of directors initiated a review of its collaboration with Microsoft and began weighing its options in the summer of 2012 Engineers at Nokia had been working on the Android phone strategy long before Microsoft struck its deal to buy Nokia’s handset business last September But Microsoft has known about the push, Mr Toikkanen said In an update on its official blog on Monday, Frank X Shaw, Microsoft’s head of communications, wrote that Microsoft is “pleased” to see Microsoft services introduced on Nokia’s new Android devices He added however, that Microsoft and Nokia are still operating as “independent companies” until the deal closes, and that Microsoft remains committed to its Windows Phone strategy While giving Nokia yet another smartphone platform to manage, the new Android phones will fill a gap in the company’s product portfolio The Finnish company has faced increasing difficulties competing in developing markets, where consumers and manufacturers have embraced Android Globally, Android was installed on 80% of smartphones sold last year In places such as India, Android has more than 90% market share ADVERTISEMENT The Mart BUSINESS OPPORTUNITIES CAPITAL AVAILABLE LOAN, BANK GUARANTEE/ SBLC FOR LEASE We have Genuine provider for loan at flexible APR of 3% and BG/SBLC for lease at 5+2% Serious brokers and Borrower only We also secure funding, private lenders,project loans for 3% APR Email: robert.clapton@rocketmail.com Contact: Mr Robert Clapton Tel: + 44 777-650-6313 Businesses For Sale Advertise in The Mart Call +44 (0) 207 572 2123 BUSINESS OPPORTUNITIES As with all investments, appropriate advice should be obtained prior to entering into any binding contract TRAVEL 20 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL MARKETS Deutsche Bank Will Cut Its U.S Assets Weighed Down Analysts are concerned about HSBC’s ability to hit its return targets amid an uncertain global economy Daily share price Return on equity* Cost-efficiency ratio† 680 pence 20 % 65% Monday: 635.70 pence 670 2.83% 2014-2016 target: BY ISABEL GOMEZ AND EYK HENNING 12-15% 15 60 660 2014-2016 target: 10 650 54-56% 55 640 630 620 Jan Feb ’12 ’13 ’14 *Measures profits on shareholder funds †Total operating expenses divided by net operating income, before bad loan charges Sources: WSJ Market Data Group (share price); the company (return on equity, ratios) 50 ’12 ’13 ’14 The Wall Street Journal HSBC’s 2013 Results Weaker Than Expected BY MARGOT PATRICK AND MAX COLCHESTER LONDON—HSBC Holdings PLC said lower revenue and higher operating costs weighed on profit growth last year, adding to concerns about the bank’s prospects this year as some of its key markets cool and capital requirements rise HSBC said 2013 group revenue fell to $64.6 billion from $68.3 billion in 2012, while its core operating expenses rose because of an increase in the U.K bank levy and higher litigation charges Net profit, though, rose 15% to $16.2 billion from $14.03 billion, reflecting a drop in bad loans in 2013 and a drag on 2012 results from the bank’s $1.9 billion moneylaundering settlement that year The results fell far short of analyst expectations, and HSBC shares fell 2.8% in London The bank’s final 2013 dividend of 19 cents was less than the 21 cents anticipated by investors, highlighting a continuing tug of war between U.K banks and the country’s banking regulator over rules on capital Chief Executive Stuart Gulliver warned that rising capital requirements could hinder the bank’s ability to ever hit the upper end of its 12% to 15% return-on-equity target, a measure of how much profit a company generates from shareholder funds He also dashed hopes of a share buyback in the near term by saying he didn’t think it would happen in 2014 HSBC, with $2.7 trillion in assets, is regarded as one of the world’s most stable banks because of its strong capital ratios and exposure to rapidly expanding emerging economies Mr Gulliver said on Monday the bank has succeeded in becoming “leaner and simpler” since starting a restructuring in 2011 that included exiting from 63 businesses and shedding tens of thousands of jobs But analysts have been concerned about the bank’s ability to hit its return targets and jump-start revenue growth in an uncertain global economy Return on equity in the year was 9.2%, up from 8.4% in 2012 The bank missed its cost-efficiency target, too, and said both figures had been affected by repayments to U.K customers who were wrongfully sold insurance on loans and credit cards Profit before taxes fell in many of the regions where HSBC operates In Asia Pacific excluding Hong Kong, pretax profit slipped to $7.76 billion from $10.45 billion Latin America pretax profit fell to $1.97 billion from $2.38 billion The decline was offset, though, by a better performance from Europe, where last year’s $3.41 billion pretax loss swung to a $1.83 billion gain In Hong Kong, the bank’s largest profit generator last year, profit before taxes rose to $8.09 billion from $7.58 billion Mr Gulliver said the recent sharp selloffs in some emerging markets are “a reflection of specific circumstances rather than a generalized threat,” and that the bank remains “optimistic about the longer-term prospects of emerging markets and especially the opportunities for HSBC, which will arise from the anticipated material expansion in South-South trade and capital flows.” Meanwhile, there were fresh grumbles from Mr Gulliver and other HSBC executives about U.K and European Union rules Mr Gulliver outlined a new pay program for top executives and traders that will see about 665 people collect new “fixed pay allowances” that hand them extra cash and shares in addition to their salaries, as a way around new European Union rules limiting annual bonuses for bank staff to 100% of their fixed pay, or 200% with shareholder approval Although it means Mr Gulliver’s fixed pay will rise to around $3.6 million a year, mainly in the form of shares, from $1.875 million now in cash, he said “we’d prefer not to have to this” but felt compelled to act in the best interests of shareholders to attract and retain staff RBS ‘Makes the Tea’ for Clients Continued from page 15 bank, introducing new services and shuffling the unit’s management, according to a person close to the company It is also trying to drum up demand for loans The bank sent hundreds of relationship bankers, who work with specific clients, to deliver letters to small businesses offering them credit Since 2011, RBS also sends corporate bankers to work in customers’ businesses The aim is for bankers to see things from a customer’s perspective and better understand the businesses that they lend to Mr Eady, who is relationship director at RBS, has worked in about nine different businesses, including a supermarket He says he enjoys spending days with clients Sometimes his new co-workers worry that he is spying on their business Others make derogatory comments about bankers Mr Eady says he just grins and gets on with the job The roles are varied Ian Cowie, chief executive of RBS’s business and commercial banking, spent a day collecting trash in East London A colleague in Northern England chased chickens around a farm On a recent day, Mr Eady went to visit North London food wholesaler Cyprofood A few months earlier, Mr Eady had spent a day helping unpack vegetables and carry food around the airy warehouse The day was productive: He learned about Cyprofood’s booming watermelon business But things nearly took a turn for the worse when a large crate of feta cheese wobbled perilously as Mr Eady unloaded it A colleague righted the crate, keeping it from falling RBS lent Cyprofood money to ex- pand over the past five years It hasn’t always been easy, says Cetin Agcagul, Cyprofood’s managing director Despite the company more than quadrupling its turnover over the past few years, the bank wasn’t always eager to lend “There were times when we didn’t get what we were expecting,” says Mr Agcagul He didn’t say how much the bank had lent the company The 29-year-old businessman was surprised to hear that Mr Eady spent a day working in the warehouse “Did we pay him for that day?” he said turning to his finance director, and, of course, the answer was no Mr Agcagul praised Mr Eady for his efforts to better understand his business, telling him: “You see things like us.” —Jason Douglas contributed to this article FRANKFURT—Deutsche Bank AG plans to reduce its U.S.-based assets by around a quarter to $300 billion in the coming years to comply with new rules for foreign banks’ subsidiaries published by the U.S Federal Reserve last week Germany’s largest lender aims to reassign activities from the U.S to other regions such as Europe or Asia, a spokesman for the bank told The Wall Street Journal, confirming statements Chief Financial Officer Stefan Krause made to the Financial Times Under the Fed’s new rules, foreign banks with U.S assets greater than $50 billion will have to maintain more loss-absorbing capital and hold a minimum 4% of total assets in equity capital Analysts have said that Deutsche Bank is the foreign bank most affected by the rule According to Citigroup analysts, Deutsche Bank could face a capital shortfall of roughly $7 billion under the new rules Mr Krause said the bank is confident it will be able to meet new requirements on capital and the use of leverage Further, he said, a reduction in the bank’s U.S assets shouldn’t be viewed as a pullback from the U.S The bank’s U.S operations include its Mexican arm as well as its repo business located in Frankfurt and Tokyo A spokesman confirmed the bank plans to reassign these activities to its German or Asian operations The lender also is set to convert some of its internal funding lines for the U.S into hybrid capital, a financing instrument that is automatically transformed into equity in times of stress U.K to Ease Banks’ Entry BY MARGOT PATRICK LONDON—British regulators are poised to make it easier for foreign banks to set up shop in the U.K., a reversal of years of intensified supervision following the financial crisis The U.K.’s Prudential Regulation Authority, the primary overseer of banks operating here, plans to unveil a proposed new approach Wednesday to supervising the U.K arms of foreign banks The overall message will be that it will become easier for foreign banks to open lightly regulated arms known as branches, assuming the banks don’t collect retail deposits and that their home-country regulators are deemed cooperative, according to people briefed on the PRA’s plans The expected shift represents an attempt by the U.K to make London a more attractive financial hub and thereby increase cross-border trade The PRA already has started promoting an open-door policy to Chinese banks looking to business in London The agency’s head, Andrew Bailey, visited China last December to help spread the message, although he has said the new policy isn’t specific to any country “The message is that the doors are open so come and play in our market—as long as you have the right sort of business model and don’t want to something that could bring the system down,” said Bob Penn, a partner at Allen & Overy LLP “In part this looks like a political rear-guard action to put London back on the agenda for international organizations who may have felt snubbed in the past.” The PRA plans to outline the new approach in a consultation paper Wednesday that will delve into details such as specific activities that will be tolerated within the U.K branches of foreign banks Existing branches of banks from outside the European Economic Area may have to meet new requirements to continue operating in their current form if the PRA’s proposed rules are adopted The planned shift is remarkable because of the aggressive way in which the U.K has cracked down on foreign-bank branches following the financial crisis Because of the U.K.’s historic position as a center for trade across the world, foreign banks have operated in the country for centuries Foreign bank branches now account for around £2.4 trillion, or nearly one-third, of the U.K.’s roughly £7.9 trillion in resident banking assets, according to the Bank of England Assets at local subsidiaries of foreign banks such as Citigroup Inc., UBS AG and J.P Morgan Chase & Co account for another £1 trillion Local subsidiaries are supervised by the PRA like domestic banks and must have their own liquidity and capital Bank branches, by contrast, are more lightly regulated offshoots of a foreign bank, overseen primarily by the home-country regulator Those branches have caused heartburn for the U.K in the recent past The government is still engaged in legal action with Iceland over a £2.35 billion bailout of depositors in the local branch of Iceland’s Landsbanki in 2008 The PRA also encountered concern over the health of Cypriot banks during the euro-zone debt crisis, successfully pressuring their U.K branches to convert into subsidiaries Since the postcrisis crackdown, the PRA has continued to press foreign banks to move more of their activities into local subsidiaries It also has taken a tougher line on letting subsidiaries rely on their parents for financial help For example, a liquidity line extended to U.K.-incorporated UBS Ltd by its Swiss parent, UBS AG, was cut off by the PRA two weeks ago as part of an agreement between the regulator and the bank to make the entity self-sufficient The PRA’s new stance stands in contrast to the U.S., where the Federal Reserve approved new rules last week requiring large foreign banks to hold more capital locally Fed officials said the move is important to fortify the U.S financial system, but foreign banks criticized it as a step toward further Balkanization of the global financial industry “If you have a subsidiary you have local capital and local liquidity and the capacity to carry out your own domestic regulation effectively,” said Clifford Smout, a former Bank of England official “If it’s a branch, you are completely reliant on the supervision of another party because the capital and the liquidity of the firm is available for global creditors.” THE WALL STREET JOURNAL Tuesday, February 25, 2014 | 21 MARKETS Fed as Top Cop Is Something to Bank On ranging from capital levels and bankers’ bonuses to the legal structure of subsidiaries To critics—and there are many on Wall Street—the drive to erect national barriers threatens to Balkanize the banking sector and hit world economic growth by constraining the free flow of capital “While we haven’t seen a new protectionism, we have seen fragmentation in rules and capital which is not useful for coordinated global growth,” Kevin Warsh, who was on the board of the Federal Reserve from 2006 to 2011, told me Last Tuesday marked an important point in the postcrisis regulatory shakeout, because the Fed asserted its right to become the world’s banking policeman What the central bank did is as important as what it said What the Fed did was pass rules that require large foreign banks to keep high levels of capital in their U.S units The aim is simple: to make sure that, in times of trouble, overseas lenders don’t rely on U.S financial help, as some of them did in 2008 What the Fed, through governor Daniel Tarullo, said was: “The most [ Current Account ] BY FRANCESCO GUERRERA “Financial institutions may be global in life, but they are national in death.” The words of Thomas Huertas, a British banking watchdog, in 2009 sum up the most important piece of unfinished regulatory business left over from the financial crisis Unlike most other sectors, finance is a global industry regulated by national authorities When the failure of a company with headquarters near Times Square, as Lehman Brothers Holding Inc was, can hit traders in London, regional banks in Germany and churches in Australia, domestic regulators have their work cut out The problem has been that, since the crisis, national agencies have been even more preoccupied with their home turfs, trying to bolster domestic defenses against banking crises The urge is understandable but it has created a cacophony of rules on issues NAV GF AT LB DATE CR NAV n ALEXANDRA INVESTMENT MANAGEMENT AlexandraConvertibleBondFundI,Ltd.(ClassA) OT OT VGB 08/31 USD 2155.22 —%RETURN— YTD 12-MO 2-YR NS NS NS n BANC INTERNACIONAL D'ANDORRA BANCA MORA Avgd Meritxell 96, Andorra la Vella Andorra Ph +376.884884 www.bibm.ad Andfs Anglaterra Andfs Borsa Global Andfs Emergents Andfs Espanya Andfs Estats Units Andfs Europa Andfs Franca Andfs Japo Andfs Plus Dollars Andfs RF Dolars Andfs RF Euros Andorfons Andorfons Alternative Premium Andorfons Mix 30 Andorfons Mix 60 UK GL GL EU US EU EU JP US US EU EU GL EU EU EQ EQ EQ EQ EQ EQ EQ EQ BA BD BD BD EQ BA BA AND AND AND AND AND AND AND AND AND AND AND AND AND AND AND 11/16 02/21 11/02 02/21 02/21 02/21 02/21 02/21 10/22 02/21 02/21 02/21 12/31 02/21 12/19 GBP EUR USD EUR USD EUR EUR JPY USD USD EUR EUR EUR EUR EUR 8.47 6.70 14.77 15.60 21.03 8.05 10.98 660.78 9.66 12.22 11.71 15.79 109.45 10.42 8.96 2.8 0.6 -20.4 10.4 0.6 7.0 0.3 -5.3 2.3 0.6 0.5 0.8 16.9 1.0 4.4 3.6 11.8 -19.2 49.2 25.5 29.2 20.0 24.3 3.0 0.1 1.4 3.0 16.9 6.1 7.1 14.9 5.1 -4.7 22.2 14.2 12.8 13.6 22.0 6.2 1.4 1.7 3.0 8.3 3.6 -2.5 FUND NAME NAV GF AT LB DATE CR GH FUND S GBP GH Fund S USD GH Fund USD Hedge Investments Leverage GH USD MultiAdv Arb CHF Hdg MultiAdv Arb EUR Hdg MultiAdv Arb GBP Hdg MultiAdv Arb S EUR MultiAdv Arb S GBP MultiAdv Arb S USD MultiAdv Arb USD OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT OT CYM CYM GGY GGY GGY JEY JEY JEY JEY JEY JEY JEY 01/31 01/31 01/31 08/16 01/31 01/31 01/31 01/31 01/31 01/31 01/31 01/31 GBP USD USD USD USD CHF EUR GBP EUR GBP USD USD 163.37 183.43 318.33 158.48 148.62 100.74 112.34 122.34 126.73 133.92 144.88 212.29 0.6 0.6 0.5 NS 0.9 0.8 0.8 0.8 1.0 0.9 0.8 0.8 7.8 7.8 6.5 NS 11.1 3.6 4.0 4.4 5.3 5.6 5.2 4.1 7.6 7.6 6.4 3.6 10.7 3.9 4.2 4.7 5.6 6.0 5.7 4.5 OT OT OT OT OT OT OT OT OT OT OT EQ EQ EQ EQ EQ EQ OT OT OT OT OT JEY JEY JEY JEY JEY JEY JEY JEY GGY GGY GGY 01/31 01/31 09/28 09/28 06/30 06/30 04/30 04/30 01/31 01/31 01/31 EUR USD USD EUR EUR USD EUR USD USD EUR GBP 97.06 181.80 151.22 82.99 127.84 135.07 104.69 105.31 126.86 114.61 122.37 -0.4 -0.4 3.4 2.8 -3.4 2.0 1.3 1.5 -2.6 -2.2 -2.6 4.9 5.0 -2.4 -3.0 -1.3 4.3 -9.5 -8.8 -12.0 -12.0 -12.0 4.0 4.7 -5.5 -5.9 2.2 5.1 -1.9 -1.7 -8.6 -8.6 -8.5 86.28 8577.68 9032.12 79.01 121.37 10807.34 11130.39 96.94 102.83 23.3 -9.3 4.6 -12.2 -9.0 3.5 17.9 -0.9 -4.6 -24.9 -8.4 11.0 -11.1 -8.8 5.1 25.6 0.7 -4.1 -22.3 0.3 13.2 -1.0 8.1 11.3 23.9 8.4 6.9 n HSBC Uni-folio Asian AdbantEdge EUR Asian AdvantEdge Emerg AdvantEdge Emerg AdvantEdge EUR Europ AdvantEdge EUR Europ AdvantEdge USD Real AdvantEdge 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LuxTopic-Pacific OT OT LUX 02/24 EUR OT OT LUX 02/24 EUR OT OT LUX 02/24 EUR OT OT LUX 02/24 EUR OT EQ LUX 02/24 EUR EU BD LUX 02/24 EUR AS EQ LUX 07/20 EUR AS EQ LUX 07/20 EUR EU EQ LUX 02/24 EUR OT OT LUX 02/24 EUR n HERMITAGE CAPITAL MANAGEMENT LTD Tel: +7501 258 3160 www.hermitagefund.com The Hermitage Fund GL EQ JEY 03/12 USD 4.31 252.94 187.42 279.50 132.06 150.29 144.57 140.29 20.31 19.58 -0.7 0.1 -3.6 -1.2 8.9 1.0 -8.5 -8.8 -0.3 -1.2 -8.0 6.4 6.6 6.3 -14.4 2.8 5.0 4.4 6.8 -8.8 -7.2 7.4 5.2 9.1 -18.6 4.4 7.6 7.0 5.4 0.1 963.12 4.5 105.6 HSBC Trinkaus Golden Opportunities Prosperity Return Fund A Prosperity Return Fund B Prosperity Return Fund C Prosperity Return Fund D Renaissance Hgh Grade Bd A Renaissance Hgh Grade Bd B Renaissance Hgh Grade Bd C Renaissance Hgh Grade Bd D OT JP EU EU EU EU EU EU EU OT BD BA BA BA BA BA BA BA LUX LUX LUX LUX LUX LUX LUX LUX LUX 02/21 12/06 12/06 12/06 12/06 12/06 12/06 12/06 12/06 USD JPY JPY USD EUR JPY JPY USD EUR -23.2 n MP ASSET MANAGEMENT INC Tel: + 386 587 47 77 MP-BALKAN.SI MP-TURKEY.SI EE OT EQ SVN 08/12 EUR OT SVN 02/21 EUR 19.29 33.35 -1.9 -7.9 -8.4 -31.1 n HORSEMAN CAPITAL MANAGEMENT LTD T: +44(0)20 7838 7580, F: +44(0) 20 7838 7590, www.horsemancapital.com n MERIDEN GROUP Horseman EurSelLtd EUR EU EQ GBR 01/31 EUR 349.13 4.3 31.3 29.1 Tel: + 376 741 175 Fax: + 376 741 183 Email: meriden@meriden-ipm.com Horseman EurSelLtd USD Horseman Glbl Ltd EUR Horseman Glbl Ltd USD EU EQ GBR 01/31 USD GL EQ CYM 01/31 USD GL EQ CYM 01/31 USD 349.13 577.71 577.71 NS NS NS n HSBC ALTERNATIVE INVESTMENTS LIMITED T +44 20 7860 3074 F + 44 20 7860 3174 www.hail.hsbc.com HSBC ALTERNATIVE STRATEGY FUND Special Opp EUR Special Opp Inst EUR Special Opp Inst USD Special Opp USD OT OT OT OT OT OT OT OT GGY GGY GGY GGY n HSBC Portfolio Selection Fund GH Fund CHF Hdg GH Fund EUR Hdg (Non-V) GH Fund GBP Hdg GH Fund Inst USD GH FUND S EUR OT OT OT OT OT OT OT OT OT OT postcrisis regulatory response The worst because the rules are unabashedly unilateral and predicated on the belief, spelled out by Mr Tarullo, that the U.S can tell other countries what to in order to keep the financial system safe That won’t go down well with the Europeans and other critics, who argue that the U.S abdicated that role after failing to police its own banks in the run-up to the crisis Yet, the Fed’s decision cuts through the regulatory quicksands that have mired the international financial system since 2008 Instead of the morass of committees, international forums and tepid communiqués from the Group of 20 (there was another one this past weekend), banks and their investors have the prospect of having the Fed and its rules as a global model If the Fed is the global lender of last resort, it should also be the global banking regulator In itself, that won’t eliminate the maze of diverging national rules but could go a long way toward simplifying it, even if the EU retaliates Unless Mr Barnier imposes wildly different restrictions on the European units of U.S banks, which already have to observe international capital rules, the resulting outcome should be tighter capital and risk controls across the two regions The Fed’s rules—and the EU’s response—could help plug two other holes in the regulatory net: the lack of a system to let a large bank fail without disrupting global markets, and the sluggish efforts by European banks to bolster capital levels According to Chris Brummer, a law professor at Georgetown University, the impetus to pass foreign-bank rules partly reflects “the absence of a credible crossborder resolution mechanism, as well as lingering concerns with the recapitalization efforts in Europe.” Despite the controversy, last week’s move by the Fed could be the start of a race to the top of the regulatory tree After all, these are “our” banks and our problem Francesco Guerrera is The Wall Street Journal’s financial editor Write to him at: currentaccount@wsj.com and follow him on Twitter: @guerreraf72 INTERNATIONAL INVESTMENT FUNDS Advertisement FUND NAME important contribution we can make to the global financial system is to ensure the stability of the U.S financial system.” As a statement of regulatory intent, Mr Tarullo’s words echo those of John Connally, Richard Nixon’s Treasury secretary, who told a group of European finance ministers that the dollar was “our currency but your problem.” Not surprisingly, the Fed’s actions elicited outrage in the European Union, which abhors the idea of having U.S regulators setting capital levels for EU banks Michel Barnier, the European commissioner for the internal market, called the measures discriminatory and issued a not-sothinly-veiled threat to retaliate When I spoke to Mr Tarullo on Thursday, he didn’t back down “The stability of the U.S financial system is very important,” he said “Contrast the 1997-1998 Asian market crisis, when the U.S was very solid and as a result, the contagion never could engulf the entire financial system In 2007, when the U.S wasn’t solid, the contagion did spread.” The Fed’s ruling encapsulates both the worst and the best of the GGY GGY GGY GGY CYM 12/31 03/31 03/28 12/31 01/31 01/31 01/31 01/31 01/31 EUR EUR USD USD CHF EUR GBP USD EUR 122.21 88.51 123.18 129.13 125.95 140.23 154.96 133.63 156.05 14.2 0.7 4.2 14.0 0.5 0.5 0.5 0.6 0.6 NS NS NS NS NS NS 14.2 -0.3 18.5 14.0 Antanta Combined Fund Antanta MidCap Fund Meriden Opps Fund Meriden Protective Div EE EE GL GL EQ EQ OT EQ AND AND AND AND 01/24 01/24 02/05 11/24 USD USD EUR EUR 207.19 373.49 22.68 NS.00 -1.3 3.5 0.0 -2.8 -19.3 -7.3 -11.2 NS -10.9 -6.8 -17.5 -11.6 -11.0 NS 17.0 13.3 10.6 17.3 6.7 6.3 6.9 7.3 7.7 6.1 6.0 6.7 7.0 7.2 FUND NAME NAV GF AT LB DATE CR Pictet-Brazil Index-P USD Pictet-CHF Bonds-P Pictet-China Index-P USD Pictet-Clean Energy-P USD Pictet-Digital Comm-P USD Pictet-Eastern Europe-P EUR Pictet-Em Corp Bds-P USD Pictet-Em Loc Curr Dbt-P USD Pictet-Em Mkts Hgh Div-P USD Pictet-Em Mkts Index-P USD Pictet-Em Mkts Sust Eq-P USD Pictet-Emerging Markets-P USD Pictet-Envir Megatr Sel-P EUR Pictet-Eu Equities Sel-P EUR Pictet-EUR Bonds-P Pictet-EUR Corp Bds Ex Fin-P Pictet-EUR Corporate Bonds-P Pictet-EUR Government Bonds-P Pictet-EUR High Yield-P Pictet-EUR Inflation Lkd Bds-P Pictet-EUR SM-Term Bds-P Pictet-EUR ST High Yld-P Pictet-Euroland Index-P EUR Pictet-Europe Index-P EUR Pictet-European Sust Eq-P EUR Pictet-Generics-P USD Pictet-Glo Bds Fundamental-P USD Pictet-Glo Em Currencies-P USD Pictet-Glo Emerging Debt-P USD Pictet-Glo Megatrend Sel-P USD Pictet-Greater China-P USD Pictet-High Dividend Sel-P EUR Pictet-India Index-P USD Pictet-Indian Equities-P USD Pictet-Japan Index-P JPY Pictet-Japanese Eq Opp-P JPY Pictet-Japanese Eq Sel-P JPY Pictet-Latam Index-P USD Pictet-Latin Am Loc Curr Dbt-P USD Pictet-Pac (ExJpn) Idx-P USD Pictet-Piclife-P CHF Pictet-Premium Brands-P EUR Pictet-Quality Gl Eq-P USD Pictet-Russia Index-P USD Pictet-Russian Equities-P USD Pictet-Security-P USD Pictet-Short-T Money Mkt CHF-P Pictet-Short-T Money Mkt EUR-P Pictet-Short-T Money Mkt JPY-P Pictet-Short-T Money Mkt USD-P Pictet-Small Cap Europe-P EUR Pictet-Sov ST Money Mkt-P EUR Pictet-Sov ST Money Mkt-P USD Pictet-Timber-P USD Pictet-US Eq Grwth Sel-P USD Pictet-US Eq Value Sel-P USD Pictet-US High Yield-P USD Pictet-USA Index-P USD Pictet-USD Government Bonds-P Pictet-USD Short Mid-Term Bds-P Pictet-Water-P EUR Pictet-World Gvt Bonds-P EUR PTR-Banyan-P USD PTR-Corto Europe-P EUR PTR-Kosmos-P EUR PTR-Mandarin-P USD OT CH AS OT OT EU OT OT GL GL GL GL OT EU EU EU EU EU EU EU EU EU EU EU EU OT OT OT GL GL AS OT EA EA JP JP JP GL OT AS OT OT GL EE EE GL CH OT OT OT EU OT OT GL US US US US US US OT OT OT OT OT OT OT BD EQ OT EQ EQ OT OT EQ EQ EQ EQ OT EQ BD BD BD BD BD BD BD BD EQ EQ EQ EQ OT OT BD EQ EQ OT EQ EQ EQ EQ EQ EQ OT EQ OT EQ EQ EQ EQ EQ MM OT OT OT EQ OT OT EQ EQ EQ BD EQ BD BD OT OT OT OT OT OT LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/24 02/21 02/21 02/24 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/24 02/21 02/21 02/24 02/24 02/24 02/24 02/21 02/21 02/24 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/21 02/20 02/21 02/21 02/24 USD CHF USD USD USD EUR USD USD USD USD USD USD EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR USD USD USD USD USD USD EUR USD USD JPY JPY JPY USD USD USD CHF EUR USD USD USD USD CHF EUR JPY USD EUR EUR USD USD USD USD USD USD USD USD EUR EUR USD EUR EUR USD NAV 63.09 466.05 99.84 86.51 210.81 319.28 100.73 175.15 105.97 234.57 91.03 492.50 121.49 540.93 475.82 132.87 179.13 139.02 221.30 116.85 132.15 115.89 116.12 148.48 188.80 210.97 128.53 103.84 308.82 210.73 380.86 129.21 81.25 303.32 12560.47 6969.12 10616.89 72.39 135.30 361.62 903.38 123.15 123.23 75.27 61.24 167.75 124.25 137.73 10127.88 132.31 860.51 102.68 102.02 151.31 172.80 185.77 145.23 156.77 579.97 125.82 197.58 132.15 95.94 130.87 106.89 103.23 Data provided by: —%RETURN— YTD 12-MO 2-YR -8.0 1.2 -5.2 1.3 2.2 -7.5 1.0 -2.6 -5.7 -4.2 -6.0 -5.3 0.3 -1.2 2.4 1.6 1.7 2.5 1.6 0.8 0.5 0.9 2.0 2.4 2.5 10.6 0.4 -1.1 0.6 3.4 -5.1 0.5 -2.4 0.3 -6.7 -7.0 -8.0 -7.8 0.3 0.7 0.4 -3.2 -0.4 -8.8 -10.2 1.7 0.0 0.0 0.0 0.0 4.7 0.0 0.0 0.4 2.0 -0.5 1.6 -0.5 1.5 0.2 0.9 2.5 -6.5 4.3 0.5 -2.8 -22.5 1.4 -1.9 31.0 38.3 -13.1 -1.7 -14.3 -8.3 -7.3 -10.8 -7.1 12.8 8.1 3.5 3.3 4.0 4.6 10.9 -2.1 2.3 6.2 25.2 20.2 18.3 34.4 -3.5 -4.1 -4.5 25.9 -1.4 12.0 -6.9 -2.8 28.2 28.3 25.7 -20.7 -13.8 -0.8 4.8 13.6 16.4 -10.2 -8.5 21.3 0.0 0.0 0.0 0.1 31.2 -0.1 0.1 9.0 33.5 21.4 6.1 23.9 -1.5 0.2 12.3 -3.8 -9.2 15.3 1.2 6.3 -20.7 2.5 1.5 12.5 22.2 -4.4 NS -4.7 NS -3.3 NS -4.4 9.7 10.0 6.2 4.7 6.4 5.9 13.0 0.9 2.6 7.0 16.3 14.8 13.5 24.6 -1.0 -1.9 2.9 18.4 2.4 12.3 -5.8 -2.5 23.1 25.0 21.7 -14.9 -7.0 7.6 6.5 11.9 NS -7.5 -6.3 15.1 0.0 0.0 0.0 0.2 23.9 -0.1 0.1 14.8 18.7 15.0 8.4 17.6 0.3 0.3 11.0 -2.6 -4.5 16.7 1.6 3.7 FUND NAME NAV GF AT LB DATE CR Paragon Limited USD A UK Fund USD A EU OT n Pictet Funds (Europe) SA, ROUTE DES ACACIAS 60, CH-1211 GENEVA 73 Tel: + 41 (58) 323 3000 Web: www.pictetfunds.com Pictet-Abs Ret Gl Div-P EUR Pictet-Agriculture-P EUR Pictet-Asian Eq ExJpn-P USD Pictet-Asian Loc Cur Dbt-P USD Pictet-Biotech-P USD GL OT LUX OT OT LUX OT OT LUX AS BD LUX OT EQ LUX 02/21 02/21 02/24 02/24 02/21 EUR EUR USD USD USD 113.74 149.57 179.60 142.84 658.29 -0.3 -2.1 -2.4 0.2 18.9 -3.7 -1.4 -0.2 -7.8 70.8 -0.9 3.1 1.5 -2.2 45.8 OT JP OT OT EQ EQ EQ EQ IRL IRL IRL IRL 02/21 02/24 02/21 02/21 USD USD USD USD n Hemisphere Management (Ireland) Limited Discovery USD A Elbrus USD A Europn Conviction USD B Europn Forager USD B Latin America USD A GL OT EU EU GL OT OT EQ EQ EQ CYM CYM CYM CYM CYM 12/31 01/31 01/31 01/31 06/30 USD USD USD USD USD 23.53 21.17 33.46 32.82 3.0 -6.2 18.0 17.9 31.7 13.8 71.3 70.8 15.4 5.9 47.1 46.5 101.35 10.10 161.54 324.09 NS.00 NS NS 0.3 2.6 NS NS NS 1.1 11.7 NS NS NS 5.3 11.9 NS EQ CYM 12/31 USD OT CYM 04/13 USD NS.00 157.94 —%RETURN— YTD 12-MO 2-YR 12.7 1.8 12.7 NS 14.2 NS n PT CIPTADANA ASSET MANAGEMENT Tel: +6221 25574 883 Fax: +6221 25574 893 Website: www.ciptadana-asset.com Indonesian Grth Fund GL EQ BMU 02/19 USD 154.09 13.0 -16.5 -10.2 1127.97 1372.98 10.69 1.1 6.0 17.3 5.8 28.6 84.6 6.7 18.4 52.3 13472.00 -6.4 37.6 28.2 16498.00 -4.3 50.8 34.8 n THE NATIONAL INVESTOR PO Box 47435, Abu Dhabi, UAE Web:www.tni.ae MENA Special Sits Fund MENA UCITS Fund UAE Blue Chip Fund OT OT OT OT BMU 01/31 USD OT IRL 02/13 USD OT ARE 02/13 AED n YUKI MANAGEMENT & RESEARCH n YMR-N Series YMR-N Growth Fund JP EQ IRL 02/24 JPY n Yuki Asia Umbrella Series Yuki Rebounding Gro Fd JP EQ IRL 02/24 JPY n Yuki Mizuho Series Yuki Mizuho Jpn Dyn Gro JP EQ IRL 02/24 JPY 5745.00 -6.7 36.4 27.1 Yuki Mizuho Jpn Inc JP EQ IRL 02/24 JPY 10031.00 -4.0 27.0 22.4 Yuki Mizuho Jpn Lg Cap JP EQ IRL 02/24 JPY 6167.00 -8.4 25.1 18.0 Yuki Mizuho Jpn LowP JP EQ IRL 02/24 JPY 18512.00 -6.3 49.8 35.6 Yuki Mizuho Jpn Val Sel AS EQ IRL 02/24 JPY 9158.00 -4.9 51.2 39.7 n OTHER FUNDS For information about these funds, please contact us on Tel: +44 (0) 207 842 9694/9633 Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 n WINTON CAPITAL MANAGEMENT LTD Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301 Winton Evolution EUR Cls H Winton Evolution GBP Cls G Winton Evolution USD Cls F Winton Futures EUR Cls C Winton Futures GBP Cls D Winton Futures JPY Cls E Winton Futures USD Cls B GL GL GL GL GL GL GL n POLAR CAPITAL PARTNERS LIMITED International Fund Managers (Ireland) Limited PH - 353 670 660 Fax - 353 670 1185 Global Technology Japan Fund USD Polar Healthcare Class I USD Polar Healthcare Class R USD NAV OT OT OT OT OT OT OT CYM CYM CYM VGB VGB VGB VGB 01/31 01/31 01/31 01/31 01/31 01/31 01/31 EUR NS.00 GBP NS.00 USD NS.00 EUR 245.63 GBP 267.48 JPY 17199.60 USD 876.58 NS 1.3 -4.4 -3.1 -3.1 -3.1 -2.4 -2.4 -2.3 -2.4 7.2 7.6 7.6 3.8 4.1 4.4 4.2 1.5 1.9 1.8 0.9 1.3 1.0 1.2 INDICES FUND NAME NAV ——————%RETURN —————— GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR n ARIX ABSOLUTE RETURN INVESTABLE INDEX Feri Institutional Advisors, www.feri.de ARIX Composite Gross USD OT OT GBR 01/31.00 USD1603.76 0.1 5.8 6.1 NAV OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8 n CG Portfolio Fund Ltd OT Data as shown is for information purposes only No offer is being made by Morningstar, Ltd or this publication Funds shown aren’t registered with the U.S Securities and Exchange Commission and aren’t available for sale to United States citizens and/or residents except as noted Prices are in local currencies All performance figures are calculated using the most recent prices available 12-month and 2-year returns may be calculated over 11- and 23-month periods pending receipt and publication of the last month end price For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email: lauren.berkemeyer@dowjones.com 22 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL MARKETS India Migrant Workers Bring Home the Gold CALICUT, India—More than 50 passengers on a recent Air India flight from Dubai arrived in this small city on India’s Malabar Coast carrying gold bars that customs officials valued at $2.5 million The passengers arrived at the customs line in the dusty airport here, handed over declaration forms for the gold and paid the 10% duty, many saying that they had bought the bars for a relative’s coming wedding The customs officials weren’t surprised to see the caravan of gold With normal avenues of import closed, officials say, jewelers and traders in this gold-obsessed country are exploiting a legal loophole and using Indians who are coming home after working in other countries to ferry the precious metal into India It is an example of what happens when a government tries to restrict a much sought-after commodity “We’ve seen this sharp increase,” said Peter Abraham, Calicut’s airport director “These people just don’t have the capacity to buy all this gold They are just poor people working in the Middle East Probably they are acting as couriers.” In December, passengers declared a total of more than 4,000 pounds of gold at the Calicut airport alone, valued at roughly $80 million That is up from 518 pounds in November and 70 pounds in October India’s insatiable demand for gold has been rising over the past decade The metal is considered the best form of life savings by the vast majority of the country’s one-billion plus people Very few Indians own stocks or bonds and close to half don’t even have a bank account The yellow metal is also thought to bring both good fortune and prosperity India’s gold demand jumped to around 864 metric tons in 2012, up around 30% from a decade earlier “India’s demand for gold cannot simply dry up” because the government is blocking imports said Bachhraj Bemalwa, director in the All India Gem and Jewelry Trade Federation “People are crazy for gold in this country.” Desperate to shrink a chronic trade deficit that has threatened to destabilize the economy, India started trying to curb gold imports last year The import tax on gold was raised to 10% of the value of the gold from 2% Importers are also required to re-export at least 20% of the gold they bring into the country Because of the restrictions, gold prices in India are out of Associated Press BY BIMAN MUKHERJI Indian customers shop for gold jewelry at a shop in Mumbai whack with those in the rest of the world A kilogram of gold sells for about $40,300 on global markets In India, it is fetching $48,400 But there is a way around the curbs Indians who have lived abroad for at least six months are allowed to bring home up to kilogram, or 2.2 pounds, of gold They need only to pay the 10% duty There is no re-export requirement The difference in domestic and international gold prices provides an ample margin for traders to cover the cost of airfare and even a little something extra for couriers to bring the metal home ‘Whole families are walking in with their pockets stuffed with gold,’ said one Calicut customs official Millions of Indian migrant workers come and go every year from Calicut and other Indian cities to Middle East destinations such as Dubai Many work as construction workers and domestic helpers, often earning a monthly salary of about $1,000 “Whole families are walking in with their pockets stuffed with gold,” said one Calicut customs official “They all tell us stories about needing the gold for weddings in the family, but we all know are just couriers.” And one after the other, they meet people just outside the airport, hand over their gold and move on Customs officers say the passengers aren’t breaking the law as long as they have worked overseas for six months They could even openly declare that they have been paid to bring in gold for others, customs officials said, but most are reluctant to declare the real source of their gold because they feel like they may be breaking the law “So long as it comes within the legal provisions, then there is no cause of worry for the government,” said D.S Malik, a Finance Ministry spokesman “If it still continues to increase, then the government may take a call at the appropriate time” about closing the loophole, he said Meanwhile, outright gold smuggling is also on the rise, officials said India arrested 206 people in the first half of this fiscal year for smuggling the yellow metal, compared with 38 people a year earlier The value of gold seized from smugglers between April and October was $33.6 million, almost double the $17.3 million seized in the full financial year to March 31, 2013, according to India’s finance ministry People have been trying to smuggle gold by ingesting it, hiding it in their underwear or even disguising it as staples, batteries or the internal parts of televisions It is like a return to the 1980s, when India was more socialist and restricted most imports, creating a thriving smuggling trade in every town The Indian government may soon cut its import tax on gold to between 6% and 8% from the current 10%, according to government and industry officials While gold supplies through official channels such as banks have dried up and posed problems for jewelry shops across India, some in Calicut say there is no dearth of supply, as long as they don’t ask too many questions “People bring in coins and bars all the time,” said Shirish K.P., a 39year-old jeweler at Calicut’s gold hub of Palayam “We don’t really need to ask where it comes from.” Global Investors Reverse Course on the Yuan Continued from page 15 Bullish bets had buoyed the yuan since the beginning of the year, according to traders and analysts, driven by hopes that the currency would keep appreciating as China continued to promote its international use “There were way too many structured products [betting on yuan appreciation] bought by private-bank investors and wealthy individuals,” said Eric Yum, head of offshore yuan and Hong Kong dollar trading at J.P Morgan Chase & Co “Panic selloff was triggered when the PBOC kept fixing the yuan at weaker levels.” Hot-money inflows—defined as net capital inflows not intended for foreign direct investment—accounted for more than $150 billion of the $433 billion increase in China’s foreign-exchange reserves in 2013, UBS said That had been help- ing to push up the yuan Some reckon, though, that China’s long-term policy to let the yuan appreciate won’t change much, given Beijing’s plan to internationalize its currency Plus, they figure, the central bank may be reluctant to let the yuan become too weak because that could trigger outflows from investors and multinational companies operating in China S&P 500 Advances To Intraday Record BY CLARE CONNAGHAN AND NEELABH CHATURVEDI $170 billion He said he expects more volatility in stocks this year, though he still favors corners of the market that will benefit from economic expansion, including consumer-discretionary, industrial and technology stocks The Dow Jones Industrial Average gained 105.83 points, or 0.7%, to 16209.13 The Nasdaq Composite Index advanced 29.56 points, or 0.7%, to 4292.97, its highest close since April 2000 While the S&P 500 finished close to its all-time high, the Dow remains 2.2% away from its record of 16576.66 reached Dec 31 The Nasdaq Composite Index remains 15% from its all-time high of 5048.62 reached at the height of the dot-com bubble in 2000 In Europe, shares got a lift from German confidence data The Ifo institute’s business-confidence index climbed to 111.3 in February, from an unrevised 110.6 in January, hitting its highest level since July 2011 and smashing economists’ forecasts “The rise in February’s German Ifo survey suggests that the economic recovery has continued to pick up some momentum in the early months of 2014,” said Jonathan Loynes, chief European economist at Capital Economics Yields on Ukraine government bonds fell sharply on expectations the European Union and other authorities will offer a financial-assistance package The yield on Ukraine’s benchmark dollar-denominated 10-year bond fell by nearly a percentage point to 9.17%, according to Tradeweb HSBC Holdings shares fell 2.8% in London after the bank’s full-year results came in short of analyst expectations Gold for February delivery gained $14.40 a troy ounce, or 1.1%, to $1,338.30 on the Comex division of the New York Mercantile Exchange Nymex crude for April delivery gained 62 cents a barrel, or 0.6%, to $102.82 —Dan Strumpf contributed to this article The S&P 500 rose to finish just a fraction below its record closing high Monday, as a mixed bag of recent U.S economic data and corporate earnings has failed to damp investors’ enthusiasm for stocks European shares also climbed, boosted by the gains in the U.S and by better-than-expected data on German business confidence The Stoxx Europe 600 rose 0.6% to MARKET 338.19, its highest close REPORT since January 2008 The U.K.’s FTSE 100 index added 0.4% to 6865.86, its seventh consecutive gain, leaving it at its highest close since December 1999 Germany’s DAX rose 0.5% to 9708.94, and France’s CAC 40 advanced 0.9% to 4419.13 The S&P 500 closed up 11.46 points, or 0.6%, at 1847.71, just below its Jan 15 record closing level of 1848.38 It hit an all-time intraday high of 1858.71 Monday The rally over the past few weeks has wiped out the S&P 500’s earlier year-to-date loss of 5.8%, underscoring investors’ willingness to shrug off a bevy of disappointing U.S economic reports and a mixed fourthquarter earnings season Many market watchers have dismissed the bad news as unduly influenced by unusually harsh winter weather and are confident growth will pick up again later in the year One upbeat indication has been the recent pickup in gross domestic product U.S GDP expanded at a pace of 3.7% in the final two quarters of 2013, the best second half of a year since 2003 Meanwhile, the Federal Reserve’s willingness to continue reining in its stimulus program has been viewed by investors as a vote of confidence in the U.S economy “The markets should be at an alltime high because we have an alltime high in GDP and an all-time high in earnings, so it’s reflecting that reality,” said Ron Florance, deputy chief investment officer for Wells Fargo Private Bank, which manages Fund Scorecard EUR Inflation-Linked Bond Funds that invest principally in inflation-linked bonds denominated in or hedged-into the Euro Ranked on % total return (dividends reinvested) in Euros for one year ending February 24, 2014 Leading 10 Performers FUND FUND RATING * NAME 3 NS NS 4 NS 4 FUND MGM'T CO LEGAL CURR BASE CamGestion CamGestion EURFRA Oblicycle Inflation O LFP La Franỗaise des EURFRA MultistratộgiesObligatairesI Placements Fon Fineco G.I.I.C Fineco EURESP Inflación FI ComStage Commerz Funds EURLUX iBoxx€SovInfLnkEu-InfTRETF Solutions S.A Duemme SICAV Duemme EURLUX BondInflation LinkedIAcc International Luxembourg SA Aviva Aviva Investors EURFRA Investors Inflation Euro A France Vanguard Vanguard Group EURIRL EurznInfl-LnkdBdIdxInsEUR (Ireland) Limited MEAG MEAG Munich Ergo EURDEU RealReturn KAG FIM Real FIM Varainhoito Oy EURFIN Lyxor ETF Lyxor EURFRA EuroMTSInfLinkInvstGrdA/I International Asset Management NOTE: Changes in currency rates will affect performance and rankings KEY: ** 2YR and 5YR performance is annualized NA-not available due to incomplete data; NS-fund not in existence for entire period YTD % Return in $US ** 1-YR 2-YR 5-YR 2.31 4.70 8.37 4.05 1.87 4.53 4.88 3.35 1.19 2.43 3.92 NS 1.97 2.14 6.33 NS 1.37 1.88 2.85 NS 1.23 1.84 4.65 NS 1.47 1.70 6.74 4.82 1.71 1.38 3.77 NS 1.37 1.37 4.23 4.43 1.48 1.33 5.39 4.51 Source: Morningstar, Ltd Oliver’s Yard, 55-71 City Road London EC1Y 1HQ United Kingdom www.morningstar.co.uk; Email: mediaservice@morningstar.com Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001 THE WALL STREET JOURNAL Tuesday, February 25, 2014 | 23 GLOBAL MARKETS LINEUP Major stock market indexes Stock indexes from around the world, grouped by region Shown in local-currency terms Close PERFORMANCE Percentage change Yr.-to-date PREVIOUS SESSION Region/Country Index Net change EUROPE Stoxx Europe 600 338.19 2.10 Stoxx Europe 50 0.62% 3.0% 52-wk 17.2% Region/Country Spain Close 10193.10 2976.76 15.65 0.53 2.0 13.1 Sweden OMX Stockholm Euro Stoxx 322.93 2.27 0.71 2.7 21.7 Switzerland SMI Euro Stoxx 50 3157.31 25.64 0.82 1.6 20.0 Turkey Austria ATX 2678.01 14.74 5.2 10.6 Belgium Bel-20 3044.76 25.32 4.1 19.4 Czech Republic PX 1039.29 -6.77 5.1 3.9 Euro Zone 0.55 0.84 -0.65% Denmark OMX Copenhagen 645.07 7.84 Finland OMX Helsinki 7557.09 34.58 France CAC-40 4419.13 38.07 Germany DAX 9708.94 51.99 BUX 18221.94 110.96 ISEQ 5054.19 49.34 Italy FTSE MIB 20477.50 85.60 AEX 401.76 1.40 0.35 Norway All-Shares 0.38 Poland WIG Portugal Russia 614.21 7307.70 79.21 RTSI 1318.98 3.44 64185.96 300.3 U.K FTSE 100 6865.86 27.80 ASIA-PACIFIC DJ Asia-Pacific TSM 1414.39 -1.52 Australia SPX/ASX 200 5440.20 1.50 30.1 China Shanghai Composite 20.4 Hong Kong Hang Seng 22388.56 2076.69 -179.68 19.2 India S&P BSE Sensex 20811.44 Japan Nikkei Stock Average 14837.68 -3.4 Singapore Straits Times 3105.84 South Korea Kospi 1949.05 8.0 26.1 AMERICAS DJ Americas 468.01 18.2 Brazil Bovespa 47476.97 Mexico IPC 40010.97 19.5 -8.6 0.26% 17.7 11.4 1.10 18.6 2.45%18.52 2.99 17.72 3.05 13.47 3.17 19.15 2.39 19.37 2.99 13.07 3.33 18.44 3.24 21.17 3.80 17.32 3.61 8.55 1.93 19.85 1699.11 224.68 0.63% 14.7% 0.78 10.4 1377.79 1369.50 1437.32 362.82 0.65 17.1 0.71 21.5 0.64 17.4 -0.05 -14.3 PERFORMANCE (U.S.dollars) Last Daily 52-wk 3248.66 2478.72 230.53 3490.22 3279.81 245.47 1701.43 1713.88 2095.31 475.20 19602.53 203.42 0.72% 0.56 0.73 0.56 0.76 0.10 0.79 0.85 0.50 -0.10 1.13 -0.18 Price-toDividend earnings yield* ratio* S&P Dow Jones Index -1.9 -1.7 -0.19 7.7 -8.9 0.53 27.2 -1.9 -5.6 -3.1 0.19 -0.45 -3.0 0.5 19.5 -7.8 -16.3 -6.4 1.03 0.20 0.72 -8.8 Sources: SIX Financial Information; WSJ Market Data Group 17.5% 19.2 14.7 23.2 20.6 -8.2 22.2 26.8 22.0 -10.9 26.3 3.8 6.35%14.98 6.71 14.35 3.29 29.14 2.16 19.16 2.50 17.18 3.29 21.22 3.97 22.93 1.94 13.55 Developed and emerging-market regional and country indexes from MSCI as of February 24, 2014 PERFORMANCE (euros) PERFORMANCE (U.S.dollars) Last Daily 52-wk Last Daily 52-wk Turkey Titans 20 -c Global Select Div Asia/Pacific Select Div 280.86 U.S Select Dividend -d S&P Glb Nat Resources 2006.01 Islamic Market Islamic Market 100 Islamic Turkey -c Sustainability Europe 111.06 S&P Glb Infrastructure 1513.97 Luxury DJ-UBS Commodity -p 118.73 654.95 254.43 1.27% -9.0% 329.93 1249.09 0.46 2737.94 -4.6 2780.27 3020.59 3971.31 0.59 167.56 15.4 0.63 2349.33 8.1 2074.75 0.37 134.18 -2.4 0.55% 0.83 1.13 0.90 0.40 0.84 0.78 0.44 0.45 0.58 0.40 0.37 -16.0% 14.0 -5.5 24.1 -0.8 17.9 18.9 -7.8 19.9 12.3 17.4 -2.1 Price-toDividend earnings yield ratio MSCI Index LOCAL-CURRENCY Last PERFORMANCE Daily YTD 52-wk 2.50% 16 MSCI ACWI* 406.40 -0.30% -0.5% 2.50 17 World (Developed Markets) 1,659.85 -0.23 -0.1 18.1 2.40 17 World ex-EMU -0.17 -0.3 17.7 2.40 17 World ex-UK 1,668.51 -0.20 -0.3 18.5 3.10 16 EAFE 1,924.84 -0.85 0.5 14.1 2.70 11 Emerging Markets (EM) 959.26 -0.90 -4.3 -10.3 201.88 14.4% 3.30 16 EUROPE 114.62 0.38 2.2 15.9 3.20 18 EMU 200.87 -0.61 1.6 20.7 17.5 USD GBP CHF SEK RUB NOK Australia 1.1061 1.8405 1.2448 0.1703 0.0312 0.1835 Canada 1.1059 1.8401 1.2446 0.1703 0.0312 0.1834 Denmark 5.4300 9.0351 6.1110 0.8362 0.1531 0.9007 Euro 0.7277 1.2107 0.8189 0.1121 0.0205 JPY 0.1207 ILS EUR 0.0108 0.3145 0.0108 0.3144 0.0530 1.5438 7.4624 0.0071 0.2069 0.1340 3.00 1.80 4.8337 0.6477 3.1805 3.1798 140.7995 18.8679 92.6440 92.6252 Norway 6.0290 10.0316 6.7850 0.9285 0.1700 0.0588 1.7141 8.2855 1.1103 5.4517 5.4506 32.0693 Russia 35.4722 59.0221 39.9204 5.4627 5.8836 0.3462 10.0852 48.7486 6.5326 32.0758 Sweden 6.4936 10.8046 7.3079 0.1831 1.0771 0.0634 1.8462 8.9240 1.1959 5.8718 0.8886 1.4785 0.1368 0.0250 0.1474 0.0087 0.2526 1.2211 0.1636 0.8035 0.6010 0.6764 0.0926 0.0169 0.0997 0.0059 0.1709 0.8259 0.1107 0.5435 1.6639 1.1254 0.1540 0.0282 0.1659 0.0098 0.2843 1.3743 0.1842 0.9043 LIFFE LIFFE Copper ($/lb.) Gold ($/troy oz.) Silver ($/troy oz.) Aluminum ($/ton)* Tin ($/ton)* Copper ($/ton)* Lead ($/ton)* Zinc ($/ton)* Nickel ($/ton)* COMEX Crude oil ($/bbl.) Heating oil ($/gal.) RBOB gasoline ($/gal.) Natural gas ($/mmBtu) Brent crude ($/bbl.) Gas oil ($/ton) NYMEX COMEX COMEX LME LME LME LME LME LME NYMEX NYMEX NYMEX ICE-EU ICE-EU 3.2360 1336.70 22.065 1,777.50 23,100.00 7,151.00 2,154.00 2,056.00 14,450 -0.0240 13.10 0.250 16.50 100.00 19.00 11.00 20.50 145 102.72 3.0546 3.0045 4.709 110.65 931.50 0.52 0.0157 0.0015 -0.303 0.80 4.25 0.81 2.46 -0.74 0.99 1.15 0.94 0.43 0.27 0.51 1.01 1.01 0.51 0.52 0.05 -6.05 0.73 0.46 14.0 770.11 0.59 -2.8 -4.1 1,133.05 0.89 -0.4 12.8 13 AC ASIA PACIFIC EX-JAPAN 459.61 -0.72 -1.8 -3.9 16 Japan 2.31 -6.4 29.9 -8.5 South Africa 753.80 China 59.91 0.21 -5.1 16 India 798.76 0.89 -2.3 2.6 10 Korea 569.05 1.97 -3.5 0.6 16 Taiwan 301.76 1.03 -0.3 7.0 1.90 19 US BROAD MARKET 2,103.29 0.13 -0.1 24.1 1.50 30 US Small Cap 3,266.82 -0.23 1.2 30.6 3.20 Source: ICAP Plc -0.51 -0.05 8.5 2.8 2.90 0.9041 Currencies 1.2 0.52 1.20 0.5433 U.S Russia 0.37 207.29 1.50 0.8033 U.K 2,016.12 3.40 5.8706 Switzerland LIFFE Nordic Countries 4.9091 ICE-US UK 17 0.6579 29.1289 3.45 3.46 13 4.9101 ICE-US -16.6 0.6580 0.0343 ICE-US 33.8 -5.1 0.5834 ICE-US 5.5 0.70 18 16.9935 -0.09 -0.37 0.53 260.70 3.70 2.8883 CME 275.07 EM Europe 3.00 0.0992 CBOT Europe Small Cap 0.5417 1.01% 1.94 23 0.9998 15.7777 -0.16% 14.5 3.9583 -0.75 13.75 11.75 -0.125 -11 5.85 0.59 0.72 -2.00 -1 48 1.3 1.0002 115.3012 458.25 1374.00 617.25 141.325 2,939 175.35 17.66 89.07 390.00 1,847 2,003 0.25 0.2037 5.8524 CBOT 108.04 0.2037 170.4724 CBOT Europe Growth 1.5198 3.5173 Corn (cents/bu.) Soybeans (cents/bu.) Wheat (cents/bu.) Live cattle (cents/lb.) Cocoa ($/ton) Coffee (cents/lb.) Sugar (cents/lb.) Cotton (cents/lb.) Rapeseed (euro/ton) Cocoa (pounds/ton) Robusta coffee ($/ton) 17.1 21 1.5201 102.4535 Prices of futures contracts with the most open interest 3.1 CDN Israel EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange; NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of February 21, 2014 ONE-DAY CHANGE Commodity Exchange Last price Net Percentage 2.2 0.51 DKK Japan Commodities 0.42 117.01 3.30 AUD 122.98 Europe Value 3.70 U.S.-dollar and euro foreign-exchange rates in global trading Europe ex-UK 13 2.40 Source: S&P Dow Jones Indices 18 3.60 Cross rates 3.20 4.20 2.30 *Fundamentals are based on data in U.S dollar Footnotes: a-in US dollar b-dividends reinvested c-in local currency Note:All data as of p.m.ET 14 EM LATIN AMERICA 2,942.72 -0.58 -8.1 -25.3 *Twenty-four developed and 21 emerging markets Source: MSCI London close on Feb 24 AMERICAS Year high Year low 463.00 1,378.00 617.75 143.200 3,002 179.35 17.79 90.44 398 1,871 2,045 414.50 1,247.50 553.75 135.375 2,636 112.50 14.92 82.60 349 1,674 1,575 3.4110 3.1775 1,339.20 1,203.70 22.215 19.030 1,813.00 1,686.50 23,175.00 21,410.00 7,422.00 7,051.00 2,242.00 2,097.50 2,110.00 1,964.00 14,730 13,425 103.45 3.0901 3.0394 5.2090 110.82 940.50 91.48 2.8758 2.7831 3.8580 104.75 890.00 Sources: SIX Financial Information; WSJ Market Data Group WSJ.com>> -10.7 MSCI indexes PERFORMANCE (euros) Last Daily 52-wk Global TSM Global DOW Global Titans 50 Dev Europe TSM Developed Markets TSM S&P BMI Emg Markets S&P Europe 350 S&P Euro Europe Dow BRIC 50 U.S TSM Kuwait Titans 30 -c -1.9 -15.7 Note: Americas index data are as of 3:00 p.m ET S&P Dow Jones Indices Price-toDividend earnings yield* ratio* S&P Dow Jones Index 4.1 7.6 -3.9 286.39 1.9 8.4 1.6 -0.80 96.73 5.4 1.24 1.7 -2.4 4.78 -0.01 11.7 0.03 -8.78 17.6 -15.4 0.41 5.91 36.8 4.3 -5.3 -0.11% -27.99 -1.8 52-wk 24.6 3.4 0.47 110.69 26.7 1.80 0.64 -37.01 -1.75 11.3 0.99 663.49 PSI 20 0.87 2.35 54063.60 BIST 100 1.6 0.42 Netherlands 7.80 53.70 2.9 0.61 Ireland 441.88 8485.48 3.0 0.54 Hungary Net change 122.10 14.0 1.23 0.46 PERFORMANCE Percentage change Yr.-to-date 2.8 1.21 PREVIOUS SESSION Index IBEX 35 Follow the markets throughout the day with updated stock quotes, news and commentary at WSJ.com Also, receive email alerts that summarize the day’s trading in Europe and Asia To sign up, go to WSJ.com/email Per euro In euros Per U.S dollar In U.S dollars Argentina peso-a 10.8187 0.0924 7.8723 0.1270 Euro zone euro 1 0.7277 1.3743 Brazil real 3.2043 0.3121 2.3317 0.4289 1-mo forward 1.0000 1.0000 0.7277 1.3743 EUROPE Per euro In euros Per U.S dollar In U.S dollars Canada dollar 1.5198 0.6580 1.1059 0.9043 3-mos forward 1.0000 1.0000 0.7276 1.3743 Chile peso 762.17 0.001312 554.60 0.001803 6-mos forward 0.9999 1.0001 0.7276 1.3744 0.0502 Colombia peso Ecuador US dollar-f Mexico peso-a 2804.07 0.0003566 2040.40 0.0004901 Czech Rep koruna-b 27.354 0.0366 19.904 1.3743 0.7277 1 Denmark krone 7.4624 0.1340 5.4301 0.1842 18.1483 0.0551 13.2057 0.0757 Hungary forint 309.96 0.003226 225.54 0.004434 Peru sol 3.8555 0.2594 2.8055 0.3564 Norway krone 8.2855 0.1207 6.0290 0.1659 Uruguay peso-e 30.955 0.0323 22.525 0.0444 Poland zloty 4.1557 0.2406 3.0239 0.3307 U.S dollar 1.3743 0.7277 1 Russia ruble-d 48.749 0.02051 35.472 0.02819 8.73 0.114591 6.35 0.157480 Sweden krona 8.9240 0.1121 6.4936 0.1540 Switzerland franc 1.2211 0.8189 0.8886 1.1254 Venezuela bolivar ASIA-PACIFIC Australia dollar 1.5201 0.6579 1.1061 0.9041 1-mo forward 1.2209 0.8191 0.8884 1.1256 1-mo forward 1.5229 0.6566 1.1082 0.9024 3-mos forward 1.2202 0.8195 0.8879 1.1263 3-mos forward 1.5293 0.6539 1.1128 0.8986 6-mos forward 1.2191 0.8203 0.8871 1.1273 6-mos forward 1.5386 0.6499 1.1196 0.8932 Turkey lira 2.9885 0.3346 2.1746 0.4598 U.K pound 1.6639 China yuan 8.3801 0.1193 6.0978 0.1640 0.8259 1.2107 0.6010 Hong Kong dollar 10.6637 0.0938 7.7595 0.1289 1-mo forward 0.8261 1.2105 0.6011 1.6636 India rupee 85.0402 0.0118 61.8800 0.0162 3-mos forward 0.8265 1.2099 0.6014 1.6628 6-mos forward 0.8271 1.2091 0.6018 1.6616 2.6525 Indonesia rupiah Japan yen 15915 0.0000628 140.80 11580 0.0000864 0.007102 102.45 0.009761 1-mo forward 140.78 0.007103 102.44 0.009762 MIDDLE EAST/AFRICA Bahrain dinar 0.5181 1.9301 0.3770 3-mos forward 140.73 0.007106 102.41 0.009765 Egypt pound-a 9.5690 0.1045 6.9630 0.1436 6-mos forward 140.65 0.007110 102.35 0.009771 Israel shekel 4.8337 0.2069 3.5173 0.2843 Malaysia ringgit-c 4.4920 0.2226 3.2687 0.3059 Jordan dinar 0.9731 1.0277 0.7081 1.4123 New Zealand dollar 1.6487 0.6065 1.1997 0.8335 Kuwait dinar 0.3871 2.5833 0.2817 3.5501 144.292 0.0069 104.995 0.0095 Lebanon pound Philippines peso Pakistan rupee 61.177 0.0163 44.516 0.0225 Saudi Arabia riyal 5.1542 0.1940 3.7505 0.2666 Singapore dollar 1.7368 0.5758 1.2638 0.7912 South Africa rand 14.8569 0.0673 10.8107 0.0925 5.0478 0.1981 3.6731 0.2723 South Korea won 1476.65 0.0006772 1074.50 0.0009307 Taiwan dollar 41.722 0.02397 30.360 0.03294 Thailand baht 44.702 0.02237 32.528 0.03074 United Arab dirham 2065.81 0.0004841 1503.20 0.0006652 a-floating rate b-financial c-government rate c-commercial rate d-Russian Central Bank rate Source: ICAP Plc 24 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL BLUE CHIPS & BONDS Major players & benchmarks Dow Jones Industrial Average Below, a look at the Dow Jones Stoxx 50, the biggest and best known companies in Europe, including the U.K LAST: 16209.13 YEAR TO DATE: OVER 52 WEEKS Stoxx Europe 50: Monday's best and worst Company Country Industry Banco Bilbao Vizcaya Argn Spain Banks AstraZeneca United Kingdom Deutsche Telekom Germany Unilever Previous close, in local currency Volume P/E: 16 s 105.83, or 0.66% t 367.53, or 2.2% s 2,424.96, or 17.6% High STOCK PERFORMANCE Previous session YTD 52-week 18,215,553 9.07 Pharmaceuticals 3,011,298 4,100 1.80 14.7 8,407,968 12.48 1.63 0.4 52.4 United Kingdom Food Products 2,941,995 2,474 1.44 -0.3 -5.9 BG Grp United Kingdom Integrated Oil & Gas 6,060,474 1,118 1.41 -13.9 -4.5 HSBC Hldgs United Kingdom Banks 68,493,705 635.70 -4.0 -11.9 Rio Tinto United Kingdom General Mining 5,641,168 3,537 3.7 1.7 Standard Chartered United Kingdom Banks 5,569,046 1,305 -0.84 -4.0 -25.2 -0.75 17000 Close Low 38.9 Mobile Telecommunications United Kingdom General Mining 28,271,022 Food Retailers & Wholesalers 20,880,603 -1.79 336.50 United Kingdom -2.83% 333.40 22.3% 7.6 16000 50–day moving average -10.4 15000 .And the rest of Europe's blue chips Company/Country (Industry) Volume Total 4,724,384 France (Integrated Oil & Gas) Banco Santander S.A 31,134,813 Spain (Banks) BASF 2,151,875 Germany (Commodity Chemicals) Deutsche Bank 4,460,154 Germany (Banks) Allianz SE 1,386,363 Germany (Full Line Insurance) BNP Paribas 2,884,975 France (Banks) Unilever CVA 3,531,437 Netherlands (Food Products) 125,768,004 Lloyds Banking Group PLC United Kingdom (Banks) Moet Hennessy Louis Vuitt 569,134 France (Clothing & Accessories) Reckitt Benckiser Grp 1,088,730 United Kingdom (Nondurable Household Products) Siemens 1,560,480 Germany (Diversified Industrials) British American Tobacco 3,548,310 United Kingdom (Tobacco) Roche Holding Part Cert 1,272,323 Switzerland (Pharmaceuticals) BP PLC 32,337,102 United Kingdom (Integrated Oil & Gas) Daimler 3,834,572 Germany (Automobiles) Diageo 3,820,396 United Kingdom (Distillers & Vintners) Anheuser-Busch InBev 1,559,270 Belgium (Brewers) Telefonica S.A 14,962,746 Spain (Fixed Line Telecommunications) Bayer 1,083,442 Germany (Specialty Chemicals) National Grid 7,180,815 United Kingdom (Multiutilities) Latest, in local currency 46.24 14500 STOCK PERFORMANCE Latest YTD 52-week Company/Country (Industry) 1.39% 3.8% 1.37 2.0 16.0 83.26 1.33 7.4 11.0 35.70 1.32 2.9 -1.4 130.80 1.32 0.3 23.7 59.34 1.21 4.7 36.0 28.90 1.03 -1.3 -3.0 81.60 1.00 3.4 48.7 138.75 0.95 4.6 4.8 5,025 0.90 4.8 11.3 95.69 0.89 -3.6 Novartis AG 4,259,110 Switzerland (Pharmaceuticals) Financiere Richemont 788,403 Switzerland (Clothing & Accessories) Nestle 3,880,964 Switzerland (Food Products) L'Air Liquide 672,057 France (Commodity Chemicals) Zurich Insurance Group 292,249 Switzerland (Full Line Insurance) Credit Suisse Group AG 2,830,082 Switzerland (Banks) ABB 4,298,080 Switzerland (Industrial Machinery) Sanofi SA 1,797,323 France (Pharmaceuticals) 37,938,685 Barclays United Kingdom (Banks) ENI 9,578,434 Italy (Integrated Oil & Gas) ING Groep 10,083,180 Netherlands (Life Insurance) Royal Dutch Shell A 4,897,225 United Kingdom (Integrated Oil & Gas) SAP 2,206,697 Germany (Software) UBS 4,945,523 Switzerland (Banks) Telefon L.M Ericsson B 7,636,828 Sweden (Telecommunications Equipment) GlaxoSmithKline 9,700,920 United Kingdom (Pharmaceuticals) AXA 4,930,931 France (Full Line Insurance) Vodafone Group 299,780,125 United Kingdom (Mobile Telecommunications) Schneider Electric 1,491,688 France (Electrical Components & Equipment) BHP Billiton 8,536,826 United Kingdom (General Mining) 21.5% 6.57 20.1 3,183 0.87 -1.7 -7.8 270.00 0.86 8.3 27.2 505.90 0.84 3.7 13.9 67.69 0.83 7.6 49.2 1,910 0.82 -4.5 -3.2 74.66 0.80 -3.4 5.9 11.45 0.79 -3.3 15.7 102.20 0.79 0.2 38.6 840.00 0.78 6.6 Volume 17.4 29 Latest, in local currency STOCK PERFORMANCE Latest YTD 52-week 74.40 0.74% 4.5% 88.60 0.62 -0.2 0.61 1.7 3.1 99.24 0.58 -3.5 7.1 267.50 0.56 3.5 4.8 28.23 0.53 3.5 8.2 22.40 0.49 -4.6 4.6 74.30 0.41 -3.7 2.0 259.00 0.39 -4.8 -15.6 17.42 0.35 -0.4 -0.7 10.62 0.33 5.1 13 20 27 Jan 10 17 24 Credit derivatives Spreads on credit derivatives are one way the market rates creditworthiness Regions that are treading in rough waters can see spreads swing toward the maximum—and vice versa Indexes below are for five-year swaps Markit iTraxx Indexes Index: series/version Mid-spread, in pct pts Mid-price Europe: 20/1 Eur High Volatility: 20/1 Europe Crossover: 20/1 Asia ex-Japan IG: 20/1 Japan: 20/1 SPREAD RANGE, in pct pts since most recent roll Maximum Minimum Average Coupon 68.4 16.1% 0.29 2.8 -6.6 18.55 0.22 9.6 83.00 0.12 5.7 4.8 1,683 0.12 4.4 13.8 19.64 0.10 -2.8 44.3 250.70 15.4 67.7 65.72 -0.26 3.7 11.2 1,960 -0.51 4.9 Volume, in millions Latest Points AT&T AmExpress Boeing Caterpillar Chevron CiscoSys CocaCola Disney DuPont ExxonMobil GenElec GoldmanSachs HomeDpt Intel IBM JPMorgChas JohnsJohns McDonalds Merck Microsoft Nike B Pfizer ProctGamb 3M TravelersCos UnitedTech UtdHlthGp Verizon VISA ClA 23.8 -6.4 T AXP BA CAT CVX CSCO KO DIS DD XOM GE GS HD INTC IBM JPM JNJ MCD MRK MSFT NKE PFE PG MMM TRV UTX UNH VZ V 27.2 2.4 3.9 3.6 5.9 30.5 20.1 5.3 3.7 12.4 29.2 2.7 9.2 19.3 3.7 12.6 6.4 3.1 8.8 24.8 4.5 32.3 6.0 1.9 1.6 2.6 8.3 144.7 1.9 $32.52 90.07 129.92 97.60 114.28 22.20 37.57 80.84 64.71 96.63 25.38 166.78 77.94 24.70 183.87 58.05 91.35 96.61 56.38 37.78 78.01 32.04 78.09 132.65 83.65 116.65 75.98 46.87 226.05 –0.28 1.32 1.64 0.10 1.60 0.07 0.39 0.72 –0.16 1.60 0.44 2.28 0.20 0.28 1.08 0.44 –0.17 0.16 0.35 –0.20 1.53 0.58 0.12 1.08 –0.14 1.27 2.17 –0.40 2.69 –0.85% 1.49 1.28 0.10 1.42 0.29 1.05 0.89 –0.25 1.68 1.75 1.39 0.26 1.17 0.59 0.76 –0.19 0.17 0.62 –0.53 2.00 1.84 0.15 0.82 –0.17 1.10 2.94 –0.85 1.20 WMT 5.3 73.44 0.32 0.44 Showing the biggest improvement 1.04 0.69 0.81 1.61 1.01 1.23 Norske Skogindustrier 2.74 109.75 0.05 4.08 2.74 3.24 1.36 98.37 0.01 1.57 1.24 0.76 101.13 0.01 0.97 0.68 t –165 –393 –682 SODEXO 61 –3 –4 –6 1.38 REPSOL 109 –4 –5 –8 0.82 Valeo 90 –3 –4 –9 1.00 CHANGE, in basis points Yesterday Yesterday Five-day 28-day 2107 2.00 Australia And the most deterioration CHANGE, in basis points 0.01% Index roll Source: WSJ Market Data Group At its most basic, the pricing of credit-default swaps measures how much a buyer has to pay to purchase-and how much a seller demands to sell-protection from default on an issuer's debt The snapshot below gives a sense which way the market was moving yesterday 0.01 3.00 Veolia Environnement 106 –3 –2 –7 Unitymedia KabelBW 251 –8 –34 –69 Iberdrola 106 –3 –2 –6 Yesterday Yesterday Five-day 28-day Bay Landbk Giroz 104 10 CIR SpA CIE Industriali Riunite 232 13 Landbk Baden Wuertbg 73 IMPERIAL Chem Inds 25 Holcim 121 ONO Fin II –99 120 47 1 ENEL 106 –3 –2 –16 Kabel Deutschland Vertrieb und Service VIRGIN MEDIA Fin 284 –8 –44 –81 HBOS 57 –2 –7 Gas Nat 106 –3 –3 –6 SAFEWAY 161 34 52 Fresenius 99 6 Japan Source: Markit Group –1 Sept Oct Nov Dec Jan Feb 2014 2013 Source: Markit Group WSJ.com>> Follow the markets throughout the day, with updated stock quotes, news and commentary at WSJ.com Also, receive emails that summarize the day’s trading in Europe and Asia To sign up, go to WSJ.com/Email CHANGE Percentage Credit-default swaps: European companies 99.64 t Spreads on five-year swaps for corporate debt; based on Markit iTraxx indexes 21 Symbol Stock -3.8 101.29% Spreads 14 DJIA component stocks 3.2 0.22 1.08 In percentage points Feb WalMart 2,223 58.22 0.73 Note: Data as of February 21 31 Note: Price-to-earnings ratios are for trailing 12 months 20.1 66.40 Dec Sources: SIX Financial Information Tracking credit markets & dealmakers 15500 -9.9 -0.3 -0.52 16500 t Glencore Xstrata PLC Tesco 1.4% 1.93% US: Bank revenues from equity capital markets Behind every IPO, follow-on or convertible equity offering is one or more investment banks At right, investment banks historical and year-to-date revenues from global equity-capital-market (ECM) deals n Equity capital markets n Debt capital markets (both in billions, left axis) ECM as a percentage of total 75% (right axis) t 50 25 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Dealogic THE WALL STREET JOURNAL Tuesday, February 25, 2014 | 25 Illustration by Michael Witte PERSONAL JOURNAL Professional Makeup Advice in Your Home But These New Online Services Aren’t Ready to Replace Old-Fashioned Beauty Counters Just Yet BY ALINA DIZIK You may not need to go to the nearest beauty counter to find the perfect shade of lipstick New online services let customers consult professional makeup advisers at home To combat feeling washed out in the winter, we asked four services for recomCRANKY mendations for CONSUMER foundation and powder, a new stylish lip color and subtle eyeliner shade We were able to chat almost instantly with beauty professionals online, many of whom are trained makeup artists Jill Glaser—a makeup artist and founder of the Makeup First School of Makeup Artistry, a vocational school for makeup artists in Chicago, who isn’t affiliated with a specific brand— helped us apply the makeup the various services suggested and assess the results We either chatted with a live makeup expert about our needs or filled out an online survey Companies also provided makeup tutorials or virtual try-on tools where we learned more about the products The one-on-one attention from online makeup professionals was a plus since it can be difficult to get at a busy store beauty counter Shopping online also allowed us to easily browse customer reviews and get more information on a product Nordstrom, Estée Lauder and its Bobbi Brown unit offer flexible return policies, so in each case people have the option to return the products even if they were used or opened There were some hitches To get a list of the recommendations, we had to scroll through an emailed chat transcript each site sent afterward We had trouble pinpointing our skin type and tone with online surveys Also, we wanted to know more than just the first name of the person and what made them an expert Nordstrom Nordstrom.com Service: Online chat function included product hyperlinks and one-on-one attention Best recommendation: YSL Glossy Stain What we liked: Site offered various brands What we disliked: A lip gloss brand was recommended without a shade Foundation was too sheer for our skin Favorite tip: Some companies can use a foundation shade you currently own to help find a compa- rable match in another brand Our recommendations via a 30-minute chat were from the store’s entire array of products We didn’t always understand why a product was being recommended For example, the beauty specialist recommended a bronzer because it was matte and a subtler option for wintertime But she also recommended a $60 foundation that Ms Glaser said matched our skin tone but was too sheer “We should be asking more probing questions,” of the customers, says Nordstrom spokeswoman Pamela Lopez, regarding the issue Overall, we liked the recommendations, including brands we’ve never tried before, such as the Balm and Stila Ms Glaser liked the consistency of a recommended lip gloss, but we weren’t provided a shade and were left to choose from dozens of colors Bobbi Brown BobbiBrown.com Service: Upload a photo of yourself before online chat Best recommendation: Pot Rouge in pale pink What we liked: Included detailed application instructions and various tutorials on building a beauty routine What we disliked: Bronzer wasn’t a good fit Favorite tip: Apply a creamy blush on the apples of the cheeks with our fingers for a “lit-from-within glow.” We were asked to answer a few questions about our preferences and upload a photo before the online makeup artist, Cassandra, gave us advice We liked the blush and lip color, but Ms Glaser pointed out the bronzer looked “flat” on the face and didn’t give the desired glow L’Oréal lorealparisusa.com Service:: Quizzes help determine product suggestions Best recommendation: True Match Super-Blendable Compact Makeup in creamy natural What we liked: Online assessments were useful and fun to complete What we disliked: Some questions were confusing, such as one asking us to describe our makeup style from choices like “alternative,” “girly” or “fashion forward.” Favorite tip: Twist the mascara wand as we pull it out of the tube, to evenly coat each part of the brush and avoid clumps With just a short quiz, the foundation was perfect for our skin tone and type, said Ms Glaser She liked the “staying power” of the gel-based black eyeliner but thought the shade was too harsh A blush that was recommended was sheer and chalky The company declined to comment Estée Lauder EsteeLauder.com Service: Virtual makeover tool and chat function manned by makeup experts Best recommendation: Double Wear Stay-in-Place Eye Pencil in midnight blue What we liked: Thorough chat with detailed product recommendations Virtual makeup tool let us test products on a headshot of our face What we disliked: We had to search the website to order products ourselves Favorite tip: Navy-colored eyeliner would make the whites of our eyes seem brighter The company has 12 virtual beauty advisers who have an average of 16 years experience within Estée Lauder, says Beth Zurn, a senior vice president We liked our product recommendations, especially a wine-colored lip gloss shade that turned out to be perfect for winter As for the issue of having to search for products online, Ms Zurn says it’s up to each expert to send hyperlinks 26 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL SPORTS HEARD ON THE PITCH After Sochi, Winter Games Focus Shifts to Korea The moment the torch went out in Sochi, Pyeongchang 2018 began sucking the Winter Olympic air eastward to the Korean Peninsula The South Koreans have had some 200 observers in Sochi, taking notes on everything from security to transportation to the design of the venues Their goal is to deliver their Games in an “accurate, convenient and prompt manner,” in the words of Moon Donghoo, secretary-general of the Pyeongchang organizing committee—absent the chaos and roughly $50 billion expenditure of the Sochi Games That may be easier said than done Like Sochi, Pyeongchang is a massive project that includes a new high-speed rail line and expressway, construction of six venues and a plethora of housing Pyeongchang also has yet to begin selling major sponsorships, an effort Moon said will start later this year “We expect following Sochi we will have a more favorable environment,” Moon said “Pyeongchang is relatively far away.” Of course, as Sochi organizers know, four years can pass quickly, especially when multibillion-dollar infrastructure projects are involved As of now, few in the International Olympic Committee are particularly worried about Pyeongchang The 2016 Rio Summer Games are the next crisis on the horizon Pyeongchang figures to be significantly different from the Sochi Games, whose ice sports took place in a vast gated park that was a 40-minute train ride from downtown Sochi “This huge Olympic Park is a bit far from Sochi’s downtown,” Moon said “We want to integrate our Games into the city and the people.” Also, Sochi isn’t near a major Russian city and has just 350,000 residents The plan is for Pyeongchang to be just a 60-minute train ride or a 90-minute car ride from Seoul, a metropolitan area with roughly 25 million people The Games will be within about a fourhour drive from any major city in the nation Finally, Pyeongchang will likely be a more accommodating host in terms of hogging medals The Koreans specialize in speedskating, especially short-track speedskating They won eight medals in Sochi, including three gold, but silvermedalist figure skater Yuna Kim was the only Korean to win a nonspeedskating medal — Matthew Futterman Reuters HEARD ON THE FIELD A complex network of gondolas and lifts was built in preparation for the Sochi Olympics to ferry athletes, officials and fans to high-altitude events Sochi’s Gondolas Left Dangling Olympics Expansion Leaves Russian Ski Resorts With More Lifts Than Tourists BY RACHEL BACHMAN SOCHI, Russia—Eight years ago, only a handful of ski lifts existed on the snowy, desolate mountains near Sochi But since this resort area in southern Russia made its bid to host the Winter Olympics, more than 50 chairlifts and gondolas have been built In case you’re wondering, That is 20 more than there are in all of Vail, Colo This latticework of lifts—some of which are the fastest of their kind in the world—were built to ferry athletes, officials and fans to Olympic events ranging from women’s halfpipe to men’s biathlon During the Games, visitors marveled at their speed and efficiency while experts expressed astonishment at the overall scale of the skilift expansion “It’s the biggest one I ever saw,” said Paul Matthews, president of Ecosign, the nearly 40-year-old company that plotted Sochi’s mountain venues “They put many more lifts than I recommended I call it lift porn.” Now that the Games are over, the future of some of the most elaborate lifts, which were built for use primarily at the Games, isn’t entirely clear Sochi’s resorts have a long way to go to establish themselves as international destinations Even Rosa Khutor, the largest of the region’s ski areas and the site of many Olympic events, is attracting only about 5% of its guests from outside Russia Without a significant increase in tourism, those lifts could become an Olympic white elephant In all, 21.6 kilometers (13 miles) of cable-car routes were built for the Games, organizers say One gondola took people to a peak near the start of the Olympic cross-country skiing and biathlon events It is the world’s longest and fastest detachable-car ropeway, traveling at up to 8.5 meters per second It is one of the two crown jewels here: 3S gondolas made by Austria-based Doppelmayr Both of the 3S lifts— named for the three cables on which they travel—can carry up to 30 people in each sleek, royal-blue cabin The other 3S lift can carry 4,500 people per hour in each direction It goes to the mountainside Olympic Village and is equipped to carry automobiles Without an increase in tourism, the lifts could become a white elephant In a statement, Games organizers defended the lift construction in the 5,000-person village where the mountain events were held “The cable car system in Krasnaya Polyana will be actively used by tourists and visitors in the postOlympic period and become a part of the Sochi 2014 tangible legacy.” The total budget for Games “sports venues and transport and engineering infrastructure” was 214 billion rubles (about $6 billion), organizers said, half of which came from the federal budget and half from private investments That approaches the entire cost of the Vancouver 2010 Games, $7.4 billion, which also included operations and security The total cost of the Sochi Games is reported to exceed $50 billion, making them the costliest Olympics ever According to Matthews, Sochi organizers built so many lifts in part because leaders at the International Ski Federation (FIS) asked them to They requested lifts to the start of each competition, he said, and, “they got everything they wanted They got gold-plated.” A spokeswoman for FIS, which sanctions skiing and snowboarding events at the Olympics, responded that “planning an Olympic Games is a total team effort that involves input from the Sochi Organizing Committee, the International Olympic Committee and the International Ski Federation.” Most Winter Olympics are awarded to areas with sizable ski resorts Vancouver didn’t build a single chairlift for the Games By contrast, Sochi started from scratch Russian President Vladimir Putin pushed development of its mountain area with two agendas: to prepare for the Olympics, and to foster in Russia the kind of worldclass ski area available in other parts of Europe The push has been a boon to the world’s lift builders France-based Poma erected 16 lifts in Sochi, including the heated chairlifts used for the men’s and women’s downhill ski courses, and a 10-person gondola to the ski jump A Poma spokeswoman said its Sochi lifts cost €100 million, or about $137 million, the largest project in a single area in company history Doppelmayr, the world’s marketshare leader in lifts, has installed 35 in Sochi Five more installations were delayed until after the closing ceremony because they weren’t integral to the Winter Games, Doppelmayr spokesman Ekkehard Assmann said Helicopter skiers long have prized the cluster of Caucasus Mountain peaks about 65 kilometers east of downtown Sochi for its powdery snow, breathtaking vistas and untouched slopes But until recently the area lacked infrastructure to support day-trippers and large numbers of skiers A longterm plan to expand ski facilities slammed into high gear in 2007, when Sochi won the bid for the 2014 Games Organizers built a train that takes visitors from the Sochi Airport to Rosa Khutor and accelerated lift construction “Projects like Sochi need huge manpower and are therefore very expensive in my opinion,” said Andreas Haselsberger, an executive at the large Austrian ski-resort complex SkiWelt “For a normal skiing area this investment cannot be done.” Sochi’s ski areas still are dwarfed by ones like SkiWelt, which has 91 lifts and cable cars, and France’s Les Trois Vallées, which bills itself as the world’s largest ski area Those resorts, however, were developed over a half-century The big question following the Olympics is whether large numbers of other tourists will follow Putin to Sochi’s slopes A paper prepared by Games organizers on the Sochi Olympics’ legacy says the alpine skiing complex will help “cement its status as an international alpine skiing resort.” Getty Images Kim Jung-haeng, head of South Korea’s Olympic Committee THE WALL STREET JOURNAL Tuesday, February 25, 2014 | 27 OFF THE WALL Making New York Trains Easier on the Ears Musician and ‘Subway Geek’ Is on a Quest to Jazz Up Turnstile Tones; a Swipe at the Ugly Beep BY HANNAH KARP Brooklyn, N.Y Araby Williams/The Wall Street Journal M usician James Murphy thinks New York’s “underground music” scene leaves a lot to be desired He wants to change the underlying sound: the cacophony produced by the subway turnstiles “They make this unpleasant beep and are all slightly out of tune from one another,” said Mr Murphy, 44 years old, over breakfast recently in the trendy Williamsburg neighborhood here For the past 15 years, Mr Murphy has been crafting what he says is a low-cost musical solution: He has worked out a unique set of notes for every station, one of which would sound each time a passenger swipes his or her MetroCard to catch a train The busier a station becomes, the richer the harmonies would be The same notes would also play in a set sequence when the subway arrives at that stop Each of the city’s 468 subway stations would have note sets in different keys Now, he believes his plan finally has a chance, as the state’s Metropolitan Transportation Authority embarks on a $900,000-ayear project to improve passenger flow at some stations by repositioning turnstiles, furniture and emergency exits A separate project in the works will preserve the old turnstiles but eventually eliminate the need to swipe MetroCards through them By 2019, according to the plan, subway riders will enter using devices such as a smartphone, card or key, embedded with an electronic chip The reason for the tones in the first place is simply to accommodate the blind: A single tone means “go,” a double tone means ”swipe again” and a triple tone indicates insufficient fare The dissonance among machines is due to “natural technical variation and we really don’t care,” said MTA spokesman Adam Lisberg Many New Yorkers are probably completely oblivious to the tones and their meaning Mr Lisberg said Mr Murphy’s plan “is a very cool idea,” one that several people have independently proposed over the years But it might be hard to put into practice, he said: It’s likely to require a lot of time and money, and probably means temporarily taking each of the city’s 3,289 turnstiles out of service, something the authority is not inclined to “for an art project.” “If you screw something up,” Mr Lisberg continued, you risk breaking the turnstile Given the 5.5 million passengers who use the system on an average weekday, he said the transit authority was “not inclined to mess with anything that could get in their way.” Mr Murphy, though, argues that his plan would cost very little, and labor could be saved if tone generators were installed or reprogrammed during the repositioning or along with the new mechanism that will detect passengers’ microchips James Murphy, pictured in a New York subway station, thinks turnstiles should emit more pleasing sounds Mr Murphy, the well-known creator and lead singer of the now-defunct electronic-dancepunk band LCD Soundsystem, failed to land a meeting with former Mayor Michael Bloomberg He’s more hopeful about his prospects with Mr Bloomberg’s successor, Bill de Blasio: “If the mayor wanted this to happen, I know there’s someone who could make this work.” Howard Wolfson, who served as deputy mayor under Mr Bloomberg and writes a popular music blog, said he was approached about the idea but couldn’t help because the MTA is a state agency, not part of New York City government Mr Murphy isn’t the only one lobbying for more euphonic turnstiles In July, James Kogan, freshly graduated from New York’s selective Stuyvesant High School, emailed the MTA’s arts department with a nearly identical proposal that would substitute “soothing chords” for the current sound of a turnstile, which he lamented was “a cold, dismissive beep.” He said he could write the code himself that would tell turnstiles to generate notes at random from a given harmonic set All he would need, he said, is one computer scientist familiar with turnstile language to help with the installation “This is not so difficult—I took some very basic computer programming,” said Mr Kogan, a selftaught guitarist who is now a freshman at the University of Chicago He said he got the idea while plucking chords on an African thumb piano called a kalimba Mr Murphy, a subway geek whose smartphone is loaded with apps that suggest the most strategic train car and door to stand near in order to exit a station most efficiently, has lived in New York since the 1980s and is generally happy with the subway service He said he gets “very angry when I see people jump fare.” He said his subway-sound obsession began in the 1990s when he first rode the Tokyo metro and was blown away by the system’s friendly voices and “incredibly gentle beeps.” He was further in- spired by trips through the Barcelona airport, which he said featured a signature four-note sequence before loudspeaker announcements Mr Murphy said the ditty reminded him of the opening notes of the group Chicago’s song “Colour My World.” “In New York at the time, you had all this indistinguishable yelling and horrible ‘you’ve done something wrong’ sounds,” he said “I became kind of obsessed with this idea that instead of just unpleasant, with almost no change at all, it could be beautiful.” Unique harmonic sequences could also help cut down on riders missing their stops, Mr Murphy added, while boosting their emotional connections to their neighborhoods So around 2001, the same year he started LCD Soundsystem and founded his record label, DFA Records, Mr Murphy and his man- agement team started approaching arts-funding organizations and city and state officials They made little headway “An art project that integrates in with the turnstile—that’s like three different departments and no one’s going to agree,” Mr Murphy said he was told repeatedly Still, Mr Murphy forged ahead in his spare time, composing the note sequences for various subway lines in his head—the same way he writes songs Mr Murphy played his last show with LCD Soundsystem in 2011 He is doing a lot of different things now In addition to frequent solo DJ gigs, he produced Canadian indie-rock band Arcade Fire’s fourth studio album, “Reflektor,” and composed music for a revival of the play “Betrayal.” He also created his own espresso blend in conjunction with Blue Bottle, a high-end coffee company, and is building a new studio in Williamsburg While his subway oeuvre is only partially complete, he is prepared to drop everything if the MTA gives his plan a green light “If it doesn’t happen I’ll be broken hearted,” he said Online>> Watch a video about James Murphy’s subway audio project at WSJ.com/OffTheWall WSJ.com’s dynamic global finance and markets blog Get the jump on market-moving news across the globe and around the clock, our dedicated journalists cover the biggest developments in markets, finance and deal-making wsj.com/moneybeat © 2014 Dow Jones & Company, Inc All rights reserved 3WSJC1068 28 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL HEARD ON THE STREET Email: heard@wsj.com FINANCIAL ANALYSIS & COMMENTARY HSBC Is Running in Place Bloomberg News Back of the Pack Share performance 60% 40 Bank of America Citigroup Barclays HSBC 20 –20 ’14 2013 Source: FactSet effectively been running hard to stand still It has promoted itself as a key beneficiary of global growth thanks to its expertise in trade finance The futures curve suggests gas prices will drop markedly CF Industries Holdings, meanwhile, uses gas to make nitrogen-rich plant food But the company shielded itself against swings in natural-gas prices by locking in 75% of its first-quarter natural-gas needs at $3.66 MMBtu via hedges It has also hedged half of its second-quarter exposure loan provisions, cost savings and decreasing regulatory fines can only be plucked so often Slower revenue and di- With emerging-market growth becoming increasingly checkered, it is getting harder to judge the bank’s revenue outlook But with emerging-market growth increasingly checkered, it is getting harder to judge HSBC’s revenue outlook On the expense side, the low-hanging fruit of lower Industries Feel Burn From Chill Investors in America’s steelmakers and fertilizer producers can smell gas Front-month natural-gas prices rose back above $6 a million British thermal units last week Steelmakers burn gas to fuel their blast furnaces Credit Suisse estimates that before adjusting for hedging, a $1 increase in the gas price knocks $1.60 a share off U.S Steel’s value and 74 cents off AK Steel Holding’s—6.5% and 11.5% of their current share prices, respectively Stuart Gulliver, CEO of HSBC The Wall Street Journal Still, analysts at brokerage Feltl say CF’s earnings could face pressure if strength in gas prices persists They expect earnings of $18.38 a share in the second half of the year if gas prices average $3.75 MMBtu, but that drops to $17.72 if gas hovers at $4.25 So far this year, gas has averaged $5.31 But while traders thrill to daily swings in front-month futures, corporate profits are affected by how gas prices perform over time Frontmonth futures were back below $6 Monday The futures curve suggests prices will drop markedly as winter weather eases Prices for gas to be delivered in April have risen only about 8% over the past month and are below $5 That offers some hope for the steelmakers especially, whose stocks have slipped by double-digit percentages this year But with gas inventories possibly hitting a 10-year seasonal low by the end of this harsh winter, there is another risk to negotiate: a hot summer All that air conditioning would take a lot of electricity—and the gas to produce it —Tatyana Shumsky minished savings opportunities could make it hard for HSBC to significantly raise its return on equity from the 9.2% it achieved last year Certainly, its hopes of achieving a ROE of 12% to 15% sometime between 2014 and 2016 look hard to realize The absence of firm regulatory capital requirements makes that ROE target even more uncertain, because the equity side of the equation still is unclear HSBC’s best hope may be to achieve a ROE that at least beats its roughly 10% cost of equity That would mean the bank at least creating value for its shareholders But given that it already trades at 1.3 times its expected tangible book value for 2014, that hardly equates to much for investors to get excited about —Andrew Peaple Monetary policy is a lot like weather forecasting: It is cloaked in scientific method but often turns out to be more art The Federal Reserve transcripts of 2008 meetings, released Friday, give some illustrations of this During the board’s Sept 16 meeting, a day after the collapse of Lehman Brothers, there was discussion of how other countries were reacting to market turmoil Nathan Sheets, then the Fed’s director of the division of international finance, noted the People’s Bank of China the day before cut its main policy rate by 0.27 percentage point, or 27 basis points He said, “I guess they felt that 26 would not have been enough and 28 would have been too much.” Fed Chairman Ben Bernanke added that “three is a lucky number in China,” and that Vice Chairman Donald Kohn was about to point out that, “three cubed is 27.” To which Mr Kohn said he also was going to wonder “whether we needed to harness the mystical powers.” The transcript reflects the back and forth was marked by laughter Mr Sheets summed it up: “The science of monetary policy.” Volkswagen Keeps on Truckin’ Ferdinand Piëch’s empire building knows no bounds The Volkswagen chairman is offering €6.7 billion ($9.21 billion) to buy out minority shareholders in Swedish truck maker Scania, of which it already owns 63% That looks like a steep price considering VW shareholders aren’t likely to see much for their money anytime soon Scania deserves some premium to its truck-maker peers, thanks to its premium products, efficient manufacturing model and the large portion of sales it derives from high-margin service contracts But VW is paying 50% more than Scania’s average price over the past 90 days That values the truck maker at an eye-watering 1.8 times forecast 2014 sales; Volvo and VW’s MAN trade at just 0.8 times and one times, respectively VW looks unlikely to get much for its generosity It already has an 89% voting interest in Scania, but it argues legal restrictions designed to protect the Swedish company’s minorities prevent it from realizing the full benefits of cooperation, like sharing technology With 100% of Scania, VW reckons that it can generate an additional €650 million a year in cost synergies The snag is that long product cycles in the trucks business mean the new savings won’t materialize for 10 to 15 years, reducing their value to just €1.8 billon taxed and capitalized today, estimates ISI Group Nor is VW treating its shareholders equitably Ordinary shareholders, which include the Porsche family, haven’t been asked to contribute But holders of VW’s more liquid preference shares have been asked to throw in up to €2 billion of the Scania purchase price, marking the fourth cash call since 2009 The capital increase also looks unnecessary, unless VW has bigger designs for its cash It will be left with about €14 billion in net cash, above the €10 billion it needs to maintain its credit rating VW expects to generate a further €6 billion in free cash flow from operations this year All this comes as VW’s core business is generating diminishing returns This year is expected to mark the fourth in a row of flat earnings despite sales being 24% higher than in 2011, Bernstein Research notes Pressure on VW to prove the merits of its expanding empire is only likely to grow —Renée Schultes Fender Bender Volkswagen’s preferred shares €225 200 175 150 125 100 2013 Source: FactSet The Wall Street Journal ’14 Agence France-Presse HSBC is suffering growing pains Despite a 9% rise in both the bank’s pretax profit and dividend for 2013, its shares fell 2.8% Monday as results came in below expectations With worries about emerging markets clouding the outlook for a bank that has hitched itself to the mast of growing global trade, HSBC has a bit to to renew investor excitement Sure, the fall in its shares looks a little overdone Analysts may have failed to anticipate the impact of the U.K.’s bank levy, a $903 million charge that HSBC takes in the fourth quarter And HSBC has managed steady performance even while it has been shrinking Since 2011 the bank has exited from 63 businesses, accounting for $95 billion of its risk-weighted assets Its operating income has fallen by only 2.3% in that time, helped by target-beating annual cost savings worth $4.9 billion Moreover, HSBC’s balance sheet is in decent shape, with core Tier equity up to 10.9% of its risk-weighted assets The rising dividend could eventually be accompanied by share buybacks HSBC will seek shareholder approval for that this spring Still, the problem for HSBC is that since 2011 it has OVERHEARD Assembly line at the Scania truck plant in Angers, France WSJ.com/Heard For China, A Storm Brews in A Teacup China’s secretive currency managers certainly know how to conjure up a storm The usually predictable Chinese yuan took a dive over the past week, its first sustained weakness against the dollar since 2012 The People’s Bank of China has guided the yuan 0.5% weaker by moving its daily target rate lower That is despite pressure from traders, who work within the currency’s narrow trading band, to let it strengthen It is a fast and big move for the tightly controlled currency The freely traded Hong Kong flavor of the yuan, a leveraged reflection of its onshore cousin, has fallen a more dramatic 1.3% The most obvious explanation is that China wants to flush speculators out of a trade that seemed to go in one direction: toward yuan strength The yuan’s low volatility and steady 3% appreciation against the dollar last year made it like catnip for carry-trade investors burned by the Indian rupee and Turkish lira Beijing has accepted a long-term strengthening of its currency, as evidenced by the yuan’s 20% rise in tradeweighted terms since 2010, according to UBS economist Wang Tao What it doesn’t like is speculative cash that piggybacks on that appreciation Such inflows put pressure on the government to either allow the currency to rise more than it desires, harming the export sector, or absorb the inflows by accumulating currency reserves Reserves grew last year by $510 billion to $3.8 trillion It is likely a chunk of those inflows didn’t come through wholly legitimate means Two of the biggest inflow generators—export earnings and foreign direct investment—have in the past been manipulated by companies that work on both sides of the border to sneak in cash to take advantage of higher interest rates and other investment opportunities A risk is that if investors sense Beijing wants the appreciation trend to take a prolonged breather to boost the slowing economy, capital might flow back out It is highly unlikely that China’s reserves-rich, risk-averse currency managers will let the currency drop substantially But by guiding the currency lower in the short term, Beijing hopes to prevent an unwinding of the yuan trade from causing real damage —Alex Frangos ... article 12 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL OPINION: REVIEW & OUTLOOK Aiding Ukraine’s Democrats T he latest Ukrainian revolution moved rapidly on the weekend, with President Viktor... extradited to the U.S to stand trial —Siobhan Hughes and David Luhnow 10 | Tuesday, February 25, 2014 THE WALL STREET JOURNAL UPHEAVAL IN UKRAINE Former Leader Gets a Chilly Welcome KIEV, Ukraine—Yulia... newsroom of The Wall Street Journal to any errors in news articles by emailing wsjcontact@wsj.com or by calling +44 (0)20 7842 9901 Volvo 28 Wells Fargo 22 THE WALL STREET JOURNAL Tuesday,