www.businesswire.com MAR 17,2003 21:32 PACIFIC 00:32 EASTERN Business Editors

    NEW YORK--(BUSINESS WIRE)--March 17, 2003--Standard & Poor's--ASIA-PACIFIC UPDATE:     Here is the current lineup of top articles and research from Standard & Poor's:

All times U.S. Eastern. For complete details see ratingsdirect.com or standardandpoors.com.

PUBLISHED:

RESEARCH REPORTS

CORPORATES
--  Enersis and Endesa Chile Announced Mandate to Launch
    Syndication of US$2.3 Billion Bank Loans
--  S&P Report Says War With Iraq Not an Immediate Threat to U.S.
    Health Care Credit
--  Increasing Longevity in the U.S. Adds More Pressure to State
    and Local Government Creditworthiness
--  U.S. Economic Forecast: A Foggy Bottom Crystal Ball

GLOBAL FIXED INCOME
--  Europe Investment Grade Market: Not Much of a Lull After the
    Storm

FINANCIAL SERVICES
--  Bank Contingency Planning in the Gulf Provides Cushion in
    Event of War in Iraq
--  Delays in Stock Disposals Could Pressure Japanese Bank Ratings
--  U.S. Reverse Mortgage Suit to be Monitored by Standard &
    Poor's
--  Strong Pricing Environment Not the Expected Boon for U.S.
    Property/Casualty Insurers
--  Accounting Rules and Business Needs at Odds

SOVEREIGNS
--  Italian Regions' Ability to Manage Health Care Costs Remains
    Key for Future Creditworthiness
--  The Hong Kong Budget: What Does It Mean for Hong Kong's Future
--  Venezuela's Political Crisis Will Have Long-Term Impact on
    Ratings
--  War in Iraq Not to Have Ratings Impact on European Strategic
    Oil Reserve Management Agencies

STRUCTURED FINANCE
--  Aussie RMBS: In Search of Sub-Debt Investors Special Report
    Published
--  Rating Transitions 2002: Global CDO and Credit Default Swap
    Rating Performance
--  U.S. Retail: What Will CMBS Do With All of the Space?
--  Italy's First Wholly Synthetic ABS Deal Could Serve as
    Blueprint for Traditional Asset Classes

RATING ACTIONS

CORPORATE RATINGS
--  Aristocrat's 'BBB-' Rating on Negative Outlook
--  United Expects to Meet Its First Covenant Test; Some Ratings
    Still CreditWatch Negative
--  Remington Products Co. L.L.C. Outlook Revised to Positive
--  York International Corp. Long-term Ratings Lowered on
    Challenging Industry Conditions
--  Radnor Holdings Corp. Ratings Raised, Off CreditWatch On
    Completed Refinancing
--  Omnicom Group Inc. Ratings Lowered, Off Watch
--  Gemstar-TV Guide International Inc. Rating Still on Watch
    Negative Amid Ongoing SEC Probe
--  CommScope Inc. Placed on CreditWatch Negative, on Sustained
    Weak Operating Performance

FINANCIAL SERVICES RATINGS
--  Ratings on M & T Bank Corp. Raised and Removed from
    CreditWatch
--  Chubb Corp. Pending Senior Note Issue Rated 'A+'; On WatchNeg
--  Outlook on Charles Schwab Corp. Revised to Negative; Ratings
    Affirmed
--  Argonaut Group Inc.'s Property/Casualty Subsidiaries 'BBB+'
    Ratings Remain on Watch Negative

STRUCTURED FINANCE RATINGS
--  Ratings on Various Metris Master Trust-Related Transactions
    Placed on CreditWatch Negative
--  Rating on SPIRET Trust Series 2002-1 Lowered and Removed From
    CreditWatch Negative
--  CNC Pass-Through Certificates Series 1994-1 Ratings Affirmed
    and Off CreditWatch

RESEARCH ANALYSIS

CORPORATES
--  Renault S.A.
--  Electronic Data Systems Corp.
--  Dow Chemical Co. (The)

FINANCIAL SERVICES
--  Westpac Banking Corp.
--  China Construction Bank
--  Kreditanstalt fuer Wiederaufbau
--  China Construction Bank
--  United Guaranty Residential Insurance Co.

SOVEREIGNS
--  Morocco (Kingdom of)
--  Chile (Republic of)





--30--GM/sf*

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KEYWORD: NEW YORK INTERNATIONAL ASIA PACIFIC
INDUSTRY KEYWORD: BANKING BOND/STOCK RATINGS
SOURCE: Standard & Poor's

www.themoscowtimes.com Monday, Mar. 17, 2003. Page 1 By Boris Fishman Special to The Moscow Times

NEW YORK -- President Vladimir Putin and his economic team were the heroes of the day at the seventh annual forum on Investing in Russia & CIS, hosted by Sachs Associates and Bloomberg at the Plaza Hotel last Thursday.

In formal presentations and private conversations in the lavish reception rooms, conference participants agreed that Putin's stewardship has fostered unprecedented political stability and enabled significant macroeconomic reform in Russia.

"There is a sense of Russia truly coming of age," said former U.S. Ambassador James Collins, now a senior advisor at Akin Gump Strauss Hauer & Feld. "They've always known how to improve the economy, but the political environment hasn't been conducive. With Putin, this missing ingredient is finally in place."

Although the dreary performance of world markets has contributed to more modest GDP growth, the Russian economy had another surpassing year in 2002, outperforming almost every other emerging market. Central Bank reserves exceed $50 billion, foreign debt as a percentage of GDP has fallen by 20 percent since 2000, and real incomes increased by 10 percent last year. Russia was also one of only two nations operating a budget surplus in 2002, said William Browder, CEO of Hermitage Capital Management.

As a result, investor confidence has risen dramatically. General Motors, Caterpillar, and Frito-Lay are developing new projects in Russia, and enterprises as diverse as Nike, Dow Chemical and Wal-Mart have investigated the possibility of joining them. Last month, BP's landmark commitment of $6.75 billion to a joint venture with Tyumen Oil Co. served notice of a new era in foreign investment.

"We've reached the point when this kind of transaction leads to an increase in share price," said Charles Ryan, the CEO of United Financial Group. "Only several years ago, a deal like this would have sent shareholders out of the room gagging." Ryan also pointed out that Russians themselves were showing a newfound faith in their economy. Native capital returned to Russia in record numbers in 2002.

But disagreement between Russia and the United States on war in Iraq deflated some of the prevailing optimism. Both political and economic stability -- and, consequently, the investment climate -- depend on the course Putin elects. If the country sanctions the war, he risks handing the Communists, eager to portray him as an American lapdog, a public relations coup on the eve of parliamentary and presidential elections. A Russian veto, on the other hand, would likely restrict Russia's access to the spoils of postwar Iraq, a crucial source of income Putin would need to offset declines in revenue caused by falling oil prices and unwelcome reforms in pensions and the electricity sector. The Communist opposition draws most of its support from Russians embittered by poverty.

Dimitri Simes, the president of the Nixon Center, noted the dramatic change in Russia's position on the war in recent weeks. "Just several weeks ago, you had Russian officials privately reassuring the American government that the talks with France and Germany were meant merely to appease public opinion back home," he said. "That kind of implicit guarantee hasn't been available in the past 10 days. There is a distinct possibility that Russia may choose to veto. We've really underestimated the degree of resentment in Moscow toward U.S. foreign policy."

Boris Nemtsov, a leader of the Union of Right Forces, said the Russian government felt short-changed by the Bush administration. "After 9/11, Russia was the first country to support the United States in its war on terror," Nemtsov said. "We provided assistance in Afghanistan. We approved American bases in Central Asia. And what did we get in return? Even Jackson-Vanik still exists. It's like a bad joke."

Simes and Nemtsov warned, however, that Russia could not weather the consequences of a veto, referring to the promises of economic retaliation from American officials in recent days.

"We have to think about our long-term strategic interests," Nemtsov said. "We can't afford rash behavior. Sometimes it's tough for men to set aside their emotions, but there's no other choice here. President Putin understands that."

Conference participants disagreed on whether the economy were sufficiently diversified to withstand a fall in oil prices. Christopher Weafer, the chief equity strategist at Alfa Bank, conceded that Russia remains oil-dependent, but he said that it was far less vulnerable than several years ago to a steep slide in oil revenue. "In 1998, the Russian economy needed more than $26 a barrel to balance," he said. "Today, that figure is $16." Whether the Russian economy will come to resemble Portugal's -- as is Putin's much-publicized aspiration -- or Venezuela's, its fortunes determined by boom-and-bust oil cycles, remains to be seen, he said.

Ryan pointed out that the oil sector claimed a mere one-seventh of foreign investment in Russia, and that considerable gains posted in consumer goods, construction and engineering offered evidence of a diversifying economy.

Most presentations ignored Iraq and oil dependence altogether, focusing instead on strides in ownership rights and debt servicing, and reforms necessary to encourage investor confidence. Speakers said an overweight, obstructionist bureaucracy and a weak judiciary sabotaged foreign investment, as did unreliable corporate governance and persisting corruption. As usual, the harshest criticism was reserved for the banking sector. A proliferation of small banks subsisting on negligible assets unbound by effective regulation have resulted in mistrust of the banking system.

Nonetheless, the consensus seemed to be that Russia had earned investment-grade status, the coveted seal of approval conferred by rating agencies such as Moody's. Helena Hessel, a director at Standard & Poor's, was less sanguine. She cited the deceleration of reform in view of impending elections and declines in GDP growth as reasons the upgrade was at least two years away.

Browder coyly undermined her assessment.

"It would seem that the market has been a better indicator of economic performance," he said. "The credit agencies failed to downgrade Russia for 163 days after it defaulted in August 1998. They did a little better with Enron -- that downgrade came only two days after the company filed for bankruptcy."

The comment drew grateful snickers from an audience sapped by a day of phlegmatic presentations delivered either in a joyless monotone or with ear-straining speed required by the brief time allotted to speakers.

Rushing through his PowerPoint presentation, Weafer seemed to propose that oil sector reform might begin with the unpronounceable names of firms like Surgutneftegaz, but the audience, casting longing looks toward the coffee and dessert being served in the outside hall, failed to pick up on the humor.

In the reception chambers, the mood was more upbeat. Though half the name tags on the welcome table remained unclaimed, the conference brought together many old acquaintances and business partners, lending a genial atmosphere to the proceedings. Amid the bullish banter of the assembled brokers, investors, and company executives, it was sometimes difficult to imagine they discussed a nation that only four years ago seemed at risk of receding into chaos. Indeed, if it weren't for the surnames, the accidental visitor might have assumed this was a fund drive for the South Koreans. The bland lunch of grilled chicken and pasta salad was avowedly stateless in its influences, and the gallantly attired Russian executives who made presentations seemed to have embraced the global nature of their economy to the point that the English translator wandered the halls without much to do. Investment in Russia seemed a no-brainer.

"We are always accused of being boosterish here," said Robert Langer, the bearded, affable moderator of the afternoon panel and a partner at Akin Gump. "And we certainly should talk more about what we've gotten wrong. But I think the glass is definitely half-full rather than half-empty. What it's full of, I'm not sure I could tell you."

www.timesofoman.com By Palazhi Ashok Kumar

MUSCAT — Though fiscal position of the Gulf and Middle East economies are seen improving on considerable rise in oil prices, importers have to pay through the nose for their imports from Europe and a few Asian markets.

More precisely, because of the steep fall in the value of dollar and an unprecedented rise in the value of euro consumers are paying more dollars for importing goods from Europe and Asia. According to yesterday’s international cross-currency rates, one euro is equal to $1.076, and one dollar is equal to 0.9289 euro, with the result that the Gulf and Middle East consumers ending up paying more on their imports from countries with strong currencies.

The euro and a few other Asian currencies, including the Japanese yen, are expected to test new highs against dollar in the next two months as the value of dollar is expected to fall further against major international currencies, foreign exchange dealers forecast yesterday.

Till today, the price of oil is fixed in dollar and the largest oil consumer in the world is the United States.

“Technically speaking, when you pay one dollar you get only 0.929 euros and when you pay one euro you get $1.076, making the euro stronger and dollar weaker,” foreign exchange dealers added.

Oil-producing countries in the region are extremely exposed to trade shocks because of their heavy dependence on oil export earnings. Oman has estimated a fiscal deficit of RO400 million for the year 2003, constituting over 15 per cent of the total revenue. As the price of Oman crude in the international market has been considerably increasing in the last two-and-a-half months, and likely to remain firm at least till March-end, the budgeted deficit of RO400 million will come down drastically and help achieve a balanced fiscal situation. The price of Oman crude on March 14 stood at $30.64 a barrel.

During the last three decades, the drop in oil prices in the international market affected Gulf economies adversely on more than one occasion and the steep fall in oil price had prompted Gulf economies to embark on highly focussed diversification programmes. The currencies of Gulf economies have been pegged to the US dollar and any fall in the value of dollar could have a negative impact on the imports of Gulf economies.

During 1991-95, most economies in the region were stuck with instability because of Gulf war. However, it did not have any tangible adverse impact on some of the economies in the region, including Oman. In fact, consequent rise in oil prices boosted the economic expansion.

Though the budgeted deficit for the year 2002 was RO380 million, the actual deficit for the year reduced to below RO100 million, because of the significant increase in oil price in the second half of 2002.

The largest oil consumer in the world is the United States while the Middle East has the largest proven oil reserves.

According to the International Energy Agency (IEA), the world crude oil production surged by 1.96 million barrels per day (bpd) in February this year. Opec crude supply rose by 1.5 million bpd, Venezuela adding 850,000 bpd and Saudi Arabia 330,000 bpd. Non-Opec supply increased by 340,000 bpd.

According to BP statistical review, the total oil production per day in the Middle East stood at 22.23 million as of December-end 2001. The daily oil production of Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, Syria, UAE, Yemen and others stood at 3.68 million, 2.41 million, 2.14 million, 959,000, 783,000, 8.76 million, 551,000, 2.42 million, 458,000 and 49,000, respectively. Total proven oil reserves of Middle East countries as of 2001-end stood at 685.6 billion barrels — Iran 89.7 billion barrels, Iraq 112.5 billion barrels, Kuwait 96.5 billion barrels, Oman 5.5 billion barrels, Qatar 15.2 billion barrels, Saudi Arabia 261.8 billion barrels, Syria 2.5 billion barrels, UAE 97.8 billion and Yemen 4 billion barrels.

Though war fears would continue to heat up prices, a war would result in a fall in prices. During the Gulf war, a decade ago, oil prices spiked past $40 a barrel at over $41 because of disruption in oil supply. The oil installations of Kuwait were attacked and supplies had been affected.

IEA had said that effective Opec spare capacity fell to 1.7 million bpd in February, and could drop below one million bpd in early March. This is less than the potential loss of supply in the event of war in Iraq.

Cash crude prices climbed further last month, with averaging $35.73 and product prices outpaced crude, boosting refining margins in all major refining centres.

Oil demand for 2003 stands unchanged at 78.01 million bpd. Low European demand in January was offset by strong growth in Asia and North America, driven partly by fuel switching into oil in Japan and in the US. Chinese apparent demand growth is expected to slow after strong gains in January, especially if prices remain high.

Increase in world oil price had aided increase in government expenditures of all Gulf economies in the past. Because of increase in oil price, during 1980 in particular, Oman’s fiscal situation had improved significantly. During 1981-85, the domestic economy entered into an expansionary phase. However, the beginning of 1986-90, as a result of steep fall in oil prices and decline in world oil demand led the nation to a severe economic crisis. Fall in oil price had even affected one of its previous development plans and the government was forced to re-work its target set in the plan.

Over the last few years, oil price fluctuated considerably and so were the external current account balances and fiscal positions of oil exporting countries.

Nevertheless, the promising policies coupled with sound macro economic management to address internal and external imbalances may help Gulf nations to achieve a higher growth. In fact, the uptrend in euro is making vacations in Paris and Rome more expensive for Arab (including the Gulf) tourists, but offering relief to manufacturers by making their goods cheaper in comparison to those of European competitors. As the currencies of the six-member Arab states have been pegged to the US dollar, the fiscal positions of these governments will not suffer.

www.dailystar.com.lb Compiled by Daily Star staff

LONDON: Sheikh Ahmed Zaki Yamani, famed as the face of Organization of the Petroleum Exporting Countries (OPEC) during the oil price shocks of the 1970s, warned Friday a war on Iraq could drive oil above $50 a barrel and wreck the world economy. “If the absence (of Iraqi crude) is long enough and it can’t really be corrected and reduced by strategic reserves, prices can go to a very horrible ceiling and the price will be above $50,” the former Saudi oil minister told journalists on the sidelines of a seminar organized by his London-based think tank, the Center for Global Energy Studies (CGES). “It will ruin the world’s economy,” he warned. US oil prices surged to nearly $40 a barrel on fear that a war could disrupt Baghdad’s 1.7 million barrels per day of exports, but have since calmed after Saudi Arabia promised to make up any shortfall. World crude prices slumped again Friday as investment hedge funds bailed out of oil in anticipation that an American war could finish quickly. US light crude shed $2.11 to $33.95 a barrel for a 10 percent fall in two days as a series of automatic sell stops were triggered on the futures market. London Brent fell $1.28 to $31.15, an eight-week low. “Last time in the 1991 Gulf War there was a big collapse when the shooting started and perhaps this time traders are getting in ahead of the game,” said Christopher Bellew of brokers Prudential-Bache International. Also dragging prices down was a Reuters report that Saudi Arabia had snapped up 14 tankers to move a massive 29.5 million barrels of crude oil to the US for May delivery. Oil traders said the chartering spree shows Riyadh will keep supplies running high into May on top of sharp increases in recent months to fill shortages from strike-hit producer Venezuela and allay supply fears ahead of a possible war. Asked how much war premium was factored into prices, Yamani said: “You can’t really quantify.” But he added there were also fundamental reasons for current price strength, such as low US oil inventories, which have fallen to a 27-year low. Yamani said prices would fall to less than $25 a barrel if any conflict were short and did not do any permanent damage to oil fields, but he doubted OPEC could make up in the short term for any outage of Iraqi supplies. “With the absence of Iraqi crude from the market for some time, I don’t think OPEC will really stand up to the present offer to make up for the difference, especially if the Venezuelan problems are not solved quickly,” Yamani said. Asked later by journalists if that meant that the International Energy Agency (IEA) would have to tap into emergency stockpiles to meet demand, he said: “I hope so, I think they have to.” Both the Paris-based IEA and Washington have indicated a preference for OPEC to meet any shortfall, although both remain ready to act swiftly should extra oil be needed. Among the worst case scenarios would be if Iraqi President Saddam Hussein set out to destroy Iraqi oil wells, something the Iraqi leader has denied he would do, though Yamani said he didn’t take Saddam’s denial very seriously. He cited research that because pressure in Iraq wells was low ú in contrast with Kuwaiti wells torched during the Gulf War ú setting fire to them could destroy them for good. Provided, however, any war ended quickly and damage to oil fields was limited, prices could slump and the producers’ cartel could lose its power. “OPEC has a lot of problems … (it) has to reduce production in order to stabilize prices. To what extent can Saudi Arabia continue to reduce production I don’t know. OPEC has problems even without a war,” Yamani said. Should foreign investment pour into Iraq, production could soar, heralding an era of far cheaper oil. “Foreign oil companies injecting billions of dollars have to have a return on their investment, Iraq will produce without restriction,” he said. ú Agencies

reuters.com Fri March 14, 2003 11:00 AM ET By Richard Mably

LONDON (Reuters) - World crude prices slumped again on Friday as investment hedge funds bailed out of oil in anticipation that a U.S. war against Iraq could start soon and finish quickly.

U.S. light crude by 10:30 a.m. EST had lost $2.11 at $33.95 a barrel for a 10 percent fall in two days as a series of automatic sell stops were triggered on the futures market. London Brent fell $1.28 to $31.15, an eight-week low.

"Last time in the 1991 Gulf War there was a big collapse when the shooting started and perhaps this time traders are getting in ahead of the game," said Christopher Bellew of brokers Prudential-Bache International.

Dealers said market perception seemed to be shifting toward the view that a war on Iraq would be contained and not hit oil flows from the Middle East as a whole, supplier of 40 percent of world crude exports.

Analysts said hot fund money was shifting out of oil and fixed income and back into undervalued equities markets, hit hard this year by political and economic uncertainty.

"(There's been) an about turn on the fixed income markets triggering a reversal in crude prices while at the same time equity markets rallied," said Steve Kwan, head of technical analysis at MMS International.

"People are selling bonds, currencies, oil and gold and buying stocks, the dollar and a big part of the reason is they are re-examining their handicapping on what is to happen next," said Bill O'Grady, at A.G. Edwards in St. Louis.

The United States says it could go to war without clear United Nations backing but Russia, Germany and France all refused on Friday to drop their opposition to rapid military action.

Secretary of State Colin Powell told a congressional committee there might be no vote at all on the resolution, widely seen as a war trigger -- a sign that Washington fears it might not get enough support at the international body.

Also dragging prices down was a Reuters report that OPEC powerhouse Saudi Arabia had snapped up 14 tankers to move a massive 29.5 million barrels of crude oil to the U.S. Gulf for May delivery.

The bookings made by Vela International Marine, state oil company Saudi Aramco's chartering arm, indicate that its own huge fleet is already fully employed.

Oil traders said the chartering spree shows Riyadh will keep supplies running high into May on top of sharp increases in recent months to fill shortages from strike-hit producer Venezuela and allay supply fears ahead of a possible war.

Saudi already has raised output by more than a million barrels per day since the start of the year and market monitors see it moving toward 9.5 million bpd in March of its 10.5 million bpd capacity.

IEA

Petroleum importing nations, represented by the Paris-based International Energy Agency, have said they will give OPEC the first chance to compensate for any shortage in the event or war.

"I'm confident that OPEC in general and Saudi Arabia in particular will deliver," Saudi Oil Minister Ali al-Naimi told Reuters on Thursday.

IEA Executive Director Claude Mandil on Friday said the agency, coordinator for emergency inventories for 26 industrialized nations, would make a decision on whether or not to release reserves within hours of any supply disruption.

"We will not have to wait, we will discuss with producers in the very first hours and see how we can work together in the coming hours," he told Reuters.

He said he had been assured by the Japanese government that it was not considering a unilateral release of oil stocks in the event of war in Iraq.

"I was told by the Japanese government that it will stay under the umbrella of the International Energy Agency as they did always," said Mandil.

Japanese newspaper Nihon Keizai Shimbun reported on Friday that Tokyo was considering selling about 300,000 barrels a day of crude from state reserves should U.S.-led forces invade Iraq.

Mandil said he also expected the United States to consult with the IEA under a coordinated release, should one be necessary.

IEA member countries must hold stocks worth 90 days of net imports but have the right to make unilateral drawdowns from excess inventories. Both Japan and the United States, among others, have large volumes above the mandatory 90-day minimum.