Meet the man behind Pleco, the revolutionary Chinese language learning app that’s older than the iPhone

Learning Chinese is not for the faint of heart. Not only does the non-native Mandarin speaker have to master the language’s infamous tones, he or she will must memorize hundreds of thousands of (practically speaking) non-phonetic characters, get acquainted with a wide range of accents, and grapple with a deceptively simple grammar system. At the same time, even the most gifted linguist will admit that one of the biggest challenges posed by Mandarin isn’t the mechanics of the actual language, but the grunt work required to learn it well. Looking up characters in a paper-bound Chinese dictionary is a multi-step process that can take tens of minutes if you’re not careful. Also, relying on a single Chinese-English dictionary for reference is a surefire way to commit language suicide. For such a long-lasting, quickly-evolving language, you’ll need at least three dictionaries handy in order to get a rough idea of what a specific character, word, or phrase means – and even then you’ll usually have to apply some brainpower to figure out how it’s used properly. Enter Pleco – the best Chinese dictionary app on the planet. To some of our readers, a dictionary app might not seem like the most exciting of subjects, but those who know and use Pleco understand how crucial it is to one’s language learning regimen. It’s one of those rare brand names (if you can call it a brand) that will elicit sheer glee from its users upon the very mention of its name. A Swiss Army knife app featuring 25 dictionaries, almost anyone that’s used it can recall a moment when Pleco “saved their life.” While the app has won legions of fans, few are aware just how revolutionary it was and continues to be. Pleco was first launched as an app for Palm in 2001 – before the big boom in Chinese language learning and the world’s mass adoption of mobile handsets. It pioneered the notion of a Chinese dictionary as a powerful, always-on tool for a wide range of learners, and was the first cross-platform Chinese dictionary to merge handwriting input with character searches across multiple dictionaries. Want to know what 熊貓 means but don’t know how to pronounce the characters? Just trace them in the input field and you’ll find the word next to “panda,” its definition, alongside “xiongmao,” its romanized phonetic pronunciation. Now the app features optical character recognition (“hover-to-translate”), mixed character-pinyin search (trust us, that’s a big deal), voice input, flashcards, and many other bells and whistles that make learning Chinese that much easier for hardcore students. When you consider that for centuries, the only way to look up the word for “panda” was to count the number of strokes for the radical component of 熊, consult a series of charts, and then hope that the suggested definition remotely made sense, the convenience of Pleco marks a major turning point in the history of Chinese language learning. Moreover, more than ten years after it first appeared on Palm, Pleco remains a mostly one-man operation. For 32-year-old Mike Love, a programmer based in New York, Pleco is a full-time hobby that doubles as a business. While many of the apps that dominate our smartphones were created by Silicon Valley dreamers with pipe-dream ambitions and half-baked business plans, Love has added tremendous value to language learners around the world simply by building a better dictionary. Think of him as the pastor overseeing the long-awaited wedding between the Chinese language and mobile electronic devices.

Source: TECHINASIA

UK-based Skyscanner acquires Chinese travel search startup Youbibi for an undisclosed amount

It’s not often that we get news of international internet companies acquiring Chinese startups, so when it happens, we pay attention: today, Edinburgh-based travel booking firm Skyscanner announced it has acquired Shenzhen’s Youbibi. Neither firm has disclosed the financial terms of the deal. Skyscanner officially launched in 2001 as an aggregation and comparison service along the lines of Priceline. It opened an office in Beijing in 2012. Since then, the company claims to have surpassed one million visitors each month (the company provided no data on bookings). The company also formed a partnership with Baidu to provide the Chinese search engine with data for international flight listings – about one year after Baidu purchased a majority stake in booking aggregator Qunar. Youbibi, meanwhile, launched in 2010 and currently sees 100,000 monthly visitors to its site. Like Skyscanner and the China’s Qunar, it aggregates and compares ticket and lodging prices on other websites, but specializes in the local market. Skyscanner’s acquisition of the company marks a deliberate attempt to ramp up its domestic offerings in China. A company spokesperson told Tech in Asia: Skyscanner is a global brand and we are very much focused on being local to each of our key markets. In China, it is important for us to build our product around a specialist team of Chinese engineers, based in China to enable us to continuously build and develop our product within China, by Chinese developers, specifically for Chinese travelers. It’s our model to focus any acquisitions on smaller start-up companies that share our focus on innovative product development. While certain firms like CTrip and Qunar have emerged from China’s domestic online travel booking industry to grow into giant-sized companies, the space remains fragmented even as revenues increase. According to iResearch, online travel agencies in China generated RMB2.99 billion (almost US$480 million) in revenues for Q1 2014, up 17 percent year-on-year. The research firm estimates that Ctrip occupies about 51 percent of the domestic online travel agency market, followed by eLong at 9 percent, and the Ctrip-backed LY.com at 6 percent.

Source: TECHINASIA

Alibaba invests big in media company

Chinese e-commerce firm Alibaba has invested heavily in Hong Kong-listed China Vision Media Group Ltd. (CVMG), becoming the media company's biggest shareholder, CVMG announced in a statement on Wednesday.

Alibaba paid 6.24 billion HK dollars for 59.32 percent of CVMG's shares, the statement said.

Liu Chunning, Alibaba Group vice president, will serve as president of CVMG, while Dong Ping, the media group's former president, will become adviser to the company. Chinese action movie star Jet Li will act as CVMG's independent non-executive director, according to the statement.

The company will be renamed "Alibaba Film Group Co., Ltd." accordingly, a previous statement said.

CVMG has previously obtained investment priorities in the movies of Hong Kong film directors Wong Kai-wai and Peter Ho-sun Chan, as well as Hong Kong actor Stephen Chow. It also signed deals with an entertainment company in March to invest in five films.

Source: Xinhua

WSJ: Rebalancing China’s Economy? Fuhgeddaboudit

If there is one economic tonic that’s prescribed over and over for China, it’s this: rebalance the economy.

In layman’s terms, that means China should rely less on investment in infrastructure and capital-intensive industries and more on domestic consumption. (Any journalist covering China’s economy has written that prior sentence enough times to make his or her wrists hurt.)

Why? Excessive investment has led to the construction of subways, bridges, airports and real estate projects that have no reason for being. The investment focus has also made the air over every major Chinese city foul with pollution. If people spent more and saved less, the theory goes, they would spend more on services and high-tech goods, which produce more employment and less pollution than, say, steel mills.

At least one major bank thinks the rebalancing theory is wrong.

“We believe the obsession with rebalancing China’s economy is leading to misguided policy recommendations that are too blunt and may carry unintended consequences,” including, perhaps, reducing savings, write HSBC economists Qu Hongbin and John Zhu in a new report.

Sure, China’s investment rate is ultra-high at around 48% of GDP, they acknowledge. Sure the household consumption rate is ultra-low at roughly 34%–about half the level of the U.S. ( Some economists think that China’s consumption rate is lower than U.S.’s ever was, in its entire history.)

But Messrs. Qu and Zhu argue that China is a poor country and investment is still necessary. “There are still more useful infrastructure projects to be built before the country gets overrun by bridges to nowhere,” they write.

And, they argue, who says a consumer-based economy is so great, especially one powered by debt? The U.S. hasn’t exactly been a beacon to the rest of the world in the last couple of years when it comes to the economy.

In some ways, though, HSBC’s analysis isn’t all that much different than those of the rebalancers. Messrs. Qu and Zhu argue that China has to invest more wisely so that it gets value from its investment – the same as those pushing more domestic spending.

But rebalancing will happen naturally as China’s population ages, they say. People all over the world save less when they reach old age because they aren’t earning much income and they  still have plenty of expenses. For now, HSBC says, China should amp up its investment.

So, Chinese consumers, keep a lid on those credit card bills.

WSJ: Hedge Fund Industry Surpasses $3 Trillion for First Time

The WSJ reports,"the hedge-fund industry exceeded the $3 trillion barrier in May for the first time ever, according to one research firm, as new allocations and performance gains pushed total assets to a new record".

Some $22 billion flowed into hedge funds last month, bringing the year-to-date inflows to $93 billion, according to data provider eVestment. That’s the largest five-month total to start a year since 2007. Performance gains also added $37.8 billion in assets last month, leaving the total tally just north of $3 trillion.

"Cash has flowed into these hedge funds despite relatively muted performances over the past several years. Many hedge-fund managers have underperformed their benchmarks as the stock market has surged to record after record. Hedge funds suffered back-to-back monthly declines in March and April for the first time since April and May of 2012, according to researcher HFR Inc. These funds rebounded in May and posted gains across all main strategies", HFR said earlier this month.

"And yet, capital continue to flow toward hedge managers who purport to be better positioned for a potential market downturn.

Much of the cash coming to hedge funds has been allocated to stocks. Some $11.5 billion were added to equity strategies last month, or a little more than half of the monthly inflow, eVestment says. That brings the year-to-date total to equity funds to $59.4 billion, the best start to a year since mid-2007, eVestment said.

EVestment is the first to put total assets in the hedge-fund industry at more than $3 trillion. Other research firms have stuck to more conservative estimates. Data firm HFR pegged the industry at $2.7 trillion in April, the same month that trade publication HedgeFund Intelligence measured it at $2.6 trillion".

U.S. clarifies what lightly processed oil drillers can export

 U.S. energy markets marked a seismic shift on Wednesday after federal officials provided more clarity on what companies glutted with oil can ship to thirsty markets abroad, leading to expectations for a potential surge in shale oil exports.

News that companies can export a type of ultra-light crude if it has been minimally refined pushed crude oil prices higher, and triggered a realignment in energy stocks, with refiner shares sagging while those in several oil and gas producers jumped.

The U.S. Department of Commerce's Bureau of Industry and Security told Pioneer Natural Resources and Enterprise Product Partners on Tuesday that removing highly flammable gases from light oil, known as condensate, was sufficient processing to qualify the condensate as a "refined product."

Under U.S. law refined products are allowed to be exported, but most crude oil is not.

Higher oil prices are arguably unwelcome at a time U.S. gasoline prices are already high, putting a strain on consumers and the economy. The White House on Wednesday said the Commerce Department's ruling was not a change in policy.

"As the Commerce Department has said, oil that goes through a process to become a petroleum product is no longer considered crude oil," spokesman Josh Earnest told reporters in daily briefing.
The U.S. shale oil boom of the last five years has led energy companies and politicians to push for a reversal of the 40-year export ban. Drillers say the ban, at a time of sharply rising production, has led to a glut of domestic oil that could soon force them to slow down output.

The Wall Street Journal on Tuesday first reported that the Commerce Department, under growing pressure, had given export approval to the companies via a private ruling.

However, a Commerce Department official told Reuters on Wednesday that its ruling was a commodity class determination.

"They do not constitute a change in policy but are a description of what the regulations are and how they apply to a particular item," said Kevin Wolf, an assistant secretary of commerce for export administration.

Still, U.S. oil prices, which rose 58 cents to $106.66 per barrel, highlighted the greater scrutiny of a regulatory gray area. Regulations prohibit the export of condensate that has been produced directly from an oil field but allow it if the same type of oil emerges from a natural gas plant or a refinery.

ASIAN BUYERS

Energy-hungry Asian countries, which get most of their oil from the Middle East, would welcome extra U.S. supplies.

The shale oil boom is expected by some estimates to make the United States the world's top crude producer, surpassing both Saudi Arabia and Russia - an outcome unimaginable a decade ago.

It has also led to a glut of light oil in Texas and Louisiana that is difficult to process there because refiners have invested billions of dollars to process heavier oils from Mexico and Venezuela.

It was not immediately clear how much condensate the companies would be able to ship, and when.

But Enterprise has the infrastructure in place to export processed condensate from its massive Houston storage facility, spokesman Rick Rainey said, and can start exporting the very light crude oil any time.
The condensate in question has long been run through equipment known as stabilizers, which shave off volatile natural gas liquids, in order to meet pipeline specifications. Stabilizers are common in the Eagle Ford shale region of Texas.

A lawyer who works for the oil refining industry downplayed the significance of the ruling.

"The decision to allow condensate exports frankly is not that big of a deal," said the lawyer who did not want to be identified, because his firm represents a variety of oil industry interests. "It doesn't look like many other companies will be able to use these decisions to their advantage," because a distillation unit is a piece of equipment requiring substantial capital investment, permitting, and specific crudes.

Citigroup oil analyst Ed Morse, however, deemed the ruling significant.

"The flood gates of exports will be opened now," he said, adding that some 200,000 to 300,000 bpd of U.S. condensate could be exported by the end of the year and that the volume could double in 2015.

Shares in Pioneer jumped 5.15 percent on Wednesday, those in Enterprise advanced by 1.35 percent and shares in several other U.S. oil and gas producers, especially those more weighted to condensate, also rose.

But shares of U.S. refiners, especially those most levered to light crude oil, dropped on fears of a rise in crude oil costs. Valero Energy Corp slumped 8.3 percent, and Alon USA Energy shed 6 percent.

Source: Reuters

CANADA STOCKS-TSX steady as energy share gains offset weak U.S. data

Canada's main stock index was little changed on Wednesday as gains in shares of energy producers and Valeant Pharmaceuticals <VRX.TO> helped overcome the impact of data showing a bigger-than-expected drop in U.S. economic growth in the first quarter.

Figures indicated the U.S. economy recorded its worst performance in five years in the quarter. The market also set aside worries about the situation in Iraq. Militants attacked one of Iraq's largest air bases and seized control of several small oilfields. 

The Toronto market, which hit a record closing high last week, is up about 10 percent so far in 2014. Most of the gains have come from the energy sector, which is up about 21 percent since the start of the year.

“The increased geopolitical concerns seem to be helping commodities this month,” said Youssef Zohny, portfolio manager at Stenner Investment Partners, a subsidiary of Richardson GMP.

“The TSX has had a very good run this year," he added. “We expect it to continue to outperform other global markets, but it's likely vulnerable to some profit-taking in the short term."

The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> closed up 12.28 points, or 0.08 percent, at 14,974.65. Five of the 10 main sectors on the index were higher.

Energy shares climbed 0.2 percent, supported by higher U.S. crude oil prices. Suncor Energy Inc <SU.TO> added 0.3 percent to C$44.70, and Canadian Natural Resources Ltd <CNQ.TO> rose 0.6 percent to C$48.25.

The industrial sector advanced 0.3 percent. Canadian National Railway Co <CNR.TO> gained 1.1 percent to C$68.04, and Canadian Pacific Railway Ltd <CP.TO> added 0.9 percent to C$191.58.

In corporate news, Valeant said it had called a special meeting for its shareholders to approve the issue of new shares, another step in its pursuit of Botox maker Allergan Inc <AGN.N>. Valeant shares jumped 4.3 percent to C$134.93.

Source: Reuters

U.S. Ambassador Baucus says China hacking threatens national security

 Cyber theft of trade secrets by China is a threat to U.S. national security, U.S. Ambassador to China Max Baucus said on Wednesday in the first major public address of his tenure, warning that Washington would continue to pressure Beijing.

Baucus' remarks come as commercial ties between the world's two largest economies have been strained over cyber espionage charges and revelations by former National Security Agency contractor Edward Snowden of U.S. spying. 
In May, Washington indicted five Chinese military officers for hacking U.S. companies, prompting Beijing to suspend a Sino-U.S. working group on cyber issues. It adamantly denies the charges.

Such behaviour is criminal and runs counter to China's World Trade Organization commitments, Baucus told business leaders at an American Chamber of Commerce in China luncheon two weeks ahead of annual high-level bilateral talks in Beijing.

"Cyber-enabled theft of trade secrets by state actors in China has emerged as a major threat to our economic, and thus, national security," Baucus said.

"We won't sit idly by when a crime is committed in the real world. So why should we when it happens in cyber space?" he said. "We will continue to use diplomatic and legal means to make clear that this type of behaviour must stop."

Tensions over cyber security rose in late 2012 after Washington banned Chinese communications equipment makers Huawei Technologies Co Ltd and ZTE Corp <000063.SZ> from building U.S. telecoms infrastructure.

Beijing responded by pressuring big state-owned firms to stop buying U.S.-made hardware, emphasising security risks following Snowden's revelations, people in the industry said.

U.S. equipment and software providers such as IBM Corp and Cisco Systems Inc have already seen their China sales drop after the Snowden leaks.

INVESTMENT TREATY A PRIORITY

Like a string of ambassadors before him, Baucus, a former Montana senator who arrived in Beijing in March, has made it his immediate priority to boost the two countries' commercial and economic links. He has stressed that stronger economic ties will help resolve a host of thorny political and security challenges.

Baucus said a bilateral investment treaty would help China rebalance its economy by opening up its service industries to more foreign investment and that moving forward negotiations would be among his top priorities as ambassador.

"I believe that the U.S.-China bilateral investment treaty ... today could do for China's investment regime what the WTO accession did 15 years ago," Baucus said.

The investment treaty talks, which were launched in 2008, will likely be at the centre of the Strategic & Economic Dialogue that will bring U.S. Secretary of State John Kerry and Treasury Secretary Jacob Lew to Beijing in July.

Disputes over cyber security topped the agenda at last year's meeting, initiated in 2008 to help manage a relationship that is growing more complex with China's emergence as major economic and military power. However, the annual talks have yielded few substantive agreements.

Lew has said he will push China to speed up economic reforms and do more to allow markets to determine the value of its yuan currency.
Washington's aim for the investment treaty is to loosen Beijing's restrictions in key sectors from service industries to agriculture, and ensure that foreign companies receive treatment equal to Chinese private and state-owned enterprises.

China heavily restricts dozens of industries and U.S. firms have long complained they are forced to meet unfair burdens such as ownership caps and are pressured to transfer technology in exchange for market access.

Source: Reuters

China to introduce more forex derivatives, strengthen supervision

China's foreign exchange regulator said it will increase the number of foreign exchange derivate products available in the market to facilitate export growth and help companies hedge currency risk.

The State Administration of Foreign Exchange (SAFE) said in a statement on its website that it would strengthen supervision of derivatives trading by banks to ensure that the trade helps reduce risks for companies, and expand the variety of tools available, focused on foreign exchange options.

The statement said it would add principal swap transactions for currency swaps and lower the entry threshold for companies and bank branches.

SAFE has been moving to help Chinese firms cope with an increasingly volatile domestic exchange rate after the People's Bank of China (PBOC) set off a steep depreciation in the value of the yuan earlier this year, then followed up by widening the intraday trading band to 2 percent on either side of the official daily fixed rate.

That depreciation led to significant currency derivative losses by Chinese companies, in particular airlines, many of which had bet heavily on the yuan continuing to appreciate.

Source: Reuters

Rising debt payments pressure Argentina to solve crisis

 Argentina's debt servicing costs are set to more than double in 2015 as foreign reserves slide to critically low levels, boosting pressure on the nation to resolve its 12-year-old battle with creditors and regain access to international credit markets.

Debt payments in foreign currency will rise to $9.4 billion next year, $6 billion of which is due in October to pay holders of its Boden 2015 debt, according to government data analyzed by Reuters. Argentina has agreed this year to make payments to the Paris Club, the World Bank and Repsol SA that will cost about $1.5 billion in 2015, according to Bank of America estimates. That could bring the total bill to $10.8 billion, compared with about $5 billion this year, including payments on the recent agreements.

Foreign reserves, which fell 30 percent last year and stand at eight-year lows of about $29 billion, are seen falling in the second half of 2014 after Argentina's main farm exports, soy and corn, are harvested and sold in the first half.

"Payments will increase next year and it's going to be tight to pay," said Bank of America economist Marcos Buscaglia in New York, who sees reserves falling to $26.7 billion by the end of 2014.

Official data on total debt payments is open to interpretation, economists say, as it includes a medley of inter-public-sector and international loans that are usually rolled over and therefore would not affect reserves.

Reuters has stripped out most of these loans but not all, such as those held by the pension system for which a clear breakdown of bond holdings in dollars is not readily available.

Latin America's No. 3 economy, which slid into a recession in the first three months of this year, has been burning up its reserves to pay debt and finance imports. [ID:nL2N0P41AZ]

Analysts say there are short-term fixes that Argentina can use to tide over cash flow problems as long as it soon regains access to global credit markets it has been shut out of ever since its default on $100 billion of bonds in 2002..

To do that, it needs to reach a deal with the "holdout" investors who have refused its attempts to restructure their bonds and who last week scored another victory against the country in U.S. courts.

"All the deals sealed in 2014 increase a lot the debt services that Argentina will face up to 2019," Buscaglia said.

“If Argentina can tap markets, it will be a manageable schedule.”

President Cristina Fernandez says rulings that Argentina pay one group of holdouts $1.33 billion in cash would prompt new claims of up to $15 billion - an "absurd" sum she says it can’t pay.

After years of refusing to negotiate with the holdouts, Argentina says it is now ready to talk. If it does not pay or reach a deal, U.S. courts will prevent it from servicing debt held by the more than 90 percent of creditors who agreed to restructure.

The next payment is due on June 30 and Argentina has a month-long grace period, meaning it could be in technical default by the end of July.


DIRE CASH-FLOW

Argentina's cash-flow situation looks more dire if only liquid net reserves are considered. Those are the headline figure minus gold, IMF special drawing rights or bank reserve requirement deposits, depending on definitions.

Analyst estimates for net reserves range between $14.7 billion and $21 billion. There is no official estimate.

"Argentina is near bankruptcy with net foreign exchange reserves at only three months of import coverage," said Siobhan Morden, head of Latin America strategy at Jefferies in New York, which estimates net reserves at $16.5 billion.

A common rule of thumb is that a country should have reserves to cover at least three months' worth of imports in order to protect it from external crisis. Argentine imports stood at $5.9 billion in May.

"This metric shows their stock is quite low and they still have quite significant dollar liabilities. These are serious financing constraints on paying these holdout liabilities," Morden said.

That said, Argentina still has options to deal with the impending credit crunch. It could roll over much of its Boden 2015 bonds, which are governed by local law, as long as investors remain keen on high-yielding Argentine debt. It would still have to pay the interest but at least not all the amortization costs.

Elections at the end of 2015 are expected to bring in a more investor-friendly government and that plus a shift over recent months toward more pragmatic policies has improved investor appetite. The market quickly absorbed billions in Argentine bonds issued last month to compensate Repsol for the taking of its YPF subsidiary.

"Only in the worst case scenario would Argentina pay (the amortization of the Boden 2015) with reserves," said Gustavo Ber, an analyst at local consultancy Estudio Ber. "Many investors could be interested in rolling over the debt."

Argentina's central bank could borrow from foreign banks or raise the foreign currency deposits requirement for local banks to get its hands on foreign currency.

The government could also raise import restrictions to stop capital outflows and devalue the currency again to boost exports, though these measures would risk fuelling one of the world's highest inflation rates and hurting consumption. Restrictions on imports of energy or intermediate goods for manufacturers could also further hurt the economy.

"You may have trouble by 2017 if this situation persists for three years in a row," said analyst Mauro Roca of Goldman Sachs.

"But a lot could happen before then.

"It's important to resolve the situation with holdouts and then Argentina can forget the reserves because once it has access to international markets it will be able to finance itself that way," Roca said.

Source: Reuters

More U.S., EU sanctions depend on Putin's choices on Ukraine-Kerry

Russian President Vladimir Putin's response to a peace plan for Ukraine will decide whether the United States and Europe step up sanctions, U.S. Secretary of State John Kerry said on Wednesday.

The United States was delighted that Putin had asked the upper chamber of Russia's parliament to retract a law enabling him to intervene militarily in Ukraine, Kerry said, "but it could be reversed in 10 minutes."

Putin should prove his commitment to peace in Ukraine, Kerry told a news conference after NATO foreign ministers met.

"Until Russia fully makes that kind of commitment to the peace process and to the stability of Ukraine, the United States and Europe are compelled to continue to prepare greater costs, including tough economic sanctions, with the hopes that they will not have to be used."

"But that is dependent on the choices that Russia and its president make in the next days and weeks," he said.

EU leaders are due to meet in Brussels on Friday and could consider more economic sanctions against Russia if it fails to support Ukrainian President Petro Poroshenko's peace plan.

A senior Obama administration official said last Friday that the United States had stepped up talks with the European Union about imposing additional sectoral sanctions on Russia because of the flows of Russian military equipment to Ukraine.

The official, speaking on condition of anonymity, said the sanctions would be targeted primarily at the financial, defence and high technology sectors.

Kerry said the United States and its allies were preparing sanctions in case the peace effort in Ukraine failed.

"We believe it is critical for President Putin ... to stop the flow of weapons and fighters across the border, to call publicly for the separatists to lay down their arms, to pull Russian forces and equipment back and to help get OSCE hostages released," he said, referring to Organisation for Security and Cooperation in Europe monitors held in Ukraine.


HELICOPTER

Many Russian-speakers in Ukraine have been alienated by a wave of Ukrainian nationalism since Moscow-backed president Viktor Yanukovich was toppled in February.

Moscow denies Western accusations that it has allowed fighters to cross into Ukraine along with heavy weapons to confront government forces.

Kerry said a Ukrainian helicopter that crashed on Tuesday, killing nine people, was shot down with a Russian shoulder-launched missile.

German Foreign Minister Frank-Walter Steinmeier urged Russia to take a clear position on the shooting down of the helicopter.

"There must also be an announcement of detailed steps toward a cooperation with Ukraine or possibly the OSCE," he said.

"If economic sanctions become necessary, we are prepared."

British Foreign Secretary William Hague warned that the case for tougher EU sanctions on Moscow would strengthen unless Russia acted to defuse violence in eastern Ukraine and to support Poroshenko's peace plan.

The ministers agreed to prolong a suspension of practical cooperation with Russia that NATO announced in April in protest at Russia's annexation of Ukraine's Crimea region.

Russia continued to be in breach of its international commitments, including a 1997 agreement with NATO, because of its actions in Ukraine, a NATO official said.

Canadian Foreign Minister John Baird said what was needed from Moscow was "less talk and more tangible action."

"The reality of their covert efforts on the ground are indisputable ... It will not be business as usual as long as they continue to take that course of action," he told Reuters.

NATO ministers endorsed measures to help Ukraine including setting up new trust funds, worth around 12 million euros ($16.4 million), to improve Ukrainian military capabilities in logistics, cyber security and command and control.

Source: Reuters

Germany and Italy align on EU policy, Britain set for showdown

 Britain's slender hopes of securing Italian support in its campaign to stop Jean-Claude Juncker becoming European Commission president crumbled on Wednesday when Germany offered Rome a gentler interpretation of EU budget rules.

Chancellor Angela Merkel acknowledged that a European Union pact that sets limits on government deficits should be applied flexibly to promote economic growth. This gesture to the wishes of Italian Prime Minister Matteo Renzi all but ensures he will back Juncker's nomination at a summit on Friday.

"The German government agrees that the Stability and Growth Pact offers excellent conditions for (promoting growth and competitiveness), with clear guard rails and limits on the one hand and a lot of instruments allowing flexibility on the other," Merkel told Germany's lower house of parliament.

"We must use both just as they have been used in the past."

The EU summit starts on Thursday with a solemn commemoration in Ypres, Belgium, of the outbreak of World War One a century ago in which millions of Europeans died. That will be followed by a working dinner on the EU's long-term policy agenda before the contentious decision on the Commission presidency on Friday.

The tilt in economic policy and the likely appointment of 59-year-old Juncker highlight a new political balance in Europe that is set to shape the EU's institutions for the next five years, with the risk of Britain drifting away.

Juncker, who was prime minister of Luxembourg for 19 years, has been at the heart of EU decision-making since the early 1990s. But British Prime Minister David Cameron has waged a campaign against Juncker, casting him as an old-school federalist who does not have the skill or energy to breathe new life into the EU.

Cameron renewed his promise in parliament to fight to the end but seems certain to be overwhelmingly defeated in an unprecedented summit vote he has demanded.

The leaders of Sweden and the Netherlands, who initially shared Cameron's reservations, both announced they would not block Juncker and a senior German official forecast "a very large, dominant majority" in favour of the appointment.

The tentative convergence between Italy and Germany points the way towards a German-style "grand coalition" of the centre-left and centre-right at European level, with Renzi, the young reformer, in the frontline with the conservative Merkel.

Renzi, whose centre-left party won a resounding victory in European elections last month, boosting his profile on the EU stage, has made budget flexibility a central issue as he searches for ways to kickstart his flaccid economy.

Sandro Gozi, Italy's undersecretary for EU affairs, accepted there was no question of altering the 2005 stability pact, just a need to apply it more flexibly to favour investment spending and allow countries implementing growth-enhancing reforms extra time to meet deficit and debt targets.

"No one is asking to revise the pact but to use the rules to their maximum," he told la Repubblica newspaper.

In a warning shot to placate German fiscal hawks, Merkel's parliamentary group said Renzi wanted to deviate from the path of stability but Berlin would not allow any "dirty tricks" that put Europe on a "comfortable but fatal debt track".

Italy takes over the EU's rotating presidency for six months in July, determined to re-energise the union and change the way it works. In a speech to parliament on Tuesday, Renzi, 39, said he was fed up with the EU acting like a "nagging old aunt".


MOMENT OF TRUTH

Cameron has also objected to the principle of EU leaders' letting the European Parliament effectively determine the choice, since Juncker was the leading candidate of the centre-right group that topped the poll in the European elections.
British Europe Minister David Lidington said choosing the Commission president from among those leading candidates risked making the EU executive a "creature of the European Parliament".

But Juncker has firm backing from Merkel and most other EU leaders. Conservative Swedish Prime Minister Fredrik Reinfeldt said on Wednesday he was ready to support Juncker if a majority of leaders backed him, and Dutch Prime Minister Mark Rutte told parliament he would not block him if it came to a vote, leaving the British leader virtually isolated.

Herman Van Rompuy, president of the European Council and chairman of EU summits, is determined to secure Juncker's nomination before the meeting ends on Friday, even if it means a vote that leaves Britain isolated and defeated. 
Normally EU leaders take decisions by consensus but a showdown looks increasingly likely because Cameron is holding firm and demanding a vote. An EU ambassador said Cameron would probably lose it by 26 votes to 2, with only Hungarian Prime Minister Viktor Orban joining him in opposition.

It would be the second time Britain has been left on the margins on a critical EU issue in the past three years, having been one of only two countries to veto new budget rules for the euro zone at the end of 2011.

The confrontation has badly damaged Britain's reputation after 41 years as a member of the union, a senior minister in Cameron's coalition said on Wednesday, but it has gone down well so far with British voters.

A poll conducted by Populus for the Financial Times found 49 percent of people thought Cameron was taking a strong stand, with only 22 percent perceiving him as weak.
Yet while his stand may go down well at home in the short run, it could increase the likelihood of Britain eventually leaving the EU, which Cameron has said he wants to prevent.

If he is re-elected next year, Cameron has promised voters an in/out referendum on membership by the end of 2017 after he tries to renegotiate Britain's relationship with the EU. Some polls show more Britons now leaning towards "Brexit".

EU officials and diplomats are working on ways to prevent Britain being left out in the cold. One official said if Cameron dropped his demand for a vote, Britain could be given the top economic job in the Commission, or a similarly powerful post.

But there is no sign Cameron will accept such an inducement. A British official close to him said this week the prime minister would not be "bought off" by EU leaders. "Some principles are worth fighting for," the official said.

Merkel and Rutte both called Cameron on Wednesday to discuss the appointment, but a spokeswoman for the British leader said he had told them he would not drop his opposition to the process of the parliament choosing a preferred candidate.

"Chancellor Merkel and Prime Minister Rutte recognised the prime minister's position and agreed that if the European Council decides not to proceed by consensus then there should be a vote," the spokeswoman said.

"Both leaders also underlined their support for Britain’s continued membership of a reformed European Union and their ongoing commitment to working with the prime minister as he renegotiates Britain’s relationship with the EU."

If as expected Juncker is nominated by EU leaders, he will have to be approved by a majority in the European Parliament in a vote set for July 16.

Tentative plans are being made for EU leaders to meet again on the same day to discuss the other top jobs that have to be filled, including a successor for Van Rompuy, an EU foreign affairs chief, a economics czar and the rest of the 28-member Commission, the EU's executive.

That would bring Cameron back face-to-face with his fellow EU leaders barely two weeks after an uncomfortable showdown.

Source: Reuters

Asian shares gain as global bond yields decline

June 26 (Reuters) - Asian shares swung higher on Thursday as weak U.S. growth seemed to further delay the day when interest rates might rise, pulling down bond yields globally and pushing investors toward riskier assets in a desperate search for returns.

A shockingly poor reading on the U.S. economy for the first quarter also pressured the dollar while giving a lift to most commodities and resource-related currencies.

Still, the prospect that Federal Reserve would keep rates low for longer encouraged equity investors. MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> added 0.3 percent. Japan's Nikkei <.N225> gained 0.4 percent and South Korea <.KS11> 0.5 percent.

On Wall Street, the Dow <.DJI> bounced 0.29 percent, the S&P 500 <.SPX> 0.49 percent and the Nasdaq <.IXIC> 0.68 percent.

Markets managed to put a positive spin on data showing the U.S. economy shrank at an annualised 2.9 percent pace in the first quarter, far below already-pessimistic estimates. Analysts emphasised the weakness was mainly due to one-off factors and a marked rebound was likely this quarter.

Yet the result was so poor that it soured the outlook for the entire year, such that the Fed's recently lowered forecast of 2.2 percent growth for 2014 now seems highly optimistic.

That only added to market expectations the Fed would keep rates near zero well into next year and led investors to push out ever further on the yield curve in search of returns.

This trend nudged yields on 10-year Treasuries down to 2.56 percent and away from the June peak of 2.66 percent.

The hunt for yield was even more acute in Europe, where the European Central Bank recently started charging banks for taking their cash deposits.

The tide of money pushed yields on German 10-year debt to a one-year trough of 1.26 percent . That in turn widened the spread against U.S. paper out to 130 basis points, giving Treasuries the biggest premium in at least two decades.

That yield advantage could provide the U.S. dollar some support over time, but for now the sticker shock from the GDP numbers kept the currency under pressure.

The dollar index <.DXY> fell as far as 80.091, a low not seen since May 22, while the euro bounced to $1.3627 .

Sterling climbed to $1.6984 from a one-week low of $1.6952, while the Australian dollar popped back above 94 U.S. cents from $0.9354.

The lower dollar helped gold up to $1,318.75 an ounce, from a low of $1,310.36 on Wednesday.

In oil markets, U.S. crude was firmer after news of a government decision to permit exports of lightly refined oil promised to open a new source of demand for the product.
U.S. crude added 18 cents to $106.68 a barrel, while Brent gained 20 cents to $114.20. 

Southeast Asia fears grow. At least 30 Malaysians and 56 Indonesians are estimated by security officials to have gone to fight in Syria

June 26 (Reuters) - Four gun-wielding rebel fighters sit relaxing on a wall, their faces concealed by scarves and ski masks. All are Indonesians who came to Syria to join the Islamist insurgency, the cameraman says, speaking Indonesian peppered with Arabic phrases.

He pans around and introduces them as a former soldier, a businessman, and a college student, before settling on a boy in his early teens leaning on his AK-47 assault rifle.

"Brothers in Indonesia, don’t be afraid, because fear is a temptation from Satan,” says one of the fighters in the YouTube video, which has since been removed from the Islamist website.

As Sunni Islamist rebels surge from Syria into Iraq, security officials in Southeast Asia and Australia worry the conflict is radicalising a new generation of militants, who are being influenced to an unprecedented degree by social media.

In the 1990s, several hundred Indonesian, Malaysian and Philippine Muslims trained with al Qaeda in Afghanistan and brought their skills and ideology home, inspiring attacks such as the 2002 Bali nightclub bombing that killed 202 people.

At least 30 Malaysians and 56 Indonesians are estimated by security officials to have gone to fight in Syria, although security analysts say the true number is likely higher.

Australia's government estimates around 150 Australians have

gone to the Middle East to join the fighting in Syria and Iraq, with some taking leadership roles.

Many, including those in the video, are believed to have joined the Islamic State of Iraq and the Levant (ISIL), also known as ISIS, whose hard-line Islamist rebels have led a Sunni Muslim charge across western and northern Iraq, including the capture of border crossings and the key city of Mosul.

"It's a growing concern," Malaysian Deputy Home Minister Wan Junaidi Tuanku Jaafar told Reuters.

"Some Malaysians who may have been in contact with some of these people get motivated to participate. We have been arresting a lot of militants within the country."

Malaysian police have arrested at least 16 suspected militants since April who they said were believed to have ties to ISIL and some of whom trained in jungle areas in northern Malaysia. Malaysian media, citing an ISIL website, reported that a Malaysian named Ahmad Tarmimi carried out a suicide bombing in Iraq in May, although Reuters was unable to verify the incident.

Malaysia is investigating a report by Syria's permanent representative to the United Nations that 15 Malaysians fighting for ISIL had been killed, its Foreign Ministry said on Tuesday.

Australian Foreign Minister Julie Bishop said this week she had cancelled a "substantial number" of passports on security grounds in recent months and was considering further measures.

"There is a real danger that these extremists will come back home as trained terrorists and pose a threat to our security," Bishop told the Australian parliament on Monday.

Saudi Arabia, Tunisia, Morocco and Russia are by far the largest contributors of the estimated 11,000 foreign fighters in Syria, according to strategic security firm The Soufan Group.

Official estimates of 236 militants from Australia, Malaysia and Indonesia would account for nearly 9 percent of the foreign fighters from countries excluding those four.


"THE FINAL BATTLE"

Indonesia, the world's most populous Muslim country, has long been the epicentre of Islamist militancy in east Asia, breeding groups such as Jemaah Islamiah (JI) that carried out the 2002 Bali bombing and other attacks on Western targets.

The Jakarta-based Institute for Policy Analysis of Conflict

(IPAC) said in a report in January the Syrian crisis had inspired Indonesian extremists to an unprecedented extent, partly due to teachings that "the final battle" would take place in the greater Syrian region.

"We can see that ISIS is getting better, it’s growing and it’s widening its reach and influence over cities in Iraq – Mosul, Tikrit and then Ramadi. Soon, God willing, even Baghdad will fall,” said M. Fachry, the chief editor of al-mustaqbal.net, an Indonesian militant website.

Abu Bakar Bashir, the spiritual father of JI who has since split with the group, and Aman Abdurrahman, an influential extremist scholar, have urged their followers to support ISIL in recent months. Several pro-ISIL rallies have drawn large crowds in Indonesia, where support and recruitment for foreign militant groups remains legal.

The concern among security officials is that fighters in Syria and Iraq could breathe new life into the radical movement in Indonesia, where militant groups have been dispersed and weakened in recent years by security crackdowns.

"That’s why we’re focusing on it. Because it will be a massive problem when they come back to Indonesia, everyone agrees on that,” said an Indonesian security official, who is briefed on anti-terrorism efforts but declined to be identified.

Unlike in the 1990s, social media now plays an influential role, with Facebook, YouTube and Twitter widely used by militants to transmit their message and lionise "martyrs".

“It’s the development of social media that has caused ISIS’s popularity to rise. ISIS has been using social media, especially Twitter, to massively increase their growth," said al-mustaqbal.net's M. Fachry.

Mohd Lotfi Ariffin, a Malaysian who says he is fighting in Syria, regularly posts pictures and videos of himself and other militants to his nearly 19,000 Facebook followers.

One of those followers, 21-year-old Malaysian Mohammad Fadhlan Shahidi, was inspired to join him in Syria, according to a video posted on his Facebook page on May 15 showing him side-by-side with Lotfi and another Malaysian fighter.

"At the beginning, I got in touch with Ustaz (teacher) Lutfi," Fadhlan says. "The Ustaz told me how much I would need for the trip."

Police in Malaysia and Indonesia face a struggle to keep track of militant activity and secure convictions, analysts say,

because of the threat's more diffuse nature and due to political changes in both countries that have undermined their reach.

The governments of both countries have been accused of sometimes fanning Islamist extremism for political gain. Malaysian Prime Minister Najib Razak was reported as telling members of his ruling party on Monday that they should be inspired by ISIL's bravery and against-the-odds victories.

Indonesia's security establishment no longer has the tight control over society that prevailed under late President Suharto up to the 1990s, said Yohanes Sulaiman, a lecturer at the Indonesian National Defence University.

"The problem we have is the chain of command of the government. The military is no longer the all-powerful entity it was when it was able to get the names of everybody," he said.

Malaysian officials say they have been hobbled by the government's repeal in 2012 of the Internal Security Act, which allowed indefinite detention of suspects.

"The police especially think we are powerless to handle it like we did it before," said Malaysia's Wan Junaidi.

China c.bank survey: more bankers think economy cooled in second quarter

More Chinese bankers believe the economy is cooling in the second quarter than earlier in the year and demand for loans has weakened, according to a central bank survey published on Wednesday.

The survey also showed that in the second quarter, the number of bankers who believed monetary policy was appropriate increased from the first three months of the year.

Business confidence in China cooled in the second quarter compared with the first quarter, according to the People's Bank of China (PBOC).

China's central bank has taken targeted measures to support the economy, including cutting reserve requirements for selected banks. The government has unveiled a host of steps - dubbed a

"mini-stimulus programme" by some economists - to boost activity in certain sectors.

A Reuters poll in April forecast that China's annual economic growth pace could slow to 7.3 percent in the second quarter from a 18-month low of 7.4 percent in January-March, with full-year growth of 7.3 percent in 2014, the weakest in 24 years.

Recent data reinforced market expectations that the world's second-largest economy is powering through its recent soft patch, even if the recovery may be patchy. [ID:nL4N0P40JC]


CLIMATE 'RELATIVELY COOL'

About 47 percent of bankers polled thought the economic climate is "relatively cool" in the second quarter, up 16.3 percentage points from the first quarter, the central bank said.

It also showed more bankers believed that the current monetary policy stance is appropriate - up 5.8 percentage points, to 72 percent, compared with the previous three months.

The central bank polls bankers, households and business people separately every quarter for their views on the economy, inflation, home prices and other subjects.

The confidence index of entrepreneurs in the second quarter fell to 64.9 percent, 2.1 percentage points lower than the first quarter, the survey showed.

The PBOC also reported that based on the survey, slightly fewer Chinese residents believe property prices are at unacceptable levels, as home prices are showing signs of cooling.

The survey also showed inflation expectations among Chinese residents held steady in the second quarter.

Source: Reuters