Part 4 –Financial News

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BBC Learning English
Talk about English
Insight Plus
Part 4 –Financial News


Jackie: Money is a powerful force. From the notes and coins in our pockets to the billions
that flow around the world each day –It drives business and the economy. Money
is the topic of this second chance to hear Insight Plus - your guide to the language
you hear every day in the news, first broadcast in 2001. For BBC Learning
English.com, here’s Lyse Doucet.

Lyse: Money and financial activity are essential to our world. Technology and
communication are now developing at such a fast pace, fortunes can be made and
lost in minutes. Our world is also becoming a smaller place. Contacts between
countries are growing and what happens in one place can have a profound effect
around the world. That’s especially true of money.

You can hear it when you listen to programmes on business and finance. They
usually include reports on what’s happening on the most important stock markets
or stock exchanges. These are places where companies can raise money, by selling
a share of their business.


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Investors try to buy shares in companies with the best prospects. The more
profitable the firm, the more the value of the shares will increase. Shareholders are
effectively buying a piece of the company, or equity

Most countries have their own equity or stock and they list their most important
companies, and the value of their shares, on a list or index. The names of the most
powerful indices are famous – you’ve probably heard about the Dow Jones in
New York, the FTSE in London, Hong Kong’s index is called the Hang Seng and
in Japan it’s the Nikkei.

This report from Russell Padmore of the BBC’s Business Unit mentions the Dow
Jones, and the Nasdaq.

Clip
It’s been a rollercoaster day for stocks in New York as the technology driven Nasdaq Index
again dropped in value. At one stage the Nasdaq fell around five per cent to reach its lowest
level for a year. The Dow Jones Index also fell but has steadied slightly.

Lyse: Stock exchanges have traditionally been buildings where traders buy and sell
shares on a trading floor. But now, so much trading is done electronically,
through computers, some exchanges don’t even need a physical space.
Nasdaq is the largest electronic stock market in the world. It’s based in New
York and specializes in high technology companies such as the makers of
electronics and internet software.


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The BBC’s World Service Business unit reports daily on the movements of the
world’s main stock markets. Here’s that report from Russell Padmore again. He
says it’s been a rollercoaster day – what does he mean by that?

Clip
It’s been a rollercoaster day for stocks in New York as the technology driven Nasdaq Index
again dropped in value. At one stage the Nasdaq fell around five per cent to reach its lowest
level for a year. The Dow Jones Index also fell but has steadied slightly.

Lyse: It was an exciting and nerve wracking day for Nasdaq. The value of shares in its
companies went up and down like a roller coaster. The value of shares traded -
bought and sold – on the Dow Jones Index was lower, but there was less dramatic
movement and the market eventually stopped its huge fluctuations, it steadied
slightly. What causes this movement? Here’s more of that report.

Clip
It’s been a rollercoaster day for stocks in New York as the technology driven Nasdaq Index
again dropped in value. At one stage the Nasdaq fell around five per cent to reach its lowest
level for a year. The Dow Jones Index also fell but has steadied slightly.

The markets were driven lower by news from Hewlett Packard admitting that its fourth quarter
earnings fall far short of forecasts, by as much as 20 percent. Hewlett surprised the markets by
releasing the news two days ahead of schedule. The computer and printer making company
also revealed that it has ended talks to buy the PriceWaterhouseCoopers consulting business.
Hewlett’s stock dropped around 15 per cent becoming the latest in a series of technology
groups to take a battering on Wall Street …which is already unsettled by political indecision,
from the presidential election.


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Lyse: We heard the phrase driven up or down. The value of the stocks and shares is
strongly affected by news or developments which have an impact on the company’s
financial position. For example, the company Hewlett Packard realised it would
make less money in its fourth quarter, the last part of the year, than it forecast, or
predicted.

Forecasts play a key role in the financial world. Investors decide where to put their
money based on expectations that companies will perform in a certain way. That
can be easier for older, more established companies such as banks - stock markets
call them blue chip stocks. But newer industries like computer software or the
internet which trade on the Nasdaq are less well-known, they attract investors
willing to take more risks.

In our last report we also heard how technology companies or groups took a
battering on Wall Street, the financial area of New York. It’s not just Hewlett
Packard, but the entire industry which is suffering from problems and that’s
reflected in the value of their shares on the markets.

Lyse: The world of business and finance is the subject of today’s Insight Plus from the
BBC World Service – your guide to the language and background to the stories
that stay in the news.

Markets are also affected by what’s happening in the world of politics…markets
get nervous when political activity is unstable, unpredictable, or in some countries
in a state of upheaval. When that happens, it affects not just one company, or
group of companies, but the economy of a country or even an entire region.


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Take a country like the Philippines. The business community there lost confidence
in the President Joseph Estrada when he was charged with taking millions of
dollars bribes. It reinforced the growing doubts over his management of the
economy. The Philippines is also still suffering from the effects of an economic
crisis that swept across Asia in the late 1990’s. Many countries are now recovering
but the Philippines’ economy is still struggling. This piece by World Service
Business Reporter Karen Hoggan shows how this is reflected in the stock market.

Clip
The financial figures are depressing. The Philippine stock exchange has fallen by around a third
so far this year and last month the currency - the Peso - hit an all time low against the dollar.
A leading credit rating agency has downgraded the outlook for the country from stable to
negative - an indication of how risky it thinks investing there could be.

Lyse: The Philippine’s financial position is described as depressing – that’s a very big
cause of concern. The value of the currency, the peso, has hit an all time low
against the American dollar, one of the world’s strongest and most stable
currencies. It means the peso has never been worth so little, on the markets it’s hit
an all-time low. And it’s not just the currency. Serious concern about the country’s
financial and political future means its credit rating has been downgraded, or
reduced. That sends a signal to the financial community that the Philippines is an
unsafe place to do business – you could lose your money if you invest, if you put
your money into stocks and shares there.

Compare the Philippines with some of its neighbours. The wealthiest, fastest
growing countries in this region used to be known as the Tiger Economies but
even strong economies like South Korea saw their currency collapse in the


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financial crisis of the late 90’s, their economic policies couldn’t sustain such rapid
growth. Some south Asian governments were also guilty of financial
mismanagement and in some cases corruption.

This next report from Manuela Saragoza looks at the progress made in South
Korea. She focuses on two of the country’s largest corporations, Hyundai
Engineering and Construction and Daewoo Motors. They’re both known as
chaebols – conglomerates, or groups of companies which have merged. They were
wallowing in debt, in other words, they owed more money than they actually had.
But the government tried to help them to raise more money, or to return to
liquidity. Let’s see what happened.

Clip
Hyundai Engineering and Construction is wallowing in debt to the tune of 4.4 billion dollars.
Creditor banks have agreed to freeze repayments while the mess is sorted out but the South
Korean government has resorted to some interesting tactics in returning liquidity to the
company

Hyundai was pulled back from the brink of bankruptcy last week, but another Chaebol,
Daewoo, was not so lucky. The motor company collapsed with more than 10 billion dollars in
debt was forced into liquidation by its creditors after labour unions refused to agree to
restructuring which would have involved 3500 job cuts. Daewoo is awaiting another court
decision on the receivership it applied for last week.

Lyse: The South Korean government saved Hyundai which was on the verge of
bankruptcy, the point of saying it couldn’t pay its bills. But Daewoo Motors
collapsed. It was forced into liquidation, of selling everything it owned to try to


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pay its debts. And it had to go into receivership, a court appointed someone to
take control of the bankrupt company.

Bankruptcy may be the worst fate a company can suffer, but a takeover can also be
unwelcome. That’s when one company wants to buy and own another. We’ll hear
the word takeover in this next extract about the London Stock Exchange and the
OM group, listen out for the word that’s used with takeover – a word that means
an offer.

Clip
The London Stock Exchange has beaten off an unwanted takeover bid from the OM group,
the operator of the financial market in Stockholm. OM’s failure had been expected as the
Swedish firm failed to get enough support from the main shareholders of the London
exchange, mostly investment banks and stockbrokers. They voted by nine to one against the
plan. The end of the hostile bid from the Swedish company cleared the way for the London
Stock Exchange to form an alliance with other financial markets, to create a pan European
share trading platform. After a failed attempt to merge with the Bourse in Frankfurt, London’s
future could be a closer link with the Nasdag in New York.

Lyse: The London stock Exchange defeated a takeover bid from the OM Group. The
bid was unwelcome or hostile. The offer was made without the agreement of
the target company. Today on Insight Plus business and finance have been in
the spotlight. Next time you listen to reports about the Dow Jones or the
Nikkei, in other words on stock markets, expect to hear language that’ll indicate
how well those companies listed on the index are doing. And stock markets
don’t just reflect performance of an individual company, they also tell us about
the health of whole sectors of business activity and countries too.