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The risk posed by asset bubbles in Asia is overstated because surging prices in markets don’t threaten regional economies, said Stephen Roach, chairman of Morgan Stanley Asia Ltd.

“The difference between the asset bubbles in this region and asset bubbles also around the world is that they have not affected the real side of the Asian economy,” Roach told Bloomberg Television in an interview in Hong Kong today.

Concerns about inflation in Asia are “overblown” as excess capacity in the global economy is likely to keep a “lid” on prices for the next few years, said Roach, author of “The Next Asia.” “Beyond that, it’s a big challenge.”

Standard & Poor’s warned yesterday that Asian policy makers may fuel asset bubbles by leaving interest rates “too low for too long” as the region leads a global recovery from the worst slowdown since World War II. Stock and property markets are looking “frothy” in Asia, said David Wyss, an economist at S&P.

The U.S. had “monster bubbles in property credit that ended up stalling home-building activities and personal consumption” and when they burst the “economy went into the tank,” said Roach. In contrast, in Asia “you have bubbles that come and go, but they don’t impact on the real economy free credit reports.”

China’s Economy

Roach also said that Chinese Premier Wen Jiabao’s past warnings that his nation’s growth path is “unbalanced and unsustainable” have become a “serious concern now.”

“Two of the main engines of the Chinese economy, exports and investments, really have reached their point of maximum dynamism,” Roach said. “The Chinese need to change the model and move much more into consumer-led” growth, he said.

China’s central bank last month ordered banks to set aside more deposits as reserves for the second time in a month to cool the economic expansion after loan growth accelerated and property prices surged 9.5 percent in January, the most in 21 months. The China Banking Regulatory Commission told banks the same month to “strictly” follow property lending policies.

China’s consumer prices increased 1.5 percent in January from a year earlier, mainly due to gains in food costs resulting from the cold winter weather, the National Bureau of Statistics said. The gauge rose 0.6 percent from December.

In the fourth quarter of 2009, the Chinese economy grew 10.7 percent from a year earlier, the fastest pace since 2007.

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European Union finance ministers are uniting to oppose President Barack Obama’s proposal to limit banks’ size and risk-taking, saying his plan may run counter to EU policy, according to a draft document.

Their position, which they will ratify at a two-day meeting starting today, comes after Obama last month urged the adoption of the so-called “Volcker rule,” named for former Federal Reserve Chairman Paul Volcker. The plan would bar commercial banks from owning hedge funds and limit how much they can trade for their own account.

The finance officials gathering in Brussels will express “their concern that the application of the ‘Volcker’ rule in the EU may not be consistent with the current principles of the internal market and universal banking,” the document obtained by Bloomberg News said. “Any policy choice should avoid pushing risks to other parts of the financial system.”

The resistance underscores political divisions over how to overhaul banking regulations to prevent a repeat of the crisis that forced taxpayers to prop up the financial system. While leaders have called for a Group of 20 initiative, the U.S., Britain, and France are forging their own policies to limit compensation and risks.

At a meeting this month in Canada, Group of Seven finance ministers signaled they are rallying around a plan to introduce a levy on banks if it can be applied worldwide business cards design.

The Feb. 10 draft, entitled “Issues note on the most recent proposals of the U.S. administration in respect of Systemically Important Financial Institutions and the introduction of a financial crisis responsibility fee,” was prepared by a committee of officials from finance ministries, the European Central Bank and the European Commission.

EU Proposals

The three-page memo also considered proposals including levying a stability fee on banks and creating national or pan- European funds for future bailouts.

Swedish Finance Minister Anders Borg last month presented a plan to create a fund for future banking crises. In contrast, the Netherlands’ Wouter Bos last month wrote a letter to his counterparts welcoming Obama’s proposals and calling for a “serious debate” on the U.S. plan at the meeting in Brussels.

Jean-Claude Juncker, who heads the group of euro-area finance ministers, last month voiced concern about a common approach on bank levies given that taxes are a matter dealt with at the national level of the 27-member bloc.

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Japan’s economy probably grew at the fastest pace since the first quarter of 2008 as a global trade revival fueled demand for the nation’s exports.

Gross domestic product rose an annualized 3.6 percent in the three months ended Dec. 31, following a 1.3 percent expansion in the third quarter, according to the median forecast of 23 economists surveyed by Bloomberg News. The Cabinet Office report is due on Feb. 15 at 8:50 a.m. in Tokyo.

Nissan Motor Co. and Canon Inc. are among companies benefitting from stronger global demand as countries poured more than $2 trillion into their economies to spur growth. Those gains have failed to reach consumers at home, where wages are tumbling and household outlays have been propped up by government incentives that are starting to wear off.

“Japan may be able to stave off a double-dip recession given exports have done better than expected,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “Still, it’s questionable whether a recovery in domestic demand without the stimulus is possible and the economy is still highly dependent on overseas demand, underscoring the fragility of the recovery.”

Gains in the Nikkei 225 Stock Average stalled this year after a 19 percent advance in 2009, a reflection of concerns about the strength of the global recovery. The yen is the only currency that has gained against the dollar since Dec. 31 among 10 major currencies tracked by Bloomberg, threatening exporters’ profits.

Asia spearheaded Japan’s revival at the end of 2009. Shipments to the region surged 31 percent in December, the fastest pace in almost a decade, helping China overtake the U.S. as Japan’s largest foreign customer on an annual basis. Demand from the U.S. is also improving after the nation’s GDP expanded the most in six years last quarter.

‘More Resilient’

“The Asian economy is growing at a fast pace while the U.S. economy is picking up, a sign the global recovery is becoming more resilient,” said Yoshiki Shinke, senior economist at Dai- Ichi Life Research Institute in Tokyo.

Nissan, Japan’s third-largest carmaker, this week forecast a return to profit for the year ending March 31, citing government incentives that boosted sales in China and Japan. Canon, the world’s largest camera maker, is predicting its biggest annual profit increase in a decade amid revived global demand.

Japan’s economy expanded 0.9 percent from the previous quarter, the survey showed. Overseas shipments increased 5.3 percent in the fourth quarter from the previous three months, analysts surveyed said ay day loans. Net exports, or shipments minus imports, added 0.5 percentage point to growth.

Calculation Change

The Cabinet Office said last week that it will change the way it calculates exports and imports on a seasonally adjusted basis to account for the anomaly created by the financial crisis in 2008. The announcement prompted economists to cut their annualized GDP forecasts by about 1 percentage point.

The faster growth may not be enough to convince Prime Minister Yukio Hatoyama that the recovery is sustainable. The premier, facing upper house elections in July, is implementing a 7.2 trillion yen ($80 billion) stimulus package that his administration estimates can boost growth by about 0.7 percentage point next fiscal year.

Even if GDP is strong, “Hatoyama may compile an additional stimulus as he wants to lure voters ahead of the election, especially when his popularity is sliding,” said Susumu Kato, chief economist for Japan at Calyon Securities in Tokyo.

‘Long Way’

Central bankers aren’t confident that growth is durable. Kazuo Momma, the Bank of Japan’s top economist, this month said “there is still a long way to go” before the expansion becomes sustainable. Governor Masaaki Shirakawa and his policy board will hold a rate-setting meeting two days after the GDP report is released.

Japan’s wages slumped at a near-record pace in December, when household sentiment fell to a six-month low. In a sign that stimulus measures are fading, retail sales fell 1.2 percent in December on a seasonally adjusted basis, the largest drop a year, as customers purchased fewer cars and appliances.

Nevertheless, consumer spending probably contributed to the growth in the fourth quarter. The 0.3 percent increase predicted by economists would be a third of the pace of the previous quarter. Capital investment may rise 1.5 percent, the first positive reading in seven quarters.

Economists including Calyon’s Kato said the business investment figure may be revised down when the government updates the GDP report next month to reflect additional data.

“The domestic economy remains fundamentally weak as the positive cyclical loop between income and expenditure has yet to kick in,” said Ryutaro Kono, chief economist at BNP Paribas in Tokyo. “Although we believe the worst is over for corporate earnings, the return on capital remains so low that companies will continue to restrain labor costs for some time.”

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Sterling Kozlowski, the region's top KeyBank N.A. executive since mid-2006, is leaving Western New York to become president of KeyBank's Maine district.

Kozlowski begins his new job Feb. 16, according to a release issued Monday by the bank. He will replaced retiring Maine district president Dick Lucas.

A search for the district's next president has begun, the bank said.

Kozlowski, a Syracuse native who grew up in Rochester, joined KeyBank in July 2006 after working 23 years at HSBC Bank USA N.A. In his current job, he has been responsible for 1,000 employees, 41 branches and 50 ATMs.

In Maine, he will focus on revenue, expense management, profitability and credit quality, the bank said. He will also work with sales managers to provide banking accessibility to low- to moderate-income individuals and communities.

Kozlowski earned an undergraduate degree in marketing management from Syracuse University. He also graduated from the advanced commercial lending program at the University at Buffalo and the Graduate School of Retail Bank Management at the University of Virginia.

Cleveland-based KeyBank, a subsidiary of KeyCorp, is the third largest bank in Western New York. Four new or renovated branches are expected to open locally within the next couple of years.

Nationwide, KeyBank has about $93 billion in assets and more than 1,000 branches.

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Knight Security Systems has won a contract with the Texas Department of Aging and Disability Services to install security cameras at the San Antonio State Supported Living Center.

This is a home that cares for 300 mentally disabled people in San Antonio. The video cameras should help ensure residents are being kept safe.

The work is being done in San Antonio as part of a statewide contract between Aging and Disability Services and Houston-based Knight. In all, a total of 12 state-supported living centers will receive the company’s cameras.

The contract is worth $12 million.

Knight will install a total of 3,200 video cameras in 335 buildings.

Founded in 1983, Knight Security Systems has worked with more than 3,000 Texas customers since its inception.

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Finance Minister Hirohisa Fujii’s health deterioration threatens his four-month tenure, exposing a lack of experience in a government that’s struggling to contain Japan’s debt and sustain an economic recovery.

Prime Minister Yukio Hatoyama said yesterday that no decision has been made on whether Fujii, 77, will remain in his job as the government awaits judgment on his medical condition. Fujii told reporters in Tokyo that health issues may prevent him from attending the next session of parliament this month. He is likely to resign, Kyodo News reported today, citing an unnamed ruling party lawmaker.

A Fujii resignation would elevate focus on the two vice- finance chiefs, Yoshihiko Noda and Naoki Minezaki, as well as Deputy Prime Minister Naoto Kan, who heads economic policy, and Yoshito Sengoku, the minister for administrative reform. Investors would examine any successor’s credentials on fiscal matters after Fujii championed avoiding an increase in new bond sales, said Susumu Kato at Calyon Securities in Tokyo

“Hatoyama needs someone who is heavyweight and has expertise, but the DPJ lacks experienced personnel,” said Kato, Calyon’s chief economist for Japan. “Fujii gave a sense of security in a relatively young Cabinet as he’s veteran politician who has already been finance minister.”

Retirement Postponed

Hatoyama asked Fujii last year to postpone retirement and run in the August election that brought his Democratic Party of Japan to power for the first time. Fujii previously headed the Finance Ministry in 1993, and is a former budget examiner at the agency, giving him a deeper background in the area than other lawmakers in the party.

Financial markets indicated little immediate concern over doubts about Fujii’s future, with Japanese government bonds little changed and the Nikkei 225 Stock Average closing at the highest level since October 2008. Yields on benchmark 10-year notes were at 1.325 percent. The yen rose 0.6 percent to 91.92 as of 6 p.m. in Tokyo yesterday.

The Diet is scheduled to convene later this month, when the finance minister would typically face lawmakers’ questions over the proposed record 92.3 trillion yen ($1 trillion) budget.

While the DPJ-led coalition’s majority in the Diet means Hatoyama’s 2010 budget is likely to be little affected by a Fujii departure, it could complicate any effort to compile an additional fiscal stimulus, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo.

Stimulus Weighed

“There’s a chance that the government may have an additional stimulus” package to submit before elections for the upper house of the Diet in July, Muto said. “If that happens, the government will be in trouble unless it chooses a person who has strong political leadership as a next finance minister.”

The latest warning on the durability of Japan’s recovery from its deepest postwar recession came yesterday from Sony Corp business card templates. Vice Chairman Ryoji Chubachi. He said “there’s a risk of a double-dip recession,” citing the damage of deflation to companies’ earnings. Chubachi spoke at a New Year’s party attended by government officials and business leaders in Tokyo.

Kato at Calyon Securities said a Fujii departure may have an impact on debt markets, depending on the dedication of any successor to avoiding an increase in government bond issuance.

Spending Restraint

In the course of compiling the 2010 budget, Fujii urged ministers to restrain outlays after their requests amounted to an unprecedented 95 trillion yen. He said the government must keep its promise of holding bond sales around 44 trillion yen to contain the world’s largest public debt burden — even after Hatoyama indicated he wouldn’t strictly adhere to the cap should more spending be necessary.

“There’s no finance-ministry type other than Fujii” within the DPJ, said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “If Fujii steps down, fiscal discipline may loosen regardless of who takes over the post.”

Fujii, Japan’s fifth finance minister since August 2008, was admitted to hospital on Dec. 28 for high blood pressure and exhaustion, three days after the budget release. “My examination is continuing, and I’ll respect my doctor’s judgment,” he said. He canceled his regular Wednesday press briefing for today.

For Hatoyama, losing his finance chief would come as his public support tumbles. The Cabinet had an approval rating of 50 percent in a Dec. 25-27 poll by Nikkei Inc. and TV Tokyo Corp., down from 75 percent backing in mid-September.

Currency Stance

Some analysts said Fujii wouldn’t necessarily be missed by investors after he indicated he supported a stronger yen, only to later say that the government is prepared to step into the currency market to stem its gains. As finance minister, Fujii is responsible for overseeing Japan’s exchange-rate policy.

The yen climbed to a 14-year high of 84.83 per dollar on Nov. 27, hurting exporters by eroding their profits earned abroad. The currency has since retreated about 8 percent.

“Investor estimation of Fujii’s steadiness isn’t that high because of his currency gaffes,” Hirokata Kusaba, a senior economist at Mizuho Research Institute in Tokyo. “The budget has been already drafted and the government bill will pass because the ruling coalition controls both chambers,” meaning the impact of his departure “will be limited.”

Kusaba said Sengoku or Noda would be the most likely candidates to replace Fujii.

Kiuchi at Nomura said the yen may weaken no matter who succeeds Fujii because he “is labeled as tolerating a stronger yen and opposing intervention.”

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Wall Street is in for a quiet three and a half days of trading this week with many market participants on vacation and traders mostly focused on defending this year’s gains.

"There are a lot of lights out in investment management offices," said Lawrence Creatura, a portfolio manager with Federated Clover Investment Advisors. "It’s likely to be a quiet week."

The stock exchange will close early Thursday and will remain dark Friday for the Christmas Holiday. Many traders will take the entire week off.

And with the major indexes on track to post double-digit percentage gains for the year, those money managers who are on the clock next week will probably not be making any aggressive plays.

"Investors will have a very limited focus," said Doug Roberts, chief investment strategist for Channel Capital Research. "For the most part, people are trying to protect gains."

Still, traders will have to contend with a number of economic reports this week, including the final revision to third-quarter gross domestic product, data on personal income and spending, as well as weekly jobless claims numbers.

What’s more, the lack of participation means trading volumes could be low, which tends to amplify small moves and cause market volatility.

Meanwhile, investors continue to focus on the economic outlook for next year.

The Federal Reserve said last week that economic conditions continue to pick up, even as the central bank held interest rates at historic lows. It also noted that conditions in the financial markets have improved, and that it will allow most of its asset purchase programs, launched during the height of the financial crisis, to wind down on schedule.

"The consensus is for stepwise improvement in the economy in 2010," Creatura said. "Any deviation from that script will have pronounced effect on the market."

The market may also look to the dollar for direction. The greenback regained ground against the euro last week as concerns about the economic health of some major European economies weighed on the shared currency.

Greece’s credit rating was downgraded by Standard & Poors last week, and investors will be on the lookout for red flags from other euro zone economies.

"If we see further talk that S&P and Moody’s are going to look closer at Spain, another major economy, stocks here could take a hit," said Charlie Smith, an analyst at Fort Pitt Capital Group.

On the docket

Monday: Nothing scheduled

Tuesday: The Commerce Department will release its final revision of third-quarter Gross Domestic Product before the opening bell.

Economists surveyed by Briefing.com expect GDP, the broadest measure of economic activity, to have risen at an annual rate of 2.7% in the three months ending in September.

While that would be below the 3.5% growth rate the government projected in October, it still marks a substantial improvement over the previous four quarters, in which economic activity shrank.

Shortly after the market opens, the National Association of Realtors will release a report on existing home sales in November.

Wednesday: Government figures on personal income and spending in November come out in the morning.

Economists forecast a 0.5% increase in personal incomes, while spending is expected to be unchanged from the month before.

Reports on consumer confidence and new home sales are due out shortly after the opening bell.

The weekly crude oil inventories report is also due in the morning.

Thursday: A report on durable goods orders comes out before the start of trading.

Economists believe new orders for long-lasting manufactured goods rose 0.4% in November after a decline of 0.6% the month before. Excluding transportation, durable goods orders are expected to rise 1.0%.

The government’s weekly jobless claims report is also due in the morning, but no estimates were available yet.

The stock exchange will close at 1 p.m. ET and will remain dark Friday.  

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Bernard Madoff’s investors aren’t the only ones suffering through the aftershocks of his epic fraud. A cloud of suspicion hangs over the financial planning industry, forcing even longtime veterans adjust their business practices and reassure skittish clients.

"In the wake of that scandal, people don’t know whom to trust," says Michael Garry, who runs his own wealth management firm in Newtown, Penn.

For Roger Balser, managing partner of Balser Wealth Management in Avon, Ohio, the Madoff mess unleashed an avalanche of new paperwork demands.

Soon after the scandal broke, Balser met with representatives from a firm that had referred customers to him in the past. The accountants — whom Balser had known for some time — grilled him for 90 minutes about how their clients’ assets were protected from him.

"I explained that the only things I can do are execute trades and take management fees from their accounts after notifying the custodian in writing," Balser says. "The CPAs were adamant that we cease this practice of having access to the client account to withdraw management fees."

Now Balser’s firm bills the clients every quarter and waits for a mailed check to pay the fees. It’s been a big hassle for the small company, sucking up extra administrative hours and expenses.

The Madoff fallout is worst near the fraud’s epicenter. "We serve a number of higher-end North Shore clientele and have felt the ripple effects of Bernie pooping in our sandbox," says Benjamin Chafitz, a partner with The Signature Group of Companies in Garden City, N.Y. He’s seen clients affected by Madoff losses move out of homes, cancel insurance policies and change their lifestyle.

"On the investment end, we are being quizzed like never before about who the custodians are and where the assets are invested," Chafitz says. "Across the board, clients are rethinking their relationship with their advisers. It is no longer adequate to be friends; you need to be able to demonstrate that you have the ideas, resources and staff to achieve your clients’ goals."

New skepticism

Spooked by Madoff’s crimes, some clients are seeking safety in brand names.

Garry met recently with a prospect referred by a longtime customer of his. After a phone conversation, they followed up with a two-hour consultation that Garry felt went very well. But the potential client chose instead to go with a financial planner from Morgan Stanley (MS, Fortune 500). Her reason: An accountant friend told her to avoid small firms in the wake of the Madoff scandal.

"Of course, I don’t think that is necessarily good advice because Madoff was hardly a tiny enterprise, and he was able to commit the fraud because he was an investment adviser and broker, just like the other large brokerage firms," Garry says. "The problem for me and others in my position is that if people aren’t sure who to trust, they tend to go with names that they have heard of, like the Merrill Lynches and Smith Barneys."

Customers are more skeptical than ever before, says Ron Reuven, CEO of Reuven Enterprises in New York City.

"It seems like just a year ago, these same people did not even know some of these loopholes existed, and now they question everything that comes to mind," he says.

When pitching for new business, he runs into a Catch-22: Clients don’t want to do business with an investment manager who isn’t the very best, and they’ll shop around to find the most successful advisers. But if you present a plan for generating above-average returns, clients are dubious — is it another Madoff-like scheme?

The blame for this new wariness doesn’t lie only with Madoff, Balser says. If industry regulators did a better job at reigning in bad operators, customers wouldn’t need to be so guarded.

"The SEC and the government have not done a good enough job when the warning signs were there," he says.

Damage control

It’s not all doom and gloom, says Paul Tran, president of Focal Point Financial & Insurance Services in Monrovia, Calif. He thinks the combination of the Madoff debacle and the economic wipeout have created new opportunities for the best money managers.

When news of Madoff’s misdeeds broke, Tran leapt into action. His staff phoned clients to explain to them why Madoff’s investors fell and why they weren’t going to suffer the same fate. They also took the opportunity for a check-in on how customers were weathering the recession.

"That part is crucial, because people are talking about their account balances and the economy more than anything nowadays, and for people to hear that their financial adviser took measures to insulate them from fraud and do the right thing — expect referral calls," Tran says. "Even though account balances may have gone down with the economic downturn, bad news is almost always better than uncertain news. It’s all about communication."

Joseph Sarappo, owner of Retirement Planning Specialists in Philadelphia, sees that as the silver lining in this year’s streak of financial frauds.

"With Madoff and other pyramid schemes in the news, there was an overall a feeling of unease among some investors, especially those at or close to retirement age," he says. "As a result, most wealth managers will tell you that they’ve taken to more consistent communication with their clients."

In the long run, this year’s disruptive effects could pay off for independent managers, say Seth Asher Rabinowitz, senior vice president of investor relations for Silicon Associates in Beverly Hill, Calif. His take: "It makes long-established wealth managers’ clients question their relationships, and consider giving new guys a chance." 

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SupportSpace Ltd., which runs a web-based network of independent computer support experts, has raised $10 million in funding.

Founded in 2006 and based in South San Francisco, SupportSpace had previously raised a $14.25 million Series A round of venture capital. The latest round was led by Emergence Capital Partners, with participation from previous investors BRM Group and Gemini Israel.

Kevin Spain, principal at Emergence Capital, has joined SupportSpace's board of directors.

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Italian business confidence rose to the highest in more than a year in November on expectations that exports will help the recovery gather pace after the worst recession in six decades.

The Isae Institute’s manufacturing sentiment index climbed to 78.8 from a revised 77.4 in October, the Rome-based research center Isae said today. The reading compared with a median forecast of 78 in a Bloomberg News survey of 16 economists.

“The data confirms a positive trend for the output, a further sign that the worst is over,” said Silvio Peruzzo, an economist at Royal Bank of Scotland in London. “However, manufacturers need to rely on exports while domestic demand remains weak due to the growing unemployment.”

Italy emerged from the recession in the third quarter as the global recovery helped exports increase 6.6 percent in September from the previous month. The country posted a trade surplus in October compared with a deficit from a year earlier, national statistics institute Istat said today. After previously forecasting 0.7 percent growth for 2010, Finance Minister Giulio Tremonti said on Nov. 24 the economy may expand by “more than 1 percent” next year.

“Greater confidence is due to an improved outlook for orders, especially from abroad, and rising expectations on short-term production,” Isae said in today’s report. “Inventories remain below levels considered normal.”

Stimulus Spending

Government stimulus measures across Europe helped auto sales recover from a global decline caused by the recession. In Italy, they benefited the country’s biggest manufacturer, Fiat SpA. Sales of the Turin-based automaker rose 15 percent for the month of October.

Incentives to trade in old cars for newer models are due to be phased out and unemployment is still rising, which may weigh on consumer spending. Italy’s jobless rate climbed in the second quarter to a seasonally adjusted 7.4 percent, and will rise to 8.5 percent next year and 8.7 percent in 2011, the Organization for Economic Cooperation and Development said on Nov. 19.

Consumer confidence unexpectedly rose in November as optimism on economic growth outweighed concerns on the outlook for the labor market, Isae said yesterday. Manufacturers were more pessimistic about the job market than consumers, today’s report showed. A sub-index measuring expectations on employment fell to minus 17 in November from minus 16.

Isae conducted its latest survey of 4,000 companies between Nov. 2 and Nov. 18. The research center revised its October reading from an initial 77.1.

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