UPDATE 1-Russia ready in principle to buy Spanish debt

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* Euro zone needs to devise debt strategy first

* Russia the world's third-largest reserve holder

MOSCOW, Oct 10 (Reuters) - Russia is ready in principle to buy Spanish government debt once the euro zone's member states have put in place a strategy to overcome the currency bloc's debt crisis, Arkady Dvorkovich, economic adviser to President Dmitry Medvedev, said on Monday.

Russia is the world's third-largest reserves holder and has over two-fifths of its $517 billion in foreign reserves invested in euro-zone sovereign debt.

"When the European countries announce a concrete and clear strategy to exit the crisis, and if in the framework of this strategy support from Russia and other BRIC countries is necessary, then we would provide such support," Dvorkovich said in response to a question.

Dvorkovich, attending a conference in Moscow with Spanish Economy Minister Elena Salgado, said Salgado had met Russia's former Finance Minister Alexei Kudrin and Foreign Minister Sergei Lavrov.

Salgado left the event without taking questions from reporters.

The BRIC nations -- Brazil, Russia, India and China -- are a loose coalition of large emerging economies that together hold the bulk of the world's foreign exchange reserves.

Of Russia's total reserves, $109 billion are held in two sovereign wealth funds whose asset allocation is set by the finance ministry. The central bank decides how the remainder is invested.

Moscow has generally taken a sceptical approach towards offering bilateral financial support to euro-zone countries, saying it would prefer to invest in bonds issued by a common bailout fund, the European Financial Stability Facility (EFSF).

Officials have also said that they would prefer to support any debt initiative that is put together under the auspices of the Group of 20 nations, which is due to hold a summit in Cannes, France, next month.

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WRAPUP 4-Polish PM wins new term, markets buoyant

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* Tusk's Civic Platform wins new four-year term

* Tusk to seek new coalition with Peasants' Party

* Marklets, analysts welcome outcome as sign of stability

By Gareth Jones

WARSAW, Oct 10 (Reuters) - Centre-right leader Donald Tusk has become the first Polish prime minister since the fall of communism in 1989 to win a second consecutive term following his Civic Platform's election victory, nearly complete results showed on Monday.

With 93 percent of the votes counted, Tusk's pro-business party had 39 percent of the votes in Sunday's election. Its main rival, Jaroslaw Kaczynski's nationalist-conservative Law and Justice party, trailed on 30 percent.

On that projection, Civic Platform would secure 206 seats in the 460-member lower chamber, or Sejm.

Its ally, the rural-based Peasants' Party, was on track to win 30 seats, giving Tusk enough support to rebuild the same coalition that has steered Poland smoothly through the economic turmoil of the past four years.

Tusk is also expected to try to lure moderate members of the post-communist Democratic Left Alliance (SLD) into a new coalition. The SLD won only about 8.2 percent of the vote after losing many younger voters to a new libertarian grouping.

Palikot's Movement, founded by wealthy businessman and former PO lawmaker Janusz Palikot, won 9.9 percent. Palikot's attacks on the powerful Roman Catholic Church and championing of causes such as gay rights and legalisation of soft drugs have struck a chord among young urban voters.

Lech Walesa, Poland's former president and leader of the Solidarity trade union in communist times, said Palikot had successfully tapped into issues neglected by other parties.

"Palikot had a clearer message... and people want a simpler, clear message," Walesa told TVN24 television.

Financial markets welcomed Tusk's victory as a guarantee of political and economic stability in the European Union's largest eastern member state at a time of deepening crisis in the euro zone.

"From the point of view of the markets, this is very good news. Investors worried that we could see a coalition made up of three parties," said Ernest Pytlarczyk, chief economist at BRE Bank.

The Polish zloty was 1 percent higher against the euro in early Monday trade, bonds also firmed and the Warsaw bourse's main index rose 0.3 percent while other regional stock markets fell.

Polish President Bronislaw Komorowski, a former Civic Platform lawmaker, is expected to ask Tusk to form a government but has said he must first wait for the final election results, expected on Tuesday evening.

"I hope that it will be possible to reduce the time necessary for creating the government ... to a minimum," Komorowski said on Sunday evening.

The main surprise of the election was the rise of a new liberal grouping, Palikot's Movement, which the exit poll showed winning 9.9 percent, much of it at the expense of the former communists.

Janusz Palikot, its founder, is a wealthy businessman and former PO lawmaker whose attacks on the powerful Roman Catholic Church and championing of causes such as gay rights and legalisation of soft drugs struck a chord among young voters.

CONTINUITY

Political analysts said Sunday's election result showed Polish democracy had come of age.

"The ruling party and coalition for the first time in Poland's post-communist history has been re-elected and that shows the consolidation of democracy in Poland," said Jacek Raciborski, a political scientist at Warsaw University.

"Only the low turnout is worrying," he added.

About one in two eligible voters took part in the election, in which a return to power by Kaczynski would have threatened relations with Germany and Russia and worried investors.

Tusk's party also won a clear victory in the upper chamber, or Senate, where it was projected to win 62 of the 100 seats.

The outgoing coalition has presided over four years of strong economic growth, steering Poland smoothly through the 2008-09 global financial crisis without dipping into recession.

Its victory ends a string of defeats for ruling parties in elections in EU member states this year, including in Portugal, Latvia, Denmark and Ireland.

Civic Platform has pledged more cautious reforms aimed at reining in the public debt and budget deficit, expected to reach 53.8 percent and 5.6 percent respectively this year.

It also wants to continue a privatisation programme set to net 15 billion zlotys ($4 billion) for state coffers in 2011 and to pursue closer ties with Poland's EU partners.

The result is a personal triumph for Tusk, 54, a pragmatic liberal conservative from near Gdansk on Poland's Baltic coast, who was involved in the Solidarity movement that helped end decades of communist rule.

Tusk, whose country holds the EU presidency until the end of this year, favours closer integration with the rest of the bloc and says joining the euro remains a strategic goal for Poland despite the debt crisis in the euro zone.

He has good personal ties with German Chancellor Angela Merkel and has maintained a cautious rapprochement with Russia, despite strains over a plane crash there last year that killed then-President Lech Kaczynski, Jaroslaw Kaczynski's twin.

Jaroslaw Kaczynski's calls for a halt to privatisation, for higher taxes on the wealthy and for a more combative stance in dealings with the EU had unsettled investors.

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UPDATE 1-China's Citic Securities dips after $1.7bln HK debut

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(Adds details, background)

By Elzio Barreto

HONG KONG Oct 6 (Reuters) - Citic Securities Co Ltd, China's largest listed brokerage, fell as much as 4.5 percent before recovering on its Hong Kong stock market debut on Thursday, after raising a less-than-expected $1.7 billion in its first listing outside the mainland.

Citic Securities is among the few companies to successfully launch a stock offering in Hong Kong during the past months, with a long list of deals pulled or postponed due to the volatile markets.

In early morning trade, Citic Securities shares were trading at HK$12.96 compared with the offer price of HK$13.30 each and recovering from the day's low of HK$12.70. The company sold shares at the bottom of a revised price range of HK$13.30-$15.20 a share last week.

While the shares held close to the offer price, they traded far below the broader market. The benchmark Hong Kong stock exchange index was up 4.4 percent in early trade.

Citic Securities , already listed on Shanghai's stock exchange, is part of China's state-backed conglomerate Citic Group which was formed in 1979 as China's first financial group.

The Hong Kong listing comes at a time when global stock markets have plunged on concerns about European debt crisis, among other factors. The benchmark Hang Seng index tumbled to a 2-1/2 year low on Tuesday, falling eight of the past nine sessions, during which the index lost about 15 percent.

Citic Securities is the biggest Hong Kong listing since the $2.5 billion initial public offering by luxury goods maker Prada in June.

The offering is the first of nearly $35 billion in share sales in Hong Kong and China still planned in the coming months by financial companies, including Haitong Securities, New China Life and China Guangfa Bank.

Investors have been on high alert and remain wary of equity markets because of lingering concerns over Europe's debt troubles and fears of a slowdown in the U.S. and Chinese economies.

Just last month, some $4.5 billion worth of deals were pulled in Hong Kong including Sany Heavy Industry and rival XCMG Construction Machinery Co Ltd , underscoring tepid investor appetite for IPOs

Apart from Citic Securities, only five other companies including shoemaker Hongguo International Holding and tea company Tenfu Holdings sold stock in Hong Kong the past two weeks since offerings resumed after a two-month hiatus.

The five offerings raised a total of $510 million. The slowdown in share sales the past months in Hong Kong, Singapore and other main markets in the region contributed to a 49 percent slump in Asia Pacific equity capital markets in the third quarter from a year earlier.

Securities companies in China are forecast to post annual profit growth of nearly 20 percent between 2011 and 2013, buoyed by an increase in capital markets activity and new businesses such as margin financing and private equity investments, BOC International estimated.

Citic Securities was the sole global coordinator of the offer, with a group of banks including BOC International, CCB International, Bank of America Merrill Lynch and Credit Agricole's CLSA unit helping to underwrite the deal. (Reporting by Elzio Barreto; Editing by Denny Thomas and Michael Flaherty)

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Dexia accepts rescue offer after marathon meeting

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A boy walks past the logo of Belgian-French financial services group Dexia in Brussels in this October 9, 2011 file photo. Belgium will buy the Belgian banking business of Dexia for 4 billion euros ($5.4 billion) and provide the bulk of guarantees to cover leftover assets of the parent group, the Belgian government said on October 10, 2011.

Credit: Reuters/Francois Lenoir/Files

By Philip Blenkinsop and Robert-Jan Bartunek

BRUSSELS | Mon Oct 10, 2011 2:11am EDT

BRUSSELS (Reuters) - Franco-Belgian bank Dexia agreed early on Monday to the nationalization of its Belgian banking division and secured state guarantees in a rescue that could pressure other euro zone governments to strengthen their banking sectors.

Belgium will pay 4 billion euros ($5.4 billion) to buy Dexia Bank Belgium, the largely retail Belgian division, which has 6,000 staff and deposits totaling 80 billion euros from 4 million customers.

Dexia also secured state guarantees of up to 90 billion euros to secure borrowing over the next 10 years. Belgium would provide 60.5 percent of these guarantees, France 36.5 percent and Luxembourg 3 percent.

Dexia's announcement came after a board meeting that lasted some 14 hours from mid-afternoon on Sunday after France, Belgium and Luxembourg had agreed a rescue plan.

The extraordinary meetings at the end of the weekend had echoes of the dismantlement of financial group Fortis in October 2008 by the Netherlands, Belgium and BNP Paribas. Then, shareholders protested at the initial terms offered, and only agreed on improved terms six months later.

The governments rushed to support Dexia after it became the first bank to fall victim to the two-year-old euro zone debt crisis, as a credit crunch denied it access to wholesale funds and sent its shares down 42 percent last week.

"We found an agreement on the fair division of the costs related to the management of the 'rest bank'," Belgian Prime Minister Yves Leterme told a news conference in the early hours of Monday.

The likely burden of bailing out Dexia led ratings agency Moody's to warn Belgium late on Friday that its Aa1 government bond ratings may fall.

The country had a debt-to-GDP ratio of 96.2 percent last year, lower only than Greece and Italy among euro zone members and on a par with bailout recipient Ireland.

Finance Minister Didier Reynders said that the deal should not push Belgium's debt-to-GDP ratio above 100 percent.

Dexia, which used short-term funding to finance long-term lending, found credit drying up as the euro zone debt crisis worsened. The problem was exacerbated by the bank's heavy exposure to Greece.

Dexia has global credit risk exposure of $700 billion - more than twice Greece's GDP - and its rescue has stoked investors' anxieties about the strength of European banks in general.

The governments' rescue package came as the leaders of France and Germany agreed that European banks needed to be recapitalized, but papered over differences on how that would happen.

Paris wants to tap the euro zone's 440 billion euro ($594 billion) European Financial Stability Facility (EFSF) to recapitalize French banks, while Berlin is insisting the fund should be used as a last resort.

There were fresh reports over the weekend that big French banks BNP Paribas and Societe Generale might agree to capital injections as part of a Europe-wide plan to boost lenders' financial strength. However, both banks deny such plans.

Dexia's board had also instructed the company's chief executive to seek backing from French state bank Caisse des Depots. A consortium of CDC and La Banque Postale, the French post office's banking arm, would ensure the financing of public entities in France.

It was not clear what would be the fate of healthy businesses, such as Denizbank in Turkey, its asset management operation and its funds custody joint venture with Royal Bank of Canada.

Its Luxembourg division is set to be sold.

Otherwise, Dexia will be left with a portfolio of bonds in run-off, which totaled 95.3 billion euros at the end of June and including 7.7 billion euros of junk class and some 7.4 billion euros of mortgage-backed securities.

Dexia's shares have been suspended since Thursday afternoon. Belgium's financial markets watchdog said trading would resume on Monday after the bank's news conference and analyst call.

Chairman Jean-Luc Dehaene and Chief Executive Pierre Mariani were scheduled to host a news conference at 0900 Central European Time (0700 GMT). ($1 = 0.741 Euros)

(Reporting By Philip Blenkinsop. Editing by Sebastian Moffett and Ramya Venugopal)

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Shrewd hedge funds profit in turbulent September

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By Laurence Fletcher

LONDON | Fri Oct 7, 2011 5:30am EDT

LONDON (Reuters) - A select band of shrewd hedge fund managers have avoided September's market pitfalls to post healthy profits, even as Europe's deepening debt crisis leaves much of the $2 trillion industry nursing painful losses.

Bearish macro bets such as owning U.S. and European government bonds, as well as being short equities, commodities and the euro, have helped funds navigate a crisis that has seen fears of a global recession and a banking crisis grow.

Brevan Howard's $25 billion Master fund, one of the world's biggest hedge funds, gained 1.5 percent last month to September 23, said two sources who had seen data on the fund's performance. This takes profits this year to 12.3 percent.

And GLG, part of Man Group (EMG.L), saw its $2 billion Atlas Macro fund, which is managed by Driss Ben-Brahim and Jamil Baz, gain an estimated 6 percent in September, said a person close to the company.

In contrast, the average hedge fund lost 3 percent last month, according to Hedge Fund Research's HFRX index, taking year-to-date losses to 8.4 percent. The third quarter was the worst for three years.

Equity funds were hard hit, particularly those focusing on stocks' fundamental value, with MSCI's World index of stocks .MIWO00000PUS falling a further 8.8 percent during the month.

A number of industry insiders have pointed to markets being preoccupied with economic worries, rather than company fundamentals.

"This is not 2008, but perhaps one similarity with 2008 is that market's focus is on macro, and no-one is really focusing on the micro," said Frank Frecentese, global head of hedge fund investments at Citi Private Bank.

EQUITY, CREDIT FUNDS

Global macro funds -- made famous by the likes of George Soros -- have tended to be more bearish than equity managers and have benefited from falling bond yields in countries such as the United States, Germany and the UK.

On Thursday the Bank of England announced a further 75 billion pound stimulus, pushing yields on longer-dated debt to record lows.

Stenham Asset Management said its Trading fund, which invests in macro hedge funds, gained an estimated 0.8 percent in September, taking third-quarter gains to 3.4 percent.

Meanwhile, a smattering of equity managers were able to profit, even as markets fell.

Marshall Wace's $1 billion Eureka fund, managed by co-founder Paul Marshall, gained 1.5 percent in September, taking gains this year to 5.8 percent, said a source familiar with the matter.

And its Global Opportunities fund, which is run by Fehim Sever and which focuses on emerging markets, rose 6.5 percent last month, lifting this year's profits to 23.8 percent.

Among credit funds, CQS, one of Europe's biggest hedge fund managers, saw its Credit Long-Short fund, which is managed by Simon Finch, gain 1.7 percent in September, taking year-to-date gains to 7.9 percent.

This was helped by active trading of both long and short positions, according to a source familiar with the matter.

And while GLG's Emerging Markets fund has suffered this year, its Emerging Credit Opportunities portfolio gained 1 percent last month.

(Reporting by Laurence Fletcher. Editing by Chris Vellacott and Will Waterman)

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China's Huijin to buy shares of big state banks -Xinhua

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BEIJING | Mon Oct 10, 2011 4:04am EDT

The share purchases will start on Monday, it said.

The state banks are Industrial and Commercial Bank of China < 1398.HK > < 601398.SS >, Bank of China < 3988.HK > < 601988.SS >, China Construction Bank < 0939.HK > < 601939.SS > and Agricultural Bank of China < 1288.HK > < 601288.SS >. (Reporting by Aillen Wang and Kevin Yao; Editing by Ken Wills)

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Yang eyes Yahoo buyout with private equity

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1 of 3. A Yahoo! signs sits out front of their headquarters in Sunnyvale, California, February 1, 2008.

Credit: Reuters/Kimberly White

By Peter Lauria, Alexei Oreskovic and Nadia Damouni

NEW YORK/SAN FRANCISCO | Sun Oct 9, 2011 7:58pm EDT

NEW YORK/SAN FRANCISCO (Reuters) - For the last few years, a widely circulated joke about Jerry Yang was that he had the best tan in Silicon Valley from all the time he spent on Stanford University's golf course.

But the jests stopped about six months ago, when the Yahoo Inc co-founder and former CEO put away his golf clubs and began showing up on a daily basis at the Internet company's headquarters in Sunnyvale, California, according to a high-ranking Yahoo executive.

Now, Yang is interested in a deal with private equity firms that would take the $20 billion company off public markets, according to people familiar with the situation.

Such a deal would involve rolling over Yang's stake in Yahoo, which stood at 3.63 percent as of April 2. Yahoo's other co-founder, David Filo, would likely follow Yang's lead and roll over his stake, said other sources close to Yahoo. Filo held 5.90 percent of Yahoo's shares as of May 11.

Shortly after firing Carol Bartz as CEO in September, Yahoo and its longtime advisers at Allen & Co and Goldman Sachs began working on a strategic review, which could include a sale of the Internet pioneer, after receiving unsolicited expressions of interest.

Jack Ma, CEO of Chinese e-commerce giant Alibaba, said last month that he would be "very interested" in buying Yahoo, a deal that could help the former English school teacher expand into the U.S. Alibaba is being advised by UBS.

Microsoft Corp is also considering bidding for Yahoo, as is Silver Lake Partners, Providence Equity Partners and Hellman & Friedman, Reuters reported last week.

Another private firm that has expressed interest in Yahoo is Bain Capital, a source said. Bain has invested heavily in several media companies including Clear Channel Communications and The Weather Channel in recent years. A Bain spokesman declined to comment.

Yahoo declined to detail Yang's current role other than to say, "The entire Board, including Jerry, is fully aligned and unanimous in support of the comprehensive scope of the ongoing strategic review. As always, Jerry's singular focus remains to serve the best interests of Yahoo -- its shareholders, employees, users and advertisers."

THE GOING PRIVATE PLAY

Three years ago, Microsoft offered $33 per share, or $47.5 billion, to acquire Yahoo. Yang and the board turned down that bid, to the regret of many shareholders. Yahoo's shares closed at $15.47 on Friday.

Now Yang, who turns 43 in November, finds himself in essentially the same spot -- trying to resuscitate an organization where a lack of operational vision and clear leadership has made it susceptible to a takeover.

Yahoo's share of the U.S. Internet search market stood at 16 percent in August, compared with 19 percent two years ago, according to ComScore, despite a deal to outsource search technology to Microsoft. In contrast, Google Inc's search share has been steady at 65 percent, while Microsoft's share rose to 15 percent from 9 percent two years ago.

Yahoo's U.S. display ad impressions fell to 10.2 percent in June, and time spent by users on its site increased just 1.6 percent for the 12 months ended July 2011, according to ComScore. By comparison, Facebook's ad impressions swelled to 32.4 percent in June 2011 and time spent by users on its site jumped 58 percent for the 12 months ended July 2011.

Yahoo's advisors are expected to send financial information this week to interested parties, said a person familiar with the matter. Talks so far have been informal and have not firmed up on terms that would compel Yahoo to enter into direct negotiations, said another source.

There are several reasons why Yang might want to take Yahoo private. For starters, Yahoo is punished by Wall Street for not being a growth company and its low stock price prevents shares from being used as currency for acquisitions.

A buyer could sell off Yahoo's international assets, which include a partnership with Softbank in Yahoo Japan as well as about 40 percent stake in Alibaba.

The buyer could then use the cash -- estimated to be upward of $12 billion -- to pay off debt. That would pare down Yahoo to its U.S. operations, which has deteriorated to the point that they are being valued at just $5 billion and $6 billion, according to two sources close to the situation.

YANG'S WANING INFLUENCE

Whether Yang will succeed in taking Yahoo private remains to be seen -- it depends on the terms he manages to negotiate, as well as what other offers are on the table.

Yang still exerts influence over the board, but he has less clout with Yahoo management and staff now than he did during the talks with Microsoft, according to current and former employees.

Executives most loyal to Yang have matriculated out of the company over the years, replaced by a younger generation. Moreover, some detractors hold Yang responsible for refusing Microsoft in 2008, saying his decision was influenced by his personal attachment to Yahoo, rather than financial considerations.

"The Microsoft decision really split the company, with many feeling that Jerry's decision was bad for them personally because he left a lot of money on the table," said a former executive who worked at Yahoo at the time of the offer.

Nevertheless, Yang still retains pockets of support inside the company. His supporters say he has a deep concern for the direction and culture of the business he founded with Filo in 1995. They praised Yang for stepping in again to try to lift Yahoo's fortunes at a difficult juncture, just as he did in 2007 when he assumed the CEO role from Terry Semel.

Yang also has a deep network of contacts in the industry and a reputation for actively working behind the scenes.

"He'd be in the office, the door would be closed, he'd be working the phones, but you wouldn't know who he'd be working them with," said another former Yahoo executive who worked closely with Yang.

The Business Insider blog reported in September that Yang was trying to buy Yahoo.

Yang, whose quiet speech and calm demeanor belie a fiercely competitive streak, has a better chance of remaining involved with Yahoo in a management-led buyout than an outright sale. But private equity firms also like to install their own management at companies they acquire.

In pushing a go-private agenda, Yang appears to be hoping that his knowledge of Yahoo will be enough to convince a buyer to allow him to stay on and try to restore the company to its former glory, away from the harsh eyes of Wall Street.

(Reporting by Peter Lauria and Nadia Damouni in New York and Alexei Oreskovic in San Francisco; Additional reporting by Paritosh Bansal and Soyoung Kim in New York; Editing by Tiffany Wu and Richard Chang)

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