March 7 (Bloomberg) -- Chinese Commerce Minister Chen Deming is leading representatives from Bank of China Ltd., China Shipping (Group) Co. and more than 20 of the country’s companies to Europe to expand business amid worldwide recession.
The group, including China National Coal Group, CNFC Overseas Fishery Co., Suzhou New District High-Tech Industrial Co. and representatives from Chinese automakers will visit Germany, Switzerland, Spain and the U.K., the ministry said on its Web site today.
The companies will follow up on issues and deals discussed during a similar trip to Europe last month, the ministry said. The global financial crisis is spurring the Chinese government to seek business opportunities and cooperation in Europe and to signal China’s commitment to an open market, the report said.
The cooperation will focus on the auto industry, machinery and electronics, light industry, food, textile, garment making, the chemical and pharmaceutical industry, and environmental protection, the report said.
Saturday, March 7, 2009
Retail Sales Probably Fell in February: U.S. Economy Preview
March 8 (Bloomberg) -- Sales at U.S. retailers probably fell in February for the seventh time in eight months as soaring unemployment battered consumers, economists said before a government report this week.
Purchases dropped 0.5 percent, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due on March 12. Another report may show the trade gap shrank in January as Americans bought fewer goods made abroad.
Consumers are shopping at discounters like Wal-Mart Stores Inc. to make ends meet as home values plunge and the jobless rate climbs, forsaking purchases of expensive items like automobiles. President Barack Obama, trying to maintain support for his $787 billion stimulus plan, last week said the deteriorating economy demands “bold action and big ideas.”
“The headwinds are coming from everywhere,” said Jonathan Basile, an economist at Credit Suisse Holdings in New York. “Persistent job losses and reports of pay cuts have become embedded in consumer expectations and they think that incomes are going to shrink.”
A Labor Department report last week showed employers eliminated 651,000 jobs in February and the unemployment rate jumped to 8.1 percent, the highest level since December 1983. Job losses have now exceeded 600,000 for three straight months, the first time that’s happened since records began in 1939.
While Obama’s stimulus plan aims to create or save 3.5 million jobs, the nation has now already lost 4.4 million since the recession began in December 2007.
Wal-Mart Gains
Lower home values and stricter lending rules have made consumers reluctant to spend beyond necessities. Wal-Mart, the world’s largest retailer, last week said sales at stores open at least a year rose 5.1 percent in February as cash-strapped shoppers sought cheaper gasoline and groceries.
“It’s almost like a significant percentage of consumers realize that they might have been living beyond their real means,” Eduardo Castro-Wright, Bentonville, Arkansas-based Wal- Mart’s head of U.S. stores, said in a Feb. 26 interview.
Others didn’t fare as well. Retailers from Macy’s Inc., the second-biggest U.S. department-store company, to Gap Inc., the largest U.S. apparel chain, and luxury seller Saks Inc. reported declines.
Retailers’ March same-store sales may drop as much as 1 percent, according to Mike Niemira, chief economist at the New York-based International Council of Shopping Centers.
Fewer Autos
Commerce’s report may also show that excluding automobiles, sales declined 0.1 percent last month, the survey showed. Total sales rose 1 percent in January.
Auto dealers are struggling. Sales in February fell to the lowest level since 1981, industry data showed last week. General Motors Corp., surviving with the help of government loans, said sales plunged 53 percent, while Ford Motor Co. had a 48 percent decline.
“This is still a deepening recession and a deepening credit crunch,” Treasury Secretary Timothy Geithner said at a Senate hearing last week.
The ailing economy is weighing on Americans’ confidence. A March 13 report by Reuters/University of Michigan may show its consumer sentiment index fell this month to the lowest level since 1980, according to the survey median.
As demand cools, imports also are falling. The trade deficit probably narrowed in January to $38 billion, the smallest in more than six years, the survey showed. Exports also will keep sliding in the face of economic slumps from Europe to Japan. Commerce will report the figures on March 13.
The same day, a Labor report may show the cost of imported goods fell in February for the seventh consecutive month as waning sales eroded companies’ pricing power, economists said.
Purchases dropped 0.5 percent, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due on March 12. Another report may show the trade gap shrank in January as Americans bought fewer goods made abroad.
Consumers are shopping at discounters like Wal-Mart Stores Inc. to make ends meet as home values plunge and the jobless rate climbs, forsaking purchases of expensive items like automobiles. President Barack Obama, trying to maintain support for his $787 billion stimulus plan, last week said the deteriorating economy demands “bold action and big ideas.”
“The headwinds are coming from everywhere,” said Jonathan Basile, an economist at Credit Suisse Holdings in New York. “Persistent job losses and reports of pay cuts have become embedded in consumer expectations and they think that incomes are going to shrink.”
A Labor Department report last week showed employers eliminated 651,000 jobs in February and the unemployment rate jumped to 8.1 percent, the highest level since December 1983. Job losses have now exceeded 600,000 for three straight months, the first time that’s happened since records began in 1939.
While Obama’s stimulus plan aims to create or save 3.5 million jobs, the nation has now already lost 4.4 million since the recession began in December 2007.
Wal-Mart Gains
Lower home values and stricter lending rules have made consumers reluctant to spend beyond necessities. Wal-Mart, the world’s largest retailer, last week said sales at stores open at least a year rose 5.1 percent in February as cash-strapped shoppers sought cheaper gasoline and groceries.
“It’s almost like a significant percentage of consumers realize that they might have been living beyond their real means,” Eduardo Castro-Wright, Bentonville, Arkansas-based Wal- Mart’s head of U.S. stores, said in a Feb. 26 interview.
Others didn’t fare as well. Retailers from Macy’s Inc., the second-biggest U.S. department-store company, to Gap Inc., the largest U.S. apparel chain, and luxury seller Saks Inc. reported declines.
Retailers’ March same-store sales may drop as much as 1 percent, according to Mike Niemira, chief economist at the New York-based International Council of Shopping Centers.
Fewer Autos
Commerce’s report may also show that excluding automobiles, sales declined 0.1 percent last month, the survey showed. Total sales rose 1 percent in January.
Auto dealers are struggling. Sales in February fell to the lowest level since 1981, industry data showed last week. General Motors Corp., surviving with the help of government loans, said sales plunged 53 percent, while Ford Motor Co. had a 48 percent decline.
“This is still a deepening recession and a deepening credit crunch,” Treasury Secretary Timothy Geithner said at a Senate hearing last week.
The ailing economy is weighing on Americans’ confidence. A March 13 report by Reuters/University of Michigan may show its consumer sentiment index fell this month to the lowest level since 1980, according to the survey median.
As demand cools, imports also are falling. The trade deficit probably narrowed in January to $38 billion, the smallest in more than six years, the survey showed. Exports also will keep sliding in the face of economic slumps from Europe to Japan. Commerce will report the figures on March 13.
The same day, a Labor report may show the cost of imported goods fell in February for the seventh consecutive month as waning sales eroded companies’ pricing power, economists said.
GM, Opel Hire Lawyers to Advise on Reorganization, Insolvency
March 7 (Bloomberg) -- General Motors Corp. and its German Adam Opel GmbH subsidiary hired three law firms to advise on reorganization and insolvency options, a spokesman for GM Europe said.
Baker & McKenzie and Clifford Chance LLP will advise GM Europe. The Heidelberg, Germany-based law firm Wellensiek has been retained by GM’s Opel unit, the spokesman said, confirming a report in Die Welt newspaper. He declined to be identified.
“For Opel, the primary reason is for advice on reorganizing,” the spokesman said in a telephone interview today. The law firms also were selected for their expertise in German and U.S. insolvency rules, he said.
GM’s top executive in Europe, Carl-Peter Forster, held talks with government officials in Berlin yesterday. The carmaker is offering as much as 50 percent of Opel to outside investors in return for 3.3 billion euros ($4.2 billion) in public assistance. One of the participants in the talks, Economy Minister Karl- Theodor zu Guttenberg, said a government decision on aid was weeks away.
“The draft must be improved and clarified,” Chancellor Angela Merkel said today in her weekly Internet address. “We will help if the benefit for all people concerned is greater than the damage.”
Interior Minister Wolfgang Schaeuble, in an interview with Handelsblatt yesterday, said German insolvency laws are a better option than government assistance for Opel.
U.S. Visit
Guttenberg plans to travel to the U.S. from March 15 to March 18 for talks with GM executives on their plans for Opel. He is also scheduled to meet U.S. Treasury Secretary Timothy Geithner.
GM’s Chief Operating Officer Fritz Henderson said on March 3 that Opel and its Luton, England-based Vauxhall brand may be insolvent in the second quarter unless it receives state aid.
Opel’s closure could threaten as many as 300,000 jobs at Suppliers and dealers, as well as the 55,000 employed across Europe by the Ruesselsheim-based automaker.
Germany, where Opel employs 26,000 people, has the most at stake in a rescue. Politicians are keen to prop up the auto industry, which employs one in eight workers in the country, with national elections looming Sept. 27. Aid talks are also under way with the Spanish and U.K. governments.
Baker & McKenzie and Clifford Chance LLP will advise GM Europe. The Heidelberg, Germany-based law firm Wellensiek has been retained by GM’s Opel unit, the spokesman said, confirming a report in Die Welt newspaper. He declined to be identified.
“For Opel, the primary reason is for advice on reorganizing,” the spokesman said in a telephone interview today. The law firms also were selected for their expertise in German and U.S. insolvency rules, he said.
GM’s top executive in Europe, Carl-Peter Forster, held talks with government officials in Berlin yesterday. The carmaker is offering as much as 50 percent of Opel to outside investors in return for 3.3 billion euros ($4.2 billion) in public assistance. One of the participants in the talks, Economy Minister Karl- Theodor zu Guttenberg, said a government decision on aid was weeks away.
“The draft must be improved and clarified,” Chancellor Angela Merkel said today in her weekly Internet address. “We will help if the benefit for all people concerned is greater than the damage.”
Interior Minister Wolfgang Schaeuble, in an interview with Handelsblatt yesterday, said German insolvency laws are a better option than government assistance for Opel.
U.S. Visit
Guttenberg plans to travel to the U.S. from March 15 to March 18 for talks with GM executives on their plans for Opel. He is also scheduled to meet U.S. Treasury Secretary Timothy Geithner.
GM’s Chief Operating Officer Fritz Henderson said on March 3 that Opel and its Luton, England-based Vauxhall brand may be insolvent in the second quarter unless it receives state aid.
Opel’s closure could threaten as many as 300,000 jobs at Suppliers and dealers, as well as the 55,000 employed across Europe by the Ruesselsheim-based automaker.
Germany, where Opel employs 26,000 people, has the most at stake in a rescue. Politicians are keen to prop up the auto industry, which employs one in eight workers in the country, with national elections looming Sept. 27. Aid talks are also under way with the Spanish and U.K. governments.
Asian Stocks Fall for Fourth Week as Global Recession Deepens
March 7 (Bloomberg) -- Asian stocks fell for a fourth week, led by finance companies and automakers, amid mounting concerns that losses from the financial crisis will increase.
HSBC Holdings Plc, Europe’s largest bank, slumped 24 percent, the most since Oct. 24, after announcing a $17.7 billion stock sale. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, tumbled 12 percent as Citigroup Inc.’s stock fell below $1 for the first time. Honda Motor Co., which makes half of its revenue in North America, sank 10 percent after U.S. auto sales tumbled.
“People haven’t yet understood the full depth of the financial crisis,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion of assets. “Should regulators assess banks’ assets under stricter conditions, quite a few of these companies may be effectively insolvent.”
The MSCI Asia Pacific Index lost 4.3 percent to 71.95 in the past five days. The four-week drop is the longest series of declines since October. The gauge, which has slumped 19 percent this year, on March 3 fell to its lowest level since August 2003.
The Nikkei 225 Stock Average fell 5.2 percent this week, while Australia’s S&P/ASX 200 Index dropped 6 percent. Hong Kong’s Hang Seng index slumped 7 percent.
AMP Ltd., Australia’s biggest pension-plan provider, tumbled 21 percent this week as it sought to raise funds. Manila Electric Co. climbed 40 percent on speculation its major shareholders are vying for control of the utility. Elpida Memory Inc., Japan’s biggest memory-chip maker, dropped 8 percent on concern a possible rescue plan for the company may be delayed.
Government Support
Governments from China to the U.S. and Australia have sought to introduce policies this year to ease the financial crisis and revive growth. Central banks in India and the Philippines cut rates this week.
China’s Shanghai Composite Index gained 5.3 percent as Premier Wen Jiabao said the country’s economic growth target of 8 percent for this year is within reach. He pledged to increase spending to bolster the world’s third-largest economy.
“The global recession demands rapid responses,” said Hiroshi Morikawa, a strategist at Tokyo-based MU Investments Co., which manages about $14 billion. “China is one of the few spots in the world where we can see signs of recovery.”
MSCI’s Asian index slumped by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid falling profits. Earnings estimates for companies in the gauge have been slashed by 48 percent since the beginning of 2009, data compiled by Bloomberg shows.
Fund Raising
HSBC slumped 24 percent to HK$43.50, the lowest since September 1996. The company fell the most in 20 years on March 3 after announcing a $17.7 billion share sale to strengthen its balance sheet after earnings last year tumbled.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, dropped 12 percent to 401 yen as bank of Japan Deputy Governor Hirohide Yamaguchi said the central bank may need to expand its purchases of corporate debt to prevent a credit shortage as the recession deepens.
Shares of Citigroup, once the world’s biggest bank by value, tumbled to as low as 97 cents in the week in New York trading amid concern the shares can recover after more than $37.5 billion in losses and a government rescue.
“Citi below $1 shows we are still far from the exit of this U.S.-originated global financial crisis,” Kiyoshi Ishigane, a senior strategist at Tokyo-based Mitsubishi UFJ Asset Management Co., which oversees about $61 billion., said in an interview with Bloomberg Television.
Bright Spots
Honda Motor dropped 10 percent to 2,150 yen after its U.S. sales fell 38 percent last month. Toyota Motor Corp., the world’s largest automaker, slumped 8.8 percent to 2,900 yen. The company, facing the first loss in 59 years, suffered a record 40 percent drop in sales last month to the U.S., its biggest market.
AMP tumbled 21 percent to A$3.83, the lowest since August 2003. The company said on March 3 it’s seeking to raise A$300 million ($192 million) through a notes offer.
Manila Electric Co. climbed 40 percent 126 pesos. San Miguel Corp. Vice Chairman Ramon Ang said this week his company hasn’t added to the stake it agreed to buy last year. San Miguel said it would purchase 27 percent of the utility in October and took four seats on its board in January.
Elpida Memory Inc., Japan’s biggest memory-chip maker, slumped 8 percent to 544 yen after the Nikkei newspaper said a possible rescue package involving Taiwan’s government may be arranged later than the company projected.
Elpida had hoped to gain a package with Taiwan’s government by the end of March, the Nikkei reported today.
HSBC Holdings Plc, Europe’s largest bank, slumped 24 percent, the most since Oct. 24, after announcing a $17.7 billion stock sale. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, tumbled 12 percent as Citigroup Inc.’s stock fell below $1 for the first time. Honda Motor Co., which makes half of its revenue in North America, sank 10 percent after U.S. auto sales tumbled.
“People haven’t yet understood the full depth of the financial crisis,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion of assets. “Should regulators assess banks’ assets under stricter conditions, quite a few of these companies may be effectively insolvent.”
The MSCI Asia Pacific Index lost 4.3 percent to 71.95 in the past five days. The four-week drop is the longest series of declines since October. The gauge, which has slumped 19 percent this year, on March 3 fell to its lowest level since August 2003.
The Nikkei 225 Stock Average fell 5.2 percent this week, while Australia’s S&P/ASX 200 Index dropped 6 percent. Hong Kong’s Hang Seng index slumped 7 percent.
AMP Ltd., Australia’s biggest pension-plan provider, tumbled 21 percent this week as it sought to raise funds. Manila Electric Co. climbed 40 percent on speculation its major shareholders are vying for control of the utility. Elpida Memory Inc., Japan’s biggest memory-chip maker, dropped 8 percent on concern a possible rescue plan for the company may be delayed.
Government Support
Governments from China to the U.S. and Australia have sought to introduce policies this year to ease the financial crisis and revive growth. Central banks in India and the Philippines cut rates this week.
China’s Shanghai Composite Index gained 5.3 percent as Premier Wen Jiabao said the country’s economic growth target of 8 percent for this year is within reach. He pledged to increase spending to bolster the world’s third-largest economy.
“The global recession demands rapid responses,” said Hiroshi Morikawa, a strategist at Tokyo-based MU Investments Co., which manages about $14 billion. “China is one of the few spots in the world where we can see signs of recovery.”
MSCI’s Asian index slumped by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid falling profits. Earnings estimates for companies in the gauge have been slashed by 48 percent since the beginning of 2009, data compiled by Bloomberg shows.
Fund Raising
HSBC slumped 24 percent to HK$43.50, the lowest since September 1996. The company fell the most in 20 years on March 3 after announcing a $17.7 billion share sale to strengthen its balance sheet after earnings last year tumbled.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, dropped 12 percent to 401 yen as bank of Japan Deputy Governor Hirohide Yamaguchi said the central bank may need to expand its purchases of corporate debt to prevent a credit shortage as the recession deepens.
Shares of Citigroup, once the world’s biggest bank by value, tumbled to as low as 97 cents in the week in New York trading amid concern the shares can recover after more than $37.5 billion in losses and a government rescue.
“Citi below $1 shows we are still far from the exit of this U.S.-originated global financial crisis,” Kiyoshi Ishigane, a senior strategist at Tokyo-based Mitsubishi UFJ Asset Management Co., which oversees about $61 billion., said in an interview with Bloomberg Television.
Bright Spots
Honda Motor dropped 10 percent to 2,150 yen after its U.S. sales fell 38 percent last month. Toyota Motor Corp., the world’s largest automaker, slumped 8.8 percent to 2,900 yen. The company, facing the first loss in 59 years, suffered a record 40 percent drop in sales last month to the U.S., its biggest market.
AMP tumbled 21 percent to A$3.83, the lowest since August 2003. The company said on March 3 it’s seeking to raise A$300 million ($192 million) through a notes offer.
Manila Electric Co. climbed 40 percent 126 pesos. San Miguel Corp. Vice Chairman Ramon Ang said this week his company hasn’t added to the stake it agreed to buy last year. San Miguel said it would purchase 27 percent of the utility in October and took four seats on its board in January.
Elpida Memory Inc., Japan’s biggest memory-chip maker, slumped 8 percent to 544 yen after the Nikkei newspaper said a possible rescue package involving Taiwan’s government may be arranged later than the company projected.
Elpida had hoped to gain a package with Taiwan’s government by the end of March, the Nikkei reported today.
Thursday, March 5, 2009
Japanese Stocks Drop on Yen, Commodity Decline; Honda Slumps
March 6 (Bloomberg) -- Japanese stocks retreated, extending a weekly decline, after a stronger yen darkened the profit outlook for carmakers and commodity prices fell.
Honda Motor Co., which gets more than half its sales from North America, lost 3.8 percent after the Japanese currency rose from a four-month low. Smaller rival Fuji Heavy Industries Ltd. dived 6.2 percent after saying it asked for a government loan. Mizuho Financial Group Inc., Japan’s No. 2 listed bank, sank 3.8 percent after Citigroup Inc.’s stock fell below $1 for the first time. Inpex Corp. lost 4.2 percent after crude fell yesterday.
“The weaker yen provided support for Japanese equities, and that’s dissipated,” Kiyoshi Ishigane, a senior strategist at Tokyo-based Mitsubishi UFJ Asset Management Co., which oversees about $61 billion, said in an interview with Bloomberg Television. “Citi below $1 shows we are still far from the exit of this U.S.-originated global financial crisis.”
The Nikkei 225 Stock Average declined 232.13, or 3.1 percent, to 7,201.36 as of 12:36 p.m. in Tokyo. The broader Topix index fell 17.05, or 2.3 percent, to 724.50. The Nikkei is set for a 4.9 percent drop this week, while the Topix is poised for a 4.3 percent slide. Both headed for the biggest retreat since the period ended Jan. 23.
The Nikkei lost 16 percent this year through yesterday, extending its 42 percent tumble last year, as $1.2 trillion in writedowns and credit losses globally raised doubts about the health of the financial system. A quarter of the gauge’s members have lost more than half their value in the past six months, according to Bloomberg data.
Currency Rises
The yen strengthened versus the dollar to as much as 97.72 yesterday from 99.68 earlier, the weakest since November. The yen appreciated to as much as 122.72 against the euro from 125.09 at the close of stock trading in Tokyo yesterday after European Central Bank President Jean-Claude Trichet said the current benchmark rate wasn’t the lowest the bank could reach.
Honda, Japan’s No. 2 automaker, dived 3.8 percent to 2,175 yen, while market leader Toyota Motor Corp. slid 2.5 percent to 2,910 yen. Sony Corp., which gets a quarter of its sales from the U.S., lost 2.5 percent to 1,738 yen. Fanuc Ltd. dropped 5.4 percent to 6,090 yen, after Macquarie Group Ltd. started the coverage of the industrial robot maker with an “underperform” rating, citing the “collapse” of capital investment.
Fuji Heavy, maker of Subaru-brand cars, plummeted 6.2 percent to 319 yen. The company applied for a loan from the state-run Development Bank of Japan for its daily operations, it said today. Akebono Brake Industry Co., part owned by Toyota, tumbled 13 percent to 510 yen after Chief Executive Officer Hisataka Nobumoto said failures may spread among auto-part suppliers should the government fail to provide support.
Banks Decline
Mizuho fell 3.8 percent to 178 yen, and bigger rival Mitsubishi UFJ Financial Group Inc. sank 3.3 percent to 407 yen. Tokio Marine Holdings Inc., Japan’s biggest casualty insurer, plunged 3.8 percent to 1,944 yen, extending its drop to a fifth day, while Shinko Securities Co. lost 5.4 percent to 158 yen.
In New York, the Standard & Poor’s 500 Index slid 4.3 percent to the lowest close since September 1996, led by financial companies. Shares of Citigroup, once the world’s biggest bank by value, tumbled to 97 cents before closing at $1.02, bringing this year’s decline to 85 percent.
“People probably haven’t yet understood the full depth of the financial crisis,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion. “Should regulators assess banks’ assets under strict conditions, quite a few of these companies may be effectively insolvent.”
Inpex, Japan’s biggest oil explorer, fell 4.2 percent to 617,000 yen, while its closest domestic competitor, Japan Petroleum Exploration Co., dropped 1.7 percent to 3,560 yen. Mitsui & Co., a trading company that gets more than half its profit from commodities, sank 3.9 percent to 837 yen.
Short-Selling
Crude oil for April delivery fell 3.9 percent to settle at $43.61 a barrel in New York yesterday, while a measure of six primary metals traded in London declined 1.6 percent for the first slump in three days.
Japan’s Financial Services Agency may extend restrictions on short selling of shares, an official at the regulator said today. The temporary restrictions, implemented in October and due to expire this month, include a ban on so-called naked short-selling and requirements that investors disclose short positions over a certain threshold.
“Regulators are concerned they will send wrong messages to the market if they lift the ban,” said Daiwa Asset’s Nagano. “That is, authorities are OK with short-selling and a further tumble in the market.”
Nikkei futures expiring in March retreated 2.7 percent to 7,210 in Osaka and slumped 2.8 percent to 7,195 in Singapore.
Honda Motor Co., which gets more than half its sales from North America, lost 3.8 percent after the Japanese currency rose from a four-month low. Smaller rival Fuji Heavy Industries Ltd. dived 6.2 percent after saying it asked for a government loan. Mizuho Financial Group Inc., Japan’s No. 2 listed bank, sank 3.8 percent after Citigroup Inc.’s stock fell below $1 for the first time. Inpex Corp. lost 4.2 percent after crude fell yesterday.
“The weaker yen provided support for Japanese equities, and that’s dissipated,” Kiyoshi Ishigane, a senior strategist at Tokyo-based Mitsubishi UFJ Asset Management Co., which oversees about $61 billion, said in an interview with Bloomberg Television. “Citi below $1 shows we are still far from the exit of this U.S.-originated global financial crisis.”
The Nikkei 225 Stock Average declined 232.13, or 3.1 percent, to 7,201.36 as of 12:36 p.m. in Tokyo. The broader Topix index fell 17.05, or 2.3 percent, to 724.50. The Nikkei is set for a 4.9 percent drop this week, while the Topix is poised for a 4.3 percent slide. Both headed for the biggest retreat since the period ended Jan. 23.
The Nikkei lost 16 percent this year through yesterday, extending its 42 percent tumble last year, as $1.2 trillion in writedowns and credit losses globally raised doubts about the health of the financial system. A quarter of the gauge’s members have lost more than half their value in the past six months, according to Bloomberg data.
Currency Rises
The yen strengthened versus the dollar to as much as 97.72 yesterday from 99.68 earlier, the weakest since November. The yen appreciated to as much as 122.72 against the euro from 125.09 at the close of stock trading in Tokyo yesterday after European Central Bank President Jean-Claude Trichet said the current benchmark rate wasn’t the lowest the bank could reach.
Honda, Japan’s No. 2 automaker, dived 3.8 percent to 2,175 yen, while market leader Toyota Motor Corp. slid 2.5 percent to 2,910 yen. Sony Corp., which gets a quarter of its sales from the U.S., lost 2.5 percent to 1,738 yen. Fanuc Ltd. dropped 5.4 percent to 6,090 yen, after Macquarie Group Ltd. started the coverage of the industrial robot maker with an “underperform” rating, citing the “collapse” of capital investment.
Fuji Heavy, maker of Subaru-brand cars, plummeted 6.2 percent to 319 yen. The company applied for a loan from the state-run Development Bank of Japan for its daily operations, it said today. Akebono Brake Industry Co., part owned by Toyota, tumbled 13 percent to 510 yen after Chief Executive Officer Hisataka Nobumoto said failures may spread among auto-part suppliers should the government fail to provide support.
Banks Decline
Mizuho fell 3.8 percent to 178 yen, and bigger rival Mitsubishi UFJ Financial Group Inc. sank 3.3 percent to 407 yen. Tokio Marine Holdings Inc., Japan’s biggest casualty insurer, plunged 3.8 percent to 1,944 yen, extending its drop to a fifth day, while Shinko Securities Co. lost 5.4 percent to 158 yen.
In New York, the Standard & Poor’s 500 Index slid 4.3 percent to the lowest close since September 1996, led by financial companies. Shares of Citigroup, once the world’s biggest bank by value, tumbled to 97 cents before closing at $1.02, bringing this year’s decline to 85 percent.
“People probably haven’t yet understood the full depth of the financial crisis,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion. “Should regulators assess banks’ assets under strict conditions, quite a few of these companies may be effectively insolvent.”
Inpex, Japan’s biggest oil explorer, fell 4.2 percent to 617,000 yen, while its closest domestic competitor, Japan Petroleum Exploration Co., dropped 1.7 percent to 3,560 yen. Mitsui & Co., a trading company that gets more than half its profit from commodities, sank 3.9 percent to 837 yen.
Short-Selling
Crude oil for April delivery fell 3.9 percent to settle at $43.61 a barrel in New York yesterday, while a measure of six primary metals traded in London declined 1.6 percent for the first slump in three days.
Japan’s Financial Services Agency may extend restrictions on short selling of shares, an official at the regulator said today. The temporary restrictions, implemented in October and due to expire this month, include a ban on so-called naked short-selling and requirements that investors disclose short positions over a certain threshold.
“Regulators are concerned they will send wrong messages to the market if they lift the ban,” said Daiwa Asset’s Nagano. “That is, authorities are OK with short-selling and a further tumble in the market.”
Nikkei futures expiring in March retreated 2.7 percent to 7,210 in Osaka and slumped 2.8 percent to 7,195 in Singapore.
Asian Stocks Fall on Earnings, Economy Concerns; HSBC Drops
March 6 (Bloomberg) -- Asian stocks fell, dragging the regional benchmark index to a fourth weekly decline, on renewed concern losses at financial institutions will mount as the global recession deepens.
HSBC Holdings Plc, Europe’s largest bank, sank 2.1 percent after CLSA Asia-Pacific Markets cut its share-price target and Citigroup Inc.’s stock fell below $1 for the first time. BHP Billiton Ltd. dropped 2.9 percent in Sydney after oil and metals prices retreated. Honda Motor Co., which gets more than half its sales from North America, lost 5.3 percent after the Japanese currency rose against the dollar.
“People haven’t yet understood the full depth of the financial crisis,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion of assets. “Should regulators assess banks’ assets under stricter conditions, quite a few of these companies may be effectively insolvent.”
The MSCI Asia Pacific Index dropped 1.6 percent to 71.98 as of 1:27 p.m. in Tokyo, following a two-day, 1.8 percent gain. The gauge lost 4.3 percent this week, taking declines in the past year to 50 percent, as the global recession pummeled profits at companies from BHP to Toyota Motor Corp., the world’s largest automaker.
Japan’s Nikkei 225 Stock Average slumped 2.9 percent to 7,219.49. Hong Kong’s Hang Seng Index lost 1.2 percent, while Australia’s S&P/ASX 200 Index fell 1.7 percent. All Asian markets declined except Taiwan.
Mounting Losses
Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The U.S. gauge slid 4.3 percent yesterday to the lowest close since September 1996, led by financial companies. Shares of Citigroup, once the world’s biggest bank by value, tumbled to 97 cents before closing at $1.02, bringing this year’s decline to 85 percent.
“Citi below $1 shows we are still far from the exit of this U.S.-originated global financial crisis,” Kiyoshi Ishigane, a senior strategist at Tokyo-based Mitsubishi UFJ Asset Management Co., which oversees about $61 billion., said in an interview with Bloomberg Television.
The global credit crisis sparked by a U.S. housing slump has caused almost $1.2 trillion of losses at financial institutions worldwide and prompted government bailouts of banks including Citigroup. Lloyds Banking Group Plc is close to an agreement with the U.K. government that would leave it state- controlled, the Financial Times reported.
HSBC sank 2.1 percent to HK$43.85. The company’s share- price target was cut to HK$28 from HK$41 at CLSA amid concerns some borrowers will fail to repay their loans, a report dated yesterday said.
Worst Performers
The London-based lender announced plans on March 2 to raise 12.5 billion pounds ($17.7 billion) in the U.K.’s biggest rights offering. HSBC said it will eliminate 6,100 jobs and close U.S. consumer lending units after subprime losses cut profit.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, dropped 4.3 percent to 403 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, slipped 4.3 percent to 177 yen.
Bank of Japan Deputy Governor Hirohide Yamaguchi said the central bank may need to expand its purchases of corporate debt to prevent a credit shortage as the recession deepens.
A gauge of finance stocks on MSCI’s Asian index lost 2.2 percent today, the most of 10 industry groups. The finance gauge is also the worst performer this year.
BHP slipped 2.9 percent to A$27.50 in Sydney after a measure of six primary metals traded in London declined 1.6 percent for the first slump in three days. The company had its earnings estimates cut by Merrill Lynch & Co. because of declining metal prices.
Inpex Corp., Japan’s largest oil explorer, lost 3.7 percent to 620,000 yen in Tokyo after oil fell 3.9 percent to settle at $43.61 a barrel in New York yesterday. Cnooc Ltd., China’s largest offshore oil producer, slumped 3 percent to HK$6.09.
Honda Motor, Japan’s second-largest carmaker, fell 5.3 percent to 2,140 yen in Tokyo after the Japanese currency strengthened to as high as 97.72 yesterday versus the dollar from a four-month low of 99.68 earlier. Toyota dipped 3 percent to 2,895 yen.
“The weaker yen provided support for Japanese equities, and that’s dissipated,” said Mitsubishi UFJ’s Ishigane.
HSBC Holdings Plc, Europe’s largest bank, sank 2.1 percent after CLSA Asia-Pacific Markets cut its share-price target and Citigroup Inc.’s stock fell below $1 for the first time. BHP Billiton Ltd. dropped 2.9 percent in Sydney after oil and metals prices retreated. Honda Motor Co., which gets more than half its sales from North America, lost 5.3 percent after the Japanese currency rose against the dollar.
“People haven’t yet understood the full depth of the financial crisis,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion of assets. “Should regulators assess banks’ assets under stricter conditions, quite a few of these companies may be effectively insolvent.”
The MSCI Asia Pacific Index dropped 1.6 percent to 71.98 as of 1:27 p.m. in Tokyo, following a two-day, 1.8 percent gain. The gauge lost 4.3 percent this week, taking declines in the past year to 50 percent, as the global recession pummeled profits at companies from BHP to Toyota Motor Corp., the world’s largest automaker.
Japan’s Nikkei 225 Stock Average slumped 2.9 percent to 7,219.49. Hong Kong’s Hang Seng Index lost 1.2 percent, while Australia’s S&P/ASX 200 Index fell 1.7 percent. All Asian markets declined except Taiwan.
Mounting Losses
Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The U.S. gauge slid 4.3 percent yesterday to the lowest close since September 1996, led by financial companies. Shares of Citigroup, once the world’s biggest bank by value, tumbled to 97 cents before closing at $1.02, bringing this year’s decline to 85 percent.
“Citi below $1 shows we are still far from the exit of this U.S.-originated global financial crisis,” Kiyoshi Ishigane, a senior strategist at Tokyo-based Mitsubishi UFJ Asset Management Co., which oversees about $61 billion., said in an interview with Bloomberg Television.
The global credit crisis sparked by a U.S. housing slump has caused almost $1.2 trillion of losses at financial institutions worldwide and prompted government bailouts of banks including Citigroup. Lloyds Banking Group Plc is close to an agreement with the U.K. government that would leave it state- controlled, the Financial Times reported.
HSBC sank 2.1 percent to HK$43.85. The company’s share- price target was cut to HK$28 from HK$41 at CLSA amid concerns some borrowers will fail to repay their loans, a report dated yesterday said.
Worst Performers
The London-based lender announced plans on March 2 to raise 12.5 billion pounds ($17.7 billion) in the U.K.’s biggest rights offering. HSBC said it will eliminate 6,100 jobs and close U.S. consumer lending units after subprime losses cut profit.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, dropped 4.3 percent to 403 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, slipped 4.3 percent to 177 yen.
Bank of Japan Deputy Governor Hirohide Yamaguchi said the central bank may need to expand its purchases of corporate debt to prevent a credit shortage as the recession deepens.
A gauge of finance stocks on MSCI’s Asian index lost 2.2 percent today, the most of 10 industry groups. The finance gauge is also the worst performer this year.
BHP slipped 2.9 percent to A$27.50 in Sydney after a measure of six primary metals traded in London declined 1.6 percent for the first slump in three days. The company had its earnings estimates cut by Merrill Lynch & Co. because of declining metal prices.
Inpex Corp., Japan’s largest oil explorer, lost 3.7 percent to 620,000 yen in Tokyo after oil fell 3.9 percent to settle at $43.61 a barrel in New York yesterday. Cnooc Ltd., China’s largest offshore oil producer, slumped 3 percent to HK$6.09.
Honda Motor, Japan’s second-largest carmaker, fell 5.3 percent to 2,140 yen in Tokyo after the Japanese currency strengthened to as high as 97.72 yesterday versus the dollar from a four-month low of 99.68 earlier. Toyota dipped 3 percent to 2,895 yen.
“The weaker yen provided support for Japanese equities, and that’s dissipated,” said Mitsubishi UFJ’s Ishigane.
Satyam Receives Regulatory Approval for Stake Sale
March 6 (Bloomberg) -- Satyam Computer Services Ltd., the software services provider at the center of India’s biggest corporate fraud inquiry, received regulatory approval to sell as much as 51 percent of itself through a global bidding process.
The selected investor would acquire the stake by first buying a 31 percent stake at a preferential sale of new shares and subsequently making an open offer for a minimum 20 percent, the Hyderabad-based provider said in an e-mailed statement today.
“The company expects to invite expressions of interest from qualified investors shortly in a global competitive bidding process,” Satyam said. “Qualified investors are expected to have total net assets in excess of $150 million.”
Satyam’s state-appointed board is pushing ahead with the stake sale plan before the fraud inquiry is complete or the company restates accounts in a bid to restore investor confidence and stem client defections. The software provider’s founder Ramalinga Raju said in January he inflated assets by $1 billion, triggering an 80 percent slump in the stock.
A buyer may gain about 50,000 employees while facing the absence of financial information and potential liabilities from lawsuits in the U.S.
International Business Machines Corp. is the front-runner to acquire Satyam and has begun talks with the Indian company’s board, the Business Standard reported yesterday, citing unidentified people familiar with the situation.
The selected investor would acquire the stake by first buying a 31 percent stake at a preferential sale of new shares and subsequently making an open offer for a minimum 20 percent, the Hyderabad-based provider said in an e-mailed statement today.
“The company expects to invite expressions of interest from qualified investors shortly in a global competitive bidding process,” Satyam said. “Qualified investors are expected to have total net assets in excess of $150 million.”
Satyam’s state-appointed board is pushing ahead with the stake sale plan before the fraud inquiry is complete or the company restates accounts in a bid to restore investor confidence and stem client defections. The software provider’s founder Ramalinga Raju said in January he inflated assets by $1 billion, triggering an 80 percent slump in the stock.
A buyer may gain about 50,000 employees while facing the absence of financial information and potential liabilities from lawsuits in the U.S.
International Business Machines Corp. is the front-runner to acquire Satyam and has begun talks with the Indian company’s board, the Business Standard reported yesterday, citing unidentified people familiar with the situation.
Wednesday, March 4, 2009
Japan Companies Cut Spending 18.1%, Most in Decade
March 5 (Bloomberg) -- Japanese companies cut spending last quarter at the fastest pace in a decade as exports crashed and earnings at manufacturers from Toyota Motor Corp. to Sharp Corp. evaporated.
Capital spending excluding software fell 18.1 percent in the three months ended Dec. 31 from a year earlier, a seventh quarterly decline, the Ministry of Finance said today in Tokyo. Profits tumbled 64.1 percent, the most since 1974.
The plunge in investment, along with a drop in inventories, probably means last quarter’s decline in gross domestic product was steeper than the annualized 12.7 percent reported last month. Economists predict an even worse contraction in the current three months as an unprecedented slump in exports and production prompts companies to fire thousands of workers.
“The fourth quarter was a disaster and the first quarter of the calendar year is going to be an even larger disaster,” said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo.
The government will use today’s report to revise GDP on March 12. Inventories fell by 4.6 trillion yen ($46 billion), the most in more than a year, the ministry said. The reduction suggests the economy shrank more than initially estimated, said Akira Maekawa, a senior economist at UBS AG in Tokyo.
Replenishing Stockpiles
Factory output may start to pick up next quarter as companies replenish stockpiles that they drained because of tumbling sales, according to Masayuki Morikawa, deputy director-general at the Trade Ministry.
“Output looks set to recover as long as demand picks up,” Morikawa said in an interview yesterday, adding that China holds the key to any rebound.
Still, sales have yet to show signs of improvement. Exports plunged 45.7 percent in January, extending a streak of record declines that started in November. Federal Reserve Chairman Ben S. Bernanke said last week the U.S. economy, Japan’s biggest market, may not recover until next year.
Companies are closing factories, not building them. NEC LCD Technologies Ltd. will probably shut a plant in southern Japan this year as part of a cost-cutting drive at parent NEC Corp.Sony Corp. and Pioneer Corp. are also closing facilities and firing workers.
Toyota, Japan’s biggest automaker, expects its first annual loss in 59 years in the period ending March. Sharp, the country’s largest maker of liquid-crystal-display televisions, will post its first loss in more than five decades and cut 1,500 temporary jobs because of falling sales.
Credit Squeeze
As well as losing money that could be invested in factories and equipment, companies are finding it harder to raise cash to fund spending.
Toyota may turn to the government for loans because private investors are demanding up to 50 percent more in interest for its debt. Companies including Sony and Kobe Steel Ltd. have had to scale back bond sales for lack of buyers.
The government this week said it would tap some of its $1 trillion in foreign reserves to help the state-run Japan Bank for International Cooperation increase loans to companies operating abroad.
Bank of Japan Governor Masaaki Shirakawa said this week the economy is worsening faster than his policy board expected. Purchases of corporate bonds and commercial paper by the bank, which in December lowered the key overnight lending rate to 0.1 percent, haven’t fully restored credit markets, Shirakawa said.
Capital spending excluding software fell 18.1 percent in the three months ended Dec. 31 from a year earlier, a seventh quarterly decline, the Ministry of Finance said today in Tokyo. Profits tumbled 64.1 percent, the most since 1974.
The plunge in investment, along with a drop in inventories, probably means last quarter’s decline in gross domestic product was steeper than the annualized 12.7 percent reported last month. Economists predict an even worse contraction in the current three months as an unprecedented slump in exports and production prompts companies to fire thousands of workers.
“The fourth quarter was a disaster and the first quarter of the calendar year is going to be an even larger disaster,” said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo.
The government will use today’s report to revise GDP on March 12. Inventories fell by 4.6 trillion yen ($46 billion), the most in more than a year, the ministry said. The reduction suggests the economy shrank more than initially estimated, said Akira Maekawa, a senior economist at UBS AG in Tokyo.
Replenishing Stockpiles
Factory output may start to pick up next quarter as companies replenish stockpiles that they drained because of tumbling sales, according to Masayuki Morikawa, deputy director-general at the Trade Ministry.
“Output looks set to recover as long as demand picks up,” Morikawa said in an interview yesterday, adding that China holds the key to any rebound.
Still, sales have yet to show signs of improvement. Exports plunged 45.7 percent in January, extending a streak of record declines that started in November. Federal Reserve Chairman Ben S. Bernanke said last week the U.S. economy, Japan’s biggest market, may not recover until next year.
Companies are closing factories, not building them. NEC LCD Technologies Ltd. will probably shut a plant in southern Japan this year as part of a cost-cutting drive at parent NEC Corp.Sony Corp. and Pioneer Corp. are also closing facilities and firing workers.
Toyota, Japan’s biggest automaker, expects its first annual loss in 59 years in the period ending March. Sharp, the country’s largest maker of liquid-crystal-display televisions, will post its first loss in more than five decades and cut 1,500 temporary jobs because of falling sales.
Credit Squeeze
As well as losing money that could be invested in factories and equipment, companies are finding it harder to raise cash to fund spending.
Toyota may turn to the government for loans because private investors are demanding up to 50 percent more in interest for its debt. Companies including Sony and Kobe Steel Ltd. have had to scale back bond sales for lack of buyers.
The government this week said it would tap some of its $1 trillion in foreign reserves to help the state-run Japan Bank for International Cooperation increase loans to companies operating abroad.
Bank of Japan Governor Masaaki Shirakawa said this week the economy is worsening faster than his policy board expected. Purchases of corporate bonds and commercial paper by the bank, which in December lowered the key overnight lending rate to 0.1 percent, haven’t fully restored credit markets, Shirakawa said.
Asian Stocks Rise as China’s Wen Pledges Increased Investment
March 5 (Bloomberg) -- Asian stocks gained for a second day, led by commodity and construction companies, after China’s Premier Wen Jiabao pledged to “significantly increase” investment in the world’s third-largest economy.
BHP Billiton Ltd., the world’s biggest mining company, climbed 5.1 percent in Sydney and Komatsu Ltd., the world’s No. 2 maker of earthmoving equipment, jumped 5 percent in Tokyo on speculation demand for metals and industrial machinery will rise. Mazda Motor Corp., Japan’s No. 4 carmaker, surged 10 percent as the yen weakened. Hong Kong’s Hang Seng Index and U.S. futures erased gains after Wen refrained from announcing an expansion of a 4 trillion yuan ($585 billion) spending package.
“The Chinese authorities have already greased the wheels of recovery,” said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $85 billion. “It may be a short-term disappointment that no further stimulus was announced, but it doesn’t undermine the China growth story.”
The MSCI Asia Pacific Index gained 0.9 percent to 72.93 as of 12:15 p.m. in Tokyo, with three stocks rising for each one that fell. The gauge has slumped 48 percent in the past year as the financial crisis dragged the world’s largest economies into recession, hurting profits at companies from BHP to Toyota Motor Corp., the world’s largest automaker.
Japan’s Nikkei 225 Stock Average climbed 2.7 percent, the most since Jan. 27, while Australia’s S&P/ASX 200 Index rose 0.6 percent. All markets open for trading in the region advanced except in Hong Kong, where the Hang Seng Index fell as much as 1.2 percent, and Singapore.
Government Intervention
Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, leapt 6.2 percent after shipping fees rose the most in two weeks. NEC Electronics Corp., Japan’s third-biggest chipmaker, surged 9.5 percent after Goldman Sachs Group Inc. advised investors to buy semiconductor shares.
Futures on the Standard & Poor’s 500 Index lost 0.6 percent after rising 0.5 percent earlier today. The U.S. gauge climbed 2.4 percent in New York yesterday, breaking a five-day losing streak, while Europe’s Dow Jones Stoxx 600 Index leapt 3.9 percent, the most since Dec. 8.
The MSCI Asia Pacific yesterday reversed a 1.6 percent decline to end the day 0.7 percent higher after a former Chinese statistics bureau head told reporters the premier would announce a new economic package on top of its previously announced spending plan.
China needs to “reverse the economic slide as soon as possible,” Wen told delegates to China’s parliament in Beijing today. Tumbling exports have slowed the country’s economic growth to the weakest in seven years.
Commodities Surge
Governments from the U.S. to China and Australia have sought to introduce policies this year to ease the financial crisis and bolster their economies. India’s central bank yesterday cut its key interest rate to a record low.
Speculation China’s economy will pick up steam drove up commodity prices. Crude oil in New York surged 9 percent to $45.38, the highest settlement since Jan. 26, while copper leapt 5.6 percent. The Reuters/Jefferies CRB Index of 19 commodities had its biggest rally this year.
BHP Billiton jumped 5.1 to A$28.50. Rio Tinto Group, the world’s third-largest miner, surged 5.2 percent to A$45.75.
Komatsu Ltd., the world’s second-biggest maker of earthmoving equipment, climbed 5 percent in Tokyo to 1,088 yen. Hitachi Construction and Machinery Co., the world’s largest maker of giant excavators, rose 4.4 percent to 1,266 yen.
Weaker yen
“People are keen to see how much more money China will pump into its economy,” Mitsushige Akino, who oversees about $615 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. “If the country doubles its planned spending, the impact will be huge.”
Mazda Motor soared 10 percent to 137 yen after the yen depreciated against the dollar to as much as 99.49 yesterday, the weakest level since Nov. 5, from 98.44 at the 3 p.m. close of stock trading in Tokyo.
Toyota Motor Corp., which makes 37 percent of its revenue in North America, gained 1.8 percent to 3,040 yen. Honda Motor Co. climbed 3.2 percent to 2,275 yen.
Mitsui O.S.K climbed 6.2 percent to 498 yen after the Baltic Dry Index rose 2.5 percent yesterday in London, the most since Feb. 19. Nippon Yusen K.K. advanced 4.2 percent to 402 yen, the first gain in five days.
NEC Electronics surged 9.5 percent to 541 yen. Samsung Electronics Co., the world’s largest maker of computer-memory chips, gained 1.6 percent to 497,000 won.
Profits may start improving now that the companies have pared back inventory and production, Goldman Sachs analyst James Covello wrote in a report. Semiconductor supplies were 30 percent below normal levels in January, according to Goldman estimates.
Mizuho Financial Group Inc., rose 5 percent to 189 after saying yesterday it will hold 58 percent of the company to be created through the merger of Mizuho Securities Co. and Shinko Securities Co. Shinko surged 6.9 percent.
BHP Billiton Ltd., the world’s biggest mining company, climbed 5.1 percent in Sydney and Komatsu Ltd., the world’s No. 2 maker of earthmoving equipment, jumped 5 percent in Tokyo on speculation demand for metals and industrial machinery will rise. Mazda Motor Corp., Japan’s No. 4 carmaker, surged 10 percent as the yen weakened. Hong Kong’s Hang Seng Index and U.S. futures erased gains after Wen refrained from announcing an expansion of a 4 trillion yuan ($585 billion) spending package.
“The Chinese authorities have already greased the wheels of recovery,” said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $85 billion. “It may be a short-term disappointment that no further stimulus was announced, but it doesn’t undermine the China growth story.”
The MSCI Asia Pacific Index gained 0.9 percent to 72.93 as of 12:15 p.m. in Tokyo, with three stocks rising for each one that fell. The gauge has slumped 48 percent in the past year as the financial crisis dragged the world’s largest economies into recession, hurting profits at companies from BHP to Toyota Motor Corp., the world’s largest automaker.
Japan’s Nikkei 225 Stock Average climbed 2.7 percent, the most since Jan. 27, while Australia’s S&P/ASX 200 Index rose 0.6 percent. All markets open for trading in the region advanced except in Hong Kong, where the Hang Seng Index fell as much as 1.2 percent, and Singapore.
Government Intervention
Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, leapt 6.2 percent after shipping fees rose the most in two weeks. NEC Electronics Corp., Japan’s third-biggest chipmaker, surged 9.5 percent after Goldman Sachs Group Inc. advised investors to buy semiconductor shares.
Futures on the Standard & Poor’s 500 Index lost 0.6 percent after rising 0.5 percent earlier today. The U.S. gauge climbed 2.4 percent in New York yesterday, breaking a five-day losing streak, while Europe’s Dow Jones Stoxx 600 Index leapt 3.9 percent, the most since Dec. 8.
The MSCI Asia Pacific yesterday reversed a 1.6 percent decline to end the day 0.7 percent higher after a former Chinese statistics bureau head told reporters the premier would announce a new economic package on top of its previously announced spending plan.
China needs to “reverse the economic slide as soon as possible,” Wen told delegates to China’s parliament in Beijing today. Tumbling exports have slowed the country’s economic growth to the weakest in seven years.
Commodities Surge
Governments from the U.S. to China and Australia have sought to introduce policies this year to ease the financial crisis and bolster their economies. India’s central bank yesterday cut its key interest rate to a record low.
Speculation China’s economy will pick up steam drove up commodity prices. Crude oil in New York surged 9 percent to $45.38, the highest settlement since Jan. 26, while copper leapt 5.6 percent. The Reuters/Jefferies CRB Index of 19 commodities had its biggest rally this year.
BHP Billiton jumped 5.1 to A$28.50. Rio Tinto Group, the world’s third-largest miner, surged 5.2 percent to A$45.75.
Komatsu Ltd., the world’s second-biggest maker of earthmoving equipment, climbed 5 percent in Tokyo to 1,088 yen. Hitachi Construction and Machinery Co., the world’s largest maker of giant excavators, rose 4.4 percent to 1,266 yen.
Weaker yen
“People are keen to see how much more money China will pump into its economy,” Mitsushige Akino, who oversees about $615 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. “If the country doubles its planned spending, the impact will be huge.”
Mazda Motor soared 10 percent to 137 yen after the yen depreciated against the dollar to as much as 99.49 yesterday, the weakest level since Nov. 5, from 98.44 at the 3 p.m. close of stock trading in Tokyo.
Toyota Motor Corp., which makes 37 percent of its revenue in North America, gained 1.8 percent to 3,040 yen. Honda Motor Co. climbed 3.2 percent to 2,275 yen.
Mitsui O.S.K climbed 6.2 percent to 498 yen after the Baltic Dry Index rose 2.5 percent yesterday in London, the most since Feb. 19. Nippon Yusen K.K. advanced 4.2 percent to 402 yen, the first gain in five days.
NEC Electronics surged 9.5 percent to 541 yen. Samsung Electronics Co., the world’s largest maker of computer-memory chips, gained 1.6 percent to 497,000 won.
Profits may start improving now that the companies have pared back inventory and production, Goldman Sachs analyst James Covello wrote in a report. Semiconductor supplies were 30 percent below normal levels in January, according to Goldman estimates.
Mizuho Financial Group Inc., rose 5 percent to 189 after saying yesterday it will hold 58 percent of the company to be created through the merger of Mizuho Securities Co. and Shinko Securities Co. Shinko surged 6.9 percent.
India Asset Sale, Deficit Cut Key to Retaining Investment Grade
March 5 (Bloomberg) -- India needs to contain its widening budget gap and implement changes including stake sales of state- run companies and easier rules for construction firms to keep its investment-grade credit rating, Standard & Poor's said.
The rating may be reviewed after the new government, which assumes office after parliamentary elections in April and May, unveils its economic policies, R. Ravimohan, S&P's managing director and regional head for South and Southeast Asia, said in an interview.
S&P last week lowered its outlook on India's debt rating to negative from stable, saying the country's deteriorating fiscal position was ``unsustainable'' in the medium term. The outlook cut came after India on Feb. 16 said its deficit for the year will rise to 6 percent, double its initial estimate. S&P had lifted India to the investment grade BBB- in Jan. 2007.
India has announced excise cuts and 200 billion rupees ($3.9 billion) spending since December as part of two stimulus packages to bolster an economy likely to grow at the weakest pace since 2003 and as Prime Minister Manmohan Singh's government faces elections. The government last year announced farm loan waivers worth as much as 717 billion rupees and gave 5 million civil servants a 21 percent pay rise.
The government could begin with an asset-sale program from its about $100 billion ownership in state-run companies, give construction firms greater access to bank funds to generate more employment, and help electricity generators get their dues, Ravimohan said.
Asset Sales
An asset-sale program can help in reversing a big slippage in India's fiscal consolidation and also raise funds that could aid the government give a boost to the economy, he said.
``China and other emerging economies have used privatization programs to raise money and improve the efficiency of these companies, and such programs have been beneficial for everyone,'' said Sam Mahtani, who manages $2.5 billion in emerging market funds as a director at F&C Investments in London. ``It'll be a challenge and will test the will power of top government ministers to push it through. It's an issue of managing a coalition.''
Investment in sectors such as power, education, medical services, pharmaceuticals and construction could generate good returns for India over the long term, and it should seek to remove ``bottlenecks'' from different sectors, Ravimohan said.
Construction for housing, roads and other infrastructure projects could generate large number of jobs in a nation that's likely to add up to 15 million to the workforce every year over the next three to four decades, he said.
`Relatively Strong'
Indian companies have cut half a million jobs in the quarter to December amid the global slowdown, according to the labor ministry.
``If there's a program that takes us through those positives, the rating will stay,'' Ravimohan said. ``The rating does take into account India's strengths, its diversities, size of the economy, growing young population, the relative strength of the domestic economy versus the foreign economy and therefore not getting hit as much as several other economies, the relatively strong banking system, and the cushions that are available to the government.''
The combined budget deficit of India's states and the central governments could rise to 13 percent of gross domestic product by March next year from a current estimate of 11.4 percent if the government doesn't initiate steps to rein in the shortfall, said Ravimohan, who was the managing director at S&P's Indian unit, Crisil Ltd., from 1994 to 2007.
``The next trigger is obviously going to be the new government and its policies,'' he said. ``In any case, the next budget will also set the tone.''
India's economy posted 5.3 percent growth in the quarter to Dec. 31 from a year earlier, with the farm sector sliding 2.2 percent. The $1.2 trillion economy may expand 5 percent to 5.5 percent in the year to March 31 if the declining trend in the farm sector continues, Ravimohan said. Growth could be between 6 percent and 6.5 percent if agriculture picks up, he said.
The rating may be reviewed after the new government, which assumes office after parliamentary elections in April and May, unveils its economic policies, R. Ravimohan, S&P's managing director and regional head for South and Southeast Asia, said in an interview.
S&P last week lowered its outlook on India's debt rating to negative from stable, saying the country's deteriorating fiscal position was ``unsustainable'' in the medium term. The outlook cut came after India on Feb. 16 said its deficit for the year will rise to 6 percent, double its initial estimate. S&P had lifted India to the investment grade BBB- in Jan. 2007.
India has announced excise cuts and 200 billion rupees ($3.9 billion) spending since December as part of two stimulus packages to bolster an economy likely to grow at the weakest pace since 2003 and as Prime Minister Manmohan Singh's government faces elections. The government last year announced farm loan waivers worth as much as 717 billion rupees and gave 5 million civil servants a 21 percent pay rise.
The government could begin with an asset-sale program from its about $100 billion ownership in state-run companies, give construction firms greater access to bank funds to generate more employment, and help electricity generators get their dues, Ravimohan said.
Asset Sales
An asset-sale program can help in reversing a big slippage in India's fiscal consolidation and also raise funds that could aid the government give a boost to the economy, he said.
``China and other emerging economies have used privatization programs to raise money and improve the efficiency of these companies, and such programs have been beneficial for everyone,'' said Sam Mahtani, who manages $2.5 billion in emerging market funds as a director at F&C Investments in London. ``It'll be a challenge and will test the will power of top government ministers to push it through. It's an issue of managing a coalition.''
Investment in sectors such as power, education, medical services, pharmaceuticals and construction could generate good returns for India over the long term, and it should seek to remove ``bottlenecks'' from different sectors, Ravimohan said.
Construction for housing, roads and other infrastructure projects could generate large number of jobs in a nation that's likely to add up to 15 million to the workforce every year over the next three to four decades, he said.
`Relatively Strong'
Indian companies have cut half a million jobs in the quarter to December amid the global slowdown, according to the labor ministry.
``If there's a program that takes us through those positives, the rating will stay,'' Ravimohan said. ``The rating does take into account India's strengths, its diversities, size of the economy, growing young population, the relative strength of the domestic economy versus the foreign economy and therefore not getting hit as much as several other economies, the relatively strong banking system, and the cushions that are available to the government.''
The combined budget deficit of India's states and the central governments could rise to 13 percent of gross domestic product by March next year from a current estimate of 11.4 percent if the government doesn't initiate steps to rein in the shortfall, said Ravimohan, who was the managing director at S&P's Indian unit, Crisil Ltd., from 1994 to 2007.
``The next trigger is obviously going to be the new government and its policies,'' he said. ``In any case, the next budget will also set the tone.''
India's economy posted 5.3 percent growth in the quarter to Dec. 31 from a year earlier, with the farm sector sliding 2.2 percent. The $1.2 trillion economy may expand 5 percent to 5.5 percent in the year to March 31 if the declining trend in the farm sector continues, Ravimohan said. Growth could be between 6 percent and 6.5 percent if agriculture picks up, he said.
India’s Central Bank May Continue Cutting Rates to Spur Growth
March 5 (Bloomberg) -- India’s central bank indicated it may keep cutting interest rates after economic growth slowed to a five-year low last quarter.
The Reserve Bank of India yesterday reduced the benchmark repurchase rate to a record low of 5 percent from 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent, adding it will “maintain ample liquidity in the banking system”.
Governor Duvvuri Subbarao is driving policy rates down to unprecedented lows to revive investment and spur consumption in Asia’s third-largest economy. The $1.2 trillion economy is slowing as exports decline and companies’ access to funds from overseas and from the stock market is cut off by the global recession.
“Credit availability in India is drying up and is the problem,” said Chetan Ahya, an economist at Morgan Stanley in Singapore. “We expect the RBI to cut the policy rate by another 50 basis points by the end of the second quarter of 2009.”
The deepening global recession and slumping share markets, including a 13 percent decline in India’s key stock index this year, have forced policy makers around the world to slash borrowing costs.
The U.S. Federal Reserve’s benchmark rate is near zero, the Bank of England’s is the lowest since its creation in 1694 and the European Central Bank today will probably trim its main rate to 1.5 percent, the lowest level in 10 years of setting policy, according to economists.
Slowing Inflation
Subbarao has room to slash rates because falling commodity prices have slowed inflation to a 14-month low of 3.36 percent from a 16-year peak of 12.91 percent in August.
India’s economy expanded 5.3 percent in the three months to Dec. 31 from a year earlier after a 7.6 percent gain in the previous quarter, the statistics agency said last week. That was less than the 6.1 percent predicted by economists.
India, which grew an average 9 percent in the past four years, is suffering from a slump in exports after trade as a percentage of GDP rose to 35 percent in the year ended March 31, 2008, from 21 percent in 1997-98.
The nation’s exports declined last quarter for the first time in seven years. Local demand has also been hit because commercial banks, laden with high-cost deposits, have been slow to reduce lending rates.
Prime Minister Manmohan Singh’s government has backed the monetary stimulus by lowering taxes and increasing spending on infrastructure.
Tax Cuts
Acting Finance Minister Pranab Mukherjee Feb. 16 lowered the excise duty to 8 percent from 10 percent and the service tax to 10 percent from 12 percent. He extended a 4 percentage-point cut in central value-added tax announced in December beyond March 31.
Before yesterday’s announcement, the combined stimulus from interest-rate cuts, increased government outlays and lower taxes totaled almost $80 billion, or 7 percent of India’s gross domestic product, according to the central bank.
Overseas borrowing and the sale of new shares on the stock market provided Indian industry with about 40 percent of total funding in the year ended March 31, 2008, according to Tehmina Khan, an economist at Capital Economics Ltd. in London.
Still, the spending is straining the budget deficit, which the finance ministry forecasts will widen to 6 percent of GDP in the year ending March 31 from a target of 2.5 percent. The government expects borrowing next year to increase to a record 3.62 trillion rupees ($72 billion). Indian government debt is the equivalent of 80 percent of the nation’s GDP.
Yields on India’s benchmark bonds due in 2018 have risen 1.19 percentage points to 6.44 percent this year because of deteriorating government finances.
Weighing on Confidence
“The massive public debt is weighing on investor confidence,” said Sherman Chan, a Sydney-based economist at Moody’s Economy.com. “There is an urgent need to clean up the government balance sheet after the global storm.”
The government, whose five-year term ends in May, wants to prop up growth and reduce unemployment as it prepares to face general elections.
Standard & Poor’s said Feb. 24 that the nation’s credit rating may be cut to junk as government debt reaches a level that’s “not sustainable.” S&P lowered India’s rating outlook to negative from stable.
Mukherjee said the rating company’s move was “not unexpected” and that the global decline requires “extraordinary steps from the government.”
Already, companies have cut about half a million jobs in the three months ended in December, according to the labor ministry.
Apollo Tyres Ltd., the Indian tiremaker partly owned by Michelin & Cie, said this month it plans to cut its workforce by 15 percent, or 1,500 employees. A survey of 50 textile companies by the Apparel Export Promotion Council of India found they reduced 14 percent of their workers in November.
“The mother-of-all monetary easing will continue,” said Rajeev Malik, regional economist at Macquarie Group Ltd. in Singapore. “There is no more room on the fiscal side and so the RBI will have to do the heavy lifting to support growth.”
The Reserve Bank of India yesterday reduced the benchmark repurchase rate to a record low of 5 percent from 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent, adding it will “maintain ample liquidity in the banking system”.
Governor Duvvuri Subbarao is driving policy rates down to unprecedented lows to revive investment and spur consumption in Asia’s third-largest economy. The $1.2 trillion economy is slowing as exports decline and companies’ access to funds from overseas and from the stock market is cut off by the global recession.
“Credit availability in India is drying up and is the problem,” said Chetan Ahya, an economist at Morgan Stanley in Singapore. “We expect the RBI to cut the policy rate by another 50 basis points by the end of the second quarter of 2009.”
The deepening global recession and slumping share markets, including a 13 percent decline in India’s key stock index this year, have forced policy makers around the world to slash borrowing costs.
The U.S. Federal Reserve’s benchmark rate is near zero, the Bank of England’s is the lowest since its creation in 1694 and the European Central Bank today will probably trim its main rate to 1.5 percent, the lowest level in 10 years of setting policy, according to economists.
Slowing Inflation
Subbarao has room to slash rates because falling commodity prices have slowed inflation to a 14-month low of 3.36 percent from a 16-year peak of 12.91 percent in August.
India’s economy expanded 5.3 percent in the three months to Dec. 31 from a year earlier after a 7.6 percent gain in the previous quarter, the statistics agency said last week. That was less than the 6.1 percent predicted by economists.
India, which grew an average 9 percent in the past four years, is suffering from a slump in exports after trade as a percentage of GDP rose to 35 percent in the year ended March 31, 2008, from 21 percent in 1997-98.
The nation’s exports declined last quarter for the first time in seven years. Local demand has also been hit because commercial banks, laden with high-cost deposits, have been slow to reduce lending rates.
Prime Minister Manmohan Singh’s government has backed the monetary stimulus by lowering taxes and increasing spending on infrastructure.
Tax Cuts
Acting Finance Minister Pranab Mukherjee Feb. 16 lowered the excise duty to 8 percent from 10 percent and the service tax to 10 percent from 12 percent. He extended a 4 percentage-point cut in central value-added tax announced in December beyond March 31.
Before yesterday’s announcement, the combined stimulus from interest-rate cuts, increased government outlays and lower taxes totaled almost $80 billion, or 7 percent of India’s gross domestic product, according to the central bank.
Overseas borrowing and the sale of new shares on the stock market provided Indian industry with about 40 percent of total funding in the year ended March 31, 2008, according to Tehmina Khan, an economist at Capital Economics Ltd. in London.
Still, the spending is straining the budget deficit, which the finance ministry forecasts will widen to 6 percent of GDP in the year ending March 31 from a target of 2.5 percent. The government expects borrowing next year to increase to a record 3.62 trillion rupees ($72 billion). Indian government debt is the equivalent of 80 percent of the nation’s GDP.
Yields on India’s benchmark bonds due in 2018 have risen 1.19 percentage points to 6.44 percent this year because of deteriorating government finances.
Weighing on Confidence
“The massive public debt is weighing on investor confidence,” said Sherman Chan, a Sydney-based economist at Moody’s Economy.com. “There is an urgent need to clean up the government balance sheet after the global storm.”
The government, whose five-year term ends in May, wants to prop up growth and reduce unemployment as it prepares to face general elections.
Standard & Poor’s said Feb. 24 that the nation’s credit rating may be cut to junk as government debt reaches a level that’s “not sustainable.” S&P lowered India’s rating outlook to negative from stable.
Mukherjee said the rating company’s move was “not unexpected” and that the global decline requires “extraordinary steps from the government.”
Already, companies have cut about half a million jobs in the three months ended in December, according to the labor ministry.
Apollo Tyres Ltd., the Indian tiremaker partly owned by Michelin & Cie, said this month it plans to cut its workforce by 15 percent, or 1,500 employees. A survey of 50 textile companies by the Apparel Export Promotion Council of India found they reduced 14 percent of their workers in November.
“The mother-of-all monetary easing will continue,” said Rajeev Malik, regional economist at Macquarie Group Ltd. in Singapore. “There is no more room on the fiscal side and so the RBI will have to do the heavy lifting to support growth.”
Monday, March 2, 2009
Japanese Stocks Fall as Recession Concerns Mount; Inpex Slumps
March 3 (Bloomberg) -- Japanese shares fell for a second day as concern the deepening recession will spark more losses at financial companies outweighed optimism the government will act to boost equity prices.
Tokio Marine Holdings Inc., the nation’s No. 1 casualty insurer, lost 2.8 percent after American International Group Inc. had the worst quarterly loss in U.S. history, prompting the government to inject more aid. Inpex Corp., Japan’s biggest oil explorer, retreated 5.8 percent as crude prices fell. Seafood maker Maruha Nichiro Holdings Inc. sank 4.3 percent after saying writedowns on its stockholdings will widen its net loss. Fuji Heavy Industries Ltd., maker of Subaru cars, and Isuzu Motors Ltd. reversed losses to advance more than 3.5 percent.
The Nikkei 225 Stock Average fell 50.43, or 0.7 percent, to close at 7,229.72 in Tokyo, after losing as much as 2.6 percent to the lowest closing level since October 1982. The broader Topix index declined 7.79, or 1.1 percent, to 726.80.
“U.S. coffers will be wiped out if the government nationalizes all of its financial institutions,” said Mitsushige Akino, who oversees about $615 million at Tokyo-based Ichiyoshi Investment Management Co. “Investors are wondering which banks will be left to die and are fearful of its consequences.”
Shares pared losses after Japanese Finance Minister Kaoru Yosano said the government can’t ignore “excessive declines” in the nation’s stock market. Yosano said on Feb. 26 that he ordered a study into ways to bolster equities.
The Nikkei has fallen 18 percent in 2009, extending last year’s record 42 percent dive as recessions in the world’s largest economies and global financial turmoil decimated corporate earnings. Japanese banks including Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. have slashed annual profit targets in part because of increasing writedowns on stockholdings.
Tokio Marine Holdings Inc., the nation’s No. 1 casualty insurer, lost 2.8 percent after American International Group Inc. had the worst quarterly loss in U.S. history, prompting the government to inject more aid. Inpex Corp., Japan’s biggest oil explorer, retreated 5.8 percent as crude prices fell. Seafood maker Maruha Nichiro Holdings Inc. sank 4.3 percent after saying writedowns on its stockholdings will widen its net loss. Fuji Heavy Industries Ltd., maker of Subaru cars, and Isuzu Motors Ltd. reversed losses to advance more than 3.5 percent.
The Nikkei 225 Stock Average fell 50.43, or 0.7 percent, to close at 7,229.72 in Tokyo, after losing as much as 2.6 percent to the lowest closing level since October 1982. The broader Topix index declined 7.79, or 1.1 percent, to 726.80.
“U.S. coffers will be wiped out if the government nationalizes all of its financial institutions,” said Mitsushige Akino, who oversees about $615 million at Tokyo-based Ichiyoshi Investment Management Co. “Investors are wondering which banks will be left to die and are fearful of its consequences.”
Shares pared losses after Japanese Finance Minister Kaoru Yosano said the government can’t ignore “excessive declines” in the nation’s stock market. Yosano said on Feb. 26 that he ordered a study into ways to bolster equities.
The Nikkei has fallen 18 percent in 2009, extending last year’s record 42 percent dive as recessions in the world’s largest economies and global financial turmoil decimated corporate earnings. Japanese banks including Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. have slashed annual profit targets in part because of increasing writedowns on stockholdings.
HSBC Shares Fall Most in 20 Years After Rights Offer Announced
March 3 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank, fell the most in more than two decades in Hong Kong trading after announcing plans to raise 12.5 billion pounds ($17.5 billion) in a rights offer following losses at its U.S. unit.
The shares plunged 18 percent to HK$46.60 at 10:07 a.m. local time, after falling as much as 19 percent. It was the biggest intraday drop since October 1987.
The shares plunged 18 percent to HK$46.60 at 10:07 a.m. local time, after falling as much as 19 percent. It was the biggest intraday drop since October 1987.
Asia Aluminum Plans New Tactic to Gain Support for Bond Buyback
March 3 (Bloomberg) -- Asia Aluminum Holdings Ltd. Chairman Kwong Wui Chun, who offered his shares to investors to win support for a restructuring plan and debt buyback offer, now plans to shock bondholders into agreement.
“I want to present the real difficulty that the company is facing,” Kwong said in an interview in Hong Kong yesterday. “I want to give investors a picture of the situation” by sharing a liquidation analysis report prepared by a consulting firm, he said, without naming the company.
Kwong on Feb. 27 sent a letter to investors offering his shares in Asia Aluminum’s parent if investors accept a bond buyback offer and guarantee that the company won’t go into liquidation, employees won’t be fired and banks and suppliers won’t suffer losses.
Asia Aluminum, the region’s biggest maker of extruded aluminum, on Feb. 13 offered to pay as much as 27.5 cents on the dollar for its 8 percent notes due 2011 while parent AA Investments Co. offered 13.5 cents for pay-in-kind notes as part of a “crucial” restructuring. Trade association EMTA and Aberdeen Asset Management Plc on Feb. 26 hosted a call for holders of the 8 percent notes in which all participants agreed not to sell at the offer price, according to Bondcritic.com analyst Warut Promboon.
Since the offer, customers have threatened cancellations and suppliers who previously extended credit have demanded cash, Kwong said. Deputy Chairman and Chief Executive Officer Benby Chan Yiu Tsuan resigned “to pursue his own interests,” the company said in a filing yesterday.
‘Peanuts’
A buyback at the offer price would mean bondholders get “peanuts” while shareholders and bank lenders “walk away with a much lighter debt burden,” according to Dubai-based investor Sami Caracand, who said he and his family own $250,000 of the 8 percent notes.
Standard & Poor’s cut Asia Aluminum’s credit rating by five grades to CC on Feb. 16 after the company said a slump in sales and cashflow coincided with a need to finance factory production and pressure on working capital. Investors have until May 18 to accept the buyback, with an “early consent” date on March 10.
Kwong tried in vain to sell parts of Asia Aluminum for more than a year and fought to avoid bankruptcy because of his concern for the future of the company’s 10,000 workers in southern China, he said.
Asia Aluminum has said it aims to get help from a Chinese municipal government to fund its buyback and has letters of intent from China Construction Bank Corp. and Bank of China Ltd. to provide loans if the tender is successful.
“I want to present the real difficulty that the company is facing,” Kwong said in an interview in Hong Kong yesterday. “I want to give investors a picture of the situation” by sharing a liquidation analysis report prepared by a consulting firm, he said, without naming the company.
Kwong on Feb. 27 sent a letter to investors offering his shares in Asia Aluminum’s parent if investors accept a bond buyback offer and guarantee that the company won’t go into liquidation, employees won’t be fired and banks and suppliers won’t suffer losses.
Asia Aluminum, the region’s biggest maker of extruded aluminum, on Feb. 13 offered to pay as much as 27.5 cents on the dollar for its 8 percent notes due 2011 while parent AA Investments Co. offered 13.5 cents for pay-in-kind notes as part of a “crucial” restructuring. Trade association EMTA and Aberdeen Asset Management Plc on Feb. 26 hosted a call for holders of the 8 percent notes in which all participants agreed not to sell at the offer price, according to Bondcritic.com analyst Warut Promboon.
Since the offer, customers have threatened cancellations and suppliers who previously extended credit have demanded cash, Kwong said. Deputy Chairman and Chief Executive Officer Benby Chan Yiu Tsuan resigned “to pursue his own interests,” the company said in a filing yesterday.
‘Peanuts’
A buyback at the offer price would mean bondholders get “peanuts” while shareholders and bank lenders “walk away with a much lighter debt burden,” according to Dubai-based investor Sami Caracand, who said he and his family own $250,000 of the 8 percent notes.
Standard & Poor’s cut Asia Aluminum’s credit rating by five grades to CC on Feb. 16 after the company said a slump in sales and cashflow coincided with a need to finance factory production and pressure on working capital. Investors have until May 18 to accept the buyback, with an “early consent” date on March 10.
Kwong tried in vain to sell parts of Asia Aluminum for more than a year and fought to avoid bankruptcy because of his concern for the future of the company’s 10,000 workers in southern China, he said.
Asia Aluminum has said it aims to get help from a Chinese municipal government to fund its buyback and has letters of intent from China Construction Bank Corp. and Bank of China Ltd. to provide loans if the tender is successful.
Asian Stocks Drop as Recession Concerns Mount; BHP, Canon Fall
March 3 (Bloomberg) -- Asian stocks slumped for a second day, led by banks and mining companies, as another bailout for American International Group Inc. and a U.S. manufacturing report worsened confidence in the global economy.
Mitsubishi UFJ Financial Group Inc. dropped 1.4 percent as the U.S. government offered more aid to insurer AIG after the company reported the worst loss by any U.S. corporation. Canon Inc., which gets a third of its sales from the Americas, declined 4.1 percent after U.S. manufacturing shrank for a 13th month. BHP Billiton Ltd., the world’s biggest mining company, sank 1.8 percent in Sydney as oil and metals prices fell.
“Markets are reflecting the deepening of the financial crisis and a sense any recovery will be delayed,” Mamoru Shimode, an equity strategist at Resona Trust & Banking Co., said in an interview with Bloomberg Television.
The MSCI Asia Pacific Index dropped 1.2 percent to 71.63, set for its lowest close since August 2003, at 10:20 a.m. in Tokyo. The gauge has fallen 20 percent in 2009, extending last year’s record 43 percent tumble, as recessions in the world’s largest economies hurt earnings at companies from BHP to Toyota Motor Corp., the world’s largest automaker.
Japan’s Nikkei 225 Stock Average dropped 1.5 percent to 7,174.51 in Tokyo, while South Korea’s Kospi index slipped 2 percent. Australia’s S&P/ASX 200 Index fell 1.3 percent. All markets open for trading declined.
Futures on the Standard & Poor’s 500 Index added 0.4 percent. The gauge slumped 4.7 percent yesterday to its lowest close since October 1996. Europe’s Dow Jones Stoxx 600 Index slid 5 percent to the lowest close in six years after HSBC Holdings Plc, the region’s biggest bank by value, said it plans to raise $17.7 billion and shed 6,100 jobs.
Record Loss
The deepening global recession, a third government rescue for Citigroup Inc. and dividend cuts at companies from General Electric Co. to JPMorgan Chase & Co. have dragged the MSCI World Index to three consecutive weeks of declines. The benchmark gauge has fallen 23 percent this year, adding to last year’s 42 percent slump.
AIG yesterday said its fourth-quarter loss widened to $61.7 billion from $5.29 billion a year earlier. The results brought AIG’s annual loss to almost $100 billion, prompting the U.S. to offer a package of equity, new credit and lower interest rates on existing loans.
Mitsubishi UFJ, Japan’s largest bank, lost 1.4 percent to 417 yen in Tokyo. Mizuho Financial Group Inc., the country’s second largest, declined 1.7 percent to 178 yen.
Canon fell 4.1 percent to 2,315 yen in Tokyo, while Sony Corp., the world’s second-largest consumer-electronics maker, dropped 1.1 percent to 1,642 yen.
Oil, Metals
The U.S.’s Institute for Supply Management yesterday said its factory index stayed at 35.8 last month, below the 50 threshold that divides expansion and contraction. The gauge has remained below 50 since February 2008.
BHP Billiton fell 1.8 percent to A$27.45. Rio Tinto Group, the world’s third-largest miner, lost 1.2 percent to A$43.68. Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, slipped 1 percent to A$33.92.
Crude oil for April delivery tumbled 10 percent, the most since Jan. 7, to $40.15 a barrel in New York. A measure of six primary metals traded in London fell 2.2 percent, with nickel losing 4.5 percent.
Mitsubishi UFJ Financial Group Inc. dropped 1.4 percent as the U.S. government offered more aid to insurer AIG after the company reported the worst loss by any U.S. corporation. Canon Inc., which gets a third of its sales from the Americas, declined 4.1 percent after U.S. manufacturing shrank for a 13th month. BHP Billiton Ltd., the world’s biggest mining company, sank 1.8 percent in Sydney as oil and metals prices fell.
“Markets are reflecting the deepening of the financial crisis and a sense any recovery will be delayed,” Mamoru Shimode, an equity strategist at Resona Trust & Banking Co., said in an interview with Bloomberg Television.
The MSCI Asia Pacific Index dropped 1.2 percent to 71.63, set for its lowest close since August 2003, at 10:20 a.m. in Tokyo. The gauge has fallen 20 percent in 2009, extending last year’s record 43 percent tumble, as recessions in the world’s largest economies hurt earnings at companies from BHP to Toyota Motor Corp., the world’s largest automaker.
Japan’s Nikkei 225 Stock Average dropped 1.5 percent to 7,174.51 in Tokyo, while South Korea’s Kospi index slipped 2 percent. Australia’s S&P/ASX 200 Index fell 1.3 percent. All markets open for trading declined.
Futures on the Standard & Poor’s 500 Index added 0.4 percent. The gauge slumped 4.7 percent yesterday to its lowest close since October 1996. Europe’s Dow Jones Stoxx 600 Index slid 5 percent to the lowest close in six years after HSBC Holdings Plc, the region’s biggest bank by value, said it plans to raise $17.7 billion and shed 6,100 jobs.
Record Loss
The deepening global recession, a third government rescue for Citigroup Inc. and dividend cuts at companies from General Electric Co. to JPMorgan Chase & Co. have dragged the MSCI World Index to three consecutive weeks of declines. The benchmark gauge has fallen 23 percent this year, adding to last year’s 42 percent slump.
AIG yesterday said its fourth-quarter loss widened to $61.7 billion from $5.29 billion a year earlier. The results brought AIG’s annual loss to almost $100 billion, prompting the U.S. to offer a package of equity, new credit and lower interest rates on existing loans.
Mitsubishi UFJ, Japan’s largest bank, lost 1.4 percent to 417 yen in Tokyo. Mizuho Financial Group Inc., the country’s second largest, declined 1.7 percent to 178 yen.
Canon fell 4.1 percent to 2,315 yen in Tokyo, while Sony Corp., the world’s second-largest consumer-electronics maker, dropped 1.1 percent to 1,642 yen.
Oil, Metals
The U.S.’s Institute for Supply Management yesterday said its factory index stayed at 35.8 last month, below the 50 threshold that divides expansion and contraction. The gauge has remained below 50 since February 2008.
BHP Billiton fell 1.8 percent to A$27.45. Rio Tinto Group, the world’s third-largest miner, lost 1.2 percent to A$43.68. Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, slipped 1 percent to A$33.92.
Crude oil for April delivery tumbled 10 percent, the most since Jan. 7, to $40.15 a barrel in New York. A measure of six primary metals traded in London fell 2.2 percent, with nickel losing 4.5 percent.
Sunday, March 1, 2009
Growing Economic Crisis Threatens the Idea of One Europe
PARIS — The leaders of the European Union gathered Sunday in Brussels in an emergency summit meeting that seemed to highlight the very worries it was designed to calm: that the world economic crisis has unleashed forces threatening to split Europe into rival camps.
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Olivier Hoslet/European Pressphoto Agency
The leaders of European Union countries who gathered Sunday in Brussels included, from left, Sergei Stanishev of Bulgaria, Nicolas Sarkozy of France, Andrus Ansip of Estonia, Demetris Christofias of Cyprus, Mirek Topolanek of the Czech Republic and Lawrence Gonzi of Malta.
An urgent call from Hungary for a large bailout for newer, Eastern members was bluntly rejected by Europe’s strongest economy, Germany, and received little support from other countries. Chancellor Angela Merkel of Germany, facing federal elections in September, said countries must be dealt with on a case-by-case basis.
“Saying that the situation is the same for all Central and Eastern European states, I don’t see that,” Mrs. Merkel told reporters. She spoke after Prime Minister Ferenc Gyurcsany of Hungary warned, “We should not allow that a new Iron Curtain should be set up and divide Europe.”
With uncertain leadership and few powerful collective institutions, the European Union is struggling with the strains this crisis has inevitably produced among 27 countries with uneven levels of development.
The traditional concept of “solidarity” is being undermined by protectionist pressures in some member countries and the rigors of maintaining a common currency, the euro, for a region that has diverse economic needs. Particularly acute economic problems in some newer members that once were part of the Soviet bloc have only made matters worse.
Europe’s difficulties are in sharp contrast to the American response. President Obama has just announced a budget that will send the United States more deeply into debt but that also makes an effort to redistribute income and overhaul health care, improve education and combat environmental problems.
Whether Europe can reach across constituencies to create consensus, however, has been an open, and suddenly pressing, question.
“The European Union will now have to prove whether it is just a fair-weather union or has a real joint political destiny,” said Stefan Kornelius, the foreign editor of the German newspaper Süddeutsche Zeitung. “We always said you can’t really have a currency union without a political union, and we don’t have one. There is no joint fiscal policy, no joint tax policy, no joint policy on which industries to subsidize or not. And none of the leaders is strong enough to pull the others out of the mud.”
Thomas Klau, Paris director of the European Council on Foreign Relations, an independent research and advocacy group, said, “This crisis affects the political union that backs the euro and of course the E.U. as a whole, and solidarity is at the heart of the debate.”
The crisis also has implications for Washington, which wants a European Union that can promote common interests in places like Afghanistan and the Middle East with financial and military help.
“All of that is in doubt if the cornerstone of the E.U. — its internal market, economic union and solidarity — is in question,” said Ronald D. Asmus, a former State Department official who runs the Brussels office of the German Marshall Fund.
The problems are basically twofold: within the inner core of nations that use the euro as their common currency, which together have an economy roughly the size of the United States’; and within the larger European Union.
The 16 nations that use the euro — introduced in 1999, and one of the proudest European accomplishments — must submit to the monetary leadership of the European Central Bank. That keeps some members hardest hit by the economic downturn, like Ireland, Spain, Italy and Greece, from unilaterally taking radical steps to stimulate their economies.
Germany once vowed never to bail out weaker members in return for giving up its strong national currency, the deutsche mark. But German leaders are now faced with the unpalatable prospect of having to put German money at risk to bail out less responsible partners that do not adhere to European fiscal rules.
Within the larger European Union, fissures are growing between older members and newer ones, especially those that lived under the yoke of Soviet socialism. Some countries of Central Europe, like the Czech Republic and Poland, are doing relatively well. Others, including Hungary, Romania and the Baltic states, are in a state of near-meltdown.
But only two newer members — tiny Slovenia and Slovakia — are protected by being among the countries that use the euro, and there was little support on Sunday for changing the rules to allow more to join quickly.
Many new members have seen their currencies plummet against the euro. That has made their debt repayments to European banks, their primary lenders, a much greater burden even as the global recession has meant a plunge in orders from consumers in the West. Some countries are asking for aid, both from their European partners and from the International Monetary Fund, to prop up their currencies and the banks.
While Western European countries are reluctant, with their own problems both at home and among the countries using the euro, there is a deep interconnectedness in any case.
Much of the debt at risk in Eastern Europe is on the books of euro zone banks — especially ones in Austria and Italy. The same is true of problems farther afield, in Ukraine, which is not yet a member.
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Olivier Hoslet/European Pressphoto Agency
The leaders of European Union countries who gathered Sunday in Brussels included, from left, Sergei Stanishev of Bulgaria, Nicolas Sarkozy of France, Andrus Ansip of Estonia, Demetris Christofias of Cyprus, Mirek Topolanek of the Czech Republic and Lawrence Gonzi of Malta.
An urgent call from Hungary for a large bailout for newer, Eastern members was bluntly rejected by Europe’s strongest economy, Germany, and received little support from other countries. Chancellor Angela Merkel of Germany, facing federal elections in September, said countries must be dealt with on a case-by-case basis.
“Saying that the situation is the same for all Central and Eastern European states, I don’t see that,” Mrs. Merkel told reporters. She spoke after Prime Minister Ferenc Gyurcsany of Hungary warned, “We should not allow that a new Iron Curtain should be set up and divide Europe.”
With uncertain leadership and few powerful collective institutions, the European Union is struggling with the strains this crisis has inevitably produced among 27 countries with uneven levels of development.
The traditional concept of “solidarity” is being undermined by protectionist pressures in some member countries and the rigors of maintaining a common currency, the euro, for a region that has diverse economic needs. Particularly acute economic problems in some newer members that once were part of the Soviet bloc have only made matters worse.
Europe’s difficulties are in sharp contrast to the American response. President Obama has just announced a budget that will send the United States more deeply into debt but that also makes an effort to redistribute income and overhaul health care, improve education and combat environmental problems.
Whether Europe can reach across constituencies to create consensus, however, has been an open, and suddenly pressing, question.
“The European Union will now have to prove whether it is just a fair-weather union or has a real joint political destiny,” said Stefan Kornelius, the foreign editor of the German newspaper Süddeutsche Zeitung. “We always said you can’t really have a currency union without a political union, and we don’t have one. There is no joint fiscal policy, no joint tax policy, no joint policy on which industries to subsidize or not. And none of the leaders is strong enough to pull the others out of the mud.”
Thomas Klau, Paris director of the European Council on Foreign Relations, an independent research and advocacy group, said, “This crisis affects the political union that backs the euro and of course the E.U. as a whole, and solidarity is at the heart of the debate.”
The crisis also has implications for Washington, which wants a European Union that can promote common interests in places like Afghanistan and the Middle East with financial and military help.
“All of that is in doubt if the cornerstone of the E.U. — its internal market, economic union and solidarity — is in question,” said Ronald D. Asmus, a former State Department official who runs the Brussels office of the German Marshall Fund.
The problems are basically twofold: within the inner core of nations that use the euro as their common currency, which together have an economy roughly the size of the United States’; and within the larger European Union.
The 16 nations that use the euro — introduced in 1999, and one of the proudest European accomplishments — must submit to the monetary leadership of the European Central Bank. That keeps some members hardest hit by the economic downturn, like Ireland, Spain, Italy and Greece, from unilaterally taking radical steps to stimulate their economies.
Germany once vowed never to bail out weaker members in return for giving up its strong national currency, the deutsche mark. But German leaders are now faced with the unpalatable prospect of having to put German money at risk to bail out less responsible partners that do not adhere to European fiscal rules.
Within the larger European Union, fissures are growing between older members and newer ones, especially those that lived under the yoke of Soviet socialism. Some countries of Central Europe, like the Czech Republic and Poland, are doing relatively well. Others, including Hungary, Romania and the Baltic states, are in a state of near-meltdown.
But only two newer members — tiny Slovenia and Slovakia — are protected by being among the countries that use the euro, and there was little support on Sunday for changing the rules to allow more to join quickly.
Many new members have seen their currencies plummet against the euro. That has made their debt repayments to European banks, their primary lenders, a much greater burden even as the global recession has meant a plunge in orders from consumers in the West. Some countries are asking for aid, both from their European partners and from the International Monetary Fund, to prop up their currencies and the banks.
While Western European countries are reluctant, with their own problems both at home and among the countries using the euro, there is a deep interconnectedness in any case.
Much of the debt at risk in Eastern Europe is on the books of euro zone banks — especially ones in Austria and Italy. The same is true of problems farther afield, in Ukraine, which is not yet a member.
South Africa’s 23% Jobless Rate Probably Increased: Week Ahead
March 2 (Bloomberg) -- South Africa’s unemployment rate, the highest of 61 countries tracked by Bloomberg, may have increased for the first time in three years as manufacturers and miners cut jobs.
The rate probably rose in the fourth quarter from 23 percent in the previous three months, according to Sanlam Investment Management and Old Mutual Investment Group, two of South Africa’s three largest private money managers. The statistics office will publish the data at 11:30 a.m. in Pretoria today.
South Africa’s economy, the biggest on the continent, contracted for the first time in a decade in the fourth quarter as a global economic recession slashed demand for platinum and steel. ArcelorMittal South Africa Ltd., Africa’s largest steelmaker, cut 1,000 contractor jobs in December, while carmakers such as General Motors Corp. shut its South African plant for most of December.
“The outlook is bleak,” said Arthur Kamp, an economist at Cape Town-based Sanlam. “Private sector fixed investment growth has slowed and will probably decline this year. That is going to be a drag on employment. We are seeing job losses in the mining and manufacturing industries now, but that will likely spread to the retail and financial services sectors.”
Election Promise
Gross domestic product contracted an annualized 1.8 percent in the fourth quarter, undermining a government pledge to cut the unemployment rate to 14 percent by 2014. The ruling African National Congress promised in its election manifesto this year to make “decent work opportunities” the main focus of its economic policy.
“I would expect the unemployment rate to rise,” said Rian Le Roux, chief economist of Cape Town-based Old Mutual. “We’ll see another poor GDP growth number in the first quarter, if not a contraction.”
Investec Asset Management will tomorrow publish the Purchasing Managers Index, an indicator of manufacturing output. The index has been below 50, signaling a contraction in production, since May 2008.
The National Association of Automobile Manufacturers will also publish vehicle sales data for February tomorrow.
The Reserve Bank is scheduled to release gross gold and foreign currency reserves data for February on March 6. Reserves fell for the first time in three months in January after the dollar strengthened, cutting the value of reserves held in euros and other currencies, the bank said on Feb. 6.
Earnings Decline
On the corporate front, Standard Bank Group Ltd., Africa’s biggest lender, may post a decline of as much as 12 percent in full-year earnings per share as the economy faltered and it sold new stock to Industrial & Commercial Bank of China Ltd., the lender said Feb. 20. The earnings will be published March 5.
Sanlam Ltd., the largest South Africa-based insurer, also reports full-year earnings March 5 and may say per-share earnings before one-time items fell between 35 percent and 45 percent after tumbling stock markets cut the value of its investments, the Cape Town-based company said Feb. 6.
The rand gained for the first time in three weeks, climbing 0.5 percent against the dollar last week, to close at 10.0703. Government bonds fell for a fourth week, with the yield on the benchmark 13.5 percent security due September 2015 rising to 8.04 percent from 7.99 percent a week before. Bond yields move inversely to prices.
The benchmark FTSE/JSE Africa All Share index declined 4.8 percent, the third weekly drop. Sappi Ltd., the world’s largest maker of glossy paper, tumbled 21 percent. Anglo Platinum Ltd., the world’s biggest producer of the metal, declined 16 percent.
The rate probably rose in the fourth quarter from 23 percent in the previous three months, according to Sanlam Investment Management and Old Mutual Investment Group, two of South Africa’s three largest private money managers. The statistics office will publish the data at 11:30 a.m. in Pretoria today.
South Africa’s economy, the biggest on the continent, contracted for the first time in a decade in the fourth quarter as a global economic recession slashed demand for platinum and steel. ArcelorMittal South Africa Ltd., Africa’s largest steelmaker, cut 1,000 contractor jobs in December, while carmakers such as General Motors Corp. shut its South African plant for most of December.
“The outlook is bleak,” said Arthur Kamp, an economist at Cape Town-based Sanlam. “Private sector fixed investment growth has slowed and will probably decline this year. That is going to be a drag on employment. We are seeing job losses in the mining and manufacturing industries now, but that will likely spread to the retail and financial services sectors.”
Election Promise
Gross domestic product contracted an annualized 1.8 percent in the fourth quarter, undermining a government pledge to cut the unemployment rate to 14 percent by 2014. The ruling African National Congress promised in its election manifesto this year to make “decent work opportunities” the main focus of its economic policy.
“I would expect the unemployment rate to rise,” said Rian Le Roux, chief economist of Cape Town-based Old Mutual. “We’ll see another poor GDP growth number in the first quarter, if not a contraction.”
Investec Asset Management will tomorrow publish the Purchasing Managers Index, an indicator of manufacturing output. The index has been below 50, signaling a contraction in production, since May 2008.
The National Association of Automobile Manufacturers will also publish vehicle sales data for February tomorrow.
The Reserve Bank is scheduled to release gross gold and foreign currency reserves data for February on March 6. Reserves fell for the first time in three months in January after the dollar strengthened, cutting the value of reserves held in euros and other currencies, the bank said on Feb. 6.
Earnings Decline
On the corporate front, Standard Bank Group Ltd., Africa’s biggest lender, may post a decline of as much as 12 percent in full-year earnings per share as the economy faltered and it sold new stock to Industrial & Commercial Bank of China Ltd., the lender said Feb. 20. The earnings will be published March 5.
Sanlam Ltd., the largest South Africa-based insurer, also reports full-year earnings March 5 and may say per-share earnings before one-time items fell between 35 percent and 45 percent after tumbling stock markets cut the value of its investments, the Cape Town-based company said Feb. 6.
The rand gained for the first time in three weeks, climbing 0.5 percent against the dollar last week, to close at 10.0703. Government bonds fell for a fourth week, with the yield on the benchmark 13.5 percent security due September 2015 rising to 8.04 percent from 7.99 percent a week before. Bond yields move inversely to prices.
The benchmark FTSE/JSE Africa All Share index declined 4.8 percent, the third weekly drop. Sappi Ltd., the world’s largest maker of glossy paper, tumbled 21 percent. Anglo Platinum Ltd., the world’s biggest producer of the metal, declined 16 percent.
HSBC May Sell $17 Billion of Shares to Boost Capital
March 2 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank by market value, may raise about 12 billion pounds ($17 billion) to bolster capital as bad U.S. loans erode earnings, said two people with knowledge of the situation.
The bank will consider a rights offering, said the people, who declined to be identified because terms of the transaction haven’t been completed. The Financial Times reported Feb. 28 that Goldman Sachs Group Inc. and JPMorgan Cazenove were hired to underwrite the sale.
Financial institutions in Europe, led by UBS AG and Royal Bank of Scotland Group Plc, have been forced to raise more than $355 billion because of credit market losses and investment writedowns, according to data compiled by Bloomberg. Higher capital levels would give London-based HSBC the ability to buy assets from cash-strapped rivals, the FT said.
“The share sale could eliminate market concerns about the bank’s capital problem,” said Lee Yuk-kei, Hong Kong-based analyst at Core Pacific-Yamaichi International Ltd.
HSBC’s shares will be suspended from trading in Hong Kong, it said in a statement filed to the city’s stock exchange today. Richard Lindsay, a London-based spokesman for the bank, declined to comment on the capital-raising plans.
HSBC plans to announce a two-for-five rights issue, priced at about 300 pence a share, almost 40 percent below the stock’s closing price of 491.25 pence in London on Feb. 27, the Sunday Telegraph reported yesterday, citing unidentified people close to the company.
Tier 1 Ratio
The bank’s Tier 1 capital ratio -- a measure of financial strength -- will rise to 10.5 percent after the rights offer, the Sunday Times reported yesterday, without citing anyone.
HSBC is also expected to announce plans to shrink its U.S. consumer finance operations, the Financial Times reported, citing people familiar with the issue. It plans to scale back its U.S. credit-card and mortgage lending unit and will close its consumer subprime lending to new business, the newspaper said.
The share sale will probably be announced when the company releases second-half results at 8:30 a.m. London time today, the FT said.
“HSBC isn’t raising capital for fear of current losses, it is looking forward and putting itself in a very strong position beyond this crisis,” said Howard Wheeldon, senior strategist at BGC Partners in London.
The offering likely will set a U.K. record for a rights offer funded by private investors, surpassing Royal Bank of Scotland’s 12.3 billion-pound sale last June.
Bad-Loan Provisions
HSBC, unlike Royal Bank of Scotland, hasn’t been bailed out by the U.K. government. The company has, though, racked up $42.3 billion of bad-loan provisions since the start of 2006, chiefly at its U.S. unit. Banks and insurers worldwide have suffered more than $1.1 trillion of losses and writedowns amid the worst financial crisis since World War II.
“HSBC previously had one of the strongest capital ratios relative to other banks, yet it is now suffering somewhat by comparison as others around them build up capital,” said Mamoun Tazi, an analyst at MF Global Securities Ltd. in London with a “buy” rating on the stock.
HSBC’s Tier 1 capital ratio stood at 8.9 percent as of Sept. 30, near the top end of its 7.5 percent to 9.0 percent range. The company had a loan-to-deposit ratio of 88 percent then.
In a separate step to retain capital, the bank may cut its full-year dividend by as much as 50 percent according to Simon Willis, an analyst at NCB Stockbrokers Ltd. in London. Derek Chambers, an analyst at Standard & Poor’s Equity Research in London, expects a 20 percent cut in the dividend.
Declined 32 Percent
HSBC has declined 32 percent over the last year, valuing the bank at 59.7 billion pounds. The 65-member Bloomberg Europe Banks Index has dropped 68 percent in that period.
HSBC’s net income for the six months to Dec. 31 probably fell 29 percent to $5.85 billion, compared with $8.24 billion a year earlier, according to the median estimate of 10 analysts in a Bloomberg News survey. Bad-loan provisions likely increased 20 percent to $13.1 billion, according to the median estimate of five analysts.
The company bought subprime-mortgage lender Household International, renamed HSBC Finance, for $15.5 billion in 2003. The bank has reduced lending, fired managers and sold parts of the business to reduce provisions at the unit and control losses. It has rejected pressure from shareholder Knight Vinke Asset Management LLC to separate the operation.
In the second half, losses in North America likely widened to $3.59 billion from $2.34 billion, according to the five analysts surveyed, driven by consumer and corporate loan defaults.
The bank will consider a rights offering, said the people, who declined to be identified because terms of the transaction haven’t been completed. The Financial Times reported Feb. 28 that Goldman Sachs Group Inc. and JPMorgan Cazenove were hired to underwrite the sale.
Financial institutions in Europe, led by UBS AG and Royal Bank of Scotland Group Plc, have been forced to raise more than $355 billion because of credit market losses and investment writedowns, according to data compiled by Bloomberg. Higher capital levels would give London-based HSBC the ability to buy assets from cash-strapped rivals, the FT said.
“The share sale could eliminate market concerns about the bank’s capital problem,” said Lee Yuk-kei, Hong Kong-based analyst at Core Pacific-Yamaichi International Ltd.
HSBC’s shares will be suspended from trading in Hong Kong, it said in a statement filed to the city’s stock exchange today. Richard Lindsay, a London-based spokesman for the bank, declined to comment on the capital-raising plans.
HSBC plans to announce a two-for-five rights issue, priced at about 300 pence a share, almost 40 percent below the stock’s closing price of 491.25 pence in London on Feb. 27, the Sunday Telegraph reported yesterday, citing unidentified people close to the company.
Tier 1 Ratio
The bank’s Tier 1 capital ratio -- a measure of financial strength -- will rise to 10.5 percent after the rights offer, the Sunday Times reported yesterday, without citing anyone.
HSBC is also expected to announce plans to shrink its U.S. consumer finance operations, the Financial Times reported, citing people familiar with the issue. It plans to scale back its U.S. credit-card and mortgage lending unit and will close its consumer subprime lending to new business, the newspaper said.
The share sale will probably be announced when the company releases second-half results at 8:30 a.m. London time today, the FT said.
“HSBC isn’t raising capital for fear of current losses, it is looking forward and putting itself in a very strong position beyond this crisis,” said Howard Wheeldon, senior strategist at BGC Partners in London.
The offering likely will set a U.K. record for a rights offer funded by private investors, surpassing Royal Bank of Scotland’s 12.3 billion-pound sale last June.
Bad-Loan Provisions
HSBC, unlike Royal Bank of Scotland, hasn’t been bailed out by the U.K. government. The company has, though, racked up $42.3 billion of bad-loan provisions since the start of 2006, chiefly at its U.S. unit. Banks and insurers worldwide have suffered more than $1.1 trillion of losses and writedowns amid the worst financial crisis since World War II.
“HSBC previously had one of the strongest capital ratios relative to other banks, yet it is now suffering somewhat by comparison as others around them build up capital,” said Mamoun Tazi, an analyst at MF Global Securities Ltd. in London with a “buy” rating on the stock.
HSBC’s Tier 1 capital ratio stood at 8.9 percent as of Sept. 30, near the top end of its 7.5 percent to 9.0 percent range. The company had a loan-to-deposit ratio of 88 percent then.
In a separate step to retain capital, the bank may cut its full-year dividend by as much as 50 percent according to Simon Willis, an analyst at NCB Stockbrokers Ltd. in London. Derek Chambers, an analyst at Standard & Poor’s Equity Research in London, expects a 20 percent cut in the dividend.
Declined 32 Percent
HSBC has declined 32 percent over the last year, valuing the bank at 59.7 billion pounds. The 65-member Bloomberg Europe Banks Index has dropped 68 percent in that period.
HSBC’s net income for the six months to Dec. 31 probably fell 29 percent to $5.85 billion, compared with $8.24 billion a year earlier, according to the median estimate of 10 analysts in a Bloomberg News survey. Bad-loan provisions likely increased 20 percent to $13.1 billion, according to the median estimate of five analysts.
The company bought subprime-mortgage lender Household International, renamed HSBC Finance, for $15.5 billion in 2003. The bank has reduced lending, fired managers and sold parts of the business to reduce provisions at the unit and control losses. It has rejected pressure from shareholder Knight Vinke Asset Management LLC to separate the operation.
In the second half, losses in North America likely widened to $3.59 billion from $2.34 billion, according to the five analysts surveyed, driven by consumer and corporate loan defaults.
Asian Stocks Fall as Global Recession Deepens; Samsung Declines
March 2 (Bloomberg) -- Asian stocks slid, dragging the Nikkei 225 Stock Average down the most in five weeks, and U.S. futures fell as declines in Japanese wages and South Korean exports fueled concerns the global recession is deepening.
Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, retreated 5.1 percent as bond risk rose and the nation’s wage declines accelerated in January. Samsung Electronics Co., the world’s biggest memory-chip maker, sank 3 percent in Seoul after the country’s exports dropped for a fourth month in February. BHP Billiton Ltd., the world’s largest mining company, lost 3.4 percent in Sydney as metal and oil prices slumped. Treasuries rose for the first time in a week.
“We don’t know yet how long this global recession will last,” said Hisakazu Amano, head of fund management at Tokyo- based T&D Asset Management Co., which oversees about $39 billion. “With the market dominated by an atmosphere of malaise and despair, there are few people who dare to buy.”
The MSCI Asia Pacific Index dropped 3 percent to 72.92 at 11:51 a.m. in Tokyo. The gauge has fallen 18 percent in 2009, extending last year’s record 43 percent tumble, as the world’s largest economies sank deeper into recession.
The Nikkei 225 Stock Average declined 3.2 percent, the most since Jan. 23, to 7,325.96. Hong Kong’s Hang Seng Index sank 3.6 percent, while South Korea’s Kospi slid 3.9 percent. All markets open for trading declined.
Macquarie Group Ltd., Australia’s largest investment bank, slumped 8.7 percent, as it said it had no outstanding capital commitments to its listed funds. HSBC Holdings Plc, Europe’s biggest bank, was halted from trading in Hong Kong on speculation it may raise $17 billion to bolster capital.
Worsening Recession
Futures on the Standard & Poor’s 500 Index dropped 1.4 percent today. The gauge fell 2.4 percent to a 12-year low on Feb. 27 after the Commerce Department said the U.S. economy shrank in the three months to December by the most since 1982. Citigroup Inc. tumbled 39 percent the same day as a government move to cut shareholders’ stakes in the company by 74 percent drove down U.S. bank stocks.
The worsening global recession has pummeled Asian exports, prompting companies from Toyota Motor Corp. to Sony Corp. to fire workers and halt factory lines. Monthly wages in Japan fell 1.3 percent from a year earlier, after declining 0.8 percent in December, the Labor Ministry said in Tokyo today.
Mitsubishi UFJ tumbled 5.1 percent to 431 yen in Tokyo. Mizuho Financial Group Inc., Japan’s second-largest bank, lost 4.3 percent to 180 yen.
Government Support?
Governments from the U.S. to China and Australia have introduced policies this year to ease the financial crisis and revive the global economy. Japan may buy as much as 10 trillion yen ($102 billion) in corporate bonds held by banks, the Mainichi newspaper reported today.
“We’ll see more statistics that show the deterioration of the global economy,” Seiji Arai, a strategist at Mitsubishi UFJ Securities Co., said in an interview with Bloomberg Television. “In Tokyo, there is growing optimism that the government will take measures to shore up the stock market and implement additional economic measures.”
The cost of protecting Asia-Pacific bonds from default jumped, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 17.5 basis points, according to ICAP Plc.
Samsung Electronics declined 3 percent to 462,500 won. Hynix Semiconductor Inc., Asia’s second-biggest maker of memory chips, slumped 3.1 percent to 8,370 won. South Korea’s overseas shipments decreased 17.1 percent in February from a year earlier following January’s record 33.8 percent slump, the government reported today.
Copper, Oil
BHP dropped 3.4 percent to A$27.85 as copper futures in New York lost 0.9 percent in after-hours trading, extending Feb. 27’s 2.6 percent drop. Oil in New York slipped 1.9 percent today.
Rio Tinto Group, the world’s third-largest miner, slumped 6.6 percent to A$44.14. Cnooc Ltd., China’s largest offshore oil producer, fell 4.1 percent to A$6.52 in Hong Kong. Inpex Corp., Japan’s No. 1 oil explorer, lost 5.6 percent to 640,000 yen.
Macquarie, which last week said it had no plans to raise capital, fell for a 10th day, slumping 8.7 percent to A$15.51. The company said today it wasn’t planning to increase its investment in its listed funds.
HSBC’s Hong Kong shares, which were suspended today, ended last week at HK$56.95. The bank’s U.S.-traded receipts fell 5.1 percent to the equivalent of HK$53.99 on Feb. 27.
The lender may raise about 12 billion pounds ($17 billion) to bolster capital as bad U.S. loans erode earnings, said two people with knowledge of the situation. The lender will consider a rights offering, the people said.
Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, retreated 5.1 percent as bond risk rose and the nation’s wage declines accelerated in January. Samsung Electronics Co., the world’s biggest memory-chip maker, sank 3 percent in Seoul after the country’s exports dropped for a fourth month in February. BHP Billiton Ltd., the world’s largest mining company, lost 3.4 percent in Sydney as metal and oil prices slumped. Treasuries rose for the first time in a week.
“We don’t know yet how long this global recession will last,” said Hisakazu Amano, head of fund management at Tokyo- based T&D Asset Management Co., which oversees about $39 billion. “With the market dominated by an atmosphere of malaise and despair, there are few people who dare to buy.”
The MSCI Asia Pacific Index dropped 3 percent to 72.92 at 11:51 a.m. in Tokyo. The gauge has fallen 18 percent in 2009, extending last year’s record 43 percent tumble, as the world’s largest economies sank deeper into recession.
The Nikkei 225 Stock Average declined 3.2 percent, the most since Jan. 23, to 7,325.96. Hong Kong’s Hang Seng Index sank 3.6 percent, while South Korea’s Kospi slid 3.9 percent. All markets open for trading declined.
Macquarie Group Ltd., Australia’s largest investment bank, slumped 8.7 percent, as it said it had no outstanding capital commitments to its listed funds. HSBC Holdings Plc, Europe’s biggest bank, was halted from trading in Hong Kong on speculation it may raise $17 billion to bolster capital.
Worsening Recession
Futures on the Standard & Poor’s 500 Index dropped 1.4 percent today. The gauge fell 2.4 percent to a 12-year low on Feb. 27 after the Commerce Department said the U.S. economy shrank in the three months to December by the most since 1982. Citigroup Inc. tumbled 39 percent the same day as a government move to cut shareholders’ stakes in the company by 74 percent drove down U.S. bank stocks.
The worsening global recession has pummeled Asian exports, prompting companies from Toyota Motor Corp. to Sony Corp. to fire workers and halt factory lines. Monthly wages in Japan fell 1.3 percent from a year earlier, after declining 0.8 percent in December, the Labor Ministry said in Tokyo today.
Mitsubishi UFJ tumbled 5.1 percent to 431 yen in Tokyo. Mizuho Financial Group Inc., Japan’s second-largest bank, lost 4.3 percent to 180 yen.
Government Support?
Governments from the U.S. to China and Australia have introduced policies this year to ease the financial crisis and revive the global economy. Japan may buy as much as 10 trillion yen ($102 billion) in corporate bonds held by banks, the Mainichi newspaper reported today.
“We’ll see more statistics that show the deterioration of the global economy,” Seiji Arai, a strategist at Mitsubishi UFJ Securities Co., said in an interview with Bloomberg Television. “In Tokyo, there is growing optimism that the government will take measures to shore up the stock market and implement additional economic measures.”
The cost of protecting Asia-Pacific bonds from default jumped, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 17.5 basis points, according to ICAP Plc.
Samsung Electronics declined 3 percent to 462,500 won. Hynix Semiconductor Inc., Asia’s second-biggest maker of memory chips, slumped 3.1 percent to 8,370 won. South Korea’s overseas shipments decreased 17.1 percent in February from a year earlier following January’s record 33.8 percent slump, the government reported today.
Copper, Oil
BHP dropped 3.4 percent to A$27.85 as copper futures in New York lost 0.9 percent in after-hours trading, extending Feb. 27’s 2.6 percent drop. Oil in New York slipped 1.9 percent today.
Rio Tinto Group, the world’s third-largest miner, slumped 6.6 percent to A$44.14. Cnooc Ltd., China’s largest offshore oil producer, fell 4.1 percent to A$6.52 in Hong Kong. Inpex Corp., Japan’s No. 1 oil explorer, lost 5.6 percent to 640,000 yen.
Macquarie, which last week said it had no plans to raise capital, fell for a 10th day, slumping 8.7 percent to A$15.51. The company said today it wasn’t planning to increase its investment in its listed funds.
HSBC’s Hong Kong shares, which were suspended today, ended last week at HK$56.95. The bank’s U.S.-traded receipts fell 5.1 percent to the equivalent of HK$53.99 on Feb. 27.
The lender may raise about 12 billion pounds ($17 billion) to bolster capital as bad U.S. loans erode earnings, said two people with knowledge of the situation. The lender will consider a rights offering, the people said.
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