Asian markets headed into the weekend on a mixed note Friday, with financial stocks sagging after a pullback on Wall Street, while a surge in commodity prices overnight boosted resource stocks across the region.
With Japanese markets closed for a holiday and Dow Jones Industrial Average futures pointing lower, some of the recent euphoria over the U.S. Federal Reserve's decision to buy longer-dated Treasurys was replaced by caution.
"Traders are left wondering whether these steps are being taken because the Fed fears the ongoing slowdown could be even worse than currently expected - and they are getting their retaliation in first," said IG Index Chief Market Strategist David Jones.
"There is definitely a feeling around stock markets at the moment that the recent momentum has waned and we are back into wait-and-see mode."
Australia's S&P/ASX 200 fell 0.4%, Taiwan's Taiex lost 1.5% and Hong Kong's Hang Seng Index declined 2.3% to 12833.51.
Among gainers, China's Shanghai Composite rose 0.7% and South Korea's Kospi added 0.8%. India's Sensex fell 0.4% while Singapore's Straits Times gained 0.8%.
Elsewhere in Southeast Asia, the Malaysian index rose 0.5%, Indonesian shares gained 1.5%, Philippine stocks rose 3% and Thailand's SET Index ended 0.5% higher.
For the week, the Shanghai Composite finished with solid gains of more than 7%, while Japan's Nikkei 225 Average gained 5% in the week to Thursday.
Some analysts had a positive outlook for the markets.
"History shows that bear markets end when monetary policy is eased aggressively and the banking system is sorted," HSBC strategist Garry Evans wrote in a report. "With further positive surprises possible and quantitative easing beginning, there seems more risk on the upside than on the downside for markets now."
In a note to clients, UBS Research global equity strategist Jeffrey Palma wrote: "Recent market moves look to us to be more related to expectations of longer-term structural growth prospects rather than near-term cyclical ones."
Financials declined as investors locked in profits after recent gains. National Australia Bank fell 2% in Sydney, Shinhan Financial Group lost 2% in Seoul and United Overseas Bank fell 0.9% in Singapore afternoon trading.
Mining and energy-related companies were buoyed by gains in prices for base and precious metals as well as crude-oil. April crude-oil futures ended above $50 a barrel and gold prices climbed sharply than 8% in New York Thursday.
Rio Tinto and BHP Billiton jumped 3% in Sydney, Korea Zinc surged 9.8% in Seoul and Cnooc added 1.2% and Aluminum Corp. of China climbed 2.3% in a downbeat Hong Kong.
Macquarie Airports tumbled 8.2% after saying passenger traffic continued to decline across its portfolio of global airports in February, with traffic at the Sydney Airport down 7.8% from a year ago.
In Shanghai, expectations of government-led infrastructure construction lifted resource stocks, with Jiangxi Copper surging 10%.
Shares of Alibaba.com plunged 12.4% in Hong Kong a day after it reported weak earnings. Citigroup downgraded the stock to a sell Friday.
Chemicals maker Nuplex Industries plummeted 52.3% in New Zealand, as trading resumed trade after it announced a 132.8 million New Zealand dollar (US$74.4 million) capital-raising through a seven-for-one rights issue.
Recent strength in the New Zealand dollar was curbing export-linked stocks, with Fisher & Paykel Healthcare down 4.4% and Rakon off 4.7%.
Currency trade was fairly quiet because of the Japanese holiday. The euro was around $1.3585, from $1.3678 late in New York. The U.S. dollar was around 95.31 yen, from 94.41 yen.
Westpac senior currency strategist Sean Callow said dollar-bearishness remained, but there would be limits to its near-term fall from here. He expected it to find support against the yen around 93.55 yen.
NabCapital senior currency strategist John Kyriakopoulos added further gains in the Australian dollar, which has been buoyed by a general return of risk appetite, may now be "harder won," with the U.S. dollar heading toward oversold levels.
April Nymex futures were recently down 87 cents on Nymex at $50.74 a barrel. Crude had gained Thursday along with other commodities on hopes the Fed's actions to unlock credit and boost economic growth would help demand for raw materials.
Spot gold reversed early declines to rise $3.50 to $962.50 a troy ounce recently, after rallying more than $30 overnight.
Concerns that aggressive quantitative easing in the U.S. would spur inflation were still supporting the metal, said HSBC analyst James Steel. Gold is often used a hedge against inflation.
Still, "it's by no means clear whether the proposed Fed actions will lead to higher inflation," Mr. Steel added.
Saturday, March 21, 2009
Administration Seeks Increase in Oversight of Executive Pay
WASHINGTON — The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.
The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.
Officials said the proposal would seek a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.
It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.
The administration has been considering increased oversight of executive pay for some time, but the issue was heightened in recent days as public fury over bonuses spilled into the regulatory effort.
The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could go beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.
One proposal could impose greater requirements on company boards to tie executive compensation more closely to corporate performance and to take other steps to ensure that compensation was aligned with the financial interest of the company.
The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission.
During the presidential campaign, Mr. Obama repeatedly urged regulators to adopt new rules to give shareholders a greater voice in setting executive pay for all public companies. And last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses that exceeded one-third of their annual pay.
The regulatory plan is being put together ahead of the meeting of the Group of 20 industrialized and developing nations in London. The meeting, which begins April 2, is expected to be dominated by the global financial crisis and discussions about better oversight of large financial companies, whose problems could threaten to undermine international markets.
An important part of the plan still under debate is how to regulate the shadow banking system that Wall Street firms use to package and trade mortgage-backed securities, the so-called toxic assets held by many banks and blamed for the credit crisis.
Officials said the plan would also call for increasing the levels of capital that financial institutions need to hold to absorb possible losses. In a sign of the economic system’s fragility, officials said the administration would emphasize that those heightened standards should not be imposed now because they could discourage more lending. Rather, they would be put in place after the economy began to rebound.
“The argument some are making is that they don’t want to be stepping on the gas pedal and the brake at the same time,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics and a former top official at the International Monetary Fund.
Administration officials are also debating how tightly to supervise hedge funds.
A broad consensus has emerged among regulators and administration officials that hedge funds must be registered and more closely monitored, probably by the Securities and Exchange Commission. But officials have not decided how much the funds will have to disclose about their investments and trading practices. The officials spoke on condition of anonymity because the regulatory plan was still being formulated and they did not want to upstage Mr. Obama or Treasury Secretary Timothy F. Geithner, who will describe the plan when he appears before Congress on Thursday.
A central aspect of the plan, which has already been announced by the administration, would give the government greater authority to take over and resolve problems at large troubled companies not now regulated by Washington, like insurance companies and hedge funds.
That proposal would, for instance, make it easier for the government to cancel bonus contracts like those given to executives at the American International Group, which have stoked a political furor. Under the proposal, the Treasury secretary would have the authority to seize and wind down a struggling institution after consulting with the president and upon the recommendation of two-thirds of the Federal Reserve board.
Long before he became Treasury secretary, Mr. Geithner sought broader authority for the government to resolve problems at financial institutions not under bank regulators’ supervision.
The government now has the power to take over only the banking unit that controls federally insured deposits of large troubled institutions, not the parent company — a limit that could pose problems if large financial conglomerates like Citigroup or Bank of America continued to spiral downward.
In unveiling the regulatory plan, Mr. Obama would signal to Europe that he intended to crack down on the risk-taking and other free-wheeling practices by the financial industry that resulted in the global economic meltdown.
France and Germany especially have suggested that the better response is not more government spending but tighter regulation.
The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.
Officials said the proposal would seek a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.
It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.
The administration has been considering increased oversight of executive pay for some time, but the issue was heightened in recent days as public fury over bonuses spilled into the regulatory effort.
The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could go beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.
One proposal could impose greater requirements on company boards to tie executive compensation more closely to corporate performance and to take other steps to ensure that compensation was aligned with the financial interest of the company.
The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission.
During the presidential campaign, Mr. Obama repeatedly urged regulators to adopt new rules to give shareholders a greater voice in setting executive pay for all public companies. And last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses that exceeded one-third of their annual pay.
The regulatory plan is being put together ahead of the meeting of the Group of 20 industrialized and developing nations in London. The meeting, which begins April 2, is expected to be dominated by the global financial crisis and discussions about better oversight of large financial companies, whose problems could threaten to undermine international markets.
An important part of the plan still under debate is how to regulate the shadow banking system that Wall Street firms use to package and trade mortgage-backed securities, the so-called toxic assets held by many banks and blamed for the credit crisis.
Officials said the plan would also call for increasing the levels of capital that financial institutions need to hold to absorb possible losses. In a sign of the economic system’s fragility, officials said the administration would emphasize that those heightened standards should not be imposed now because they could discourage more lending. Rather, they would be put in place after the economy began to rebound.
“The argument some are making is that they don’t want to be stepping on the gas pedal and the brake at the same time,” said Morris Goldstein, a senior fellow at the Peterson Institute for International Economics and a former top official at the International Monetary Fund.
Administration officials are also debating how tightly to supervise hedge funds.
A broad consensus has emerged among regulators and administration officials that hedge funds must be registered and more closely monitored, probably by the Securities and Exchange Commission. But officials have not decided how much the funds will have to disclose about their investments and trading practices. The officials spoke on condition of anonymity because the regulatory plan was still being formulated and they did not want to upstage Mr. Obama or Treasury Secretary Timothy F. Geithner, who will describe the plan when he appears before Congress on Thursday.
A central aspect of the plan, which has already been announced by the administration, would give the government greater authority to take over and resolve problems at large troubled companies not now regulated by Washington, like insurance companies and hedge funds.
That proposal would, for instance, make it easier for the government to cancel bonus contracts like those given to executives at the American International Group, which have stoked a political furor. Under the proposal, the Treasury secretary would have the authority to seize and wind down a struggling institution after consulting with the president and upon the recommendation of two-thirds of the Federal Reserve board.
Long before he became Treasury secretary, Mr. Geithner sought broader authority for the government to resolve problems at financial institutions not under bank regulators’ supervision.
The government now has the power to take over only the banking unit that controls federally insured deposits of large troubled institutions, not the parent company — a limit that could pose problems if large financial conglomerates like Citigroup or Bank of America continued to spiral downward.
In unveiling the regulatory plan, Mr. Obama would signal to Europe that he intended to crack down on the risk-taking and other free-wheeling practices by the financial industry that resulted in the global economic meltdown.
France and Germany especially have suggested that the better response is not more government spending but tighter regulation.
India’s Ahluwalia Says Economy May Grow Less Than 7% (Update1)
India’s economy probably will grow less than 7 percent in the fiscal year ending March 31, said Montek Singh Ahluwalia, deputy chairman of the nation’s Planning Commission.
Recent economic data show “a more serious slowdown” than the government had expected, he said today via videolink from New Delhi to a conference in Philadelphia sponsored by the University of Pennsylvania’s Wharton business school.
The International Monetary Fund said this past week that India’s economy will weaken more than government forecasts as the global recession reduces corporate investment. Indian banks are reluctant to extend loans in a slowing economy for fear of piling up bad debts, even after the central bank has cut its key repurchase rate to an all-time low of 5 percent.
Growth this year may be “less than 7 percent,” while the government had expected it would be about 7.1 percent, Ahluwalia said. That’s “certainly not a bad growth rate,” given the global recession, he said. The global financial crisis has “had an impact on the real economy” through India’s trade and investment links with the rest of the world, he said.
Ahluwalia said he expects the government that emerges from the nation’s coming parliamentary elections will continue the fiscal stimulus policies of the current administration and that growth over the current fiscal year and the next may average 6.5 percent. He didn’t make a specific forecast for the coming fiscal year.
IMF Forecast
The IMF said March 17 that India’s growth will be at 6.3 percent this fiscal year and will slow to 5.3 percent in the year starting April 1.
The country is experiencing “some withdrawal” of foreign private capital, though that will return once the global economy recovers and if the new government keeps policies in place, Ahluwalia said.
“There will be some loss of growth,” he said. Still, India is “well positioned” and the government’s stimulus efforts is aimed at investing in areas such as infrastructure to correct the “neglect of the past.”
India’s financial sector is in “pretty strong shape,” Ahluwalia also said.
India and China offer “spectacular opportunities” for investors, said investor Jim Rogers, chairman of Singapore-based Rogers Holdings and the author of books including “Hot Commodities,” “Investment Biker” and “Adventure Capitalist.”
India’s politicians are one of the “major problems,” Rogers told the Wharton India Economic Forum via videolink from Singapore. The country has the “single worst bureaucracy in the world.” If a person can deal with that, “there are fortunes” to be made by investing in India, Rogers said.
Recent economic data show “a more serious slowdown” than the government had expected, he said today via videolink from New Delhi to a conference in Philadelphia sponsored by the University of Pennsylvania’s Wharton business school.
The International Monetary Fund said this past week that India’s economy will weaken more than government forecasts as the global recession reduces corporate investment. Indian banks are reluctant to extend loans in a slowing economy for fear of piling up bad debts, even after the central bank has cut its key repurchase rate to an all-time low of 5 percent.
Growth this year may be “less than 7 percent,” while the government had expected it would be about 7.1 percent, Ahluwalia said. That’s “certainly not a bad growth rate,” given the global recession, he said. The global financial crisis has “had an impact on the real economy” through India’s trade and investment links with the rest of the world, he said.
Ahluwalia said he expects the government that emerges from the nation’s coming parliamentary elections will continue the fiscal stimulus policies of the current administration and that growth over the current fiscal year and the next may average 6.5 percent. He didn’t make a specific forecast for the coming fiscal year.
IMF Forecast
The IMF said March 17 that India’s growth will be at 6.3 percent this fiscal year and will slow to 5.3 percent in the year starting April 1.
The country is experiencing “some withdrawal” of foreign private capital, though that will return once the global economy recovers and if the new government keeps policies in place, Ahluwalia said.
“There will be some loss of growth,” he said. Still, India is “well positioned” and the government’s stimulus efforts is aimed at investing in areas such as infrastructure to correct the “neglect of the past.”
India’s financial sector is in “pretty strong shape,” Ahluwalia also said.
India and China offer “spectacular opportunities” for investors, said investor Jim Rogers, chairman of Singapore-based Rogers Holdings and the author of books including “Hot Commodities,” “Investment Biker” and “Adventure Capitalist.”
India’s politicians are one of the “major problems,” Rogers told the Wharton India Economic Forum via videolink from Singapore. The country has the “single worst bureaucracy in the world.” If a person can deal with that, “there are fortunes” to be made by investing in India, Rogers said.
Learn English or get out: Canada
Toronto: Hinting that language skills will soon become a must for getting citizenship, Canadian immigration minister Jason Kenney on Friday said immigrants should either learn English or French, or face denial of citizenship.
Speaking at an immigration conference in Calgary, the minister said new immigrants must have to learn one of the two official languages (English and French) to integrate into Canada society.
Giving an example of how immigrants are not making efforts to learn any of the two official languages, the minister cited his experiences during his visit to India in January. He said when he attended a few immigration interviews in Delhi, he was surprised to find a woman who had been a Canadian citizen for 12 years but had no knowledge of English.
“This woman was sponsoring a spouse to come to Canada...It made me wonder—is this an isolated example? Regrettably, I don’t think it’s isolated enough,’’ the minister said.
The minister emphasized that the immigration system needs to be overhauled to make learning of official
languages mandatory for those seeking to become citizens of this country.
“In terms of the citizenship, if you can’t complete the test in one of those two languages, you are not supposed to become a citizen, which I don’t think is harsh. It is just basically saying go back and study more and come back to us when you can get by in one of those languages,’’ the minister said at the conference.
Of the about 250,000 new immigrants into Canada each year, more than 66,000 were admitted in the family category where language skills are not mandatory. This has led to huge investment in government programmes to impart language skills to these people so that compete and integrate in Canadian society.
The immigration minister recalled citizenship judges telling him that they frequently give oath of citizenship to people who have no language skills to compete in their adopted society. Last year, the current Conservative government tightened the immigration system by passing a law to give the immigration minister discretionary powers to decide how many immigrants to admit each year or whom to deny entry. IANS
Speaking at an immigration conference in Calgary, the minister said new immigrants must have to learn one of the two official languages (English and French) to integrate into Canada society.
Giving an example of how immigrants are not making efforts to learn any of the two official languages, the minister cited his experiences during his visit to India in January. He said when he attended a few immigration interviews in Delhi, he was surprised to find a woman who had been a Canadian citizen for 12 years but had no knowledge of English.
“This woman was sponsoring a spouse to come to Canada...It made me wonder—is this an isolated example? Regrettably, I don’t think it’s isolated enough,’’ the minister said.
The minister emphasized that the immigration system needs to be overhauled to make learning of official
languages mandatory for those seeking to become citizens of this country.
“In terms of the citizenship, if you can’t complete the test in one of those two languages, you are not supposed to become a citizen, which I don’t think is harsh. It is just basically saying go back and study more and come back to us when you can get by in one of those languages,’’ the minister said at the conference.
Of the about 250,000 new immigrants into Canada each year, more than 66,000 were admitted in the family category where language skills are not mandatory. This has led to huge investment in government programmes to impart language skills to these people so that compete and integrate in Canadian society.
The immigration minister recalled citizenship judges telling him that they frequently give oath of citizenship to people who have no language skills to compete in their adopted society. Last year, the current Conservative government tightened the immigration system by passing a law to give the immigration minister discretionary powers to decide how many immigrants to admit each year or whom to deny entry. IANS
US tightens rules on hiring H1B workers
Washington: Dealing a blow to Indian professionals seeking employment in the US, the Obama administration has announced additional measures for hiring foreign specialists under the H-1B visa work programme making it more difficult for the firms receiving federal bailout to hire overseas workers.
These measures come about 10 days before the US Citizenship and Immigration Services (USCIS) starts accepting petitions for new H-1B visas for the fiscal year beginning October 1, 2009.
The USCIS on Friday announced the measures to enforce the provisions of the new Employ American Workers Act (EAWA) of the American Recovery and Reinvestment Act, which prohibits hiring of H-1B visa holders by US companies that receive the federal aid money. Indian nationals account for bulk of the coveted H-1B visas.
Under this legislation any company that has received covered funding and seeks to hire new H-1B workers is considered an ‘H-1B dependent employer’.
All H-1B dependent employers must make additional attestations to the US Department of Labour (DOL) when filing the Labour Condition Application (LCA), the USCIS said.
The USCIS reminded petitioners that “a valid LCA must be on file with DOL at the time the H-1B petition is filed with USCIS.”
This means if the petitioner indicates on its petition that it is subject to the EAWA, but the Labour Condition Application does not contain proper attestations relating to H-1B dependent employers, USCIS will deny the H-1B petition.
The USCIS also announced that it will start accepting petitions for H-1B work visas for next fiscal from April 1.
Lottery would decide successful applicants if the number of petitions for the fiscal beginning October 1 this year cross the annual cap, it said.
In a statement, the USCIS said the numerical limitation on H- 1B petitions for fiscal year 2010 is 65,000. Additionally, the first 20,000 H-1B petitions filed on behalf of aliens who have earned a US masters degree or higher are exempted from this cap.
However, petitions for new H-1B employment are exempted from the annual cap if the beneficiaries will work at institutions of higher education or a related or affiliated non-profit entities, or at non-profit research organisations or governmental research bodies, the USCIS said.
Thus, employers may continue to file petitions for these exempted H-1B categories seeking work dates starting in financial year 2009 or 2010. PTI
Republicans block tax on AIG bonuses
Senate Republicans are drawing out a flap that has made the Obama administration squirm, applying the brakes to Democratic attempts to quickly tax away most of the bonuses at troubled insurance giant AIG. Senator Jon Kyl, the Republicans’ vote counter, blocked Democratic efforts saying, “I don’t believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding potential consequences.” AP
These measures come about 10 days before the US Citizenship and Immigration Services (USCIS) starts accepting petitions for new H-1B visas for the fiscal year beginning October 1, 2009.
The USCIS on Friday announced the measures to enforce the provisions of the new Employ American Workers Act (EAWA) of the American Recovery and Reinvestment Act, which prohibits hiring of H-1B visa holders by US companies that receive the federal aid money. Indian nationals account for bulk of the coveted H-1B visas.
Under this legislation any company that has received covered funding and seeks to hire new H-1B workers is considered an ‘H-1B dependent employer’.
All H-1B dependent employers must make additional attestations to the US Department of Labour (DOL) when filing the Labour Condition Application (LCA), the USCIS said.
The USCIS reminded petitioners that “a valid LCA must be on file with DOL at the time the H-1B petition is filed with USCIS.”
This means if the petitioner indicates on its petition that it is subject to the EAWA, but the Labour Condition Application does not contain proper attestations relating to H-1B dependent employers, USCIS will deny the H-1B petition.
The USCIS also announced that it will start accepting petitions for H-1B work visas for next fiscal from April 1.
Lottery would decide successful applicants if the number of petitions for the fiscal beginning October 1 this year cross the annual cap, it said.
In a statement, the USCIS said the numerical limitation on H- 1B petitions for fiscal year 2010 is 65,000. Additionally, the first 20,000 H-1B petitions filed on behalf of aliens who have earned a US masters degree or higher are exempted from this cap.
However, petitions for new H-1B employment are exempted from the annual cap if the beneficiaries will work at institutions of higher education or a related or affiliated non-profit entities, or at non-profit research organisations or governmental research bodies, the USCIS said.
Thus, employers may continue to file petitions for these exempted H-1B categories seeking work dates starting in financial year 2009 or 2010. PTI
Republicans block tax on AIG bonuses
Senate Republicans are drawing out a flap that has made the Obama administration squirm, applying the brakes to Democratic attempts to quickly tax away most of the bonuses at troubled insurance giant AIG. Senator Jon Kyl, the Republicans’ vote counter, blocked Democratic efforts saying, “I don’t believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding potential consequences.” AP
Friday, March 20, 2009
Asian Stocks Post Biggest Weekly Gain Since 2007 on Fed Plans
March 21 (Bloomberg) -- Asian stocks posted their biggest weekly rally since August 2007 as the U.S. and Japan stepped up measures to ease the financial crisis and revive economic growth.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, jumped 17 percent in Tokyo after the Federal Reserve joined the Bank of Japan in buying government debt. Commonwealth Bank of Australia, the nation’s largest mortgage lender, rose 12 percent in Sydney after the Reserve Bank of Australia said it has scope to further cut rates. PetroChina Ltd., the nation’s biggest oil producer, rose 4 percent as crude rose to a three-month high.
“The liquidity injections from the Fed and the Bank of Japan have boosted sentiment in the market,” said Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which manages $27 billion of Asian assets. “People may start to take profit on this bear-market rally. We’re still a long way from the end of this crisis.”
The MSCI Asia Pacific Index rose 6.4 percent to 79.53 this week, adding to last week’s 3.9 percent advance. Japan’s Nikkei 225 Stock Average climbed 5 percent in a holiday-shortened week. Hong Kong’s Hang Seng Index rose 2.5 percent. South Korea’s Kospi Index jumped 4 percent.
Standard Chartered Plc, the U.K.’s second-largest bank by market value, gained 11 percent in Hong Kong after saying it does not need to raise capital. China Huiyuan Juice Group Ltd. plunged 58 percent in Hong Kong after Chinese regulators blocked Coca-Cola Co.’s $2.3 billion takeover bid. Casio Computer Co., the maker of G-Shock watches and Exilim cameras, tumbled 17 percent in Tokyo as it forecast its first loss in seven years.
Concerted Action
Governments from the U.S. to China and Japan are widening measures to ease the financial crisis, which has caused more than $1 trillion of losses worldwide, and avert what the World Bank predicts will be the first global economic contraction since World War II.
The Fed said on March 18 it will purchase $300 billion in Treasury securities and an additional $750 billion of mortgage securities. The Fed will use newly created money to fund the purchases, increasing the supply of funds in the market and helping to drive down rates.
That follows a Bank of Japan move to increase its monthly purchases of government debt from bank 1.8 trillion yen ($18.3 billion) from 1.4 trillion currently. The central bank also said this week it may provide as much as 1 trillion yen in subordinated loans to banks.
“It’s positive that governments are making concerted efforts to revive the economy but it will take some time before consumers become comfortable spending again,” said Yoji Takeda who manages about $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “It’s hard to be 100 percent bullish on equities.”
Good Start
Mitsubishi UFJ gained 17 percent to 489 yen in Tokyo. Mizuho Financial Group Inc., Japan’s second-largest bank, jumped 17 percent to 209 yen. Standard Chartered gained 11 percent to HK$99.15 in Hong Kong as it joined global banks including Citigroup Inc. and JPMorgan Chase & Co. in saying they had a good start for the year.
Commonwealth Bank of Australia climbed 12 percent to A$34. Macquarie Group Ltd., the nation’s biggest investment bank, soared 20 percent to A$23.50. The country has more scope than most others to respond to the worsening slump in the global economy, Malcolm Edey, assistant governor of the Reserve Bank of Australia, said on March 19.
PetroChina gained 4 percent to HK$5.98 in Hong Kong, adding to last week’s 12 percent jump, as crude prices surged 10.4 percent to $51.06 a barrel, the highest since Nov. 28. Cnooc Ltd., China’s largest offshore oil producer, jumped 5.8 percent to HK$7.53.
Huiyuan, China’s biggest domestic juicemaker, plummeted 58 percent to HK$4.33. The Ministry of Commerce said Coca-Cola’s proposed takeover would have been “negative for competition.”
Casio tumbled 17 percent to 640 yen. The company predicted a net loss of 23 billion yen in the year to March 31, compared with its forecast last month for profit of 1.5 billion yen.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, jumped 17 percent in Tokyo after the Federal Reserve joined the Bank of Japan in buying government debt. Commonwealth Bank of Australia, the nation’s largest mortgage lender, rose 12 percent in Sydney after the Reserve Bank of Australia said it has scope to further cut rates. PetroChina Ltd., the nation’s biggest oil producer, rose 4 percent as crude rose to a three-month high.
“The liquidity injections from the Fed and the Bank of Japan have boosted sentiment in the market,” said Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which manages $27 billion of Asian assets. “People may start to take profit on this bear-market rally. We’re still a long way from the end of this crisis.”
The MSCI Asia Pacific Index rose 6.4 percent to 79.53 this week, adding to last week’s 3.9 percent advance. Japan’s Nikkei 225 Stock Average climbed 5 percent in a holiday-shortened week. Hong Kong’s Hang Seng Index rose 2.5 percent. South Korea’s Kospi Index jumped 4 percent.
Standard Chartered Plc, the U.K.’s second-largest bank by market value, gained 11 percent in Hong Kong after saying it does not need to raise capital. China Huiyuan Juice Group Ltd. plunged 58 percent in Hong Kong after Chinese regulators blocked Coca-Cola Co.’s $2.3 billion takeover bid. Casio Computer Co., the maker of G-Shock watches and Exilim cameras, tumbled 17 percent in Tokyo as it forecast its first loss in seven years.
Concerted Action
Governments from the U.S. to China and Japan are widening measures to ease the financial crisis, which has caused more than $1 trillion of losses worldwide, and avert what the World Bank predicts will be the first global economic contraction since World War II.
The Fed said on March 18 it will purchase $300 billion in Treasury securities and an additional $750 billion of mortgage securities. The Fed will use newly created money to fund the purchases, increasing the supply of funds in the market and helping to drive down rates.
That follows a Bank of Japan move to increase its monthly purchases of government debt from bank 1.8 trillion yen ($18.3 billion) from 1.4 trillion currently. The central bank also said this week it may provide as much as 1 trillion yen in subordinated loans to banks.
“It’s positive that governments are making concerted efforts to revive the economy but it will take some time before consumers become comfortable spending again,” said Yoji Takeda who manages about $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “It’s hard to be 100 percent bullish on equities.”
Good Start
Mitsubishi UFJ gained 17 percent to 489 yen in Tokyo. Mizuho Financial Group Inc., Japan’s second-largest bank, jumped 17 percent to 209 yen. Standard Chartered gained 11 percent to HK$99.15 in Hong Kong as it joined global banks including Citigroup Inc. and JPMorgan Chase & Co. in saying they had a good start for the year.
Commonwealth Bank of Australia climbed 12 percent to A$34. Macquarie Group Ltd., the nation’s biggest investment bank, soared 20 percent to A$23.50. The country has more scope than most others to respond to the worsening slump in the global economy, Malcolm Edey, assistant governor of the Reserve Bank of Australia, said on March 19.
PetroChina gained 4 percent to HK$5.98 in Hong Kong, adding to last week’s 12 percent jump, as crude prices surged 10.4 percent to $51.06 a barrel, the highest since Nov. 28. Cnooc Ltd., China’s largest offshore oil producer, jumped 5.8 percent to HK$7.53.
Huiyuan, China’s biggest domestic juicemaker, plummeted 58 percent to HK$4.33. The Ministry of Commerce said Coca-Cola’s proposed takeover would have been “negative for competition.”
Casio tumbled 17 percent to 640 yen. The company predicted a net loss of 23 billion yen in the year to March 31, compared with its forecast last month for profit of 1.5 billion yen.
Financial Shares Lead the Market Down
21 st march , 2009
Stocks dropped on Friday as investors worried about the consequences of efforts on Capitol Hill to claw back bonuses from firms that received government bailouts.
Financial shares pulled down the broader markets, giving back many of their gains from earlier in the week. The Dow Jones industrial average fell 122.42 points, or 1.65 percent, to 7,278.38, while the broader Standard & Poor’s 500-stock index lost 15.5 points, or 1.98 percent, to 768.54. The technology-heavy Nasdaq composite index declined 26.21 points, or 1.77 percent, to 1,457.27.
On Thursday, the House of Representatives responded to growing furor over bonuses at the American International Group by passing a bill that would impose a 90 percent tax on bonuses awarded this year by companies that received $5 billion or more in bailout money. The Senate is expected to take up its version of the bill next week.
Shares of Bank of America, JPMorgan Chase and U.S. Bancorp all declined. Bank of America fell 74 cents, 10.68 percent, to $6.19; JPMorgan Chase dropped $1.80, or 7.21 percent, to $23.15; while U.S. Bancorp lost 84 cents, or 5.89 percent, to $13.42.
But investors appeared to applaud a shuffle in management at Citigroup, lifting shares 2 cents, or 0.77 percent, to $2.62, after the bank named a new financial chief and put its current chief financial officer in charge of its Citi Holdings unit, a division the bank created to hold toxic assets and other businesses it plans to sell.
Shares of General Electric fell 59 cents, or 5.82 percent, to $9.54, a day after G.E. held a five-hour meeting to try to assuage concerns about its financial arm, GE Capital. As the credit crisis has deepened, the company has cut its dividend and lost its triple-A credit rating, and it is facing questions about whether it needs to raise more capital.
Even a speech by the Federal Reserve chairman, Ben S. Bernanke, was not able to break Wall Street out of its malaise. In recent weeks, stock indexes have surged after remarks from Mr. Bernanke.
On Friday, Mr. Bernanke told a gathering of community bankers that some of the Fed’s measures to attack the financial crisis were taking hold, and called for smarter regulation of the financial system.
At the same event, Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, again warned that it would lose about $65 billion over the next five years because of bank failures, in addition to $18 billion from last year. She said the declining insurance fund was likely to fall further.
Gains earlier in the week lifted some of the major indexes from their lowest point in some 12 years. For the week, the Dow rose less than 0.8 percent, while the S.& P. 500 gained 1.6 percent, and the Nasdaq jumped 1.8 percent. The weekly gains, coupled with a surge in the S.& P. 500 last week, represented Wall Street’s first two-week winning streak since the beginning of 2009.
The S.& P. 500 is down 14.91 percent for the year, while the Dow Jones industrials are off by 17.07 percent and the Nasdaq by 7.59 percent.
Corners of the financial market that reacted sharply to the Federal Reserve’s plans to buy $1 trillion in securities unwound a bit on Friday. The dollar gained back some ground against the euro and the yen, and gold and oil prices fell back.
The Treasury’s 10-year note fell 9/32, to 101. The yield, which moves in the opposite direction from the price, rose to 2.63 percent, from 2.6 percent Thursday.
Stocks dropped on Friday as investors worried about the consequences of efforts on Capitol Hill to claw back bonuses from firms that received government bailouts.
Financial shares pulled down the broader markets, giving back many of their gains from earlier in the week. The Dow Jones industrial average fell 122.42 points, or 1.65 percent, to 7,278.38, while the broader Standard & Poor’s 500-stock index lost 15.5 points, or 1.98 percent, to 768.54. The technology-heavy Nasdaq composite index declined 26.21 points, or 1.77 percent, to 1,457.27.
On Thursday, the House of Representatives responded to growing furor over bonuses at the American International Group by passing a bill that would impose a 90 percent tax on bonuses awarded this year by companies that received $5 billion or more in bailout money. The Senate is expected to take up its version of the bill next week.
Shares of Bank of America, JPMorgan Chase and U.S. Bancorp all declined. Bank of America fell 74 cents, 10.68 percent, to $6.19; JPMorgan Chase dropped $1.80, or 7.21 percent, to $23.15; while U.S. Bancorp lost 84 cents, or 5.89 percent, to $13.42.
But investors appeared to applaud a shuffle in management at Citigroup, lifting shares 2 cents, or 0.77 percent, to $2.62, after the bank named a new financial chief and put its current chief financial officer in charge of its Citi Holdings unit, a division the bank created to hold toxic assets and other businesses it plans to sell.
Shares of General Electric fell 59 cents, or 5.82 percent, to $9.54, a day after G.E. held a five-hour meeting to try to assuage concerns about its financial arm, GE Capital. As the credit crisis has deepened, the company has cut its dividend and lost its triple-A credit rating, and it is facing questions about whether it needs to raise more capital.
Even a speech by the Federal Reserve chairman, Ben S. Bernanke, was not able to break Wall Street out of its malaise. In recent weeks, stock indexes have surged after remarks from Mr. Bernanke.
On Friday, Mr. Bernanke told a gathering of community bankers that some of the Fed’s measures to attack the financial crisis were taking hold, and called for smarter regulation of the financial system.
At the same event, Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, again warned that it would lose about $65 billion over the next five years because of bank failures, in addition to $18 billion from last year. She said the declining insurance fund was likely to fall further.
Gains earlier in the week lifted some of the major indexes from their lowest point in some 12 years. For the week, the Dow rose less than 0.8 percent, while the S.& P. 500 gained 1.6 percent, and the Nasdaq jumped 1.8 percent. The weekly gains, coupled with a surge in the S.& P. 500 last week, represented Wall Street’s first two-week winning streak since the beginning of 2009.
The S.& P. 500 is down 14.91 percent for the year, while the Dow Jones industrials are off by 17.07 percent and the Nasdaq by 7.59 percent.
Corners of the financial market that reacted sharply to the Federal Reserve’s plans to buy $1 trillion in securities unwound a bit on Friday. The dollar gained back some ground against the euro and the yen, and gold and oil prices fell back.
The Treasury’s 10-year note fell 9/32, to 101. The yield, which moves in the opposite direction from the price, rose to 2.63 percent, from 2.6 percent Thursday.
Recession to claim one in 56 UK companies
Published: March 21 2009 02:26 | Last updated: March 21 2009 02:26
One in every 56 businesses is expected to collapse this year as the recession intensifies, a leading accounting firm has warned.
BDO Stoy Hayward says the rate of business failures will increase by 59 per cent by the end of this year to 36,000 companies, up from 22,600, or one in 87, in 2008.
EDITOR’S CHOICE
Cycle couriers saddled with drop in custom - Mar-21
Broker admits error over dates - Mar-20
Reforms urged for professional services - Mar-16
PM to reject minimum price on alcohol - Mar-16
Bill prompts downgrade of Wal-Mart - Mar-11
Retail sales slow after ‘discount-driven blip’ - Mar-10
As the UK economy contracts at its fastest rate since the second world war, the firm’s Industry Watch report predicts that more company casualties will follow in 2010. It says 39,000 businesses, or one in 50, are likely to fail next year.
Though all sectors will be affected, construction and property are expected to feel the worst effects of the downturn. The report predicts that 3.2 per cent of companies in the sector, as many as 10,300 businesses, will go under.
Manufacturing will be next worst hit, with 2,300 companies, or about 2.3 per cent of the sector, to close.
Shay Bannon, head of business restructuring at BDO Stoy Hayward, said: “The deteriorating economy and expectations of a drawn-out recession has led to a downward revision in the UK outlook and has severely impacted the survival rate of UK businesses.”
The report says the slowdown in consumer spending and corporate demand, coupled with shattered business confidence, has sharply pushed up the business failure rate this year. Investments by companies in their businesses are forecast to fall by 15.6 per cent in 2009 while consumer spending is likely to be down 1.8 per cent on last year.
Mr Bannon added: “Companies are tightening their belts and ... the government is also increasing its initiatives to kick start the economy, and both should have an effect.
“However, because of the uncertainty among businesses on how long it will take for an upturn to emerge and lead to a more positive impact on their business, for some, surviving tomorrow will not be possible.”
One in every 56 businesses is expected to collapse this year as the recession intensifies, a leading accounting firm has warned.
BDO Stoy Hayward says the rate of business failures will increase by 59 per cent by the end of this year to 36,000 companies, up from 22,600, or one in 87, in 2008.
EDITOR’S CHOICE
Cycle couriers saddled with drop in custom - Mar-21
Broker admits error over dates - Mar-20
Reforms urged for professional services - Mar-16
PM to reject minimum price on alcohol - Mar-16
Bill prompts downgrade of Wal-Mart - Mar-11
Retail sales slow after ‘discount-driven blip’ - Mar-10
As the UK economy contracts at its fastest rate since the second world war, the firm’s Industry Watch report predicts that more company casualties will follow in 2010. It says 39,000 businesses, or one in 50, are likely to fail next year.
Though all sectors will be affected, construction and property are expected to feel the worst effects of the downturn. The report predicts that 3.2 per cent of companies in the sector, as many as 10,300 businesses, will go under.
Manufacturing will be next worst hit, with 2,300 companies, or about 2.3 per cent of the sector, to close.
Shay Bannon, head of business restructuring at BDO Stoy Hayward, said: “The deteriorating economy and expectations of a drawn-out recession has led to a downward revision in the UK outlook and has severely impacted the survival rate of UK businesses.”
The report says the slowdown in consumer spending and corporate demand, coupled with shattered business confidence, has sharply pushed up the business failure rate this year. Investments by companies in their businesses are forecast to fall by 15.6 per cent in 2009 while consumer spending is likely to be down 1.8 per cent on last year.
Mr Bannon added: “Companies are tightening their belts and ... the government is also increasing its initiatives to kick start the economy, and both should have an effect.
“However, because of the uncertainty among businesses on how long it will take for an upturn to emerge and lead to a more positive impact on their business, for some, surviving tomorrow will not be possible.”
Thursday, March 19, 2009
Indian Output May Signal Stockmarket’s ‘Bottom,’ JPMorgan Says
March 20 (Bloomberg) -- Indian stocks may “bottom” in the middle of the year after the slump in industrial production ends, JPMorgan Chase & Co. said.
Output typically troughs two to four months before India’s equity markets, JPMorgan analysts led by Bharat Iyer wrote in a report dated yesterday. Production may drop 3 percent over March and April before recovering, they said.
The Bombay Stock Exchange Sensitive Index has dropped 6.7 percent this year, adding to a 52 percent slump in 2008, as the global financial crisis and recession weighed on the corporate earnings outlook. In the last economic cycle, industrial production started recovering in May 2001 while equity markets reached a bottom in September that year, JPMorgan said.
“The above analysis would suggest that the equity markets could bottom out over June to July,” the analysts wrote. “This would also be a decisive phase for the equity markets as there should be clarity by then on the results of the national elections and the progress of the monsoon and its seasonal impact on the economy.”
Output at factories, utilities and mines dropped 0.5 percent in January from a year earlier, declining for the third time in four months, the Central Statistical Organization said on March 12. Economists had expected a 0.9 percent contraction.
Prime Minister Manmohan Singh has reduced taxes on consumer products and the central bank slashed interest rates to a record low to revive an economy that some analysts fear may slow further as elections in April and May stymie policymaking in the world’s biggest democracy.
Output typically troughs two to four months before India’s equity markets, JPMorgan analysts led by Bharat Iyer wrote in a report dated yesterday. Production may drop 3 percent over March and April before recovering, they said.
The Bombay Stock Exchange Sensitive Index has dropped 6.7 percent this year, adding to a 52 percent slump in 2008, as the global financial crisis and recession weighed on the corporate earnings outlook. In the last economic cycle, industrial production started recovering in May 2001 while equity markets reached a bottom in September that year, JPMorgan said.
“The above analysis would suggest that the equity markets could bottom out over June to July,” the analysts wrote. “This would also be a decisive phase for the equity markets as there should be clarity by then on the results of the national elections and the progress of the monsoon and its seasonal impact on the economy.”
Output at factories, utilities and mines dropped 0.5 percent in January from a year earlier, declining for the third time in four months, the Central Statistical Organization said on March 12. Economists had expected a 0.9 percent contraction.
Prime Minister Manmohan Singh has reduced taxes on consumer products and the central bank slashed interest rates to a record low to revive an economy that some analysts fear may slow further as elections in April and May stymie policymaking in the world’s biggest democracy.
Asian Stocks Fall as Valuations Climb; Commonwealth Declines
March 20 (Bloomberg) -- Asian stocks fell after the benchmark index’s biggest weekly rally since August 2007 drove valuations to the highest in more than a year.
Commonwealth Bank of Australia fell 3.4 percent, leading the first decline among financial companies in six days, amid skepticism U.S. and Japanese plans to purchase bonds will ease the financial crisis. China Mobile Ltd. dropped 3.9 percent in Hong Kong on speculation an investor was seeking to sell shares in the company. Alibaba.com Ltd., operator of China’s biggest trading Web site, lost 8.5 percent after profit missed analyst estimates. Japan’s stock market is closed for a holiday.
“We are not outright bullish on equities,” said Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion. “We’re seeing profit-taking on financial stocks. We need to see the credit market functioning normally before any rally can be sustained.”
The MSCI Asia Pacific excluding Japan Index dropped 0.5 percent to 234.90 as of 11:24 a.m. in Hong Kong, cutting its advance this week to 5.7 percent. The gauge that includes Japan has climbed 7.7 percent in the past five days, the most since August 2007, as banks including Barclays Plc and Standard Chartered Plc reported “strong” starts to the year.
Hong Kong’s Hang Seng Index fell 1.1 percent to 12,988.30, while Taiwan’s Taiex Index lost 1 percent. Most markets declined except South Korea, Indonesia, Thailand and the Philippines.
Nuplex Industries Ltd., which makes resins for paints and building products, plunged 53 percent in Wellington on a rights offer to bolster its balance sheet. BHP Billiton Ltd., the world’s largest mining company, rose 4.3 percent in Sydney, as commodity prices rallied.
Finance Stocks
Futures on the Standard & Poor’s 500 Index fell 0.7 percent. The gauge dropped 1.3 percent yesterday, led by financial shares, halting the S&P 500’s rebound from a 12-year low reached on March 9. The measure gained 16 percent in that time.
Commonwealth Bank of Australia fell 3.4 percent to A$32.86 in Sydney. Macquarie Group Ltd., Australia’s largest investment bank, dropped 3.8 percent to A$23.67. Hang Seng Bank Ltd., controlled by London-based HSBC Holdings Plc, slumped 2.6 percent to HK$76.50 in Hong Kong.
A gauge of finance stocks on the MSCI Asia Pacific excluding Japan Index fell 2.2 percent, snapping a five-day, 15 percent rally. The comments this week from Barclays and Standard Chartered added to similar statements from Citigroup Inc. and Bank of America Corp., which fueled speculation the worst of the financial crisis is over.
‘False Dawn’
Gains in the week have driven the average valuation of companies on the MSCI Asia Pacific Index to 15 times reported profit, the highest since January 2008, data compiled by Bloomberg show.
The rally is a “false dawn,” said Martin Marnick, head of trading at Helmsman Global Trading Ltd. in Hong Kong. He predicts stocks will fall in coming days.
China Mobile, the world’s largest cell-phone operator by users, slumped 3.9 percent to HK$64.10. An investor failed to sell about HK$4 billion ($516 million) of the company’s shares yesterday, Ming Pao Daily News reported, citing brokers it didn’t identify.
Alibaba fell 7.3 percent to HK$7.60 in Hong Kong. The company reported full-year net income of 1.2 billion yuan ($175.8 million), compared with the 1.26 billion yuan median in a Bloomberg survey of nine analysts.
In Wellington, Nuplex plummeted 50 percent to 53 New Zealand cents. The company plans to raise NZ$132.8 million ($74 million) through a seven-for-one rights offer at 23 cents each.
Commodity Prices
BHP gained 4.3 percent to A$32.60 as a measure of six metals in London jumped 5.6 percent yesterday, while gold futures in New York climbed the most since September.
Rio Tinto Group, the world’s third-largest mining company, added 3.4 percent to A$47.04. Posco, Asia’s third-largest steelmaker, gained 2.6 percent to 356,500 won. Newcrest Mining Ltd., Australia’s biggest gold producer, climbed 3.1 percent to A$34.11.
Santos Ltd., the nation’s third-largest oil and gas producer, jumped 3.3 percent to A$15.85 as crude oil futures surged 7.2 percent yesterday to $51.61 a barrel, the highest settlement since Nov. 28. Cnooc Ltd., China’s largest offshore oil producer, added 1.9 percent to HK$7.58.
“Investors are switching out from banks and into the resources stocks because they’re waiting for signs of improvement in the credit markets,” said Rob Patterson, who manages about $2 billion at Argo Investments Ltd. in Adelaide, Australia.
Commonwealth Bank of Australia fell 3.4 percent, leading the first decline among financial companies in six days, amid skepticism U.S. and Japanese plans to purchase bonds will ease the financial crisis. China Mobile Ltd. dropped 3.9 percent in Hong Kong on speculation an investor was seeking to sell shares in the company. Alibaba.com Ltd., operator of China’s biggest trading Web site, lost 8.5 percent after profit missed analyst estimates. Japan’s stock market is closed for a holiday.
“We are not outright bullish on equities,” said Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion. “We’re seeing profit-taking on financial stocks. We need to see the credit market functioning normally before any rally can be sustained.”
The MSCI Asia Pacific excluding Japan Index dropped 0.5 percent to 234.90 as of 11:24 a.m. in Hong Kong, cutting its advance this week to 5.7 percent. The gauge that includes Japan has climbed 7.7 percent in the past five days, the most since August 2007, as banks including Barclays Plc and Standard Chartered Plc reported “strong” starts to the year.
Hong Kong’s Hang Seng Index fell 1.1 percent to 12,988.30, while Taiwan’s Taiex Index lost 1 percent. Most markets declined except South Korea, Indonesia, Thailand and the Philippines.
Nuplex Industries Ltd., which makes resins for paints and building products, plunged 53 percent in Wellington on a rights offer to bolster its balance sheet. BHP Billiton Ltd., the world’s largest mining company, rose 4.3 percent in Sydney, as commodity prices rallied.
Finance Stocks
Futures on the Standard & Poor’s 500 Index fell 0.7 percent. The gauge dropped 1.3 percent yesterday, led by financial shares, halting the S&P 500’s rebound from a 12-year low reached on March 9. The measure gained 16 percent in that time.
Commonwealth Bank of Australia fell 3.4 percent to A$32.86 in Sydney. Macquarie Group Ltd., Australia’s largest investment bank, dropped 3.8 percent to A$23.67. Hang Seng Bank Ltd., controlled by London-based HSBC Holdings Plc, slumped 2.6 percent to HK$76.50 in Hong Kong.
A gauge of finance stocks on the MSCI Asia Pacific excluding Japan Index fell 2.2 percent, snapping a five-day, 15 percent rally. The comments this week from Barclays and Standard Chartered added to similar statements from Citigroup Inc. and Bank of America Corp., which fueled speculation the worst of the financial crisis is over.
‘False Dawn’
Gains in the week have driven the average valuation of companies on the MSCI Asia Pacific Index to 15 times reported profit, the highest since January 2008, data compiled by Bloomberg show.
The rally is a “false dawn,” said Martin Marnick, head of trading at Helmsman Global Trading Ltd. in Hong Kong. He predicts stocks will fall in coming days.
China Mobile, the world’s largest cell-phone operator by users, slumped 3.9 percent to HK$64.10. An investor failed to sell about HK$4 billion ($516 million) of the company’s shares yesterday, Ming Pao Daily News reported, citing brokers it didn’t identify.
Alibaba fell 7.3 percent to HK$7.60 in Hong Kong. The company reported full-year net income of 1.2 billion yuan ($175.8 million), compared with the 1.26 billion yuan median in a Bloomberg survey of nine analysts.
In Wellington, Nuplex plummeted 50 percent to 53 New Zealand cents. The company plans to raise NZ$132.8 million ($74 million) through a seven-for-one rights offer at 23 cents each.
Commodity Prices
BHP gained 4.3 percent to A$32.60 as a measure of six metals in London jumped 5.6 percent yesterday, while gold futures in New York climbed the most since September.
Rio Tinto Group, the world’s third-largest mining company, added 3.4 percent to A$47.04. Posco, Asia’s third-largest steelmaker, gained 2.6 percent to 356,500 won. Newcrest Mining Ltd., Australia’s biggest gold producer, climbed 3.1 percent to A$34.11.
Santos Ltd., the nation’s third-largest oil and gas producer, jumped 3.3 percent to A$15.85 as crude oil futures surged 7.2 percent yesterday to $51.61 a barrel, the highest settlement since Nov. 28. Cnooc Ltd., China’s largest offshore oil producer, added 1.9 percent to HK$7.58.
“Investors are switching out from banks and into the resources stocks because they’re waiting for signs of improvement in the credit markets,” said Rob Patterson, who manages about $2 billion at Argo Investments Ltd. in Adelaide, Australia.
India's Plan to Extend Trading Hours Will Drive Up Costs, Birla Says
March 20 (Bloomberg) -- India’s proposal to narrow the gap between local and overseas securities trading hours may be spurned by investors on concern it will boost costs, Birla Sun Life Asset Management Co. said.
Trading hours for stocks and derivatives may be increased, the Securities and Exchange Board of India said yesterday, seeking market feedback over the next three weeks.
“It will make life miserable,” Birla Sun Life’s Chief Investment Officer A. Balasubramaniam said in an interview late yesterday. The nation’s third-largest money manager oversees $9.6 billion of assets. “We should trade fewer hours as it will improve productivity.”
The local market would have to open 3 1/2 hours earlier at 6:30 a.m. to match the start in Singapore, where trading volume of India’s Nifty stock futures has surged 10-fold since February 2007. Higher costs outweigh any benefits from eliminating the delay, said Samir Arora, who runs an India-focused fund at Helios Capital Management.
“There should absolutely be no change or increase in timing,” the Singapore-based hedge fund manager said. “Investors and fund managers would be better off spending more time in analysis and research, which is best done when the markets are closed.”
Daily trading of Nifty futures in Singapore rose as high as 23,404 contracts last month from a peak of 2,266 contracts in February 2007, data compiled by Bloomberg show.
Singapore License
The National Stock Exchange of India, which licensed its benchmark S&P CNX Nifty Index to the Singapore Exchange, proposed the change because investors don’t want the gap, the Indian exchange said in an e-mailed response to questions late yesterday. The proposal isn’t linked to the Singapore Exchange’s license, the Indian bourse said.
“The feedback from our members is that it is inevitable over a period of time trading hours are extended and are more in line with international benchmarks,” National Stock Exchange said. It will extend the hours “when there is broad consensus from market participants,” the bourse said.
The National Stock Exchange was ranked the second-largest derivative bourse globally in 2007 in terms of the number of contracts traded in single-stock futures.
Nifty futures start trading on the Singapore Exchange at 9 a.m. Singapore time, or 6:30 a.m. India time. Indian stock markets open at 9:55 a.m. local time and shut at 3:30 p.m., about the same time as the close of futures trading in the city- state.
‘Benefits Both’
“SGX believes that trading in its listed futures contracts benefits both the index futures as well as its component stocks in the home exchanges,” Singapore Exchange said in an e-mailed response to queries.
India’s 5 1/2-hour trading day is sufficient to keep the local stock market competitive, said Kenneth Andrade, head of investments at IDFC Asset Management Co.
“It’s anyway virtually the entire day,” said Andrade, whose company oversees assets worth $1.8 billion in Mumbai. “If you can’t finish trading, you have to be inefficient.”
The cost to brokerages will “shoot up” as they would require two shifts to match Singapore’s opening, said Arun Kejriwal, founder of Kejriwal Research & Investment Services in Mumbai.
“Which country in the world opens its markets even before the newspaper is out?” he said. “Logistically, it will be a nightmare.”
Trading hours for stocks and derivatives may be increased, the Securities and Exchange Board of India said yesterday, seeking market feedback over the next three weeks.
“It will make life miserable,” Birla Sun Life’s Chief Investment Officer A. Balasubramaniam said in an interview late yesterday. The nation’s third-largest money manager oversees $9.6 billion of assets. “We should trade fewer hours as it will improve productivity.”
The local market would have to open 3 1/2 hours earlier at 6:30 a.m. to match the start in Singapore, where trading volume of India’s Nifty stock futures has surged 10-fold since February 2007. Higher costs outweigh any benefits from eliminating the delay, said Samir Arora, who runs an India-focused fund at Helios Capital Management.
“There should absolutely be no change or increase in timing,” the Singapore-based hedge fund manager said. “Investors and fund managers would be better off spending more time in analysis and research, which is best done when the markets are closed.”
Daily trading of Nifty futures in Singapore rose as high as 23,404 contracts last month from a peak of 2,266 contracts in February 2007, data compiled by Bloomberg show.
Singapore License
The National Stock Exchange of India, which licensed its benchmark S&P CNX Nifty Index to the Singapore Exchange, proposed the change because investors don’t want the gap, the Indian exchange said in an e-mailed response to questions late yesterday. The proposal isn’t linked to the Singapore Exchange’s license, the Indian bourse said.
“The feedback from our members is that it is inevitable over a period of time trading hours are extended and are more in line with international benchmarks,” National Stock Exchange said. It will extend the hours “when there is broad consensus from market participants,” the bourse said.
The National Stock Exchange was ranked the second-largest derivative bourse globally in 2007 in terms of the number of contracts traded in single-stock futures.
Nifty futures start trading on the Singapore Exchange at 9 a.m. Singapore time, or 6:30 a.m. India time. Indian stock markets open at 9:55 a.m. local time and shut at 3:30 p.m., about the same time as the close of futures trading in the city- state.
‘Benefits Both’
“SGX believes that trading in its listed futures contracts benefits both the index futures as well as its component stocks in the home exchanges,” Singapore Exchange said in an e-mailed response to queries.
India’s 5 1/2-hour trading day is sufficient to keep the local stock market competitive, said Kenneth Andrade, head of investments at IDFC Asset Management Co.
“It’s anyway virtually the entire day,” said Andrade, whose company oversees assets worth $1.8 billion in Mumbai. “If you can’t finish trading, you have to be inefficient.”
The cost to brokerages will “shoot up” as they would require two shifts to match Singapore’s opening, said Arun Kejriwal, founder of Kejriwal Research & Investment Services in Mumbai.
“Which country in the world opens its markets even before the newspaper is out?” he said. “Logistically, it will be a nightmare.”
Tuesday, March 17, 2009
FSA Report Promises a ‘Very British Revolution’ in Regulation
March 18 (Bloomberg) -- Financial Services Authority Chairman Adair Turner has promised to start a “revolution” in financial regulation with new rules for banks and hedge funds to address the worst economic crisis in 80 years.
The U.K. regulator said last month that a report to be issued today will discuss liquidity and capital rules, compensation, accounting, and how the FSA and the Bank of England can monitor risks to the financial system.
“This will be a very polite revolution,” said Simon Gleeson, a regulatory lawyer at London-based Clifford Chance LLP. “It’ll be a very British revolution, where not much is going to happen and everyone will be nice to each other.”
The FSA has come under fire for not doing enough to spot warning signs of the global financial crisis, which has led to the nationalization of Northern Rock Plc and Bradford & Bingley Plc, the takeover of a third bank, and the government holding majority stakes in two others.
The FSA report is one of several from regulatory agencies before the Group of 20 Nations’ summit in April in London, when lawmakers from around the world will try to redesign financial regulation. U.K. Prime Minister Gordon Brown asked Turner to lead the U.K.’s position on the global response to the crisis. The report’s themes, apart from the oversight of system-wide risk, are ones all regulators must discuss ahead of the summit.
No Coincidence
“There’s no coincidence at all in the timing,” said Bob Penn, a regulatory lawyer at Allen & Overy LLP. “This is a clear play to demonstrate thought-leadership, and is a plea for international consensus.”
The FSA said as early as June that it would press ahead with reforming liquidity rules even if other countries lag behind, and has published proposals for banks to hold more Treasury bonds. Similarly, it has published a draft code on compensation; and told banks that they should plan to move to conserve capital in the good times to draw on during the bad.
Different regulators moving at different speeds is the main hurdle to Turner’s proposals: financial regulation is dictated by directives from the European Union, and rules on capital are overseen by an international committee in Basel, Switzerland.
“What is needed is a revolution in Europe and a revolution in the United States,” said Jonathan McMahon, a former FSA supervisor now advising companies on regulation at Promontory Financial Group.
Catch Up With U.K.
There is an international consensus that hedge funds need greater supervision. The FSA already regulates hedge-fund managers and Hector Sants, the FSA’s chief executive officer, told the select committee last month that it would be a good idea for the rest of the world “to catch up” with the U.K.
The FSA said last month if hedge funds posed a risk to the economy if they failed, it would introduce capital and liquidity rules. An obstacle is that the funds are often based overseas, beyond the jurisdiction of the FSA, said McMahon.
At a parliamentary committee hearing last month, Turner also said there would be proposals to increase by “several times” the amount of capital banks hold against risks on their proprietary trading books. Proprietary trading is when a financial company trades securities and other financial instruments with its own money rather than for its customers.
Banks have “been able to trade in pretty much whatever market they choose in whatever instrument they like,” said McMahon. “It is certainly putting the brakes on some of the changes that have occurred over the last 20 years.”
Perhaps the biggest change will be in the way the FSA regulates. Turner told lawmakers that political pressure to use a “light touch” stopped the FSA from asking too many questions.
Scary Sants
The opposition Conservatives suggested last week that should they win the next general election, they may hand supervision of capital back to the Bank of England. The FSA was created by Gordon Brown in 1997 as one of his first acts as then-Chancellor of the Exchequer.
Sants said last week that “people should be frightened” of the FSA. He signaled a move away from principles-based regulation, where companies abide by 11 over-arching themes such as treating customers fairly.
He said the FSA will question the business models of financial companies, become involved in appointing senior executives -- and hold them to account when things go wrong.
“That will be heightening the risk for the FSA,” said Arnondo Chakrabarti, a regulatory lawyer at Allen & Overy. “People can say: ‘You were involved in those business decisions’ if things go wrong.”
The U.K. regulator said last month that a report to be issued today will discuss liquidity and capital rules, compensation, accounting, and how the FSA and the Bank of England can monitor risks to the financial system.
“This will be a very polite revolution,” said Simon Gleeson, a regulatory lawyer at London-based Clifford Chance LLP. “It’ll be a very British revolution, where not much is going to happen and everyone will be nice to each other.”
The FSA has come under fire for not doing enough to spot warning signs of the global financial crisis, which has led to the nationalization of Northern Rock Plc and Bradford & Bingley Plc, the takeover of a third bank, and the government holding majority stakes in two others.
The FSA report is one of several from regulatory agencies before the Group of 20 Nations’ summit in April in London, when lawmakers from around the world will try to redesign financial regulation. U.K. Prime Minister Gordon Brown asked Turner to lead the U.K.’s position on the global response to the crisis. The report’s themes, apart from the oversight of system-wide risk, are ones all regulators must discuss ahead of the summit.
No Coincidence
“There’s no coincidence at all in the timing,” said Bob Penn, a regulatory lawyer at Allen & Overy LLP. “This is a clear play to demonstrate thought-leadership, and is a plea for international consensus.”
The FSA said as early as June that it would press ahead with reforming liquidity rules even if other countries lag behind, and has published proposals for banks to hold more Treasury bonds. Similarly, it has published a draft code on compensation; and told banks that they should plan to move to conserve capital in the good times to draw on during the bad.
Different regulators moving at different speeds is the main hurdle to Turner’s proposals: financial regulation is dictated by directives from the European Union, and rules on capital are overseen by an international committee in Basel, Switzerland.
“What is needed is a revolution in Europe and a revolution in the United States,” said Jonathan McMahon, a former FSA supervisor now advising companies on regulation at Promontory Financial Group.
Catch Up With U.K.
There is an international consensus that hedge funds need greater supervision. The FSA already regulates hedge-fund managers and Hector Sants, the FSA’s chief executive officer, told the select committee last month that it would be a good idea for the rest of the world “to catch up” with the U.K.
The FSA said last month if hedge funds posed a risk to the economy if they failed, it would introduce capital and liquidity rules. An obstacle is that the funds are often based overseas, beyond the jurisdiction of the FSA, said McMahon.
At a parliamentary committee hearing last month, Turner also said there would be proposals to increase by “several times” the amount of capital banks hold against risks on their proprietary trading books. Proprietary trading is when a financial company trades securities and other financial instruments with its own money rather than for its customers.
Banks have “been able to trade in pretty much whatever market they choose in whatever instrument they like,” said McMahon. “It is certainly putting the brakes on some of the changes that have occurred over the last 20 years.”
Perhaps the biggest change will be in the way the FSA regulates. Turner told lawmakers that political pressure to use a “light touch” stopped the FSA from asking too many questions.
Scary Sants
The opposition Conservatives suggested last week that should they win the next general election, they may hand supervision of capital back to the Bank of England. The FSA was created by Gordon Brown in 1997 as one of his first acts as then-Chancellor of the Exchequer.
Sants said last week that “people should be frightened” of the FSA. He signaled a move away from principles-based regulation, where companies abide by 11 over-arching themes such as treating customers fairly.
He said the FSA will question the business models of financial companies, become involved in appointing senior executives -- and hold them to account when things go wrong.
“That will be heightening the risk for the FSA,” said Arnondo Chakrabarti, a regulatory lawyer at Allen & Overy. “People can say: ‘You were involved in those business decisions’ if things go wrong.”
India May Fail to Meet 7.1% Growth Forecast as Harvests Decline
March 18 (Bloomberg) -- India may fail to achieve the government’s 7.1 percent economic growth forecast if crop harvests don’t meet expectations, according to the finance ministry’s top economist.
Agricultural output in Asia’s third-largest economy fell 2.2 percent last quarter from a year earlier and the nation’s farm ministry expects food-grain production in the year to June to decline by 1.3 percent to 227.9 million tons.
“To the extent that agriculture growth turns out to be below the 2.6 percent expectation” then our forecast for gross domestic product in the fiscal year ending March 31 would have to be adjusted, the finance ministry’s Chief Economic Advisor Arvind Virmani said in an interview in New Delhi yesterday.
India’s $1.2 trillion economy is faltering as the worst financial crisis to hit the global economy since the Great Depression saps demand for the nation’s exports. Poor harvests may further weaken growth that is already at a six-year low.
Reduced farm production may “play a spoilsport,” said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor’s. “Lower agriculture output will imply lower GDP.” Joshi expects GDP growth to be close to 6.5 percent in the year to March 31.
Wheat production in India, the world’s biggest producer of the grain after China, will miss the official target this year after dry weather hurt crop prospects. Output may total 77.8 million metric tons, less than the 78.6 million ton target set by the government in September, according to the farm ministry.
Sugar, Cotton
Total oilseed output, which also includes monsoon-sown crop, may drop almost 13 percent and sugarcane production may decline 17 percent to 290.5 million tons. Cotton output may drop 14 percent to 22.2 million bales of 170 kilograms (375 pounds).
To boost farm production, Prime Minister Manmohan Singh has subsidized fertilizers and announced record-high guaranteed prices to buy wheat, rice and other products. That may also help the government win support from rural voters in elections occurring in April and May.
Weaker external demand is also damping Indian economic growth. Exports dropped 16 percent to $12.38 billion in January from a year earlier, the fourth straight monthly fall, and industrial production posted its first back-to-back decline in 16 years.
“Traditionally, monetary policy is the first line of defense against demand shocks,” Virmani said, indicating that the central bank may add to five interest rate cuts since October. “Monetary and fiscal policy responses will continue.”
Interest Rates
The Reserve Bank of India on March 4 reduced its key repurchase rate to an all-time low of 5 percent from 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent. The bank has cut the repurchase rate by 400 basis points since October and the reverse repurchase rate by 250 basis points.
The central bank has been able to reduce borrowing costs as inflation eased from 12.91 percent in August to a six-year low of 2.43 percent in the week to Feb. 28.
“It won’t be surprising if inflation comes down to low levels,” Virmani said. “But any kind of talk of deflation over a substantial period of time is just not evident” from any historical data-based analysis. Any negative weekly numbers would not continue for a sustained period, he said.
While gains in India’s benchmark wholesale-price index have slowed, other gauges of inflation that the central bank takes into account when deciding policy are at a decade high.
Consumer Prices
Inflation as measured by the consumer prices paid by industrial workers quickened to 10.45 percent in January, the highest since December 1998. This index takes into account prices for house rentals, toiletries, phones and school fees. The consumer-price index for farm workers increased 11.62 percent in January from a year earlier, following an 11.14 percent gain in December.
“Lower wholesale-price inflation is good but one should not be euphoric about it as long as consumer-price inflation is still running at above historic levels,” Virmani said.
The government may need to extend fiscal stimulus plans in the year starting April 1 to support growth, Virmani said.
Prime Minister Singh’s government has announced three stimulus packages since December. Initiatives have included tax cuts on consumer products and services and higher spending on roads, ports and utilities.
Acting Finance Minister Pranab Mukherjee on Feb. 24 lowered excise duty to 8 percent from 10 percent and the service tax to 10 percent from 12 percent. He extended a 4 percentage point reduction in central value-added tax announced in December to beyond March 31.
India’s economy grew 5.3 percent in the three months to Dec. 31, the weakest pace of expansion since the last quarter of 2003.
Agricultural output in Asia’s third-largest economy fell 2.2 percent last quarter from a year earlier and the nation’s farm ministry expects food-grain production in the year to June to decline by 1.3 percent to 227.9 million tons.
“To the extent that agriculture growth turns out to be below the 2.6 percent expectation” then our forecast for gross domestic product in the fiscal year ending March 31 would have to be adjusted, the finance ministry’s Chief Economic Advisor Arvind Virmani said in an interview in New Delhi yesterday.
India’s $1.2 trillion economy is faltering as the worst financial crisis to hit the global economy since the Great Depression saps demand for the nation’s exports. Poor harvests may further weaken growth that is already at a six-year low.
Reduced farm production may “play a spoilsport,” said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor’s. “Lower agriculture output will imply lower GDP.” Joshi expects GDP growth to be close to 6.5 percent in the year to March 31.
Wheat production in India, the world’s biggest producer of the grain after China, will miss the official target this year after dry weather hurt crop prospects. Output may total 77.8 million metric tons, less than the 78.6 million ton target set by the government in September, according to the farm ministry.
Sugar, Cotton
Total oilseed output, which also includes monsoon-sown crop, may drop almost 13 percent and sugarcane production may decline 17 percent to 290.5 million tons. Cotton output may drop 14 percent to 22.2 million bales of 170 kilograms (375 pounds).
To boost farm production, Prime Minister Manmohan Singh has subsidized fertilizers and announced record-high guaranteed prices to buy wheat, rice and other products. That may also help the government win support from rural voters in elections occurring in April and May.
Weaker external demand is also damping Indian economic growth. Exports dropped 16 percent to $12.38 billion in January from a year earlier, the fourth straight monthly fall, and industrial production posted its first back-to-back decline in 16 years.
“Traditionally, monetary policy is the first line of defense against demand shocks,” Virmani said, indicating that the central bank may add to five interest rate cuts since October. “Monetary and fiscal policy responses will continue.”
Interest Rates
The Reserve Bank of India on March 4 reduced its key repurchase rate to an all-time low of 5 percent from 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent. The bank has cut the repurchase rate by 400 basis points since October and the reverse repurchase rate by 250 basis points.
The central bank has been able to reduce borrowing costs as inflation eased from 12.91 percent in August to a six-year low of 2.43 percent in the week to Feb. 28.
“It won’t be surprising if inflation comes down to low levels,” Virmani said. “But any kind of talk of deflation over a substantial period of time is just not evident” from any historical data-based analysis. Any negative weekly numbers would not continue for a sustained period, he said.
While gains in India’s benchmark wholesale-price index have slowed, other gauges of inflation that the central bank takes into account when deciding policy are at a decade high.
Consumer Prices
Inflation as measured by the consumer prices paid by industrial workers quickened to 10.45 percent in January, the highest since December 1998. This index takes into account prices for house rentals, toiletries, phones and school fees. The consumer-price index for farm workers increased 11.62 percent in January from a year earlier, following an 11.14 percent gain in December.
“Lower wholesale-price inflation is good but one should not be euphoric about it as long as consumer-price inflation is still running at above historic levels,” Virmani said.
The government may need to extend fiscal stimulus plans in the year starting April 1 to support growth, Virmani said.
Prime Minister Singh’s government has announced three stimulus packages since December. Initiatives have included tax cuts on consumer products and services and higher spending on roads, ports and utilities.
Acting Finance Minister Pranab Mukherjee on Feb. 24 lowered excise duty to 8 percent from 10 percent and the service tax to 10 percent from 12 percent. He extended a 4 percentage point reduction in central value-added tax announced in December to beyond March 31.
India’s economy grew 5.3 percent in the three months to Dec. 31, the weakest pace of expansion since the last quarter of 2003.
Asian Stocks Advance on Japan Bank Plan, U.S. Housing Starts
March 18 (Bloomberg) -- Asian stocks gained for a fourth day, led by financial companies, after the Bank of Japan said it will buy more government bonds from banks to spur lending and U.S. housing starts unexpectedly surged.
Mizuho Financial Group Inc., which has the most credit- related losses in Asia, rose 1.5 percent in Tokyo as the central bank pledged to buy 1.8 trillion yen ($18.3 billion) of debt each month. HSBC Holdings Plc, Europe’s largest bank, jumped 5 percent in Hong Kong, its seventh day of gains, after saying business last month was in line with its own estimates. James Hardie Industries NV, which sells home siding in the U.S., climbed 5.6 percent in Sydney on speculation demand will rise.
The MSCI Asia Pacific Index rose 0.3 percent to 77.71 as of 1:36 p.m. in Tokyo, adding to a 7.4 percent advance in the past three days. The gauge is down 13 percent this year, extending last year’s record 43 percent slump as slowing global growth pummeled Asia’s corporate earnings.
“It’s positive that governments are making concerted efforts to revive the economy but it will take some time before consumers become comfortable spending again,” said Yoji Takeda, who manages about $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “It’s hard to be 100 percent bullish on equities.”
Japan’s Topix Index lost 0.2 percent, while Hong Kong’s Hang Seng Index gained 1.5 percent. China’s Shanghai Composite Index added 0.5 percent. Most markets advanced in Asia except Taiwan, South Korea and Australia.
Housing Starts
Rio Tinto Group, the world’s third-largest mining company, sank 8.7 percent in Sydney, while Nintendo Co., maker of the Wii game console, lost 4.8 percent in Osaka, after brokerages recommended investors sell the companies’ shares. Chugai Pharmaceutical Co. slumped 7.1 percent after an arthritis treatment was linked to deaths.
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent as U.S. Treasury Secretary Timothy Geithner said he plans to “wind down” American International Group Inc. following a bonus scandal.
The S&P 500 climbed 3.2 percent yesterday as the U.S. Commerce Department said work began on an annualized rate of 583,000 homes in February, a 22 percent surge from the previous month. Economists had predicted a drop to 450,000.
The MSCI Asia Pacific Index has rallied 10 percent since March 9, when the gauge dropped to the lowest in more than five years, as banks including Citigroup Inc. and JPMorgan Chase & Co. reported strong starts to the year.
Analysts’ earnings estimates for companies included in the MSCI gauge have declined 65 percent in the past 12 months as the global recession deepened, data compiled by Bloomberg show.
‘Safety Net’
Mizuho, which has declared $7.6 billion of credit-related losses, added 1.5 percent to 203 yen in Tokyo. Sumitomo Mitsui Financial Group Inc rose 1.9 percent to 3,310 yen.
The Bank of Japan said today it will buy 1.8 trillion yen ($18.3 billion) of government debt from banks each month, up from 1.4 trillion now. The central bank said yesterday it may provide as much as 1 trillion yen in subordinated loans to banks to replenish capital and keep them lending.
“A safety net has been put in place for the banks with expectations they will get capital support,” said Hideo Arimura, who oversees the equivalent of $1.9 billion at Mizuho Asset Management Co. “That’s relieved concern their shares will keep falling.”
Governments from the U.S. to Japan have stepped up measures this year to ease the financial crisis. U.S. Federal Reserve policy makers, who conclude a two-day meeting today, may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met, analysts said.
Rights Offer
HSBC gained 5 percent to HK$42.40, adding to a 35 percent advance in the past six days. Chief Executive Officer Sandy Flockhart said on March 10 that the bank had a strong performance in January and February. The bank affirmed those comments yesterday as it released details of a $17.5 billion rights offer.
James Hardie, which gets 79 percent of its revenue in the U.S., climbed 5.6 percent to A$3.96. Nissan Motor Co., which derives 40 percent of sales from North America, advanced 1.7 percent to 364 yen in Tokyo.
The finance unit of Nissan, Japan’s third-largest automaker, plans to sell $1.3 billion in securities backed by auto loans in one of the first debt offerings eligible for a U.S. government program to boost consumer lending. Investors may buy the AAA- rated bonds from Nissan with loans from the Term Asset-Backed Securities Loan Facility.
Side Effects
Rio sank 8.7 percent to A$47.47 after the stock was cut to “sell” from “hold” by Goldman Sachs JBWere Pty because of “problematic” debt and forecast aluminum losses.
Nintendo lost 4.8 percent to 28,500 yen. The stock was rated “sell” in new coverage at Deutsche Bank AG, which projected profit will decline from next fiscal year.
Chugai Pharmaceutical, the Japanese unit of Roche Holding AG, slumped 7.1 percent to 1,478 yen. Among the 4,915 patients in Japan treated with Actemra in the 10 months to February, 221 cases of severe side effects were reported, according to documents posted on Chugai Pharma’s Web site. The Asahi newspaper reported the cases earlier.
Mizuho Financial Group Inc., which has the most credit- related losses in Asia, rose 1.5 percent in Tokyo as the central bank pledged to buy 1.8 trillion yen ($18.3 billion) of debt each month. HSBC Holdings Plc, Europe’s largest bank, jumped 5 percent in Hong Kong, its seventh day of gains, after saying business last month was in line with its own estimates. James Hardie Industries NV, which sells home siding in the U.S., climbed 5.6 percent in Sydney on speculation demand will rise.
The MSCI Asia Pacific Index rose 0.3 percent to 77.71 as of 1:36 p.m. in Tokyo, adding to a 7.4 percent advance in the past three days. The gauge is down 13 percent this year, extending last year’s record 43 percent slump as slowing global growth pummeled Asia’s corporate earnings.
“It’s positive that governments are making concerted efforts to revive the economy but it will take some time before consumers become comfortable spending again,” said Yoji Takeda, who manages about $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “It’s hard to be 100 percent bullish on equities.”
Japan’s Topix Index lost 0.2 percent, while Hong Kong’s Hang Seng Index gained 1.5 percent. China’s Shanghai Composite Index added 0.5 percent. Most markets advanced in Asia except Taiwan, South Korea and Australia.
Housing Starts
Rio Tinto Group, the world’s third-largest mining company, sank 8.7 percent in Sydney, while Nintendo Co., maker of the Wii game console, lost 4.8 percent in Osaka, after brokerages recommended investors sell the companies’ shares. Chugai Pharmaceutical Co. slumped 7.1 percent after an arthritis treatment was linked to deaths.
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent as U.S. Treasury Secretary Timothy Geithner said he plans to “wind down” American International Group Inc. following a bonus scandal.
The S&P 500 climbed 3.2 percent yesterday as the U.S. Commerce Department said work began on an annualized rate of 583,000 homes in February, a 22 percent surge from the previous month. Economists had predicted a drop to 450,000.
The MSCI Asia Pacific Index has rallied 10 percent since March 9, when the gauge dropped to the lowest in more than five years, as banks including Citigroup Inc. and JPMorgan Chase & Co. reported strong starts to the year.
Analysts’ earnings estimates for companies included in the MSCI gauge have declined 65 percent in the past 12 months as the global recession deepened, data compiled by Bloomberg show.
‘Safety Net’
Mizuho, which has declared $7.6 billion of credit-related losses, added 1.5 percent to 203 yen in Tokyo. Sumitomo Mitsui Financial Group Inc rose 1.9 percent to 3,310 yen.
The Bank of Japan said today it will buy 1.8 trillion yen ($18.3 billion) of government debt from banks each month, up from 1.4 trillion now. The central bank said yesterday it may provide as much as 1 trillion yen in subordinated loans to banks to replenish capital and keep them lending.
“A safety net has been put in place for the banks with expectations they will get capital support,” said Hideo Arimura, who oversees the equivalent of $1.9 billion at Mizuho Asset Management Co. “That’s relieved concern their shares will keep falling.”
Governments from the U.S. to Japan have stepped up measures this year to ease the financial crisis. U.S. Federal Reserve policy makers, who conclude a two-day meeting today, may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met, analysts said.
Rights Offer
HSBC gained 5 percent to HK$42.40, adding to a 35 percent advance in the past six days. Chief Executive Officer Sandy Flockhart said on March 10 that the bank had a strong performance in January and February. The bank affirmed those comments yesterday as it released details of a $17.5 billion rights offer.
James Hardie, which gets 79 percent of its revenue in the U.S., climbed 5.6 percent to A$3.96. Nissan Motor Co., which derives 40 percent of sales from North America, advanced 1.7 percent to 364 yen in Tokyo.
The finance unit of Nissan, Japan’s third-largest automaker, plans to sell $1.3 billion in securities backed by auto loans in one of the first debt offerings eligible for a U.S. government program to boost consumer lending. Investors may buy the AAA- rated bonds from Nissan with loans from the Term Asset-Backed Securities Loan Facility.
Side Effects
Rio sank 8.7 percent to A$47.47 after the stock was cut to “sell” from “hold” by Goldman Sachs JBWere Pty because of “problematic” debt and forecast aluminum losses.
Nintendo lost 4.8 percent to 28,500 yen. The stock was rated “sell” in new coverage at Deutsche Bank AG, which projected profit will decline from next fiscal year.
Chugai Pharmaceutical, the Japanese unit of Roche Holding AG, slumped 7.1 percent to 1,478 yen. Among the 4,915 patients in Japan treated with Actemra in the 10 months to February, 221 cases of severe side effects were reported, according to documents posted on Chugai Pharma’s Web site. The Asahi newspaper reported the cases earlier.
Monday, March 16, 2009
Bollore Eyes Media Stakes, Open to Future Aegis, Havas
March 17 (Bloomberg) -- French financier Vincent Bollore is shopping for cheap media assets as market values have plunged and said “all the doors are open” to a possible merger of ad firms Aegis Plc and Havas SA, in which he’s the biggest investor.
“My plan is to have the best future for both companies and I’m quite impressed by the new CEO and chairman of Aegis,” Bollore, 56, said in an interview yesterday in Paris. Aegis Chairman John Napier took over as interim chief executive officer after Robert Lerwill stepped down in November. Bollore insisted that his approach at Havas, where he is chairman, is “hands on,” while he’s a silent investor in Aegis.
Bollore owns 32 percent of French firm Havas and 29.9 percent of London-based Aegis. A merger would create a global advertising force to rival Martin Sorrell’s WPP Plc and New York- based Omnicom Group Inc., the two largest ad companies. As the global recession weighs on revenue and market values, some say Bollore may soon follow through.
“We’re getting toward the bottom of this market and Bollore won’t miss the bottom,” said Lorna Tilbian, a media analyst at Numis Corp. in London. “Being a consummate strategist, now is the perfect time” to merge Havas and Aegis.
In his 17th floor office overlooking the Seine river in a Paris suburb, Bollore said he sees “many opportunities” to expand in advertising, TV and newspapers as values have plummeted, noting shares of Interpublic Group of Cos., the third-largest ad company, are “very cheap.” New York-based Interpublic has lost 50 percent of its market value in the past year, compared with about 32 percent at WPP, Havas and Aegis and 45 percent at Omnicom.
Family Business
Bollore, who took over his family’s struggling paper-mill business in 1981, has turned Bollore Groupe into a holding company with revenue of 6.4 billion euros ($8.3 billion) in 2007, with banking, media, shipping and paper manufacturing stakes. The company supplies the paper for 60 percent of printed Bibles and Qurans and 90 percent of passports.
A corporate raider, friend of French President Nicolas Sarkozy and comic-book collector, Bollore was ranked the 843rd wealthiest man in the world by Forbes last year, worth $1.4 billion. He bought stakes in French tubemaker Vallourec SA, Vivendi Universal SA and construction group Bouygues SA and sold them -- sometimes after a power struggle -- for a profit.
Bollore also owns 5 percent of Mediobanca SpA, Italy’s biggest publicly traded investment bank, builds electric cars with Ferrari designer Pininafarina SpA, operates ports in Congo, Nigeria and the Ivory Coast and runs Cameroon’s rail system.
Media Expansion
Bollore began expanding into media in 2004 and gradually built holdings in Aegis and Havas. He also owns French digital TV channel Direct 8, two free newspapers, a stake in movie producer Gaumont SA and a cinema in Paris.
“Aegis lacks a CEO and Bollore will have to strike when there isn’t leadership,” Tilbian said. “The scene is set with falling interest levels and rates and valuation and a lack of management.”
Bollore has failed in five attempts to nominate representatives to the Aegis board and yesterday said he won’t try again this year if Aegis proposed independent people to the board.
“It’s important not to have only the management involved in the future of the company,” he said. “If it’s outside people, independent and non-active inside the company, it could be a formula.”
‘Discreet’
Bollore noted talk in the market that “an agreement” between Havas and Aegis could be a good idea. “I suppose it’s true, but if I say these companies should work together I’ve pushed them outside. I must be discreet in this.”
Analysts have said the companies may work best together in purchasing advertising space. Havas’s media-buying portfolio is largely regional while Aegis is a big player in continental Europe, they said.
Aegis’s media-buying unit Carat and digital business Isobar are “very attractive to a group that would want another global media network,” according to Anthony De Larrinaga, an analyst at Jefferies International Ltd. in London.
Analysts say Aegis may try to sell its market research unit Synovate, leaving the rest open for a bid from Bollore.
“Aegis could sell Synovate and the balance will merge with Havas,” said Alex De Groote, a media analyst at Panmure Gordon & Co. in London. A Havas and Aegis merger would save money, possibly through job cuts, and Bollore might finance such a deal with a mixture of cash and shares, De Groote said.
Bollore himself insists he is a long-term shareholder in both companies and is in no hurry to merge. Improved earnings at Havas in recent years has cut debt and produced “real cash flow,” Bollore said.
“Havas I’m sure will make some acquisitions one day.”
“My plan is to have the best future for both companies and I’m quite impressed by the new CEO and chairman of Aegis,” Bollore, 56, said in an interview yesterday in Paris. Aegis Chairman John Napier took over as interim chief executive officer after Robert Lerwill stepped down in November. Bollore insisted that his approach at Havas, where he is chairman, is “hands on,” while he’s a silent investor in Aegis.
Bollore owns 32 percent of French firm Havas and 29.9 percent of London-based Aegis. A merger would create a global advertising force to rival Martin Sorrell’s WPP Plc and New York- based Omnicom Group Inc., the two largest ad companies. As the global recession weighs on revenue and market values, some say Bollore may soon follow through.
“We’re getting toward the bottom of this market and Bollore won’t miss the bottom,” said Lorna Tilbian, a media analyst at Numis Corp. in London. “Being a consummate strategist, now is the perfect time” to merge Havas and Aegis.
In his 17th floor office overlooking the Seine river in a Paris suburb, Bollore said he sees “many opportunities” to expand in advertising, TV and newspapers as values have plummeted, noting shares of Interpublic Group of Cos., the third-largest ad company, are “very cheap.” New York-based Interpublic has lost 50 percent of its market value in the past year, compared with about 32 percent at WPP, Havas and Aegis and 45 percent at Omnicom.
Family Business
Bollore, who took over his family’s struggling paper-mill business in 1981, has turned Bollore Groupe into a holding company with revenue of 6.4 billion euros ($8.3 billion) in 2007, with banking, media, shipping and paper manufacturing stakes. The company supplies the paper for 60 percent of printed Bibles and Qurans and 90 percent of passports.
A corporate raider, friend of French President Nicolas Sarkozy and comic-book collector, Bollore was ranked the 843rd wealthiest man in the world by Forbes last year, worth $1.4 billion. He bought stakes in French tubemaker Vallourec SA, Vivendi Universal SA and construction group Bouygues SA and sold them -- sometimes after a power struggle -- for a profit.
Bollore also owns 5 percent of Mediobanca SpA, Italy’s biggest publicly traded investment bank, builds electric cars with Ferrari designer Pininafarina SpA, operates ports in Congo, Nigeria and the Ivory Coast and runs Cameroon’s rail system.
Media Expansion
Bollore began expanding into media in 2004 and gradually built holdings in Aegis and Havas. He also owns French digital TV channel Direct 8, two free newspapers, a stake in movie producer Gaumont SA and a cinema in Paris.
“Aegis lacks a CEO and Bollore will have to strike when there isn’t leadership,” Tilbian said. “The scene is set with falling interest levels and rates and valuation and a lack of management.”
Bollore has failed in five attempts to nominate representatives to the Aegis board and yesterday said he won’t try again this year if Aegis proposed independent people to the board.
“It’s important not to have only the management involved in the future of the company,” he said. “If it’s outside people, independent and non-active inside the company, it could be a formula.”
‘Discreet’
Bollore noted talk in the market that “an agreement” between Havas and Aegis could be a good idea. “I suppose it’s true, but if I say these companies should work together I’ve pushed them outside. I must be discreet in this.”
Analysts have said the companies may work best together in purchasing advertising space. Havas’s media-buying portfolio is largely regional while Aegis is a big player in continental Europe, they said.
Aegis’s media-buying unit Carat and digital business Isobar are “very attractive to a group that would want another global media network,” according to Anthony De Larrinaga, an analyst at Jefferies International Ltd. in London.
Analysts say Aegis may try to sell its market research unit Synovate, leaving the rest open for a bid from Bollore.
“Aegis could sell Synovate and the balance will merge with Havas,” said Alex De Groote, a media analyst at Panmure Gordon & Co. in London. A Havas and Aegis merger would save money, possibly through job cuts, and Bollore might finance such a deal with a mixture of cash and shares, De Groote said.
Bollore himself insists he is a long-term shareholder in both companies and is in no hurry to merge. Improved earnings at Havas in recent years has cut debt and produced “real cash flow,” Bollore said.
“Havas I’m sure will make some acquisitions one day.”
Standard Chartered Had ‘Strong’ First Two Months
March 17 (Bloomberg) -- Standard Chartered Plc, the U.K.’s second-largest bank by market value, had a “strong” first two months of the year, said Chief Executive Officer Peter Sands.
Sands, speaking in Hong Kong today, also said he has no plans to cut jobs and that the bank will focus on “organic” growth, though would consider acquisitions in Asia and the Middle East. He said he’s “comfortable” with Standard Chartered’s capital levels.
London-based Standard Chartered joins Citigroup Inc. and Bank of America Corp. in seeking to reassure investors that earnings are recovering from the worst financial meltdown in decades. The bank’s shares have lost 2.7 percent in London this year, compared with a 33 percent plunge for rival HSBC Holdings Plc, which is raising $17.6 billion in a rights offer.
Standard Chartered shares slipped 0.6 percent in Hong Kong trading at 11:45 a.m., after falling as much as 2.5 percent before Sands’s remarks.
UBS AG cut its rating on Standard Chartered to “neutral” from “buy” on March 11, reversing a March 4 upgrade, following the stock’s 38 percent gain over six trading sessions after second-half profit beat analysts’ estimates. The bank reported an 8.3 percent increase in net income on March 3.
The bank’s results were mainly lifted by earnings from corporate lending, which rose 18 percent to HK$1.35 billion, compensating for a decline in consumer banking profit in Hong Kong and the Asia-Pacific region.
‘Comfortable’
Standard Chartered raised 1.8 billion pounds ($2.8 billion) in a December rights offer, fueling speculation that HSBC would follow suit as economies around the world weaken. Both banks have avoided following RBS and Lloyds Banking Group Plc in seeking government aid.
“I would never rule out more capital but we’re very comfortable with our capital position,” Sands said today.
Standard Chartered plans to open its first locally incorporated bank in Vietnam this year, Ashok Sud, its Hanoi- based chief executive officer for Vietnam, Laos and Cambodia, said this month. The lender holds 15 percent of Asia Commercial Bank, Vietnam’s biggest listed company by market value.
Sands, speaking in Hong Kong today, also said he has no plans to cut jobs and that the bank will focus on “organic” growth, though would consider acquisitions in Asia and the Middle East. He said he’s “comfortable” with Standard Chartered’s capital levels.
London-based Standard Chartered joins Citigroup Inc. and Bank of America Corp. in seeking to reassure investors that earnings are recovering from the worst financial meltdown in decades. The bank’s shares have lost 2.7 percent in London this year, compared with a 33 percent plunge for rival HSBC Holdings Plc, which is raising $17.6 billion in a rights offer.
Standard Chartered shares slipped 0.6 percent in Hong Kong trading at 11:45 a.m., after falling as much as 2.5 percent before Sands’s remarks.
UBS AG cut its rating on Standard Chartered to “neutral” from “buy” on March 11, reversing a March 4 upgrade, following the stock’s 38 percent gain over six trading sessions after second-half profit beat analysts’ estimates. The bank reported an 8.3 percent increase in net income on March 3.
The bank’s results were mainly lifted by earnings from corporate lending, which rose 18 percent to HK$1.35 billion, compensating for a decline in consumer banking profit in Hong Kong and the Asia-Pacific region.
‘Comfortable’
Standard Chartered raised 1.8 billion pounds ($2.8 billion) in a December rights offer, fueling speculation that HSBC would follow suit as economies around the world weaken. Both banks have avoided following RBS and Lloyds Banking Group Plc in seeking government aid.
“I would never rule out more capital but we’re very comfortable with our capital position,” Sands said today.
Standard Chartered plans to open its first locally incorporated bank in Vietnam this year, Ashok Sud, its Hanoi- based chief executive officer for Vietnam, Laos and Cambodia, said this month. The lender holds 15 percent of Asia Commercial Bank, Vietnam’s biggest listed company by market value.
Asian Stocks Gain for Third Day on Policy Optimism; HSBC Rises
March 17 (Bloomberg) -- Asian stocks gained for a third day, the longest winning streak in seven weeks, as Australia’s central bank signaled it may cut interest rates and Standard Chartered Plc reported a “strong” start to 2009.
Woolworths Ltd., Australia’s biggest retailer, rose 2.1 percent in Sydney after the Reserve Bank of Australia said it had “flexibility” to lower borrowing costs. HSBC Holdings Plc, Europe’s biggest lender, gained 2.4 percent in Hong Kong as Goldman Sachs Group Inc. said earnings may recover. Mizuho Financial Group Inc., Japan’s second-largest publicly traded lender, jumped 4.2 percent after Kyodo News said the Bank of Japan may widen support for banks.
“Expectations are heightening that we’ll see some additional policies designed to aid the economy and boost stock prices,” said Fujio Ando, who helps oversee $1 billion at Tokyo- based Chibagin Asset Management Co. “This upward movement in the market could continue until the early part of April.”
The MSCI Asia Pacific Index rose 1.6 percent to 77.43 as of 1:34 p.m. in Tokyo, with finance companies accounting for 41 percent of the increase. The measure climbed 7.4 percent in the past three days. The gauge is down 41 percent in the past year as slowing global growth pummeled Asia’s corporate earnings.
Japan’s Nikkei 225 Stock Average gained 2 percent to 7,860.95, while Hong Kong’s Hang Seng Index gained 0.6 percent. All markets open for trading gained except Singapore, Indonesia, India, Sri Lanka and the Philippines.
Sumco Corp., the world’s second-largest maker of silicon wafers, soared 9.5 percent Tokyo on brokerage upgrades. China Life Insurance Co., the nation’s biggest insurer, gained 1.6 percent in Shanghai as premium income rose. BHP Billiton Ltd., the world’s biggest mining company, rose 1.7 percent in Sydney as copper climbed to a four-month high yesterday.
Credit-Card Defaults
Futures on the Standard & Poor’s 500 Index were little changed. The gauge lost 0.4 percent yesterday as concern over rising credit-card defaults snuffed out a rally in financial companies. American Express Co., the largest credit-card company by purchases, reported higher delinquency rates for February.
Woolworths gained 2.1 percent to A$25.22 in Sydney. Wesfarmers Ltd., Australia’s second-largest retailer, climbed 3.3 percent to A$18.37.
The central bank’s decision to leave its key interest rate unchanged earlier this month “would leave adequate flexibility for policy at future meetings,” according to minutes of a March 3 meeting released in Sydney today.
Governments from the U.S. to China and Japan are widening measures to ease the financial crisis, which has caused more than $1 trillion of losses at institutions worldwide.
‘Eventual Recovery’
Standard Chartered, the U.K.’s second-largest bank by market value, today said it had a “strong” first two months of the year, echoing similar comments from Barclays Plc, Citigroup Inc., Deutsche Bank AG and Bank of America Corp. Standard Chartered shares in Hong Kong dropped 0.8 percent to HK$93, paring an earlier 3.6 percent slump.
The MSCI Asia Pacific Index has declined 14 percent this year, adding to a record 43 percent slide in 2008. Cuts to analysts’ earnings forecasts has left companies on the benchmark gauge trading at an average 23 times estimated profits, up from 14 times at the end of last year.
HSBC, which is raising $17.5 billion of capital in a rights offer, gained 2.4 percent to HK$40.95 in Hong Kong. Goldman Sachs raised its recommendation on the stock to “neutral” from “sell,” saying its path to “eventual recovery” is clearer.
Mizuho climbed 4.2 percent to 197 yen in Tokyo. Mitsubishi UFJ Financial Group Ltd., Japan’s biggest publicly traded bank, rose 4.8 percent to 462 yen.
Brokerage Upgrades
The Bank of Japan, which starts a two-day policy meeting today, is considering buying subordinated loans and bonds from lenders to increase their capital base, allowing them to continue providing loans to cash-strapped companies, Kyodo News reported on its Web site.
Sumco soared 9.5 percent to 1,440 in Tokyo after KBC Securities Japan and Nomura Holdings Inc. recommended investors buy the shares amid signs of a recovery in earnings.
China Life Insurance Co., the nation’s biggest insurer, gained 1.6 percent to 21.73 yuan in Shanghai. The company posted premium income of 67.2 billion yuan for the first two months of this year. That’s 12.6 percent higher than a year earlier, according to Bloomberg News calculations.
BHP added 1.7 percent to A$31.51. Rio Tinto Ltd., the world’s No. 3 mining company, added 1.4 percent to A$51.45. Copper futures in New York surged 5 percent yesterday to $1.747 a pound, having earlier risen to the highest since Nov. 11. An index of six metals on the London Metals Exchange rose 3 percent.
Woodside Petroleum Ltd., Australia’s second-largest oil producer, gained 1.5 percent to A$36.60 in Sydney. Inpex Corp., Japan’s largest oil explorer, jumped 2.5 percent to 660,000 in Tokyo. Crude oil in New York rose 2.4 percent to $47.35 yesterday, the highest settlement since Jan. 6.
Woolworths Ltd., Australia’s biggest retailer, rose 2.1 percent in Sydney after the Reserve Bank of Australia said it had “flexibility” to lower borrowing costs. HSBC Holdings Plc, Europe’s biggest lender, gained 2.4 percent in Hong Kong as Goldman Sachs Group Inc. said earnings may recover. Mizuho Financial Group Inc., Japan’s second-largest publicly traded lender, jumped 4.2 percent after Kyodo News said the Bank of Japan may widen support for banks.
“Expectations are heightening that we’ll see some additional policies designed to aid the economy and boost stock prices,” said Fujio Ando, who helps oversee $1 billion at Tokyo- based Chibagin Asset Management Co. “This upward movement in the market could continue until the early part of April.”
The MSCI Asia Pacific Index rose 1.6 percent to 77.43 as of 1:34 p.m. in Tokyo, with finance companies accounting for 41 percent of the increase. The measure climbed 7.4 percent in the past three days. The gauge is down 41 percent in the past year as slowing global growth pummeled Asia’s corporate earnings.
Japan’s Nikkei 225 Stock Average gained 2 percent to 7,860.95, while Hong Kong’s Hang Seng Index gained 0.6 percent. All markets open for trading gained except Singapore, Indonesia, India, Sri Lanka and the Philippines.
Sumco Corp., the world’s second-largest maker of silicon wafers, soared 9.5 percent Tokyo on brokerage upgrades. China Life Insurance Co., the nation’s biggest insurer, gained 1.6 percent in Shanghai as premium income rose. BHP Billiton Ltd., the world’s biggest mining company, rose 1.7 percent in Sydney as copper climbed to a four-month high yesterday.
Credit-Card Defaults
Futures on the Standard & Poor’s 500 Index were little changed. The gauge lost 0.4 percent yesterday as concern over rising credit-card defaults snuffed out a rally in financial companies. American Express Co., the largest credit-card company by purchases, reported higher delinquency rates for February.
Woolworths gained 2.1 percent to A$25.22 in Sydney. Wesfarmers Ltd., Australia’s second-largest retailer, climbed 3.3 percent to A$18.37.
The central bank’s decision to leave its key interest rate unchanged earlier this month “would leave adequate flexibility for policy at future meetings,” according to minutes of a March 3 meeting released in Sydney today.
Governments from the U.S. to China and Japan are widening measures to ease the financial crisis, which has caused more than $1 trillion of losses at institutions worldwide.
‘Eventual Recovery’
Standard Chartered, the U.K.’s second-largest bank by market value, today said it had a “strong” first two months of the year, echoing similar comments from Barclays Plc, Citigroup Inc., Deutsche Bank AG and Bank of America Corp. Standard Chartered shares in Hong Kong dropped 0.8 percent to HK$93, paring an earlier 3.6 percent slump.
The MSCI Asia Pacific Index has declined 14 percent this year, adding to a record 43 percent slide in 2008. Cuts to analysts’ earnings forecasts has left companies on the benchmark gauge trading at an average 23 times estimated profits, up from 14 times at the end of last year.
HSBC, which is raising $17.5 billion of capital in a rights offer, gained 2.4 percent to HK$40.95 in Hong Kong. Goldman Sachs raised its recommendation on the stock to “neutral” from “sell,” saying its path to “eventual recovery” is clearer.
Mizuho climbed 4.2 percent to 197 yen in Tokyo. Mitsubishi UFJ Financial Group Ltd., Japan’s biggest publicly traded bank, rose 4.8 percent to 462 yen.
Brokerage Upgrades
The Bank of Japan, which starts a two-day policy meeting today, is considering buying subordinated loans and bonds from lenders to increase their capital base, allowing them to continue providing loans to cash-strapped companies, Kyodo News reported on its Web site.
Sumco soared 9.5 percent to 1,440 in Tokyo after KBC Securities Japan and Nomura Holdings Inc. recommended investors buy the shares amid signs of a recovery in earnings.
China Life Insurance Co., the nation’s biggest insurer, gained 1.6 percent to 21.73 yuan in Shanghai. The company posted premium income of 67.2 billion yuan for the first two months of this year. That’s 12.6 percent higher than a year earlier, according to Bloomberg News calculations.
BHP added 1.7 percent to A$31.51. Rio Tinto Ltd., the world’s No. 3 mining company, added 1.4 percent to A$51.45. Copper futures in New York surged 5 percent yesterday to $1.747 a pound, having earlier risen to the highest since Nov. 11. An index of six metals on the London Metals Exchange rose 3 percent.
Woodside Petroleum Ltd., Australia’s second-largest oil producer, gained 1.5 percent to A$36.60 in Sydney. Inpex Corp., Japan’s largest oil explorer, jumped 2.5 percent to 660,000 in Tokyo. Crude oil in New York rose 2.4 percent to $47.35 yesterday, the highest settlement since Jan. 6.
Sunday, March 15, 2009
U.K. Mortgage Bond Market May Stay Shut Through 2009, BOE Told
March 16 (Bloomberg) -- U.K. residential mortgage-backed bond markets may stay shut throughout the rest of this year as banks nurse losses from the financial crisis, according to the Bank of England’s contacts.
“Overall liquidity conditions have yet to normalize to any significant degree,” the central bank said in its quarterly bulletin today. “Residential mortgage-backed securities (RMBS) markets remained effectively closed, at least for publicly issued securities. In general, contacts did not expect a sustained improvement in market conditions during 2009.”
Average asking prices for a home dropped 9 percent this month from a year earlier as buyers struggled to obtain home loans, Rightmove Plc said today. The British economy is in the throes of its worst contraction for three decades, threatening to exacerbate losses at banks stung by the financial crisis.
The central bank said in its report that credit costs rose last month as institutions became more reluctant to lend to each other. While the three-month London Interbank Offered Rate has fallen more than 4.4 percentage points since last year’s peak, the Libor-OIS spread, a gauge of banks’ reluctance to lend, widened to a two-month high on March 11.
“Contacts cite ongoing balance sheet constraints on financial institutions as an important factor in continued pricing anomalies in various asset markets,” the bank said.
The outstanding balance of British residential mortgage- backed securities was the world’s second-biggest as of the third quarter of 2008, totaling 407 billion euros ($525 billion). That’s still a 10th of equivalent outstanding U.S. securities.
Toxic Assets
Prime Minister Gordon Brown has taken controlling stakes in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc and agreed to insure 585 billion pounds ($816 billion) of toxic assets, in return for pledges that they will lend more.
Rightmove, Britain’s biggest property Web site, said asking prices for homes fell 9 percent from a year earlier, close to the pace of February. On the month, prices rose 0.9 percent to an average of 218,081 pounds, the report showed.
The Bank of England cut the benchmark interest rate to 0.5 percent on March 5, and started printing money to buy gilts and other assets to revive the economy and prevent deflation. The bank will spend 2 billion pounds on government bonds today and a total of 5 billion pounds this week.
The central bank’s forecasts show economic growth won’t resume until the second quarter of next year, while inflation will slow to 0.3 percent in early 2011, below the bank’s 2 percent goal.
Policy Action
Policy makers “will take the necessary steps to bring inflation back to target by making changes to monetary policy so that any deviation from target is short-lived and less costly,” according to a separate article in the bulletin by Charlotta Groth and Peter Westaway, both officials at the bank.
The central bank’s economic forecasts are consistent with the “configuration of falling asset prices and depressed economic conditions in the face of an adverse demand shock” in an environment of debt deflation, the article said. Uncertainty about how the strength of these effects form part of the bank’s uncertainty about how bad things will get, the bulletin said.
A situation of deflation where interest rates are at zero also poses a risk to the economy by eliminating one of the central bank’s tools for stoking growth, the economists said.
“If policy responds sufficiently promptly and decisively, employing the full range of conventional and unconventional monetary policy instruments, deflationary episodes should be short-lived,” Groth and Westaway wrote.
“Overall liquidity conditions have yet to normalize to any significant degree,” the central bank said in its quarterly bulletin today. “Residential mortgage-backed securities (RMBS) markets remained effectively closed, at least for publicly issued securities. In general, contacts did not expect a sustained improvement in market conditions during 2009.”
Average asking prices for a home dropped 9 percent this month from a year earlier as buyers struggled to obtain home loans, Rightmove Plc said today. The British economy is in the throes of its worst contraction for three decades, threatening to exacerbate losses at banks stung by the financial crisis.
The central bank said in its report that credit costs rose last month as institutions became more reluctant to lend to each other. While the three-month London Interbank Offered Rate has fallen more than 4.4 percentage points since last year’s peak, the Libor-OIS spread, a gauge of banks’ reluctance to lend, widened to a two-month high on March 11.
“Contacts cite ongoing balance sheet constraints on financial institutions as an important factor in continued pricing anomalies in various asset markets,” the bank said.
The outstanding balance of British residential mortgage- backed securities was the world’s second-biggest as of the third quarter of 2008, totaling 407 billion euros ($525 billion). That’s still a 10th of equivalent outstanding U.S. securities.
Toxic Assets
Prime Minister Gordon Brown has taken controlling stakes in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc and agreed to insure 585 billion pounds ($816 billion) of toxic assets, in return for pledges that they will lend more.
Rightmove, Britain’s biggest property Web site, said asking prices for homes fell 9 percent from a year earlier, close to the pace of February. On the month, prices rose 0.9 percent to an average of 218,081 pounds, the report showed.
The Bank of England cut the benchmark interest rate to 0.5 percent on March 5, and started printing money to buy gilts and other assets to revive the economy and prevent deflation. The bank will spend 2 billion pounds on government bonds today and a total of 5 billion pounds this week.
The central bank’s forecasts show economic growth won’t resume until the second quarter of next year, while inflation will slow to 0.3 percent in early 2011, below the bank’s 2 percent goal.
Policy Action
Policy makers “will take the necessary steps to bring inflation back to target by making changes to monetary policy so that any deviation from target is short-lived and less costly,” according to a separate article in the bulletin by Charlotta Groth and Peter Westaway, both officials at the bank.
The central bank’s economic forecasts are consistent with the “configuration of falling asset prices and depressed economic conditions in the face of an adverse demand shock” in an environment of debt deflation, the article said. Uncertainty about how the strength of these effects form part of the bank’s uncertainty about how bad things will get, the bulletin said.
A situation of deflation where interest rates are at zero also poses a risk to the economy by eliminating one of the central bank’s tools for stoking growth, the economists said.
“If policy responds sufficiently promptly and decisively, employing the full range of conventional and unconventional monetary policy instruments, deflationary episodes should be short-lived,” Groth and Westaway wrote.
OPEC Decides Against Fourth Output Cut on Economy
March 16 (Bloomberg) -- OPEC agreed to maintain current production quotas, concerned that a fourth cut since September risked increasing energy costs during the worst global economy in six decades.
The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s crude oil, will aim to complete existing production cutbacks agreed to late last year and meet again on May 28 to review policy, Secretary-General Abdalla el-Badri said after yesterday’s meeting in Vienna.
OPEC members still need to trim about 800,000 barrels a day to comply with the record output reductions decided in December after oil slumped more than $100 a barrel from July’s record. Global inventories have started to fall, indicating the policy is working. A new cut threatened a price increase that could harm the economy, Saudi Arabian Oil Minister Ali al-Naimi said.
“They’ve decided that, in the medium term, the danger to the global economy was greater than the danger of high inventories,” David Kirsch, an analyst with Washington-based consultant PFC Energy, said in an interview in Vienna. “A rollover should be sufficient to draw down inventories to acceptable levels by the third quarter.”
The collapse in oil prices has cut costs for consumers and business, one of the few bright spots in a bleak economic picture. Finance chiefs from the 20 biggest developed and emerging economies pledged a “sustained effort” to end the recession after a weekend meeting. The International Monetary Fund predicts the first global economic contraction in six decades.
Demand Drops
Higher prices could further erode global oil demand, already forecast to fall by 1 million barrels a day in 2009. Oil futures fell after the OPEC meeting, dropping as much as $2.40 a barrel, or 5.2 percent, to $43.85 a barrel in New York. Prior to OPEC’s decision, oil prices had gained 3.7 percent this year.
“A lot of people would have been surprised by OPEC’s lack of action,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “It’s quite bearish.”
Algerian Oil Minister Chakib Khelil, who had argued for another cutback prior to the meeting, said afterwards that all OPEC members will make an “extra effort” to comply with the existing cutbacks. Oil prices will not rise a lot after yesterday’s decision, he added.
The crude oil production target for 11 OPEC members bound by quotas is 24.85 million barrels a day, while actual output from those countries averaged 25.715 million barrels a day in February, according to an OPEC report published on March 13 that cited data from secondary sources including analysts. That means the group had completed 79 percent of its promised reduction.
‘Fully Adhere’
“Now it is time to fully adhere to the cuts we agreed upon,” Qatari Oil Minister Abdullah Bin Hamad Al-Attiyah said after the meeting.
Saudi Arabia, which pumps more than twice as much oil as Iran, OPEC’s second-largest producer, is the only member to cut more output than agreed last year. Iran and Nigeria have made good on only about half of their promised reductions, according to figures OPEC released March 13. The group agreed to three cutbacks late last year totaling 4.2 million barrels a day.
The 12-nation producer group doesn’t expect a rapid recovery in prices to $75 a barrel, the level that several ministers and Saudi King Abdullah have previously said is appropriate to encourage investment in the industry.
‘Find Balance’
“The situation creates a lot of uncertainties, but we believe that by the end of the year we will find a balanced oil price,” OPEC President Jose Maria Botelho de Vasconcelos, who is also Angola’s oil minister, said at a press conference after the meeting. “We need to adhere and then in May we can look if other measures can be taken.”
OPEC’s el-Badri criticized Russia and other non-OPEC producers for failing to restrict their own output to support oil prices.
“I have not seen any action as far as production reduction is concerned,” he said in an interview. “I don’t see anything form Norway, I don’t see anything from Mexico. It’s not a free ride or a free lunch.”
The group already faces a 61 percent plunge in net oil revenue this year amid declining production and prices, according to the U.S. Energy Department, which estimates OPEC will earn $383 billion in 2009 from crude exports. Global oil demand is set to decline for a second consecutive year, the first back-to-back drop since 1983.
IEA Forecast
The Paris-based International Energy Agency last week cut its 2009 forecast for oil demand for a seventh month, and reduced supply estimates, as the global economic slump saps consumption as well as investment in new fields. Both the IEA and OPEC see demand slumping more than 1 million barrels a day this year, to about 84.5 million barrels a day.
“By meeting again in May, they can adjust targets should economic conditions deteriorate,” PFC’s Kirsch said. “The steps they’ve already taken are starting to have some effect, we’ve started to see crude inventories in the U.S. come down.”
OPEC’s May 28 meeting and an already scheduled Sept. 9 summit will both take place in Vienna, where the group’s secretariat is based. El-Badri’s term of office was extended for another three years from 2010.
The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s crude oil, will aim to complete existing production cutbacks agreed to late last year and meet again on May 28 to review policy, Secretary-General Abdalla el-Badri said after yesterday’s meeting in Vienna.
OPEC members still need to trim about 800,000 barrels a day to comply with the record output reductions decided in December after oil slumped more than $100 a barrel from July’s record. Global inventories have started to fall, indicating the policy is working. A new cut threatened a price increase that could harm the economy, Saudi Arabian Oil Minister Ali al-Naimi said.
“They’ve decided that, in the medium term, the danger to the global economy was greater than the danger of high inventories,” David Kirsch, an analyst with Washington-based consultant PFC Energy, said in an interview in Vienna. “A rollover should be sufficient to draw down inventories to acceptable levels by the third quarter.”
The collapse in oil prices has cut costs for consumers and business, one of the few bright spots in a bleak economic picture. Finance chiefs from the 20 biggest developed and emerging economies pledged a “sustained effort” to end the recession after a weekend meeting. The International Monetary Fund predicts the first global economic contraction in six decades.
Demand Drops
Higher prices could further erode global oil demand, already forecast to fall by 1 million barrels a day in 2009. Oil futures fell after the OPEC meeting, dropping as much as $2.40 a barrel, or 5.2 percent, to $43.85 a barrel in New York. Prior to OPEC’s decision, oil prices had gained 3.7 percent this year.
“A lot of people would have been surprised by OPEC’s lack of action,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “It’s quite bearish.”
Algerian Oil Minister Chakib Khelil, who had argued for another cutback prior to the meeting, said afterwards that all OPEC members will make an “extra effort” to comply with the existing cutbacks. Oil prices will not rise a lot after yesterday’s decision, he added.
The crude oil production target for 11 OPEC members bound by quotas is 24.85 million barrels a day, while actual output from those countries averaged 25.715 million barrels a day in February, according to an OPEC report published on March 13 that cited data from secondary sources including analysts. That means the group had completed 79 percent of its promised reduction.
‘Fully Adhere’
“Now it is time to fully adhere to the cuts we agreed upon,” Qatari Oil Minister Abdullah Bin Hamad Al-Attiyah said after the meeting.
Saudi Arabia, which pumps more than twice as much oil as Iran, OPEC’s second-largest producer, is the only member to cut more output than agreed last year. Iran and Nigeria have made good on only about half of their promised reductions, according to figures OPEC released March 13. The group agreed to three cutbacks late last year totaling 4.2 million barrels a day.
The 12-nation producer group doesn’t expect a rapid recovery in prices to $75 a barrel, the level that several ministers and Saudi King Abdullah have previously said is appropriate to encourage investment in the industry.
‘Find Balance’
“The situation creates a lot of uncertainties, but we believe that by the end of the year we will find a balanced oil price,” OPEC President Jose Maria Botelho de Vasconcelos, who is also Angola’s oil minister, said at a press conference after the meeting. “We need to adhere and then in May we can look if other measures can be taken.”
OPEC’s el-Badri criticized Russia and other non-OPEC producers for failing to restrict their own output to support oil prices.
“I have not seen any action as far as production reduction is concerned,” he said in an interview. “I don’t see anything form Norway, I don’t see anything from Mexico. It’s not a free ride or a free lunch.”
The group already faces a 61 percent plunge in net oil revenue this year amid declining production and prices, according to the U.S. Energy Department, which estimates OPEC will earn $383 billion in 2009 from crude exports. Global oil demand is set to decline for a second consecutive year, the first back-to-back drop since 1983.
IEA Forecast
The Paris-based International Energy Agency last week cut its 2009 forecast for oil demand for a seventh month, and reduced supply estimates, as the global economic slump saps consumption as well as investment in new fields. Both the IEA and OPEC see demand slumping more than 1 million barrels a day this year, to about 84.5 million barrels a day.
“By meeting again in May, they can adjust targets should economic conditions deteriorate,” PFC’s Kirsch said. “The steps they’ve already taken are starting to have some effect, we’ve started to see crude inventories in the U.S. come down.”
OPEC’s May 28 meeting and an already scheduled Sept. 9 summit will both take place in Vienna, where the group’s secretariat is based. El-Badri’s term of office was extended for another three years from 2010.
Global Mining M&A Drops 40% to $127 Billion, Ernst & Young Says
March 16 (Bloomberg) -- Global mining mergers and acquisitions slumped 40 percent to $127 billion last year and the value of transactions will drop further in 2009 amid a commodity price rout, according to Ernst & Young LLP.
A total of 919 transactions took place in 2008, compared with 903 deals valued at $211 billion in 2007, Ernst & Young said in an e-mailed report today.
Mining takeovers were stifled as many transactions were “delayed, damaged or destroyed” by the global credit crunch and a slump in metal prices, the firm said. BHP Billiton Ltd. scrapped a $66 billion bid for Rio Tinto Group last year, in what would’ve been the world’s biggest mining takeover, as the worst recession since World War II slashed demand for minerals.
“Fears about economic growth basically trashed metal prices and equity values and therefore deals fell away and people started focusing on conserving cash,” Mike Elliott, Sydney-based global mining and metals sector leader for Ernst & Young, said in an interview.
The number of loans in the industry increased threefold to 268 for a value of $172 billion, from $111 billion a year earlier, Ernst & Young said. The total includes a $55 billion loan arranged, though not drawn down by BHP, the world’s biggest mining company, after it abandoned its Rio Tinto offer, the report said.
Takeovers in the mining industry will be boosted later this year by the “inevitable string of players who will go into bankruptcy,” the report said. Increased financing availability will also spur more deals, and investments will likely be in underlying assets rather than in entire companies, it said.
Chinese Investment
China last month invested almost $22 billion in debt-laden mining companies including Rio Tinto, OZ Minerals Ltd. and Fortescue Metals Group Ltd. to take advantage of a rout in commodity prices to secure supplies of resources. Buyers may focus on base metals assets, zinc, lead, nickel, as the market is “neglecting” these metals for investment, Elliott said.
The number of transactions this year may remain “quite healthy,” although the value of those deals would be “considerably lower,” Elliott said. “There will be continued buying from Chinese buyers. We are seeing quite a lot of Japanese activity as well and motivated by the same thing, long- term resource security concerns.”
Funds raised in initial share sales declined 42 percent to $12.4 billion with the total of initial public offerings dropping to 117 from 280 a year earlier, Ernst & Young said.
A total of 919 transactions took place in 2008, compared with 903 deals valued at $211 billion in 2007, Ernst & Young said in an e-mailed report today.
Mining takeovers were stifled as many transactions were “delayed, damaged or destroyed” by the global credit crunch and a slump in metal prices, the firm said. BHP Billiton Ltd. scrapped a $66 billion bid for Rio Tinto Group last year, in what would’ve been the world’s biggest mining takeover, as the worst recession since World War II slashed demand for minerals.
“Fears about economic growth basically trashed metal prices and equity values and therefore deals fell away and people started focusing on conserving cash,” Mike Elliott, Sydney-based global mining and metals sector leader for Ernst & Young, said in an interview.
The number of loans in the industry increased threefold to 268 for a value of $172 billion, from $111 billion a year earlier, Ernst & Young said. The total includes a $55 billion loan arranged, though not drawn down by BHP, the world’s biggest mining company, after it abandoned its Rio Tinto offer, the report said.
Takeovers in the mining industry will be boosted later this year by the “inevitable string of players who will go into bankruptcy,” the report said. Increased financing availability will also spur more deals, and investments will likely be in underlying assets rather than in entire companies, it said.
Chinese Investment
China last month invested almost $22 billion in debt-laden mining companies including Rio Tinto, OZ Minerals Ltd. and Fortescue Metals Group Ltd. to take advantage of a rout in commodity prices to secure supplies of resources. Buyers may focus on base metals assets, zinc, lead, nickel, as the market is “neglecting” these metals for investment, Elliott said.
The number of transactions this year may remain “quite healthy,” although the value of those deals would be “considerably lower,” Elliott said. “There will be continued buying from Chinese buyers. We are seeing quite a lot of Japanese activity as well and motivated by the same thing, long- term resource security concerns.”
Funds raised in initial share sales declined 42 percent to $12.4 billion with the total of initial public offerings dropping to 117 from 280 a year earlier, Ernst & Young said.
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