WASHINGTON — Five weeks ago, President Obama stood before the Turkish legislature in Ankara and said many Americans had Muslims in their families or had lived in a Muslim-majority country. “I know,” he said, “because I am one of them.”
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But will that exposure lead Mr. Obama to take a different tack from his predecessors in his dealings with Israel?
That question, which has captivated a wide spectrum of people, from America’s Israel lobby to Palestinian-Americans to the Muslim world, will take center stage on Monday, when Israel’s hawkish prime minister, Benjamin Netanyahu, has his first face-to-face meeting with Mr. Obama since he became president.
In an interview broadcast Saturday on Israeli television, Israel’s defense minister, Ehud Barak, said he believed that in the meeting, Mr. Netanyahu would signal a significant policy shift for his new government and endorse the creation of a Palestinian state — perhaps reflecting uncertainty about whether Mr. Obama would accept an Israeli hard line.
“This is a piece of the cloud that’s hovering over this meeting: is this man different?” said Aaron David Miller, a former Middle East negotiator at the State Department and the author of “The Much Too Promised Land: America’s Elusive Search for Arab-Israeli Peace.” “The fact that he’s African-American. The fact that his middle name is Hussein. The fact that the world for him is not black or white, that the Israeli-Palestinian situation is not black and white, there is gray, and in that gray lies the ability of this president to understand the needs and requirements of Palestinians. Is that on Benjamin Netanyahu’s mind? There’s no question that that’s there.”
Mr. Obama’s past suggests why, four months into his presidency, the answer to the question remains elusive. His first book, “Dreams From My Father,” delves deeply into matters of race and nationality and the need to belong somewhere, issues that permeate the Arab-Israeli conflict. But in the book Mr. Obama does not address specifically how he views Israel and the plight of the Palestinians.
As a state senator in Chicago, Mr. Obama cultivated friendships with Arab-Americans, including Rashid Khalidi, a Palestinian-American scholar and a critic of Israel. Mr. Obama and Mr. Khalidi had many dinners together, friends said, in which they discussed Palestinian issues.
During the 1990s, Mr. Obama also attended tributes to Arab-Americans, where he often seemed “empathetic” to the cause of Palestinians, said Ali Abunimah, a Palestinian-American journalist in Chicago.
This contrasts with the more “tabula rasa” image of the Israeli-Palestinian conflict that many of Mr. Obama’s predecessors brought to their presidencies — a blank slate that was then shaped by the strong alliance with Israel that is a fixture of politics in the United States, many Middle East experts say.
“I think this president gets it, in terms of the suffering of the Palestinians,” said Charles W. Freeman Jr., a former United States ambassador to Saudi Arabia. “He gets it, which is already light years ahead of the average elected American politician.”
Mr. Obama’s predecessors, Presidents Bill Clinton and George W. Bush, came of age politically with the American-Israeli viewpoint of the Middle East conflict as their primary tutor, said Daniel Levy, a former Israeli peace negotiator. While each often expressed concern and empathy for the Palestinians — with Mr. Clinton, in particular, pushing hard for Middle East peace during the last months of his presidency — their early perspectives were shaped more by Israelis and American Jews than by Muslims, Mr. Levy said.
“I think that Barack Obama, on this issue as well as many other issues, brings a fresh approach and a fresh background,” Mr. Levy said. “He’s certainly familiar with Israel’s concerns and with the closeness of the Israel-America relationship and with that narrative. But what I think might be different is a familiarity that I think President Obama almost certainly has with where the Palestinian grievance narrative is coming from.”
None of this necessarily means that Mr. Obama will chart a course that is different from his predecessors’. During the campaign he struck a position on Israel that was indistinguishable from those of his rivals Hillary Rodham Clinton and John McCain, going so far as to say in 2008 that he supported Jerusalem as the undivided capital of Israel. (He later attributed that statement to “poor phrasing in the speech,” telling Fareed Zakaria of CNN that he meant to say he did not want barbed wire running through Jerusalem.)
Still, many Palestinian-Americans who hoped that Mr. Obama would come into office and quickly seek to press the Israeli government on Palestinian issues have been disappointed.
“In practice, despite the hype, there is much more continuity with previous administrations,” Mr. Abunimah said. “People get carried away with the atmospheric change, but the substance of the U.S. policy towards Israel has been the same policy.”
Last year, for instance, Mr. Obama was quick to distance himself from Robert Malley, an informal adviser to his campaign, when reports arose that Mr. Malley, a special adviser to Mr. Clinton, had had direct contacts with Hamas, the militant Islamist organization that won the Palestinian legislative elections in 2006 and that controls Gaza. Similarly, he distanced himself from Zbigniew Brzezinski, a former national security adviser who was often critical of Israel, after complaints from some pro-Israel groups.
And Mr. Obama offered no public support for the appointment of Mr. Freeman to a top intelligence post in March after several congressional representatives and lobbyists complained that Mr. Freeman had an irrational hatred of Israel. Mr. Freeman angrily withdrew from consideration for the post.
But Mr. Freeman, in a telephone interview last week, said he still believed that Mr. Obama would go where his predecessors did not on Israel. Mr. Obama’s appointment of Gen. James L. Jones as his national security adviser — a man who has worked with Palestinians and Israelis to try to open up movement for Palestinians on the ground and who has sometimes irritated Israeli military officials — could foreshadow friction between the Obama administration and the Israeli government, several Middle East experts said.
The same is true for the appointment of George J. Mitchell as Mr. Obama’s special envoy to the region; Mr. Mitchell, who helped negotiate peace in Northern Ireland, has already hinted privately that the administration may have to look for ways to include Hamas, in some fashion, in a unity Palestinian government.
Mr. Obama’s meeting with Mr. Netanyahu, while crucial, may only preview the beginning of the path the president will take, Mr. Freeman said.
“You can’t really tell anything by what happened to me and the fact that he didn’t step forward to take on the skunks,” he said, referring to his own appointment controversy and Mr. Obama’s silence amid critics’ attacks. “The first nine months, Nixon was absolutely horrible on China. In retrospect, it was clear that he had every intention to charge ahead, but he was picking his moment. He didn’t want to have the fight before he had to have the fight.”
“I sense that Obama is picking his moment,” Mr. Freeman said.
Saturday, May 16, 2009
Economy Woes Shake Up Campaign for California Governor as Voters Seek Answers
17th May, 2009
LOS ANGELES — If a campaign consultant were in search of a billable candidate in the inchoate race to succeed Gov. Arnold Schwarzenegger, it might seem sensible to seek out a Democrat.
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Vying for California Governor’s MansionGraphic
Vying for California Governor’s Mansion
Democrats hold a whopping advantage in registered voters in California, and President Obama beat Senator John McCain here by 24 percentage points last fall. Republicans seeking statewide office have largely gotten clobbered in recent years, and the party’s standard-bearer — Mr. Schwarzenegger, barred by term limits from running for re-election — has one of the lowest approval ratings for a governor in nearly 25 years.
But the dynamics of the 2010 race, which has come into full swing in recent weeks, are already proving to be topsy-turvy, with Democrats trying to buck a gubernatorial slump against a millionaire-peppered group of moderate Republicans.
Many voters in California, despondent over the state’s dire fiscal straits, high unemployment and stream of businesses flowing to other states, say they value competence and solutions more than party affiliation or celebrity.
“What the voters will be looking for in this election is someone who has some answers,” said Bruce E. Cain, a professor of political science at the University of California, Berkeley. “I do not remember the morale of the state being so low.”
That malaise seems to infuse even those running for governor, a job whose innate challenges (including a population of nearly 39 million) are made all the more difficult by a State Constitution that requires a two-thirds vote by lawmakers to pass a budget or a tax increase and by a ballot initiative system that allows voters to set their own rules with just a simple majority.
“It’s not much of career builder; it’s more of a career ender,” said Jerry Brown, 71, the state’s attorney general, who was governor from 1975 to 1983. “But I feel I could bear that better than the other candidates.”
In addition to Mr. Brown — who has yet to declare his candidacy formally but has not been shy about his desire to run — the Democratic field includes Mayor Gavin Newsom of San Francisco, who is madly trying to Twitter his way beyond the single issue of same-sex marriage, which has so far defined him. His friendly counterpart to the south, meanwhile, Mayor Antonio R. Villaraigosa of Los Angeles, has been coy about his intentions — he ducked the state party’s convention this month — but has a reputation for jumping into races at the last minute. (State Treasurer Bill Lockyer has been floated as a possible dark horse.)
Mr. Brown, Mr. Newsom and Mr. Villaraigosa all have high-profile jobs but an uphill battle in front of them. Democrats have lost six of the last eight races for governor, including a 2003 recall, despite having a lock on most other statewide offices.
“Any Democrat who thinks that Republicans have no chance in this race should take a look at recent history,” said Garry South, a Democratic consultant who is working on the Newsom campaign.
On the Republican side are two Silicon Valley millionaires — a former eBay chief executive, Meg Whitman, and the state’s insurance commissioner, Steven Poizner, the only Republican to win a statewide office in the last election. They are joined by Tom Campbell, a former congressman who flies below most voters’ radar screens.
The Republicans have been focused on taxes and the state’s regulatory environment, which they suggest combine to drive companies out of the state, as well as on job creation, though they have offered few specific plans. They are also presenting themselves as a check on the power of the Democrats, who control both houses of the State Legislature.
“In the general election our point will be, ‘Do you want just one party in charge?’ ” Mr. Campbell said.
Democrats are hoping to capitalize on Mr. Obama’s popularity here and on his campaign’s inroads in drawing young people to the polls. Mr. Newsom, 41, in particular, has been angling for younger voters, announcing his candidacy via Twitter. (He claims 400,000 followers and says he posts “90 percent” of his own tweets.)
At the same time, Mr. Newsom, who made a tidy fortune as the founder of Plumpjack, a wine, lodging and restaurant group, is also looking to pump up his moderate, pro-business credentials with more conservative voters who might be skeptical of his well-publicized embrace of same-sex marriage and his liberal San Francisco pedigree.
“I’m a pro-job Democrat,” he said. “I’ve been very progressive when it comes to social issues and pragmatic when it comes to business.”
Most of the candidates agree that social issues will probably play only a small role in the election because of the state’s economic plight.
“I don’t think social issues are the core burning problem facing the state,” Mr. Poizner said.
Candidates from both parties also seem to agree that it is a good idea to distance themselves from Mr. Schwarzenegger, whose popularity has slipped as the state has been buffeted by recession, high foreclosure rates and chronic budget battles. That includes Mr. Villaraigosa, even though he continues to make appearances with Mr. Schwarzenegger.
“He is doing as good a job as he can do,” said Mr. Villaraigosa, adding that the only way to get California back on track is “to make fundamental changes to the way we govern.”
That might include seemingly radical solutions like calling a constitutional convention to consider changing some provisions, including the two-thirds rule in the State Legislature.
Republicans are also looking to present themselves as reformers.
Mr. Poizner, for example, who got rich running technology companies, is positioning himself as the only Republican with business credentials who has demonstrated that he can win statewide office. Mr. Poizner is also pushing education reform, favoring a large expansion of charter schools. “I am going to be very specific,” he said. “And it will drive my political consultants nuts.”
Likewise, Ms. Whitman seems to be striking an outsider attitude, saying she wants to bring her experiences at eBay to bear on the state’s budget.
“I want to run Sacramento a bit more like a business,” she said. “We have a government we can’t afford.”
Mr. Campbell, a business professor at the University of California, Berkeley, seems to strike a more placid tone and says he can easily work with a Democratic-controlled Legislature. “Oh gosh, yes I can!” he said.
Such post-partisanship was supposed to be a hallmark of Mr. Schwarzenegger’s second term, which he began in 2007 with a call for “the party of California” to come together to fix the state. Two years later, however, the consensus is that despite all the potential takers, running the State of California is a miserable job.
“Most governors leave discredited and unpopular,” said Mr. Brown, who at this early point in the contest is leading among Democrats in most polls.
LOS ANGELES — If a campaign consultant were in search of a billable candidate in the inchoate race to succeed Gov. Arnold Schwarzenegger, it might seem sensible to seek out a Democrat.
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Multimedia
Vying for California Governor’s MansionGraphic
Vying for California Governor’s Mansion
Democrats hold a whopping advantage in registered voters in California, and President Obama beat Senator John McCain here by 24 percentage points last fall. Republicans seeking statewide office have largely gotten clobbered in recent years, and the party’s standard-bearer — Mr. Schwarzenegger, barred by term limits from running for re-election — has one of the lowest approval ratings for a governor in nearly 25 years.
But the dynamics of the 2010 race, which has come into full swing in recent weeks, are already proving to be topsy-turvy, with Democrats trying to buck a gubernatorial slump against a millionaire-peppered group of moderate Republicans.
Many voters in California, despondent over the state’s dire fiscal straits, high unemployment and stream of businesses flowing to other states, say they value competence and solutions more than party affiliation or celebrity.
“What the voters will be looking for in this election is someone who has some answers,” said Bruce E. Cain, a professor of political science at the University of California, Berkeley. “I do not remember the morale of the state being so low.”
That malaise seems to infuse even those running for governor, a job whose innate challenges (including a population of nearly 39 million) are made all the more difficult by a State Constitution that requires a two-thirds vote by lawmakers to pass a budget or a tax increase and by a ballot initiative system that allows voters to set their own rules with just a simple majority.
“It’s not much of career builder; it’s more of a career ender,” said Jerry Brown, 71, the state’s attorney general, who was governor from 1975 to 1983. “But I feel I could bear that better than the other candidates.”
In addition to Mr. Brown — who has yet to declare his candidacy formally but has not been shy about his desire to run — the Democratic field includes Mayor Gavin Newsom of San Francisco, who is madly trying to Twitter his way beyond the single issue of same-sex marriage, which has so far defined him. His friendly counterpart to the south, meanwhile, Mayor Antonio R. Villaraigosa of Los Angeles, has been coy about his intentions — he ducked the state party’s convention this month — but has a reputation for jumping into races at the last minute. (State Treasurer Bill Lockyer has been floated as a possible dark horse.)
Mr. Brown, Mr. Newsom and Mr. Villaraigosa all have high-profile jobs but an uphill battle in front of them. Democrats have lost six of the last eight races for governor, including a 2003 recall, despite having a lock on most other statewide offices.
“Any Democrat who thinks that Republicans have no chance in this race should take a look at recent history,” said Garry South, a Democratic consultant who is working on the Newsom campaign.
On the Republican side are two Silicon Valley millionaires — a former eBay chief executive, Meg Whitman, and the state’s insurance commissioner, Steven Poizner, the only Republican to win a statewide office in the last election. They are joined by Tom Campbell, a former congressman who flies below most voters’ radar screens.
The Republicans have been focused on taxes and the state’s regulatory environment, which they suggest combine to drive companies out of the state, as well as on job creation, though they have offered few specific plans. They are also presenting themselves as a check on the power of the Democrats, who control both houses of the State Legislature.
“In the general election our point will be, ‘Do you want just one party in charge?’ ” Mr. Campbell said.
Democrats are hoping to capitalize on Mr. Obama’s popularity here and on his campaign’s inroads in drawing young people to the polls. Mr. Newsom, 41, in particular, has been angling for younger voters, announcing his candidacy via Twitter. (He claims 400,000 followers and says he posts “90 percent” of his own tweets.)
At the same time, Mr. Newsom, who made a tidy fortune as the founder of Plumpjack, a wine, lodging and restaurant group, is also looking to pump up his moderate, pro-business credentials with more conservative voters who might be skeptical of his well-publicized embrace of same-sex marriage and his liberal San Francisco pedigree.
“I’m a pro-job Democrat,” he said. “I’ve been very progressive when it comes to social issues and pragmatic when it comes to business.”
Most of the candidates agree that social issues will probably play only a small role in the election because of the state’s economic plight.
“I don’t think social issues are the core burning problem facing the state,” Mr. Poizner said.
Candidates from both parties also seem to agree that it is a good idea to distance themselves from Mr. Schwarzenegger, whose popularity has slipped as the state has been buffeted by recession, high foreclosure rates and chronic budget battles. That includes Mr. Villaraigosa, even though he continues to make appearances with Mr. Schwarzenegger.
“He is doing as good a job as he can do,” said Mr. Villaraigosa, adding that the only way to get California back on track is “to make fundamental changes to the way we govern.”
That might include seemingly radical solutions like calling a constitutional convention to consider changing some provisions, including the two-thirds rule in the State Legislature.
Republicans are also looking to present themselves as reformers.
Mr. Poizner, for example, who got rich running technology companies, is positioning himself as the only Republican with business credentials who has demonstrated that he can win statewide office. Mr. Poizner is also pushing education reform, favoring a large expansion of charter schools. “I am going to be very specific,” he said. “And it will drive my political consultants nuts.”
Likewise, Ms. Whitman seems to be striking an outsider attitude, saying she wants to bring her experiences at eBay to bear on the state’s budget.
“I want to run Sacramento a bit more like a business,” she said. “We have a government we can’t afford.”
Mr. Campbell, a business professor at the University of California, Berkeley, seems to strike a more placid tone and says he can easily work with a Democratic-controlled Legislature. “Oh gosh, yes I can!” he said.
Such post-partisanship was supposed to be a hallmark of Mr. Schwarzenegger’s second term, which he began in 2007 with a call for “the party of California” to come together to fix the state. Two years later, however, the consensus is that despite all the potential takers, running the State of California is a miserable job.
“Most governors leave discredited and unpopular,” said Mr. Brown, who at this early point in the contest is leading among Democrats in most polls.
EBRD Board Says Ready to Consider Raising Capital
May 16 (Bloomberg) -- The European Bank for Reconstruction and Development’s board of governors is willing to discuss raising capital, Board Chairman Brian Lenihan said, as the global crisis means more banks and businesses in former communist states need loans and investment.
“The governors of the bank expressed broad openness to discuss enhanced capital needs of the EBRD,” Lenihan, who is also Ireland’s finance minister, said in a statement in London after a board meeting today. “However, this was combined with the strong view that there should be a real necessity for extra capital and that the case has to be made convincingly.”
The former communist countries in Europe and central Asia that the London-based EBRD invests in are struggling through the deepest recession since shaking off communist regimes. The financial crisis that left banks with more than $2 trillion in losses worldwide has led to a dearth of credit and investment in the region.
The governors warned that allocating more resources in response to the crisis “will inevitably expose the bank to high risks, and a sizeable contribution to recovery may test the bank’s capital,” according to Lenihan.
The EBRD posted a loss last year as declines in equity markets eroded the value of its assets. The bank’s capital resources review, which follows this week’s annual meeting, is the right forum in which to discuss capital needs, the governors concluded, Lenihan said.
Strategy
EBRD President Thomas Mirow yesterday called on governors to start addressing the bank’s capital needs as part of talks on its medium-term strategy for the period between 2011 and 2015. The board should reach a decision when the bank holds its next annual meeting in Zagreb a year from now, he said.
“There have been, as I had hoped for, some preliminary debates about what is the sustainable business volume for this bank, how do we cope with risks, and what should this mean in terms of a possible capital increase,” Mirow told reporters today.
“In this field, we didn’t have all shareholders on the same line” with some preferring to stay within the existing capital limits, he said, adding that “there was no divisive debate.”
Australia will remain a shareholder of the EBRD, reversing an earlier decision, lawmaker Peter Reith, who headed the country’s delegation, told the board meeting today.
‘Systemically Important’
The London-based bank will probably invest between 7 billion euros ($9.5 billion) and 8 billion euros in the region next year, compared with this year’s record 7 billion euros, Mirow said in a May 12 Bloomberg interview. The EBRD is focusing its efforts on 12 “systemically important” western parent banks, such as units of Italy’s UniCredit SpA, and some large local lenders, including Latvia’s Parex Banka AS and Hungary’s OTP Bank Nyrt., he said.
The EBRD has lent 2.3 billion euros ($3.13 billion) to the region so far this year. Funding rose by more than half from the same period last year. The EBRD in the whole of last year invested 5.1 billion euros.
Eastern Europe has probably seen the worst of the economic crisis, Mirow told reporters today. He predicted there will be a “very cautious recovery” from next year, while the region’s banks also will be further hit through the economy, he said.
‘Bottoming Out’
“We see signs of a bottoming out this year,” Mirow said. “There will be further hits, also to the financial sector through the real economy” and people will not immediately feel the improvement as a recovery in employment will lag behind.”
The slump in the last two quarters prompted the EBRD last week to revise its average 2009 forecast for the economies to a contraction of more than 5 percent, after still predicting growth in early January. Expansion will return next year at a rate of 1.4 percent, the bank estimates. Mirow said today he doesn’t expect the bank’s forecast to “deteriorate.”
The development bank teamed up in March with the World Bank, and European Investment Bank to extend a 24.5 billion-euro aid package over two years for the region’s banks and companies.
The EBRD was created in 1991 to invest in former communist countries from the Balkans to Asia to help them transform their economies. Since its formation, the bank has invested 41.7 billion euros, or 134.8 billion euros including contributions from private partners.
“The governors of the bank expressed broad openness to discuss enhanced capital needs of the EBRD,” Lenihan, who is also Ireland’s finance minister, said in a statement in London after a board meeting today. “However, this was combined with the strong view that there should be a real necessity for extra capital and that the case has to be made convincingly.”
The former communist countries in Europe and central Asia that the London-based EBRD invests in are struggling through the deepest recession since shaking off communist regimes. The financial crisis that left banks with more than $2 trillion in losses worldwide has led to a dearth of credit and investment in the region.
The governors warned that allocating more resources in response to the crisis “will inevitably expose the bank to high risks, and a sizeable contribution to recovery may test the bank’s capital,” according to Lenihan.
The EBRD posted a loss last year as declines in equity markets eroded the value of its assets. The bank’s capital resources review, which follows this week’s annual meeting, is the right forum in which to discuss capital needs, the governors concluded, Lenihan said.
Strategy
EBRD President Thomas Mirow yesterday called on governors to start addressing the bank’s capital needs as part of talks on its medium-term strategy for the period between 2011 and 2015. The board should reach a decision when the bank holds its next annual meeting in Zagreb a year from now, he said.
“There have been, as I had hoped for, some preliminary debates about what is the sustainable business volume for this bank, how do we cope with risks, and what should this mean in terms of a possible capital increase,” Mirow told reporters today.
“In this field, we didn’t have all shareholders on the same line” with some preferring to stay within the existing capital limits, he said, adding that “there was no divisive debate.”
Australia will remain a shareholder of the EBRD, reversing an earlier decision, lawmaker Peter Reith, who headed the country’s delegation, told the board meeting today.
‘Systemically Important’
The London-based bank will probably invest between 7 billion euros ($9.5 billion) and 8 billion euros in the region next year, compared with this year’s record 7 billion euros, Mirow said in a May 12 Bloomberg interview. The EBRD is focusing its efforts on 12 “systemically important” western parent banks, such as units of Italy’s UniCredit SpA, and some large local lenders, including Latvia’s Parex Banka AS and Hungary’s OTP Bank Nyrt., he said.
The EBRD has lent 2.3 billion euros ($3.13 billion) to the region so far this year. Funding rose by more than half from the same period last year. The EBRD in the whole of last year invested 5.1 billion euros.
Eastern Europe has probably seen the worst of the economic crisis, Mirow told reporters today. He predicted there will be a “very cautious recovery” from next year, while the region’s banks also will be further hit through the economy, he said.
‘Bottoming Out’
“We see signs of a bottoming out this year,” Mirow said. “There will be further hits, also to the financial sector through the real economy” and people will not immediately feel the improvement as a recovery in employment will lag behind.”
The slump in the last two quarters prompted the EBRD last week to revise its average 2009 forecast for the economies to a contraction of more than 5 percent, after still predicting growth in early January. Expansion will return next year at a rate of 1.4 percent, the bank estimates. Mirow said today he doesn’t expect the bank’s forecast to “deteriorate.”
The development bank teamed up in March with the World Bank, and European Investment Bank to extend a 24.5 billion-euro aid package over two years for the region’s banks and companies.
The EBRD was created in 1991 to invest in former communist countries from the Balkans to Asia to help them transform their economies. Since its formation, the bank has invested 41.7 billion euros, or 134.8 billion euros including contributions from private partners.
Friday, May 15, 2009
Asian Stocks Post Weekly Decline on Growth, Profit Concerns
May 16 (Bloomberg) -- Asian stocks fell this week as investors sold shares trading at their most expensive valuations in five years on concerns that the economy and corporate profits will take longer than expected to recover.
Hitachi Ltd., Japan’s third largest chipmaker, tumbled 17 percent after forecasting a loss. Rio Tinto Group, the world’s third-largest mining company, slumped 14 percent after London’s Telegraph newspaper reported the company may sell shares. China Construction Bank Ltd., the world’s No. 2 lender by market value, dropped 8.8 percent as Bank of America Corp. sold a stake.
“All positive news has already been priced,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co., which oversees the equivalent of $3.3 billion. “We need solid evidence the economy is indeed recovering to go up any further.”
The MSCI Asia Pacific Index fell 0.7 percent to 97.28 in the past five days, ending a two-week, 9.5 percent advance. Speculation the global economy is recovering sent the gauge to the highest since Oct. 7 on May 11. The average valuation of its companies is 33 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average dropped 1.8 percent, snapping its two-week, 8.3 percent advance. Australia’s S&P/ASX 200 Index slumped 4.3 percent.
Stimulus Measures
The MSCI Asia Pacific Index’s relative strength index, which measures how rapidly prices have risen or fallen, traded above the threshold of 70 that some investors use as a signal to sell in the six trading days through May 13.
“Of course it’s time for a correction, that’s the way markets work,” investor Jim Rogers said in an interview with Bloomberg Television May 12. “I don’t see the stock market as a great place to be for the next two to three years.”
MSCI’s Asian index has climbed 38 percent from a five-year low on March 9 on speculation stimulus measures by governments around the world are working to pull the global economy out its worst recession since World War II.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, declined 6.3 percent after soaring 23 percent in the past week. Toyota Motor Corp., the world’s biggest automaker, retreated 9.8 percent after saying it will cut production. Santos Ltd., Australia’s third-biggest oil and gas producer, dropped 10 percent following a share sale.
Hopes for an economic recovery faltered this week as government reports showed U.S. retail sales fell 0.4 percent in April and Germany’s economy contracted 3.8 percent in the fourth quarter. Japan’s wholesale prices fell at the fastest pace in 22 years in April, according to central bank figures issued yesterday.
‘Rapid Recovery Unlikely’
“It looks to me now as if the markets are now pricing in a rapid recovery, that they’re pricing in a V-shaped recession, which I consider extremely unlikely,” Nobel Prize-winning economist Paul Krugman said at a forum in Shanghai on May 12. “The market seems to be looking as if this is going to be an average recession, but it’s not.”
Hitachi tumbled 17 percent to 325 yen in Tokyo. The company said on May 12 it will post a net loss of 270 billion yen ($2.78 billion) in the 12 months ending March 31, 2010.
Rio Tinto slumped 14 percent to A$61.88 in Sydney. London’s Telegraph newspaper reported on May 13 that Rio may sell shares to current shareholders if an investment by Aluminum Corp. of China Ltd. is not allowed to proceed. Rio yesterday reaffirmed its commitment to the $19.5 billion transaction.
MSCI Changes
China Construction Bank dropped 8.8 percent to HK$4.79. Bank of America sold 13.509 billion shares, or a 5.78 percent stake, for HK$4.20 apiece, Beijing-based Construction Bank said on May 13.
Mitsubishi UFJ declined 6.4 percent to 613 yen in Tokyo. The stock’s surge the previous week took it to its highest close since Nov. 5.
Toyota Motor retreated 9.8 percent to 3,590 yen. The company said on May 13 it will slash global vehicle production by 28 percent in 2009 to its lowest in seven years as worldwide vehicle demand plummets.
Santos Ltd., Australia’s third-biggest oil and gas producer, dropped 10 percent to A$14.13 in Sydney. The company said on May 13 it raised A$1.75 billion ($1.3 billion) by selling shares to institutional investors. It will sell a further A$1.25 billion to retail investors.
Hitachi Ltd., Japan’s third largest chipmaker, tumbled 17 percent after forecasting a loss. Rio Tinto Group, the world’s third-largest mining company, slumped 14 percent after London’s Telegraph newspaper reported the company may sell shares. China Construction Bank Ltd., the world’s No. 2 lender by market value, dropped 8.8 percent as Bank of America Corp. sold a stake.
“All positive news has already been priced,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co., which oversees the equivalent of $3.3 billion. “We need solid evidence the economy is indeed recovering to go up any further.”
The MSCI Asia Pacific Index fell 0.7 percent to 97.28 in the past five days, ending a two-week, 9.5 percent advance. Speculation the global economy is recovering sent the gauge to the highest since Oct. 7 on May 11. The average valuation of its companies is 33 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average dropped 1.8 percent, snapping its two-week, 8.3 percent advance. Australia’s S&P/ASX 200 Index slumped 4.3 percent.
Stimulus Measures
The MSCI Asia Pacific Index’s relative strength index, which measures how rapidly prices have risen or fallen, traded above the threshold of 70 that some investors use as a signal to sell in the six trading days through May 13.
“Of course it’s time for a correction, that’s the way markets work,” investor Jim Rogers said in an interview with Bloomberg Television May 12. “I don’t see the stock market as a great place to be for the next two to three years.”
MSCI’s Asian index has climbed 38 percent from a five-year low on March 9 on speculation stimulus measures by governments around the world are working to pull the global economy out its worst recession since World War II.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, declined 6.3 percent after soaring 23 percent in the past week. Toyota Motor Corp., the world’s biggest automaker, retreated 9.8 percent after saying it will cut production. Santos Ltd., Australia’s third-biggest oil and gas producer, dropped 10 percent following a share sale.
Hopes for an economic recovery faltered this week as government reports showed U.S. retail sales fell 0.4 percent in April and Germany’s economy contracted 3.8 percent in the fourth quarter. Japan’s wholesale prices fell at the fastest pace in 22 years in April, according to central bank figures issued yesterday.
‘Rapid Recovery Unlikely’
“It looks to me now as if the markets are now pricing in a rapid recovery, that they’re pricing in a V-shaped recession, which I consider extremely unlikely,” Nobel Prize-winning economist Paul Krugman said at a forum in Shanghai on May 12. “The market seems to be looking as if this is going to be an average recession, but it’s not.”
Hitachi tumbled 17 percent to 325 yen in Tokyo. The company said on May 12 it will post a net loss of 270 billion yen ($2.78 billion) in the 12 months ending March 31, 2010.
Rio Tinto slumped 14 percent to A$61.88 in Sydney. London’s Telegraph newspaper reported on May 13 that Rio may sell shares to current shareholders if an investment by Aluminum Corp. of China Ltd. is not allowed to proceed. Rio yesterday reaffirmed its commitment to the $19.5 billion transaction.
MSCI Changes
China Construction Bank dropped 8.8 percent to HK$4.79. Bank of America sold 13.509 billion shares, or a 5.78 percent stake, for HK$4.20 apiece, Beijing-based Construction Bank said on May 13.
Mitsubishi UFJ declined 6.4 percent to 613 yen in Tokyo. The stock’s surge the previous week took it to its highest close since Nov. 5.
Toyota Motor retreated 9.8 percent to 3,590 yen. The company said on May 13 it will slash global vehicle production by 28 percent in 2009 to its lowest in seven years as worldwide vehicle demand plummets.
Santos Ltd., Australia’s third-biggest oil and gas producer, dropped 10 percent to A$14.13 in Sydney. The company said on May 13 it raised A$1.75 billion ($1.3 billion) by selling shares to institutional investors. It will sell a further A$1.25 billion to retail investors.
Asian Currencies Drop as Stocks Falter on Dim Recovery Outlook
May 16 (Bloomberg) -- Asian currencies, led by South Korea’s won, declined this week after a rally in regional stocks faltered on signs the global recession is far from easing.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, fell this week for the first time in a month and the MSCI Asia Pacific Index of shares snapped a two-week rally. Europe’s economy contracted at the fastest pace in at least 13 years in the first quarter, while state-run Korea Development Institute expects the economy will shrink 2.3 percent in 2009, the first time in more than a decade.
“The correction we’ve seen in global equities this week probably hasn’t finished yet,” said Dariusz Kowalczyk, a strategist with SJS Markets Ltd. in Hong Kong. “There’s room for further risk aversion which would be negative for Asian emerging currencies.”
The won, Asia’s best-performing currency in the past month, declined 0.8 percent this week to 1,257 per dollar in Seoul. The Philippine peso weakened 0.8 percent to 47.635, while the Malaysian ringgit fell 0.9 percent to 3.5495.
Initial U.S. jobless claims rose by 32,000 to 637,000 in the week ended May 9, the Labor Department said this week, 27,000 more than estimated in a Bloomberg survey of economists. The bankruptcy of Chrysler LLC may cause further job losses.
Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, when it fell 1.6 percent, the European Union’s statistics office said yesterday. That’s the biggest slide since the euro-area GDP data were first compiled in 1995.
‘Pretty Bloody’
Indonesia, Southeast Asia’s biggest economy, expanded 4.4 percent last quarter, the slowest pace in five years, the government reported yesterday. Singapore’s economy shrank the most since at least 1975 in the same quarter and Thailand’s Finance Minister Korn Chatikavanij estimates a “pretty bloody” GDP contraction of as much as 6 percent in the same period.
The peso ended a two-week rally on speculation oil companies are purchasing dollars to pay for imports.
The currency has declined 1.3 percent since touching a three-month high reached on May 11 after the tax bureau said revenue fell short of target in April, spurring concern that the government will fail to narrow its budget deficit.
Weak economic reports are “unlikely to shake up the growing seeds of risk appetite,” said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore. “A lot would still want to jump into this green shoots bandwagon. I can sense that markets are going to take more and more risks.”
Taiwan Dollar
Taiwan’s dollar completed a fourth winning week on speculation warming relations with China will draw investment and help pull the economy out of a recession.
The currency’s gains were tempered as global funds sold $1.1 billion more local shares than they bought this week. The benchmark Taiex index of stocks fell 1.4 percent for the week, ending a three-week rally.
“The structural dynamics remain good for Taiwan’s dollar,” said Wai Ho Leong, a regional economist at Barclays Capital Plc in Singapore, citing prospects that Asia will lead the global economic recovery. The selling of Taiwan shares is likely to be temporary, he said.
The island’s dollar rose 0.3 percent this week to NT$32.950 against the U.S. currency, according to Taipei Forex Inc. It touched NT$32.767 on May 13, the strongest level since Dec. 31.
Elsewhere, the Indonesian rupiah declined 0.6 percent this week to 10,438 a dollar, while Thailand’s baht jumped 0.9 percent to 34.56. China’s yuan traded at 6.8258 versus 6.8218 on May 8, while Singapore’s dollar was at S$1.4668, compared with S$1.4659.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, fell this week for the first time in a month and the MSCI Asia Pacific Index of shares snapped a two-week rally. Europe’s economy contracted at the fastest pace in at least 13 years in the first quarter, while state-run Korea Development Institute expects the economy will shrink 2.3 percent in 2009, the first time in more than a decade.
“The correction we’ve seen in global equities this week probably hasn’t finished yet,” said Dariusz Kowalczyk, a strategist with SJS Markets Ltd. in Hong Kong. “There’s room for further risk aversion which would be negative for Asian emerging currencies.”
The won, Asia’s best-performing currency in the past month, declined 0.8 percent this week to 1,257 per dollar in Seoul. The Philippine peso weakened 0.8 percent to 47.635, while the Malaysian ringgit fell 0.9 percent to 3.5495.
Initial U.S. jobless claims rose by 32,000 to 637,000 in the week ended May 9, the Labor Department said this week, 27,000 more than estimated in a Bloomberg survey of economists. The bankruptcy of Chrysler LLC may cause further job losses.
Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, when it fell 1.6 percent, the European Union’s statistics office said yesterday. That’s the biggest slide since the euro-area GDP data were first compiled in 1995.
‘Pretty Bloody’
Indonesia, Southeast Asia’s biggest economy, expanded 4.4 percent last quarter, the slowest pace in five years, the government reported yesterday. Singapore’s economy shrank the most since at least 1975 in the same quarter and Thailand’s Finance Minister Korn Chatikavanij estimates a “pretty bloody” GDP contraction of as much as 6 percent in the same period.
The peso ended a two-week rally on speculation oil companies are purchasing dollars to pay for imports.
The currency has declined 1.3 percent since touching a three-month high reached on May 11 after the tax bureau said revenue fell short of target in April, spurring concern that the government will fail to narrow its budget deficit.
Weak economic reports are “unlikely to shake up the growing seeds of risk appetite,” said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore. “A lot would still want to jump into this green shoots bandwagon. I can sense that markets are going to take more and more risks.”
Taiwan Dollar
Taiwan’s dollar completed a fourth winning week on speculation warming relations with China will draw investment and help pull the economy out of a recession.
The currency’s gains were tempered as global funds sold $1.1 billion more local shares than they bought this week. The benchmark Taiex index of stocks fell 1.4 percent for the week, ending a three-week rally.
“The structural dynamics remain good for Taiwan’s dollar,” said Wai Ho Leong, a regional economist at Barclays Capital Plc in Singapore, citing prospects that Asia will lead the global economic recovery. The selling of Taiwan shares is likely to be temporary, he said.
The island’s dollar rose 0.3 percent this week to NT$32.950 against the U.S. currency, according to Taipei Forex Inc. It touched NT$32.767 on May 13, the strongest level since Dec. 31.
Elsewhere, the Indonesian rupiah declined 0.6 percent this week to 10,438 a dollar, while Thailand’s baht jumped 0.9 percent to 34.56. China’s yuan traded at 6.8258 versus 6.8218 on May 8, while Singapore’s dollar was at S$1.4668, compared with S$1.4659.
‘In three years, Bharti will be a lifestyle company’
Bharti boss Sunil Mittal took time out from his hectic day to talk to Prabhakar Sinha. Excerpts:
How do you find the achievement of crossing the the milestone 100 million subscribers mark?
We take all the big events in our stride as it happened.
A 100 million connections—an amazing feat for Bharti. Does it seem you’ve climbed Mt Everest? I mean where do you go from here? What is the challenge now?
This is indeed a big achievement. A few years ago our big dream was to achieve a 25-million subscribers base. Only a few companies like British Telecom, Telefonica, Orange, Deutsche Telecom used to have those kind of numbers. Now our challenge is to globalise. We are in some small islandcountries. We would be looking at entering big countries now.
How will you do it? Via acquisitions?
Yes. We are looking for acquisitions in emerging markets like Africa and middleeast. We tried to acquire MTN of South Africa but couldn’t. It was a disappointment. But, we will keep trying to do acquisition to enter emerging economies.
Are you looking at any particular company at the moment?
Nothing of that sort. We keep getting proposals from our bankers. Due to recession in the developed world, valuations too have become attractive.
Where will growth come from here?
Commerce and entertainment will drive growth here. Fund transfer and collection through mobile phone will be a big business.
But, this will require 3G...
Partly yes. Entertainment will require 3G. But, money transfer through mobile phone can happen with the existing system of 2G also. I will say that in the next three years this company will move from being a telecom company to entertainment, fund transfer, and collection powerhouse. In other words, it will be a lifestyle company.
So you find Vodafone a more determined competitor than Hutch?
Hutch was very tough competitor. It used to move very fast. Ashim Ghosh is a great leader. He led the transformation of Hutch’s operation to Vodafone in a seamless manner. Vodafone is also doing well. But its response time is not very fast.
What’s the secret of succeeding during a slowdown?
You need to ensure an efficient production system. We have experienced some headwind but there’s not been much effect of the downturn. Only the international roaming business has been affected because of fewer foreigners visiting India due to the slowdown. Other than that, we try to hold your cost. In this, our model of outsourcing various services that we require is a great boon. Because of this, we could manage our cost very well. This helped us in containing our debt, which is at around $1 billion as against $7-8 billion in the case of some of our competitors of much smaller size.
You once said that after 50 years of age, you would join politics.
Yes, but I have changed my mind. Participating directly in politics is a different ballgame. I do participate in discussions and debates. I continue to be in public life from where I am. I think I can contribute more to the society from here. It is nice to see a lot of young people participating in politics nowadays.
We are in the cusp of a generational change in political leadership. What do you expect from this?
The new generation is more energetic, dynamic and understands the aspirations of youth better. They are comfortable with globalisation. Most of them are very well educated. But, the role of elderly statesmen will continue to be there in mentoring the new leadership.
How do you find the achievement of crossing the the milestone 100 million subscribers mark?
We take all the big events in our stride as it happened.
A 100 million connections—an amazing feat for Bharti. Does it seem you’ve climbed Mt Everest? I mean where do you go from here? What is the challenge now?
This is indeed a big achievement. A few years ago our big dream was to achieve a 25-million subscribers base. Only a few companies like British Telecom, Telefonica, Orange, Deutsche Telecom used to have those kind of numbers. Now our challenge is to globalise. We are in some small islandcountries. We would be looking at entering big countries now.
How will you do it? Via acquisitions?
Yes. We are looking for acquisitions in emerging markets like Africa and middleeast. We tried to acquire MTN of South Africa but couldn’t. It was a disappointment. But, we will keep trying to do acquisition to enter emerging economies.
Are you looking at any particular company at the moment?
Nothing of that sort. We keep getting proposals from our bankers. Due to recession in the developed world, valuations too have become attractive.
Where will growth come from here?
Commerce and entertainment will drive growth here. Fund transfer and collection through mobile phone will be a big business.
But, this will require 3G...
Partly yes. Entertainment will require 3G. But, money transfer through mobile phone can happen with the existing system of 2G also. I will say that in the next three years this company will move from being a telecom company to entertainment, fund transfer, and collection powerhouse. In other words, it will be a lifestyle company.
So you find Vodafone a more determined competitor than Hutch?
Hutch was very tough competitor. It used to move very fast. Ashim Ghosh is a great leader. He led the transformation of Hutch’s operation to Vodafone in a seamless manner. Vodafone is also doing well. But its response time is not very fast.
What’s the secret of succeeding during a slowdown?
You need to ensure an efficient production system. We have experienced some headwind but there’s not been much effect of the downturn. Only the international roaming business has been affected because of fewer foreigners visiting India due to the slowdown. Other than that, we try to hold your cost. In this, our model of outsourcing various services that we require is a great boon. Because of this, we could manage our cost very well. This helped us in containing our debt, which is at around $1 billion as against $7-8 billion in the case of some of our competitors of much smaller size.
You once said that after 50 years of age, you would join politics.
Yes, but I have changed my mind. Participating directly in politics is a different ballgame. I do participate in discussions and debates. I continue to be in public life from where I am. I think I can contribute more to the society from here. It is nice to see a lot of young people participating in politics nowadays.
We are in the cusp of a generational change in political leadership. What do you expect from this?
The new generation is more energetic, dynamic and understands the aspirations of youth better. They are comfortable with globalisation. Most of them are very well educated. But, the role of elderly statesmen will continue to be there in mentoring the new leadership.
Thursday, May 14, 2009
Foreign Direct Investment in China Tumbles on Crisis
May 15 (Bloomberg) -- Foreign direct investment in China fell for a seventh month from a year earlier as companies cut spending to weather the world’s worst financial crisis since World War II.
Investment dropped 22.5 percent to $5.89 billion in April, the commerce ministry said at a briefing in Beijing today. That compares with a 9.5 percent decline in March. For the first four months of this year, spending fell 21 percent to $27.67 billion.
Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus plan may counter weaker investment by Chinese and foreign companies and revive the world’s third-biggest economy. Spending on factories and property surged 30.5 percent in the first four months and new lending climbed to a record, data this week showed.
“This is a reflection of multinational companies around the world tightening their belts,” said David Cohen, an economist with Action Economics in Singapore. “The weakness is being offset by the fiscal stimulus measures of the Chinese government.”
Businesses that are partly or entirely foreign owned account for 30 percent of industrial output, 55 percent of trade and 11 percent of urban jobs, according to the commerce ministry.
“The decline is in line with the global economic crisis, showing the effect of the world recession on investments,” commerce ministry spokesman Yao Jian said at a briefing in Beijing.
Currency Gains
Besides the credit crunch, investors’ reduced expectations for the yuan to appreciate are discouraging inflows of capital, according to Wang Tao, an economist at UBS AG in Beijing. She expects “smaller but sizable foreign direct investment inflows in 2009, with a continued rise in Chinese investment abroad.”
The government has stalled gains by the currency against the dollar since July last year, aiding exporters of toys, clothes and electronics after global demand collapsed.
China recorded a 40.6 percent drop in new registrations by foreign companies in the first quarter from a year earlier, the State Administration for Industry and Commerce said in a report released this week.
Not all companies are holding back on investment as the government spurs demand by providing subsidies for purchases of vehicles and home appliances.
Volkswagen AG, the biggest overseas carmaker in China, and its local partner, China FAW Group Corp., will invest 550 million euros ($737 million) expanding capacity at a plant in western Chengdu city, the Chinese automaker said May 8. China’s vehicle sales have topped those in the U.S. this year.
Investment dropped 22.5 percent to $5.89 billion in April, the commerce ministry said at a briefing in Beijing today. That compares with a 9.5 percent decline in March. For the first four months of this year, spending fell 21 percent to $27.67 billion.
Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus plan may counter weaker investment by Chinese and foreign companies and revive the world’s third-biggest economy. Spending on factories and property surged 30.5 percent in the first four months and new lending climbed to a record, data this week showed.
“This is a reflection of multinational companies around the world tightening their belts,” said David Cohen, an economist with Action Economics in Singapore. “The weakness is being offset by the fiscal stimulus measures of the Chinese government.”
Businesses that are partly or entirely foreign owned account for 30 percent of industrial output, 55 percent of trade and 11 percent of urban jobs, according to the commerce ministry.
“The decline is in line with the global economic crisis, showing the effect of the world recession on investments,” commerce ministry spokesman Yao Jian said at a briefing in Beijing.
Currency Gains
Besides the credit crunch, investors’ reduced expectations for the yuan to appreciate are discouraging inflows of capital, according to Wang Tao, an economist at UBS AG in Beijing. She expects “smaller but sizable foreign direct investment inflows in 2009, with a continued rise in Chinese investment abroad.”
The government has stalled gains by the currency against the dollar since July last year, aiding exporters of toys, clothes and electronics after global demand collapsed.
China recorded a 40.6 percent drop in new registrations by foreign companies in the first quarter from a year earlier, the State Administration for Industry and Commerce said in a report released this week.
Not all companies are holding back on investment as the government spurs demand by providing subsidies for purchases of vehicles and home appliances.
Volkswagen AG, the biggest overseas carmaker in China, and its local partner, China FAW Group Corp., will invest 550 million euros ($737 million) expanding capacity at a plant in western Chengdu city, the Chinese automaker said May 8. China’s vehicle sales have topped those in the U.S. this year.
Asian Stocks Advance on Sony Forecast, Bank Borrowing Costs
May 15 (Bloomberg) -- Asian stocks climbed, paring the MSCI Asia Pacific Index’s first weekly decline in three weeks, after Sony Corp. forecast a smaller loss than analysts expected and bank borrowing costs plunged.
Sony, the world’s No. 2 maker of consumer electronics, jumped 6.5 percent after the company said it will close factories as part of restructuring efforts. HSBC Holdings Plc, Europe’s largest lender by market value, rose 3.5 percent and Tokio Marine Holdings Inc., Japan’s biggest property insurer, gained 4.8 percent on optimism a government bailout of U.S. insurers will further ease the credit crunch.
“Optimism lifts the market, and the gain in equities further lifts optimism,” said Kiyoshi Ishigane, a senior strategist a Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion in Tokyo. “Like a drunkard waking up with a hangover, investors will eventually be hit with the reality that things haven’t improved overnight.”
The MSCI Asia Pacific Index rose 1.7 percent to 96.86 as of 1:29 p.m. in Tokyo. It declined 1.2 percent this week as the most expensive valuations since 2004 raised concern a two-month stock rally had outpaced earnings prospects.
Japan’s Nikkei 225 Stock Average gained 1.6 percent to 9,234.71. All markets in Asia rose except China.
Tokyo Electron Ltd. climbed 6.6 percent after saying orders for semiconductor equipment will rise this quarter. Rio Tinto Group, the world’s third-largest mining company, surged 7.1 percent in Sydney after saying it remains committed to a $19.5 billion investment from Aluminum Corp. of China. Singapore Airlines Ltd., the world’s second-biggest carrier by market value, gained 2.2 percent on plans to spin off a unit.
Sony Earnings
Futures on the Standard & Poor’s 500 Index added 0.1 percent. The benchmark rose 1 percent yesterday, snapping a three-day losing streak, as declining funding costs boosted bank shares. CA Inc., the world’s second-largest maker of software for mainframe computers, led gains by technology companies after reporting earnings that beat analyst estimates.
The MSCI Asia Pacific Index has climbed 37 percent from a five-year low on March 9 amid speculation the worst of the financial crisis had passed. Shares on the gauge are valued at 32 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.
Sony jumped 6.5 percent to 2,560. The company forecast yesterday it will post a 110 billion yen ($1.1 billion) operating loss this year, better than the median 135.6 billion yen loss estimate in a Bloomberg survey of nine analysts.
The company also said it will close a further five factories in addition to three that have already been announced as part of the company’s restructuring plan.
Borrowing Costs
Hitoshi Kuriyama, an analyst at Merrill Lynch & Co., lifted his price target on Sony by 200 yen to 2,800 because the company “is making steady progress with structural changes and ramping up new business models,” according to a report.
Tokyo Electron, the world’s second-largest supplier of semiconductor production equipment, rallied 6.6 percent to 4,350 yen after saying orders are likely to rise this quarter.
HSBC jumped 3.5 percent to HK$64.65 on optimism central bank efforts to unlock credit markets are bearing fruit. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded lender by value, added 3.4 percent to 608 yen. Tokio Marine gained 4.8 percent to 2,945 yen.
The three-month London interbank offered rate, or Libor, for dollar-denominated loans fell almost three basis points to 0.85 percent yesterday, according to the British Bankers’ Association.
The rate surged as high as 4.8 percent in October in the aftermath of the collapse of Lehman Brothers Holdings Inc. as banks became reluctant to lend to each other amid collapsing financial markets.
Policies ‘Mobilized’
“The drop in Libor is an indication that government policies are being effectively mobilized, and are fueling expectations for a rebound in financial shares,” said Takero Inaizumi, a manager at Mizuho Investors Securities Co. in Tokyo.
The U.S. government approved six insurers for bailout funds from the Troubled Asset Relief Program after investment declines eroded capital across the industry, according to the companies and Andrew Williams, a spokesman for the Treasury.
The bailouts are part of a series of global efforts to alleviate the credit crisis, which has caused losses of more than $1.4 trillion at the biggest banks, insurers and brokerages.
Rio surged 7.1 percent to A$61.67. The company has agreed to sell $7.2 billion of convertible bonds and stakes in projects worth $12.3 billion to Aluminum Corp. and said it remains committed to the deal in a response to a query from the Australian Stock Exchange. The statement helped quell speculation Rio will be forced to boost its capital base with a share sale that would dilute the value of existing stock.
Singapore Air Divestiture
Singapore Airlines gained 2.2 percent to S$11.86 after saying it plans to divest its Singapore Airport Terminal Services Ltd. unit in a stock distribution to shareholders.
“Focusing on their core business is the right thing to do now,” said Christopher Wong, a fund manager at Aberdeen Asset Management Asia Ltd. in Singapore, which oversees $20 billion. “The whole aviation business is going through a very tough period.”
Sumitomo Electric Industries Ltd., which makes electrical wires and cables, soared 11 percent to 1,005. Net income for the year ended in March beat its forecast by 72 percent as a tax code change on overseas dividends lifted profits.
Sony, the world’s No. 2 maker of consumer electronics, jumped 6.5 percent after the company said it will close factories as part of restructuring efforts. HSBC Holdings Plc, Europe’s largest lender by market value, rose 3.5 percent and Tokio Marine Holdings Inc., Japan’s biggest property insurer, gained 4.8 percent on optimism a government bailout of U.S. insurers will further ease the credit crunch.
“Optimism lifts the market, and the gain in equities further lifts optimism,” said Kiyoshi Ishigane, a senior strategist a Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion in Tokyo. “Like a drunkard waking up with a hangover, investors will eventually be hit with the reality that things haven’t improved overnight.”
The MSCI Asia Pacific Index rose 1.7 percent to 96.86 as of 1:29 p.m. in Tokyo. It declined 1.2 percent this week as the most expensive valuations since 2004 raised concern a two-month stock rally had outpaced earnings prospects.
Japan’s Nikkei 225 Stock Average gained 1.6 percent to 9,234.71. All markets in Asia rose except China.
Tokyo Electron Ltd. climbed 6.6 percent after saying orders for semiconductor equipment will rise this quarter. Rio Tinto Group, the world’s third-largest mining company, surged 7.1 percent in Sydney after saying it remains committed to a $19.5 billion investment from Aluminum Corp. of China. Singapore Airlines Ltd., the world’s second-biggest carrier by market value, gained 2.2 percent on plans to spin off a unit.
Sony Earnings
Futures on the Standard & Poor’s 500 Index added 0.1 percent. The benchmark rose 1 percent yesterday, snapping a three-day losing streak, as declining funding costs boosted bank shares. CA Inc., the world’s second-largest maker of software for mainframe computers, led gains by technology companies after reporting earnings that beat analyst estimates.
The MSCI Asia Pacific Index has climbed 37 percent from a five-year low on March 9 amid speculation the worst of the financial crisis had passed. Shares on the gauge are valued at 32 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.
Sony jumped 6.5 percent to 2,560. The company forecast yesterday it will post a 110 billion yen ($1.1 billion) operating loss this year, better than the median 135.6 billion yen loss estimate in a Bloomberg survey of nine analysts.
The company also said it will close a further five factories in addition to three that have already been announced as part of the company’s restructuring plan.
Borrowing Costs
Hitoshi Kuriyama, an analyst at Merrill Lynch & Co., lifted his price target on Sony by 200 yen to 2,800 because the company “is making steady progress with structural changes and ramping up new business models,” according to a report.
Tokyo Electron, the world’s second-largest supplier of semiconductor production equipment, rallied 6.6 percent to 4,350 yen after saying orders are likely to rise this quarter.
HSBC jumped 3.5 percent to HK$64.65 on optimism central bank efforts to unlock credit markets are bearing fruit. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded lender by value, added 3.4 percent to 608 yen. Tokio Marine gained 4.8 percent to 2,945 yen.
The three-month London interbank offered rate, or Libor, for dollar-denominated loans fell almost three basis points to 0.85 percent yesterday, according to the British Bankers’ Association.
The rate surged as high as 4.8 percent in October in the aftermath of the collapse of Lehman Brothers Holdings Inc. as banks became reluctant to lend to each other amid collapsing financial markets.
Policies ‘Mobilized’
“The drop in Libor is an indication that government policies are being effectively mobilized, and are fueling expectations for a rebound in financial shares,” said Takero Inaizumi, a manager at Mizuho Investors Securities Co. in Tokyo.
The U.S. government approved six insurers for bailout funds from the Troubled Asset Relief Program after investment declines eroded capital across the industry, according to the companies and Andrew Williams, a spokesman for the Treasury.
The bailouts are part of a series of global efforts to alleviate the credit crisis, which has caused losses of more than $1.4 trillion at the biggest banks, insurers and brokerages.
Rio surged 7.1 percent to A$61.67. The company has agreed to sell $7.2 billion of convertible bonds and stakes in projects worth $12.3 billion to Aluminum Corp. and said it remains committed to the deal in a response to a query from the Australian Stock Exchange. The statement helped quell speculation Rio will be forced to boost its capital base with a share sale that would dilute the value of existing stock.
Singapore Air Divestiture
Singapore Airlines gained 2.2 percent to S$11.86 after saying it plans to divest its Singapore Airport Terminal Services Ltd. unit in a stock distribution to shareholders.
“Focusing on their core business is the right thing to do now,” said Christopher Wong, a fund manager at Aberdeen Asset Management Asia Ltd. in Singapore, which oversees $20 billion. “The whole aviation business is going through a very tough period.”
Sumitomo Electric Industries Ltd., which makes electrical wires and cables, soared 11 percent to 1,005. Net income for the year ended in March beat its forecast by 72 percent as a tax code change on overseas dividends lifted profits.
Indea Hedge Fund Plans to Buy, Not ‘Panic,’ on Election Results
May 15 (Bloomberg) -- Indea Capital Pte, an India-focused hedge fund that manages about $300 million, plans to buy shares even if India’s election results disappoint investors, said Chief Investment Officer Raj Mishra.
The ruling Congress party-led coalition and the main opposition-led group may have each failed to secure enough votes to form a government, based on exit polls after a five-week election that ended May 13.
“The bias is to buy when there’s a post-election decline rather than to panic,” Mishra, who is based in Singapore, said in an interview today. “Once the election is complete and we have better clarity about the strength of the government, then probably potential long-term investors will feel more comfortable.”
The Bombay Stock Exchange’s Sensitive Index, which has gained 23 percent this year, may rise another 25 percent “in the medium term,” he said. Indian stocks fell yesterday after exit polls indicated no single party will win enough votes to form the next government ahead of counting tomorrow.
After the last elections, the Sensex plunged 11 percent on May 17, 2004, as investors feared that Communist allies in the new government would slow the pace of reforms.
The reaction to the election results will be “less severe” this time as “no one expects anyone to get an overwhelming majority,” Mishra said.
Poll Outcome
“Market participants are less homogenous these days,” Mishra said. “It doesn’t appear to me that everybody’s expecting a favorable outcome.”
Indian Prime Minister Manmohan Singh may need support from regional parties to continue ruling the world’s largest democracy.
Six television networks forecast the ruling alliance led by Singh’s Congress party may emerge just ahead of its chief rival. CNN-IBN predicted Congress and its allies will get as many as 205 seats compared with a maximum 185 for the opposing coalition. Star News-Nielsen and News X gave the Congress-led bloc 199 seats to 191 for the BJP-led group.
The outcome of India’s election is likely to affect the market for as long as two weeks, “not longer term,” Mishra said.
The International Monetary Fund expects India’s economy to grow 4.5 percent in 2009, while Reserve Bank of India Governor Duvvuri Subbarao said April 21 that government stimulus and monetary easing could help the economy grow 6 percent in the year that started April 1.
Growth Prospects
Such growth “is still very good by global standards and there are companies that will benefit from it,” Mishra said.
A third of Indea’s Long Term Opportunities Fund, which bets on rising stocks, is in cash and the manager is preparing to invest should stocks decline, Mishra said. The fund gained 11.5 percent in April.
The Indea Absolute Return Fund, which bets on rising as well as falling stocks, reported an average annual return of 14.75 percent since it was set up in July 2003.
The firm also started a quantitative fund, Indea Ankam Fund, in March. The fund is run by Saurabh Singal, who joined Indea from Deutsche Bank AG last year. While the fund uses computer models to pick trades, it also relies on the “subjective judgement” of the manager, Mishra said.
Some clients that withdrew from Indea’s funds last year are “looking to return as conditions stabilize,” Mishra said. “We’re seeing increasing interest from old investors,” he said.
The firm managed about $1 billion at the peak in early 2008, he said.
Mishra was the head of equities at Dresdner Kleinwort Wasserstein before “very cheap valuations” in the stock market and India’s accelerating economic growth prompted him to start his own hedge fund business in 2003.
The ruling Congress party-led coalition and the main opposition-led group may have each failed to secure enough votes to form a government, based on exit polls after a five-week election that ended May 13.
“The bias is to buy when there’s a post-election decline rather than to panic,” Mishra, who is based in Singapore, said in an interview today. “Once the election is complete and we have better clarity about the strength of the government, then probably potential long-term investors will feel more comfortable.”
The Bombay Stock Exchange’s Sensitive Index, which has gained 23 percent this year, may rise another 25 percent “in the medium term,” he said. Indian stocks fell yesterday after exit polls indicated no single party will win enough votes to form the next government ahead of counting tomorrow.
After the last elections, the Sensex plunged 11 percent on May 17, 2004, as investors feared that Communist allies in the new government would slow the pace of reforms.
The reaction to the election results will be “less severe” this time as “no one expects anyone to get an overwhelming majority,” Mishra said.
Poll Outcome
“Market participants are less homogenous these days,” Mishra said. “It doesn’t appear to me that everybody’s expecting a favorable outcome.”
Indian Prime Minister Manmohan Singh may need support from regional parties to continue ruling the world’s largest democracy.
Six television networks forecast the ruling alliance led by Singh’s Congress party may emerge just ahead of its chief rival. CNN-IBN predicted Congress and its allies will get as many as 205 seats compared with a maximum 185 for the opposing coalition. Star News-Nielsen and News X gave the Congress-led bloc 199 seats to 191 for the BJP-led group.
The outcome of India’s election is likely to affect the market for as long as two weeks, “not longer term,” Mishra said.
The International Monetary Fund expects India’s economy to grow 4.5 percent in 2009, while Reserve Bank of India Governor Duvvuri Subbarao said April 21 that government stimulus and monetary easing could help the economy grow 6 percent in the year that started April 1.
Growth Prospects
Such growth “is still very good by global standards and there are companies that will benefit from it,” Mishra said.
A third of Indea’s Long Term Opportunities Fund, which bets on rising stocks, is in cash and the manager is preparing to invest should stocks decline, Mishra said. The fund gained 11.5 percent in April.
The Indea Absolute Return Fund, which bets on rising as well as falling stocks, reported an average annual return of 14.75 percent since it was set up in July 2003.
The firm also started a quantitative fund, Indea Ankam Fund, in March. The fund is run by Saurabh Singal, who joined Indea from Deutsche Bank AG last year. While the fund uses computer models to pick trades, it also relies on the “subjective judgement” of the manager, Mishra said.
Some clients that withdrew from Indea’s funds last year are “looking to return as conditions stabilize,” Mishra said. “We’re seeing increasing interest from old investors,” he said.
The firm managed about $1 billion at the peak in early 2008, he said.
Mishra was the head of equities at Dresdner Kleinwort Wasserstein before “very cheap valuations” in the stock market and India’s accelerating economic growth prompted him to start his own hedge fund business in 2003.
Wednesday, May 13, 2009
Asian Stocks Fall on Growth, Profit Concerns; Sony, Rio Slump
May 14 (Bloomberg) -- Asian stocks fell, driving the MSCI Asia Pacific Index down the most in six weeks, as U.S. retail sales declined and Leighton Holdings Ltd. cut its profit target.
Sony Corp., the world’s No. 2 maker of consumer electronics, slumped 6.8 percent amid speculation it will today forecast a second-straight annual loss. Leighton Holdings Ltd., Australia’s biggest builder, fell 7.2 percent after slashing its full-year forecast by 10 percent. Rio Tinto Group, the world’s third- largest mining company, tumbled 11 percent in Sydney, falling for a second day after the Daily Telegraph reported the company may sell shares.
The MSCI Asia Pacific Index dropped 2.7 percent to 95.54 as of 1:44 p.m. in Tokyo, the biggest decline since March 30. Through yesterday, the measure had climbed 39 percent from a five-year low on March 9 on speculation the global economy is recovering, taking valuations of companies in the gauge to the highest levels since March 2004.
“Investors had started expecting a possible recovery even though it wasn’t clear if the global economy had bottomed out,” said Naoteru Teraoka, who helps oversee the equivalent of $23 billion at Chuo Mitsui Asset Management Co. in Tokyo. “That was premature.”
Japan’s Nikkei 225 Stock Average slumped 2.4 percent to 9,120.15. Hong Kong’s Hang Seng Index sank 3.2 percent, while Australia’s S&P/ASX 200 Index slid 2.8 percent. All markets fell.
Panasonic Corp., the world’s biggest consumer-electronics maker, lost 4.5 percent after the Yomiuri newspaper reported the company may forecast a net loss. Hong Kong Exchanges & Clearing Ltd., operator of Asia’s third-biggest stock market, fell 5.7 percent after its chairman said it was “difficult to say” if profit had hit bottom. Alumina Ltd. slumped 13 percent in Sydney on speculation China has boosted aluminum production.
Retail Sales
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge fell 2.7 percent yesterday as the Commerce Department reported a 0.4 percent decline in retail sales in April. Economists had estimated the number would be unchanged.
Treasuries and the dollar rose as demand for safe-haven assets climbed ahead of a U.S. government report today that economists expect will show an increase in jobless claims. The yield on the 10-year note declined two basis points to 3.10 percent, according to data compiled by Bloomberg. The U.S. currency advanced to 95.74 yen from 95.30 yesterday in New York.
Sony retreated 6.8 percent to 2,400 yen. Canon Inc., which gets a third of its sales from the Americas, declined 4.2 percent to 3,170 yen.
“The U.S. retail report stole confidence from investors that the global economy was headed for a recovery,” said Mitsushige Akino, who oversees about $629 million at Ichiyoshi Investment Management Co. in Tokyo. “Current valuations are prohibitive unless you believe companies will raise annual forecasts later this year.”
Panasonic, Leighton
The two-month rally in stocks has pushed the average valuation of companies in the MSCI Asia Pacific Index to 31 times reported profit, the highest since March 30, 2004.
Panasonic lost 4.5 percent to 1,388 yen. The company may forecast a net loss of more than 100 billion yen for the business year through March 31, 2010, the Yomiuri newspaper reported. The electronics maker is scheduled to announce financial results tomorrow.
Leighton tumbled 7.2 percent to A$22.59 after forecasting full-year net profit of about A$430 million ($323 million). The company said on Feb. 12 that full-year profit may be about A$480 million.
Hong Kong Exchanges slumped 5.7 percent to HK$103.6. Chairman Ronald Arculli said it’s “difficult to say” if earnings hit bottom after the company yesterday reported its lowest quarterly profit in two years.
Mining Companies Fall
“Every day you hear good news, you hear not-so-good news,” Arculli said in an interview with Bloomberg Television yesterday. “Unfortunately, with the uncertainty, there’s bound to be volatility.”
Rio Tinto sank 11 percent to A$57.91, extending yesterday’s 4.7 percent drop. The Telegraph reported yesterday that the company may drop an investment deal with Aluminum Corp. of China for a 5 billion-pound ($7.6 billion) share sale.
Alumina, partner in the world’s biggest producer of the material used to make aluminum, slumped 13 percent to A$1.19.
China may produce as much as 12.6 million tons this year, Ru Xiaojie, an analyst at Aluminum Corp., said yesterday in Beijing at a conference. Ru said after her speech that the analysis represented her own views.
BHP Billiton Ltd., the world’s biggest mining company, sank 5.5 percent to A$32.55 as the U.S. retail sales report fanned concern falling consumer spending will curb demand for resources. Crude oil for June delivery lost 1.4 percent to $58.02 a barrel in New York, the steepest drop since April 27. Copper futures declined 2.6 percent.
Lower crude prices prompted Inpex Corp., Japan’s largest oil and gas explorer, to forecast a 61 percent tumble in net income this fiscal year, a filing with the exchange showed yesterday. The stock slumped 6.2 percent
Sony Corp., the world’s No. 2 maker of consumer electronics, slumped 6.8 percent amid speculation it will today forecast a second-straight annual loss. Leighton Holdings Ltd., Australia’s biggest builder, fell 7.2 percent after slashing its full-year forecast by 10 percent. Rio Tinto Group, the world’s third- largest mining company, tumbled 11 percent in Sydney, falling for a second day after the Daily Telegraph reported the company may sell shares.
The MSCI Asia Pacific Index dropped 2.7 percent to 95.54 as of 1:44 p.m. in Tokyo, the biggest decline since March 30. Through yesterday, the measure had climbed 39 percent from a five-year low on March 9 on speculation the global economy is recovering, taking valuations of companies in the gauge to the highest levels since March 2004.
“Investors had started expecting a possible recovery even though it wasn’t clear if the global economy had bottomed out,” said Naoteru Teraoka, who helps oversee the equivalent of $23 billion at Chuo Mitsui Asset Management Co. in Tokyo. “That was premature.”
Japan’s Nikkei 225 Stock Average slumped 2.4 percent to 9,120.15. Hong Kong’s Hang Seng Index sank 3.2 percent, while Australia’s S&P/ASX 200 Index slid 2.8 percent. All markets fell.
Panasonic Corp., the world’s biggest consumer-electronics maker, lost 4.5 percent after the Yomiuri newspaper reported the company may forecast a net loss. Hong Kong Exchanges & Clearing Ltd., operator of Asia’s third-biggest stock market, fell 5.7 percent after its chairman said it was “difficult to say” if profit had hit bottom. Alumina Ltd. slumped 13 percent in Sydney on speculation China has boosted aluminum production.
Retail Sales
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge fell 2.7 percent yesterday as the Commerce Department reported a 0.4 percent decline in retail sales in April. Economists had estimated the number would be unchanged.
Treasuries and the dollar rose as demand for safe-haven assets climbed ahead of a U.S. government report today that economists expect will show an increase in jobless claims. The yield on the 10-year note declined two basis points to 3.10 percent, according to data compiled by Bloomberg. The U.S. currency advanced to 95.74 yen from 95.30 yesterday in New York.
Sony retreated 6.8 percent to 2,400 yen. Canon Inc., which gets a third of its sales from the Americas, declined 4.2 percent to 3,170 yen.
“The U.S. retail report stole confidence from investors that the global economy was headed for a recovery,” said Mitsushige Akino, who oversees about $629 million at Ichiyoshi Investment Management Co. in Tokyo. “Current valuations are prohibitive unless you believe companies will raise annual forecasts later this year.”
Panasonic, Leighton
The two-month rally in stocks has pushed the average valuation of companies in the MSCI Asia Pacific Index to 31 times reported profit, the highest since March 30, 2004.
Panasonic lost 4.5 percent to 1,388 yen. The company may forecast a net loss of more than 100 billion yen for the business year through March 31, 2010, the Yomiuri newspaper reported. The electronics maker is scheduled to announce financial results tomorrow.
Leighton tumbled 7.2 percent to A$22.59 after forecasting full-year net profit of about A$430 million ($323 million). The company said on Feb. 12 that full-year profit may be about A$480 million.
Hong Kong Exchanges slumped 5.7 percent to HK$103.6. Chairman Ronald Arculli said it’s “difficult to say” if earnings hit bottom after the company yesterday reported its lowest quarterly profit in two years.
Mining Companies Fall
“Every day you hear good news, you hear not-so-good news,” Arculli said in an interview with Bloomberg Television yesterday. “Unfortunately, with the uncertainty, there’s bound to be volatility.”
Rio Tinto sank 11 percent to A$57.91, extending yesterday’s 4.7 percent drop. The Telegraph reported yesterday that the company may drop an investment deal with Aluminum Corp. of China for a 5 billion-pound ($7.6 billion) share sale.
Alumina, partner in the world’s biggest producer of the material used to make aluminum, slumped 13 percent to A$1.19.
China may produce as much as 12.6 million tons this year, Ru Xiaojie, an analyst at Aluminum Corp., said yesterday in Beijing at a conference. Ru said after her speech that the analysis represented her own views.
BHP Billiton Ltd., the world’s biggest mining company, sank 5.5 percent to A$32.55 as the U.S. retail sales report fanned concern falling consumer spending will curb demand for resources. Crude oil for June delivery lost 1.4 percent to $58.02 a barrel in New York, the steepest drop since April 27. Copper futures declined 2.6 percent.
Lower crude prices prompted Inpex Corp., Japan’s largest oil and gas explorer, to forecast a 61 percent tumble in net income this fiscal year, a filing with the exchange showed yesterday. The stock slumped 6.2 percent
India Stocks May Suffer Election ‘Blip,’ HDFC Says
May 14 (Bloomberg) -- Indian stocks may halt their second- quarter rally unless the next government attracts foreign investment to revive the economy, said HDFC Standard Life Insurance Co., the country’s sixth-largest private insurer.
The ruling Congress party-led coalition may have won the most seats without securing enough votes to form a government, based on exit polls after a five-week election that ended yesterday. SGX CNX Nifty Index futures slumped the most in two weeks in Singapore while Indian stocks traded in the U.S. sank.
“The election outcome will only be a blip,” Prasun Gajri, chief investment officer at HDFC Standard Life, which manages $1 billion in equities, said in an interview in Mumbai yesterday. “It isn’t the only determinant for the market. It may impact the markets for a month or two but nothing beyond that.”
The Bombay Stock Exchange Sensitive Index, or Sensex, was the worst performer in the first quarter among the so-called BRIC markets that also include Brazil, Russia and China. The gauge rebounded 24 percent in the second quarter, beating benchmark indexes in Brazil and China.
“The rally has been too fast, too soon,” Gajri, 37, said. While the economy has shown signs of an improvement, investors will need to watch for more data, he said.
Nifty Futures Fall
Nifty index futures, derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd., fell 2.2 percent to 3,560 as of 10:45 a.m. in Singapore, the most since April 28. The Bank of New York Mellon India ADR Index dropped 5.5 percent to 557.22, the most since March 5. The Sensex slid 1.1 percent in Mumbai yesterday.
American depository receipts or ADRs of Infosys Technologies Ltd., India’s second-largest computer-services provider, dropped 4.7 percent to $30.36, the most since April 15. Those of ICICI Bank Ltd., India’s second-largest lender, tumbled 6.7 percent to $20.99. That’s the largest drop since April 20.
The International Monetary Fund expects India’s economy to grow 4.5 percent in 2009, while Reserve Bank of India Governor Duvvuri Subbarao said April 21 that government stimulus and monetary easing could help the economy grow 6 percent in the year that started April 1. The $1.2 trillion economy expanded 5.3 percent in the three months to Dec. 31, the weakest pace of expansion since the last quarter of 2003.
Insurers
Investments by Indian insurance companies will be the biggest drivers of the equity market, Rakesh Jhunjhunwala, ranked a billionaire by Forbes magazine last year, said in an interview last month. Insurers could invest about $50 billion a year in the next two to three years, he said.
Gajri estimates insurers will invest more than $10 billion this fiscal year ending March 31.
“We are cautiously optimistic,” Gajri said. “If the second half shows signs of a recovery, we will remove the word cautious from our stance.”
The measure more than tripled since 2004, before dropping 52 percent last year after a global credit crisis wiped out more than $30 trillion from the value of global equities.
Liquidity flows into the market are very strong as investors’ aversion to risk has receded, Gajri said. Insurers are moving from defensive stocks such as consumer companies and utilities to growth industries such as banks and engineering firms.
Prime Minister Manmohan Singh’s Congress Party-led United Progressive Alliance is competing with the main opposition Bharatiya Janata Party-led National Democratic Alliance and a group of communist and regional parties known as the third front. Votes will be counted on May 16 to elect 543 lawmakers to the Lok Sabha, or lower house of parliament.
The Sensex plunged 11 percent on May 17, 2004, the most in more than a decade, on investor concern a government formed by Sonia Gandhi’s Congress Party and communist allies would slow the pace of reforms.
The ruling Congress party-led coalition may have won the most seats without securing enough votes to form a government, based on exit polls after a five-week election that ended yesterday. SGX CNX Nifty Index futures slumped the most in two weeks in Singapore while Indian stocks traded in the U.S. sank.
“The election outcome will only be a blip,” Prasun Gajri, chief investment officer at HDFC Standard Life, which manages $1 billion in equities, said in an interview in Mumbai yesterday. “It isn’t the only determinant for the market. It may impact the markets for a month or two but nothing beyond that.”
The Bombay Stock Exchange Sensitive Index, or Sensex, was the worst performer in the first quarter among the so-called BRIC markets that also include Brazil, Russia and China. The gauge rebounded 24 percent in the second quarter, beating benchmark indexes in Brazil and China.
“The rally has been too fast, too soon,” Gajri, 37, said. While the economy has shown signs of an improvement, investors will need to watch for more data, he said.
Nifty Futures Fall
Nifty index futures, derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd., fell 2.2 percent to 3,560 as of 10:45 a.m. in Singapore, the most since April 28. The Bank of New York Mellon India ADR Index dropped 5.5 percent to 557.22, the most since March 5. The Sensex slid 1.1 percent in Mumbai yesterday.
American depository receipts or ADRs of Infosys Technologies Ltd., India’s second-largest computer-services provider, dropped 4.7 percent to $30.36, the most since April 15. Those of ICICI Bank Ltd., India’s second-largest lender, tumbled 6.7 percent to $20.99. That’s the largest drop since April 20.
The International Monetary Fund expects India’s economy to grow 4.5 percent in 2009, while Reserve Bank of India Governor Duvvuri Subbarao said April 21 that government stimulus and monetary easing could help the economy grow 6 percent in the year that started April 1. The $1.2 trillion economy expanded 5.3 percent in the three months to Dec. 31, the weakest pace of expansion since the last quarter of 2003.
Insurers
Investments by Indian insurance companies will be the biggest drivers of the equity market, Rakesh Jhunjhunwala, ranked a billionaire by Forbes magazine last year, said in an interview last month. Insurers could invest about $50 billion a year in the next two to three years, he said.
Gajri estimates insurers will invest more than $10 billion this fiscal year ending March 31.
“We are cautiously optimistic,” Gajri said. “If the second half shows signs of a recovery, we will remove the word cautious from our stance.”
The measure more than tripled since 2004, before dropping 52 percent last year after a global credit crisis wiped out more than $30 trillion from the value of global equities.
Liquidity flows into the market are very strong as investors’ aversion to risk has receded, Gajri said. Insurers are moving from defensive stocks such as consumer companies and utilities to growth industries such as banks and engineering firms.
Prime Minister Manmohan Singh’s Congress Party-led United Progressive Alliance is competing with the main opposition Bharatiya Janata Party-led National Democratic Alliance and a group of communist and regional parties known as the third front. Votes will be counted on May 16 to elect 543 lawmakers to the Lok Sabha, or lower house of parliament.
The Sensex plunged 11 percent on May 17, 2004, the most in more than a decade, on investor concern a government formed by Sonia Gandhi’s Congress Party and communist allies would slow the pace of reforms.
Satyam Win for Mississippi Pension Fund Boosts Plaintiff Role
May 14 (Bloomberg) -- Mississippi’s pension system, the 65th largest in the U.S., has emerged as one of the nation’s most aggressive institutional litigants against companies it says committed securities fraud.
The Public Employees’ Retirement System of Mississippi is involved in at least 21 active federal securities-fraud class actions. It’s a lead plaintiff, either on its own or as part of an investor group, in at least 11 of them, including its May 12 appointment to co-manage litigation against Satyam Computer Services Ltd., the software-services provider at the center of India’s biggest corporate fraud inquiry.
“It certainly is at the high end of public pension fund participation,” said Michael Perino, a securities-law professor at St. John’s University School of Law.
The lead plaintiff in a class action manages the case, including approval of any settlement. It can push for corporate- governance changes at the targeted company.
“You have control of the litigation, and you’re going to make sure you not only protect your retirement system and the employees, but also other states and other retirement systems,” Mississippi Attorney General Jim Hood said in a phone interview. Hood’s office oversees the state’s lawsuits.
Under Hood, a Democrat elected in 2003 with support from trial lawyers, Mississippi has become a leader in the field, though Hood denies he’s doing the bidding of the plaintiffs’ bar.
Lead Plaintiff
The Satyam litigation in New York federal court is the third this month in which Mississippi PERS was appointed a lead plaintiff. Among institutional investors, Mississippi PERS was the most frequent lead plaintiff last year, with three cases, either on its own or as part of an investor group.
Teachers’ Retirement System of Louisiana was the most frequent lead plaintiff from 2000 to 2008, with 18 cases, according to Stanford Law School’s Securities Class Action Clearinghouse and Michael Klausner, a Stanford law professor. Mississippi PERS is now the second-most frequent, with 14.
Since 2005, Louisiana’s lead-plaintiff activity has fallen off while Mississippi PERS’s has risen.
Mississippi PERS, based in Jackson, ranked as the 65th largest U.S. pension fund or sponsor, with $18.8 billion, as of Sept. 30, according to Pensions & Investments magazine. The largest pension system is California Public Employees Retirement System, with $214.6 billion.
Under U.S. securities law, the person or entity with the largest financial interest is typically chosen to lead a class action, and so is often an institutional investor.
Legal Fees
The lead plaintiff’s attorneys usually get the majority of the legal fees of a settlement or court victory. The lawyers only get paid if they win back money for their clients. Typically, contingency lawyers take a third of any recovery. Institutional investors, including Mississippi PERS, push for lower fees, allowing more money for injured shareholders.
For example, Mississippi’s standard contract calls for the law firm to receive -- if a settlement is reached after fact- finding is completed and before a trial is started -- 20 percent of up to $25 million, another 18 percent for any amount between $25 million and $75 million, and so on, with the percentage decreasing as the recovery amount increases.
Last year, New York-based Bernstein Litowitz Berger & Grossmann LLP, which represents Mississippi PERS in Satyam and other cases, had a median settlement of 6 percent of estimated damages in securities class actions, according to Cornerstone Research. That was the highest figure for the most-active plaintiffs firms.
‘Terrific Guardian’
“I view them as a terrific guardian of integrity in the capital markets,” Sean Coffey, a Bernstein Litowitz partner, said of Mississippi PERS. “They are folks who talk the talk and walk the walk, and they’re very active.”
Of six completed cases for which the pension system served as a lead plaintiff, four of the companies settled and two won dismissals. The rest haven’t been resolved.
Delphi Corp., the Troy, Michigan-based car-parts maker, settled for $333.4 million; Mills Corp., the Chevy Chase, Maryland-based real-estate investment trust, for $165 million; Scor Holding (Switzerland) AG, the Zurich-based reinsurer, for $114.6 million; and Sonus Networks Inc., the Westford, Massachusetts-based maker of software used for Internet-based phone calls, for $9.5 million.
The Mills settlement hasn’t yet been approved by the judge.
Aggressive Stance
The Satyam case illustrates the aggressive stance Mississippi, with a population of 2.94 million, can take in litigation. Since Jan. 7, when Satyam Chairman Ramalinga Raju revealed an accounting fraud and resigned, investors in the company’s American depositary receipts filed at least a dozen securities-fraud lawsuits in the U.S.
Mississippi PERS pushed to be a lead plaintiff despite having bought Satyam’s common stock in India rather than ADRs in the U.S. The Hyderabad-based company and a group of individual investors opposed Mississippi PERS for that reason. The pension system says it lost $12.7 million on the investment.
In another case filed in December, Mississippi PERS accused Morgan Stanley of misleading investors about so-called pass- through certificates that entitle holders to income from pools of mortgage loans or mortgage-backed securities.
U.S. District Judge Mariana R. Pfaelzer in Santa Ana, California, in March criticized Mississippi PERS for filing the case in California state court, and sent it to federal court in New York, where Morgan Stanley is based. The complaint alleges violations of federal securities law.
State juries tend to be more generous than federal juries; 17 of the top 25 U.S. jury verdicts were in state court, according to data compiled by Bloomberg. Nine of the top 10 subprime lenders were based in California, according to a study by Washington-based Center for Public Integrity.
‘Forum Shopping’
Morgan Stanley called Mississippi PERS’s strategy “improper forum shopping.” The pension system said state court was proper because most of the loans underlying the securities were made in California.
In April, Mississippi PERS won lead status over Michigan- based Iron Workers Local No. 25 Pension Fund in other pass- through litigation against Merrill Lynch & Co. and J.P. Morgan & Co. At an April 1 hearing, George Neville, a special assistant attorney general in Mississippi, testified that the state allows 12 law firms to monitor its investments at no charge and advise on whether it should initiate or join a securities-fraud suit if the price of a particular security drops.
12 Monitoring Firms
Neville said the practice is common among securities law firms.
“We play one off against the other,” Neville testified about the 12 firms. “We contact other monitoring firms to determine what their take is on that case. They know they may not get it, and so sometimes they say, well, it’s a really good case, sometimes they tell us it’s a dog, and that helps drive our decision making.”
“We’ve retained some of the best securities firms out there,” said Hood, the attorney general. “Whichever recognizes our losses first and makes contact with us, by e-mail usually, they get it.”
The Wall Street Journal editorial board criticized Hood for receiving campaign contributions from law firms that represent the state in securities cases, including Bernstein Litowitz; Radnor, Pennsylvania-based Barroway Topaz Kessler Meltzer & Check LLP; and New York-based Wolf Popper LLP.
Competitive Bidding
On March 30, a bill died in the Mississippi legislature that would have required the attorney general to hold competitive bidding to hire law firms to represent the state.
“To the extent a law firm develops a relationship with a pension fund or AG of a state, and their political contributions result in them getting a contract to sue on behalf of the state, we think that’s a problem,” said Bryan Quigley, a spokesman for the U.S. Chamber Institute for Legal Reform in Washington.
The institute, an arm of the U.S. Chamber of Commerce, has created a Mississippi Campaign for Legal Reform.
“There’s definitely political mileage to be gained from leading these cases,” said Perino of St. John’s University.
Hood said he had to take political contributions from the law firms; corporations won’t give him money because he sues them. He said he was outspent in both his elections by opponents backed by corporate money.
“Who’s going to contribute to a prosecutor who goes after them for wrongdoing?” he said. “The Chamber has been very successful in switching it to something salacious like pay to play.”
‘Duty to Recover’
“If Mississippi public employees have lost money, I have a duty to recover it -- it’s that simple,” Hood said. “The office of the attorney general has evolved, or devolved, into it because of failure of the SEC to police our markets,” he said, referring to the U.S. Securities and Exchange Commission.
The two other cases in which Mississippi PERS was appointed lead plaintiff this month are against Royal Bank of Scotland Group Plc, over several securities offerings, and Goldman Sachs Group Inc., over pass-through certificates.
Hood said Mississippi PERS will likely get involved in more securities cases.
“I’m sure that we will probably end up in more cases because of the economic meltdown, as more fraud is discovered,” he said.
The Satyam case is In re Satyam Computer Services Ltd. Securities Litigation, 09-md-2027, U.S. District Court, Southern District of New York (Manhattan).
The Public Employees’ Retirement System of Mississippi is involved in at least 21 active federal securities-fraud class actions. It’s a lead plaintiff, either on its own or as part of an investor group, in at least 11 of them, including its May 12 appointment to co-manage litigation against Satyam Computer Services Ltd., the software-services provider at the center of India’s biggest corporate fraud inquiry.
“It certainly is at the high end of public pension fund participation,” said Michael Perino, a securities-law professor at St. John’s University School of Law.
The lead plaintiff in a class action manages the case, including approval of any settlement. It can push for corporate- governance changes at the targeted company.
“You have control of the litigation, and you’re going to make sure you not only protect your retirement system and the employees, but also other states and other retirement systems,” Mississippi Attorney General Jim Hood said in a phone interview. Hood’s office oversees the state’s lawsuits.
Under Hood, a Democrat elected in 2003 with support from trial lawyers, Mississippi has become a leader in the field, though Hood denies he’s doing the bidding of the plaintiffs’ bar.
Lead Plaintiff
The Satyam litigation in New York federal court is the third this month in which Mississippi PERS was appointed a lead plaintiff. Among institutional investors, Mississippi PERS was the most frequent lead plaintiff last year, with three cases, either on its own or as part of an investor group.
Teachers’ Retirement System of Louisiana was the most frequent lead plaintiff from 2000 to 2008, with 18 cases, according to Stanford Law School’s Securities Class Action Clearinghouse and Michael Klausner, a Stanford law professor. Mississippi PERS is now the second-most frequent, with 14.
Since 2005, Louisiana’s lead-plaintiff activity has fallen off while Mississippi PERS’s has risen.
Mississippi PERS, based in Jackson, ranked as the 65th largest U.S. pension fund or sponsor, with $18.8 billion, as of Sept. 30, according to Pensions & Investments magazine. The largest pension system is California Public Employees Retirement System, with $214.6 billion.
Under U.S. securities law, the person or entity with the largest financial interest is typically chosen to lead a class action, and so is often an institutional investor.
Legal Fees
The lead plaintiff’s attorneys usually get the majority of the legal fees of a settlement or court victory. The lawyers only get paid if they win back money for their clients. Typically, contingency lawyers take a third of any recovery. Institutional investors, including Mississippi PERS, push for lower fees, allowing more money for injured shareholders.
For example, Mississippi’s standard contract calls for the law firm to receive -- if a settlement is reached after fact- finding is completed and before a trial is started -- 20 percent of up to $25 million, another 18 percent for any amount between $25 million and $75 million, and so on, with the percentage decreasing as the recovery amount increases.
Last year, New York-based Bernstein Litowitz Berger & Grossmann LLP, which represents Mississippi PERS in Satyam and other cases, had a median settlement of 6 percent of estimated damages in securities class actions, according to Cornerstone Research. That was the highest figure for the most-active plaintiffs firms.
‘Terrific Guardian’
“I view them as a terrific guardian of integrity in the capital markets,” Sean Coffey, a Bernstein Litowitz partner, said of Mississippi PERS. “They are folks who talk the talk and walk the walk, and they’re very active.”
Of six completed cases for which the pension system served as a lead plaintiff, four of the companies settled and two won dismissals. The rest haven’t been resolved.
Delphi Corp., the Troy, Michigan-based car-parts maker, settled for $333.4 million; Mills Corp., the Chevy Chase, Maryland-based real-estate investment trust, for $165 million; Scor Holding (Switzerland) AG, the Zurich-based reinsurer, for $114.6 million; and Sonus Networks Inc., the Westford, Massachusetts-based maker of software used for Internet-based phone calls, for $9.5 million.
The Mills settlement hasn’t yet been approved by the judge.
Aggressive Stance
The Satyam case illustrates the aggressive stance Mississippi, with a population of 2.94 million, can take in litigation. Since Jan. 7, when Satyam Chairman Ramalinga Raju revealed an accounting fraud and resigned, investors in the company’s American depositary receipts filed at least a dozen securities-fraud lawsuits in the U.S.
Mississippi PERS pushed to be a lead plaintiff despite having bought Satyam’s common stock in India rather than ADRs in the U.S. The Hyderabad-based company and a group of individual investors opposed Mississippi PERS for that reason. The pension system says it lost $12.7 million on the investment.
In another case filed in December, Mississippi PERS accused Morgan Stanley of misleading investors about so-called pass- through certificates that entitle holders to income from pools of mortgage loans or mortgage-backed securities.
U.S. District Judge Mariana R. Pfaelzer in Santa Ana, California, in March criticized Mississippi PERS for filing the case in California state court, and sent it to federal court in New York, where Morgan Stanley is based. The complaint alleges violations of federal securities law.
State juries tend to be more generous than federal juries; 17 of the top 25 U.S. jury verdicts were in state court, according to data compiled by Bloomberg. Nine of the top 10 subprime lenders were based in California, according to a study by Washington-based Center for Public Integrity.
‘Forum Shopping’
Morgan Stanley called Mississippi PERS’s strategy “improper forum shopping.” The pension system said state court was proper because most of the loans underlying the securities were made in California.
In April, Mississippi PERS won lead status over Michigan- based Iron Workers Local No. 25 Pension Fund in other pass- through litigation against Merrill Lynch & Co. and J.P. Morgan & Co. At an April 1 hearing, George Neville, a special assistant attorney general in Mississippi, testified that the state allows 12 law firms to monitor its investments at no charge and advise on whether it should initiate or join a securities-fraud suit if the price of a particular security drops.
12 Monitoring Firms
Neville said the practice is common among securities law firms.
“We play one off against the other,” Neville testified about the 12 firms. “We contact other monitoring firms to determine what their take is on that case. They know they may not get it, and so sometimes they say, well, it’s a really good case, sometimes they tell us it’s a dog, and that helps drive our decision making.”
“We’ve retained some of the best securities firms out there,” said Hood, the attorney general. “Whichever recognizes our losses first and makes contact with us, by e-mail usually, they get it.”
The Wall Street Journal editorial board criticized Hood for receiving campaign contributions from law firms that represent the state in securities cases, including Bernstein Litowitz; Radnor, Pennsylvania-based Barroway Topaz Kessler Meltzer & Check LLP; and New York-based Wolf Popper LLP.
Competitive Bidding
On March 30, a bill died in the Mississippi legislature that would have required the attorney general to hold competitive bidding to hire law firms to represent the state.
“To the extent a law firm develops a relationship with a pension fund or AG of a state, and their political contributions result in them getting a contract to sue on behalf of the state, we think that’s a problem,” said Bryan Quigley, a spokesman for the U.S. Chamber Institute for Legal Reform in Washington.
The institute, an arm of the U.S. Chamber of Commerce, has created a Mississippi Campaign for Legal Reform.
“There’s definitely political mileage to be gained from leading these cases,” said Perino of St. John’s University.
Hood said he had to take political contributions from the law firms; corporations won’t give him money because he sues them. He said he was outspent in both his elections by opponents backed by corporate money.
“Who’s going to contribute to a prosecutor who goes after them for wrongdoing?” he said. “The Chamber has been very successful in switching it to something salacious like pay to play.”
‘Duty to Recover’
“If Mississippi public employees have lost money, I have a duty to recover it -- it’s that simple,” Hood said. “The office of the attorney general has evolved, or devolved, into it because of failure of the SEC to police our markets,” he said, referring to the U.S. Securities and Exchange Commission.
The two other cases in which Mississippi PERS was appointed lead plaintiff this month are against Royal Bank of Scotland Group Plc, over several securities offerings, and Goldman Sachs Group Inc., over pass-through certificates.
Hood said Mississippi PERS will likely get involved in more securities cases.
“I’m sure that we will probably end up in more cases because of the economic meltdown, as more fraud is discovered,” he said.
The Satyam case is In re Satyam Computer Services Ltd. Securities Litigation, 09-md-2027, U.S. District Court, Southern District of New York (Manhattan).
Tuesday, May 12, 2009
Asian Stocks Rise as Olympus, Nissan Forecasts Stoke Optimism
May 13 (Bloomberg) -- Asian stocks rose, resuming a two- month rally, as forecasts from Olympus Corp. and Nissan Motor Co. boosted confidence corporate earnings are recovering from the global recession.
Olympus, the world’s biggest maker of endoscopes, soared 11 percent in Tokyo after unexpectedly forecasting a return to profit this year. Nissan, Japan’s third-largest automaker, rallied 7.1 percent after predicting a narrower loss than analysts estimated. Cnooc Ltd., China’s biggest offshore oil producer, gained 6.9 percent as crude oil rose for a second day. Toyota Motor Corp., the world’s biggest automaker, fell 2.4 percent after saying it expects to cut vehicle production.
“We’ll see a difference in the pace of recovery between businesses that are carrying out deeper cost reduction and those that don’t,” said Naoki Fujiwara, chief fund manager at Tokyo- based Shinkin Asset Management Co., which oversees about $6.1 billion. “A possible earnings rebound is already fully reflected in current valuations.”
The MSCI Asia Pacific Index rose 0.7 percent to 98.57 as of 1:01 p.m. in Tokyo. The benchmark dropped yesterday, ending a six-day winning streak. The gauge has climbed 40 percent from a five-year low on March 9 on speculation the worst of the financial crisis is over.
Japan’s Nikkei 225 Stock Average added 0.6 percent to 9,353.96, while Hong Kong’s Hang Seng Index climbed 0.7 percent. All markets in Asia advanced except Australia and Vietnam.
Hitachi Ltd., Japan’s third-largest chipmaker, sank 9.7 percent on a loss forecast. Santos Ltd., Australia’s third- biggest oil and gas producer, slumped 7.5 percent in Sydney on concern a share sale will dilute the value of existing holdings. China Construction Bank Corp., the nation’s second largest, lost 1.8 percent after an investor sold stock in the company.
Record Loss
Futures on the U.S. Standard & Poor’s 500 Index added 0.4 percent even as David Walker, the former U.S. comptroller general, wrote in the Financial Times that the government should rein in the country’s finances because its AAA debt rating may be cut. The S&P 500 lost 0.1 percent yesterday.
The dollar weakened against Asian currencies today after the FT report. The yen strengthened to as much as 95.79 against the U.S. currency, the strongest level since April 28. A stronger local currency cuts the value of repatriated sales for Japanese exporters.
Olympus jumped 11 percent to 1,919 yen. The company forecast net income of 40 billion yen ($416 million) for the year ending March 2010, the company said yesterday after markets in Japan closed. Analysts expected a net loss of 9.3 billion yen, based on the median of 10 estimates compiled by Bloomberg.
Toyota Production
Nissan rose 7.1 percent to 546 yen after projecting a net loss for fiscal 2009 that was almost half the amount analysts had expected. The carmaker plans to slash 20,000 jobs in response to an industry wide slump in the U.S., traditionally Nissan’s most profitable market.
The rally in stocks in the past two months has driven the average valuation of companies on the MSCI Asia Pacific Index to 31 times reported profit, the highest level since March 30, 2004, according to data compiled by Bloomberg. Analyst estimates for earnings of companies on the stock gauge climbed in April after declining the previous year, the data show.
Toyota slumped 2.4 percent to 3,650 yen. The company expects to cut global vehicle production by 28 percent this year as the recession hammers demand, according to figures provided by Hideaki Homma, a company spokesman.
Cnooc gained 6.9 percent to HK$10.36 in Hong Kong. PetroChina Co., Asia’s biggest crude producer, gained 5.1 percent to HK$8.52. Inpex Corp., Japan’s No. 1 oil company, rose 2.8 percent to 740,000 yen.
South Korea Housing
Crude oil futures rose 0.6 percent to $58.85 a barrel in New York yesterday, after earlier climbing above $60 for the first time since Nov. 11. Oil prices climbed 1.4 percent in after-hours trading.
Hitachi lost 9.7 percent to 344 yen, the biggest slide since Feb. 2, after forecasting a net loss of 270 billion yen for this fiscal year. That was worse than the median loss predicted by analysts in a Bloomberg survey.
Santos slumped 7.5 percent to A$14.59 following a two-day trading halt. The company raised A$3 billion ($2.3 billion) in Australia’s largest share sale since November to help fund a liquefied natural gas project.
Construction Bank lost 1.8 percent to HK$4.89 after an unidentified institution sold shares worth HK$3.6 billion ($465 million), according to a document sent to fund managers. The notice came a day after news that Bank of America Corp. sold part of its stake in the Chinese bank for $7.3 billion to a group of investors.
South Korea’s GS Engineering & Construction Corp. climbed 4.6 percent to 78,100 won. Hyundai Engineering & Construction Co. added 1.9 percent to 69,400 won. BNP Paribas boosted its view on builders to “positive” from “neutral” on optimism for a recovery in South Korea’s housing market.
Olympus, the world’s biggest maker of endoscopes, soared 11 percent in Tokyo after unexpectedly forecasting a return to profit this year. Nissan, Japan’s third-largest automaker, rallied 7.1 percent after predicting a narrower loss than analysts estimated. Cnooc Ltd., China’s biggest offshore oil producer, gained 6.9 percent as crude oil rose for a second day. Toyota Motor Corp., the world’s biggest automaker, fell 2.4 percent after saying it expects to cut vehicle production.
“We’ll see a difference in the pace of recovery between businesses that are carrying out deeper cost reduction and those that don’t,” said Naoki Fujiwara, chief fund manager at Tokyo- based Shinkin Asset Management Co., which oversees about $6.1 billion. “A possible earnings rebound is already fully reflected in current valuations.”
The MSCI Asia Pacific Index rose 0.7 percent to 98.57 as of 1:01 p.m. in Tokyo. The benchmark dropped yesterday, ending a six-day winning streak. The gauge has climbed 40 percent from a five-year low on March 9 on speculation the worst of the financial crisis is over.
Japan’s Nikkei 225 Stock Average added 0.6 percent to 9,353.96, while Hong Kong’s Hang Seng Index climbed 0.7 percent. All markets in Asia advanced except Australia and Vietnam.
Hitachi Ltd., Japan’s third-largest chipmaker, sank 9.7 percent on a loss forecast. Santos Ltd., Australia’s third- biggest oil and gas producer, slumped 7.5 percent in Sydney on concern a share sale will dilute the value of existing holdings. China Construction Bank Corp., the nation’s second largest, lost 1.8 percent after an investor sold stock in the company.
Record Loss
Futures on the U.S. Standard & Poor’s 500 Index added 0.4 percent even as David Walker, the former U.S. comptroller general, wrote in the Financial Times that the government should rein in the country’s finances because its AAA debt rating may be cut. The S&P 500 lost 0.1 percent yesterday.
The dollar weakened against Asian currencies today after the FT report. The yen strengthened to as much as 95.79 against the U.S. currency, the strongest level since April 28. A stronger local currency cuts the value of repatriated sales for Japanese exporters.
Olympus jumped 11 percent to 1,919 yen. The company forecast net income of 40 billion yen ($416 million) for the year ending March 2010, the company said yesterday after markets in Japan closed. Analysts expected a net loss of 9.3 billion yen, based on the median of 10 estimates compiled by Bloomberg.
Toyota Production
Nissan rose 7.1 percent to 546 yen after projecting a net loss for fiscal 2009 that was almost half the amount analysts had expected. The carmaker plans to slash 20,000 jobs in response to an industry wide slump in the U.S., traditionally Nissan’s most profitable market.
The rally in stocks in the past two months has driven the average valuation of companies on the MSCI Asia Pacific Index to 31 times reported profit, the highest level since March 30, 2004, according to data compiled by Bloomberg. Analyst estimates for earnings of companies on the stock gauge climbed in April after declining the previous year, the data show.
Toyota slumped 2.4 percent to 3,650 yen. The company expects to cut global vehicle production by 28 percent this year as the recession hammers demand, according to figures provided by Hideaki Homma, a company spokesman.
Cnooc gained 6.9 percent to HK$10.36 in Hong Kong. PetroChina Co., Asia’s biggest crude producer, gained 5.1 percent to HK$8.52. Inpex Corp., Japan’s No. 1 oil company, rose 2.8 percent to 740,000 yen.
South Korea Housing
Crude oil futures rose 0.6 percent to $58.85 a barrel in New York yesterday, after earlier climbing above $60 for the first time since Nov. 11. Oil prices climbed 1.4 percent in after-hours trading.
Hitachi lost 9.7 percent to 344 yen, the biggest slide since Feb. 2, after forecasting a net loss of 270 billion yen for this fiscal year. That was worse than the median loss predicted by analysts in a Bloomberg survey.
Santos slumped 7.5 percent to A$14.59 following a two-day trading halt. The company raised A$3 billion ($2.3 billion) in Australia’s largest share sale since November to help fund a liquefied natural gas project.
Construction Bank lost 1.8 percent to HK$4.89 after an unidentified institution sold shares worth HK$3.6 billion ($465 million), according to a document sent to fund managers. The notice came a day after news that Bank of America Corp. sold part of its stake in the Chinese bank for $7.3 billion to a group of investors.
South Korea’s GS Engineering & Construction Corp. climbed 4.6 percent to 78,100 won. Hyundai Engineering & Construction Co. added 1.9 percent to 69,400 won. BNP Paribas boosted its view on builders to “positive” from “neutral” on optimism for a recovery in South Korea’s housing market.
Asia Day Ahead: U.S. Stocks Fall; Swine Flu May Be Human Error
May 13 (Bloomberg) -- Most U.S. stocks fell for a second day as share sales at Ford Motor Co., U.S. Bancorp and Anadarko Petroleum Corp. heightened concern that earnings will be diluted by capital-raising efforts. The World Health Organization is investigating an Australian researcher’s claim that the swine flu virus circling the globe may have been created as a result of human error.
TOP STORIES/MOST READ ON BLOOMBERG
Home Prices in U.S. Drop Most on Record in Quarter
Home prices in the U.S. dropped the most on record in the first quarter from a year earlier, led by California and Florida, as banks sold foreclosed properties.
Aston Martin Owner Is First to Default on Gulf Sukuk
Investment Dar Co., the owner of half of Aston Martin Lagonda Ltd., missed a payment on $100 million of debt, becoming the first Persian Gulf company to default on Islamic bonds.
Swine Flu May Be Human Error, Scientist Says; WHO Probes Claim
The World Health Organization is investigating an Australian researcher’s claim that the swine flu virus circling the globe may have been created as a result of human error.
Greenspan Sees ‘Seeds of a Bottoming’ in U.S. Housing
Former Federal Reserve Chairman Alan Greenspan said that the U.S. housing market may be on the verge of recovery and that it’s “very easy to see” financial markets continuing to improve.
MAIN ECONOMIC RELEASES TODAY NZ Central Bank Chief Bollard Speaks at 9 a.m. Wellington Time Japan Current Account Surplus Seen Narrowing on Export Slump Japan Bank Lending Figures for April Released by Central Bank China Industrial Production Growth Seen Accelerating to 8.6% China Retail Sales Seen Rising 14.5% in April From Year Earlier Australian Consumer Sentiment Index Released Japan Corporate Bankruptcies May Rise in April From Year Ago South Korea’s April Unemployment Rate Is Released Japan Merchant Confidence May Rise for Fourth Month in April
MAIN ANALYST UPGRADES/DOWNGRADES *MITSUI OSK CUT TO ‘NEUTRAL’ FROM ‘BUY’ AT NOMURA *WOORI FINANCE RAISED TO ‘HOLD’ AT BNP PARIBAS *NIKON RAISED TO ‘OVERWEIGHT’ AT JPMORGAN *SECOM CUT TO ‘HOLD’ FROM ‘BUY’ AT KBC *SINO-FOREST RAISED TO ‘OUTPERFORM’ AT RBC *DAIICHI SANKYO CUT TO ‘NEUTRAL’ AT CREDIT SUISSE *SUMITOMO OSAKA CEMENT CUT TO ‘NEUTRAL’ AT CREDIT SUISSE *CTRIP RAISED TO ‘NEUTRAL’ FROM ‘SELL’ AT GOLDMAN SACHS
ASIAN MARKETS
The Nikkei 225 futures contract due in June fell 25 points to 9,290. The Hang Seng Index futures for May gained 378 to 17,188. The S&P/ASX 200 Index futures contract due in June rose 20 to 3,889 at 6:59 a.m. in Sydney.
Most U.S. Stocks Decline as Share Sales Raise Dilution Concern
Most U.S. stocks fell for a second day as share sales at Ford Motor Co., U.S. Bancorp and Anadarko Petroleum Corp. heightened concern that earnings will be diluted by capital- raising efforts.
Treasuries Little Changed as Stocks Fluctuate, Fed Buys Debt
Treasury notes were little changed as stocks fluctuated and the Federal Reserve bought U.S. debt for the second time this week.
Dollar Slides Beyond $1.37 Versus Euro on Pared Safety Demand
The dollar slid beyond $1.37 against the euro for the first time since March as evidence the worst of the global economic slump may be over pared demand for safety.
European Stocks Fall for Second Day; ThyssenKrupp, EADS Decline
European stocks declined for a second day as some investors speculated further gains in equities are not justified by the outlook for economic growth and corporate earnings.
European Bonds Decline as Netherlands and Finland Issue Debt
European bonds dropped after the Netherlands and Finland sold 4 billion euros ($5.5 billion) of debt and a government report showed German inflation accelerated more than forecast in April.
Gold, Silver Rise as Dollar’s Drop Boosts Appeal of Commodities
Gold and silver prices rose for the first time in three sessions in New York as speculation that the economy may resume growing soon and the dollar’s decline boosted the appeal of the precious metals as hedges against inflation.
Crude Oil Rises to a 6-Month High as Chinese Imports Surge
Oil rose to a six-month high after China, the world’s second-biggest energy-consuming country, increased crude imports by 14 percent in April.
HIGHLIGHTS FROM NEWSPAPERS
South Korean President May Meet With Japan Leader, Nikkei Says
President Lee Myung Bak of South Korea may visit Japan in late June and meet with Japanese Prime Minister Taro Aso, Nikkei English News reported without specifying how it obtained the information.
TOP STORIES/MOST READ ON BLOOMBERG
Home Prices in U.S. Drop Most on Record in Quarter
Home prices in the U.S. dropped the most on record in the first quarter from a year earlier, led by California and Florida, as banks sold foreclosed properties.
Aston Martin Owner Is First to Default on Gulf Sukuk
Investment Dar Co., the owner of half of Aston Martin Lagonda Ltd., missed a payment on $100 million of debt, becoming the first Persian Gulf company to default on Islamic bonds.
Swine Flu May Be Human Error, Scientist Says; WHO Probes Claim
The World Health Organization is investigating an Australian researcher’s claim that the swine flu virus circling the globe may have been created as a result of human error.
Greenspan Sees ‘Seeds of a Bottoming’ in U.S. Housing
Former Federal Reserve Chairman Alan Greenspan said that the U.S. housing market may be on the verge of recovery and that it’s “very easy to see” financial markets continuing to improve.
MAIN ECONOMIC RELEASES TODAY NZ Central Bank Chief Bollard Speaks at 9 a.m. Wellington Time Japan Current Account Surplus Seen Narrowing on Export Slump Japan Bank Lending Figures for April Released by Central Bank China Industrial Production Growth Seen Accelerating to 8.6% China Retail Sales Seen Rising 14.5% in April From Year Earlier Australian Consumer Sentiment Index Released Japan Corporate Bankruptcies May Rise in April From Year Ago South Korea’s April Unemployment Rate Is Released Japan Merchant Confidence May Rise for Fourth Month in April
MAIN ANALYST UPGRADES/DOWNGRADES *MITSUI OSK CUT TO ‘NEUTRAL’ FROM ‘BUY’ AT NOMURA *WOORI FINANCE RAISED TO ‘HOLD’ AT BNP PARIBAS *NIKON RAISED TO ‘OVERWEIGHT’ AT JPMORGAN *SECOM CUT TO ‘HOLD’ FROM ‘BUY’ AT KBC *SINO-FOREST RAISED TO ‘OUTPERFORM’ AT RBC *DAIICHI SANKYO CUT TO ‘NEUTRAL’ AT CREDIT SUISSE *SUMITOMO OSAKA CEMENT CUT TO ‘NEUTRAL’ AT CREDIT SUISSE *CTRIP RAISED TO ‘NEUTRAL’ FROM ‘SELL’ AT GOLDMAN SACHS
ASIAN MARKETS
The Nikkei 225 futures contract due in June fell 25 points to 9,290. The Hang Seng Index futures for May gained 378 to 17,188. The S&P/ASX 200 Index futures contract due in June rose 20 to 3,889 at 6:59 a.m. in Sydney.
Most U.S. Stocks Decline as Share Sales Raise Dilution Concern
Most U.S. stocks fell for a second day as share sales at Ford Motor Co., U.S. Bancorp and Anadarko Petroleum Corp. heightened concern that earnings will be diluted by capital- raising efforts.
Treasuries Little Changed as Stocks Fluctuate, Fed Buys Debt
Treasury notes were little changed as stocks fluctuated and the Federal Reserve bought U.S. debt for the second time this week.
Dollar Slides Beyond $1.37 Versus Euro on Pared Safety Demand
The dollar slid beyond $1.37 against the euro for the first time since March as evidence the worst of the global economic slump may be over pared demand for safety.
European Stocks Fall for Second Day; ThyssenKrupp, EADS Decline
European stocks declined for a second day as some investors speculated further gains in equities are not justified by the outlook for economic growth and corporate earnings.
European Bonds Decline as Netherlands and Finland Issue Debt
European bonds dropped after the Netherlands and Finland sold 4 billion euros ($5.5 billion) of debt and a government report showed German inflation accelerated more than forecast in April.
Gold, Silver Rise as Dollar’s Drop Boosts Appeal of Commodities
Gold and silver prices rose for the first time in three sessions in New York as speculation that the economy may resume growing soon and the dollar’s decline boosted the appeal of the precious metals as hedges against inflation.
Crude Oil Rises to a 6-Month High as Chinese Imports Surge
Oil rose to a six-month high after China, the world’s second-biggest energy-consuming country, increased crude imports by 14 percent in April.
HIGHLIGHTS FROM NEWSPAPERS
South Korean President May Meet With Japan Leader, Nikkei Says
President Lee Myung Bak of South Korea may visit Japan in late June and meet with Japanese Prime Minister Taro Aso, Nikkei English News reported without specifying how it obtained the information.
India Moves to ‘Claw Back’ Hidden Overseas Funds as Voting Ends
May 13 (Bloomberg) -- India’s next government that emerges from elections ending today needs to follow through on pledges to bring back cash stashed overseas to help fund an $85 billion economic stimulus plan and bolster markets, Credit Suisse Group AG and Credit Agricole SA say.
“India has to claw back every cent it can get,” said Joseph Tan, chief economist for Asia in Singapore at Credit Suisse, the second-biggest Swiss bank. The prospect of “revenue is the impetus for this crackdown on tax evasion and tax havens,” he said.
The government said in a Supreme Court filing this month that it proposed a new tax agreement with Switzerland to improve the exchange of banking information. The affidavit followed an April petition from Ram Jethmalani, a law minister in the previous Bharatiya Janata Party-led government, calling for the repatriation 70 trillion rupees ($1.4 trillion) of funds he estimates are illicitly held overseas.
Cracking down on illegal outflows from India may help extend a rally in the nation’s stocks and currency, said Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Calyon, the investment banking arm of Paris-based Credit Agricole. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, climbed 49 percent since closing at a three-year low on March 9, while the rupee gained 5.2 percent in the same period to 49.315 per dollar.
“If they do get back even a part of the money, it would be positive for the rupee and Indian stocks,” Kotecha said.
Matter of Priority
Calyon forecasts the rupee will appreciate almost 3 percent to end the year at 48 a dollar, while Barclays predicts 47 in six months. The median estimate in a Bloomberg survey of 27 analysts is for the rupee to trade at 49.20 on Dec. 31.
The Global Financial Integrity program, a Washington-based non-government organization campaigning for tighter controls on tax havens, estimates “illicit outflows” from India probably averaged as much as $27 billion annually in the five years through 2006, equivalent to about 35 percent of the nation’s budget deficit.
“The government has already initiated action,” Jayanthi Natarajan, a spokeswoman in New Delhi for the Indian National Congress, the biggest party in the coalition government, said in an interview on May 6. “It is not an election issue for us, though the opposition has made it an issue. This is a matter of principle and priority.”
Election Rhetoric
India’s Supreme Court asked the government on May 4 to provide more information on money held in offshore accounts in response to the request by the BJP’s Jethmalani. The government has failed to act so far because politicians may be among the offenders, the petition said. The government said in a statement filed this month it has no “authentic” estimates of the amount lying in those bank accounts.
“This is election rhetoric,” said N. Bhaskara Rao, chairman of the Center for Media Studies, an independent policy research group in New Delhi. He said he expects the government won’t follow through with its pledge.
Both parties made election promises to build roads, bridges and rural health centers in a country where the World Bank estimates 76 percent survive on less than $2 a day. They have also pledged to reduce a budget shortfall that has swelled to 6 percent of gross domestic product, the most since 2001.
‘Join the Queue’
Lal Krishna Advani, leader of the BJP, vowed last month to bring back the black money within the first 100 days of its administration, the Press Trust of India reported on April 17.
Both the Congress party and the BJP may need to form a government in coalition with smaller parties, which have won support by criticizing corruption among officials, according to surveys before balloting began on April 16.
“It is time India joined the queue,” Sitaram Yechury, leader of the Communist Party of India (Marxist), said in an interview in New Delhi on April 30. “We are on a better wicket now after the Swiss banks relented” to the U.S., he said, referring to favorable playing conditions on a cricket pitch.
UBS AG, Switzerland’s largest bank, paid $780 million in February and agreed to part with about 250 names of American account holders after the Justice Department accused the lender of conspiring to defraud the U.S.
European leaders among the Group of 20 countries said in March that they would introduce more transparent regulations for tax havens. Under the new rules, Switzerland will assist in all investigations provided the governments produced “concrete evidence of wrongdoing,” said James Nason, a spokesman for the Basel-based Swiss Bankers Association in an April 30 e-mail.
Speculation is growing that Indians are bringing money back to the country “due to the fear that a new government will take action on Swiss funds,” said R.K. Gupta, who oversees the equivalent of $130 million in Indian stocks at Taurus Asset Management Co. in New Delhi.
“India has to claw back every cent it can get,” said Joseph Tan, chief economist for Asia in Singapore at Credit Suisse, the second-biggest Swiss bank. The prospect of “revenue is the impetus for this crackdown on tax evasion and tax havens,” he said.
The government said in a Supreme Court filing this month that it proposed a new tax agreement with Switzerland to improve the exchange of banking information. The affidavit followed an April petition from Ram Jethmalani, a law minister in the previous Bharatiya Janata Party-led government, calling for the repatriation 70 trillion rupees ($1.4 trillion) of funds he estimates are illicitly held overseas.
Cracking down on illegal outflows from India may help extend a rally in the nation’s stocks and currency, said Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Calyon, the investment banking arm of Paris-based Credit Agricole. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, climbed 49 percent since closing at a three-year low on March 9, while the rupee gained 5.2 percent in the same period to 49.315 per dollar.
“If they do get back even a part of the money, it would be positive for the rupee and Indian stocks,” Kotecha said.
Matter of Priority
Calyon forecasts the rupee will appreciate almost 3 percent to end the year at 48 a dollar, while Barclays predicts 47 in six months. The median estimate in a Bloomberg survey of 27 analysts is for the rupee to trade at 49.20 on Dec. 31.
The Global Financial Integrity program, a Washington-based non-government organization campaigning for tighter controls on tax havens, estimates “illicit outflows” from India probably averaged as much as $27 billion annually in the five years through 2006, equivalent to about 35 percent of the nation’s budget deficit.
“The government has already initiated action,” Jayanthi Natarajan, a spokeswoman in New Delhi for the Indian National Congress, the biggest party in the coalition government, said in an interview on May 6. “It is not an election issue for us, though the opposition has made it an issue. This is a matter of principle and priority.”
Election Rhetoric
India’s Supreme Court asked the government on May 4 to provide more information on money held in offshore accounts in response to the request by the BJP’s Jethmalani. The government has failed to act so far because politicians may be among the offenders, the petition said. The government said in a statement filed this month it has no “authentic” estimates of the amount lying in those bank accounts.
“This is election rhetoric,” said N. Bhaskara Rao, chairman of the Center for Media Studies, an independent policy research group in New Delhi. He said he expects the government won’t follow through with its pledge.
Both parties made election promises to build roads, bridges and rural health centers in a country where the World Bank estimates 76 percent survive on less than $2 a day. They have also pledged to reduce a budget shortfall that has swelled to 6 percent of gross domestic product, the most since 2001.
‘Join the Queue’
Lal Krishna Advani, leader of the BJP, vowed last month to bring back the black money within the first 100 days of its administration, the Press Trust of India reported on April 17.
Both the Congress party and the BJP may need to form a government in coalition with smaller parties, which have won support by criticizing corruption among officials, according to surveys before balloting began on April 16.
“It is time India joined the queue,” Sitaram Yechury, leader of the Communist Party of India (Marxist), said in an interview in New Delhi on April 30. “We are on a better wicket now after the Swiss banks relented” to the U.S., he said, referring to favorable playing conditions on a cricket pitch.
UBS AG, Switzerland’s largest bank, paid $780 million in February and agreed to part with about 250 names of American account holders after the Justice Department accused the lender of conspiring to defraud the U.S.
European leaders among the Group of 20 countries said in March that they would introduce more transparent regulations for tax havens. Under the new rules, Switzerland will assist in all investigations provided the governments produced “concrete evidence of wrongdoing,” said James Nason, a spokesman for the Basel-based Swiss Bankers Association in an April 30 e-mail.
Speculation is growing that Indians are bringing money back to the country “due to the fear that a new government will take action on Swiss funds,” said R.K. Gupta, who oversees the equivalent of $130 million in Indian stocks at Taurus Asset Management Co. in New Delhi.
Monday, May 11, 2009
Investment slowdown fears for central Europe
By Jan Cienski in Warsaw and Thomas Escritt in Budapest
Published: May 12 2009 03:04 | Last updated: May 12 2009 03:04
Central Europe has been hard hit by the global economic downturn, but the pain has not yet persuaded many investors to close recently built factories that have sprung up across the region in the past decade.
The reason is that factories tend to be more modern than their counterparts in western Europe and central European labour – helped by recent declines in local currencies – is still significantly cheaper than in more developed parts of the continent.
EDITOR’S CHOICE
Poland considers postponing euro entry - May-11
Risk shifts summit from Gdansk - May-09
IMF gives $17.1bn loan to Romania - May-05
Lithuania hopes for entry deal on euro - Apr-07
ECB rejects euro short cuts in east Europe - Apr-06
IMF urges eastern EU to adopt euro - Apr-05
However, investment agencies are reporting new investment is likely to slow significantly this year and there are fears over the region’s status as an investment hub.
Companies have been rethinking or putting off future commitments, part of a wider trend of slowing foreign investment in a region that had until recently been one of the world’s leading investment magnets thanks to its close ties to western Europe and lower costs.
Poland, which saw €12bn ($16bn, £11bn) in foreign direct investments last year, expects that there will be only about €7bn this year. In Poland, Marcegaglia, the Italian steel maker, was thinking about building a new rolling plant near the city of Szczecin, but has decided to hold off, concentrating on other priorities.
“Poland is still a very attractive country for us because of its large market and lower costs,” said Antonio Marcegaglia, the company’s chief executive. “The investment in Szczecin is not completely out, but we needed more time to look and decide if we want to go ahead in the future.”
Central Europe could also benefit as international companies struggle to cut costs, which could help partially shield the region from steep recession.
In one recent example Dell, the computer maker, announced it was shifting production from its factory in Limerick to its plant in Lodz. Rafal Branowski, the company’s spokesman, said that the reason for the move was purely to save money. Dorota Lombardi, a director of the special investment zone near the central Polish city of Lodz, said none of the companies that had set up factories in her region had pulled out, but several potential investors had put off talks until later this year.
“We are seeing interest from companies who already have investments with us. Those who are new are more hesitant,” she said, adding that it made little sense for investors to close new factories. Some companies are pulling out: Hitachi, the Japanese electronics company, is closing a new flat-screen television factory in the Czech Republic because of a slump in demand.
Central Europe could benefit as international companies struggle to cut costs, which could help partially shield the region from the steep recession expected in western Europe.
Sorin Vasilescu, director of Romania's Agency for Foreign Investment, said: “A few projects have been cancelled – and their number is not significant, but more than a few are on standby.”
Mr Vasilescu said he expected to find out the fate of these postponed investments in the second half of this year.
Published: May 12 2009 03:04 | Last updated: May 12 2009 03:04
Central Europe has been hard hit by the global economic downturn, but the pain has not yet persuaded many investors to close recently built factories that have sprung up across the region in the past decade.
The reason is that factories tend to be more modern than their counterparts in western Europe and central European labour – helped by recent declines in local currencies – is still significantly cheaper than in more developed parts of the continent.
EDITOR’S CHOICE
Poland considers postponing euro entry - May-11
Risk shifts summit from Gdansk - May-09
IMF gives $17.1bn loan to Romania - May-05
Lithuania hopes for entry deal on euro - Apr-07
ECB rejects euro short cuts in east Europe - Apr-06
IMF urges eastern EU to adopt euro - Apr-05
However, investment agencies are reporting new investment is likely to slow significantly this year and there are fears over the region’s status as an investment hub.
Companies have been rethinking or putting off future commitments, part of a wider trend of slowing foreign investment in a region that had until recently been one of the world’s leading investment magnets thanks to its close ties to western Europe and lower costs.
Poland, which saw €12bn ($16bn, £11bn) in foreign direct investments last year, expects that there will be only about €7bn this year. In Poland, Marcegaglia, the Italian steel maker, was thinking about building a new rolling plant near the city of Szczecin, but has decided to hold off, concentrating on other priorities.
“Poland is still a very attractive country for us because of its large market and lower costs,” said Antonio Marcegaglia, the company’s chief executive. “The investment in Szczecin is not completely out, but we needed more time to look and decide if we want to go ahead in the future.”
Central Europe could also benefit as international companies struggle to cut costs, which could help partially shield the region from steep recession.
In one recent example Dell, the computer maker, announced it was shifting production from its factory in Limerick to its plant in Lodz. Rafal Branowski, the company’s spokesman, said that the reason for the move was purely to save money. Dorota Lombardi, a director of the special investment zone near the central Polish city of Lodz, said none of the companies that had set up factories in her region had pulled out, but several potential investors had put off talks until later this year.
“We are seeing interest from companies who already have investments with us. Those who are new are more hesitant,” she said, adding that it made little sense for investors to close new factories. Some companies are pulling out: Hitachi, the Japanese electronics company, is closing a new flat-screen television factory in the Czech Republic because of a slump in demand.
Central Europe could benefit as international companies struggle to cut costs, which could help partially shield the region from the steep recession expected in western Europe.
Sorin Vasilescu, director of Romania's Agency for Foreign Investment, said: “A few projects have been cancelled – and their number is not significant, but more than a few are on standby.”
Mr Vasilescu said he expected to find out the fate of these postponed investments in the second half of this year.
IMF Eases Pakistan’s FY10 Budget Deficit Target to Boost Growth
May 12 (Bloomberg) -- The International Monetary Fund, which approved a $7.6 billion loan to Pakistan in November, has agreed to ease the country’s budget-deficit target to help boost economic growth.
“The slowing economy, additional donor support, and the need to protect priority expenditures call for a relaxation of the fiscal deficit target for 2009-10,” the IMF said in a statement yesterday. An increase in the target to 4.6 percent of gross domestic product from 3.4 percent “will provide fiscal space and boost growth,” the Washington-based lender said.
Pakistan’s economy has deteriorated in the past two years amid the highest interest rates in Asia and the nation’s fight against Taliban militants, which the United Nations says has forced one million people to flee their homes.
The government predicts the economy will expand 2.5 percent this fiscal year, the slowest pace in eight years, compared with annual average growth of 6.8 percent in the past five years.
The IMF said any cut in the central bank’s key interest rate “will await a significant decline in core inflation.” The lender also called for increasing the country’s tax-to-GDP ratio.
State Bank of Pakistan last month cut its benchmark lending rate by one percentage point to 14 percent to slow inflation.
“The slowing economy, additional donor support, and the need to protect priority expenditures call for a relaxation of the fiscal deficit target for 2009-10,” the IMF said in a statement yesterday. An increase in the target to 4.6 percent of gross domestic product from 3.4 percent “will provide fiscal space and boost growth,” the Washington-based lender said.
Pakistan’s economy has deteriorated in the past two years amid the highest interest rates in Asia and the nation’s fight against Taliban militants, which the United Nations says has forced one million people to flee their homes.
The government predicts the economy will expand 2.5 percent this fiscal year, the slowest pace in eight years, compared with annual average growth of 6.8 percent in the past five years.
The IMF said any cut in the central bank’s key interest rate “will await a significant decline in core inflation.” The lender also called for increasing the country’s tax-to-GDP ratio.
State Bank of Pakistan last month cut its benchmark lending rate by one percentage point to 14 percent to slow inflation.
Asian Stocks Fall From Seven-Month High on Valuation Concerns
May 12 (Bloomberg) -- Asian stocks fell from a seven-month high, led by banks and mining companies, as investors sold shares trading at their most expensive valuations in five years.
Mitsubishi UFJ Financial Group Inc., which soared 26 percent in the past three days, dropped 4.8 percent. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, slumped 4.5 percent after JPMorgan Chase & Co. cut its recommendation on the stock. Sony Corp., which gets a quarter of its sales from the U.S., retreated 2.4 percent as the yen climbed versus the dollar.
“Of course its time for a correction, that’s the way markets work,” investor Jim Rogers said in an interview with Bloomberg Television. “I don’t see the stock market as a great place to be for the next two to three years, maybe for the next decade.”
The MSCI Asia Pacific Index fell 1.3 percent to 97.25 as of 1:47 p.m. in Tokyo, snapping a six-day advance. Optimism the global economy is recovering drove the gauge to the highest since Oct. 7 yesterday. The average valuation of its constituent members is 28 times trailing earnings, a level not seen since March 2004, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average retreated 1 percent to 9,356.16. The measure’s price-book ratio climbed to 1.14 yesterday, the highest level since Oct. 7, from a record low of 0.81 on March 9, according to gauge compiler Nikkei Inc.
Most Asian markets declined except in China, India and Vietnam. South Korea’s Kospi Index lost 0.8 percent as the nation’s central bank left its benchmark interest rate unchanged at 2 percent.
Technical Indicators
Sumitomo Heavy Industries Ltd., Japan’s largest maker of plastic-injection-molding gear, slumped 9 percent after projecting lower earnings. Asahi Glass Co. climbed 11 percent after Nomura Holdings Inc. recommended buying the shares. NCsoft Corp., South Korea’s biggest online-game maker, surged 13 percent as brokerages raised their share-price targets.
Futures on the U.S. Standard & Poor’s 500 Index lost 0.5 percent. The gauge fell 2.2 percent in New York yesterday, retreating from the most expensive level in seven months.
“Technical indicators suggest the market is overheating and investors are ready to take profit after recent gains,” said Toshio Sumitani, a strategist at Tokai Tokyo Securities Co.
The MSCI Asia Pacific Index’s relative strength index, which measures how rapidly prices have risen or fallen, climbed to 78 yesterday, above the threshold of 70 that some investors use as a signal to sell.
Mitsubishi UFJ, Japan’s largest publicly traded bank, retreated 4.8 percent to 642 yen. Yuanta Financial Holding Co., the owner of Taiwan’s largest securities brokerage, slumped 6.9 percent to NT$23.55 in Taipei. Commonwealth Bank of Australia, the nation’s largest lender, fell 1 percent to A$36.30.
Mounting Losses
Finance companies accounted for 43 percent of the MSCI Asia Pacific Index’s drop today. The shares are the second-worst performing of the benchmark measure’s 10 industry groups in the past year. The deepening credit crisis has caused losses at the biggest financial institutions to swell to more than $1.4 trillion since the start of 2007.
HSBC Holdings Plc, Europe’s largest bank, said yesterday it will be a “tough” year in 2009 as bad loans increase and the economy deteriorates. Former Oppenheimer & Co. analyst Meredith Whitney said in an interview with CNBC yesterday profits at U.S. banks will miss consensus estimates in 2010 and 2011, adding shares of lenders are “grossly overvalued.”
HSBC added 1.1 percent to HK$66.85 in Hong Kong.
Fortescue dropped 4.6 percent to A$2.93. The stock was cut to “underweight” from “neutral” at JPMorgan, which cited weaker-than-expected production and higher costs.
Metal Prices
BHP Billiton, the world’s largest mining company, slumped 2.6 percent to A$34.37. Mitsui & Co., Japan’s second-largest trading company, declined 3.3 percent to 1,156 yen. A measure of six primary metals traded in London fell 1.8 percent yesterday, the sharpest drop since April 28. Copper futures in New York dropped 2.7 percent.
Sony lost 2.4 percent to 2,630 yen as the yen strengthened against the dollar to as much as 97.14 today, a level not seen since April 29, from 98.43 at the 3 p.m. close of stock trading in Tokyo.
Mazda Motor Corp., Japan’s fifth-largest automaker, lost 5 percent to 247 yen. Kyodo News said the company may forecast an operating loss of more than 25 billion yen ($257 million) for the current fiscal year due to slumping vehicle sales.
Toyota Motor Corp., the world’s largest automaker, dropped 1.6 percent to 3,730 yen after the company said it’s idling three of 11 production lines at a domestic engine plant in anticipation of lower sales.
Brokerage Upgrades
Sumitomo Heavy slumped 9 percent to 413 yen. Net income for the year ending March 2010 will decrease by 74 percent to 3.5 billion yen ($35.5 million), Sumitomo Heavy said in a release to the exchange yesterday. That missed the median profit estimate of 10.9 billion yen by analysts surveyed by Bloomberg.
Asahi Glass jumped 11 percent to 650 yen, the highest since Oct. 21, after Nomura raised the stock to “buy,” citing a recovery in demand for liquid crystal glass substrates.
NCsoft climbed 13 percent to 177,000 won. Credit Suisse Group AG increased its share-price estimate by 18 percent, citing higher-than-expected first-quarter earnings. Goldman Sachs Group Inc. raised its stock price estimate by 7.7 percent.
Mitsubishi UFJ Financial Group Inc., which soared 26 percent in the past three days, dropped 4.8 percent. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, slumped 4.5 percent after JPMorgan Chase & Co. cut its recommendation on the stock. Sony Corp., which gets a quarter of its sales from the U.S., retreated 2.4 percent as the yen climbed versus the dollar.
“Of course its time for a correction, that’s the way markets work,” investor Jim Rogers said in an interview with Bloomberg Television. “I don’t see the stock market as a great place to be for the next two to three years, maybe for the next decade.”
The MSCI Asia Pacific Index fell 1.3 percent to 97.25 as of 1:47 p.m. in Tokyo, snapping a six-day advance. Optimism the global economy is recovering drove the gauge to the highest since Oct. 7 yesterday. The average valuation of its constituent members is 28 times trailing earnings, a level not seen since March 2004, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average retreated 1 percent to 9,356.16. The measure’s price-book ratio climbed to 1.14 yesterday, the highest level since Oct. 7, from a record low of 0.81 on March 9, according to gauge compiler Nikkei Inc.
Most Asian markets declined except in China, India and Vietnam. South Korea’s Kospi Index lost 0.8 percent as the nation’s central bank left its benchmark interest rate unchanged at 2 percent.
Technical Indicators
Sumitomo Heavy Industries Ltd., Japan’s largest maker of plastic-injection-molding gear, slumped 9 percent after projecting lower earnings. Asahi Glass Co. climbed 11 percent after Nomura Holdings Inc. recommended buying the shares. NCsoft Corp., South Korea’s biggest online-game maker, surged 13 percent as brokerages raised their share-price targets.
Futures on the U.S. Standard & Poor’s 500 Index lost 0.5 percent. The gauge fell 2.2 percent in New York yesterday, retreating from the most expensive level in seven months.
“Technical indicators suggest the market is overheating and investors are ready to take profit after recent gains,” said Toshio Sumitani, a strategist at Tokai Tokyo Securities Co.
The MSCI Asia Pacific Index’s relative strength index, which measures how rapidly prices have risen or fallen, climbed to 78 yesterday, above the threshold of 70 that some investors use as a signal to sell.
Mitsubishi UFJ, Japan’s largest publicly traded bank, retreated 4.8 percent to 642 yen. Yuanta Financial Holding Co., the owner of Taiwan’s largest securities brokerage, slumped 6.9 percent to NT$23.55 in Taipei. Commonwealth Bank of Australia, the nation’s largest lender, fell 1 percent to A$36.30.
Mounting Losses
Finance companies accounted for 43 percent of the MSCI Asia Pacific Index’s drop today. The shares are the second-worst performing of the benchmark measure’s 10 industry groups in the past year. The deepening credit crisis has caused losses at the biggest financial institutions to swell to more than $1.4 trillion since the start of 2007.
HSBC Holdings Plc, Europe’s largest bank, said yesterday it will be a “tough” year in 2009 as bad loans increase and the economy deteriorates. Former Oppenheimer & Co. analyst Meredith Whitney said in an interview with CNBC yesterday profits at U.S. banks will miss consensus estimates in 2010 and 2011, adding shares of lenders are “grossly overvalued.”
HSBC added 1.1 percent to HK$66.85 in Hong Kong.
Fortescue dropped 4.6 percent to A$2.93. The stock was cut to “underweight” from “neutral” at JPMorgan, which cited weaker-than-expected production and higher costs.
Metal Prices
BHP Billiton, the world’s largest mining company, slumped 2.6 percent to A$34.37. Mitsui & Co., Japan’s second-largest trading company, declined 3.3 percent to 1,156 yen. A measure of six primary metals traded in London fell 1.8 percent yesterday, the sharpest drop since April 28. Copper futures in New York dropped 2.7 percent.
Sony lost 2.4 percent to 2,630 yen as the yen strengthened against the dollar to as much as 97.14 today, a level not seen since April 29, from 98.43 at the 3 p.m. close of stock trading in Tokyo.
Mazda Motor Corp., Japan’s fifth-largest automaker, lost 5 percent to 247 yen. Kyodo News said the company may forecast an operating loss of more than 25 billion yen ($257 million) for the current fiscal year due to slumping vehicle sales.
Toyota Motor Corp., the world’s largest automaker, dropped 1.6 percent to 3,730 yen after the company said it’s idling three of 11 production lines at a domestic engine plant in anticipation of lower sales.
Brokerage Upgrades
Sumitomo Heavy slumped 9 percent to 413 yen. Net income for the year ending March 2010 will decrease by 74 percent to 3.5 billion yen ($35.5 million), Sumitomo Heavy said in a release to the exchange yesterday. That missed the median profit estimate of 10.9 billion yen by analysts surveyed by Bloomberg.
Asahi Glass jumped 11 percent to 650 yen, the highest since Oct. 21, after Nomura raised the stock to “buy,” citing a recovery in demand for liquid crystal glass substrates.
NCsoft climbed 13 percent to 177,000 won. Credit Suisse Group AG increased its share-price estimate by 18 percent, citing higher-than-expected first-quarter earnings. Goldman Sachs Group Inc. raised its stock price estimate by 7.7 percent.
Sunday, May 10, 2009
Indian Bonds Decline as Some Investors Sold Before Debt Sales
May 11 (Bloomberg) -- Indian bonds fell for a third day on speculation some investors sold part of their holdings to raise cash for purchases at bond auctions later this week.
Benchmark 10-year bond yields climbed to the highest level in almost a month before the government’s scheduled sale of 120 billion rupees ($2.4 billion) of debt on May 14, the second this month. India plans to raise a record 2.41 trillion rupees from bond sales in the six months ending Sept. 30 as it increases spending to revive growth in Asia’s third-largest economy.
“The approach is to not hold positions for long because of a large supply,” said S. Srikumar, chief debt trader at state- owned Corporation Bank in Mumbai. “That is going to keep the pressure on yields to rise.”
The yield on the 6.05 percent note due February 2019 rose four basis points to 6.42 percent as of 9:45 a.m. in Mumbai, according to the central bank’s trading system. The price fell 0.26, or 26 paise per 100-rupee face amount, to 97.37. A basis point is 0.01 percentage point.
The 2019 debt’s yield may increase to 6.50 this week, Srikumar said.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, was little changed. The rate, a fixed payment made to receive floating rates, was at 5.75 percent.
Benchmark 10-year bond yields climbed to the highest level in almost a month before the government’s scheduled sale of 120 billion rupees ($2.4 billion) of debt on May 14, the second this month. India plans to raise a record 2.41 trillion rupees from bond sales in the six months ending Sept. 30 as it increases spending to revive growth in Asia’s third-largest economy.
“The approach is to not hold positions for long because of a large supply,” said S. Srikumar, chief debt trader at state- owned Corporation Bank in Mumbai. “That is going to keep the pressure on yields to rise.”
The yield on the 6.05 percent note due February 2019 rose four basis points to 6.42 percent as of 9:45 a.m. in Mumbai, according to the central bank’s trading system. The price fell 0.26, or 26 paise per 100-rupee face amount, to 97.37. A basis point is 0.01 percentage point.
The 2019 debt’s yield may increase to 6.50 this week, Srikumar said.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, was little changed. The rate, a fixed payment made to receive floating rates, was at 5.75 percent.
Indian Rupee Rises to Two-Month High as Fund Inflows Increase
May 11 (Bloomberg) -- India’s rupee rose to a two-month high on optimism a nine-week rally in local shares will encourage overseas funds to increase holdings of local assets.
Data from the capital markets regulator showed share purchases by foreign funds exceeded sales on all but two of the last 21 trading days. The Bombay Stock Exchange’s Sensitive Index has rebounded 46 percent from a three-year low reached on March 9, and on May 8 rounded out the best run of weekly gains in 2 1/2 years.
“The rupee is expected to keep its positive bias as capital inflows are showing a sustained improvement,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “Further gains in equities will support that trend.”
The rupee strengthened as much as 0.5 percent to 49.0600 per dollar, the strongest level since Feb. 17, and traded at 49.1275 as of 9:46 a.m. in Mumbai, according to data compiled by Bloomberg. It advanced 1.7 percent last week, the most since the five-day period ended March 20.
Offshore contracts indicate bets the rupee will trade at 49.18 to the dollar in a month, compared with expectations of 49.34 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Overseas funds bought a net $655 million of Indian shares this month, according to data released by the Securities and Exchange Board of India.
The Reserve Bank of India estimates Asia’s third-largest economy will expand 6 percent in the fiscal year that began April 1. Gross domestic product rose 5.3 percent in the three months ended Dec. 31, the second-fastest pace among the world’s top-20 economies after China.
Data from the capital markets regulator showed share purchases by foreign funds exceeded sales on all but two of the last 21 trading days. The Bombay Stock Exchange’s Sensitive Index has rebounded 46 percent from a three-year low reached on March 9, and on May 8 rounded out the best run of weekly gains in 2 1/2 years.
“The rupee is expected to keep its positive bias as capital inflows are showing a sustained improvement,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “Further gains in equities will support that trend.”
The rupee strengthened as much as 0.5 percent to 49.0600 per dollar, the strongest level since Feb. 17, and traded at 49.1275 as of 9:46 a.m. in Mumbai, according to data compiled by Bloomberg. It advanced 1.7 percent last week, the most since the five-day period ended March 20.
Offshore contracts indicate bets the rupee will trade at 49.18 to the dollar in a month, compared with expectations of 49.34 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Overseas funds bought a net $655 million of Indian shares this month, according to data released by the Securities and Exchange Board of India.
The Reserve Bank of India estimates Asia’s third-largest economy will expand 6 percent in the fiscal year that began April 1. Gross domestic product rose 5.3 percent in the three months ended Dec. 31, the second-fastest pace among the world’s top-20 economies after China.
Hindustan Unilever Quarterly Sales Miss Estimates
May 11 (Bloomberg) -- Hindustan Unilever Ltd., India’s biggest household products maker, posted lower-than-estimated sales as retail chains shut stores and wholesalers reduced inventories on speculation of price reductions.
Sales rose 6 percent to 39.9 billion rupees ($810 million) in the quarter ended March, lower than the 43.6 billion rupee median estimate of 15 analysts surveyed by Bloomberg News.
Companies are cutting prices to boost demand and retailers are shutting money-losing stores to shore up profit as Asia’s third-biggest economy slows from 9 percent average growth in the past four years, damping consumer demand. India has announced tax cuts to boost demand after its economy expanded 5.3 percent in the three months ended December, the slowest pace in five years.
“Because of frequent price corrections, trade downstocking has been observed,” Vice Chairman D. Sundaram told reporters in a conference call yesterday. “The number of organized retail stores has also come down.”
The company cut prices of several items including Lux and Lifebuoy soaps, Sundaram said.
Indian retailers are shutting unprofitable stores and reducing costs to maintain profit margins as the economic slowdown hurts sales. Retailer Subhiksha Trading Services Ltd. said on Jan. 30 its business has come to a “near standstill” and it needs 3 billion rupees to survive.
Hindustan Unilever has lost 7 percent of its market value compared with a 23 percent gain for India’s benchmark Sensitive Index. Hindustan Unilever gained 1 percent to 233.05 rupees on May 8.
Profit Estimate
Hindustan Unilever posted a 3.7 percent increase in profit in the March quarter, missing estimates after a one-time charge for retirement benefits and restructuring.
Net income increased to 3.95 billion rupees in the three months ended March, the company said. That lags behind the 4.51 billion rupee median estimate of 15 analysts surveyed by Bloomberg News.
Profit before one-time items rose 20 percent as the company benefited from lower raw material prices, it said.
The company made a one-time provision of 604.8 million rupees for retirement benefits and 257 million rupees for restructuring in the quarter ended March.
Prices of raw materials including palm oil and petroleum derivatives have reduced from record levels last year.
“Input costs are down sequentially except in tea” Hindustan Unilever said yesterday.
Lower costs and cost savings boosted the operating margin, or the percentage of sales left after subtracting production and other expenses, by 2 percentage points in the quarter.
Hindustan Unilever’s revenue from soaps and detergents, which contribute about half of sales, gained 16 percent to 20.1 billion rupees. Profit before interest and tax rose 43 percent to 3.34 billion rupees.
Profit before interest and tax from more expensive personal care products such as skin creams and toothpaste fell 2.8 percent to 2.39 billion rupees. Sales of Fair & Lovely skin cream, Pepsodent toothpaste and other personal care products rose 1.9 percent to 10.4 billion rupees.
Sales rose 6 percent to 39.9 billion rupees ($810 million) in the quarter ended March, lower than the 43.6 billion rupee median estimate of 15 analysts surveyed by Bloomberg News.
Companies are cutting prices to boost demand and retailers are shutting money-losing stores to shore up profit as Asia’s third-biggest economy slows from 9 percent average growth in the past four years, damping consumer demand. India has announced tax cuts to boost demand after its economy expanded 5.3 percent in the three months ended December, the slowest pace in five years.
“Because of frequent price corrections, trade downstocking has been observed,” Vice Chairman D. Sundaram told reporters in a conference call yesterday. “The number of organized retail stores has also come down.”
The company cut prices of several items including Lux and Lifebuoy soaps, Sundaram said.
Indian retailers are shutting unprofitable stores and reducing costs to maintain profit margins as the economic slowdown hurts sales. Retailer Subhiksha Trading Services Ltd. said on Jan. 30 its business has come to a “near standstill” and it needs 3 billion rupees to survive.
Hindustan Unilever has lost 7 percent of its market value compared with a 23 percent gain for India’s benchmark Sensitive Index. Hindustan Unilever gained 1 percent to 233.05 rupees on May 8.
Profit Estimate
Hindustan Unilever posted a 3.7 percent increase in profit in the March quarter, missing estimates after a one-time charge for retirement benefits and restructuring.
Net income increased to 3.95 billion rupees in the three months ended March, the company said. That lags behind the 4.51 billion rupee median estimate of 15 analysts surveyed by Bloomberg News.
Profit before one-time items rose 20 percent as the company benefited from lower raw material prices, it said.
The company made a one-time provision of 604.8 million rupees for retirement benefits and 257 million rupees for restructuring in the quarter ended March.
Prices of raw materials including palm oil and petroleum derivatives have reduced from record levels last year.
“Input costs are down sequentially except in tea” Hindustan Unilever said yesterday.
Lower costs and cost savings boosted the operating margin, or the percentage of sales left after subtracting production and other expenses, by 2 percentage points in the quarter.
Hindustan Unilever’s revenue from soaps and detergents, which contribute about half of sales, gained 16 percent to 20.1 billion rupees. Profit before interest and tax rose 43 percent to 3.34 billion rupees.
Profit before interest and tax from more expensive personal care products such as skin creams and toothpaste fell 2.8 percent to 2.39 billion rupees. Sales of Fair & Lovely skin cream, Pepsodent toothpaste and other personal care products rose 1.9 percent to 10.4 billion rupees.
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