July 19 (Bloomberg) -- The British economy will shrink 4.4 percent in 2009 before recovering in 2010, Ernst & Young’s Item Club will say tomorrow.
The forecast by the research group, which uses the same economic model as the U.K. Treasury, is worse than the 3.5 percent contraction predicted in April. Tomorrow it will also revise up the prediction for 2010 to show the economy expanding 0.5 percent instead of shrinking 0.1 percent.
U.K. gross domestic product plunged by the most in a half- century in the first quarter, prompting the central bank to cut interest rates to a record low and start buying assets with newly created money. Bank of England Deputy Governor Charles Bean said last week that the economy may return to quarterly growth by the end of this year.
“The economic patient has been in trauma, but thanks to the paramedics at the Treasury and the Bank of England, who pumped billions of pounds worth of medicine into the economy, the patient has been stabilized for now,” Item Club Chief Economic Adviser Peter Spencer will say in a statement. “But it remains unclear how quick and complete recovery will be and there is still a serious chance of a relapse.”
Saturday, July 18, 2009
Friday, July 17, 2009
Asian Currencies Advance on Recovery, Led by South Korea’s Won
July 18 (Bloomberg) -- South Korea’s won led currency gains in Asia this week as improved earnings and evidence the global economy is recovering from a recession bolstered demand for emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index had its best week in almost two months as China and Singapore this week reported economic growth that beat analysts’ estimates. Indonesia’s rupiah fell, trimming the week’s advance, after two separate hotel explosions in Jakarta yesterday. Taiwan’s dollar had its biggest weekly gain since May on speculation a rebound in global demand for personal computers will boost the island’s exports.
“The market has gradually moved back into risk appetite,” said Callum Henderson, head of currency strategy at Standard Chartered Plc in Singapore. “U.S. corporate earnings and Chinese GDP were above expectations, all of that is supportive for the balance in equities and supportive for assets.”
The won jumped 1.8 percent this week to 1,259.3 per dollar in Seoul, according to data compiled by Bloomberg. Singapore’s dollar strengthened 0.8 percent to S$1.4515, while India’s rupee rose 0.5 percent to 48.74. Taiwan’s dollar appreciated 0.3 percent to NT$32.955.
The Asia Dollar Index climbed 0.6 percent this week, the most since May 22, as China on July 16 said gross domestic product increased 7.9 percent in the second quarter from a year earlier, exceeding the median 7.8 percent forecast in a Bloomberg survey. The MSCI Asia Pacific Index of stocks advanced 2.9 percent, the most since the five-day period ended May 8.
Recovery Signs
Singapore said on July 14 that its economy expanded an annualized 20.4 percent last quarter from the previous three months and raised its forecast for 2009, saying GDP will shrink 4 percent to 6 percent this year, compared with an earlier prediction for a 9 percent contraction.
Goldman Sachs Group Inc. said its profit in the second quarter reached a record $3.44 billion, while Intel Corp.’s third-quarter sales and profit forecasts topped analysts’ estimates. Researcher Gartner Inc. said this week that personal- computer shipments declined 5 percent in the three months to June, about half the pace of its earlier forecast.
The won had its biggest weekly advance in two months as overseas investors bought more Korean shares than they sold for a third day. LG Display Co., the world’s second-largest maker of liquid-crystal displays, on July 16 reported second-quarter profit beat estimates. The Kospi index of local shares completed its fourth-straight weekly advance.
“The tech sector has benefited from the positive reports this week,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “That’s supportive of the Korean won and the Korean stock market.”
Electronics Exports
Taiwan’s dollar touched an almost two-week high on optimism an end to the global recession will fuel demand for the island’s exports. Electronics account for about two-fifths of Taiwan’s overseas sales and China is the biggest buyer.
The rupiah fell the most in two weeks after blasts hit the Ritz Carlton and JW Marriott hotels in Jakarta. The explosions, which killed at least eight people and injured 42, are Indonesia’s first terrorist attacks since 2005.
“This will throw a spanner in the works for regional markets, which have been getting used to an upbeat outlook,” said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. “This will keep regional currencies in volatile trade.”
Samurai Bond
Indonesia went ahead with a 35 billion yen ($374 million) sale of 10-year samurai bonds yesterday and set the terms in a private placement, Rahmat Waluyanto, the finance ministry’s director general of debt management, said in a text message.
The rupiah fell 0.5 percent yesterday to 10,175 a dollar, trimming the week’s gain to 0.2 percent. Malaysia’s ringgit traded little changed at 3.5680 after touching 3.5535 on July 16, a one-week high.
Indonesia was hit by bombings annually from 1999 to 2005 that left about 280 people dead and authorities have blamed the Southeast Asian terrorist group, Jemaah Islamiyah, for the attacks.
Elsewhere, the Philippine peso climbed 0.5 percent this week to 48.075 a dollar and the Thai baht was little changed at 34.07. China’s yuan traded at 6.8317 versus 6.8328 on July 10.
The Bloomberg-JPMorgan Asia Dollar Index had its best week in almost two months as China and Singapore this week reported economic growth that beat analysts’ estimates. Indonesia’s rupiah fell, trimming the week’s advance, after two separate hotel explosions in Jakarta yesterday. Taiwan’s dollar had its biggest weekly gain since May on speculation a rebound in global demand for personal computers will boost the island’s exports.
“The market has gradually moved back into risk appetite,” said Callum Henderson, head of currency strategy at Standard Chartered Plc in Singapore. “U.S. corporate earnings and Chinese GDP were above expectations, all of that is supportive for the balance in equities and supportive for assets.”
The won jumped 1.8 percent this week to 1,259.3 per dollar in Seoul, according to data compiled by Bloomberg. Singapore’s dollar strengthened 0.8 percent to S$1.4515, while India’s rupee rose 0.5 percent to 48.74. Taiwan’s dollar appreciated 0.3 percent to NT$32.955.
The Asia Dollar Index climbed 0.6 percent this week, the most since May 22, as China on July 16 said gross domestic product increased 7.9 percent in the second quarter from a year earlier, exceeding the median 7.8 percent forecast in a Bloomberg survey. The MSCI Asia Pacific Index of stocks advanced 2.9 percent, the most since the five-day period ended May 8.
Recovery Signs
Singapore said on July 14 that its economy expanded an annualized 20.4 percent last quarter from the previous three months and raised its forecast for 2009, saying GDP will shrink 4 percent to 6 percent this year, compared with an earlier prediction for a 9 percent contraction.
Goldman Sachs Group Inc. said its profit in the second quarter reached a record $3.44 billion, while Intel Corp.’s third-quarter sales and profit forecasts topped analysts’ estimates. Researcher Gartner Inc. said this week that personal- computer shipments declined 5 percent in the three months to June, about half the pace of its earlier forecast.
The won had its biggest weekly advance in two months as overseas investors bought more Korean shares than they sold for a third day. LG Display Co., the world’s second-largest maker of liquid-crystal displays, on July 16 reported second-quarter profit beat estimates. The Kospi index of local shares completed its fourth-straight weekly advance.
“The tech sector has benefited from the positive reports this week,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “That’s supportive of the Korean won and the Korean stock market.”
Electronics Exports
Taiwan’s dollar touched an almost two-week high on optimism an end to the global recession will fuel demand for the island’s exports. Electronics account for about two-fifths of Taiwan’s overseas sales and China is the biggest buyer.
The rupiah fell the most in two weeks after blasts hit the Ritz Carlton and JW Marriott hotels in Jakarta. The explosions, which killed at least eight people and injured 42, are Indonesia’s first terrorist attacks since 2005.
“This will throw a spanner in the works for regional markets, which have been getting used to an upbeat outlook,” said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. “This will keep regional currencies in volatile trade.”
Samurai Bond
Indonesia went ahead with a 35 billion yen ($374 million) sale of 10-year samurai bonds yesterday and set the terms in a private placement, Rahmat Waluyanto, the finance ministry’s director general of debt management, said in a text message.
The rupiah fell 0.5 percent yesterday to 10,175 a dollar, trimming the week’s gain to 0.2 percent. Malaysia’s ringgit traded little changed at 3.5680 after touching 3.5535 on July 16, a one-week high.
Indonesia was hit by bombings annually from 1999 to 2005 that left about 280 people dead and authorities have blamed the Southeast Asian terrorist group, Jemaah Islamiyah, for the attacks.
Elsewhere, the Philippine peso climbed 0.5 percent this week to 48.075 a dollar and the Thai baht was little changed at 34.07. China’s yuan traded at 6.8317 versus 6.8328 on July 10.
Asian Stocks Record Best Week Since May on Recovery Speculatio
July 18 (Bloomberg) -- Asian stocks rose this week, giving the MSCI Asia Pacific Index its biggest advance since May, amid renewed confidence the global economy is recovering.
CapitaLand Ltd., Singapore’s biggest developer, climbed 10 percent as Singapore upgraded its economic growth forecasts. Alumina Ltd., partner in the world’s biggest producer of the material used to make aluminum, jumped 15 percent in Sydney as commodity prices climbed. Bank of Communications Co. gained 8.3 percent in Hong Kong as economist Nouriel Roubini said the worst of the financial crisis is over.
“The recovery is gaining traction,” said Nader Naeimi, a strategist at AMP Capital Investors in Sydney, which manages about $95 billion. “Even if we don’t see spectacular growth, a stabilization should be enough to support a market rally.”
The MSCI Asia Pacific Index added 2.7 percent to 103.38 this week. The gauge has rallied 47 percent from a five-year low on March 9 amid optimism stimulus policies around the world will revive the global economy. The MSCI World Index gained 6.7 percent this week, the most since March.
Hong Kong’s Hang Seng Index climbed 6.2 percent, while Japan’s Nikkei 225 Stock Average rose 1.2 percent. Indonesia’s Jakarta Composite Index fell 0.6 percent yesterday, paring its weekly gain to 2.1 percent, after bomb blasts killed at least eight people in the city.
The MSCI Asia Pacific Index has risen this week as government reports showed economic growth accelerated in China and U.S. manufacturing improved. Intel Corp. forecast sales that beat analyst estimates, while International Business Machines Corp. raised its profit forecast.
‘Gaining Momentum’
“Sentiment has been gaining momentum following positive economic and earnings news,” said Michiya Tomita, who helps manage $61 billion at Mitsubishi UFJ Asset Management Co. in Hong Kong. “Most of the good news has been priced in. Investors will be looking for more catalysts in the next few weeks as companies report earnings.”
Stocks on the MSCI Asia Pacific Index are trading at an average 43 times reported earnings, up from the 15 times shares were trading at during the market’s trough in March. Companies on the S&P 500 are currently at 14 times profit.
In Singapore, the Straits Times Index advanced 5.3 percent this week, after the trade ministry said the city’s gross domestic product will shrink between 4 percent and 6 percent this year, less than an earlier forecast for a contraction of as much as 9 percent.
The economy grew an annualized 20.4 percent last quarter from the previous three months, after declining a revised 12.7 percent between January and March, it said.
Singapore Growth
CapitaLand surged 10 percent to S$3.73. City Developments Ltd., Singapore’s second-largest property company, jumped 14 percent to S$9.38. City Developments has started selling an 85- unit development, the Business Times reported yesterday.
“This upward trend will continue for some time, as economic indicators have confirmed the economy is recovering,” said Harvey Chang, a SinoPac Securities Investment Trust Co. fund manager who helps oversee about $1.5 billion. “There’s plenty of money in the market.”
Energy shares, material producers and finance companies were the best performing of the MSCI Asia Pacific Index’s 10 industry groups this week on speculation economic growth will boost commodity prices, real-estate demand and bank lending.
Alumina jumped 15 percent to A$1.52, while Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, climbed 15 percent to A$3.92. BHP Billiton Ltd., the world’s largest mining company and Australia’s largest oil producer, added 7.8 percent to A$35.20.
Metals Rally
A gauge of six metals in London rose 9.1 percent, the best week since Feb. 6. Oil futures in New York added 6.1 percent, the biggest weekly advance since May 29.
Among finance companies, Bank of Communications, part owned by HSBC Holdings Plc, rose 8.3 percent to HK$8.83 in Hong Kong. HSBC, Europe’s largest lender, climbed 9.2 percent to HK$68.30.
Sumitomo Realty & Development Co., Japan’s No. 3 developer, rose 5.2 percent to 1,646 yen. Takashi Hashimoto, a Barclays Capital analyst in Tokyo, assigned an “overweight” recommendation to the company in new coverage.
“The freefall of the economy has stopped,” New York University’s Roubini, who predicted the financial crisis, said on July 16. “There is light at the end of the tunnel. And the light at the end of the tunnel for once is not the one of an incoming train.” Roubini reiterated his view that the contraction would last 24 months.
CapitaLand Ltd., Singapore’s biggest developer, climbed 10 percent as Singapore upgraded its economic growth forecasts. Alumina Ltd., partner in the world’s biggest producer of the material used to make aluminum, jumped 15 percent in Sydney as commodity prices climbed. Bank of Communications Co. gained 8.3 percent in Hong Kong as economist Nouriel Roubini said the worst of the financial crisis is over.
“The recovery is gaining traction,” said Nader Naeimi, a strategist at AMP Capital Investors in Sydney, which manages about $95 billion. “Even if we don’t see spectacular growth, a stabilization should be enough to support a market rally.”
The MSCI Asia Pacific Index added 2.7 percent to 103.38 this week. The gauge has rallied 47 percent from a five-year low on March 9 amid optimism stimulus policies around the world will revive the global economy. The MSCI World Index gained 6.7 percent this week, the most since March.
Hong Kong’s Hang Seng Index climbed 6.2 percent, while Japan’s Nikkei 225 Stock Average rose 1.2 percent. Indonesia’s Jakarta Composite Index fell 0.6 percent yesterday, paring its weekly gain to 2.1 percent, after bomb blasts killed at least eight people in the city.
The MSCI Asia Pacific Index has risen this week as government reports showed economic growth accelerated in China and U.S. manufacturing improved. Intel Corp. forecast sales that beat analyst estimates, while International Business Machines Corp. raised its profit forecast.
‘Gaining Momentum’
“Sentiment has been gaining momentum following positive economic and earnings news,” said Michiya Tomita, who helps manage $61 billion at Mitsubishi UFJ Asset Management Co. in Hong Kong. “Most of the good news has been priced in. Investors will be looking for more catalysts in the next few weeks as companies report earnings.”
Stocks on the MSCI Asia Pacific Index are trading at an average 43 times reported earnings, up from the 15 times shares were trading at during the market’s trough in March. Companies on the S&P 500 are currently at 14 times profit.
In Singapore, the Straits Times Index advanced 5.3 percent this week, after the trade ministry said the city’s gross domestic product will shrink between 4 percent and 6 percent this year, less than an earlier forecast for a contraction of as much as 9 percent.
The economy grew an annualized 20.4 percent last quarter from the previous three months, after declining a revised 12.7 percent between January and March, it said.
Singapore Growth
CapitaLand surged 10 percent to S$3.73. City Developments Ltd., Singapore’s second-largest property company, jumped 14 percent to S$9.38. City Developments has started selling an 85- unit development, the Business Times reported yesterday.
“This upward trend will continue for some time, as economic indicators have confirmed the economy is recovering,” said Harvey Chang, a SinoPac Securities Investment Trust Co. fund manager who helps oversee about $1.5 billion. “There’s plenty of money in the market.”
Energy shares, material producers and finance companies were the best performing of the MSCI Asia Pacific Index’s 10 industry groups this week on speculation economic growth will boost commodity prices, real-estate demand and bank lending.
Alumina jumped 15 percent to A$1.52, while Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, climbed 15 percent to A$3.92. BHP Billiton Ltd., the world’s largest mining company and Australia’s largest oil producer, added 7.8 percent to A$35.20.
Metals Rally
A gauge of six metals in London rose 9.1 percent, the best week since Feb. 6. Oil futures in New York added 6.1 percent, the biggest weekly advance since May 29.
Among finance companies, Bank of Communications, part owned by HSBC Holdings Plc, rose 8.3 percent to HK$8.83 in Hong Kong. HSBC, Europe’s largest lender, climbed 9.2 percent to HK$68.30.
Sumitomo Realty & Development Co., Japan’s No. 3 developer, rose 5.2 percent to 1,646 yen. Takashi Hashimoto, a Barclays Capital analyst in Tokyo, assigned an “overweight” recommendation to the company in new coverage.
“The freefall of the economy has stopped,” New York University’s Roubini, who predicted the financial crisis, said on July 16. “There is light at the end of the tunnel. And the light at the end of the tunnel for once is not the one of an incoming train.” Roubini reiterated his view that the contraction would last 24 months.
Indonesia’s Economy May Be Unharmed by Bombings, Citigroup Says
July 18 (Bloomberg) -- Indonesia’s economy is resilient enough to withstand yesterday’s bomb attacks on the Ritz Carlton and JW Marriott hotels in Jakarta, economists said.
“Terrorist threats in Indonesia are nothing new,” said Johanna Chua, head of Asian economic research at Citigroup Inc. in Hong Kong. “The economic impact will likely be limited.”
A decade of continuous expansion in Indonesia hasn’t been interrupted by six major terrorist bombings since October 2002 as the assaults have done little to harm consumer spending, which accounts for almost two-thirds of the economy. Fitch Ratings said an “isolated incident” wouldn’t impact the nation’s credit outlook.
“As tragic as it is, this isn’t a macro-policy-changing event,” Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney, said of yesterday’s attacks. “I think it’s got a short-term impact.”
Indonesia’s $433 billion economy, the largest in Southeast Asia, grew 4.4 percent in the first quarter from a year earlier, compared with a 6.2 percent contraction for Malaysia and Thailand’s 7.1 percent slump.
Growth could accelerate to “significantly” more than 7 percent if President Susilo Bambang Yudhoyono fulfils his pledge to fix the nation’s congested roads, neglected ports and ageing power plants, according to Joachim von Amsberg, the World Bank’s representative in Jakarta.
Foreign Reserves
The rupiah declined the most in three weeks and stocks dropped after the bombings in the nation’s capital, which killed eight people and injured at least 53 others. The currency slid as much as 1 percent to 10,223 per dollar and the Jakarta Composite Index of shares slumped as much as 2.7 percent.
The bombings in Jakarta don’t represent a credit risk for Indonesia, said James McCormack, head of Asian sovereign ratings at Fitch Ratings in Hong Kong. The nation had foreign-currency reserves of $57.6 billion at the end of June, near the highest since July 2008.
“Obviously if this episode were repeated then it becomes a national-security concern,” McCormack said in an interview with Bloomberg Television. “But we’re not there yet.”
Indonesia went ahead yesterday with a 35 billion yen ($374 million) sale of 10-year samurai bonds after the bombing. The sale is the first by a nation to tap Japanese investors since Lehman Brothers Holdings Inc. collapsed in September.
“We do not see any major economic shock as a result of these blasts,” said Helmi Arman, an economist at PT Bank Danamon Indonesia in Jakarta. “The country has lived out numerous other terror attacks in the past five years.”
‘Remains Committed’
Accor SA, Europe’s biggest hotelier and operator of 37 hotels in Indonesia, said it will push through with plans to develop 15 locations in the country.
The Paris-based company, which has 11 hotels in Jakarta, “remains committed to Indonesia,” Gerard Guillouet, vice president for Accor operations in Malaysia, Indonesia and Singapore, said in an e-mailed statement.
“Global factors are still in favor of Indonesia,” said Fauzi Ichsan, senior economist at Standard Chartered Plc in Jakarta. The economy is “fundamentally strong,” he said.
Indonesia’s economy slowed in the months following the October 2002 bombing in Bali, which killed 202 people. Growth eased to 4.75 percent in the quarter ended December 2002 from 5.2 percent in the previous three months, as tourism revenue for the year dropped 20 percent to $4.3 billion from 2001.
The pace of expansion also weakened in the wake of the August 2003 assault on the JW Marriott hotel in Jakarta and the second Bali bombing in October 2005, which saw a halving in the number of tourist arrivals on the island.
Political Stability
“While tourism and general retail and travel-related activities could be affected by the latest events, we expect the impact to be temporary,” said Citigroup’s Chua.
Indonesia’s economy has also benefited in recent years from a more stable political environment and the success of government efforts to crack down on extremists. President Yudhoyono earlier this month was re-elected for a second term.
“There has been a lot of progress made in Indonesia on the terrorist front,” said Stephen Vickers, chief executive of Hong Kong-based FTI International Risk Ltd. “They managed to get completely through the elections without any major incidents.”
Economic growth may still weaken if yesterday’s bombing is the start of a new campaign by Jemaah Islamiyah, a Southeast Asian militant group with links to al Qaeda.
“Smaller, nastier, grittier bombings involving smaller numbers of people are quite likely,” said Vickers. “There are likely to be some more low-intensity, low-scale attacks in the coming weeks.”
“Terrorist threats in Indonesia are nothing new,” said Johanna Chua, head of Asian economic research at Citigroup Inc. in Hong Kong. “The economic impact will likely be limited.”
A decade of continuous expansion in Indonesia hasn’t been interrupted by six major terrorist bombings since October 2002 as the assaults have done little to harm consumer spending, which accounts for almost two-thirds of the economy. Fitch Ratings said an “isolated incident” wouldn’t impact the nation’s credit outlook.
“As tragic as it is, this isn’t a macro-policy-changing event,” Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney, said of yesterday’s attacks. “I think it’s got a short-term impact.”
Indonesia’s $433 billion economy, the largest in Southeast Asia, grew 4.4 percent in the first quarter from a year earlier, compared with a 6.2 percent contraction for Malaysia and Thailand’s 7.1 percent slump.
Growth could accelerate to “significantly” more than 7 percent if President Susilo Bambang Yudhoyono fulfils his pledge to fix the nation’s congested roads, neglected ports and ageing power plants, according to Joachim von Amsberg, the World Bank’s representative in Jakarta.
Foreign Reserves
The rupiah declined the most in three weeks and stocks dropped after the bombings in the nation’s capital, which killed eight people and injured at least 53 others. The currency slid as much as 1 percent to 10,223 per dollar and the Jakarta Composite Index of shares slumped as much as 2.7 percent.
The bombings in Jakarta don’t represent a credit risk for Indonesia, said James McCormack, head of Asian sovereign ratings at Fitch Ratings in Hong Kong. The nation had foreign-currency reserves of $57.6 billion at the end of June, near the highest since July 2008.
“Obviously if this episode were repeated then it becomes a national-security concern,” McCormack said in an interview with Bloomberg Television. “But we’re not there yet.”
Indonesia went ahead yesterday with a 35 billion yen ($374 million) sale of 10-year samurai bonds after the bombing. The sale is the first by a nation to tap Japanese investors since Lehman Brothers Holdings Inc. collapsed in September.
“We do not see any major economic shock as a result of these blasts,” said Helmi Arman, an economist at PT Bank Danamon Indonesia in Jakarta. “The country has lived out numerous other terror attacks in the past five years.”
‘Remains Committed’
Accor SA, Europe’s biggest hotelier and operator of 37 hotels in Indonesia, said it will push through with plans to develop 15 locations in the country.
The Paris-based company, which has 11 hotels in Jakarta, “remains committed to Indonesia,” Gerard Guillouet, vice president for Accor operations in Malaysia, Indonesia and Singapore, said in an e-mailed statement.
“Global factors are still in favor of Indonesia,” said Fauzi Ichsan, senior economist at Standard Chartered Plc in Jakarta. The economy is “fundamentally strong,” he said.
Indonesia’s economy slowed in the months following the October 2002 bombing in Bali, which killed 202 people. Growth eased to 4.75 percent in the quarter ended December 2002 from 5.2 percent in the previous three months, as tourism revenue for the year dropped 20 percent to $4.3 billion from 2001.
The pace of expansion also weakened in the wake of the August 2003 assault on the JW Marriott hotel in Jakarta and the second Bali bombing in October 2005, which saw a halving in the number of tourist arrivals on the island.
Political Stability
“While tourism and general retail and travel-related activities could be affected by the latest events, we expect the impact to be temporary,” said Citigroup’s Chua.
Indonesia’s economy has also benefited in recent years from a more stable political environment and the success of government efforts to crack down on extremists. President Yudhoyono earlier this month was re-elected for a second term.
“There has been a lot of progress made in Indonesia on the terrorist front,” said Stephen Vickers, chief executive of Hong Kong-based FTI International Risk Ltd. “They managed to get completely through the elections without any major incidents.”
Economic growth may still weaken if yesterday’s bombing is the start of a new campaign by Jemaah Islamiyah, a Southeast Asian militant group with links to al Qaeda.
“Smaller, nastier, grittier bombings involving smaller numbers of people are quite likely,” said Vickers. “There are likely to be some more low-intensity, low-scale attacks in the coming weeks.”
Tata Consultancy Net Beats Estimates on Costs, Dollar
July 17 (Bloomberg) -- Tata Consultancy Services Ltd., India’s largest software exporter, beat analysts’ estimates as profit climbed 23 percent on pared costs and a weaker dollar that boosted the value of overseas earnings.
First-quarter net income rose to 15.2 billion rupees ($312 million) in the three months ended June 30, from 12.4 billion rupees a year earlier, Mumbai-based Tata Consultancy said today. That compared with the 12.9 billion-rupee median of 21 analyst estimates compiled by Bloomberg.1. Sales climbed 12 percent.
Tata Consultancy joins closest rival Infosys Technologies Ltd. in beating estimates after the software provider froze pay and capped hiring to cope with the global recession. Chief Executive Officer Subramanian Ramadorai plans to boost non-U.S. sales to reduce the company’s dependence on its biggest market.
“Indian IT companies are going to benefit greatly because of their cost structures” when a recovery begins, Gopal Agrawal, head of equities at Mirae Asset India Investment Co. in Mumbai, said before the results. “Cross-currency movements in the last quarter” also helped software exporters, said Agrawal, who supervises $50 million including Tata Consultancy shares.
The dollar’s 13 percent decline in the quarter against the pound and 5.6 percent drop versus the euro also boosted earnings. The U.K. market contributed 17 percent of Tata Consultancy’s revenue in the quarter, while continental Europe provided 11 percent.
Tata Consultancy rose 3.4 percent to close at 434.1 rupees in Mumbai trading before the results were reported. The stock has added 82 percent this year, outpacing a 53 percent gain for the benchmark Sensitive Index and Infosys’s 67 percent advance.
Orders Boost Revenue
Sales rose to 72.1 billion rupees, beating analysts’ median estimate of 69.2 billion rupees after Tata Consultancy won eight “large” deals, including five from companies in the U.S.
“In times like this, I believe, we’ve managed our operations exceptionally well,” Ramadorai said at a briefing. “The overall growth has been broad-based across major and emerging markets. We’ve increased our wallet share with our top 10 clients as well.”
Tata Consultancy, which provides computer services and back-office support to Citigroup Inc., Volkswagen AG and other customers, said it won a multimillion dollar order from a specialty retailer in the U.S., where it gets half its sales. The Indian company also signed a multi-year contract with an Australian energy retailer for managing software applications.
Top 10 Clients
The share of revenue from Tata Consultancy’s 10 biggest customers rose to 28 percent in the quarter, from 26.9 percent in the preceding three months, the company said in a presentation to analysts and posted on its Web site.
The proportion of revenue accounted for by sales in the home market rose to 9.1 percent, from 8.2 percent in the previous quarter. Tata Consultancy aims to double sales in India to $1 billion in the next three years, Chief Operating Officer Natarajan Chandrasekaran said in April.
Infosys last week reported profit for the quarter ended June 30 rose 18 percent to 15.3 billion rupees, beating analysts’ estimates, after the company trimmed costs and won orders, including two from Fortune 500 companies.
‘Watchful of the Situation’
“The global economy across countries continues to be weak,” Ramadorai said. “We are certainly watchful of the situation and we don’t rule out the fact that more surprises can be expected.”
Chrysler LLC, which gave Tata Consultancy an order earlier this year, filed for bankruptcy April 30. Citigroup has received a $52 billion government bailout and financial firms worldwide have shed more than 328,000 jobs since the financial crisis started, according to data compiled by Bloomberg.
“IT services firms are mainly catering to global companies in America, mainly U.S. banks, which of course are suffering from the downturn in the financial industry,” Gunnar Pahlson, who oversees $500 million in emerging markets stocks at Sweden’s HQ Fonder AB, said by phone from Stockholm before the results were reported. “I don’t think you should expect a recovery in order flow this year; maybe next year.”
The U.S. information-technology market will shrink by 5 percent in the year ending December and global IT spending will decline 11 percent, Cambridge, Massachusetts-based Forrester Research Inc. forecast last month. Forrester expects a “strong technology recovery” in late 2009 and 2010.
IBM, Intel
International Business Machines Corp., the world’s biggest computer-services provider, yesterday reported second-quarter earnings that topped estimates and raised its full-year forecast. Intel Corp., the world’s biggest chipmaker, also beat estimates with its quarterly results, which were announced on July 14.
The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey of economists showed last week.
Growth will average 1.5 percent in the July-to-December period, compared with last month’s 1.2 percent projection, according to the median of 57 forecasts in the survey.
Tata Consultancy is seeing some signs of improvement in its biggest market and among financial clients, Chandrasekaran said.
“We’ve seen growth in the U.S., we’ve seen growth in the financial services sector,” he told reporters at the briefing. “The deal pipeline is healthy and distributed across industries. Still, we’re cautious about manufacturing and high-tech.”
Wipro Ltd., India’s third-largest computer-services company, will report first-quarter earnings on July 22.
First-quarter net income rose to 15.2 billion rupees ($312 million) in the three months ended June 30, from 12.4 billion rupees a year earlier, Mumbai-based Tata Consultancy said today. That compared with the 12.9 billion-rupee median of 21 analyst estimates compiled by Bloomberg.1. Sales climbed 12 percent.
Tata Consultancy joins closest rival Infosys Technologies Ltd. in beating estimates after the software provider froze pay and capped hiring to cope with the global recession. Chief Executive Officer Subramanian Ramadorai plans to boost non-U.S. sales to reduce the company’s dependence on its biggest market.
“Indian IT companies are going to benefit greatly because of their cost structures” when a recovery begins, Gopal Agrawal, head of equities at Mirae Asset India Investment Co. in Mumbai, said before the results. “Cross-currency movements in the last quarter” also helped software exporters, said Agrawal, who supervises $50 million including Tata Consultancy shares.
The dollar’s 13 percent decline in the quarter against the pound and 5.6 percent drop versus the euro also boosted earnings. The U.K. market contributed 17 percent of Tata Consultancy’s revenue in the quarter, while continental Europe provided 11 percent.
Tata Consultancy rose 3.4 percent to close at 434.1 rupees in Mumbai trading before the results were reported. The stock has added 82 percent this year, outpacing a 53 percent gain for the benchmark Sensitive Index and Infosys’s 67 percent advance.
Orders Boost Revenue
Sales rose to 72.1 billion rupees, beating analysts’ median estimate of 69.2 billion rupees after Tata Consultancy won eight “large” deals, including five from companies in the U.S.
“In times like this, I believe, we’ve managed our operations exceptionally well,” Ramadorai said at a briefing. “The overall growth has been broad-based across major and emerging markets. We’ve increased our wallet share with our top 10 clients as well.”
Tata Consultancy, which provides computer services and back-office support to Citigroup Inc., Volkswagen AG and other customers, said it won a multimillion dollar order from a specialty retailer in the U.S., where it gets half its sales. The Indian company also signed a multi-year contract with an Australian energy retailer for managing software applications.
Top 10 Clients
The share of revenue from Tata Consultancy’s 10 biggest customers rose to 28 percent in the quarter, from 26.9 percent in the preceding three months, the company said in a presentation to analysts and posted on its Web site.
The proportion of revenue accounted for by sales in the home market rose to 9.1 percent, from 8.2 percent in the previous quarter. Tata Consultancy aims to double sales in India to $1 billion in the next three years, Chief Operating Officer Natarajan Chandrasekaran said in April.
Infosys last week reported profit for the quarter ended June 30 rose 18 percent to 15.3 billion rupees, beating analysts’ estimates, after the company trimmed costs and won orders, including two from Fortune 500 companies.
‘Watchful of the Situation’
“The global economy across countries continues to be weak,” Ramadorai said. “We are certainly watchful of the situation and we don’t rule out the fact that more surprises can be expected.”
Chrysler LLC, which gave Tata Consultancy an order earlier this year, filed for bankruptcy April 30. Citigroup has received a $52 billion government bailout and financial firms worldwide have shed more than 328,000 jobs since the financial crisis started, according to data compiled by Bloomberg.
“IT services firms are mainly catering to global companies in America, mainly U.S. banks, which of course are suffering from the downturn in the financial industry,” Gunnar Pahlson, who oversees $500 million in emerging markets stocks at Sweden’s HQ Fonder AB, said by phone from Stockholm before the results were reported. “I don’t think you should expect a recovery in order flow this year; maybe next year.”
The U.S. information-technology market will shrink by 5 percent in the year ending December and global IT spending will decline 11 percent, Cambridge, Massachusetts-based Forrester Research Inc. forecast last month. Forrester expects a “strong technology recovery” in late 2009 and 2010.
IBM, Intel
International Business Machines Corp., the world’s biggest computer-services provider, yesterday reported second-quarter earnings that topped estimates and raised its full-year forecast. Intel Corp., the world’s biggest chipmaker, also beat estimates with its quarterly results, which were announced on July 14.
The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey of economists showed last week.
Growth will average 1.5 percent in the July-to-December period, compared with last month’s 1.2 percent projection, according to the median of 57 forecasts in the survey.
Tata Consultancy is seeing some signs of improvement in its biggest market and among financial clients, Chandrasekaran said.
“We’ve seen growth in the U.S., we’ve seen growth in the financial services sector,” he told reporters at the briefing. “The deal pipeline is healthy and distributed across industries. Still, we’re cautious about manufacturing and high-tech.”
Wipro Ltd., India’s third-largest computer-services company, will report first-quarter earnings on July 22.
Thursday, July 16, 2009
Asian Stocks Head for First Weekly Gain in Three; Nomura Gains
July 17 (Bloomberg) -- Asian stocks rose, with the MSCI Asia Pacific Index set for its first weekly gain in three, as commodity prices rose and International Business Machines Corp. earnings beat analyst estimates.
Woodside Petroleum Ltd., Australia’s second-largest oil producer, gained 2.1 percent. Toshiba Corp., Japan’s biggest chipmaker, climbed 2 percent as IBM became the second technology bellwether this week after Intel Corp. to post forecasts that exceeded analyst targets. Macquarie Countrywide Trust jumped 14 percent after selling a stake in U.S. properties. Nomura Holdings Inc., Japan’s largest brokerage, gained 2.2 percent after the Nikkei English News said the nation’s investment banking revenue rose.
“Improved investor risk appetite is being reflected in rising stocks and positive sentiment on commodities,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “The market is starting to surmise that U.S. earnings will not be as weak as forecast.”
The MSCI Asia Pacific Index added 0.3 percent to 102.89 as of 9:40 a.m. in Tokyo, adding to its 4.6 percent advance in the past three days. The gauge has rallied 46 percent from a five- year low on March 9 amid optimism stimulus policies around the world will revive the global economy.
Japan’s Nikkei 225 Stock Average rose 0.3 percent, while South Korea’s Kospi Index added 0.3 percent. Taiwan’s Taiex Index climbed 0.8 percent.
Worst Is Over?
Futures on the Standard & Poor’s 500 Index lost 0.4 percent. The gauge reversed a loss of as much as 0.6 percent to finish 0.9 percent higher in New York yesterday as economist Nouriel Roubini said the worst of the financial crisis is over and reiterated that the recession may end this year. Roubini later said in a statement that his quotes were taken out of context.
“While the consensus is that the U.S. economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery,” Roubini, a New York University professor, said in the statement.
Woodside Petroleum added 2.1 percent to A$42.28 in Sydney. Crude oil for August delivery rose 0.8 percent to $62.02 a barrel in New York. An index of six metals traded in London increased 0.5 percent to the highest since June 12.
Toshiba rose 2 percent to 350 yen. IBM, the world’s biggest computer-services provider, said net income rose 12 percent in the second quarter. For the year, earnings will be at least $9.70 a share, a 50-cent increase from its previous forecast, the company said.
Nomura added 2.2 percent to 730 yen. Japanese investment bank commission revenue in the quarter ended in June rose 90 percent to $874 million from a year earlier, Nikkei English News reported, citing research firm Dealogic.
Macquarie Countrywide climbed 14 percent to 58.5 Australian cents. The company agreed to sell its 75 percent interest in a U.S. portfolio of 86 properties for $1.3 billion.
Woodside Petroleum Ltd., Australia’s second-largest oil producer, gained 2.1 percent. Toshiba Corp., Japan’s biggest chipmaker, climbed 2 percent as IBM became the second technology bellwether this week after Intel Corp. to post forecasts that exceeded analyst targets. Macquarie Countrywide Trust jumped 14 percent after selling a stake in U.S. properties. Nomura Holdings Inc., Japan’s largest brokerage, gained 2.2 percent after the Nikkei English News said the nation’s investment banking revenue rose.
“Improved investor risk appetite is being reflected in rising stocks and positive sentiment on commodities,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “The market is starting to surmise that U.S. earnings will not be as weak as forecast.”
The MSCI Asia Pacific Index added 0.3 percent to 102.89 as of 9:40 a.m. in Tokyo, adding to its 4.6 percent advance in the past three days. The gauge has rallied 46 percent from a five- year low on March 9 amid optimism stimulus policies around the world will revive the global economy.
Japan’s Nikkei 225 Stock Average rose 0.3 percent, while South Korea’s Kospi Index added 0.3 percent. Taiwan’s Taiex Index climbed 0.8 percent.
Worst Is Over?
Futures on the Standard & Poor’s 500 Index lost 0.4 percent. The gauge reversed a loss of as much as 0.6 percent to finish 0.9 percent higher in New York yesterday as economist Nouriel Roubini said the worst of the financial crisis is over and reiterated that the recession may end this year. Roubini later said in a statement that his quotes were taken out of context.
“While the consensus is that the U.S. economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery,” Roubini, a New York University professor, said in the statement.
Woodside Petroleum added 2.1 percent to A$42.28 in Sydney. Crude oil for August delivery rose 0.8 percent to $62.02 a barrel in New York. An index of six metals traded in London increased 0.5 percent to the highest since June 12.
Toshiba rose 2 percent to 350 yen. IBM, the world’s biggest computer-services provider, said net income rose 12 percent in the second quarter. For the year, earnings will be at least $9.70 a share, a 50-cent increase from its previous forecast, the company said.
Nomura added 2.2 percent to 730 yen. Japanese investment bank commission revenue in the quarter ended in June rose 90 percent to $874 million from a year earlier, Nikkei English News reported, citing research firm Dealogic.
Macquarie Countrywide climbed 14 percent to 58.5 Australian cents. The company agreed to sell its 75 percent interest in a U.S. portfolio of 86 properties for $1.3 billion.
Macquarie Countrywide Jumps After U.S. Portfolio Sale
July 17 (Bloomberg) -- Macquarie CountryWide Trust surged in Sydney trading after the company agreed to sell its 75 percent interest in a U.S. property portfolio for $1.3 billion to repair a balance sheet ravaged by the financial crisis.
Shares of the Sydney-based property trust jumped 9.5 cents, or 18 percent, to 61 cents at 10:10 a.m. local time, taking their gain since a February low to 485 percent.
Global Retail Investors LLC, a joint venture between the California Public Employees’ Retirement System and an affiliate of First Washington Realty Inc., has agreed to buy Macquarie CountryWide’s stake in the portfolio of 86 properties. Settlement of the contracts will occur in three parts, the company said in a statement to the stock exchange today.
So-called “satellite” businesses of Macquarie Group Ltd. including Macquarie CountryWide have been selling assets to pare back debt after the global financial crisis raised interest expenses and cut asset values. Macquarie CountryWide cut the overall book value of its assets by 10 percent in the six months to Dec. 31.
“Gearing and debt will be substantially lessened, providing the trust with greater flexibility to strategically respond to the continuing challenging market conditions,” Macquarie CountryWide’s Chief Executive Officer Steven Sewell said in the statement today.
Shares of the Sydney-based property trust jumped 9.5 cents, or 18 percent, to 61 cents at 10:10 a.m. local time, taking their gain since a February low to 485 percent.
Global Retail Investors LLC, a joint venture between the California Public Employees’ Retirement System and an affiliate of First Washington Realty Inc., has agreed to buy Macquarie CountryWide’s stake in the portfolio of 86 properties. Settlement of the contracts will occur in three parts, the company said in a statement to the stock exchange today.
So-called “satellite” businesses of Macquarie Group Ltd. including Macquarie CountryWide have been selling assets to pare back debt after the global financial crisis raised interest expenses and cut asset values. Macquarie CountryWide cut the overall book value of its assets by 10 percent in the six months to Dec. 31.
“Gearing and debt will be substantially lessened, providing the trust with greater flexibility to strategically respond to the continuing challenging market conditions,” Macquarie CountryWide’s Chief Executive Officer Steven Sewell said in the statement today.
Wednesday, July 15, 2009
Spielberg, Anil Ambani Plan $825 Million Film Funding
Steven Spielberg’s new film studio will have about $825 million in financing once the initial funding is completed, according to its biggest investor, Reliance Anil Dhirubhai Ambani Group.
DreamWorks SKG, formed in November by Spielberg and Indian billionaire Anil Ambani, will receive equity from Reliance and bank loans, according to an e-mailed statement today from Ambani’s Reliance BIG Entertainment, the distributor for India. Walt Disney Co., which will release films elsewhere, is also providing funding, according to the statement.
DreamWorks plans to start production this year and release its first movie in 2010, according to the statement. The Los Angeles-based studio seeks to make five to six films a year. The initial funding is expected to close shortly, Reliance said, without offering details. In December, Spielberg delayed a plan to raise about $700 million in debt, in addition to equity, a person with knowledge of the situation said at the time. The funding was previously targeted for January, the person said.
“We welcome the opportunity and freedom they have given us to make the films we want to make,” Stacey Snider, chief executive officer of DreamWorks, said in the statement.
Spielberg broke away from Viacom Inc.’s Paramount Pictures in September. He spent $26.5 million of his own money to buy rights to 17 films from Paramount, Variety reported in January.
In February, Disney agreed to distribute DreamWorks films to theaters and to provide the studio with loans that may total as much as $200 million, two people with knowledge of the deal said at the time.
Burbank, California-based Disney will receive fees and increase its release schedule with the DreamWorks agreement.
Disney, the world’s biggest media company, rose 97 cents, or 4.2 percent, to $24.08 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 6.1 percent this year.
DreamWorks SKG, formed in November by Spielberg and Indian billionaire Anil Ambani, will receive equity from Reliance and bank loans, according to an e-mailed statement today from Ambani’s Reliance BIG Entertainment, the distributor for India. Walt Disney Co., which will release films elsewhere, is also providing funding, according to the statement.
DreamWorks plans to start production this year and release its first movie in 2010, according to the statement. The Los Angeles-based studio seeks to make five to six films a year. The initial funding is expected to close shortly, Reliance said, without offering details. In December, Spielberg delayed a plan to raise about $700 million in debt, in addition to equity, a person with knowledge of the situation said at the time. The funding was previously targeted for January, the person said.
“We welcome the opportunity and freedom they have given us to make the films we want to make,” Stacey Snider, chief executive officer of DreamWorks, said in the statement.
Spielberg broke away from Viacom Inc.’s Paramount Pictures in September. He spent $26.5 million of his own money to buy rights to 17 films from Paramount, Variety reported in January.
In February, Disney agreed to distribute DreamWorks films to theaters and to provide the studio with loans that may total as much as $200 million, two people with knowledge of the deal said at the time.
Burbank, California-based Disney will receive fees and increase its release schedule with the DreamWorks agreement.
Disney, the world’s biggest media company, rose 97 cents, or 4.2 percent, to $24.08 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 6.1 percent this year.
Pakistan seeks additional $4bn from IMF
Pakistan has requested an additional $4bn in financing from the international monetary fund (IMF) to meet the higher costs of security, finance ministry officials in Islamabad said on Wednesday.
The funding would come on top of a $7.6bn loan agreed late last year to ward off a balance of payments crisis.
EDITOR’S CHOICE
Pakistan’s displaced return to Swat Valley - Jul-12
Helmand deaths trigger debate on UK role - Jul-13
However, a senior finance ministry official said, the additional IMF loan would be used mainly to bridge the expenditure gap until Pakistan’s major aid donors known as the “friends of Pakistan” begin to provide a $5.25bn promised for the next two years until June 2011.
“The request to the IMF is for a bridging loan. We are not seeking a new loan that will add to our debt stock. This is simply money which will be repaid when the assistance from the friends of Pakistan gets delivered,” said Sakib Sherani, a senior advisor to Shaukat Tarin, the de facto finance minister.
Mr Tarin, currently on a visit to the United States, is expected to meet with officials from the IMF, the World Bank and US Aid to discuss the economic fallout from Pakistan ’s three-month-long battle with Taliban militants in the country’s northern Swat valley.
Pakistani officials and western diplomats warn that the extent of international support to help the country meet the economic fallout of the fighting may be a crucial factor in persuading Pakistan to fight Taliban militants in other areas.
“The international support will be a principal litmus test of how Pakistan reacts in future to international pressure on fighting the Taliban” said one western diplomat..
At least 2m people forced to flee the fighting in Swat began returning home in the first phase of a potentially difficult resettlement process on Monday. The return has coincided with warnings from senior Pakistani officials who say that remnant Taliban militants will try to fight back, possibly carrying out suicide attacks targeting refugess returning home.
“One such security incident and you will surely see people suddenly just driving back to the (internally displaced persons’) camps,” said one senior government official. Pakistani officials and UN experts said, beyond the immediate relief, medium to long-term rehabilitation of the IDPs could cost as much as $2bn or more.
Earlier this year, Mr Tarin told the FT that the fallout from Pakistan ’s campaign against militant Islamists was costing up to $8.5bn annually “in terms of lost exports, lost investments, increased expenses and loss in revenue.”
“Direct annual cost of the security apparatus is about US$2.5bn-US$3bn in the next two years,” he added.
However, some of the IMF conditions are already facing mounting popular criticism in Pakistan including energy price increases proposed earlier this year.
The funding would come on top of a $7.6bn loan agreed late last year to ward off a balance of payments crisis.
EDITOR’S CHOICE
Pakistan’s displaced return to Swat Valley - Jul-12
Helmand deaths trigger debate on UK role - Jul-13
However, a senior finance ministry official said, the additional IMF loan would be used mainly to bridge the expenditure gap until Pakistan’s major aid donors known as the “friends of Pakistan” begin to provide a $5.25bn promised for the next two years until June 2011.
“The request to the IMF is for a bridging loan. We are not seeking a new loan that will add to our debt stock. This is simply money which will be repaid when the assistance from the friends of Pakistan gets delivered,” said Sakib Sherani, a senior advisor to Shaukat Tarin, the de facto finance minister.
Mr Tarin, currently on a visit to the United States, is expected to meet with officials from the IMF, the World Bank and US Aid to discuss the economic fallout from Pakistan ’s three-month-long battle with Taliban militants in the country’s northern Swat valley.
Pakistani officials and western diplomats warn that the extent of international support to help the country meet the economic fallout of the fighting may be a crucial factor in persuading Pakistan to fight Taliban militants in other areas.
“The international support will be a principal litmus test of how Pakistan reacts in future to international pressure on fighting the Taliban” said one western diplomat..
At least 2m people forced to flee the fighting in Swat began returning home in the first phase of a potentially difficult resettlement process on Monday. The return has coincided with warnings from senior Pakistani officials who say that remnant Taliban militants will try to fight back, possibly carrying out suicide attacks targeting refugess returning home.
“One such security incident and you will surely see people suddenly just driving back to the (internally displaced persons’) camps,” said one senior government official. Pakistani officials and UN experts said, beyond the immediate relief, medium to long-term rehabilitation of the IDPs could cost as much as $2bn or more.
Earlier this year, Mr Tarin told the FT that the fallout from Pakistan ’s campaign against militant Islamists was costing up to $8.5bn annually “in terms of lost exports, lost investments, increased expenses and loss in revenue.”
“Direct annual cost of the security apparatus is about US$2.5bn-US$3bn in the next two years,” he added.
However, some of the IMF conditions are already facing mounting popular criticism in Pakistan including energy price increases proposed earlier this year.
Indian Lawmakers Approve Budget as Minister Vows to Cut Deficit
India’s parliament approved this year’s budget as Finance Minister Pranab Mukherjee vowed to trim the fiscal deficit after economic growth picks up.
“What is required right now is to achieve high growth in the shortest possible time,” Mukherjee told lawmakers today in the upper house, urging them to support the finance bill. “This level of deficit is not sustainable and we shall correct it soon.” The lower house passed the budget yesterday.
Financial markets are concerned the record 4.51 trillion rupees ($92 billion) borrowing may leave little money for private companies for investments, with the key bond yield rising 24 basis points since the budget was presented on July 6. Mukherjee said he plans to trim the deficit to 5.5 percent of gross domestic product by March 2011 and to 4 percent in the following 12 months.
Mukherjee forecast higher spending for infrastructure and the rural poor will see the budget deficit widen to 6.8 percent of gross domestic product in the year ending March 31, from 6 percent in the previous year. He is betting on faster economic expansion to raise tax revenue and step up allocations for roads and the poor, and trim the budget deficit in the coming years.
The finance minister said the widening of the deficit won’t “crowd out” borrowing needs of private companies, adding that the government “working in tandem” with the central bank will ensure enough money is available with the nation’s banks.
Reviving Demand
Prime Minister Manmohan Singh’s government, which won re- election in May for a second term, is focused on reviving consumer and investment demand as the nation’s $1.2 trillion economy, pummeled by the global recession, is forecast to grow 6.7 percent this year, the weakest since 2003.
“Higher growth is essential because it means higher tax incomes -- and this is no longer a theoretical proposition,” Mukherjee said. India’s record growth of close to 9 percent in the five years ended March 31 helped tax revenue more than double since 2004, he said.
The minister said the government’s fiscal stimulus since December is showing positive results, though the economy is still “not out of the woods.”
In June, steel and cement production grew by 13 percent each from a year earlier, while mobile-phone connections in May rose by 12 million, a 49 percent increase from the year before, the minister said.
Fiscal Discipline
“These are small beginnings that show that our strategy to generate internal demand is responding,” Mukherjee said. “In the medium term, we should have clear objectives and come back to the path of fiscal discipline.”
He said he plans to tap revenue from the sale of stakes in state-run companies and generate more revenue from the introduction of a goods and service tax from April 1 that will subsume all indirect taxes and will levy only value-added production so that manufacturers don’t pay taxes twice.
Indian state-owned companies NHPC Ltd. and Oil India Ltd. will sell shares to the public this year, Mukherjee had told lawmakers earlier in the day. NHPC is India’s largest hydroelectric power generator while Oil India is the country’s second-biggest government-owned energy explorer.
“What is required right now is to achieve high growth in the shortest possible time,” Mukherjee told lawmakers today in the upper house, urging them to support the finance bill. “This level of deficit is not sustainable and we shall correct it soon.” The lower house passed the budget yesterday.
Financial markets are concerned the record 4.51 trillion rupees ($92 billion) borrowing may leave little money for private companies for investments, with the key bond yield rising 24 basis points since the budget was presented on July 6. Mukherjee said he plans to trim the deficit to 5.5 percent of gross domestic product by March 2011 and to 4 percent in the following 12 months.
Mukherjee forecast higher spending for infrastructure and the rural poor will see the budget deficit widen to 6.8 percent of gross domestic product in the year ending March 31, from 6 percent in the previous year. He is betting on faster economic expansion to raise tax revenue and step up allocations for roads and the poor, and trim the budget deficit in the coming years.
The finance minister said the widening of the deficit won’t “crowd out” borrowing needs of private companies, adding that the government “working in tandem” with the central bank will ensure enough money is available with the nation’s banks.
Reviving Demand
Prime Minister Manmohan Singh’s government, which won re- election in May for a second term, is focused on reviving consumer and investment demand as the nation’s $1.2 trillion economy, pummeled by the global recession, is forecast to grow 6.7 percent this year, the weakest since 2003.
“Higher growth is essential because it means higher tax incomes -- and this is no longer a theoretical proposition,” Mukherjee said. India’s record growth of close to 9 percent in the five years ended March 31 helped tax revenue more than double since 2004, he said.
The minister said the government’s fiscal stimulus since December is showing positive results, though the economy is still “not out of the woods.”
In June, steel and cement production grew by 13 percent each from a year earlier, while mobile-phone connections in May rose by 12 million, a 49 percent increase from the year before, the minister said.
Fiscal Discipline
“These are small beginnings that show that our strategy to generate internal demand is responding,” Mukherjee said. “In the medium term, we should have clear objectives and come back to the path of fiscal discipline.”
He said he plans to tap revenue from the sale of stakes in state-run companies and generate more revenue from the introduction of a goods and service tax from April 1 that will subsume all indirect taxes and will levy only value-added production so that manufacturers don’t pay taxes twice.
Indian state-owned companies NHPC Ltd. and Oil India Ltd. will sell shares to the public this year, Mukherjee had told lawmakers earlier in the day. NHPC is India’s largest hydroelectric power generator while Oil India is the country’s second-biggest government-owned energy explorer.
Retailer Knockoffs Abound in India
NEW DELHI — Retailers are flocking to India, thanks to an economy that is still growing and a young population eager to gobble up new brand names.
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But some Western brands — once they conquer the regulatory hurdles to getting into the market here — may get a sinking sense of déjà vu. For instance, Timberland, the maker of hiking boots and other outdoor gear, identifiable by its tree logo and chunky, durable shoes, will find Woodland, which sells similar shoes and clothing, and has a tree logo.
Pinkberry, the Los Angeles-based frozen yogurt chain, will encounter Cocoberry, a frozen yogurt retailer with a look-alike logo and a similar array of candy and fresh fruit toppings.
And The Financial Times, Pearson’s newspaper published with a pink tint since 1893, is locked in a legal battle with Bennett, Coleman & Company, owners of India’s largest English-language newspaper: a pink-tinted supplement it calls The Financial Times, which it registered in India in 1984.
Pearson’s Financial Times is eager to publish in India, but Bennett Coleman is challenging that right in court. Indeed, in recent months, a subsidiary of Bennett Coleman registered similar names with India’s newspaper registry, including FT Asia and Worldwide Financial Times.
Like Bennett Coleman, Woodland — the Timberland look-alike — is no mom-and-pop operation. It has 230 stores nationwide and another 50 on the way, and it is a staple of urban shopping malls. That could cramp Timberland’s planned expansion in India, potentially confusing would-be customers and costing Timberland sales.
The United States has long tussled over intellectual property rights with China, where counterfeiters crank out knockoffs of designer bags and iPhones (and manufacturers have even made entire vehicles that look just like foreign cars). But as brands look to India as one of the few opportunities for growth in an anemic global market, foreign companies and governments alike are protesting the country’s lack of intellectual property protections, too.
As Gary Locke, the Commerce secretary, told a group of Indian executives visiting Washington this month, “U.S. businesses need assurances that when they come to India, they’ll be operating in a secure and reliable environment for intellectual property.”
India will be the best market in the world for retail sales growth this year, A. T. Kearney said in a report released in June. India’s “growing, educated and aspirational middle class is demanding a better retail environment and more global brands and styles,” the consulting group said.
Wal-Mart, Carrefour and Tesco are opening wholesale stores that will sell to restaurants and owners of small shops. Dozens of foreign brands that have not already entered the Indian market are searching for domestic joint venture partners, which they need before opening a store here.
When questioned about the inspiration for Woodland, Harkirat Singh, managing director and the third generation to run the family shoe company, said the assumption should not be made that “just because the name sounds similar,” Woodland is copying Timberland. There is a “similarity,” he acknowledged, “but our line is quite different from theirs.”
Mr. Singh said he thought Timberland’s entry into India could help, not hurt, his business. Foreign brands “bring more awareness about quality footwear” to India, he said. Then Indian consumers “buy our product because it is more value for money.”
Timberland’s spokeswoman, Robin Giampa, said that Woodland’s “imitation of several of the valuable and well-recognized Timberland brands is a concern.” The company is addressing Woodland’s “brand piracy” through the appropriate legal processes in India, she said.
Whether that will be successful or not is unclear. “Our courts have recognized that you can’t have an isolated approach to trademark law,” said Gayatri Roy, a lawyer with Luthra & Luthra in New Delhi, meaning judges have often ruled that brands that are well known around the world cannot be copied by someone else in India, even if the companies with those brands do not do business in India. In such cases, Indian courts have decided in favor of Whirlpool, Dunhill and Volvo, among others.
In the case of Timberland and Woodland, though, it may be difficult for Timberland to prove that it should be protected, Ms. Roy said. After all, Woodland has been in business since 1992, she said, so they have created their own identity.
When asked whether Pinkberry frozen yogurt was his inspiration, Cocoberry’s chief executive, G. S. Bhalla, said he wanted to create a brand “associated with nature, health and social responsibility.”
(The company said Mr. Bhalla’s seven-year-old daughter was the inspiration for combining the words Coco, for cocoa, and berry, for the fresh fruit that tops the yogurt.)
“Our product, recipe, store design, menu and philosophy are unique and very different from any other brand in the world,” Mr. Bhalla said. “We plan to expand at a steady and controlled pace in India,” he said. Pinkberry had no comment.
Citigroup has been active in India, as Citibank, for decades, and the country’s urban areas are dotted with bank branches with the blue-striped sign. But that did not stop “Yes Bank,” a retail banking chain that rolled out branches throughout India in recent years, from using a very similar sign.
Some imitators are so loosely based on the original that they may not be considered a threat — like the “6Ten” convenience stores. With their yellow and blue signs and piles of loose grains for sale rather than Slurpees, they are unlikely to be seen as competition to 7-Eleven.
And sometimes, the imitation is less about the brand than about what it represents. Across India, a number of scooter and motorcycle drivers sport the familiar Marlboro cigarette logo of a red and white chevron on their helmets. On closer inspection, those logos say “Marlborne” or “Melbourne.”
The helmets, made by several manufacturers, are “basically replicas of the helmets worn by Michael Schumacher during his racing days at Ferrari,” explained Rahim Premji, a partner with Allibhai Premji Tyrewalla, a bike dealership. Mr. Schumacher, a Formula One driver, was sponsored by Marlboro.
Helmet manufacturers were forced to replace the Marlboro name after the authorities said that tobacco advertising was not allowed in India, Mr. Premji said. Marlboro, not surprisingly, has not complained about the free advertising.
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* Timberland Co
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But some Western brands — once they conquer the regulatory hurdles to getting into the market here — may get a sinking sense of déjà vu. For instance, Timberland, the maker of hiking boots and other outdoor gear, identifiable by its tree logo and chunky, durable shoes, will find Woodland, which sells similar shoes and clothing, and has a tree logo.
Pinkberry, the Los Angeles-based frozen yogurt chain, will encounter Cocoberry, a frozen yogurt retailer with a look-alike logo and a similar array of candy and fresh fruit toppings.
And The Financial Times, Pearson’s newspaper published with a pink tint since 1893, is locked in a legal battle with Bennett, Coleman & Company, owners of India’s largest English-language newspaper: a pink-tinted supplement it calls The Financial Times, which it registered in India in 1984.
Pearson’s Financial Times is eager to publish in India, but Bennett Coleman is challenging that right in court. Indeed, in recent months, a subsidiary of Bennett Coleman registered similar names with India’s newspaper registry, including FT Asia and Worldwide Financial Times.
Like Bennett Coleman, Woodland — the Timberland look-alike — is no mom-and-pop operation. It has 230 stores nationwide and another 50 on the way, and it is a staple of urban shopping malls. That could cramp Timberland’s planned expansion in India, potentially confusing would-be customers and costing Timberland sales.
The United States has long tussled over intellectual property rights with China, where counterfeiters crank out knockoffs of designer bags and iPhones (and manufacturers have even made entire vehicles that look just like foreign cars). But as brands look to India as one of the few opportunities for growth in an anemic global market, foreign companies and governments alike are protesting the country’s lack of intellectual property protections, too.
As Gary Locke, the Commerce secretary, told a group of Indian executives visiting Washington this month, “U.S. businesses need assurances that when they come to India, they’ll be operating in a secure and reliable environment for intellectual property.”
India will be the best market in the world for retail sales growth this year, A. T. Kearney said in a report released in June. India’s “growing, educated and aspirational middle class is demanding a better retail environment and more global brands and styles,” the consulting group said.
Wal-Mart, Carrefour and Tesco are opening wholesale stores that will sell to restaurants and owners of small shops. Dozens of foreign brands that have not already entered the Indian market are searching for domestic joint venture partners, which they need before opening a store here.
When questioned about the inspiration for Woodland, Harkirat Singh, managing director and the third generation to run the family shoe company, said the assumption should not be made that “just because the name sounds similar,” Woodland is copying Timberland. There is a “similarity,” he acknowledged, “but our line is quite different from theirs.”
Mr. Singh said he thought Timberland’s entry into India could help, not hurt, his business. Foreign brands “bring more awareness about quality footwear” to India, he said. Then Indian consumers “buy our product because it is more value for money.”
Timberland’s spokeswoman, Robin Giampa, said that Woodland’s “imitation of several of the valuable and well-recognized Timberland brands is a concern.” The company is addressing Woodland’s “brand piracy” through the appropriate legal processes in India, she said.
Whether that will be successful or not is unclear. “Our courts have recognized that you can’t have an isolated approach to trademark law,” said Gayatri Roy, a lawyer with Luthra & Luthra in New Delhi, meaning judges have often ruled that brands that are well known around the world cannot be copied by someone else in India, even if the companies with those brands do not do business in India. In such cases, Indian courts have decided in favor of Whirlpool, Dunhill and Volvo, among others.
In the case of Timberland and Woodland, though, it may be difficult for Timberland to prove that it should be protected, Ms. Roy said. After all, Woodland has been in business since 1992, she said, so they have created their own identity.
When asked whether Pinkberry frozen yogurt was his inspiration, Cocoberry’s chief executive, G. S. Bhalla, said he wanted to create a brand “associated with nature, health and social responsibility.”
(The company said Mr. Bhalla’s seven-year-old daughter was the inspiration for combining the words Coco, for cocoa, and berry, for the fresh fruit that tops the yogurt.)
“Our product, recipe, store design, menu and philosophy are unique and very different from any other brand in the world,” Mr. Bhalla said. “We plan to expand at a steady and controlled pace in India,” he said. Pinkberry had no comment.
Citigroup has been active in India, as Citibank, for decades, and the country’s urban areas are dotted with bank branches with the blue-striped sign. But that did not stop “Yes Bank,” a retail banking chain that rolled out branches throughout India in recent years, from using a very similar sign.
Some imitators are so loosely based on the original that they may not be considered a threat — like the “6Ten” convenience stores. With their yellow and blue signs and piles of loose grains for sale rather than Slurpees, they are unlikely to be seen as competition to 7-Eleven.
And sometimes, the imitation is less about the brand than about what it represents. Across India, a number of scooter and motorcycle drivers sport the familiar Marlboro cigarette logo of a red and white chevron on their helmets. On closer inspection, those logos say “Marlborne” or “Melbourne.”
The helmets, made by several manufacturers, are “basically replicas of the helmets worn by Michael Schumacher during his racing days at Ferrari,” explained Rahim Premji, a partner with Allibhai Premji Tyrewalla, a bike dealership. Mr. Schumacher, a Formula One driver, was sponsored by Marlboro.
Helmet manufacturers were forced to replace the Marlboro name after the authorities said that tobacco advertising was not allowed in India, Mr. Premji said. Marlboro, not surprisingly, has not complained about the free advertising.
Tuesday, July 14, 2009
Key Says New Zealand Is Coming Out of Recession
July 15 (Bloomberg) -- New Zealand Prime Minister John Key said he agrees with Reserve Bank Governor Alan Bollard’s assessment that the economy is recovering from a recession.
“That tallies with what he’s been privately telling us, that we’re starting to come out of this recession, which is good news,” Key told Television New Zealand today. “The governor is in a good position to assess both the international markets and the domestic market.”
Bollard yesterday said the economy, which has been in a recession since the first quarter of last year, is likely to start recovering earlier than some of its trading partners. The central bank has cut borrowing costs to a record low and Key has reduced income taxes and boosted infrastructure spending to kick-start demand.
The government will develop policies to bolster exports and improve productivity in industries that sell goods overseas, Key said earlier in a speech in Wellington. The six main policy drivers are regulatory reform, infrastructure investment, better public services, education, innovation and a world-class tax system, he said.
Key wants increased output from exporters rather than growth fanned by consumer spending and borrowing, which widens the nation’s trading deficit and increases debt.
“There has been insufficient growth and investment in the internationally competitive sectors of the economy,” Key told a business audience. “Because of our poor export growth, our current account deficit has grown unsustainably large.”
The deficit was 8.5 percent of gross domestic product in the year ended March 31 compared to 4.5 percent in the U.S.
Key said New Zealand needs to encourage business investment and run a more efficient public sector. The government will also review the tax system.
“We can’t consider our tax system in isolation,” Key said. “The government will be watching closely what comes our of the Henry review of taxation in Australia.”
“That tallies with what he’s been privately telling us, that we’re starting to come out of this recession, which is good news,” Key told Television New Zealand today. “The governor is in a good position to assess both the international markets and the domestic market.”
Bollard yesterday said the economy, which has been in a recession since the first quarter of last year, is likely to start recovering earlier than some of its trading partners. The central bank has cut borrowing costs to a record low and Key has reduced income taxes and boosted infrastructure spending to kick-start demand.
The government will develop policies to bolster exports and improve productivity in industries that sell goods overseas, Key said earlier in a speech in Wellington. The six main policy drivers are regulatory reform, infrastructure investment, better public services, education, innovation and a world-class tax system, he said.
Key wants increased output from exporters rather than growth fanned by consumer spending and borrowing, which widens the nation’s trading deficit and increases debt.
“There has been insufficient growth and investment in the internationally competitive sectors of the economy,” Key told a business audience. “Because of our poor export growth, our current account deficit has grown unsustainably large.”
The deficit was 8.5 percent of gross domestic product in the year ended March 31 compared to 4.5 percent in the U.S.
Key said New Zealand needs to encourage business investment and run a more efficient public sector. The government will also review the tax system.
“We can’t consider our tax system in isolation,” Key said. “The government will be watching closely what comes our of the Henry review of taxation in Australia.”
Intel Jumps After Asian Consumers Spur Comeback in PC Industry
July 15 (Bloomberg) -- Intel Corp. rose as much as 8.4 percent in late trading yesterday after its revenue forecast topped analysts’ estimates, indicating that shoppers in Asia are helping reignite demand for personal computers.
Sales will be as much as $8.9 billion in the current quarter, Intel said yesterday. That compares with an average estimate of $7.86 billion in a Bloomberg survey of analysts.
PC makers are boosting orders for chips in anticipation of increasing demand in the second half, Chief Executive Officer Paul Otellini said. While businesses probably won’t start buying new PCs until next year, consumers in Asia -- especially China -- are leading the recovery, he said. Intel reported a 12 percent jump in second-quarter sales from the previous three months, the largest sequential increase since 1988.
“Intel’s results reflect the stabilizing environment,” said Patrick Wang, a New York-based analyst at Wedbush Morgan Securities. Wang, who rates the stock “outperform,” owns the shares personally. “It was a superb quarter for them.”
Intel, based in Santa Clara, California, jumped as much as $1.42 to $18.25 yesterday in extended trading. The shares, up 15 percent this year, closed at $16.83 on the Nasdaq Stock Market.
Intel’s Asia-Pacific sales were $4.41 billion last quarter, up 21 percent from the first quarter. Sales in the Americas rose 12 percent sequentially, while Europe dropped 9.4 percent.
European Fine
Intel set aside funds in the second quarter to pay a $1.45 billion European Union fine, resulting in its first loss in 22 years. The net loss was $398 million, or 7 cents a share, compared with a profit of $1.6 billion, or 28 cents, a year earlier.
The European Union announced the fine in May, saying the company used illegal rebates to thwart competitors. Intel, which accounts for about 80% of the PC processor market, is appealing the decision.
Excluding the European fine, Intel reported a profit of 18 cents a share. That topped the average analyst estimate of 8 cents. Revenue fell 15 percent from a year earlier to $8.02 billion, compared with the $7.29 billion predicted by analysts.
There is “a clear expectation for a seasonally stronger second half,” Otellini said on a conference call.
Profit Margin
Gross margin, the percentage of sales remaining after excluding costs of production, will be about 53 percent this quarter, Intel said. Chris Danely, an analyst at JPMorgan Chase & Co. in San Francisco, had predicted 51 percent.
Sales typically decline in the second quarter from the first, then begin to rise again in the third quarter -- when computer makers increase orders to meet back-to-school demand.
Intel kicked off two weeks of earnings reports by technology companies such as International Business Machines Corp., Google Inc. and Microsoft Corp. The use of Intel’s chips in everything from laptops to supercomputers makes its earnings an indicator of industry demand.
Intel cut its 2009 budget for plants and equipment to about $4.7 billion, down from $5.2 billion last year. The company had said previously that the budget would be little changed from 2008.
PC sales may drop 4 percent this year as companies slash spending on technology, according to El Segundo, California- based ISuppli Corp. That would be the first decline since 2001, when the dot-com bust left a glut of PCs.
Intel’s Otellini said yesterday that the company isn’t expecting corporate spending to improve this year. Microsoft’s new operating system, Windows 7, will likely fuel purchases next year, he said.
Sales will be as much as $8.9 billion in the current quarter, Intel said yesterday. That compares with an average estimate of $7.86 billion in a Bloomberg survey of analysts.
PC makers are boosting orders for chips in anticipation of increasing demand in the second half, Chief Executive Officer Paul Otellini said. While businesses probably won’t start buying new PCs until next year, consumers in Asia -- especially China -- are leading the recovery, he said. Intel reported a 12 percent jump in second-quarter sales from the previous three months, the largest sequential increase since 1988.
“Intel’s results reflect the stabilizing environment,” said Patrick Wang, a New York-based analyst at Wedbush Morgan Securities. Wang, who rates the stock “outperform,” owns the shares personally. “It was a superb quarter for them.”
Intel, based in Santa Clara, California, jumped as much as $1.42 to $18.25 yesterday in extended trading. The shares, up 15 percent this year, closed at $16.83 on the Nasdaq Stock Market.
Intel’s Asia-Pacific sales were $4.41 billion last quarter, up 21 percent from the first quarter. Sales in the Americas rose 12 percent sequentially, while Europe dropped 9.4 percent.
European Fine
Intel set aside funds in the second quarter to pay a $1.45 billion European Union fine, resulting in its first loss in 22 years. The net loss was $398 million, or 7 cents a share, compared with a profit of $1.6 billion, or 28 cents, a year earlier.
The European Union announced the fine in May, saying the company used illegal rebates to thwart competitors. Intel, which accounts for about 80% of the PC processor market, is appealing the decision.
Excluding the European fine, Intel reported a profit of 18 cents a share. That topped the average analyst estimate of 8 cents. Revenue fell 15 percent from a year earlier to $8.02 billion, compared with the $7.29 billion predicted by analysts.
There is “a clear expectation for a seasonally stronger second half,” Otellini said on a conference call.
Profit Margin
Gross margin, the percentage of sales remaining after excluding costs of production, will be about 53 percent this quarter, Intel said. Chris Danely, an analyst at JPMorgan Chase & Co. in San Francisco, had predicted 51 percent.
Sales typically decline in the second quarter from the first, then begin to rise again in the third quarter -- when computer makers increase orders to meet back-to-school demand.
Intel kicked off two weeks of earnings reports by technology companies such as International Business Machines Corp., Google Inc. and Microsoft Corp. The use of Intel’s chips in everything from laptops to supercomputers makes its earnings an indicator of industry demand.
Intel cut its 2009 budget for plants and equipment to about $4.7 billion, down from $5.2 billion last year. The company had said previously that the budget would be little changed from 2008.
PC sales may drop 4 percent this year as companies slash spending on technology, according to El Segundo, California- based ISuppli Corp. That would be the first decline since 2001, when the dot-com bust left a glut of PCs.
Intel’s Otellini said yesterday that the company isn’t expecting corporate spending to improve this year. Microsoft’s new operating system, Windows 7, will likely fuel purchases next year, he said.
London Financial Job Openings Increased in June, Survey Says
July 15 (Bloomberg) -- Job openings in London’s financial- services industry rose in June to the highest level this year, according to a survey by recruitment firm Morgan McKinley.
The number of job vacancies climbed 20 percent last month from May, when openings were also up 14 percent versus April, the London-based company said in a statement today. In all, job openings have increased 30 percent this year, the survey shows.
“There does seem to have been an improvement in the appetite amongst employers to recruit,” said Andrew Evans, managing director of Morgan McKinley’s financial-services unit. “There have been muted increases in hiring in most areas and across most levels within the financial-services industry. This was particularly apparent in June.”
Signs are mounting that the U.K. economy is recovering from the worst recession since 1979. Bank of England Deputy Governor Charles Bean said on BBC Radio Leeds this week that the economy has probably hit bottom and will recover over time. The U.K.’s benchmark FTSE 100 index has gained about 20 percent since its low in March.
Total job openings are still down 58 percent compared with a year ago, the survey shows. There were 3,780 new job openings within the financial services industry in June, an increase from the 3,150 available in the previous month. That’s still less than half the 8,946 jobs open in June 2008.
The average city salary was almost unchanged at 50,115 pounds ($81,787), only 1 percent lower than in the same period in 2008, Morgan McKinley said.
As the financial markets thaw, redundancy announcements slow and confidence levels improve, workers in the financial industry have started to seek out better positions, Evans said.
“The financial services jobs market is still highly competitive,” he said. “It is likely to get even more competitive over the summer months.”
The number of job vacancies climbed 20 percent last month from May, when openings were also up 14 percent versus April, the London-based company said in a statement today. In all, job openings have increased 30 percent this year, the survey shows.
“There does seem to have been an improvement in the appetite amongst employers to recruit,” said Andrew Evans, managing director of Morgan McKinley’s financial-services unit. “There have been muted increases in hiring in most areas and across most levels within the financial-services industry. This was particularly apparent in June.”
Signs are mounting that the U.K. economy is recovering from the worst recession since 1979. Bank of England Deputy Governor Charles Bean said on BBC Radio Leeds this week that the economy has probably hit bottom and will recover over time. The U.K.’s benchmark FTSE 100 index has gained about 20 percent since its low in March.
Total job openings are still down 58 percent compared with a year ago, the survey shows. There were 3,780 new job openings within the financial services industry in June, an increase from the 3,150 available in the previous month. That’s still less than half the 8,946 jobs open in June 2008.
The average city salary was almost unchanged at 50,115 pounds ($81,787), only 1 percent lower than in the same period in 2008, Morgan McKinley said.
As the financial markets thaw, redundancy announcements slow and confidence levels improve, workers in the financial industry have started to seek out better positions, Evans said.
“The financial services jobs market is still highly competitive,” he said. “It is likely to get even more competitive over the summer months.”
Monday, July 13, 2009
Japan Bonds to Beat U.S. for First Time Since 1999
July 14 (Bloomberg) -- Japanese bonds will beat Treasuries this year for the first time in a decade as the economy shrinks at twice the pace of the U.S., the largest traders in the securities said.
The yield on Japan’s 10-year bond will end 2009 at 1.30 percent, little changed from the three-month low of 1.27 percent set last week, based on the median estimate in a Bloomberg News survey of the 23 primary dealers that bid at government debt sales. Japan’s economy will shrink 5.9 percent this year, versus 2.5 percent in the U.S., a separate survey of banks and securities companies shows.
Traders said the market for Japanese government bonds, so- called JGBs, with 846.5 trillion yen ($9.1 trillion) outstanding, will gain as deflation spreads and loan demand wanes. Banks in the nation such as Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., the two largest by assets, own a record 111.9 trillion yen of the securities, the most since Bank of Japan figures started in 1993.
“Buy now,” said Kenro Kawano, a fixed-income strategist at Credit Suisse Group AG in Tokyo, the most bullish of the primary dealers, with a yield forecast of 1 percent. “Deflation pressure will increase. Banks are accumulating JGBs, and the pace is increasing.”
Ten-year government debt will return 0.7 percent through year-end if the survey proves right, according to data compiled by Bloomberg. The yield on the 1.4 percent security due June 2019 rose one basis point to 1.31 percent today. The price fell 0.089 yen to 100.790 yen. A basis point is 0.01 percentage point.
Treasury Yields
Treasury 10-year yields will rise to 3.76 percent by year- end from 3.35 percent today, for a 1.7 percent loss, based on another Bloomberg survey, with the most recent forecasts given the heaviest weightings.
Treasuries and Japanese government bonds have both rallied in the past month as stock declines around the world increased demand for the relative safety of government debt. Ten-year yields in both markets set their highs for this year on June 11. The rate has dropped about 65 basis points in the U.S. since then, versus 25 basis points in Japan, leading companies from New York-based BlackRock Inc. to Franklin Templeton Investments in San Mateo, California, to turn more bullish on their outlook for Treasuries.
The MSCI World Index of stocks fell 7 percent from this year’s high, also made on June 11, as expectations for an economic recovery this year have faded.
Outperforming Treasuries
Japanese 10-year bonds are outperforming Treasuries in 2009, though they pay annual interest of 1.4 percent, versus 3.125 percent for the U.S. securities.
Japan’s government bonds are little changed this year, while Treasuries have lost 3.4 percent, according to indexes compiled by Merrill Lynch & Co. American securities had their worst first half in at least three decades as President Barack Obama increased the marketable debt to a record $6.61 trillion.
The last time JGBs beat Treasuries was in 1999, when they returned 5.12 percent, compared with a loss of 2.38 percent for American bonds, as quickening economic growth caused the U.S. Federal Reserve to raise interest rates. Japan and the U.S. are the biggest bond markets among 35 nations ranked by the Bank for International Settlements in Basel, Switzerland.
Japanese banks are using deposits to purchase bonds as demand for loans slows. Outstanding loans have fallen for three straight months, the longest decline since 2005, according to the central bank.
‘Huge Risk’
“There is a huge risk not holding bonds,” said Tomoya Masanao, an executive vice president in Tokyo at Pacific Investment Management Co. “The growth rate won’t rise much and prices will remain low.”
Pimco increased its bet on Japanese debt “slightly” since the fiscal year started April 1, he said. The company, based in Newport Beach, California, runs the world’s biggest bond fund, the $161 billion Total Return Fund.
The Ministry of Finance plans to increase bond sales to a record 130.2 trillion yen in the current fiscal year to allow Prime Minister Taro Aso to pay for 25 trillion yen in spending he has announced.
Government debt will increase to almost double the size of the nation’s gross domestic product next year, according to the Paris-based Organization for Economic Cooperation and Development.
170 Percent of GDP
Borrowing already amounts to 170 percent of GDP, the most among the Group of Seven industrialized nations, according to Bloomberg data. U.S. debt is equal to 55.9 percent of its economy, the figures show.
Aso, from the Liberal Democratic Party, plans to hold national elections on Aug. 30, legislator Shuzen Tanigawa said yesterday. The premier faces a challenge from the Democratic Party of Japan.
“The LDP or DPJ, regardless the outcome of the forthcoming general election, are likely to hammer out fresh stimulus measures to boost the public support,” said Akitsugu Bandou, senior economist at Okasan Securities Co. in Tokyo. “We have to brace for more debt sales.” Ten-year yields may climb to 1.5 percent by the end of December, he said.
At the start of the year, primary dealers projected yields would increase to 1.7 percent by Dec. 31.
Since then, Bank of Japan Governor Masaaki Shirakawa increased the amount of bonds the central bank buys to 1.8 trillion yen a month from 1.4 trillion to combat the nation’s worst postwar economic recession.
Record Contraction
Shirakawa cut the target for overnight loans between banks to 0.1 percent from 0.3 percent in December. The economy contracted at a record 14.2 percent annual pace in the three months ended March 31.
Consumer prices fell at an unprecedented rate in May, sending the inflation index measuring costs excluding fresh food down 1.1 percent from a year earlier. Deflation, or a general drop in prices, enhances the value of a bond’s fixed payments.
“The Japanese economy may fall into a double-dip recession, and deflationary pressure will strengthen,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. Ueno forecasts 10-year yields will drop to 1.1 percent by Dec. 31.
Treasuries fell this year on speculation investors from outside the U.S., who own more than half of the nation’s debt, will demand higher yields to keep buying. Japan doesn’t face that challenge because about 92 percent of the bonds are held within the country, based on data from the Ministry of Finance.
Deflation to Spread
Yields indicate deflation will spread. The difference between rates on five-year notes and inflation-linked debt, which reflects the outlook among traders for consumer prices over the term of the securities, was negative 1.6 percentage points. By contrast, the figure is positive in the U.S., the U.K., Germany and Italy.
“Investors globally should prefer yen bonds,” said Daisuke Uno, chief bond and currency strategist at Sumitomo Mitsui Banking Corp. in Tokyo, a unit of Japan’s third-largest banking group. “Yen bonds are considered to be safer than U.S. Treasuries” after the first half, he said. Japanese 10-year yields will fall to 1.125 percent by year-end, he said.
The yield on Japan’s 10-year bond will end 2009 at 1.30 percent, little changed from the three-month low of 1.27 percent set last week, based on the median estimate in a Bloomberg News survey of the 23 primary dealers that bid at government debt sales. Japan’s economy will shrink 5.9 percent this year, versus 2.5 percent in the U.S., a separate survey of banks and securities companies shows.
Traders said the market for Japanese government bonds, so- called JGBs, with 846.5 trillion yen ($9.1 trillion) outstanding, will gain as deflation spreads and loan demand wanes. Banks in the nation such as Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., the two largest by assets, own a record 111.9 trillion yen of the securities, the most since Bank of Japan figures started in 1993.
“Buy now,” said Kenro Kawano, a fixed-income strategist at Credit Suisse Group AG in Tokyo, the most bullish of the primary dealers, with a yield forecast of 1 percent. “Deflation pressure will increase. Banks are accumulating JGBs, and the pace is increasing.”
Ten-year government debt will return 0.7 percent through year-end if the survey proves right, according to data compiled by Bloomberg. The yield on the 1.4 percent security due June 2019 rose one basis point to 1.31 percent today. The price fell 0.089 yen to 100.790 yen. A basis point is 0.01 percentage point.
Treasury Yields
Treasury 10-year yields will rise to 3.76 percent by year- end from 3.35 percent today, for a 1.7 percent loss, based on another Bloomberg survey, with the most recent forecasts given the heaviest weightings.
Treasuries and Japanese government bonds have both rallied in the past month as stock declines around the world increased demand for the relative safety of government debt. Ten-year yields in both markets set their highs for this year on June 11. The rate has dropped about 65 basis points in the U.S. since then, versus 25 basis points in Japan, leading companies from New York-based BlackRock Inc. to Franklin Templeton Investments in San Mateo, California, to turn more bullish on their outlook for Treasuries.
The MSCI World Index of stocks fell 7 percent from this year’s high, also made on June 11, as expectations for an economic recovery this year have faded.
Outperforming Treasuries
Japanese 10-year bonds are outperforming Treasuries in 2009, though they pay annual interest of 1.4 percent, versus 3.125 percent for the U.S. securities.
Japan’s government bonds are little changed this year, while Treasuries have lost 3.4 percent, according to indexes compiled by Merrill Lynch & Co. American securities had their worst first half in at least three decades as President Barack Obama increased the marketable debt to a record $6.61 trillion.
The last time JGBs beat Treasuries was in 1999, when they returned 5.12 percent, compared with a loss of 2.38 percent for American bonds, as quickening economic growth caused the U.S. Federal Reserve to raise interest rates. Japan and the U.S. are the biggest bond markets among 35 nations ranked by the Bank for International Settlements in Basel, Switzerland.
Japanese banks are using deposits to purchase bonds as demand for loans slows. Outstanding loans have fallen for three straight months, the longest decline since 2005, according to the central bank.
‘Huge Risk’
“There is a huge risk not holding bonds,” said Tomoya Masanao, an executive vice president in Tokyo at Pacific Investment Management Co. “The growth rate won’t rise much and prices will remain low.”
Pimco increased its bet on Japanese debt “slightly” since the fiscal year started April 1, he said. The company, based in Newport Beach, California, runs the world’s biggest bond fund, the $161 billion Total Return Fund.
The Ministry of Finance plans to increase bond sales to a record 130.2 trillion yen in the current fiscal year to allow Prime Minister Taro Aso to pay for 25 trillion yen in spending he has announced.
Government debt will increase to almost double the size of the nation’s gross domestic product next year, according to the Paris-based Organization for Economic Cooperation and Development.
170 Percent of GDP
Borrowing already amounts to 170 percent of GDP, the most among the Group of Seven industrialized nations, according to Bloomberg data. U.S. debt is equal to 55.9 percent of its economy, the figures show.
Aso, from the Liberal Democratic Party, plans to hold national elections on Aug. 30, legislator Shuzen Tanigawa said yesterday. The premier faces a challenge from the Democratic Party of Japan.
“The LDP or DPJ, regardless the outcome of the forthcoming general election, are likely to hammer out fresh stimulus measures to boost the public support,” said Akitsugu Bandou, senior economist at Okasan Securities Co. in Tokyo. “We have to brace for more debt sales.” Ten-year yields may climb to 1.5 percent by the end of December, he said.
At the start of the year, primary dealers projected yields would increase to 1.7 percent by Dec. 31.
Since then, Bank of Japan Governor Masaaki Shirakawa increased the amount of bonds the central bank buys to 1.8 trillion yen a month from 1.4 trillion to combat the nation’s worst postwar economic recession.
Record Contraction
Shirakawa cut the target for overnight loans between banks to 0.1 percent from 0.3 percent in December. The economy contracted at a record 14.2 percent annual pace in the three months ended March 31.
Consumer prices fell at an unprecedented rate in May, sending the inflation index measuring costs excluding fresh food down 1.1 percent from a year earlier. Deflation, or a general drop in prices, enhances the value of a bond’s fixed payments.
“The Japanese economy may fall into a double-dip recession, and deflationary pressure will strengthen,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. Ueno forecasts 10-year yields will drop to 1.1 percent by Dec. 31.
Treasuries fell this year on speculation investors from outside the U.S., who own more than half of the nation’s debt, will demand higher yields to keep buying. Japan doesn’t face that challenge because about 92 percent of the bonds are held within the country, based on data from the Ministry of Finance.
Deflation to Spread
Yields indicate deflation will spread. The difference between rates on five-year notes and inflation-linked debt, which reflects the outlook among traders for consumer prices over the term of the securities, was negative 1.6 percentage points. By contrast, the figure is positive in the U.S., the U.K., Germany and Italy.
“Investors globally should prefer yen bonds,” said Daisuke Uno, chief bond and currency strategist at Sumitomo Mitsui Banking Corp. in Tokyo, a unit of Japan’s third-largest banking group. “Yen bonds are considered to be safer than U.S. Treasuries” after the first half, he said. Japanese 10-year yields will fall to 1.125 percent by year-end, he said.
Australia, N.Z. Dollars Gain on Equities, Central Bank Comments
July 14 (Bloomberg) -- The Australian and New Zealand dollars gained for a second day as equity futures signaled stocks in Australia and Japan may open higher, raising speculation investors will buy higher-yielding assets.
New Zealand’s dollar was the best-performer among the 16 most-traded currencies versus the dollar and yen as central bank governor Alan Bollard said today the nation’s economy may recover ahead of most of its trading partners. The Standard & Poor’s 500 Index gained the most in six weeks yesterday as analyst Meredith Whitney recommended buying shares of Goldman Sachs Group Inc. and said U.S. banks may advance 15 percent.
“The Aussie may test 78.80 cents on the topside on equities,” said Jim Vrondas, manager of corporate business at online foreign-exchange dealer OzForex Ltd. in Sydney.
Australia’s currency rose 0.2 percent to 78.43 U.S. cents as of 8:41 a.m. in Sydney from 78.32 cents in New York yesterday. The so-called Aussie rose 0.3 percent to 73.03 yen.
New Zealand’s dollar gained 0.3 percent to 63.44 U.S. cents from 63.23 in New York. It traded at 59.10 yen from 58.78.
“Early signs of a global recovery have now emerged,” RBNZ Governor Bollard said in notes for a speech delivered today in Napier. “New Zealand looks likely to start recovering ahead of the pack.”
New Zealand’s dollar was the best-performer among the 16 most-traded currencies versus the dollar and yen as central bank governor Alan Bollard said today the nation’s economy may recover ahead of most of its trading partners. The Standard & Poor’s 500 Index gained the most in six weeks yesterday as analyst Meredith Whitney recommended buying shares of Goldman Sachs Group Inc. and said U.S. banks may advance 15 percent.
“The Aussie may test 78.80 cents on the topside on equities,” said Jim Vrondas, manager of corporate business at online foreign-exchange dealer OzForex Ltd. in Sydney.
Australia’s currency rose 0.2 percent to 78.43 U.S. cents as of 8:41 a.m. in Sydney from 78.32 cents in New York yesterday. The so-called Aussie rose 0.3 percent to 73.03 yen.
New Zealand’s dollar gained 0.3 percent to 63.44 U.S. cents from 63.23 in New York. It traded at 59.10 yen from 58.78.
“Early signs of a global recovery have now emerged,” RBNZ Governor Bollard said in notes for a speech delivered today in Napier. “New Zealand looks likely to start recovering ahead of the pack.”
Australian June Business Sentiment Rises on Rate Cuts
July 14 (Bloomberg) -- Australian business sentiment turned positive in June for the first time since December 2007, increasing central bank Governor Glenn Stevens’ scope to keep borrowing costs unchanged at a half-century low this year.
The sentiment index rose 6 points to 4, after holding below zero for the previous 17 months, according to a National Australia Bank Ltd. survey of more than 400 companies questioned between June 24 and 30, and released in Sydney today. A figure above zero shows optimists outnumber pessimists.
Rising business confidence adds to signs Australia’s economy may skirt the global recession, helped by government spending and Stevens’ decision to slash borrowing costs to 3 percent. The jobless rate rose less than forecast in June, consumer confidence jumped to the highest level since December 2007 and home-loan approvals rose for an eighth month.
Much of the improvement in sentiment can “be put down to the prospect that ‘Armageddon’ had been avoided,” said Alan Oster, chief economist at National Australia Bank in Melbourne. “Business conditions appear to have rebounded to a level roughly similar to that reported prior to the collapse of Lehman Brothers Holdings Inc. in September.”
The Australian dollar rose to 78.20 U.S. cents at 11:33 a.m. in Sydney from 78.15 cents just before the report was released. The two-year government bond yield climbed 2 basis points to 3.75 percent. A basis point is 0.01 percentage point.
Cash Handouts
Governor Stevens left the overnight cash rate target unchanged on July 7 for a third straight month after slashing the rate by 4.25 percentage points between September and April to spur consumer demand.
The government has also distributed more than A$12 billion ($9.4 billion) to households this year, boosting at retailers such as David Jones Ltd., and allocated A$22 billion to upgrade roads, railways, ports, hospitals and schools.
Sydney-based David Jones, Australia’s second-largest department store chain, said last month that earnings after tax will rise by between 20 percent and 30 percent in the six months ending July 25.
Gross domestic product unexpectedly expanded 0.4 percent in the first quarter from the previous three months as consumer spending and exports helped Australia avoid a recession, a report showed last month.
Rates Outlook
“With an economy holding up better than expected, we now see the Reserve Bank on hold,” National Australia’s Oster said. “Rate increases are clearly a story for the second half of 2010.”
Governor Stevens will increase the benchmark lending rate to around 3.75 percent by the end of next year, before pushing the rate to between 5 percent and 5.5 percent by late 2011, Oster added.
National Australia’s business conditions gauge, a measure of hiring, sales and profits, jumped to minus 2 points from minus 14.
“While the survey clearly points to much better-than- expected outcomes, the real question is whether this improvement can be sustained into the second half of 2009,” Oster said.
“It’s hard to see the pace of consumer spending being maintained in the face of less cash handouts, rising unemployment and the damage done to household balance sheets.”
GDP will shrink 0.5 percent this year, before expanding 1 percent in 2010, Oster predicts.
The sentiment index rose 6 points to 4, after holding below zero for the previous 17 months, according to a National Australia Bank Ltd. survey of more than 400 companies questioned between June 24 and 30, and released in Sydney today. A figure above zero shows optimists outnumber pessimists.
Rising business confidence adds to signs Australia’s economy may skirt the global recession, helped by government spending and Stevens’ decision to slash borrowing costs to 3 percent. The jobless rate rose less than forecast in June, consumer confidence jumped to the highest level since December 2007 and home-loan approvals rose for an eighth month.
Much of the improvement in sentiment can “be put down to the prospect that ‘Armageddon’ had been avoided,” said Alan Oster, chief economist at National Australia Bank in Melbourne. “Business conditions appear to have rebounded to a level roughly similar to that reported prior to the collapse of Lehman Brothers Holdings Inc. in September.”
The Australian dollar rose to 78.20 U.S. cents at 11:33 a.m. in Sydney from 78.15 cents just before the report was released. The two-year government bond yield climbed 2 basis points to 3.75 percent. A basis point is 0.01 percentage point.
Cash Handouts
Governor Stevens left the overnight cash rate target unchanged on July 7 for a third straight month after slashing the rate by 4.25 percentage points between September and April to spur consumer demand.
The government has also distributed more than A$12 billion ($9.4 billion) to households this year, boosting at retailers such as David Jones Ltd., and allocated A$22 billion to upgrade roads, railways, ports, hospitals and schools.
Sydney-based David Jones, Australia’s second-largest department store chain, said last month that earnings after tax will rise by between 20 percent and 30 percent in the six months ending July 25.
Gross domestic product unexpectedly expanded 0.4 percent in the first quarter from the previous three months as consumer spending and exports helped Australia avoid a recession, a report showed last month.
Rates Outlook
“With an economy holding up better than expected, we now see the Reserve Bank on hold,” National Australia’s Oster said. “Rate increases are clearly a story for the second half of 2010.”
Governor Stevens will increase the benchmark lending rate to around 3.75 percent by the end of next year, before pushing the rate to between 5 percent and 5.5 percent by late 2011, Oster added.
National Australia’s business conditions gauge, a measure of hiring, sales and profits, jumped to minus 2 points from minus 14.
“While the survey clearly points to much better-than- expected outcomes, the real question is whether this improvement can be sustained into the second half of 2009,” Oster said.
“It’s hard to see the pace of consumer spending being maintained in the face of less cash handouts, rising unemployment and the damage done to household balance sheets.”
GDP will shrink 0.5 percent this year, before expanding 1 percent in 2010, Oster predicts.
Sunday, July 12, 2009
Singapore Probably Exited Recession on Output Gains
July 13 (Bloomberg) -- Singapore’s economy probably expanded for the first time in five quarters as a rebound in manufacturing helped the Southeast Asian nation emerge from its worst recession since independence in 1965.
Gross domestic product rose an annualized 13.4 percent last quarter from the previous three months, after shrinking 14.6 percent between January and March, according to the median estimate of 12 economists surveyed by Bloomberg News. The trade ministry will release the data at 8 a.m. tomorrow.
Singapore and other economies in the region are forecast to report better second-quarter figures as about $2 trillion in stimulus worldwide helps stabilize overseas sales for companies including Japan’s Nissan Motor Co. and South Korea’s Samsung Electronics Co. The International Monetary Fund last week increased its forecast for emerging Asia’s growth in 2009.
“Much healthier manufacturing-sector numbers in the second quarter are the key drivers” of Singapore’s performance, said Chow Penn Nee, an economist at United Overseas Bank Ltd. in Singapore. We “will also likely see financial services boosting the services sector, with the rally in the stock markets in April, May and June.”
Singapore’s industrial output climbed in the first two months last quarter, while the decline in the island’s exports narrowed in May amid gains in drug shipments. Manufacturing, which slid 26.1 percent in the three months ended March, accounts for about a quarter of the economy.
India, South Korea
Other Asian nations have also reported an improvement in manufacturing. In May, India’s industrial production increased at the fastest pace in eight months, while Malaysia’s posted the smallest decline in six months. South Korea’s output rose more than estimated while China’s accelerated the same month.
Singapore’s $161 billion economy declined 5.4 percent in the three months ended June from a year earlier, compared with a 10.1 percent drop in the first quarter, according to the Bloomberg survey.
The Straits Times Index rose 37.2 percent last quarter, the biggest gain since at least 1999. The volume of stocks traded increased more than 50 percent in that period. The index was 0.3 percent lower as of 9:40 a.m. local time. The Singapore dollar was little changed at S$1.4615 against the U.S. currency.
The government forecasts the economy will shrink between 6 percent and 9 percent this year, the deepest contraction since its independence 44 years ago. Economists at Citigroup Inc., Goldman Sachs and DBS Group Holdings Ltd. are among those that have increased their Singapore economic estimates in recent weeks as manufacturing and export figures showed improvement.
Signs of recovery were also evident in other parts of the economy, Citigroup’s Kit Wei Zheng said.
“Re-stocking driven rebounds in technology, continued growth in construction spending, financial services and a revival in the private housing market contributed to the recovery in the broader economy,” he said.
Gross domestic product rose an annualized 13.4 percent last quarter from the previous three months, after shrinking 14.6 percent between January and March, according to the median estimate of 12 economists surveyed by Bloomberg News. The trade ministry will release the data at 8 a.m. tomorrow.
Singapore and other economies in the region are forecast to report better second-quarter figures as about $2 trillion in stimulus worldwide helps stabilize overseas sales for companies including Japan’s Nissan Motor Co. and South Korea’s Samsung Electronics Co. The International Monetary Fund last week increased its forecast for emerging Asia’s growth in 2009.
“Much healthier manufacturing-sector numbers in the second quarter are the key drivers” of Singapore’s performance, said Chow Penn Nee, an economist at United Overseas Bank Ltd. in Singapore. We “will also likely see financial services boosting the services sector, with the rally in the stock markets in April, May and June.”
Singapore’s industrial output climbed in the first two months last quarter, while the decline in the island’s exports narrowed in May amid gains in drug shipments. Manufacturing, which slid 26.1 percent in the three months ended March, accounts for about a quarter of the economy.
India, South Korea
Other Asian nations have also reported an improvement in manufacturing. In May, India’s industrial production increased at the fastest pace in eight months, while Malaysia’s posted the smallest decline in six months. South Korea’s output rose more than estimated while China’s accelerated the same month.
Singapore’s $161 billion economy declined 5.4 percent in the three months ended June from a year earlier, compared with a 10.1 percent drop in the first quarter, according to the Bloomberg survey.
The Straits Times Index rose 37.2 percent last quarter, the biggest gain since at least 1999. The volume of stocks traded increased more than 50 percent in that period. The index was 0.3 percent lower as of 9:40 a.m. local time. The Singapore dollar was little changed at S$1.4615 against the U.S. currency.
The government forecasts the economy will shrink between 6 percent and 9 percent this year, the deepest contraction since its independence 44 years ago. Economists at Citigroup Inc., Goldman Sachs and DBS Group Holdings Ltd. are among those that have increased their Singapore economic estimates in recent weeks as manufacturing and export figures showed improvement.
Signs of recovery were also evident in other parts of the economy, Citigroup’s Kit Wei Zheng said.
“Re-stocking driven rebounds in technology, continued growth in construction spending, financial services and a revival in the private housing market contributed to the recovery in the broader economy,” he said.
New Zealand Retail Sales Gain 0.8%, Spurring Recovery
July 13 (Bloomberg) -- New Zealand’s retail sales rose for the third time in four months in May, adding to signs that record-low interest rates and income-tax cuts may help the economy emerge from a recession later this year.
Sales gained 0.8 percent from April when they increased 0.5 percent, seasonally adjusted, Statistics New Zealand said in Wellington today. Core retail sales, which exclude car yards, fuel outlets and workshops, surged 1.6 percent, the biggest monthly gain since February 2007.
Higher retail and property sales add to evidence the economy may emerge from the worst recession in three decades by the end of this year. Reserve Bank Governor Alan Bollard kept the benchmark interest rate unchanged last month for the first time in a year, saying household spending may rebound.
“There were some tentative sign of housing-related spending picking up, although this is from a low base and the pickup in housing demand has been relatively modest to date,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. The report “suggests that underlying consumer demand remains reasonably subdued,” she said.
The increase in sales was four times the 0.2 percent median estimate in a Bloomberg News survey of 10 economists. New Zealand’s dollar bought 62.85 U.S. cents at 11:20 a.m. in Wellington from 62.74 cents just before the report was released.
Interest Rates
Bollard has cut the benchmark interest rate by 5.75 points to a record-low 2.5 percent since July last year. Finance Minister Bill English reduced income taxes on April 1 to help kick-start an economy that shrank for a fifth straight quarter in the three months ended March 31.
The economy may start growing in the fourth quarter of this year, Bollard said on June 11.
Buoying spending, annual immigration growth accelerated to the highest in more than two years in May. Consumers’ pessimism about their future wealth has fallen to the lowest level since February last year, according to a Roy Morgan Research poll taken in the two weeks ended July 5.
House prices were unchanged in June from a year earlier -- the first time in 15 months values hadn’t declined, the Real Estate Institute said last week. House sales rose 40 percent from a year earlier.
Retail sales increased in 14 of the 24 store categories measured in today’s report, led by a 2.2 percent gain in supermarket and grocery sales, which make up one-fifth of all retailing.
Monthly Sales
The monthly sales series isn’t adjusted to exclude price movements and sales. Grocery food prices rose 1 percent in May, according to government figures.
Clothing store sales surged 13 percent as plummeting temperatures and above-average rainfall boosted sales of winter clothes, the statistics bureau said. Appliance sales also gained.
“The cold snap sent shoppers indoors to the mall and boosted clothing sales,” said ASB’s Turner.
Pumpkin Patch Ltd., the nation’s second-largest retailer by market capitalization, last month said trading at its children’s clothing stores, was “reasonably robust.”
Vehicle dealer sales fell for the first time in three months, dropping 1.9 percent. Purchases from fuel outlets declined 2.7 percent.
The core retail trend series, which excludes irregular movements as well as seasonality, rose 0.2 percent from April.
Sales gained 0.8 percent from April when they increased 0.5 percent, seasonally adjusted, Statistics New Zealand said in Wellington today. Core retail sales, which exclude car yards, fuel outlets and workshops, surged 1.6 percent, the biggest monthly gain since February 2007.
Higher retail and property sales add to evidence the economy may emerge from the worst recession in three decades by the end of this year. Reserve Bank Governor Alan Bollard kept the benchmark interest rate unchanged last month for the first time in a year, saying household spending may rebound.
“There were some tentative sign of housing-related spending picking up, although this is from a low base and the pickup in housing demand has been relatively modest to date,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. The report “suggests that underlying consumer demand remains reasonably subdued,” she said.
The increase in sales was four times the 0.2 percent median estimate in a Bloomberg News survey of 10 economists. New Zealand’s dollar bought 62.85 U.S. cents at 11:20 a.m. in Wellington from 62.74 cents just before the report was released.
Interest Rates
Bollard has cut the benchmark interest rate by 5.75 points to a record-low 2.5 percent since July last year. Finance Minister Bill English reduced income taxes on April 1 to help kick-start an economy that shrank for a fifth straight quarter in the three months ended March 31.
The economy may start growing in the fourth quarter of this year, Bollard said on June 11.
Buoying spending, annual immigration growth accelerated to the highest in more than two years in May. Consumers’ pessimism about their future wealth has fallen to the lowest level since February last year, according to a Roy Morgan Research poll taken in the two weeks ended July 5.
House prices were unchanged in June from a year earlier -- the first time in 15 months values hadn’t declined, the Real Estate Institute said last week. House sales rose 40 percent from a year earlier.
Retail sales increased in 14 of the 24 store categories measured in today’s report, led by a 2.2 percent gain in supermarket and grocery sales, which make up one-fifth of all retailing.
Monthly Sales
The monthly sales series isn’t adjusted to exclude price movements and sales. Grocery food prices rose 1 percent in May, according to government figures.
Clothing store sales surged 13 percent as plummeting temperatures and above-average rainfall boosted sales of winter clothes, the statistics bureau said. Appliance sales also gained.
“The cold snap sent shoppers indoors to the mall and boosted clothing sales,” said ASB’s Turner.
Pumpkin Patch Ltd., the nation’s second-largest retailer by market capitalization, last month said trading at its children’s clothing stores, was “reasonably robust.”
Vehicle dealer sales fell for the first time in three months, dropping 1.9 percent. Purchases from fuel outlets declined 2.7 percent.
The core retail trend series, which excludes irregular movements as well as seasonality, rose 0.2 percent from April.
Most Asian Stocks Fall on Economic Growth Concern; Kirin Surges
July 13 (Bloomberg) -- Most Asian stocks fell, led by technology and mining companies, after an index of U.S. consumer sentiment sank more than economists expected and commodity prices declined. Consumer-related shares advanced.
Samsung Electronics Co., Asia’s biggest maker of computer- memory chips and flat screens, lost 1.2 percent in Seoul. Rio Tinto Group, the world’s third-largest mining company, dropped 1.7 percent after oil and metals prices declined on July 10. Kirin Holdings Co., Japan’s biggest beverage maker, surged 9.8 percent after the Nikkei newspaper said the company may merge with Suntory Holdings Ltd.
The MSCI Asia Pacific Index fell 0.1 percent to 100.58 as of 9:45 a.m. in Tokyo, with three stocks declining for every two that advanced. The gauge lost 4.2 percent in the two weeks through July 10.
“Uncertainty reigns over the market and people are gradually switching to the view that the economic recovery will be harder than expected,” said Tsutomu Yamada, a market analyst at Kabu.com Securities Co.
Japan’s Nikkei 225 Stock Average gained 0.4 percent, while South Korea’s Kospi Index sank 0.8 percent. Australia’s S&P/ASX 200 Index and New Zealand’s NZX 50 Index were little changed.
Futures on the U.S. Standard & Poor’s 500 Index gained 0.3 percent. The measure dropped 0.4 percent on July 10 after the Reuters/University of Michigan preliminary index of consumer sentiment slid to 64.6 in July from the prior month. Economists had estimated the gauge would fall to 70.
“It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” U.S. Treasury Secretary Timothy Geithner said, according to a transcript of an interview with “CNN’s Fareed Zakaria GPS” show.
Samsung Electronics Co., Asia’s biggest maker of computer- memory chips and flat screens, lost 1.2 percent in Seoul. Rio Tinto Group, the world’s third-largest mining company, dropped 1.7 percent after oil and metals prices declined on July 10. Kirin Holdings Co., Japan’s biggest beverage maker, surged 9.8 percent after the Nikkei newspaper said the company may merge with Suntory Holdings Ltd.
The MSCI Asia Pacific Index fell 0.1 percent to 100.58 as of 9:45 a.m. in Tokyo, with three stocks declining for every two that advanced. The gauge lost 4.2 percent in the two weeks through July 10.
“Uncertainty reigns over the market and people are gradually switching to the view that the economic recovery will be harder than expected,” said Tsutomu Yamada, a market analyst at Kabu.com Securities Co.
Japan’s Nikkei 225 Stock Average gained 0.4 percent, while South Korea’s Kospi Index sank 0.8 percent. Australia’s S&P/ASX 200 Index and New Zealand’s NZX 50 Index were little changed.
Futures on the U.S. Standard & Poor’s 500 Index gained 0.3 percent. The measure dropped 0.4 percent on July 10 after the Reuters/University of Michigan preliminary index of consumer sentiment slid to 64.6 in July from the prior month. Economists had estimated the gauge would fall to 70.
“It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” U.S. Treasury Secretary Timothy Geithner said, according to a transcript of an interview with “CNN’s Fareed Zakaria GPS” show.
Berkshire, CapitalSource, Schwab: U.S. Equity Market Preview
July 12 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading tomorrow. Stock symbols are in parentheses, and prices are as of 5:30 p.m. in New York on July 10, unless otherwise specified.
Berkshire Hathaway Inc. (BRK/A US): Warren Buffett’s conglomerate may rise as the recovering U.S. economy boosts the value of its more-than-$50 billion equity portfolio and other investments, Barron’s reported, without citing anyone. Berkshire Hathaway Class A stock fell $475, or 0.5 percent, to $85,125.
BRF Brasil Foods SA (PDA:US): The company formerly known as Perdigao SA, which is taking over Sadia SA, may rise as 36 percent as growth in Brazilian consumption boosts sales, Barron’s reported, citing Renato Prado, an equity analyst at Fator Corretora in Sao Paolo. BRF Brasil’s American depositary receipts, which each represent two ordinary shares, fell 76 cents, or 1.9 percent, to $38.69 on July 10.
CapitalSource Inc. (CSE:US) fell 10 percent to $4.06. The loan provider to small and mid-sized businesses said it plans a public offering of about 17.5 million shares of its common stock.
Charles Schwab Corp. (SCHW:US): The largest independent brokerage by client assets may be undervalued as the company cuts fees and offers new products to attract investors, Barron’s reported. Schwab fell 14 cents to $16.47.
Hoku Scientific Inc. (HOKU:US): The maker of fuel-cell and solar-power components said it retained Deutsche Bank Securities Inc. as its financial adviser to seek a possible sale.
RSC Holdings Inc. (RRR:US): The second-largest construction-equipment rental company in North America may rise to $15 within the next year amid a construction slump as petrochemicals, food processing and other industries spend more on equipment, Barron’s reported, citing Vance Edelson, an analyst at Morgan Stanley in New York. RSC gained 28 cents to $6 on July 10.
State Street Corp. (STT:US): The largest money manager for institutions paid $60 million to repurchase warrants held by the U.S., the U.S. Treasury said in a report on emergency aid to financial institutions.
Berkshire Hathaway Inc. (BRK/A US): Warren Buffett’s conglomerate may rise as the recovering U.S. economy boosts the value of its more-than-$50 billion equity portfolio and other investments, Barron’s reported, without citing anyone. Berkshire Hathaway Class A stock fell $475, or 0.5 percent, to $85,125.
BRF Brasil Foods SA (PDA:US): The company formerly known as Perdigao SA, which is taking over Sadia SA, may rise as 36 percent as growth in Brazilian consumption boosts sales, Barron’s reported, citing Renato Prado, an equity analyst at Fator Corretora in Sao Paolo. BRF Brasil’s American depositary receipts, which each represent two ordinary shares, fell 76 cents, or 1.9 percent, to $38.69 on July 10.
CapitalSource Inc. (CSE:US) fell 10 percent to $4.06. The loan provider to small and mid-sized businesses said it plans a public offering of about 17.5 million shares of its common stock.
Charles Schwab Corp. (SCHW:US): The largest independent brokerage by client assets may be undervalued as the company cuts fees and offers new products to attract investors, Barron’s reported. Schwab fell 14 cents to $16.47.
Hoku Scientific Inc. (HOKU:US): The maker of fuel-cell and solar-power components said it retained Deutsche Bank Securities Inc. as its financial adviser to seek a possible sale.
RSC Holdings Inc. (RRR:US): The second-largest construction-equipment rental company in North America may rise to $15 within the next year amid a construction slump as petrochemicals, food processing and other industries spend more on equipment, Barron’s reported, citing Vance Edelson, an analyst at Morgan Stanley in New York. RSC gained 28 cents to $6 on July 10.
State Street Corp. (STT:US): The largest money manager for institutions paid $60 million to repurchase warrants held by the U.S., the U.S. Treasury said in a report on emergency aid to financial institutions.
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