Published: September 25 2009 06:24 | Last updated: September 26 2009 00:51
World leaders promised a new era of economic co-operation at the close of the G20 summit in Pittsburgh on Friday, endorsing new guidelines for bankers’ pay, a tight timetable for regulatory reform and a new framework for balanced growth.
But little progress was made on trade or climate change and many experts expressed doubt that the accord on growth would actually result in policy changes by leading nations.
“There is no longer an Anglo-Saxon world and a European world,” said Nicolas Sarkozy, the French president, highlighting US agreement to implement the Basel II capital accord and a crackdown on tax havens.
European nations agreed to support some form of bank leverage ratio – a key US demand.
President Barack Obama said the summit laid the ground for an era of co-operation. “We’ve brought the global economy back from the brink,” he said.
Mr Obama linked the summit’s declaration with the prosperity of ordinary Americans. “We need to act together to make sure our recovery creates new jobs and industries, while preventing the kinds of imbalances and abuse that led us into this crisis.”
The G20 did not endorse a cap on bonus payments but established guidelines requiring a large proportion to be paid in deferred compensation.
The G20 pledged to shift at least 5 per cent of the shares in the IMF to emerging economies from over-represented nations, and transfer at least 3 per cent vote share in the World Bank.
“The commitment on bonuses will bring an end to the unacceptable and disgraced old system,” said Gordon Brown, the UK prime minister.
Friday, September 25, 2009
Asian Currencies Rise, Led by Won, on Recovery, Stock Buying
Sept. 26 (Bloomberg) -- South Korea’s won led gains in Asian currencies this week as increasing confidence the economy is recovering from a recession helped lure funds from overseas.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, was near the highest level in 11 months after the Asian Development Bank raised its economic growth forecasts for this year and next. The Thai baht and Indonesian rupiah fell yesterday on speculation leaders from the Group of 20 nations will tighten controls on global banks, curbing demand for assets in developing markets.
“The won will be one of the better-performing currencies in Asia over the next six months,” said Patrick Bennett, a Hong Kong-based foreign-exchange strategist at Societe Generale SA. “We’re still in the process of investors rebuilding positions in Asian equities, which will drive the currencies to stronger levels.”
The won rose 1.8 percent this week to 1,186.00 per dollar in Seoul, according to data compiled by Bloomberg. The Philippine peso appreciated 0.7 percent to 47.320, according to Tullett Prebon Plc. The Indian rupee gained 0.2 percent to 47.995 in Mumbai.
Korea’s won had a fifth weekly gain, its longest winning streak since April, and the peso climbed for a fourth week, its best run this year. Consumer sentiment in Korea stayed at a seven-year high this month, according to a report published by the nation’s central bank yesterday.
Stock Inflows
Asia, excluding Japan, will expand 3.9 percent in 2009, faster than a March estimate of 3.4 percent, the Manila-based ADB said in a report on Sept. 22. Growth may accelerate in 2010 to 6.4 percent, it said.
Emerging-market stock funds investing in Asia excluding Japan attracted $427 million during the week ended Sept. 23, EPFR Global, a Cambridge, Massachusetts-based research firm, said in an e-mailed statement on Sept. 24.
Asian currencies mostly retreated yesterday after Federal Reserve Governor Kevin Warsh signaled the central bank may start to raise interest rates before indicators suggest it needs to.
Thailand’s baht dropped 0.2 percent yesterday and the Singapore dollar declined 0.3 percent. The MSCI Asia-Pacific Index of regional shares lost 0.7 percent.
‘Short Squeeze’
“When you have a major central bank harking about changing their accommodative policy stance, it’s causing a short squeeze on the market,” said Alan Cayetano, a senior currency trader at Metropolitan Bank & Trust Co. in Manila. “People are selling commodities and equities and buying back the dollar.”
The Dollar Index traded on ICE Futures in New York, which compares the currency to those of six trading partners, rose 1.1 percent on Sept. 24, the biggest gain since Aug. 7. It was little changed yesterday.
The yen advanced against the euro this week on speculation Japanese exporters repatriated profits before the fiscal first half ends this month. Japan’s currency climbed to 131.70 yen per euro in New York from 134.33 yen on Sept. 18.
The Philippine peso traded near a three-month high after the central bank on Sept. 24 said remittances from overseas nationals and the balance of payments surplus may exceed forecasts. Exports may decline at a slower pace, Director Rosabel Guerrero told reporters in Manila.
Ringgit Strategy
Malaysia’s ringgit dropped yesterday, paring a weekly gain, on speculation a rally that drove the currency to a nine-month high was too rapid given the nation’s economic recovery trails other emerging markets in the region.
Bank Negara Malaysia said expansion later this year will be modest and its record-low benchmark interest rate was still appropriate. The central bank will likely keep its policy rate at 2 percent until mid-2010 because growth is “underperforming” the rest of Asia, Citigroup Inc. said in a research note on Sept. 24.
The currency declined 0.2 percent to 3.4711 per dollar yesterday, according to data compiled by Bloomberg. For the week it was up 0.3 percent.
Investors should buy the ringgit against the Singapore dollar because higher commodity prices will spur Malaysia’s economic recovery over the next six months, Australia & New Zealand Banking Group Ltd. said yesterday in a research note.
The ringgit may advance 2 percent to 2.40 per Singapore dollar by the end of the first quarter of 2010 as increases in prices of crude oil, palm oil and rubber will help Malaysia’s economy expand at a faster pace than its southern neighbor, strategist Yeo Han Sia said in a research note yesterday.
“We expect the base effect in commodity prices to narrow the export gap in Malaysia’s favor, having knock-on effects for portfolio flows and the currency cross rate,” wrote Yeo, who is based in Singapore.
Elsewhere, the Singapore dollar slid 0.1 percent this week to S$1.4160 versus the greenback. The Taiwan dollar rose 0.5 percent to NT$32.458 and the baht rose 0.4 percent to 33.60 from Sept. 18. The yuan closed at 6.8282 in Shanghai, from 6.8279.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, was near the highest level in 11 months after the Asian Development Bank raised its economic growth forecasts for this year and next. The Thai baht and Indonesian rupiah fell yesterday on speculation leaders from the Group of 20 nations will tighten controls on global banks, curbing demand for assets in developing markets.
“The won will be one of the better-performing currencies in Asia over the next six months,” said Patrick Bennett, a Hong Kong-based foreign-exchange strategist at Societe Generale SA. “We’re still in the process of investors rebuilding positions in Asian equities, which will drive the currencies to stronger levels.”
The won rose 1.8 percent this week to 1,186.00 per dollar in Seoul, according to data compiled by Bloomberg. The Philippine peso appreciated 0.7 percent to 47.320, according to Tullett Prebon Plc. The Indian rupee gained 0.2 percent to 47.995 in Mumbai.
Korea’s won had a fifth weekly gain, its longest winning streak since April, and the peso climbed for a fourth week, its best run this year. Consumer sentiment in Korea stayed at a seven-year high this month, according to a report published by the nation’s central bank yesterday.
Stock Inflows
Asia, excluding Japan, will expand 3.9 percent in 2009, faster than a March estimate of 3.4 percent, the Manila-based ADB said in a report on Sept. 22. Growth may accelerate in 2010 to 6.4 percent, it said.
Emerging-market stock funds investing in Asia excluding Japan attracted $427 million during the week ended Sept. 23, EPFR Global, a Cambridge, Massachusetts-based research firm, said in an e-mailed statement on Sept. 24.
Asian currencies mostly retreated yesterday after Federal Reserve Governor Kevin Warsh signaled the central bank may start to raise interest rates before indicators suggest it needs to.
Thailand’s baht dropped 0.2 percent yesterday and the Singapore dollar declined 0.3 percent. The MSCI Asia-Pacific Index of regional shares lost 0.7 percent.
‘Short Squeeze’
“When you have a major central bank harking about changing their accommodative policy stance, it’s causing a short squeeze on the market,” said Alan Cayetano, a senior currency trader at Metropolitan Bank & Trust Co. in Manila. “People are selling commodities and equities and buying back the dollar.”
The Dollar Index traded on ICE Futures in New York, which compares the currency to those of six trading partners, rose 1.1 percent on Sept. 24, the biggest gain since Aug. 7. It was little changed yesterday.
The yen advanced against the euro this week on speculation Japanese exporters repatriated profits before the fiscal first half ends this month. Japan’s currency climbed to 131.70 yen per euro in New York from 134.33 yen on Sept. 18.
The Philippine peso traded near a three-month high after the central bank on Sept. 24 said remittances from overseas nationals and the balance of payments surplus may exceed forecasts. Exports may decline at a slower pace, Director Rosabel Guerrero told reporters in Manila.
Ringgit Strategy
Malaysia’s ringgit dropped yesterday, paring a weekly gain, on speculation a rally that drove the currency to a nine-month high was too rapid given the nation’s economic recovery trails other emerging markets in the region.
Bank Negara Malaysia said expansion later this year will be modest and its record-low benchmark interest rate was still appropriate. The central bank will likely keep its policy rate at 2 percent until mid-2010 because growth is “underperforming” the rest of Asia, Citigroup Inc. said in a research note on Sept. 24.
The currency declined 0.2 percent to 3.4711 per dollar yesterday, according to data compiled by Bloomberg. For the week it was up 0.3 percent.
Investors should buy the ringgit against the Singapore dollar because higher commodity prices will spur Malaysia’s economic recovery over the next six months, Australia & New Zealand Banking Group Ltd. said yesterday in a research note.
The ringgit may advance 2 percent to 2.40 per Singapore dollar by the end of the first quarter of 2010 as increases in prices of crude oil, palm oil and rubber will help Malaysia’s economy expand at a faster pace than its southern neighbor, strategist Yeo Han Sia said in a research note yesterday.
“We expect the base effect in commodity prices to narrow the export gap in Malaysia’s favor, having knock-on effects for portfolio flows and the currency cross rate,” wrote Yeo, who is based in Singapore.
Elsewhere, the Singapore dollar slid 0.1 percent this week to S$1.4160 versus the greenback. The Taiwan dollar rose 0.5 percent to NT$32.458 and the baht rose 0.4 percent to 33.60 from Sept. 18. The yuan closed at 6.8282 in Shanghai, from 6.8279.
Asian Stocks Post 1st Decline in Three Weeks; Commodities Fall
Sept. 26 (Bloomberg) -- Asian stocks declined for the first time in three weeks as commodities prices slumped and companies took advantage of the recent rally to sell new shares.
Aluminum Corp. of China, the nation’s biggest producer of the metal, slumped 8 percent in Hong Kong. BHP Billiton Ltd., the world’s largest miner, fell 3 percent. Nomura Holdings Inc., Japan’s biggest brokerage, slumped 17 percent after announcing a record $5.6 billion share sale. Guoyuan Securities Co. slumped 11 percent after regulators approved its plan to sell additional equity.
“I wouldn’t be surprised if we’d seen the peak of the market for this year because the economic news isn’t going to improve very much,” investor Marc Faber, the publisher of the Gloom, Boom & Doom report said in a Sept. 25 interview with Bloomberg Television. “The correction in the market has been overdue for quite some time.”
The MSCI Asia Pacific Index dropped 0.5 percent this week to 117.77. Asian markets have rallied 67 percent since the MSCI benchmark dropped to a five-year low on March 9.
Japan’s Nikkei 225 Stock Average fell 1 percent, while China’s benchmark Shanghai Composite Index tumbled 4.2 percent for the region’s steepest decline. Vietnam, Thailand and Indonesia were among markets that posted gains this week.
Geely Automobile Holdings Ltd. surged 28 percent after saying it will raise HK$2.59 billion ($334 million) selling convertible bonds and warrants to a fund managed by Goldman Sachs Group Inc. Japan Airlines Corp. plunged 22 percent as it sought aid to avoid a bankruptcy filing.
Asia Outperformance
MSCI’s Asian index has recovered to levels last seen before the collapse of Lehman Brothers Holdings Inc. a year ago the previous week. The ensuing credit crisis sparked more than $1.6 trillion in losses and writedowns at financial institutions and helped send economies globally into recession.
The 31 percent advance this year by the Asian gauge tops a 16 percent rise by the Standard & Poor’s 500 Index and 20 percent climb by Europe’s Stoxx 600 Index.
The MSCI Asia Pacific Index’s six-month rally has been driven by better-than-estimated economic reports and corporate earnings. Of 646 companies on the gauge that reported net income for the latest quarter, 256 beat analyst predictions, compared with 168 that missed.
Aluminum Corp. retreated 8 percent to HK$8.63 in Hong Kong. BHP lost 3 percent to A$37.55. PetroChina Co., the country’s biggest oil company, declined 3.1 percent to HK$9.02.
A measure of six metals traded in London slid 3.1 percent this week, the biggest drop since July. Crude oil slumped 8.4 percent.
Share Sales
Nomura plunged 17 percent to 573 yen. The company will sell about 800 million shares, equivalent to almost 30 percent of the stock outstanding, to fund expansion outside Japan.
Guoyuan Securities declined 11 percent to 18.51 yuan. China’s regulator granted approval for the company’s plan to sell as many as 500 million new shares, raising as much as 10 billion yuan ($1.46 billion.)
Chinese companies raised at least 96.1 billion yuan in local initial public offerings since a nine-month moratorium on sales ended in June. In a sign that rising supply may be overwhelming investor demand, Metallurgical Corporation of China Ltd. rose 28 percent in its first day of trading in Shanghai on Sept. 21, less than half this year’s average debut gain of 68 percent.
Investor Caution
Metallurgical’s Hong Kong listing on Sept. 24, in which its shares fell 12 percent, was the weakest first-day performance for a newly listed company in the city this year. Of the three companies that listed in Hong Kong this week, only one, Sinopharm Group Co., gained.
“Investors will become more cautious about buying into IPOs following the debuts this week,” said Louis Wong, a fund manager at Phillip Securities HK Ltd. in Hong Kong.
Geely rallied 28 percent to HK$2.29. The company plans to raise HK$2.59 billion selling convertible bonds and warrants to a fund managed by Goldman Sachs Group Inc.
Japan Airlines retreated 22 percent to 133 yen. The nation’s largest carrier will be reorganized under a government plan designed to avert a bankruptcy. JAL posted a 99 billion yen loss in the first quarter, the most in at least six years, as business and leisure travel plummeted during the country’s worst postwar recession.
Aluminum Corp. of China, the nation’s biggest producer of the metal, slumped 8 percent in Hong Kong. BHP Billiton Ltd., the world’s largest miner, fell 3 percent. Nomura Holdings Inc., Japan’s biggest brokerage, slumped 17 percent after announcing a record $5.6 billion share sale. Guoyuan Securities Co. slumped 11 percent after regulators approved its plan to sell additional equity.
“I wouldn’t be surprised if we’d seen the peak of the market for this year because the economic news isn’t going to improve very much,” investor Marc Faber, the publisher of the Gloom, Boom & Doom report said in a Sept. 25 interview with Bloomberg Television. “The correction in the market has been overdue for quite some time.”
The MSCI Asia Pacific Index dropped 0.5 percent this week to 117.77. Asian markets have rallied 67 percent since the MSCI benchmark dropped to a five-year low on March 9.
Japan’s Nikkei 225 Stock Average fell 1 percent, while China’s benchmark Shanghai Composite Index tumbled 4.2 percent for the region’s steepest decline. Vietnam, Thailand and Indonesia were among markets that posted gains this week.
Geely Automobile Holdings Ltd. surged 28 percent after saying it will raise HK$2.59 billion ($334 million) selling convertible bonds and warrants to a fund managed by Goldman Sachs Group Inc. Japan Airlines Corp. plunged 22 percent as it sought aid to avoid a bankruptcy filing.
Asia Outperformance
MSCI’s Asian index has recovered to levels last seen before the collapse of Lehman Brothers Holdings Inc. a year ago the previous week. The ensuing credit crisis sparked more than $1.6 trillion in losses and writedowns at financial institutions and helped send economies globally into recession.
The 31 percent advance this year by the Asian gauge tops a 16 percent rise by the Standard & Poor’s 500 Index and 20 percent climb by Europe’s Stoxx 600 Index.
The MSCI Asia Pacific Index’s six-month rally has been driven by better-than-estimated economic reports and corporate earnings. Of 646 companies on the gauge that reported net income for the latest quarter, 256 beat analyst predictions, compared with 168 that missed.
Aluminum Corp. retreated 8 percent to HK$8.63 in Hong Kong. BHP lost 3 percent to A$37.55. PetroChina Co., the country’s biggest oil company, declined 3.1 percent to HK$9.02.
A measure of six metals traded in London slid 3.1 percent this week, the biggest drop since July. Crude oil slumped 8.4 percent.
Share Sales
Nomura plunged 17 percent to 573 yen. The company will sell about 800 million shares, equivalent to almost 30 percent of the stock outstanding, to fund expansion outside Japan.
Guoyuan Securities declined 11 percent to 18.51 yuan. China’s regulator granted approval for the company’s plan to sell as many as 500 million new shares, raising as much as 10 billion yuan ($1.46 billion.)
Chinese companies raised at least 96.1 billion yuan in local initial public offerings since a nine-month moratorium on sales ended in June. In a sign that rising supply may be overwhelming investor demand, Metallurgical Corporation of China Ltd. rose 28 percent in its first day of trading in Shanghai on Sept. 21, less than half this year’s average debut gain of 68 percent.
Investor Caution
Metallurgical’s Hong Kong listing on Sept. 24, in which its shares fell 12 percent, was the weakest first-day performance for a newly listed company in the city this year. Of the three companies that listed in Hong Kong this week, only one, Sinopharm Group Co., gained.
“Investors will become more cautious about buying into IPOs following the debuts this week,” said Louis Wong, a fund manager at Phillip Securities HK Ltd. in Hong Kong.
Geely rallied 28 percent to HK$2.29. The company plans to raise HK$2.59 billion selling convertible bonds and warrants to a fund managed by Goldman Sachs Group Inc.
Japan Airlines retreated 22 percent to 133 yen. The nation’s largest carrier will be reorganized under a government plan designed to avert a bankruptcy. JAL posted a 99 billion yen loss in the first quarter, the most in at least six years, as business and leisure travel plummeted during the country’s worst postwar recession.
Thursday, September 24, 2009
Sri Lanka Bonds, Economy Are Luring Investors, Bogollagama Says
Sept. 25 (Bloomberg) -- Sri Lankan bonds are attracting increased interest from global investors as the government focuses on economic development after the end of the three- decade civil war, said Foreign Minister Rohitha Bogollagama.
“It’s our priority to make use after the long struggle and effort into meaningful economic development,” he said in an interview at the Asia Society in New York.
The army’s victory over the Liberation Tigers of Tamil Eelam in May has prompted economists to boost their growth forecasts and spurred a rally in stocks, making the island’s Colombo All-Share Index the best performer in Asia this year.
The International Monetary Fund said this week it expects growth of 3.5 percent in 2009, up from a July estimate of 3 percent. The $41 billion economy is showing signs of “bottoming out,” said Brian Aitken, the IMF’s Mission Chief for Sri Lanka. The economy grew 2.1 percent in the second quarter from a year earlier after gaining 1.5 percent in the three months to March 31, the statistics department said in Colombo on Sept. 14.
“The conclusion of the civil war should increase foreign direct investment in areas where Sri Lanka is strong, such as tourism, garments and tea, but also more broadly in other sectors of the economy,” said Ashok Parameswaran, senior emerging markets analyst at Invesco Inc. in New York. “For the government to really take advantage of the civil war’s end, it must take steps to improve the investment environment by reducing red tape and improving contract enforcement.”
The country is increasing foreign trade and investment and has sold dollar-denominated sovereign bonds in overseas markets to help fund reconstruction. A $500 million bond issue is “attracting lots of investors,” Bogollagama said.
IMF Aid
The Asian island nation is also receiving aid from the IMF to help avert a balance of payments crisis after foreign- exchange reserves fell to an eight-year low of $1.27 billion in March.
The IMF said on Sept. 22 it’s “cautiously positive” on the nation’s prospects as it reviews the economy for the release of a second payment in its $2.6 billion aid package. Sri Lanka has received a first payment of $322 million and may get the second part in November, Bogollagama said.
The South Asian country’s Colombo All-Share Index has gained 92 percent in 2009. The index was the region’s third- worst performer in the past two years as record spending on defense strained government finances, and the country sought an International Monetary Fund loan.
The stock market’s rally is a sign of Sri Lanka’s “very vibrant economy” and shows investors’ confidence in the country, Bogollagama said.
Sri Lankan stocks may offer better returns as the end of the civil war frees up government spending for investments in infrastructure and agriculture, investor Jim Rogers said last month.
“It’s our priority to make use after the long struggle and effort into meaningful economic development,” he said in an interview at the Asia Society in New York.
The army’s victory over the Liberation Tigers of Tamil Eelam in May has prompted economists to boost their growth forecasts and spurred a rally in stocks, making the island’s Colombo All-Share Index the best performer in Asia this year.
The International Monetary Fund said this week it expects growth of 3.5 percent in 2009, up from a July estimate of 3 percent. The $41 billion economy is showing signs of “bottoming out,” said Brian Aitken, the IMF’s Mission Chief for Sri Lanka. The economy grew 2.1 percent in the second quarter from a year earlier after gaining 1.5 percent in the three months to March 31, the statistics department said in Colombo on Sept. 14.
“The conclusion of the civil war should increase foreign direct investment in areas where Sri Lanka is strong, such as tourism, garments and tea, but also more broadly in other sectors of the economy,” said Ashok Parameswaran, senior emerging markets analyst at Invesco Inc. in New York. “For the government to really take advantage of the civil war’s end, it must take steps to improve the investment environment by reducing red tape and improving contract enforcement.”
The country is increasing foreign trade and investment and has sold dollar-denominated sovereign bonds in overseas markets to help fund reconstruction. A $500 million bond issue is “attracting lots of investors,” Bogollagama said.
IMF Aid
The Asian island nation is also receiving aid from the IMF to help avert a balance of payments crisis after foreign- exchange reserves fell to an eight-year low of $1.27 billion in March.
The IMF said on Sept. 22 it’s “cautiously positive” on the nation’s prospects as it reviews the economy for the release of a second payment in its $2.6 billion aid package. Sri Lanka has received a first payment of $322 million and may get the second part in November, Bogollagama said.
The South Asian country’s Colombo All-Share Index has gained 92 percent in 2009. The index was the region’s third- worst performer in the past two years as record spending on defense strained government finances, and the country sought an International Monetary Fund loan.
The stock market’s rally is a sign of Sri Lanka’s “very vibrant economy” and shows investors’ confidence in the country, Bogollagama said.
Sri Lankan stocks may offer better returns as the end of the civil war frees up government spending for investments in infrastructure and agriculture, investor Jim Rogers said last month.
Japan’s Exporters Confront ‘Longing’ for Stronger Yen
Sept. 25 (Bloomberg) -- Japan’s exporters are in danger of being left behind by a global trade recovery as the nation’s change in government ushers in a tolerance for exchange-rate gains that threaten to erode their profits.
Japanese exports fell 36 percent in August from a year earlier, the Finance Ministry said yesterday, an 11th straight decline. The drop was exacerbated by the yen’s 17 percent surge against the dollar in the past year, making Japanese goods more expensive abroad and hurting the value of repatriated earnings.
Japan’s currency jumped to a seven-month high last week after Finance Minister Hirohisa Fujii, whose Democratic Party of Japan won elections promising to boost consumers’ purchasing power, said he didn’t support a “weak yen.” The comments suggested a change from the Liberal Democratic Party, which ruled for most of the past 55 years supporting the exporters that led growth.
“You’ve got some romantic longing that maybe a strong yen isn’t such a bad thing,” said Jesper Koll, chief executive officer of hedge fund TRJ Tantallon Research Japan. “It’s a nice little policy that at the margins increases the purchasing power of Mr. and Mrs. Watanabe. The problem is that whether you like it or not, you are a net exporter. A stronger yen will eat further into the profitability of corporate Japan.”
The currency’s gains have made it harder for Japanese exporters such as Panasonic Corp. and Toyota Motor Corp. to compete with rivals in South Korea. The Korean won has depreciated 23 percent versus the dollar in the past two years just as the yen surged 26 percent.
‘See the Damage’
“You can see the damage from the yen if you look at Japanese exports compared to Korean exports,” said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. “Korea’s done much better over the last year and if you look at the won-yen exchange rate that tells you a lot of the reason.”
Record sales helped Samsung Electronics Co.’s profit climb 5.2 percent last quarter, while Panasonic suffered a net loss as revenue dropped 26 percent. Hyundai Motor Co. has taken market share away from Toyota: The South Korean carmaker’s U.S. sales dropped less than 1 percent in the first eight months of the year, while Toyota’s plunged 29 percent.
“We’re affected by exchange rates, there’s no doubt about it,” said Paul Nolasco, a Tokyo-based spokesman at Toyota, which based its earnings estimates on the assumption that the yen will trade at an average of 92 to the dollar in the next six months. The automaker forecasts a 450 billion yen ($5 billion) net loss for the year ending March 2010.
Profit Level
The yen traded at 91.11 per dollar at 11:13 a.m. in New York, rising 0.2 percent from late yesterday. That’s stronger than the 97.33 level that Japan’s exporters say they need to ensure a profit, according to a Cabinet Office survey released April 22.
Exports helped lead Japan’s economy to grow for the first time in more than a year in the second quarter, ending the country’s worst postwar recession.
During the election campaign, the DPJ, led by Yukio Hatoyama, said a stronger currency would benefit households by making imported goods less expensive. The emphasis on consumers contrasted with the LDP’s focus on corporate interests, analysts said.
While LDP-led governments didn’t sell the yen in the past five years, they had a history of foreign-exchange intervention combined with support for the U.S.’s “strong-dollar” policy. The Bank of Japan, at the behest of the Ministry of Finance, sold yen and bought dollars on more than 40 days during the first quarter of 2004.
‘Underlying Doubt’
“For the previous guys, there was an underlying doubt in the minds of the market that at some point they would intervene,” said Macquarie’s Jerram. “Fujii’s comments suggest the possibility is less under the DPJ.”
Fujii said yesterday that “in principle, markets -- the currency market, the stock market -- are the stronghold of a free economy. I have been questioning the idea of easy intervention.”
Goldman Sachs Group Inc. analysts are among those predicting the yen will decline because the Bank of Japan will refrain from raising interest rates longer than its counterparts, seeking to strengthen the recovery. Goldman Sachs forecasts it will weaken to 98 per dollar by the year-end.
The yen rose to a seven-month high of 90.13 on Sept. 16 after Fujii said he doesn’t support a weak-yen policy. The 77- year-old lawmaker moderated his tone two days later, when he said foreign-exchange rates should reflect economic fundamentals.
Japanese Companies
The yen’s strength is already taking a toll on some Japanese companies. Canon Inc., the country’s biggest maker of office equipment, says every 1 yen increase against the dollar will lower its second-half operating profit by 4.2 billion yen. The company based its profit forecast of 110 billion yen on the assumption the yen would average 95 to the dollar in the last six months of the business year.
“There are some factors that are not in our control,” said Richard Berger, a Tokyo-based spokesman at the company. “Changes in the exchange rate can have a serious impact on results.”
Japanese exports fell 36 percent in August from a year earlier, the Finance Ministry said yesterday, an 11th straight decline. The drop was exacerbated by the yen’s 17 percent surge against the dollar in the past year, making Japanese goods more expensive abroad and hurting the value of repatriated earnings.
Japan’s currency jumped to a seven-month high last week after Finance Minister Hirohisa Fujii, whose Democratic Party of Japan won elections promising to boost consumers’ purchasing power, said he didn’t support a “weak yen.” The comments suggested a change from the Liberal Democratic Party, which ruled for most of the past 55 years supporting the exporters that led growth.
“You’ve got some romantic longing that maybe a strong yen isn’t such a bad thing,” said Jesper Koll, chief executive officer of hedge fund TRJ Tantallon Research Japan. “It’s a nice little policy that at the margins increases the purchasing power of Mr. and Mrs. Watanabe. The problem is that whether you like it or not, you are a net exporter. A stronger yen will eat further into the profitability of corporate Japan.”
The currency’s gains have made it harder for Japanese exporters such as Panasonic Corp. and Toyota Motor Corp. to compete with rivals in South Korea. The Korean won has depreciated 23 percent versus the dollar in the past two years just as the yen surged 26 percent.
‘See the Damage’
“You can see the damage from the yen if you look at Japanese exports compared to Korean exports,” said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. “Korea’s done much better over the last year and if you look at the won-yen exchange rate that tells you a lot of the reason.”
Record sales helped Samsung Electronics Co.’s profit climb 5.2 percent last quarter, while Panasonic suffered a net loss as revenue dropped 26 percent. Hyundai Motor Co. has taken market share away from Toyota: The South Korean carmaker’s U.S. sales dropped less than 1 percent in the first eight months of the year, while Toyota’s plunged 29 percent.
“We’re affected by exchange rates, there’s no doubt about it,” said Paul Nolasco, a Tokyo-based spokesman at Toyota, which based its earnings estimates on the assumption that the yen will trade at an average of 92 to the dollar in the next six months. The automaker forecasts a 450 billion yen ($5 billion) net loss for the year ending March 2010.
Profit Level
The yen traded at 91.11 per dollar at 11:13 a.m. in New York, rising 0.2 percent from late yesterday. That’s stronger than the 97.33 level that Japan’s exporters say they need to ensure a profit, according to a Cabinet Office survey released April 22.
Exports helped lead Japan’s economy to grow for the first time in more than a year in the second quarter, ending the country’s worst postwar recession.
During the election campaign, the DPJ, led by Yukio Hatoyama, said a stronger currency would benefit households by making imported goods less expensive. The emphasis on consumers contrasted with the LDP’s focus on corporate interests, analysts said.
While LDP-led governments didn’t sell the yen in the past five years, they had a history of foreign-exchange intervention combined with support for the U.S.’s “strong-dollar” policy. The Bank of Japan, at the behest of the Ministry of Finance, sold yen and bought dollars on more than 40 days during the first quarter of 2004.
‘Underlying Doubt’
“For the previous guys, there was an underlying doubt in the minds of the market that at some point they would intervene,” said Macquarie’s Jerram. “Fujii’s comments suggest the possibility is less under the DPJ.”
Fujii said yesterday that “in principle, markets -- the currency market, the stock market -- are the stronghold of a free economy. I have been questioning the idea of easy intervention.”
Goldman Sachs Group Inc. analysts are among those predicting the yen will decline because the Bank of Japan will refrain from raising interest rates longer than its counterparts, seeking to strengthen the recovery. Goldman Sachs forecasts it will weaken to 98 per dollar by the year-end.
The yen rose to a seven-month high of 90.13 on Sept. 16 after Fujii said he doesn’t support a weak-yen policy. The 77- year-old lawmaker moderated his tone two days later, when he said foreign-exchange rates should reflect economic fundamentals.
Japanese Companies
The yen’s strength is already taking a toll on some Japanese companies. Canon Inc., the country’s biggest maker of office equipment, says every 1 yen increase against the dollar will lower its second-half operating profit by 4.2 billion yen. The company based its profit forecast of 110 billion yen on the assumption the yen would average 95 to the dollar in the last six months of the business year.
“There are some factors that are not in our control,” said Richard Berger, a Tokyo-based spokesman at the company. “Changes in the exchange rate can have a serious impact on results.”
Tuesday, September 22, 2009
BOE May Cap Bond Purchases as U.K. Exits Recession, CBI Says
Sept. 23 (Bloomberg) -- The Bank of England may stop buying bonds when it completes its current 175 billion-pound ($286 billion) plan as the U.K. shakes off the recession, the Confederation of British Industry said.
Gross domestic product will rise 0.3 percent in the third quarter, the biggest U.K. business lobby said in a report today, reversing a June prediction for a drop of the same size. The CBI forecast 0.4 percent growth in the last three months of the year and said the central bank will start raising the benchmark interest rate in the first half of 2010.
“Armageddon has receded somewhat over the horizon,” Richard Lambert, CBI director general and a former Bank of England policy maker, told reporters at a briefing in London yesterday. “But the recovery will be slow and protracted. Unemployment will continue to rise.”
The central bank plans to complete its current program to buy bonds by November. While Governor Mervyn King joined a minority bid to raise the plan to 200 billion pounds in August, most economists in a Bloomberg News survey say he probably switched to favor the current amount at this month’s meeting. Minutes of that meeting will be published today.
“At this stage, we don’t see the need for additional quantitative easing,” CBI Chief Economic Adviser Ian McCafferty told reporters. “It’s clear that quantitative easing has not yet had much of an impact on the wider economy.”
2010 Forecast
The economy will expand 0.9 percent in 2010 after a 4.3 percent contraction this year, the CBI said. The total drop in output in the recession will be 5.5 percent, close to the 5.9 percent of the recession in the early 1980s, the report showed.
King voted in a minority in August for a bigger expansion of the bond-purchase program. Ten of 14 economists in a Bloomberg News survey predict minutes of the September meeting will show a unanimous vote. That report will be published at 9:30 a.m. in London.
The CBI predicts the central bank will raise the benchmark interest rate to 1 percent in the second quarter from the current record low of 0.5 percent. The rate will stand at 2 percent by the end of next year, according to the CBI’s forecasts.
House prices will fall 9.8 percent this year before rising 0.8 percent in 2010, and unemployment will peak at about 3 million from the current level of 2.5 million, the CBI said in its forecasts.
Gross domestic product will rise 0.3 percent in the third quarter, the biggest U.K. business lobby said in a report today, reversing a June prediction for a drop of the same size. The CBI forecast 0.4 percent growth in the last three months of the year and said the central bank will start raising the benchmark interest rate in the first half of 2010.
“Armageddon has receded somewhat over the horizon,” Richard Lambert, CBI director general and a former Bank of England policy maker, told reporters at a briefing in London yesterday. “But the recovery will be slow and protracted. Unemployment will continue to rise.”
The central bank plans to complete its current program to buy bonds by November. While Governor Mervyn King joined a minority bid to raise the plan to 200 billion pounds in August, most economists in a Bloomberg News survey say he probably switched to favor the current amount at this month’s meeting. Minutes of that meeting will be published today.
“At this stage, we don’t see the need for additional quantitative easing,” CBI Chief Economic Adviser Ian McCafferty told reporters. “It’s clear that quantitative easing has not yet had much of an impact on the wider economy.”
2010 Forecast
The economy will expand 0.9 percent in 2010 after a 4.3 percent contraction this year, the CBI said. The total drop in output in the recession will be 5.5 percent, close to the 5.9 percent of the recession in the early 1980s, the report showed.
King voted in a minority in August for a bigger expansion of the bond-purchase program. Ten of 14 economists in a Bloomberg News survey predict minutes of the September meeting will show a unanimous vote. That report will be published at 9:30 a.m. in London.
The CBI predicts the central bank will raise the benchmark interest rate to 1 percent in the second quarter from the current record low of 0.5 percent. The rate will stand at 2 percent by the end of next year, according to the CBI’s forecasts.
House prices will fall 9.8 percent this year before rising 0.8 percent in 2010, and unemployment will peak at about 3 million from the current level of 2.5 million, the CBI said in its forecasts.
New Zealand Economy Emerges From Recession, Currency Rises
Sept. 23 (Bloomberg) -- New Zealand emerged from its worst recession in three decades, unexpectedly expanding for the first time in six quarters on rising consumer spending and exports of logs and dairy products. The nation’s currency surged.
Gross domestic product increased 0.1 percent in the three months to June 30 following a 0.8 percent drop in the first quarter, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of 12 economists was for a 0.2 percent contraction.
New Zealand’s dollar rose to a 13-month high as traders increased bets that Reserve Bank Governor Alan Bollard may raise interest rates sooner than he indicated earlier this month. Bollard, who expected a second-quarter contraction, said on Sept. 10 the benchmark interest rate needed to stay at a record-low 2.5 percent until late next year.
“We see the scope for growth to add pressure to monetary policy expectations over the second half,” said Bernard Doyle, economist at Goldman Sachs JBWere Ltd. in Auckland. “We continue to believe the first rate hike will come mid-next year, but with a reasonable chance of an earlier move.”
New Zealand’s dollar surged as high as 73.12 U.S. cents from 71.94 cents before the report was released. It bought 72.66 cents at 1:15 p.m. in Wellington.
The currency has gained 2.8 percent in two days after the nation yesterday posted the narrowest current account deficit in more than four years. Fonterra Cooperative Group Ltd., the world’s largest dairy company, also raised its milk price forecast yesterday for the coming year, boosting farm incomes.
Rate Outlook
Traders expect Bollard will raise the official cash rate by 149 basis points over the next year as the economy recovers, according to a Credit Suisse index based on swaps prices. A basis point is 0.01 percentage points.
Bollard may be reluctant to raise the benchmark too soon because that may further stoke the currency and curb exports, which make up 30 percent of the economy. New Zealand’s dollar has gained 27 percent against the U.S. dollar in the past six months, the second best performing major currency after South Africa’s rand.
“The strength of the currency will continue to be a concern and a risk to the forecast recovery,” said Robin Clements, chief New Zealand economist at UBS AG in Christchurch.
The current account deficit narrowed to 5.9 percent of GDP in the year ended June 30, the smallest gap since the year ended Sept. 30, 2004, Statistics New Zealand said yesterday.
Fonterra raised its milk forecast 12 percent, citing increased global demand. Economists estimated that would add at least NZ$700 million ($510 million) to farm incomes.
‘Patchy Recovery’
Bollard this month forecast the economy shrank 0.1 percent in the second quarter and would undergo a “patchy recovery” in the second half of the year. He projected growth of about 0.8 percent a quarter in 2010.
Gross domestic product began contracting early last year after Bollard raised interest rates in 2007 to counter a housing boom and consumer spending that was being fanned by excessive borrowing.
An ensuing collapse in world trade and tight credit conditions stalled business confidence and demand for exports. The New Zealand dollar’s gain also curbed overseas shipments, which make up a third of the economy.
As sales slumped, companies shut plants and fired workers, pushing up the jobless rate to a nine-year high of 6 percent in the three months ended June 30.
Record-low interest rates, government spending and fewer New Zealanders heading overseas for higher-paid jobs has helped revive the housing market and consumer confidence.
House Prices
Second-quarter house prices rose for the first time in six quarters and have continued to gain, according to the government. Consumer confidence rose to an 18 month high in June, according to a Westpac Banking Corp./McDermott Miller Ltd. poll.
Household spending, which makes up 60 percent of the economy, rose 0.4 percent in the second quarter, the first gain in six quarters, today’s report showed.
Sales of food and other so-called non-durable goods gained 0.8 percent and spending on services increased, led by medical and health. Purchases of durable items such as cars, furniture and home appliances declined.
Warehouse Group Ltd., the nation’s largest discount retailer, said on Sept. 11 that sales increased in the three months ended Aug. 2, the first quarterly gain since early 2008.
Exports of goods and services increased 4.7 percent in the second quarter amid higher shipments of dairy products and lumber. Tourist spending in New Zealand declined. Import volumes slumped 3.8 percent.
Business investment increased 1.3 percent as companies spent more on software and on oil gas exploration, the statistics agency said. Plant and machinery investment fell.
Inventories declined by a record amount as demand for exports was met through existing stock rather than production, the agency said.
Gross domestic product increased 0.1 percent in the three months to June 30 following a 0.8 percent drop in the first quarter, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of 12 economists was for a 0.2 percent contraction.
New Zealand’s dollar rose to a 13-month high as traders increased bets that Reserve Bank Governor Alan Bollard may raise interest rates sooner than he indicated earlier this month. Bollard, who expected a second-quarter contraction, said on Sept. 10 the benchmark interest rate needed to stay at a record-low 2.5 percent until late next year.
“We see the scope for growth to add pressure to monetary policy expectations over the second half,” said Bernard Doyle, economist at Goldman Sachs JBWere Ltd. in Auckland. “We continue to believe the first rate hike will come mid-next year, but with a reasonable chance of an earlier move.”
New Zealand’s dollar surged as high as 73.12 U.S. cents from 71.94 cents before the report was released. It bought 72.66 cents at 1:15 p.m. in Wellington.
The currency has gained 2.8 percent in two days after the nation yesterday posted the narrowest current account deficit in more than four years. Fonterra Cooperative Group Ltd., the world’s largest dairy company, also raised its milk price forecast yesterday for the coming year, boosting farm incomes.
Rate Outlook
Traders expect Bollard will raise the official cash rate by 149 basis points over the next year as the economy recovers, according to a Credit Suisse index based on swaps prices. A basis point is 0.01 percentage points.
Bollard may be reluctant to raise the benchmark too soon because that may further stoke the currency and curb exports, which make up 30 percent of the economy. New Zealand’s dollar has gained 27 percent against the U.S. dollar in the past six months, the second best performing major currency after South Africa’s rand.
“The strength of the currency will continue to be a concern and a risk to the forecast recovery,” said Robin Clements, chief New Zealand economist at UBS AG in Christchurch.
The current account deficit narrowed to 5.9 percent of GDP in the year ended June 30, the smallest gap since the year ended Sept. 30, 2004, Statistics New Zealand said yesterday.
Fonterra raised its milk forecast 12 percent, citing increased global demand. Economists estimated that would add at least NZ$700 million ($510 million) to farm incomes.
‘Patchy Recovery’
Bollard this month forecast the economy shrank 0.1 percent in the second quarter and would undergo a “patchy recovery” in the second half of the year. He projected growth of about 0.8 percent a quarter in 2010.
Gross domestic product began contracting early last year after Bollard raised interest rates in 2007 to counter a housing boom and consumer spending that was being fanned by excessive borrowing.
An ensuing collapse in world trade and tight credit conditions stalled business confidence and demand for exports. The New Zealand dollar’s gain also curbed overseas shipments, which make up a third of the economy.
As sales slumped, companies shut plants and fired workers, pushing up the jobless rate to a nine-year high of 6 percent in the three months ended June 30.
Record-low interest rates, government spending and fewer New Zealanders heading overseas for higher-paid jobs has helped revive the housing market and consumer confidence.
House Prices
Second-quarter house prices rose for the first time in six quarters and have continued to gain, according to the government. Consumer confidence rose to an 18 month high in June, according to a Westpac Banking Corp./McDermott Miller Ltd. poll.
Household spending, which makes up 60 percent of the economy, rose 0.4 percent in the second quarter, the first gain in six quarters, today’s report showed.
Sales of food and other so-called non-durable goods gained 0.8 percent and spending on services increased, led by medical and health. Purchases of durable items such as cars, furniture and home appliances declined.
Warehouse Group Ltd., the nation’s largest discount retailer, said on Sept. 11 that sales increased in the three months ended Aug. 2, the first quarterly gain since early 2008.
Exports of goods and services increased 4.7 percent in the second quarter amid higher shipments of dairy products and lumber. Tourist spending in New Zealand declined. Import volumes slumped 3.8 percent.
Business investment increased 1.3 percent as companies spent more on software and on oil gas exploration, the statistics agency said. Plant and machinery investment fell.
Inventories declined by a record amount as demand for exports was met through existing stock rather than production, the agency said.
Subscribe to:
Posts (Atom)
Posts
