Oct. 31 (Bloomberg) -- Philippine authorities carried out evacuations and thousands of travelers were stranded as Typhoon Mirinae slammed into the archipelago, where about 1,100 people have died in cyclones this year.
Evacuations were ordered in the island province of Catanduanes and the coastal areas of Quezon province, where Mirinae’s eye made landfall, police and disaster agency officials said. Eight thousand were evacuated in Rizal province south of Manila, ABS-CBN News reported.
From the Pacific Ocean, the typhoon entered Quezon around midnight and was 60 kilometers south-southeast of Manila at 4 a.m., the local weather bureau said. The storm, with winds of 130 kilometers per hour, will exit Batangas province for the South China Sea around noon, the agency said.
The typhoon’s arrival coincides with the All-Saints’ weekend, when many Filipinos travel to their home provinces in the archipelago of more than 7,000 islands. Many visit cemeteries to pay respects to their ancestors. Others vacation during the three-day weekend.
The Philippines has been battered by more than 10 cyclones this year. More than 121,000 people remain in evacuation centers after cyclones Ketsana barreled into Luzon Sept. 26 and Parma followed this month. Hundreds were killed in floods and landslides and farm damage forced the world’s biggest importer of rice to schedule a supply auction for this week.
Delay Trips
The National Disaster Coordination Council advised Filipinos to delay their trips until at least this afternoon.
About 8,500 people and hundreds of trucks and cars were stranded as the government banned boats and ferries from taking to sea in Luzon and the Visayas islands farther south, Admiral Wilfredo Tamayo, Coast Guard commandant, said. About 20 fishermen were rescued off Quezon, he said.
“While the typhoon is here, travel has to be stopped both ways,” Tamayo said by phone. Vessels weighing more than 1,000 gross tons may sail by tomorrow, he said.
As many as 800 people were killed after a ferry sank in June last year when Typhoon Fengshen slammed into the Philippines.
Philippine Airlines and Cebu Pacific Air, the nation’s biggest carriers, canceled or delayed flights to and from Manila and said they had moved aircraft to central airports, away from the typhoon’s path. At least five bus companies suspended trips between Luzon and Visayas, ABS-CBN reported.
Leaving Homes
Troops persuaded people along Catanduanes’ rivers to leave their homes, Lieutenant Colonel Romeo Basco said in a phone interview. Some are already in town halls, he said. More than 4,000 people are expected to be evacuated in Quezon, Senior Superintendent Elmo Sarona, the police chief there, said.
Roads in Pagsanjan and Lumban in Laguna, a province south of Manila, were inaccessible amid strong currents of knee-deep water, said military spokesman Noel Detoyato.
In Manila, while winds are strong, the rain is falling in spurts, meaning there’s a “very slim possibility” of the degree of flooding brought on by Ketsana, weather bureau Administrator Prisco Nilo said in an interview. Ketsana left about 80 percent of Manila, a city of almost 12 million people, underwater.
Winds splintered trees and toppled free-standing or lightly constructed signage in the Manila area.
Power had been cut in several parts of the city because of strong winds, Manila Electric Co. spokesman Joe Zaldarriaga said in a phone interview today. The power retailer has monitored outages in parts of the capital and nearby provinces of Laguna and Rizal.
Rains have been “continuous” along Mirinae’s path, Nilo said, resulting in some flooding in Laguna province, south of Manila.
Friday, October 30, 2009
Asian Currencies Drop for a Second Week on Recovery Concerns
Oct. 31 (Bloomberg) -- Asian currencies declined for a second week, led by the Indonesian rupiah and Indian rupee, as unexpected slides in U.S. home sales and consumer confidence fueled concern about the speed of a global economic recovery.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, sank to its lowest level this month as investors favored safer bets than emerging-market assets. The benchmark recouped some of its losses in the latter part of the week as reports showing the first U.S. economic growth in a year and falling unemployment in Japan brightened the outlook for exports.
“Risk aversion was weighing down sentiment on Asian currencies but the long-term view still holds,” said Penn Nee Chow, an economist in Singapore at United Overseas Bank Ltd. “Asian currencies will continue to gain against the U.S. dollar as the outlook improves. A lot of Asian economies are expected to come back to year-on-year growth in the fourth quarter.”
The rupiah dropped 1.6 percent this week to 9,585 per dollar, India’s rupee fell 1.0 percent to 46.9729 and the Malaysian ringgit slid 0.9 percent to 3.4138. All three were still up for the month.
The Asia Dollar Index had a weekly loss of 0.2 percent and the MSCI Asia-Pacific Index of shares dropped 2.6 percent. Emerging-market equity funds’ net inflows fell to $2.2 billion in the week to Oct. 28, after averaging $4.4 billion over the previous two weeks, according to research firm EPFR Global.
Below-Average Growth
The International Monetary Fund on Oct. 29 said the region’s governments must maintain fiscal support for their economies as demand for their exports will remain sluggish. Growth in Asia including Japan, Australia and New Zealand will probably accelerate to 5.8 percent next year from 2.8 percent in 2009, “well below” the 6.8 percent average of the past decade, the Washington-based lender said.
The U.S. economy, the world’s biggest, grew at a 3.5 percent pace in the third quarter after a 0.7 percent slump in the preceding three months, the Commerce Department said Oct. 29. Japan’s jobless rate slid to a four-month low of 5.3 percent in September, the statistics bureau announced yesterday.
The Korean won ended the week 0.1 percent lower at 1,182.05 in Seoul. The currency, which has strengthened 9 percent in the past six months, reached a five-week low of 1,205.75 per dollar on Oct. 29.
“The U.S. gross domestic product in particular points out a lot of good indications,” said Mirza Baig, a currency strategist in Singapore at Deutsche Bank AG, the world’s biggest trader of foreign exchange. “It will support risk appetite in the near term. The won has gone back above 1,200, which was a resistance level.”
Elsewhere, the Philippine peso fell 1.3 percent this week to 47.595. The Singapore dollar dropped 0.3 percent to S$1.3978 and Taiwan’s dollar declined 0.4 percent to NT$32.535. The Thai baht was little changed at 33.43.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, sank to its lowest level this month as investors favored safer bets than emerging-market assets. The benchmark recouped some of its losses in the latter part of the week as reports showing the first U.S. economic growth in a year and falling unemployment in Japan brightened the outlook for exports.
“Risk aversion was weighing down sentiment on Asian currencies but the long-term view still holds,” said Penn Nee Chow, an economist in Singapore at United Overseas Bank Ltd. “Asian currencies will continue to gain against the U.S. dollar as the outlook improves. A lot of Asian economies are expected to come back to year-on-year growth in the fourth quarter.”
The rupiah dropped 1.6 percent this week to 9,585 per dollar, India’s rupee fell 1.0 percent to 46.9729 and the Malaysian ringgit slid 0.9 percent to 3.4138. All three were still up for the month.
The Asia Dollar Index had a weekly loss of 0.2 percent and the MSCI Asia-Pacific Index of shares dropped 2.6 percent. Emerging-market equity funds’ net inflows fell to $2.2 billion in the week to Oct. 28, after averaging $4.4 billion over the previous two weeks, according to research firm EPFR Global.
Below-Average Growth
The International Monetary Fund on Oct. 29 said the region’s governments must maintain fiscal support for their economies as demand for their exports will remain sluggish. Growth in Asia including Japan, Australia and New Zealand will probably accelerate to 5.8 percent next year from 2.8 percent in 2009, “well below” the 6.8 percent average of the past decade, the Washington-based lender said.
The U.S. economy, the world’s biggest, grew at a 3.5 percent pace in the third quarter after a 0.7 percent slump in the preceding three months, the Commerce Department said Oct. 29. Japan’s jobless rate slid to a four-month low of 5.3 percent in September, the statistics bureau announced yesterday.
The Korean won ended the week 0.1 percent lower at 1,182.05 in Seoul. The currency, which has strengthened 9 percent in the past six months, reached a five-week low of 1,205.75 per dollar on Oct. 29.
“The U.S. gross domestic product in particular points out a lot of good indications,” said Mirza Baig, a currency strategist in Singapore at Deutsche Bank AG, the world’s biggest trader of foreign exchange. “It will support risk appetite in the near term. The won has gone back above 1,200, which was a resistance level.”
Elsewhere, the Philippine peso fell 1.3 percent this week to 47.595. The Singapore dollar dropped 0.3 percent to S$1.3978 and Taiwan’s dollar declined 0.4 percent to NT$32.535. The Thai baht was little changed at 33.43.
Thursday, October 29, 2009
Bank of Japan to Debate Ending Corporate Debt-Purchase Programs
Oct. 30 (Bloomberg) -- Bank of Japan policy makers will probably today debate ending their purchases of corporate debt as central banks around the world start phasing out emergency measures taken at the height of the financial crisis.
Board members have signaled differences over the timing of a withdrawal from three programs designed to sustain credit, and today’s vote may be divided, central bank watchers said. A majority favor allowing commercial paper and corporate bond buying to expire at year-end, while extending unlimited collateral-backed lending to banks through March, they said.
Central bank Governor Masaaki Shirakawa is aiming to avoid the financial industry becoming dependent on the central bank’s backstop facilities, while keeping alive a recovery from the nation’s worst postwar recession. As a result, Japan may lag behind other developed nations in raising interest rates at the same time as ending the corporate-debt programs, analysts said.
“The BOJ’s board will probably extend the limitless lending facility just once more because scrapping all the programs at once may fuel concern about companies’ borrowing at the end of the fiscal year,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. “In any case, the bank will keep emphasizing its commitment to prolonging a super-low rate policy.”
The three credit programs have been in place since the bank slashed the benchmark interest rate to 0.1 percent in December amid the worst global financial crisis since the 1930s. The bank decided in July to extend all the measures to Dec. 31. Japan’s fiscal year ends March 31.
Economic Outlook
The central bank’s decision is expected early afternoon in Tokyo. At 3 p.m., the board will release its semi-annual economic outlook. Policy makers will probably forecast that the economy will expand about 1 percent in each of the next two years and deflation will extend into fiscal 2011, analysts said.
Shirakawa said twice over the past month that the need to support corporate debt markets with policy steps has receded because companies have regained access to private funding. At the same time, the governor emphasized the bank’s intention to keep rates “very low” to ensure the economy keeps expanding.
In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. The sale took place even after Moody’s Investors Service last week downgraded Japan’s largest beverage maker to A2, the sixth-highest grade.
‘Soft Landing’
Policy makers will probably keep interest rates unchanged into next year, in part to hold down corporate borrowing costs, analysts said.
“The central bank probably wants to make sure that ending the credit-easing measures won’t drive up money-market rates,” said Izuru Kato, chief market economist at Totan Research Co. in Tokyo. “If the bank seeks a soft landing, it will be necessary to extend the limitless lending program to March and give a transition period for lenders.”
Yields on 10-year government bonds climbed to an 11-week high on Oct. 28 on concern the government may have to sell more debt to pay for promised spending for households.
The bank’s likely forecasts of prolonged deflation and tepid growth will help to quash speculation for any early rate increase, analysts added. Fifteen of 16 economists surveyed by Bloomberg News last week said the bank will hold the key rate at 0.1 percent at least through the end of 2010.
Fuel Speculation
Even so, should the bank decide today to end its limitless lending program, that “may flare up speculation for policy tightening,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “Announcing an end to the step now would be bad timing because investors worldwide are getting nervous about rate hikes.”
Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week.
In the U.S., two-year Treasury note yields this week rose to the highest level in almost a month on speculation Federal Reserve officials will probably discuss next month how and when to signal the possibility of higher U.S. interest rates.
The Bank of Japan’s unlimited lending program is still in demand while few lenders have offered to sell corporate debt to the central bank. The bank’s assets as of Sept. 30 included 6.9 trillion yen in such loans and only 100 billion yen of commercial paper purchased from lenders and 300 billion yen of corporate bonds.
Some policy makers have suggested a reluctance to scrap the credit-easing programs. Board member Atsushi Mizuno said in August that the bank-loan facility had helped keep short-term interest rates low and ending it prematurely may unsettle financial markets.
“There may be a small number of dissenting votes” about the measures, said Totan Research’s Kato. “Even so, the board will probably come up with a majority consensus” to end the initiatives, he said.
The central bank will probably extend other measures, namely the temporary acceptance of low-rated debt as collateral and 0.1 percent interest payments on reserves, Kato said.
Board members have signaled differences over the timing of a withdrawal from three programs designed to sustain credit, and today’s vote may be divided, central bank watchers said. A majority favor allowing commercial paper and corporate bond buying to expire at year-end, while extending unlimited collateral-backed lending to banks through March, they said.
Central bank Governor Masaaki Shirakawa is aiming to avoid the financial industry becoming dependent on the central bank’s backstop facilities, while keeping alive a recovery from the nation’s worst postwar recession. As a result, Japan may lag behind other developed nations in raising interest rates at the same time as ending the corporate-debt programs, analysts said.
“The BOJ’s board will probably extend the limitless lending facility just once more because scrapping all the programs at once may fuel concern about companies’ borrowing at the end of the fiscal year,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. “In any case, the bank will keep emphasizing its commitment to prolonging a super-low rate policy.”
The three credit programs have been in place since the bank slashed the benchmark interest rate to 0.1 percent in December amid the worst global financial crisis since the 1930s. The bank decided in July to extend all the measures to Dec. 31. Japan’s fiscal year ends March 31.
Economic Outlook
The central bank’s decision is expected early afternoon in Tokyo. At 3 p.m., the board will release its semi-annual economic outlook. Policy makers will probably forecast that the economy will expand about 1 percent in each of the next two years and deflation will extend into fiscal 2011, analysts said.
Shirakawa said twice over the past month that the need to support corporate debt markets with policy steps has receded because companies have regained access to private funding. At the same time, the governor emphasized the bank’s intention to keep rates “very low” to ensure the economy keeps expanding.
In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. The sale took place even after Moody’s Investors Service last week downgraded Japan’s largest beverage maker to A2, the sixth-highest grade.
‘Soft Landing’
Policy makers will probably keep interest rates unchanged into next year, in part to hold down corporate borrowing costs, analysts said.
“The central bank probably wants to make sure that ending the credit-easing measures won’t drive up money-market rates,” said Izuru Kato, chief market economist at Totan Research Co. in Tokyo. “If the bank seeks a soft landing, it will be necessary to extend the limitless lending program to March and give a transition period for lenders.”
Yields on 10-year government bonds climbed to an 11-week high on Oct. 28 on concern the government may have to sell more debt to pay for promised spending for households.
The bank’s likely forecasts of prolonged deflation and tepid growth will help to quash speculation for any early rate increase, analysts added. Fifteen of 16 economists surveyed by Bloomberg News last week said the bank will hold the key rate at 0.1 percent at least through the end of 2010.
Fuel Speculation
Even so, should the bank decide today to end its limitless lending program, that “may flare up speculation for policy tightening,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “Announcing an end to the step now would be bad timing because investors worldwide are getting nervous about rate hikes.”
Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week.
In the U.S., two-year Treasury note yields this week rose to the highest level in almost a month on speculation Federal Reserve officials will probably discuss next month how and when to signal the possibility of higher U.S. interest rates.
The Bank of Japan’s unlimited lending program is still in demand while few lenders have offered to sell corporate debt to the central bank. The bank’s assets as of Sept. 30 included 6.9 trillion yen in such loans and only 100 billion yen of commercial paper purchased from lenders and 300 billion yen of corporate bonds.
Some policy makers have suggested a reluctance to scrap the credit-easing programs. Board member Atsushi Mizuno said in August that the bank-loan facility had helped keep short-term interest rates low and ending it prematurely may unsettle financial markets.
“There may be a small number of dissenting votes” about the measures, said Totan Research’s Kato. “Even so, the board will probably come up with a majority consensus” to end the initiatives, he said.
The central bank will probably extend other measures, namely the temporary acceptance of low-rated debt as collateral and 0.1 percent interest payments on reserves, Kato said.
Philippines Shuts Schools, Sends Supplies as Typhoon Approaches
Oct. 30 (Bloomberg) -- Philippines authorities ordered schools to close and stockpiled relief goods throughout Luzon, as Typhoon Mirinae bore down on the archipelago, where about 1,100 people have died in tropical cyclones this year.
Primary and secondary schools in most parts of Luzon were suspended after Storm Signal No. 2 was raised for the island, the National Disaster Coordinating Council said on its Web site today. The signal means winds of between 60 and 100 kilometers (60 miles) per hour are expected.
The Philippines has been battered by more than 10 cyclones this year, according to the council’s Web site. More than 121,000 people remain in evacuation centers after two cyclones barreled into Luzon, the most populous island, since Sept. 26.
Mirinae’s eye was located 547 kilometers east of the city of Casiguran on eastern Luzon at 4 a.m. local time today, the Philippines weather office said.
The storm has maximum sustained winds of 150 kph, with gusts to 185 kph, and was moving west-southwest at 22 kph, the office said.
Mirinae, referred to as Santi in the Philippines, is forecast to make landfall east of Manila after 2 a.m. tomorrow and sweep across the capital before heading over the South China Sea, according to the agency’s forecast.
The typhoon’s expected landfall coincides with All Saints’ weekend, when many Filipinos travel by boat and other means to their home provinces.
The Philippine Coast Guard yesterday sent rescue divers to the eastern coast of Luzon and to areas on the western coast where Mirinae is forecast to exit the island.
As many as 800 people were killed after a ferry sank in June last year when Typhoon Fengshen slammed into the archipelago of more than 7,000 islands.
Primary and secondary schools in most parts of Luzon were suspended after Storm Signal No. 2 was raised for the island, the National Disaster Coordinating Council said on its Web site today. The signal means winds of between 60 and 100 kilometers (60 miles) per hour are expected.
The Philippines has been battered by more than 10 cyclones this year, according to the council’s Web site. More than 121,000 people remain in evacuation centers after two cyclones barreled into Luzon, the most populous island, since Sept. 26.
Mirinae’s eye was located 547 kilometers east of the city of Casiguran on eastern Luzon at 4 a.m. local time today, the Philippines weather office said.
The storm has maximum sustained winds of 150 kph, with gusts to 185 kph, and was moving west-southwest at 22 kph, the office said.
Mirinae, referred to as Santi in the Philippines, is forecast to make landfall east of Manila after 2 a.m. tomorrow and sweep across the capital before heading over the South China Sea, according to the agency’s forecast.
The typhoon’s expected landfall coincides with All Saints’ weekend, when many Filipinos travel by boat and other means to their home provinces.
The Philippine Coast Guard yesterday sent rescue divers to the eastern coast of Luzon and to areas on the western coast where Mirinae is forecast to exit the island.
As many as 800 people were killed after a ferry sank in June last year when Typhoon Fengshen slammed into the archipelago of more than 7,000 islands.
Wednesday, October 28, 2009
N.Z. Keeps Rate at 2.5%, May Tighten 2nd Half of 2010
Oct. 29 (Bloomberg) -- New Zealand’s central bank said it will wait until the second half of next year before raising interest rates because the economy needs further stimulus as it recovers from a recession.
“We see no urgency to begin withdrawing monetary policy stimulus and we expect to keep the cash rate at the current level until the second half of 2010,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today after leaving the official cash rate at a record-low of 2.5 percent.
Bollard is keeping borrowing costs steady as his counterparts in Australia and Norway increase their benchmark rates amid accelerating inflation. The nation’s currency fell as traders pared bets the central bank would increase the cash rate as early as the first quarter.
“They had to acknowledge that the official cash rate is unlikely to stay at these levels through the next year,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. Still “they don’t want to threaten the recovery, and they don’t want to fuel the currency.”
New Zealand’s dollar fell to 71.86 U.S. cents at 1:50 p.m. in Wellington from 72.81 cents immediately before the decision. Traders expect 212 basis points of rate increases over the next year, down from 232 points yesterday, according to a Credit Suisse index based on swaps trading. A basis point is 0.01 percentage point.
Rate Outlook
All 11 economists surveyed by Bloomberg News expected today’s decision. Three forecast a rate increase in the first quarter of next year and nine, including Ong, expect higher borrowing costs by June 30.
New Zealand’s currency has surged 25 percent against the U.S. dollar the past six months, the best performing major currency tracked by Bloomberg, as rising house prices and a pickup in consumer and business confidence fanned expectations Bollard may raise borrowing costs as early as January.
Instead, his outlook on rates has changed only slightly since Sept. 10 when he said he expected to keep the cash rate “at or below the current level through until the latter part of 2010.”
The economy grew for the first time in six quarters in the three months to June, buoyed by low interest rates and a fiscal stimulus that included tax cuts and extra government spending.
“The forecast recovery in economic activity is based on fiscal and monetary policy continuing to provide substantial support to the economy,” said Bollard. “We think such support remains appropriate.”
Fiscal Stimulus
Finance Minister Bill English has signaled he will cut government spending. Removing some fiscal stimulus is likely to reduce the work that monetary policy will otherwise need to do, Bollard said.
Central bankers around the world are now assessing when to start raising interest rates as the global economy recovers.
Reserve Bank of Australia Governor Glenn Stevens raised his benchmark rate on Oct. 6 by a quarter point to 3.25 percent, the first G-20 central banker to move since the height of the financial crisis.
Norway’s central bank yesterday raised its overnight deposit rate to 1.5 percent. Bank of Korea Governor Lee Seong Tae last month signaled he may increase borrowing costs in the future to stem rising property prices.
While the economies of New Zealand’s main trading partners are rebounding, there remains “significant vulnerabilities and challenges to be worked through,” Bollard said.
Inflation Accelerates
In New Zealand, trader expectations of a rate increase in the coming year surged after an Oct. 15 report showed inflation accelerated faster in the third quarter than Bollard expected, and that core inflation hasn’t slowed amid the worst recession in three decades.
Traders saw no chance of an increase today, according to an index compiled by Credit Suisse based on swaps trading in Wellington yesterday.
“Inflation is expected to track comfortably within the target range over the medium term,” Bollard said. The central bank is required to keep annual price gains between 1 percent and 3 percent.
House prices have increased 7.9 percent since a low in January and property sales in September surged 44 percent from a year earlier, according to Real Estate Institute figures.
A stronger housing market helped drive consumer confidence to a four-year high in the third quarter, according to an index complied by Westpac Banking Corp. and McDermott Miller Ltd.
“A very gradual increase in household spending appears to be taking place,” said Bollard. “Government spending is also supporting activity. Business spending, however, remains weak and credit growth is very subdued.”
Business Confidence
Signs of a global recovery and rising commodity prices kept business confidence near a 10-year high in October, according to an ANZ National Bank Ltd. survey published yesterday.
To be sure, the currency’s gains may slow the recovery by curbing exports and tourism, which make up 40 percent of the economy. Spending by foreign tourists in New Zealand fell in the 12 months through March 31, the first drop in a decade, a report showed yesterday.
“The high level of the New Zealand dollar has limited the scope for exports to contribute to the recovery, and reinforces a bias toward domestic expenditure,” said Bollard. “After some short-term correction, it is also likely to see the current account deficit begin to widen in the medium term.”
“We see no urgency to begin withdrawing monetary policy stimulus and we expect to keep the cash rate at the current level until the second half of 2010,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today after leaving the official cash rate at a record-low of 2.5 percent.
Bollard is keeping borrowing costs steady as his counterparts in Australia and Norway increase their benchmark rates amid accelerating inflation. The nation’s currency fell as traders pared bets the central bank would increase the cash rate as early as the first quarter.
“They had to acknowledge that the official cash rate is unlikely to stay at these levels through the next year,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. Still “they don’t want to threaten the recovery, and they don’t want to fuel the currency.”
New Zealand’s dollar fell to 71.86 U.S. cents at 1:50 p.m. in Wellington from 72.81 cents immediately before the decision. Traders expect 212 basis points of rate increases over the next year, down from 232 points yesterday, according to a Credit Suisse index based on swaps trading. A basis point is 0.01 percentage point.
Rate Outlook
All 11 economists surveyed by Bloomberg News expected today’s decision. Three forecast a rate increase in the first quarter of next year and nine, including Ong, expect higher borrowing costs by June 30.
New Zealand’s currency has surged 25 percent against the U.S. dollar the past six months, the best performing major currency tracked by Bloomberg, as rising house prices and a pickup in consumer and business confidence fanned expectations Bollard may raise borrowing costs as early as January.
Instead, his outlook on rates has changed only slightly since Sept. 10 when he said he expected to keep the cash rate “at or below the current level through until the latter part of 2010.”
The economy grew for the first time in six quarters in the three months to June, buoyed by low interest rates and a fiscal stimulus that included tax cuts and extra government spending.
“The forecast recovery in economic activity is based on fiscal and monetary policy continuing to provide substantial support to the economy,” said Bollard. “We think such support remains appropriate.”
Fiscal Stimulus
Finance Minister Bill English has signaled he will cut government spending. Removing some fiscal stimulus is likely to reduce the work that monetary policy will otherwise need to do, Bollard said.
Central bankers around the world are now assessing when to start raising interest rates as the global economy recovers.
Reserve Bank of Australia Governor Glenn Stevens raised his benchmark rate on Oct. 6 by a quarter point to 3.25 percent, the first G-20 central banker to move since the height of the financial crisis.
Norway’s central bank yesterday raised its overnight deposit rate to 1.5 percent. Bank of Korea Governor Lee Seong Tae last month signaled he may increase borrowing costs in the future to stem rising property prices.
While the economies of New Zealand’s main trading partners are rebounding, there remains “significant vulnerabilities and challenges to be worked through,” Bollard said.
Inflation Accelerates
In New Zealand, trader expectations of a rate increase in the coming year surged after an Oct. 15 report showed inflation accelerated faster in the third quarter than Bollard expected, and that core inflation hasn’t slowed amid the worst recession in three decades.
Traders saw no chance of an increase today, according to an index compiled by Credit Suisse based on swaps trading in Wellington yesterday.
“Inflation is expected to track comfortably within the target range over the medium term,” Bollard said. The central bank is required to keep annual price gains between 1 percent and 3 percent.
House prices have increased 7.9 percent since a low in January and property sales in September surged 44 percent from a year earlier, according to Real Estate Institute figures.
A stronger housing market helped drive consumer confidence to a four-year high in the third quarter, according to an index complied by Westpac Banking Corp. and McDermott Miller Ltd.
“A very gradual increase in household spending appears to be taking place,” said Bollard. “Government spending is also supporting activity. Business spending, however, remains weak and credit growth is very subdued.”
Business Confidence
Signs of a global recovery and rising commodity prices kept business confidence near a 10-year high in October, according to an ANZ National Bank Ltd. survey published yesterday.
To be sure, the currency’s gains may slow the recovery by curbing exports and tourism, which make up 40 percent of the economy. Spending by foreign tourists in New Zealand fell in the 12 months through March 31, the first drop in a decade, a report showed yesterday.
“The high level of the New Zealand dollar has limited the scope for exports to contribute to the recovery, and reinforces a bias toward domestic expenditure,” said Bollard. “After some short-term correction, it is also likely to see the current account deficit begin to widen in the medium term.”
Asian Stocks Fall on Growth Concerns; ANZ Bank, Advantest Slump
Oct. 29 (Bloomberg) -- Asian stocks dropped, extending a global decline, after the head of Australia & New Zealand Banking Group Ltd. said the Australian economy is “still fragile” and new-home sales unexpectedly fell in the U.S.
ANZ Bank, Australia’s second-biggest provider of business loans, dropped 2 percent in Sydney as it reported lower-than- estimated earnings. Advantest Corp., the world’s No. 1 maker of memory-chip testers, sank 4.5 percent after posting a wider loss on slumping orders. BHP Billiton Ltd., the world’s largest mining company, slid 3 percent after commodity prices declined.
The MSCI Asia Pacific Index slipped 0.8 percent to 115.43 as of 10:27 a.m. in Tokyo, extending a 2.9 percent decline in the past two days. The gauge has climbed 63 percent from a more than five-year low on March 9 amid signs the global economy is recovering from its worst slowdown since World War II. The MSCI World Index lost 0.2 percent, after slumping 2 percent yesterday.
“Cracks have been showing up,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Markets, which holds $75 billion in assets. “Investors are worried about whether the improvements we’ve seen are self-sustaining or just the result of stimulus which is fading.”
Japan’s Nikkei 225 Stock Average sank 1.5 percent to 9,923.92. Australia’s S&P/ASX 200 Index slid 1.9 percent, while New Zealand’s NZX 50 Index dipped 1 percent. South Korea’s Kospi Index declined 1.6 percent.
New Home Sales
Futures on the Standard & Poor’s 500 Index lost 0.1 percent. The gauge fell 2 percent in New York yesterday, the most in a month, as the Commerce Department said sales of new homes fell 3.6 percent to a level that was lower than the most pessimistic economist’s forecast.
ANZ Bank dropped 2 percent to A$22.98. The lender said full-year net income fell 11 percent to A$2.94 billion ($2.6 billion). The bank was expected to report full-year profit of A$3.13 billion, according to the average of six analysts’ estimates compiled by Bloomberg.
Australia’s central bank should have waited longer before raising borrowing costs because the economy is “still fragile,” ANZ Bank Chief Executive Officer Mike Smith told reporters in Sydney today.
The Reserve Bank of Australia this month became the first central bank among Group of 20 nations to raise interest rates amid signs of strength in the country’s economy.
Advantest Loss
“It wouldn’t have been a bad idea just to let Christmas wash through and then see what needed to happen in the new year,” ANZ Bank’s Smith said.
Advantest slumped 4.5 percent to 2,110 yen. The company’s second-quarter net loss widened to 3.3 billion yen ($36 million) from 2.8 billion yen a year earlier.
Better-than-estimated earnings and economic reports have driven the global stock rally since March. Companies in the MSCI Asia Pacific Index are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for Europe’s Dow Jones Stoxx 600 Index.
Resources companies declined after crude oil for December delivery tumbled 2.6 percent, the most in a month, to $77.46 a barrel in New York yesterday, while the London Metals Index, a measure of six metals, slumped 3.2 percent.
BHP dropped 3 percent to A$37.24. Rio Tinto Ltd., the world’s second-biggest mining company, slipped 4.4 percent to A$61.26. Woodside Petroleum Ltd., Australia’s second-largest oil producer, dropped 2.5 percent to A$47.18. Inpex Corp., Japan’s largest oil explorer, fell 2.6 percent to 750,000 yen.
NEC Electronics
Nippon Mining Holdings Inc. sank 3.9 percent to 392 yen. Japan’s biggest copper producer and an oil refiner said in a preliminary earnings statement first-half net income was 18.8 billion yen, missing its projection by 18 percent, amid narrower margins for petroleum products.
NEC Electronics Corp. had yet to trade and was being bid for at 650 yen, compared with its close yesterday of 750 yen. Japan’s fourth-largest chipmaker widened its full-year net loss forecast, citing lower demand for semiconductors used in cars, flat-panel televisions and handsets.
The loss in the 12 months ending March 31 will probably be 55 billion yen, wider than the 9 billion yen projected earlier, the company said in a statement.
ANZ Bank, Australia’s second-biggest provider of business loans, dropped 2 percent in Sydney as it reported lower-than- estimated earnings. Advantest Corp., the world’s No. 1 maker of memory-chip testers, sank 4.5 percent after posting a wider loss on slumping orders. BHP Billiton Ltd., the world’s largest mining company, slid 3 percent after commodity prices declined.
The MSCI Asia Pacific Index slipped 0.8 percent to 115.43 as of 10:27 a.m. in Tokyo, extending a 2.9 percent decline in the past two days. The gauge has climbed 63 percent from a more than five-year low on March 9 amid signs the global economy is recovering from its worst slowdown since World War II. The MSCI World Index lost 0.2 percent, after slumping 2 percent yesterday.
“Cracks have been showing up,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Markets, which holds $75 billion in assets. “Investors are worried about whether the improvements we’ve seen are self-sustaining or just the result of stimulus which is fading.”
Japan’s Nikkei 225 Stock Average sank 1.5 percent to 9,923.92. Australia’s S&P/ASX 200 Index slid 1.9 percent, while New Zealand’s NZX 50 Index dipped 1 percent. South Korea’s Kospi Index declined 1.6 percent.
New Home Sales
Futures on the Standard & Poor’s 500 Index lost 0.1 percent. The gauge fell 2 percent in New York yesterday, the most in a month, as the Commerce Department said sales of new homes fell 3.6 percent to a level that was lower than the most pessimistic economist’s forecast.
ANZ Bank dropped 2 percent to A$22.98. The lender said full-year net income fell 11 percent to A$2.94 billion ($2.6 billion). The bank was expected to report full-year profit of A$3.13 billion, according to the average of six analysts’ estimates compiled by Bloomberg.
Australia’s central bank should have waited longer before raising borrowing costs because the economy is “still fragile,” ANZ Bank Chief Executive Officer Mike Smith told reporters in Sydney today.
The Reserve Bank of Australia this month became the first central bank among Group of 20 nations to raise interest rates amid signs of strength in the country’s economy.
Advantest Loss
“It wouldn’t have been a bad idea just to let Christmas wash through and then see what needed to happen in the new year,” ANZ Bank’s Smith said.
Advantest slumped 4.5 percent to 2,110 yen. The company’s second-quarter net loss widened to 3.3 billion yen ($36 million) from 2.8 billion yen a year earlier.
Better-than-estimated earnings and economic reports have driven the global stock rally since March. Companies in the MSCI Asia Pacific Index are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for Europe’s Dow Jones Stoxx 600 Index.
Resources companies declined after crude oil for December delivery tumbled 2.6 percent, the most in a month, to $77.46 a barrel in New York yesterday, while the London Metals Index, a measure of six metals, slumped 3.2 percent.
BHP dropped 3 percent to A$37.24. Rio Tinto Ltd., the world’s second-biggest mining company, slipped 4.4 percent to A$61.26. Woodside Petroleum Ltd., Australia’s second-largest oil producer, dropped 2.5 percent to A$47.18. Inpex Corp., Japan’s largest oil explorer, fell 2.6 percent to 750,000 yen.
NEC Electronics
Nippon Mining Holdings Inc. sank 3.9 percent to 392 yen. Japan’s biggest copper producer and an oil refiner said in a preliminary earnings statement first-half net income was 18.8 billion yen, missing its projection by 18 percent, amid narrower margins for petroleum products.
NEC Electronics Corp. had yet to trade and was being bid for at 650 yen, compared with its close yesterday of 750 yen. Japan’s fourth-largest chipmaker widened its full-year net loss forecast, citing lower demand for semiconductors used in cars, flat-panel televisions and handsets.
The loss in the 12 months ending March 31 will probably be 55 billion yen, wider than the 9 billion yen projected earlier, the company said in a statement.
Tuesday, October 27, 2009
Australia Inflation Cools to Slowest in Decade, Eases Rate Talk
Oct. 28 (Bloomberg) -- Australian inflation cooled to the slowest pace in 10 years, easing pressure on central bank Governor Glenn Stevens to increase the benchmark lending rate by half a percentage point next week.
The consumer price index rose in the third quarter by an annual 1.3 percent, the smallest gain since the second quarter of 1999, after advancing 1.5 percent in the previous three months, the Bureau of Statistics said in Sydney today. Prices rose 1 percent from the second quarter.
Australia’s dollar fell after the report as traders boosted bets Stevens will slow the pace of future interest-rate increases. The Reserve Bank of Australia, the first Group of 20 central bank to raise borrowing costs since the height of the global financial crisis, said keeping borrowing costs too low may threaten its goal of maintaining inflation between 2 percent and 3 percent on average.
“Anyone worrying about inflation in the near term is barking up the wrong tree,” said Prasad Patkar, who helps manage about $1.3 billion at Platypus Asset Management in Sydney. “Today’s report probably won’t alter the RBA’s stance on gradually withdrawing monetary stimulus from ‘emergency’ levels.”
The Australian dollar fell to 91.41 U.S. cents at 12:15 p.m. in Sydney from 91.80 just before the report. Australia’s two- year government bond yield declined 8 basis points to 4.85 percent. A basis is 0.01 percentage point.
Bets Pared
Investors are certain Governor Stevens will increase the rate by a quarter point on Nov. 3, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. There is also a 10 percent chance of a half-point increase, the futures showed at 12:37 p.m., down from 16 percent prior to the report.
Food prices fell 0.8 percent and health costs slipped 1 percent in the third quarter, today’s report showed. By contrast, electricity costs rose 11.4 percent and gasoline advanced 4 percent.
The median estimate of economists surveyed by Bloomberg News was for annual inflation of 1.2 percent.
The Reserve Bank’s core inflation measures, which exclude the largest price increases and declines, were also published today.
The weighted-median gauge of inflation advanced 0.8 percent in the third quarter for an annual increase of 3.8 percent. Economists forecast gains of 0.8 percent and 3.7 percent respectively.
“The Reserve Bank is on a path back to neutral but there’s nothing in the data that suggests they have to ramp up their rhetoric or their tightening,” said Annette Beacher, senior strategist at TD Securities in Singapore.
Strengthening Economy
Signs are mounting that Australia’s economy, one of the few including China and India to skirt a recession in the first half of this year, will strengthen in coming months.
Reports published since Sept. 30 show consumer confidence jumped this month to the highest level in more than two years, business sentiment held last month near a six-year high, retail sales rose in August, and house prices climbed 7.9 percent this year through August.
An index of skilled vacancies in Australia rose 1.9 percent in October from September, a report today showed.
Gross domestic product expanded 1 percent in the first half of this year as consumers increased spending, spurred by the central bank slashing borrowing costs by a record 4.25 percentage points between September last year and April, plus A$42 billion ($39 billion) in government stimulus spending.
‘Trend’ Pace Growth
Governor Stevens expects GDP growth to accelerate close to its “trend” pace of 3 percent next year.
Australia’s experience of the global recession has been “much milder than elsewhere,” Assistant Governor Malcolm Edey said in Sydney today. “Australia came into the most intense phase of the crisis period in better shape than most, and with more scope than most to make timely macroeconomic policy responses.”
The economy’s rebound from the worst global recession since the Great Depression was a key reason central bank policy makers raised the benchmark interest rate to 3.25 percent from a 49- year low of 3 percent on Oct. 6.
Keeping the rate at “very low levels” may be “imprudent,” the bank said in minutes of its October meeting, published last week.
“While the current forecasts suggested inflation would fall in the coming year, the expected trough in inflation was significantly higher than earlier thought,” the bank said on Oct. 20. “By 2011 inflation could be rising again.”
The consumer price index rose in the third quarter by an annual 1.3 percent, the smallest gain since the second quarter of 1999, after advancing 1.5 percent in the previous three months, the Bureau of Statistics said in Sydney today. Prices rose 1 percent from the second quarter.
Australia’s dollar fell after the report as traders boosted bets Stevens will slow the pace of future interest-rate increases. The Reserve Bank of Australia, the first Group of 20 central bank to raise borrowing costs since the height of the global financial crisis, said keeping borrowing costs too low may threaten its goal of maintaining inflation between 2 percent and 3 percent on average.
“Anyone worrying about inflation in the near term is barking up the wrong tree,” said Prasad Patkar, who helps manage about $1.3 billion at Platypus Asset Management in Sydney. “Today’s report probably won’t alter the RBA’s stance on gradually withdrawing monetary stimulus from ‘emergency’ levels.”
The Australian dollar fell to 91.41 U.S. cents at 12:15 p.m. in Sydney from 91.80 just before the report. Australia’s two- year government bond yield declined 8 basis points to 4.85 percent. A basis is 0.01 percentage point.
Bets Pared
Investors are certain Governor Stevens will increase the rate by a quarter point on Nov. 3, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. There is also a 10 percent chance of a half-point increase, the futures showed at 12:37 p.m., down from 16 percent prior to the report.
Food prices fell 0.8 percent and health costs slipped 1 percent in the third quarter, today’s report showed. By contrast, electricity costs rose 11.4 percent and gasoline advanced 4 percent.
The median estimate of economists surveyed by Bloomberg News was for annual inflation of 1.2 percent.
The Reserve Bank’s core inflation measures, which exclude the largest price increases and declines, were also published today.
The weighted-median gauge of inflation advanced 0.8 percent in the third quarter for an annual increase of 3.8 percent. Economists forecast gains of 0.8 percent and 3.7 percent respectively.
“The Reserve Bank is on a path back to neutral but there’s nothing in the data that suggests they have to ramp up their rhetoric or their tightening,” said Annette Beacher, senior strategist at TD Securities in Singapore.
Strengthening Economy
Signs are mounting that Australia’s economy, one of the few including China and India to skirt a recession in the first half of this year, will strengthen in coming months.
Reports published since Sept. 30 show consumer confidence jumped this month to the highest level in more than two years, business sentiment held last month near a six-year high, retail sales rose in August, and house prices climbed 7.9 percent this year through August.
An index of skilled vacancies in Australia rose 1.9 percent in October from September, a report today showed.
Gross domestic product expanded 1 percent in the first half of this year as consumers increased spending, spurred by the central bank slashing borrowing costs by a record 4.25 percentage points between September last year and April, plus A$42 billion ($39 billion) in government stimulus spending.
‘Trend’ Pace Growth
Governor Stevens expects GDP growth to accelerate close to its “trend” pace of 3 percent next year.
Australia’s experience of the global recession has been “much milder than elsewhere,” Assistant Governor Malcolm Edey said in Sydney today. “Australia came into the most intense phase of the crisis period in better shape than most, and with more scope than most to make timely macroeconomic policy responses.”
The economy’s rebound from the worst global recession since the Great Depression was a key reason central bank policy makers raised the benchmark interest rate to 3.25 percent from a 49- year low of 3 percent on Oct. 6.
Keeping the rate at “very low levels” may be “imprudent,” the bank said in minutes of its October meeting, published last week.
“While the current forecasts suggested inflation would fall in the coming year, the expected trough in inflation was significantly higher than earlier thought,” the bank said on Oct. 20. “By 2011 inflation could be rising again.”
Australian Dollar Falls as Consumer Prices Damp Rate Prospects
Oct. 28 (Bloomberg) -- The Australian dollar fell after annual consumer prices slowed in line with economists’ expectations, prompting speculation the central bank may temper the pace of interest rate increases.
New Zealand’s currency dropped for a fifth day before a central bank meeting tomorrow where policy makers may hold interest rates at a record low. Annual consumer price inflation in Australia slowed to 1.3 percent in the third quarter from 1.5 percent. Economists in a Bloomberg survey forecast 1.2 percent.
“The market was going into this thinking the risks were to the upside in terms of the consensus forecasts,” said Robert Rennie, currency research head in Sydney at Westpac Banking Corp. “This isn’t a strong enough piece of data to see the Australian dollar gain. We are in a short-term corrective phase.”
Australia’s currency fell 0.2 percent to 91.48 U.S. cents as of 11:52 a.m. in Sydney from 91.66 cents in New York yesterday when it touched 91.22 cents, the least since Oct. 19. The currency fell 0.4 percent to 83.80 yen.
New Zealand’s dollar declined 0.2 percent to 74.29 U.S. cents from 74.42 cents in New York yesterday. It earlier dropped to 74.13 cents, also the weakest since Oct. 19. The so-called kiwi slipped 0.4 percent to 68.06 yen.
Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
An Australian index measuring the number of jobs available for skilled workers rose 1.9 percent in October from September, a government report showed today.
Australian government bonds advanced. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 5.65 percent, according to Bloomberg data. The price of the 5.25 percent security due March 2019 gained 0.256 to 97.114.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.71 percent from 4.73 yesterday.
New Zealand’s currency dropped for a fifth day before a central bank meeting tomorrow where policy makers may hold interest rates at a record low. Annual consumer price inflation in Australia slowed to 1.3 percent in the third quarter from 1.5 percent. Economists in a Bloomberg survey forecast 1.2 percent.
“The market was going into this thinking the risks were to the upside in terms of the consensus forecasts,” said Robert Rennie, currency research head in Sydney at Westpac Banking Corp. “This isn’t a strong enough piece of data to see the Australian dollar gain. We are in a short-term corrective phase.”
Australia’s currency fell 0.2 percent to 91.48 U.S. cents as of 11:52 a.m. in Sydney from 91.66 cents in New York yesterday when it touched 91.22 cents, the least since Oct. 19. The currency fell 0.4 percent to 83.80 yen.
New Zealand’s dollar declined 0.2 percent to 74.29 U.S. cents from 74.42 cents in New York yesterday. It earlier dropped to 74.13 cents, also the weakest since Oct. 19. The so-called kiwi slipped 0.4 percent to 68.06 yen.
Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
An Australian index measuring the number of jobs available for skilled workers rose 1.9 percent in October from September, a government report showed today.
Australian government bonds advanced. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 5.65 percent, according to Bloomberg data. The price of the 5.25 percent security due March 2019 gained 0.256 to 97.114.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.71 percent from 4.73 yesterday.
National Australia Slumps to Six-Month Loss on Debts
Oct. 28 (Bloomberg) -- National Australia Bank Ltd., the country’s biggest lender to businesses, slumped to a fiscal second-half loss after charges for bad debts climbed and the company set aside funds for a tax settlement in New Zealand.
The net loss of A$75 million ($69 million) in the six months ended Sept. 30 compared with a profit of A$1.85 billion in the year-earlier period, the Melbourne-based bank said in a statement today. Cash earnings, which strip out one-time items, rose 8 percent to A$1.81 billion.
Chief Executive Officer Cameron Clyne, who bought insurance, mortgage and brokerage assets since July, said he may consider reducing capital buffers that protect against future loan losses as the economy recovers. Australia’s central bank this month became the first among Group of 20 nations to raise interest rates since the global financial crisis began.
“The outlook is suggesting the worst is over,” said Hugh Dive, who helps manage about $3 billion at Investors Mutual Ltd. including National Australia shares. “Once bad debts start coming off, if they can maintain market share with a similar margin, we’ll see expanded earnings going forward.”
National Australia shares fell 0.6 percent to A$30.53 at 11:17 a.m. in Sydney. The shares have advanced 46 percent this year as analysts forecast an earnings rebound after the country dodged the global recession and the jobless rate unexpectedly fell in September.
‘Robust’ Prospects
Second-half net interest income, or revenue from borrowers minus interest paid to depositors, rose to A$6.19 billion from A$5.84 billion, National Australia said.
“Near- to medium-term prospects for sustainable growth look robust,” Ben Potter, research analyst at IG Markets, said in a note today. “We would expect some upwards revisions to price targets.”
Charges for bad and doubtful debts rose to A$2 billion in the second half from A$1.76 billion a year earlier. The lender also set aside A$542 million for a tax bill after New Zealand authorities reviewed structured finance transactions it carried out.
It may not be possible to judge whether bad debts have peaked for another six months because Australia’s economy is still supported by a government stimulus, National Australia executives said during a conference call today.
‘Somewhat Cautious’
“There are a number of positive signs but you also need to be somewhat cautious,” Clyne told reporters in Sydney. Asset quality “might be stabilizing, but there are still a number of issues to be worked through.”
National Australia said it may reduce its Tier 1 capital ratio, a measure of the lender’s ability to withstand future losses, “when conditions become more predictable.”
The bank’s Tier 1 ratio climbed 65 basis points from March to 8.96 percent on Sept. 30. A basis point is 0.01 of a percentage point. National Australia will pay a final dividend of 73 cents, down from 97 cents a year ago.
Australian banks can absorb possible defaults by businesses and households and losses may be limited to 2 percent of outstanding loans, or A$33 billion of A$1.65 trillion in total credits as of March this year, the International Monetary Fund said in an Oct. 14 report.
The nation’s top four banks may amass as much as A$18 billion of surplus Tier 1 capital before the end of next year, Credit Suisse AG said in an Oct. 14 report. The banks may return A$15 billion of that to investors through share buybacks as asset quality improves and bad debts ease, Credit Suisse said.
Acquisition Spree
National Australia in September bought Aviva Plc’s Australian wealth advisory and life insurance units for A$825 million. In August, the bank agreed to purchase the mortgage business of Challenger Financial Services Group for A$385 million. A month earlier, it said it would buy most of Goldman Sachs JBWere Pty’s private brokerage for A$99 million.
Full-year profit fell as bad debts swelled and earnings slumped in the recession-hit U.K., where National Australia runs Clydesdale Bank and Yorkshire Bank. Net income dropped to A$2.59 billion from A$4.54 billion.
National Australia was expected to report annual profit of A$4.18 billion, according to the average of seven analysts’ estimates compiled by Bloomberg.
The net loss of A$75 million ($69 million) in the six months ended Sept. 30 compared with a profit of A$1.85 billion in the year-earlier period, the Melbourne-based bank said in a statement today. Cash earnings, which strip out one-time items, rose 8 percent to A$1.81 billion.
Chief Executive Officer Cameron Clyne, who bought insurance, mortgage and brokerage assets since July, said he may consider reducing capital buffers that protect against future loan losses as the economy recovers. Australia’s central bank this month became the first among Group of 20 nations to raise interest rates since the global financial crisis began.
“The outlook is suggesting the worst is over,” said Hugh Dive, who helps manage about $3 billion at Investors Mutual Ltd. including National Australia shares. “Once bad debts start coming off, if they can maintain market share with a similar margin, we’ll see expanded earnings going forward.”
National Australia shares fell 0.6 percent to A$30.53 at 11:17 a.m. in Sydney. The shares have advanced 46 percent this year as analysts forecast an earnings rebound after the country dodged the global recession and the jobless rate unexpectedly fell in September.
‘Robust’ Prospects
Second-half net interest income, or revenue from borrowers minus interest paid to depositors, rose to A$6.19 billion from A$5.84 billion, National Australia said.
“Near- to medium-term prospects for sustainable growth look robust,” Ben Potter, research analyst at IG Markets, said in a note today. “We would expect some upwards revisions to price targets.”
Charges for bad and doubtful debts rose to A$2 billion in the second half from A$1.76 billion a year earlier. The lender also set aside A$542 million for a tax bill after New Zealand authorities reviewed structured finance transactions it carried out.
It may not be possible to judge whether bad debts have peaked for another six months because Australia’s economy is still supported by a government stimulus, National Australia executives said during a conference call today.
‘Somewhat Cautious’
“There are a number of positive signs but you also need to be somewhat cautious,” Clyne told reporters in Sydney. Asset quality “might be stabilizing, but there are still a number of issues to be worked through.”
National Australia said it may reduce its Tier 1 capital ratio, a measure of the lender’s ability to withstand future losses, “when conditions become more predictable.”
The bank’s Tier 1 ratio climbed 65 basis points from March to 8.96 percent on Sept. 30. A basis point is 0.01 of a percentage point. National Australia will pay a final dividend of 73 cents, down from 97 cents a year ago.
Australian banks can absorb possible defaults by businesses and households and losses may be limited to 2 percent of outstanding loans, or A$33 billion of A$1.65 trillion in total credits as of March this year, the International Monetary Fund said in an Oct. 14 report.
The nation’s top four banks may amass as much as A$18 billion of surplus Tier 1 capital before the end of next year, Credit Suisse AG said in an Oct. 14 report. The banks may return A$15 billion of that to investors through share buybacks as asset quality improves and bad debts ease, Credit Suisse said.
Acquisition Spree
National Australia in September bought Aviva Plc’s Australian wealth advisory and life insurance units for A$825 million. In August, the bank agreed to purchase the mortgage business of Challenger Financial Services Group for A$385 million. A month earlier, it said it would buy most of Goldman Sachs JBWere Pty’s private brokerage for A$99 million.
Full-year profit fell as bad debts swelled and earnings slumped in the recession-hit U.K., where National Australia runs Clydesdale Bank and Yorkshire Bank. Net income dropped to A$2.59 billion from A$4.54 billion.
National Australia was expected to report annual profit of A$4.18 billion, according to the average of seven analysts’ estimates compiled by Bloomberg.
Indian ADRs: ICICI Bank, HDFC Bank, Sterlite Industries, Wipro
Oct. 27 (Bloomberg) -- The Bank of New York Mellon India ADR Index decreased 3.6 percent to 895.40, the most in two months. The ChIndia Index, composed of 50 Chinese and Indian American depositary receipts, slumped 2.4 percent. The Bombay Stock Exchange Sensitive Index, or Sensex, declined 2.3 percent to 16,353.40.
The following Indian ADRs had unusual price changes. Stock symbols are in parentheses.
ICICI Bank Ltd. (IBN US) sank 8.2 percent to $34.32, the most since March 30. India’s second largest lender slumped after the Reserve Bank of India proposed that banks increase the minimum provision ratio for bad debts to 70 percent from 10 percent.
HDFC Bank Ltd. (HDB US) dropped 2.1 percent to $144.13.
Sterlite Industries Ltd. (SLT US) decreased 6.7 percent to $16.10, extending its losses to a third day. India’s largest copper producer dropped as prices of the metal declined after a report showed U.S. consumer sentiment slipping, stoking concern that a stalling economic recovery may limit demand for the metal.
Wipro Ltd. (WIT US) rose 0.4 percent to $18.74, gaining the most since Oct. 19. India’s third-largest software-services exporter reported second-quarter profit that beat analysts’ estimates as the global economic recovery spurred clients to increase orders.
The following Indian ADRs had unusual price changes. Stock symbols are in parentheses.
ICICI Bank Ltd. (IBN US) sank 8.2 percent to $34.32, the most since March 30. India’s second largest lender slumped after the Reserve Bank of India proposed that banks increase the minimum provision ratio for bad debts to 70 percent from 10 percent.
HDFC Bank Ltd. (HDB US) dropped 2.1 percent to $144.13.
Sterlite Industries Ltd. (SLT US) decreased 6.7 percent to $16.10, extending its losses to a third day. India’s largest copper producer dropped as prices of the metal declined after a report showed U.S. consumer sentiment slipping, stoking concern that a stalling economic recovery may limit demand for the metal.
Wipro Ltd. (WIT US) rose 0.4 percent to $18.74, gaining the most since Oct. 19. India’s third-largest software-services exporter reported second-quarter profit that beat analysts’ estimates as the global economic recovery spurred clients to increase orders.
Monday, October 26, 2009
Japanese Stocks Fall as Commodities Companies, Banks Decline
Oct. 27 (Bloomberg) -- Japanese stocks fell, headed for their biggest drop in three weeks, after a decline in the price of crude weighed on commodities companies and banks slumped on concern they will be slow to recover from the recession.
Mitsubishi Corp. and Mitsui & Co., Japan’s largest commodities traders, sank more than 3.5 percent after crude dropped the most in a month in New York yesterday. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, lost 1.3 percent, mirroring declines by U.S. financial shares after Rochdale Securities LLC analyst Richard Bove said Bank of America Corp. may have to sell shares to pay back its government bailout.
“Financial stocks will be the focus of selling,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Energy-related stocks should fall on lower commodity prices as well.”
The Nikkei 225 Stock Average lost 1.2 percent to 10,234.10 as of 10:10 a.m. in Tokyo. The broader Topix index decreased 1.7 percent to 895.44, with more than eight times as many shares retreating as advancing. Both gauges were on course for their steepest slump since Oct. 2.
In New York yesterday, the Standard & Poor’s 500 Index retreated 1.2 percent. Financial companies led the decline after Bove said the government will force Bank of America to raise more capital before repaying the Troubled Asset Relief Program. Crude oil for December delivery lost 2.3 percent to $78.68 a barrel, the biggest drop since Sept. 24.
Sumitomo Mitsui dropped 1.3 percent to 3,100 yen. Tokio Marine Holdings Inc., Japan’s largest casualty insurer, lost 3.2 percent to 2,305 yen. A measure of insurance companies in the Topix had the largest decline among 33 industry groups.
Hitachi Ltd., a maker of nuclear reactors, jumped 4 percent to 311 yen, on course for its biggest increase since Oct. 7. The company narrowed its full-year net loss forecast because of a recovery in demand in China and other emerging markets.
Mitsubishi Corp. and Mitsui & Co., Japan’s largest commodities traders, sank more than 3.5 percent after crude dropped the most in a month in New York yesterday. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, lost 1.3 percent, mirroring declines by U.S. financial shares after Rochdale Securities LLC analyst Richard Bove said Bank of America Corp. may have to sell shares to pay back its government bailout.
“Financial stocks will be the focus of selling,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Energy-related stocks should fall on lower commodity prices as well.”
The Nikkei 225 Stock Average lost 1.2 percent to 10,234.10 as of 10:10 a.m. in Tokyo. The broader Topix index decreased 1.7 percent to 895.44, with more than eight times as many shares retreating as advancing. Both gauges were on course for their steepest slump since Oct. 2.
In New York yesterday, the Standard & Poor’s 500 Index retreated 1.2 percent. Financial companies led the decline after Bove said the government will force Bank of America to raise more capital before repaying the Troubled Asset Relief Program. Crude oil for December delivery lost 2.3 percent to $78.68 a barrel, the biggest drop since Sept. 24.
Sumitomo Mitsui dropped 1.3 percent to 3,100 yen. Tokio Marine Holdings Inc., Japan’s largest casualty insurer, lost 3.2 percent to 2,305 yen. A measure of insurance companies in the Topix had the largest decline among 33 industry groups.
Hitachi Ltd., a maker of nuclear reactors, jumped 4 percent to 311 yen, on course for its biggest increase since Oct. 7. The company narrowed its full-year net loss forecast because of a recovery in demand in China and other emerging markets.
India May Signal Plans to Reverse Deepest Rate Cuts on Record
Oct. 27 (Bloomberg) -- India’s central bank may today signal plans to reverse its deepest interest-rate cuts on record as inflation pressures build in Asia’s third-largest economy.
The Reserve Bank of India will probably raise its inflation forecast and indicate policy is at a “turning point,” said Macquarie Group Ltd. economist Rajeev Malik. Morgan Stanley’s Chetan Ahya said the bank may ask lenders to set aside more cash as reserves in its quarterly statement due 11:15 a.m. in Mumbai.
At stake: safeguarding the purchasing power of India’s 1.2 billion people without a premature boost to borrowing costs that endangers the nation’s economic recovery. Benchmark 10-year bond yields have advanced to the highest level in more than a month on concern accelerating inflation will prompt the central bank to increase borrowing costs.
“We expect the RBI to set the foundation for the upcoming reversal of its expansionary measures,” said Sonal Varma, a Mumbai-based economist at Nomura Securities Co., Japan’s largest brokerage. “There are incipient signs of recovery as well as of rising inflationary pressures.”
The majority of economists surveyed by Bloomberg News expect no change in policy rates today. Governor Duvvuri Subbarao may keep the benchmark reverse repurchase rate at 3.25 percent and the cash reserve ratio at 5 percent, according to the median forecast of 24 economists in a Bloomberg News survey.
Central banks globally have stepped up their vigil against inflation and asset-price increases.
Global Shift
The Reserve Bank of Australia was the first among the Group of 20 nations to increase rates three weeks ago, citing costlier real estate as a reason. Norway’s Norges Bank is set to raise borrowing costs on Oct. 28, according to a Bloomberg survey. Bank of Korea Governor Lee Seong Tae said Oct. 23 that keeping rates at a record low may not be healthy for the economy.
At the Federal Reserve, officials under Chairman Ben S. Bernanke are reviewing whether recent gains in asset prices and narrowing credit spreads are justified as they try to ensure near-zero borrowing costs don’t create bubbles.
Subbarao this month said policy makers within the Reserve Bank agree on the need to tighten policy, while not on “when and how” to exit. The yield on India’s 6.90 percent note due July 2019 was 7.44 percent at 1:35 p.m. in Mumbai yesterday, the highest level since Sept. 4.
Political Context
India’s government has also commented on the central bank’s decision, adding a political dimension to today’s decision, analysts said. Finance Minister Pranab Mukherjee told Bloomberg- UTV television channel on Oct. 8 that promoting growth and containing inflation are both important and the central bank shouldn’t “compromise” one for the other. He stressed the need to “strike a balance” while setting interest rates.
Subbarao and Mukherjee met in New Delhi on Oct. 23 for an hour-long meeting to discuss the state of economy, a practice held before monetary policy announcements in India.
“The Reserve Bank could make a case for pre-emptive monetary tightening,” said Robert Prior-Wandesforde, senior Asian economist at HSBC Group Plc in Singapore. “But, with bank lending so low and political pressure not to act, the likelihood is that all rates will be left unchanged.”
Commercial bank loans grew 10.75 percent in the week ended Oct. 9, according to the central bank, which is almost a third of the pace a year ago and indicates demand remains diminished. The Reserve Bank expects economic growth of around 6 percent in the current financial year ending March 31, the weakest pace since 2003.
Inflation Rate
At the same time, consumer-price inflation in India is running above 10 percent and may accelerate further after the smallest monsoon rains since 1972 create food shortages. India’s $1.2 trillion economy depends on the June to September rains to water crops.
“Inflation is a concern in India and could quickly develop into a problem,” said Kevin Grice, an economist at Capital Economics Ltd. in London.
Subbarao wants to ensure that monetary and fiscal stimulus, which the central bank estimates is worth more than 12 percent of gross domestic product, doesn’t cause demand for goods and services including cars and mortgages to surge and worsen inflation.
India uses wholesale price data as its key inflation gauge; consumer price indexes are calculated on the basis of rural and urban workers and don’t capture the aggregate price picture.
Wholesale prices rose for a sixth week on Oct. 10, gaining 1.21 percent. HSBC’s Prior-Wandesforde expects the rate to hit 8 percent by March 31. Asset prices are also rising, evidenced by the 75 percent climb in the Bombay Stock Exchange’s Sensitive index since January.
“The central bank faces a very delicate situation to manage growth and inflation,” said Ravi Sud, chief financial officer at Hero Honda Motors Ltd., India’s biggest motorcycle maker. “On balance, inflation is the risk as it will hurt consumption and eventually hurt growth as well.”
It will be a “big challenge” to sustain Hero Honda’s profit margins because of rising commodity prices, Sud said last week. Hero Honda, based in New Delhi, is the Indian affiliate of Japan’s Honda Motor Co.
The Reserve Bank of India will probably raise its inflation forecast and indicate policy is at a “turning point,” said Macquarie Group Ltd. economist Rajeev Malik. Morgan Stanley’s Chetan Ahya said the bank may ask lenders to set aside more cash as reserves in its quarterly statement due 11:15 a.m. in Mumbai.
At stake: safeguarding the purchasing power of India’s 1.2 billion people without a premature boost to borrowing costs that endangers the nation’s economic recovery. Benchmark 10-year bond yields have advanced to the highest level in more than a month on concern accelerating inflation will prompt the central bank to increase borrowing costs.
“We expect the RBI to set the foundation for the upcoming reversal of its expansionary measures,” said Sonal Varma, a Mumbai-based economist at Nomura Securities Co., Japan’s largest brokerage. “There are incipient signs of recovery as well as of rising inflationary pressures.”
The majority of economists surveyed by Bloomberg News expect no change in policy rates today. Governor Duvvuri Subbarao may keep the benchmark reverse repurchase rate at 3.25 percent and the cash reserve ratio at 5 percent, according to the median forecast of 24 economists in a Bloomberg News survey.
Central banks globally have stepped up their vigil against inflation and asset-price increases.
Global Shift
The Reserve Bank of Australia was the first among the Group of 20 nations to increase rates three weeks ago, citing costlier real estate as a reason. Norway’s Norges Bank is set to raise borrowing costs on Oct. 28, according to a Bloomberg survey. Bank of Korea Governor Lee Seong Tae said Oct. 23 that keeping rates at a record low may not be healthy for the economy.
At the Federal Reserve, officials under Chairman Ben S. Bernanke are reviewing whether recent gains in asset prices and narrowing credit spreads are justified as they try to ensure near-zero borrowing costs don’t create bubbles.
Subbarao this month said policy makers within the Reserve Bank agree on the need to tighten policy, while not on “when and how” to exit. The yield on India’s 6.90 percent note due July 2019 was 7.44 percent at 1:35 p.m. in Mumbai yesterday, the highest level since Sept. 4.
Political Context
India’s government has also commented on the central bank’s decision, adding a political dimension to today’s decision, analysts said. Finance Minister Pranab Mukherjee told Bloomberg- UTV television channel on Oct. 8 that promoting growth and containing inflation are both important and the central bank shouldn’t “compromise” one for the other. He stressed the need to “strike a balance” while setting interest rates.
Subbarao and Mukherjee met in New Delhi on Oct. 23 for an hour-long meeting to discuss the state of economy, a practice held before monetary policy announcements in India.
“The Reserve Bank could make a case for pre-emptive monetary tightening,” said Robert Prior-Wandesforde, senior Asian economist at HSBC Group Plc in Singapore. “But, with bank lending so low and political pressure not to act, the likelihood is that all rates will be left unchanged.”
Commercial bank loans grew 10.75 percent in the week ended Oct. 9, according to the central bank, which is almost a third of the pace a year ago and indicates demand remains diminished. The Reserve Bank expects economic growth of around 6 percent in the current financial year ending March 31, the weakest pace since 2003.
Inflation Rate
At the same time, consumer-price inflation in India is running above 10 percent and may accelerate further after the smallest monsoon rains since 1972 create food shortages. India’s $1.2 trillion economy depends on the June to September rains to water crops.
“Inflation is a concern in India and could quickly develop into a problem,” said Kevin Grice, an economist at Capital Economics Ltd. in London.
Subbarao wants to ensure that monetary and fiscal stimulus, which the central bank estimates is worth more than 12 percent of gross domestic product, doesn’t cause demand for goods and services including cars and mortgages to surge and worsen inflation.
India uses wholesale price data as its key inflation gauge; consumer price indexes are calculated on the basis of rural and urban workers and don’t capture the aggregate price picture.
Wholesale prices rose for a sixth week on Oct. 10, gaining 1.21 percent. HSBC’s Prior-Wandesforde expects the rate to hit 8 percent by March 31. Asset prices are also rising, evidenced by the 75 percent climb in the Bombay Stock Exchange’s Sensitive index since January.
“The central bank faces a very delicate situation to manage growth and inflation,” said Ravi Sud, chief financial officer at Hero Honda Motors Ltd., India’s biggest motorcycle maker. “On balance, inflation is the risk as it will hurt consumption and eventually hurt growth as well.”
It will be a “big challenge” to sustain Hero Honda’s profit margins because of rising commodity prices, Sud said last week. Hero Honda, based in New Delhi, is the Indian affiliate of Japan’s Honda Motor Co.
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