Nov. 21 (Bloomberg) -- Asian stocks fell this week, dragging the MSCI Asia Pacific Index to its biggest weekly decline in three amid Japanese share sales, while companies including Sony Corp. fueled profit concerns.
Mitsubishi UFJ Financial Group Inc. sank 7.3 percent after announcing Japan’s biggest public sale of additional common shares. Hitachi Ltd., the Nikkei 225 Stock Average’s fourth- largest company by sales, plunged 14 percent after revealing its plan to sell securities. Sony Corp., which makes the PlayStation 3 game console and Bravia televisions, slid 5.5 percent as it pushed back profitability targets.
“What you’re seeing is very much Japan-related,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which holds $75 billion in assets. “Everywhere else in Asia you have a very strong growth profile, but Japan has a lot of long-term structural issues that still need to be tackled.”
The MSCI Asia Pacific Index fell 1.2 percent to 116.91 this week, the steepest weekly retreat since the five days to Oct. 30. Seven of the 10 heaviest drags on the gauge were Japanese shares, including Mitsubishi UFJ.
Japan’s Topix index slid 3.2 percent, extending its drop to a fourth week. The gauge has fallen 2.4 percent in 2009, making it the only loser among the world’s 10 biggest stock markets, according to data compiled by Bloomberg.
The Kospi Index jumped 3.1 percent, breaking a five-week losing streak. Samsung Electronics Co., the world’s largest television maker, soared 5.7 percent after lifting its full-year TV shipment target. Lihir Gold Ltd. jumped 6.6 percent in Sydney, pacing gains among miners of the precious metal, after bullion climbed to a record.
China’s Growth
The S&P/ASX 200 Index fell 0.4 percent in Sydney. Hong Kong’s Hang Seng Index declined 0.4 percent, having closed at a level in the week that was double its March 9 low. The Shanghai Composite Index climbed 3.8 percent as the Ministry of Commerce’s Yao Jian said consumer spending will become an “important engine” for growth.
Expectations for more robust growth in emerging economies including China have overshadowed concerns about Japan’s recovery, driving up Asian equities faster than other regions. The MSCI Asia Pacific Index has risen 31 percent in 2009, compared with a 21 percent gain by the Standard & Poor’s 500 Index in the U.S. and a 23 percent climb by Europe’s Dow Jones Stoxx 600.
The Organization for Economic Cooperation and Development lifted its growth outlook for China on Nov. 19, saying the nation’s economy will expand 8.3 percent in 2009. In contrast, the Paris-based group said Japan will contract 5.3 percent this year and recommended the central bank buying more government bonds to grapple with deflation.
Interest Rates Near Zero
The Bank of Japan on Nov. 20 kept its overnight lending rate at 0.1 percent and raised its economic assessment even as government pressure for it to fight deflation intensified.
Mitsubishi UFJ, Japan’s biggest listed bank, fell 7.3 percent to 471 yen. The lender planned to raise as much as 1 trillion yen ($11.2 billion) by selling common stock, Mitsubishi UFJ said on Nov. 18, as international regulators worked on tighter capital rules.
Hitachi, which makes rice cookers and builds nuclear power plants, slid 14 percent to 253 yen, the steepest slump since the week ended May 15. The company will sell stock for the first time in 27 years, Hitachi said on Nov. 16.
Tokyo Tatemono Co., a property developer, and Nomura Real Estate Residential Fund Inc. also tumbled after revealing share- sale plans. Tokyo Tatemono lost 21 percent to 325 yen, while Nomura Real Estate slumped 15 percent to 352,000 yen.
Valuation Concerns
Sony sank 5.5 percent to 2,410 yen. The Tokyo-based company said on Nov. 19 that it’s aiming for a 10 percent return on equity by March 2013, which is later than its previous target of March 2011.
The new prediction from Sony helped fuel concerns that Asian equities had become too expensive relative to earnings expectations. The MSCI Asia Pacific Index has climbed 66 percent since March 9 amid signs the global economy is recovering from its worst slowdown since World War II.
Stocks on the gauge trade at an average 1.5 times book value, up from 1 at the March low. Shares on the U.S. Standard & Poor’s 500 Index are valued at 2.2 times, while Europe’s Dow Jones Stoxx 600 Index is at 1.7 times.
“The market has gone up a lot in a short span of time, so I would expect to see a correction in the near-term, since it’s not extremely cheap,” said Nicholas Yeo, head of Hong Kong and China equities at Aberdeen Asset Management Co., which manages $40 billion in Asian equities.
Asset Bubbles?
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Nov. 19 the risk of new asset bubbles in global economies and markets is rising, echoing similar comments by Hong Kong Exchanges & Clearing Ltd.’s Chairman Ronald Arculli the previous day.
Samsung, which counts China as its biggest market by revenue, jumped 5.7 percent to 755,000 won, the first weekly since September. The company on Nov. 16 raised its flat-panel TV shipment target for this year by 15 percent.
Lihir climbed 6.6 percent to A$3.58, a third weekly advance. Newcrest Mining Ltd., Australia’s largest gold producer, added 3.7 percent to A$35.84.
Gold for immediate deliver rose to a record $1,152.85 an ounce on Nov. 18 as the weakening U.S. currency prompted investors to flock to the metal as a haven. The dollar has depreciated in 2009 against all the 16 major currencies tracked by Bloomberg.
Friday, November 20, 2009
Japan’s Bonds Gain for 2nd Week on Outlook for Rates, Deflation
Nov. 21 (Bloomberg) -- Japan’s 20-year government bonds gained for a second week after the central bank held interest rates near zero amid mounting pressure for it to fight deflation.
Benchmark 20-year yields were near the lowest level in more than a month after central bank Governor Masaaki Shirakawa and his colleagues kept the benchmark overnight rate at 0.1 percent in a unanimous vote yesterday. The world’s second-largest economy is in deflation for the first time in three years, the Cabinet Office said in a monthly report.
“There’s no chance for the central bank to raise rates in the foreseeable future,” said Koji Ochiai, a senior market economist in Tokyo at Mizuho Investors Securities Co., a unit of Japan’s second-largest lender. “The bank is pressured to expand monetary easing measures and buy more bonds.”
Twenty-year bond yields declined six basis points during the week to 2.04 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. Yields touched 2.025 percent, the lowest since Oct. 13. They completed a seven-day drop on Nov. 19, the longest slide since a 12-day decline ended Dec. 30.
Ten-year yields fell 3.5 basis points to 1.305 percent this week, while five-year yields slipped three basis points to 0.59 percent. Both held near their lowest levels in more than a month.
Bond futures for December delivery advanced 0.37 this week to 139.25 on the Tokyo Stock Exchange.
Fighting Deflation
“Japan’s economy is in a mild deflationary phase,” the Cabinet Office report said in Tokyo yesterday, referring to prices in its evaluation for the first time since June 2006. The economy is “in a difficult situation,” the report said.
The BOJ can buy more bonds to help combat deflation as the purchases would provide more liquidity and push up price expectations, Angel Gurria, secretary general of the Organization for Economic Cooperation, said in Tokyo on Nov. 19.
The spread between rates on five-year notes and inflation- linked debt, which reflects the outlook among traders for consumer prices over the term of the securities, was negative 0.88 percentage point yesterday, from minus 0.82 on Nov. 18.
Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation. Deflation, a general drop in prices, enhances the value of the fixed payments from bonds.
Consumer prices excluding fresh food dropped for a seventh month in September and the central bank said last month it expects them to keep sliding through fiscal 2011.
Yen, Stocks
“The BOJ won’t raise interest rates until 2012,” which should help bonds, said Eiji Dohke, chief strategist in Tokyo at UBS Securities Japan Ltd., one of the 23 primary dealers that are required to bid at government debt sales.
Twenty-year bonds also gained as the yen approached the strongest level in more than a month versus the dollar, damping the outlook for exporters’ profits.
Japan’s currency traded at 88.84 yen per dollar yesterday from 88.97 in New York on Nov. 19, when it climbed to 88.64, the strongest since Oct. 9. The Nikkei 225 Stock Average fell 0.5 percent yesterday, completing a four-week drop.
“Given the yen appreciation and the decline in stocks, investors cannot help but to buy bonds,” said Makoto Yamashita, chief Japan interest-rate strategist at Deutsche Securities Inc. in Tokyo. “Also month-end demand from pension funds can be expected as they seek to extend duration.” Duration is a gauge of how much a change in yield affects a bond’s price.
Nomura Securities Co. increased the average duration of its Bond Performance Index by 0.07 year to 6.41 years this month, according to the company’s Web site. Duration for December will be posted on the Web site toward the end of the month.
Money managers such as Japan’s Government Pension Investment Fund, which runs the world’s largest pool of retirement wealth, use the index to help decide their holdings.
Benchmark 20-year yields were near the lowest level in more than a month after central bank Governor Masaaki Shirakawa and his colleagues kept the benchmark overnight rate at 0.1 percent in a unanimous vote yesterday. The world’s second-largest economy is in deflation for the first time in three years, the Cabinet Office said in a monthly report.
“There’s no chance for the central bank to raise rates in the foreseeable future,” said Koji Ochiai, a senior market economist in Tokyo at Mizuho Investors Securities Co., a unit of Japan’s second-largest lender. “The bank is pressured to expand monetary easing measures and buy more bonds.”
Twenty-year bond yields declined six basis points during the week to 2.04 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. Yields touched 2.025 percent, the lowest since Oct. 13. They completed a seven-day drop on Nov. 19, the longest slide since a 12-day decline ended Dec. 30.
Ten-year yields fell 3.5 basis points to 1.305 percent this week, while five-year yields slipped three basis points to 0.59 percent. Both held near their lowest levels in more than a month.
Bond futures for December delivery advanced 0.37 this week to 139.25 on the Tokyo Stock Exchange.
Fighting Deflation
“Japan’s economy is in a mild deflationary phase,” the Cabinet Office report said in Tokyo yesterday, referring to prices in its evaluation for the first time since June 2006. The economy is “in a difficult situation,” the report said.
The BOJ can buy more bonds to help combat deflation as the purchases would provide more liquidity and push up price expectations, Angel Gurria, secretary general of the Organization for Economic Cooperation, said in Tokyo on Nov. 19.
The spread between rates on five-year notes and inflation- linked debt, which reflects the outlook among traders for consumer prices over the term of the securities, was negative 0.88 percentage point yesterday, from minus 0.82 on Nov. 18.
Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation. Deflation, a general drop in prices, enhances the value of the fixed payments from bonds.
Consumer prices excluding fresh food dropped for a seventh month in September and the central bank said last month it expects them to keep sliding through fiscal 2011.
Yen, Stocks
“The BOJ won’t raise interest rates until 2012,” which should help bonds, said Eiji Dohke, chief strategist in Tokyo at UBS Securities Japan Ltd., one of the 23 primary dealers that are required to bid at government debt sales.
Twenty-year bonds also gained as the yen approached the strongest level in more than a month versus the dollar, damping the outlook for exporters’ profits.
Japan’s currency traded at 88.84 yen per dollar yesterday from 88.97 in New York on Nov. 19, when it climbed to 88.64, the strongest since Oct. 9. The Nikkei 225 Stock Average fell 0.5 percent yesterday, completing a four-week drop.
“Given the yen appreciation and the decline in stocks, investors cannot help but to buy bonds,” said Makoto Yamashita, chief Japan interest-rate strategist at Deutsche Securities Inc. in Tokyo. “Also month-end demand from pension funds can be expected as they seek to extend duration.” Duration is a gauge of how much a change in yield affects a bond’s price.
Nomura Securities Co. increased the average duration of its Bond Performance Index by 0.07 year to 6.41 years this month, according to the company’s Web site. Duration for December will be posted on the Web site toward the end of the month.
Money managers such as Japan’s Government Pension Investment Fund, which runs the world’s largest pool of retirement wealth, use the index to help decide their holdings.
Thursday, November 19, 2009
India Must Raise Rates ‘Fairly Soon’ to Tame Prices, OECD Says
Nov. 20 (Bloomberg) -- India’s central bank must tighten its monetary policy “fairly soon” to stem inflation, the Organization for Economic Cooperation and Development said.
“Given the magnitude of easing and the speed at which inflation has bounced back, monetary policy will need to be tightened fairly soon,” the Paris-based OECD said about India in a report released yesterday.
Expectations of higher interest rates have sent Indian bond prices down by 5.9 percent in 2009, the worst performance among 10 Asian local-currency debt markets tracked by HSBC Holdings Plc. The central bank took the first steps to raise borrowing costs last month by ordering lenders to set aside a bigger proportion of their deposits in government bonds.
India’s consumer price index for industrial workers may average 5.4 percent in the 12 months starting April 1, more than double the rate in the current year, the OECD said. During the same period, India’s economic growth may accelerate to 7.3 percent from 6.1 percent, it estimates.
Central bank Governor Duvvuri Subbarao has injected 5.85 trillion rupees ($126 billion) of cash into the economy since September 2008 to protect India from the worst financial crisis since the 1930s.
In the last monetary policy announcement on Oct. 27, Subbarao raised the statutory liquidity ratio to 25 percent from 24 percent and kept the benchmark policy rates unchanged. He maintained the central bank’s economic growth forecast for the year ending March 31 at 6 percent “with an upward bias.”
Inflation Pressures
“Given that activity is expected to strengthen relatively quickly and that the recovery is likely to have begun with only a modest level of slack in the economy, delayed fiscal consolidation will also contribute to higher inflationary pressures,” the OECD said.
India also loosened the fiscal policy to stimulate the economy amid the global recession, cutting excise and customs tax rates, raising government salaries and stepping up spending on roads and power.
As a result, India’s national budget deficit, including federal and state government finances, may reach 10.1 percent of gross domestic product in the year ending March 31 from 4.2 percent of GDP two years ago, the OECD said.
The OECD said it projects only a “modest narrowing” in the budget shortfall because much of the increase in expenditure in the past year, such as the rise in salaries of government workers, is permanent in nature.
The deficit is forecast by the OECD to narrow to 9 percent of GDP in the next financial year starting April 1.
“Given the magnitude of easing and the speed at which inflation has bounced back, monetary policy will need to be tightened fairly soon,” the Paris-based OECD said about India in a report released yesterday.
Expectations of higher interest rates have sent Indian bond prices down by 5.9 percent in 2009, the worst performance among 10 Asian local-currency debt markets tracked by HSBC Holdings Plc. The central bank took the first steps to raise borrowing costs last month by ordering lenders to set aside a bigger proportion of their deposits in government bonds.
India’s consumer price index for industrial workers may average 5.4 percent in the 12 months starting April 1, more than double the rate in the current year, the OECD said. During the same period, India’s economic growth may accelerate to 7.3 percent from 6.1 percent, it estimates.
Central bank Governor Duvvuri Subbarao has injected 5.85 trillion rupees ($126 billion) of cash into the economy since September 2008 to protect India from the worst financial crisis since the 1930s.
In the last monetary policy announcement on Oct. 27, Subbarao raised the statutory liquidity ratio to 25 percent from 24 percent and kept the benchmark policy rates unchanged. He maintained the central bank’s economic growth forecast for the year ending March 31 at 6 percent “with an upward bias.”
Inflation Pressures
“Given that activity is expected to strengthen relatively quickly and that the recovery is likely to have begun with only a modest level of slack in the economy, delayed fiscal consolidation will also contribute to higher inflationary pressures,” the OECD said.
India also loosened the fiscal policy to stimulate the economy amid the global recession, cutting excise and customs tax rates, raising government salaries and stepping up spending on roads and power.
As a result, India’s national budget deficit, including federal and state government finances, may reach 10.1 percent of gross domestic product in the year ending March 31 from 4.2 percent of GDP two years ago, the OECD said.
The OECD said it projects only a “modest narrowing” in the budget shortfall because much of the increase in expenditure in the past year, such as the rise in salaries of government workers, is permanent in nature.
The deficit is forecast by the OECD to narrow to 9 percent of GDP in the next financial year starting April 1.
Asian Stocks Fall for 4th Day; Commodity, Chip Shares Decline
Nov. 20 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to its longest losing streak in more than four months, after Merrill Lynch & Co. cut its outlook on the global semiconductor industry and commodities retreated.
Advantest Corp., the world’s biggest maker of memory-chip testers, lost 2.6 percent in Tokyo. Sony Corp., the maker of the PlayStation 3 game machine, slid 2.8 percent after pushing back its profitability targets by two years. BHP Billiton Ltd., the world’s biggest mining company, slid 1.6 percent, snapping a four-day advance, after oil and metal prices fell.
“It seems investors are rushing to sell off stocks,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Since sentiment is bad, any news could drag shares lower.”
The MSCI Asia Pacific Index fell 0.3 percent to 117.14 as of 10:02 a.m. in Tokyo. The gauge is headed for a fourth day of declines, the longest losing streak since July 8. The index has dropped 0.9 percent this week.
Japan’s Nikkei 225 Stock Average retreated 0.4 percent. The S&P/ASX 200 Index dropped 1.3 percent in Sydney.
Futures on the Standard & Poor’s 500 Index dipped 0.1 percent. The index retreated 1.3 percent yesterday, the most since Oct. 30. Intel Corp. and Texas Instruments Inc., the second-largest U.S. chipmaker, slumped after Bank of America Corp.’s Merrill Lynch unit cut its ratings on the chipmakers.
OECD Forecasts
“There’s a growing disparity between supply growth and consumption, therefore the downside risk to earnings is increasing,” Dan Heyler, Hong Kong-based head of Asian semiconductor research, said yesterday. “We think the supply chain will be aggressively replenished through to March.”
He cut Taiwan Semiconductor Manufacturing Co., the world’s largest custom chipmaker, to “neutral” from “buy,” and United Microelectronics Corp. to “underperform” from “buy.”
Crude oil for December delivery retreated for the fist time in four days yesterday, plunging 2.7 percent to $77.46 a barrel in New York. The London Metals Index, a measure of six metals including copper and zinc, sank 1.5 percent.
Stocks around the world have rallied since March amid signs the global economy is recovering from its worst slowdown since World War II. The Organization for Economic Cooperation and Development doubled its growth forecast for the leading developed economies next year to 1.9 percent, the Paris-based organization said in a report yesterday.
The MSCI Asia Pacific Index has climbed 31 percent in 2009, outpacing gains of 21 percent by the Standard & Poor’s 500 Index and 24 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the Asian gauge are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.
Advantest Corp., the world’s biggest maker of memory-chip testers, lost 2.6 percent in Tokyo. Sony Corp., the maker of the PlayStation 3 game machine, slid 2.8 percent after pushing back its profitability targets by two years. BHP Billiton Ltd., the world’s biggest mining company, slid 1.6 percent, snapping a four-day advance, after oil and metal prices fell.
“It seems investors are rushing to sell off stocks,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Since sentiment is bad, any news could drag shares lower.”
The MSCI Asia Pacific Index fell 0.3 percent to 117.14 as of 10:02 a.m. in Tokyo. The gauge is headed for a fourth day of declines, the longest losing streak since July 8. The index has dropped 0.9 percent this week.
Japan’s Nikkei 225 Stock Average retreated 0.4 percent. The S&P/ASX 200 Index dropped 1.3 percent in Sydney.
Futures on the Standard & Poor’s 500 Index dipped 0.1 percent. The index retreated 1.3 percent yesterday, the most since Oct. 30. Intel Corp. and Texas Instruments Inc., the second-largest U.S. chipmaker, slumped after Bank of America Corp.’s Merrill Lynch unit cut its ratings on the chipmakers.
OECD Forecasts
“There’s a growing disparity between supply growth and consumption, therefore the downside risk to earnings is increasing,” Dan Heyler, Hong Kong-based head of Asian semiconductor research, said yesterday. “We think the supply chain will be aggressively replenished through to March.”
He cut Taiwan Semiconductor Manufacturing Co., the world’s largest custom chipmaker, to “neutral” from “buy,” and United Microelectronics Corp. to “underperform” from “buy.”
Crude oil for December delivery retreated for the fist time in four days yesterday, plunging 2.7 percent to $77.46 a barrel in New York. The London Metals Index, a measure of six metals including copper and zinc, sank 1.5 percent.
Stocks around the world have rallied since March amid signs the global economy is recovering from its worst slowdown since World War II. The Organization for Economic Cooperation and Development doubled its growth forecast for the leading developed economies next year to 1.9 percent, the Paris-based organization said in a report yesterday.
The MSCI Asia Pacific Index has climbed 31 percent in 2009, outpacing gains of 21 percent by the Standard & Poor’s 500 Index and 24 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the Asian gauge are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.
Wednesday, November 18, 2009
Ford, Hyundai Sales Mismatch Shows Obama’s Free-Trade Quandary
Nov. 19 (Bloomberg) -- President Barack Obama is in Seoul today, giving him a last chance on his four-nation Asia trip to show he opposes protectionism. Standing in the way is a U.S. auto lobby that is blocking a free-trade agreement.
It’s a tall order. A top item on South Korea’s agenda is the trade accord, which was signed in 2007. The deal has been held up in Congress, where lawmakers are demanding wider access to Korea for Chrysler Group LLC, Ford Motor Co. and General Motors Co., and neither side shows signs of compromise.
The U.S. Chamber of Commerce estimates that failure to enact the accord means the loss of $35 billion in exports and 345,000 jobs. South Korea signed a rival agreement with the European Union last month that calls for 99 percent of commerce to be duty-free within five years.
“Team Obama talked the talk, now we’ll see if they walk the walk,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington. “Possibly in Seoul the president will achieve another breakthrough” with a commitment to seek ratification of the U.S.-South Korea pact.
U.S. automakers sold 6,980 vehicles in South Korea last year, or 0.72 percent of the overall passenger car market, according to the Korea Automobile Importers & Distributors Association. Those figures exclude GM’s local Daewoo unit, which captured 7 percent of the market in the first nine months of this year.
Hyundai Motor Co., Korea’s biggest carmaker, accounted for almost half of all sales. Through October this year, Hyundai raised its U.S. sales 4.1 percent to 373,222 vehicles. The collective U.S. market share for Hyundai and its Kia Motors Corp. affiliate was 7.3 percent in October.
Trade Barriers
While in Asia, Obama has been called on by regional leaders, including Malaysian Prime Minister Najib Razak and Chinese President Hu Jintao, to demonstrate the U.S. will work to reduce trade barriers. At the Asia-Pacific Economic Cooperation summit in Singapore, Obama expressed interest in joining and expanding a regional free-trade group that so far includes Chile, New Zealand, Singapore and Brunei.
Forging an agreement that would ensure passage of the Korea trade accord will be “politically tough back in the U.S.,” Hufbauer said.
Democrats, who have majorities in the House and Senate, are holding up a vote on the agreement. Representative Sander Levin, a Michigan Democrat and chairman of the House Ways and Means Committee’s trade panel, said South Korea first must remove tax and regulatory obstacles to sales of U.S. autos, refrigerators and other manufactured goods.
No Budging
The South Korean government’s position remains unchanged. There will be “no re-negotiation,” Ahn Ho Young, South Korea’s deputy minister for trade, said in an interview in Seoul yesterday. “We’re trying to coordinate so that both countries ratify the agreement” as soon as possible.
Any breakthrough will come without U.S. Trade Representative Ron Kirk, who accompanied Obama on earlier stops in Singapore and China and is returning home.
South Korea is the seventh-biggest U.S. trading partner. Last year, two-way trade totaled $82.9 billion, according to the Commerce Department.
China, the second-biggest U.S. trading partner after Canada, has been subjected to a series of trade sanctions by the Obama administration on tires and steel pipe in the months leading up to the president’s Asia trip. China called the pipe tariffs “discriminatory” and said it would start its own anti-dumping probe of American cars.
Obama didn’t mention trade during a joint appearance with Hu Nov. 17 at Beijing’s Great Hall of the People. Hu urged Obama to “oppose and reject protectionism in all its manifestations in an even stronger stand.”
Currency Issues
Obama is pushing to reduce the U.S. trade deficit with China, which widened to a 10-month high in September, by boosting U.S. exports and seeking a revaluation of the yuan, which has remained fixed at about 6.83 to one U.S. dollar since July 2008.
In Beijing Nov. 17, Obama suggested he won no new commitment from Hu on revaluation, instead referring to “past statements” made by China “to move toward a more market- oriented exchange rate over time.”
In the hour before Obama spoke, Yu Yongding, a former adviser to China’s central bank, told attendees at a Beijing conference that China had no confidence in the U.S. dollar.
Obama’s visit had little effect on the value of yuan futures. Twelve-month non-deliverable yuan forwards traded at 6.6205 per dollar as of 5:30 p.m. in Hong Kong, from 6.6237 yesterday. The contracts indicate traders are predicting a 3.1 percent gain in a year. In the spot market, the currency was little changed at 6.8270, according to the China Foreign Exchange Trade System.
‘Mutual Interest’
Administration officials said they weren’t expecting to leave China with a major agreement.
The U.S.-China relationship “is based on mutual interest; that is strengthening, that we’ve made progress on,” White House press secretary Robert Gibbs said. “We understand there’s a lot of work to do.”
Still, U.S. companies used the president’s visit to help cement business ties in China. Tempe, Arizona-based First Solar Inc. advanced its plan to build the world’s biggest plant directly converting sunlight to electricity in Inner Mongolia, signing an agreement in Beijing Nov. 17 with U.S. Energy Secretary Steven Chu and Chinese Vice Premier Li Keqiang in attendance.
China is the third-biggest export market for the U.S., with outbound shipments last year amounting to $71.5 billion, an increase of 9.5 percent from 2007. The U.S. imported $337.8 billion from China last year, more than from any other country, according to the Commerce Department.
North Korea
In Seoul, Obama will discuss North Korea’s nuclear program with South Korean President Lee Myung Bak in talks today. China is host to six-party talks aimed at removing nuclear weapons from the Korean peninsula. The negotiations, which also include the two Koreas, Japan, Russia and the U.S., were broken off after North Korea launched a rocket in April in violation of a United Nations resolution.
Obama is also scheduled to visit U.S. troops today at Osan Air Base south of Seoul.
--Julianna Goldman, Edwin Chen, Michael Forsythe. With assistance from Seyoon Kim, Bomi Lim and Seonjin Cha in Seoul, Mark Drajem in Washington and Belinda Cao in Beijing. Editors: Joe Sobczyk, Bill Austin.
It’s a tall order. A top item on South Korea’s agenda is the trade accord, which was signed in 2007. The deal has been held up in Congress, where lawmakers are demanding wider access to Korea for Chrysler Group LLC, Ford Motor Co. and General Motors Co., and neither side shows signs of compromise.
The U.S. Chamber of Commerce estimates that failure to enact the accord means the loss of $35 billion in exports and 345,000 jobs. South Korea signed a rival agreement with the European Union last month that calls for 99 percent of commerce to be duty-free within five years.
“Team Obama talked the talk, now we’ll see if they walk the walk,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington. “Possibly in Seoul the president will achieve another breakthrough” with a commitment to seek ratification of the U.S.-South Korea pact.
U.S. automakers sold 6,980 vehicles in South Korea last year, or 0.72 percent of the overall passenger car market, according to the Korea Automobile Importers & Distributors Association. Those figures exclude GM’s local Daewoo unit, which captured 7 percent of the market in the first nine months of this year.
Hyundai Motor Co., Korea’s biggest carmaker, accounted for almost half of all sales. Through October this year, Hyundai raised its U.S. sales 4.1 percent to 373,222 vehicles. The collective U.S. market share for Hyundai and its Kia Motors Corp. affiliate was 7.3 percent in October.
Trade Barriers
While in Asia, Obama has been called on by regional leaders, including Malaysian Prime Minister Najib Razak and Chinese President Hu Jintao, to demonstrate the U.S. will work to reduce trade barriers. At the Asia-Pacific Economic Cooperation summit in Singapore, Obama expressed interest in joining and expanding a regional free-trade group that so far includes Chile, New Zealand, Singapore and Brunei.
Forging an agreement that would ensure passage of the Korea trade accord will be “politically tough back in the U.S.,” Hufbauer said.
Democrats, who have majorities in the House and Senate, are holding up a vote on the agreement. Representative Sander Levin, a Michigan Democrat and chairman of the House Ways and Means Committee’s trade panel, said South Korea first must remove tax and regulatory obstacles to sales of U.S. autos, refrigerators and other manufactured goods.
No Budging
The South Korean government’s position remains unchanged. There will be “no re-negotiation,” Ahn Ho Young, South Korea’s deputy minister for trade, said in an interview in Seoul yesterday. “We’re trying to coordinate so that both countries ratify the agreement” as soon as possible.
Any breakthrough will come without U.S. Trade Representative Ron Kirk, who accompanied Obama on earlier stops in Singapore and China and is returning home.
South Korea is the seventh-biggest U.S. trading partner. Last year, two-way trade totaled $82.9 billion, according to the Commerce Department.
China, the second-biggest U.S. trading partner after Canada, has been subjected to a series of trade sanctions by the Obama administration on tires and steel pipe in the months leading up to the president’s Asia trip. China called the pipe tariffs “discriminatory” and said it would start its own anti-dumping probe of American cars.
Obama didn’t mention trade during a joint appearance with Hu Nov. 17 at Beijing’s Great Hall of the People. Hu urged Obama to “oppose and reject protectionism in all its manifestations in an even stronger stand.”
Currency Issues
Obama is pushing to reduce the U.S. trade deficit with China, which widened to a 10-month high in September, by boosting U.S. exports and seeking a revaluation of the yuan, which has remained fixed at about 6.83 to one U.S. dollar since July 2008.
In Beijing Nov. 17, Obama suggested he won no new commitment from Hu on revaluation, instead referring to “past statements” made by China “to move toward a more market- oriented exchange rate over time.”
In the hour before Obama spoke, Yu Yongding, a former adviser to China’s central bank, told attendees at a Beijing conference that China had no confidence in the U.S. dollar.
Obama’s visit had little effect on the value of yuan futures. Twelve-month non-deliverable yuan forwards traded at 6.6205 per dollar as of 5:30 p.m. in Hong Kong, from 6.6237 yesterday. The contracts indicate traders are predicting a 3.1 percent gain in a year. In the spot market, the currency was little changed at 6.8270, according to the China Foreign Exchange Trade System.
‘Mutual Interest’
Administration officials said they weren’t expecting to leave China with a major agreement.
The U.S.-China relationship “is based on mutual interest; that is strengthening, that we’ve made progress on,” White House press secretary Robert Gibbs said. “We understand there’s a lot of work to do.”
Still, U.S. companies used the president’s visit to help cement business ties in China. Tempe, Arizona-based First Solar Inc. advanced its plan to build the world’s biggest plant directly converting sunlight to electricity in Inner Mongolia, signing an agreement in Beijing Nov. 17 with U.S. Energy Secretary Steven Chu and Chinese Vice Premier Li Keqiang in attendance.
China is the third-biggest export market for the U.S., with outbound shipments last year amounting to $71.5 billion, an increase of 9.5 percent from 2007. The U.S. imported $337.8 billion from China last year, more than from any other country, according to the Commerce Department.
North Korea
In Seoul, Obama will discuss North Korea’s nuclear program with South Korean President Lee Myung Bak in talks today. China is host to six-party talks aimed at removing nuclear weapons from the Korean peninsula. The negotiations, which also include the two Koreas, Japan, Russia and the U.S., were broken off after North Korea launched a rocket in April in violation of a United Nations resolution.
Obama is also scheduled to visit U.S. troops today at Osan Air Base south of Seoul.
--Julianna Goldman, Edwin Chen, Michael Forsythe. With assistance from Seyoon Kim, Bomi Lim and Seonjin Cha in Seoul, Mark Drajem in Washington and Belinda Cao in Beijing. Editors: Joe Sobczyk, Bill Austin.
Japanese Stocks Fall as Companies Announce Plans to Sell Shares
Nov. 19 (Bloomberg) -- Japanese stocks fell, dragging down the Topix index for a seventh consecutive day, after companies announced plans to sell shares.
Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, tumbled 5 percent after announcing plans to sell as much as 1 trillion yen ($11.2 billion) in securities. Nomura Real Estate Residential Fund Inc. plunged 7.5 percent after its proposal to sell stock. Nihon Nohyaku Co. plummeted 15 percent as the maker of insecticides said earnings fell.
“There’s no reason to buy into Japan,” said Mitsushige Akino, who oversees the equivalent of $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “Domestic investors are looking more at foreign countries since Japan lacks any clear potential for growth.”
The Nikkei 225 Stock Average fell 1.4 percent to 9,541.99 as of 10:13 a.m. in Tokyo, set for the lowest since July 17. The broader Topix index lost 1.7 percent to 835.76, on course for its lowest since April 28, as four times as many stocks declined as advanced.
The Topix has fallen 1.1 percent this year, the only decline among the world’s 40 largest equity markets, according to data compiled by Bloomberg. That compares with increases of 23 percent for the Standard & Poor’s 500 Index in the U.S. and 26 percent for the Dow Jones Stoxx 600 Index in Europe. The global recession has sapped demand for Japanese companies’ products and the stronger yen has hurt exporters.
The ratio of investors who want to be “overweight” Japanese stocks during the next year against those who plan to be “underweight” dropped this month to the level of November 2002, according to a report dated yesterday from Bank of America Corp.’s Merrill Lynch & Co. brokerage.
Banks Slump
Banks fell the most today among the 33 industry groups in the Topix, after Mitsubishi UFJ announced its second share sale since January. The lender lost 5 percent to 460 yen. Mizuho Financial Group Inc. slumped 6 percent to 156 yen, on course for the lowest close since September 2003. Sumitomo Mitsui Financial Group Inc. tumbled 5.3 percent to 2,700 yen, set for its lowest in eight months.
Nomura Real Estate Residential plunged 7.5 percent to 356,000 yen, falling the most since Dec. 11. The company said it plans to raise as much as 11.5 billion yen in new shares.
T&D Holdings Inc. retreated 4.6 percent to 2,060 yen, heading for the lowest since Feb. 19. The insurer had its rating reduced to “neutral” from “above average” at Tokai Tokyo Securities Co.
Nihon Nohyaku plummeted 15 percent to 469 yen, set for the sharpest slide since October 2008. The maker of insecticides and fungicides said full-year net income fell 19 percent to 1.66 billion yen, missing its forecast by 21 percent. It expects profit to further drop this fiscal year.
To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.
Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, tumbled 5 percent after announcing plans to sell as much as 1 trillion yen ($11.2 billion) in securities. Nomura Real Estate Residential Fund Inc. plunged 7.5 percent after its proposal to sell stock. Nihon Nohyaku Co. plummeted 15 percent as the maker of insecticides said earnings fell.
“There’s no reason to buy into Japan,” said Mitsushige Akino, who oversees the equivalent of $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “Domestic investors are looking more at foreign countries since Japan lacks any clear potential for growth.”
The Nikkei 225 Stock Average fell 1.4 percent to 9,541.99 as of 10:13 a.m. in Tokyo, set for the lowest since July 17. The broader Topix index lost 1.7 percent to 835.76, on course for its lowest since April 28, as four times as many stocks declined as advanced.
The Topix has fallen 1.1 percent this year, the only decline among the world’s 40 largest equity markets, according to data compiled by Bloomberg. That compares with increases of 23 percent for the Standard & Poor’s 500 Index in the U.S. and 26 percent for the Dow Jones Stoxx 600 Index in Europe. The global recession has sapped demand for Japanese companies’ products and the stronger yen has hurt exporters.
The ratio of investors who want to be “overweight” Japanese stocks during the next year against those who plan to be “underweight” dropped this month to the level of November 2002, according to a report dated yesterday from Bank of America Corp.’s Merrill Lynch & Co. brokerage.
Banks Slump
Banks fell the most today among the 33 industry groups in the Topix, after Mitsubishi UFJ announced its second share sale since January. The lender lost 5 percent to 460 yen. Mizuho Financial Group Inc. slumped 6 percent to 156 yen, on course for the lowest close since September 2003. Sumitomo Mitsui Financial Group Inc. tumbled 5.3 percent to 2,700 yen, set for its lowest in eight months.
Nomura Real Estate Residential plunged 7.5 percent to 356,000 yen, falling the most since Dec. 11. The company said it plans to raise as much as 11.5 billion yen in new shares.
T&D Holdings Inc. retreated 4.6 percent to 2,060 yen, heading for the lowest since Feb. 19. The insurer had its rating reduced to “neutral” from “above average” at Tokai Tokyo Securities Co.
Nihon Nohyaku plummeted 15 percent to 469 yen, set for the sharpest slide since October 2008. The maker of insecticides and fungicides said full-year net income fell 19 percent to 1.66 billion yen, missing its forecast by 21 percent. It expects profit to further drop this fiscal year.
To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.
Tuesday, November 17, 2009
RBA Signals Reduction of RMBS as Australia Collateral
Nov. 18 (Bloomberg) -- Australia’s central bank expects to reduce the amount of residential mortgage-backed securities it accepts as collateral from the nation’s lenders for repurchase agreements, Assistant Governor Guy Debelle said.
“With the improvement in funding conditions, we generally no longer expect or wish to see internal securitizations offered as collateral in our market operations on a regular basis,” Debelle told a securitization conference in Sydney today. He didn’t address monetary policy in his speech.
Debelle’s remarks add to signals from central banks around the world that they plan to cut or ease crisis measures. The U.S. Federal Reserve yesterday said it will reduce the maximum maturity on discount-window loans to 28 days from 90 days. Reserve Bank of Australia Governor Glenn Stevens has also said government guarantees for local banks may no longer be needed.
Australia’s central bank widened the range of securities it was willing to hold under repurchase agreements in October 2007, shortly after the onset of the global credit squeeze, to include both so-called RMBS and asset-backed commercial paper.
After the financial crisis peaked, the central bank ended last year holding around A$45 billion ($42 billion) of such assets.
“The bank intends to maintain the broader range of securities that it accepts in its market operations,” Debelle told the Australian Securitization Conference. “That is, internal RMBS will remain eligible collateral.”
‘Important Part’
Debelle, who heads the central bank’s financial markets division, said securitization will “remain an important part of the financial landscape,” as it represents a way of dispersing risk around the financial system.
“While I expect securitization to make a solid return, I do not expect it to be as large a part of the market as it was in 2007 anytime soon,” he said.
Australia’s government said last month it may double its investments in RMBS to A$16 billion to promote competition in the nation’s home-loan market and put “downward pressure” on borrowing costs.
Prime Minister Kevin Rudd’s government has not yet announced how the additional funding will be spent, Fitch Ratings said in a statement today. It may incorporate a widening of eligibility criteria to facilitate more lending to small businesses, and a facility to enhance Australian RMBS liquidity, according to the ratings company.
Credit Quality
The slump in new issuance in such securities amid the global financial crisis didn’t reflect concerns about the credit quality of local RMBS, Debelle said. “Unlike in the U.S., the credit quality of Australian RMBS has remained at the highest level throughout the financial crisis.”
Non-performing housing loans account for less than 1 percent of all RMBS issued in Australia, according to Reserve Bank figures. In the U.S., the rate is above 5 percent.
That performance reflects “both the quality and the composition of the types of loans securitized, which has been underpinned by the strength of the Australian economy, particularly the relatively low unemployment rate, robust household income growth, as well as low interest rates” Debelle said.
Signs that the nation’s economy is strengthening prompted central bank Governor Stevens to raise the benchmark lending rate by a quarter percentage point this month and in October to 3.5 percent, making him the only policy maker in the world to raise borrowing costs twice this year.
December Increase
Stevens will raise the rate on Dec. 1 for a record third month to 3.75, according 18 of 20 economists surveyed by Bloomberg on Nov. 13.
Gross domestic product grew 1 percent in the first half of the year after Stevens slashed the overnight cash rate target by a record 4.25 percentage points between September 2008 and April. The government also distributed more than A$20 billion in cash to households.
“The underlying sound condition of household balance sheets in Australia has helped limit the incidence of household financial difficulties during the economic downturn,” Debelle said.
Australian issuers of RMBS should use that strength to “differentiate” their product from U.S. assets, particularly among pension trustees “whose views may be affected by continual media exposure to the U.S. experience that securitized assets are excessively risky,” the assistant governor added.
“The message that Australian RMBS have been, and continue to be, a strongly performing asset needs to be continually reinforced,” Debelle said.
“With the improvement in funding conditions, we generally no longer expect or wish to see internal securitizations offered as collateral in our market operations on a regular basis,” Debelle told a securitization conference in Sydney today. He didn’t address monetary policy in his speech.
Debelle’s remarks add to signals from central banks around the world that they plan to cut or ease crisis measures. The U.S. Federal Reserve yesterday said it will reduce the maximum maturity on discount-window loans to 28 days from 90 days. Reserve Bank of Australia Governor Glenn Stevens has also said government guarantees for local banks may no longer be needed.
Australia’s central bank widened the range of securities it was willing to hold under repurchase agreements in October 2007, shortly after the onset of the global credit squeeze, to include both so-called RMBS and asset-backed commercial paper.
After the financial crisis peaked, the central bank ended last year holding around A$45 billion ($42 billion) of such assets.
“The bank intends to maintain the broader range of securities that it accepts in its market operations,” Debelle told the Australian Securitization Conference. “That is, internal RMBS will remain eligible collateral.”
‘Important Part’
Debelle, who heads the central bank’s financial markets division, said securitization will “remain an important part of the financial landscape,” as it represents a way of dispersing risk around the financial system.
“While I expect securitization to make a solid return, I do not expect it to be as large a part of the market as it was in 2007 anytime soon,” he said.
Australia’s government said last month it may double its investments in RMBS to A$16 billion to promote competition in the nation’s home-loan market and put “downward pressure” on borrowing costs.
Prime Minister Kevin Rudd’s government has not yet announced how the additional funding will be spent, Fitch Ratings said in a statement today. It may incorporate a widening of eligibility criteria to facilitate more lending to small businesses, and a facility to enhance Australian RMBS liquidity, according to the ratings company.
Credit Quality
The slump in new issuance in such securities amid the global financial crisis didn’t reflect concerns about the credit quality of local RMBS, Debelle said. “Unlike in the U.S., the credit quality of Australian RMBS has remained at the highest level throughout the financial crisis.”
Non-performing housing loans account for less than 1 percent of all RMBS issued in Australia, according to Reserve Bank figures. In the U.S., the rate is above 5 percent.
That performance reflects “both the quality and the composition of the types of loans securitized, which has been underpinned by the strength of the Australian economy, particularly the relatively low unemployment rate, robust household income growth, as well as low interest rates” Debelle said.
Signs that the nation’s economy is strengthening prompted central bank Governor Stevens to raise the benchmark lending rate by a quarter percentage point this month and in October to 3.5 percent, making him the only policy maker in the world to raise borrowing costs twice this year.
December Increase
Stevens will raise the rate on Dec. 1 for a record third month to 3.75, according 18 of 20 economists surveyed by Bloomberg on Nov. 13.
Gross domestic product grew 1 percent in the first half of the year after Stevens slashed the overnight cash rate target by a record 4.25 percentage points between September 2008 and April. The government also distributed more than A$20 billion in cash to households.
“The underlying sound condition of household balance sheets in Australia has helped limit the incidence of household financial difficulties during the economic downturn,” Debelle said.
Australian issuers of RMBS should use that strength to “differentiate” their product from U.S. assets, particularly among pension trustees “whose views may be affected by continual media exposure to the U.S. experience that securitized assets are excessively risky,” the assistant governor added.
“The message that Australian RMBS have been, and continue to be, a strongly performing asset needs to be continually reinforced,” Debelle said.
Obama, Hu Vow Cooperation Amid Divisions Over Currency, Trade
Nov. 18 (Bloomberg) -- President Barack Obama and Chinese President Hu Jintao left their formal meetings in Beijing yesterday with promises of increased cooperation amid lingering friction over currency, trade and human rights.
Obama said the world’s most populous nation played a vital role in helping end a global recession and will be a key partner in dealing with challenges from curbing the nuclear ambitions of Iran and North Korea to combating climate change.
“The relationship between the United States and China has never been more important to our collective future,” Obama said in an appearance with Hu at the Great Hall of the People.
Hu, speaking first, said through a translator that the U.S. and China “share extensive common interests” on issues that affect “mankind’s peace and stability and development.”
While the U.S. president wraps up his first trip to China today pledging to continue the strategic and economic dialogue between the two countries, the two countries’ biggest differences remain unresolved. Obama called on Hu to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis.
“I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time,” Obama said. “Doing so based on economic fundamentals would make an essential contribution to the global rebalancing effort.”
Yuan Peg
Hu, in his remarks, made no mention of the yuan peg to a weakening dollar, which has forced central banks across Asia to sell their currencies to limit appreciation and maintain export competitiveness with China. The Indonesian rupiah gained 11 percent against the yuan in the past six months, and the Korean won rose 9.4 percent.
The yuan has been pegged at about 6.83 to a dollar since July 2008. Maintaining the peg has also helped make China the biggest foreign holder of U.S. government debt, with $797.1 billion in August, up 10 percent from Jan. 1, Treasury data show.
In a briefing, China’s vice foreign minister, He Yafei, told reporters that the stability of the exchange rate has helped settle financial markets.
‘Trade Frictions’
Hu said both parties will work on easing “trade frictions.” He also stressed that the two countries “need to oppose and reject protectionism in all its manifestations.”
America’s trade deficit with China widened to a 10-month high in September, raising concern that the combination of a recovering U.S. economy and a fixed yuan exchange rate against the dollar will worsen global imbalances.
It also has fueled calls for action against China from lawmakers, unions and some manufacturers. Obama’s administration responded by imposing duties of 35 percent on $1.8 billion worth of automobile tires imported from China, and duties of as much as 99 percent on Chinese steel pipes, in a case brought by U.S. Steel Corp. and other companies.
While Obama stresses cooperation, he faces skepticism at home. Seven in 10 people polled for CNN Nov. 13-15 said they consider China an economic threat to the U.S. China also represents unfair competition for U.S. companies, according to 67 percent of the 1,014 Americans surveyed, while 27 percent viewed China as a potential market.
Wider Relationship
The U.S.-China relationship “goes far beyond any single issue,” Obama said.
“The major challenges of the 21st century, from climate change to nuclear proliferation to economic recovery, are challenges that touch both our nations and challenges that neither of our nations can solve by acting alone,” Obama said.
Obama said the U.S. and China, the two largest consumers of energy, made progress on climate change. With expectations for a global treaty on emissions coming out of a summit in Copenhagen next month now gone, Obama and Hu agreed to move forward on a new two-stage plan that may aim to have an agreement next year.
On North Korea, Obama said he thanked Hu for China’s efforts to bring North Korea back into negotiations aimed at dismantling its nuclear weapons that also include Japan, South Korea and Russia.
“North Korea has a choice,” Obama said, between further isolation and provocation or becoming a full part of the international community, “which can give a better life to its people.”
Iran Concerns
On Iran, Obama said, he and Hu agreed that government in Tehran must provide solid and verifiable assurances that its nuclear program is peaceful.”
If Iran “fails to take this opportunity,” Obama said, “there will be consequences.”
China has balked at further sanctions against Iran. Hu reiterated that China seeks to resolve the dispute through negotiations.
Obama also addressed human rights, repeating language he used Nov. 16 when addressing students in Shanghai. Freedom of religion and political speech are fundamental, he said, and not limited to any particular country or culture.
On Tibet, Obama said that while Tibet is part of China, the U.S. “supports the early resumption on dialogue between the Chinese government and representatives of the Dalai Lama to resolve any concerns and differences.”
Obama travels this evening to Seoul, the last stop on his eight-day Asia trip.
Obama said the world’s most populous nation played a vital role in helping end a global recession and will be a key partner in dealing with challenges from curbing the nuclear ambitions of Iran and North Korea to combating climate change.
“The relationship between the United States and China has never been more important to our collective future,” Obama said in an appearance with Hu at the Great Hall of the People.
Hu, speaking first, said through a translator that the U.S. and China “share extensive common interests” on issues that affect “mankind’s peace and stability and development.”
While the U.S. president wraps up his first trip to China today pledging to continue the strategic and economic dialogue between the two countries, the two countries’ biggest differences remain unresolved. Obama called on Hu to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis.
“I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time,” Obama said. “Doing so based on economic fundamentals would make an essential contribution to the global rebalancing effort.”
Yuan Peg
Hu, in his remarks, made no mention of the yuan peg to a weakening dollar, which has forced central banks across Asia to sell their currencies to limit appreciation and maintain export competitiveness with China. The Indonesian rupiah gained 11 percent against the yuan in the past six months, and the Korean won rose 9.4 percent.
The yuan has been pegged at about 6.83 to a dollar since July 2008. Maintaining the peg has also helped make China the biggest foreign holder of U.S. government debt, with $797.1 billion in August, up 10 percent from Jan. 1, Treasury data show.
In a briefing, China’s vice foreign minister, He Yafei, told reporters that the stability of the exchange rate has helped settle financial markets.
‘Trade Frictions’
Hu said both parties will work on easing “trade frictions.” He also stressed that the two countries “need to oppose and reject protectionism in all its manifestations.”
America’s trade deficit with China widened to a 10-month high in September, raising concern that the combination of a recovering U.S. economy and a fixed yuan exchange rate against the dollar will worsen global imbalances.
It also has fueled calls for action against China from lawmakers, unions and some manufacturers. Obama’s administration responded by imposing duties of 35 percent on $1.8 billion worth of automobile tires imported from China, and duties of as much as 99 percent on Chinese steel pipes, in a case brought by U.S. Steel Corp. and other companies.
While Obama stresses cooperation, he faces skepticism at home. Seven in 10 people polled for CNN Nov. 13-15 said they consider China an economic threat to the U.S. China also represents unfair competition for U.S. companies, according to 67 percent of the 1,014 Americans surveyed, while 27 percent viewed China as a potential market.
Wider Relationship
The U.S.-China relationship “goes far beyond any single issue,” Obama said.
“The major challenges of the 21st century, from climate change to nuclear proliferation to economic recovery, are challenges that touch both our nations and challenges that neither of our nations can solve by acting alone,” Obama said.
Obama said the U.S. and China, the two largest consumers of energy, made progress on climate change. With expectations for a global treaty on emissions coming out of a summit in Copenhagen next month now gone, Obama and Hu agreed to move forward on a new two-stage plan that may aim to have an agreement next year.
On North Korea, Obama said he thanked Hu for China’s efforts to bring North Korea back into negotiations aimed at dismantling its nuclear weapons that also include Japan, South Korea and Russia.
“North Korea has a choice,” Obama said, between further isolation and provocation or becoming a full part of the international community, “which can give a better life to its people.”
Iran Concerns
On Iran, Obama said, he and Hu agreed that government in Tehran must provide solid and verifiable assurances that its nuclear program is peaceful.”
If Iran “fails to take this opportunity,” Obama said, “there will be consequences.”
China has balked at further sanctions against Iran. Hu reiterated that China seeks to resolve the dispute through negotiations.
Obama also addressed human rights, repeating language he used Nov. 16 when addressing students in Shanghai. Freedom of religion and political speech are fundamental, he said, and not limited to any particular country or culture.
On Tibet, Obama said that while Tibet is part of China, the U.S. “supports the early resumption on dialogue between the Chinese government and representatives of the Dalai Lama to resolve any concerns and differences.”
Obama travels this evening to Seoul, the last stop on his eight-day Asia trip.
Monday, November 16, 2009
CapitaLand Said to Raise S$2.47 Billion in Unit IPO
Nov. 17 (Bloomberg) -- CapitaLand Ltd. raised S$2.47 billion ($1.79 billion) selling shares in its CapitaMalls Asia Ltd. unit in Singapore’s biggest initial public offering in at least a decade, said a person familiar with the matter.
Southeast Asia’s largest real estate developer sold 1.165 billion shares in CapitaMalls at S$2.12 each, the person said, asking not to be identified before a company announcement. The shares were previously offered at S$1.98 to S$2.39 apiece.
The listing of CapitaMalls Asia will give investors access to a company that manages 86 retail properties across Asia, including China. The company’s net asset value is estimated at about S$5.3 billion as of Sept. 30, according to a prospectus filed with Singapore’s central bank Nov. 2.
The share sale is the largest IPO in the city-state since Singapore Telecommunications Ltd.’s initial offering in 1993, which raised more than S$4 billion, a record for the island.
CapitaMalls Asia’s portfolio includes the Ion Orchard shopping mall in Singapore, a project jointly developed with Hong Kong’s Sun Hung Kai Properties Ltd. The shopping center, which opened in July, counts LVMH Moet Hennessy Louis Vuitton SA’s Louis Vuitton, and Fast Retailing Co.’s Uniqlo chain among its tenants.
CapitaLand said on Oct. 5 it will retain majority control of the unit following the share sale and for the “foreseeable future.”
Southeast Asia’s largest real estate developer sold 1.165 billion shares in CapitaMalls at S$2.12 each, the person said, asking not to be identified before a company announcement. The shares were previously offered at S$1.98 to S$2.39 apiece.
The listing of CapitaMalls Asia will give investors access to a company that manages 86 retail properties across Asia, including China. The company’s net asset value is estimated at about S$5.3 billion as of Sept. 30, according to a prospectus filed with Singapore’s central bank Nov. 2.
The share sale is the largest IPO in the city-state since Singapore Telecommunications Ltd.’s initial offering in 1993, which raised more than S$4 billion, a record for the island.
CapitaMalls Asia’s portfolio includes the Ion Orchard shopping mall in Singapore, a project jointly developed with Hong Kong’s Sun Hung Kai Properties Ltd. The shopping center, which opened in July, counts LVMH Moet Hennessy Louis Vuitton SA’s Louis Vuitton, and Fast Retailing Co.’s Uniqlo chain among its tenants.
CapitaLand said on Oct. 5 it will retain majority control of the unit following the share sale and for the “foreseeable future.”
RBA Says Pace of Australia Rate Rises ‘Open Question’
Nov. 17 (Bloomberg) -- Australia’s central bank says the pace of interest-rate increases is an “open question” as it balances the risk of keeping borrowing costs too low against an economy that may cool as government stimulus abates.
“If economic conditions evolved as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question,” officials said in minutes released today in Sydney of their Nov. 3 meeting, at which they raised the overnight cash rate target to 3.5 percent.
Signs the economy is rebounding from the global recession with “less spare capacity than earlier thought likely,” will prompt Reserve Bank Governor Glenn Stevens to raise the rate on Dec. 1 by another quarter percentage point for a record third month, say analysts surveyed by Bloomberg. Still, a report showing consumer confidence fell this month may prompt policy makers to wait until next year.
“In considering the pace of that adjustment, members were conscious of balancing risks,” the minutes said. “On the one hand, business and consumer confidence could prove fragile, and economic activity at home and abroad might slow more than expected as the effects of stimulus measures faded.”
The rising Australian currency will also “constrain output and dampen inflationary pressure,” while credit conditions for some borrowers “remained quite difficult,” the bank said.
Market Reaction
The Australian dollar traded at 93.53 U.S. cents at 11:36 a.m. in Sydney from 93.76 cents before the minutes were released. The local currency has gained 33 percent this year against its U.S. counterpart. The two-year government bond yield fell 2 basis points, or 0.02 percentage point, to 4.56 percent.
“On the other hand, a lengthy period with interest rates at a very low level carried its own risk, particularly once the threat of serious economic weakness had passed,” policy makers said.
Governor Stevens raised the overnight cash rate target by a quarter point in October and this month, from a half-century low of 3 percent, becoming the first policy maker in the world to boost borrowing costs twice this year.
By contrast, the U.S. Federal Reserve and Bank of Japan have kept borrowing costs at close to zero, while the European Central Bank and Bank of England have held rates at record lows.
Rate Expectations
Investors are betting there is a 72 percent chance Stevens will increase the key rate by another quarter point in two weeks, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 7:20 a.m. That would be the first time in history the bank has raised borrowing costs at three successive meetings.
Still, there are signs the impact from A$20 billion ($19 billion) in cash handouts to households from Prime Minister Kevin Rudd’s government may be waning. Consumer confidence fell this month for the first time since May, a Westpac Banking Corp. survey showed on Nov. 11.
Liaison with shopkeepers “pointed to retailers experiencing mixed conditions in September and October, although the broader perspective was that spending appeared to have held up reasonably well given that the earlier boost from the payments to households was fading,” today’s minutes said.
Also, “members noted the weak outlook for construction of apartments, in contrast to the current strong population growth.”
Underlying inflation and gains in the annual consumer price index were expected “to be consistent” with the central bank’s target range of between 2 percent and 3 percent, the minutes said.
Economic Forecasts
The central bank this month predicted the nation’s economy will expand at more than three times the pace it forecast in August. Gross domestic product will rise 1.75 percent this year and 3.25 percent in 2010, the bank said on Nov. 6. Three months earlier, it forecast gains of 0.5 percent and 2.25 percent respectively.
The economy will continue its expansion in 2011 and 2012 as companies boost investment in resources, including Western Australia’s A$43 billion Gorgon liquefied natural gas project owned by Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc, the bank predicted earlier this month.
Conditions in the global and Australian economies “were significantly better than had been expected earlier in the year” when the board cut the rate to 3 percent, today’s minutes said.
“The growth outlook for the next few years had improved,” they added. “The board therefore concluded that it remained prudent, over time, gradually to reduce the degree of monetary accommodation.”
“If economic conditions evolved as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question,” officials said in minutes released today in Sydney of their Nov. 3 meeting, at which they raised the overnight cash rate target to 3.5 percent.
Signs the economy is rebounding from the global recession with “less spare capacity than earlier thought likely,” will prompt Reserve Bank Governor Glenn Stevens to raise the rate on Dec. 1 by another quarter percentage point for a record third month, say analysts surveyed by Bloomberg. Still, a report showing consumer confidence fell this month may prompt policy makers to wait until next year.
“In considering the pace of that adjustment, members were conscious of balancing risks,” the minutes said. “On the one hand, business and consumer confidence could prove fragile, and economic activity at home and abroad might slow more than expected as the effects of stimulus measures faded.”
The rising Australian currency will also “constrain output and dampen inflationary pressure,” while credit conditions for some borrowers “remained quite difficult,” the bank said.
Market Reaction
The Australian dollar traded at 93.53 U.S. cents at 11:36 a.m. in Sydney from 93.76 cents before the minutes were released. The local currency has gained 33 percent this year against its U.S. counterpart. The two-year government bond yield fell 2 basis points, or 0.02 percentage point, to 4.56 percent.
“On the other hand, a lengthy period with interest rates at a very low level carried its own risk, particularly once the threat of serious economic weakness had passed,” policy makers said.
Governor Stevens raised the overnight cash rate target by a quarter point in October and this month, from a half-century low of 3 percent, becoming the first policy maker in the world to boost borrowing costs twice this year.
By contrast, the U.S. Federal Reserve and Bank of Japan have kept borrowing costs at close to zero, while the European Central Bank and Bank of England have held rates at record lows.
Rate Expectations
Investors are betting there is a 72 percent chance Stevens will increase the key rate by another quarter point in two weeks, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 7:20 a.m. That would be the first time in history the bank has raised borrowing costs at three successive meetings.
Still, there are signs the impact from A$20 billion ($19 billion) in cash handouts to households from Prime Minister Kevin Rudd’s government may be waning. Consumer confidence fell this month for the first time since May, a Westpac Banking Corp. survey showed on Nov. 11.
Liaison with shopkeepers “pointed to retailers experiencing mixed conditions in September and October, although the broader perspective was that spending appeared to have held up reasonably well given that the earlier boost from the payments to households was fading,” today’s minutes said.
Also, “members noted the weak outlook for construction of apartments, in contrast to the current strong population growth.”
Underlying inflation and gains in the annual consumer price index were expected “to be consistent” with the central bank’s target range of between 2 percent and 3 percent, the minutes said.
Economic Forecasts
The central bank this month predicted the nation’s economy will expand at more than three times the pace it forecast in August. Gross domestic product will rise 1.75 percent this year and 3.25 percent in 2010, the bank said on Nov. 6. Three months earlier, it forecast gains of 0.5 percent and 2.25 percent respectively.
The economy will continue its expansion in 2011 and 2012 as companies boost investment in resources, including Western Australia’s A$43 billion Gorgon liquefied natural gas project owned by Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc, the bank predicted earlier this month.
Conditions in the global and Australian economies “were significantly better than had been expected earlier in the year” when the board cut the rate to 3 percent, today’s minutes said.
“The growth outlook for the next few years had improved,” they added. “The board therefore concluded that it remained prudent, over time, gradually to reduce the degree of monetary accommodation.”
Asian Stocks Rise on U.S. Retail Sales; Mining Shares Advance
Nov. 17 (Bloomberg) -- Asian stocks rose, led by technology and mining companies, after a report showed retail sales rebounded in the U.S. and commodity prices climbed.
Canon Inc. advanced 2.4 percent in Tokyo, after the company agreed to buy Oce NV, the world’s largest maker of wide-format printers. Those of Mitsubishi Corp., Japan’s biggest commodities trader, gained 1.8 percent after oil and metal prices climbed. Alumina Ltd., an aluminum producer, added 3.4 percent in Sydney.
“Consumption has been solid,” said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC Co. in Tokyo. “This will prompt hopes for the Christmas sales season.”
The MSCI Asia Pacific Index added 0.2 percent to 119.50 as of 9:50 a.m. in Tokyo. The gauge has climbed 69 percent from a more than five-year low on March 9. Japan’s Nikkei 225 Stock Average rose 0.3 percent. Australia’s S&P/ASX 200 Index added 0.2 percent. South Korea’s Kospi Index gained 0.2 percent.
Futures on the Standard & Poor’s 500 Index were little changed. The gauge rose 1.5 percent yesterday after government figures showed retail sales increased 1.4 percent in October after a 2.3 percent drop in September. The gain beat an estimate of a 0.9 percent gain by economists in a Bloomberg News survey.
Crude oil for December delivery jumped 3.3 percent to $78.90 a barrel in New York yesterday, the largest increase since Sept. 30. The London Metals Index, a measure of six metals including copper and zinc, climbed 4.7 percent yesterday, the biggest gain since Aug. 3.
The MSCI Asia Pacific Index’s rally since March outpaced gains of 64 percent for the S&P 500 and 59 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI gauge are valued at 22 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx.
Canon Inc. advanced 2.4 percent in Tokyo, after the company agreed to buy Oce NV, the world’s largest maker of wide-format printers. Those of Mitsubishi Corp., Japan’s biggest commodities trader, gained 1.8 percent after oil and metal prices climbed. Alumina Ltd., an aluminum producer, added 3.4 percent in Sydney.
“Consumption has been solid,” said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC Co. in Tokyo. “This will prompt hopes for the Christmas sales season.”
The MSCI Asia Pacific Index added 0.2 percent to 119.50 as of 9:50 a.m. in Tokyo. The gauge has climbed 69 percent from a more than five-year low on March 9. Japan’s Nikkei 225 Stock Average rose 0.3 percent. Australia’s S&P/ASX 200 Index added 0.2 percent. South Korea’s Kospi Index gained 0.2 percent.
Futures on the Standard & Poor’s 500 Index were little changed. The gauge rose 1.5 percent yesterday after government figures showed retail sales increased 1.4 percent in October after a 2.3 percent drop in September. The gain beat an estimate of a 0.9 percent gain by economists in a Bloomberg News survey.
Crude oil for December delivery jumped 3.3 percent to $78.90 a barrel in New York yesterday, the largest increase since Sept. 30. The London Metals Index, a measure of six metals including copper and zinc, climbed 4.7 percent yesterday, the biggest gain since Aug. 3.
The MSCI Asia Pacific Index’s rally since March outpaced gains of 64 percent for the S&P 500 and 59 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI gauge are valued at 22 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx.
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