Feb. 27 (Bloomberg) -- India’s pledge to enact the biggest budget-deficit reduction in 19 years may offer the central bank more scope to drain money from the economy and rein in inflation.
Finance Minister Pranab Mukherjee yesterday unveiled plans to cut the deficit to 5.5 percent of gross domestic product in the year starting April 1 from 6.9 percent the previous year. The effort, which relies on tax increases and 400 billion rupees ($9 billion) of state asset sales, is aimed at shrinking a debt burden equivalent to about 82 percent of the economy.
The commitment means Prime Minister Manmohan Singh’s government will need to tap less of the nation’s savings than anticipated, lessening the impact on private credit growth from higher interest rates. The Reserve Bank of India may start boosting its benchmark rates at or before the next policy gathering in April, according to Goldman Sachs Group Inc.
“By cutting the deficit, the finance minister has made room for monetary tightening without crowding out” lending to private businesses, said K. Ramanathan, who helps manage the equivalent of 22 billion rupees ($477 million) at ING Investment Management in Mumbai.
Stocks rose after yesterday’s budget release, with the Sensitive Index gaining 1.1 percent in Mumbai, helping pare losses since the start of the year that were spurred in part by global investor concern about sovereign debt quality. Bonds at first rallied, then closed lower on concern a rise in the tax on fuels will boost energy costs and worsen inflation.
Ratings Impact
Fitch Ratings analyst Andrew Colquhoun said “we are marginally less encouraged to go for a downgrade” in India’s sovereign debt rating after the budget proposal. Standard & Poor’s said in a statement that it may raise its rating outlook to stable should finances improve, echoing similar remarks by Moody’s Investors Services before the release.
Moody’s ranks India’s rupee-denominated debt at Ba2, two levels below investment grade, while Fitch and S&P have a BBB- rating, the lowest investment grade. That puts India below its BRIC counterparts, which include China, Russia and Brazil.
Central banks are urging governments to curb deficits after the global recession ended and after Greece’s debt downgrade hit the euro. Federal Reserve Chairman Ben S. Bernanke this week said high deficits may cause “crowding out” of investment and Bank of Japan Governor Masaaki Shirakawa last week called for a “path for fiscal consolidation.”
In India, where policy makers aim to achieve the fastest- growing economy in the world within four years, fiscal stimulus measures saw the deficit climb from 2.7 percent of GDP two years ago. The finance ministry yesterday said public debt sales will rise by 1.3 percent, less than the 2 percent median forecast in a Bloomberg News survey, to 4.57 trillion rupees in the next fiscal year.
Subbarao Warning
Governor Duvvuri Subbarao had last month warned that fiscal stimulus, worth more than 4 percent of GDP given since 2008, must be withdrawn to ensure companies have access to funds.
“With fiscal policy in train, the focus will now shift to monetary policy to remove its massively accommodative stance,” Tushar Poddar, chief economist at Mumbai-based Goldman Sachs India Securities Ltd., said in a report. He said the RBI may raise interest rates by 3 percentage points this year to slow “rising domestic demand and inflationary pressures.”
Yesterday’s budget numbers are counting on a smooth series of asset sales, wireless license auctions and increase in tax revenue as the economy expands, JPMorgan Chase & Co. analysts said in a note. Should the deficit objective be reached, there will be “space for a strong pick up in investment and credit growth.”
‘Nasty Surprises’
“If a few things go wrong, the budget will look shaky,” Mumbai-based JPMorgan analysts Jahangir Aziz and Gunjan Gulati said in the note. “The global recovery can turn up nasty surprises and create enough anxiety to keep domestic financial markets volatile.”
Policy makers are working to unwind 7.5 trillion rupees of tax and interest rate cuts to curb consumer-price inflation that’s the highest in the Asia-Pacific region, according to data compiled by Bloomberg.
While India’s inflation has been stoked mainly by shortages in food supply after last year’s worst monsoon rainfall in 37 years, officials are concerned a surfeit of cash in the economy will spur excessive demand for services and industrial goods.
Prices paid by industrial workers in India rose almost 15 percent in December from a year earlier, the most in 11 years. Industrial production grew 16.8 percent in December, the quickest pace since at least 1994, prompting the central bank to say manufacturers are nearing capacity.
Excise Tax
Mukherjee raised the excise tax on almost all products to 10 percent from 8 percent in his budget to help trim the deficit.
Indian oil retailers including Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. increased gasoline prices after the levies were announced. Gasoline prices will be raised by 2.71 rupees a liter and diesel by 2.55 rupees a liter, Oil Secretary S. Sundareshan said.
Tata Motors Ltd., India’s biggest truckmaker, will pass on the higher tax to consumers and may raise prices by as much as 70,000 rupees, Managing Director Prakash Telang said. Maruti Suzuki India Ltd. raised prices of various models by as much as 13,000 rupees with immediate effect, the company said in a statement on Feb. 26.
Bharatiya Janata Party’s Sushma Swaraj, the main opposition leader in the lower house of parliament called the budget “inflationary” after higher taxes were imposed. Swaraj led a walk-out by her party during Mukherjee’s budget presentation.
“Any kind of subsidy cut will require a trade-off between living with slightly higher inflation in the near term but with more sustainable growth dynamics over a medium term,” said Rajeev Malik, a Singapore-based regional economist at Macquarie Group Ltd. “I don’t think the move to tax fuel will mean a more aggressive tightening by the central bank.”
Usha Thorat, a deputy governor at the central bank, told reporters in Mumbai yesterday that “the budget is positive for inflation reduction, in the sense it is in sync with the expectation that we outlined.”
Friday, February 26, 2010
Asian Stocks Post Weekly Gain as U.S. Rate Concern Eases
Feb. 27 (Bloomberg) -- Asian stocks gained this week, driving up the MSCI Asia Pacific Index by the most in seven weeks as concern eased that the Federal Reserve will raise borrowing costs to curb inflation.
Li & Fung Ltd., which gets 62 percent of sales from the U.S., gained 2.9 percent in Hong Kong as Fed Chairman Ben S. Bernanke said low interest rates are still needed to boost growth. Evergreen Marine Corp., Asia’s largest container- shipping line, surged 11 percent in Taipei after boosting freight rates. Woolworths Ltd., Australia’s biggest retailer, advanced 4 percent in Sydney after reporting higher profit and announcing a share buyback.
“Bernanke stuck to the script and emphasized the Fed’s commitment to maintaining interest rates at low levels until the economic recovery becomes self-sustaining,” said Tim Schroeders, who helps manage about $1.1 billion of equity investments at Pengana Capital Ltd. in Melbourne.
The MSCI Asia Pacific Index gained 2.4 percent to 118.07 this week, the most since the week ended Jan. 8. The gauge has lost 6.9 percent from a 17-month high on Jan. 15 on speculation central banks will start withdrawing stimulus measures. It has risen 1.5 percent this month.
Hong Kong’s Hang Seng Index climbed 3.6 percent this week, the biggest gain in the Asia-Pacific region, as the city’s economic growth beat estimates. Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, surged 7.7 percent after winning a land auction. Japan’s Nikkei 225 Stock Average rose less than 0.1 percent to 10,126.03 as the nation’s exports and factory output increased.
China Index Gains
China’s Shanghai Composite Index increased 1.1 percent, resuming trade after a one-week holiday for the Lunar New Year, as the government said it will extend support for the country’s industries amid weak global demand.
The MSCI Asia Pacific Index surged 34 percent last year as governments worldwide boosted spending and central banks lowered interest rates to help restore economies battered by the global recession. The gauge has fallen about 2.3 percent this year on signs governments from China to the U.S. and India will tighten lending and withdraw stimulus policies.
Bernanke said Feb. 24 that a slack U.S. labor market and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate low “for an extended period.”
China’s government will continue to expand domestic demand and encourage companies to find new export markets, according to a statement released Feb. 24 after a meeting chaired by Premier Wen Jiabao.
‘Recovery on Track’
Japanese exports climbed at the fastest pace in almost 30 years in January and the country’s factory output increased for the 11th straight month, government reports said this week. Hong Kong’s economic growth beat estimates in the fourth quarter and Financial Secretary John Tsang forecast Feb. 24 an expansion of as much as 5 percent this year.
“All the signs are that the global recovery is on track, but the market is also focusing on the potential for bad news,” said Matt Riordan, who helps manage $4.9 billion at Paradice Investment Management in Sydney.
Li & Fung, a supplier to Wal-Mart Stores Inc., gained 2.9 percent to HK$36.10 in Hong Kong. Esprit Holdings Ltd., the biggest Hong Kong-listed clothier, rose 1.9 percent to HK$55.35 after Citigroup Inc. upgraded the stock to “buy” from “sell.”
Evergreen Marine surged 11 percent to NT$19.2, leading shipping lines higher, after a group of lines said they plan to raise rates for hauling containers to Asia from the U.S.
Woolworths, ANZ
Hong Kong-based Orient Overseas International Ltd. climbed 8.5 percent to HK$56.75 and Singapore’s Neptune Orient Lines Ltd. gained 7.2 percent to S$1.78. Nomura Holdings Inc. recommended investors “buy” shares of the three shipping companies as earnings are expected to recover.
Woolworths climbed 4 percent to A$26.84. The company said yesterday it will buy back A$400 million ($355 million) of stock after reporting an increase in first-half net income.
Australia & New Zealand Banking Group Ltd., Australia’s fourth-biggest lender, gained 5.4 percent to A$23.14 after saying unaudited underlying profit in the four months ended Jan. 31 rose 16 percent.
“Earnings reports have been pretty strong,” said Winson Fong, who helps manage about $2.5 billion at SG Asset Management H.K. Ltd. in Hong Kong. “People are also becoming less panicked about China’s tightening and Europe’s deficit crisis.”
Concern that Greece, Spain and Portugal will struggle to curb deficits have contributed to the MSCI gauge’s drop this year. Standard & Poor’s and Moody’s Investors Services said this week Greece’s credit rating may be lowered.
Utilities, Developers
A gauge of utilities companies posted the biggest gain of the MSCI Asia Pacific Index’s 10 industry group this week. Japan’s Chugoku Electric Power Co. rose 5.8 percent to 1,855 yen and New Zealand’s Contact Energy Ltd. climbed 7.4 percent to NZ$6.12 as investors sought haven from risks.
Sun Hung Kai Properties jumped 7.7 percent to HK$107.80. The company won Hong Kong’s first land auction of the year with a bid that exceeded most analysts’ estimates after selling 900 homes last weekend.
In Singapore, City Developments Ltd. dropped 5.2 percent to S$10.28 after the city-state moved to curb speculation in the property market by imposing a levy on sales of residential properties within a year from the date of purchase.
Li & Fung Ltd., which gets 62 percent of sales from the U.S., gained 2.9 percent in Hong Kong as Fed Chairman Ben S. Bernanke said low interest rates are still needed to boost growth. Evergreen Marine Corp., Asia’s largest container- shipping line, surged 11 percent in Taipei after boosting freight rates. Woolworths Ltd., Australia’s biggest retailer, advanced 4 percent in Sydney after reporting higher profit and announcing a share buyback.
“Bernanke stuck to the script and emphasized the Fed’s commitment to maintaining interest rates at low levels until the economic recovery becomes self-sustaining,” said Tim Schroeders, who helps manage about $1.1 billion of equity investments at Pengana Capital Ltd. in Melbourne.
The MSCI Asia Pacific Index gained 2.4 percent to 118.07 this week, the most since the week ended Jan. 8. The gauge has lost 6.9 percent from a 17-month high on Jan. 15 on speculation central banks will start withdrawing stimulus measures. It has risen 1.5 percent this month.
Hong Kong’s Hang Seng Index climbed 3.6 percent this week, the biggest gain in the Asia-Pacific region, as the city’s economic growth beat estimates. Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, surged 7.7 percent after winning a land auction. Japan’s Nikkei 225 Stock Average rose less than 0.1 percent to 10,126.03 as the nation’s exports and factory output increased.
China Index Gains
China’s Shanghai Composite Index increased 1.1 percent, resuming trade after a one-week holiday for the Lunar New Year, as the government said it will extend support for the country’s industries amid weak global demand.
The MSCI Asia Pacific Index surged 34 percent last year as governments worldwide boosted spending and central banks lowered interest rates to help restore economies battered by the global recession. The gauge has fallen about 2.3 percent this year on signs governments from China to the U.S. and India will tighten lending and withdraw stimulus policies.
Bernanke said Feb. 24 that a slack U.S. labor market and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate low “for an extended period.”
China’s government will continue to expand domestic demand and encourage companies to find new export markets, according to a statement released Feb. 24 after a meeting chaired by Premier Wen Jiabao.
‘Recovery on Track’
Japanese exports climbed at the fastest pace in almost 30 years in January and the country’s factory output increased for the 11th straight month, government reports said this week. Hong Kong’s economic growth beat estimates in the fourth quarter and Financial Secretary John Tsang forecast Feb. 24 an expansion of as much as 5 percent this year.
“All the signs are that the global recovery is on track, but the market is also focusing on the potential for bad news,” said Matt Riordan, who helps manage $4.9 billion at Paradice Investment Management in Sydney.
Li & Fung, a supplier to Wal-Mart Stores Inc., gained 2.9 percent to HK$36.10 in Hong Kong. Esprit Holdings Ltd., the biggest Hong Kong-listed clothier, rose 1.9 percent to HK$55.35 after Citigroup Inc. upgraded the stock to “buy” from “sell.”
Evergreen Marine surged 11 percent to NT$19.2, leading shipping lines higher, after a group of lines said they plan to raise rates for hauling containers to Asia from the U.S.
Woolworths, ANZ
Hong Kong-based Orient Overseas International Ltd. climbed 8.5 percent to HK$56.75 and Singapore’s Neptune Orient Lines Ltd. gained 7.2 percent to S$1.78. Nomura Holdings Inc. recommended investors “buy” shares of the three shipping companies as earnings are expected to recover.
Woolworths climbed 4 percent to A$26.84. The company said yesterday it will buy back A$400 million ($355 million) of stock after reporting an increase in first-half net income.
Australia & New Zealand Banking Group Ltd., Australia’s fourth-biggest lender, gained 5.4 percent to A$23.14 after saying unaudited underlying profit in the four months ended Jan. 31 rose 16 percent.
“Earnings reports have been pretty strong,” said Winson Fong, who helps manage about $2.5 billion at SG Asset Management H.K. Ltd. in Hong Kong. “People are also becoming less panicked about China’s tightening and Europe’s deficit crisis.”
Concern that Greece, Spain and Portugal will struggle to curb deficits have contributed to the MSCI gauge’s drop this year. Standard & Poor’s and Moody’s Investors Services said this week Greece’s credit rating may be lowered.
Utilities, Developers
A gauge of utilities companies posted the biggest gain of the MSCI Asia Pacific Index’s 10 industry group this week. Japan’s Chugoku Electric Power Co. rose 5.8 percent to 1,855 yen and New Zealand’s Contact Energy Ltd. climbed 7.4 percent to NZ$6.12 as investors sought haven from risks.
Sun Hung Kai Properties jumped 7.7 percent to HK$107.80. The company won Hong Kong’s first land auction of the year with a bid that exceeded most analysts’ estimates after selling 900 homes last weekend.
In Singapore, City Developments Ltd. dropped 5.2 percent to S$10.28 after the city-state moved to curb speculation in the property market by imposing a levy on sales of residential properties within a year from the date of purchase.
Thursday, February 25, 2010
Most Asian Stocks Rise; Australian Retailers Gain on Earnings
Feb. 26 (Bloomberg) -- Most Asian stocks advanced as gains among Australian retailers and raw-material producers overshadowed declines by technology companies.
Woolworths Ltd., Australia’s biggest retailer, climbed 3.5 percent as it announced a share buy-back following an increase in first-half profit. Harvey Norman Holdings Ltd., the nation’s largest furniture and electronics retailer, gained 2.9 percent after earnings jumped 60 percent. Newcrest Mining Ltd. advanced 2 percent as gold climbed in New York yesterday. In Seoul, Hynix Semiconductor Inc. sank 3.2 percent on concern creditors will sell shares in the company.
The MSCI Asia Pacific Index rose 0.1 percent to 117.15 at 9:57 a.m. in Tokyo. Five stocks advanced for every four that declined. The gauge has slumped 7.8 percent from a 17-month high on Jan. 15 amid concerns governments will start withdrawing stimulus measures and Greece, Spain and Portugal will struggle to curb deficits.
Japan’s Nikkei 225 Stock Average gained 0.2 percent. Australia’s S&P/ASX 200 Index rose 0.5 percent. New Zealand’s NZX 50 Index was little changed.
Woolworths Ltd., Australia’s biggest retailer, climbed 3.5 percent as it announced a share buy-back following an increase in first-half profit. Harvey Norman Holdings Ltd., the nation’s largest furniture and electronics retailer, gained 2.9 percent after earnings jumped 60 percent. Newcrest Mining Ltd. advanced 2 percent as gold climbed in New York yesterday. In Seoul, Hynix Semiconductor Inc. sank 3.2 percent on concern creditors will sell shares in the company.
The MSCI Asia Pacific Index rose 0.1 percent to 117.15 at 9:57 a.m. in Tokyo. Five stocks advanced for every four that declined. The gauge has slumped 7.8 percent from a 17-month high on Jan. 15 amid concerns governments will start withdrawing stimulus measures and Greece, Spain and Portugal will struggle to curb deficits.
Japan’s Nikkei 225 Stock Average gained 0.2 percent. Australia’s S&P/ASX 200 Index rose 0.5 percent. New Zealand’s NZX 50 Index was little changed.
European Economy Risks Decoupling From Global Growth Recovery
Feb. 26 (Bloomberg) -- Europe’s economy may be coming unstuck from the global recovery as governments to the south of the region struggle to reverse budget deficits and consumers in the north pull back spending.
After the 16-nation euro economy almost stagnated in the fourth quarter, data this week showed the weakness reaching into 2010. Confidence among households and companies worsened unexpectedly, French consumer spending fell and bank loans to the private sector slid for a fifth month. At the same time, Standard & Poor’s said it may soon downgrade Greece again as the country grapples with the region’s largest budget shortfall.
Signs of a flagging recovery risk extending the euro’s slide against the dollar. They are also prompting Citigroup Inc. to advise investors to favor German government bonds and UBS AG to recommend European stocks with links to the faster-growing U.S., such as Daimler AG. As they cut their growth forecasts, economists predict slower interest-rate increases from the European Central Bank, whose governing council meets next week.
“Europe is where we see the biggest risk of a double dip at the global level,” said Julian Callow, chief European economist at Barclays Capital in London. “Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.”
The European Commission yesterday said the euro-area recovery may not gather momentum until the fourth quarter and maintained its forecast for 0.7 percent growth this year. Citigroup cut its 2010 growth prediction to 1.1 percent, while raising its projection for the U.S. to 3.2 percent.
ECB Policy
Having begun the year predicting the ECB would lift its benchmark interest rate from a record low of 1 percent in the second quarter and to 2 percent by the end of the year, economists at Bank of America Merrill Lynch now don’t expect any increase until December.
Still, ECB policy makers meeting in Frankfurt on March 4 will take decisions on a further “gradual” phasing out of emergency measures introduced to fight the financial crisis, council member George Provopoulos said in an interview on Feb. 19. After already announcing the end of its 12- and 6-month loans, President Jean-Claude Trichet has indicated the bank may return to an auction procedure in some of its refinancing operations as a next step.
Stocks Decline
The outlook for the economy is unnerving investors and taking its toll on stocks. While the S&P 500 Index in the U.S. has risen 3.8 percent this year, Europe’s Dow Jones Stoxx 50 has dropped 9.5 percent, giving up almost half of its 2009 gain.
The euro has fallen almost 6 percent against the dollar this year on speculation the U.S. will recover faster and concerns about Greece’s fiscal problems. That decline may continue, according to Chris Turner, head of foreign-exchange strategy at ING Financial Markets, who says the euro “will struggle” to return to $1.37 and is more likely to slip to $1.30. The currency was at $1.3499 late yesterday in London.
Investors should favor German bonds over U.S. Treasuries because the ECB will lag behind the Federal Reserve in raising rates, Citigroup said on Feb. 23. At UBS, strategist Nick Nelson says that European companies making more than a quarter of their sales in the U.S. may benefit from the dollar’s strength and the U.S. rebound.
“There are tentative signs that the U.S. economy may be pulling ahead from Europe,” Nelson said in a Feb. 23 report, which cited luxury carmaker Daimler and publisher Wolters Kluwer NV among potential winners.
‘Stalled’
The euro-area is also troubling policy makers abroad. Bank of England Governor Mervyn King said on Feb. 23 that indications the U.K.’s largest trading partner has “stalled” threatens U.K. exports.
Alcatel-Lucent SA, the world’s biggest supplier of fixed- line phone networks, this month lowered its 2010 profit-margin targets. RWE AG, Germany’s second-largest utility, yesterday reduced its earnings growth forecast because of delays in developing power plants as well as oil and gas projects.
“It will take several years for the European economy to return to the level seen in 2008,” RWE Chief Executive Officer Juergen Grossmann said.
Rising borrowing costs on the back of Greece’s mounting fiscal problems may further undermine Europe’s economy. The impact of sliding sovereign bonds could be “broader, weighing further on the recovery” by pushing up financing costs, the commission said yesterday.
Growth Brake
The drive to shrink budget deficits in Greece, Spain, Portugal and elsewhere is another potential brake. Barclays’s Callow estimates that countries representing 20 percent of the euro region’s output will have a fiscal tightening of 2 percent of gross domestic product in 2010.
“The sovereign debt crisis in Europe’s periphery reinforces drags on euro-area growth,” said Michael Saunders, an economist at Citigroup in London.
Consumers will also keep retrenching as unemployment rises from December’s 11-year high after climbing slowly last year when government aid limited firings, said Gilles Moec, an economist at Deutsche Bank AG in London. Spending may also suffer as governments cut programs used to stoke consumer demand in 2009.
“Now we’re getting the backlash,” said Moec, who predicts global and euro-zone growth of 4.1 percent and 1.1 percent, respectively, this year. “Domestic demand is feeling the lagged effects of the recession.”
After the 16-nation euro economy almost stagnated in the fourth quarter, data this week showed the weakness reaching into 2010. Confidence among households and companies worsened unexpectedly, French consumer spending fell and bank loans to the private sector slid for a fifth month. At the same time, Standard & Poor’s said it may soon downgrade Greece again as the country grapples with the region’s largest budget shortfall.
Signs of a flagging recovery risk extending the euro’s slide against the dollar. They are also prompting Citigroup Inc. to advise investors to favor German government bonds and UBS AG to recommend European stocks with links to the faster-growing U.S., such as Daimler AG. As they cut their growth forecasts, economists predict slower interest-rate increases from the European Central Bank, whose governing council meets next week.
“Europe is where we see the biggest risk of a double dip at the global level,” said Julian Callow, chief European economist at Barclays Capital in London. “Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.”
The European Commission yesterday said the euro-area recovery may not gather momentum until the fourth quarter and maintained its forecast for 0.7 percent growth this year. Citigroup cut its 2010 growth prediction to 1.1 percent, while raising its projection for the U.S. to 3.2 percent.
ECB Policy
Having begun the year predicting the ECB would lift its benchmark interest rate from a record low of 1 percent in the second quarter and to 2 percent by the end of the year, economists at Bank of America Merrill Lynch now don’t expect any increase until December.
Still, ECB policy makers meeting in Frankfurt on March 4 will take decisions on a further “gradual” phasing out of emergency measures introduced to fight the financial crisis, council member George Provopoulos said in an interview on Feb. 19. After already announcing the end of its 12- and 6-month loans, President Jean-Claude Trichet has indicated the bank may return to an auction procedure in some of its refinancing operations as a next step.
Stocks Decline
The outlook for the economy is unnerving investors and taking its toll on stocks. While the S&P 500 Index in the U.S. has risen 3.8 percent this year, Europe’s Dow Jones Stoxx 50 has dropped 9.5 percent, giving up almost half of its 2009 gain.
The euro has fallen almost 6 percent against the dollar this year on speculation the U.S. will recover faster and concerns about Greece’s fiscal problems. That decline may continue, according to Chris Turner, head of foreign-exchange strategy at ING Financial Markets, who says the euro “will struggle” to return to $1.37 and is more likely to slip to $1.30. The currency was at $1.3499 late yesterday in London.
Investors should favor German bonds over U.S. Treasuries because the ECB will lag behind the Federal Reserve in raising rates, Citigroup said on Feb. 23. At UBS, strategist Nick Nelson says that European companies making more than a quarter of their sales in the U.S. may benefit from the dollar’s strength and the U.S. rebound.
“There are tentative signs that the U.S. economy may be pulling ahead from Europe,” Nelson said in a Feb. 23 report, which cited luxury carmaker Daimler and publisher Wolters Kluwer NV among potential winners.
‘Stalled’
The euro-area is also troubling policy makers abroad. Bank of England Governor Mervyn King said on Feb. 23 that indications the U.K.’s largest trading partner has “stalled” threatens U.K. exports.
Alcatel-Lucent SA, the world’s biggest supplier of fixed- line phone networks, this month lowered its 2010 profit-margin targets. RWE AG, Germany’s second-largest utility, yesterday reduced its earnings growth forecast because of delays in developing power plants as well as oil and gas projects.
“It will take several years for the European economy to return to the level seen in 2008,” RWE Chief Executive Officer Juergen Grossmann said.
Rising borrowing costs on the back of Greece’s mounting fiscal problems may further undermine Europe’s economy. The impact of sliding sovereign bonds could be “broader, weighing further on the recovery” by pushing up financing costs, the commission said yesterday.
Growth Brake
The drive to shrink budget deficits in Greece, Spain, Portugal and elsewhere is another potential brake. Barclays’s Callow estimates that countries representing 20 percent of the euro region’s output will have a fiscal tightening of 2 percent of gross domestic product in 2010.
“The sovereign debt crisis in Europe’s periphery reinforces drags on euro-area growth,” said Michael Saunders, an economist at Citigroup in London.
Consumers will also keep retrenching as unemployment rises from December’s 11-year high after climbing slowly last year when government aid limited firings, said Gilles Moec, an economist at Deutsche Bank AG in London. Spending may also suffer as governments cut programs used to stoke consumer demand in 2009.
“Now we’re getting the backlash,” said Moec, who predicts global and euro-zone growth of 4.1 percent and 1.1 percent, respectively, this year. “Domestic demand is feeling the lagged effects of the recession.”
Wednesday, February 24, 2010
Origin Energy’s Profit Rises 28% After Financing Costs Decline
Feb. 25 (Bloomberg) -- Origin Energy Ltd., Australia’s second-largest energy retailer, said first-half underlying profit increased 28 percent on lower financing costs.
Profit excluding one-time items rose to A$355 million ($317 million) in the six months ended Dec. 31 from A$277 million a year earlier, Origin said today in a statement to the Australian stock exchange. That’s higher than the A$311 million median estimate of five analysts surveyed by Bloomberg News.
Origin reported first-half net income after tax of A$371 million compared with A$6.7 billion a year earlier. The first half of the prior year benefited from a gain on the sale of a stake in the Australia Pacific LNG project to ConocoPhillips.
The venture by Origin and Houston-based ConocoPhillips is one of five in the Australian state of Queensland planning to tap gas extracted from coal seams for conversion into liquefied natural gas and export to Asia. The venture plans to make a final investment decision late in 2010, Origin has said.
Origin’s LNG venture and BG Group Plc agreed to develop jointly owned coal-seam gas fields in Queensland, the company said in a separate statement today. Origin expects additional gas and oil discoveries from an expanded exploration program and seeks to tap increasing demand for renewable energy sources Managing Director Grant King said in today’s statement.
Origin reiterated its forecast that full-year underlying profit will be about 15 percent higher than a year earlier.
Profit excluding one-time items rose to A$355 million ($317 million) in the six months ended Dec. 31 from A$277 million a year earlier, Origin said today in a statement to the Australian stock exchange. That’s higher than the A$311 million median estimate of five analysts surveyed by Bloomberg News.
Origin reported first-half net income after tax of A$371 million compared with A$6.7 billion a year earlier. The first half of the prior year benefited from a gain on the sale of a stake in the Australia Pacific LNG project to ConocoPhillips.
The venture by Origin and Houston-based ConocoPhillips is one of five in the Australian state of Queensland planning to tap gas extracted from coal seams for conversion into liquefied natural gas and export to Asia. The venture plans to make a final investment decision late in 2010, Origin has said.
Origin’s LNG venture and BG Group Plc agreed to develop jointly owned coal-seam gas fields in Queensland, the company said in a separate statement today. Origin expects additional gas and oil discoveries from an expanded exploration program and seeks to tap increasing demand for renewable energy sources Managing Director Grant King said in today’s statement.
Origin reiterated its forecast that full-year underlying profit will be about 15 percent higher than a year earlier.
Aussie, Kiwi Dollars Fall as Greece Concerns Sap Risk Demand
Feb. 25 (Bloomberg) -- Australia’s dollar weakened, reversing earlier gains, as speculation Greece won’t be able to push through fiscal cuts needed to gain European Union help in paying its debts undermined demand for higher-yielding assets.
The so-called Aussie pared this month’s advance versus the U.S. dollar after Standard & Poor’s said yesterday it may downgrade Greece’s credit rating by the end of March. Demand for the South Pacific nations’ currencies also declined as Asian stocks and commodities fell. Concern over Greece’s sovereign risk may prompt the Reserve Bank of Australia to keep borrowing costs unchanged at next week’s meeting, Barclays Capital said.
“The risk remains that concerns about sovereign credit ratings in the euro area could lead the RBA to hold off once again,” said David Forrester, a currency economist at Barclays in Singapore. “The news flow on this front remains discouraging and a bit of a weight on the Australian dollar.”
Australia’s currency dropped to 89.20 U.S. cents as of 12:51 p.m. in Sydney, from 89.37 cents yesterday in New York, reversing earlier gains of as much as 0.2 percent. It is up 1 percent so far this month. It fell to 80.13 yen from 80.56 yen.
New Zealand’s dollar declined to 69.05 U.S. cents from 69.34 cents. The so-called kiwi fell to 61.98 yen from 62.50 yen.
The South Pacific nations’ currencies declined as the MSCI Asia Pacific Index of regional shares slumped 0.1 percent, having earlier gained as much as 0.2 percent.
“We believe that a further downgrade of Greece of one to two notches is possible within a month,” S&P analysts led by Marko Mrsnik in London said in a statement that was released late Feb. 24.
Greece Rating
S&P cut Greece’s rating in December from A- to BBB+ and signaled then it may reduce the grade again. The government has since struggled to persuade investors it can slash the budget deficit from last year’s 12.7 percent of gross domestic product without outside help or a default.
Declines in the New Zealand dollar were tempered after Federal Reserve Chairman Ben S. Bernanke said the U.S. needs low interest rates, safeguarding the South Pacific nation’s yield advantage.
“Expect yield support for the New Zealand dollar again to factor throughout trading today,” said David Croy, a strategist at ANZ Investment Bank in Wellington. Bernanke “reassured markets that it will be a long process to revert to normalization,” he said.
U.S. Rates
Bernanke said the U.S. economy is in a “nascent” recovery that still requires low borrowing costs to encourage demand from consumers and businesses once federal stimulus expires.
“A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” Bernanke told the House Financial Services Committee in Washington yesterday at the start of his two days of semi-annual testimony before Congress. “Private final demand does seem to be growing at a moderate pace.”
Benchmark interest rates are 3.75 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.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to rate expectations, rose to 4.155 percent today from 4.1478 percent yesterday.
Australian government bonds rose for a second day. The yield on the benchmark 10-year note fell two basis points to 5.53 percent, according to data compiled by Bloomberg. The 5.25 percent security due March 2019 advanced 0.12, or A$1.20 per A$1,000 face amount, to 98.04.
The so-called Aussie pared this month’s advance versus the U.S. dollar after Standard & Poor’s said yesterday it may downgrade Greece’s credit rating by the end of March. Demand for the South Pacific nations’ currencies also declined as Asian stocks and commodities fell. Concern over Greece’s sovereign risk may prompt the Reserve Bank of Australia to keep borrowing costs unchanged at next week’s meeting, Barclays Capital said.
“The risk remains that concerns about sovereign credit ratings in the euro area could lead the RBA to hold off once again,” said David Forrester, a currency economist at Barclays in Singapore. “The news flow on this front remains discouraging and a bit of a weight on the Australian dollar.”
Australia’s currency dropped to 89.20 U.S. cents as of 12:51 p.m. in Sydney, from 89.37 cents yesterday in New York, reversing earlier gains of as much as 0.2 percent. It is up 1 percent so far this month. It fell to 80.13 yen from 80.56 yen.
New Zealand’s dollar declined to 69.05 U.S. cents from 69.34 cents. The so-called kiwi fell to 61.98 yen from 62.50 yen.
The South Pacific nations’ currencies declined as the MSCI Asia Pacific Index of regional shares slumped 0.1 percent, having earlier gained as much as 0.2 percent.
“We believe that a further downgrade of Greece of one to two notches is possible within a month,” S&P analysts led by Marko Mrsnik in London said in a statement that was released late Feb. 24.
Greece Rating
S&P cut Greece’s rating in December from A- to BBB+ and signaled then it may reduce the grade again. The government has since struggled to persuade investors it can slash the budget deficit from last year’s 12.7 percent of gross domestic product without outside help or a default.
Declines in the New Zealand dollar were tempered after Federal Reserve Chairman Ben S. Bernanke said the U.S. needs low interest rates, safeguarding the South Pacific nation’s yield advantage.
“Expect yield support for the New Zealand dollar again to factor throughout trading today,” said David Croy, a strategist at ANZ Investment Bank in Wellington. Bernanke “reassured markets that it will be a long process to revert to normalization,” he said.
U.S. Rates
Bernanke said the U.S. economy is in a “nascent” recovery that still requires low borrowing costs to encourage demand from consumers and businesses once federal stimulus expires.
“A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” Bernanke told the House Financial Services Committee in Washington yesterday at the start of his two days of semi-annual testimony before Congress. “Private final demand does seem to be growing at a moderate pace.”
Benchmark interest rates are 3.75 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.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to rate expectations, rose to 4.155 percent today from 4.1478 percent yesterday.
Australian government bonds rose for a second day. The yield on the benchmark 10-year note fell two basis points to 5.53 percent, according to data compiled by Bloomberg. The 5.25 percent security due March 2019 advanced 0.12, or A$1.20 per A$1,000 face amount, to 98.04.
Tuesday, February 23, 2010
Asia Stocks Fall for First Time in Three Days on U.S. Concern
Feb. 24 (Bloomberg) -- Asian stocks declined for the first time in three days, led by materials companies and carmakers, after a drop in U.S. consumer confidence to a 10-month low spurred concern that the economic recovery will slow.
BHP Billiton Ltd., the world’s largest mining company, fell 1.8 percent in Sydney on speculation a slowdown will dent demand for metals. Canon Inc., a camera maker that gets 79 percent of sales outside Japan, sank 3.4 percent, leading Japanese exporters lower after the dollar weakened against the yen. Hyundai Motor Co., South Korea’s biggest carmaker, declined 3 percent after AutoWeek magazine said the company halted U.S. sales of some cars due to a door-lock problem.
“The U.S. consumer confidence report has again created nervousness about the fragility of the recovery and its sustainability,” said Nader Naeimi, an investment strategist in Sydney at AMP Capital Investors, which oversees about $90 billion globally. “Nevertheless, the fundamentals remain strong and we are still seeing good earnings coming through.”
The MSCI Asia Pacific Index fell 1.3 percent to 117.48 as of 10:28 a.m. in Tokyo, snapping a 3.2 percent gain in the past two days. Eight times as many stocks declined as rose. The gauge has lost 7.3 percent from a 17-month high on Jan. 15 on concern governments will start withdrawing stimulus measures, and that Greece, Spain and Portugal will struggle to curb deficits.
Japan’s Nikkei 225 Stock Average dropped 2 percent to 10,146.17. Australia’s S&P/ASX 200 Index declined 1 percent in Sydney. South Korea’s Kospi Index slipped 1.1 percent.
Confidence, Commodities Decline
Futures on the Standard & Poor’s 500 Index fell 0.1 percent. The measure retreated 1.2 percent in New York yesterday after the Conference Board’s confidence index for February decreased to the lowest level since April 2009, a report from the New York-based private research group showed.
In addition, the Ifo institute in Munich said its survey of German business confidence unexpectedly fell for the first time in 11 months in February as the coldest winter in 14 years damped retail sales and construction.
Material producers sank the most among the MSCI Asia Pacific Index’s 10 industry groups. BHP fell 2.2 percent to A$41.17 and was the biggest drag on the gauge. Rio Tinto Group, the world’s No. 3 mining company, lost 2.3 percent to A$70.59. Mitsubishi Corp., a trading company that gets about 40 percent of sales from commodities, declined 2 percent to 2,218 yen in Tokyo.
Crude oil for April delivery lost 1.8 percent in New York yesterday, the steepest decline in two weeks. The London Metal Exchange Index of six metals including copper and zinc dropped for a second day yesterday, slipping 2.3 percent.
Dollar Weakens
Japanese exporters declined as the dollar weakened to as low as 89.92 yen in Tokyo from 91.08 at the 3 p.m. close of stock trading yesterday. Japanese companies consider an average level of 92.90 as the dividing line between losses and profits, the Cabinet Office said on Feb. 19.
Canon, the world’s largest camera maker, dropped 3.1 percent to 3,705 yen. Sony Corp., an electronics maker that receives 23 percent of sales from the U.S., declined 2.8 percent to 3,100 yen. Nissan Motor Co., a carmaker that gets 35 percent of revenue in North America, slid 2.7 percent to 725 yen. Honda Motor Co., which gets about 44 percent of sales in North America, lost 1.9 percent. Hyundai Motor fell 3 percent to 113,500 won.
BHP Billiton Ltd., the world’s largest mining company, fell 1.8 percent in Sydney on speculation a slowdown will dent demand for metals. Canon Inc., a camera maker that gets 79 percent of sales outside Japan, sank 3.4 percent, leading Japanese exporters lower after the dollar weakened against the yen. Hyundai Motor Co., South Korea’s biggest carmaker, declined 3 percent after AutoWeek magazine said the company halted U.S. sales of some cars due to a door-lock problem.
“The U.S. consumer confidence report has again created nervousness about the fragility of the recovery and its sustainability,” said Nader Naeimi, an investment strategist in Sydney at AMP Capital Investors, which oversees about $90 billion globally. “Nevertheless, the fundamentals remain strong and we are still seeing good earnings coming through.”
The MSCI Asia Pacific Index fell 1.3 percent to 117.48 as of 10:28 a.m. in Tokyo, snapping a 3.2 percent gain in the past two days. Eight times as many stocks declined as rose. The gauge has lost 7.3 percent from a 17-month high on Jan. 15 on concern governments will start withdrawing stimulus measures, and that Greece, Spain and Portugal will struggle to curb deficits.
Japan’s Nikkei 225 Stock Average dropped 2 percent to 10,146.17. Australia’s S&P/ASX 200 Index declined 1 percent in Sydney. South Korea’s Kospi Index slipped 1.1 percent.
Confidence, Commodities Decline
Futures on the Standard & Poor’s 500 Index fell 0.1 percent. The measure retreated 1.2 percent in New York yesterday after the Conference Board’s confidence index for February decreased to the lowest level since April 2009, a report from the New York-based private research group showed.
In addition, the Ifo institute in Munich said its survey of German business confidence unexpectedly fell for the first time in 11 months in February as the coldest winter in 14 years damped retail sales and construction.
Material producers sank the most among the MSCI Asia Pacific Index’s 10 industry groups. BHP fell 2.2 percent to A$41.17 and was the biggest drag on the gauge. Rio Tinto Group, the world’s No. 3 mining company, lost 2.3 percent to A$70.59. Mitsubishi Corp., a trading company that gets about 40 percent of sales from commodities, declined 2 percent to 2,218 yen in Tokyo.
Crude oil for April delivery lost 1.8 percent in New York yesterday, the steepest decline in two weeks. The London Metal Exchange Index of six metals including copper and zinc dropped for a second day yesterday, slipping 2.3 percent.
Dollar Weakens
Japanese exporters declined as the dollar weakened to as low as 89.92 yen in Tokyo from 91.08 at the 3 p.m. close of stock trading yesterday. Japanese companies consider an average level of 92.90 as the dividing line between losses and profits, the Cabinet Office said on Feb. 19.
Canon, the world’s largest camera maker, dropped 3.1 percent to 3,705 yen. Sony Corp., an electronics maker that receives 23 percent of sales from the U.S., declined 2.8 percent to 3,100 yen. Nissan Motor Co., a carmaker that gets 35 percent of revenue in North America, slid 2.7 percent to 725 yen. Honda Motor Co., which gets about 44 percent of sales in North America, lost 1.9 percent. Hyundai Motor fell 3 percent to 113,500 won.
Japan’s Export Growth Accelerates on Global Rebound
Feb. 24 (Bloomberg) -- Japan’s exports climbed at the fastest pace in almost 30 years in January, supporting the nation’s economic recovery as falling wages damp demand at home.
Shipments abroad advanced 40.9 percent from a year earlier, the biggest increase since February 1980, the Finance Ministry said today in Tokyo. The median estimate of 22 economists surveyed by Bloomberg was for exports to rise 39.5 percent.
The growth was led by the biggest advance in exports to China since 1985, while shipments to the U.S. increased for the first time in more than two years, spurring sales at manufacturers from Mazda Motor Corp. to Bridgestone Corp. More than $2 trillion in worldwide government spending has helped sustain Japan’s expansion, stimulus the economy needs to keep growing as its consumers pare spending.
“Exports will continue to be a driving force for the economy,” said Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities Co. in Tokyo. “Still, given that the export recovery is driven by stimulus measures, this won’t be enough to benefit households and help Japan return to a path of self- sustained growth.”
The yen traded at 90.20 against the dollar at 9:58 a.m. in Tokyo, compared with 90.24 before the report was released. Exports rose a seasonally adjusted 8.6 percent from December.
Japan posted a trade surplus of 85.2 billion yen in January, better than the median prediction for a 136 billion-yen deficit. Imports rose 8.6 percent, the first increase since October 2008, today’s report showed.
Favorable Comparison
The improvement in exports was partly due to a favorable year-on-year comparison. In January 2009, shipments abroad tumbled 45.7 percent as global trade froze in the aftermath of the collapse of Lehman Brothers Holdings Inc. in the previous September.
A government report last week showed that Japan’s economy expanded at an annual 4.6 percent rate last quarter. The export- led recovery was driven by Asia, especially China, where gross domestic product accelerated to the fastest pace since 2007 last quarter. The nation is Japan’s largest overseas customer.
Mazda Motor plans to increase production capacity in China to meet growing demand in the world’s biggest car market. The automaker aims to boost China sales 22 percent this year.
Bridgestone, the world’s largest tiremaker by sales, forecast a more than 40-fold increase in 2010 profit on rebounding auto sales in Japan, the U.S. and Europe.
Exports to Asia advanced 68.1 percent in January from a year earlier and shipments to China climbed 79.9 percent.
U.S. demand is also improving after a report last month showed the nation’s economy expanded the most in six years last quarter. Shipments to the U.S. rose 24.2 percent. Exports to Europe rose 11.1 percent.
Benefitting Consumers
The resurgence in demand hasn’t been benefiting consumers at home, who have been grappling with falling wages. BNP Paribas forecasts Japan’s economy will grow an annualized 1.2 percent in the three months ending March, less than half last quarter’s pace.
Demand for services slipped at the fastest pace in nine months in December and retail sales have slid for 13 months. The impetus from government stimulus measures are also fading.
“The foundations for economic recovery are by no means rock solid, with frail domestic demand and a pronounced skew toward restocking and exports to Asia,” said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc. “In particular, January-March is in economic policy limbo and we expect near-zero growth.”
Japan’s construction machinery shipments will likely rise for the first time in three years in fiscal 2010, supported by continued demand in China and other Asian nations, according to the Japan Construction Equipment Manufacturers Association.
Toyota Motor Corp., the country’s biggest automaker, has recalled 8 million vehicles because of accelerator and brake problems.
The government lowered its evaluation of both exports and imports yesterday, saying they are increasing “moderately.” Shipments to Asia are slowing and there’s a need to monitor the effects of recent auto recalls, said Keisuke Tsumura, a parliamentary secretary at the Cabinet Office.
Shipments abroad advanced 40.9 percent from a year earlier, the biggest increase since February 1980, the Finance Ministry said today in Tokyo. The median estimate of 22 economists surveyed by Bloomberg was for exports to rise 39.5 percent.
The growth was led by the biggest advance in exports to China since 1985, while shipments to the U.S. increased for the first time in more than two years, spurring sales at manufacturers from Mazda Motor Corp. to Bridgestone Corp. More than $2 trillion in worldwide government spending has helped sustain Japan’s expansion, stimulus the economy needs to keep growing as its consumers pare spending.
“Exports will continue to be a driving force for the economy,” said Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities Co. in Tokyo. “Still, given that the export recovery is driven by stimulus measures, this won’t be enough to benefit households and help Japan return to a path of self- sustained growth.”
The yen traded at 90.20 against the dollar at 9:58 a.m. in Tokyo, compared with 90.24 before the report was released. Exports rose a seasonally adjusted 8.6 percent from December.
Japan posted a trade surplus of 85.2 billion yen in January, better than the median prediction for a 136 billion-yen deficit. Imports rose 8.6 percent, the first increase since October 2008, today’s report showed.
Favorable Comparison
The improvement in exports was partly due to a favorable year-on-year comparison. In January 2009, shipments abroad tumbled 45.7 percent as global trade froze in the aftermath of the collapse of Lehman Brothers Holdings Inc. in the previous September.
A government report last week showed that Japan’s economy expanded at an annual 4.6 percent rate last quarter. The export- led recovery was driven by Asia, especially China, where gross domestic product accelerated to the fastest pace since 2007 last quarter. The nation is Japan’s largest overseas customer.
Mazda Motor plans to increase production capacity in China to meet growing demand in the world’s biggest car market. The automaker aims to boost China sales 22 percent this year.
Bridgestone, the world’s largest tiremaker by sales, forecast a more than 40-fold increase in 2010 profit on rebounding auto sales in Japan, the U.S. and Europe.
Exports to Asia advanced 68.1 percent in January from a year earlier and shipments to China climbed 79.9 percent.
U.S. demand is also improving after a report last month showed the nation’s economy expanded the most in six years last quarter. Shipments to the U.S. rose 24.2 percent. Exports to Europe rose 11.1 percent.
Benefitting Consumers
The resurgence in demand hasn’t been benefiting consumers at home, who have been grappling with falling wages. BNP Paribas forecasts Japan’s economy will grow an annualized 1.2 percent in the three months ending March, less than half last quarter’s pace.
Demand for services slipped at the fastest pace in nine months in December and retail sales have slid for 13 months. The impetus from government stimulus measures are also fading.
“The foundations for economic recovery are by no means rock solid, with frail domestic demand and a pronounced skew toward restocking and exports to Asia,” said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc. “In particular, January-March is in economic policy limbo and we expect near-zero growth.”
Japan’s construction machinery shipments will likely rise for the first time in three years in fiscal 2010, supported by continued demand in China and other Asian nations, according to the Japan Construction Equipment Manufacturers Association.
Toyota Motor Corp., the country’s biggest automaker, has recalled 8 million vehicles because of accelerator and brake problems.
The government lowered its evaluation of both exports and imports yesterday, saying they are increasing “moderately.” Shipments to Asia are slowing and there’s a need to monitor the effects of recent auto recalls, said Keisuke Tsumura, a parliamentary secretary at the Cabinet Office.
Monday, February 22, 2010
Australian Economy to Boom Later This Decade, BIS Shrapnel Says
Feb. 23 (Bloomberg) -- Australia’s economy will accelerate over the next two years before building “into a boom” amid a surge in business investment, BIS Shrapnel Ltd. said.
Gross domestic product will rise 2.7 percent in the 12 months through June 2010, 3 percent in fiscal 2011 and 3.8 percent the following two years, the Sydney-based forecaster said today.
A surge in house construction and government investment in infrastructure such as schools and roads will help stoke economic growth, BIS Shrapnel predicts. Inflationary pressures, leading to higher interest rates, will increase in three to four years as a mining expansion intensifies.
“We are now well and truly into recovery from what turned out to be a modest downturn,” said BIS Shrapnel economist Richard Robinson. “Investment, and primarily the construction side of it, is the primary driver of growth in the economy.”
“Growth will pick up speed over the next two years and build into a boom later this decade,” the BIS Shrapnel report said.
Gross domestic product will rise 2.7 percent in the 12 months through June 2010, 3 percent in fiscal 2011 and 3.8 percent the following two years, the Sydney-based forecaster said today.
A surge in house construction and government investment in infrastructure such as schools and roads will help stoke economic growth, BIS Shrapnel predicts. Inflationary pressures, leading to higher interest rates, will increase in three to four years as a mining expansion intensifies.
“We are now well and truly into recovery from what turned out to be a modest downturn,” said BIS Shrapnel economist Richard Robinson. “Investment, and primarily the construction side of it, is the primary driver of growth in the economy.”
“Growth will pick up speed over the next two years and build into a boom later this decade,” the BIS Shrapnel report said.
Malaysia May Have Emerged From Recession Amid Global Recovery
Feb. 23 (Bloomberg) -- Malaysia’s economy probably emerged from its first recession in a decade last quarter, giving room for the central bank to raise interest rates from a record low as early as next month.
Gross domestic product increased 3.4 percent in the fourth quarter from a year earlier, after contracting 1.2 percent in the previous three months, according to the median estimate of 14 economists surveyed by Bloomberg News. The figures are due to be released at 6 p.m. in Kuala Lumpur tomorrow.
Central banks around the world are starting to raise interest rates or tighten monetary policy as the global recovery takes hold. Malaysia’s government has said the economy may expand more than the current 2 percent-to-3 percent forecast this year and the central bank has warned that borrowing costs cannot be kept “too low” for too long as growth strengthens.
“We expect Malaysia’s economy to register a positive recovery in the fourth quarter on resilient domestic demand and fiscal stimulus measures while the pace of external demand contraction eases further,” said Alvin Liew, an economist at Standard Chartered Bank in Singapore. “Based on the improved outlook, we believe the central bank can start to focus on normalizing monetary policy from its next meeting.”
Malaysia’s neighbors are among Asian economies that are recovering from the global slowdown. Singapore last week raised its economic growth forecast for 2010, predicting an expansion of as much as 6.5 percent this year. Thailand yesterday said its economy grew a faster-than-expected 5.8 percent last quarter as it emerged from a yearlong recession.
Rising Demand
Malaysia’s industrial production climbed the most in 22 months in December amid an increase in orders for manufactured goods. The government predicts overseas sales will increase 3.5 percent this year after slumping in 2009.
“Positive developments in manufacturing production, financing activity, external trade and labor market conditions reaffirm the assessment that the economic recovery is gaining strength,” the central bank said Jan. 26. “The economy is expected to expand further in 2010, with growth being supported by strengthening domestic demand, particularly private consumption, and further improvements in external demand.”
Bank Negara Malaysia has kept the overnight policy rate at 2 percent for seven straight meetings, the lowest since it was introduced in April 2004. Governor Zeti Akhtar Aziz said Jan. 29 that Malaysia needs to “normalize” rates from their current “unprecedented levels.” Policy makers next meet on March 4.
Stimulus Measures
Malaysia’s $195 billion economy probably shrank 3 percent last year, International Trade and Industry Minister Mustapa Mohamed said Feb. 4. The government is confident of 5 percent GDP growth in 2010, Second Finance Minister Ahmad Husni Hanadzlah said last month.
Consumer prices probably rose 1.5 percent in January from a year earlier, after a 1.1 percent gain the month before, according to the median estimate of seven economists in a Bloomberg survey. The statistics department will release the figures at 5 p.m. tomorrow.
Malaysia unveiled two stimulus plans worth a combined 67 billion ringgit ($20 billion) in 2008 and 2009 to revive growth as the worst global slump since the Great Depression hurt exports of Malaysian Pacific Industries Bhd.’s semiconductors and other goods.
The country still faces competition for investment from the rest of the region even after liberalizing some services industries, including banking and insurance, Trade Minister Mustapa said in August. Approved factory investment declined in 2009 as companies delayed projects and foreign investment more than halved last year.
New Model
The government is working on a new economic model to bolster investments and sustain long-term growth and will unveil its plans next month. In neighboring Singapore, a government- appointed panel this month outlined seven proposals to restructure the economy including doubling productivity and relying less on foreign labor.
“It is the consistent policy in the medium to long term that makes a country competitive, like Singapore, Hong Kong or China,” Francis Yeoh, managing director of Malaysia’s biggest builder YTL Corp., said Feb. 8 in Kuala Lumpur. “I’m not going to advocate short-term stimuli, more subsidies. That is the wrong thing to do.”
Gross domestic product increased 3.4 percent in the fourth quarter from a year earlier, after contracting 1.2 percent in the previous three months, according to the median estimate of 14 economists surveyed by Bloomberg News. The figures are due to be released at 6 p.m. in Kuala Lumpur tomorrow.
Central banks around the world are starting to raise interest rates or tighten monetary policy as the global recovery takes hold. Malaysia’s government has said the economy may expand more than the current 2 percent-to-3 percent forecast this year and the central bank has warned that borrowing costs cannot be kept “too low” for too long as growth strengthens.
“We expect Malaysia’s economy to register a positive recovery in the fourth quarter on resilient domestic demand and fiscal stimulus measures while the pace of external demand contraction eases further,” said Alvin Liew, an economist at Standard Chartered Bank in Singapore. “Based on the improved outlook, we believe the central bank can start to focus on normalizing monetary policy from its next meeting.”
Malaysia’s neighbors are among Asian economies that are recovering from the global slowdown. Singapore last week raised its economic growth forecast for 2010, predicting an expansion of as much as 6.5 percent this year. Thailand yesterday said its economy grew a faster-than-expected 5.8 percent last quarter as it emerged from a yearlong recession.
Rising Demand
Malaysia’s industrial production climbed the most in 22 months in December amid an increase in orders for manufactured goods. The government predicts overseas sales will increase 3.5 percent this year after slumping in 2009.
“Positive developments in manufacturing production, financing activity, external trade and labor market conditions reaffirm the assessment that the economic recovery is gaining strength,” the central bank said Jan. 26. “The economy is expected to expand further in 2010, with growth being supported by strengthening domestic demand, particularly private consumption, and further improvements in external demand.”
Bank Negara Malaysia has kept the overnight policy rate at 2 percent for seven straight meetings, the lowest since it was introduced in April 2004. Governor Zeti Akhtar Aziz said Jan. 29 that Malaysia needs to “normalize” rates from their current “unprecedented levels.” Policy makers next meet on March 4.
Stimulus Measures
Malaysia’s $195 billion economy probably shrank 3 percent last year, International Trade and Industry Minister Mustapa Mohamed said Feb. 4. The government is confident of 5 percent GDP growth in 2010, Second Finance Minister Ahmad Husni Hanadzlah said last month.
Consumer prices probably rose 1.5 percent in January from a year earlier, after a 1.1 percent gain the month before, according to the median estimate of seven economists in a Bloomberg survey. The statistics department will release the figures at 5 p.m. tomorrow.
Malaysia unveiled two stimulus plans worth a combined 67 billion ringgit ($20 billion) in 2008 and 2009 to revive growth as the worst global slump since the Great Depression hurt exports of Malaysian Pacific Industries Bhd.’s semiconductors and other goods.
The country still faces competition for investment from the rest of the region even after liberalizing some services industries, including banking and insurance, Trade Minister Mustapa said in August. Approved factory investment declined in 2009 as companies delayed projects and foreign investment more than halved last year.
New Model
The government is working on a new economic model to bolster investments and sustain long-term growth and will unveil its plans next month. In neighboring Singapore, a government- appointed panel this month outlined seven proposals to restructure the economy including doubling productivity and relying less on foreign labor.
“It is the consistent policy in the medium to long term that makes a country competitive, like Singapore, Hong Kong or China,” Francis Yeoh, managing director of Malaysia’s biggest builder YTL Corp., said Feb. 8 in Kuala Lumpur. “I’m not going to advocate short-term stimuli, more subsidies. That is the wrong thing to do.”
Sunday, February 21, 2010
Asian Stocks Gain as Fed Rate Concern Eases, Commodities Rise
Feb. 22 (Bloomberg) -- Asian stocks rallied from the biggest decline in two weeks after a smaller-than-estimated increase in U.S. consumer prices eased concern the Federal Reserve will increase interest rates.
BHP Billiton Ltd., Australia’s top oil producer and the world’s largest mining company, gained 2.3 percent after metal and crude oil prices rose. Mitsubishi Corp., a trading company that gets about 40 percent of sales from commodities, advanced 2.9 percent in Tokyo. Camera maker Nikon Corp. climbed 3.6 percent in Tokyo after Credit Suisse Group AG upgraded the stock.
“The market will take back last week’s losses as concerns over the Fed rate increase ease,” said Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets Co. in Tokyo.
The MSCI Asia Pacific Index gained 1.9 percent to 117.55 as of 9:46 a.m. in Tokyo. The gauge sank 2.1 percent on Feb. 19 after the Fed raised the cost of direct loans to banks. The index has lost about 7.3 percent from a 17-month high on Jan. 15 on speculation central banks will tighten monetary policy, and that Greece, Spain and Portugal will struggle to curb deficits.
Japan’s Nikkei 225 Stock Average advanced 2.8 percent to 10,401.12. South Korea’s Kospi Index gained 2.1 percent and Australia’s S&P/ASX 200 Index increased 1.6 percent. New Zealand’s NZX 50 Index rose 0.5 percent.
Futures on the Standard & Poor’s 500 Index gained 0.2 percent. The gauge rose 0.2 percent in New York on Feb. 19 after a government report showed an index of U.S. consumer prices rose 0.2 percent in January from the previous month, less than the 0.3 percent projected by economists.
New York Fed President William Dudley indicated on Feb. 19 that policy makers are more concerned about maintaining growth than fighting inflation, citing the consumer price data. The Fed raising the so-called discount rate from 0.5 percent to 0.75 percent on Feb. 18 triggered concern stimulus programs are winding down.
A gauge of raw material producers posted the biggest gain of the MSCI Asia Pacific Index’s 10 industry groups today.
Crude oil for March delivery climbed 1 percent to $79.81 a barrel on Feb. 19. The London Metal Exchange Index of six metals including copper and zinc gained 1.9 percent to its highest level since Jan. 20.
BHP Billiton Ltd., Australia’s top oil producer and the world’s largest mining company, gained 2.3 percent after metal and crude oil prices rose. Mitsubishi Corp., a trading company that gets about 40 percent of sales from commodities, advanced 2.9 percent in Tokyo. Camera maker Nikon Corp. climbed 3.6 percent in Tokyo after Credit Suisse Group AG upgraded the stock.
“The market will take back last week’s losses as concerns over the Fed rate increase ease,” said Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets Co. in Tokyo.
The MSCI Asia Pacific Index gained 1.9 percent to 117.55 as of 9:46 a.m. in Tokyo. The gauge sank 2.1 percent on Feb. 19 after the Fed raised the cost of direct loans to banks. The index has lost about 7.3 percent from a 17-month high on Jan. 15 on speculation central banks will tighten monetary policy, and that Greece, Spain and Portugal will struggle to curb deficits.
Japan’s Nikkei 225 Stock Average advanced 2.8 percent to 10,401.12. South Korea’s Kospi Index gained 2.1 percent and Australia’s S&P/ASX 200 Index increased 1.6 percent. New Zealand’s NZX 50 Index rose 0.5 percent.
Futures on the Standard & Poor’s 500 Index gained 0.2 percent. The gauge rose 0.2 percent in New York on Feb. 19 after a government report showed an index of U.S. consumer prices rose 0.2 percent in January from the previous month, less than the 0.3 percent projected by economists.
New York Fed President William Dudley indicated on Feb. 19 that policy makers are more concerned about maintaining growth than fighting inflation, citing the consumer price data. The Fed raising the so-called discount rate from 0.5 percent to 0.75 percent on Feb. 18 triggered concern stimulus programs are winding down.
A gauge of raw material producers posted the biggest gain of the MSCI Asia Pacific Index’s 10 industry groups today.
Crude oil for March delivery climbed 1 percent to $79.81 a barrel on Feb. 19. The London Metal Exchange Index of six metals including copper and zinc gained 1.9 percent to its highest level since Jan. 20.
Reliance Said to Raise Lyondell Bid to $14.5 Billion
Feb. 22 (Bloomberg) -- Reliance Industries Ltd., owner of the world’s largest oil-refining complex, raised its offer for bankrupt LyondellBasell Industries AF to about $14.5 billion, according to two people with knowledge of the offer.
The revised bid allows Lyondell creditors to opt for cash or equity as part of the deal, said the people, who declined to be identified because the talks are private. Reliance, the Mumbai-based refiner and energy explorer controlled by billionaire Mukesh Ambani, offered an undisclosed amount on Nov. 21 to buy a controlling stake in the chemicals and fuels maker.
Buying LyondellBasell would create a company with more than $80 billion in revenue and give Reliance chemical plants and two crude oil refineries in the U.S. and Europe. The chemicals maker rejected a previously revised Reliance bid that valued the company at $13.5 billion, the Wall Street Journal reported Jan. 8.
Reliance had outstanding debt of 700 billion rupees ($15 billion) and cash and cash equivalents of 159.6 billion rupees as of Dec. 31, the company said. Reliance has raised about $2 billion selling shares since September, Chief Financial Officer Alok Agarwal said last month.
David Harpole, a Lyondell spokesman, declined to comment on the revised offer. Manoj Warrier, a spokesman for Reliance, didn’t immediately return a message before regular business hours in India. The Telegraph in India previously reported that Reliance was increasing its offer.
$22 Billion in Debt
Lyondell was formed in a 2007 deal financed with $22 billion in debt in which it was bought by Basell AF, a unit of Len Blavatnik’s Access Industries Holdings LLC. Creditors have said the buyout crippled one of the world’s largest polymers, petrochemicals, and fuel companies, causing it to seek bankruptcy.
Lyondell Chemical Co. filed a plan to reorganize in December while evaluating the offer from Reliance, pitting India’s biggest company against lenders. Lyondell has said it plans to reorganize by repaying its $8 billion bankruptcy loan in full and giving an equity stake in the new company to lenders, including sponsors of a $2.8 billion rights offering.
Access and Apollo Management LP have affiliates that were backers of the company’s rights offering. Ares Corporate Opportunities Fund III was a third sponsor of the rights offering, according to court documents.
The revised bid allows Lyondell creditors to opt for cash or equity as part of the deal, said the people, who declined to be identified because the talks are private. Reliance, the Mumbai-based refiner and energy explorer controlled by billionaire Mukesh Ambani, offered an undisclosed amount on Nov. 21 to buy a controlling stake in the chemicals and fuels maker.
Buying LyondellBasell would create a company with more than $80 billion in revenue and give Reliance chemical plants and two crude oil refineries in the U.S. and Europe. The chemicals maker rejected a previously revised Reliance bid that valued the company at $13.5 billion, the Wall Street Journal reported Jan. 8.
Reliance had outstanding debt of 700 billion rupees ($15 billion) and cash and cash equivalents of 159.6 billion rupees as of Dec. 31, the company said. Reliance has raised about $2 billion selling shares since September, Chief Financial Officer Alok Agarwal said last month.
David Harpole, a Lyondell spokesman, declined to comment on the revised offer. Manoj Warrier, a spokesman for Reliance, didn’t immediately return a message before regular business hours in India. The Telegraph in India previously reported that Reliance was increasing its offer.
$22 Billion in Debt
Lyondell was formed in a 2007 deal financed with $22 billion in debt in which it was bought by Basell AF, a unit of Len Blavatnik’s Access Industries Holdings LLC. Creditors have said the buyout crippled one of the world’s largest polymers, petrochemicals, and fuel companies, causing it to seek bankruptcy.
Lyondell Chemical Co. filed a plan to reorganize in December while evaluating the offer from Reliance, pitting India’s biggest company against lenders. Lyondell has said it plans to reorganize by repaying its $8 billion bankruptcy loan in full and giving an equity stake in the new company to lenders, including sponsors of a $2.8 billion rights offering.
Access and Apollo Management LP have affiliates that were backers of the company’s rights offering. Ares Corporate Opportunities Fund III was a third sponsor of the rights offering, according to court documents.
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