May 29 (Bloomberg) -- Japanese bonds completed a weekly loss as signs the global economy is recovering and a rally in stocks around the world damped demand for government debt.
Ten-year yields were near the highest level in a week as optimism the European debt crisis is easing boosted local shares for a third day and pushed down the cost of protecting Japanese bonds from default. Bond losses were tempered yesterday after a government report showed deflation deepened, enhancing the value of the fixed payments from debt.
“We continue to have hard evidence pointing to a sustained recovery” of the global economy, said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “Current yield levels are apparently unsustainable.”
The yield on the benchmark 10-year bond climbed 1.5 basis points this week to 1.25 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.133 yen to 100.436 yen. The yield briefly climbed to 1.27 percent yesterday, the highest level since May 20.
Ten-year bond futures for June delivery rose 0.05 this week to 140.45 on the Tokyo Stock Exchange.
The Nikkei 225 Stock Average advanced 1.3 percent yesterday and the Markit iTraxx Japan index of credit-default swaps dropped 11 basis points to 129 basis points. The swap indexes are benchmarks for protecting bonds against default. An increase suggests deteriorating perceptions of credit quality and a drop shows improvement.
Factory Output
Japanese factoryoutput gained 2.5 percent in April, following a 1.2 percent increase in March, according to the median estimate of economists surveyed by Bloomberg News before the data is announced on May 31.
Demand for bonds also waned after China confirmed its commitment to investing in Europe, denying earlier media reports it may be reconsidering putting money into the region due to the sovereign debt crisis.
China’s State Administration of Foreign Exchange, or SAFE, which manages $2.4 trillion of foreign-exchange reserves, said in a statement on May 27 that “Europe has been and will be one of the major markets for investing China’s exchange reserves.”
“Once the extreme pessimism about the credit crisis in Europe eases, the flight to safer assets like bonds will reverse,” said Yozo Asai, head of the investment information department at Naito Securities Co. “Stocks were oversold from a viewpoint of macro- and micro-economic fundamentals.”
Jobless Rate
Ten-year bonds erased earlier losses to be unchanged yesterday after government reports showed Japan’s unemployment rate unexpectedly increased in April, household spending fell and deflation deepened.
Prices excluding fresh food slid 1.5 percent from a year earlier, after dropping 1.2 percent in March, the statistics bureau said in Tokyo. The jobless rate climbed to 5.1 percent from 5 percent.
“Given strong deflationary pressure in Japan, yields won’t rise too much,” said Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Ltd.
Japanese debt has handed investors a return of 3.9 percent in dollar terms this month, according to indexes from Bank of America Corp.’s Merrill Lynch unit. Treasuries have returned 1.4 percent and German bunds have incurred a 5.8 percent loss, the indexes show.
“Current yields are not attractive at all,” said Shinji Hiramatsu, who helps oversee the equivalent of $15.7 billion in assets at Sompo Japan Asset Management Ltd. in Tokyo. “But unless uncertainties over the credit crisis in Europe are fully removed, bonds will continue to draw buying interest as a safe haven.”
Friday, May 28, 2010
Asian Stocks Advance as Europe Concerns Ease, Commodities Gain
May 29 (Bloomberg) -- Asian stocks rose this week as concerns over Europe’s debt crisis eased after China reaffirmed its support, boosting the global economic outlook and commodity prices.
Rio Tinto Group, the world’s third-largest mining company, surged 10 percent in Sydney as concern eased that a proposed Australian mining tax will cut earnings. Fortescue Metals Group Ltd., Australia’s third-largest iron-ore producer, soared 13 percent. Poly (Hong Kong) Investment Ltd., a Chinese property developer, rallied 15 percent on speculation the nation will delay further measures to cool its property market due to Europe’s debt crisis.
“The market has priced in all the bad news for now,” said Ayako Sera, a strategist at Tokyo-based Sumitomo Trust & Banking Co., which manages the equivalent of $307 billion. “Stocks are undervalued, assuming Europe’s problems won’t spill over and cripple the global economy.”
The MSCI Asia Pacific Index climbed 1.3 percent to 113.56 this week amid speculation stock declines since April had more than reflected European debt concerns.
Gauges tracking material and energy stocks on the MSCI Asia Pacific Index climbed more than 3 percent, the biggest gains among its 10 industry groups.
China’s Shanghai Composite Index advanced 2.8 percent, and Hong Kong’s Hang Seng Index gained 1.1 percent. Japan’s Nikkei 225 Stock Average slipped 0.2 percent. South Korea’s Kospi Index rose 1.4 percent and Australia’s S&P/ASX 200 Index climbed 3.5 percent.
Slump Prompts Buying
The MSCI Asia Pacific Index has declined 12 percent from this year’s high on April 15 on concern some European countries will be unable to repay their debt, even after the region’s leaders unveiled a bailout plan worth almost $1 trillion.
The slump in markets has prompted AMP Capital Investors Ltd. to buy stocks and commodities, according to Nader Naeimi, a strategist at the Sydney-based money manager. Companies in the MSCI Asia Pacific Index are valued at an average of 14.4 times estimated earnings, near the lowest level since January 2009.
“We’ve got bad news just about every place you can look but on the other hand, we’ve got rising earnings and better economic conditions in most of the world,” Donald Gimbel, senior managing director at Carret Asset Management LLC, said in a Bloomberg Television interview. “Now is probably an opportune time to pick up some of the bargains that have been created over the past two or three weeks.”
Australia Tax Changes?
Rio Tinto surged 10 percent to A$68.20. BHP Billiton Ltd., the world’s No. 1 mining company, climbed 6 percent to A$38.97. Fortescue soared 13 percent to A$4.19.
The Australian newspaper reported the government may raise the lower limit for its proposed mining tax from 6 percent to 11 or 12 percent of company returns. Australia said this month it would impose a 40 percent tax on mining profits from 2012.
The London Metal Exchange Index, a measure of six metals including copper and zinc, advanced 0.8 percent this week.
Poly (Hong Kong) Investment Ltd., a Chinese property developer, climbed 15 percent to HK$7.81 in Hong Kong. Guangzhou R&F Properties Co., the largest developer in the southern Chinese city, gained 14 percent to HK$10.08.
China should be cautious in introducing new tightening measures as the global economic environment is complex, Xu Lianzhong, an official with the National Development and Reform Commission’s price monitoring center, wrote in a commentary published May 24 in the China Securities Journal. The European debt problem is one of many global economic uncertainties that China faces, Xu wrote.
Reliance Rapprochement
“Any indication China will take a measured approach to controlling overheating in some sectors, rather than crushing economic activity generally, means people can start to check this big item off the ‘macro concerns’ list,” said Prasad Patkar, who helps manage about $1.7 billion in Sydney at Platypus Asset Management Ltd.
Reliance Natural Resources Ltd. soared 18 percent to 52.5 rupees in Mumbai. It was among companies controlled by Mukesh Ambani and Anil Ambani after the brothers moved to end a five- year feud that split India’s second-biggest group. Mukesh, 53, and 50-year-old Anil issued almost identical statements May 23, saying they were “hopeful and confident” of creating an “environment of harmony, co-operation and collaboration” after ending a 2006 accord to not compete.
Rio Tinto Group, the world’s third-largest mining company, surged 10 percent in Sydney as concern eased that a proposed Australian mining tax will cut earnings. Fortescue Metals Group Ltd., Australia’s third-largest iron-ore producer, soared 13 percent. Poly (Hong Kong) Investment Ltd., a Chinese property developer, rallied 15 percent on speculation the nation will delay further measures to cool its property market due to Europe’s debt crisis.
“The market has priced in all the bad news for now,” said Ayako Sera, a strategist at Tokyo-based Sumitomo Trust & Banking Co., which manages the equivalent of $307 billion. “Stocks are undervalued, assuming Europe’s problems won’t spill over and cripple the global economy.”
The MSCI Asia Pacific Index climbed 1.3 percent to 113.56 this week amid speculation stock declines since April had more than reflected European debt concerns.
Gauges tracking material and energy stocks on the MSCI Asia Pacific Index climbed more than 3 percent, the biggest gains among its 10 industry groups.
China’s Shanghai Composite Index advanced 2.8 percent, and Hong Kong’s Hang Seng Index gained 1.1 percent. Japan’s Nikkei 225 Stock Average slipped 0.2 percent. South Korea’s Kospi Index rose 1.4 percent and Australia’s S&P/ASX 200 Index climbed 3.5 percent.
Slump Prompts Buying
The MSCI Asia Pacific Index has declined 12 percent from this year’s high on April 15 on concern some European countries will be unable to repay their debt, even after the region’s leaders unveiled a bailout plan worth almost $1 trillion.
The slump in markets has prompted AMP Capital Investors Ltd. to buy stocks and commodities, according to Nader Naeimi, a strategist at the Sydney-based money manager. Companies in the MSCI Asia Pacific Index are valued at an average of 14.4 times estimated earnings, near the lowest level since January 2009.
“We’ve got bad news just about every place you can look but on the other hand, we’ve got rising earnings and better economic conditions in most of the world,” Donald Gimbel, senior managing director at Carret Asset Management LLC, said in a Bloomberg Television interview. “Now is probably an opportune time to pick up some of the bargains that have been created over the past two or three weeks.”
Australia Tax Changes?
Rio Tinto surged 10 percent to A$68.20. BHP Billiton Ltd., the world’s No. 1 mining company, climbed 6 percent to A$38.97. Fortescue soared 13 percent to A$4.19.
The Australian newspaper reported the government may raise the lower limit for its proposed mining tax from 6 percent to 11 or 12 percent of company returns. Australia said this month it would impose a 40 percent tax on mining profits from 2012.
The London Metal Exchange Index, a measure of six metals including copper and zinc, advanced 0.8 percent this week.
Poly (Hong Kong) Investment Ltd., a Chinese property developer, climbed 15 percent to HK$7.81 in Hong Kong. Guangzhou R&F Properties Co., the largest developer in the southern Chinese city, gained 14 percent to HK$10.08.
China should be cautious in introducing new tightening measures as the global economic environment is complex, Xu Lianzhong, an official with the National Development and Reform Commission’s price monitoring center, wrote in a commentary published May 24 in the China Securities Journal. The European debt problem is one of many global economic uncertainties that China faces, Xu wrote.
Reliance Rapprochement
“Any indication China will take a measured approach to controlling overheating in some sectors, rather than crushing economic activity generally, means people can start to check this big item off the ‘macro concerns’ list,” said Prasad Patkar, who helps manage about $1.7 billion in Sydney at Platypus Asset Management Ltd.
Reliance Natural Resources Ltd. soared 18 percent to 52.5 rupees in Mumbai. It was among companies controlled by Mukesh Ambani and Anil Ambani after the brothers moved to end a five- year feud that split India’s second-biggest group. Mukesh, 53, and 50-year-old Anil issued almost identical statements May 23, saying they were “hopeful and confident” of creating an “environment of harmony, co-operation and collaboration” after ending a 2006 accord to not compete.
Daiichi Sankyo Is Confident on Resolving Ranbaxy Ban
May 28 (Bloomberg) -- Daiichi Sankyo Co.’s incoming Chief Executive Officer Joji Nakayama said he’s confident a ban imposed by U.S. regulators on some drugs from its Indian unit, Ranbaxy Laboratories Ltd., will be lifted.
“We definitely must solve the issue,” Nakayama, 60, said in an interview in Tokyo today. “I’m very confident we will solve it. There’s no other way.”
Daiichi Sankyo and Ranbaxy are in talks with the Food and Drug Administration after the U.S. authority blocked the import of more than 30 generic medicines made at two Ranbaxy plants in 2008. The Indian unit derived almost half its sales from the U.S., the largest pharmaceutical market, in the last quarter.
Tokyo-based Daiichi Sankyo rose 1.5 percent to close at 1,584 yen in Tokyo. The shares have declined about 19 percent this year, making the company the fourth-worst performer on the 33-member Topix Pharmaceutical Index, which has dropped 8.8 percent. Ranbaxy shares rose 1.8 percent to 421.3 rupees at 11:30 a.m. in Mumbai.
The FDA in September 2008 blocked the import of more than 30 generic medicines made at two Ranbaxy plants, in Dewas and Paonta Sahib, because of deficiencies in manufacturing processes.
The regulator said in February 2009 that Ranbaxy won’t be allowed to introduce new drugs from the Paonta Sahib factory because of falsified data. U.K. and Australian regulators approved drugs from the plant, located in northern Himachal Pradesh state, after a joint audit.
Awaiting Inspection
Ranbaxy is waiting for FDA officials to inspect the Dewas factory as part of a process to resume drug exports from the plant, it said on Feb. 25. The Paonta Sahib plant remains under the FDA’s Application Integrity Policy list of companies from which the regulator has stopped reviewing drug submissions.
“Ranbaxy is experienced in making medicines at a lower cost and Daiichi Sankyo aims to take full advantage of it after the FDA issue is resolved,” Nakayama said.
Daiichi Sankyo started a unit last month for selling generic drugs in Japan that will utilize Ranbaxy’s cheaper costs, Nakayama said. The company aims to start the operations in October.
Nakayama said he plans to use Daiichi Sankyo’s resources and staff rather than hiring new people in Japan for the unit to reduce costs.
Board Reshuffle
The incoming CEO is replacing Takashi Shoda, who will become chairman, Daiichi Sankyo said on May 12. Nakayama will assume the position on June 28 subject to shareholder approval.
Shoda and senior executive officer Tsutomu Une who serves as Chairman at Ranbaxy, will remain as a board member of the Indian company, Nakayama said. Daiichi Sankyo has a 64 percent stake in Ranbaxy.
Nakayama, currently an executive vice president at Daiichi Sankyo, joined Suntory Holdings Ltd., a Japanese beverage maker, in 1979 after studying bioengineering at Osaka University and completing an MBA at Northwestern University.
He became the head of the biological laboratory at Suntory in 2000 before the company’s drug unit was bought by Daiichi Sankyo’s forerunner Daiichi Pharmaceutical.
“We definitely must solve the issue,” Nakayama, 60, said in an interview in Tokyo today. “I’m very confident we will solve it. There’s no other way.”
Daiichi Sankyo and Ranbaxy are in talks with the Food and Drug Administration after the U.S. authority blocked the import of more than 30 generic medicines made at two Ranbaxy plants in 2008. The Indian unit derived almost half its sales from the U.S., the largest pharmaceutical market, in the last quarter.
Tokyo-based Daiichi Sankyo rose 1.5 percent to close at 1,584 yen in Tokyo. The shares have declined about 19 percent this year, making the company the fourth-worst performer on the 33-member Topix Pharmaceutical Index, which has dropped 8.8 percent. Ranbaxy shares rose 1.8 percent to 421.3 rupees at 11:30 a.m. in Mumbai.
The FDA in September 2008 blocked the import of more than 30 generic medicines made at two Ranbaxy plants, in Dewas and Paonta Sahib, because of deficiencies in manufacturing processes.
The regulator said in February 2009 that Ranbaxy won’t be allowed to introduce new drugs from the Paonta Sahib factory because of falsified data. U.K. and Australian regulators approved drugs from the plant, located in northern Himachal Pradesh state, after a joint audit.
Awaiting Inspection
Ranbaxy is waiting for FDA officials to inspect the Dewas factory as part of a process to resume drug exports from the plant, it said on Feb. 25. The Paonta Sahib plant remains under the FDA’s Application Integrity Policy list of companies from which the regulator has stopped reviewing drug submissions.
“Ranbaxy is experienced in making medicines at a lower cost and Daiichi Sankyo aims to take full advantage of it after the FDA issue is resolved,” Nakayama said.
Daiichi Sankyo started a unit last month for selling generic drugs in Japan that will utilize Ranbaxy’s cheaper costs, Nakayama said. The company aims to start the operations in October.
Nakayama said he plans to use Daiichi Sankyo’s resources and staff rather than hiring new people in Japan for the unit to reduce costs.
Board Reshuffle
The incoming CEO is replacing Takashi Shoda, who will become chairman, Daiichi Sankyo said on May 12. Nakayama will assume the position on June 28 subject to shareholder approval.
Shoda and senior executive officer Tsutomu Une who serves as Chairman at Ranbaxy, will remain as a board member of the Indian company, Nakayama said. Daiichi Sankyo has a 64 percent stake in Ranbaxy.
Nakayama, currently an executive vice president at Daiichi Sankyo, joined Suntory Holdings Ltd., a Japanese beverage maker, in 1979 after studying bioengineering at Osaka University and completing an MBA at Northwestern University.
He became the head of the biological laboratory at Suntory in 2000 before the company’s drug unit was bought by Daiichi Sankyo’s forerunner Daiichi Pharmaceutical.
Standard Chartered Gets Bids for 2.2 Times Shares
May 28 (Bloomberg) -- Standard Chartered Plc received orders for 2.2 times an estimated $500 million in shares on offer in India as bidders responded to a new rule by committing funds on the final day of the sale.
The London-based lender that makes at least three quarters of its profit in Asia received orders for 447.7 million shares as of 5:25 p.m., according to data from the National and Bombay stock exchanges. It agreed to sell an additional 36 million Indian depository receipts to so-called anchor investors earlier this week.
Indian and overseas funds, who are required to pay the full amount at the time of making their bid under a rule that came into effect this month, waited until the final hours of Standard Chartered’s four-day sale to avoid tying up capital. Europe’s debt crisis has also made it more difficult for companies worldwide to sell new stock.
“From now on, we are likely to see share sales get subscribed only on the last day of the offer because of the new regulations on bid payments,” A. Murugappan, head of investment banking at ICICI Securities Ltd., said in an interview in Mumbai today. It is also “getting increasingly difficult to pull deals off because of the volatility in the markets.”
The bank, which is the first company to seek to sell IDRs, is offering about 240 million shares at 100 rupees to 115 rupees each. It sold 15 percent of the offering to investors including ICICI Prudential Asset Management Co. and Reliance Capital Ltd. for 104 rupees a share, according to a filing this week.
Barring Insurers
Domestic insurers are prohibited from taking part in the sale, limiting potential buyers, Prabodh Agrawal, an analyst at India Infoline Ltd. in Singapore, said in a note to clients on May 24. Record stock purchases by insurers helped boost the benchmark Sensitive Index 81 percent in 2009, making it the third-best performing equity market in Asia.
Still, “the bank emerged unscathed from the recent financial crisis,” said Agrawal, who has a “subscribe” rating on the stock. The company also has a “stable funding base, and a well-capitalized balance sheet.”
Standard Chartered, which is listed in Hong Kong and London, aims to raise as much as $573 million from the India offering, according to data compiled by Bloomberg. Ten IDRs will represent one share of Standard Chartered, the bank said in a filing on May 14.
London, Hong Kong Trading
U.K.-traded shares of Standard Chartered fell 1.4 percent to 1,659 pence today. In Hong Kong, the stock rose 1.2 percent to HK$185.50.
Standard Chartered began the final day of its sale with bids for 11 percent of the stock on offer.
Investors may be deterred by regulatory risks tied to Standard Chartered’s global operations and concern that currency fluctuations affecting the IDRs, whose underlying shares are denominated in British pounds, Abhijit Majumder, an analyst at Prabhudas Lilladher Pvt. in Mumbai, wrote on May 24.
UBS AG, Goldman Sachs Group Inc., JM Financial Services Ltd., Bank of America Corp.’s Merrill Lynch & Co., Kotak Mahindra Capital Co., SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. are managing the sale.
Individuals and employees who bid for 100,000 rupees of shares or less will be eligible for a 5 percent discount on the final price, the bank has said. Retail investors will get up to 30 percent of the issue and employees 2 percent.
Standard Chartered, which counts India as its most profitable overseas market after Hong Kong, and rivals including Credit Suisse Group AG are seeking to win corporate clients in the world’s second-fastest growing major economy. The bank has been in India for more than 150 years.
The London-based lender that makes at least three quarters of its profit in Asia received orders for 447.7 million shares as of 5:25 p.m., according to data from the National and Bombay stock exchanges. It agreed to sell an additional 36 million Indian depository receipts to so-called anchor investors earlier this week.
Indian and overseas funds, who are required to pay the full amount at the time of making their bid under a rule that came into effect this month, waited until the final hours of Standard Chartered’s four-day sale to avoid tying up capital. Europe’s debt crisis has also made it more difficult for companies worldwide to sell new stock.
“From now on, we are likely to see share sales get subscribed only on the last day of the offer because of the new regulations on bid payments,” A. Murugappan, head of investment banking at ICICI Securities Ltd., said in an interview in Mumbai today. It is also “getting increasingly difficult to pull deals off because of the volatility in the markets.”
The bank, which is the first company to seek to sell IDRs, is offering about 240 million shares at 100 rupees to 115 rupees each. It sold 15 percent of the offering to investors including ICICI Prudential Asset Management Co. and Reliance Capital Ltd. for 104 rupees a share, according to a filing this week.
Barring Insurers
Domestic insurers are prohibited from taking part in the sale, limiting potential buyers, Prabodh Agrawal, an analyst at India Infoline Ltd. in Singapore, said in a note to clients on May 24. Record stock purchases by insurers helped boost the benchmark Sensitive Index 81 percent in 2009, making it the third-best performing equity market in Asia.
Still, “the bank emerged unscathed from the recent financial crisis,” said Agrawal, who has a “subscribe” rating on the stock. The company also has a “stable funding base, and a well-capitalized balance sheet.”
Standard Chartered, which is listed in Hong Kong and London, aims to raise as much as $573 million from the India offering, according to data compiled by Bloomberg. Ten IDRs will represent one share of Standard Chartered, the bank said in a filing on May 14.
London, Hong Kong Trading
U.K.-traded shares of Standard Chartered fell 1.4 percent to 1,659 pence today. In Hong Kong, the stock rose 1.2 percent to HK$185.50.
Standard Chartered began the final day of its sale with bids for 11 percent of the stock on offer.
Investors may be deterred by regulatory risks tied to Standard Chartered’s global operations and concern that currency fluctuations affecting the IDRs, whose underlying shares are denominated in British pounds, Abhijit Majumder, an analyst at Prabhudas Lilladher Pvt. in Mumbai, wrote on May 24.
UBS AG, Goldman Sachs Group Inc., JM Financial Services Ltd., Bank of America Corp.’s Merrill Lynch & Co., Kotak Mahindra Capital Co., SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. are managing the sale.
Individuals and employees who bid for 100,000 rupees of shares or less will be eligible for a 5 percent discount on the final price, the bank has said. Retail investors will get up to 30 percent of the issue and employees 2 percent.
Standard Chartered, which counts India as its most profitable overseas market after Hong Kong, and rivals including Credit Suisse Group AG are seeking to win corporate clients in the world’s second-fastest growing major economy. The bank has been in India for more than 150 years.
Wednesday, May 26, 2010
India’s Largest Bourse Plans Short Selling to Lure Investors
May 27 (Bloomberg) -- National Stock Exchange of India Ltd., the nation’s largest bourse, plans to offer short sales within the next few weeks aimed at luring investors to the local market after expanding in the U.S. and Singapore.
The company, which counts Goldman Sachs Group Inc. and Temasek Holdings Pte as shareholders, will introduce short selling to meet a “huge demand,” Chief Executive Officer Ravi Narain said in an interview at his office in Mumbai.
National Stock Exchange is expanding in India as foreigners pumped in a net $4.3 billion this year, 18 percent more than a year earlier, data compiled by Bloomberg show. The nation’s benchmark stock index dropped less than half the MSCI Emerging Markets Index’s 16 percent slide from its April 15 peak.
“My view is that if the whole world is rushing to India, you’d have to be brain dead to be rushing out,” Narain, 54, said yesterday. “Our strategy should be to continue to attract foreign investors to Indian assets onshore and to bringing foreign products to Indian markets.”
Temasek, Singapore’s state-owned investment company, called its 5 percent investment in the National Stock Exchange “a proxy to India’s growth and the development of its capital markets” when it bought out NYSE Euronext’s stake this month. The economy may grow 8 percent in the 12 months through March 31, the central bank predicted April 27. That would follow last year’s 7.2 percent expansion.
China, Germany
National Stock Exchange’s average daily turnover in equities has more than doubled in the past four years, according to data on its website. Narain, who was involved in setting up the Indian bourse since its incorporation in 1992, now wants to broaden the products with the short sales allowing traders to borrow the assets they deal in.
The bourse’s plan comes as China introduced short sales and margin trading two months ago, and this week said it will allow some foreign funds to trade index futures. Germany earlier this month banned uncovered short selling of some bonds and naked short selling on the shares of 10 German financial companies, saying such practices endanger the stability of the economy.
National Stock Exchange is also speeding up the time transactions take to enter and leave its system, and Narain forecast executions will be cut to less than one millisecond by the end of the year from five milliseconds.
Among products due to be available by yearend are an intraday volatility index and other options, said Narain, a Cambridge University-trained economist with a MBA from the Wharton School of University of Pennsylvania.
S&P 500
National Stock Exchange, which began trading equities in November 1994, plans to sell its index futures in the U.S. under an agreement with CME Group Inc., owner of the world’s biggest futures exchange. That will allow Standard & Poor’s 500 Index and Dow Jones Industrial Average futures to trade in rupees on the Indian bourse.
For foreigners, access to India’s capital markets remains restricted by bureaucracy, said Vikas Pershad, Chicago-based chief executive officer of hedge fund Veda Investments LLC. The country last month ordered overseas funds to provide ownership information for money coming into the equity market as the regulator tightens so-called know-your-client norms.
“It takes a long time for foreign investors to register,” he said. “If India’s capital markets have to compete with U.S., Australia, Hong Kong, Japan or Western Europe then the process should be made simpler, faster and less costly.” Pershad declined to say how much he has invested in India.
National Stock Exchange said it’s careful with the introduction of short sales and isn’t rushing to roll it out.
“Very soon, we’ll have finished building our systems and we’ll launch this, and then people will be able to short,” Narain said. “There’s been a huge demand for lending and borrowing of shares.”
The company, which counts Goldman Sachs Group Inc. and Temasek Holdings Pte as shareholders, will introduce short selling to meet a “huge demand,” Chief Executive Officer Ravi Narain said in an interview at his office in Mumbai.
National Stock Exchange is expanding in India as foreigners pumped in a net $4.3 billion this year, 18 percent more than a year earlier, data compiled by Bloomberg show. The nation’s benchmark stock index dropped less than half the MSCI Emerging Markets Index’s 16 percent slide from its April 15 peak.
“My view is that if the whole world is rushing to India, you’d have to be brain dead to be rushing out,” Narain, 54, said yesterday. “Our strategy should be to continue to attract foreign investors to Indian assets onshore and to bringing foreign products to Indian markets.”
Temasek, Singapore’s state-owned investment company, called its 5 percent investment in the National Stock Exchange “a proxy to India’s growth and the development of its capital markets” when it bought out NYSE Euronext’s stake this month. The economy may grow 8 percent in the 12 months through March 31, the central bank predicted April 27. That would follow last year’s 7.2 percent expansion.
China, Germany
National Stock Exchange’s average daily turnover in equities has more than doubled in the past four years, according to data on its website. Narain, who was involved in setting up the Indian bourse since its incorporation in 1992, now wants to broaden the products with the short sales allowing traders to borrow the assets they deal in.
The bourse’s plan comes as China introduced short sales and margin trading two months ago, and this week said it will allow some foreign funds to trade index futures. Germany earlier this month banned uncovered short selling of some bonds and naked short selling on the shares of 10 German financial companies, saying such practices endanger the stability of the economy.
National Stock Exchange is also speeding up the time transactions take to enter and leave its system, and Narain forecast executions will be cut to less than one millisecond by the end of the year from five milliseconds.
Among products due to be available by yearend are an intraday volatility index and other options, said Narain, a Cambridge University-trained economist with a MBA from the Wharton School of University of Pennsylvania.
S&P 500
National Stock Exchange, which began trading equities in November 1994, plans to sell its index futures in the U.S. under an agreement with CME Group Inc., owner of the world’s biggest futures exchange. That will allow Standard & Poor’s 500 Index and Dow Jones Industrial Average futures to trade in rupees on the Indian bourse.
For foreigners, access to India’s capital markets remains restricted by bureaucracy, said Vikas Pershad, Chicago-based chief executive officer of hedge fund Veda Investments LLC. The country last month ordered overseas funds to provide ownership information for money coming into the equity market as the regulator tightens so-called know-your-client norms.
“It takes a long time for foreign investors to register,” he said. “If India’s capital markets have to compete with U.S., Australia, Hong Kong, Japan or Western Europe then the process should be made simpler, faster and less costly.” Pershad declined to say how much he has invested in India.
National Stock Exchange said it’s careful with the introduction of short sales and isn’t rushing to roll it out.
“Very soon, we’ll have finished building our systems and we’ll launch this, and then people will be able to short,” Narain said. “There’s been a huge demand for lending and borrowing of shares.”
New Zealand’s Trade Surplus Widens as Imports Decline
May 27 (Bloomberg) -- New Zealand’s trade surplus widened in April as imports of crude oil and machinery declined, while rising commodity prices and a seasonal increase in farm production kept exports near record levels.
The surplus increased to NZ$656 million ($437 million) from NZ$590 million in March, Statistics New Zealand said today in Wellington. In the year ended April, the nation posted a NZ$161 million trade surplus, the first since July 2002.
Exports, which make up 30 percent of gross domestic product, have been rising as prices of New Zealand’s commodity shipments jumped to an all-time high and demand from nations such as China has been surging. The Chinese economy will grow 11 percent this year and 9.7 percent in 2011, the Organization for Economic Cooperation and Development forecast yesterday.
“There is some evidence of firmer commodity prices feeding through, with dairy and forestry exports leading the increase,” said Mark Smith, an economist at ANZ National Bank Ltd. in Wellington. “We expect this to continue with the weaker New Zealand dollar also to provide support.”
The currency has declined 6.6 percent against the U.S. dollar in the past six months. It bought 66.44 U.S. cents at 11:45 a.m. in Wellington from 66.57 cents immediately before the trade report.
The trade surplus was wider than the NZ$455 million median forecast in a Bloomberg News survey of eight economists. The monthly figures aren’t seasonally adjusted and New Zealand’s exports typically increase between February and May as milk, wool and meat production peaks.
Milk Powder
Exports fell 2.2 percent to NZ$3.97 billion in April from a record NZ$4.06 billion in March, today’s report showed.
Shipments of milk powder, butter and crude oil declined from March, the agency said. Meat and fruit exports rose.
Commodity prices increased 4.9 percent in April from March, according to an index compiled by ANZ National Bank Ltd. New Zealand’s dollar fell 4.9 percent against the U.S. currency in the past three months.
Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, this week raised the price it will pay farmers for milk in the new season beginning June 1, citing higher world prices. Whole milk powder prices were near a 21-month high at an auction in early May, the Auckland-based company said.
Exports to China increased by 44 percent from a year earlier to NZ$460 million in April. China now buys 10 percent of total annual exports and is New Zealand’s second largest customer after Australia.
Navy Ship
Imports declined 4.5 percent from March to NZ$3.31 billion, today’s report showed. The figures included a navy ship that boosted military goods imports by NZ$95 million.
Crude oil imports declined 7.5 percent as a fall in volumes offset rising prices.
From a year earlier, imports fell 0.2 percent while exports gained 9 percent. Stronger demand for New Zealand goods led to the NZ$161 million trade surplus in the 12 months ended April 30 from a NZ$172 million deficit in the year through March. Economists expected the annual shortfall would be NZ$60 million.
The surplus increased to NZ$656 million ($437 million) from NZ$590 million in March, Statistics New Zealand said today in Wellington. In the year ended April, the nation posted a NZ$161 million trade surplus, the first since July 2002.
Exports, which make up 30 percent of gross domestic product, have been rising as prices of New Zealand’s commodity shipments jumped to an all-time high and demand from nations such as China has been surging. The Chinese economy will grow 11 percent this year and 9.7 percent in 2011, the Organization for Economic Cooperation and Development forecast yesterday.
“There is some evidence of firmer commodity prices feeding through, with dairy and forestry exports leading the increase,” said Mark Smith, an economist at ANZ National Bank Ltd. in Wellington. “We expect this to continue with the weaker New Zealand dollar also to provide support.”
The currency has declined 6.6 percent against the U.S. dollar in the past six months. It bought 66.44 U.S. cents at 11:45 a.m. in Wellington from 66.57 cents immediately before the trade report.
The trade surplus was wider than the NZ$455 million median forecast in a Bloomberg News survey of eight economists. The monthly figures aren’t seasonally adjusted and New Zealand’s exports typically increase between February and May as milk, wool and meat production peaks.
Milk Powder
Exports fell 2.2 percent to NZ$3.97 billion in April from a record NZ$4.06 billion in March, today’s report showed.
Shipments of milk powder, butter and crude oil declined from March, the agency said. Meat and fruit exports rose.
Commodity prices increased 4.9 percent in April from March, according to an index compiled by ANZ National Bank Ltd. New Zealand’s dollar fell 4.9 percent against the U.S. currency in the past three months.
Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, this week raised the price it will pay farmers for milk in the new season beginning June 1, citing higher world prices. Whole milk powder prices were near a 21-month high at an auction in early May, the Auckland-based company said.
Exports to China increased by 44 percent from a year earlier to NZ$460 million in April. China now buys 10 percent of total annual exports and is New Zealand’s second largest customer after Australia.
Navy Ship
Imports declined 4.5 percent from March to NZ$3.31 billion, today’s report showed. The figures included a navy ship that boosted military goods imports by NZ$95 million.
Crude oil imports declined 7.5 percent as a fall in volumes offset rising prices.
From a year earlier, imports fell 0.2 percent while exports gained 9 percent. Stronger demand for New Zealand goods led to the NZ$161 million trade surplus in the 12 months ended April 30 from a NZ$172 million deficit in the year through March. Economists expected the annual shortfall would be NZ$60 million.
Tuesday, May 25, 2010
India to Pay Brokers Fees for Stock Sales to Attract Investors
May 26 (Bloomberg) -- India, seeking to raise a record 400 billion rupees ($8.4 billion) from asset sales, is paying fees to brokers who sell stock in state-run companies after individual investors shunned offerings this year.
The government will pay brokers 0.35 percent of the value of the shares they sell to retail investors and 0.15 percent of stock marketed to high net-worth individuals, Disinvestment Secretary Sumit Bose, 56, said in an interview in New Delhi.
Bose, the official in charge of India’s asset-sale program, needs to bolster demand for offerings by Engineers India Ltd. and Coal India Ltd. as overseas investors pull the most funds out of India since October 2008. Individuals ordered 15 percent of the stock allocated to them in an 85 billion rupee sale by New Delhi-based NTPC Ltd. in February.
“The government has realized without enlisting the support of the broking community, it can’t ensure the response it wants for its share sales,” said Vijay Kumar Singhania, director at the Association of National Exchanges Members of India. “The move is aimed at ensuring wider participation after a lukewarm response to some share offers.”
Broker payments were previously included in the near-zero fees paid to investment banks managing the sales. Citigroup Inc., Morgan Stanley, Kotak Mahindra Capital Co., Edelweiss Capital Ltd., RBS Equities (India) Ltd. and UBS AG were paid 0.001 percent for arranging an offer by NMDC Ltd., Asia’s third- largest iron-ore producer by market value, in March, data compiled by Bloomberg show.
‘Comprehensive Fees’
“We had an all comprehensive fees for the bankers taking into account expenses on printing, expenses on filing fees, expenses on retail,” said Bose. “There is no way we can keep tab on how much is actually being paid, this way we will be able to.”
NTPC, the nation’s biggest utility, in February attracted bids for 1.2 times the shares on sale. Hyderabad-based NMDC received orders for 1.25 times the stock offered in March.
In the same month, private-sector companies such as Mumbai- based IL&FS Transportation Networks Ltd. received bids of 33.1 times the stock on offer and Ahmedabad-based Pradip Overseas Ltd. got orders for 13.7 times.
“Retail is especially important because that is the cornerstone of the policy,” Bose said in his office on May 24. “The policy is public ownership” of shares of state-run companies, he said.
July Offering
The next offering will take place in July, Bose said. The government has selected four banks to manage the sale of a 10 percent stake in Engineers India and the New Delhi-based company may file its offer document with the capital markets regulator in three to four weeks, he said.
At least 29 companies worldwide from Hong Kong-based Swire Properties Ltd. to Americold Realty Trust of Atlanta have postponed or withdrawn share sales in the past month as Europe’s widening debt crisis helped spur the biggest surge in weekly stock-market volatility in at least two decades.
India’s benchmark Sensitive Index has lost more than 10 percent from its 2010 high on April 7, the common definition of a correction. Overseas portfolio investors sold $1.77 billion of Indian equities this month, according to the market regulator.
Initial public offerings in India have still advanced an average 6.2 percent in their first month of trading, beating the Sensex Index by 5.3 percentage points, data compiled by Bloomberg show. That’s more than three times the performance of U.S. IPOs, which have exceeded the Standard & Poor’s 500 Index by 1.5 points on average in the first month.
“Why should one get unduly worried at this stage” about global markets, said Bose. “We’ll see how it affects us.”
The government will pay brokers 0.35 percent of the value of the shares they sell to retail investors and 0.15 percent of stock marketed to high net-worth individuals, Disinvestment Secretary Sumit Bose, 56, said in an interview in New Delhi.
Bose, the official in charge of India’s asset-sale program, needs to bolster demand for offerings by Engineers India Ltd. and Coal India Ltd. as overseas investors pull the most funds out of India since October 2008. Individuals ordered 15 percent of the stock allocated to them in an 85 billion rupee sale by New Delhi-based NTPC Ltd. in February.
“The government has realized without enlisting the support of the broking community, it can’t ensure the response it wants for its share sales,” said Vijay Kumar Singhania, director at the Association of National Exchanges Members of India. “The move is aimed at ensuring wider participation after a lukewarm response to some share offers.”
Broker payments were previously included in the near-zero fees paid to investment banks managing the sales. Citigroup Inc., Morgan Stanley, Kotak Mahindra Capital Co., Edelweiss Capital Ltd., RBS Equities (India) Ltd. and UBS AG were paid 0.001 percent for arranging an offer by NMDC Ltd., Asia’s third- largest iron-ore producer by market value, in March, data compiled by Bloomberg show.
‘Comprehensive Fees’
“We had an all comprehensive fees for the bankers taking into account expenses on printing, expenses on filing fees, expenses on retail,” said Bose. “There is no way we can keep tab on how much is actually being paid, this way we will be able to.”
NTPC, the nation’s biggest utility, in February attracted bids for 1.2 times the shares on sale. Hyderabad-based NMDC received orders for 1.25 times the stock offered in March.
In the same month, private-sector companies such as Mumbai- based IL&FS Transportation Networks Ltd. received bids of 33.1 times the stock on offer and Ahmedabad-based Pradip Overseas Ltd. got orders for 13.7 times.
“Retail is especially important because that is the cornerstone of the policy,” Bose said in his office on May 24. “The policy is public ownership” of shares of state-run companies, he said.
July Offering
The next offering will take place in July, Bose said. The government has selected four banks to manage the sale of a 10 percent stake in Engineers India and the New Delhi-based company may file its offer document with the capital markets regulator in three to four weeks, he said.
At least 29 companies worldwide from Hong Kong-based Swire Properties Ltd. to Americold Realty Trust of Atlanta have postponed or withdrawn share sales in the past month as Europe’s widening debt crisis helped spur the biggest surge in weekly stock-market volatility in at least two decades.
India’s benchmark Sensitive Index has lost more than 10 percent from its 2010 high on April 7, the common definition of a correction. Overseas portfolio investors sold $1.77 billion of Indian equities this month, according to the market regulator.
Initial public offerings in India have still advanced an average 6.2 percent in their first month of trading, beating the Sensex Index by 5.3 percentage points, data compiled by Bloomberg show. That’s more than three times the performance of U.S. IPOs, which have exceeded the Standard & Poor’s 500 Index by 1.5 points on average in the first month.
“Why should one get unduly worried at this stage” about global markets, said Bose. “We’ll see how it affects us.”
BHP Group Offers A$4.85 Billion for Australian Coal Rail Assets
May 26 (Bloomberg) -- BHP Billiton Ltd., Xstrata Plc and 11 other coal miners in Australia bid A$4.85 billion ($4 billion) for the nation’s biggest coal railroad to head off the state government’s planned initial public offering of the assets.
The bid is more that what Queensland state would be able to achieve in an IPO, Nick Greiner, chairman of the Queensland Coal Industry Rail Group, said today in a statement. An IPO may raise A$3 billion, according to the Australian newspaper.
The 13 miners including Rio Tinto Group and Peabody Energy Corp. may have more incentive to add tracks than a single owner, who may seek to profit by raising fees on a monopoly asset. They plan to spend A$2.05 billion to expand the railroad to meet demand from Asian steel mills, Greiner said.
“The rail group is bidding more for the track alone than what the government was hoping to achieve for the whole network,” said Andrew Harrington, an analyst at Patersons Securities Ltd. in Sydney. “The incentive for the coal miners is to get more of their coal on ships, which means more tracks and cheaper transport. There is little incentive for a privatized vertically integrated enterprise to expand track.”
Australian Rail Track Corp., which manages tracks in three states including the Hunter Valley coal network in New South Wales, would run the railroad, Greiner said. Australian Rail Track intends to participate as an equity owner and discussions are advanced, Greiner said.
Committed to Expansion
QRNational Coal, a unit of state-owned QR Ltd., operates more than 540 train services from 56 mines for 23 customers each week in Queensland and New South Wales, according to the company’s annual report. The business booked sales of more than A$1.3 billion in 2008 and 2009, and transports about 185 million metric tons per year.
Queensland Premier Anna Bligh, who said in March that an IPO would maximize the value to the taxpayer, said in June that the non-passenger parts of its rail network may be worth A$7 billion. The state planned to keep a 25 percent to 40 percent stake in the network.
Bligh will “examine the detail” of the bid, the Australian Broadcasting Corp. cited her as saying. Bligh and state Treasurer Andrew Fraser weren’t immediately available to comment.
The miners’ group, which accounts for 98 percent Queensland’s export coal industry, is committed to expanding the network to support growth and has arranged a loan of A$1.35 billion, Greiner said in an e-mailed statement. The network currently operates in a “sub-optimal” way, Greiner said.
Capacity Constraints
“This is about guaranteeing that investments are made in the regulated assets at the right time or early,” Greiner said. “The coal companies are incentivized to invest more in the track, maintain the track better and operate it better.”
Rail constraints in Queensland’s Bowen Basin will persist for as long as two years, hindering export growth, Deutsche Bank AG said in March, citing an independent report.
The Dalrymple Bay port, which ships steelmaking and power- station coal from Queensland, may be constrained for as long as two years, possibly limiting export to as little as 65 million tons of coal this year, compared with a terminal capacity of 85 million tons, Deutsche said.
“Rail in the Bowen Basin has been a sore point with the miners for an extended period, as two sections are missing from the heavy haulage rail line, so that the major production area in the central Bowen is isolated from the under-utilized Abbot Point terminal to the North, and the coal terminals at Gladstone to the south,” Sydney-based Credit Suisse AG analyst Paul McTaggart.
Price Increase
BHP and Mitsubishi Corp., which own the world’s largest coking coal exporter, won a 55 percent price increase from JFE Holdings Inc. in March for a three-month coking coal accord starting in April. BHP expects an annual demand growth rate of 5.5 percent until 2025, Hubie van Dalsen, the president of BHP’s metallurgical coal operations, said in a May 5 presentation.
Queensland is selling assets to prop up finances after forecasts the global recession will cut government revenue by A$15 billion over four years to 2012. Credit Suisse Group AG, Goldman Sachs JBWere, Merrill Lynch, Royal Bank of Scotland Group Plc and UBS AG are managers for the share sale.
BHP, Rio, Xstrata, Peabody, Anglo American Plc, Macarthur Coal Ltd. Vale SA, Wesfarmers Ltd., Ensham Resources Pty, Felix Resources Ltd. and Jellinbah Resources have all signed equity commitments for the bid. New Hope Corp. and Aquila Resources Ltd. support the bid and have the opportunity to contribute equity at a later stage, Greiner said.
The acquisition loan is underwritten by ANZ Banking Group Ltd., BNP Paribas SA and Citibank NA. the group said.
The bid is more that what Queensland state would be able to achieve in an IPO, Nick Greiner, chairman of the Queensland Coal Industry Rail Group, said today in a statement. An IPO may raise A$3 billion, according to the Australian newspaper.
The 13 miners including Rio Tinto Group and Peabody Energy Corp. may have more incentive to add tracks than a single owner, who may seek to profit by raising fees on a monopoly asset. They plan to spend A$2.05 billion to expand the railroad to meet demand from Asian steel mills, Greiner said.
“The rail group is bidding more for the track alone than what the government was hoping to achieve for the whole network,” said Andrew Harrington, an analyst at Patersons Securities Ltd. in Sydney. “The incentive for the coal miners is to get more of their coal on ships, which means more tracks and cheaper transport. There is little incentive for a privatized vertically integrated enterprise to expand track.”
Australian Rail Track Corp., which manages tracks in three states including the Hunter Valley coal network in New South Wales, would run the railroad, Greiner said. Australian Rail Track intends to participate as an equity owner and discussions are advanced, Greiner said.
Committed to Expansion
QRNational Coal, a unit of state-owned QR Ltd., operates more than 540 train services from 56 mines for 23 customers each week in Queensland and New South Wales, according to the company’s annual report. The business booked sales of more than A$1.3 billion in 2008 and 2009, and transports about 185 million metric tons per year.
Queensland Premier Anna Bligh, who said in March that an IPO would maximize the value to the taxpayer, said in June that the non-passenger parts of its rail network may be worth A$7 billion. The state planned to keep a 25 percent to 40 percent stake in the network.
Bligh will “examine the detail” of the bid, the Australian Broadcasting Corp. cited her as saying. Bligh and state Treasurer Andrew Fraser weren’t immediately available to comment.
The miners’ group, which accounts for 98 percent Queensland’s export coal industry, is committed to expanding the network to support growth and has arranged a loan of A$1.35 billion, Greiner said in an e-mailed statement. The network currently operates in a “sub-optimal” way, Greiner said.
Capacity Constraints
“This is about guaranteeing that investments are made in the regulated assets at the right time or early,” Greiner said. “The coal companies are incentivized to invest more in the track, maintain the track better and operate it better.”
Rail constraints in Queensland’s Bowen Basin will persist for as long as two years, hindering export growth, Deutsche Bank AG said in March, citing an independent report.
The Dalrymple Bay port, which ships steelmaking and power- station coal from Queensland, may be constrained for as long as two years, possibly limiting export to as little as 65 million tons of coal this year, compared with a terminal capacity of 85 million tons, Deutsche said.
“Rail in the Bowen Basin has been a sore point with the miners for an extended period, as two sections are missing from the heavy haulage rail line, so that the major production area in the central Bowen is isolated from the under-utilized Abbot Point terminal to the North, and the coal terminals at Gladstone to the south,” Sydney-based Credit Suisse AG analyst Paul McTaggart.
Price Increase
BHP and Mitsubishi Corp., which own the world’s largest coking coal exporter, won a 55 percent price increase from JFE Holdings Inc. in March for a three-month coking coal accord starting in April. BHP expects an annual demand growth rate of 5.5 percent until 2025, Hubie van Dalsen, the president of BHP’s metallurgical coal operations, said in a May 5 presentation.
Queensland is selling assets to prop up finances after forecasts the global recession will cut government revenue by A$15 billion over four years to 2012. Credit Suisse Group AG, Goldman Sachs JBWere, Merrill Lynch, Royal Bank of Scotland Group Plc and UBS AG are managers for the share sale.
BHP, Rio, Xstrata, Peabody, Anglo American Plc, Macarthur Coal Ltd. Vale SA, Wesfarmers Ltd., Ensham Resources Pty, Felix Resources Ltd. and Jellinbah Resources have all signed equity commitments for the bid. New Hope Corp. and Aquila Resources Ltd. support the bid and have the opportunity to contribute equity at a later stage, Greiner said.
The acquisition loan is underwritten by ANZ Banking Group Ltd., BNP Paribas SA and Citibank NA. the group said.
Monday, May 24, 2010
Ambanis May Support $1.5 Trillion Roads, Ports Push
May 25 (Bloomberg) -- The decision by billionaires Mukesh and Anil Ambani to scrap a non-competition accord may spur spending on ports, roads and energy, supporting India’s goal to invest $1.5 trillion on infrastructure, investors say.
The world’s richest brothers split India’s second-biggest business empire five years ago after their father died in 2002 without leaving a will and have squabbled ever since as their business interests collided.
Mukesh Ambani’s Reliance Industries Ltd. and companies controlled by Anil added $4 billion in market value yesterday as investors welcomed the end to the non-competition agreement brokered by their mother in 2006. The accord sparked disputes that held up road projects in Mumbai, a power station near New Delhi and a merger with Africa’s biggest mobile-phone company.
“Reliance Industries should get into building ports and power plants and roads because they are good at executing large projects,” said Vikas Pershad, Chicago-based chief executive officer of Veda Investments LLC, which owns shares in the energy explorer and oil refiner. “Building infrastructure has a lot of synergies with their business. It will be good not just for the company but for the country.”
India, ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of infrastructure, on March 23 lowered its target for investment in roads and ports after failing to complete planned projects. Prime Minister Manmohan Singh the same day asked companies and investors to fund half the planned $1 trillion budgeted for the five years starting April 2012.
Biggest Complex
Mukesh, 53, completed the world’s biggest refinery complex in December 2008 and four months later started pumping gas from India’s largest natural gas field.
Under a 2005 agreement that split the Reliance group, Mukesh kept the petrochemicals, oil and gas units and Anil, 50, secured the power, financial services, telecommunications, and entertainment units. The brothers said on May 23 they were scrapping the accord drawn up the following year that barred them from expanding in each other’s businesses.
“I wouldn’t be surprised if Reliance Industries gets into the telecoms or financial services businesses,” said Seth Freeman, chief executive officer at San Francisco-based EM Capital Management LLC, which owns shares in companies run by both brothers. “Mukesh Ambani has more than sufficient resources to get into any business he chooses.”
Market Value
Manoj Warrier, a spokesman for Reliance Industries, declined to comment on the Mumbai-based company’s investment plans. The Anil Dhirubhai Ambani group didn’t respond to an e- mail seeking comments.
Yesterday’s stock rally extended gains in the Reliance group companies that have more than tripled since the feuding brothers broke up the family empire. The brothers’ six publically traded companies had a market value of $96 billion yesterday, compared with the unified Reliance group’s $29 billion on Jan. 17, 2006, the day before the spilt took effect.
The rapprochement came after India’s Supreme Court on May 7 ordered the two groups to resolve a disagreement over supplying gas from India’s largest field that Mukesh controls. The brothers will now negotiate an accord to ensure Anil’s Reliance Power Ltd. gets the fuel it needs to build gas-fired projects.
Negotiations will “eliminate any room for further disputes,” the two groups said in statements on May 23. The companies will have “greater ability to participate in high growth sectors of the Indian economy, such as oil and gas, petrochemicals, telecommunications, power, and financial services,” according to the statements.
Asian Stocks
Reliance Industries shares declined 1.5 percent to 1,007.75 rupees at 9:40 a.m. in Mumbai today, mirroring the benchmark Sensitive Index, as Asian stocks slumped on concern that Europe’s debt crisis may spread and tensions on the Korean peninsula escalated. Reliance Infrastructure Ltd., the Anil Ambani-controlled builder of a mass rapid transit system in Mumbai, dropped 2 percent to 1,027.50 rupees and Reliance Communications Ltd. lost 4.5 percent to 141.20 rupees.
Reliance Power fell 2.7 percent, Reliance Natural Resources declined 3.7 percent and Reliance Capital Ltd. dropped 1.4 percent.
In the years since the two brothers split the empire founded by their father, the late Dhirubhai Ambani, their battle over the price of natural gas from Reliance Industries assets halted plans for a major north Indian power plant, while a merger between Anil’s Reliance Communications and South Africa’s MTN Group Ltd. was scuttled after Mukesh said he had the first right to buy shares in his brother’s company.
“Foreign investment is going to be easier,” said Chirag Shah, a Mumbai-based research director at IDFC Securities Ltd. “Earlier the agreement between the two brothers restricted Reliance Communications from doing a lot.”
Fiercest Fight
Their fiercest fight was over the natural gas field in the Bay of Bengal, off India’s east coast.
The Supreme Court this month ordered the brothers to rework a gas-supply agreement that Anil Ambani said entitled his Reliance Natural Resources to buy fuel from the KG-D6 gas field at below a government-set price.
The court ruled that the two firms must reach an agreement on a new contract within six weeks of the start of talks.
The world’s richest brothers split India’s second-biggest business empire five years ago after their father died in 2002 without leaving a will and have squabbled ever since as their business interests collided.
Mukesh Ambani’s Reliance Industries Ltd. and companies controlled by Anil added $4 billion in market value yesterday as investors welcomed the end to the non-competition agreement brokered by their mother in 2006. The accord sparked disputes that held up road projects in Mumbai, a power station near New Delhi and a merger with Africa’s biggest mobile-phone company.
“Reliance Industries should get into building ports and power plants and roads because they are good at executing large projects,” said Vikas Pershad, Chicago-based chief executive officer of Veda Investments LLC, which owns shares in the energy explorer and oil refiner. “Building infrastructure has a lot of synergies with their business. It will be good not just for the company but for the country.”
India, ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of infrastructure, on March 23 lowered its target for investment in roads and ports after failing to complete planned projects. Prime Minister Manmohan Singh the same day asked companies and investors to fund half the planned $1 trillion budgeted for the five years starting April 2012.
Biggest Complex
Mukesh, 53, completed the world’s biggest refinery complex in December 2008 and four months later started pumping gas from India’s largest natural gas field.
Under a 2005 agreement that split the Reliance group, Mukesh kept the petrochemicals, oil and gas units and Anil, 50, secured the power, financial services, telecommunications, and entertainment units. The brothers said on May 23 they were scrapping the accord drawn up the following year that barred them from expanding in each other’s businesses.
“I wouldn’t be surprised if Reliance Industries gets into the telecoms or financial services businesses,” said Seth Freeman, chief executive officer at San Francisco-based EM Capital Management LLC, which owns shares in companies run by both brothers. “Mukesh Ambani has more than sufficient resources to get into any business he chooses.”
Market Value
Manoj Warrier, a spokesman for Reliance Industries, declined to comment on the Mumbai-based company’s investment plans. The Anil Dhirubhai Ambani group didn’t respond to an e- mail seeking comments.
Yesterday’s stock rally extended gains in the Reliance group companies that have more than tripled since the feuding brothers broke up the family empire. The brothers’ six publically traded companies had a market value of $96 billion yesterday, compared with the unified Reliance group’s $29 billion on Jan. 17, 2006, the day before the spilt took effect.
The rapprochement came after India’s Supreme Court on May 7 ordered the two groups to resolve a disagreement over supplying gas from India’s largest field that Mukesh controls. The brothers will now negotiate an accord to ensure Anil’s Reliance Power Ltd. gets the fuel it needs to build gas-fired projects.
Negotiations will “eliminate any room for further disputes,” the two groups said in statements on May 23. The companies will have “greater ability to participate in high growth sectors of the Indian economy, such as oil and gas, petrochemicals, telecommunications, power, and financial services,” according to the statements.
Asian Stocks
Reliance Industries shares declined 1.5 percent to 1,007.75 rupees at 9:40 a.m. in Mumbai today, mirroring the benchmark Sensitive Index, as Asian stocks slumped on concern that Europe’s debt crisis may spread and tensions on the Korean peninsula escalated. Reliance Infrastructure Ltd., the Anil Ambani-controlled builder of a mass rapid transit system in Mumbai, dropped 2 percent to 1,027.50 rupees and Reliance Communications Ltd. lost 4.5 percent to 141.20 rupees.
Reliance Power fell 2.7 percent, Reliance Natural Resources declined 3.7 percent and Reliance Capital Ltd. dropped 1.4 percent.
In the years since the two brothers split the empire founded by their father, the late Dhirubhai Ambani, their battle over the price of natural gas from Reliance Industries assets halted plans for a major north Indian power plant, while a merger between Anil’s Reliance Communications and South Africa’s MTN Group Ltd. was scuttled after Mukesh said he had the first right to buy shares in his brother’s company.
“Foreign investment is going to be easier,” said Chirag Shah, a Mumbai-based research director at IDFC Securities Ltd. “Earlier the agreement between the two brothers restricted Reliance Communications from doing a lot.”
Fiercest Fight
Their fiercest fight was over the natural gas field in the Bay of Bengal, off India’s east coast.
The Supreme Court this month ordered the brothers to rework a gas-supply agreement that Anil Ambani said entitled his Reliance Natural Resources to buy fuel from the KG-D6 gas field at below a government-set price.
The court ruled that the two firms must reach an agreement on a new contract within six weeks of the start of talks.
Standard Chartered Sells Indian Shares to ICICI, Reliance, HDFC
May 25 (Bloomberg) -- ICICI Prudential Asset Management Co., Franklin Templeton Investments, and four other investors bought shares valued at 3.7 billion rupees ($78.8 million) in Standard Chartered Plc’s first share sale in India.
The other so-called anchor investors are Sundaram BNP Paribas Mutual Fund, Birla Mutual Fund, HDFC Mutual Fund and Reliance Capital, according to a share sale filing by Standard Chartered to the National Stock Exchange late yesterday. The funds bought 15 percent of the total offering, the maximum they can invest, for 104 rupees a share, it said.
Standard Chartered, the largest foreign bank in India by branches, is the first company to sell Indian Depository Receipts, offering about 240 million shares at 100 rupees to 115 rupees each. The bank expects to raise as much as $750 million, Finance Director Richard Meddings said May 14. It counts India as its most profitable overseas market after Hong Kong.
Ten IDRs will represent one share of Standard Chartered, the bank said. Retail investors and employees who don’t bid for more than 100,000 rupees of shares will be eligible for a 5 percent discount to the final price, it said.
UBS AG, Goldman Sachs, JM Financial Services Ltd., Bank of America Corp.’s Merrill Lynch & Co., Kotak Mahindra Capital Co., SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. are managing the sale.
The other so-called anchor investors are Sundaram BNP Paribas Mutual Fund, Birla Mutual Fund, HDFC Mutual Fund and Reliance Capital, according to a share sale filing by Standard Chartered to the National Stock Exchange late yesterday. The funds bought 15 percent of the total offering, the maximum they can invest, for 104 rupees a share, it said.
Standard Chartered, the largest foreign bank in India by branches, is the first company to sell Indian Depository Receipts, offering about 240 million shares at 100 rupees to 115 rupees each. The bank expects to raise as much as $750 million, Finance Director Richard Meddings said May 14. It counts India as its most profitable overseas market after Hong Kong.
Ten IDRs will represent one share of Standard Chartered, the bank said. Retail investors and employees who don’t bid for more than 100,000 rupees of shares will be eligible for a 5 percent discount to the final price, it said.
UBS AG, Goldman Sachs, JM Financial Services Ltd., Bank of America Corp.’s Merrill Lynch & Co., Kotak Mahindra Capital Co., SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. are managing the sale.
Sunday, May 23, 2010
Air France, Enel, Goodtech, HSBC, Total: Europe Equity Preview
May 24 (Bloomberg) -- Shares of the following companies may have unusual moves in European trading. Stock symbols are in parentheses.
The Stoxx Europe 600 Index fell 0.5 percent to 237.11. The Stoxx 50 Index declined 0.7 percent to 2,326.48. The Euro Stoxx 50 Index, a benchmark for nations using the euro, rose 0.2 percent to 2,574.18.
Air France-KLM Group (AF FP): Europe’s biggest airline hopes to get about 120 million euros ($151 million) in compensation from the France for losses it incurred during the air space closure caused by ash clouds from the volcanic eruption in Iceland, Le Journal du Dimanche said, without citing anyone. The shares were little changed at 9.41 euros.
Caja de Ahorros del Mediterraneo (CAM SM): Bilbao Bizkaia Kutxa is in merger talks with CAM, El Pais said, without saying where it got the information. The two lenders will probably need funds from the government’s bank restructuring fund to complete the transaction, the newspaper said. CAM slipped 0.3 percent to 5.95 euros.
Enel SpA (ENEL IM): Sintonia SA is considering buying a stake in Enel’s Green Power unit, Gilberto Benetton told Corriere della Sera in an interview. The shares rose 0.4 percent to 3.57 euros.
ERG SpA (ERG IM): Italy’s biggest exporter of oil products and France’s Total SA (FP FP) won European Union approval for their plan to set up an Italian refining and marketing venture. ERG rose 0.3 percent to 9.85 euros. Total slipped 0.3 percent to 36.60 euros.
Finmeccanica SpA (FNC IM): Ansaldo Breda, a unit of the Italian company, is among rivals vying to build 50 high-speed trains for Italy’s Ferrovie dello Stato SpA in an order valued at about 1.2 billion euros, Il Messaggero reported. The shares rose 0.27 percent to 9.23 euros.
Goodtech AS (GOD NO): The Norwegian maker of piping equipment was downgraded to “hold” from “buy” at Terra Markets. The shares surged 14 percent to 2.4 kroner.
HSBC Holdings Plc (HSBA LN): Stephen Green plans to step down as executive chairman at Europe’s biggest bank later this year and will be succeeded by John Thornton, the Sunday Telegraph reported, without saying where it obtained the information. The stock fell 0.4 percent to 629.2 pence.
Invensys Plc (ISYS LN): The U.K. maker of controls that help run Whirlpool Corp. washing machines is scheduled to report earnings. The shares climbed 2.6 percent to 286.3 pence.
Logica Plc (LOG NA): Infosys Technologies Ltd., India’s second-largest software exporter, dismissed media reports that it’s planning to purchase Logica Plc as a “rumor.” The Daily Mail said Infosys was considering buying the Anglo-Dutch computer-services company for 2.9 billion pounds ($4.2 billion) in cash, or 180 pence a share, without saying where it got the information. Logica gained 3.6 percent to 1.42 euros.
Prudential Plc (PRU LN): The U.S. Treasury is resurrecting a backup plan to float American International Group Inc.’s AIA Group Ltd., amid concern the U.K. insurer’s takeover of the Asian insurer may fall apart, the Sunday Times reported. The stock rose 0.1 percent to 517 pence.
Sapec SA (SAP BB): The third-largest supplier of crop- protection products on the Iberian Peninsula said first-quarter earnings before interest, tax, depreciation and amortization showed “considerable progress,” even as revenue declined to 117 million euros from 128 million euros a year earlier. Sapec said in an e-mail that it’s confident about a recovery of full- year earnings, adding it’s still in talks to sell two thirds of its 58 percent holding in Grupo Naturener SA. The shares dropped 1.4 percent to 55.01 euros.
Suez Environnement SA (SEV FP): Chief Executive Officer Jean-Louis Chaussade is “confident” the French water company will meet its annual targets, Le Journal des Finances reported, citing an interview. “Activity trend” improved in April, Chaussade said. The shares fell 2.3 percent to 14.44 euros.
Unipol Gruppo Finanziario SpA (UNI IM): Chief Executive Officer Carlo Cimbri said the lender should complete a 400 million-euro stock sale by the “summer,” la Stampa reported, citing an interview. The shares rose 1.5 percent to 72 cents.
Ypsomed Holding AG (YPSN SW): The company that supplies needles and injection pens to Sanofi-Aventis SA reports full- year results. The stock was unchanged at 60 francs.
The Stoxx Europe 600 Index fell 0.5 percent to 237.11. The Stoxx 50 Index declined 0.7 percent to 2,326.48. The Euro Stoxx 50 Index, a benchmark for nations using the euro, rose 0.2 percent to 2,574.18.
Air France-KLM Group (AF FP): Europe’s biggest airline hopes to get about 120 million euros ($151 million) in compensation from the France for losses it incurred during the air space closure caused by ash clouds from the volcanic eruption in Iceland, Le Journal du Dimanche said, without citing anyone. The shares were little changed at 9.41 euros.
Caja de Ahorros del Mediterraneo (CAM SM): Bilbao Bizkaia Kutxa is in merger talks with CAM, El Pais said, without saying where it got the information. The two lenders will probably need funds from the government’s bank restructuring fund to complete the transaction, the newspaper said. CAM slipped 0.3 percent to 5.95 euros.
Enel SpA (ENEL IM): Sintonia SA is considering buying a stake in Enel’s Green Power unit, Gilberto Benetton told Corriere della Sera in an interview. The shares rose 0.4 percent to 3.57 euros.
ERG SpA (ERG IM): Italy’s biggest exporter of oil products and France’s Total SA (FP FP) won European Union approval for their plan to set up an Italian refining and marketing venture. ERG rose 0.3 percent to 9.85 euros. Total slipped 0.3 percent to 36.60 euros.
Finmeccanica SpA (FNC IM): Ansaldo Breda, a unit of the Italian company, is among rivals vying to build 50 high-speed trains for Italy’s Ferrovie dello Stato SpA in an order valued at about 1.2 billion euros, Il Messaggero reported. The shares rose 0.27 percent to 9.23 euros.
Goodtech AS (GOD NO): The Norwegian maker of piping equipment was downgraded to “hold” from “buy” at Terra Markets. The shares surged 14 percent to 2.4 kroner.
HSBC Holdings Plc (HSBA LN): Stephen Green plans to step down as executive chairman at Europe’s biggest bank later this year and will be succeeded by John Thornton, the Sunday Telegraph reported, without saying where it obtained the information. The stock fell 0.4 percent to 629.2 pence.
Invensys Plc (ISYS LN): The U.K. maker of controls that help run Whirlpool Corp. washing machines is scheduled to report earnings. The shares climbed 2.6 percent to 286.3 pence.
Logica Plc (LOG NA): Infosys Technologies Ltd., India’s second-largest software exporter, dismissed media reports that it’s planning to purchase Logica Plc as a “rumor.” The Daily Mail said Infosys was considering buying the Anglo-Dutch computer-services company for 2.9 billion pounds ($4.2 billion) in cash, or 180 pence a share, without saying where it got the information. Logica gained 3.6 percent to 1.42 euros.
Prudential Plc (PRU LN): The U.S. Treasury is resurrecting a backup plan to float American International Group Inc.’s AIA Group Ltd., amid concern the U.K. insurer’s takeover of the Asian insurer may fall apart, the Sunday Times reported. The stock rose 0.1 percent to 517 pence.
Sapec SA (SAP BB): The third-largest supplier of crop- protection products on the Iberian Peninsula said first-quarter earnings before interest, tax, depreciation and amortization showed “considerable progress,” even as revenue declined to 117 million euros from 128 million euros a year earlier. Sapec said in an e-mail that it’s confident about a recovery of full- year earnings, adding it’s still in talks to sell two thirds of its 58 percent holding in Grupo Naturener SA. The shares dropped 1.4 percent to 55.01 euros.
Suez Environnement SA (SEV FP): Chief Executive Officer Jean-Louis Chaussade is “confident” the French water company will meet its annual targets, Le Journal des Finances reported, citing an interview. “Activity trend” improved in April, Chaussade said. The shares fell 2.3 percent to 14.44 euros.
Unipol Gruppo Finanziario SpA (UNI IM): Chief Executive Officer Carlo Cimbri said the lender should complete a 400 million-euro stock sale by the “summer,” la Stampa reported, citing an interview. The shares rose 1.5 percent to 72 cents.
Ypsomed Holding AG (YPSN SW): The company that supplies needles and injection pens to Sanofi-Aventis SA reports full- year results. The stock was unchanged at 60 francs.
Thai Stocks, Currency Hold Up as Exports Outweigh Instability
May 24 (Bloomberg) -- Thailand’s benchmark stock index and currency are among the best performers in emerging markets as the nation’s economic growth outweighs the deadliest political clash in two decades.
The baht’s 0.9 percent gain since anti-government rallies began on March 12 makes it the top-performing currency among developing nations, according to data compiled by Bloomberg. The key share index climbed 3.8 percent, the most among 22 countries on the MSCI Emerging Markets Index after Morocco. It was also the best performer among Asia’s 10 biggest equity markets.
Firefighters in Bangkok extinguished blazes over the weekend that burned 39 buildings, following a military assault on May 19 to end the two-month protest in Bangkok. A government report today showed Southeast Asia’s biggest economy after Indonesia expanded at the fastest pace since 1995 last quarter, driven by exports.
“Fortunately, the manufacturing sector hasn’t been much affected by the political turmoil as the factories aren’t in central Bangkok,” said Takahide Irimura, head of emerging- market research in Tokyo at Kokusai Asset Management Co., which manages about $61 billion of assets. “Supported by a favorable current account, the baht will appreciate.”
The political conflict may curb consumption and imports, boosting the nation’s trade surplus and supporting the baht, Irimura said. Kokusai, whose Global Sovereign Open fund is Asia’s biggest bond fund, doesn’t provide forecasts, he said.
Baht, SET
The baht gained 0.2 percent to 32.38 per dollar as of 10 a.m. in Bangkok, according to data compiled by Bloomberg. Exporters are repatriating overseas income to buy baht as “the situation is under control in the capital,” according to Chatchawan Jumruswittayawong, a foreign-exchange trader at Bank of Ayudhya Pcl. The currency may trade between 32.25 and 32.50 this week, he said.
The cost of credit-default swaps insuring Thai government debt from default was little changed at 157 basis points, according to Royal Bank of Scotland Group Plc prices.
The SET Index dropped 1.7 percent to 752.84, reflecting the global rout on May 20 and May 21 when the bourse was closed because of violent clashes between demonstrators and security forces. The MSCI Asia-Pacific excluding Japan index slumped 2.8 percent during that time, to an eight-month low, on concern Europe’s debt crisis will crimp global growth.
Greek Crisis
“The Greek debt crisis and domestic political unrest have driven away overseas investors,” said Suppakorn Soontornkit, chief investment officer of MFC Asset Management Pcl, which oversees 230 billion baht ($7.1 billion) of assets. “As soon as the European debt concern dissipates, I am confident foreign investors will return to the Thai market.”
Suppakorn maintained his forecast that the SET may rise to between 820 and 887 this year. The company’s MFC Value Long Term Equity Fund was ranked the top large equity fund in 2009 by Morningstar Inc., a fund research company.
The eviction of anti-government protesters from central Bangkok will prompt a more prolonged flight from the stocks and currency markets by overseas investors, who expect the demonstrations to resume at some point, Sopawadee Lertmanascha, who manages about 447 billion baht of assets as secretary general of the Government Pension Fund, Thailand’s third-biggest money manager, said May 18.
Foreign investors cut their Thai stockholdings on each of this month’s 11 trading days, the longest stretch of net sales since November 2008, pulling 38.7 billion baht, according to data compiled by Bloomberg.
‘Less Rosy’
Finance Minister Korn Chatikavanij said on May 21 economic growth for the second quarter and beyond will be “less rosy” because of the deadly protests. Thai financial institutions, currency reserves, tax revenue and stock markets remain strong, he said at a press conference in Tokyo.
Thai Prime Minister Abhisit Vejjajiva yesterday extended a curfew put in place last week on concern demonstrations may break out again after the May 19 crackdown. Protesters also torched a city hall in Udon Thani province and seized a government building in Khon Kaen, raising concern the unrest may spread beyond the capital.
The longer-term outlook is optimistic as foreigners decouple investment decisions from the riots, according to Mark Mobius, who oversees about $34 billion in emerging markets as Templeton Asset Management Ltd.’s Singapore-based chairman.
“The headlines show that it’s pretty much a disaster center,” Mobius said in a Bloomberg Television interview right after the May 19 crackdown. Still, investors are “differentiating these events and saying OK, there are problems and there’ll be disruptions, but the country will come out of it and investing and trade will continue.”
Economic Growth
Gross domestic product rose 12 percent in the three months to March 31 from a year earlier, after growing a revised 5.9 percent in the previous quarter, the government said in Bangkok today. That beat the 9 percent median forecast in a Bloomberg News survey and was the highest reading since the second quarter of 1995. A report this week may show exports increased for a sixth consecutive month in April, rising 37.5 percent from a year earlier, according a separate survey.
Losses in the baht have also been limited because the central bank controls speculative trading, according to Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. The Bank of Thailand sets a daily cap of 300 million baht for trading accounts held by non-residents for investments in securities and other financial instruments.
“The baht is in fact one of the strongest performers in Asia this year and we expect the outperformance to continue, simply because there is much less foreign involvement,” said Thomas Harr, a strategist at Standard Chartered Plc in Singapore, who predicts the baht will gain to 31 by year end. “In a risk- off environment, there is definitely less impact on Thailand.”
The baht’s 0.9 percent gain since anti-government rallies began on March 12 makes it the top-performing currency among developing nations, according to data compiled by Bloomberg. The key share index climbed 3.8 percent, the most among 22 countries on the MSCI Emerging Markets Index after Morocco. It was also the best performer among Asia’s 10 biggest equity markets.
Firefighters in Bangkok extinguished blazes over the weekend that burned 39 buildings, following a military assault on May 19 to end the two-month protest in Bangkok. A government report today showed Southeast Asia’s biggest economy after Indonesia expanded at the fastest pace since 1995 last quarter, driven by exports.
“Fortunately, the manufacturing sector hasn’t been much affected by the political turmoil as the factories aren’t in central Bangkok,” said Takahide Irimura, head of emerging- market research in Tokyo at Kokusai Asset Management Co., which manages about $61 billion of assets. “Supported by a favorable current account, the baht will appreciate.”
The political conflict may curb consumption and imports, boosting the nation’s trade surplus and supporting the baht, Irimura said. Kokusai, whose Global Sovereign Open fund is Asia’s biggest bond fund, doesn’t provide forecasts, he said.
Baht, SET
The baht gained 0.2 percent to 32.38 per dollar as of 10 a.m. in Bangkok, according to data compiled by Bloomberg. Exporters are repatriating overseas income to buy baht as “the situation is under control in the capital,” according to Chatchawan Jumruswittayawong, a foreign-exchange trader at Bank of Ayudhya Pcl. The currency may trade between 32.25 and 32.50 this week, he said.
The cost of credit-default swaps insuring Thai government debt from default was little changed at 157 basis points, according to Royal Bank of Scotland Group Plc prices.
The SET Index dropped 1.7 percent to 752.84, reflecting the global rout on May 20 and May 21 when the bourse was closed because of violent clashes between demonstrators and security forces. The MSCI Asia-Pacific excluding Japan index slumped 2.8 percent during that time, to an eight-month low, on concern Europe’s debt crisis will crimp global growth.
Greek Crisis
“The Greek debt crisis and domestic political unrest have driven away overseas investors,” said Suppakorn Soontornkit, chief investment officer of MFC Asset Management Pcl, which oversees 230 billion baht ($7.1 billion) of assets. “As soon as the European debt concern dissipates, I am confident foreign investors will return to the Thai market.”
Suppakorn maintained his forecast that the SET may rise to between 820 and 887 this year. The company’s MFC Value Long Term Equity Fund was ranked the top large equity fund in 2009 by Morningstar Inc., a fund research company.
The eviction of anti-government protesters from central Bangkok will prompt a more prolonged flight from the stocks and currency markets by overseas investors, who expect the demonstrations to resume at some point, Sopawadee Lertmanascha, who manages about 447 billion baht of assets as secretary general of the Government Pension Fund, Thailand’s third-biggest money manager, said May 18.
Foreign investors cut their Thai stockholdings on each of this month’s 11 trading days, the longest stretch of net sales since November 2008, pulling 38.7 billion baht, according to data compiled by Bloomberg.
‘Less Rosy’
Finance Minister Korn Chatikavanij said on May 21 economic growth for the second quarter and beyond will be “less rosy” because of the deadly protests. Thai financial institutions, currency reserves, tax revenue and stock markets remain strong, he said at a press conference in Tokyo.
Thai Prime Minister Abhisit Vejjajiva yesterday extended a curfew put in place last week on concern demonstrations may break out again after the May 19 crackdown. Protesters also torched a city hall in Udon Thani province and seized a government building in Khon Kaen, raising concern the unrest may spread beyond the capital.
The longer-term outlook is optimistic as foreigners decouple investment decisions from the riots, according to Mark Mobius, who oversees about $34 billion in emerging markets as Templeton Asset Management Ltd.’s Singapore-based chairman.
“The headlines show that it’s pretty much a disaster center,” Mobius said in a Bloomberg Television interview right after the May 19 crackdown. Still, investors are “differentiating these events and saying OK, there are problems and there’ll be disruptions, but the country will come out of it and investing and trade will continue.”
Economic Growth
Gross domestic product rose 12 percent in the three months to March 31 from a year earlier, after growing a revised 5.9 percent in the previous quarter, the government said in Bangkok today. That beat the 9 percent median forecast in a Bloomberg News survey and was the highest reading since the second quarter of 1995. A report this week may show exports increased for a sixth consecutive month in April, rising 37.5 percent from a year earlier, according a separate survey.
Losses in the baht have also been limited because the central bank controls speculative trading, according to Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. The Bank of Thailand sets a daily cap of 300 million baht for trading accounts held by non-residents for investments in securities and other financial instruments.
“The baht is in fact one of the strongest performers in Asia this year and we expect the outperformance to continue, simply because there is much less foreign involvement,” said Thomas Harr, a strategist at Standard Chartered Plc in Singapore, who predicts the baht will gain to 31 by year end. “In a risk- off environment, there is definitely less impact on Thailand.”
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