June 13 (Bloomberg) -- Australian Prime Minister Kevin Rudd, facing an electoral backlash over plans to introduce a 40 percent tax on mining profits, will remain as the leader going into the next election, Federal Finance Minister Lindsay Tanner said.
“Rudd will lead the government to the election,” Tanner said on ABC Television today. “I believe the government will win. Suddenly, it’s become a much tighter contest and we’re under a bit of pressure. It will be a tough fight.”
BHP Billiton Ltd., the world’s largest mining company, and Xstrata Plc have called on the Australian government to roll back or ditch plans for the tax to avoid a flight of investment from the country, while Sinosteel Corp. today said it was “concerned.” The so-called “super tax” is proving a hard sell in the main mining states of Western Australia, where a poll showed support for Rudd’s Labor Party has fallen to a record low, and Queensland.
“The mining tax, it’s a severe negative for the government at the moment,” Galaxy Research pollster David Briggs said on Sky News today. He said Labor would probably lose four of its 15 seats in Queensland should an election be held now.
Australia, which voted Rudd’s center-left Labor Party into power in October 2007 after 12 years of conservative Liberal Party rule, must go to the polls within 10 months. Most political experts are predicting the election will be held later this year.
Gillard Speculation
Deputy Prime Minister Julia Gillard said speculation she may challenge Rudd’s leadership was “absolutely absurd.”
“I’ve read the newspapers and the thing that matters is not what’s in the pages of the daily newspapers but a focus on making a difference to working families,” Gillard told reporters in Brisbane yesterday.
Nationally, a survey conducted between June 3 and June 5 showed 53 percent of voters preferred the opposition, compared with 47 percent who backed Rudd’s party, the first time Labor has trailed in four years.
The proposed 40 percent levy would be imposed on resource companies’ returns that exceed the rate on long-term Australian government bonds, currently about 6 percent, and be offset by a credit for royalties paid to state governments, according to government documents.
China Concern
Sinosteel is investigating the impact the proposed tax will have on its cashflow, Guilio Casello, chief operating officer of Sinosteel Midwest Corp., told ABC Television today. China’s biggest iron ore trader bought Australian company Midwest Corp. for A$1.4 billion in 2008 and is developing a mine in Western Australia.
“Obviously there’s concern,” Casello said. “The Chinese are very large investors into the region. They invest in obviously not just our project but in a number of projects into the region. They’re still very committed to the region. They understand the potential.”
BHP and Xstrata has joined Rio Tinto Group and Peabody Energy Corp. in reviewing, suspending or slowing Australian projects because of the tax.
The government may raise the threshold at which the levy kicks in to more than 10 percent from 6 percent, the Herald Sun newspaper reported June 12. Resources Minister Martin Ferguson has said the government is open to “refinements” to the tax.
“Our tax reforms are about making sure mining companies pay a fairer price for our mineral wealth,” Treasurer Wayne Swan said in an e-mailed statement today.
Facing Protests
Rudd faced protests from mining executives in Perth last week as he met with business leaders to promote the tax.
Industry groups say the tax would force companies to shift operations overseas, jeopardizing investment in a business that represents about 10 percent of the A$1.2 trillion ($980 billion) economy. Rudd has countered that the companies involved are exaggerating their importance to Australia, the world’s biggest shipper of iron ore and coal.
Wild West
Labor’s support has fallen to a record low of 26 percent in Western Australia, compared with 52 percent for the Liberals and their coalition partner the Nationals, according to a West Australian newspaper poll released yesterday. On those figures, Labor would lose all four of the seats it holds in the state, generator of a third of the nation’s exports.
“The Western Australian market has been unsettled by the combined impacts of the instability in Europe, the uncertainty caused by the proposed resource super profits tax in Australia and declining commodity prices,” Keith Jones, managing partner of Deloitte in the state, said in an e-mailed statement today.
The value of Western Australian-listed companies in May decreased by A$20.7 billion, or 13 percent, to A$143.8 billion, Deloitte said.
Western Australia, about four times the size of France, accounts for 62 percent of the nation’s mineral production, 73 percent of natural gas and 64 percent of crude oil and condensate.
In Rudd’s favor, voters supported his actions during the global financial crisis when he implemented a stimulus program that helped the nation avoid recession. He was aided by demand for raw materials from India and China, the world’s largest buyer of iron ore, which fueled purchases of Australia’s natural resources.
“People need to get serious,” Transport Minister Anthony Albanese said on the Ten television network today, referring to calls for Rudd to be replaced. “The fact is our prime minister is the one leader of the advanced world who negotiated successfully through the global financial crisis.”
Saturday, June 12, 2010
SanDisk, Symantec Workers Lead Silicon Valley in Profit Gains
June 13 (Bloomberg) -- SanDisk Corp. and Symantec Corp. are leading their Silicon Valley peers in boosting profit per employee, as technology workers learn to do more with less.
SanDisk earned $684,381 more from each worker last year than the prior year, while Symantec added $430,453, according to Bloomberg data measuring the most recent fiscal year.
About half of the companies in a Bloomberg regional index had more profitable workforces last year, helped by job cuts and the start of the economic recovery. Silicon Valley lost about 90,000 jobs during the worst of the slump. The remaining workers had to take on more of the burden, propelling productivity to its highest level since the dot-com boom in 2000.
“You can get your people to work harder for an extended period of time, but the question is, is that sustainable?” said Tracey Grose, vice president of research and development for Collaborative Economics Inc., a Mountain View, California-based consulting firm.
Productivity rose 3.8 percent between the second quarters of 2008 and 2009, according to an annual survey by Joint Venture: Silicon Valley Network and Silicon Valley Community Foundation. As companies begin to see orders rebound, they eventually have to bring workers back.
“When companies start turning around, they will take on temporary help, and then they’ll start hiring full-time positions,” Grose said.
Job Cuts
SanDisk, a maker of Flash memory based in Milpitas, cut at least 10 percent of its workforce in late 2008, part of an effort to reduce operating expenses to $800 million or less.
Like the housing market, the flash-memory industry had a supply glut. That caused prices to crash, forcing companies to take a loss on every component that went out the door.
“These guys were losing probably close to one dollar a part at the end of 2008,” said Joe Unsworth, an analyst at Stamford, Connecticut-based Gartner Inc. “They were absolutely hemorrhaging cash.”
Prices recovered after the industry cut capacity and worked through the excess inventory, he said. SanDisk has been profitable since the second quarter of 2009. On an employee basis, the company earned $127,123 last year, up from a loss of $557,258 in 2008.
Symantec, the world’s biggest maker of computer-security software, also cut jobs during the recession, reducing its workforce budget by 4.5 percent at the end of 2008.
Consumer Rebound
At the time, corporate customers were curbing security spending. Sales at Mountain View-based Symantec tumbled for four straight quarters, through September of last year.
Customers bought consumer products at a faster pace than business software, helping Symantec pull out the slump, said Chief Financial Officer James Beer. Per worker, net income was $41,035 last year, compared with a loss of $389,418 the previous year.
Google Inc., EBay Inc. and Yahoo! Inc. also boosted per- employee profit last year. Google employees had some of the region’s highest numbers, accounting for $328,734 on average. Oracle Corp., at $65,035, and Hewlett-Packard Co., at $25,197, were both little changed from the prior year.
Thirty-five companies in Bloomberg’s index of 78 Bay Area stocks saw profitability per employee drop last year. And 20 lost money -- often because of writedowns and reorganizations. Lam Research Corp. and JDS Uniphase Corp. ranked at the bottom of the list.
Wider Loss
At JDS, a Milpitas-based maker of fiber-optic equipment, the loss per worker widened to $216,600, from $3,056 the previous year. It was hurt by one-time charges, including the writedown of an acquisition. The timing of its fiscal year didn’t help because it ended last June, before the economic recovery got under way.
“Customers were cautious on spending on telecom equipment,” said Jim Monroe, a spokesman for JDS. Things have improved since last year, he said. Bookings last quarter reached the highest level in two years.
Lam was hurt when memory producers -- such as SanDisk -- scaled back production plans during the slowdown, said Carol Raeburn, a spokeswoman for the Fremont company.
During the fiscal year that ended last June, Lam had a loss of $111,453 per worker, down from a profit of $115,618. The company completed its purchase of SEZ Holding AG in March 2008, not long before the recession deepened. The company had to write down the value of the business, eating into profit. Lam also cut jobs as it integrated SEZ.
“The biggest reason for the loss was a restructuring,” Raeburn said.
The memory business has since rebounded, helping Lam post record shipments last quarter. Sales of smartphones, netbooks and tablet computers such as Apple Inc.’s iPad have helped.
“It’s the whole consumer electronics category that’s driving this demand,” Raeburn said. “It just shows you how fast things can change from the doldrums.”
SanDisk earned $684,381 more from each worker last year than the prior year, while Symantec added $430,453, according to Bloomberg data measuring the most recent fiscal year.
About half of the companies in a Bloomberg regional index had more profitable workforces last year, helped by job cuts and the start of the economic recovery. Silicon Valley lost about 90,000 jobs during the worst of the slump. The remaining workers had to take on more of the burden, propelling productivity to its highest level since the dot-com boom in 2000.
“You can get your people to work harder for an extended period of time, but the question is, is that sustainable?” said Tracey Grose, vice president of research and development for Collaborative Economics Inc., a Mountain View, California-based consulting firm.
Productivity rose 3.8 percent between the second quarters of 2008 and 2009, according to an annual survey by Joint Venture: Silicon Valley Network and Silicon Valley Community Foundation. As companies begin to see orders rebound, they eventually have to bring workers back.
“When companies start turning around, they will take on temporary help, and then they’ll start hiring full-time positions,” Grose said.
Job Cuts
SanDisk, a maker of Flash memory based in Milpitas, cut at least 10 percent of its workforce in late 2008, part of an effort to reduce operating expenses to $800 million or less.
Like the housing market, the flash-memory industry had a supply glut. That caused prices to crash, forcing companies to take a loss on every component that went out the door.
“These guys were losing probably close to one dollar a part at the end of 2008,” said Joe Unsworth, an analyst at Stamford, Connecticut-based Gartner Inc. “They were absolutely hemorrhaging cash.”
Prices recovered after the industry cut capacity and worked through the excess inventory, he said. SanDisk has been profitable since the second quarter of 2009. On an employee basis, the company earned $127,123 last year, up from a loss of $557,258 in 2008.
Symantec, the world’s biggest maker of computer-security software, also cut jobs during the recession, reducing its workforce budget by 4.5 percent at the end of 2008.
Consumer Rebound
At the time, corporate customers were curbing security spending. Sales at Mountain View-based Symantec tumbled for four straight quarters, through September of last year.
Customers bought consumer products at a faster pace than business software, helping Symantec pull out the slump, said Chief Financial Officer James Beer. Per worker, net income was $41,035 last year, compared with a loss of $389,418 the previous year.
Google Inc., EBay Inc. and Yahoo! Inc. also boosted per- employee profit last year. Google employees had some of the region’s highest numbers, accounting for $328,734 on average. Oracle Corp., at $65,035, and Hewlett-Packard Co., at $25,197, were both little changed from the prior year.
Thirty-five companies in Bloomberg’s index of 78 Bay Area stocks saw profitability per employee drop last year. And 20 lost money -- often because of writedowns and reorganizations. Lam Research Corp. and JDS Uniphase Corp. ranked at the bottom of the list.
Wider Loss
At JDS, a Milpitas-based maker of fiber-optic equipment, the loss per worker widened to $216,600, from $3,056 the previous year. It was hurt by one-time charges, including the writedown of an acquisition. The timing of its fiscal year didn’t help because it ended last June, before the economic recovery got under way.
“Customers were cautious on spending on telecom equipment,” said Jim Monroe, a spokesman for JDS. Things have improved since last year, he said. Bookings last quarter reached the highest level in two years.
Lam was hurt when memory producers -- such as SanDisk -- scaled back production plans during the slowdown, said Carol Raeburn, a spokeswoman for the Fremont company.
During the fiscal year that ended last June, Lam had a loss of $111,453 per worker, down from a profit of $115,618. The company completed its purchase of SEZ Holding AG in March 2008, not long before the recession deepened. The company had to write down the value of the business, eating into profit. Lam also cut jobs as it integrated SEZ.
“The biggest reason for the loss was a restructuring,” Raeburn said.
The memory business has since rebounded, helping Lam post record shipments last quarter. Sales of smartphones, netbooks and tablet computers such as Apple Inc.’s iPad have helped.
“It’s the whole consumer electronics category that’s driving this demand,” Raeburn said. “It just shows you how fast things can change from the doldrums.”
Friday, June 11, 2010
Craft Shop Family Buys Up Ancient Bibles for Museum
OKLAHOMA CITY — At least one example of the printed word is in great demand even in the digital age: ancient Bibles.
Enlarge This Image
With a goal of establishing a national Bible museum of great depth and size, the evangelical Christian family behind the Hobby Lobby chain of craft stores has been spending heavily to amass a collection that has set dealers buzzing in the staid world of rare books.
Specialists estimate the family has bought illuminated, or decorated, manuscripts, Torahs, papyri and other works worth $20 million to $40 million from auction houses, dealers, private collectors and institutions, some of which may be selling because of financial pressure.
The man leading the effort is Steve Green, president of Hobby Lobby, a private company based here that is a favorite of scrapbook makers, do-it-yourselfers and home decorators. The company, founded by his father, David, in 1972, now numbers 439 stores and has generated a family fortune that Forbes magazine estimates at $2.5 billion.
With money to spare, the younger Mr. Green, 46, has found a passion to complement his vocation, and is working with specialists in deal-making and history who, using company money on behalf of the family, began buying with a flourish about six months ago.
“They have caught everyone’s attention because no one in recent memory has spent so much so quickly on Bibles,” said Dr. Eric White, curator of special collections at the Bridwell Library at Southern Methodist University in Dallas.
The collection now includes more than 30,000 items, according to Mr. Green and his team. Some of those were shown to The New York Times at Hobby Lobby offices in Oklahoma City, including a New Testament papyrus from the second century A.D., a lavishly illustrated and illuminated Martin Luther New Testament and a Spanish Inquisition Torah.
“The goal is to create a museum around the story of the Bible,” Mr. Green explained. “No book has been persecuted as much or loved as much. Its incredible story needs to be told.”
Mr. Green is Pentecostal, but other family members worship in churches of other denominations, including Baptist and Assemblies of God. The family gives to a variety of Christian causes, Oral Roberts University and evangelical ministries among them, and adheres to Christian principles, closing its stores on Sundays, playing Christian music in them and operating Mardel, a separate chain of religious bookstores.
With sales last year of just over $2 billion the company has no long-term debt, Mr. Green said over a lunch of sandwiches that began with a prayer at the company’s nondescript, sprawling corporate headquarters. Despite the recession, profits rose in 2009, he said, perhaps because people spent more time at home.
For the Green family, the time seems ideal for buying religious works.
As Sam Fogg, a London dealer of rare manuscripts, put it, “Between 1988 and 1993, the Bible market rocketed,” and then it languished even as the broader art market rose.
In addition, “Libraries are rethinking their mission in the age of digitization,” said David N. Redden, executive vice president at Sotheby’s books department. “They are wondering what their holdings should be: whether they are about collecting rare books or disseminating information. If the latter, do they need rare books? In some ways, it is not a bad time to be buying.”
The Green collection aims to be one of a kind. Other Bible collections in the United States, including one at the American Bible Society in Manhattan, generally intend to inspire readership, said Dr. Scott Carroll, who began advising Mr. Green about six months ago. “Our goal is to inspire people with the story of the Bible and its history.”
Dr. Carroll, a former professor in ancient studies who has specialized in Biblical manuscripts, recently resigned from Cornerstone University, a nondenominational Christ-based liberal arts school in Grand Rapids, Mich., to become executive director of the museum and an adviser to Mr. Green. In the 1990s, Dr. Carroll helped another collector, Robert Van Kampen, build the private Van Kampen Collection of Bibles and related material in Orlando, Fla., and helped oversee its academic objectives, including archaeological digs.
Some who are knowledgeable about the rare book market suggest that the group’s buying has pushed up prices. The buying has also spawned some skepticism about the overall quality of purchases made in such rapid-fire style. Among the 30 objects that the Green group offered for examination recently were a silver amulet from the first or second century inscribed with a passage from Deuteronomy, also known as the Shema; the Codex Climaci Rescriptus, a manuscript originated from the Monastery of Mt. St. Catherine that was home to the earliest near-complete copy of the Bible, and the first volume of a Complutensian Polyglot Bible that was used for the comparative study of the text of Scripture. It contains the first printing of the Septuagint, or Old Testament Scriptures in Greek.
Enlarge This Image
With a goal of establishing a national Bible museum of great depth and size, the evangelical Christian family behind the Hobby Lobby chain of craft stores has been spending heavily to amass a collection that has set dealers buzzing in the staid world of rare books.
Specialists estimate the family has bought illuminated, or decorated, manuscripts, Torahs, papyri and other works worth $20 million to $40 million from auction houses, dealers, private collectors and institutions, some of which may be selling because of financial pressure.
The man leading the effort is Steve Green, president of Hobby Lobby, a private company based here that is a favorite of scrapbook makers, do-it-yourselfers and home decorators. The company, founded by his father, David, in 1972, now numbers 439 stores and has generated a family fortune that Forbes magazine estimates at $2.5 billion.
With money to spare, the younger Mr. Green, 46, has found a passion to complement his vocation, and is working with specialists in deal-making and history who, using company money on behalf of the family, began buying with a flourish about six months ago.
“They have caught everyone’s attention because no one in recent memory has spent so much so quickly on Bibles,” said Dr. Eric White, curator of special collections at the Bridwell Library at Southern Methodist University in Dallas.
The collection now includes more than 30,000 items, according to Mr. Green and his team. Some of those were shown to The New York Times at Hobby Lobby offices in Oklahoma City, including a New Testament papyrus from the second century A.D., a lavishly illustrated and illuminated Martin Luther New Testament and a Spanish Inquisition Torah.
“The goal is to create a museum around the story of the Bible,” Mr. Green explained. “No book has been persecuted as much or loved as much. Its incredible story needs to be told.”
Mr. Green is Pentecostal, but other family members worship in churches of other denominations, including Baptist and Assemblies of God. The family gives to a variety of Christian causes, Oral Roberts University and evangelical ministries among them, and adheres to Christian principles, closing its stores on Sundays, playing Christian music in them and operating Mardel, a separate chain of religious bookstores.
With sales last year of just over $2 billion the company has no long-term debt, Mr. Green said over a lunch of sandwiches that began with a prayer at the company’s nondescript, sprawling corporate headquarters. Despite the recession, profits rose in 2009, he said, perhaps because people spent more time at home.
For the Green family, the time seems ideal for buying religious works.
As Sam Fogg, a London dealer of rare manuscripts, put it, “Between 1988 and 1993, the Bible market rocketed,” and then it languished even as the broader art market rose.
In addition, “Libraries are rethinking their mission in the age of digitization,” said David N. Redden, executive vice president at Sotheby’s books department. “They are wondering what their holdings should be: whether they are about collecting rare books or disseminating information. If the latter, do they need rare books? In some ways, it is not a bad time to be buying.”
The Green collection aims to be one of a kind. Other Bible collections in the United States, including one at the American Bible Society in Manhattan, generally intend to inspire readership, said Dr. Scott Carroll, who began advising Mr. Green about six months ago. “Our goal is to inspire people with the story of the Bible and its history.”
Dr. Carroll, a former professor in ancient studies who has specialized in Biblical manuscripts, recently resigned from Cornerstone University, a nondenominational Christ-based liberal arts school in Grand Rapids, Mich., to become executive director of the museum and an adviser to Mr. Green. In the 1990s, Dr. Carroll helped another collector, Robert Van Kampen, build the private Van Kampen Collection of Bibles and related material in Orlando, Fla., and helped oversee its academic objectives, including archaeological digs.
Some who are knowledgeable about the rare book market suggest that the group’s buying has pushed up prices. The buying has also spawned some skepticism about the overall quality of purchases made in such rapid-fire style. Among the 30 objects that the Green group offered for examination recently were a silver amulet from the first or second century inscribed with a passage from Deuteronomy, also known as the Shema; the Codex Climaci Rescriptus, a manuscript originated from the Monastery of Mt. St. Catherine that was home to the earliest near-complete copy of the Bible, and the first volume of a Complutensian Polyglot Bible that was used for the comparative study of the text of Scripture. It contains the first printing of the Septuagint, or Old Testament Scriptures in Greek.
Ambani brothers to compete in telecoms
Mukesh Ambani, India’s wealthiest man, will re-enter the country’s telecoms market, pitching him into direct competition with his younger sibling, Anil.
Reliance Industries, the older Ambani brother’s flagship, announced on Friday it had agreed to buy out Infotel Broadband Services, the only company to have won a national allocation in an auction of spectrum for fourth-generation mobile broadband services.
The spectrum auction, which closed on Friday, and an earlier sale of third-generation mobile spectrum that ended last month, have netted India’s exchequer $23bn. While this is seen as a success for Pranab Mukherjee, finance minister, the outlay has led to concern over the health of Indian mobile companies.
India’s leading telecoms companies – Bharti Airtel, Reliance Communications, controlled by Anil Ambani, and Vodafone Essar – participated in the 3G auction. But Reliance Communications and Vodafone pulled out of the latest auction, citing the high cost. National allocations in the 3G auction reached $3.6bn, while those in the latest auction hit $2.7bn.
Anil Ambani’s Reliance Communications said it “welcomed” his brother’s entry into the market. Mukesh specialised in telecoms when he and Anil worked together under their late father, Dhirubhai Ambani.
When the brothers split their father’s empire in 2005, Anil was given the telecoms company. Under non-compete agreements signed at the time, Mukesh was restricted from entering the sector. After a legal battle, the brothers agreed last month to scrap these agreements.
Reliance Industries, the older Ambani brother’s flagship, announced on Friday it had agreed to buy out Infotel Broadband Services, the only company to have won a national allocation in an auction of spectrum for fourth-generation mobile broadband services.
The spectrum auction, which closed on Friday, and an earlier sale of third-generation mobile spectrum that ended last month, have netted India’s exchequer $23bn. While this is seen as a success for Pranab Mukherjee, finance minister, the outlay has led to concern over the health of Indian mobile companies.
India’s leading telecoms companies – Bharti Airtel, Reliance Communications, controlled by Anil Ambani, and Vodafone Essar – participated in the 3G auction. But Reliance Communications and Vodafone pulled out of the latest auction, citing the high cost. National allocations in the 3G auction reached $3.6bn, while those in the latest auction hit $2.7bn.
Anil Ambani’s Reliance Communications said it “welcomed” his brother’s entry into the market. Mukesh specialised in telecoms when he and Anil worked together under their late father, Dhirubhai Ambani.
When the brothers split their father’s empire in 2005, Anil was given the telecoms company. Under non-compete agreements signed at the time, Mukesh was restricted from entering the sector. After a legal battle, the brothers agreed last month to scrap these agreements.
Asian Stocks Fall for a Second Week on U.S. Jobs, Euro Concerns
June 12 (Bloomberg) -- Asian stocks fell for a second week after a U.S. jobs report missed economist estimates and concern grew that Europe’s crisis of government debt is spreading.
LG Electronics Inc., which counts North America as its biggest market, slumped 11 percent in Seoul this week after a government report showed U.S. employers hired fewer workers in May than forecast. Nintendo Co., a Japanese game maker that gets 34 percent of its sales in Europe, retreated 8.1 percent after the euro weakened. Mitsui & Co., which holds a stake in an oil field operated by BP Plc where an oil spill is unfolding, tumbled 9.5 percent in Tokyo on concern earnings will suffer.
The MSCI Asia Pacific Index slid 0.9 percent to 112.44 this week. The gauge plunged 3.3 percent on June 7, its steepest drop since March 30, 2009, after a Hungarian government official said the country’s economy was in a “very grave situation.”
“What I’m afraid of is that the volatility of the euro can trigger turmoil in the financial markets, prompting investors to reduce risk assets including stocks,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Inc., which manages the equivalent of $18 billion.
Japan’s Nikkei 225 Stock Average tumbled 2 percent this week even as a government report showed Japan’s gross domestic product rose at an annualized 5 percent rate in the three months ended March 31, faster than the 4.2 percent projected by economists.
The S&P/ASX 200 Index gained 1.3 percent in Sydney, as gains in oil and copper prices lifted mining companies. The statistics bureau reported on June 10 that the jobless rate fell to 5.2 percent in May from 5.4 percent from the previous month.
U.S. Jobs
The MSCI Asia Pacific Index has slumped about 13 percent from its high this year on April 15 amid growing concern European countries in addition to Greece will struggle to curb their budget deficits or repay debt. The decline has dragged the average price of companies in the gauge to 14.4 times estimated earnings, compared with 20.1 times at the beginning of this year, according to data compiled by Bloomberg.
Companies relying on demand in the U.S. dropped after Labor Department figures on June 4 showed the country’s private payrolls rose by 41,000, trailing the 180,000 gain projected by economists. LG Electronics Inc., South Korea’s No. 2 electronics maker, lost 11 percent to 94,600 won. James Hardie Industries SE, the biggest seller of home siding in the U.S., slumped 8.6 percent to A$6.9 in Sydney.
The euro sank to an eight-year low against the yen this week, depreciating to as low as 108.08 on June 7. A weaker euro reduces the value of European income at Japanese companies.
‘Grave Situation’
Nintendo, the maker of the Wii video-game machine, fell 8.1 percent to 24,480 yen. Sony Corp., which makes the rival PlayStation 3 player, declined 7.2 percent to 2,571 yen. Honda Motor Co., a carmaker that gets 81 percent of its revenue outside Japan, slipped 7.8 percent to 2,606 yen.
Peter Szijjarto, a spokesman for the Hungarian Prime Minister, said on June 4 that the nation’s economy is in a “very grave situation” and that it was “no exaggeration” to talk about a default. State Secretary Mihaly Varga said the next day that comments about a possible default were “unfortunate.”
“We might as well think Hungary is in the same situation as Greece,” said Societe Generale’s Yoshino. “I remember Greece’s announcement on its deficit didn’t appear to be a big deal in the media coverage at first.”
Fitch Ratings further fueled concern about Europe after saying June 8 that the U.K. is facing a “formidable” challenge in curtailing its budget shortfalls. In April, Greece, Spain and Portugal had their credit ratings cut by Standard & Poor’s as spending to stimulate their economies swelled budget deficits.
Mitsui Tumbles
Mitsui, Japan’s second-biggest trading company by market value, tumbled 9.5 percent to 1,092, this week’s biggest drop on the Nikkei 225. Through its subsidiary, the company holds a 10 percent stake in the Mississippi Canyon 252 block in the Gulf of Mexico, the location of BP’s leaking well. The worst spill in U.S. history has cost BP $1.25 billion, the company said June 7.
Commodity-linked shares advanced as prices for oil and copper rose. BHP Billiton Ltd., the world’s largest mining company, climbed 1.9 percent to A$38.58 in Sydney, and Rio Tinto Group, the world’s No. 3 mining company, gained 2.2 percent to A$69.1. Oil jumped 4.8 percent this week before Asian markets closed, while copper gained 2.1 percent.
LG Electronics Inc., which counts North America as its biggest market, slumped 11 percent in Seoul this week after a government report showed U.S. employers hired fewer workers in May than forecast. Nintendo Co., a Japanese game maker that gets 34 percent of its sales in Europe, retreated 8.1 percent after the euro weakened. Mitsui & Co., which holds a stake in an oil field operated by BP Plc where an oil spill is unfolding, tumbled 9.5 percent in Tokyo on concern earnings will suffer.
The MSCI Asia Pacific Index slid 0.9 percent to 112.44 this week. The gauge plunged 3.3 percent on June 7, its steepest drop since March 30, 2009, after a Hungarian government official said the country’s economy was in a “very grave situation.”
“What I’m afraid of is that the volatility of the euro can trigger turmoil in the financial markets, prompting investors to reduce risk assets including stocks,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Inc., which manages the equivalent of $18 billion.
Japan’s Nikkei 225 Stock Average tumbled 2 percent this week even as a government report showed Japan’s gross domestic product rose at an annualized 5 percent rate in the three months ended March 31, faster than the 4.2 percent projected by economists.
The S&P/ASX 200 Index gained 1.3 percent in Sydney, as gains in oil and copper prices lifted mining companies. The statistics bureau reported on June 10 that the jobless rate fell to 5.2 percent in May from 5.4 percent from the previous month.
U.S. Jobs
The MSCI Asia Pacific Index has slumped about 13 percent from its high this year on April 15 amid growing concern European countries in addition to Greece will struggle to curb their budget deficits or repay debt. The decline has dragged the average price of companies in the gauge to 14.4 times estimated earnings, compared with 20.1 times at the beginning of this year, according to data compiled by Bloomberg.
Companies relying on demand in the U.S. dropped after Labor Department figures on June 4 showed the country’s private payrolls rose by 41,000, trailing the 180,000 gain projected by economists. LG Electronics Inc., South Korea’s No. 2 electronics maker, lost 11 percent to 94,600 won. James Hardie Industries SE, the biggest seller of home siding in the U.S., slumped 8.6 percent to A$6.9 in Sydney.
The euro sank to an eight-year low against the yen this week, depreciating to as low as 108.08 on June 7. A weaker euro reduces the value of European income at Japanese companies.
‘Grave Situation’
Nintendo, the maker of the Wii video-game machine, fell 8.1 percent to 24,480 yen. Sony Corp., which makes the rival PlayStation 3 player, declined 7.2 percent to 2,571 yen. Honda Motor Co., a carmaker that gets 81 percent of its revenue outside Japan, slipped 7.8 percent to 2,606 yen.
Peter Szijjarto, a spokesman for the Hungarian Prime Minister, said on June 4 that the nation’s economy is in a “very grave situation” and that it was “no exaggeration” to talk about a default. State Secretary Mihaly Varga said the next day that comments about a possible default were “unfortunate.”
“We might as well think Hungary is in the same situation as Greece,” said Societe Generale’s Yoshino. “I remember Greece’s announcement on its deficit didn’t appear to be a big deal in the media coverage at first.”
Fitch Ratings further fueled concern about Europe after saying June 8 that the U.K. is facing a “formidable” challenge in curtailing its budget shortfalls. In April, Greece, Spain and Portugal had their credit ratings cut by Standard & Poor’s as spending to stimulate their economies swelled budget deficits.
Mitsui Tumbles
Mitsui, Japan’s second-biggest trading company by market value, tumbled 9.5 percent to 1,092, this week’s biggest drop on the Nikkei 225. Through its subsidiary, the company holds a 10 percent stake in the Mississippi Canyon 252 block in the Gulf of Mexico, the location of BP’s leaking well. The worst spill in U.S. history has cost BP $1.25 billion, the company said June 7.
Commodity-linked shares advanced as prices for oil and copper rose. BHP Billiton Ltd., the world’s largest mining company, climbed 1.9 percent to A$38.58 in Sydney, and Rio Tinto Group, the world’s No. 3 mining company, gained 2.2 percent to A$69.1. Oil jumped 4.8 percent this week before Asian markets closed, while copper gained 2.1 percent.
Bhopal ruling heightens sense of betrayal
Abdul Jabbar Khan chokes up when he walks underneath the steel pipework and corroding tanks of the Union Carbide plant in the Indian city of Bhopal.
The memories of the thousands of dead from a deadly poison gas cloud that erupted when water accidentally entered a methyl isocyanate storage tank 26 years ago are too fresh. In one of the world’s worst industrial accidents, Mr Khan lost three family members and suffered damage to his eyesight.
The community within an 8km radius of the plant lost between 8,000 and 30,000 people, by various estimates. Some were gassed instantly as they slept, others died lingering and painful deaths in the years that followed.
“In my view this is a graveyard,” Mr Khan says between long silences. “We should make this a big memorial like the Nazi concentration camps or Hiroshima nuclear bomb site.”
A court verdict this week brought the accident’s sorry history sharply to light. Many, including senior Indian officials, were taken by surprise by how open the wounds inflicted by the accident remain. A local court in Bhopal convicted one of India’s top industrialists, Keshub Mahindra, and seven other people of criminal negligence over the gas leak. The former members of Union Carbide’s senior management in India were each sentenced to two years in jail and fined Rs100,000 ($2,130, €1,765, £1,456). Mr Khan attacks the ruling, saying: “This Bhopal judgment will be quoted in courtrooms everywhere in the favour of multinationals.”
The Union Carbide pesticide plant to this day looks as if it has been recently abandoned and is hauntingly intact. In the control room hangs a board explaining what to do when alarms sound. Outside, the excavated giant black tank in which the deadly chemical reaction took place lies like a beached submarine. More tanks lie nearby in a cracked underground concrete bunker rent open by extreme heat, their dials burst.
A few hundred metres away, in the suburb of JP Nagar, blighted families store a disturbing collection of medical records, death certificates and compensation grants alongside family photos in their tightly packed dwellings. Shams Saad Begum, a 28-year-old widow, received Rs100,000 for her son, Raja, and Rs25,000 for her husband, Mohammed Saieed. Locals complain that poisons continue to leach into the groundwater.
Satyanath Sarangi, president of the Bhopal Group for Information and Action, attributes renewed interest in the accident to the debate about corporate liability in light of BP’s oil spill in the Gulf of Mexico and proposed legislation in India that would cap compensation in case of a nuclear accident.
“There’s been a groundswell of outrage,” says Mr Sarangi. “All the charges against the US parent company were extinguished after the settlement . . . But if European companies are held accountable in the US, why not US companies when they are abroad?”
According to Jairam Ramesh, India’s environment minister, 325 tonnes of toxic material lies at the site along with a bitter legacy that has intractably linked Bhopal, a once beautiful lakeside city, with Union Carbide, now part of US multinational Dow Chemical.
The site, now the property of Madhya Pradesh state, bears testament to a rehabilitation that never happened and the halting legal process to bring those responsible to book.
After paying $470m compensation in 1989, Union Carbide, based in Danbury, Connecticut, wiped its hands of responsibility, much to the anger of locals. They view Warren Anderson, the company’s elderly American former chairman, as the city’s bogeyman and hang effigies of him from gallows on Bhopal’s streets. The sense of betrayal is also trained on the Indian government.
The central and state governments have over the years bickered about compensation and its disbursement. “The state government says we don’t have the money. The centre says we gave you the money and you have not used it,” says Rachna Dhingra, a campaigner with the Bhopal Group.
The court sentence, in the eyes of Mr Khan and others who believe the plant was mismanaged and used untested technology, was paltry. The surviving seven defendants – one died as the case proceeded – may still be years away from imprisonment as they are expected to appeal. The judgment is also likely to be challenged by activists who want to press on with charges of “culpable homicide” and seek Mr Anderson’s extradition.
Union Carbide said this week that its executives were not responsible for the plant’s operation, only those of its Indian subsidiary.
Robert Blake, a senior US state department official, urged India not to allow Bhopal to damage warming US-India relations.
Some Indian politicians have quickly turned on Washington. Brinda Karat, a senior member of the Communist Party of India (Marxist) described the US response as that of an “imperial power full of arrogance speaking to its subjects.”
Mr Khan, the wall of his verandah papered with the apocalyptic pictures of the semi-naked Bhopal dead, many of them children, is less articulate but more fair. He ascribes failure to the Indian government, the judiciary and multinational business operating at the cost of poor people, and fears the consequences of this week’s light sentences in the Bhopal sessions court.
“This is a bad ruling. It has a bad affect on India and other poor countries,” he says.
The memories of the thousands of dead from a deadly poison gas cloud that erupted when water accidentally entered a methyl isocyanate storage tank 26 years ago are too fresh. In one of the world’s worst industrial accidents, Mr Khan lost three family members and suffered damage to his eyesight.
The community within an 8km radius of the plant lost between 8,000 and 30,000 people, by various estimates. Some were gassed instantly as they slept, others died lingering and painful deaths in the years that followed.
“In my view this is a graveyard,” Mr Khan says between long silences. “We should make this a big memorial like the Nazi concentration camps or Hiroshima nuclear bomb site.”
A court verdict this week brought the accident’s sorry history sharply to light. Many, including senior Indian officials, were taken by surprise by how open the wounds inflicted by the accident remain. A local court in Bhopal convicted one of India’s top industrialists, Keshub Mahindra, and seven other people of criminal negligence over the gas leak. The former members of Union Carbide’s senior management in India were each sentenced to two years in jail and fined Rs100,000 ($2,130, €1,765, £1,456). Mr Khan attacks the ruling, saying: “This Bhopal judgment will be quoted in courtrooms everywhere in the favour of multinationals.”
The Union Carbide pesticide plant to this day looks as if it has been recently abandoned and is hauntingly intact. In the control room hangs a board explaining what to do when alarms sound. Outside, the excavated giant black tank in which the deadly chemical reaction took place lies like a beached submarine. More tanks lie nearby in a cracked underground concrete bunker rent open by extreme heat, their dials burst.
A few hundred metres away, in the suburb of JP Nagar, blighted families store a disturbing collection of medical records, death certificates and compensation grants alongside family photos in their tightly packed dwellings. Shams Saad Begum, a 28-year-old widow, received Rs100,000 for her son, Raja, and Rs25,000 for her husband, Mohammed Saieed. Locals complain that poisons continue to leach into the groundwater.
Satyanath Sarangi, president of the Bhopal Group for Information and Action, attributes renewed interest in the accident to the debate about corporate liability in light of BP’s oil spill in the Gulf of Mexico and proposed legislation in India that would cap compensation in case of a nuclear accident.
“There’s been a groundswell of outrage,” says Mr Sarangi. “All the charges against the US parent company were extinguished after the settlement . . . But if European companies are held accountable in the US, why not US companies when they are abroad?”
According to Jairam Ramesh, India’s environment minister, 325 tonnes of toxic material lies at the site along with a bitter legacy that has intractably linked Bhopal, a once beautiful lakeside city, with Union Carbide, now part of US multinational Dow Chemical.
The site, now the property of Madhya Pradesh state, bears testament to a rehabilitation that never happened and the halting legal process to bring those responsible to book.
After paying $470m compensation in 1989, Union Carbide, based in Danbury, Connecticut, wiped its hands of responsibility, much to the anger of locals. They view Warren Anderson, the company’s elderly American former chairman, as the city’s bogeyman and hang effigies of him from gallows on Bhopal’s streets. The sense of betrayal is also trained on the Indian government.
The central and state governments have over the years bickered about compensation and its disbursement. “The state government says we don’t have the money. The centre says we gave you the money and you have not used it,” says Rachna Dhingra, a campaigner with the Bhopal Group.
The court sentence, in the eyes of Mr Khan and others who believe the plant was mismanaged and used untested technology, was paltry. The surviving seven defendants – one died as the case proceeded – may still be years away from imprisonment as they are expected to appeal. The judgment is also likely to be challenged by activists who want to press on with charges of “culpable homicide” and seek Mr Anderson’s extradition.
Union Carbide said this week that its executives were not responsible for the plant’s operation, only those of its Indian subsidiary.
Robert Blake, a senior US state department official, urged India not to allow Bhopal to damage warming US-India relations.
Some Indian politicians have quickly turned on Washington. Brinda Karat, a senior member of the Communist Party of India (Marxist) described the US response as that of an “imperial power full of arrogance speaking to its subjects.”
Mr Khan, the wall of his verandah papered with the apocalyptic pictures of the semi-naked Bhopal dead, many of them children, is less articulate but more fair. He ascribes failure to the Indian government, the judiciary and multinational business operating at the cost of poor people, and fears the consequences of this week’s light sentences in the Bhopal sessions court.
“This is a bad ruling. It has a bad affect on India and other poor countries,” he says.
Thursday, June 10, 2010
Reliance Said to Consider Buying Pioneer Shale Gas Assets Stake
June 11 (Bloomberg) -- Reliance Industries Ltd., India’s biggest company by market value, is considering buying a stake in shale gas assets owned by Pioneer Natural Resources Co. in the U.S., two people with knowledge of the matter said yesterday.
The Irving, Texas-based company said last month it expects to announce a joint venture to accelerate its Eagle Ford Shale development by the end of the second quarter. Pioneer shares climbed 6.7 percent yesterday to $68.87, the highest since July 15, 2008. The Standard & Poor’s 500 Index rose 3 percent.
Reliance, which acquired a stake in shale gas assets in the U.S. from Atlas Energy Inc. in April for $1.7 billion, is joining Royal Dutch Shell Plc and Exxon Mobil Corp. in buying unconventional gas reserves in anticipation prices for the cleaner-burning fuel will recover. Shale-gas deposits weren’t considered worth tapping before Houston billionaire George P. Mitchell pioneered new extraction techniques in the 1990s.
“Shale gas is the big energy play and everyone wants to be there,” said Juergen Maier, who helps manage 1.1 billion euros ($1.3 billion) of assets, including Reliance shares, at Raiffeisen Capital Management in Vienna. “Reliance has the cash flowing in now and it makes sense to grow inorganically and become a global player.”
Unconventional gas is the industry term to describe the fuel trapped in shale formations, coal beds and impermeable sandstone rock. BP Plc Chief Executive Officer Tony Hayward described shale gas as a “game changer” after it allowed the U.S. to overtake Russia in total gas production last year.
Cash Reserves
Reliance, the Mumbai-based energy explorer and oil refiner controlled by Asia’s richest man, Mukesh Ambani, had cash and equivalents of 218.7 billion rupees ($4.7 billion) as of March 31, the company said April 24.
Shares in Reliance rose 0.8 percent to 1,015.35 rupees in Mumbai trading yesterday, compared with a 1.6 percent gain in the benchmark Sensitive Index. The stock has declined 12 percent in the past year.
Pioneer has about 310,000 acres of at the Eagle Ford Shale Play in south Texas, according to its website. The company’s first successful well tested in October 2009 and second one in January this year.
The Irving, Texas-based company said last month it expects to announce a joint venture to accelerate its Eagle Ford Shale development by the end of the second quarter. Pioneer shares climbed 6.7 percent yesterday to $68.87, the highest since July 15, 2008. The Standard & Poor’s 500 Index rose 3 percent.
Reliance, which acquired a stake in shale gas assets in the U.S. from Atlas Energy Inc. in April for $1.7 billion, is joining Royal Dutch Shell Plc and Exxon Mobil Corp. in buying unconventional gas reserves in anticipation prices for the cleaner-burning fuel will recover. Shale-gas deposits weren’t considered worth tapping before Houston billionaire George P. Mitchell pioneered new extraction techniques in the 1990s.
“Shale gas is the big energy play and everyone wants to be there,” said Juergen Maier, who helps manage 1.1 billion euros ($1.3 billion) of assets, including Reliance shares, at Raiffeisen Capital Management in Vienna. “Reliance has the cash flowing in now and it makes sense to grow inorganically and become a global player.”
Unconventional gas is the industry term to describe the fuel trapped in shale formations, coal beds and impermeable sandstone rock. BP Plc Chief Executive Officer Tony Hayward described shale gas as a “game changer” after it allowed the U.S. to overtake Russia in total gas production last year.
Cash Reserves
Reliance, the Mumbai-based energy explorer and oil refiner controlled by Asia’s richest man, Mukesh Ambani, had cash and equivalents of 218.7 billion rupees ($4.7 billion) as of March 31, the company said April 24.
Shares in Reliance rose 0.8 percent to 1,015.35 rupees in Mumbai trading yesterday, compared with a 1.6 percent gain in the benchmark Sensitive Index. The stock has declined 12 percent in the past year.
Pioneer has about 310,000 acres of at the Eagle Ford Shale Play in south Texas, according to its website. The company’s first successful well tested in October 2009 and second one in January this year.
Nato commander probes Helmand lessons
General Stanley McChrystal, the top US and Nato commander in Afghanistan, has said that the alliance’s next military operation in the south of the country will be delayed for several months as it learns from mistakes made in February’s major military engagement in central Helmand.
In an interview with the Financial Times, Gen McChrystal said planning was still under way for operations to clear out the Taliban from the suburbs of Kandahar city, one of the insurgency’s biggest strongholds. However, he said Nato’s offensive operation in Kandahar would no longer take place this summer, as planned, adding that “you won’t see decisive efforts” until autumn.
Gen McChrystal said Nato would take a “more deliberate” approach on Kandahar city because it was learning lessons from its operation in the town of Marjah, the Taliban stronghold in central Helmand cleared by alliance troops in February.
Speaking in Brussels, where he was attending a meeting of Nato defence ministers, Gen McChrystal said the alliance had provided security for the Marjah area “fairly rapidly”. However, he said efforts to provide police and civic services in Marjah had been insufficiently effective, amid reports that the Taliban are still a presence in the area.
“The biggest lesson we learned from Marjah was that the Afghan governance that we bring in ... needs to be as robust as possible.
“It would have been helpful if we had been able to produce the number of civil servants and other facilities needed. We had that intent, that’s what we . . . tried to do. But we did it less well than we would like to do it for the future.”
He said a major challenge for Hamid Karzai’s Afghan government would be to ensure that an adequate level of governance was established in Kandahar city in the next few months ahead of Nato plans to remove the Taliban from the city suburbs. “I think it’s a tremendous opportunity for them to focus national energy and effort on an area that Afghans consider worthy of that,” he said.
Gen McChrystal, who took over as Nato commander in Afghanistan one year ago, said he was confident that the alliance operation would eventually create a stable and independent Afghan government that could fend for itself.
“I am confident that this [mission] can be done, that success can be achieved,” he said.
He acknowledged “there has to be visible progress by the end of this year,” suggesting that November’s annual summit of Nato heads of government in Lisbon would be a critical moment for an assessment of the campaign.
“We must be able to get indicators that are convincing people that the campaign is making progress,” he said. “At the Nato Lisbon conference, that will be expected of me, and I expect to be able to deliver on that.”
However, the General also acknowledged that the next six months would be demanding for Nato member nations: “Operationally it will be tough to the end of the year, casualties will stay high and may go higher than they are now.”
He conceded that President Karzai’s government faced a tough challenge to establish confidence in his government across the country. “The government has not produced a compelling narrative or demonstrated the capacity to be credible . . . The government is more popular [than the Taliban]. But it does not have the level of credibility that it needs to build the confidence of the Afghan people.”
In Helmand, Gen McChrystal said that, by the end of this year the security situation “will be significantly better than it is today”.
“I think you will find the population being convinced. I don’t claim that in Helmand [security] will be complete. But it will be significantly further along and we will get that sense that this is working.”
However, he said that the situation in Kandahar would be more mixed by the end of this year because the surge there was starting later. “Inside the city security will be significantly better as we increase the police and partnering [with Afghan forces]. Around the city, security will still be in the middle of a difficult struggle . . . Those areas will go from Taliban control to at least being contested.”
Overall, the general said he expected that over the next six months the Taliban effort across the country would be depleted. “I expect that at the end of this year the Taliban will have made a very energetic effort. They will have pushed as much violence as they can. But their ability to come out in 2011 will be less credible than it was in 2010.”
In an interview with the Financial Times, Gen McChrystal said planning was still under way for operations to clear out the Taliban from the suburbs of Kandahar city, one of the insurgency’s biggest strongholds. However, he said Nato’s offensive operation in Kandahar would no longer take place this summer, as planned, adding that “you won’t see decisive efforts” until autumn.
Gen McChrystal said Nato would take a “more deliberate” approach on Kandahar city because it was learning lessons from its operation in the town of Marjah, the Taliban stronghold in central Helmand cleared by alliance troops in February.
Speaking in Brussels, where he was attending a meeting of Nato defence ministers, Gen McChrystal said the alliance had provided security for the Marjah area “fairly rapidly”. However, he said efforts to provide police and civic services in Marjah had been insufficiently effective, amid reports that the Taliban are still a presence in the area.
“The biggest lesson we learned from Marjah was that the Afghan governance that we bring in ... needs to be as robust as possible.
“It would have been helpful if we had been able to produce the number of civil servants and other facilities needed. We had that intent, that’s what we . . . tried to do. But we did it less well than we would like to do it for the future.”
He said a major challenge for Hamid Karzai’s Afghan government would be to ensure that an adequate level of governance was established in Kandahar city in the next few months ahead of Nato plans to remove the Taliban from the city suburbs. “I think it’s a tremendous opportunity for them to focus national energy and effort on an area that Afghans consider worthy of that,” he said.
Gen McChrystal, who took over as Nato commander in Afghanistan one year ago, said he was confident that the alliance operation would eventually create a stable and independent Afghan government that could fend for itself.
“I am confident that this [mission] can be done, that success can be achieved,” he said.
He acknowledged “there has to be visible progress by the end of this year,” suggesting that November’s annual summit of Nato heads of government in Lisbon would be a critical moment for an assessment of the campaign.
“We must be able to get indicators that are convincing people that the campaign is making progress,” he said. “At the Nato Lisbon conference, that will be expected of me, and I expect to be able to deliver on that.”
However, the General also acknowledged that the next six months would be demanding for Nato member nations: “Operationally it will be tough to the end of the year, casualties will stay high and may go higher than they are now.”
He conceded that President Karzai’s government faced a tough challenge to establish confidence in his government across the country. “The government has not produced a compelling narrative or demonstrated the capacity to be credible . . . The government is more popular [than the Taliban]. But it does not have the level of credibility that it needs to build the confidence of the Afghan people.”
In Helmand, Gen McChrystal said that, by the end of this year the security situation “will be significantly better than it is today”.
“I think you will find the population being convinced. I don’t claim that in Helmand [security] will be complete. But it will be significantly further along and we will get that sense that this is working.”
However, he said that the situation in Kandahar would be more mixed by the end of this year because the surge there was starting later. “Inside the city security will be significantly better as we increase the police and partnering [with Afghan forces]. Around the city, security will still be in the middle of a difficult struggle . . . Those areas will go from Taliban control to at least being contested.”
Overall, the general said he expected that over the next six months the Taliban effort across the country would be depleted. “I expect that at the end of this year the Taliban will have made a very energetic effort. They will have pushed as much violence as they can. But their ability to come out in 2011 will be less credible than it was in 2010.”
Asia Weathers Europe Crisis as China Exports Soar
June 11 (Bloomberg) -- Asia’s economies signaled they are best placed to weather Europe’s debt crisis this week as data from China’s exports to job growth in South Korea and Australia surpassed analysts’ forecasts.
Regional stocks rose yesterday after a report showed Chinese shipments abroad climbed 48.5 percent in May from a year earlier, more than the 32 percent median forecast in a Bloomberg survey, and separate figures showed a jump in property prices. Unemployment rates in South Korea and Australia fell last month, according to government figures, and Japan reported its economy expanded more than previously estimated in the first quarter.
The resilience may amplify American calls for Asian nations to reduce reliance on exports and increase their contribution to a world recovery clouded by Europe’s fiscal woes. China has so far resisted letting its yuan rise against the dollar, seeking to shield exporters, while Japan’s central bank has flagged the recovery in refraining from stepping up injections of cash.
“These numbers are very positive,” said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada. “Asian countries have pretty strong fiscal positions and they’ve got growing domestic demand, which will help insulate against any shocks out of Europe.”
Also, the “sharp pick-up in China’s trade surplus will not go unnoticed in Washington, where there will be more pressure on the U.S. administration out of Congress to take a tougher line with China” on its currency, Jackson said.
Stocks Surge
U.S. Treasury Secretary Timothy F. Geithner told the Senate Finance Committee yesterday that a more flexible yuan could redress global economic “distortions” and help China cool prices. The Senate will vote “soon” on a measure aimed at getting China to raise the value of the yuan, Senator Charles Schumer of New York told Geithner at the hearing.
The economic reports helped stoke a surge in stock markets around Asia. The MSCI Asia Pacific Index rose 1 percent yesterday to 110.98 in Tokyo.
Asia’s growth contrasts with several European nations that may see their gross domestic product shrink, with the risk of a “double dip” recession, Andrew Burns, lead writer of the World Bank’s Global Economic Prospects 2010 report, said in a telecast from Washington late June 9. Burns didn’t single out European countries by name.
Eastern Europe, Central Asia and Latin America are the developing regions most in danger of an impact from the crisis that started in Greece, he said.
Knock-On Effects
East Asia wouldn’t be unscathed by a return to recession in the advanced economies, Burns said. “That’s going to have important knock-on effects in East Asia, particularly because it is a very heavy trading region.”
The Bank of Korea cited the European situation in keeping its benchmark interest rate at a record-low 2 percent yesterday.
“There is a considerable degree of uncertainty over the actual growth path, caused by the fiscal problems of European countries,” Governor Kim Choong Soo and his policy board said in a statement yesterday.
At the same time, Asia will continue to lead the global rebound, International Monetary Fund Deputy Managing Director Naoyuki Shinohara said June 9. That brings its own challenges, with increasing capital inflows and the risk of overheating if policy makers fail to take “appropriate” action, he said in a speech in Singapore.
China’s inflation accelerated in May to the quickest pace in 19 months as consumer prices rose 3.1 percent from a year earlier, a report showed today. Retail sales quickened, industrial production jumped 16.5 percent, and lending growth exceeded economists’ forecasts.
China Property
Property prices rose at the second-fastest pace on record in May, jumping 12.4 percent from a year earlier, a sign that the Chinese government’s crackdown on speculation has yet to avert the threat of an asset-price bubble.
“The Chinese property market is still growing at an unsustainable rate,” said David Taylor, a market analyst at CMC Markets in Sydney. “There’s also evidence that the sovereign debt woes of Europe are yet to have a material impact on China’s trade balance.”
Signs of economic strength in Asia are prompting leaders and policy makers to boost economic forecasts for their economies. Malaysian Prime Minister Najib Razak said yesterday that economic growth will average 4.2 percent in the 2006-2010 period, and Sri Lankan central bank Governor Nivard Cabraal said his nation’s economy may expand faster than earlier forecast in 2010.
Japanese Growth
Japan’s economy expanded at an annualized 5 percent rate in the three months ended March 31, quicker than the 4.9 percent reported last month, driven by exports and an upward revision to consumer spending.
China’s customs bureau said yesterday the nation posted a trade surplus in May of $19.53 billion.
By contrast, the trade deficit in the U.S. widened in April to the highest level in more than a year as exports fell more than imports, a Commerce Department report showed. The gap grew 0.6 percent to $40.3 billion, the most since December 2008.
“Unfortunately for Chinese policy makers the latest trade figures are probably ‘too good’,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “The lift in the trade surplus will again get politicians in Washington rattling sabers about the value of the yuan.”
Rate Increases
Some economies in the region are growing fast enough for policy makers to begin raising borrowing costs. New Zealand central bank Governor Alan Bollard yesterday increased the official cash rate to 2.75 percent from a record-low 2.5 percent, the first boost in three years.
India’s central bank has raised rates twice since mid-March by a quarter percentage point each time, taking the reverse- repurchase rate to 3.75 percent.
In Australia, where central bank Governor Glenn Stevens has led Group of 20 policy makers with the most aggressive round of interest rate increases, a mining investment boom continues to stoke demand for workers.
Australian employers added 26,900 to payrolls in May, more than the 20,000 forecast by analysts, pushing down the jobless rate to 5.2 percent from 5.4 percent, almost half the level of the U.S. and Europe.
Regional stocks rose yesterday after a report showed Chinese shipments abroad climbed 48.5 percent in May from a year earlier, more than the 32 percent median forecast in a Bloomberg survey, and separate figures showed a jump in property prices. Unemployment rates in South Korea and Australia fell last month, according to government figures, and Japan reported its economy expanded more than previously estimated in the first quarter.
The resilience may amplify American calls for Asian nations to reduce reliance on exports and increase their contribution to a world recovery clouded by Europe’s fiscal woes. China has so far resisted letting its yuan rise against the dollar, seeking to shield exporters, while Japan’s central bank has flagged the recovery in refraining from stepping up injections of cash.
“These numbers are very positive,” said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada. “Asian countries have pretty strong fiscal positions and they’ve got growing domestic demand, which will help insulate against any shocks out of Europe.”
Also, the “sharp pick-up in China’s trade surplus will not go unnoticed in Washington, where there will be more pressure on the U.S. administration out of Congress to take a tougher line with China” on its currency, Jackson said.
Stocks Surge
U.S. Treasury Secretary Timothy F. Geithner told the Senate Finance Committee yesterday that a more flexible yuan could redress global economic “distortions” and help China cool prices. The Senate will vote “soon” on a measure aimed at getting China to raise the value of the yuan, Senator Charles Schumer of New York told Geithner at the hearing.
The economic reports helped stoke a surge in stock markets around Asia. The MSCI Asia Pacific Index rose 1 percent yesterday to 110.98 in Tokyo.
Asia’s growth contrasts with several European nations that may see their gross domestic product shrink, with the risk of a “double dip” recession, Andrew Burns, lead writer of the World Bank’s Global Economic Prospects 2010 report, said in a telecast from Washington late June 9. Burns didn’t single out European countries by name.
Eastern Europe, Central Asia and Latin America are the developing regions most in danger of an impact from the crisis that started in Greece, he said.
Knock-On Effects
East Asia wouldn’t be unscathed by a return to recession in the advanced economies, Burns said. “That’s going to have important knock-on effects in East Asia, particularly because it is a very heavy trading region.”
The Bank of Korea cited the European situation in keeping its benchmark interest rate at a record-low 2 percent yesterday.
“There is a considerable degree of uncertainty over the actual growth path, caused by the fiscal problems of European countries,” Governor Kim Choong Soo and his policy board said in a statement yesterday.
At the same time, Asia will continue to lead the global rebound, International Monetary Fund Deputy Managing Director Naoyuki Shinohara said June 9. That brings its own challenges, with increasing capital inflows and the risk of overheating if policy makers fail to take “appropriate” action, he said in a speech in Singapore.
China’s inflation accelerated in May to the quickest pace in 19 months as consumer prices rose 3.1 percent from a year earlier, a report showed today. Retail sales quickened, industrial production jumped 16.5 percent, and lending growth exceeded economists’ forecasts.
China Property
Property prices rose at the second-fastest pace on record in May, jumping 12.4 percent from a year earlier, a sign that the Chinese government’s crackdown on speculation has yet to avert the threat of an asset-price bubble.
“The Chinese property market is still growing at an unsustainable rate,” said David Taylor, a market analyst at CMC Markets in Sydney. “There’s also evidence that the sovereign debt woes of Europe are yet to have a material impact on China’s trade balance.”
Signs of economic strength in Asia are prompting leaders and policy makers to boost economic forecasts for their economies. Malaysian Prime Minister Najib Razak said yesterday that economic growth will average 4.2 percent in the 2006-2010 period, and Sri Lankan central bank Governor Nivard Cabraal said his nation’s economy may expand faster than earlier forecast in 2010.
Japanese Growth
Japan’s economy expanded at an annualized 5 percent rate in the three months ended March 31, quicker than the 4.9 percent reported last month, driven by exports and an upward revision to consumer spending.
China’s customs bureau said yesterday the nation posted a trade surplus in May of $19.53 billion.
By contrast, the trade deficit in the U.S. widened in April to the highest level in more than a year as exports fell more than imports, a Commerce Department report showed. The gap grew 0.6 percent to $40.3 billion, the most since December 2008.
“Unfortunately for Chinese policy makers the latest trade figures are probably ‘too good’,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “The lift in the trade surplus will again get politicians in Washington rattling sabers about the value of the yuan.”
Rate Increases
Some economies in the region are growing fast enough for policy makers to begin raising borrowing costs. New Zealand central bank Governor Alan Bollard yesterday increased the official cash rate to 2.75 percent from a record-low 2.5 percent, the first boost in three years.
India’s central bank has raised rates twice since mid-March by a quarter percentage point each time, taking the reverse- repurchase rate to 3.75 percent.
In Australia, where central bank Governor Glenn Stevens has led Group of 20 policy makers with the most aggressive round of interest rate increases, a mining investment boom continues to stoke demand for workers.
Australian employers added 26,900 to payrolls in May, more than the 20,000 forecast by analysts, pushing down the jobless rate to 5.2 percent from 5.4 percent, almost half the level of the U.S. and Europe.
Cameron has to cancel visit to Afghan troops
David Cameron, the UK prime minister, was forced to cancel a visit to troops at an outpost in southern Afghanistan after the British military intercepted communications that suggested insurgents were planning to shoot down his helicopter.
The Chinook carrying Mr Cameron towards the patrol base at Shahzad in Helmand province was diverted to a British military base in Lashkar Gah, the provincial capital, where the prime minister resumed his programme.
“They [the British military] intercepted a phone call about wanting to bring a helicopter down,” a UK official said, adding that the call was intercepted quite close to where the helicopter was due to land. “They picked up a second communication which seemed to suggest they knew a VIP was possibly in the helicopter.”
Four US soldiers were killed on Wednesday when insurgents shot down their helicopter in Helmand, according to a statement from Isaf, the Nato-led force in the country.
UK officials had been hoping to showcase Shahzad as an area where the presence of British forces has improved security for locals. “He [Cameron] is disappointed when it gives the impression that the security situation is not good when to all intents and purposes the opposite is true,” the official said.
The decision to divert the flight was taken by Brigadier Richard Felton, the commander of Task Force Helmand, the UK official said.
Mr Cameron had met Gulab Mangal, the governor of Helmand, and visited a UK-funded agricultural college. He had flown to the province in southern Afghanistan after holding talks on Thursday with Hamid Karzai, Afghanistan’s president, in Kabul.
The Chinook carrying Mr Cameron towards the patrol base at Shahzad in Helmand province was diverted to a British military base in Lashkar Gah, the provincial capital, where the prime minister resumed his programme.
“They [the British military] intercepted a phone call about wanting to bring a helicopter down,” a UK official said, adding that the call was intercepted quite close to where the helicopter was due to land. “They picked up a second communication which seemed to suggest they knew a VIP was possibly in the helicopter.”
Four US soldiers were killed on Wednesday when insurgents shot down their helicopter in Helmand, according to a statement from Isaf, the Nato-led force in the country.
UK officials had been hoping to showcase Shahzad as an area where the presence of British forces has improved security for locals. “He [Cameron] is disappointed when it gives the impression that the security situation is not good when to all intents and purposes the opposite is true,” the official said.
The decision to divert the flight was taken by Brigadier Richard Felton, the commander of Task Force Helmand, the UK official said.
Mr Cameron had met Gulab Mangal, the governor of Helmand, and visited a UK-funded agricultural college. He had flown to the province in southern Afghanistan after holding talks on Thursday with Hamid Karzai, Afghanistan’s president, in Kabul.
Wednesday, June 9, 2010
Backlash over India minimum float rule
India is facing a growing private sector backlash against a rule change that will lead to a flood of more than $50bn of new shares being listed over three years.
There are concerns that the move could damage the country’s stock market and hamper economic growth.
The Finance Ministry has ordered companies to raise the portion of their shares that are publicly held from the current 10 per cent to 25 per cent.
This implies that total share issuance in India this year could reach nearly double the previous annual record of $17.7bn in 2007, analysts say.
“The same amount of money will be chasing a greater number of stock offerings, so that could put pressure on the companies’ valuations,” Hari S. Bhartia, president of the Confederation of Indian Industry, said.
He urged the government to put the rule on hold.
The Sensex has fallen 4.9 per cent this year after rising 81 per cent in 2009, as higher interest rates and the deepening European debt crisis hit foreign fund inflows.
But Pranab Mukherjee, finance minister, is continuing with a plan to sell shares in state-owned groups to help reduce India’s fiscal deficit.
Analysts believe the free float rule is mainly aimed at speeding up this divestment programme. Many state-owned companies have public floats well below 25 per cent.
The rule has been praised by corporate governance advocates, who have long charged that a smaller public holding allows companies to manipulate their stock prices by trading small numbers of shares.
Nilesh Jasani, analyst at Credit Suisse in Mumbai, said in a report that the rule was well intentioned but “without a rampant bull market supported by massive unprecedented inflows, the . . . demand for funds cannot be met”.
He said the rule would force companies to sell $13bn of additional shares this year on top of $15bn already planned, plus a $4bn rights issue unveiled on Wednesday by State Bank of India.
This would make a total of $32bn of issuance this year against a rolling 12-month average of $12bn over the past four.
“If companies with genuine needs for funds cannot raise the money they need, the entire infrastructure investment theme could come under pressure with many secondary impacts on [economic] growth,” Mr Jasani said.
According to Bloomberg data, about one-sixth of the top 3,000 companies listed in India will have to issue shares under the rule, including Reliance Power, controlled by industrialist Anil Ambani, Wipro Technologies, the third-largest outsourcing company, and DLF, the biggest real estate company.
The rule will fall heavily on about 29 state-owned companies, forcing them to issue shares worth Rs1,250bn ($27bn), Prithvi Haldea, chairman of market data firm Prime Database, said.
There are concerns that the move could damage the country’s stock market and hamper economic growth.
The Finance Ministry has ordered companies to raise the portion of their shares that are publicly held from the current 10 per cent to 25 per cent.
This implies that total share issuance in India this year could reach nearly double the previous annual record of $17.7bn in 2007, analysts say.
“The same amount of money will be chasing a greater number of stock offerings, so that could put pressure on the companies’ valuations,” Hari S. Bhartia, president of the Confederation of Indian Industry, said.
He urged the government to put the rule on hold.
The Sensex has fallen 4.9 per cent this year after rising 81 per cent in 2009, as higher interest rates and the deepening European debt crisis hit foreign fund inflows.
But Pranab Mukherjee, finance minister, is continuing with a plan to sell shares in state-owned groups to help reduce India’s fiscal deficit.
Analysts believe the free float rule is mainly aimed at speeding up this divestment programme. Many state-owned companies have public floats well below 25 per cent.
The rule has been praised by corporate governance advocates, who have long charged that a smaller public holding allows companies to manipulate their stock prices by trading small numbers of shares.
Nilesh Jasani, analyst at Credit Suisse in Mumbai, said in a report that the rule was well intentioned but “without a rampant bull market supported by massive unprecedented inflows, the . . . demand for funds cannot be met”.
He said the rule would force companies to sell $13bn of additional shares this year on top of $15bn already planned, plus a $4bn rights issue unveiled on Wednesday by State Bank of India.
This would make a total of $32bn of issuance this year against a rolling 12-month average of $12bn over the past four.
“If companies with genuine needs for funds cannot raise the money they need, the entire infrastructure investment theme could come under pressure with many secondary impacts on [economic] growth,” Mr Jasani said.
According to Bloomberg data, about one-sixth of the top 3,000 companies listed in India will have to issue shares under the rule, including Reliance Power, controlled by industrialist Anil Ambani, Wipro Technologies, the third-largest outsourcing company, and DLF, the biggest real estate company.
The rule will fall heavily on about 29 state-owned companies, forcing them to issue shares worth Rs1,250bn ($27bn), Prithvi Haldea, chairman of market data firm Prime Database, said.
Goldman Cuts Asia Currency Forecasts on Euro, China Slowdown
June 10 (Bloomberg) -- Goldman Sachs Group Inc. cut its three-month forecasts for Asian currencies, predicting more modest appreciation for South Korea’s won and Malaysia’s ringgit on declines in the euro and a slowing Chinese economy.
A weaker euro has “a direct impact on the rates against the dollar for any country that cares at all about its trade- weighted exchange rate,” Michael Buchanan, chief Asia-Pacific economist in Hong Kong, said in a research note received today via e-mail. It also makes interest-rate increases less likely in Asia and deters investment in riskier assets, he wrote.
The U.S. bank weakened its projection for the won to 1,150 per dollar from 1,100, its ringgit forecast to 3.15 from 3.10 and its estimate for Indonesia’s rupiah to 9,000 from 8,800. Its prediction for India’s rupee was slashed to 47.50 from 44 to reflect the nation’s budget and current-account deficits.
Goldman yesterday reversed a forecast for the euro to rise, saying it will fall to $1.15 in three months as the probability of “continued policy mishaps” encourages investors to sell the 16-nation currency. The euro slumped 2.5 percent last week and traded at a four-year low of $1.1877 on June 7, less than the bank’s previous target of $1.35.
India’s rupee closed yesterday at 47.03 per dollar in Mumbai, 1.4 percent weaker than at the start of the month, and is the only Asian currency that Goldman predicts will weaken over the coming three months. The budget deficit amounted to 6.9 percent of gross domestic product in the fiscal year ended March 31, the highest proportion in 16 years, and Kotak Mahindra Bank Ltd. this month said the current-account deficit may widen to $30 billion in 2010 from $25.6 billion last year.
Rate Outlook
South Korea’s won was 1.3 percent weaker at 1,265.25 as of 11:20 a.m. in Seoul, slumping after Vice Finance Minister Yim Jong Yong said the government will “soon” announce plans to reduce volatility in capital flows. Goldman’s Buchanan said he has reined in his forecast for two interest-rate increases of a quarter of a percentage point each this year to just one, citing “the prospects of a slowdown in European growth.”
Three-month forecasts for the Philippine peso, Thai baht and Singapore dollar were lowered by Goldman to 44.50, 32.20 and S$1.38, respectively, versus the greenback from 43.60, 32.00 and S$1.36. The Taiwan dollar estimate was revised to NT$31.50 from NT$31.00, while projections for China’s yuan and the Hong Kong dollar were left unchanged at 6.74 and 7.80.
A weaker euro has “a direct impact on the rates against the dollar for any country that cares at all about its trade- weighted exchange rate,” Michael Buchanan, chief Asia-Pacific economist in Hong Kong, said in a research note received today via e-mail. It also makes interest-rate increases less likely in Asia and deters investment in riskier assets, he wrote.
The U.S. bank weakened its projection for the won to 1,150 per dollar from 1,100, its ringgit forecast to 3.15 from 3.10 and its estimate for Indonesia’s rupiah to 9,000 from 8,800. Its prediction for India’s rupee was slashed to 47.50 from 44 to reflect the nation’s budget and current-account deficits.
Goldman yesterday reversed a forecast for the euro to rise, saying it will fall to $1.15 in three months as the probability of “continued policy mishaps” encourages investors to sell the 16-nation currency. The euro slumped 2.5 percent last week and traded at a four-year low of $1.1877 on June 7, less than the bank’s previous target of $1.35.
India’s rupee closed yesterday at 47.03 per dollar in Mumbai, 1.4 percent weaker than at the start of the month, and is the only Asian currency that Goldman predicts will weaken over the coming three months. The budget deficit amounted to 6.9 percent of gross domestic product in the fiscal year ended March 31, the highest proportion in 16 years, and Kotak Mahindra Bank Ltd. this month said the current-account deficit may widen to $30 billion in 2010 from $25.6 billion last year.
Rate Outlook
South Korea’s won was 1.3 percent weaker at 1,265.25 as of 11:20 a.m. in Seoul, slumping after Vice Finance Minister Yim Jong Yong said the government will “soon” announce plans to reduce volatility in capital flows. Goldman’s Buchanan said he has reined in his forecast for two interest-rate increases of a quarter of a percentage point each this year to just one, citing “the prospects of a slowdown in European growth.”
Three-month forecasts for the Philippine peso, Thai baht and Singapore dollar were lowered by Goldman to 44.50, 32.20 and S$1.38, respectively, versus the greenback from 43.60, 32.00 and S$1.36. The Taiwan dollar estimate was revised to NT$31.50 from NT$31.00, while projections for China’s yuan and the Hong Kong dollar were left unchanged at 6.74 and 7.80.
Nato trucks destroyed near Pakistan capital
At least seven people have been killed in a brazen night-time assault in which more than 50 trucks carrying fuel and other supplies for western forces in Afghanistan were destroyed on the outskirts of Islamabad.
Previous attacks on Nato supply convoys have been concentrated close to the Afghan border.
“This is very worrying, coming so close to the capital. I would have thought this area was otherwise protected,” said a senior interior ministry official.
Pakistani police detained at least 20 suspected militants after the attack on the trucks parked at a makeshift depot near Tarnol, a suburb of Islamabad, first targeting fuel tankers.
“Within minutes of this attack, fire spread around the compound. People could see flames from a few miles around the location” said Habib Khan, an eyewitness.
Police officials said at least seven people who appeared to be truck drivers were killed while another five were injured.
Kaleem Imam, Islamabad police chief, said the gunmen “kept on firing in the air to prevent emergency services and the police from reaching the spot”.
More than 60 per cent of non-fuel supplies and up to half of the fuel used by western forces in Afghanistan has been passing through Pakistan. Nato has been seeking alternative supply routes into Afghanistan from the north via central Asia.
A Pakistani intelligence official in Lahore, capital of populous Punjab province, said some of the 20 militants arrested after the attack were from his province.
In the past week, a number of security and police officials have warned against the Taliban widening its network of supporters in the Punjab, home to more than 60 per cent of Pakistan’s population.
Last month, two well co-ordinated militant attacks targeting places of worship belonging to the Ahmadiyah sect in Lahore killed at least 80 people.
“If the Taliban are spreading their wings rapidly in the Punjab, then that’s a dangerous development” said the intelligence official in Lahore. “The Punjab angle can be very, very troubling.”
Previous attacks on Nato supply convoys have been concentrated close to the Afghan border.
“This is very worrying, coming so close to the capital. I would have thought this area was otherwise protected,” said a senior interior ministry official.
Pakistani police detained at least 20 suspected militants after the attack on the trucks parked at a makeshift depot near Tarnol, a suburb of Islamabad, first targeting fuel tankers.
“Within minutes of this attack, fire spread around the compound. People could see flames from a few miles around the location” said Habib Khan, an eyewitness.
Police officials said at least seven people who appeared to be truck drivers were killed while another five were injured.
Kaleem Imam, Islamabad police chief, said the gunmen “kept on firing in the air to prevent emergency services and the police from reaching the spot”.
More than 60 per cent of non-fuel supplies and up to half of the fuel used by western forces in Afghanistan has been passing through Pakistan. Nato has been seeking alternative supply routes into Afghanistan from the north via central Asia.
A Pakistani intelligence official in Lahore, capital of populous Punjab province, said some of the 20 militants arrested after the attack were from his province.
In the past week, a number of security and police officials have warned against the Taliban widening its network of supporters in the Punjab, home to more than 60 per cent of Pakistan’s population.
Last month, two well co-ordinated militant attacks targeting places of worship belonging to the Ahmadiyah sect in Lahore killed at least 80 people.
“If the Taliban are spreading their wings rapidly in the Punjab, then that’s a dangerous development” said the intelligence official in Lahore. “The Punjab angle can be very, very troubling.”
Mumbai, Dubai in Race to Build the Tallest Residential Tower
June 10 (Bloomberg) -- Developers in Mumbai and Dubai are in a race to build the world’s tallest residential tower as they try to tap demand among swelling billionaire ranks for luxury homes costing more than $10 million.
Lodha Developers Ltd. said on June 8 its 442-meter (1,450 feet) World One property in India’s financial capital will be the tallest when completed in 2014. Trident International Holdings said the same day that its delayed 516-meter Pentominium tower in Dubai will be finished by 2013.
Apartments at World One, designed by the architects behind the Louvre pyramid in Paris, will sell for as much as 500 million rupees ($10.6 million), Managing Director Abhisheck Lodha said at a press conference on June 8. The company is in talks with private-equity investors to fund part of the project, which will cost 20 billion rupees to build, he said.
“As development happens and business grows here, there is a shift of wealth with new billionaires in Asia who are seeking luxury, marquee properties,” said Anurag Mathur, the Gurgaon, New Delhi-based managing director at Cushman & Wakefield Inc.’s Indian unit.
If both buildings are completed according to their schedules, the Pentominium would be the tallest and World One the second-tallest residential tower, according to Marshall Gerometta, database editor at the Chicago-based Council on Tall Buildings and Urban Habitat. The tallest residential building is the 323-meter Q1 on Australia’s Gold Coast in Queensland state.
Apartments in Pentominium in the Dubai Marina area will sell for as much as 40 million dirhams ($10.9 million), said Ayush Kukreti, Trident’s senior vice president of marketing, strategy and planning.
Billionaire Ranks
Asian billionaires including India’s Mukesh Ambani and Hong Kong’s Li Ka-shing increased their wealth as the region’s rich expanded their fortunes at the world’s quickest pace in the past year, according to Forbes magazine. Billionaires in the region have a combined worth of $729 billion, up from $357 billion a year ago, Forbes said in March. The wealth of their U.S. and European peers rose 18 percent and 50 percent, respectively.
The number of Indian billionaires rose to 49 from 24, Forbes said. Ambani, chairman of Reliance Industries Ltd., and Lakshmi Mittal, chairman and chief executive officer of ArcelorMittal, the world’s largest steelmaker, are Asia’s wealthiest individuals, according to Forbes.
“World One will cater to the aspirations of the global Indian,” Lodha said.
The development on a 17-acre plot that used to be a textile mill in the central district of Mumbai will include three residential towers, Lodha said. The tallest will have 117 stories. The project is expected to generate revenue of about 50 billion rupees, he said.
Sea Views
Mumbai-based Lodha, which is planning an initial share sale, will offer three- to five-room apartments and duplexes on the top floors of World One with views of the Arabian Sea and the city’s horse-racing track, according to a company statement.
Pei Cobb Freed & Partners Architects LLP, who created the Louvre pyramid in Paris and the Bank of China Tower in Hong Kong, will design the project, Lodha said.
“Every global city is made memorable by its architectural landmarks,” Lodha said.
Lodha is will start selling the project by the end of this month. The cheapest apartment will cost 75 million rupees and the construction will be completed by 2014, the managing director said.
Pentominium
Dubai-based Trident delayed the Pentominium project’s completion by two years after the economic slowdown, Kukreti said in a phone interview on June 8. The developer said in 2007 it was building the world’s tallest residential tower.
Trident has received the second installment from buyers about three months ago and will finish the project by 2013, Kukreti said. The company hired Arabian Construction Co. to build the tower at a cost of about $400 million, he said.
Each apartment in Pentominium will occupy one floor and will range from 6,500 square feet (604 square meters) to 7,500 square feet, Kukreti said. The project will include 24 penthouses designed by Salvatore Ferragamo.
Dubai, the second-biggest sheikhdom in the United Arab Emirates, experienced the world’s worst property slump during the global recession, with selling prices falling by more than 50 percent and project cancellations exceeding $300 billion.
By contrast, the world’s second-fastest pace of economic growth has fuelled a recovery in Mumbai property values. Home prices in the city jumped about 30 percent in the six months to April, real-estate broker Knight Frank (India) Pvt. estimates.
“There is a cash crunch in Dubai and it will likely stay that way for the next couple of years,” said Saud Masud, an analyst at UBS AG in Dubai. “I doubt this project will be completed on time,” he said, referring to the Pentominium.
Lodha Developers Ltd. said on June 8 its 442-meter (1,450 feet) World One property in India’s financial capital will be the tallest when completed in 2014. Trident International Holdings said the same day that its delayed 516-meter Pentominium tower in Dubai will be finished by 2013.
Apartments at World One, designed by the architects behind the Louvre pyramid in Paris, will sell for as much as 500 million rupees ($10.6 million), Managing Director Abhisheck Lodha said at a press conference on June 8. The company is in talks with private-equity investors to fund part of the project, which will cost 20 billion rupees to build, he said.
“As development happens and business grows here, there is a shift of wealth with new billionaires in Asia who are seeking luxury, marquee properties,” said Anurag Mathur, the Gurgaon, New Delhi-based managing director at Cushman & Wakefield Inc.’s Indian unit.
If both buildings are completed according to their schedules, the Pentominium would be the tallest and World One the second-tallest residential tower, according to Marshall Gerometta, database editor at the Chicago-based Council on Tall Buildings and Urban Habitat. The tallest residential building is the 323-meter Q1 on Australia’s Gold Coast in Queensland state.
Apartments in Pentominium in the Dubai Marina area will sell for as much as 40 million dirhams ($10.9 million), said Ayush Kukreti, Trident’s senior vice president of marketing, strategy and planning.
Billionaire Ranks
Asian billionaires including India’s Mukesh Ambani and Hong Kong’s Li Ka-shing increased their wealth as the region’s rich expanded their fortunes at the world’s quickest pace in the past year, according to Forbes magazine. Billionaires in the region have a combined worth of $729 billion, up from $357 billion a year ago, Forbes said in March. The wealth of their U.S. and European peers rose 18 percent and 50 percent, respectively.
The number of Indian billionaires rose to 49 from 24, Forbes said. Ambani, chairman of Reliance Industries Ltd., and Lakshmi Mittal, chairman and chief executive officer of ArcelorMittal, the world’s largest steelmaker, are Asia’s wealthiest individuals, according to Forbes.
“World One will cater to the aspirations of the global Indian,” Lodha said.
The development on a 17-acre plot that used to be a textile mill in the central district of Mumbai will include three residential towers, Lodha said. The tallest will have 117 stories. The project is expected to generate revenue of about 50 billion rupees, he said.
Sea Views
Mumbai-based Lodha, which is planning an initial share sale, will offer three- to five-room apartments and duplexes on the top floors of World One with views of the Arabian Sea and the city’s horse-racing track, according to a company statement.
Pei Cobb Freed & Partners Architects LLP, who created the Louvre pyramid in Paris and the Bank of China Tower in Hong Kong, will design the project, Lodha said.
“Every global city is made memorable by its architectural landmarks,” Lodha said.
Lodha is will start selling the project by the end of this month. The cheapest apartment will cost 75 million rupees and the construction will be completed by 2014, the managing director said.
Pentominium
Dubai-based Trident delayed the Pentominium project’s completion by two years after the economic slowdown, Kukreti said in a phone interview on June 8. The developer said in 2007 it was building the world’s tallest residential tower.
Trident has received the second installment from buyers about three months ago and will finish the project by 2013, Kukreti said. The company hired Arabian Construction Co. to build the tower at a cost of about $400 million, he said.
Each apartment in Pentominium will occupy one floor and will range from 6,500 square feet (604 square meters) to 7,500 square feet, Kukreti said. The project will include 24 penthouses designed by Salvatore Ferragamo.
Dubai, the second-biggest sheikhdom in the United Arab Emirates, experienced the world’s worst property slump during the global recession, with selling prices falling by more than 50 percent and project cancellations exceeding $300 billion.
By contrast, the world’s second-fastest pace of economic growth has fuelled a recovery in Mumbai property values. Home prices in the city jumped about 30 percent in the six months to April, real-estate broker Knight Frank (India) Pvt. estimates.
“There is a cash crunch in Dubai and it will likely stay that way for the next couple of years,” said Saud Masud, an analyst at UBS AG in Dubai. “I doubt this project will be completed on time,” he said, referring to the Pentominium.
Tuesday, June 8, 2010
Asian Stocks Decline for Third Time in Four Days on Europe, Yen
June 9 (Bloomberg) -- Asian stocks fell for the third time in four days as the stronger yen dragged down Japanese exporters and on concern Europe’s debt crisis will worsen after Fitch Ratings called the U.K.’s fiscal challenge “formidable.”
Nintendo Co., the maker of video-game consoles and which gets 85 percent of sales outside Japan, sank 4.7 percent. Nissan Motor Co., a carmaker that gets about 75 percent of its revenue outside Japan, slumped 3.3 percent in Tokyo. Canon Inc., a Japanese electronics maker that counts Europe as its biggest market, declined 1.8 percent.
“Market sentiment is very bearish,” said Prasad Patkar, who helps manage about $1.5 billion in Sydney at Platypus Asset Management Ltd. “Everyone is focusing on any bad news they can get their hands on. When the tide is so heavily bearish, any reason is used to sell off and any good news is ignored.”
The MSCI Asia Pacific Index fell 0.8 percent to 109.40 as of 1:23 p.m. in Tokyo, with almost twice as many stocks declining as advancing. The gauge has retreated 15 percent since this year’s high on April 15 on concern debt crises among European countries will undermine a global economic recovery.
The drop has cut the price of shares in the index to 14.1 times estimated earnings on average, near the lowest level since January 2009.
Japan’s Nikkei 225 Stock Average retreated 1.2 percent, the biggest decline among benchmarks in the Asia-Pacific region, even after a Cabinet Office report showed the nation’s machinery orders rose more than economists estimated in April.
Australian Confidence Falls
Australia’s S&P/ASX 200 Index slipped 0.2 percent. Consumer confidence fell in June for a third straight month after the central bank boosted borrowing costs six times since October, a survey by Westpac Banking Corp. and the Melbourne Institute showed.
South Korea’s Kospi index fell 0.3 percent. China’s Shanghai Composite Index gained 0.2 percent. Hong Kong’s Hang Seng Index slipped 0.4 percent.
Futures on the Standard & Poor’s 500 Index dropped 0.3 percent. The index rose 1.1 percent yesterday as a rally in commodity markets boosted oil and metals producers, overshadowing losses by semiconductor companies.
Nintendo lost 4.7 percent to 24,120 yen and was the most active stock by value in Japan. Nissan, the country’s third- largest automaker, slid 3.3 percent to 619 yen. Canon, the world’s biggest maker of cameras and office equipment, retreated 1.8 percent to 3,625 yen.
Honda Motor Co., a carmaker that gets 81 percent of its sales outside Japan, fell 3.1 percent to 2,614 yen and was the biggest drag on the MSCI Asia Pacific Index, followed by Nintendo.
Yen Hurts Exporters
Consumer discretionary stocks, which include exporters of cars and electronics, fell the most among the MSCI Asia Pacific Index’s 10 industry groups.
The yen strengthened to as much as 108.90 per euro today from 109.86 at yesterday’s close of Tokyo stock trading. Against the dollar, the Japanese currency rose to as much as 91.24 from 91.77. A stronger yen lowers the value of overseas income at Japanese companies when converted into their home currency.
The U.K. government needs to accelerate budget-deficit cuts to protect Britain’s top credit rating, Fitch Ratings said yesterday.
“The scale of the United Kingdom’s fiscal challenge is formidable and warrants a strong medium-term consolidation strategy -- including a faster pace of deficit reduction than set out in the April 2010 budget,” Fitch said.
‘Scary’ U.K. Situation
“I’m scared of the U.K.’s situation, particularly if it cuts the budget because the scale of its economy is significant enough to create a huge impact,” said Castor Pang, Cinda International Ltd’s research director in Hong Kong.
LG Electronics Inc., South Korea’s second-largest electronics maker, dropped 2.4 percent to 98,600 won after BNP Paribas SA reduced its rating on the company to “hold” from “buy.” The company’s profit margins in its liquid-crystal- display television business will be “vulnerable” to the weak euro, analyst Peter Yu said.
Mazda Motor Corp. declined 3.9 percent to 221 yen after the automaker was cut to “market perform” from “outperform” by Mitsubishi UFJ Morgan Stanley Securities Co.
First Ship Lease Trust, the Singapore-based ship-leasing company, plunged 10 percent to 39.5 Singapore cents after its BB- credit rating was placed on watch for a possible downgrade by Standard & Poor’s Ratings Services.
Gold Shares Advance
In Sydney, Newcrest Mining Ltd., Australia’s largest gold producer, climbed 0.9 percent to A$33.50 after gold rose to a record yesterday. Rival St. Barbara Ltd. jumped 5.9 percent to 36 Australian cents. Avoca Resources Ltd., an Australian gold exploration company, increased 7.4 percent to A$2.33. Real Gold Mining Ltd. climbed 2.7 percent to HK$12.82 in Hong Kong.
The price of gold climbed to $1,254.50 an ounce in New York yesterday, surpassing the previous high of $1,249.70 set on May 14, as demand for the metal rose among investors seeking a haven from the financial turmoil in Europe. Gold for immediate delivery fell 0.1 percent today to $1,235.30 an ounce.
Elpida Memory Inc., Japan’s sole maker of computer-memory chips, sank 2.9 percent to 1,691 yen in Tokyo. Hynix Semiconductor Inc., the world’s second-largest maker of computer memory chips, fell 3.6 percent to 25,500 won in Seoul. Samsung Electronics Co. declined 2 percent to 769,000 won. An index of prices for dynamic-random-access-memory chips fell yesterday for the first time since June 1.
Nintendo Co., the maker of video-game consoles and which gets 85 percent of sales outside Japan, sank 4.7 percent. Nissan Motor Co., a carmaker that gets about 75 percent of its revenue outside Japan, slumped 3.3 percent in Tokyo. Canon Inc., a Japanese electronics maker that counts Europe as its biggest market, declined 1.8 percent.
“Market sentiment is very bearish,” said Prasad Patkar, who helps manage about $1.5 billion in Sydney at Platypus Asset Management Ltd. “Everyone is focusing on any bad news they can get their hands on. When the tide is so heavily bearish, any reason is used to sell off and any good news is ignored.”
The MSCI Asia Pacific Index fell 0.8 percent to 109.40 as of 1:23 p.m. in Tokyo, with almost twice as many stocks declining as advancing. The gauge has retreated 15 percent since this year’s high on April 15 on concern debt crises among European countries will undermine a global economic recovery.
The drop has cut the price of shares in the index to 14.1 times estimated earnings on average, near the lowest level since January 2009.
Japan’s Nikkei 225 Stock Average retreated 1.2 percent, the biggest decline among benchmarks in the Asia-Pacific region, even after a Cabinet Office report showed the nation’s machinery orders rose more than economists estimated in April.
Australian Confidence Falls
Australia’s S&P/ASX 200 Index slipped 0.2 percent. Consumer confidence fell in June for a third straight month after the central bank boosted borrowing costs six times since October, a survey by Westpac Banking Corp. and the Melbourne Institute showed.
South Korea’s Kospi index fell 0.3 percent. China’s Shanghai Composite Index gained 0.2 percent. Hong Kong’s Hang Seng Index slipped 0.4 percent.
Futures on the Standard & Poor’s 500 Index dropped 0.3 percent. The index rose 1.1 percent yesterday as a rally in commodity markets boosted oil and metals producers, overshadowing losses by semiconductor companies.
Nintendo lost 4.7 percent to 24,120 yen and was the most active stock by value in Japan. Nissan, the country’s third- largest automaker, slid 3.3 percent to 619 yen. Canon, the world’s biggest maker of cameras and office equipment, retreated 1.8 percent to 3,625 yen.
Honda Motor Co., a carmaker that gets 81 percent of its sales outside Japan, fell 3.1 percent to 2,614 yen and was the biggest drag on the MSCI Asia Pacific Index, followed by Nintendo.
Yen Hurts Exporters
Consumer discretionary stocks, which include exporters of cars and electronics, fell the most among the MSCI Asia Pacific Index’s 10 industry groups.
The yen strengthened to as much as 108.90 per euro today from 109.86 at yesterday’s close of Tokyo stock trading. Against the dollar, the Japanese currency rose to as much as 91.24 from 91.77. A stronger yen lowers the value of overseas income at Japanese companies when converted into their home currency.
The U.K. government needs to accelerate budget-deficit cuts to protect Britain’s top credit rating, Fitch Ratings said yesterday.
“The scale of the United Kingdom’s fiscal challenge is formidable and warrants a strong medium-term consolidation strategy -- including a faster pace of deficit reduction than set out in the April 2010 budget,” Fitch said.
‘Scary’ U.K. Situation
“I’m scared of the U.K.’s situation, particularly if it cuts the budget because the scale of its economy is significant enough to create a huge impact,” said Castor Pang, Cinda International Ltd’s research director in Hong Kong.
LG Electronics Inc., South Korea’s second-largest electronics maker, dropped 2.4 percent to 98,600 won after BNP Paribas SA reduced its rating on the company to “hold” from “buy.” The company’s profit margins in its liquid-crystal- display television business will be “vulnerable” to the weak euro, analyst Peter Yu said.
Mazda Motor Corp. declined 3.9 percent to 221 yen after the automaker was cut to “market perform” from “outperform” by Mitsubishi UFJ Morgan Stanley Securities Co.
First Ship Lease Trust, the Singapore-based ship-leasing company, plunged 10 percent to 39.5 Singapore cents after its BB- credit rating was placed on watch for a possible downgrade by Standard & Poor’s Ratings Services.
Gold Shares Advance
In Sydney, Newcrest Mining Ltd., Australia’s largest gold producer, climbed 0.9 percent to A$33.50 after gold rose to a record yesterday. Rival St. Barbara Ltd. jumped 5.9 percent to 36 Australian cents. Avoca Resources Ltd., an Australian gold exploration company, increased 7.4 percent to A$2.33. Real Gold Mining Ltd. climbed 2.7 percent to HK$12.82 in Hong Kong.
The price of gold climbed to $1,254.50 an ounce in New York yesterday, surpassing the previous high of $1,249.70 set on May 14, as demand for the metal rose among investors seeking a haven from the financial turmoil in Europe. Gold for immediate delivery fell 0.1 percent today to $1,235.30 an ounce.
Elpida Memory Inc., Japan’s sole maker of computer-memory chips, sank 2.9 percent to 1,691 yen in Tokyo. Hynix Semiconductor Inc., the world’s second-largest maker of computer memory chips, fell 3.6 percent to 25,500 won in Seoul. Samsung Electronics Co. declined 2 percent to 769,000 won. An index of prices for dynamic-random-access-memory chips fell yesterday for the first time since June 1.
Indian police disperse Hyundai sit-in strikers
Indian police dispersed dozens of workers occupying a Hyundai Motor plant in Chennai as a strike brought the operations of India’s second largest carmaker to a halt for a second day.
The industrial action was the fourth strike in two years at the South Korean carmaker’s operations in India’s southern state of Tamil Nadu. The stoppages, over the union , could lead the carmaker to consider switching production elsewhere.
Hyundai estimated that the strike in its first day had affected the production of 2,200 cars. The factory near Chennai produces 1,500 cars a day – including the models i10 and i20 hatchback as well as the Verna and Accent sedans – and employs 10,000 people.
Hyundai, alongside other South Korean companies, has enjoyed considerable success in India. A leading car exporter, it pioneered a strategy of making India a small car export hub, while its models have gained in popularity in the domestic market.
The company said local management was in talks to resolve the dispute and hoped operations would resume shortly. The sit-in was called in protest of the earlier dismissal of 67 workers and to demand the recognition of multiple labour unions.
Hyundai has faced increasing labour disputes in its overseas plants this year as it rapidly expands overseas production to join the top ranks of global automakers. Production was halted at its Beijing plant last week as a result of a strike at one of its suppliers.
It produces half its cars abroad with production bases in the US, China, India, Turkey and eastern Europe. But labour unrest has been seen as one of the biggest risks hindering its global ambition.
The company said about 150 workers in the Indian plant went on a sit-in strike. It had sought government intervention for an early settlement to the disputes.
Hyundai, the world’s fourth-largest automaker with affiliate Kia Motors, is riding high on the industry’s strong recovery. It aims to increase global sales this year by 11 per cent to 3.46m vehicles.
Strikes over the recognition of labour unions can turn nasty in India. Two years ago, the Indian chief executive of Graziano, an Italian multinational, was lynched at the gear box manufacturers' premises near the capital Delhi.
The industrial action was the fourth strike in two years at the South Korean carmaker’s operations in India’s southern state of Tamil Nadu. The stoppages, over the union , could lead the carmaker to consider switching production elsewhere.
Hyundai estimated that the strike in its first day had affected the production of 2,200 cars. The factory near Chennai produces 1,500 cars a day – including the models i10 and i20 hatchback as well as the Verna and Accent sedans – and employs 10,000 people.
Hyundai, alongside other South Korean companies, has enjoyed considerable success in India. A leading car exporter, it pioneered a strategy of making India a small car export hub, while its models have gained in popularity in the domestic market.
The company said local management was in talks to resolve the dispute and hoped operations would resume shortly. The sit-in was called in protest of the earlier dismissal of 67 workers and to demand the recognition of multiple labour unions.
Hyundai has faced increasing labour disputes in its overseas plants this year as it rapidly expands overseas production to join the top ranks of global automakers. Production was halted at its Beijing plant last week as a result of a strike at one of its suppliers.
It produces half its cars abroad with production bases in the US, China, India, Turkey and eastern Europe. But labour unrest has been seen as one of the biggest risks hindering its global ambition.
The company said about 150 workers in the Indian plant went on a sit-in strike. It had sought government intervention for an early settlement to the disputes.
Hyundai, the world’s fourth-largest automaker with affiliate Kia Motors, is riding high on the industry’s strong recovery. It aims to increase global sales this year by 11 per cent to 3.46m vehicles.
Strikes over the recognition of labour unions can turn nasty in India. Two years ago, the Indian chief executive of Graziano, an Italian multinational, was lynched at the gear box manufacturers' premises near the capital Delhi.
IMF Says Risks to Economy Have Risen ‘Significantly’
June 9 (Bloomberg) -- Risks to the global economic outlook have “risen significantly” and policy makers have limited room to provide support to growth, International Monetary Fund Deputy Managing Director Naoyuki Shinohara said.
Most advanced economies are experiencing a “subdued” recovery, Shinohara said in a speech in Singapore today. “A key concern is that the room for continued policy support has become much more limited and has, in some cases, been exhausted.”
Shinohara’s remarks come days after finance chiefs from the Group of 20 diverged on prescriptions for sustaining the global recovery. U.S. Treasury Secretary Timothy F. Geithner called on Japan and European countries with trade surpluses to boost domestic demand, while Europe’s representatives said reining in budget deficits was the top priority.
As advanced economies suffer stunted recoveries, Asia will continue to lead the world economic rebound, according to Shinohara, the former top currency official at Japan’s Ministry of Finance. That brings its own challenges, with increasing capital inflows and the risk of overheating if policy makers fail to take “appropriate” action, he said.
“After nearly two years of global economic and financial upheaval, shockwaves are still being felt, as we have seen with recent developments in Europe and the resulting financial market volatility,” Shinohara said. “The global outlook remains unusually uncertain and downside risks have risen significantly.”
Withdrawing Stimulus
Asia’s rebound is outpacing the rest of the world as companies from Nissan Motor Co. to Taiwan Semiconductor Manufacturing Co. increase exports and domestic spending strengthens. Some of the region’s central banks have started to withdraw monetary stimulus to stem inflation and asset bubbles while others are reluctant to increase borrowing costs on concern the European debt crisis may thwart the global economic recovery.
Macroeconomic policies have “appropriately” begun to normalize and the “strong” fiscal position in most Asian economies provides them with the “space” to respond flexibly, Shinohara said.
Still, Asian governments said last month public debt risks and “destabilizing” capital flows are among threats to the region’s recovery.
Capital Flows
“Should the recovery continue as expected, Asia’s bright growth prospects, together with low interest rates in major economies, would likely attract more capital,” Shinohara said. “This could lead to risks of overheating in some economies if appropriate policy action is not taken. On the other hand, further increases in global risk aversion could see capital flows change direction quickly.”
The escalation of Europe’s debt crisis forced the European Union and the International Monetary Fund to offer as much as 750 billion euros ($897 billion) to countries in danger of financial instability.
Group of 20 finance officials who gathered earlier this month signaled deeper concern about the economic and fiscal outlooks than when they last met in April. In a statement after their June 5 meeting, the finance chiefs promised to “safeguard recovery,” yet replaced an endorsement of budget stimulus with a pledge to pursue “credible, growth-friendly measures to deliver fiscal sustainability.”
“Adverse developments in Europe could disrupt global trade, with implications for Asia given the still important role of external demand,” Shinohara said today. “In the event of spillovers from Europe, there is ample room in most Asian economies to pause the withdrawal of fiscal stimulus.”
Useful Controls
Asian policy makers have a range of tools to manage capital flows, Shinohara said.
“Most countries in Asia also have room to address the impact of capital flows through more exchange-rate flexibility,” he said. “In some exceptional circumstances, controls on capital flows may be useful and can provide temporary breathing space during periods of large swings in capital flows.”
Most advanced economies are experiencing a “subdued” recovery, Shinohara said in a speech in Singapore today. “A key concern is that the room for continued policy support has become much more limited and has, in some cases, been exhausted.”
Shinohara’s remarks come days after finance chiefs from the Group of 20 diverged on prescriptions for sustaining the global recovery. U.S. Treasury Secretary Timothy F. Geithner called on Japan and European countries with trade surpluses to boost domestic demand, while Europe’s representatives said reining in budget deficits was the top priority.
As advanced economies suffer stunted recoveries, Asia will continue to lead the world economic rebound, according to Shinohara, the former top currency official at Japan’s Ministry of Finance. That brings its own challenges, with increasing capital inflows and the risk of overheating if policy makers fail to take “appropriate” action, he said.
“After nearly two years of global economic and financial upheaval, shockwaves are still being felt, as we have seen with recent developments in Europe and the resulting financial market volatility,” Shinohara said. “The global outlook remains unusually uncertain and downside risks have risen significantly.”
Withdrawing Stimulus
Asia’s rebound is outpacing the rest of the world as companies from Nissan Motor Co. to Taiwan Semiconductor Manufacturing Co. increase exports and domestic spending strengthens. Some of the region’s central banks have started to withdraw monetary stimulus to stem inflation and asset bubbles while others are reluctant to increase borrowing costs on concern the European debt crisis may thwart the global economic recovery.
Macroeconomic policies have “appropriately” begun to normalize and the “strong” fiscal position in most Asian economies provides them with the “space” to respond flexibly, Shinohara said.
Still, Asian governments said last month public debt risks and “destabilizing” capital flows are among threats to the region’s recovery.
Capital Flows
“Should the recovery continue as expected, Asia’s bright growth prospects, together with low interest rates in major economies, would likely attract more capital,” Shinohara said. “This could lead to risks of overheating in some economies if appropriate policy action is not taken. On the other hand, further increases in global risk aversion could see capital flows change direction quickly.”
The escalation of Europe’s debt crisis forced the European Union and the International Monetary Fund to offer as much as 750 billion euros ($897 billion) to countries in danger of financial instability.
Group of 20 finance officials who gathered earlier this month signaled deeper concern about the economic and fiscal outlooks than when they last met in April. In a statement after their June 5 meeting, the finance chiefs promised to “safeguard recovery,” yet replaced an endorsement of budget stimulus with a pledge to pursue “credible, growth-friendly measures to deliver fiscal sustainability.”
“Adverse developments in Europe could disrupt global trade, with implications for Asia given the still important role of external demand,” Shinohara said today. “In the event of spillovers from Europe, there is ample room in most Asian economies to pause the withdrawal of fiscal stimulus.”
Useful Controls
Asian policy makers have a range of tools to manage capital flows, Shinohara said.
“Most countries in Asia also have room to address the impact of capital flows through more exchange-rate flexibility,” he said. “In some exceptional circumstances, controls on capital flows may be useful and can provide temporary breathing space during periods of large swings in capital flows.”
Ambani truce has brought a flurry of activity
After a family agreement last month cleared the way for Anil Ambani, the Indian billionaire industrialist, to sell a stake in his flagship Reliance Communications (RCom), no one was surprised when he immediately got the process under way.
This month, name after name, including Etisalat, based in Dubai, MTN of South Africa and AT&T of the US, have emerged as possible suitors for India’s second biggest mobile group by subscribers.
Kunal Bajaj, director for India at Analysis Mason, the consultancy,said: “RCom has the most debt out of India’s mobile operators.
“It needs to raise capital to fund the purchase of 3G spectrum and it’s the last one left without a global partner.”
Mr Ambani has long wanted to sell part of RCom, which has more than 100m subscribers, to raise capital for the company and possibly some cash for his other interests. These include operations in the financial, electricity generation and media sectors. The pressure to raise money has only increased amid the intense competition in the Indian market and following auctions for third generation spectrum last month.
But when Mr Ambani proposed a deal with MTN two years ago, Mukesh Ambani, his elder brother, invoked a right of first refusal over RCom that he gained when the brothers split their late father’s business empire between them five years ago.
Bharti Airtel said on Tuesday it had completed its $10.7bn acquisition of the African assets of Kuwait’s Zain, James Lamont reports from in New Delhi. But Econet Wireless, a South African mobile telephone operator, insisted a dispute over the ownership of the second-largest mobile telecoms operator in Nigeria remained unresolved.
In Nigeria – Africa’s most populous nation and Zain’s single biggest source of revenues – minorities in the local subsidiary had claimed that the Kuwaiti majority owners had ignored their right of first refusal over the deal.
Econet Wireless, a 5 per cent shareholder in Zain Nigeria, said the issue was before a tribunal constituted under the United Nations Commission on International Trade Law and before the Lagos State High Court.
The company said: “Econet Wireless can confirm that the dispute surrounding the ownership of the assets in Nigeria which form part of the transaction is not resolved and that Econet is not party to any agreement between Bharti Airtel and Zain”.
Earlier, Sunil Bharti Mittal, chairman of Bharti Airtel, India’s largest mobile network, said a long-standing dispute with Broad Communications Group, Bharti’s main partner in Nigeria, had been settled without any financial payment.
In May, the brothers agreed to a peace deal that removed this right of first refusal. With this right gone, the first name to emerge as a possible suitor was MTN – again.
Phutuma Nhleko, MTN’s chief executive, has been keen to expand the group’s leading position in emerging markets, and in April the company confirmed it was in talks to buy the African assets of Orascom Telecom, the Cairo-based mobile operator.
But the talks have run into difficulties because the government of Algeria has objected to Orascom’s plans to sell its Algerian mobile business – the most profitable of its African assets – to MTN.
This has prompted speculation that MTN might again look at Reliance. Together, the pair would represent possibly the largest group with a focus purely on emerging markets. But MTN has publicly denied it is in talks with the Indian group.
Another group that has also felt compelled to deny any talks with RCom over the past week is AT&T.
The US telecoms group has been preoccupied with consolidation in its home market over the past five years, but Randall Stephenson, the company’s chief executive, is interested in overseas expansion.
Moreover, AT&T has a good working knowledge of India.
In 2005, AT&T sold a minority stake in Idea Cellular, a mid-sized Indian mobile operator, and it established an Indian joint venture with Mahindra Telecommunications in 2006, but this is focused on serving companies rather than consumers.
Perhaps the most likely combination could be with Etisalat. Talks between the pair began about two months ago, said one person familiar with the situation.
A deal between the two companies, under which Etisalat would take a 26 per cent stake in Reliance, could put an enterprise value of $16bn on India’s third-largest mobile operator by revenue.
This person added that Etisalat had also been considering taking a stake in Idea Cellular or Aircel, another mid-sized Indian mobile operator.
A deal with Etisalat would provide RCom with a chance to reduce its debt, which is 3.7 times earnings before interest, taxation, depreciation and amortisation, versus 0.7 times for Bharti Airtel, the industry leader, according to Nomura analysts.
However, Rajiv Sharma, a telecoms analyst with HSBC in Mumbai, said the $4bn price for a 26 per cent stake implied a 100 per cent premium to RCom’s current share price.
He said: “Whilst Etisalat has the balance sheet to afford the stake ... the reported price looks too high ... especially as Etisalat will be looking at a range of options”.
This month, name after name, including Etisalat, based in Dubai, MTN of South Africa and AT&T of the US, have emerged as possible suitors for India’s second biggest mobile group by subscribers.
Kunal Bajaj, director for India at Analysis Mason, the consultancy,said: “RCom has the most debt out of India’s mobile operators.
“It needs to raise capital to fund the purchase of 3G spectrum and it’s the last one left without a global partner.”
Mr Ambani has long wanted to sell part of RCom, which has more than 100m subscribers, to raise capital for the company and possibly some cash for his other interests. These include operations in the financial, electricity generation and media sectors. The pressure to raise money has only increased amid the intense competition in the Indian market and following auctions for third generation spectrum last month.
But when Mr Ambani proposed a deal with MTN two years ago, Mukesh Ambani, his elder brother, invoked a right of first refusal over RCom that he gained when the brothers split their late father’s business empire between them five years ago.
Bharti Airtel said on Tuesday it had completed its $10.7bn acquisition of the African assets of Kuwait’s Zain, James Lamont reports from in New Delhi. But Econet Wireless, a South African mobile telephone operator, insisted a dispute over the ownership of the second-largest mobile telecoms operator in Nigeria remained unresolved.
In Nigeria – Africa’s most populous nation and Zain’s single biggest source of revenues – minorities in the local subsidiary had claimed that the Kuwaiti majority owners had ignored their right of first refusal over the deal.
Econet Wireless, a 5 per cent shareholder in Zain Nigeria, said the issue was before a tribunal constituted under the United Nations Commission on International Trade Law and before the Lagos State High Court.
The company said: “Econet Wireless can confirm that the dispute surrounding the ownership of the assets in Nigeria which form part of the transaction is not resolved and that Econet is not party to any agreement between Bharti Airtel and Zain”.
Earlier, Sunil Bharti Mittal, chairman of Bharti Airtel, India’s largest mobile network, said a long-standing dispute with Broad Communications Group, Bharti’s main partner in Nigeria, had been settled without any financial payment.
In May, the brothers agreed to a peace deal that removed this right of first refusal. With this right gone, the first name to emerge as a possible suitor was MTN – again.
Phutuma Nhleko, MTN’s chief executive, has been keen to expand the group’s leading position in emerging markets, and in April the company confirmed it was in talks to buy the African assets of Orascom Telecom, the Cairo-based mobile operator.
But the talks have run into difficulties because the government of Algeria has objected to Orascom’s plans to sell its Algerian mobile business – the most profitable of its African assets – to MTN.
This has prompted speculation that MTN might again look at Reliance. Together, the pair would represent possibly the largest group with a focus purely on emerging markets. But MTN has publicly denied it is in talks with the Indian group.
Another group that has also felt compelled to deny any talks with RCom over the past week is AT&T.
The US telecoms group has been preoccupied with consolidation in its home market over the past five years, but Randall Stephenson, the company’s chief executive, is interested in overseas expansion.
Moreover, AT&T has a good working knowledge of India.
In 2005, AT&T sold a minority stake in Idea Cellular, a mid-sized Indian mobile operator, and it established an Indian joint venture with Mahindra Telecommunications in 2006, but this is focused on serving companies rather than consumers.
Perhaps the most likely combination could be with Etisalat. Talks between the pair began about two months ago, said one person familiar with the situation.
A deal between the two companies, under which Etisalat would take a 26 per cent stake in Reliance, could put an enterprise value of $16bn on India’s third-largest mobile operator by revenue.
This person added that Etisalat had also been considering taking a stake in Idea Cellular or Aircel, another mid-sized Indian mobile operator.
A deal with Etisalat would provide RCom with a chance to reduce its debt, which is 3.7 times earnings before interest, taxation, depreciation and amortisation, versus 0.7 times for Bharti Airtel, the industry leader, according to Nomura analysts.
However, Rajiv Sharma, a telecoms analyst with HSBC in Mumbai, said the $4bn price for a 26 per cent stake implied a 100 per cent premium to RCom’s current share price.
He said: “Whilst Etisalat has the balance sheet to afford the stake ... the reported price looks too high ... especially as Etisalat will be looking at a range of options”.
Monday, June 7, 2010
India Delays Fuel Price Decision Amid High Inflation
June 8 (Bloomberg) -- India delayed a decision to raise prices of fuels including gasoline and diesel on concern higher costs will stoke inflation, already running at the fastest clip among the Group of 20 nations. Shares of state refiners fell.
Ministers led by Finance Minister Pranab Mukherjee met yesterday to discuss a recommendation made by a panel in February that India free gasoline and diesel prices from state control and increase kerosene and cooking gas rates. The ministers are likely to reconvene in 10 days, Oil Secretary Sthanunathan Sundareshan told reporters in New Delhi.
Raising prices will help the government cut expenditure on fuel subsidies, which were 260 billion rupees ($5.5 billion) last year. India, which more than doubled prices of natural gas sold by state-run Oil & Natural Gas Corp. and Oil India Ltd. last month, is seeking to limit losses of state refiners that help cap inflation by selling fuels below cost.
“Sooner or later, they will have to take a call as they can’t allow refiners to continue to suffer losses indefinitely,” said Mridul Saggar, a Mumbai-based economist at Kotak Securities Ltd. “At this moment, political-economic compulsions are weighing on policy makers.”
The ministers concluded that further discussions are needed before they can reach a decision, according to a government statement yesterday.
Euro IV Fuels
The government increased auto fuel prices on Feb. 27 the first increase this year, after Finance Minister Mukherjee imposed import duty and excise tax on crude oil and refined products. State refiners were then allowed to raise rates on April 1 after they started selling Euro IV compliant motor fuels.
The current price of gasoline in Delhi is 47.93 rupees a liter, according to Indian Oil Corp.’s website. Diesel costs 38.10 rupees a liter.
Indian Oil, the nation’s biggest state-owned refiner, declined as much as 6 percent to 322.25 rupees in Mumbai trading today and was at 333.50 rupees at 9 a.m. local time. Bharat Petroleum Corp. fell 3.1 percent and Hindustan Petroleum Corp. dropped 2.7 percent. The benchmark Sensitive Index gained 0.2 percent.
Crude oil for July delivery climbed as much as 30 cents to $71.74 a barrel on the New York Mercantile Exchange, and was at $71.59 at 10:15 a.m. Singapore time. Crude has declined 13 percent this year, reducing revenue losses of Indian state refiners and giving the government room to raise prices by a smaller amount.
Inflation
Indian Oil is still hopeful that gasoline and diesel prices may be freed from government control, Chairman and Managing Director B.M. Bansal said in New Delhi yesterday. The refiner is losing 1.1 billion rupees a day on fuel sales, he said.
The inflation rate for industrial workers in India climbed more than 13 percent in April, while prices paid by farm workers rose about 15 percent. This compares with inflation rates of 2.2 percent in the U.S., 1.5 percent in the euro zone and 2.8 percent in China.
India’s Oil Minister Murli Deora said in May last year that he would seek Cabinet approval for lifting a cap on retail prices of gasoline and diesel.
India last removed prices of oil products from government control in April 2002, giving state-owned refiners freedom to set retail fuel prices twice a month. That stopped in December 2003 after the then Bharatiya Janata Party-led government barred them from raising rates before the May 2004 elections.
Chinese Refiners
Refiners in China, the world’s second-biggest oil user, are assured of profits because they can adjust gasoline and diesel prices when oil changes by 4 percent over 22 working days.
Indian refiners depend on government bonds and discounts on crude from ONGC and other state-run explorers to compensate for losses from selling fuels at fixed prices.
China cut gasoline prices by 230 yuan (34 cents) per ton and diesel by 220 yuan a ton starting June 1, the National Development and Reform Commission said.
India will support the Group of 20 leaders on withdrawing subsidies for fossil fuels “over time,” Shyam Saran, then the country’s special envoy on climate change, said during the Group of 20 meeting in Pittsburgh in September.
Ministers led by Finance Minister Pranab Mukherjee met yesterday to discuss a recommendation made by a panel in February that India free gasoline and diesel prices from state control and increase kerosene and cooking gas rates. The ministers are likely to reconvene in 10 days, Oil Secretary Sthanunathan Sundareshan told reporters in New Delhi.
Raising prices will help the government cut expenditure on fuel subsidies, which were 260 billion rupees ($5.5 billion) last year. India, which more than doubled prices of natural gas sold by state-run Oil & Natural Gas Corp. and Oil India Ltd. last month, is seeking to limit losses of state refiners that help cap inflation by selling fuels below cost.
“Sooner or later, they will have to take a call as they can’t allow refiners to continue to suffer losses indefinitely,” said Mridul Saggar, a Mumbai-based economist at Kotak Securities Ltd. “At this moment, political-economic compulsions are weighing on policy makers.”
The ministers concluded that further discussions are needed before they can reach a decision, according to a government statement yesterday.
Euro IV Fuels
The government increased auto fuel prices on Feb. 27 the first increase this year, after Finance Minister Mukherjee imposed import duty and excise tax on crude oil and refined products. State refiners were then allowed to raise rates on April 1 after they started selling Euro IV compliant motor fuels.
The current price of gasoline in Delhi is 47.93 rupees a liter, according to Indian Oil Corp.’s website. Diesel costs 38.10 rupees a liter.
Indian Oil, the nation’s biggest state-owned refiner, declined as much as 6 percent to 322.25 rupees in Mumbai trading today and was at 333.50 rupees at 9 a.m. local time. Bharat Petroleum Corp. fell 3.1 percent and Hindustan Petroleum Corp. dropped 2.7 percent. The benchmark Sensitive Index gained 0.2 percent.
Crude oil for July delivery climbed as much as 30 cents to $71.74 a barrel on the New York Mercantile Exchange, and was at $71.59 at 10:15 a.m. Singapore time. Crude has declined 13 percent this year, reducing revenue losses of Indian state refiners and giving the government room to raise prices by a smaller amount.
Inflation
Indian Oil is still hopeful that gasoline and diesel prices may be freed from government control, Chairman and Managing Director B.M. Bansal said in New Delhi yesterday. The refiner is losing 1.1 billion rupees a day on fuel sales, he said.
The inflation rate for industrial workers in India climbed more than 13 percent in April, while prices paid by farm workers rose about 15 percent. This compares with inflation rates of 2.2 percent in the U.S., 1.5 percent in the euro zone and 2.8 percent in China.
India’s Oil Minister Murli Deora said in May last year that he would seek Cabinet approval for lifting a cap on retail prices of gasoline and diesel.
India last removed prices of oil products from government control in April 2002, giving state-owned refiners freedom to set retail fuel prices twice a month. That stopped in December 2003 after the then Bharatiya Janata Party-led government barred them from raising rates before the May 2004 elections.
Chinese Refiners
Refiners in China, the world’s second-biggest oil user, are assured of profits because they can adjust gasoline and diesel prices when oil changes by 4 percent over 22 working days.
Indian refiners depend on government bonds and discounts on crude from ONGC and other state-run explorers to compensate for losses from selling fuels at fixed prices.
China cut gasoline prices by 230 yuan (34 cents) per ton and diesel by 220 yuan a ton starting June 1, the National Development and Reform Commission said.
India will support the Group of 20 leaders on withdrawing subsidies for fossil fuels “over time,” Shyam Saran, then the country’s special envoy on climate change, said during the Group of 20 meeting in Pittsburgh in September.
Asia shares rise as investors pick favourites
HONG KONG, June 8 – The euro bounced from a four-year low and Asian stocks rose on Tuesday as traders paused in their selloff of risky assets ahead of Chinese economic data and a European Central Bank meeting later in the week.
Fears about a spreading European sovereign debt crisis, a slowdown in China and a weak US job market have combined to sap investors’ willingness to take risks for higher returns, prompting them to dump global equities, high-yield bonds, the euro and emerging market currencies.
However, the euro has fallen 12 per cent so far in the second quarter – on track for the biggest quarterly decline since being launched in 1999 – and global equities are the cheapest since the latest bull market started in March 2009.
The pace of decline has enticed some buyers to sift through the market, with an eye for value.
Japan’s Nikkei share average rose 0.4 per cent while the MSCI Asia ex-Japan index added 0.6 per cent.
“We’re seeing cherry-picking of shares today. Caution pervades after the US market’s substantial losses and continued foreign selling, but investors are scooping up some shares that they’re bullish on in the longer-term,” said Kim Jeong-hoon, a market analyst at Korea Investment & Securities in Seoul.
The euro climbed 0.3 per cent to $1.1955, causing dealers to cover their bets against the currency and push it up from a four-year low of $1.1875 plumbed overnight.
Ben Bernanke, chairman of the Federal Reserve, offered his verbal support, saying European leaders were committed to ensuring the survival of the euro and have the means to support every heavily indebted member of the currency union.
After a policy meeting on Thursday, ECB president Jean-Claude Trichet will likely face tough questioning on liquidity provisions in the eurozone and the stability of the European financial system.
The Australian dollar, a favourite of investors because of its relatively high interest rate, rose 1.2 per cent to US$0.8200, retracing almost all of Monday’s losses.
The Nikkei rebounded after suffering its biggest one-day fall in 14 months on Monday.
“Though pension funds are likely to emerge to buy at the lows, even retail investors are starting to get a bit spooked at this point, so whether they’ll buy or not is key,” said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.
Hong Kong’s Hang Seng index was up 0.3 per cent on the day, with gains in index heavyweight HSBC winning out over small losses in other banks and land developers.
As worries grew about the health of the global economic recovery, short-selling of Hong Kong-listed equities picked up on Monday to 10 per cent of trading volume, with banks making up the three of the top four most-shorted stocks, a dealer said.
Valuations of global equities have come down quickly in the last several weeks. The MSCI index of world equities is trading at 11.4 times its expected 12-month earnings, the lowest since March 2009.
The uncertain global economic outlook could have an impact on earnings forecasts, though economists as a whole have not changed their growth predictions in a big way.
Asian investors are awaiting a flurry of data from China this week after reports last month indicated growth may have peaked in the world’s third-largest economy.
Though the number of property sales in big Chinese cities is decreasing, likely pointing to an easing in price pressures, other indicators do not reflect a massive slowdown in the world’s fastest-growing economy or its demand for imported goods.
On the contrary, Taiwan’s exports to China in May rose 66 per cent on a year-on-year basis, indicating sustained demand from a key trade market.
The benchmark 10-year US Treasury yield rebounded to 3.18 per cent after finishing trade in New York around 3.15 per cent.
Still, in the last two months the yield has tumbled 65 basis points, squashed by investors exiting risky trades and buying Treasuries, particularly late-dated maturities. The spread between 10-year and 2-year yields has narrowed 37 basis points since April.
The sliding US dollar put some upward pressure on crude prices. The July contract was up 0.2 per cent to $71.59 a barrel.
Fears about a spreading European sovereign debt crisis, a slowdown in China and a weak US job market have combined to sap investors’ willingness to take risks for higher returns, prompting them to dump global equities, high-yield bonds, the euro and emerging market currencies.
However, the euro has fallen 12 per cent so far in the second quarter – on track for the biggest quarterly decline since being launched in 1999 – and global equities are the cheapest since the latest bull market started in March 2009.
The pace of decline has enticed some buyers to sift through the market, with an eye for value.
Japan’s Nikkei share average rose 0.4 per cent while the MSCI Asia ex-Japan index added 0.6 per cent.
“We’re seeing cherry-picking of shares today. Caution pervades after the US market’s substantial losses and continued foreign selling, but investors are scooping up some shares that they’re bullish on in the longer-term,” said Kim Jeong-hoon, a market analyst at Korea Investment & Securities in Seoul.
The euro climbed 0.3 per cent to $1.1955, causing dealers to cover their bets against the currency and push it up from a four-year low of $1.1875 plumbed overnight.
Ben Bernanke, chairman of the Federal Reserve, offered his verbal support, saying European leaders were committed to ensuring the survival of the euro and have the means to support every heavily indebted member of the currency union.
After a policy meeting on Thursday, ECB president Jean-Claude Trichet will likely face tough questioning on liquidity provisions in the eurozone and the stability of the European financial system.
The Australian dollar, a favourite of investors because of its relatively high interest rate, rose 1.2 per cent to US$0.8200, retracing almost all of Monday’s losses.
The Nikkei rebounded after suffering its biggest one-day fall in 14 months on Monday.
“Though pension funds are likely to emerge to buy at the lows, even retail investors are starting to get a bit spooked at this point, so whether they’ll buy or not is key,” said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.
Hong Kong’s Hang Seng index was up 0.3 per cent on the day, with gains in index heavyweight HSBC winning out over small losses in other banks and land developers.
As worries grew about the health of the global economic recovery, short-selling of Hong Kong-listed equities picked up on Monday to 10 per cent of trading volume, with banks making up the three of the top four most-shorted stocks, a dealer said.
Valuations of global equities have come down quickly in the last several weeks. The MSCI index of world equities is trading at 11.4 times its expected 12-month earnings, the lowest since March 2009.
The uncertain global economic outlook could have an impact on earnings forecasts, though economists as a whole have not changed their growth predictions in a big way.
Asian investors are awaiting a flurry of data from China this week after reports last month indicated growth may have peaked in the world’s third-largest economy.
Though the number of property sales in big Chinese cities is decreasing, likely pointing to an easing in price pressures, other indicators do not reflect a massive slowdown in the world’s fastest-growing economy or its demand for imported goods.
On the contrary, Taiwan’s exports to China in May rose 66 per cent on a year-on-year basis, indicating sustained demand from a key trade market.
The benchmark 10-year US Treasury yield rebounded to 3.18 per cent after finishing trade in New York around 3.15 per cent.
Still, in the last two months the yield has tumbled 65 basis points, squashed by investors exiting risky trades and buying Treasuries, particularly late-dated maturities. The spread between 10-year and 2-year yields has narrowed 37 basis points since April.
The sliding US dollar put some upward pressure on crude prices. The July contract was up 0.2 per cent to $71.59 a barrel.
Indian Stocks Fall Most in Two Week on Global Recovery
June 7 (Bloomberg) -- India’s stocks fell, snapping a three-day rally, as investors withdrew funds from riskier assets amid concern Europe’s sovereign-debt crisis will slow a global economic recovery.
DLF Ltd., India’s biggest developer, dropped the most in four months. Reliance Industries Ltd., the nation’s most valuable company, retreated to the lowest in almost two weeks. A rebound in the global economy faces “significant challenges,” Group of 20 finance chiefs said over the weekend.
“This bumpy ride is likely to continue for some more time because the global economy is under threat,” said Deven Choksey, chief executive officer at K.R. Choksey Shares & Securities in Mumbai, who manages about $123 million for wealthy individuals.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, declined 410.35, or 2.4 percent, to 16,707.34 at 11:52 a.m. in Mumbai, poised for its steepest drop since May 25. The S&P CNX Nifty Index on the National Stock Exchange lost 2.2 percent to 5,021.30. The BSE 200 Index retreated 2 percent to 2,129.97.
DLF sank 6 percent to 264.85 rupees, heading for its worst decline since Jan. 27. Reliance dropped 2.2 percent to 1,008.85 rupees, its lowest level since May 26.
Investors are worried that the “global economy is going to decelerate as fiscal stimulus wears off,” said Ivan Leung, Hong Kong-based chief investment strategist at JPMorgan Private Bank. “It may not be time to add risk.”
Wipro, Sterlite
Tata Consultancy Services Ltd., the biggest software- services exporter, retreated 1.8 percent to 751.5 rupees. Infosys Technologies Ltd., the No. 2, dropped 2.3 percent to 2,665.05 rupees, while Wipro Ltd., the third-biggest, dropped 1.9 percent to 643 rupees. The companies derive about a fifth of their sales in Europe.
Sterlite Industries (India) Ltd., India’s largest copper producer, dropped 3.9 percent to 623 rupees. Hindalco Industries Ltd., the biggest aluminum producer, lost 4.9 percent to 140.4 rupees. Tata Steel Ltd., the biggest producer of the alloy, decreased 3.4 percent to 468.75 rupees.
A gauge of raw-material producers in the MSCI Asia Pacific Index slumped 4.1 percent, the second-most of 10 industry groups, after commodity prices extended declines from June 4. Copper futures in New York sank as much as 3.1 percent, while crude dropped as much as 2.8 percent.
‘Grave Situation’
India’s rupee slid as much as l.4 percent per dollar, the lowest since May 26, on speculation fund outflows from local stocks will accelerate as investors shun emerging market assets. The currency may slip 2.4 percent this year to the lowest since September as funds favor safer investments, Mohan Shenoi, head of Treasury at Kotak Mahindra Bank Ltd. in Mumbai, said in a June 4 interview.
The MSCI Asia Pacific Index retreated as much as 3.5 percent today, set for its biggest decline since March 30, 2009. The gauge has slumped 15 percent from its high this year on April 15 amid growing concern the Greece-triggered sovereign debt crisis is spilling over to other European nations.
Hungary’s economy is in a “very grave situation” and it is “no exaggeration” to talk about a default, Peter Szijjarto, a spokesman for the Hungarian Prime Minister, said June 4. State Secretary Mihaly Varga said the next day that comments about a possible default are “unfortunate.”
Finance Minister Pranab Mukherjee said June 4 that India’s economy will be hurt should the sovereign debt crisis that originated in Greece spread in Europe.
Overseas investors bought a net 4.93 billion rupees ($106 million) of Indian stocks June 3, increasing total purchases of the equities this year to 212.6 billion rupees, according to the nation’s market regulator.
Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.
The following were among the most active on the exchange:
Container Corp. of India Ltd. (CCRI IN) decreased 2.3 percent to 1,269.7 rupees. The state-controlled freight-train operator was cut to “neutral” from “overweight” by Aditya Makharia, an analyst at JPMorgan Chase & Co., who said margin expansion may be restricted even as the company benefits from reviving growth in foreign trade.
Reliance Communications Ltd. (RCOM IN) climbed 1.8 percent to 171.65 rupees. The board of India’s second-largest wireless carrier approved the sale of a 26 percent stake valued at 90.5 billion rupees to help pay debt and upgrade networks, the Mumbai-based company said yesterday.
Shree Renuka Sugars Ltd. (SHRS IN) lost 3.9 percent to 60.9 rupees. The company failed to agree on the purchase of Brazilian sugar maker Equipav SA Acucar & Alcool after a shareholder declined to sign the deal, O Estado de S. Paulo reported, citing unnamed bankers involved in the talks.
Shree Renuka Sugars’ Managing Director Narendra Murkumbi wasn’t immediately available at his office telephone for comment on the report.
DLF Ltd., India’s biggest developer, dropped the most in four months. Reliance Industries Ltd., the nation’s most valuable company, retreated to the lowest in almost two weeks. A rebound in the global economy faces “significant challenges,” Group of 20 finance chiefs said over the weekend.
“This bumpy ride is likely to continue for some more time because the global economy is under threat,” said Deven Choksey, chief executive officer at K.R. Choksey Shares & Securities in Mumbai, who manages about $123 million for wealthy individuals.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, declined 410.35, or 2.4 percent, to 16,707.34 at 11:52 a.m. in Mumbai, poised for its steepest drop since May 25. The S&P CNX Nifty Index on the National Stock Exchange lost 2.2 percent to 5,021.30. The BSE 200 Index retreated 2 percent to 2,129.97.
DLF sank 6 percent to 264.85 rupees, heading for its worst decline since Jan. 27. Reliance dropped 2.2 percent to 1,008.85 rupees, its lowest level since May 26.
Investors are worried that the “global economy is going to decelerate as fiscal stimulus wears off,” said Ivan Leung, Hong Kong-based chief investment strategist at JPMorgan Private Bank. “It may not be time to add risk.”
Wipro, Sterlite
Tata Consultancy Services Ltd., the biggest software- services exporter, retreated 1.8 percent to 751.5 rupees. Infosys Technologies Ltd., the No. 2, dropped 2.3 percent to 2,665.05 rupees, while Wipro Ltd., the third-biggest, dropped 1.9 percent to 643 rupees. The companies derive about a fifth of their sales in Europe.
Sterlite Industries (India) Ltd., India’s largest copper producer, dropped 3.9 percent to 623 rupees. Hindalco Industries Ltd., the biggest aluminum producer, lost 4.9 percent to 140.4 rupees. Tata Steel Ltd., the biggest producer of the alloy, decreased 3.4 percent to 468.75 rupees.
A gauge of raw-material producers in the MSCI Asia Pacific Index slumped 4.1 percent, the second-most of 10 industry groups, after commodity prices extended declines from June 4. Copper futures in New York sank as much as 3.1 percent, while crude dropped as much as 2.8 percent.
‘Grave Situation’
India’s rupee slid as much as l.4 percent per dollar, the lowest since May 26, on speculation fund outflows from local stocks will accelerate as investors shun emerging market assets. The currency may slip 2.4 percent this year to the lowest since September as funds favor safer investments, Mohan Shenoi, head of Treasury at Kotak Mahindra Bank Ltd. in Mumbai, said in a June 4 interview.
The MSCI Asia Pacific Index retreated as much as 3.5 percent today, set for its biggest decline since March 30, 2009. The gauge has slumped 15 percent from its high this year on April 15 amid growing concern the Greece-triggered sovereign debt crisis is spilling over to other European nations.
Hungary’s economy is in a “very grave situation” and it is “no exaggeration” to talk about a default, Peter Szijjarto, a spokesman for the Hungarian Prime Minister, said June 4. State Secretary Mihaly Varga said the next day that comments about a possible default are “unfortunate.”
Finance Minister Pranab Mukherjee said June 4 that India’s economy will be hurt should the sovereign debt crisis that originated in Greece spread in Europe.
Overseas investors bought a net 4.93 billion rupees ($106 million) of Indian stocks June 3, increasing total purchases of the equities this year to 212.6 billion rupees, according to the nation’s market regulator.
Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.
The following were among the most active on the exchange:
Container Corp. of India Ltd. (CCRI IN) decreased 2.3 percent to 1,269.7 rupees. The state-controlled freight-train operator was cut to “neutral” from “overweight” by Aditya Makharia, an analyst at JPMorgan Chase & Co., who said margin expansion may be restricted even as the company benefits from reviving growth in foreign trade.
Reliance Communications Ltd. (RCOM IN) climbed 1.8 percent to 171.65 rupees. The board of India’s second-largest wireless carrier approved the sale of a 26 percent stake valued at 90.5 billion rupees to help pay debt and upgrade networks, the Mumbai-based company said yesterday.
Shree Renuka Sugars Ltd. (SHRS IN) lost 3.9 percent to 60.9 rupees. The company failed to agree on the purchase of Brazilian sugar maker Equipav SA Acucar & Alcool after a shareholder declined to sign the deal, O Estado de S. Paulo reported, citing unnamed bankers involved in the talks.
Shree Renuka Sugars’ Managing Director Narendra Murkumbi wasn’t immediately available at his office telephone for comment on the report.
Reliance Communications Gains After Stake Sale Agreed
June 7 (Bloomberg) -- Reliance Communications Ltd., India’s second-largest wireless carrier, rose in Mumbai trading after the company’s board approved the sale of a 26 percent stake to help pay debt and upgrade networks.
The board gave preliminary approval for the sale of the stake, valued at 90.5 billion rupees ($1.9 billion) at the last closing price, to a strategic or private-equity investor, the Mumbai-based company said yesterday. Reliance shares rose as much as 6.2 percent to 179 rupees, its highest intraday price since April 12.
Reliance, controlled by Indian billionaire Anil Ambani, didn’t identify any suitors. The Wall Street Journal reported AT&T Inc. is in early talks about investing in the company. Emirates Telecommunication Corp. may buy a stake valued at $4 billion, the Financial Times said last week.
Selling a stake would help the Indian company purchase network equipment as it prepares to offer third-generation wireless services in the world’s second-largest mobile-phone market. Reliance paid 85.9 billion rupees to the government for 3G licenses last month.
“With the kind of capital expenditure that the company would need going forward it may require an infusion of funds,” said Rahul Jain, a Mumbai-based analyst with Angel Broking Ltd., who has a “neutral” recommendation on the stock.
Reliance shares traded at 171 rupees at 10:47 a.m.
Overseas Expansion
AT&T, which is looking to expand outside of the U.S., has been holding informal discussions with Reliance for the past few weeks, according to the Journal report. Mark Siegel, a spokesman for AT&T, declined to comment on the report.
Reliance Communications Spokesman Anuj Bakshi declined to comment on specific companies that had expressed interest.
Indian phone operators are trying to revive earnings growth by offering data services in a market where voice calls cost as little as one U.S. cent per minute.
Revenue in the nation’s mobile-phone services industry is poised to fall 22 percent for the year after declining 25 percent in 2009, according to estimates from Bank of America Corp.’s Merrill Lynch unit.
Vodafone Group Plc on May 18 booked a $3.3 billion charge for its Indian unit, citing “intense” price competition.
“The competition in the Indian market is getting intense and is showing no signs of stabilizing at all,” said Jain.
Falling Shares
At the close of trading in Mumbai on June 4, Reliance was worth $7.4 billion. The stock dropped 49 percent in the 12 months to June 4 compared with a 15 percent gain for the Bombay Stock Exchange’s benchmark Sensitive Index. Larger rival Bharti Airtel Ltd. shed 31 percent during the same period.
Reliance said on June 2 it had received “various proposals” from overseas companies, after the Times of India newspaper reported Emirates Telecommunications, known as Etisalat, was in advanced talks to buy a 25 percent stake.
Etisalat spokesman Ahmed Bin Ali said on June 2 that Indian operators were among companies being looked at for possible investment, without specifying Reliance.
The Economic Times reported on June 1 that the Indian company may restart merger talks with South Africa’s MTN Group Ltd., after negotiations collapsed in July 2008.
Nozipho January-Bardill, a spokeswoman for MTN, said “there are definitely not any talks with Reliance.”
Reliance will sell shares at an “appropriate premium to the prevailing market price” and “examine and pursue other appropriate strategic combination or consolidation opportunities,” the company said in its statement yesterday.
The board gave preliminary approval for the sale of the stake, valued at 90.5 billion rupees ($1.9 billion) at the last closing price, to a strategic or private-equity investor, the Mumbai-based company said yesterday. Reliance shares rose as much as 6.2 percent to 179 rupees, its highest intraday price since April 12.
Reliance, controlled by Indian billionaire Anil Ambani, didn’t identify any suitors. The Wall Street Journal reported AT&T Inc. is in early talks about investing in the company. Emirates Telecommunication Corp. may buy a stake valued at $4 billion, the Financial Times said last week.
Selling a stake would help the Indian company purchase network equipment as it prepares to offer third-generation wireless services in the world’s second-largest mobile-phone market. Reliance paid 85.9 billion rupees to the government for 3G licenses last month.
“With the kind of capital expenditure that the company would need going forward it may require an infusion of funds,” said Rahul Jain, a Mumbai-based analyst with Angel Broking Ltd., who has a “neutral” recommendation on the stock.
Reliance shares traded at 171 rupees at 10:47 a.m.
Overseas Expansion
AT&T, which is looking to expand outside of the U.S., has been holding informal discussions with Reliance for the past few weeks, according to the Journal report. Mark Siegel, a spokesman for AT&T, declined to comment on the report.
Reliance Communications Spokesman Anuj Bakshi declined to comment on specific companies that had expressed interest.
Indian phone operators are trying to revive earnings growth by offering data services in a market where voice calls cost as little as one U.S. cent per minute.
Revenue in the nation’s mobile-phone services industry is poised to fall 22 percent for the year after declining 25 percent in 2009, according to estimates from Bank of America Corp.’s Merrill Lynch unit.
Vodafone Group Plc on May 18 booked a $3.3 billion charge for its Indian unit, citing “intense” price competition.
“The competition in the Indian market is getting intense and is showing no signs of stabilizing at all,” said Jain.
Falling Shares
At the close of trading in Mumbai on June 4, Reliance was worth $7.4 billion. The stock dropped 49 percent in the 12 months to June 4 compared with a 15 percent gain for the Bombay Stock Exchange’s benchmark Sensitive Index. Larger rival Bharti Airtel Ltd. shed 31 percent during the same period.
Reliance said on June 2 it had received “various proposals” from overseas companies, after the Times of India newspaper reported Emirates Telecommunications, known as Etisalat, was in advanced talks to buy a 25 percent stake.
Etisalat spokesman Ahmed Bin Ali said on June 2 that Indian operators were among companies being looked at for possible investment, without specifying Reliance.
The Economic Times reported on June 1 that the Indian company may restart merger talks with South Africa’s MTN Group Ltd., after negotiations collapsed in July 2008.
Nozipho January-Bardill, a spokeswoman for MTN, said “there are definitely not any talks with Reliance.”
Reliance will sell shares at an “appropriate premium to the prevailing market price” and “examine and pursue other appropriate strategic combination or consolidation opportunities,” the company said in its statement yesterday.
Investor group opposes Lehman plan
Published: June 6 2010 23:05 | Last updated: June 6 2010 23:05
A group of Dutch retail investors who own bonds sold by a unit of Lehman Brothers Holdings are organising to oppose the bankrupt bank’s proposal for pay-outs to its creditors.
The group believes that European creditors who own bonds issued by Lehman Brothers Treasury, an Amsterdam-based unit, are being treated unfairly and they intend to dispute Lehman’s plan in US proceedings this month, said Gerhard Zeilmaker, a bondholder and retired senior executive at ABN Amro.
Lawyers at Houthoff Buruma were named trustees for the Dutch unit.
“LBHI’s proposed creditor treatment plan favours US creditors, large financial institutions, over European individual investors,” the Dutch group said on Sunday.
As part of its bankruptcy proceedings, Lehman this year drafted a plan that lays out the estimated pay-outs to the various creditors at the holding company and subsidiaries. The bondholder group argues that the plan unfairly cuts their claim by 50 per cent, to the benefit of US creditors. Lehman was not immediately available for comment.
The Dutch group represents about 100 investors holding $650m-$1bn in face value of bonds, Mr Zeilmaker said.
Lehman Brothers Treasury raised more than $34bn from about 50,000 individual investors across Europe, the group said. It is not working directly with hedge funds, which have bought many of the bonds since the bankruptcy.
The Dutch investor group said Derk Jan Eppink, Belgian member of the European Parliament, supported the campaign and had brought it to the European Commission’s attention.
The opposition of European bondholders is the latest twist in Lehman’s complex bankruptcy.
Retail investors around the world suffered considerable losses when Lehman failed. Soon after its bankruptcy, angry Asian retail investors protested over losses in structured products arranged by Lehman, while the plan the Dutch investors dispute foresees some other bondholders with claims to Lehman Brothers Holdings – the parent company – receiving just 15 per cent of their claims or less.
In the nearly two years since its bankruptcy filing, Lehman has launched several lawsuits to boost the pool available to pay back its myriad creditors. It is trying to recover $11bn on the sale of its North American investment bank to Barclays, as well as $8.6bn seized by JPMorgan as collateral in the days leading up to Lehman’s collapse.
Last week Lehman’s former executives and Ernst & Young, the auditor, asked a judge to dismiss a class action suit that alleges offering documents for Lehman securities contained “untrue statements and omitted materials facts” related to the use of “Repo 105”, described as an “accounting gimmick” by Lehman’s court-appointed examiner.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
A group of Dutch retail investors who own bonds sold by a unit of Lehman Brothers Holdings are organising to oppose the bankrupt bank’s proposal for pay-outs to its creditors.
The group believes that European creditors who own bonds issued by Lehman Brothers Treasury, an Amsterdam-based unit, are being treated unfairly and they intend to dispute Lehman’s plan in US proceedings this month, said Gerhard Zeilmaker, a bondholder and retired senior executive at ABN Amro.
Lawyers at Houthoff Buruma were named trustees for the Dutch unit.
“LBHI’s proposed creditor treatment plan favours US creditors, large financial institutions, over European individual investors,” the Dutch group said on Sunday.
As part of its bankruptcy proceedings, Lehman this year drafted a plan that lays out the estimated pay-outs to the various creditors at the holding company and subsidiaries. The bondholder group argues that the plan unfairly cuts their claim by 50 per cent, to the benefit of US creditors. Lehman was not immediately available for comment.
The Dutch group represents about 100 investors holding $650m-$1bn in face value of bonds, Mr Zeilmaker said.
Lehman Brothers Treasury raised more than $34bn from about 50,000 individual investors across Europe, the group said. It is not working directly with hedge funds, which have bought many of the bonds since the bankruptcy.
The Dutch investor group said Derk Jan Eppink, Belgian member of the European Parliament, supported the campaign and had brought it to the European Commission’s attention.
The opposition of European bondholders is the latest twist in Lehman’s complex bankruptcy.
Retail investors around the world suffered considerable losses when Lehman failed. Soon after its bankruptcy, angry Asian retail investors protested over losses in structured products arranged by Lehman, while the plan the Dutch investors dispute foresees some other bondholders with claims to Lehman Brothers Holdings – the parent company – receiving just 15 per cent of their claims or less.
In the nearly two years since its bankruptcy filing, Lehman has launched several lawsuits to boost the pool available to pay back its myriad creditors. It is trying to recover $11bn on the sale of its North American investment bank to Barclays, as well as $8.6bn seized by JPMorgan as collateral in the days leading up to Lehman’s collapse.
Last week Lehman’s former executives and Ernst & Young, the auditor, asked a judge to dismiss a class action suit that alleges offering documents for Lehman securities contained “untrue statements and omitted materials facts” related to the use of “Repo 105”, described as an “accounting gimmick” by Lehman’s court-appointed examiner.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Chinese bank IPO set to fall short
By Jamil Anderlini in Beijing
Published: June 6 2010 23:03 | Last updated: June 6 2010 23:03
Agricultural Bank of China’s initial public offering is likely to raise much less than the $30bn record-setting total it had hoped for when it sells shares in Hong Kong and Shanghai as early as next month.
Analysts and bankers close to the deal said that judging by investor appetite, the current state of the market and details in the IPO prospectus released on Friday, Agricultural Bank was more likely to raise a little over $20bn.
At that level the IPO would not be the world’s largest. It had been set to eclipse the IPO record set by Industrial and Commercial Bank of China, which raised $22bn in 2006.
China’s stock market has dropped about 20 per cent since mid-April on general worries about the country’s economy and concern over a huge flood of bank fundraisings hitting the market at the same time. Chinese lenders have been rushing to shore up their balance sheets following an unprecedented lending spree last year.
Bank of Communications, China’s fifth-largest bank which is almost one-fifth owned by HSBC of the UK, announced a Rmb33.07bn ($4.8bn) rights issue in Hong Kong and Shanghai on Sunday that was 21 per cent smaller than the amount it had earlier said it planned to raise.
HSBC said it would take up its full allotment of the Hong Kong portion of the rights issue, which is priced at a 37 per cent discount to the bank’s closing price on Friday.
Initial public offerings
IPO
FT In depth: News, comment and analysis on flotations
Agricultural Bank will sell up to 56.3bn new shares, or almost 17 per cent of its enlarged capital base, in Shanghai and Hong Kong, if over-allotment options are exercised in both markets.
The lender has in recent weeks on its roadshow offered potential investors an asking price roughly benchmarked to the 1.94 times price-to-book ratio ICBC sold its shares for in its IPO. But mainland Chinese fund managers have been reluctant to offer a ratio of more than 1.2 times and bankers said the eventual IPO price might be a ratio of about 1.3-1.5 times.
“The gap between the bank’s expectations and the market perception is huge and in the current market environment the bank will have to lower its sights somewhat,” said one person familiar with the IPO.
Agricultural Bank is the last of China’s large state-controlled banks to seek a public listing and is regarded as the weakest of the country’s lenders. Its net profits were Rmb65bn last year on Rmb8,880bn in total assets, while ICBC, the world’s largest lender by market value, made almost Rmb129bn on Rmb11,785bn in total assets.
Following a $19bn bail-out from China’s sovereign wealth fund at the end of 2008, Agricultural Bank’s non-performing loan ratio fell from almost 24 per cent at the end of 2007 to 2.9 per cent at the end of last year.
China’s securities regulator said it would review Agricultural Bank’s IPO plan on Wednesday. A Hong Kong hearing is expected the following day.
The IPO is almost certain to go ahead and will be supported by large state-owned Chinese enterprises such as PetroChina and China Life Insurance.
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Published: June 6 2010 23:03 | Last updated: June 6 2010 23:03
Agricultural Bank of China’s initial public offering is likely to raise much less than the $30bn record-setting total it had hoped for when it sells shares in Hong Kong and Shanghai as early as next month.
Analysts and bankers close to the deal said that judging by investor appetite, the current state of the market and details in the IPO prospectus released on Friday, Agricultural Bank was more likely to raise a little over $20bn.
At that level the IPO would not be the world’s largest. It had been set to eclipse the IPO record set by Industrial and Commercial Bank of China, which raised $22bn in 2006.
China’s stock market has dropped about 20 per cent since mid-April on general worries about the country’s economy and concern over a huge flood of bank fundraisings hitting the market at the same time. Chinese lenders have been rushing to shore up their balance sheets following an unprecedented lending spree last year.
Bank of Communications, China’s fifth-largest bank which is almost one-fifth owned by HSBC of the UK, announced a Rmb33.07bn ($4.8bn) rights issue in Hong Kong and Shanghai on Sunday that was 21 per cent smaller than the amount it had earlier said it planned to raise.
HSBC said it would take up its full allotment of the Hong Kong portion of the rights issue, which is priced at a 37 per cent discount to the bank’s closing price on Friday.
Initial public offerings
IPO
FT In depth: News, comment and analysis on flotations
Agricultural Bank will sell up to 56.3bn new shares, or almost 17 per cent of its enlarged capital base, in Shanghai and Hong Kong, if over-allotment options are exercised in both markets.
The lender has in recent weeks on its roadshow offered potential investors an asking price roughly benchmarked to the 1.94 times price-to-book ratio ICBC sold its shares for in its IPO. But mainland Chinese fund managers have been reluctant to offer a ratio of more than 1.2 times and bankers said the eventual IPO price might be a ratio of about 1.3-1.5 times.
“The gap between the bank’s expectations and the market perception is huge and in the current market environment the bank will have to lower its sights somewhat,” said one person familiar with the IPO.
Agricultural Bank is the last of China’s large state-controlled banks to seek a public listing and is regarded as the weakest of the country’s lenders. Its net profits were Rmb65bn last year on Rmb8,880bn in total assets, while ICBC, the world’s largest lender by market value, made almost Rmb129bn on Rmb11,785bn in total assets.
Following a $19bn bail-out from China’s sovereign wealth fund at the end of 2008, Agricultural Bank’s non-performing loan ratio fell from almost 24 per cent at the end of 2007 to 2.9 per cent at the end of last year.
China’s securities regulator said it would review Agricultural Bank’s IPO plan on Wednesday. A Hong Kong hearing is expected the following day.
The IPO is almost certain to go ahead and will be supported by large state-owned Chinese enterprises such as PetroChina and China Life Insurance.
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