India’s rupee fell past the 50 per dollar level for the first time in more than two years on speculation slowing economic growth and faster inflation will deter foreign investment.
The currency was poised for its biggest weekly loss this month after China reported Oct. 18 that its third-quarter gross domestic product increased at the slowest pace in two years. Food inflation in India accelerated to 10.6 percent in the week ended Oct. 8 from a year earlier, the fastest rate since April, government data showed yesterday. Concern Europe’s debt crisis is worsening also sapped demand for emerging-market assets.
“The growth outlook has weakened and inflation remains stubbornly high,” said Jonathan Cavenagh, a Singapore-based senior currency strategist at Westpac Banking Corp. “European investors invested a lot of capital in Asia when the 2008 financial crisis eased and now there is concern they will pull this back. India stands to lose more than its peers as the country is running a current-account deficit.”
The rupee slid 0.5 percent today and 2 percent this week to 50.05 per dollar as of 11:43 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 50.19 earlier, the lowest level since April, 2009. The currency has declined 11 percent this year, the worst performance among Asia’s 10 most-traded currencies.
India’s growth in the year through March may be lower than earlier estimates, Finance Minister Pranab Mukherjee said on Oct. 19. Asia’s third-largest economy grew 7.7 percent in the three months through June from a year earlier, the smallest gain since 2009, government data show.
Possible Intervention
India’s current account, the broadest measure of trade and investment flows, showed a deficit of $14.1 billion in the three months through June, compared with a shortfall of $5.4 billion the previous quarter, the central bank said last month.
Importers increased purchases of dollars ahead of public holidays next week on concern Europe’s debt crisis will worsen, said Kamlakar Rao, head of foreign-exchange trading at state-run Allahabad Bank. Local financial markets are shut on Oct. 26 and 27 for the Diwali festival, when Indians traditionally purchase precious metals.
“There was a lot of demand for dollars from gold and oil importers,” Mumbai-based Rao said. “The Reserve Bank of India would be concerned about this move.”
The RBI will likely intervene to support the rupee if concern Europe’s debt crisis will worsen threatens to push the currency past 50.35 a dollar, said J. Moses Harding, an executive vice president at IndusInd Bank Ltd. in Mumbai.
The central bank may intervene should the currency fall to levels reached during the financial crisis, a Finance Ministry official told reporters in New Delhi on Sept. 23, requesting not to be identified as he isn’t authorized to speak on the matter. The rupee dropped to a record-low 52.18 per dollar in March 2009.
Europe Concern
The currency has weakened as concern Europe’s debt turmoil will slow global growth resulted in investors favoring the relative safety of the dollar over emerging-market assets. South Africa’s rand has dropped 19 percent in 2011, the worst among 25 developing-nation currencies tracked by Bloomberg. In Asia, the Taiwan dollar fell 3.8 percent and the Thai baht 3.5 percent.
“Concern the European crisis will drive the dollar higher is on investors’ minds,” IndusInd’s Harding said. “In the earlier period of weakening the rupee largely tracked the Dollar Index but this time it has far exceeded the move.”
The Dollar Index, which measures the currency’s performance against six major trading partners, rose 0.4 percent this week.
Rebound Expected
Offshore forwards indicate the rupee will trade at 50.91 to the dollar in three months, compared with expectations of 50.41 yesterday and 49.69 at the end of last week. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.
The rupee will rebound to 48.60 per dollar in the next few weeks, said Sailesh K. Jha, Singapore-based head of Asia strategy at Skandinaviska Enskilda Banken AB. Investors will return to risky assets, dollar-demand from oil importers will ease and interest-rate differentials will widen, he said.
The RBI will increase its repurchase rate by a quarter of a percentage point to 8.50 percent when it meets on Oct. 25, according to 13 of 19 analysts in a Bloomberg Survey. Six expect no change.
SEB predicts the rate will rise to 9 percent by March 2012, while Westpac’s Cavenagh said he sees the RBI cutting interest rates in the first quarter next year. Central bank rates stand at less than 1 percent in the U.S., 1.5 percent in the euro area and China’s key lending rate is 6.56 percent.
“We expect improvements in risk sentiment in the near-term on the back of our view that European Union policy makers will not disappoint the market significantly and macro data will surprise on the upside in Asia,” Jha wrote in a report published today. He advises buying the rupee at 50.30 per dollar.
To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Friday, October 21, 2011
Thursday, October 20, 2011
EU Said to Mull Wielding $1.3T to Break Impasse By James G. Neuger and Tony Czuczka - Oct 20, 2011
European governments may unleash as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, seeking to break a deadlock between Germany and France that is forcing leaders to hold two summits within four days.
Negotiations on combining the European Union’s temporary and planned permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending, accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked the French-German clash, two people familiar with the discussions said. They declined to be identified because political leaders will have to decide.
That option may be one way out of the impasse between Europe’s two biggest economies. Finance ministers meet in Brussels today from about 2 p.m. to lay the groundwork for an Oct. 23 meeting of government leaders that had been the deadline for a solution to the debt crisis. A summit for Oct. 26 was set yesterday after Germany and France said the EU needs more time to seal a “global and ambitious” accord.
“The market wants the euro crisis solved yesterday, and the politicians and finance ministries seem to be saying ‘yes we can, but no we won’t,’” Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an e-mail. “Europe has the wealth to deal with Greece, it is just that the process in incredibly complex.”
Disclosure of the dual-use option helped reverse declines in U.S. stocks and the euro yesterday. The Standard & Poor’s 500 Index added 0.5 percent after losing as much as 1 percent. The euro climbed to $1.3781 in New York from as low as $1.3656.
Greek Vote
In Greece, Prime Minister George Papandreou won a parliamentary vote late yesterday on further austerity measures designed to secure more aid under the 2010 bailout. As hooded protesters threw rocks and battled riot police outside the parliament building in Athens, one man died of heart failure after a rock hit him on the head, the government said.
EU officials weighing deeper losses for Greek bondholders in a revamped bailout are concerned that any investor involvement risks further roiling markets, say people familiar with the deliberations.
Five Scenarios
Greece has accumulated at least 20 billion euros in additional financing needs since a 159 billion-euro package was set in July, because of a deepening recession and delays in enacting the plan, said the people, who declined to be identified because euro-area leaders have yet to agree on their strategy. The EU is considering five scenarios, ranging from sticking with July’s voluntary swap to a so-called hard restructuring, where investors could be forced to exchange Greek bonds for new ones at 50 percent of their value, the people said.
The 440 billion-euro European Financial Stability Facility has already spent or committed about 160 billion euros, including loans to Greece that will run for up to 30 years. Instead of replacing it with the European Stability Mechanism, which will hold 500 billion euros, in mid-2013, a consensus is emerging on merging the two funds, the people said.
The 500 billion-euro total was deemed sufficient when Greece, Ireland and Portugal were the primary victims of the debt crisis. Widening bond spreads in Italy, Spain, Belgium and France upended that calculation.
Credit Lines
Standard & Poor’s said France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario. The sovereign ratings of Spain, Italy, Ireland and Portugal would also be reduced by another one or two levels in either of New York-based S&P’s two stress scenarios, it said in a report.
The EFSF may be authorized to provide credit lines of as much as 10 percent of a country’s economy, according to a proposal prepared for this week’s meetings. By that measure, credit lines for Spain and Italy, countries that required European Central Bank support as their borrowing costs soared, could reach 270 billion euros ($371 billion).
“EFSF will need to be leveraged up,” Lael Brainard, the U.S. Treasury’s undersecretary for international affairs, said to a Senate subcommittee yesterday in Washington.
Germany and France, the euro region’s biggest financial backers, are at odds over how to do that. The fund’s tasks include recapitalization of banks and buying bonds in primary and secondary markets.
France favors creating a bank out of the EFSF, boosting its financial clout with backing from the ECB, a proposal that Germany rejects, Finance Minister Wolfgang Schaeuble told lawmakers in Berlin this week. French Prime Minister Francois Fillon said yesterday that the euro region should agree to use leverage to make the fund “massive.”
Europe’s Impact
German Chancellor Angela Merkel and French President Nicolas Sarkozy facing growing pressure from the U.S. and other global partners to end the wrangling. Federal Reserve Chairman Ben S. Bernanke briefed Senate Democrats yesterday about the European debt crisis and said it “could have an impact” on the U.S. economy, Senator Dick Durbin of Illinois said in Washington. Merkel and Sarkozy plan to meet one-on-one in Brussels tomorrow on the eve of the first summit.
The focus on the lending ceiling came after central bankers ruled out giving the EFSF a banking license, blocking the most potent option for scaling it up. France has pushed Germany to go beyond a less powerful, ECB-backed option of using it to insure 20 percent to 30 percent of new bond issues.
Still, the 280 billion euros left in the EFSF cannot be wholly committed to bond insurance, since that would drain the fund to zero, the people said. Instead, finance ministers are likely to decide on the use of the EFSF’s instruments on a case- by-case basis, the people said.
Meanwhile, the ECB is considering lending more money against asset-backed bonds if issuers provide additional information about the loans underpinning the securities, according to a person familiar with the matter. The proposed change is part of a broader ECB initiative to encourage banks to improve transparency in asset-backed bonds they sell to investors and boost confidence in a market blamed for worsening the credit crisis in 2007.
To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Tony Czuczka in Berlin at aczuczka@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Negotiations on combining the European Union’s temporary and planned permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending, accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked the French-German clash, two people familiar with the discussions said. They declined to be identified because political leaders will have to decide.
That option may be one way out of the impasse between Europe’s two biggest economies. Finance ministers meet in Brussels today from about 2 p.m. to lay the groundwork for an Oct. 23 meeting of government leaders that had been the deadline for a solution to the debt crisis. A summit for Oct. 26 was set yesterday after Germany and France said the EU needs more time to seal a “global and ambitious” accord.
“The market wants the euro crisis solved yesterday, and the politicians and finance ministries seem to be saying ‘yes we can, but no we won’t,’” Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an e-mail. “Europe has the wealth to deal with Greece, it is just that the process in incredibly complex.”
Disclosure of the dual-use option helped reverse declines in U.S. stocks and the euro yesterday. The Standard & Poor’s 500 Index added 0.5 percent after losing as much as 1 percent. The euro climbed to $1.3781 in New York from as low as $1.3656.
Greek Vote
In Greece, Prime Minister George Papandreou won a parliamentary vote late yesterday on further austerity measures designed to secure more aid under the 2010 bailout. As hooded protesters threw rocks and battled riot police outside the parliament building in Athens, one man died of heart failure after a rock hit him on the head, the government said.
EU officials weighing deeper losses for Greek bondholders in a revamped bailout are concerned that any investor involvement risks further roiling markets, say people familiar with the deliberations.
Five Scenarios
Greece has accumulated at least 20 billion euros in additional financing needs since a 159 billion-euro package was set in July, because of a deepening recession and delays in enacting the plan, said the people, who declined to be identified because euro-area leaders have yet to agree on their strategy. The EU is considering five scenarios, ranging from sticking with July’s voluntary swap to a so-called hard restructuring, where investors could be forced to exchange Greek bonds for new ones at 50 percent of their value, the people said.
The 440 billion-euro European Financial Stability Facility has already spent or committed about 160 billion euros, including loans to Greece that will run for up to 30 years. Instead of replacing it with the European Stability Mechanism, which will hold 500 billion euros, in mid-2013, a consensus is emerging on merging the two funds, the people said.
The 500 billion-euro total was deemed sufficient when Greece, Ireland and Portugal were the primary victims of the debt crisis. Widening bond spreads in Italy, Spain, Belgium and France upended that calculation.
Credit Lines
Standard & Poor’s said France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario. The sovereign ratings of Spain, Italy, Ireland and Portugal would also be reduced by another one or two levels in either of New York-based S&P’s two stress scenarios, it said in a report.
The EFSF may be authorized to provide credit lines of as much as 10 percent of a country’s economy, according to a proposal prepared for this week’s meetings. By that measure, credit lines for Spain and Italy, countries that required European Central Bank support as their borrowing costs soared, could reach 270 billion euros ($371 billion).
“EFSF will need to be leveraged up,” Lael Brainard, the U.S. Treasury’s undersecretary for international affairs, said to a Senate subcommittee yesterday in Washington.
Germany and France, the euro region’s biggest financial backers, are at odds over how to do that. The fund’s tasks include recapitalization of banks and buying bonds in primary and secondary markets.
France favors creating a bank out of the EFSF, boosting its financial clout with backing from the ECB, a proposal that Germany rejects, Finance Minister Wolfgang Schaeuble told lawmakers in Berlin this week. French Prime Minister Francois Fillon said yesterday that the euro region should agree to use leverage to make the fund “massive.”
Europe’s Impact
German Chancellor Angela Merkel and French President Nicolas Sarkozy facing growing pressure from the U.S. and other global partners to end the wrangling. Federal Reserve Chairman Ben S. Bernanke briefed Senate Democrats yesterday about the European debt crisis and said it “could have an impact” on the U.S. economy, Senator Dick Durbin of Illinois said in Washington. Merkel and Sarkozy plan to meet one-on-one in Brussels tomorrow on the eve of the first summit.
The focus on the lending ceiling came after central bankers ruled out giving the EFSF a banking license, blocking the most potent option for scaling it up. France has pushed Germany to go beyond a less powerful, ECB-backed option of using it to insure 20 percent to 30 percent of new bond issues.
Still, the 280 billion euros left in the EFSF cannot be wholly committed to bond insurance, since that would drain the fund to zero, the people said. Instead, finance ministers are likely to decide on the use of the EFSF’s instruments on a case- by-case basis, the people said.
Meanwhile, the ECB is considering lending more money against asset-backed bonds if issuers provide additional information about the loans underpinning the securities, according to a person familiar with the matter. The proposed change is part of a broader ECB initiative to encourage banks to improve transparency in asset-backed bonds they sell to investors and boost confidence in a market blamed for worsening the credit crisis in 2007.
To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Tony Czuczka in Berlin at aczuczka@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, October 19, 2011
Asian Stocks Head for Lowest in a Week Amid Europe Debt Talks Uncertainty By Kana Nishizawa - Oct 19, 2011
Asian stocks slid, with the benchmark regional index headed to its lowest close in more than a week, amid uncertainty about European bailout-fund talks and as U.S. companies grew more pessimistic about the outlook for the world’s largest economy.
Sharp Corp., a Japanese maker of liquid-crystal displays that gets about half of its revenue overseas, fell 2.2 percent in Tokyo. Esprit Holdings Ltd. (330), a clothier that gets most of its sales in Europe, sank 6.9 percent in Hong Kong. BHP Billion Ltd., the world’s biggest mining company, dropped 2.1 percent as commodity prices dropped. Newcrest Mining Ltd. (NCM), Australia’s largest gold mining company, sank 5.3 percent after saying quarterly gold output sank from a year earlier.
The MSCI Asia Pacific Index sank 1.3 percent to 115.82 as of 11:44 a.m. in Tokyo, headed for its lowest close since Oct. 11. Almost four stocks fell for each for each that gained on the gauge.
“U.S. economic conditions don’t appear to be getting any better, and in fact there’s some risk it might get worse, so that doesn’t give investors much comfort at all,” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney. “There appears to be growing concern about whether or not European leaders meeting on the weekend will be able to come up with a credible plan.”
The MSCI Asia Pacific Index declined 15 percent this year through yesterday, as Europe’s smoldering debt crisis, slowing U.S. economic growth and tighter monetary policy in China crimped the earnings outlook for the region’s companies. Europe’s leaders have pledged to use a meeting this weekend to develop a plan to tackle the crisis.
Australia, Japan
Australia’s S&P/ASX 200 slid 1.5 percent. Japan’s Nikkei 225 (NKY) Stock Average retreated 0.9 percent. Hong Kong’s Hang Seng Index lost 1.7 percent, while South Korea’s Kospi Index fell 0.1 percent. Singapore’s Straits Times Index lost 0.4 percent.
The Asia-Pacific measure’s slide compares with a 3.8 percent drop by the Standard & Poor’s 500 Index and a 14 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.9 times estimated earnings on average at the last close, compared with 12.1 times for the S&P 500 and 10.2 times for the Stoxx 600.
Futures on the S&P 500 expiring in December were little changed today. In New York the index lost 1.3 percent yesterday amid concern about the strength of the economy and concern about Europe’s progress on resolving its debt problems.
Sharp slid 2.2 percent to 666 yen in Tokyo, while Nintendo Co., a maker of Wii game Consoles which made about 41 percent of its revenue from Europe, sank 1.8 percent to 11,810 yen in Osaka. Esprit slumped 6.9 percent to HK$10.58 in Hong Kong.
No Resolution
Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an Oct. 19 meeting of European leaders in Frankfurt failed to resolve differences ahead of a summit scheduled for this weekend. French Finance Minister Francois Baroin said that Europe’s temporary bailout fund would be best enhanced with help from the European Central Bank, a position the ECB and German government continue to oppose.
The disagreements among policy makers came as banks lobbied against forced recapitalization and deeper writedowns on privately held Greek debt.
“We remain pretty nervous about Europe’s crisis because we have yet to see a concrete safety-net being established for the financial system,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Pessimism about Europe sets the tone for the market’s sentiment.”
‘Conditions Aren’t Fabulous’
The Fed’s Beige Book survey showed companies reported more doubt about the recovery even as the economy maintained its expansion last month.
U.S. economic “conditions aren’t fabulous,” said White Funds Management’s Gluskie. “They’re not going backward but they’re not dramatically improving. If it’s improving, it’s very slight, and at this stage that’s not enough to give investors huge confidence.”
BHP slid 2.1 percent to A$35.63 in Sydney. Jiangxi Copper Co., China’s No. 1 producer of the metal, fell 4.5 percent to HK$14.88 in Hong Kong. Noble Group Ltd., a Hong Kong-based commodities supplier, retreated 1.4 percent to S$1.41 in Singapore.
The Thomson Reuters/Jefferies CRB Index of raw materials fell 1.3 percent yesterday. Crude oil for November delivery dropped $2.23 to settle at $86.11 a barrel on the New York Mercantile Exchange. The London Metals Exchange Index, a measure of six metals, retreated 2.3 percent yesterday.
Newcrest Mining sank 5.3 percent to A$33.87 in Sydney. The Melbourne-based company said its gold output for the three months ended September fell to 587,296 ounces from 674,219 ounces a year earlier.
Nanya Technology Corp. (2408), a Taiwanese memory-chip maker, tumbled 6.3 percent to NT$3.60 after its third-quarter net loss widened to NT$12 billion ($398 million) from NT$2.27 billion a year earlier.
To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sharp Corp., a Japanese maker of liquid-crystal displays that gets about half of its revenue overseas, fell 2.2 percent in Tokyo. Esprit Holdings Ltd. (330), a clothier that gets most of its sales in Europe, sank 6.9 percent in Hong Kong. BHP Billion Ltd., the world’s biggest mining company, dropped 2.1 percent as commodity prices dropped. Newcrest Mining Ltd. (NCM), Australia’s largest gold mining company, sank 5.3 percent after saying quarterly gold output sank from a year earlier.
The MSCI Asia Pacific Index sank 1.3 percent to 115.82 as of 11:44 a.m. in Tokyo, headed for its lowest close since Oct. 11. Almost four stocks fell for each for each that gained on the gauge.
“U.S. economic conditions don’t appear to be getting any better, and in fact there’s some risk it might get worse, so that doesn’t give investors much comfort at all,” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney. “There appears to be growing concern about whether or not European leaders meeting on the weekend will be able to come up with a credible plan.”
The MSCI Asia Pacific Index declined 15 percent this year through yesterday, as Europe’s smoldering debt crisis, slowing U.S. economic growth and tighter monetary policy in China crimped the earnings outlook for the region’s companies. Europe’s leaders have pledged to use a meeting this weekend to develop a plan to tackle the crisis.
Australia, Japan
Australia’s S&P/ASX 200 slid 1.5 percent. Japan’s Nikkei 225 (NKY) Stock Average retreated 0.9 percent. Hong Kong’s Hang Seng Index lost 1.7 percent, while South Korea’s Kospi Index fell 0.1 percent. Singapore’s Straits Times Index lost 0.4 percent.
The Asia-Pacific measure’s slide compares with a 3.8 percent drop by the Standard & Poor’s 500 Index and a 14 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.9 times estimated earnings on average at the last close, compared with 12.1 times for the S&P 500 and 10.2 times for the Stoxx 600.
Futures on the S&P 500 expiring in December were little changed today. In New York the index lost 1.3 percent yesterday amid concern about the strength of the economy and concern about Europe’s progress on resolving its debt problems.
Sharp slid 2.2 percent to 666 yen in Tokyo, while Nintendo Co., a maker of Wii game Consoles which made about 41 percent of its revenue from Europe, sank 1.8 percent to 11,810 yen in Osaka. Esprit slumped 6.9 percent to HK$10.58 in Hong Kong.
No Resolution
Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an Oct. 19 meeting of European leaders in Frankfurt failed to resolve differences ahead of a summit scheduled for this weekend. French Finance Minister Francois Baroin said that Europe’s temporary bailout fund would be best enhanced with help from the European Central Bank, a position the ECB and German government continue to oppose.
The disagreements among policy makers came as banks lobbied against forced recapitalization and deeper writedowns on privately held Greek debt.
“We remain pretty nervous about Europe’s crisis because we have yet to see a concrete safety-net being established for the financial system,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Pessimism about Europe sets the tone for the market’s sentiment.”
‘Conditions Aren’t Fabulous’
The Fed’s Beige Book survey showed companies reported more doubt about the recovery even as the economy maintained its expansion last month.
U.S. economic “conditions aren’t fabulous,” said White Funds Management’s Gluskie. “They’re not going backward but they’re not dramatically improving. If it’s improving, it’s very slight, and at this stage that’s not enough to give investors huge confidence.”
BHP slid 2.1 percent to A$35.63 in Sydney. Jiangxi Copper Co., China’s No. 1 producer of the metal, fell 4.5 percent to HK$14.88 in Hong Kong. Noble Group Ltd., a Hong Kong-based commodities supplier, retreated 1.4 percent to S$1.41 in Singapore.
The Thomson Reuters/Jefferies CRB Index of raw materials fell 1.3 percent yesterday. Crude oil for November delivery dropped $2.23 to settle at $86.11 a barrel on the New York Mercantile Exchange. The London Metals Exchange Index, a measure of six metals, retreated 2.3 percent yesterday.
Newcrest Mining sank 5.3 percent to A$33.87 in Sydney. The Melbourne-based company said its gold output for the three months ended September fell to 587,296 ounces from 674,219 ounces a year earlier.
Nanya Technology Corp. (2408), a Taiwanese memory-chip maker, tumbled 6.3 percent to NT$3.60 after its third-quarter net loss widened to NT$12 billion ($398 million) from NT$2.27 billion a year earlier.
To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Tuesday, October 18, 2011
Tata Consultancy Shifts Hiring From Mumbai By Ketaki Gokhale - Oct 18, 2011
Tata Consultancy Services Ltd. (TCS), Asia’s biggest employer of software developers, will shift hiring to low-cost cities in India as it struggles to maintain profitability amid spiraling labor costs.
The company, based in Mumbai, is building campuses and adding workers in cities including Ahmedabad, Pune, Bhubaneswar, Nagpur, Indore and Cochin, Chief Financial Officer S. Mahalingam said in an interview. The company’s shares plunged the most in more than two years yesterday after earnings missed analysts’ estimates amid rising costs.
Employee costs at Tata Consultancy, which spent $2.8 billion on salaries in the year ending March, rose 27 percent last quarter exceeding the 15 percent increase in profit. While expanding in cheaper cities will help reduce costs, lack of infrastructure and quality of employees may create new challenges, according to Vihang Naik, an analyst at MF Global Sify Securities Pvt.
“The biggest campuses that we’re building now are in Pune and Ahmedabad,” Mahalingam said in Mumbai yesterday. “At the same time time we are putting pressure on the system, the government to upgrade the infrastructure in these places.”
Tata Consultancy plunged 7.7 percent to 1,033.55 rupees in Mumbai yesterday, the steepest decline since May 19, 2009, after profit missed analysts’ estimates by 3 percent. The company’s operating margin narrowed by 1 percentage point in the three months ended Sept. 30.
‘Hardly Have a Choice’
India’s inflation exceeded 9 percent for a 10th straight month in September, reducing room for the central bank to pause its record interest rate increases and maintaining pressure on wages. Salaries in India are set to rise the most in the Asia- Pacific region this year, according to an Aon Hewitt LLC survey released on March 8.
Wages are likely to rise an average 12.9 percent in 2011, compared with 11.7 percent last year, according to the survey of 531 organizations from 18 primary industry sectors in December and January. Chinese salaries may rise 9 percent, while those in the Philippines 7 percent, Aon Hewitt said.
Tata Consultancy and other Indian software developers “hardly have a choice in terms of this expansion,” Naik said. “It has to happen in smaller towns.”
Second-tier cities like Jaipur and Ahmedabad have operating costs that are 20 percent to 30 percent lower than established technology hubs like Bangalore, according to a May report from Everest Group, a Dallas-based firm that advises companies on outsourcing strategies.
Labor Pool
Tata Consultancy will increase its workforce in Ahmedabad to 12,000 from 2,000, and add to its “small presence” in Pune with a new facility that can hold 17,000 workers, Mahalingam said. The centers will offer a range of services including business process outsourcing and call centers, software and application development and infrastructure management, he said.
The challenges of expanding to small cities include poor infrastructure, unreliable power supply, poor English proficiency and a lower-quality labor pool, according to Everest Group.
“Infrastructure will be a very major challenge,” Mahalingam said. “If I have a choice of only two airlines to go to Bhubaneswar from Delhi, I think that’s going to put a phenomenal amount of pressure.”
Tata Consultancy will only expand into tier-two cities that have adequate engineering graduates, Mahalingam said.
“We have chosen places where there is talent,” he said. “We are not going to any place where we’re not in an active program of recruitment from colleges.”
Tata Consultancy is on track to add a gross 60,000 workers in the year ending March 2012, Chief Executive Officer N. Chandrasekaran said.
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED. Tata Consultancy Services Ltd. (TCS), Asia’s biggest employer of software developers, will shift hiring to low-cost cities in India as it struggles to maintain profitability amid spiraling labor costs.
The company, based in Mumbai, is building campuses and adding workers in cities including Ahmedabad, Pune, Bhubaneswar, Nagpur, Indore and Cochin, Chief Financial Officer S. Mahalingam said in an interview. The company’s shares plunged the most in more than two years yesterday after earnings missed analysts’ estimates amid rising costs.
Employee costs at Tata Consultancy, which spent $2.8 billion on salaries in the year ending March, rose 27 percent last quarter exceeding the 15 percent increase in profit. While expanding in cheaper cities will help reduce costs, lack of infrastructure and quality of employees may create new challenges, according to Vihang Naik, an analyst at MF Global Sify Securities Pvt.
“The biggest campuses that we’re building now are in Pune and Ahmedabad,” Mahalingam said in Mumbai yesterday. “At the same time time we are putting pressure on the system, the government to upgrade the infrastructure in these places.”
Tata Consultancy plunged 7.7 percent to 1,033.55 rupees in Mumbai yesterday, the steepest decline since May 19, 2009, after profit missed analysts’ estimates by 3 percent. The company’s operating margin narrowed by 1 percentage point in the three months ended Sept. 30.
‘Hardly Have a Choice’
India’s inflation exceeded 9 percent for a 10th straight month in September, reducing room for the central bank to pause its record interest rate increases and maintaining pressure on wages. Salaries in India are set to rise the most in the Asia- Pacific region this year, according to an Aon Hewitt LLC survey released on March 8.
Wages are likely to rise an average 12.9 percent in 2011, compared with 11.7 percent last year, according to the survey of 531 organizations from 18 primary industry sectors in December and January. Chinese salaries may rise 9 percent, while those in the Philippines 7 percent, Aon Hewitt said.
Tata Consultancy and other Indian software developers “hardly have a choice in terms of this expansion,” Naik said. “It has to happen in smaller towns.”
Second-tier cities like Jaipur and Ahmedabad have operating costs that are 20 percent to 30 percent lower than established technology hubs like Bangalore, according to a May report from Everest Group, a Dallas-based firm that advises companies on outsourcing strategies.
Labor Pool
Tata Consultancy will increase its workforce in Ahmedabad to 12,000 from 2,000, and add to its “small presence” in Pune with a new facility that can hold 17,000 workers, Mahalingam said. The centers will offer a range of services including business process outsourcing and call centers, software and application development and infrastructure management, he said.
The challenges of expanding to small cities include poor infrastructure, unreliable power supply, poor English proficiency and a lower-quality labor pool, according to Everest Group.
“Infrastructure will be a very major challenge,” Mahalingam said. “If I have a choice of only two airlines to go to Bhubaneswar from Delhi, I think that’s going to put a phenomenal amount of pressure.”
Tata Consultancy will only expand into tier-two cities that have adequate engineering graduates, Mahalingam said.
“We have chosen places where there is talent,” he said. “We are not going to any place where we’re not in an active program of recruitment from colleges.”
Tata Consultancy is on track to add a gross 60,000 workers in the year ending March 2012, Chief Executive Officer N. Chandrasekaran said.
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The company, based in Mumbai, is building campuses and adding workers in cities including Ahmedabad, Pune, Bhubaneswar, Nagpur, Indore and Cochin, Chief Financial Officer S. Mahalingam said in an interview. The company’s shares plunged the most in more than two years yesterday after earnings missed analysts’ estimates amid rising costs.
Employee costs at Tata Consultancy, which spent $2.8 billion on salaries in the year ending March, rose 27 percent last quarter exceeding the 15 percent increase in profit. While expanding in cheaper cities will help reduce costs, lack of infrastructure and quality of employees may create new challenges, according to Vihang Naik, an analyst at MF Global Sify Securities Pvt.
“The biggest campuses that we’re building now are in Pune and Ahmedabad,” Mahalingam said in Mumbai yesterday. “At the same time time we are putting pressure on the system, the government to upgrade the infrastructure in these places.”
Tata Consultancy plunged 7.7 percent to 1,033.55 rupees in Mumbai yesterday, the steepest decline since May 19, 2009, after profit missed analysts’ estimates by 3 percent. The company’s operating margin narrowed by 1 percentage point in the three months ended Sept. 30.
‘Hardly Have a Choice’
India’s inflation exceeded 9 percent for a 10th straight month in September, reducing room for the central bank to pause its record interest rate increases and maintaining pressure on wages. Salaries in India are set to rise the most in the Asia- Pacific region this year, according to an Aon Hewitt LLC survey released on March 8.
Wages are likely to rise an average 12.9 percent in 2011, compared with 11.7 percent last year, according to the survey of 531 organizations from 18 primary industry sectors in December and January. Chinese salaries may rise 9 percent, while those in the Philippines 7 percent, Aon Hewitt said.
Tata Consultancy and other Indian software developers “hardly have a choice in terms of this expansion,” Naik said. “It has to happen in smaller towns.”
Second-tier cities like Jaipur and Ahmedabad have operating costs that are 20 percent to 30 percent lower than established technology hubs like Bangalore, according to a May report from Everest Group, a Dallas-based firm that advises companies on outsourcing strategies.
Labor Pool
Tata Consultancy will increase its workforce in Ahmedabad to 12,000 from 2,000, and add to its “small presence” in Pune with a new facility that can hold 17,000 workers, Mahalingam said. The centers will offer a range of services including business process outsourcing and call centers, software and application development and infrastructure management, he said.
The challenges of expanding to small cities include poor infrastructure, unreliable power supply, poor English proficiency and a lower-quality labor pool, according to Everest Group.
“Infrastructure will be a very major challenge,” Mahalingam said. “If I have a choice of only two airlines to go to Bhubaneswar from Delhi, I think that’s going to put a phenomenal amount of pressure.”
Tata Consultancy will only expand into tier-two cities that have adequate engineering graduates, Mahalingam said.
“We have chosen places where there is talent,” he said. “We are not going to any place where we’re not in an active program of recruitment from colleges.”
Tata Consultancy is on track to add a gross 60,000 workers in the year ending March 2012, Chief Executive Officer N. Chandrasekaran said.
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED. Tata Consultancy Services Ltd. (TCS), Asia’s biggest employer of software developers, will shift hiring to low-cost cities in India as it struggles to maintain profitability amid spiraling labor costs.
The company, based in Mumbai, is building campuses and adding workers in cities including Ahmedabad, Pune, Bhubaneswar, Nagpur, Indore and Cochin, Chief Financial Officer S. Mahalingam said in an interview. The company’s shares plunged the most in more than two years yesterday after earnings missed analysts’ estimates amid rising costs.
Employee costs at Tata Consultancy, which spent $2.8 billion on salaries in the year ending March, rose 27 percent last quarter exceeding the 15 percent increase in profit. While expanding in cheaper cities will help reduce costs, lack of infrastructure and quality of employees may create new challenges, according to Vihang Naik, an analyst at MF Global Sify Securities Pvt.
“The biggest campuses that we’re building now are in Pune and Ahmedabad,” Mahalingam said in Mumbai yesterday. “At the same time time we are putting pressure on the system, the government to upgrade the infrastructure in these places.”
Tata Consultancy plunged 7.7 percent to 1,033.55 rupees in Mumbai yesterday, the steepest decline since May 19, 2009, after profit missed analysts’ estimates by 3 percent. The company’s operating margin narrowed by 1 percentage point in the three months ended Sept. 30.
‘Hardly Have a Choice’
India’s inflation exceeded 9 percent for a 10th straight month in September, reducing room for the central bank to pause its record interest rate increases and maintaining pressure on wages. Salaries in India are set to rise the most in the Asia- Pacific region this year, according to an Aon Hewitt LLC survey released on March 8.
Wages are likely to rise an average 12.9 percent in 2011, compared with 11.7 percent last year, according to the survey of 531 organizations from 18 primary industry sectors in December and January. Chinese salaries may rise 9 percent, while those in the Philippines 7 percent, Aon Hewitt said.
Tata Consultancy and other Indian software developers “hardly have a choice in terms of this expansion,” Naik said. “It has to happen in smaller towns.”
Second-tier cities like Jaipur and Ahmedabad have operating costs that are 20 percent to 30 percent lower than established technology hubs like Bangalore, according to a May report from Everest Group, a Dallas-based firm that advises companies on outsourcing strategies.
Labor Pool
Tata Consultancy will increase its workforce in Ahmedabad to 12,000 from 2,000, and add to its “small presence” in Pune with a new facility that can hold 17,000 workers, Mahalingam said. The centers will offer a range of services including business process outsourcing and call centers, software and application development and infrastructure management, he said.
The challenges of expanding to small cities include poor infrastructure, unreliable power supply, poor English proficiency and a lower-quality labor pool, according to Everest Group.
“Infrastructure will be a very major challenge,” Mahalingam said. “If I have a choice of only two airlines to go to Bhubaneswar from Delhi, I think that’s going to put a phenomenal amount of pressure.”
Tata Consultancy will only expand into tier-two cities that have adequate engineering graduates, Mahalingam said.
“We have chosen places where there is talent,” he said. “We are not going to any place where we’re not in an active program of recruitment from colleges.”
Tata Consultancy is on track to add a gross 60,000 workers in the year ending March 2012, Chief Executive Officer N. Chandrasekaran said.
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Monday, October 17, 2011
Asian Stocks Drop Most in Two Weeks as Germany Dashes Europe-Debt Optimism By Shani Raja - Oct 17, 2011
Asian stocks fell, driving the region’s benchmark index toward its biggest drop in two weeks, as Germany damped expectations for a fast resolution to Europe’s debt crisis, souring the outlook for Asian exporters and banks.
BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, slipped 3.4 percent in Sydney after commodity prices slumped. Sony Corp., which gets about 70 percent of its revenue overseas, dropped 1.7 percent in Tokyo. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, lost 1.8 percent after U.S. banks Citigroup Inc. and Wells Fargo & Co. said quarterly revenue dropped.
“The implied lack of urgency by European policy makers will create additional uncertainty regarding a robust, all- encompassing solution to Europe’s growing list of problems,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Increased uncertainty will feed through to investor nervousness and is likely to see risk reduced by investors as they move to lock in gains from the past couple of weeks.”
The MSCI Asia Pacific Index lost 2.1 percent to 116.84 as of 11:14 a.m. in Tokyo. More than 13 stocks declined for each that advanced after Steffen Seibert, spokesman for German Chancellor Angela Merkel, said Europe’s leaders won’t provide the quick end to the debt crisis that global policy makers are pushing for at an Oct. 23 summit.
All 10 industry groups on the Asian gauge retreated today. The measure climbed 3.4 percent last week after Merkel and French President Nicolas Sarkozy pledged to deliver a plan to recapitalize Europe’s banks and address Greece’s debt crisis. Raw-material stocks led the declines.
‘Complex Issue’
“The reality is that we’re dealing with a complex multi- year issue that has a lot of stakeholders involved and can’t be resolved overnight,” said Matt Riordan, who helps manage close to $6.6 billion in Sydney at Paradice Investment Management Pty.
Japan’s Nikkei 225 Stock Average fell 1.5 percent today and Australia’s S&P/ASX 200 Index lost 1.9 percent. South Korea’s Kospi Index declined 1.5 percent. Hong Kong’s Hang Seng Index slumped 3.2 percent.
The MSCI Asia Pacific Index climbed 2.1 percent yesterday after Group of 20 finance chiefs meeting in Paris endorsed parts of a plan to contain Europe’s debt crisis. Optimism the region’s officials were developing a plan to help banks weather losses on sovereign debt also fueled gains last week in stocks and the euro.
Debt Crisis
Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge lost 1.9 percent in New York yesterday after Germany said European Union leaders won’t provide a complete fix to the euro-area debt crisis. The S&P 500 rose 6 percent last week.
Germany “doused expectations there would be a definitive solution at this weekend’s European summit,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “So anticipated and hoped for has been this solution that any disappointments, setbacks during this current ‘gestation period’ are going to be met with heavy selling.”
New York-traded copper futures dropped 0.9 percent yesterday, while the London Metal Exchange Index of prices for six metals including copper and aluminum slipped 0.6 percent. Crude oil futures in New York slid 0.5 percent. Oil fell as much as 0.8 percent today, and copper futures declined as much as 1.3 percent.
The MSCI Asia Pacific Index dropped 13 percent this year through yesterday, compared with a 4.5 percent loss by the S&P 500 and a 14 percent decline by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.1 times estimated earnings on average, compared with 12 times for the S&P 500 and 10.1 times for the Stoxx 600.
The German spokesman’s comments are “another indication of the political obstacles to forging a workable solution for the eurozone,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “Investors have been reminded of the need for caution until details of any proposal are formally released and agreed on.”
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, slipped 3.4 percent in Sydney after commodity prices slumped. Sony Corp., which gets about 70 percent of its revenue overseas, dropped 1.7 percent in Tokyo. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, lost 1.8 percent after U.S. banks Citigroup Inc. and Wells Fargo & Co. said quarterly revenue dropped.
“The implied lack of urgency by European policy makers will create additional uncertainty regarding a robust, all- encompassing solution to Europe’s growing list of problems,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Increased uncertainty will feed through to investor nervousness and is likely to see risk reduced by investors as they move to lock in gains from the past couple of weeks.”
The MSCI Asia Pacific Index lost 2.1 percent to 116.84 as of 11:14 a.m. in Tokyo. More than 13 stocks declined for each that advanced after Steffen Seibert, spokesman for German Chancellor Angela Merkel, said Europe’s leaders won’t provide the quick end to the debt crisis that global policy makers are pushing for at an Oct. 23 summit.
All 10 industry groups on the Asian gauge retreated today. The measure climbed 3.4 percent last week after Merkel and French President Nicolas Sarkozy pledged to deliver a plan to recapitalize Europe’s banks and address Greece’s debt crisis. Raw-material stocks led the declines.
‘Complex Issue’
“The reality is that we’re dealing with a complex multi- year issue that has a lot of stakeholders involved and can’t be resolved overnight,” said Matt Riordan, who helps manage close to $6.6 billion in Sydney at Paradice Investment Management Pty.
Japan’s Nikkei 225 Stock Average fell 1.5 percent today and Australia’s S&P/ASX 200 Index lost 1.9 percent. South Korea’s Kospi Index declined 1.5 percent. Hong Kong’s Hang Seng Index slumped 3.2 percent.
The MSCI Asia Pacific Index climbed 2.1 percent yesterday after Group of 20 finance chiefs meeting in Paris endorsed parts of a plan to contain Europe’s debt crisis. Optimism the region’s officials were developing a plan to help banks weather losses on sovereign debt also fueled gains last week in stocks and the euro.
Debt Crisis
Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge lost 1.9 percent in New York yesterday after Germany said European Union leaders won’t provide a complete fix to the euro-area debt crisis. The S&P 500 rose 6 percent last week.
Germany “doused expectations there would be a definitive solution at this weekend’s European summit,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “So anticipated and hoped for has been this solution that any disappointments, setbacks during this current ‘gestation period’ are going to be met with heavy selling.”
New York-traded copper futures dropped 0.9 percent yesterday, while the London Metal Exchange Index of prices for six metals including copper and aluminum slipped 0.6 percent. Crude oil futures in New York slid 0.5 percent. Oil fell as much as 0.8 percent today, and copper futures declined as much as 1.3 percent.
The MSCI Asia Pacific Index dropped 13 percent this year through yesterday, compared with a 4.5 percent loss by the S&P 500 and a 14 percent decline by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.1 times estimated earnings on average, compared with 12 times for the S&P 500 and 10.1 times for the Stoxx 600.
The German spokesman’s comments are “another indication of the political obstacles to forging a workable solution for the eurozone,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “Investors have been reminded of the need for caution until details of any proposal are formally released and agreed on.”
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, October 16, 2011
Ambani Armed With $12.6B to Buy Energy Assets
By Rakteem Katakey - Oct 16, 2011
Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) is poised to use its record cash for overseas acquisitions to take advantage of the cheapest valuations of oil and natural gas companies in three years as profit growth slows.
“Reliance has a strong balance sheet and sustained earning base to pursue growth opportunities,” Chairman Ambani, 54, said Oct. 15 after the Indian refiner and explorer reported that a 16 percent rise in second-quarter profit and sale of assets to BP Plc (BP/) helped boost cash to 614.9 billion rupees ($12.6 billion).
Reliance, PetroChina Co. and Cnooc Ltd. are among Asian companies likely to spend $150 billion over the next five years on assets to secure energy supplies for the region’s growing economies, according to Sanford C. Bernstein Co. Ambani has bought shale gas assets in the U.S. and is targeting acreages in Canada after a drop in gas output in India led to an 19 percent decline in his company’s shares in Mumbai trading this year.
“A large energy acquisition may be just what they need to kick-start things,” said Kamlesh Kotak, vice president of research at Asian Markets Securities Pvt. in Mumbai. “That will be the best possible use of their cash, which has become pretty huge now.”
Reliance shares fell 1.5 percent to 854.25 rupees at 9:18 a.m. in Mumbai trading, while the benchmark Sensitive Index gained 0.3 percent.
Reliance holds the third-largest cash and short-term investments among energy companies in Asia Pacific, according to data compiled by Bloomberg. PetroChina and Cnooc have the most. The Indian company received $7.2 billion from the sale of a 30 percent stake in 21 oil and gas fields to BP and is working with the London-based explorer to help reverse the drop in output at India’s biggest gas deposit.
BP Alliance
Output at the KG-D6 field may start rising by 2014, Robert Dudley, BP’s chief executive officer, said Sept. 28. Reliance and BP have sought permission from the Indian government to develop smaller fields to make up for declining output at KG-D6’s two main producing areas.
“The future depends very much on what the BP-Reliance joint venture can do to turn around their upstream business and what Reliance will do with their cash,” Neil Beveridge and Ying Lou, Hong Kong-based analysts at Bernstein, said in a report today. “We expect Reliance to use its strong cash position to fund M&A, potentially buying overseas upstream assets.”
Bernstein and Goldman Sachs Group Inc. have predicted a surge of oil and gas takeovers after global energy shares fell 21 percent in the third quarter, the worst three months since 2008. Crude in New York has declined 4.8 percent this year amid concern that Europe’s debt crisis and a U.S. economic slowdown will drag the world back into recession.
Debt, Earnings
Reliance’s debt stood at 714 billion rupees as of Sept. 30. The explorer plans to have more cash than debt by March 31 as it seeks to expand into new business areas, Ambani said June 3.
Net income in the three months ended Sept. 30 was 57.03 billion rupees, Reliance said Oct. 15. That matched the median estimate of 22 analysts surveyed by Bloomberg and was little changed from the preceding quarter.
Sales rose 37 percent to 785.7 billion rupees from a year earlier, and were less than the record 810.20 billion rupees in the three months ended June 30. Gains processing each barrel of crude oil into fuels followed a similar pattern, rising to $10.1 in the quarter from $7.9 in the same period a year earlier, and easing from $10.3 a barrel in April-June quarter.
Refining Margins
Refining margins may fall next year as global capacity additions, including 730,000 barrels a day in China, exceed demand growth, according to an Oct. 5 note by Bank of America Corp. analyst Sabine Schels.
Pretax profit from refining increased 40 percent to 30.8 billion rupees from a year earlier. Other income, including interest earned on cash deposits, climbed 64 percent to 1.1 billion rupees. The Reserve Bank of India has increased interest rates 12 times since March 2010 to curb inflation, helping companies earn more money on their cash.
“Reliance is making more money out of money and less out of oil,” said Jagannadham Thunuguntla, chief strategist at SMC Wealth Management Services Ltd. in New Delhi. “That shows operations are stagnating,” he said. “With BP on board, they have an opportunity to work with them on overseas projects.”
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) is poised to use its record cash for overseas acquisitions to take advantage of the cheapest valuations of oil and natural gas companies in three years as profit growth slows.
“Reliance has a strong balance sheet and sustained earning base to pursue growth opportunities,” Chairman Ambani, 54, said Oct. 15 after the Indian refiner and explorer reported that a 16 percent rise in second-quarter profit and sale of assets to BP Plc (BP/) helped boost cash to 614.9 billion rupees ($12.6 billion).
Reliance, PetroChina Co. and Cnooc Ltd. are among Asian companies likely to spend $150 billion over the next five years on assets to secure energy supplies for the region’s growing economies, according to Sanford C. Bernstein Co. Ambani has bought shale gas assets in the U.S. and is targeting acreages in Canada after a drop in gas output in India led to an 19 percent decline in his company’s shares in Mumbai trading this year.
“A large energy acquisition may be just what they need to kick-start things,” said Kamlesh Kotak, vice president of research at Asian Markets Securities Pvt. in Mumbai. “That will be the best possible use of their cash, which has become pretty huge now.”
Reliance shares fell 1.5 percent to 854.25 rupees at 9:18 a.m. in Mumbai trading, while the benchmark Sensitive Index gained 0.3 percent.
Reliance holds the third-largest cash and short-term investments among energy companies in Asia Pacific, according to data compiled by Bloomberg. PetroChina and Cnooc have the most. The Indian company received $7.2 billion from the sale of a 30 percent stake in 21 oil and gas fields to BP and is working with the London-based explorer to help reverse the drop in output at India’s biggest gas deposit.
BP Alliance
Output at the KG-D6 field may start rising by 2014, Robert Dudley, BP’s chief executive officer, said Sept. 28. Reliance and BP have sought permission from the Indian government to develop smaller fields to make up for declining output at KG-D6’s two main producing areas.
“The future depends very much on what the BP-Reliance joint venture can do to turn around their upstream business and what Reliance will do with their cash,” Neil Beveridge and Ying Lou, Hong Kong-based analysts at Bernstein, said in a report today. “We expect Reliance to use its strong cash position to fund M&A, potentially buying overseas upstream assets.”
Bernstein and Goldman Sachs Group Inc. have predicted a surge of oil and gas takeovers after global energy shares fell 21 percent in the third quarter, the worst three months since 2008. Crude in New York has declined 4.8 percent this year amid concern that Europe’s debt crisis and a U.S. economic slowdown will drag the world back into recession.
Debt, Earnings
Reliance’s debt stood at 714 billion rupees as of Sept. 30. The explorer plans to have more cash than debt by March 31 as it seeks to expand into new business areas, Ambani said June 3.
Net income in the three months ended Sept. 30 was 57.03 billion rupees, Reliance said Oct. 15. That matched the median estimate of 22 analysts surveyed by Bloomberg and was little changed from the preceding quarter.
Sales rose 37 percent to 785.7 billion rupees from a year earlier, and were less than the record 810.20 billion rupees in the three months ended June 30. Gains processing each barrel of crude oil into fuels followed a similar pattern, rising to $10.1 in the quarter from $7.9 in the same period a year earlier, and easing from $10.3 a barrel in April-June quarter.
Refining Margins
Refining margins may fall next year as global capacity additions, including 730,000 barrels a day in China, exceed demand growth, according to an Oct. 5 note by Bank of America Corp. analyst Sabine Schels.
Pretax profit from refining increased 40 percent to 30.8 billion rupees from a year earlier. Other income, including interest earned on cash deposits, climbed 64 percent to 1.1 billion rupees. The Reserve Bank of India has increased interest rates 12 times since March 2010 to curb inflation, helping companies earn more money on their cash.
“Reliance is making more money out of money and less out of oil,” said Jagannadham Thunuguntla, chief strategist at SMC Wealth Management Services Ltd. in New Delhi. “That shows operations are stagnating,” he said. “With BP on board, they have an opportunity to work with them on overseas projects.”
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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