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Saturday, July 21, 2012

Reliance Profit Declines on Refining Margin, Lower Gas Output

Reliance Industries Ltd. (RIL), operator of the world’s biggest oil refining complex, reported profit slumped for the third straight quarter on declining natural gas output in India and reduced earnings from fuel sales.
Net income fell 21 percent to 44.7 billion rupees ($809 million) in the three months ended June 30, according to a stock exchange filing yesterday. The median estimate of 28 analysts compiled by Bloomberg was 43.7 billion rupees. Net sales rose 13 percent to 918.8 billion rupees.
Declining earnings have cost Mumbai-based Reliance its position as India’s biggest company by market value. Lower demand for fuels following the European debt crisis and global economic slowdown and reduced output at Reliance’s largest natural gas deposit threaten billionaire Chairman Mukesh Ambani’s target of doubling operating profit within five years.
“Operations are still weak and the outlook for gas output and refining continue to be difficult,” said Juergen Maier, a fund manager in Vienna at Raiffeisen Capital Management, which manages about $1.1 billion in emerging-market assets, including Indian stocks. “Globally economies are slowing down, which makes it difficult to improve the margin for refining.”
Reliance shares fell 0.7 percent to 722.65 rupees at the close yesterday in Mumbai, giving the company a market value of about $43 billion, the third-highest among India’s listed companies. The stock has gained 4.3 percent this year, lagging behind the 11 percent increase in the benchmark Sensitive Index. (SENSEX)

Refining Margin

Daiwa Securities Co. and Antique Stock Broking Ltd. reduced the stock to hold last month. Reliance has eight sell ratings by analysts, 18 holds and 26 buys, according to data compiled by Bloomberg. The number of buy recommendations has dropped to 50 percent of the total, the lowest since December 2010.
Europe’s debt crisis and a slowdown in China’s economy have cut fuel demand, narrowing refining margins for companies including Reliance and China Petroleum & Chemical Corp. (600028) China, the world’s second-biggest oil consumer, has cut local fuel prices three times since May, reducing profit for refiners including PetroChina Co.
Reliance made a profit of $7.6 on every barrel of crude it processed into fuels in the quarter, compared with $10.3 a barrel a year earlier, the company said in a statement.
Profit from turning Dubai crude into fuels in Singapore, a regional benchmark, averaged $3.37 a barrel in the quarter, compared with $5.16 a barrel a year earlier and $4.61 in the preceding quarter, according to data compiled by Bloomberg. The refining margin turned to a loss of 19 cents on June 29, the lowest since Nov. 15, 2010.

Low-Grade Crude

Reliance’s two adjacent refining plants at Jamnagar in the western state of Gujarat can turn a combined 1.24 million barrels of crude into fuels daily. The facilities are capable of turning cheap, low-grade crude into high-value fuels. A narrowing difference between lighter crude oil, which is typically expensive, and heavier varieties that are cheaper, hurts Reliance’s earnings.
The average difference between light Brent crude oil and heavier Dubai oil was $2.53 a barrel in the quarter ended June 30, compared with $6.06 a year earlier, according to PVM Oil Associates Ltd., a London-based crude and refined-products broker. The spread fell to $1.37 a barrel on June 12, the lowest since March 15.

Spending Plan

Reliance is spending $8 billion to boost petrochemical capacity and $4 billion on a plant to make a combustible gas to power its refineries, according to an April 20 presentation on its website. The gas plant will widen its refining margin by as much as 40 percent in three years by cutting the use of more expensive imported gas, Ambani told shareholders June 7.
Reliance had cash and equivalents of 707.32 billion rupees as of June 30, the company said in the statement. Debt stood at 732.13 billion rupees.
Reliance is also struggling to raise output from its gas field, off the east coast in the Bay of Bengal. Niko Resources Ltd. (NKO), which owns a 10 percent stake in the KG-D6 block, cut the estimate for its share of proved and probable gas reserves to 193 billion cubic feet as of March 31, according to a June 20 statement, which didn’t provide year-earlier figures.
Reliance had 104 billion cubic meters, or 3.7 trillion cubic feet, of proved gas reserves at all its assets as of March 31, according to its annual report. The explorer reduced its estimate of reserves by 6.7 percent, or 12.4 billion cubic meters, according to the report.
Gas output from KG-D6 fell 33.1 percent to 104.4 billion cubic feet in the quarter because of technical difficulties in the reservoir, Reliance said.
Reliance plans to invest 1 trillion rupees in the company’s Indian assets, including petrochemicals and telecommunications, in the next five years to double operating profit, Ambani told shareholders on June 7.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

Friday, July 20, 2012

Weakest Monsoon Since 2009 to Shrink India Rice Harvest

The rice harvest in India, the world’s second-biggest producer, is set to drop from an all-time high as the weakest monsoon in three years slows planting, potentially boosting global prices. Futures climbed for the first time in four days.
“It will be difficult to match last year’s record rice production,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute in Manila. Output was 104.3 million tons in the year ended June 30.
A 22 percent shortfall in monsoon rains delayed sowing of crops from rice to cotton, stoking a rally in commodity prices and threatening to accelerate India’s inflation that exceeded 7 percent for a fifth straight month in June. Dry weather from the U.S. to Australia has parched fields, pushing up corn, wheat and soybean prices on concern global supplies will be curbed. Costly rice, staple for half the world, may increase global food prices forecast by the United Nations to advance this month.
“The whole grains complex of wheat, corns, soybeans are forcing rice prices higher as well,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity- markets newsletter in Sydney. “Indian production is very important for the market.”
Rice planting in India dropped 19 percent to 9.68 million hectares (24 million acres) this year from 12.04 million hectares a year earlier, the farm ministry said July 13. The country is estimated to export 8 million tons of rice in 2011-2012, according to the U.S. Department of Agriculture, accounting for about 25 percent of the global trade.

FAO Forecast

World grain production will be lower in 2012 than expected a month ago, the United Nations’ Food & Agriculture Organization said July 5. Farmers across the world will harvest 2.4 billion tons of grain this year, 23 million tons less than forecast on June 7, it said. A drop in the Indian harvest “will have an impact on global prices” this year, Mohanty said in an e-mail.
Rice for September delivery rose 1.2 percent to $15.68 per 100 pounds on the Chicago Board of Trade by 2:09 p.m. in Mumbai. Futures, which reached a two-month high of $15.765 on July 16, have advanced 5.5 percent this year.
A smaller Indian crop and potential curbs on exports may help Thailand, the world’s biggest shipper, boost sales, rice institute’s Mohanty said.
Thailand’s government has bought 9.5 million tons of unmilled rice from farmers between March 1 and July 9 under a state purchase program, the ministry of commerce said July 10.

Export Review

India will review its farm-good export rules after 15 days and consider setting limits on food crops that traders can stockpile to check a rally in prices of oilseeds and grain, Food Minister K.V. Thomas said July 18.
“With the monsoon playing hide and seek, it is a challenge for our farmers and scientists to maintain the food-grain output achieved in last two years,” Farm Minister Sharad Pawar said July 16 in New Delhi. The country won’t ban exports of rice and wheat as it has ample stockpiles, he said.
Monsoon, which accounts for more than 70 percent of India’s annual rainfall, is the worst since 2009 when showers were 22 percent less than a 50-year average. Rainfall in July, the wettest month in the June-September rainy season, may miss a June forecast for a normal rain, L.S. Rathore, director general of the India Meteorological Department, said July 16.
Food-grain production reached a record 257.44 million tons in the year ended June 30 after a second year of normal rains boosted harvests, the farm ministry said July 17. That prompted the government to lift curbs on exports of the grains last year. Non-basmati shipments totaled 5.25 million tons since September, according to the food ministry.

‘Happy Situation’

State reserves of rice are more than double the amount required to run welfare programs and emergencies and the government should take advantage of the price-rally to boost exports, said Atul Chaturvedi, chief executive of Adani Wilmar Ltd. Rice inventory was 30.7 million tons, compared with 26.9 million tons a year earlier, government data showed.
“In this scenario of rising prices, India is actually in a happy situation,” Chaturvedi said. “India should sell more rice and wheat in the global market to benefit from the rally in prices. The government should not ban exports.”
More than 235 million farmers depend on the monsoon for crops such as rice, peanuts, soybean and cotton. Sowing of monsoon crops begins in June and harvesting starts in September.
To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Thursday, July 19, 2012

Bloomberry Poaches Filipinos in Macau for Casino: Southeast Asia By Clarissa Batino and Norman P. Aquino - Jul 19, 2012

Bloomberry Resorts Corp. (BLOOM) is poaching Filipino talent from Macau as it prepares to lure Chinese gamblers from the world’s largest gaming hub to its $1 billion casino resort in Manila.

The company has already enticed more than 400 Philippine nationals from Macau and Singapore to work at its Solaire Manila Resort & Casino, which will target Chinese and local players, Chief Operating Officer Michael French said in a July 18 interview. Solaire needs as many as 4,500 workers and will open in the first quarter of 2013.

Solaire’s recruitment efforts show how Macau faces rising competition for casino workers and high-stake gamblers from smaller hubs such as the Philippines and Singapore. Visitors from mainland China boosted revenue in the former Portuguese colony by 42 percent to $34 billion in 2011, as casino operators from Las Vegas Sands Corp. (LVS) to Wynn Resorts Ltd. (WYNN) expanded.

“A Chinese high-roller is used to a style in Macau,” said French, referring to high-stake betters. “So why not hire someone who has been in that market for two or three years, who knows how these gamers think, understands the service style and the mentality of the Chinese gamer, and bring them back?”

The Philippine casino market is set to expand into a $3 billion industry by 2015 from $1.3 billion last year, CLSA Asia- Pacific Markets estimates.

“The Philippines’ gain is Macau’s loss,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. (BDO) in Manila, of Solaire’s push to draw more workers from Macau.

Talent Shortage

The jobless rate in the former Portuguese colony of about 500,000 people is 2 percent, the lowest since Bloomberg began tracking the data in 2002, making it harder for local casino operators to find workers. By contrast, the Philippine unemployment rate was 6.9 percent in June.

Bloomberry holds one of four licenses the Philippines awarded to operate gambling and hotel complexes in the 110- hectare (272-acre) Entertainment City Manila. Japanese billionaire Kazuo Okada, Genting Hong Kong Ltd. (GENHK) and the SM Group of the Philippines’ richest man Henry Sy also have permits.

The company’s loss widened to 99 million pesos ($2.4 million) in the first two months of 2012 from 17.51 million pesos a year earlier as costs rose more than sixfold. The stock is down 66 percent this year amid plans to sell more shares to meet regulatory rules on the public ownership of companies.

Among Macau casino operators, Sands China (1928) Ltd. is up 7.3 percent, SJM Holdings Ltd. (880) has gained 13 percent and MGM China Holdings Ltd. (2282) has added 10 percent.

Even Split

Locals will make up a majority of Bloomberry’s patrons in the first year, and it will take two years to three years to increase the share of international gamblers, French said. His ideal client mix is an even split of local and foreign gamblers, who are mostly interested in high-stakes betting. Such high- rollers can bet as much as $1 million per trip and at times, per hand in baccarat, he estimates.

Philippine casinos such as Bloomberry “won’t probably get the top high rollers,” said Richard Laneda, an analyst at Manila-based CitisecOnline. “But these can bring in the lower end of the VIP market in Macau or Singapore.”

Philippine billionaire Enrique Razon, Bloomberry’s chairman, said on June 25 that the company will compete with integrated casino resorts in Macau, Singapore and other developments in Asia. Entertainment City Manila can in a shorter period surpass the gains made by Singapore, where the gaming industry generated $6.5 billion in revenue in 2011, Razon said at that time.

Lower Tax Rate

A lower charge or levy for casino operators in the Philippines than in Macau and Singapore will help Bloomberry and other Manila casinos, French said in the interview. The Philippines collects a regulatory fee of 15 percent to 17 percent on revenue from so-called high rollers compared with Macau’s 40 percent and Singapore’s 25 percent, he estimates.

Manila is also more accessible than Macau, and improvements in infrastructure and rising investor confidence should bolster its allure, he said.

The Philippines estimates the Manila casino development will add 1 million tourists each year and employ 40,000. Bloomberry plans to hold one more job fair each in Macau and Singapore to fill the remaining 150 management positions in the group, targeting Filipinos who have gained experience working in casinos, hotels and luxury liners, French said.

Overseas Filipinos

About 1.3 million citizens left the Philippines last year for jobs overseas, according to government data. Money Filipinos abroad sent home made up almost 10 percent of the economy that grew to $225 billion last year.

The country’s economy grew 6.4 percent in the first quarter, the fastest pace in Southeast Asia. Economic expansion in the three months ended June remained healthy, central bank Governor Amando Tetangco said on July 13.

Money sent home by more than 9.4 million Filipinos abroad is the Philippines’ largest source of foreign exchange after exports. Cash transfers climbed to a record $20.1 billion in 2011 and the central bank expects remittances to rise 5 percent this year.

Bloomberry is bringing in Filipinos with at least two years of experience and an understanding of the business, French said.

Solaire’s senior vice president for gaming operations is a returning Filipino who has worked for hotels in the Chinese city and Singapore, and its director for hotel services comes from Macau operator Galaxy Entertainment Group Ltd. (27), French said. Its vice president for table games is a Filipina coming home after years overseas.

“This is not a case of a bunch of expatriates running the company,” French said. “We’re bringing in Filipinos who understand the business and these are world-class folk.”

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net Norman P. Aquino in Manila at naquino1@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net Lars Klemming at lklemming@bloomberg.net

Wednesday, July 18, 2012

Jindal to Invest $6.3 Billion as Bolivia Fails: Corporate India By Rajesh Kumar Singh - Jul 18, 2012

Jindal Steel & Power Ltd. (JSP), India’s second-biggest steelmaker by value, will spend 350 billion rupees ($6.3 billion) to expand production at home and in Oman after scrapping a deal to develop a Bolivian iron ore mine.

Factory capacity will more than quadruple to 13 million metric tons by 2015, V.R. Sharma, chief executive officer of the steel business, said yesterday in a phone interview. The company, which runs a 3 million ton-a-year mill in India’s central state of Chhattisgarh, is building a 5 million ton plant in the eastern state of Orissa, a 3 million ton mill in Jharkhand and a 2 million ton facility in Oman, he said.

Jindal, run by billionaire lawmaker Naveen Jindal, said June 17 it terminated a contract to build the $2.1 billion El Mutun mine, joining Tata Steel Ltd. (TATA) and Steel Authority of India Ltd. (SAIL) in failing to develop projects overseas. Indian steelmakers have sought resources in Africa, Canada, the U.S. and Australia and explored markets in Europe, the Middle East and Southeast Asia to set up new capacity.

“The termination of the Bolivian project is positive for the company as it will help divert investments to more fruitful projects,” said Niraj Shah, an analyst at Mumbai-based Fortune Equity Brokers India. “It was surprising how Jindal got such a big deposit without any competition from mining heavyweights BHP Billiton Ltd. (BHP) and Rio Tinto. It always looked fraught with risk.”

Shah, who has a buy recommendation on the stock, said he did not count the Bolivian project in its valuation.

The shares of New Delhi-based Jindal rallied 2.6 percent to 426.55 rupees at the close in Mumbai yesterday. The stock has declined 5.9 percent this year, compared with an 11 percent gain in the benchmark Sensitive Index. (SENSEX)

‘Not Smooth’

“There are challenges in India, but things are not smooth elsewhere either,” Sharma, 59, said. “The growth markets for steel are India and Southeast Asia and our projects are well placed to feed this market.”

Jindal signed an accord in 2007 with the Bolivian government to develop 20 billion tons of iron ore reserves at El Mutun, build a 1.7 million ton steel mill, a sponge iron plant and an iron pellet factory. India’s iron ore reserves total about 8 billion tons.

Jindal, which has already spent about 150 billion rupees on the new projects, will buy iron ore fines from miners in India, including NMDC Ltd. (NMDC), and convert it into pellets for use in the furnaces, Sharma said. Unlike most of its rivals, Jindal operates a pellet plant and is building two more to expand its capacity for turning fines into pellets.

Tax, Freight

Iron ore fines, dust that currently does not find a market in India, comprise more than 90 percent of the nation’s iron ore exports. An increase in export duty and railway freight and a drop in prices of iron ore are hampering overseas sales, said R.K. Sharma, secretary general at the Federation of Indian Mineral Industries, a lobby group for the mining industry.

“Miners will be seeking more and more customers within the country,” Sharma said in an interview.

Iron ore with 62 percent content delivered to the Chinese port of Tianjin fell 0.9 percent to $128.30 a ton yesterday, the lowest price since Nov. 8, according to data from The Steel Index Ltd. Prices are down 7.4 percent this year. Iron ore will average $143 a ton this year, with the short-term outlook dependent on economic stimulus from China, the world’s largest importer, researcher Wood Mackenzie Ltd. said.

Price Volatility

Jindal’s strategy to buy its entire iron ore requirement from external suppliers will expose the company to price volatility and uncertain shipments, said Giriraj Daga, an analyst with Nirmal Bang Securities Ltd. in Mumbai. The stock has suffered also because of the company’s failure to secure coal supplies for its steel and power businesses, he said.

“You don’t think of making money from a steel plant which is totally dependent on the market for iron ore,” Daga said.

While demand for cars, houses and appliances is stoking steel consumption in India, work on new capacity has slowed because of farmer opposition to land acquisition and delays in environmental and mining approvals. Local projects by producers such as Steel Authority of India, Tata Steel and Essar Steel Ltd. have been delayed and face cost overruns, said A.S. Firoz, chief economist at the steel ministry.

“The constraints are numerous and there’s no change except for further deepening of some of the problems over the past few months,” Firoz said in a telephone interview. “Companies are facing difficulties in getting land, capital, raw material and skilled labor.”

Power Delay

The Bolivian setback also comes at a time when Jindal’s plan to expand its power business is facing delays because of the slow pace of government clearances and inadequate fuel supplies.

A lack of coal and gas has prompted Indian power-generation companies, including Adani Power Ltd., GVK Power & Infrastructure Ltd. and Reliance Power Ltd. (RPWR), to defer projects with a total capacity of 42 gigawatts. NTPC Ltd. (NTPC), the nation’s biggest generator, has scaled back plans to add coal-fired capacity by 42 percent in the five years ending 2017.

Jindal is racing to add 1,200 megawatts of generation capacity at Chhattisgarh, half of the planned expansion at the site, to avail tax breaks valid until March 2013, according to Nirmal Bang Securities’ Daga. Operating income from Jindal’s power business was lower than from the steel operations in the year ended March 31, the first time in four years.

To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

Tuesday, July 17, 2012

Jindal Steel Terminates $2.1 Billion Bolivia Iron Project By Alex Emery - Jul 17, 2012

Jindal Steel & Power Ltd. (JSP), India’s second-biggest steelmaker by market value, said it terminated a contract to build the $2.1 billion El Mutun iron mine in Bolivia, the biggest investment project to be canceled since President Evo Morales took office in 2006.

Bolivia offered a quarter of the 10 million cubic meters a day of natural gas originally pledged and failed to provide enough land for the project, New Delhi-based Jindal said today in a statement posted on its website. Bolivia’s government said it will call for new bids for the project within six months.

“Due to the non-fulfillment of the contractual obligations and unwillingness to fulfill the contract on the part of the government of Bolivia, Jindal has been forced to terminate the contract,” the company said, adding it plans to pursue international arbitration.

Jindal, which signed a contract in 2007 to develop 20 billion tons of iron-ore reserves at El Mutun, had planned to build a 1.7 million ton-per-year steel plant in addition to a sponge-iron factory, a pellet unit and a power project, according to the company’s website. Jindal has spent $90 million on the project to date, according to the company.

Investment has dwindled in the landlocked Andean nation since Morales nationalized gas fields, telecommunications and electricity companies. During the past month, the government has seized mines belonging to Glencore International Plc (GLEN) and South American Silver Corp. (SAC)

‘Economic Weakness’

Jindal withdrew from the project for lack of funds and not because of government pressure, Mining Minister Mario Virreira said. The government seized the company’s $36 million guarantee for failing to meet its contract, he said.

“We’re all aware of Jindal’s lack of serious economic management and economic weakness,” Virreira said today in a press conference in La Paz broadcast by state Radio Patria Nueva. “This puts an end to Jindal’s participation in the country.”

Future bidders will have to provide financial guarantees for at least 25 percent of investment commitments, Virreira said.

Jindal’s New Delhi-based spokesman Vivek Sharma didn’t immediately respond to a telephone call and e-mail outside business hours.

Jindal, which posted a $1 billion profit on $3.55 billion in revenue last year, fell 0.8 percent to 415.65 rupees in Bombay. The shares have dropped 8 percent this year.

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net;

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

Monday, July 16, 2012

Gold Climbs as U.S. Retail Data Increase Stimulus Speculation By Glenys Sim - Jul 16, 2012

Gold advanced after data showed that U.S. retail sales unexpectedly declined last month, increasing speculation that the Federal Reserve will take more steps to shore up the world’s biggest economy.

Spot gold climbed as much as 0.4 percent to $1,596.25 an ounce, and was at $1,595 at 9:42 a.m. in Singapore. August- delivery bullion gained as much as 0.3 percent to $1,596 an ounce on the Comex in New York, and traded at $1,594.50.

Data yesterday showed U.S. retail sales dropped 0.5 percent in June, after a 0.2 percent fall in May, and compared with a 0.2 percent gain projected in a Bloomberg survey. The dollar was lower against most of its major counterparts before Fed Chairman Ben S. Bernanke testifies before Congress today and tomorrow, and addresses the outlook for growth.

“The probability of being right about new quantitative easing is growing with each poor data print,” Bart Melek, head of commodity strategy at TD Securities Inc., wrote in a note. “Gold tends to rally anytime economic data materially disappoints, with the logic being that the Fed is more likely to expand its balance sheet and other central banks are more likely to stimulate if the economy is performing badly.”

The International Monetary Fund yesterday cut its 2013 global growth forecast as Europe’s debt crisis slows expansion in emerging markets from China to India. A U.S. rebound is moderating, the fund said, predicting growth worldwide will be 3.9 percent next year, less than the 4.1 percent target in April.

Cash gold almost doubled from December 2008 to June 2011 after the Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing to stimulate the economy. Last month, the U.S. central bank expanded a program of replacing short-term bonds in its portfolio with longer-term debt.

Spot silver gained as much as 0.7 percent to $27.5325 an ounce, and traded at $27.4875. Cash platinum rose as much as 0.8 percent to $1,428.75 an ounce, and was at $1,427.25. Palladium advanced as much as 0.9 percent to $582.25 an ounce, and was at $581.75.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Sunday, July 15, 2012

Easing Prices Bypass India as RBI Lacks Tetangco Scope By Clarissa Batino and Max Estayo - Jul 15, 2012


Moderating inflation pressure across most of Asia offers central banks scope to cut interest rates further in coming months, with India an exception as consumer prices probably jumped at a faster pace last month.
The Asian Development Bank lowered its inflation forecast for the region last week and China reported the smallest price gains in more than two years. By contrast, India today will report wholesale prices rose at a faster pace in June from a year earlier, according to the median estimate in a Bloomberg News survey.
India’s accelerating inflation leaves its central bank constrained as counterparts across emerging economies take action. South Korea and China surprised markets with a reduction in interest rates this month and Governor Amando Tetangco said three days ago the Philippines has scope to ease monetary policy.
Emerging-market policy makers “have by far the greatest room to counteract economic weakness,” JPMorgan Chase & Co. analysts led by Jan Loeys, chief market strategist in New York, wrote in a July 13 note. They can “boost spending through monetary stimulus, fiscal stimulus, or simply by providing more clarity about their future actions,” they said.
Emerging-market policy rates remain a percentage point above emerging-market inflation and have plenty of room to come down in nominal terms, the analysts wrote.
The ADB reduced its inflation estimate for developing Asia to 4.4 percent this year from a 4.6 percent pace forecast in April. The Manila-based lender also cut its 2012 growth forecast for Asian economies excluding Japan to 6.6 percent from 6.9 percent, citing the impact of Europe’s debt crisis and slower expansion in China and India.

Moderating Inflation

Price gains are easing across most emerging markets, helped by a decline in food and commodity prices. Inflation in China, Asia’s biggest economy, slowed to 2.2 percent in June from a year earlier and producer prices dropped for a fourth month.
In India, a weaker rupee, government spending and rising food prices are contributing to inflation. The benchmark wholesale-price index probably rose 7.61 percent in June from a year earlier, according to the median estimate of 36 analysts, the second straight acceleration.
The fastest inflation among the biggest emerging markets prompted the Reserve Bank of India to unexpectedly leave interest rates unchanged on June 18 even after the economy expanded at the slowest pace since 2003.

Complex Politics

“We expect the growth risks eventually to dominate the RBI’s thinking and lead to greater monetary easing in the coming months,” Barclays Plc economists led by Singapore-based Nigel Chalk wrote in a July 13 note. “However, given the complex domestic politics, the timing of any policy loosening is difficult to predict, especially given the RBI’s recent hawkishness.”
The People’s Bank of China unexpectedly announced a reduction in benchmark lending and deposit rates on July 5, the second cut in a month, while the Bank of Korea lowered its benchmark repurchase rate last week for the first time in more than three years.
China’s economy grew at the slowest pace in three years in the second quarter, data released July 13 showed, and Premier Wen Jiabao said yesterday the government will intensify fine- tuning policies as the momentum for a recovery has yet to be established.

Policy Space

Bangko Sentral ng Pilipinas Governor Tetangco said more easing may be possible as inflation in the Philippines moderates.
“The stance of monetary policy remains appropriate but things can change -- a possible easing cannot be ruled out,” he said in an interview in Manila on July 13. “While we have sources of resilience, we also have policy space on the monetary and fiscal sides to do more if necessary.”
Price pressures have cooled even as the $225 billion economy expanded 6.4 percent in the first quarter from a year earlier, the fastest pace in Southeast Asia based on a basket of 17 Asia-Pacific economies tracked by Bloomberg. Consumer-price gains slowed to 2.8 percent last month from a year earlier.
“One is never out of danger on inflation, but at this point in time risks are on the downside,” Tetangco said. “The growth of the economy is not at the level that would lead to a breach of the inflation target.”
Inflation will be in the lower half of his 3 percent to 5 percent target, said Tetangco, adding his forecast applies to 2012 and 2013. Economic expansion in the second quarter probably remained healthy, he said, without providing an estimate. The data are due to be released next month.

‘More Dovish’

The central bank cut the rate it pays lenders for overnight deposits twice earlier this year, by a combined 0.5 percentage point to 4 percent, before leaving it unchanged in April and June. The next policy rate review is on July 26.
Central banks in emerging markets “have become more dovish over the past one or two months and we do expect some monetary loosening,” Sebastien Barbe, Paris-based head of emerging markets research and strategy at Credit Agricole CIB, wrote in a July 12 note. “They may refrain from lowering rates quickly in the short term, just in case the global economic momentum re- accelerates at the end of the year, making the global backdrop more prone to generate inflation pressure.”
To contact the reporters responsible for this story: Clarissa Batino at cbatino@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net;