Feb. 19 (Bloomberg) -- Indian earnings estimates for the next fiscal year may be cut another 25 percent, led by revisions for banks, as the economy weakens, Credit Suisse Group said.
Analysts will probably double the one-quarter reduction in forecasts since November for the year starting April 1, as profit growth at banks, brokerages and developers falters, Credit Suisse analysts Nilesh Jasani and Arya Sen wrote in a report. Predictions for companies on the Bombay Stock Exchange Sensitive Index this fiscal year have been lowered by 15 percent.
The Sensex has dropped 6.6 percent this year, extending 2008’s record 52 percent slump, as the global recession and financial crisis weighed on the outlook for corporate earnings. Investors should avoid financial companies, making up 32 percent of profits after tax in India, because current predictions for their earnings are too optimistic, Credit Suisse said.
“We remain underweight on the sector and expect it to be the main contributor to depressed 2010 earnings,” the analysts said. “For financials’ profits to grow at over 30 percent year- on-year, while the rest of the corporate world is witnessing a contraction of the same magnitude, is unsustainable.”
Financial companies’ earnings, which grew about 30 percent in the third quarter from a year earlier, will falter as the central bank cuts interest rates, demand for loans slows and provisions increase, the report said.
The benchmark index yesterday fell 0.2 percent to 9,015.18, a three-week low. The measure is valued at about 9.3 times reported earnings, down from a high of as much as 28 times in January last year. The gauge is trading at 10.4 times next year’s profit estimates.
Election Outcome
Valuations are unlikely to get cheaper and the index will fluctuate at around Credit Suisse’s target of 9,000 on speculation of a “sharp” rebound in earnings in 2011, the analysts said. The outcome of India’s elections this year will also determine the performance of the market, they added.
“Essentially, we deem a sharp decline in 2010 earnings-per- share forecast as inevitable but not an attendant fall in equity indices,” the report said.
State Bank of India, the nation’s largest, said on Jan. 24 profit for the three months ended Dec. 31 rose 37 percent from a year earlier as companies borrowed more and investments in bonds gained. HDFC Bank Ltd., the third-largest by market value, last month posted a 45 percent increase in its third-quarter profit.
Credit Suisse has an “underperform” recommendation on State Bank of India and a “neutral” rating on HDFC. They also advised investors to be “underweight” in brokerages and property companies.
Wednesday, February 18, 2009
Karachi’s Exchange to Ease Stock Trading Limits After Freeze
Feb. 19 (Bloomberg) -- The Karachi Stock Exchange, Asia’s cheapest equity market, plans to ease trading limits this year to avoid a repeat of curbs that froze equity markets for four months and drove out overseas investors.
Pakistan’s biggest exchange may triple the current 5 percent limit that a stock can decline each day and introduce so-called circuit breakers that limit how much the entire market can fall, Adnan Afridi, managing director, said in an interview in Karachi.
“Our circuit breakers are a bit narrow by international standards,” Afridi said late yesterday. “We are looking at a combination of having wider circuit breakers, maybe 10 or 15 percent, and then having market halts, of say, 3 to 5 percent.”
Pakistan is seeking to boost investment in shares after its benchmark index declined 58 percent in 2008, the most in 18 years, because of political instability and an economic slowdown. Freeing up trading limits would attract more investors, said Tariq Iqbal Khan, chairman of Pakistan’s biggest money manager.
“If a stock has to fall 15 percent, it will either fall in one day or three days, the stocks have to come down to natural price,” said Khan, who manages the equivalent of $940 million in equities at National Investment Trust Ltd. in Karachi. “Nobody wants to trade in a value he feels is not realistic.”
The proposed market halts could stop trading for 30 minutes if the index rises or declines by a certain proportion, Afridi said. “We are studying different models,” he said.
Asia’s Lowest
The KSE100 Index is trading at 4.47 times next year’s estimated earnings, the lowest among 14 Asia-Pacific equity indexes, according to data compiled by Bloomberg. The Karachi share market has declined 36 percent since the exchange lifted trading curbs on Dec. 15 that prevented the measure from falling below its Aug. 27 level.
The curbs were imposed after the exchange’s market value almost halved from the peak on April 4 amid a political crisis leading up to the resignation of President Pervez Musharraf and the breakup of the coalition government.
Investors stoned the exchange in July after a first attempt to impose limits failed to halt the slump that threatened to undo a 11-fold rally since 2001.
Overseas investors dumped $510 million of Pakistani stocks in the past 12 months, almost five times as much as in the same period a year ago, according to the National Clearing Co.
“Significant inflows are not expected in 2009,” Afridi said. “Our credibility has been affected more so by the length of time the floor was in place rather than the decision itself.”
Pakistan’s biggest exchange may triple the current 5 percent limit that a stock can decline each day and introduce so-called circuit breakers that limit how much the entire market can fall, Adnan Afridi, managing director, said in an interview in Karachi.
“Our circuit breakers are a bit narrow by international standards,” Afridi said late yesterday. “We are looking at a combination of having wider circuit breakers, maybe 10 or 15 percent, and then having market halts, of say, 3 to 5 percent.”
Pakistan is seeking to boost investment in shares after its benchmark index declined 58 percent in 2008, the most in 18 years, because of political instability and an economic slowdown. Freeing up trading limits would attract more investors, said Tariq Iqbal Khan, chairman of Pakistan’s biggest money manager.
“If a stock has to fall 15 percent, it will either fall in one day or three days, the stocks have to come down to natural price,” said Khan, who manages the equivalent of $940 million in equities at National Investment Trust Ltd. in Karachi. “Nobody wants to trade in a value he feels is not realistic.”
The proposed market halts could stop trading for 30 minutes if the index rises or declines by a certain proportion, Afridi said. “We are studying different models,” he said.
Asia’s Lowest
The KSE100 Index is trading at 4.47 times next year’s estimated earnings, the lowest among 14 Asia-Pacific equity indexes, according to data compiled by Bloomberg. The Karachi share market has declined 36 percent since the exchange lifted trading curbs on Dec. 15 that prevented the measure from falling below its Aug. 27 level.
The curbs were imposed after the exchange’s market value almost halved from the peak on April 4 amid a political crisis leading up to the resignation of President Pervez Musharraf and the breakup of the coalition government.
Investors stoned the exchange in July after a first attempt to impose limits failed to halt the slump that threatened to undo a 11-fold rally since 2001.
Overseas investors dumped $510 million of Pakistani stocks in the past 12 months, almost five times as much as in the same period a year ago, according to the National Clearing Co.
“Significant inflows are not expected in 2009,” Afridi said. “Our credibility has been affected more so by the length of time the floor was in place rather than the decision itself.”
BOJ May Unveil Debt Program, Extend Commercial Paper Purchase
Feb. 19 (Bloomberg) -- The Bank of Japan will today unveil details of a plan to buy corporate debt and may extend lending programs in place to prevent a shortage of credit from deepening the nation’s recession.
Governor Masaaki Shirakawa and his colleagues have said they want to lower companies’ borrowing costs rather than trim the key interest rate, which is already close to zero. Policy makers will probably keep the overnight lending rate at 0.1 percent today, according to 27 of 28 economists surveyed by Bloomberg News.
The world’s second-largest economy shrank at the steepest pace since the 1974 oil shock last quarter as a global slowdown triggered record declines in exports and output. The resignation of Finance Minister Shoichi Nakagawa this week amid lawmakers’ accusations he was drunk at a Group of Seven briefing in Rome is hampering government efforts to implement a stimulus package to spur growth.
“We can’t count on the government and politicians, who are too incompetent to support the economy,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The BOJ will need to come up with more remedies instead.”
Policy makers may say today the central bank will buy as much as 1 trillion yen ($10.8 billion) in corporate bonds with a rating of at least A1, economists surveyed said. They may also extend a commercial paper purchase program, which is due to end on March 31, as well as an unlimited collateral-backed lending facility for banks slated to end in April.
Twice as Fast
Gross domestic product shrank an annualized 12.7 percent last quarter, more than twice as fast as declines in the U.S. and Europe, a report showed on Feb. 16. The same day, Nakagawa came under fire in parliament for dozing off and slurring his speech at a Group of Seven press conference. His subsequent resignation dealt a blow to Prime Minister Taro Aso, who is struggling to get approval for a 10 trillion yen stimulus package because of political gridlock.
The downturn is set to intensify. The economy may suffer a bigger contraction in the current quarter, Kazuo Momma, the central bank’s chief economist, said this month. Economic and Fiscal Policy Minister Kaoru Yosano, who’s taken over Nakagawa’s job, this week said Japan is going through “the worst postwar economic crisis.”
“Even though they have a sense of crisis, the Bank of Japan’s policy actions have been pretty minor so far,” said Yuji Shimanaka, chief economist at Mitsubishi UFJ Research and Consulting in Tokyo. “It should buy government bonds more aggressively and trim the key rate to zero immediately.”
Credit Squeeze
The central bank last month started to buy commercial paper from lenders and pledged to purchase corporate bonds to ease the credit squeeze. The bank will also resume buying stocks owned by lenders, a step it implemented between 2002 and 2004, from Feb. 23. Economists say policy makers may also decide to buy more financing bills, or short-term government securities.
As its next steps, the bank may consider adding stocks as eligible collateral and increase monthly government bond purchases from 1.4 trillion yen, economists said. It’s unlikely the central bank will cut the key rate to zero even if the downturn worsens, other economists said.
“The central bank won’t cut the key rate further unless Governor Shirakawa abandons his commitment to protecting the financial market mechanism,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. Shirakawa has said keeping rates too low would make money-market trading unprofitable and discourage investors.
Excess Reserves
The bank’s low-rate policy is already impairing money- market transactions. Foreign banks increased the amount of excess reserves they hold at the central bank by 32 percent in January from February as they seek safer returns amid financial- market turmoil, BOJ data show. The bank pays interest of 0.1 percent on excess reserves, the same level as the key rate.
“However hard the BOJ provides money to the market, it is held by lenders and returned to the BOJ,” said Tokuyoshi Takano, manager of the financial derivatives section at Mitsui Sumitomo Insurance Co. in Tokyo.
The central bank will probably announce its policy decisions and release its assessment of the economy by early afternoon in Tokyo. Shirakawa will speak at a press conference at 3:30 p.m.
Governor Masaaki Shirakawa and his colleagues have said they want to lower companies’ borrowing costs rather than trim the key interest rate, which is already close to zero. Policy makers will probably keep the overnight lending rate at 0.1 percent today, according to 27 of 28 economists surveyed by Bloomberg News.
The world’s second-largest economy shrank at the steepest pace since the 1974 oil shock last quarter as a global slowdown triggered record declines in exports and output. The resignation of Finance Minister Shoichi Nakagawa this week amid lawmakers’ accusations he was drunk at a Group of Seven briefing in Rome is hampering government efforts to implement a stimulus package to spur growth.
“We can’t count on the government and politicians, who are too incompetent to support the economy,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The BOJ will need to come up with more remedies instead.”
Policy makers may say today the central bank will buy as much as 1 trillion yen ($10.8 billion) in corporate bonds with a rating of at least A1, economists surveyed said. They may also extend a commercial paper purchase program, which is due to end on March 31, as well as an unlimited collateral-backed lending facility for banks slated to end in April.
Twice as Fast
Gross domestic product shrank an annualized 12.7 percent last quarter, more than twice as fast as declines in the U.S. and Europe, a report showed on Feb. 16. The same day, Nakagawa came under fire in parliament for dozing off and slurring his speech at a Group of Seven press conference. His subsequent resignation dealt a blow to Prime Minister Taro Aso, who is struggling to get approval for a 10 trillion yen stimulus package because of political gridlock.
The downturn is set to intensify. The economy may suffer a bigger contraction in the current quarter, Kazuo Momma, the central bank’s chief economist, said this month. Economic and Fiscal Policy Minister Kaoru Yosano, who’s taken over Nakagawa’s job, this week said Japan is going through “the worst postwar economic crisis.”
“Even though they have a sense of crisis, the Bank of Japan’s policy actions have been pretty minor so far,” said Yuji Shimanaka, chief economist at Mitsubishi UFJ Research and Consulting in Tokyo. “It should buy government bonds more aggressively and trim the key rate to zero immediately.”
Credit Squeeze
The central bank last month started to buy commercial paper from lenders and pledged to purchase corporate bonds to ease the credit squeeze. The bank will also resume buying stocks owned by lenders, a step it implemented between 2002 and 2004, from Feb. 23. Economists say policy makers may also decide to buy more financing bills, or short-term government securities.
As its next steps, the bank may consider adding stocks as eligible collateral and increase monthly government bond purchases from 1.4 trillion yen, economists said. It’s unlikely the central bank will cut the key rate to zero even if the downturn worsens, other economists said.
“The central bank won’t cut the key rate further unless Governor Shirakawa abandons his commitment to protecting the financial market mechanism,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. Shirakawa has said keeping rates too low would make money-market trading unprofitable and discourage investors.
Excess Reserves
The bank’s low-rate policy is already impairing money- market transactions. Foreign banks increased the amount of excess reserves they hold at the central bank by 32 percent in January from February as they seek safer returns amid financial- market turmoil, BOJ data show. The bank pays interest of 0.1 percent on excess reserves, the same level as the key rate.
“However hard the BOJ provides money to the market, it is held by lenders and returned to the BOJ,” said Tokuyoshi Takano, manager of the financial derivatives section at Mitsui Sumitomo Insurance Co. in Tokyo.
The central bank will probably announce its policy decisions and release its assessment of the economy by early afternoon in Tokyo. Shirakawa will speak at a press conference at 3:30 p.m.
Most Asian Stocks Fall, led by Technology Shares; Iluka Surges
Feb. 19 (Bloomberg) -- Most Asian stocks fell, led by technology companies after Hewlett-Packard Co. cut its profit forecast. Japanese exporters and Australian commodity producers advanced.
Samsung Electronics Co., the world’s largest memory-chip maker, dropped 1.1 percent as Hewlett-Packard’s chief executive officer said the industry won’t improve this year. Honda Motor Co., which gets half its revenue in North America, added 1.3 percent in Tokyo as the yen traded near its weakest this year against the dollar. Iluka Resources Ltd., the world’s biggest zircon producer, jumped 10 percent in Sydney after second-half profit surged almost sevenfold.
Five stocks declined for each that rose on the MSCI Asia Pacific Index, which was little changed at 77.60 as of 11:09 a.m. in Tokyo. The measure dropped 13 percent this year, extending 2008’s record 43 percent tumble, as the credit crisis sent the world’s biggest economies into recession.
“It’s difficult to see where significant demand will come in the next three months,” said Gary Anderson, who helps manage $3 billion of international equities in Kansas City for UMB Financial Corp. “The whole world seems to be slowing down by degrees. My concerns are deepening.”
The Nikkei 225 Stock Average gained 0.5 percent to 7,572.37, while Australia’s S&P/ASX 200 Index added 1.2 percent. Hong Kong’s Hang Seng Index dropped 1.3 percent and South Korea’s Kospi Index lost 1.6 percent.
Fortescue Metals Group Ltd., Australia’s third-biggest iron ore mining company, rose 7.7 percent after the Australian Financial Review reported a Chinese company may buy a stake.
Futures on the U.S. Standard & Poor’s 500 Index added 0.1 percent today. The gauge lost 0.1 percent yesterday as the Federal Reserve cut its growth forecast for the U.S. economy. Policy makers foresee the economic recovery could be delayed and “initially quite weak,” the central bank’s minutes released yesterday said.
Samsung Electronics Co., the world’s largest memory-chip maker, dropped 1.1 percent as Hewlett-Packard’s chief executive officer said the industry won’t improve this year. Honda Motor Co., which gets half its revenue in North America, added 1.3 percent in Tokyo as the yen traded near its weakest this year against the dollar. Iluka Resources Ltd., the world’s biggest zircon producer, jumped 10 percent in Sydney after second-half profit surged almost sevenfold.
Five stocks declined for each that rose on the MSCI Asia Pacific Index, which was little changed at 77.60 as of 11:09 a.m. in Tokyo. The measure dropped 13 percent this year, extending 2008’s record 43 percent tumble, as the credit crisis sent the world’s biggest economies into recession.
“It’s difficult to see where significant demand will come in the next three months,” said Gary Anderson, who helps manage $3 billion of international equities in Kansas City for UMB Financial Corp. “The whole world seems to be slowing down by degrees. My concerns are deepening.”
The Nikkei 225 Stock Average gained 0.5 percent to 7,572.37, while Australia’s S&P/ASX 200 Index added 1.2 percent. Hong Kong’s Hang Seng Index dropped 1.3 percent and South Korea’s Kospi Index lost 1.6 percent.
Fortescue Metals Group Ltd., Australia’s third-biggest iron ore mining company, rose 7.7 percent after the Australian Financial Review reported a Chinese company may buy a stake.
Futures on the U.S. Standard & Poor’s 500 Index added 0.1 percent today. The gauge lost 0.1 percent yesterday as the Federal Reserve cut its growth forecast for the U.S. economy. Policy makers foresee the economic recovery could be delayed and “initially quite weak,” the central bank’s minutes released yesterday said.
Tuesday, February 17, 2009
Axa May Post Second-Half Loss, Cut Dividend on Market Slump
Feb. 18 (Bloomberg) -- Axa SA, Europe’s second-largest insurer, may post a second-half loss and cut its dividend for the first time in seven years as the biggest slump in stock markets since the Great Depression eroded the value of investments.
The Paris-based insurer will probably report a net loss of 1.76 billion euros ($2.25 billion), compared with a 2.49 billion- euro profit a year earlier, according to the median estimate of 13 analysts surveyed by Bloomberg. Axa may lower its 2008 payout to shareholders by half to 60 cents, 11 analysts estimated.
The largest decline in equity markets since the 1930s has cut the value of Axa’s investments and dented demand for life- insurance policies linked to stock. Chief Executive Officer Henri de Castries said in November that the assumptions backing the company’s 2012 profit goals “have dramatically changed.”
“Axa is not immune to the financial crisis,” said Lutz Roehmeyer, who helps manage $14 billion at Landesbank Berlin Investment, including Axa shares. “The most important thing for an insurer today is to preserve capital and increase liquidity.”
Paris-based spokesman Emmanuel Touzeau declined to comment on the estimates for Axa’s earnings or its dividend.
The Dow Jones Stoxx 600 Index sank 46 percent last year for the worst annual performance on record as credit-related losses at financial firms that topped $1 trillion pushed the U.S., Europe and Japan into the first simultaneous recessions since World War II.
Insurer Writedowns
North American insurers have posted about $130 billion in writedowns and unrealized losses tied to the housing slump. Prudential Financial Inc., the second-largest U.S. life insurer, posted a $1.57 billion fourth-quarter loss after investments in subprime securities and stocks declined in value.
Life insurers invest the premiums they receive on behalf of customers in assets including equity, government bonds and corporate debt. Since life insurance contracts run for years, life insurers typically have bigger investment portfolios than other insurers and are more exposed to market movements.
MetLife Inc., the biggest life insurer, sold $2.3 billion in shares in October to boost finances, while Hartford Financial Services Group Inc. cut its dividend and raised $2.5 billion by selling debt and equity to Allianz SE.
Axa publishes profit tomorrow, the first among Europe’s top three insurers to report 2008 earnings.
The company has fallen 30 percent this year in Paris trading, valuing the insurer at 23.2 billion euros. Allianz, Europe’s largest insurer, has dropped 21 percent, while Italy’s Assicurazioni Generali SpA, the continent’s third biggest, has declined 29 percent.
‘Small Buffer’
Axa’s solvency ratio, a measure of its ability to absorb losses, will probably fall to 131 percent from 135 percent on Oct. 31, according to the median of eight estimates.
“Solvency has priority over dividends at Axa, so we expect it to opt to maintain a small buffer by reducing” the payout, Emmanuelle Cales, an analyst at Societe Generale SA, wrote in a note to investors. “This is exactly what Axa did in 2001-02.”
The insurer can absorb further shocks and has “absolutely” no need to raise funds, de Castries, 54, said on Nov. 25. The company is under no pressure from the government or regulators to increase capital, Chief Financial Officer Denis Duverne said that same day at an investors meeting.
Axa’s solvency ratio fell to 135 percent by Oct. 31 from 148 percent at the end of June, partly because of acquisitions in Mexico and Turkey.
AIG Assets
“Axa has got little leeway for solvency,” said Benoit de Broissia, an equity analyst at KBL Richelieu in Paris that oversees $5.1 billion including Axa shares. “The environment is such that maybe Axa will have to make a capital increase,” especially if it plans an acquisition such as buying parts of American International Group Inc., the U.S. insurer rescued by the government, he said.
AIG is auctioning off its global life-insurance operations to help repay parts of a $150 billion U.S. government bailout. AIG said in October it would sell life operations in countries including the U.S., Japan, and the U.K. and a minority stake in a unit that sells life policies in China and other Asian nations.
Property, Casualty
De Castries said in October that the French insurer was interested in AIG’s assets in the U.S. and Asia. The company hasn’t made comments on AIG since then. Axa’s Touzeau declined to comment on any acquisition plans.
The company’s 2008 net income probably fell to 400 million euros from 5.67 billion euros, according to analysts’ estimates. Operating income, excluding one-time items and acquisition- related costs, probably declined 24 percent to 3.79 billion euros.
In the second half, Axa’s operating earnings from life and savings, the insurer’s biggest business, probably shrank to 53 million euros from 1.18 billion euros a year earlier, according to the estimates. Property and casualty’s profit probably rose 5.6 percent to 950 million euros, while asset-management earnings probably fell 47 percent to 161 million euros.
Bloomberg calculated 2007 second-half earnings by subtracting Axa’s first-half figures from annual data. Axa declined to confirm the figures.
The Paris-based insurer will probably report a net loss of 1.76 billion euros ($2.25 billion), compared with a 2.49 billion- euro profit a year earlier, according to the median estimate of 13 analysts surveyed by Bloomberg. Axa may lower its 2008 payout to shareholders by half to 60 cents, 11 analysts estimated.
The largest decline in equity markets since the 1930s has cut the value of Axa’s investments and dented demand for life- insurance policies linked to stock. Chief Executive Officer Henri de Castries said in November that the assumptions backing the company’s 2012 profit goals “have dramatically changed.”
“Axa is not immune to the financial crisis,” said Lutz Roehmeyer, who helps manage $14 billion at Landesbank Berlin Investment, including Axa shares. “The most important thing for an insurer today is to preserve capital and increase liquidity.”
Paris-based spokesman Emmanuel Touzeau declined to comment on the estimates for Axa’s earnings or its dividend.
The Dow Jones Stoxx 600 Index sank 46 percent last year for the worst annual performance on record as credit-related losses at financial firms that topped $1 trillion pushed the U.S., Europe and Japan into the first simultaneous recessions since World War II.
Insurer Writedowns
North American insurers have posted about $130 billion in writedowns and unrealized losses tied to the housing slump. Prudential Financial Inc., the second-largest U.S. life insurer, posted a $1.57 billion fourth-quarter loss after investments in subprime securities and stocks declined in value.
Life insurers invest the premiums they receive on behalf of customers in assets including equity, government bonds and corporate debt. Since life insurance contracts run for years, life insurers typically have bigger investment portfolios than other insurers and are more exposed to market movements.
MetLife Inc., the biggest life insurer, sold $2.3 billion in shares in October to boost finances, while Hartford Financial Services Group Inc. cut its dividend and raised $2.5 billion by selling debt and equity to Allianz SE.
Axa publishes profit tomorrow, the first among Europe’s top three insurers to report 2008 earnings.
The company has fallen 30 percent this year in Paris trading, valuing the insurer at 23.2 billion euros. Allianz, Europe’s largest insurer, has dropped 21 percent, while Italy’s Assicurazioni Generali SpA, the continent’s third biggest, has declined 29 percent.
‘Small Buffer’
Axa’s solvency ratio, a measure of its ability to absorb losses, will probably fall to 131 percent from 135 percent on Oct. 31, according to the median of eight estimates.
“Solvency has priority over dividends at Axa, so we expect it to opt to maintain a small buffer by reducing” the payout, Emmanuelle Cales, an analyst at Societe Generale SA, wrote in a note to investors. “This is exactly what Axa did in 2001-02.”
The insurer can absorb further shocks and has “absolutely” no need to raise funds, de Castries, 54, said on Nov. 25. The company is under no pressure from the government or regulators to increase capital, Chief Financial Officer Denis Duverne said that same day at an investors meeting.
Axa’s solvency ratio fell to 135 percent by Oct. 31 from 148 percent at the end of June, partly because of acquisitions in Mexico and Turkey.
AIG Assets
“Axa has got little leeway for solvency,” said Benoit de Broissia, an equity analyst at KBL Richelieu in Paris that oversees $5.1 billion including Axa shares. “The environment is such that maybe Axa will have to make a capital increase,” especially if it plans an acquisition such as buying parts of American International Group Inc., the U.S. insurer rescued by the government, he said.
AIG is auctioning off its global life-insurance operations to help repay parts of a $150 billion U.S. government bailout. AIG said in October it would sell life operations in countries including the U.S., Japan, and the U.K. and a minority stake in a unit that sells life policies in China and other Asian nations.
Property, Casualty
De Castries said in October that the French insurer was interested in AIG’s assets in the U.S. and Asia. The company hasn’t made comments on AIG since then. Axa’s Touzeau declined to comment on any acquisition plans.
The company’s 2008 net income probably fell to 400 million euros from 5.67 billion euros, according to analysts’ estimates. Operating income, excluding one-time items and acquisition- related costs, probably declined 24 percent to 3.79 billion euros.
In the second half, Axa’s operating earnings from life and savings, the insurer’s biggest business, probably shrank to 53 million euros from 1.18 billion euros a year earlier, according to the estimates. Property and casualty’s profit probably rose 5.6 percent to 950 million euros, while asset-management earnings probably fell 47 percent to 161 million euros.
Bloomberg calculated 2007 second-half earnings by subtracting Axa’s first-half figures from annual data. Axa declined to confirm the figures.
Korea Banks’ Foreign Debt Burden Has Fallen, Ahn Says
Feb. 18 (Bloomberg) -- South Korean banks’ demand for dollars is decreasing as foreign-currency debt maturing every month this year is at least 50 percent lower than in the fourth quarter, a central bank official said.
Monthly foreign debt payments due have dropped to about $4 billion, from between $8 billion and $9 billion in the final three months of 2008, Ahn Byung Chan, director general of the Bank of Korea’s international bureau, said in an interview from Seoul yesterday. Concerns that Korean banks are facing a shortage of funds deepened after Woori Bank’s failure to meet an early repayment of 2014 debt roiled investors.
“Our banks are not having trouble getting foreign funding now,” Ahn said. “They are facing less need for foreign borrowing compared with the final quarter of last year.”
South Korea’s won has slumped 34 percent against the dollar in the past year, the worst-performing of the world’s 16 most- active currencies, on concern banks will run short of the greenback as exports slump and global funds dump emerging-market assets. South Korea has as much as $160 billion of external debt maturing over the next two years, compared with foreign-exchange reserves that shrank 23 percent in the past year to $200 billion, according to UBS AG, the world’s second-largest currency trader.
“They are left with no choice but to maintain a strong front,” said Nizam Idris, a currency strategist with UBS in Singapore. “The relative shortage of dollar liquidity domestically has remained strong, although not yet as bad as it was in November.”
Won Decline
The won weakened 0.5 percent to 1,462.60 per dollar as of 11:31 a.m. in Seoul, extending this year’s loss to 14 percent. The one-year cross-currency swap rate, a gauge of availability of dollars, slid to a record minus 1.7 percent yesterday, indicating Korean banks need to pay extra interest on top of floating rates to borrow dollars. It was at minus 1.6 percent today. In such swaps, two parties agree to exchange payments in one currency for payments in another.
“The shortage of dollars has become more acute in South Korea as evident in the cost for banks to swap won for dollars,” Marc Chandler, global head of currency strategy at Brown Brothers in New York, wrote in a note today. “The dollar has near term scope towards 1,500.”
The slump in the Korean won was compounded by concerns that a prolonged global recession may “hurt the export-driven Korean economy,” starving banks of foreign exchange, Ahn said. He forecast the nation will post a trade surplus of as much as $2 billion this month after a shortfall of $3.3 billion in January.
March Crisis?
Speculation the country is headed for a “March crisis” when Japanese financial institutions close their books is groundless, Ahn said. Banks in Korea, including local branches of foreign financial institutions, have about $6 billion of yen debt due to be paid by March, he said. Their total yen denominated debt stands at $25 billion.
Nomura Holdings Inc. cut its forecast for South Korea’s gross domestic product for the second time in a month, predicting the economy will shrink 6 percent in 2009, a deeper contraction than the 2 percent decline forecast in January.
The government is close to setting limits for how much individual banks can draw from a 20 trillion won ($14 billion) state-backed recapitalization fund, Shin Dong Kyu, chairman of the Korea Federation of Banks, said in an interview yesterday.
Getting money from the fund may help Korean banks avoid skipping options to redeem their subordinated debt, Shin said. A decision by Woori Bank, the nation’s second-biggest lender, not to redeem $400 million of callable debt drove up the cost for Korean lenders to borrow dollars in the swap market.
The Bank of Korea will provide 10 trillion won for the recapitalization fund and state-owned Korea Development Bank will put in 2 trillion won. The remainder will come from private investors. The fund will be used for buying banks’ preferred shares and subordinated debt.
Shin, 57, dismissed concerns that Korean banks may struggle to repay overseas debt, saying foreign-exchange reserves will allow the country to help them meet obligations if necessary.
Monthly foreign debt payments due have dropped to about $4 billion, from between $8 billion and $9 billion in the final three months of 2008, Ahn Byung Chan, director general of the Bank of Korea’s international bureau, said in an interview from Seoul yesterday. Concerns that Korean banks are facing a shortage of funds deepened after Woori Bank’s failure to meet an early repayment of 2014 debt roiled investors.
“Our banks are not having trouble getting foreign funding now,” Ahn said. “They are facing less need for foreign borrowing compared with the final quarter of last year.”
South Korea’s won has slumped 34 percent against the dollar in the past year, the worst-performing of the world’s 16 most- active currencies, on concern banks will run short of the greenback as exports slump and global funds dump emerging-market assets. South Korea has as much as $160 billion of external debt maturing over the next two years, compared with foreign-exchange reserves that shrank 23 percent in the past year to $200 billion, according to UBS AG, the world’s second-largest currency trader.
“They are left with no choice but to maintain a strong front,” said Nizam Idris, a currency strategist with UBS in Singapore. “The relative shortage of dollar liquidity domestically has remained strong, although not yet as bad as it was in November.”
Won Decline
The won weakened 0.5 percent to 1,462.60 per dollar as of 11:31 a.m. in Seoul, extending this year’s loss to 14 percent. The one-year cross-currency swap rate, a gauge of availability of dollars, slid to a record minus 1.7 percent yesterday, indicating Korean banks need to pay extra interest on top of floating rates to borrow dollars. It was at minus 1.6 percent today. In such swaps, two parties agree to exchange payments in one currency for payments in another.
“The shortage of dollars has become more acute in South Korea as evident in the cost for banks to swap won for dollars,” Marc Chandler, global head of currency strategy at Brown Brothers in New York, wrote in a note today. “The dollar has near term scope towards 1,500.”
The slump in the Korean won was compounded by concerns that a prolonged global recession may “hurt the export-driven Korean economy,” starving banks of foreign exchange, Ahn said. He forecast the nation will post a trade surplus of as much as $2 billion this month after a shortfall of $3.3 billion in January.
March Crisis?
Speculation the country is headed for a “March crisis” when Japanese financial institutions close their books is groundless, Ahn said. Banks in Korea, including local branches of foreign financial institutions, have about $6 billion of yen debt due to be paid by March, he said. Their total yen denominated debt stands at $25 billion.
Nomura Holdings Inc. cut its forecast for South Korea’s gross domestic product for the second time in a month, predicting the economy will shrink 6 percent in 2009, a deeper contraction than the 2 percent decline forecast in January.
The government is close to setting limits for how much individual banks can draw from a 20 trillion won ($14 billion) state-backed recapitalization fund, Shin Dong Kyu, chairman of the Korea Federation of Banks, said in an interview yesterday.
Getting money from the fund may help Korean banks avoid skipping options to redeem their subordinated debt, Shin said. A decision by Woori Bank, the nation’s second-biggest lender, not to redeem $400 million of callable debt drove up the cost for Korean lenders to borrow dollars in the swap market.
The Bank of Korea will provide 10 trillion won for the recapitalization fund and state-owned Korea Development Bank will put in 2 trillion won. The remainder will come from private investors. The fund will be used for buying banks’ preferred shares and subordinated debt.
Shin, 57, dismissed concerns that Korean banks may struggle to repay overseas debt, saying foreign-exchange reserves will allow the country to help them meet obligations if necessary.
Korea Banks’ Foreign Debt Burden Has Fallen, Ahn Says
Feb. 18 (Bloomberg) -- South Korean banks’ demand for dollars is decreasing as foreign-currency debt maturing every month this year is at least 50 percent lower than in the fourth quarter, a central bank official said.
Monthly foreign debt payments due have dropped to about $4 billion, from between $8 billion and $9 billion in the final three months of 2008, Ahn Byung Chan, director general of the Bank of Korea’s international bureau, said in an interview from Seoul yesterday. Concerns that Korean banks are facing a shortage of funds deepened after Woori Bank’s failure to meet an early repayment of 2014 debt roiled investors.
“Our banks are not having trouble getting foreign funding now,” Ahn said. “They are facing less need for foreign borrowing compared with the final quarter of last year.”
South Korea’s won has slumped 34 percent against the dollar in the past year, the worst-performing of the world’s 16 most- active currencies, on concern banks will run short of the greenback as exports slump and global funds dump emerging-market assets. South Korea has as much as $160 billion of external debt maturing over the next two years, compared with foreign-exchange reserves that shrank 23 percent in the past year to $200 billion, according to UBS AG, the world’s second-largest currency trader.
“They are left with no choice but to maintain a strong front,” said Nizam Idris, a currency strategist with UBS in Singapore. “The relative shortage of dollar liquidity domestically has remained strong, although not yet as bad as it was in November.”
Won Decline
The won weakened 0.5 percent to 1,462.60 per dollar as of 11:31 a.m. in Seoul, extending this year’s loss to 14 percent. The one-year cross-currency swap rate, a gauge of availability of dollars, slid to a record minus 1.7 percent yesterday, indicating Korean banks need to pay extra interest on top of floating rates to borrow dollars. It was at minus 1.6 percent today. In such swaps, two parties agree to exchange payments in one currency for payments in another.
“The shortage of dollars has become more acute in South Korea as evident in the cost for banks to swap won for dollars,” Marc Chandler, global head of currency strategy at Brown Brothers in New York, wrote in a note today. “The dollar has near term scope towards 1,500.”
The slump in the Korean won was compounded by concerns that a prolonged global recession may “hurt the export-driven Korean economy,” starving banks of foreign exchange, Ahn said. He forecast the nation will post a trade surplus of as much as $2 billion this month after a shortfall of $3.3 billion in January.
March Crisis?
Speculation the country is headed for a “March crisis” when Japanese financial institutions close their books is groundless, Ahn said. Banks in Korea, including local branches of foreign financial institutions, have about $6 billion of yen debt due to be paid by March, he said. Their total yen denominated debt stands at $25 billion.
Nomura Holdings Inc. cut its forecast for South Korea’s gross domestic product for the second time in a month, predicting the economy will shrink 6 percent in 2009, a deeper contraction than the 2 percent decline forecast in January.
The government is close to setting limits for how much individual banks can draw from a 20 trillion won ($14 billion) state-backed recapitalization fund, Shin Dong Kyu, chairman of the Korea Federation of Banks, said in an interview yesterday.
Getting money from the fund may help Korean banks avoid skipping options to redeem their subordinated debt, Shin said. A decision by Woori Bank, the nation’s second-biggest lender, not to redeem $400 million of callable debt drove up the cost for Korean lenders to borrow dollars in the swap market.
The Bank of Korea will provide 10 trillion won for the recapitalization fund and state-owned Korea Development Bank will put in 2 trillion won. The remainder will come from private investors. The fund will be used for buying banks’ preferred shares and subordinated debt.
Shin, 57, dismissed concerns that Korean banks may struggle to repay overseas debt, saying foreign-exchange reserves will allow the country to help them meet obligations if necessary.
Monthly foreign debt payments due have dropped to about $4 billion, from between $8 billion and $9 billion in the final three months of 2008, Ahn Byung Chan, director general of the Bank of Korea’s international bureau, said in an interview from Seoul yesterday. Concerns that Korean banks are facing a shortage of funds deepened after Woori Bank’s failure to meet an early repayment of 2014 debt roiled investors.
“Our banks are not having trouble getting foreign funding now,” Ahn said. “They are facing less need for foreign borrowing compared with the final quarter of last year.”
South Korea’s won has slumped 34 percent against the dollar in the past year, the worst-performing of the world’s 16 most- active currencies, on concern banks will run short of the greenback as exports slump and global funds dump emerging-market assets. South Korea has as much as $160 billion of external debt maturing over the next two years, compared with foreign-exchange reserves that shrank 23 percent in the past year to $200 billion, according to UBS AG, the world’s second-largest currency trader.
“They are left with no choice but to maintain a strong front,” said Nizam Idris, a currency strategist with UBS in Singapore. “The relative shortage of dollar liquidity domestically has remained strong, although not yet as bad as it was in November.”
Won Decline
The won weakened 0.5 percent to 1,462.60 per dollar as of 11:31 a.m. in Seoul, extending this year’s loss to 14 percent. The one-year cross-currency swap rate, a gauge of availability of dollars, slid to a record minus 1.7 percent yesterday, indicating Korean banks need to pay extra interest on top of floating rates to borrow dollars. It was at minus 1.6 percent today. In such swaps, two parties agree to exchange payments in one currency for payments in another.
“The shortage of dollars has become more acute in South Korea as evident in the cost for banks to swap won for dollars,” Marc Chandler, global head of currency strategy at Brown Brothers in New York, wrote in a note today. “The dollar has near term scope towards 1,500.”
The slump in the Korean won was compounded by concerns that a prolonged global recession may “hurt the export-driven Korean economy,” starving banks of foreign exchange, Ahn said. He forecast the nation will post a trade surplus of as much as $2 billion this month after a shortfall of $3.3 billion in January.
March Crisis?
Speculation the country is headed for a “March crisis” when Japanese financial institutions close their books is groundless, Ahn said. Banks in Korea, including local branches of foreign financial institutions, have about $6 billion of yen debt due to be paid by March, he said. Their total yen denominated debt stands at $25 billion.
Nomura Holdings Inc. cut its forecast for South Korea’s gross domestic product for the second time in a month, predicting the economy will shrink 6 percent in 2009, a deeper contraction than the 2 percent decline forecast in January.
The government is close to setting limits for how much individual banks can draw from a 20 trillion won ($14 billion) state-backed recapitalization fund, Shin Dong Kyu, chairman of the Korea Federation of Banks, said in an interview yesterday.
Getting money from the fund may help Korean banks avoid skipping options to redeem their subordinated debt, Shin said. A decision by Woori Bank, the nation’s second-biggest lender, not to redeem $400 million of callable debt drove up the cost for Korean lenders to borrow dollars in the swap market.
The Bank of Korea will provide 10 trillion won for the recapitalization fund and state-owned Korea Development Bank will put in 2 trillion won. The remainder will come from private investors. The fund will be used for buying banks’ preferred shares and subordinated debt.
Shin, 57, dismissed concerns that Korean banks may struggle to repay overseas debt, saying foreign-exchange reserves will allow the country to help them meet obligations if necessary.
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