May 20 (Bloomberg) -- Japan’s economy shrank by a record last quarter as exports collapsed and consumers and businesses slashed spending, a decline that probably marked the low point in the country’s worst recession since World War II.
Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.
Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
“There was a collapse across the board,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added, there’s “light at the end of the tunnel” and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect.
The yen traded at 95.59 per dollar at 12:56 p.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.3 percent. Economists surveyed predicted the economy would shrink 16.1 percent.
Worse Than U.S.
GDP fell 4 percent on a non-annualized basis, more than double the U.S.’s 1.6 percent slide. It’s also worse than Europe’s record 2.5 percent contraction. Without adjusting for price changes, Japan shrank 2.9 percent last quarter.
Weaker domestic demand was the biggest contributor to the decline, shaving 2.6 percentage points off GDP, the most since 1974. Net exports -- the difference between exports and imports -- was responsible for 1.4 percentage points of the drop.
Consumer spending slid 1.1 percent and business investment plunged a record 10.4 percent. Economists say companies will keep cutting spending because the decline in demand has left factories and workers underused.
“There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.”
Hitachi, a maker of nuclear reactors, home appliances and hard-disk drives, will trim costs by 500 billion yen ($5.2 billion) this fiscal year to minimize losses after a record 787.3 billion yen deficit last year. The Tokyo-based company said in January it plans to cut 7,000 jobs.
May Grow
Still, reports in the past month suggest the world’s second-largest economy may grow for the first time in a year this quarter, albeit from a low point, as exports stabilize and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, takes effect.
Consumer confidence climbed to a 10-month high in April. Exports increased in March from a month earlier, and factory output rose for the first time since September.
“Japan, first of all, will get a big boost from fiscal stimulus,” Thomas Byrne, senior vice president of Moody’s Investors Service, said in an interview in Tokyo. “Second, if the global economy picks up a little bit, that will help tremendously in Japan because of its dependence on exports.”
Byrne said Moody’s is unlikely to cut Japan’s debt rating over the next year because investors are willing to buy bonds that will fund the stimulus plans. Moody’s unified Japan’s ratings at Aa2 this week, raising the local-currency assessment from Aa3 and lowering the foreign-currency view from Aaa.
Replenishing Inventories
“While the economy will continue to be in a severe state, I expect less pressure from inventory adjustments and the stimulus package to provide support,” Economy and Fiscal Policy Minister Kaoru Yosano said after today’s report.
Falling inventories accounted for 0.3 percentage point, or about a tenth, of last quarter’s contraction. Companies including Honda Motor Corp. have cut stockpiles at a quicker rate than sales have declined, giving them room to boost output.
Honda plans to increase production in Japan this quarter as dealerships clear inventories, the Wall Street Journal reported last week. Auto sales in Japan and the U.S. may have “bottomed,” Fuji Heavy Industries Ltd. President Ikuo Mori said in Tokyo today. Fuji Heavy makes Subaru-brand cars.
Still, the failure of export demand to do better than simply stabilize will probably limit the scope of Japan’s recovery. Toyota, Hitachi, and Panasonic Corp. all forecast continued losses in the current business year. Panasonic said last week it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February.
“We basically bottomed out,” said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. Even so, “on the consumer spending side you’ve got a very clear negative from the severe labor market adjustment.”
Tuesday, May 19, 2009
World Bank Says China Recovery Hopes May Be Premature
May 20 (Bloomberg) -- Enthusiasm about an economic recovery in China may be “premature” as private investment lags behind government spending, the World Bank said.
“Until we see a recovery in private investment, it’s hard to get too excited about the future,” David Dollar, country director for China, said at a forum in Beijing today.
The Shanghai Composite Index has climbed 47 percent this year on optimism that a 4 trillion yuan ($586 billion) stimulus package will revive growth after exports collapsed because of the global recession. The world’s third-biggest economy is “struggling” and may fall short of the government’s target of an 8 percent expansion this year, Oppenheimer & Co. said this week.
Private investment, the main driver of growth, was “way down” in the first quarter, Dollar said, without citing a figure. Manufacturers have excess capacity and “a lot of the real-estate sector is over-built,” he said.
Shanghai’s stock index fell 0.1 percent as of the break in trading at 11:30 a.m. local time.
While China is the only one of the world’s five biggest economies that is still expanding, growth slowed to 6.1 percent in the first quarter, the weakest pace since at least 1999.
Stimulus spending has “stabilized” the Chinese economy, Dollar said, adding that it can’t be the source of long-term sustainable growth and the country needs to do more to increase consumption.
Borrowing Costs
China should raise the ceiling on interest rates for deposits, encouraging spending by improving returns for savers, he said.
A 30.5 percent gain in urban fixed-asset investment in the first four months from a year earlier, sparked by the stimulus plan, stoked investors’ optimism that a recovery is building.
Mark Williams, an economist with Capital Economics Ltd. in London, said May 15 that the official numbers don’t tally with other indicators, such as steel prices and excavator sales, suggesting that investment remains weak.
A recovery “lacks momentum” and hopes for a rapid rebound are receding, Williams said.
The central bank cautioned in a quarterly monetary policy report released May 6 that surging lending has been overly concentrated on government projects at the expense of small businesses. The recovery’s foundations aren’t solid, it said.
The World Bank is a lender formed after World War II to help nations reduce poverty.
“Until we see a recovery in private investment, it’s hard to get too excited about the future,” David Dollar, country director for China, said at a forum in Beijing today.
The Shanghai Composite Index has climbed 47 percent this year on optimism that a 4 trillion yuan ($586 billion) stimulus package will revive growth after exports collapsed because of the global recession. The world’s third-biggest economy is “struggling” and may fall short of the government’s target of an 8 percent expansion this year, Oppenheimer & Co. said this week.
Private investment, the main driver of growth, was “way down” in the first quarter, Dollar said, without citing a figure. Manufacturers have excess capacity and “a lot of the real-estate sector is over-built,” he said.
Shanghai’s stock index fell 0.1 percent as of the break in trading at 11:30 a.m. local time.
While China is the only one of the world’s five biggest economies that is still expanding, growth slowed to 6.1 percent in the first quarter, the weakest pace since at least 1999.
Stimulus spending has “stabilized” the Chinese economy, Dollar said, adding that it can’t be the source of long-term sustainable growth and the country needs to do more to increase consumption.
Borrowing Costs
China should raise the ceiling on interest rates for deposits, encouraging spending by improving returns for savers, he said.
A 30.5 percent gain in urban fixed-asset investment in the first four months from a year earlier, sparked by the stimulus plan, stoked investors’ optimism that a recovery is building.
Mark Williams, an economist with Capital Economics Ltd. in London, said May 15 that the official numbers don’t tally with other indicators, such as steel prices and excavator sales, suggesting that investment remains weak.
A recovery “lacks momentum” and hopes for a rapid rebound are receding, Williams said.
The central bank cautioned in a quarterly monetary policy report released May 6 that surging lending has been overly concentrated on government projects at the expense of small businesses. The recovery’s foundations aren’t solid, it said.
The World Bank is a lender formed after World War II to help nations reduce poverty.
Asian Stocks Advance, Led by Mitsubishi; T&D Slumps on Loss
May 20 (Bloomberg) -- Asian stocks rose, led by commodity companies, as Goldman, Sachs & Co. recommended buying Mitsubishi Corp. shares. Finance companies declined.
Mitsubishi Corp., a trading company that gets 47 percent of its revenue from metals and energy products, climbed 4.5 percent. T&D Holdings Inc., Japan’s biggest life insurer, slumped 13 percent after posting a wider-than-estimated full-year loss. Billabong International Ltd., Australia’s largest surfwear maker, tumbled 16 percent after a share sale.
The MSCI Asia Pacific Index rose 0.5 percent to 99.82 at 12:04 p.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Concern that stock valuations had overpriced earnings prospects gave the measure its biggest weekly decline in two months last week.
“People are buying and selling stocks for quick returns, driving the market up and down like a carnival,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $9.3 billion.
Japan’s Nikkei 225 Stock Average advanced 0.4 percent to 9,330.46 as a government report showed the economy contracted an annualized 15.2 percent in the three months ended March 31, less than some economists predicted. Most markets rose, except for Singapore and Hong Kong.
James Hardie Industries NV, the biggest seller of home siding in the U.S., declined 2.3 percent in Sydney after profit slumped in the fourth quarter. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.9 percent as commodity shipping rates gained for a 13th-straight session.
Brokerage Upgrade
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.
Mitsubishi jumped 4.5 percent to 1,736 in Tokyo. Mitsui & Co., Mitsubishi’s closest rival, added 4.4 percent to 1,160 yen. Goldman Sachs raised its view on Japan’s trading house sector to “attractive” from “neutral.” The brokerage upgraded Mitsubishi to “buy” from “neutral.”
“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.
Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.
Billabong, T&D
T&D Holdings slumped 13 percent to 2,830 yen. The company reported a loss of 89.1 billion yen ($931 million) in the 12 months ended March 31, compared with a 36.7 billion yen profit the previous year. Nomura Holdings Inc. downgraded T&D’s stock to “reduce” from “buy” after the results, which compared with a February forecast for an 84 billion yen loss.
Australia’s Billabong tumbled 16 percent to A$8.49. The company sold about A$230 million ($177 million) in new stock to institutional holders at A$7.50 a share. James Hardie slipped 2.3 percent to A$4.29. The company said fourth-quarter earnings fell 57 percent due to the U.S. housing slump.
Kawasaki Kisen Kaisha added 2.9 percent to 397 yen. Mitsui O.S.K. Lines Ltd., Japan’s No. 2 shipping company, gained 1.9 percent to 632 yen. The Baltic Dry Index, a measure of shipping costs for commodities, jumped for a 13th straight session to a level not seen in seven months.
Mitsubishi Corp., a trading company that gets 47 percent of its revenue from metals and energy products, climbed 4.5 percent. T&D Holdings Inc., Japan’s biggest life insurer, slumped 13 percent after posting a wider-than-estimated full-year loss. Billabong International Ltd., Australia’s largest surfwear maker, tumbled 16 percent after a share sale.
The MSCI Asia Pacific Index rose 0.5 percent to 99.82 at 12:04 p.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Concern that stock valuations had overpriced earnings prospects gave the measure its biggest weekly decline in two months last week.
“People are buying and selling stocks for quick returns, driving the market up and down like a carnival,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $9.3 billion.
Japan’s Nikkei 225 Stock Average advanced 0.4 percent to 9,330.46 as a government report showed the economy contracted an annualized 15.2 percent in the three months ended March 31, less than some economists predicted. Most markets rose, except for Singapore and Hong Kong.
James Hardie Industries NV, the biggest seller of home siding in the U.S., declined 2.3 percent in Sydney after profit slumped in the fourth quarter. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.9 percent as commodity shipping rates gained for a 13th-straight session.
Brokerage Upgrade
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.
Mitsubishi jumped 4.5 percent to 1,736 in Tokyo. Mitsui & Co., Mitsubishi’s closest rival, added 4.4 percent to 1,160 yen. Goldman Sachs raised its view on Japan’s trading house sector to “attractive” from “neutral.” The brokerage upgraded Mitsubishi to “buy” from “neutral.”
“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.
Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.
Billabong, T&D
T&D Holdings slumped 13 percent to 2,830 yen. The company reported a loss of 89.1 billion yen ($931 million) in the 12 months ended March 31, compared with a 36.7 billion yen profit the previous year. Nomura Holdings Inc. downgraded T&D’s stock to “reduce” from “buy” after the results, which compared with a February forecast for an 84 billion yen loss.
Australia’s Billabong tumbled 16 percent to A$8.49. The company sold about A$230 million ($177 million) in new stock to institutional holders at A$7.50 a share. James Hardie slipped 2.3 percent to A$4.29. The company said fourth-quarter earnings fell 57 percent due to the U.S. housing slump.
Kawasaki Kisen Kaisha added 2.9 percent to 397 yen. Mitsui O.S.K. Lines Ltd., Japan’s No. 2 shipping company, gained 1.9 percent to 632 yen. The Baltic Dry Index, a measure of shipping costs for commodities, jumped for a 13th straight session to a level not seen in seven months.
Monday, May 18, 2009
Stevens Says Australia Economy Aided By Rate Cuts, China Growth
May 19 (Bloomberg) -- Australia’s economy is in good shape to benefit from a global recovery later this year as interest- rate cuts drive domestic demand and a pickup in China stokes exports, central bank Governor Glenn Stevens said today.
Australia “should be in a relatively good position and well placed to take part in a renewed international expansion,” Stevens said in Sydney. “That said, most observers think that the early part of any new global expansion will be characterized by pretty slow growth.”
The Reserve Bank decided against cutting its interest rate this month on signs record policy easing and government stimulus are stoking demand, the board said in minutes of the May 5 meeting released today. Australia is benefiting from a sound banking system and households are responding to the lowest borrowing costs in half a century, Stevens said, after recent reports showed retail sales and mortgage lending surged in March.
“The Reserve Bank is happy with policy at the moment,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. “They’re saying we’ll eventually drag ourselves out of the current downturn, but it’s going to be a drawn-out affair.”
The Australian dollar traded at 76.59 U.S. cents at 1:07 p.m. in Sydney from 76.47 cents before the speech was released. The yield on the two-year government bond rose 9 basis points to 3.52 percent from yesterday.
Economic Stimulus
Australia’s economy is likely to “record better outcomes than most other advanced economies in 2009 and 2010,” the central bank’s minutes said.
The government last week announced a A$22 billion ($16.9 billion) program of spending on roads, rail, ports, hospitals and education, adding to cash handouts already allocated earlier this year.
The central bank cut its benchmark rate by a record 4.25 percentage points between early September and April to 3 percent.
“Certainly for the household sector, this is an expansionary monetary policy,” Stevens said, when answering questions after his speech. “The way households are responding confirms that.”
He added that there are signs of “quite a significant” pickup in the economy of China, Australia’s largest trading partner. The central bank’s May 5 minutes noted that export volumes from Australia had held up better than expected in the first quarter.
Australia recorded its second-largest trade surplus on record in March as agricultural exports gained.
Job Gains
Employers unexpectedly added 27,300 workers in April, pushing the jobless rate down to 5.4 percent from 5.7 percent, the first drop in eight months, the statistics bureau said this month. Retail sales rose 2.2 percent in March, four times as much as economists forecast.
“Central bankers can finally see some light at the end of the tunnel,” said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. “While they are understandably cautious, the hint of optimism is there.”
Federal Reserve Bank of Minneapolis President Gary Stern said the U.S. economy is approaching the trough of the worst recession in at least half a century. “There have been a number of more favorable developments in recent months,” Stern said in an interview last week.
The question faced by the Reserve Bank board two weeks ago was “was whether monetary policy should be eased further at this stage, or whether the cash rate should be maintained at its current level,” according to the May 5 minutes.
Rate Expectations
Investors expect Australia’s benchmark interest rate will be lower in 12 months time, according to a Credit Suisse Group index based on swaps trading.
Traders forecast the overnight cash rate target will be 8 basis points lower in 12 months, the index showed at 1:04 p.m. in Sydney. Late yesterday, they forecast 16 basis points of reductions and at the start of April, they tipped 37 basis points of adjustment.
While it’s “too soon to say” whether the global economy is rebounding, “developments over recent months are certainly consistent with the view that a recovery will get underway towards the end of the year,” Stevens said.
The nation’s economy will shrink 1.25 percent in the 12 months through June, before expanding 0.25 percent the following fiscal year, the central bank forecast last week. Three months earlier, the bank predicted growth of 0.25 percent this fiscal year and 1.25 percent a year later.
Australia “should be in a relatively good position and well placed to take part in a renewed international expansion,” Stevens said in Sydney. “That said, most observers think that the early part of any new global expansion will be characterized by pretty slow growth.”
The Reserve Bank decided against cutting its interest rate this month on signs record policy easing and government stimulus are stoking demand, the board said in minutes of the May 5 meeting released today. Australia is benefiting from a sound banking system and households are responding to the lowest borrowing costs in half a century, Stevens said, after recent reports showed retail sales and mortgage lending surged in March.
“The Reserve Bank is happy with policy at the moment,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. “They’re saying we’ll eventually drag ourselves out of the current downturn, but it’s going to be a drawn-out affair.”
The Australian dollar traded at 76.59 U.S. cents at 1:07 p.m. in Sydney from 76.47 cents before the speech was released. The yield on the two-year government bond rose 9 basis points to 3.52 percent from yesterday.
Economic Stimulus
Australia’s economy is likely to “record better outcomes than most other advanced economies in 2009 and 2010,” the central bank’s minutes said.
The government last week announced a A$22 billion ($16.9 billion) program of spending on roads, rail, ports, hospitals and education, adding to cash handouts already allocated earlier this year.
The central bank cut its benchmark rate by a record 4.25 percentage points between early September and April to 3 percent.
“Certainly for the household sector, this is an expansionary monetary policy,” Stevens said, when answering questions after his speech. “The way households are responding confirms that.”
He added that there are signs of “quite a significant” pickup in the economy of China, Australia’s largest trading partner. The central bank’s May 5 minutes noted that export volumes from Australia had held up better than expected in the first quarter.
Australia recorded its second-largest trade surplus on record in March as agricultural exports gained.
Job Gains
Employers unexpectedly added 27,300 workers in April, pushing the jobless rate down to 5.4 percent from 5.7 percent, the first drop in eight months, the statistics bureau said this month. Retail sales rose 2.2 percent in March, four times as much as economists forecast.
“Central bankers can finally see some light at the end of the tunnel,” said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. “While they are understandably cautious, the hint of optimism is there.”
Federal Reserve Bank of Minneapolis President Gary Stern said the U.S. economy is approaching the trough of the worst recession in at least half a century. “There have been a number of more favorable developments in recent months,” Stern said in an interview last week.
The question faced by the Reserve Bank board two weeks ago was “was whether monetary policy should be eased further at this stage, or whether the cash rate should be maintained at its current level,” according to the May 5 minutes.
Rate Expectations
Investors expect Australia’s benchmark interest rate will be lower in 12 months time, according to a Credit Suisse Group index based on swaps trading.
Traders forecast the overnight cash rate target will be 8 basis points lower in 12 months, the index showed at 1:04 p.m. in Sydney. Late yesterday, they forecast 16 basis points of reductions and at the start of April, they tipped 37 basis points of adjustment.
While it’s “too soon to say” whether the global economy is rebounding, “developments over recent months are certainly consistent with the view that a recovery will get underway towards the end of the year,” Stevens said.
The nation’s economy will shrink 1.25 percent in the 12 months through June, before expanding 0.25 percent the following fiscal year, the central bank forecast last week. Three months earlier, the bank predicted growth of 0.25 percent this fiscal year and 1.25 percent a year later.
Asian Stocks Rise on Growth Optimism; Toyota, PetroChina Gain
May 19 (Bloomberg) -- Asian stocks rose, led by finance companies, as U.S. banks applied to repay relief funds to the government and a drop in borrowing costs stoked optimism the financial crisis is easing.
Mitsubishi UFJ Financial Group Ltd. gained 5.6 percent in Tokyo as the London interbank offered rate fell the most in two months. Toyota Motor Corp., which gets a third of its sales in North America, rose 2.8 percent as the yen weakened. PetroChina Co., the nation’s biggest oil producer, surged 6 percent in Hong Kong as Goldman Sachs Group Inc. predicted oil prices will rise. Futures on India’s Nifty Index climbed 5 percent following a surge in American depositary receipts on election results.
“There are indications the banking system in the U.S. and parts of Europe are improving,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney. “That means the recovery will occur perhaps sooner than expected a few months ago.”
The MSCI Asia Pacific Index advanced 2.5 percent to 99.24 at 1:16 p.m. in Tokyo, with finance companies accounting for 34 percent of the increase. The gauge has climbed 40 percent from a more than five-year low on March 9.
“When we look back on these times, we’ll see the global economy bottomed out in the April-June period,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
Japan’s Nikkei 225 Stock Average climbed 3 percent to 9,306.76. Australia’s S&P/ASX 200 Index added 2.2 percent and Hong Kong’s Hang Seng Index jumped 3.1 percent. Trading in India is due to resume today as a 17 percent surge in the Sensitive Index triggered a suspension yesterday.
‘More Confident’
China Mobile Ltd. climbed 4.6 percent in Hong Kong trading on speculation the company will seek acquisitions. Asahi Glass Co., which makes glass substrates for plasma-display panels, surged 8.9 percent in Tokyo after Daiwa Securities Group Inc. recommended investors buy the stock. Filinvest Land Inc. rose 4.7 percent in Manila on brokerage upgrades.
Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 3 percent yesterday, the most in two weeks, as Goldman Sachs, JPMorgan Chase & Co. and Morgan Stanley applied to repay the combined $45 billion they received in October from the government’s Troubled Asset Relief Program, said people familiar with the matter.
“U.S. financial institutions paying back government aid is a good sign that they are becoming more confident,” said Yoji Takeda, who manages $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Macro economic data have been showing signs of bottoming. We need to see more of this for a sustained rally.”
Borrowing Costs
Mitsubishi UFJ, Japan’s biggest publicly traded bank, advanced 5.6 percent to 625 yen. Westpac Banking Corp., Australia’s biggest lender by market value, added 2.8 percent to A$20.07. HSBC Holdings Plc, Europe’s largest lender, gained 5 percent to HK$67.50 in Hong Kong.
The three-month Libor had its biggest decline since March 19 yesterday, according to British Bankers’ Association data. It has fallen for the past 34 days, as credit markets thawed amid record low interest rates and rising customer deposits.
“We’ve seen credit spreads coming back dramatically and global and Libor rates contracting,” said Ausbil’s Xiradis. “Those are good lead indicators.”
The surge in equities signaled investors are more willing to take risk, making the yen less attractive as a haven. The yen depreciated against the dollar to as low as 96.62 today from 95.03 at the 3 p.m. close of stock trading in Tokyo yesterday.
Overseas Sales
Toyota rose 3.7 percent to 3,690 yen on speculation a weaker yen will boost the value of overseas sales. Canon Inc., which gets 28 percent of sales in the U.S., climbed 4.8 percent to 3,300 yen.
PetroChina jumped 6 percent to HK$8.53. Cnooc Ltd., China’s biggest offshore oil producer, added 4.6 percent to HK$10.40. Inpex Corp., Japan’s largest oil explorer, climbed 4.9 percent to 704,000 yen. in Hong Kong.
Goldman Sachs upgraded PetroChina to “neutral” from “sell,” according to a report. The brokerage raised Cnooc and Inpex Corp. to “buy” from “neutral.”
Oil prices will average $70 a barrel next year due to a recovery in demand and as supply remains constrained, Goldman Sachs said. Crude oil futures gained 4.8 percent to $59.03 a barrel in New York yesterday, the highest settlement since Nov. 11. Prices were little changed in after-hours trading.
Indian shares trading in the U.S. rallied on speculation Prime Minister Manmohan Singh’s Congress party victory in nationwide elections will speed up economic reforms and lure overseas funds. The Bank of New York Mellon India ADR Index surged 16 percent.
Overseas Acquisitions
American depositary receipts of ICICI Bank Ltd., India’s second-largest lender, climbed 25 percent to the highest in eight months after Morgan Stanley raised its recommendation on the country’s financial stocks.
China Mobile climbed 4.6 percent to HK$75.60. The company’s Chairman Wang Jianzhou said in the city today that there is a “good opportunity” for overseas acquisitions as phone assets are “inexpensive.”
Asahi Glass rallied 8.9 percent to 671 yen, set to close at its highest level since Oct. 15. The shares were boosted to “buy” from “neutral” by Daiwa analyst Yusuke Ando.
Filinvest, the fourth-largest Philippine builder, jumped 4.7 percent to 67 centavos after Credit Suisse Group and JPMorgan Chase & Co. raised their share-price estimates.
Mitsubishi UFJ Financial Group Ltd. gained 5.6 percent in Tokyo as the London interbank offered rate fell the most in two months. Toyota Motor Corp., which gets a third of its sales in North America, rose 2.8 percent as the yen weakened. PetroChina Co., the nation’s biggest oil producer, surged 6 percent in Hong Kong as Goldman Sachs Group Inc. predicted oil prices will rise. Futures on India’s Nifty Index climbed 5 percent following a surge in American depositary receipts on election results.
“There are indications the banking system in the U.S. and parts of Europe are improving,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney. “That means the recovery will occur perhaps sooner than expected a few months ago.”
The MSCI Asia Pacific Index advanced 2.5 percent to 99.24 at 1:16 p.m. in Tokyo, with finance companies accounting for 34 percent of the increase. The gauge has climbed 40 percent from a more than five-year low on March 9.
“When we look back on these times, we’ll see the global economy bottomed out in the April-June period,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
Japan’s Nikkei 225 Stock Average climbed 3 percent to 9,306.76. Australia’s S&P/ASX 200 Index added 2.2 percent and Hong Kong’s Hang Seng Index jumped 3.1 percent. Trading in India is due to resume today as a 17 percent surge in the Sensitive Index triggered a suspension yesterday.
‘More Confident’
China Mobile Ltd. climbed 4.6 percent in Hong Kong trading on speculation the company will seek acquisitions. Asahi Glass Co., which makes glass substrates for plasma-display panels, surged 8.9 percent in Tokyo after Daiwa Securities Group Inc. recommended investors buy the stock. Filinvest Land Inc. rose 4.7 percent in Manila on brokerage upgrades.
Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 3 percent yesterday, the most in two weeks, as Goldman Sachs, JPMorgan Chase & Co. and Morgan Stanley applied to repay the combined $45 billion they received in October from the government’s Troubled Asset Relief Program, said people familiar with the matter.
“U.S. financial institutions paying back government aid is a good sign that they are becoming more confident,” said Yoji Takeda, who manages $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Macro economic data have been showing signs of bottoming. We need to see more of this for a sustained rally.”
Borrowing Costs
Mitsubishi UFJ, Japan’s biggest publicly traded bank, advanced 5.6 percent to 625 yen. Westpac Banking Corp., Australia’s biggest lender by market value, added 2.8 percent to A$20.07. HSBC Holdings Plc, Europe’s largest lender, gained 5 percent to HK$67.50 in Hong Kong.
The three-month Libor had its biggest decline since March 19 yesterday, according to British Bankers’ Association data. It has fallen for the past 34 days, as credit markets thawed amid record low interest rates and rising customer deposits.
“We’ve seen credit spreads coming back dramatically and global and Libor rates contracting,” said Ausbil’s Xiradis. “Those are good lead indicators.”
The surge in equities signaled investors are more willing to take risk, making the yen less attractive as a haven. The yen depreciated against the dollar to as low as 96.62 today from 95.03 at the 3 p.m. close of stock trading in Tokyo yesterday.
Overseas Sales
Toyota rose 3.7 percent to 3,690 yen on speculation a weaker yen will boost the value of overseas sales. Canon Inc., which gets 28 percent of sales in the U.S., climbed 4.8 percent to 3,300 yen.
PetroChina jumped 6 percent to HK$8.53. Cnooc Ltd., China’s biggest offshore oil producer, added 4.6 percent to HK$10.40. Inpex Corp., Japan’s largest oil explorer, climbed 4.9 percent to 704,000 yen. in Hong Kong.
Goldman Sachs upgraded PetroChina to “neutral” from “sell,” according to a report. The brokerage raised Cnooc and Inpex Corp. to “buy” from “neutral.”
Oil prices will average $70 a barrel next year due to a recovery in demand and as supply remains constrained, Goldman Sachs said. Crude oil futures gained 4.8 percent to $59.03 a barrel in New York yesterday, the highest settlement since Nov. 11. Prices were little changed in after-hours trading.
Indian shares trading in the U.S. rallied on speculation Prime Minister Manmohan Singh’s Congress party victory in nationwide elections will speed up economic reforms and lure overseas funds. The Bank of New York Mellon India ADR Index surged 16 percent.
Overseas Acquisitions
American depositary receipts of ICICI Bank Ltd., India’s second-largest lender, climbed 25 percent to the highest in eight months after Morgan Stanley raised its recommendation on the country’s financial stocks.
China Mobile climbed 4.6 percent to HK$75.60. The company’s Chairman Wang Jianzhou said in the city today that there is a “good opportunity” for overseas acquisitions as phone assets are “inexpensive.”
Asahi Glass rallied 8.9 percent to 671 yen, set to close at its highest level since Oct. 15. The shares were boosted to “buy” from “neutral” by Daiwa analyst Yusuke Ando.
Filinvest, the fourth-largest Philippine builder, jumped 4.7 percent to 67 centavos after Credit Suisse Group and JPMorgan Chase & Co. raised their share-price estimates.
Indian Stock Surge Shows Investors Anticipate More Open Economy
May 19 (Bloomberg) -- India’s record stock-market surge after the election triumph of Prime Minister Manmohan Singh’s Congress Party is a sign of just how much investors want the next government to open Asia’s third-biggest economy.
Expectations are soaring as Singh, 76, starts his second term without the need for support from the communist allies who choked his market-opening efforts from 2004. Investors are betting the Oxford-trained economist will remove the last barriers to foreign investments in financial services and re- start asset sales to help trim a widening budget deficit.
“There’s a real sense of urgency in taking this event and translating it into tangible results,” said Nick Chamie, global head of emerging-markets research at RBC Capital Markets in Toronto. “If we don’t see some positive signs on an improving fiscal deficit in relatively short order, we could end up again with a weaker equity market, a weaker rupee and reduced confidence in the government’s ability.”
The benchmark Sensitive Index, or Sensex, jumped 17 percent yesterday, breaching the daily limit and forcing share trading to be halted for the day for the first time. The rupee climbed 3.1 percent against the dollar to 47.92 in Mumbai and the benchmark bond yield fell 12 basis points.
Among the names being speculated by the Indian media to take over the reigns of the finance ministry is Palaniappan Chidambaram, who had the job for more than four years until last November, when he was moved to the home ministry to tackle terrorism after the Mumbai attacks. Chidambaram, 63, presided over a record average growth rate of almost 9 percent since 2004.
Mukherjee, Nath
Other potential candidates for the position include acting finance minister Pranab Mukherjee, Commerce Minister Kamal Nath, 62, Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, 65, and former central bank governor Chakravarthy Rangarajan, the Economic Times reported yesterday.
Congress and its allies won 261 of the 543 elected lower- house seats, with the party getting 206 lawmakers of its own, the most since 1991, when Singh as finance minister abandoned Soviet-style state planning and introduced free-market policies that have helped India’s economy quadruple in size.
The immediate interest among investors is the fiscal stimulus the government can provide to revive an economy growing at its weakest pace since 2003. The finance minister may unveil this year’s budget by July. Singh’s government said before the elections that the economy needs stimulus of at least another 1 percent of gross domestic product.
Six-Month ‘Honeymoon’
“They’ll have a honeymoon of six to eight months,” said John Praveen, chief investment strategist at Pramerica International Investments Advisers, a unit of Prudential Financial Inc. in Newark, New Jersey. “As long as they’re delivering on some of the expectations, the markets will hold the gains. They have to make the right start.”
The Reserve Bank of India estimates the fiscal and monetary steps announced so far are worth more than $85 billion, or almost 7 percent of GDP.
The tax cuts and increased spending since December widened the federal budget deficit to 6 percent of GDP in the year ended March 31, from a target of 2.5 percent.
The prospect of an increased budget shortfall prompted Standard & Poor’s to say in February that India’s spending plans were “not sustainable” and the nation’s credit rating may be cut to junk if finances worsen. S&P has a BBB- long term credit rating on India, the lowest investment-grade level.
Window of Opportunity
S&P and Moody’s Investors Service, which places India two steps below investment grade, yesterday indicated the South Asian nation has a chance to improve its fiscal situation after the resounding election victory.
The poll result gives the government more “political space” to sell stakes in state-run companies and improve revenue, Moody’s senior analyst Aninda Mitra told Bloomberg News.
S&P’s director of sovereign ratings Takahira Ogawa said “there is a possibility for the government to implement various measures to reform for further expansion of the economy and for the fiscal consolidation.”
Singh had to depend on the communist parties to gain a majority in parliament in his first term. The communists were opposed to his plans to raise funds by selling stakes in National Hydroelectric Power Corp., Oil India Ltd., Bharat Heavy Electricals Ltd. and National Aluminium Co.
“Among the key reforms will be disinvestment now - the new government will focus on fiscal responsibility,” said Rajeev Malik, an economist at Macquarie Group Ltd. in Singapore. “The key issue will be for the government to balance the need for additional fiscal stimulus with a credible plan for fiscal consolidation.”
Communist Impact
Communists also stalled a bill to raise the foreign- investment ceiling for Prudential Plc and other insurers to 49 percent from 26 percent, and resisted legislation aimed at removing a 10 percent cap on the voting rights of foreign investors in non-state banks. They also blocked entry of global retailers such as Wal-Mart Stores Inc. into India.
“Now the Congress party can rule with a minimum number of coalition partners and with a mandate for reform,” said Rory Medcalf, an India specialist at the Lowy Institute for International Policy in Sydney. “This is exceptionally good news for India.”
Expectations are soaring as Singh, 76, starts his second term without the need for support from the communist allies who choked his market-opening efforts from 2004. Investors are betting the Oxford-trained economist will remove the last barriers to foreign investments in financial services and re- start asset sales to help trim a widening budget deficit.
“There’s a real sense of urgency in taking this event and translating it into tangible results,” said Nick Chamie, global head of emerging-markets research at RBC Capital Markets in Toronto. “If we don’t see some positive signs on an improving fiscal deficit in relatively short order, we could end up again with a weaker equity market, a weaker rupee and reduced confidence in the government’s ability.”
The benchmark Sensitive Index, or Sensex, jumped 17 percent yesterday, breaching the daily limit and forcing share trading to be halted for the day for the first time. The rupee climbed 3.1 percent against the dollar to 47.92 in Mumbai and the benchmark bond yield fell 12 basis points.
Among the names being speculated by the Indian media to take over the reigns of the finance ministry is Palaniappan Chidambaram, who had the job for more than four years until last November, when he was moved to the home ministry to tackle terrorism after the Mumbai attacks. Chidambaram, 63, presided over a record average growth rate of almost 9 percent since 2004.
Mukherjee, Nath
Other potential candidates for the position include acting finance minister Pranab Mukherjee, Commerce Minister Kamal Nath, 62, Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, 65, and former central bank governor Chakravarthy Rangarajan, the Economic Times reported yesterday.
Congress and its allies won 261 of the 543 elected lower- house seats, with the party getting 206 lawmakers of its own, the most since 1991, when Singh as finance minister abandoned Soviet-style state planning and introduced free-market policies that have helped India’s economy quadruple in size.
The immediate interest among investors is the fiscal stimulus the government can provide to revive an economy growing at its weakest pace since 2003. The finance minister may unveil this year’s budget by July. Singh’s government said before the elections that the economy needs stimulus of at least another 1 percent of gross domestic product.
Six-Month ‘Honeymoon’
“They’ll have a honeymoon of six to eight months,” said John Praveen, chief investment strategist at Pramerica International Investments Advisers, a unit of Prudential Financial Inc. in Newark, New Jersey. “As long as they’re delivering on some of the expectations, the markets will hold the gains. They have to make the right start.”
The Reserve Bank of India estimates the fiscal and monetary steps announced so far are worth more than $85 billion, or almost 7 percent of GDP.
The tax cuts and increased spending since December widened the federal budget deficit to 6 percent of GDP in the year ended March 31, from a target of 2.5 percent.
The prospect of an increased budget shortfall prompted Standard & Poor’s to say in February that India’s spending plans were “not sustainable” and the nation’s credit rating may be cut to junk if finances worsen. S&P has a BBB- long term credit rating on India, the lowest investment-grade level.
Window of Opportunity
S&P and Moody’s Investors Service, which places India two steps below investment grade, yesterday indicated the South Asian nation has a chance to improve its fiscal situation after the resounding election victory.
The poll result gives the government more “political space” to sell stakes in state-run companies and improve revenue, Moody’s senior analyst Aninda Mitra told Bloomberg News.
S&P’s director of sovereign ratings Takahira Ogawa said “there is a possibility for the government to implement various measures to reform for further expansion of the economy and for the fiscal consolidation.”
Singh had to depend on the communist parties to gain a majority in parliament in his first term. The communists were opposed to his plans to raise funds by selling stakes in National Hydroelectric Power Corp., Oil India Ltd., Bharat Heavy Electricals Ltd. and National Aluminium Co.
“Among the key reforms will be disinvestment now - the new government will focus on fiscal responsibility,” said Rajeev Malik, an economist at Macquarie Group Ltd. in Singapore. “The key issue will be for the government to balance the need for additional fiscal stimulus with a credible plan for fiscal consolidation.”
Communist Impact
Communists also stalled a bill to raise the foreign- investment ceiling for Prudential Plc and other insurers to 49 percent from 26 percent, and resisted legislation aimed at removing a 10 percent cap on the voting rights of foreign investors in non-state banks. They also blocked entry of global retailers such as Wal-Mart Stores Inc. into India.
“Now the Congress party can rule with a minimum number of coalition partners and with a mandate for reform,” said Rory Medcalf, an India specialist at the Lowy Institute for International Policy in Sydney. “This is exceptionally good news for India.”
Sunday, May 17, 2009
Bulls Get A New Rallying Point Markets set to surge up to 20% this week
Mumbai: After 10 Janpath, the partying may shift to PJ Towers, Dalal Street.
Unlike 2004, there is no fear of any Left-sponsored Common Minimum Programme (CMP) on Dalal Street this time around. So the bulls are waiting for the maximum: To take the sensex up by a circuit-hitting 10% within minutes of opening on Monday. Most Street players expect 15-20% rally during the week.
“The market was not expecting this (a thumping win for UPA) and was preparing for a fractured mandate. The election outcome is like a dreamcome-true and we are in for a massive gap-up opening on Monday,’’ said Nishid Shah, president & chief investment officer, IDFC Mutual Fund. So no one is ready to sit on the sidelines and miss the party. “FIIs, domestic institutions and investors will invest big time over next several months. Local investors, who were left out of the last two months’ rally, will also jump in,’’ Shah added.
Other than retail investors, speculators and mutual funds could also jump in. Over the last two months, MFs stayed in cash. But now they are expected to join the celebrations, broking house officials said. “Anticipating a fractured election mandate, domestic institutions did not participate in the rally. But now DIIs have to start investing as the event risk is over,’’ said Amitabh Chakraborty, president-equities, Religare Capital Markets.
Other than the expected euphoric buying, some short coverings could further aid the rally. Markets have put built-up around 3,300-3,200 (nifty) level and those positions could prompt some short covering, Chakraborty said. Technically, the nifty could rally for another 600-650 points before it faces any major hurdle, chartists said. On sensex, this could translate to a rally of about 2,000 points and that could happen in the next 10 sessions, a derivatives analyst with a local brokerage said.
Moving beyond the immediates, the global markets, the budget and emerging economic conditions will again play on sentiments and impact the market, participants said.
Unlike 2004, there is no fear of any Left-sponsored Common Minimum Programme (CMP) on Dalal Street this time around. So the bulls are waiting for the maximum: To take the sensex up by a circuit-hitting 10% within minutes of opening on Monday. Most Street players expect 15-20% rally during the week.
“The market was not expecting this (a thumping win for UPA) and was preparing for a fractured mandate. The election outcome is like a dreamcome-true and we are in for a massive gap-up opening on Monday,’’ said Nishid Shah, president & chief investment officer, IDFC Mutual Fund. So no one is ready to sit on the sidelines and miss the party. “FIIs, domestic institutions and investors will invest big time over next several months. Local investors, who were left out of the last two months’ rally, will also jump in,’’ Shah added.
Other than retail investors, speculators and mutual funds could also jump in. Over the last two months, MFs stayed in cash. But now they are expected to join the celebrations, broking house officials said. “Anticipating a fractured election mandate, domestic institutions did not participate in the rally. But now DIIs have to start investing as the event risk is over,’’ said Amitabh Chakraborty, president-equities, Religare Capital Markets.
Other than the expected euphoric buying, some short coverings could further aid the rally. Markets have put built-up around 3,300-3,200 (nifty) level and those positions could prompt some short covering, Chakraborty said. Technically, the nifty could rally for another 600-650 points before it faces any major hurdle, chartists said. On sensex, this could translate to a rally of about 2,000 points and that could happen in the next 10 sessions, a derivatives analyst with a local brokerage said.
Moving beyond the immediates, the global markets, the budget and emerging economic conditions will again play on sentiments and impact the market, participants said.
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