Published: June 19 2009 03:00 | Last updated: June 19 2009 03:00
Taiwan Semiconductor Manufacturing Company, the world's largest contract chipmaker, has become one of the first big technology companies to bet on a recovery by restoring investment plans curtailed only months ago.
Morris Chang, TSMC's founder, who returned as chief executive a week ago , said yesterday that the company planned to boost its manufacturing capacity and technological prowess.
He likened the economic downturn to a Greek tragedy, with the first act being the financial crisis and the second being the global economic slowdown.
"In the end, there must be a third act: recovery," Mr Chang said. "For our industry, I feel the worst is over. The path to recovery is long and may have some twists and turns . . . but the trend is upwards."
TSMC saw its biggest fall in revenue to date in the first quarter, but is expecting sales to recover in the second quarter on the back of customers replenishing stocks and on strong Chinese demand for electronics.
Speaking at a conference, Mr Chang said that TSMC now planned about $1.9bn in capital expenditure this year, around the same amount as last year. I n April , the group said it would cut capital expenditure by about 20 per cent this year to $1.5bn.
TSMC also aims to increase research and development spending by 20 per cent this year, mainly through expanding its 1,200-strong research and development team by 30 per cent and adding a further 90 people to its design technology team.
Capital spending across the semiconductor industry is expected to fall nearly 45 per cent this year to $24.3bn, according to Gartner , the research company.
It said in a report, however, that equipment spending by chip companies had bottomed out in the second quarter and predicted that capital investment next year would reach $29.4bn, 21 per cent more than this year.
"The impact of the economic crisis has hit the semiconductor equipment industry hard, but signs of life are returning," said Klaus Rinnen, managing vice-president at Gartner.
TSMC is struggling with shrinking industry profit margins, which it said had averaged 21 per cent in 2004 but fell to 15 per cent last year.
It has established a unit to diversify away from chips by investing in "green" energy and LED industries.
Thursday, June 18, 2009
Australian, N.Z. Dollars Rise on Stocks, Pare Weekly Declines
June 19 (Bloomberg) -- The Australian and New Zealand dollars advanced against the yen, paring their first weekly declines since May, as gains in Asian stocks and U.S. equity futures spurred demand for higher-yielding assets.
The two currencies rose for third day versus the dollar as interest rates of 3 percent in Australia and 2.5 percent in New Zealand attracted investors to the South Pacific nations’ assets. The Australian and New Zealand currencies have moved in line with the Standard & Poor’s 500 Index about 80 percent of the time this year and tracked the Nikkei 225 Stock Average more than 90 percent of the time.
“We’ve seen improving risk appetite as sentiment towards the global economy improves,” said Danica Hampton, a currency strategist in Wellington at Bank of New Zealand Ltd. “That’s provided support to growth-sensitive currencies like the Aussie and kiwi.”
Australia’s currency strengthened 0.4 percent to 77.33 yen as of 11:36 a.m. in Sydney from yesterday in New York. It has still lost 3.3 percent this week. The so-called Aussie gained 0.3 percent to 80.06 U.S. cents, paring its loss this week to 1.4 percent.
New Zealand’s dollar advanced 0.3 percent to 61.70 yen and gained 0.2 percent to 63.87 U.S. cents. It is still down 2.5 percent versus the yen and 0.7 percent against the greenback over the past five days.
The Australian dollar may advance towards 80.75 U.S. cents and New Zealand’s currency may gain to 64.50 cents, Hampton said.
Stocks Gain
Asian stocks rose today after U.S. reports on jobless claims and manufacturing yesterday added to evidence the recession in the world’s largest economy may be bottoming.
The Labor Department said continuing jobless claims fell by 148,000 to 6.69 million, the first drop since January. The Conference Board’s index of leading economic indicators climbed 1.2 percent and a Federal Reserve report showed Philadelphia- area manufacturing shrank at the slowest pace in nine months.
The Australian and New Zealand dollars slid this week after the South Pacific nations’ central banks signaled room for interest-rate cuts.
Investors buying the New Zealand currency expecting a strong recovery may be disappointed, central bank Governor Alan Bollard said June 17.
“We expect the economy to begin growing again toward the end of the year, but the recovery is likely to be slow and drawn-out,” Bollard said in a speech in Wellington. “It could also be erratic.”
The Reserve Bank of Australia said yesterday it sold A$1.4 billion ($1.12 billion) of its own currency in May, the biggest net sales by the bank since February 2004, as the Aussie rose by a record that month.
‘Still Fragile’
Policy makers in Australia and New Zealand “are trying to highlight that the recoveries, or the green shoots, we’re seeing are still fragile and if currencies and interest rates trend higher they are at risk of being destabilized,” Hampton said. “There has been some fear that we will see risk aversion resurface.”
Australia today sold A$700 million of bonds maturing April 2012 at a weighted average yield of 4.53 percent. The so-called bid-to-cover ratio at the auction was 1.9.
Australian government bonds declined for a third day. The yield on the benchmark 10-year note gained 14 basis points, or 0.14 percentage point, to 5.75 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 1.031, or A$10.31 per A$1,000 face amount, to 96.332.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.89 percent from 3.88 yesterday.
The two currencies rose for third day versus the dollar as interest rates of 3 percent in Australia and 2.5 percent in New Zealand attracted investors to the South Pacific nations’ assets. The Australian and New Zealand currencies have moved in line with the Standard & Poor’s 500 Index about 80 percent of the time this year and tracked the Nikkei 225 Stock Average more than 90 percent of the time.
“We’ve seen improving risk appetite as sentiment towards the global economy improves,” said Danica Hampton, a currency strategist in Wellington at Bank of New Zealand Ltd. “That’s provided support to growth-sensitive currencies like the Aussie and kiwi.”
Australia’s currency strengthened 0.4 percent to 77.33 yen as of 11:36 a.m. in Sydney from yesterday in New York. It has still lost 3.3 percent this week. The so-called Aussie gained 0.3 percent to 80.06 U.S. cents, paring its loss this week to 1.4 percent.
New Zealand’s dollar advanced 0.3 percent to 61.70 yen and gained 0.2 percent to 63.87 U.S. cents. It is still down 2.5 percent versus the yen and 0.7 percent against the greenback over the past five days.
The Australian dollar may advance towards 80.75 U.S. cents and New Zealand’s currency may gain to 64.50 cents, Hampton said.
Stocks Gain
Asian stocks rose today after U.S. reports on jobless claims and manufacturing yesterday added to evidence the recession in the world’s largest economy may be bottoming.
The Labor Department said continuing jobless claims fell by 148,000 to 6.69 million, the first drop since January. The Conference Board’s index of leading economic indicators climbed 1.2 percent and a Federal Reserve report showed Philadelphia- area manufacturing shrank at the slowest pace in nine months.
The Australian and New Zealand dollars slid this week after the South Pacific nations’ central banks signaled room for interest-rate cuts.
Investors buying the New Zealand currency expecting a strong recovery may be disappointed, central bank Governor Alan Bollard said June 17.
“We expect the economy to begin growing again toward the end of the year, but the recovery is likely to be slow and drawn-out,” Bollard said in a speech in Wellington. “It could also be erratic.”
The Reserve Bank of Australia said yesterday it sold A$1.4 billion ($1.12 billion) of its own currency in May, the biggest net sales by the bank since February 2004, as the Aussie rose by a record that month.
‘Still Fragile’
Policy makers in Australia and New Zealand “are trying to highlight that the recoveries, or the green shoots, we’re seeing are still fragile and if currencies and interest rates trend higher they are at risk of being destabilized,” Hampton said. “There has been some fear that we will see risk aversion resurface.”
Australia today sold A$700 million of bonds maturing April 2012 at a weighted average yield of 4.53 percent. The so-called bid-to-cover ratio at the auction was 1.9.
Australian government bonds declined for a third day. The yield on the benchmark 10-year note gained 14 basis points, or 0.14 percentage point, to 5.75 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 1.031, or A$10.31 per A$1,000 face amount, to 96.332.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.89 percent from 3.88 yesterday.
Wednesday, June 17, 2009
Indian Stocks May ‘Consolidate,’ Add Cash, UBS Says
June 18 (Bloomberg) -- Indian shares, Asia’s second-best performers this quarter, may “consolidate” following a 57 percent gain in the benchmark stock index, UBS AG said.
The brokerage has turned “less bullish” because further gains will be limited and as companies take advantage of the rally to sell stocks, analysts Suresh A Mahadevan and Navin Gupta wrote in a report today. UBS is increasing the cash component in its model India portfolio to 5 percent and raising the weighting of so-called defensive shares including health- care and telecommunications companies, they said.
The Bombay Stock Exchange Sensitive Index’s surge this quarter makes it the fifth-best performer globally among the 89 benchmark indexes tracked by Bloomberg. In Asia, only Vietnam has advanced more.
“Over the medium term, we believe fundamentals and liquidity are likely to support higher valuations,” the analysts wrote. “However in the short term, given the sharp rally, we expect the market to consolidate.”
The brokerage raised its March 2010 target for the Sensex to 16,750 from an earlier forecast of 13,500, the report said. That’s a 15 percent gain from yesterday’s close.
The estimate is based on a price-to-estimated earnings multiple of 14.9 times, UBS said. The benchmark index is currently valued at 14.7 times next year’s earnings, according to data tracked by Bloomberg.
Cash, Drug Stocks
Investors should now hold 5 percent of their Indian portfolio in cash and place 1.5 percent of their funds in pharmaceutical companies, after previously allocating a zero weighting in the two, according to UBS’s model portfolio. The brokerage raised its weighting for so-called consumer staples shares to 7.5 percent from 4.7 percent.
UBS boosted technology services to “overweight” from “neutral,” saying an economic recovery in the U.S. and Europe and a consolidation will drive further gains for IT companies. The “underperformance” of telecommunications companies including Bharti Airtel Ltd. prompted the brokerage to upgrade the industry, the report said.
To fund the changes, investors should reduce their holdings in metals and engineering companies after a rally in the shares, UBS said.
They should cut their holdings in Reliance Industries Ltd., India’s most valuable company, as refining margins decline amid increased capacity, UBS said. The brokerage today cut its rating on the stock to “sell” from “neutral.”
The brokerage has turned “less bullish” because further gains will be limited and as companies take advantage of the rally to sell stocks, analysts Suresh A Mahadevan and Navin Gupta wrote in a report today. UBS is increasing the cash component in its model India portfolio to 5 percent and raising the weighting of so-called defensive shares including health- care and telecommunications companies, they said.
The Bombay Stock Exchange Sensitive Index’s surge this quarter makes it the fifth-best performer globally among the 89 benchmark indexes tracked by Bloomberg. In Asia, only Vietnam has advanced more.
“Over the medium term, we believe fundamentals and liquidity are likely to support higher valuations,” the analysts wrote. “However in the short term, given the sharp rally, we expect the market to consolidate.”
The brokerage raised its March 2010 target for the Sensex to 16,750 from an earlier forecast of 13,500, the report said. That’s a 15 percent gain from yesterday’s close.
The estimate is based on a price-to-estimated earnings multiple of 14.9 times, UBS said. The benchmark index is currently valued at 14.7 times next year’s earnings, according to data tracked by Bloomberg.
Cash, Drug Stocks
Investors should now hold 5 percent of their Indian portfolio in cash and place 1.5 percent of their funds in pharmaceutical companies, after previously allocating a zero weighting in the two, according to UBS’s model portfolio. The brokerage raised its weighting for so-called consumer staples shares to 7.5 percent from 4.7 percent.
UBS boosted technology services to “overweight” from “neutral,” saying an economic recovery in the U.S. and Europe and a consolidation will drive further gains for IT companies. The “underperformance” of telecommunications companies including Bharti Airtel Ltd. prompted the brokerage to upgrade the industry, the report said.
To fund the changes, investors should reduce their holdings in metals and engineering companies after a rally in the shares, UBS said.
They should cut their holdings in Reliance Industries Ltd., India’s most valuable company, as refining margins decline amid increased capacity, UBS said. The brokerage today cut its rating on the stock to “sell” from “neutral.”
Japan’s Government, Central Bank Agree Worst of Recession Over
June 18 (Bloomberg) -- Japan’s government and central bank agree that the worst of the deepest postwar recession is over.
Demand is picking up even though “the economy is in a difficult situation,” the Cabinet Office said in Tokyo yesterday. The Bank of Japan said the world’s second-largest economy has “begun to stop worsening.”
Evidence the economy has turned a corner has mounted as companies bolstered industrial output at the fastest pace in 56 years in April and exports recovered from unprecedented declines. Central bank Governor Masaaki Shirakawa said this week he is “cautious” about the rebound because renewed demand may only be temporary.
“Policy makers are raising their economic assessments to reflect recent improvements, but they remain pretty cautious about the outlook,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “Exports are starting to turn around, but that doesn’t guarantee production will keep rebounding and support employment.”
The Nikkei 225 Stock Average rose above 10,000 for the first time in eight months last week and consumer sentiment climbed to a 14-month high in May. Stocks have retreated 2.9 percent this week and the yen has strengthened against the dollar on concern a recovery in the U.S., Japan’s largest export market, isn’t a sure thing.
“It seems clear the economy bottomed out between January and March,” Japan’s Finance Minister Kaoru Yosano told reporters at a press briefing yesterday. “There are signs the decline in personal spending on some items is ending.”
‘Engines Turn’
It may take some time before Americans start spending again. President Barack Obama said in an interview that unemployment may climb to 10 percent from the current 25-year high of 9.4 percent.
“You’re starting to see the engines of the economy turn,” Obama said. Still, he added that “it’s going to take a long time” for a full-fledged recovery as households work off the debt accumulated during the real-estate boom.
Japan’s export dependence has caused it to suffer the most from the global recession. Gross domestic product fell at an annual 14.2 percent pace in the three months ended March 31, the steepest contraction since records began half a century ago. Analysts surveyed by Bloomberg expect the economy to grow this quarter, which would be the first expansion in a year.
“The upgrades by the BOJ and the government just mean the worst is over,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “The U.S. recovery will be postponed until the middle of next year so it’ll be impossible for Japan to have a solid recovery.”
‘Delicate Stage’
Economists say the economy may stutter after recovering from its worst contraction on record as Prime Minister Taro Aso’s 25 trillion-yen ($260 billion) stimulus plans wear off. The government said in yesterday’s report that rising unemployment may also discourage consumer spending and damp growth in the coming months.
“The Japanese economy is still at a delicate stage,” said David Cohen, head of Asian forecasting at Action Economics in Singapore. “At the end of the day, much will remain dependent upon the outlook for global export demand.”
Optimism that the worst is over doesn’t mean the Bank of Japan is preparing to raise the key overnight lending rate, which has stayed at 0.1 percent since being cut in December.
“Given that employment and wages are deteriorating and deflation risk is rising, it’s difficult to expect a rate hike anytime soon,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The central bank won’t likely raise rates until fiscal 2011 at the earliest,” he said, referring to the year ending March 2012.
Job Shortage
Deteriorating prospects for consumers are also a risk, the Cabinet Office said in yesterday’s report. The unemployment rate rose to a five-year high of 5 percent in April and economists surveyed by Bloomberg expect it to climb to a record 5.8 percent next year. About two work seekers are competing for a single spot, the most severe job shortage on record.
“We aren’t in a recovery phase,” said Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office. “There is a risk that Japan’s economy will deteriorate again.”
Demand is picking up even though “the economy is in a difficult situation,” the Cabinet Office said in Tokyo yesterday. The Bank of Japan said the world’s second-largest economy has “begun to stop worsening.”
Evidence the economy has turned a corner has mounted as companies bolstered industrial output at the fastest pace in 56 years in April and exports recovered from unprecedented declines. Central bank Governor Masaaki Shirakawa said this week he is “cautious” about the rebound because renewed demand may only be temporary.
“Policy makers are raising their economic assessments to reflect recent improvements, but they remain pretty cautious about the outlook,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “Exports are starting to turn around, but that doesn’t guarantee production will keep rebounding and support employment.”
The Nikkei 225 Stock Average rose above 10,000 for the first time in eight months last week and consumer sentiment climbed to a 14-month high in May. Stocks have retreated 2.9 percent this week and the yen has strengthened against the dollar on concern a recovery in the U.S., Japan’s largest export market, isn’t a sure thing.
“It seems clear the economy bottomed out between January and March,” Japan’s Finance Minister Kaoru Yosano told reporters at a press briefing yesterday. “There are signs the decline in personal spending on some items is ending.”
‘Engines Turn’
It may take some time before Americans start spending again. President Barack Obama said in an interview that unemployment may climb to 10 percent from the current 25-year high of 9.4 percent.
“You’re starting to see the engines of the economy turn,” Obama said. Still, he added that “it’s going to take a long time” for a full-fledged recovery as households work off the debt accumulated during the real-estate boom.
Japan’s export dependence has caused it to suffer the most from the global recession. Gross domestic product fell at an annual 14.2 percent pace in the three months ended March 31, the steepest contraction since records began half a century ago. Analysts surveyed by Bloomberg expect the economy to grow this quarter, which would be the first expansion in a year.
“The upgrades by the BOJ and the government just mean the worst is over,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “The U.S. recovery will be postponed until the middle of next year so it’ll be impossible for Japan to have a solid recovery.”
‘Delicate Stage’
Economists say the economy may stutter after recovering from its worst contraction on record as Prime Minister Taro Aso’s 25 trillion-yen ($260 billion) stimulus plans wear off. The government said in yesterday’s report that rising unemployment may also discourage consumer spending and damp growth in the coming months.
“The Japanese economy is still at a delicate stage,” said David Cohen, head of Asian forecasting at Action Economics in Singapore. “At the end of the day, much will remain dependent upon the outlook for global export demand.”
Optimism that the worst is over doesn’t mean the Bank of Japan is preparing to raise the key overnight lending rate, which has stayed at 0.1 percent since being cut in December.
“Given that employment and wages are deteriorating and deflation risk is rising, it’s difficult to expect a rate hike anytime soon,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The central bank won’t likely raise rates until fiscal 2011 at the earliest,” he said, referring to the year ending March 2012.
Job Shortage
Deteriorating prospects for consumers are also a risk, the Cabinet Office said in yesterday’s report. The unemployment rate rose to a five-year high of 5 percent in April and economists surveyed by Bloomberg expect it to climb to a record 5.8 percent next year. About two work seekers are competing for a single spot, the most severe job shortage on record.
“We aren’t in a recovery phase,” said Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office. “There is a risk that Japan’s economy will deteriorate again.”
Asia Day Ahead: U.S. Stocks Fall; Cantillon Said to Shut Funds
June 18 (Bloomberg) -- U.S. stocks fell for a third straight day after Standard & Poor’s downgraded the credit ratings of 18 banks, overshadowing gains in health-care shares as Congress prepares legislation to overhaul the industry. Cantillon Capital Management LLC, a $4.5 billion asset- management firm run by William von Mueffling, is closing its two hedge funds to focus on traditional investing, according to people familiar with the matter.
TOP STORIES/MOST READ ON BLOOMBERG
U.S. Banks Slide After S&P Rating Cuts on Regulation
U.S. lenders slid after Standard & Poor’s reduced its credit ratings on 18 banks, including Wells Fargo & Co., Capital One Financial Corp. and KeyCorp, citing tighter regulation and increased market volatility. Keycorp dropped 7.8 percent.
Obama Lays Out ‘Sweeping Overhaul’ of Financial Rules
President Barack Obama proposed the most sweeping overhaul of the U.S. financial regulatory system in 75 years, seeking to correct a “cascade of mistakes” that toppled major securities firms, froze credit markets and destroyed $26.4 trillion in stock market value around the world.
Cantillon Said to Close Hedge Funds in Strategy Shift
Cantillon Capital Management LLC, a $4.5 billion asset- management firm run by William von Mueffling, is closing its two hedge funds to focus on traditional investing, according to people familiar with the matter.
Wall Street Calls Obama’s Mortgage-Market Debt Plan a Burden
The Obama administration’s plan to shore up the market for mortgage bonds by forcing banks to keep some on their books faces resistance on Wall Street, as bankers call the measure burdensome and a hindrance to new lending.
MAIN ECONOMIC RELEASES TODAY World Bank Releases Its Quarterly Update on Chinese Economy India’s Wholesale Price Index Seen Dropping 1.48% in June 6 Week Reserve Bank of Australia Foreign-Exchange Transactions Report
MAIN ANALYST UPGRADES/DOWNGRADES *BHP BILLITON RAISED TO ‘OUTPERFORM FROM ‘NEUTRAL’ AT MACQUARIE *PREUKSA REAL ESTATE RAISED TO ‘BUY’ FROM ‘SELL’ AT TRINITY *SWIBER UPGRADED TO ‘OUTPERFORM’ FROM ‘UNDERPERFORM’ AT CIMB *SEKISUI HOUSE CUT TO ‘NEUTRAL’ AT CREDIT SUISSE *SEPTENI CUT TO ‘HOLD’ FROM ‘BUY’ AT KBC SECURITIES *PING AN CUT TO ‘SELL’ AT UBS ON ‘STRETCHED VALUATION’ *CHINA SHIPPING RAISED TO ‘OVERWEIGHT’ AT MORGAN STANLEY *CSR RAISED TO ‘OVERWEIGHT/CAUTIOUS’ AT MORGAN STANLEY
ASIAN MARKETS
The Nikkei 225 futures contract due in June fell 155 points to 9,670. The Hang Seng Index futures for June dropped 167 to 17,870. The S&P/ASX 200 Index futures contract due in June slipped 4 to 3,866 at 6:59 a.m. in Sydney.
U.S. Stocks Fall, Led by Banks on Downgrade; Health Shares Gain
U.S. stocks fell for a third straight day after Standard & Poor’s downgraded the credit ratings of 18 banks, overshadowing gains in health-care shares as Congress prepares legislation to overhaul the industry.
Treasuries Decline as Investors Shift Focus to Debt Auctions
Treasury 10-year notes fell, snapping a four-day rally, as investors turned their attention to next week’s three note auctions, part of the government’s record borrowing to stimulate the economy.
Dollar Drops to Two-Week Low on Reduced Bets Fed Target to Rise
The dollar dropped to the lowest level versus the yen in two weeks as slower-than-forecast monthly inflation in May led traders to reduce bets the Federal Reserve will boost the target lending rate.
European Stocks Drop for Fourth Day; Iberdrola, Sainsbury Fall
European stocks fell for a fourth straight day, the longest stretch of declines since February, amid concern that the three- month rally has outpaced the prospects for earnings growth.
German Bonds Rise as Stocks Drop on Waning Earnings Optimism
German 10-year bonds advanced as stocks fell on speculation the three-month equity rally has outpaced the prospects for corporate earnings growth, fueling demand for the safest assets.
Gold Gains in N.Y. as Dollar Falls Against Euro; Silver Climbs
Gold prices advanced in New York as the dollar fell against the euro, boosting demand for the metal as a store of value. Silver also rose.
Crude Oil Rises as U.S. Supply Declines, Fuel Demand Increases
Crude oil rose for the first time in four days after a government report showed a bigger-than-forecast inventory decline and an increase in fuel demand.
HIGHLIGHTS FROM NEWSPAPERS
Calsonic Kansei May Book Loss of 10 Billion Yen, Nikkei Says
Calsonic Kansei Corp. will probably report a group operating loss of about 10 billion yen ($104.6 million) for the April-to-June quarter, largely because of shrinking demand for car air-conditioning systems as Nissan Motor Co. cuts production, Nikkei English News said, without identifying a source for the information.
TOP STORIES/MOST READ ON BLOOMBERG
U.S. Banks Slide After S&P Rating Cuts on Regulation
U.S. lenders slid after Standard & Poor’s reduced its credit ratings on 18 banks, including Wells Fargo & Co., Capital One Financial Corp. and KeyCorp, citing tighter regulation and increased market volatility. Keycorp dropped 7.8 percent.
Obama Lays Out ‘Sweeping Overhaul’ of Financial Rules
President Barack Obama proposed the most sweeping overhaul of the U.S. financial regulatory system in 75 years, seeking to correct a “cascade of mistakes” that toppled major securities firms, froze credit markets and destroyed $26.4 trillion in stock market value around the world.
Cantillon Said to Close Hedge Funds in Strategy Shift
Cantillon Capital Management LLC, a $4.5 billion asset- management firm run by William von Mueffling, is closing its two hedge funds to focus on traditional investing, according to people familiar with the matter.
Wall Street Calls Obama’s Mortgage-Market Debt Plan a Burden
The Obama administration’s plan to shore up the market for mortgage bonds by forcing banks to keep some on their books faces resistance on Wall Street, as bankers call the measure burdensome and a hindrance to new lending.
MAIN ECONOMIC RELEASES TODAY World Bank Releases Its Quarterly Update on Chinese Economy India’s Wholesale Price Index Seen Dropping 1.48% in June 6 Week Reserve Bank of Australia Foreign-Exchange Transactions Report
MAIN ANALYST UPGRADES/DOWNGRADES *BHP BILLITON RAISED TO ‘OUTPERFORM FROM ‘NEUTRAL’ AT MACQUARIE *PREUKSA REAL ESTATE RAISED TO ‘BUY’ FROM ‘SELL’ AT TRINITY *SWIBER UPGRADED TO ‘OUTPERFORM’ FROM ‘UNDERPERFORM’ AT CIMB *SEKISUI HOUSE CUT TO ‘NEUTRAL’ AT CREDIT SUISSE *SEPTENI CUT TO ‘HOLD’ FROM ‘BUY’ AT KBC SECURITIES *PING AN CUT TO ‘SELL’ AT UBS ON ‘STRETCHED VALUATION’ *CHINA SHIPPING RAISED TO ‘OVERWEIGHT’ AT MORGAN STANLEY *CSR RAISED TO ‘OVERWEIGHT/CAUTIOUS’ AT MORGAN STANLEY
ASIAN MARKETS
The Nikkei 225 futures contract due in June fell 155 points to 9,670. The Hang Seng Index futures for June dropped 167 to 17,870. The S&P/ASX 200 Index futures contract due in June slipped 4 to 3,866 at 6:59 a.m. in Sydney.
U.S. Stocks Fall, Led by Banks on Downgrade; Health Shares Gain
U.S. stocks fell for a third straight day after Standard & Poor’s downgraded the credit ratings of 18 banks, overshadowing gains in health-care shares as Congress prepares legislation to overhaul the industry.
Treasuries Decline as Investors Shift Focus to Debt Auctions
Treasury 10-year notes fell, snapping a four-day rally, as investors turned their attention to next week’s three note auctions, part of the government’s record borrowing to stimulate the economy.
Dollar Drops to Two-Week Low on Reduced Bets Fed Target to Rise
The dollar dropped to the lowest level versus the yen in two weeks as slower-than-forecast monthly inflation in May led traders to reduce bets the Federal Reserve will boost the target lending rate.
European Stocks Drop for Fourth Day; Iberdrola, Sainsbury Fall
European stocks fell for a fourth straight day, the longest stretch of declines since February, amid concern that the three- month rally has outpaced the prospects for earnings growth.
German Bonds Rise as Stocks Drop on Waning Earnings Optimism
German 10-year bonds advanced as stocks fell on speculation the three-month equity rally has outpaced the prospects for corporate earnings growth, fueling demand for the safest assets.
Gold Gains in N.Y. as Dollar Falls Against Euro; Silver Climbs
Gold prices advanced in New York as the dollar fell against the euro, boosting demand for the metal as a store of value. Silver also rose.
Crude Oil Rises as U.S. Supply Declines, Fuel Demand Increases
Crude oil rose for the first time in four days after a government report showed a bigger-than-forecast inventory decline and an increase in fuel demand.
HIGHLIGHTS FROM NEWSPAPERS
Calsonic Kansei May Book Loss of 10 Billion Yen, Nikkei Says
Calsonic Kansei Corp. will probably report a group operating loss of about 10 billion yen ($104.6 million) for the April-to-June quarter, largely because of shrinking demand for car air-conditioning systems as Nissan Motor Co. cuts production, Nikkei English News said, without identifying a source for the information.
Tuesday, June 16, 2009
Asian Stocks Fall for Third Day on Growth Concern; BHP Drops
June 17 (Bloomberg) -- Asian stocks fell for a third day, led by mining companies and banks, after U.S. President Barack Obama said unemployment in the world’s largest economy may reach 10 percent.
Jiangxi Copper Co., China’s biggest producer of the metal, sank 3.3 percent as metal prices dropped amid concern demand will decline. Westpac Banking Corp., Australia’s biggest lender by market value, dropped 2.6 percent after a government official said it’s too soon to say the economy avoided a recession. Sekisui House Ltd. jumped 3.9 percent in Tokyo, pacing gains by developers as the central bank raised its assessment of the economy for a second month.
“We’re probably more into a grinding period for the economy rather than a rapid recovery,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State, which holds about $102 billion. “We’ve avoided the Armageddon scenario, but it doesn’t mean we’re back to the brave new world that we were all in a few years ago.
The MSCI Asia Pacific Index lost 0.3 percent to 101.74 at 2:46 p.m. in Tokyo, having swung between gains and losses at least seven times. Japan’s Nikkei 225 Stock Average added 1 percent, while the Topix Index gained 0.9 percent as a weaker yen boosted prospects for export earnings.
Hong Kong’s Hang Seng Index lost 1.3 percent, with China Resources Gas Group Ltd. tumbling 13 percent as Credit Suisse Group AG and Morgan Stanley offered to sell their stakes in the company. Australia’s S&P/ASX 200 Index dropped 1.3 percent, led by ports and rail operator Asciano Group, which slumped 12 percent after it increased the size of a share sale. The Philippines Composite Index sank 2.9 percent.
The MSCI Asia Pacific Index’s 3.4 percent drop in the past three days pared its rally from a five-year low on March 9 to 44 percent. The rally drove the average valuation of companies in the gauge to 1.5 times the book value of assets, the highest level since September, according to Bloomberg data.
Copper Drop
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge slid 1.3 percent yesterday as Best Buy Co., the world’s largest electronics retailer, posted disappointing sales.
In an interview with Bloomberg News, U.S. President Obama predicted a 10 percent unemployment rate even as he said the “engines” of an economic recovery have begun to turn. Obama is due to unveil his plan to revamp financial market regulation later today.
Jiangxi Copper slipped 3.3 percent to HK$12.74. Mitsubishi Corp., which gets more than half of its profit from commodities, slipped lost 1.3 percent to 1,857 in Tokyo. Alumina Ltd. sank 4.9 percent to A$1.45 in Sydney.
Copper prices in New York sank 1.4 percent yesterday as the U.S. Federal Reserve said industrial production sank in May. In London, a gauge of six metals dipped for a third day, the longest losing stretch since February.
Australian Banks
BHP Billiton Ltd., the world’s biggest mining company, sank 3 percent to A$35.36 in Sydney. Its credit-default swaps, the cost of protecting its debt, had their biggest gain since Oct. 22 on speculation it is planning an acquisition.
Westpac dropped 2.6 percent to A$19.34. Australia & New Zealand Banking Group Ltd. fell 2.1 percent to A$16.45. Commonwealth Bank of Australia, the nation’s largest mortgage lender, lost 1.3 percent to A$37.60.
The MSCI Asia Pacific Index slumped as much as 51 percent in the past year as the financial crisis dragged economies including Japan into recession. Australia’s economy unexpectedly grew 0.4 percent in the first quarter after contracting a 0.6 percent in previous three months, government figures released on June 3 showed.
“Celebration would be premature,” David Gruen, executive director of the Australian Treasury Department’s Macroeconomic Group, said in a speech late yesterday. “The global recession, and its Australian counterpart, still has some way to run.”
Taking Profit
The MSCI gauge climbed more than 10 percent for a second month in May, which hasn’t happened since the two months ended 1993. Stocks on the index trade at 23 times estimated profit, more than the MSCI World Index’s 15 times, Bloomberg data show.
“Some people are taking profit as the market has risen too fast,” said Naoki Fujiwara, who oversees the equivalent of $3.7 billion at Shinkin Asset Management Co. in Tokyo. “Investors’ appetite for bargain hunting is surprisingly strong.”
Japan’s Sumitomo Forestry Co. surged 12 percent to 777 yen, while Sekisui House jumped 3.9 percent to 989 yen. Morgan Stanley upgraded the stocks to “overweight” and lifted its outlook on the country’s real estate sector to “attractive,” saying home orders probably bottomed in the first quarter and should benefit from tax breaks.
Daiwa Investment
Daiwa Securities Group Inc. gained 0.6 percent to 651 yen. The company will invest 10 billion yen ($104 million) in DA Office Investment Corp., the Nikkei newspaper reported today, without citing anyone. Daiwa said it is not the source of the Nikkei report. DA Office, which denied the report, wasn’t traded as orders to buy outnumbered those to sell.
In Hong Kong, China Resources Gas plunged 13 percent to HK$5.10. Credit Suisse and Morgan Stanley are offering a combined 166 million existing shares at HK$4.30 to HK$4.60 each, according to an e-mail sent to fund managers yesterday.
Asciano slumped 12 percent to A$1.28 after the Australian ports and rail operator increased a share sale by 18 percent to A$2.35 billion ($1.86 billion) to slash debt.
Jiangxi Copper Co., China’s biggest producer of the metal, sank 3.3 percent as metal prices dropped amid concern demand will decline. Westpac Banking Corp., Australia’s biggest lender by market value, dropped 2.6 percent after a government official said it’s too soon to say the economy avoided a recession. Sekisui House Ltd. jumped 3.9 percent in Tokyo, pacing gains by developers as the central bank raised its assessment of the economy for a second month.
“We’re probably more into a grinding period for the economy rather than a rapid recovery,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State, which holds about $102 billion. “We’ve avoided the Armageddon scenario, but it doesn’t mean we’re back to the brave new world that we were all in a few years ago.
The MSCI Asia Pacific Index lost 0.3 percent to 101.74 at 2:46 p.m. in Tokyo, having swung between gains and losses at least seven times. Japan’s Nikkei 225 Stock Average added 1 percent, while the Topix Index gained 0.9 percent as a weaker yen boosted prospects for export earnings.
Hong Kong’s Hang Seng Index lost 1.3 percent, with China Resources Gas Group Ltd. tumbling 13 percent as Credit Suisse Group AG and Morgan Stanley offered to sell their stakes in the company. Australia’s S&P/ASX 200 Index dropped 1.3 percent, led by ports and rail operator Asciano Group, which slumped 12 percent after it increased the size of a share sale. The Philippines Composite Index sank 2.9 percent.
The MSCI Asia Pacific Index’s 3.4 percent drop in the past three days pared its rally from a five-year low on March 9 to 44 percent. The rally drove the average valuation of companies in the gauge to 1.5 times the book value of assets, the highest level since September, according to Bloomberg data.
Copper Drop
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge slid 1.3 percent yesterday as Best Buy Co., the world’s largest electronics retailer, posted disappointing sales.
In an interview with Bloomberg News, U.S. President Obama predicted a 10 percent unemployment rate even as he said the “engines” of an economic recovery have begun to turn. Obama is due to unveil his plan to revamp financial market regulation later today.
Jiangxi Copper slipped 3.3 percent to HK$12.74. Mitsubishi Corp., which gets more than half of its profit from commodities, slipped lost 1.3 percent to 1,857 in Tokyo. Alumina Ltd. sank 4.9 percent to A$1.45 in Sydney.
Copper prices in New York sank 1.4 percent yesterday as the U.S. Federal Reserve said industrial production sank in May. In London, a gauge of six metals dipped for a third day, the longest losing stretch since February.
Australian Banks
BHP Billiton Ltd., the world’s biggest mining company, sank 3 percent to A$35.36 in Sydney. Its credit-default swaps, the cost of protecting its debt, had their biggest gain since Oct. 22 on speculation it is planning an acquisition.
Westpac dropped 2.6 percent to A$19.34. Australia & New Zealand Banking Group Ltd. fell 2.1 percent to A$16.45. Commonwealth Bank of Australia, the nation’s largest mortgage lender, lost 1.3 percent to A$37.60.
The MSCI Asia Pacific Index slumped as much as 51 percent in the past year as the financial crisis dragged economies including Japan into recession. Australia’s economy unexpectedly grew 0.4 percent in the first quarter after contracting a 0.6 percent in previous three months, government figures released on June 3 showed.
“Celebration would be premature,” David Gruen, executive director of the Australian Treasury Department’s Macroeconomic Group, said in a speech late yesterday. “The global recession, and its Australian counterpart, still has some way to run.”
Taking Profit
The MSCI gauge climbed more than 10 percent for a second month in May, which hasn’t happened since the two months ended 1993. Stocks on the index trade at 23 times estimated profit, more than the MSCI World Index’s 15 times, Bloomberg data show.
“Some people are taking profit as the market has risen too fast,” said Naoki Fujiwara, who oversees the equivalent of $3.7 billion at Shinkin Asset Management Co. in Tokyo. “Investors’ appetite for bargain hunting is surprisingly strong.”
Japan’s Sumitomo Forestry Co. surged 12 percent to 777 yen, while Sekisui House jumped 3.9 percent to 989 yen. Morgan Stanley upgraded the stocks to “overweight” and lifted its outlook on the country’s real estate sector to “attractive,” saying home orders probably bottomed in the first quarter and should benefit from tax breaks.
Daiwa Investment
Daiwa Securities Group Inc. gained 0.6 percent to 651 yen. The company will invest 10 billion yen ($104 million) in DA Office Investment Corp., the Nikkei newspaper reported today, without citing anyone. Daiwa said it is not the source of the Nikkei report. DA Office, which denied the report, wasn’t traded as orders to buy outnumbered those to sell.
In Hong Kong, China Resources Gas plunged 13 percent to HK$5.10. Credit Suisse and Morgan Stanley are offering a combined 166 million existing shares at HK$4.30 to HK$4.60 each, according to an e-mail sent to fund managers yesterday.
Asciano slumped 12 percent to A$1.28 after the Australian ports and rail operator increased a share sale by 18 percent to A$2.35 billion ($1.86 billion) to slash debt.
Mahindra to Help India Beat China to U.S. Auto Market
June 17 (Bloomberg) -- Mahindra & Mahindra Ltd., India’s largest maker of sport-utility vehicles, is betting its diesel pickup trucks can beat the Chinese to the U.S. market.
Early next year, Mumbai-based Mahindra plans to start selling small 2- and 4-door pickups with a diesel engine that meets California’s strict exhaust rules. U.S. plans for Chinese brands such as Chery Automobile Co. and Geely Automobile Holdings Ltd. have yet to materialize, five years into their announcements.
“Once you establish the brand, volumes will come,” Pawan Goenka, Mahindra’s president in charge of the automotive business, said in a June 16 interview. “There is a hole available to us which is not populated.”
Mahindra’s trucks will arrive in the U.S. even as recession and job losses have pushed auto sales to the lowest in three decades, triggering bankruptcy filings for General Motors Corp. and Chrysler LLC. A weak economy and cheaper diesel prices may help the Indian automaker win buyers seeking a bargain, said industry analyst Eric Noble.
“It’s not a bad time to launch a durable, value-oriented brand,” said Noble, president of Car Lab, an Orange, California-based consulting firm for automakers. “There’s no real competition in compact trucks with a diesel powertrain.”
“Totally Unknown”
With a brand that’s “totally unknown” to U.S. customers, an Indian automaker will face the same challenges Hyundai Motor Co., Toyota Motor Corp. and Honda Motor Co. faced when they entered the world’s largest economy, said Puneet Gupta, a New Delhi-based analyst at CSM Worldwide Inc. In India, Mahindra makes Scorpio and Bolero SUVs.
“It’s a big challenge,” Gupta said. “Selling a very cheap vehicle may not work. Selling in a matured market may also spoil your reputation if your product is not up-to-the expectations of customers there.”
Mahindra’s shares have more than doubled this year in Mumbai trading. That’s the best performance in the benchmark 30- share Sensex index during that period.
The vehicles will be “competitive” with similar vehicles in the range of $20,000 to less than $30,000, Goenka said, without giving a specific price. The company has spent between $60 million and $70 million in reworking its Scorpio SUV into a pickup for the U.S. market. Mahindra has set up a network of 336 dealers throughout the country.
Fuel Economy
Mahindra expects the pickups to get at least 30 miles per gallon in highway driving and carry a payload of at least 2,600 pounds. By comparison, Toyota’s gasoline-engine Tacoma, the best-selling small pickup in the U.S., gets 26 mpg on the highway and can carry 1,570 pounds in its bed. Diesel engines are generally at least 20 percent more fuel efficient than gasoline engines.
Key to Mahindra starting sales on schedule will be completing U.S. crash and safety tests by August, said Larry Daniel, senior vice president of sales and marketing at Global Vehicles U.S.A. Inc., Mahindra’s distributor.
“We’re cutting it close, but are confident the trucks will do well in the tests,” Daniel said in a June 12 interview.
Plans for U.S. models from China’s Chery, first announced in late 2004, failed because of disagreements with its U.S. distribution partner Visionary Vehicles LLC. Chrysler LLC also abandoned plans to sell Chery-made cars in the U.S. Geely, China’s biggest privately owned carmaker, hasn’t met its initial goal of selling cars in the U.S. by 2008 amid talks with Ford Motor Co. on buying its Volvo Car unit.
GM’s Small Car
Last month, GM agreed with a United Auto Workers request to build small cars at an unnamed U.S. assembly plant instead of importing them from overseas. Detroit-based GM’s initial plan was to sell a U.S. version of a car built by Chinese venture partner SAIC Motor Corp., according to the Associated Press.
The first highway-legal Chinese car in the U.S. may be the Coda sedan, a battery-powered model that Santa Monica, California-based Miles Electric Vehicles plans to retail in California in late 2010. The model will be supplied by China’s Hafei Motor Co.
Mahindra was set up in 1945 as a franchise to assemble Jeeps of Willys, according to its Web site. The automaker later had a partnership with Ford Motor Co. and now makes the Logan sedan with Renault SA in India.
India Engineering
While China’s auto market has drawn more attention, India’s experience in the industry is longer, broader and more sophisticated, said Noble. China is the world’s largest auto market in the first five months of the year, ahead of the U.S.
“Probably half the global vehicle structural analysis for automakers gets done overnight in India,” Noble said. “Indian engineers have been part of the fabric of the automotive industry for 15 years. China’s engineering capabilities are much more nascent.”
Honda, which entered the U.S. pickup market four years ago with the midsize Ridgeline model, said Mahindra should be viewed as a serious competitor.
“We discount any new entrants at our own peril,” John Mendel, Honda’s U.S. executive vice president, said in a June 11 interview. “I think they can get it right.”
Early next year, Mumbai-based Mahindra plans to start selling small 2- and 4-door pickups with a diesel engine that meets California’s strict exhaust rules. U.S. plans for Chinese brands such as Chery Automobile Co. and Geely Automobile Holdings Ltd. have yet to materialize, five years into their announcements.
“Once you establish the brand, volumes will come,” Pawan Goenka, Mahindra’s president in charge of the automotive business, said in a June 16 interview. “There is a hole available to us which is not populated.”
Mahindra’s trucks will arrive in the U.S. even as recession and job losses have pushed auto sales to the lowest in three decades, triggering bankruptcy filings for General Motors Corp. and Chrysler LLC. A weak economy and cheaper diesel prices may help the Indian automaker win buyers seeking a bargain, said industry analyst Eric Noble.
“It’s not a bad time to launch a durable, value-oriented brand,” said Noble, president of Car Lab, an Orange, California-based consulting firm for automakers. “There’s no real competition in compact trucks with a diesel powertrain.”
“Totally Unknown”
With a brand that’s “totally unknown” to U.S. customers, an Indian automaker will face the same challenges Hyundai Motor Co., Toyota Motor Corp. and Honda Motor Co. faced when they entered the world’s largest economy, said Puneet Gupta, a New Delhi-based analyst at CSM Worldwide Inc. In India, Mahindra makes Scorpio and Bolero SUVs.
“It’s a big challenge,” Gupta said. “Selling a very cheap vehicle may not work. Selling in a matured market may also spoil your reputation if your product is not up-to-the expectations of customers there.”
Mahindra’s shares have more than doubled this year in Mumbai trading. That’s the best performance in the benchmark 30- share Sensex index during that period.
The vehicles will be “competitive” with similar vehicles in the range of $20,000 to less than $30,000, Goenka said, without giving a specific price. The company has spent between $60 million and $70 million in reworking its Scorpio SUV into a pickup for the U.S. market. Mahindra has set up a network of 336 dealers throughout the country.
Fuel Economy
Mahindra expects the pickups to get at least 30 miles per gallon in highway driving and carry a payload of at least 2,600 pounds. By comparison, Toyota’s gasoline-engine Tacoma, the best-selling small pickup in the U.S., gets 26 mpg on the highway and can carry 1,570 pounds in its bed. Diesel engines are generally at least 20 percent more fuel efficient than gasoline engines.
Key to Mahindra starting sales on schedule will be completing U.S. crash and safety tests by August, said Larry Daniel, senior vice president of sales and marketing at Global Vehicles U.S.A. Inc., Mahindra’s distributor.
“We’re cutting it close, but are confident the trucks will do well in the tests,” Daniel said in a June 12 interview.
Plans for U.S. models from China’s Chery, first announced in late 2004, failed because of disagreements with its U.S. distribution partner Visionary Vehicles LLC. Chrysler LLC also abandoned plans to sell Chery-made cars in the U.S. Geely, China’s biggest privately owned carmaker, hasn’t met its initial goal of selling cars in the U.S. by 2008 amid talks with Ford Motor Co. on buying its Volvo Car unit.
GM’s Small Car
Last month, GM agreed with a United Auto Workers request to build small cars at an unnamed U.S. assembly plant instead of importing them from overseas. Detroit-based GM’s initial plan was to sell a U.S. version of a car built by Chinese venture partner SAIC Motor Corp., according to the Associated Press.
The first highway-legal Chinese car in the U.S. may be the Coda sedan, a battery-powered model that Santa Monica, California-based Miles Electric Vehicles plans to retail in California in late 2010. The model will be supplied by China’s Hafei Motor Co.
Mahindra was set up in 1945 as a franchise to assemble Jeeps of Willys, according to its Web site. The automaker later had a partnership with Ford Motor Co. and now makes the Logan sedan with Renault SA in India.
India Engineering
While China’s auto market has drawn more attention, India’s experience in the industry is longer, broader and more sophisticated, said Noble. China is the world’s largest auto market in the first five months of the year, ahead of the U.S.
“Probably half the global vehicle structural analysis for automakers gets done overnight in India,” Noble said. “Indian engineers have been part of the fabric of the automotive industry for 15 years. China’s engineering capabilities are much more nascent.”
Honda, which entered the U.S. pickup market four years ago with the midsize Ridgeline model, said Mahindra should be viewed as a serious competitor.
“We discount any new entrants at our own peril,” John Mendel, Honda’s U.S. executive vice president, said in a June 11 interview. “I think they can get it right.”
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