June 30 (Bloomberg) -- The following companies may have unusual price changes in India trading. Stock symbols are in parentheses and share prices are as of June 29 close.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 21.10, or 0.1 percent, to 14,785.74. The S&P CNX Nifty Index on the National Stock Exchange added 0.4 percent to 4,390.95. The BSE 200 Index increased 0.7 percent to 1,811.79. SGX Nifty futures for July delivery advanced 0.8 percent to 4,424 at 10:19 a.m. in Singapore today.
Overseas investors bought a net 6.73 billion rupees ($138.70 million) of Indian stocks on June 26, increasing their total investment in equities this year to $4.94 billion, the Securities & Exchange Board of India said on its Web site.
Dredging Corp of India Ltd. (DCIL IN): The country’s biggest dredger of ports said it will pay a dividend of five rupees a share, in a statement to the National Stock Exchange yesterday. The stock gained 2.4 percent to 498.75 rupees.
Nestle India Ltd. (NEST IN): The unit of the world’s biggest food company was rated “overweight” in new coverage at HSBC Holdings Plc. The stock rose 2.7 percent to 1,920.15 rupees.
Gujarat Alkalies & Chemicals Ltd. (GALK IN): The Indian maker of caustic soda yesterday reported fourth-quarter profit of 215.8 million rupees, compared with 183.5 million rupees a year earlier. The shares gained 1 percent to 104.85 rupees.
Reliance Industries Ltd. (RIL IN): India’s most valuable company may file an appeal with the Supreme Court on its gas pricing and supply dispute with Reliance Natural Resources Ltd. (RNR IN) on July 6, NDTV Profit reported yesterday, without saying where it got the information. Reliance Industries gained 2.9 percent to 2,087 rupees. Reliance Natural Resources fell 0.6 percent to 90.9 rupees.
Reliance Communications Ltd. (RCOM IN): AT&T Inc. may acquire a stake in India’s second-largest mobile-phone operator, ET Now television channel reported yesterday without saying where it got the information. Reliance Communications fell 1.7 percent to 307.10 rupees before the report.
Sterlite Industries India Ltd. (STLT IN): The nation’s biggest copper producer said it will get a 61.5 billion rupee ($1.28 billion) loan from a consortium of lenders led by State Bank of India for a 2,400 mega-watt power project, in an e- mailed statement. The shares gained 5.2 percent to 645.70 rupees.
Suzlon Energy Ltd. (SUEL IN): India’s largest wind-turbine maker said it may sell all or part of its stake in unit Hansen Transmissions International NV to cut some of its debt amounting to $2.5 billion. The stock slid 5.2 percent to 117.10 rupees.
Unitech Ltd. (UT IN): India’s second-biggest real-estate developer said it allotted 227.5 million warrants convertible into an equal number of shares to Harsil Projects Pvt, in a statement to the Bombay Stock Exchange. Unitech rose 3.7 percent to 85.30 rupees.
Wockhardt Ltd. (WPL IN): The Indian drugmaker seeking to reorganize its debt said yesterday it will restructure $108 million of bonds and sell more non-core businesses in the next three-to-six months. The stock advanced 1.2 percent to 144.10 rupees.
Monday, June 29, 2009
N.Z. Reserve Bank Plans Focus on Inflation Amid Recovery
June 30 (Bloomberg) -- New Zealand’s central bank said it will focus on inflation risks over the next year as the global economy recovers from recession.
“An enormous challenge looms in inflationary risks once confidence returns to normal in global markets when there is so much liquidity around,” the bank said in its annual “statement of intent” released in Wellington today. “We will be focused on these risks as we consider the likely nature of a recovery.”
Governor Alan Bollard has cut the benchmark interest rate to a record low to kick-start an economy in its worse recession in more than three decades. He said on June 11 that inflation, which he is required to keep between 1 percent and 3 percent, would ease sharply this year, giving him scope to keep borrowing costs low until late 2010.
Consumer prices will rise just 1.2 percent in the year ending March 31, 2010, and 2.3 percent in the following year, the central bank forecast.
The statement is published annually, outlining the central bank’s plans across all its roles including financial-market regulation and prudential supervision.
While New Zealand is in its sixth quarter of recession, it has “got off remarkably lightly so far compared with larger northern hemisphere economies,” the central bank said.
“Financial aftershocks still rock our markets, with New Zealand dollar investments swinging in and out of favor as market appetite for risk fluctuates,” it said. “How long recovery will take is uncertain, though it is likely that it will be some significant time before economic activity returns to robust and healthy levels.”
“An enormous challenge looms in inflationary risks once confidence returns to normal in global markets when there is so much liquidity around,” the bank said in its annual “statement of intent” released in Wellington today. “We will be focused on these risks as we consider the likely nature of a recovery.”
Governor Alan Bollard has cut the benchmark interest rate to a record low to kick-start an economy in its worse recession in more than three decades. He said on June 11 that inflation, which he is required to keep between 1 percent and 3 percent, would ease sharply this year, giving him scope to keep borrowing costs low until late 2010.
Consumer prices will rise just 1.2 percent in the year ending March 31, 2010, and 2.3 percent in the following year, the central bank forecast.
The statement is published annually, outlining the central bank’s plans across all its roles including financial-market regulation and prudential supervision.
While New Zealand is in its sixth quarter of recession, it has “got off remarkably lightly so far compared with larger northern hemisphere economies,” the central bank said.
“Financial aftershocks still rock our markets, with New Zealand dollar investments swinging in and out of favor as market appetite for risk fluctuates,” it said. “How long recovery will take is uncertain, though it is likely that it will be some significant time before economic activity returns to robust and healthy levels.”
Japanese jobless data jumps to new high
Published: June 30 2009 05:25 | Last updated: June 30 2009 05:25
TOKYO, June 30 – Japan’s jobless rate rose to a new 5-1/2-year high in May and job availability sank to record low but government stimulus efforts prompted a modest rise in household spending, reinforcing forecasts the economy will return to growth in the current quarter.
But the jobs data suggests any recovery is likely to be tempered by sluggish domestic demand, even as the country’s export industries start to recover from a sharp downturn in the global economy.
”No one expects that the labour market is improving yet. Labour indicators are always lagging indicators to the business cycle and we are still in a very early stage of recovery so probably the deterioration of the labour market continues but at a more moderate pace,” said Masamichi Adachi, a senior economist at JP Morgan.
Although some leading economic indicators, such as industrial output, have rebounded in recent months many companies are expected to keep cutting costs on wages to churn out profits even under weaker demand.
As they stop hiring, the jobs-to-applicants ratio slid to 0.44, meaning about four jobs were available for every nine applicants. It was the lowest reading since the data started in 1963 and below a median market forecast of 0.45.
The seasonally adjusted unemployment rate rose to 5.2 per cent – the highest since September 2003 and in line with the market forecast – from 5.0 per cent in April.
Economists expect the jobless rate to rise beyond a postwar peak of 5.5 per cent, hurting domestic consumption, which had seen a limited recovery even during the boom years as the population ages.
The number of employed people sank by 1.36 million from a year earlier, a record rate, as both manufacturers and the service sector cut staff, an official said.
”Even though industrial output is rebounding, that won’t help boost employment as the level of production is at low levels,” he told a briefing.
But household spending unexpectedly rose 0.3 per cent in May from a year earlier in price-adjusted real terms, when economists on average forecast for a decline of 1.6 per cent.
Economists warn against reading too much into the government consumption data, which they say has sampling flaws, but the uptick follows government stimulus such as a one-off cash payments to each household and subsidies on energy efficient products.
”Consumption is looking likely to escape the direct impact of the high jobless rate, thanks to the impact of government measures to promote environmentally friendly cars and consumer electronics, which apparently helped boost household spending in May,” said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management.
The rebound in consumption bolstered expectations that the world’s second-largest economy will climb out of recession in April-June after four straight quarters of contraction, Japan’s longest spell of contraction on record.
Economists polled by Reuters forecast growth of 0.4 per cent expected in April-June.
Still, consumer prices started falling even after stripping out the impact of cheaper energy prices, with so-called core-core index falling 0.5 per cent in May, the biggest fall in two years, reflecting persistently weak domestic consumption.
The spectre of deflation is likely to keep the Bank of Japan from seeking an exit from easy monetary stance in the near future, economists also said.
TOKYO, June 30 – Japan’s jobless rate rose to a new 5-1/2-year high in May and job availability sank to record low but government stimulus efforts prompted a modest rise in household spending, reinforcing forecasts the economy will return to growth in the current quarter.
But the jobs data suggests any recovery is likely to be tempered by sluggish domestic demand, even as the country’s export industries start to recover from a sharp downturn in the global economy.
”No one expects that the labour market is improving yet. Labour indicators are always lagging indicators to the business cycle and we are still in a very early stage of recovery so probably the deterioration of the labour market continues but at a more moderate pace,” said Masamichi Adachi, a senior economist at JP Morgan.
Although some leading economic indicators, such as industrial output, have rebounded in recent months many companies are expected to keep cutting costs on wages to churn out profits even under weaker demand.
As they stop hiring, the jobs-to-applicants ratio slid to 0.44, meaning about four jobs were available for every nine applicants. It was the lowest reading since the data started in 1963 and below a median market forecast of 0.45.
The seasonally adjusted unemployment rate rose to 5.2 per cent – the highest since September 2003 and in line with the market forecast – from 5.0 per cent in April.
Economists expect the jobless rate to rise beyond a postwar peak of 5.5 per cent, hurting domestic consumption, which had seen a limited recovery even during the boom years as the population ages.
The number of employed people sank by 1.36 million from a year earlier, a record rate, as both manufacturers and the service sector cut staff, an official said.
”Even though industrial output is rebounding, that won’t help boost employment as the level of production is at low levels,” he told a briefing.
But household spending unexpectedly rose 0.3 per cent in May from a year earlier in price-adjusted real terms, when economists on average forecast for a decline of 1.6 per cent.
Economists warn against reading too much into the government consumption data, which they say has sampling flaws, but the uptick follows government stimulus such as a one-off cash payments to each household and subsidies on energy efficient products.
”Consumption is looking likely to escape the direct impact of the high jobless rate, thanks to the impact of government measures to promote environmentally friendly cars and consumer electronics, which apparently helped boost household spending in May,” said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management.
The rebound in consumption bolstered expectations that the world’s second-largest economy will climb out of recession in April-June after four straight quarters of contraction, Japan’s longest spell of contraction on record.
Economists polled by Reuters forecast growth of 0.4 per cent expected in April-June.
Still, consumer prices started falling even after stripping out the impact of cheaper energy prices, with so-called core-core index falling 0.5 per cent in May, the biggest fall in two years, reflecting persistently weak domestic consumption.
The spectre of deflation is likely to keep the Bank of Japan from seeking an exit from easy monetary stance in the near future, economists also said.
Sunday, June 28, 2009
India’s Economic Survey to Be Presented on July 2: Week Ahead
June 29 (Bloomberg) -- India’s Economic Survey for the year ended March 31 will be presented in parliament on July 2 as the government prepares to unveil the budget for this fiscal year next week.
India’s Finance Minister Pranab Mukherjee will present the survey, which states the nation’s economic performance during the last fiscal year, in parliament.
The railway budget for the fiscal year ending March 31 will be presented on July 3. The budget session of parliament will be held from July 2 to Aug. 7.
India will announce May trade figures on July 1 in New Delhi as the worst global recession since the Great Depression hurts demand for the nation’s jewelry, clothing and other products.
Exports fell the most in at least 14 years in April. Overseas shipments dropped 33.2 percent from a year earlier to $10.74 billion. That was the biggest decline since at least April 1995, when Bloomberg data began. Exports slid 33 percent in March. The nation’s exports, which account for about 15 percent of the economy, grew 3.4 percent to $168.7 billion in the year ended March 31, missing a $200 billion target.
India’s new Trade Minister Anand Sharma said in May that the government is likely to announce steps to help exporters in the budget.
Hindalco Industries Ltd., India’s biggest aluminum producer, will announce tomorrow earnings for the quarter ended March 31. The company may post a profit, excluding unit Novelis, of 2.03 billion rupees ($42 million) in the three-month period, according to a median estimate in a Bloomberg survey of analysts. Hindalco posted a profit of 10.8 billion rupees, which includes a one-time gain, in the year-earlier quarter.
Stocks
India’s benchmark Bombay Stock Exchange Sensitive Index, or Sensex, rose 1.7 percent, its highest in two weeks, in the week ended June 26. The Sensex gained on optimism increased state spending and the economic recovery may spur demand.
Jaiprakash Associates Ltd., the biggest builder of dams, and Larsen & Toubro Ltd., the largest engineering company, were among the biggest gainers. Jaiprakash advanced 11 percent, while Larsen & Toubro added 7.6 percent.
The rupee posted a fourth week of losses on speculation local importers sold the currency to buy foreign exchange required to settle month-end payments. The currency was poised for the first monthly drop since February as the nation’s refiners may have stepped up dollar purchases to pay for shipments of crude oil, which is set for a fifth month of gains.
Rupee, Bonds
The rupee declined 0.1 percent last week to 48.12 per dollar in Mumbai, according to data compiled by Bloomberg. The currency is Asia’s second-worst performer this month, with a 2.2 percent loss that trimmed this quarter’s gains to 5.2 percent.
Indian bonds rose for a second week, their best run in two months, on speculation borrowing costs around the world will remain low after the U.S. Federal Reserve held interest rates near zero earlier last week.
The yield on the most traded securities fell to the lowest since June 10 as banks, the biggest buyers of government debt, invested surplus cash in fixed-income securities.
The yield on the 6.07 percent note due May 2014 slid 14 basis points last week to 6.50 percent in Mumbai, according to the central bank’s trading system. A basis point is 0.01 percentage point.
Event Date
FICCI session with UCO Bank’s S.K. Goel June 29
FICCI session with Corporation Bank June 30
Hindalco earnings June 30
Indian Oil Corp. golden jubilee in Delhi June 30
Aviation Outlook conference in Mumbai June 30-July 1
Trade figures July 1
Economic Survey July 2
Railway Budget July 3
India’s Finance Minister Pranab Mukherjee will present the survey, which states the nation’s economic performance during the last fiscal year, in parliament.
The railway budget for the fiscal year ending March 31 will be presented on July 3. The budget session of parliament will be held from July 2 to Aug. 7.
India will announce May trade figures on July 1 in New Delhi as the worst global recession since the Great Depression hurts demand for the nation’s jewelry, clothing and other products.
Exports fell the most in at least 14 years in April. Overseas shipments dropped 33.2 percent from a year earlier to $10.74 billion. That was the biggest decline since at least April 1995, when Bloomberg data began. Exports slid 33 percent in March. The nation’s exports, which account for about 15 percent of the economy, grew 3.4 percent to $168.7 billion in the year ended March 31, missing a $200 billion target.
India’s new Trade Minister Anand Sharma said in May that the government is likely to announce steps to help exporters in the budget.
Hindalco Industries Ltd., India’s biggest aluminum producer, will announce tomorrow earnings for the quarter ended March 31. The company may post a profit, excluding unit Novelis, of 2.03 billion rupees ($42 million) in the three-month period, according to a median estimate in a Bloomberg survey of analysts. Hindalco posted a profit of 10.8 billion rupees, which includes a one-time gain, in the year-earlier quarter.
Stocks
India’s benchmark Bombay Stock Exchange Sensitive Index, or Sensex, rose 1.7 percent, its highest in two weeks, in the week ended June 26. The Sensex gained on optimism increased state spending and the economic recovery may spur demand.
Jaiprakash Associates Ltd., the biggest builder of dams, and Larsen & Toubro Ltd., the largest engineering company, were among the biggest gainers. Jaiprakash advanced 11 percent, while Larsen & Toubro added 7.6 percent.
The rupee posted a fourth week of losses on speculation local importers sold the currency to buy foreign exchange required to settle month-end payments. The currency was poised for the first monthly drop since February as the nation’s refiners may have stepped up dollar purchases to pay for shipments of crude oil, which is set for a fifth month of gains.
Rupee, Bonds
The rupee declined 0.1 percent last week to 48.12 per dollar in Mumbai, according to data compiled by Bloomberg. The currency is Asia’s second-worst performer this month, with a 2.2 percent loss that trimmed this quarter’s gains to 5.2 percent.
Indian bonds rose for a second week, their best run in two months, on speculation borrowing costs around the world will remain low after the U.S. Federal Reserve held interest rates near zero earlier last week.
The yield on the most traded securities fell to the lowest since June 10 as banks, the biggest buyers of government debt, invested surplus cash in fixed-income securities.
The yield on the 6.07 percent note due May 2014 slid 14 basis points last week to 6.50 percent in Mumbai, according to the central bank’s trading system. A basis point is 0.01 percentage point.
Event Date
FICCI session with UCO Bank’s S.K. Goel June 29
FICCI session with Corporation Bank June 30
Hindalco earnings June 30
Indian Oil Corp. golden jubilee in Delhi June 30
Aviation Outlook conference in Mumbai June 30-July 1
Trade figures July 1
Economic Survey July 2
Railway Budget July 3
U.K. Financial Firms Plan to Eliminate 13,000 Jobs, CBI Says
June 29 (Bloomberg) -- U.K. financial services companies may cut 13,000 jobs in the third quarter even as they expressed rising optimism for the first time in two years, Britain’s biggest business lobby group said.
“Conditions still remain rough but there are signs of some improvement expected in the coming months,” according to Ian McCafferty, the Confederation of British Industry’s chief economic adviser at a press conference in London. Profits, employment and investment remain “on a downward trend,” he said.
The rate of job cuts is slowing, the group’s quarterly financial services survey showed. Financial services companies cut about 17,000 jobs in the first quarter and probably shed 15,000 in the second quarter, said the CBI.
The Bank of England last week said financial institutions remain vulnerable to further shocks. British banks told the survey that revenue declined in the second quarter at the fastest rate since March 1991. Lenders are less optimistic “about the overall business situation” than when they were surveyed in the first quarter, the survey said.
“The rising level of bad debts are a further worry for the industry,” said McCafferty.
Concerns about bank funding were the highest since the survey was introduced in 1989, the CBI said.
“Wholesale funding is still very tight,” said John Hitchins, U.K. banking leader of PricewaterhouseCoopers LLC, which conducted the survey with the CBI. There is “intense competition” for retail deposits, he added.
Insurer Optimism
For the financial services industry as a whole, revenue is expected to rise for the first time next quarter following seven quarters of declines, the CBI said.
Insurance companies are the most optimistic about growth in the three months starting July 1, while customer-owned lenders, known as building societies, anticipate revenue and profitability will “stabilize”. Securities traders and investment managers expect an improvement in their business to be “short-lived,” said the CBI.
The CBI surveyed 73 financial-services companies, including banks, building societies, insurers, brokers and fund managers from May 20 to June 3. The CBI represents about 240,000 companies that employ one-third of Britain’s private sector workforce.
“Conditions still remain rough but there are signs of some improvement expected in the coming months,” according to Ian McCafferty, the Confederation of British Industry’s chief economic adviser at a press conference in London. Profits, employment and investment remain “on a downward trend,” he said.
The rate of job cuts is slowing, the group’s quarterly financial services survey showed. Financial services companies cut about 17,000 jobs in the first quarter and probably shed 15,000 in the second quarter, said the CBI.
The Bank of England last week said financial institutions remain vulnerable to further shocks. British banks told the survey that revenue declined in the second quarter at the fastest rate since March 1991. Lenders are less optimistic “about the overall business situation” than when they were surveyed in the first quarter, the survey said.
“The rising level of bad debts are a further worry for the industry,” said McCafferty.
Concerns about bank funding were the highest since the survey was introduced in 1989, the CBI said.
“Wholesale funding is still very tight,” said John Hitchins, U.K. banking leader of PricewaterhouseCoopers LLC, which conducted the survey with the CBI. There is “intense competition” for retail deposits, he added.
Insurer Optimism
For the financial services industry as a whole, revenue is expected to rise for the first time next quarter following seven quarters of declines, the CBI said.
Insurance companies are the most optimistic about growth in the three months starting July 1, while customer-owned lenders, known as building societies, anticipate revenue and profitability will “stabilize”. Securities traders and investment managers expect an improvement in their business to be “short-lived,” said the CBI.
The CBI surveyed 73 financial-services companies, including banks, building societies, insurers, brokers and fund managers from May 20 to June 3. The CBI represents about 240,000 companies that employ one-third of Britain’s private sector workforce.
Japan’s Factory Output Rises 5.9%, Third Monthly Gain
June 29 (Bloomberg) -- Japan’s industrial output rose for a third month in May as companies rebuilt inventories and the economy started to climb out of its deepest postwar recession.
Production increased 5.9 percent from a month earlier, the Trade Ministry said today in Tokyo, matching a gain in April that was the fastest since 1953. Economists surveyed by Bloomberg predicted a 7 percent increase, and factories were still producing 29.5 percent less than in May last year.
Manufacturers forecast output will advance this month and next, albeit at a slower pace, and economists expect the Bank of Japan’s Tankan survey this week to show sentiment among large manufacturers rebounded from a record low. The figures provide the latest evidence that the world recession is moderating as central banks flood their economies with cash and governments spend $2.2 trillion to prop up demand.
“Today’s data suggest companies are clearing inventories steadily and now the biggest focus is shifting to what happens after the inventory adjustment is completed,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “We have yet to see a pickup in final demand, which is crucial for Japan’s economy to sustain a recovery.”
A separate ministry report showed retail sales fell 2.8 percent in May from a year earlier, a ninth monthly decline, as a worsening job market forced households to cut back. Sales were unchanged from April.
Stocks Rise
The Nikkei 225 Stock Average added 0.4 percent at the lunch break in Tokyo, taking its gains to 41 percent from a 26- year low on March 10. Rengo Co., the nation’s biggest maker of cardboard boxes, surged 5.9 percent. The yen traded at 95.56 per dollar from 95.19 before the reports were published.
Production has risen for three months running, following a five-month losing streak that left about half of the country’s factory capacity sitting idle as of April. The largest output increase on record was 7.9 percent in March 1953, near the end of the Korean War.
Gains in production will slow to 3.1 percent in June and 0.9 percent next month, the ministry said, indicating that the inventory restocking may soon run its course. “Momentum is gradually fading,” said Muto at Sumitomo Mitsui.
The Organization for Economic Cooperation and Development raised its forecast for its 30 member nations for the first time in two years last week, and reports showed the U.S. economy is pulling out of its slump. Consumer spending advanced for the first time in three months in May and household sentiment rose to the highest level since February 2008.
Tankan Survey
An index of sentiment among large manufacturers will climb for the first time in a year to minus 43 from a record low of minus 58, economists predict the Tankan will show on July 1. A negative number means pessimists still outnumber optimists.
Japan’s economy is likely to grow at a 2.3 percent annual pace this quarter, according to economists surveyed by Bloomberg, following the previous period’s record 14.2 percent contraction.
China’s 4 trillion yuan ($586 billion) in government spending is feeding demand for Japan’s heavy equipment, autos and materials. China this year surpassed the U.S. as Japan’s biggest export customer.
“The impact of China’s infrastructure building has started to emerge,” Taizo Kayata, senior executive officer in charge of China operations at Komatsu Ltd., Japan’s biggest maker of construction equipment. Kayata said Chinese sales probably grew between 10 percent and 20 percent in June.
U.S., Europe
Still, rising unemployment in the U.S. and Europe may limit the rebound for Japan’s manufacturers. Nissan Motor Co. Chief Executive Officer Carlos Ghosn said last week that the U.S. market isn’t recovering. The company, which is forecasting its second annual loss, cut domestic production by 36 percent in May from a year earlier.
Job and wage cuts will probably curtail spending by Japanese consumers, which makes up more than half of the economy. Reports tomorrow are expected to show the unemployment rate rose to 5.2 percent in May and wages slid for a 12th month, extending their longest losing streak in five years, according to economists surveyed by Bloomberg.
Panasonic Corp., the world’s largest maker of plasma televisions, last week said it will reduce the annual salaries of its 10,000 managers this year.
“Consumer spending will remain weak for a while as long as the deterioration in the job market and wages continues,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “Japan’s recovery will be very weak.”
Production increased 5.9 percent from a month earlier, the Trade Ministry said today in Tokyo, matching a gain in April that was the fastest since 1953. Economists surveyed by Bloomberg predicted a 7 percent increase, and factories were still producing 29.5 percent less than in May last year.
Manufacturers forecast output will advance this month and next, albeit at a slower pace, and economists expect the Bank of Japan’s Tankan survey this week to show sentiment among large manufacturers rebounded from a record low. The figures provide the latest evidence that the world recession is moderating as central banks flood their economies with cash and governments spend $2.2 trillion to prop up demand.
“Today’s data suggest companies are clearing inventories steadily and now the biggest focus is shifting to what happens after the inventory adjustment is completed,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “We have yet to see a pickup in final demand, which is crucial for Japan’s economy to sustain a recovery.”
A separate ministry report showed retail sales fell 2.8 percent in May from a year earlier, a ninth monthly decline, as a worsening job market forced households to cut back. Sales were unchanged from April.
Stocks Rise
The Nikkei 225 Stock Average added 0.4 percent at the lunch break in Tokyo, taking its gains to 41 percent from a 26- year low on March 10. Rengo Co., the nation’s biggest maker of cardboard boxes, surged 5.9 percent. The yen traded at 95.56 per dollar from 95.19 before the reports were published.
Production has risen for three months running, following a five-month losing streak that left about half of the country’s factory capacity sitting idle as of April. The largest output increase on record was 7.9 percent in March 1953, near the end of the Korean War.
Gains in production will slow to 3.1 percent in June and 0.9 percent next month, the ministry said, indicating that the inventory restocking may soon run its course. “Momentum is gradually fading,” said Muto at Sumitomo Mitsui.
The Organization for Economic Cooperation and Development raised its forecast for its 30 member nations for the first time in two years last week, and reports showed the U.S. economy is pulling out of its slump. Consumer spending advanced for the first time in three months in May and household sentiment rose to the highest level since February 2008.
Tankan Survey
An index of sentiment among large manufacturers will climb for the first time in a year to minus 43 from a record low of minus 58, economists predict the Tankan will show on July 1. A negative number means pessimists still outnumber optimists.
Japan’s economy is likely to grow at a 2.3 percent annual pace this quarter, according to economists surveyed by Bloomberg, following the previous period’s record 14.2 percent contraction.
China’s 4 trillion yuan ($586 billion) in government spending is feeding demand for Japan’s heavy equipment, autos and materials. China this year surpassed the U.S. as Japan’s biggest export customer.
“The impact of China’s infrastructure building has started to emerge,” Taizo Kayata, senior executive officer in charge of China operations at Komatsu Ltd., Japan’s biggest maker of construction equipment. Kayata said Chinese sales probably grew between 10 percent and 20 percent in June.
U.S., Europe
Still, rising unemployment in the U.S. and Europe may limit the rebound for Japan’s manufacturers. Nissan Motor Co. Chief Executive Officer Carlos Ghosn said last week that the U.S. market isn’t recovering. The company, which is forecasting its second annual loss, cut domestic production by 36 percent in May from a year earlier.
Job and wage cuts will probably curtail spending by Japanese consumers, which makes up more than half of the economy. Reports tomorrow are expected to show the unemployment rate rose to 5.2 percent in May and wages slid for a 12th month, extending their longest losing streak in five years, according to economists surveyed by Bloomberg.
Panasonic Corp., the world’s largest maker of plasma televisions, last week said it will reduce the annual salaries of its 10,000 managers this year.
“Consumer spending will remain weak for a while as long as the deterioration in the job market and wages continues,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “Japan’s recovery will be very weak.”
U.A.E. Plans to Back Bank Bond Sales, Al-Suwaidi Says
June 28 (Bloomberg) -- The United Arab Emirates plans to guarantee bank bond sales, intensifying efforts to shore up the financial system after pledging 120 billion dirhams ($33 billion) to boost liquidity in the Arab world’s second biggest economy.
The proposed law, which would allow the government to guarantee bonds, medium-term notes, syndicated loans and commercial paper, is expected to be discussed this week and will “give banks an extra arm to extend credit,” central bank Governor Sultan Bin Nasser al-Suwaidi said in an interview in Basel, Switzerland today.
Banks in the U.A.E. faced a shortage of funds as the global financial crisis blocked their access to foreign borrowings and local liquidity dried up as foreign investors speculating on a currency revaluation withdrew money. The gap between commercial bank loans and deposits in the U.A.E. rose to 110 billion dirhams in March, before falling to 91 billion dirhams, al- Suwaidi said on May 7.
Residential real-estate prices in Dubai, the second largest emirate in the U.A.E, have halved since their peak, leaving banks exposed to non-performing loans. Home values may drop another 20 percent this year, Deutsche Bank AG said on June 10.
“Although it is not really a monetary policy instrument it can be viewed as an instrument that would enable the expansion of credit,” al-Suwaidi said. If the law is passed this week it may be put into action within four weeks.
Market Reaction
Dubai’s stock exchange was closed when news of al-Suwaidi’s statement was reported. The Dubai Financial Market’s index of bank stocks fell 57 percent in the fourth quarter of last year and lost a further 4.9 percent since then. Abu Dhabi’s bank index lost 40 percent in the fourth quarter and has risen 8.5 percent since then.
“We’ll need to see the details, but it sounds like a very significant broadening of already extensive government support for the local banking sector,” Simon Williams, chief regional economist at HSBC Holdings Plc in Dubai, said by e-mail.
The U.A.E. said on Oct. 12 that it would guarantee all local bank deposits and interbank loans. The central bank created a 50 billion dirham ($13.6 billion) credit facility in September and on Oct. 14 said it would pump a further 70 billion dirham into the banking industry. The central bank cut its key repurchase rate by one percentage point since the start of the crisis to stimulate lending.
Lending Portfolios
“The U.A.E. central bank and local banks are bracing for a challenging second half of the year, particularly regarding asset-quality deterioration and the management of the lending portfolios,” Alia Moubayed, a senior economist at Barclays Capital, said in a June 19 report. Non-performing loans are expected to increase in the third and fourth quarters and into next year, Moubayed said.
The Abu Dhabi government said on Feb. 4 that it would support five of its local banks by buying $4.36 billion in bonds. The action raised concern among investors that the same measures would not be offered to Dubai.
Abu Dhabi, the largest of the seven emirates that make up the U.A.E., issued $3 billion of bonds to fund companies hurt by the credit crisis on April 1. Abu Dhabi’s issue followed the Dubai government’s $20 billion bond issue, half of which was bought by the U.A.E. central bank. The second tranche will be issued by the end of the year.
The Abu Dhabi government bond sale set the benchmark for Abu Dhabi-based companies such as Mubadala Development Co., a state-owned investment firm that followed with the sale of $1.75 billion of 5- and 10-year notes.
A public debt law is also under way that limits the amount of debt the federal government and local governments can take to 45 percent and 15 percent of gross domestic product respectively.
“With this mechanism, we hope to have an articulated reduction of financial institutions and other corporate exposure or borrowings from international markets. We learned from the crisis that we can’t rely on borrowing from international capital markets,” al-Suwaidi said.
The proposed law, which would allow the government to guarantee bonds, medium-term notes, syndicated loans and commercial paper, is expected to be discussed this week and will “give banks an extra arm to extend credit,” central bank Governor Sultan Bin Nasser al-Suwaidi said in an interview in Basel, Switzerland today.
Banks in the U.A.E. faced a shortage of funds as the global financial crisis blocked their access to foreign borrowings and local liquidity dried up as foreign investors speculating on a currency revaluation withdrew money. The gap between commercial bank loans and deposits in the U.A.E. rose to 110 billion dirhams in March, before falling to 91 billion dirhams, al- Suwaidi said on May 7.
Residential real-estate prices in Dubai, the second largest emirate in the U.A.E, have halved since their peak, leaving banks exposed to non-performing loans. Home values may drop another 20 percent this year, Deutsche Bank AG said on June 10.
“Although it is not really a monetary policy instrument it can be viewed as an instrument that would enable the expansion of credit,” al-Suwaidi said. If the law is passed this week it may be put into action within four weeks.
Market Reaction
Dubai’s stock exchange was closed when news of al-Suwaidi’s statement was reported. The Dubai Financial Market’s index of bank stocks fell 57 percent in the fourth quarter of last year and lost a further 4.9 percent since then. Abu Dhabi’s bank index lost 40 percent in the fourth quarter and has risen 8.5 percent since then.
“We’ll need to see the details, but it sounds like a very significant broadening of already extensive government support for the local banking sector,” Simon Williams, chief regional economist at HSBC Holdings Plc in Dubai, said by e-mail.
The U.A.E. said on Oct. 12 that it would guarantee all local bank deposits and interbank loans. The central bank created a 50 billion dirham ($13.6 billion) credit facility in September and on Oct. 14 said it would pump a further 70 billion dirham into the banking industry. The central bank cut its key repurchase rate by one percentage point since the start of the crisis to stimulate lending.
Lending Portfolios
“The U.A.E. central bank and local banks are bracing for a challenging second half of the year, particularly regarding asset-quality deterioration and the management of the lending portfolios,” Alia Moubayed, a senior economist at Barclays Capital, said in a June 19 report. Non-performing loans are expected to increase in the third and fourth quarters and into next year, Moubayed said.
The Abu Dhabi government said on Feb. 4 that it would support five of its local banks by buying $4.36 billion in bonds. The action raised concern among investors that the same measures would not be offered to Dubai.
Abu Dhabi, the largest of the seven emirates that make up the U.A.E., issued $3 billion of bonds to fund companies hurt by the credit crisis on April 1. Abu Dhabi’s issue followed the Dubai government’s $20 billion bond issue, half of which was bought by the U.A.E. central bank. The second tranche will be issued by the end of the year.
The Abu Dhabi government bond sale set the benchmark for Abu Dhabi-based companies such as Mubadala Development Co., a state-owned investment firm that followed with the sale of $1.75 billion of 5- and 10-year notes.
A public debt law is also under way that limits the amount of debt the federal government and local governments can take to 45 percent and 15 percent of gross domestic product respectively.
“With this mechanism, we hope to have an articulated reduction of financial institutions and other corporate exposure or borrowings from international markets. We learned from the crisis that we can’t rely on borrowing from international capital markets,” al-Suwaidi said.
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