Nov. 2 (Bloomberg) -- Myer Holdings Ltd., Australia’s biggest department store chain, fell in Sydney as its shares began trading for the first time on the nation’s stock market.
Myer stock began trading at A$3.88 in Sydney, compared with the A$4.10 paid by investors last week in the nation’s largest initial public offering this year.
Buyout firms TPG Inc. and Blum Capital, which teamed with members of the founding Myer family to buy the retailer in 2006, sold all their shares in the IPO, taking advantage of a 44 percent rise in the benchmark stock index since March. More than A$2.1 billion ($1.9 billion) was raised, compared with the A$1.4 billion paid for the chain less than four years ago.
Myer, which has 65 stores, plans to open 15 more in the next five years, it said in the prospectus for the share sale.
Myer sold 529 million shares, with the proceeds of more than A$2.1 billion making it Australia’s largest since drilling services provider Boart Longyear Ltd. raised A$2.4 billion in April 2007.
The IPO priced Myer stock at 15.1 times forecast earnings. David Jones Ltd., Australia’s second-largest department store, is trading at 15.8 times earnings.
While Blum and TPG sold all their shares, management retain about 7.7 percent of the company’s issued capital and the Myer Family Co. Pty. has about 1.5 percent.
The Myer chain was founded in 1900, when Sidney and Elcon Myer, immigrants from Russia, opened their first shop in the town of Bendigo in Victoria state. In 1985 it was purchased by G.J. Coles & Coy, creating Coles Myer Ltd., Australia’s biggest retailer and largest publicly traded corporation at the time.
Sunday, November 1, 2009
Australian Dollar Pares Decline Versus U.S. Currency on Futures
Nov. 2 (Bloomberg) -- The Australian dollar pared declines against the greenback after futures signaled U.S. stocks may recover from their biggest weekly slump since May, supporting demand for higher-yielding assets.
Australia’s currency also found buyers as a gauge of house prices in the nation rose 4.2 percent in third quarter, beating analysts’ expectations for a 3 percent gain. The Reserve Bank of Australia will raise its benchmark interest rate by 25 basis points to 3.5 percent at a meeting tomorrow, according to a Bloomberg News survey of economists.
“The market is very skittish from the liquidation we had last week and this morning,” said Phil Burke, chief foreign- exchange dealer at JPMorgan Chase & Co. in Sydney. “Equity futures have turned positive so we could see the Aussie climb up to 90.50 U.S. cents.”
Australia’s currency traded at 89.93 U.S. cents as of 12:33 p.m. in Sydney from 89.97 cents in New York on Oct. 30. It earlier fell as low as 89.07 cents, the least since Oct. 8. The currency was little changed at 81.04 yen from 81.05 last week. It touched 79.47 yen, also the weakest since Oct. 8.
New Zealand’s dollar fetched 71.51 U.S. cents, after earlier trading as low as 70.83, the weakest since Oct. 2, from 71.81 in New York last week. It dropped as low as 63.21 yen, a one-month low, before buying 64.46 yen.
Economic Growth
Asian equities declined 1.3 percent with the Standard & Poor’s 500 index dropping 4 percent to 1,036.19 in the week ended Oct. 30. S&P 500 futures traded as high as 1,037.90 today.
Australia’s government said today that the nation’s economy will expand 1.5 percent, compared with a May prediction of a 0.5 percent contraction, in the 12 months ending June 30, 2010. The government will have a cash deficit of A$57.7 billion ($51.8 billion), compared with A$57.6 billion forecast in May, Treasurer Wayne Swan told reporters today.
An index measuring the weighted average of prices for established houses in Australia’s eight capital cities climbed 4.2 percent in the third quarter from the second, the Australian Bureau of Statistics said in Sydney today.
Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Stop Loss
The South Pacific currencies earlier dropped to their weakest in more than three weeks against the yen as traders said so-called stop-loss orders were activated, said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp.
“Stop-loss orders set by margin traders were triggered almost on all cross-currencies, accelerating the pace of declines of these currencies,” against the yen, Kudo said. “For instance, such orders were triggered at below the 80.50 yen mark for Aussie.”
A stop-loss order is an automatic instruction to sell or buy a currency should it reach a particular level.
Futures traders cut their bets that the Australian dollar will gain against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. This is the first fall in bets on a gain in the Aussie since September.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those on a drop -- so-called net longs -- was 52,887 on Oct. 27, compared with net longs of 53,990 a week earlier.
Australian government bonds were little changed. The yield on 10-year notes fell one basis point, or 0.01 percentage point, to 5.49 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.096, or A$0.96 per A$1,000 face amount, to 98.272.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell for a sixth session to 4.47 percent.
Australia’s currency also found buyers as a gauge of house prices in the nation rose 4.2 percent in third quarter, beating analysts’ expectations for a 3 percent gain. The Reserve Bank of Australia will raise its benchmark interest rate by 25 basis points to 3.5 percent at a meeting tomorrow, according to a Bloomberg News survey of economists.
“The market is very skittish from the liquidation we had last week and this morning,” said Phil Burke, chief foreign- exchange dealer at JPMorgan Chase & Co. in Sydney. “Equity futures have turned positive so we could see the Aussie climb up to 90.50 U.S. cents.”
Australia’s currency traded at 89.93 U.S. cents as of 12:33 p.m. in Sydney from 89.97 cents in New York on Oct. 30. It earlier fell as low as 89.07 cents, the least since Oct. 8. The currency was little changed at 81.04 yen from 81.05 last week. It touched 79.47 yen, also the weakest since Oct. 8.
New Zealand’s dollar fetched 71.51 U.S. cents, after earlier trading as low as 70.83, the weakest since Oct. 2, from 71.81 in New York last week. It dropped as low as 63.21 yen, a one-month low, before buying 64.46 yen.
Economic Growth
Asian equities declined 1.3 percent with the Standard & Poor’s 500 index dropping 4 percent to 1,036.19 in the week ended Oct. 30. S&P 500 futures traded as high as 1,037.90 today.
Australia’s government said today that the nation’s economy will expand 1.5 percent, compared with a May prediction of a 0.5 percent contraction, in the 12 months ending June 30, 2010. The government will have a cash deficit of A$57.7 billion ($51.8 billion), compared with A$57.6 billion forecast in May, Treasurer Wayne Swan told reporters today.
An index measuring the weighted average of prices for established houses in Australia’s eight capital cities climbed 4.2 percent in the third quarter from the second, the Australian Bureau of Statistics said in Sydney today.
Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Stop Loss
The South Pacific currencies earlier dropped to their weakest in more than three weeks against the yen as traders said so-called stop-loss orders were activated, said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp.
“Stop-loss orders set by margin traders were triggered almost on all cross-currencies, accelerating the pace of declines of these currencies,” against the yen, Kudo said. “For instance, such orders were triggered at below the 80.50 yen mark for Aussie.”
A stop-loss order is an automatic instruction to sell or buy a currency should it reach a particular level.
Futures traders cut their bets that the Australian dollar will gain against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. This is the first fall in bets on a gain in the Aussie since September.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those on a drop -- so-called net longs -- was 52,887 on Oct. 27, compared with net longs of 53,990 a week earlier.
Australian government bonds were little changed. The yield on 10-year notes fell one basis point, or 0.01 percentage point, to 5.49 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.096, or A$0.96 per A$1,000 face amount, to 98.272.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell for a sixth session to 4.47 percent.
Friday, October 30, 2009
Philippines Orders Evacuations as Typhoon Strikes
Oct. 31 (Bloomberg) -- Philippine authorities carried out evacuations and thousands of travelers were stranded as Typhoon Mirinae slammed into the archipelago, where about 1,100 people have died in cyclones this year.
Evacuations were ordered in the island province of Catanduanes and the coastal areas of Quezon province, where Mirinae’s eye made landfall, police and disaster agency officials said. Eight thousand were evacuated in Rizal province south of Manila, ABS-CBN News reported.
From the Pacific Ocean, the typhoon entered Quezon around midnight and was 60 kilometers south-southeast of Manila at 4 a.m., the local weather bureau said. The storm, with winds of 130 kilometers per hour, will exit Batangas province for the South China Sea around noon, the agency said.
The typhoon’s arrival coincides with the All-Saints’ weekend, when many Filipinos travel to their home provinces in the archipelago of more than 7,000 islands. Many visit cemeteries to pay respects to their ancestors. Others vacation during the three-day weekend.
The Philippines has been battered by more than 10 cyclones this year. More than 121,000 people remain in evacuation centers after cyclones Ketsana barreled into Luzon Sept. 26 and Parma followed this month. Hundreds were killed in floods and landslides and farm damage forced the world’s biggest importer of rice to schedule a supply auction for this week.
Delay Trips
The National Disaster Coordination Council advised Filipinos to delay their trips until at least this afternoon.
About 8,500 people and hundreds of trucks and cars were stranded as the government banned boats and ferries from taking to sea in Luzon and the Visayas islands farther south, Admiral Wilfredo Tamayo, Coast Guard commandant, said. About 20 fishermen were rescued off Quezon, he said.
“While the typhoon is here, travel has to be stopped both ways,” Tamayo said by phone. Vessels weighing more than 1,000 gross tons may sail by tomorrow, he said.
As many as 800 people were killed after a ferry sank in June last year when Typhoon Fengshen slammed into the Philippines.
Philippine Airlines and Cebu Pacific Air, the nation’s biggest carriers, canceled or delayed flights to and from Manila and said they had moved aircraft to central airports, away from the typhoon’s path. At least five bus companies suspended trips between Luzon and Visayas, ABS-CBN reported.
Leaving Homes
Troops persuaded people along Catanduanes’ rivers to leave their homes, Lieutenant Colonel Romeo Basco said in a phone interview. Some are already in town halls, he said. More than 4,000 people are expected to be evacuated in Quezon, Senior Superintendent Elmo Sarona, the police chief there, said.
Roads in Pagsanjan and Lumban in Laguna, a province south of Manila, were inaccessible amid strong currents of knee-deep water, said military spokesman Noel Detoyato.
In Manila, while winds are strong, the rain is falling in spurts, meaning there’s a “very slim possibility” of the degree of flooding brought on by Ketsana, weather bureau Administrator Prisco Nilo said in an interview. Ketsana left about 80 percent of Manila, a city of almost 12 million people, underwater.
Winds splintered trees and toppled free-standing or lightly constructed signage in the Manila area.
Power had been cut in several parts of the city because of strong winds, Manila Electric Co. spokesman Joe Zaldarriaga said in a phone interview today. The power retailer has monitored outages in parts of the capital and nearby provinces of Laguna and Rizal.
Rains have been “continuous” along Mirinae’s path, Nilo said, resulting in some flooding in Laguna province, south of Manila.
Evacuations were ordered in the island province of Catanduanes and the coastal areas of Quezon province, where Mirinae’s eye made landfall, police and disaster agency officials said. Eight thousand were evacuated in Rizal province south of Manila, ABS-CBN News reported.
From the Pacific Ocean, the typhoon entered Quezon around midnight and was 60 kilometers south-southeast of Manila at 4 a.m., the local weather bureau said. The storm, with winds of 130 kilometers per hour, will exit Batangas province for the South China Sea around noon, the agency said.
The typhoon’s arrival coincides with the All-Saints’ weekend, when many Filipinos travel to their home provinces in the archipelago of more than 7,000 islands. Many visit cemeteries to pay respects to their ancestors. Others vacation during the three-day weekend.
The Philippines has been battered by more than 10 cyclones this year. More than 121,000 people remain in evacuation centers after cyclones Ketsana barreled into Luzon Sept. 26 and Parma followed this month. Hundreds were killed in floods and landslides and farm damage forced the world’s biggest importer of rice to schedule a supply auction for this week.
Delay Trips
The National Disaster Coordination Council advised Filipinos to delay their trips until at least this afternoon.
About 8,500 people and hundreds of trucks and cars were stranded as the government banned boats and ferries from taking to sea in Luzon and the Visayas islands farther south, Admiral Wilfredo Tamayo, Coast Guard commandant, said. About 20 fishermen were rescued off Quezon, he said.
“While the typhoon is here, travel has to be stopped both ways,” Tamayo said by phone. Vessels weighing more than 1,000 gross tons may sail by tomorrow, he said.
As many as 800 people were killed after a ferry sank in June last year when Typhoon Fengshen slammed into the Philippines.
Philippine Airlines and Cebu Pacific Air, the nation’s biggest carriers, canceled or delayed flights to and from Manila and said they had moved aircraft to central airports, away from the typhoon’s path. At least five bus companies suspended trips between Luzon and Visayas, ABS-CBN reported.
Leaving Homes
Troops persuaded people along Catanduanes’ rivers to leave their homes, Lieutenant Colonel Romeo Basco said in a phone interview. Some are already in town halls, he said. More than 4,000 people are expected to be evacuated in Quezon, Senior Superintendent Elmo Sarona, the police chief there, said.
Roads in Pagsanjan and Lumban in Laguna, a province south of Manila, were inaccessible amid strong currents of knee-deep water, said military spokesman Noel Detoyato.
In Manila, while winds are strong, the rain is falling in spurts, meaning there’s a “very slim possibility” of the degree of flooding brought on by Ketsana, weather bureau Administrator Prisco Nilo said in an interview. Ketsana left about 80 percent of Manila, a city of almost 12 million people, underwater.
Winds splintered trees and toppled free-standing or lightly constructed signage in the Manila area.
Power had been cut in several parts of the city because of strong winds, Manila Electric Co. spokesman Joe Zaldarriaga said in a phone interview today. The power retailer has monitored outages in parts of the capital and nearby provinces of Laguna and Rizal.
Rains have been “continuous” along Mirinae’s path, Nilo said, resulting in some flooding in Laguna province, south of Manila.
Asian Currencies Drop for a Second Week on Recovery Concerns
Oct. 31 (Bloomberg) -- Asian currencies declined for a second week, led by the Indonesian rupiah and Indian rupee, as unexpected slides in U.S. home sales and consumer confidence fueled concern about the speed of a global economic recovery.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, sank to its lowest level this month as investors favored safer bets than emerging-market assets. The benchmark recouped some of its losses in the latter part of the week as reports showing the first U.S. economic growth in a year and falling unemployment in Japan brightened the outlook for exports.
“Risk aversion was weighing down sentiment on Asian currencies but the long-term view still holds,” said Penn Nee Chow, an economist in Singapore at United Overseas Bank Ltd. “Asian currencies will continue to gain against the U.S. dollar as the outlook improves. A lot of Asian economies are expected to come back to year-on-year growth in the fourth quarter.”
The rupiah dropped 1.6 percent this week to 9,585 per dollar, India’s rupee fell 1.0 percent to 46.9729 and the Malaysian ringgit slid 0.9 percent to 3.4138. All three were still up for the month.
The Asia Dollar Index had a weekly loss of 0.2 percent and the MSCI Asia-Pacific Index of shares dropped 2.6 percent. Emerging-market equity funds’ net inflows fell to $2.2 billion in the week to Oct. 28, after averaging $4.4 billion over the previous two weeks, according to research firm EPFR Global.
Below-Average Growth
The International Monetary Fund on Oct. 29 said the region’s governments must maintain fiscal support for their economies as demand for their exports will remain sluggish. Growth in Asia including Japan, Australia and New Zealand will probably accelerate to 5.8 percent next year from 2.8 percent in 2009, “well below” the 6.8 percent average of the past decade, the Washington-based lender said.
The U.S. economy, the world’s biggest, grew at a 3.5 percent pace in the third quarter after a 0.7 percent slump in the preceding three months, the Commerce Department said Oct. 29. Japan’s jobless rate slid to a four-month low of 5.3 percent in September, the statistics bureau announced yesterday.
The Korean won ended the week 0.1 percent lower at 1,182.05 in Seoul. The currency, which has strengthened 9 percent in the past six months, reached a five-week low of 1,205.75 per dollar on Oct. 29.
“The U.S. gross domestic product in particular points out a lot of good indications,” said Mirza Baig, a currency strategist in Singapore at Deutsche Bank AG, the world’s biggest trader of foreign exchange. “It will support risk appetite in the near term. The won has gone back above 1,200, which was a resistance level.”
Elsewhere, the Philippine peso fell 1.3 percent this week to 47.595. The Singapore dollar dropped 0.3 percent to S$1.3978 and Taiwan’s dollar declined 0.4 percent to NT$32.535. The Thai baht was little changed at 33.43.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, sank to its lowest level this month as investors favored safer bets than emerging-market assets. The benchmark recouped some of its losses in the latter part of the week as reports showing the first U.S. economic growth in a year and falling unemployment in Japan brightened the outlook for exports.
“Risk aversion was weighing down sentiment on Asian currencies but the long-term view still holds,” said Penn Nee Chow, an economist in Singapore at United Overseas Bank Ltd. “Asian currencies will continue to gain against the U.S. dollar as the outlook improves. A lot of Asian economies are expected to come back to year-on-year growth in the fourth quarter.”
The rupiah dropped 1.6 percent this week to 9,585 per dollar, India’s rupee fell 1.0 percent to 46.9729 and the Malaysian ringgit slid 0.9 percent to 3.4138. All three were still up for the month.
The Asia Dollar Index had a weekly loss of 0.2 percent and the MSCI Asia-Pacific Index of shares dropped 2.6 percent. Emerging-market equity funds’ net inflows fell to $2.2 billion in the week to Oct. 28, after averaging $4.4 billion over the previous two weeks, according to research firm EPFR Global.
Below-Average Growth
The International Monetary Fund on Oct. 29 said the region’s governments must maintain fiscal support for their economies as demand for their exports will remain sluggish. Growth in Asia including Japan, Australia and New Zealand will probably accelerate to 5.8 percent next year from 2.8 percent in 2009, “well below” the 6.8 percent average of the past decade, the Washington-based lender said.
The U.S. economy, the world’s biggest, grew at a 3.5 percent pace in the third quarter after a 0.7 percent slump in the preceding three months, the Commerce Department said Oct. 29. Japan’s jobless rate slid to a four-month low of 5.3 percent in September, the statistics bureau announced yesterday.
The Korean won ended the week 0.1 percent lower at 1,182.05 in Seoul. The currency, which has strengthened 9 percent in the past six months, reached a five-week low of 1,205.75 per dollar on Oct. 29.
“The U.S. gross domestic product in particular points out a lot of good indications,” said Mirza Baig, a currency strategist in Singapore at Deutsche Bank AG, the world’s biggest trader of foreign exchange. “It will support risk appetite in the near term. The won has gone back above 1,200, which was a resistance level.”
Elsewhere, the Philippine peso fell 1.3 percent this week to 47.595. The Singapore dollar dropped 0.3 percent to S$1.3978 and Taiwan’s dollar declined 0.4 percent to NT$32.535. The Thai baht was little changed at 33.43.
Thursday, October 29, 2009
Bank of Japan to Debate Ending Corporate Debt-Purchase Programs
Oct. 30 (Bloomberg) -- Bank of Japan policy makers will probably today debate ending their purchases of corporate debt as central banks around the world start phasing out emergency measures taken at the height of the financial crisis.
Board members have signaled differences over the timing of a withdrawal from three programs designed to sustain credit, and today’s vote may be divided, central bank watchers said. A majority favor allowing commercial paper and corporate bond buying to expire at year-end, while extending unlimited collateral-backed lending to banks through March, they said.
Central bank Governor Masaaki Shirakawa is aiming to avoid the financial industry becoming dependent on the central bank’s backstop facilities, while keeping alive a recovery from the nation’s worst postwar recession. As a result, Japan may lag behind other developed nations in raising interest rates at the same time as ending the corporate-debt programs, analysts said.
“The BOJ’s board will probably extend the limitless lending facility just once more because scrapping all the programs at once may fuel concern about companies’ borrowing at the end of the fiscal year,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. “In any case, the bank will keep emphasizing its commitment to prolonging a super-low rate policy.”
The three credit programs have been in place since the bank slashed the benchmark interest rate to 0.1 percent in December amid the worst global financial crisis since the 1930s. The bank decided in July to extend all the measures to Dec. 31. Japan’s fiscal year ends March 31.
Economic Outlook
The central bank’s decision is expected early afternoon in Tokyo. At 3 p.m., the board will release its semi-annual economic outlook. Policy makers will probably forecast that the economy will expand about 1 percent in each of the next two years and deflation will extend into fiscal 2011, analysts said.
Shirakawa said twice over the past month that the need to support corporate debt markets with policy steps has receded because companies have regained access to private funding. At the same time, the governor emphasized the bank’s intention to keep rates “very low” to ensure the economy keeps expanding.
In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. The sale took place even after Moody’s Investors Service last week downgraded Japan’s largest beverage maker to A2, the sixth-highest grade.
‘Soft Landing’
Policy makers will probably keep interest rates unchanged into next year, in part to hold down corporate borrowing costs, analysts said.
“The central bank probably wants to make sure that ending the credit-easing measures won’t drive up money-market rates,” said Izuru Kato, chief market economist at Totan Research Co. in Tokyo. “If the bank seeks a soft landing, it will be necessary to extend the limitless lending program to March and give a transition period for lenders.”
Yields on 10-year government bonds climbed to an 11-week high on Oct. 28 on concern the government may have to sell more debt to pay for promised spending for households.
The bank’s likely forecasts of prolonged deflation and tepid growth will help to quash speculation for any early rate increase, analysts added. Fifteen of 16 economists surveyed by Bloomberg News last week said the bank will hold the key rate at 0.1 percent at least through the end of 2010.
Fuel Speculation
Even so, should the bank decide today to end its limitless lending program, that “may flare up speculation for policy tightening,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “Announcing an end to the step now would be bad timing because investors worldwide are getting nervous about rate hikes.”
Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week.
In the U.S., two-year Treasury note yields this week rose to the highest level in almost a month on speculation Federal Reserve officials will probably discuss next month how and when to signal the possibility of higher U.S. interest rates.
The Bank of Japan’s unlimited lending program is still in demand while few lenders have offered to sell corporate debt to the central bank. The bank’s assets as of Sept. 30 included 6.9 trillion yen in such loans and only 100 billion yen of commercial paper purchased from lenders and 300 billion yen of corporate bonds.
Some policy makers have suggested a reluctance to scrap the credit-easing programs. Board member Atsushi Mizuno said in August that the bank-loan facility had helped keep short-term interest rates low and ending it prematurely may unsettle financial markets.
“There may be a small number of dissenting votes” about the measures, said Totan Research’s Kato. “Even so, the board will probably come up with a majority consensus” to end the initiatives, he said.
The central bank will probably extend other measures, namely the temporary acceptance of low-rated debt as collateral and 0.1 percent interest payments on reserves, Kato said.
Board members have signaled differences over the timing of a withdrawal from three programs designed to sustain credit, and today’s vote may be divided, central bank watchers said. A majority favor allowing commercial paper and corporate bond buying to expire at year-end, while extending unlimited collateral-backed lending to banks through March, they said.
Central bank Governor Masaaki Shirakawa is aiming to avoid the financial industry becoming dependent on the central bank’s backstop facilities, while keeping alive a recovery from the nation’s worst postwar recession. As a result, Japan may lag behind other developed nations in raising interest rates at the same time as ending the corporate-debt programs, analysts said.
“The BOJ’s board will probably extend the limitless lending facility just once more because scrapping all the programs at once may fuel concern about companies’ borrowing at the end of the fiscal year,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. “In any case, the bank will keep emphasizing its commitment to prolonging a super-low rate policy.”
The three credit programs have been in place since the bank slashed the benchmark interest rate to 0.1 percent in December amid the worst global financial crisis since the 1930s. The bank decided in July to extend all the measures to Dec. 31. Japan’s fiscal year ends March 31.
Economic Outlook
The central bank’s decision is expected early afternoon in Tokyo. At 3 p.m., the board will release its semi-annual economic outlook. Policy makers will probably forecast that the economy will expand about 1 percent in each of the next two years and deflation will extend into fiscal 2011, analysts said.
Shirakawa said twice over the past month that the need to support corporate debt markets with policy steps has receded because companies have regained access to private funding. At the same time, the governor emphasized the bank’s intention to keep rates “very low” to ensure the economy keeps expanding.
In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. The sale took place even after Moody’s Investors Service last week downgraded Japan’s largest beverage maker to A2, the sixth-highest grade.
‘Soft Landing’
Policy makers will probably keep interest rates unchanged into next year, in part to hold down corporate borrowing costs, analysts said.
“The central bank probably wants to make sure that ending the credit-easing measures won’t drive up money-market rates,” said Izuru Kato, chief market economist at Totan Research Co. in Tokyo. “If the bank seeks a soft landing, it will be necessary to extend the limitless lending program to March and give a transition period for lenders.”
Yields on 10-year government bonds climbed to an 11-week high on Oct. 28 on concern the government may have to sell more debt to pay for promised spending for households.
The bank’s likely forecasts of prolonged deflation and tepid growth will help to quash speculation for any early rate increase, analysts added. Fifteen of 16 economists surveyed by Bloomberg News last week said the bank will hold the key rate at 0.1 percent at least through the end of 2010.
Fuel Speculation
Even so, should the bank decide today to end its limitless lending program, that “may flare up speculation for policy tightening,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “Announcing an end to the step now would be bad timing because investors worldwide are getting nervous about rate hikes.”
Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week.
In the U.S., two-year Treasury note yields this week rose to the highest level in almost a month on speculation Federal Reserve officials will probably discuss next month how and when to signal the possibility of higher U.S. interest rates.
The Bank of Japan’s unlimited lending program is still in demand while few lenders have offered to sell corporate debt to the central bank. The bank’s assets as of Sept. 30 included 6.9 trillion yen in such loans and only 100 billion yen of commercial paper purchased from lenders and 300 billion yen of corporate bonds.
Some policy makers have suggested a reluctance to scrap the credit-easing programs. Board member Atsushi Mizuno said in August that the bank-loan facility had helped keep short-term interest rates low and ending it prematurely may unsettle financial markets.
“There may be a small number of dissenting votes” about the measures, said Totan Research’s Kato. “Even so, the board will probably come up with a majority consensus” to end the initiatives, he said.
The central bank will probably extend other measures, namely the temporary acceptance of low-rated debt as collateral and 0.1 percent interest payments on reserves, Kato said.
Philippines Shuts Schools, Sends Supplies as Typhoon Approaches
Oct. 30 (Bloomberg) -- Philippines authorities ordered schools to close and stockpiled relief goods throughout Luzon, as Typhoon Mirinae bore down on the archipelago, where about 1,100 people have died in tropical cyclones this year.
Primary and secondary schools in most parts of Luzon were suspended after Storm Signal No. 2 was raised for the island, the National Disaster Coordinating Council said on its Web site today. The signal means winds of between 60 and 100 kilometers (60 miles) per hour are expected.
The Philippines has been battered by more than 10 cyclones this year, according to the council’s Web site. More than 121,000 people remain in evacuation centers after two cyclones barreled into Luzon, the most populous island, since Sept. 26.
Mirinae’s eye was located 547 kilometers east of the city of Casiguran on eastern Luzon at 4 a.m. local time today, the Philippines weather office said.
The storm has maximum sustained winds of 150 kph, with gusts to 185 kph, and was moving west-southwest at 22 kph, the office said.
Mirinae, referred to as Santi in the Philippines, is forecast to make landfall east of Manila after 2 a.m. tomorrow and sweep across the capital before heading over the South China Sea, according to the agency’s forecast.
The typhoon’s expected landfall coincides with All Saints’ weekend, when many Filipinos travel by boat and other means to their home provinces.
The Philippine Coast Guard yesterday sent rescue divers to the eastern coast of Luzon and to areas on the western coast where Mirinae is forecast to exit the island.
As many as 800 people were killed after a ferry sank in June last year when Typhoon Fengshen slammed into the archipelago of more than 7,000 islands.
Primary and secondary schools in most parts of Luzon were suspended after Storm Signal No. 2 was raised for the island, the National Disaster Coordinating Council said on its Web site today. The signal means winds of between 60 and 100 kilometers (60 miles) per hour are expected.
The Philippines has been battered by more than 10 cyclones this year, according to the council’s Web site. More than 121,000 people remain in evacuation centers after two cyclones barreled into Luzon, the most populous island, since Sept. 26.
Mirinae’s eye was located 547 kilometers east of the city of Casiguran on eastern Luzon at 4 a.m. local time today, the Philippines weather office said.
The storm has maximum sustained winds of 150 kph, with gusts to 185 kph, and was moving west-southwest at 22 kph, the office said.
Mirinae, referred to as Santi in the Philippines, is forecast to make landfall east of Manila after 2 a.m. tomorrow and sweep across the capital before heading over the South China Sea, according to the agency’s forecast.
The typhoon’s expected landfall coincides with All Saints’ weekend, when many Filipinos travel by boat and other means to their home provinces.
The Philippine Coast Guard yesterday sent rescue divers to the eastern coast of Luzon and to areas on the western coast where Mirinae is forecast to exit the island.
As many as 800 people were killed after a ferry sank in June last year when Typhoon Fengshen slammed into the archipelago of more than 7,000 islands.
Wednesday, October 28, 2009
N.Z. Keeps Rate at 2.5%, May Tighten 2nd Half of 2010
Oct. 29 (Bloomberg) -- New Zealand’s central bank said it will wait until the second half of next year before raising interest rates because the economy needs further stimulus as it recovers from a recession.
“We see no urgency to begin withdrawing monetary policy stimulus and we expect to keep the cash rate at the current level until the second half of 2010,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today after leaving the official cash rate at a record-low of 2.5 percent.
Bollard is keeping borrowing costs steady as his counterparts in Australia and Norway increase their benchmark rates amid accelerating inflation. The nation’s currency fell as traders pared bets the central bank would increase the cash rate as early as the first quarter.
“They had to acknowledge that the official cash rate is unlikely to stay at these levels through the next year,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. Still “they don’t want to threaten the recovery, and they don’t want to fuel the currency.”
New Zealand’s dollar fell to 71.86 U.S. cents at 1:50 p.m. in Wellington from 72.81 cents immediately before the decision. Traders expect 212 basis points of rate increases over the next year, down from 232 points yesterday, according to a Credit Suisse index based on swaps trading. A basis point is 0.01 percentage point.
Rate Outlook
All 11 economists surveyed by Bloomberg News expected today’s decision. Three forecast a rate increase in the first quarter of next year and nine, including Ong, expect higher borrowing costs by June 30.
New Zealand’s currency has surged 25 percent against the U.S. dollar the past six months, the best performing major currency tracked by Bloomberg, as rising house prices and a pickup in consumer and business confidence fanned expectations Bollard may raise borrowing costs as early as January.
Instead, his outlook on rates has changed only slightly since Sept. 10 when he said he expected to keep the cash rate “at or below the current level through until the latter part of 2010.”
The economy grew for the first time in six quarters in the three months to June, buoyed by low interest rates and a fiscal stimulus that included tax cuts and extra government spending.
“The forecast recovery in economic activity is based on fiscal and monetary policy continuing to provide substantial support to the economy,” said Bollard. “We think such support remains appropriate.”
Fiscal Stimulus
Finance Minister Bill English has signaled he will cut government spending. Removing some fiscal stimulus is likely to reduce the work that monetary policy will otherwise need to do, Bollard said.
Central bankers around the world are now assessing when to start raising interest rates as the global economy recovers.
Reserve Bank of Australia Governor Glenn Stevens raised his benchmark rate on Oct. 6 by a quarter point to 3.25 percent, the first G-20 central banker to move since the height of the financial crisis.
Norway’s central bank yesterday raised its overnight deposit rate to 1.5 percent. Bank of Korea Governor Lee Seong Tae last month signaled he may increase borrowing costs in the future to stem rising property prices.
While the economies of New Zealand’s main trading partners are rebounding, there remains “significant vulnerabilities and challenges to be worked through,” Bollard said.
Inflation Accelerates
In New Zealand, trader expectations of a rate increase in the coming year surged after an Oct. 15 report showed inflation accelerated faster in the third quarter than Bollard expected, and that core inflation hasn’t slowed amid the worst recession in three decades.
Traders saw no chance of an increase today, according to an index compiled by Credit Suisse based on swaps trading in Wellington yesterday.
“Inflation is expected to track comfortably within the target range over the medium term,” Bollard said. The central bank is required to keep annual price gains between 1 percent and 3 percent.
House prices have increased 7.9 percent since a low in January and property sales in September surged 44 percent from a year earlier, according to Real Estate Institute figures.
A stronger housing market helped drive consumer confidence to a four-year high in the third quarter, according to an index complied by Westpac Banking Corp. and McDermott Miller Ltd.
“A very gradual increase in household spending appears to be taking place,” said Bollard. “Government spending is also supporting activity. Business spending, however, remains weak and credit growth is very subdued.”
Business Confidence
Signs of a global recovery and rising commodity prices kept business confidence near a 10-year high in October, according to an ANZ National Bank Ltd. survey published yesterday.
To be sure, the currency’s gains may slow the recovery by curbing exports and tourism, which make up 40 percent of the economy. Spending by foreign tourists in New Zealand fell in the 12 months through March 31, the first drop in a decade, a report showed yesterday.
“The high level of the New Zealand dollar has limited the scope for exports to contribute to the recovery, and reinforces a bias toward domestic expenditure,” said Bollard. “After some short-term correction, it is also likely to see the current account deficit begin to widen in the medium term.”
“We see no urgency to begin withdrawing monetary policy stimulus and we expect to keep the cash rate at the current level until the second half of 2010,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today after leaving the official cash rate at a record-low of 2.5 percent.
Bollard is keeping borrowing costs steady as his counterparts in Australia and Norway increase their benchmark rates amid accelerating inflation. The nation’s currency fell as traders pared bets the central bank would increase the cash rate as early as the first quarter.
“They had to acknowledge that the official cash rate is unlikely to stay at these levels through the next year,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. Still “they don’t want to threaten the recovery, and they don’t want to fuel the currency.”
New Zealand’s dollar fell to 71.86 U.S. cents at 1:50 p.m. in Wellington from 72.81 cents immediately before the decision. Traders expect 212 basis points of rate increases over the next year, down from 232 points yesterday, according to a Credit Suisse index based on swaps trading. A basis point is 0.01 percentage point.
Rate Outlook
All 11 economists surveyed by Bloomberg News expected today’s decision. Three forecast a rate increase in the first quarter of next year and nine, including Ong, expect higher borrowing costs by June 30.
New Zealand’s currency has surged 25 percent against the U.S. dollar the past six months, the best performing major currency tracked by Bloomberg, as rising house prices and a pickup in consumer and business confidence fanned expectations Bollard may raise borrowing costs as early as January.
Instead, his outlook on rates has changed only slightly since Sept. 10 when he said he expected to keep the cash rate “at or below the current level through until the latter part of 2010.”
The economy grew for the first time in six quarters in the three months to June, buoyed by low interest rates and a fiscal stimulus that included tax cuts and extra government spending.
“The forecast recovery in economic activity is based on fiscal and monetary policy continuing to provide substantial support to the economy,” said Bollard. “We think such support remains appropriate.”
Fiscal Stimulus
Finance Minister Bill English has signaled he will cut government spending. Removing some fiscal stimulus is likely to reduce the work that monetary policy will otherwise need to do, Bollard said.
Central bankers around the world are now assessing when to start raising interest rates as the global economy recovers.
Reserve Bank of Australia Governor Glenn Stevens raised his benchmark rate on Oct. 6 by a quarter point to 3.25 percent, the first G-20 central banker to move since the height of the financial crisis.
Norway’s central bank yesterday raised its overnight deposit rate to 1.5 percent. Bank of Korea Governor Lee Seong Tae last month signaled he may increase borrowing costs in the future to stem rising property prices.
While the economies of New Zealand’s main trading partners are rebounding, there remains “significant vulnerabilities and challenges to be worked through,” Bollard said.
Inflation Accelerates
In New Zealand, trader expectations of a rate increase in the coming year surged after an Oct. 15 report showed inflation accelerated faster in the third quarter than Bollard expected, and that core inflation hasn’t slowed amid the worst recession in three decades.
Traders saw no chance of an increase today, according to an index compiled by Credit Suisse based on swaps trading in Wellington yesterday.
“Inflation is expected to track comfortably within the target range over the medium term,” Bollard said. The central bank is required to keep annual price gains between 1 percent and 3 percent.
House prices have increased 7.9 percent since a low in January and property sales in September surged 44 percent from a year earlier, according to Real Estate Institute figures.
A stronger housing market helped drive consumer confidence to a four-year high in the third quarter, according to an index complied by Westpac Banking Corp. and McDermott Miller Ltd.
“A very gradual increase in household spending appears to be taking place,” said Bollard. “Government spending is also supporting activity. Business spending, however, remains weak and credit growth is very subdued.”
Business Confidence
Signs of a global recovery and rising commodity prices kept business confidence near a 10-year high in October, according to an ANZ National Bank Ltd. survey published yesterday.
To be sure, the currency’s gains may slow the recovery by curbing exports and tourism, which make up 40 percent of the economy. Spending by foreign tourists in New Zealand fell in the 12 months through March 31, the first drop in a decade, a report showed yesterday.
“The high level of the New Zealand dollar has limited the scope for exports to contribute to the recovery, and reinforces a bias toward domestic expenditure,” said Bollard. “After some short-term correction, it is also likely to see the current account deficit begin to widen in the medium term.”
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