Jan. 25 (Bloomberg) -- Not even the slowest economic growth in the industrialized world or deflation can keep Byron Wien, David Herro and John Alkire away from Japanese equities.
Wien, the Blackstone Group LP adviser who predicted last year’s rallies in stocks and oil, says Japan shares are his favorites. Harris Associates LP’s Herro, Morningstar Inc.’s international manager of the decade, says stocks at the cheapest ever relative to assets will gain even if the economy stagnates. Alkire of Morgan Stanley Asset & Investment Management is betting low debt levels will spur an advance that beats the U.S.
Japan, the world’s second-biggest equity market, is up 3.7 percent this year as measured by the Topix index, the most among the world’s 10 largest economies. Overseas investors pumped almost $13 billion into Japan during the two weeks ended Jan. 15, the most since 2004. Companies trade for an average 1.2 times book value, almost half the valuation for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.
“My best investment idea is Japan,” said Wien, 76, a former market strategist at Morgan Stanley and at hedge fund Pequot Capital Management Inc. who predicted the end of the technology bubble in 2000. “The Japanese market looks relatively attractive assuming the earnings come through, which I think they will.”
More investors are looking at net assets instead of earnings after the economy posted its lowest production since 1991 in the third quarter and stagnant profit growth left companies in the Topix trading at an average 37 times estimates for this year’s income. The price-to-earnings ratio is the highest among the world’s 10 biggest markets.
1989 High
The index fell 2.6 percent last week to end at 940.94. While the Topix remains 67 percent below the high reached on Dec. 18, 1989, investors profited in nine of the past 20 years, including a 58 percent gain in 1999 when the S&P 500 rose 20 percent.
Since the end of 2005, the Topix has fallen 43 percent, compared with the MSCI World Index’s 8.6 percent drop, as successive prime ministers including the current Yukio Hatoyama battled deflation and faltering growth. Bank of Japan Governor Masaaki Shirakawa said on Jan. 18 that he will keep borrowing costs near zero to help end the worst postwar recession. Hatoyama unveiled a 7.2 trillion yen ($80 billion) stimulus package last month.
Wien, Herro and Alkire’s predictions are based on valuations instead of economic prospects. Wien favors export- related companies, technology makers, and drug and cosmetics suppliers. Gauges of automakers and electronics companies in the Topix have climbed 11 percent and 6.2 percent, respectively, in the past three months, more than the broader index’s 4.3 percent advance.
Priced In
“Japan doesn’t have to be a strong economy to attract investor interest,” Wien said. “Things aren’t getting good there, but they’re not getting bad either. The bad news is diminishing.”
Companies in the Topix are projected to turn profitable in 2010 after a combined loss of 40 yen per share in the past 12 months, according to data compiled by Bloomberg. The Topix’s book value is 33 percent below its average dating back to 1993 of 1.8 times, according to data compiled by Bloomberg.
“Japan is extremely cheap on fundamentals,” said Herro, the chief investment officer for international equities at Harris, with $55 billion in assets. “When you combine the two concepts of low price and high quality to get a value proposition, especially if we see a movement towards more sustainable operating profitability by corporate Japan, this could be one of the best-performing markets over the next couple of years.”
Toyota, Canon
Herro bought shares of Toyota Motor Corp., the world’s largest automaker, and Canon Inc., the biggest camera manufacturer. Analysts surveyed by Bloomberg project Toyota will return to an operating profit this year, while Tokyo-based Canon’s may climb 64 percent from 2009.
Japanese equities underperformed industrialized nations since the MSCI World Index of 23 developed countries reached a record on Oct. 31, 2007. The fallout from the global recession has left the MSCI World 32 percent below that peak, compared with 30 percent for the S&P 500 and 42 percent for the Topix.
Alkire, the chief investment officer for Morgan Stanley Asset in Tokyo, says Japanese stocks may beat the U.S. and Europe in 2010 as falling expenses and low debt bolster profits. Forty-three percent of Japanese companies have no borrowings, compared with 18 percent in the U.S. and 17 percent in Europe, Alkire said in a presentation to pension funds in Tokyo.
‘Never Say Never’
“For most of the past year, foreign investors said, ‘Never buy Japan,’” said Alkire, whose firm oversees about $39 billion. “But this year, I say, ‘Never say never.’ Global markets will likely focus on Japan.”
Standard Life Investment Ltd.’s Frances Hudson isn’t as bullish because price drops may erode profits and hamper the recovery. Consumer costs fell 1.7 percent in November from a year earlier, the ninth month of declines. Japan has deflation for the first time in three years, according to the government.
“I wouldn’t write off the whole of Japan, but I would struggle to find anyone feeling positive on the domestic situation,” said Hudson, who helps oversee $197 billion at Standard Life in Edinburgh and advises staying “very light” on Tokyo-listed shares in global funds. “The government doesn’t seem to be able to make any headway in reforms. Neither in stimulating consumer spending or ending deflation.”
Speculation drove the Nikkei 225 Stock Average to a record 38,915.87 on Dec. 29, 1989. What followed was the popping of an asset bubble and a plunge in stock and real-estate values in what became known as Japan’s Lost Decade.
Worst Drop
The Nikkei has lost 73 percent from that peak, the worst performance of the world’s major markets. Japan’s nominal gross domestic product rose 23 percent between 1989 and 2008, while the U.S. increased 163 percent, according to data compiled by Bloomberg.
Japanese gross domestic product shrank to an annualized 471 trillion yen in the third quarter, the lowest level since 1991, according to Cabinet Office figures. It’s forecast to expand 1.4 percent in 2010 after a projected 5.3 percent contraction last year, according to the median estimate of economists surveyed by Bloomberg. That’s less than the 2.7 percent growth the World Bank in Washington is predicting globally.
U.S.-based funds that invest in Japanese equities attracted new money equal to 2.7 percent of total assets in the week ended Jan. 13, the most inflows since October 2005, according to data from EPFR Global in Cambridge, Massachusetts, and Frankfurt- based Deutsche Bank AG.
Weakening Yen
Money is returning as investors speculate Finance Minister Naoto Kan will bolster exports by weakening the yen, which touched a 14-year high against the dollar on Nov. 27.
Kan said Jan. 7 on his first day in office that he would welcome a weaker currency, compared with his predecessor, Hirohisa Fujii, who opposed “easy intervention.” The yen has dropped 5.9 against the dollar since Nov. 27, while the Nikkei average has rallied 17 percent.
A weaker currency will spur a rebound in stocks, according to Seiichiro Iwasawa, chief strategist at Tokyo-based Nomura Holdings Inc., the country’s largest brokerage, who predicted last month the Topix will climb to 1,200 by the end of 2010.
Operating Profit
A five-yen appreciation against the dollar that holds for a year would trim 0.2 percentage point from gross domestic product, according to Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities Co. in Tokyo. Every 1 yen drop by the Japanese currency against the dollar raises Toyota’s operating profit by about 30 billion yen and Honda Motor Co.’s by about 12 billion yen, according to figures supplied by the automakers in November.
Toyota soared 13 percent in December after plunging 14 percent the previous three months. The Toyota City, Japan-based company gets 32 percent of revenue from North America. Tokyo- based Honda, Japan’s second-largest carmaker, jumped 15 percent in December after a three-month, 8 percent drop. The company makes 81 percent of its sales from abroad.
The “change in attitude by the government is significant,” said Phillip Schwartz, a New York-based director at ING Investment Managers who helps oversee $1.3 billion and has been buying Japanese exporters. “Having been underweight for so long, fund managers fear being left out.”
To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
Last Updated: January 24, 2010 10:01
Sunday, January 24, 2010
Saturday, January 23, 2010
Korea’s Lee Seeking Singh Support for Stalled Posco India Mill
Jan. 24 (Bloomberg) -- South Korea’s President Lee Myung Bak is seeking Indian government support to clear the way for Posco’s planned $12 billion plant that’s been delayed for about three years, his office said.
Lee, to attend India’s Republic Day celebrations on Jan. 26, is seeking Prime Minister Manmohan Singh’s “continued interest and support” for the plant, he said in a written interview with the Times of India newspaper, according to a Korean-language transcript issued by Lee’s office today.
Posco’s mill in the eastern state of Orissa, potentially the biggest overseas investment in India, was announced in 2005 and is delayed, pending mining permits and land clearance. Plans by ArcelorMittal, the world’s largest steelmaker, to build a pair of $10 billion plants in Orissa and neighboring Jharkhand have also been stalled for land acquisition.
Orissa has received only about $1 billion of $44 billion in investment pledged in the last five years, data from the state’s industries department show.
Posco, Asia’s most profitable steelmaker, said this month it had secured India’s permission to acquire 88 percent of the land needed for the plant and said it was continuing talks with residents to purchase the rest.
‘New Turning Point’
Hoping the approval will lead to “a new turning point,” Lee told the Indian newspaper that the deal may become “a model case” for industrial cooperation between South Korea and India.
India, Asia’s third-biggest economy and South Korea, the region’s fourth-largest, signed a trade agreement in August aimed at cutting or eliminating tariffs, giving companies including Hyundai Motor Co. and LG Electronics Inc. better access to the world’s second-most populous nation.
Lee expects trade between the two countries and South Korean investments in India will expand because of the accord, the statement said. He also hopes the two nations will cooperate in fields including nuclear power generation and development of resources, it said.
Policy makers are working to remove remaining hurdles faced by Posco, India’s foreign ministry said on Jan. 22. Lee arrives today and will leave on Jan. 27.
“The government of India and the state government attach considerable importance to the project; it hasn’t evolved at the pace that we would’ve wanted,” Vishnu Prakash, spokesman for India’s foreign ministry, said in New Delhi. “Many of the issues have been sorted out. The remaining issues, hopefully, will be sorted out.”
Prime Minister’s Help
The nation’s steel ministry has also sought the prime minister’s help to secure permits to help get the project off the ground this year, Raja Awasthi, media adviser to Steel Minister Virbhadra Singh, said on Jan. 14.
Difficulties in acquiring land and iron-ore mines have stalled almost $80 billion of steel projects that would have more than doubled India’s 55 million-ton output, the steel minister said in an interview last month.
Posco Chairman Chung Joon Yang said on Jan. 14 the company wants to start construction of the Orissa project this year. He is scheduled to be part of a business delegation visiting India along with President Lee.
Separately, ArcelorMittal and Posco earlier this month announced plans for two new steel mills in the southern state of Karnataka in India.
Lee, to attend India’s Republic Day celebrations on Jan. 26, is seeking Prime Minister Manmohan Singh’s “continued interest and support” for the plant, he said in a written interview with the Times of India newspaper, according to a Korean-language transcript issued by Lee’s office today.
Posco’s mill in the eastern state of Orissa, potentially the biggest overseas investment in India, was announced in 2005 and is delayed, pending mining permits and land clearance. Plans by ArcelorMittal, the world’s largest steelmaker, to build a pair of $10 billion plants in Orissa and neighboring Jharkhand have also been stalled for land acquisition.
Orissa has received only about $1 billion of $44 billion in investment pledged in the last five years, data from the state’s industries department show.
Posco, Asia’s most profitable steelmaker, said this month it had secured India’s permission to acquire 88 percent of the land needed for the plant and said it was continuing talks with residents to purchase the rest.
‘New Turning Point’
Hoping the approval will lead to “a new turning point,” Lee told the Indian newspaper that the deal may become “a model case” for industrial cooperation between South Korea and India.
India, Asia’s third-biggest economy and South Korea, the region’s fourth-largest, signed a trade agreement in August aimed at cutting or eliminating tariffs, giving companies including Hyundai Motor Co. and LG Electronics Inc. better access to the world’s second-most populous nation.
Lee expects trade between the two countries and South Korean investments in India will expand because of the accord, the statement said. He also hopes the two nations will cooperate in fields including nuclear power generation and development of resources, it said.
Policy makers are working to remove remaining hurdles faced by Posco, India’s foreign ministry said on Jan. 22. Lee arrives today and will leave on Jan. 27.
“The government of India and the state government attach considerable importance to the project; it hasn’t evolved at the pace that we would’ve wanted,” Vishnu Prakash, spokesman for India’s foreign ministry, said in New Delhi. “Many of the issues have been sorted out. The remaining issues, hopefully, will be sorted out.”
Prime Minister’s Help
The nation’s steel ministry has also sought the prime minister’s help to secure permits to help get the project off the ground this year, Raja Awasthi, media adviser to Steel Minister Virbhadra Singh, said on Jan. 14.
Difficulties in acquiring land and iron-ore mines have stalled almost $80 billion of steel projects that would have more than doubled India’s 55 million-ton output, the steel minister said in an interview last month.
Posco Chairman Chung Joon Yang said on Jan. 14 the company wants to start construction of the Orissa project this year. He is scheduled to be part of a business delegation visiting India along with President Lee.
Separately, ArcelorMittal and Posco earlier this month announced plans for two new steel mills in the southern state of Karnataka in India.
U.S. to Appeal Blackwater Case Dismissal, Biden Says
BAGHDAD — Vice President Joseph R. Biden Jr. promised Iraqi leaders on Saturday that the United States would appeal the dismissal of manslaughter charges against five Blackwater Worldwide security contractors involved in a deadly shooting here that has inflamed anti-American tensions.
Skip to next paragraph
Enlarge This Image
Adam Schreck/Associated Press
The Marines handed over security control of Anbar Province to the United States Army on Saturday in a ceremony at Camp Ramadi.
At War
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era. Go to the Blog »
Enlarge This Image
Iraqi Government, via Reuters
Left, Vice President Joseph R. Biden Jr. met with Prime Minister Nuri Kamal al-Maliki in Baghdad on Saturday.
Mr. Biden, tasked by the Obama administration to oversee policy in Iraq, made the statement after a day of meetings with Iraqi leaders that dealt, in part, with a political crisis that has erupted over the March 7 parliamentary elections. American officials view the vote, a barometer of the durability of Iraq’s political system, as a crucial date in American plans to withdraw tens of thousands of combat troops from Iraq by the end of August.
The vice president expressed his “personal regret” for the Blackwater shooting in 2007, in which contractors guarding American diplomats opened fire in a crowded Baghdad traffic circle, killing 17 people, including women and children.
“A dismissal is not an acquittal,” he said after meeting President Jalal Talabani.
Investigators had concluded that the guards fired indiscriminately on unarmed civilians in an unprovoked and unjustified attack. The guards contended that they had been ambushed by insurgents and fired in self-defense.
In December, in a decision that was a blow to the Justice Department and unleashed anger and disbelief in Iraq, a federal judge threw out the five guards’ indictment on manslaughter charges, citing misuse of their statements that violated their constitutional rights. The judge’s scathing and detailed ruling was expected to make any appeal difficult.
“This is great news,” Abdel-Amir Jihan, who was wounded in the shooting, said after hearing of Mr. Biden’s announcement. “The court was not fair to us. We felt great injustice when we heard the verdict. It was not right to drop the charges against them.”
Mr. Biden was scheduled to leave Saturday evening after a 24-hour visit that involved meetings with most of the pivotal players in the election crisis. That dispute erupted this month after a government commission barred more than 500 candidates, accusing them of supporting Saddam Hussein’s Baath Party. While some leaders have insisted that the disqualifications adhered to Iraqi law, many Sunni Muslims have seen them as score-settling by religious Shiite parties who suffered under Baath Party rule, and American officials have worried that the move could impair the vote’s legitimacy.
American officials have warned Iraqi leaders to avoid a process that, in the words of Mr. Biden’s national security adviser, Antony J. Blinken, “lacks transparency and fairness and credibility.” But as expected, there was no breakthrough in the meetings, and Mr. Biden, who spent the day shuttling between meetings, stressed that the United States would not impose a solution.
“I want to make clear I am not here to resolve that issue,” he said. “I am confident that Iraq’s leaders are seized with this issue and are working for a final, just solution.”
Before his meeting with Prime Minister Nuri Kamal al-Maliki, though, Mr. Biden alluded to how frequently American mediation — especially his own, over the course of three trips here since he became vice president — has been necessary. He jokingly told Mr. Maliki: “I’ve come to apply for citizenship. I’ve been here enough.”
The crisis has proved intractable in part because of its very nature: a legal process with obvious and sweeping political effects, seized on by Iraqi leaders with competing interests.
In Mr. Biden’s meeting with Mr. Maliki, officials said, the prime minister insisted that the disqualifications were simply a legal issue. But Mr. Maliki’s critics have accused him of politicizing the issue as much as anyone, and in a speech on Friday, he took an especially hard line, saying that the barring of candidates in itself did not go far enough.
And while many of the most senior Iraqi officials have warned the United States against interference in Iraq’s affairs, others — especially many of the Sunni politicians who were barred from running — have sought American intervention.
American officials have said that, despite the current political crisis, they do not foresee any delay in this August’s withdrawal of the main body of American combat troops.
A notable step in that process happened Saturday when the Marine Corps handed over security duties in Anbar Province, once a cradle of the insurgency, to United States Army soldiers. The move formally ended the seven-year-long Marine presence in Iraq, in effect signaling the end of heavy combat operations.
As many as 25,000 Marines were once in the country, and the remaining few thousand are expected to leave within weeks.
Skip to next paragraph
Enlarge This Image
Adam Schreck/Associated Press
The Marines handed over security control of Anbar Province to the United States Army on Saturday in a ceremony at Camp Ramadi.
At War
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era. Go to the Blog »
Enlarge This Image
Iraqi Government, via Reuters
Left, Vice President Joseph R. Biden Jr. met with Prime Minister Nuri Kamal al-Maliki in Baghdad on Saturday.
Mr. Biden, tasked by the Obama administration to oversee policy in Iraq, made the statement after a day of meetings with Iraqi leaders that dealt, in part, with a political crisis that has erupted over the March 7 parliamentary elections. American officials view the vote, a barometer of the durability of Iraq’s political system, as a crucial date in American plans to withdraw tens of thousands of combat troops from Iraq by the end of August.
The vice president expressed his “personal regret” for the Blackwater shooting in 2007, in which contractors guarding American diplomats opened fire in a crowded Baghdad traffic circle, killing 17 people, including women and children.
“A dismissal is not an acquittal,” he said after meeting President Jalal Talabani.
Investigators had concluded that the guards fired indiscriminately on unarmed civilians in an unprovoked and unjustified attack. The guards contended that they had been ambushed by insurgents and fired in self-defense.
In December, in a decision that was a blow to the Justice Department and unleashed anger and disbelief in Iraq, a federal judge threw out the five guards’ indictment on manslaughter charges, citing misuse of their statements that violated their constitutional rights. The judge’s scathing and detailed ruling was expected to make any appeal difficult.
“This is great news,” Abdel-Amir Jihan, who was wounded in the shooting, said after hearing of Mr. Biden’s announcement. “The court was not fair to us. We felt great injustice when we heard the verdict. It was not right to drop the charges against them.”
Mr. Biden was scheduled to leave Saturday evening after a 24-hour visit that involved meetings with most of the pivotal players in the election crisis. That dispute erupted this month after a government commission barred more than 500 candidates, accusing them of supporting Saddam Hussein’s Baath Party. While some leaders have insisted that the disqualifications adhered to Iraqi law, many Sunni Muslims have seen them as score-settling by religious Shiite parties who suffered under Baath Party rule, and American officials have worried that the move could impair the vote’s legitimacy.
American officials have warned Iraqi leaders to avoid a process that, in the words of Mr. Biden’s national security adviser, Antony J. Blinken, “lacks transparency and fairness and credibility.” But as expected, there was no breakthrough in the meetings, and Mr. Biden, who spent the day shuttling between meetings, stressed that the United States would not impose a solution.
“I want to make clear I am not here to resolve that issue,” he said. “I am confident that Iraq’s leaders are seized with this issue and are working for a final, just solution.”
Before his meeting with Prime Minister Nuri Kamal al-Maliki, though, Mr. Biden alluded to how frequently American mediation — especially his own, over the course of three trips here since he became vice president — has been necessary. He jokingly told Mr. Maliki: “I’ve come to apply for citizenship. I’ve been here enough.”
The crisis has proved intractable in part because of its very nature: a legal process with obvious and sweeping political effects, seized on by Iraqi leaders with competing interests.
In Mr. Biden’s meeting with Mr. Maliki, officials said, the prime minister insisted that the disqualifications were simply a legal issue. But Mr. Maliki’s critics have accused him of politicizing the issue as much as anyone, and in a speech on Friday, he took an especially hard line, saying that the barring of candidates in itself did not go far enough.
And while many of the most senior Iraqi officials have warned the United States against interference in Iraq’s affairs, others — especially many of the Sunni politicians who were barred from running — have sought American intervention.
American officials have said that, despite the current political crisis, they do not foresee any delay in this August’s withdrawal of the main body of American combat troops.
A notable step in that process happened Saturday when the Marine Corps handed over security duties in Anbar Province, once a cradle of the insurgency, to United States Army soldiers. The move formally ended the seven-year-long Marine presence in Iraq, in effect signaling the end of heavy combat operations.
As many as 25,000 Marines were once in the country, and the remaining few thousand are expected to leave within weeks.
UN Panel to Strengthen Climate Research Systems, Pachauri Says
The Nobel prize-winning United Nations climate panel said it will use more rigorous research systems after being forced to re-examine its estimate of how fast Himalayan glaciers are melting.
The panel, whose work set the benchmark for global climate negotiations, is investigating research that suggested that Himalayan glaciers may disappear by 2035 after a report in the London-based Times newspaper that flawed data may have been used.
“Our systems are very robust; all we have to ensure is better implementation,” Rajendra Pachauri, who heads the UN Intergovernmental Panel on Climate Change, told reporters in New Delhi today. “We will ensure greater consistency in the next assessment report.”
The group, mandated to create a climate research summary used by policy makers worldwide, said in a 2007 report that the likelihood of Himalayan glaciers vanishing within three decades is “very high” should the Earth keep warming at current rates. The glaciers supply water to hundreds of millions of Chinese and Indians.
Pachauri chairs the IPCC panel that shared the 2007 Nobel Peace Prize with former U.S. Vice President Al Gore. The IPCC’s practices were challenged late last year after e-mails stolen from computer servers at the University of East Anglia showed climate researchers discussed keeping some scientific papers out of the IPCC report.
The British university said the e-mails were taken out of context. The report has formed the basis for two years of global climate-treaty talks.
“The skeptics have money and support from vested interests,” said Pachauri, adding he doesn’t plan to resign. “They aren’t looking for something scientifically valid for their arguments. Finally, truth will prevail.”
The panel, whose work set the benchmark for global climate negotiations, is investigating research that suggested that Himalayan glaciers may disappear by 2035 after a report in the London-based Times newspaper that flawed data may have been used.
“Our systems are very robust; all we have to ensure is better implementation,” Rajendra Pachauri, who heads the UN Intergovernmental Panel on Climate Change, told reporters in New Delhi today. “We will ensure greater consistency in the next assessment report.”
The group, mandated to create a climate research summary used by policy makers worldwide, said in a 2007 report that the likelihood of Himalayan glaciers vanishing within three decades is “very high” should the Earth keep warming at current rates. The glaciers supply water to hundreds of millions of Chinese and Indians.
Pachauri chairs the IPCC panel that shared the 2007 Nobel Peace Prize with former U.S. Vice President Al Gore. The IPCC’s practices were challenged late last year after e-mails stolen from computer servers at the University of East Anglia showed climate researchers discussed keeping some scientific papers out of the IPCC report.
The British university said the e-mails were taken out of context. The report has formed the basis for two years of global climate-treaty talks.
“The skeptics have money and support from vested interests,” said Pachauri, adding he doesn’t plan to resign. “They aren’t looking for something scientifically valid for their arguments. Finally, truth will prevail.”
India secures China pledge on trade surplus
India has claimed Wen Jiabao, the Chinese premier, has given his personal commitment to rebalance a booming bilateral trading relationship skewed overwhelmingly in China’s favour by non-tariff barriers.
New Delhi asked Beijing to take “corrective steps” to address a growing trade imbalance between the world’s two fastest-growing large economies in high level meetings in the Chinese capital this week.
EDITOR’S CHOICE
In depth: Building Brics - Jan-20
Inflation threat to China and India - Jan-15
Huawei in $500m India outlay - Jan-10
Delhi warns of vulnerable textile exports - Jan-06
Among the corrective steps recommended by Anand Sharma, India’s commerce minister, was the abolition of restrictions on Indian exports to China of products including information technology, Bollywood films and fresh food.
In the first Joint Economic Group meeting between the two countries for four years, China undertook to buy more value-added goods from India, according to the Indian delegation. India’s commerce ministry also said it had extracted a commitment from Mr Wen “that both sides could work together to ensure more balanced trade”.
The concern over the difficulty of exporting to China is one of a number of grievances that have marked a deterioration in relations between New Delhi and Beijing over the past year. Amid the global economic slowdown, India restricted the import of a variety of Chinese products, including toys, chocolates and non-branded mobile phones. More recently, Manmohan Singh, India’s prime minister, expressed surprise over China’s growing “assertiveness” over its territorial claim to Arunachal Pradesh, a state in India’s far north-east.
China has recently dislodged the US as India’s largest trading partner. But New Delhi is irked by a rising trade deficit with China that has widened over the past decade to $16bn last year. Indian officials and industrialists are concerned that raw materials are shipped from India to China, whereas trade in the other direction is of manufactured goods that are undercutting India’s small and medium-sized business.
China’s exports to India were worth about $29.5bn last year in a total bilateral trade of $43.4bn.
Neighbourly tensions: the Indo-Pakistani conflict
India Pakistan
FT interactive graphic: Tensions between India and Pakistan since partition in 1947
China is increasingly concerned about a backlash over its exports from a number of developing economies. While the US and the European Union have long called for China to allow the renminbi to appreciate, China is facing growing criticism about the level of its currency from developing nations. They argue that Chinese exports have become even more competitive over the past year as the government has allowed its currency to follow the dollar lower.
According to Ha Jiming at China International Capital Corporation, the renminbi depreciated by 14 per cent against the main emerging markets currencies last year and along with Indonesia, Brazil and Mexico, India was one of the countries that saw the most rapid rise in Chinese exports, he says.
FT series: Building Brics
Building BRICs
FT In depth: As the world emerges from recession, will the centre of gravity in the global economy shift to Brazil, Russia, India and China?
Mr Sharma, during his visit to China, highlighted the need for China to remove restrictions on the import of power equipment, rice and Indian television content. He also complained about time-consuming bureaucratic procedures blocking India’s drugmakers.
“The issue of non-tariff barriers is an issue that refers to the World Trade Organisation but it would be mutually favourable to sort this out at the bilateral level,” said Amit Mitra, the general secretary of the Federation of Indian Chambers of Commerce and Industry. “The problem is: how do we get market access?”
New Delhi asked Beijing to take “corrective steps” to address a growing trade imbalance between the world’s two fastest-growing large economies in high level meetings in the Chinese capital this week.
EDITOR’S CHOICE
In depth: Building Brics - Jan-20
Inflation threat to China and India - Jan-15
Huawei in $500m India outlay - Jan-10
Delhi warns of vulnerable textile exports - Jan-06
Among the corrective steps recommended by Anand Sharma, India’s commerce minister, was the abolition of restrictions on Indian exports to China of products including information technology, Bollywood films and fresh food.
In the first Joint Economic Group meeting between the two countries for four years, China undertook to buy more value-added goods from India, according to the Indian delegation. India’s commerce ministry also said it had extracted a commitment from Mr Wen “that both sides could work together to ensure more balanced trade”.
The concern over the difficulty of exporting to China is one of a number of grievances that have marked a deterioration in relations between New Delhi and Beijing over the past year. Amid the global economic slowdown, India restricted the import of a variety of Chinese products, including toys, chocolates and non-branded mobile phones. More recently, Manmohan Singh, India’s prime minister, expressed surprise over China’s growing “assertiveness” over its territorial claim to Arunachal Pradesh, a state in India’s far north-east.
China has recently dislodged the US as India’s largest trading partner. But New Delhi is irked by a rising trade deficit with China that has widened over the past decade to $16bn last year. Indian officials and industrialists are concerned that raw materials are shipped from India to China, whereas trade in the other direction is of manufactured goods that are undercutting India’s small and medium-sized business.
China’s exports to India were worth about $29.5bn last year in a total bilateral trade of $43.4bn.
Neighbourly tensions: the Indo-Pakistani conflict
India Pakistan
FT interactive graphic: Tensions between India and Pakistan since partition in 1947
China is increasingly concerned about a backlash over its exports from a number of developing economies. While the US and the European Union have long called for China to allow the renminbi to appreciate, China is facing growing criticism about the level of its currency from developing nations. They argue that Chinese exports have become even more competitive over the past year as the government has allowed its currency to follow the dollar lower.
According to Ha Jiming at China International Capital Corporation, the renminbi depreciated by 14 per cent against the main emerging markets currencies last year and along with Indonesia, Brazil and Mexico, India was one of the countries that saw the most rapid rise in Chinese exports, he says.
FT series: Building Brics
Building BRICs
FT In depth: As the world emerges from recession, will the centre of gravity in the global economy shift to Brazil, Russia, India and China?
Mr Sharma, during his visit to China, highlighted the need for China to remove restrictions on the import of power equipment, rice and Indian television content. He also complained about time-consuming bureaucratic procedures blocking India’s drugmakers.
“The issue of non-tariff barriers is an issue that refers to the World Trade Organisation but it would be mutually favourable to sort this out at the bilateral level,” said Amit Mitra, the general secretary of the Federation of Indian Chambers of Commerce and Industry. “The problem is: how do we get market access?”
Friday, January 22, 2010
Asian Equities Post Worst Week Since March on China Concerns
Jan. 23 (Bloomberg) -- Asian stocks fell, dragging the benchmark MSCI Asia Pacific Index to its biggest weekly drop since March, on concern the pace of economic growth will prompt central banks from China to India to curb price increases.
Aluminum Corp. of China Ltd., the country’s largest producer of the metal, sank 9.1 percent in Hong Kong. Rio Tinto Group, the world’s third-largest mining company, slid 7.2 percent in Sydney as metal prices fell. Nomura Holdings Inc., Japan’s biggest investment bank, lost 8.8 percent in Tokyo after Credit Suisse Group AG cut its rating. Nissan Motor Co., which gets about 35 percent of its sales from North America, retreated 6.4 percent as U.S. consumer confidence trailed estimates.
“It does look like we’re going through some sort of a correction,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, which oversees about $90 billion globally. “There are some worries about the extent of tightening in China. I don’t think they’re seeking to crunch their economy, but obviously the market worries that that will be the case.”
The MSCI Asia Pacific Index fell 3.5 percent to 122.39 for the first weekly drop in five. The gauge has jumped 48 percent in the past 12 months as growth in China helped the global economy emerge from the worst slowdown since World War II. The U.S. Standard & Poor’s 500 Index gained 32 percent in that time, while Europe’s Dow Jones Stoxx 600 Index added 37 percent.
Japan’s Nikkei 225 Stock Average declined 3.6 percent this week, the steepest drop since the period ended Nov. 27. Hong Kong’s Hang Seng Index lost 4.3 percent. Australia’s S&P/ASX 200 Index fell 3 percent amid concern the nation may raise taxes on mining projects.
Reduced Risk
Asian equities also fell in the week as U.S. President Barack Obama proposed measures to reduce risk-taking at banks, raising concerns the plans will curb lenders’ profits and hurt the country’s economic recovery.
China’s Shanghai Composite Index dropped 3 percent as government reports on Jan. 21 showed the country’s fourth- quarter gross domestic product grew 10.7 percent, more than economists estimated, while inflation accelerated to a more- than-forecast 1.9 percent in December.
The People’s Bank of China on Jan. 12 unexpectedly raised lenders’ reserve requirements to curb liquidity. The central bank will raise interest rates by the end of June, as well as increasing banks’ reserve requirements, according to the median of 17 forecasts by economists in a Bloomberg News survey.
‘Heavy Lifting’
Aluminum Corp. of China sank 9.1 percent to HK$8.82 in Hong Kong after Goldman Sachs Group Inc. also lowered its rating to “sell” from “neutral.” China Shenhua Energy Co., the nation’s largest coal producer, retreated 8 percent to HK$34.95.
“China has done the heavy lifting in the recovery process, and now needs to cool its economy down a little bit,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “Policy tightening measures will be forthcoming, but they need to be viewed in the context of how strong the economy has been.”
Metal prices fell amid speculation China will restrict lending and raise borrowing costs to prevent the economy overheating. The London Metal Exchange Index, a gauge of six metals including aluminum and copper, fell 2 percent this week, the first drop in six.
In Sydney, Rio Tinto lost 7.2 percent to A$72.94 and BHP Billiton Ltd., the world’s biggest mining company, sank 4.5 percent to A$41.70.
Mining Tax
The Sydney Morning Herald reported on Jan. 22 that a review of Australia’s tax system may recommend taxing mining projects in the same way as energy projects, a change that would have raised an extra A$14 billion ($12.7 billion) over the past three years, the newspaper cited Treasury estimates as saying.
Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, sank 6.9 percent to A$44.37, its lowest close since August 2009, after saying fourth-quarter revenue declined 23 percent from a year earlier on lower production.
Santos Ltd., Australia’s third-largest oil and gas producer, declined 1.5 percent to A$13.55 after saying its fourth-quarter sales dropped 7 percent on lower oil prices. Crude oil for February delivery declined 4.4 percent this week in New York.
Signs of a pick-up in economies around the region have driven the MSCI Asia Pacific up by almost 50 percent in the past year. Companies on the index are priced at an average 1.6 times book value, near the highest level since September 2008.
“The market remains overheated and there will be some more corrections,” said Mitsushige Akino, who oversees about $450 million at Ichiyoshi Investment Management Co. in Tokyo.
Financial Shares Drop
Nomura Holdings dropped 8.8 percent to 707 yen after being cut to “neutral” from “outperform” by Credit Suisse. Daiwa Securities Group Inc. dipped 3.7 percent to 492 yen after Credit Suisse lowered its rating on the Japanese brokerage sector to “market weight” from “overweight.”
HSBC Holdings Plc, which generates a fifth of its revenue in North America, slipped 5.5 percent to HK$85.70 in Hong Kong. JPMorgan Chase & Co., the largest U.S. bank by market value, reported fourth-quarter revenue that was less than analysts’ estimated. JPMorgan said it was “cautious” about the outlook for consumer loan defaults.
Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, sank 2.6 percent to 493 yen after Barclays Plc said declining sales at domestic-oriented companies will damp demand for corporate loans.
Cautious Outlook
Commonwealth Bank of Australia, the country’s biggest bank, retreated 4 percent to A$55.75 in Sydney.
“Growth is coming through from all the major banks but the rate of improvement that some investors are expecting may not be as strong as previously estimated,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne.
Nissan fell 6.4 percent to 750 yen, while Honda Motor Co., which gets 42 percent of its sales from North America, dropped 5 percent to 3,230 yen, after a measure of U.S. consumer confidence trailed forecasts.
James Hardie Industries NV, the top seller of home siding in the U.S., sank 7 percent to A$7.97 in Sydney.
The Reuters/University of Michigan preliminary index of consumer sentiment increased to 72.8 in January, lagging behind the 74 projected by economists.
“Wages and the job market have yet to recover,” said Ichiyoshi Investment’s Akino. “With weak consumer spending, a full-scale recovery in the U.S. economy won’t happen soon. Instead, workers will face tougher situations as companies continue restructuring.”
Aluminum Corp. of China Ltd., the country’s largest producer of the metal, sank 9.1 percent in Hong Kong. Rio Tinto Group, the world’s third-largest mining company, slid 7.2 percent in Sydney as metal prices fell. Nomura Holdings Inc., Japan’s biggest investment bank, lost 8.8 percent in Tokyo after Credit Suisse Group AG cut its rating. Nissan Motor Co., which gets about 35 percent of its sales from North America, retreated 6.4 percent as U.S. consumer confidence trailed estimates.
“It does look like we’re going through some sort of a correction,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, which oversees about $90 billion globally. “There are some worries about the extent of tightening in China. I don’t think they’re seeking to crunch their economy, but obviously the market worries that that will be the case.”
The MSCI Asia Pacific Index fell 3.5 percent to 122.39 for the first weekly drop in five. The gauge has jumped 48 percent in the past 12 months as growth in China helped the global economy emerge from the worst slowdown since World War II. The U.S. Standard & Poor’s 500 Index gained 32 percent in that time, while Europe’s Dow Jones Stoxx 600 Index added 37 percent.
Japan’s Nikkei 225 Stock Average declined 3.6 percent this week, the steepest drop since the period ended Nov. 27. Hong Kong’s Hang Seng Index lost 4.3 percent. Australia’s S&P/ASX 200 Index fell 3 percent amid concern the nation may raise taxes on mining projects.
Reduced Risk
Asian equities also fell in the week as U.S. President Barack Obama proposed measures to reduce risk-taking at banks, raising concerns the plans will curb lenders’ profits and hurt the country’s economic recovery.
China’s Shanghai Composite Index dropped 3 percent as government reports on Jan. 21 showed the country’s fourth- quarter gross domestic product grew 10.7 percent, more than economists estimated, while inflation accelerated to a more- than-forecast 1.9 percent in December.
The People’s Bank of China on Jan. 12 unexpectedly raised lenders’ reserve requirements to curb liquidity. The central bank will raise interest rates by the end of June, as well as increasing banks’ reserve requirements, according to the median of 17 forecasts by economists in a Bloomberg News survey.
‘Heavy Lifting’
Aluminum Corp. of China sank 9.1 percent to HK$8.82 in Hong Kong after Goldman Sachs Group Inc. also lowered its rating to “sell” from “neutral.” China Shenhua Energy Co., the nation’s largest coal producer, retreated 8 percent to HK$34.95.
“China has done the heavy lifting in the recovery process, and now needs to cool its economy down a little bit,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “Policy tightening measures will be forthcoming, but they need to be viewed in the context of how strong the economy has been.”
Metal prices fell amid speculation China will restrict lending and raise borrowing costs to prevent the economy overheating. The London Metal Exchange Index, a gauge of six metals including aluminum and copper, fell 2 percent this week, the first drop in six.
In Sydney, Rio Tinto lost 7.2 percent to A$72.94 and BHP Billiton Ltd., the world’s biggest mining company, sank 4.5 percent to A$41.70.
Mining Tax
The Sydney Morning Herald reported on Jan. 22 that a review of Australia’s tax system may recommend taxing mining projects in the same way as energy projects, a change that would have raised an extra A$14 billion ($12.7 billion) over the past three years, the newspaper cited Treasury estimates as saying.
Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, sank 6.9 percent to A$44.37, its lowest close since August 2009, after saying fourth-quarter revenue declined 23 percent from a year earlier on lower production.
Santos Ltd., Australia’s third-largest oil and gas producer, declined 1.5 percent to A$13.55 after saying its fourth-quarter sales dropped 7 percent on lower oil prices. Crude oil for February delivery declined 4.4 percent this week in New York.
Signs of a pick-up in economies around the region have driven the MSCI Asia Pacific up by almost 50 percent in the past year. Companies on the index are priced at an average 1.6 times book value, near the highest level since September 2008.
“The market remains overheated and there will be some more corrections,” said Mitsushige Akino, who oversees about $450 million at Ichiyoshi Investment Management Co. in Tokyo.
Financial Shares Drop
Nomura Holdings dropped 8.8 percent to 707 yen after being cut to “neutral” from “outperform” by Credit Suisse. Daiwa Securities Group Inc. dipped 3.7 percent to 492 yen after Credit Suisse lowered its rating on the Japanese brokerage sector to “market weight” from “overweight.”
HSBC Holdings Plc, which generates a fifth of its revenue in North America, slipped 5.5 percent to HK$85.70 in Hong Kong. JPMorgan Chase & Co., the largest U.S. bank by market value, reported fourth-quarter revenue that was less than analysts’ estimated. JPMorgan said it was “cautious” about the outlook for consumer loan defaults.
Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, sank 2.6 percent to 493 yen after Barclays Plc said declining sales at domestic-oriented companies will damp demand for corporate loans.
Cautious Outlook
Commonwealth Bank of Australia, the country’s biggest bank, retreated 4 percent to A$55.75 in Sydney.
“Growth is coming through from all the major banks but the rate of improvement that some investors are expecting may not be as strong as previously estimated,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne.
Nissan fell 6.4 percent to 750 yen, while Honda Motor Co., which gets 42 percent of its sales from North America, dropped 5 percent to 3,230 yen, after a measure of U.S. consumer confidence trailed forecasts.
James Hardie Industries NV, the top seller of home siding in the U.S., sank 7 percent to A$7.97 in Sydney.
The Reuters/University of Michigan preliminary index of consumer sentiment increased to 72.8 in January, lagging behind the 74 projected by economists.
“Wages and the job market have yet to recover,” said Ichiyoshi Investment’s Akino. “With weak consumer spending, a full-scale recovery in the U.S. economy won’t happen soon. Instead, workers will face tougher situations as companies continue restructuring.”
Japan’s Bond Futures Advance on Rising Yen, Declining Stocks
Jan. 23 (Bloomberg) -- Japan’s 10-year bond futures rose for a second week as the yen’s gain to a one-month high versus the dollar damped the outlook for exporter earnings, boosting demand for the safety of government debt.
Ten-year yields fell the most in a week yesterday after U.S. President Barack Obama on Jan. 21 proposed limiting risk-taking at banks to avoid a repetition of the global financial crisis. Bonds also advanced as Japanese stocks yesterday fell the most in two months, with the Nikkei 225 Stock Average erasing almost all of this year’s advance.
“Obama’s remarks will continue to weigh on stocks until details of his proposal become clear,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest banking group. “External factors are positive for Japan’s bonds.”
Ten-year bond futures for March delivery gained 0.13 to 139.23 this week at the Tokyo Stock Exchange.
The yield on the 1.3 percent bond maturing in December 2019 rose half a basis point to 1.325 percent this week in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.043 yen to 99.781 yen. The yield dropped 1.5 basis points yesterday, the sharpest decline since Jan. 15.
Five-year yields declined half a basis point to 0.505 percent this week.
The yen climbed to as high as 89.79 per dollar yesterday, the strongest since Dec. 18, after Obama on Jan. 21 called for limiting the size and trading activities of financial institutions to reduce risk taking. The Nikkei 225 yesterday fell 2.6 percent, the largest decline since Nov. 27.
‘Will Struggle’
“Ten-year yields will struggle to dip below 1.30 percent unless expectations re-emerge that the Bank of Japan will introduce additional monetary easing or new factors come up for Japan bonds,” Shinji Nomura, a Tokyo-based chief bond strategist at Nikko Cordial Securities Inc., wrote in a research note yesterday.
The Bank of Japan introduced a 10 trillion yen ($111 billion) credit program in December after the yen rose to a 14-year high against the dollar and Finance Minister Naoto Kan urged policy makers to ease monetary policy to arrest deflation when he was economy minister. There are “still various policy measures that could be taken” by the central bank and the government, Kan said Jan. 14.
Bank of Japan
“The yen’s latest advance is not big or rapid enough to put pressure on the BOJ,” said Eishi Yokoyama, a Tokyo-based fund manager at Daiwa SB Investments Ltd. “Investors have already taken deflation into account. Japan’s bonds will continue to be sensitive to U.S. factors for a while.”
The central bank will keep its key overnight rate at 0.1 percent on Jan. 26, according to all 17 economists surveyed by Bloomberg News. A separate survey indicates the central bank will leave the rate unchanged all year.
Consumer prices excluding fresh food fell 1.3 percent in December from a year earlier, according to the median estimate of economists in a Bloomberg News survey before the statistics bureau releases the data on Jan. 29 in Tokyo. That would be a 10th-straight decline. Deflation, a general drop in prices, enhances the value of the fixed payments from bonds.
The extra yield offered by 10-year Treasuries over similar-maturity Japanese bonds was 2.28 percentage points yesterday. The spread reached 2.54 percentage points on Dec. 31, the most in two years.
Ten-year yields fell the most in a week yesterday after U.S. President Barack Obama on Jan. 21 proposed limiting risk-taking at banks to avoid a repetition of the global financial crisis. Bonds also advanced as Japanese stocks yesterday fell the most in two months, with the Nikkei 225 Stock Average erasing almost all of this year’s advance.
“Obama’s remarks will continue to weigh on stocks until details of his proposal become clear,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest banking group. “External factors are positive for Japan’s bonds.”
Ten-year bond futures for March delivery gained 0.13 to 139.23 this week at the Tokyo Stock Exchange.
The yield on the 1.3 percent bond maturing in December 2019 rose half a basis point to 1.325 percent this week in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.043 yen to 99.781 yen. The yield dropped 1.5 basis points yesterday, the sharpest decline since Jan. 15.
Five-year yields declined half a basis point to 0.505 percent this week.
The yen climbed to as high as 89.79 per dollar yesterday, the strongest since Dec. 18, after Obama on Jan. 21 called for limiting the size and trading activities of financial institutions to reduce risk taking. The Nikkei 225 yesterday fell 2.6 percent, the largest decline since Nov. 27.
‘Will Struggle’
“Ten-year yields will struggle to dip below 1.30 percent unless expectations re-emerge that the Bank of Japan will introduce additional monetary easing or new factors come up for Japan bonds,” Shinji Nomura, a Tokyo-based chief bond strategist at Nikko Cordial Securities Inc., wrote in a research note yesterday.
The Bank of Japan introduced a 10 trillion yen ($111 billion) credit program in December after the yen rose to a 14-year high against the dollar and Finance Minister Naoto Kan urged policy makers to ease monetary policy to arrest deflation when he was economy minister. There are “still various policy measures that could be taken” by the central bank and the government, Kan said Jan. 14.
Bank of Japan
“The yen’s latest advance is not big or rapid enough to put pressure on the BOJ,” said Eishi Yokoyama, a Tokyo-based fund manager at Daiwa SB Investments Ltd. “Investors have already taken deflation into account. Japan’s bonds will continue to be sensitive to U.S. factors for a while.”
The central bank will keep its key overnight rate at 0.1 percent on Jan. 26, according to all 17 economists surveyed by Bloomberg News. A separate survey indicates the central bank will leave the rate unchanged all year.
Consumer prices excluding fresh food fell 1.3 percent in December from a year earlier, according to the median estimate of economists in a Bloomberg News survey before the statistics bureau releases the data on Jan. 29 in Tokyo. That would be a 10th-straight decline. Deflation, a general drop in prices, enhances the value of the fixed payments from bonds.
The extra yield offered by 10-year Treasuries over similar-maturity Japanese bonds was 2.28 percentage points yesterday. The spread reached 2.54 percentage points on Dec. 31, the most in two years.
Subscribe to:
Posts (Atom)
Posts
