June 1 (Bloomberg) -- Asian stocks fell, extending the MSCI Asia Pacific Index’s biggest monthly drop since October 2008, as investors speculated over the future of Japan’s prime minister and Chinese manufacturing growth slowed.
Sony Corp., which gets 69 percent of its sales outside Japan, sank 1.9 percent as a stronger yen threatened to hurt the value of overseas revenue. Anhui Conch Cement Co. dropped 2.7 percent in Shanghai after purchasing managers’ indexes showed China’s manufacturing industry grew at a slower pace in May. Hitachi Ltd., Japan’s No. 3 company by revenue, slumped 3.8 percent after the Financial Times cited the company’s president as saying it’s affected by Europe’s debt crisis.
The MSCI Asia Pacific Index sank 0.8 percent to 112.61 as of 1:17 p.m. in Tokyo, snapping a four-day advance. The gauge slumped 9.8 percent last month, the most since October 2008 on mounting concern that budget deficits in Europe and Chinese measures to control property prices will hurt the global economy.
“People are becoming aware of slowing momentum in the global economy,” said Hiroshi Morikawa, a strategist at MU Investments Co., which manages the equivalent of $14 billion in Tokyo. “Political instability will hinder Japan’s ability to react to a crisis in these turbulent times.”
Japan’s Nikkei 225 Stock Average lost 0.7 percent before a meeting between Prime Minister Yukio Hatoyama and Ichiro Ozawa, secretary-general of the ruling party, to discuss the party’s future. Hatoyama pledged “appropriate” action in the face of plunging approval ratings.
U.S. Futures Fall
China’s Shanghai Composite Index slumped 1 percent and Hong Kong’s Hang Seng Index lost 0.6 percent. Australia’s S&P/ASX 200 Index dropped 0.6 percent, while the Kospi Index declined 0.4 percent in Seoul.
Futures on the Standard & Poor’s 500 Index fell 0.7 percent, signaling a decline in U.S. markets when they resume trading today after a holiday yesterday.
Exporters in Japan declined as the yen strengthened to 111.33 per euro today from 112.59 at the 3 p.m. close of stock trading in Tokyo yesterday, while appreciating to 90.89 per dollar from 91.52.
Sony dropped 1.6 percent to 2,770 yen. Toyota Motor Corp., which gets 71 percent of its revenue outside Japan, lost 0.9 percent to 3,250 yen. A stronger yen reduces the value of overseas sales at Japanese companies when repatriated.
Japanese stocks fell after Prime Minister Hatoyama said he will consider his political future and do “what’s best for the people of Japan.” Polls showed four in five voters want him to step down six weeks before mid-term elections.
Low Valuations
“Political turmoil may make some investors refrain from buying stocks,” said Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc. “There’s also risk in selling stocks, considering the earnings recovery and relatively low valuations.”
The MSCI Asia Pacific Index has lost 13 percent from its high this year on April 15 amid concern measures to contain mounting government deficits in Europe will hurt the region’s economy, denting global growth in the process. The slump has dragged down the average price of stocks in the MSCI gauge to 14.4 times estimated earnings, near the lowest level since January 2009.
Hitachi, whose products range from rice cookers to nuclear power plants, slumped 3.8 percent to 358 yen. President Hiroaki Nakanishi said the “financial confusion in Europe is affecting various parts of our business,” the Financial Times reported, citing an interview. Hitachi yesterday set a sales target of 10.5 trillion yen ($115 billion) for the year ending March 2013.
Purchasing Managers
Anhui Conch, China’s biggest cement maker, lost 2.7 percent to 34.25 yuan. Baoshan Iron & Steel Co., the listed unit of China’s second-biggest steelmaker, sank 1.4 percent to 6.26 yuan.
The Purchasing Managers’ Index fell to 53.9 from 55.7 in April, the Federation of Logistics and Purchasing said today. That was less than the median 54.5 estimate in a Bloomberg News economist survey. Readings above 50 indicate an expansion. A separate purchasing managers’ index from HSBC Holdings Plc and Markit Economics fell to 52.7 in May from 55.2 in April.
Chinese property stocks declined after the Shanghai Securities News reported that real estate closings in Beijing, Shanghai and Shenzhen in May plunged as contract numbers dropped by as much as 70 percent from April.
Poly Real Estate Group Co, China’s second-largest developer by market value, slumped 3.5 percent to 10.66 yuan. Gemdale Corp., the fourth-largest, fell 2.5 percent to 6.28 yuan.
Roubini Forecast
The Shanghai Composite Index has tumbled 22 percent this year as the People’s Bank of China raised bank reserve requirements three times to help cool property markets.
Chinese economic growth may slow to an annual rate of 7 percent to 8 percent by the end of the year or early 2011, from 11.9 percent in the first quarter of 2010, Nouriel Roubini, the New York University professor who predicted the global financial crisis before markets peaked, said in Sao Paulo yesterday.
A gauge of utilities in the MSCI Asia Pacific Index gained the most of 10 industry groups after Goldman Sachs Group Inc. upgraded its recommendation on Japan’s power industry to “neutral” from “cautious.”
Tokyo Electric Power Co. jumped 4.2 percent to 2,352 yen after Goldman Sachs boosted its rating on the stock to “buy” from “neutral.” Chugoku Electric Power Co. rose 1.2 percent to 1,740 yen.
Monday, May 31, 2010
India’s economy grows 8.6 per cent
Under the hot sun in the Mahabubnagar district of Andhra Pradesh, in southern India, the farmers are preparing for the worst.
The smallholders, who till the arid lands east of the state capital Hyderabad, are taking steps to protect their meagre livelihoods from poor monsoon rains. They are sharing groundwater, planting crops that require less water such as groundnuts, rigging up dripwater systems and digging weather-proof compost pits.
With the memory of the worst rains for 30 years last season still fresh in the mind, they are even opting for heat-resistant sheep breeds and, with the help of the World Bank and local non-governmental organisations, insuring against loss.
India, the world’s fastest growing large economy after China, has returned to almost where it was before the global financial crisis struck in October 2008.
On Monday, the Central Statistical Organisation showed the economy was in touching distance of a talismanic 9 per cent growth rate, having expanded 8.6 per cent in the quarter ending in March compared with the same period last year.
For the entire year, India’s economy grew 7.4 per cent. This year, Pranab Mukerjee, the finance minister, expects it to top 8.5 per cent on its way to 10 per cent in years to come.
India has weathered the global downturn well, but for its economic managers really to triumph they need to address the underperforming agricultural sector.
While industrial output has grown in healthy double digits, agricultural output rose only 0.7 per cent in the quarter to the end of March. In the previous quarter, it contracted 1.8 per cent, reflecting the hazards of a sector dependent on seasonal rains.
Most of India’s 1.2bn people still derive their income from the rural economy, although farm output now represents about 20 per cent of GDP. Over the past months, they have been hit by a double blight: rising prices and low output.
A good monsoon, likely to start this month, will bring relief. More abundant farm produce will help cool food prices rising at an alarming 16 per cent.
But neither this nor worries about European sovereign debt are likely to throw the Reserve Bank of India off its course of rising interest rates. Rising growth and “uncomfortably high” inflation are expected to induce the RBI to raise the repo rate – the rate at which the central bank lends to other banks – by 100 basis points over the next six months.
“The impact of euro-area developments and the upcoming monsoon season are the main uncertainties facing policymakers, but we continue to expect further rate increases in the months ahead,” said Brian Jackson, senior strategist at the Royal Bank of Canada.
Manmohan Singh, India’s prime minister, has come under sharp criticism for high prices. The Hindu nationalist opposition Bharatiya Janata party has decided that inflation is his Achilles heel.
“The first and the foremost flaw of the government is that the government has not taken any steps to fight the inflation,” says Arun Jaitley, a BJP leader.
He and his party say that prices have rocketed since polling day in parliamentary elections just over a year ago. They say that Mr Singh’s quest for 10 per cent growth in the “medium term” will punish its poor people most in the short term.
Mr Singh has responded by giving assurances that the government would help pull wholesale price inflation back to 5-6 per cent by December from near double digits.
Some observers warn of complacency in an economy whose fast-paced growth is largely supported by domestic consumption, and public spending is one of India’s biggest challenges. They have called for the speedier adoption of measures to address the inadequacies of education, health and infrastructure.
Senior policymakers have largely shrugged off fears of any fallout from the European sovereign debt crisis in spite of falls in the rupee and local stock markets.
Some analysts believe the confidence is not misplaced.
“Forget talk about drought and global financial jitters,” says Frederic Neuman, co-head of Asian Economics research at HSBC, the banking group. “India’s economy is shaking off such obstacles with apparent ease.”
Pleasing the drought-wary farmers of Andhra Pradesh may yet be easier than calming global jitters.
Montek Singh Ahluwalia, the deputy chairman of the powerful planning commission, describes India’s economic management during the downturn as “excellent”. But he also recognises that without a recovery in the global economy, India’s quest for higher growth will be much more difficult.
“Going from 9 per cent to 10 per cent is not impossible,” he says. “But obviously, it has to be based on what global conditions are like [and] how quickly will the world get back to normal.”
The smallholders, who till the arid lands east of the state capital Hyderabad, are taking steps to protect their meagre livelihoods from poor monsoon rains. They are sharing groundwater, planting crops that require less water such as groundnuts, rigging up dripwater systems and digging weather-proof compost pits.
With the memory of the worst rains for 30 years last season still fresh in the mind, they are even opting for heat-resistant sheep breeds and, with the help of the World Bank and local non-governmental organisations, insuring against loss.
India, the world’s fastest growing large economy after China, has returned to almost where it was before the global financial crisis struck in October 2008.
On Monday, the Central Statistical Organisation showed the economy was in touching distance of a talismanic 9 per cent growth rate, having expanded 8.6 per cent in the quarter ending in March compared with the same period last year.
For the entire year, India’s economy grew 7.4 per cent. This year, Pranab Mukerjee, the finance minister, expects it to top 8.5 per cent on its way to 10 per cent in years to come.
India has weathered the global downturn well, but for its economic managers really to triumph they need to address the underperforming agricultural sector.
While industrial output has grown in healthy double digits, agricultural output rose only 0.7 per cent in the quarter to the end of March. In the previous quarter, it contracted 1.8 per cent, reflecting the hazards of a sector dependent on seasonal rains.
Most of India’s 1.2bn people still derive their income from the rural economy, although farm output now represents about 20 per cent of GDP. Over the past months, they have been hit by a double blight: rising prices and low output.
A good monsoon, likely to start this month, will bring relief. More abundant farm produce will help cool food prices rising at an alarming 16 per cent.
But neither this nor worries about European sovereign debt are likely to throw the Reserve Bank of India off its course of rising interest rates. Rising growth and “uncomfortably high” inflation are expected to induce the RBI to raise the repo rate – the rate at which the central bank lends to other banks – by 100 basis points over the next six months.
“The impact of euro-area developments and the upcoming monsoon season are the main uncertainties facing policymakers, but we continue to expect further rate increases in the months ahead,” said Brian Jackson, senior strategist at the Royal Bank of Canada.
Manmohan Singh, India’s prime minister, has come under sharp criticism for high prices. The Hindu nationalist opposition Bharatiya Janata party has decided that inflation is his Achilles heel.
“The first and the foremost flaw of the government is that the government has not taken any steps to fight the inflation,” says Arun Jaitley, a BJP leader.
He and his party say that prices have rocketed since polling day in parliamentary elections just over a year ago. They say that Mr Singh’s quest for 10 per cent growth in the “medium term” will punish its poor people most in the short term.
Mr Singh has responded by giving assurances that the government would help pull wholesale price inflation back to 5-6 per cent by December from near double digits.
Some observers warn of complacency in an economy whose fast-paced growth is largely supported by domestic consumption, and public spending is one of India’s biggest challenges. They have called for the speedier adoption of measures to address the inadequacies of education, health and infrastructure.
Senior policymakers have largely shrugged off fears of any fallout from the European sovereign debt crisis in spite of falls in the rupee and local stock markets.
Some analysts believe the confidence is not misplaced.
“Forget talk about drought and global financial jitters,” says Frederic Neuman, co-head of Asian Economics research at HSBC, the banking group. “India’s economy is shaking off such obstacles with apparent ease.”
Pleasing the drought-wary farmers of Andhra Pradesh may yet be easier than calming global jitters.
Montek Singh Ahluwalia, the deputy chairman of the powerful planning commission, describes India’s economic management during the downturn as “excellent”. But he also recognises that without a recovery in the global economy, India’s quest for higher growth will be much more difficult.
“Going from 9 per cent to 10 per cent is not impossible,” he says. “But obviously, it has to be based on what global conditions are like [and] how quickly will the world get back to normal.”
Friday, May 28, 2010
Japan’s Bonds Post Weekly Loss on Recovery Signs, Stock Gains
May 29 (Bloomberg) -- Japanese bonds completed a weekly loss as signs the global economy is recovering and a rally in stocks around the world damped demand for government debt.
Ten-year yields were near the highest level in a week as optimism the European debt crisis is easing boosted local shares for a third day and pushed down the cost of protecting Japanese bonds from default. Bond losses were tempered yesterday after a government report showed deflation deepened, enhancing the value of the fixed payments from debt.
“We continue to have hard evidence pointing to a sustained recovery” of the global economy, said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “Current yield levels are apparently unsustainable.”
The yield on the benchmark 10-year bond climbed 1.5 basis points this week to 1.25 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.133 yen to 100.436 yen. The yield briefly climbed to 1.27 percent yesterday, the highest level since May 20.
Ten-year bond futures for June delivery rose 0.05 this week to 140.45 on the Tokyo Stock Exchange.
The Nikkei 225 Stock Average advanced 1.3 percent yesterday and the Markit iTraxx Japan index of credit-default swaps dropped 11 basis points to 129 basis points. The swap indexes are benchmarks for protecting bonds against default. An increase suggests deteriorating perceptions of credit quality and a drop shows improvement.
Factory Output
Japanese factoryoutput gained 2.5 percent in April, following a 1.2 percent increase in March, according to the median estimate of economists surveyed by Bloomberg News before the data is announced on May 31.
Demand for bonds also waned after China confirmed its commitment to investing in Europe, denying earlier media reports it may be reconsidering putting money into the region due to the sovereign debt crisis.
China’s State Administration of Foreign Exchange, or SAFE, which manages $2.4 trillion of foreign-exchange reserves, said in a statement on May 27 that “Europe has been and will be one of the major markets for investing China’s exchange reserves.”
“Once the extreme pessimism about the credit crisis in Europe eases, the flight to safer assets like bonds will reverse,” said Yozo Asai, head of the investment information department at Naito Securities Co. “Stocks were oversold from a viewpoint of macro- and micro-economic fundamentals.”
Jobless Rate
Ten-year bonds erased earlier losses to be unchanged yesterday after government reports showed Japan’s unemployment rate unexpectedly increased in April, household spending fell and deflation deepened.
Prices excluding fresh food slid 1.5 percent from a year earlier, after dropping 1.2 percent in March, the statistics bureau said in Tokyo. The jobless rate climbed to 5.1 percent from 5 percent.
“Given strong deflationary pressure in Japan, yields won’t rise too much,” said Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Ltd.
Japanese debt has handed investors a return of 3.9 percent in dollar terms this month, according to indexes from Bank of America Corp.’s Merrill Lynch unit. Treasuries have returned 1.4 percent and German bunds have incurred a 5.8 percent loss, the indexes show.
“Current yields are not attractive at all,” said Shinji Hiramatsu, who helps oversee the equivalent of $15.7 billion in assets at Sompo Japan Asset Management Ltd. in Tokyo. “But unless uncertainties over the credit crisis in Europe are fully removed, bonds will continue to draw buying interest as a safe haven.”
Ten-year yields were near the highest level in a week as optimism the European debt crisis is easing boosted local shares for a third day and pushed down the cost of protecting Japanese bonds from default. Bond losses were tempered yesterday after a government report showed deflation deepened, enhancing the value of the fixed payments from debt.
“We continue to have hard evidence pointing to a sustained recovery” of the global economy, said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “Current yield levels are apparently unsustainable.”
The yield on the benchmark 10-year bond climbed 1.5 basis points this week to 1.25 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.133 yen to 100.436 yen. The yield briefly climbed to 1.27 percent yesterday, the highest level since May 20.
Ten-year bond futures for June delivery rose 0.05 this week to 140.45 on the Tokyo Stock Exchange.
The Nikkei 225 Stock Average advanced 1.3 percent yesterday and the Markit iTraxx Japan index of credit-default swaps dropped 11 basis points to 129 basis points. The swap indexes are benchmarks for protecting bonds against default. An increase suggests deteriorating perceptions of credit quality and a drop shows improvement.
Factory Output
Japanese factoryoutput gained 2.5 percent in April, following a 1.2 percent increase in March, according to the median estimate of economists surveyed by Bloomberg News before the data is announced on May 31.
Demand for bonds also waned after China confirmed its commitment to investing in Europe, denying earlier media reports it may be reconsidering putting money into the region due to the sovereign debt crisis.
China’s State Administration of Foreign Exchange, or SAFE, which manages $2.4 trillion of foreign-exchange reserves, said in a statement on May 27 that “Europe has been and will be one of the major markets for investing China’s exchange reserves.”
“Once the extreme pessimism about the credit crisis in Europe eases, the flight to safer assets like bonds will reverse,” said Yozo Asai, head of the investment information department at Naito Securities Co. “Stocks were oversold from a viewpoint of macro- and micro-economic fundamentals.”
Jobless Rate
Ten-year bonds erased earlier losses to be unchanged yesterday after government reports showed Japan’s unemployment rate unexpectedly increased in April, household spending fell and deflation deepened.
Prices excluding fresh food slid 1.5 percent from a year earlier, after dropping 1.2 percent in March, the statistics bureau said in Tokyo. The jobless rate climbed to 5.1 percent from 5 percent.
“Given strong deflationary pressure in Japan, yields won’t rise too much,” said Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Ltd.
Japanese debt has handed investors a return of 3.9 percent in dollar terms this month, according to indexes from Bank of America Corp.’s Merrill Lynch unit. Treasuries have returned 1.4 percent and German bunds have incurred a 5.8 percent loss, the indexes show.
“Current yields are not attractive at all,” said Shinji Hiramatsu, who helps oversee the equivalent of $15.7 billion in assets at Sompo Japan Asset Management Ltd. in Tokyo. “But unless uncertainties over the credit crisis in Europe are fully removed, bonds will continue to draw buying interest as a safe haven.”
Asian Stocks Advance as Europe Concerns Ease, Commodities Gain
May 29 (Bloomberg) -- Asian stocks rose this week as concerns over Europe’s debt crisis eased after China reaffirmed its support, boosting the global economic outlook and commodity prices.
Rio Tinto Group, the world’s third-largest mining company, surged 10 percent in Sydney as concern eased that a proposed Australian mining tax will cut earnings. Fortescue Metals Group Ltd., Australia’s third-largest iron-ore producer, soared 13 percent. Poly (Hong Kong) Investment Ltd., a Chinese property developer, rallied 15 percent on speculation the nation will delay further measures to cool its property market due to Europe’s debt crisis.
“The market has priced in all the bad news for now,” said Ayako Sera, a strategist at Tokyo-based Sumitomo Trust & Banking Co., which manages the equivalent of $307 billion. “Stocks are undervalued, assuming Europe’s problems won’t spill over and cripple the global economy.”
The MSCI Asia Pacific Index climbed 1.3 percent to 113.56 this week amid speculation stock declines since April had more than reflected European debt concerns.
Gauges tracking material and energy stocks on the MSCI Asia Pacific Index climbed more than 3 percent, the biggest gains among its 10 industry groups.
China’s Shanghai Composite Index advanced 2.8 percent, and Hong Kong’s Hang Seng Index gained 1.1 percent. Japan’s Nikkei 225 Stock Average slipped 0.2 percent. South Korea’s Kospi Index rose 1.4 percent and Australia’s S&P/ASX 200 Index climbed 3.5 percent.
Slump Prompts Buying
The MSCI Asia Pacific Index has declined 12 percent from this year’s high on April 15 on concern some European countries will be unable to repay their debt, even after the region’s leaders unveiled a bailout plan worth almost $1 trillion.
The slump in markets has prompted AMP Capital Investors Ltd. to buy stocks and commodities, according to Nader Naeimi, a strategist at the Sydney-based money manager. Companies in the MSCI Asia Pacific Index are valued at an average of 14.4 times estimated earnings, near the lowest level since January 2009.
“We’ve got bad news just about every place you can look but on the other hand, we’ve got rising earnings and better economic conditions in most of the world,” Donald Gimbel, senior managing director at Carret Asset Management LLC, said in a Bloomberg Television interview. “Now is probably an opportune time to pick up some of the bargains that have been created over the past two or three weeks.”
Australia Tax Changes?
Rio Tinto surged 10 percent to A$68.20. BHP Billiton Ltd., the world’s No. 1 mining company, climbed 6 percent to A$38.97. Fortescue soared 13 percent to A$4.19.
The Australian newspaper reported the government may raise the lower limit for its proposed mining tax from 6 percent to 11 or 12 percent of company returns. Australia said this month it would impose a 40 percent tax on mining profits from 2012.
The London Metal Exchange Index, a measure of six metals including copper and zinc, advanced 0.8 percent this week.
Poly (Hong Kong) Investment Ltd., a Chinese property developer, climbed 15 percent to HK$7.81 in Hong Kong. Guangzhou R&F Properties Co., the largest developer in the southern Chinese city, gained 14 percent to HK$10.08.
China should be cautious in introducing new tightening measures as the global economic environment is complex, Xu Lianzhong, an official with the National Development and Reform Commission’s price monitoring center, wrote in a commentary published May 24 in the China Securities Journal. The European debt problem is one of many global economic uncertainties that China faces, Xu wrote.
Reliance Rapprochement
“Any indication China will take a measured approach to controlling overheating in some sectors, rather than crushing economic activity generally, means people can start to check this big item off the ‘macro concerns’ list,” said Prasad Patkar, who helps manage about $1.7 billion in Sydney at Platypus Asset Management Ltd.
Reliance Natural Resources Ltd. soared 18 percent to 52.5 rupees in Mumbai. It was among companies controlled by Mukesh Ambani and Anil Ambani after the brothers moved to end a five- year feud that split India’s second-biggest group. Mukesh, 53, and 50-year-old Anil issued almost identical statements May 23, saying they were “hopeful and confident” of creating an “environment of harmony, co-operation and collaboration” after ending a 2006 accord to not compete.
Rio Tinto Group, the world’s third-largest mining company, surged 10 percent in Sydney as concern eased that a proposed Australian mining tax will cut earnings. Fortescue Metals Group Ltd., Australia’s third-largest iron-ore producer, soared 13 percent. Poly (Hong Kong) Investment Ltd., a Chinese property developer, rallied 15 percent on speculation the nation will delay further measures to cool its property market due to Europe’s debt crisis.
“The market has priced in all the bad news for now,” said Ayako Sera, a strategist at Tokyo-based Sumitomo Trust & Banking Co., which manages the equivalent of $307 billion. “Stocks are undervalued, assuming Europe’s problems won’t spill over and cripple the global economy.”
The MSCI Asia Pacific Index climbed 1.3 percent to 113.56 this week amid speculation stock declines since April had more than reflected European debt concerns.
Gauges tracking material and energy stocks on the MSCI Asia Pacific Index climbed more than 3 percent, the biggest gains among its 10 industry groups.
China’s Shanghai Composite Index advanced 2.8 percent, and Hong Kong’s Hang Seng Index gained 1.1 percent. Japan’s Nikkei 225 Stock Average slipped 0.2 percent. South Korea’s Kospi Index rose 1.4 percent and Australia’s S&P/ASX 200 Index climbed 3.5 percent.
Slump Prompts Buying
The MSCI Asia Pacific Index has declined 12 percent from this year’s high on April 15 on concern some European countries will be unable to repay their debt, even after the region’s leaders unveiled a bailout plan worth almost $1 trillion.
The slump in markets has prompted AMP Capital Investors Ltd. to buy stocks and commodities, according to Nader Naeimi, a strategist at the Sydney-based money manager. Companies in the MSCI Asia Pacific Index are valued at an average of 14.4 times estimated earnings, near the lowest level since January 2009.
“We’ve got bad news just about every place you can look but on the other hand, we’ve got rising earnings and better economic conditions in most of the world,” Donald Gimbel, senior managing director at Carret Asset Management LLC, said in a Bloomberg Television interview. “Now is probably an opportune time to pick up some of the bargains that have been created over the past two or three weeks.”
Australia Tax Changes?
Rio Tinto surged 10 percent to A$68.20. BHP Billiton Ltd., the world’s No. 1 mining company, climbed 6 percent to A$38.97. Fortescue soared 13 percent to A$4.19.
The Australian newspaper reported the government may raise the lower limit for its proposed mining tax from 6 percent to 11 or 12 percent of company returns. Australia said this month it would impose a 40 percent tax on mining profits from 2012.
The London Metal Exchange Index, a measure of six metals including copper and zinc, advanced 0.8 percent this week.
Poly (Hong Kong) Investment Ltd., a Chinese property developer, climbed 15 percent to HK$7.81 in Hong Kong. Guangzhou R&F Properties Co., the largest developer in the southern Chinese city, gained 14 percent to HK$10.08.
China should be cautious in introducing new tightening measures as the global economic environment is complex, Xu Lianzhong, an official with the National Development and Reform Commission’s price monitoring center, wrote in a commentary published May 24 in the China Securities Journal. The European debt problem is one of many global economic uncertainties that China faces, Xu wrote.
Reliance Rapprochement
“Any indication China will take a measured approach to controlling overheating in some sectors, rather than crushing economic activity generally, means people can start to check this big item off the ‘macro concerns’ list,” said Prasad Patkar, who helps manage about $1.7 billion in Sydney at Platypus Asset Management Ltd.
Reliance Natural Resources Ltd. soared 18 percent to 52.5 rupees in Mumbai. It was among companies controlled by Mukesh Ambani and Anil Ambani after the brothers moved to end a five- year feud that split India’s second-biggest group. Mukesh, 53, and 50-year-old Anil issued almost identical statements May 23, saying they were “hopeful and confident” of creating an “environment of harmony, co-operation and collaboration” after ending a 2006 accord to not compete.
Daiichi Sankyo Is Confident on Resolving Ranbaxy Ban
May 28 (Bloomberg) -- Daiichi Sankyo Co.’s incoming Chief Executive Officer Joji Nakayama said he’s confident a ban imposed by U.S. regulators on some drugs from its Indian unit, Ranbaxy Laboratories Ltd., will be lifted.
“We definitely must solve the issue,” Nakayama, 60, said in an interview in Tokyo today. “I’m very confident we will solve it. There’s no other way.”
Daiichi Sankyo and Ranbaxy are in talks with the Food and Drug Administration after the U.S. authority blocked the import of more than 30 generic medicines made at two Ranbaxy plants in 2008. The Indian unit derived almost half its sales from the U.S., the largest pharmaceutical market, in the last quarter.
Tokyo-based Daiichi Sankyo rose 1.5 percent to close at 1,584 yen in Tokyo. The shares have declined about 19 percent this year, making the company the fourth-worst performer on the 33-member Topix Pharmaceutical Index, which has dropped 8.8 percent. Ranbaxy shares rose 1.8 percent to 421.3 rupees at 11:30 a.m. in Mumbai.
The FDA in September 2008 blocked the import of more than 30 generic medicines made at two Ranbaxy plants, in Dewas and Paonta Sahib, because of deficiencies in manufacturing processes.
The regulator said in February 2009 that Ranbaxy won’t be allowed to introduce new drugs from the Paonta Sahib factory because of falsified data. U.K. and Australian regulators approved drugs from the plant, located in northern Himachal Pradesh state, after a joint audit.
Awaiting Inspection
Ranbaxy is waiting for FDA officials to inspect the Dewas factory as part of a process to resume drug exports from the plant, it said on Feb. 25. The Paonta Sahib plant remains under the FDA’s Application Integrity Policy list of companies from which the regulator has stopped reviewing drug submissions.
“Ranbaxy is experienced in making medicines at a lower cost and Daiichi Sankyo aims to take full advantage of it after the FDA issue is resolved,” Nakayama said.
Daiichi Sankyo started a unit last month for selling generic drugs in Japan that will utilize Ranbaxy’s cheaper costs, Nakayama said. The company aims to start the operations in October.
Nakayama said he plans to use Daiichi Sankyo’s resources and staff rather than hiring new people in Japan for the unit to reduce costs.
Board Reshuffle
The incoming CEO is replacing Takashi Shoda, who will become chairman, Daiichi Sankyo said on May 12. Nakayama will assume the position on June 28 subject to shareholder approval.
Shoda and senior executive officer Tsutomu Une who serves as Chairman at Ranbaxy, will remain as a board member of the Indian company, Nakayama said. Daiichi Sankyo has a 64 percent stake in Ranbaxy.
Nakayama, currently an executive vice president at Daiichi Sankyo, joined Suntory Holdings Ltd., a Japanese beverage maker, in 1979 after studying bioengineering at Osaka University and completing an MBA at Northwestern University.
He became the head of the biological laboratory at Suntory in 2000 before the company’s drug unit was bought by Daiichi Sankyo’s forerunner Daiichi Pharmaceutical.
“We definitely must solve the issue,” Nakayama, 60, said in an interview in Tokyo today. “I’m very confident we will solve it. There’s no other way.”
Daiichi Sankyo and Ranbaxy are in talks with the Food and Drug Administration after the U.S. authority blocked the import of more than 30 generic medicines made at two Ranbaxy plants in 2008. The Indian unit derived almost half its sales from the U.S., the largest pharmaceutical market, in the last quarter.
Tokyo-based Daiichi Sankyo rose 1.5 percent to close at 1,584 yen in Tokyo. The shares have declined about 19 percent this year, making the company the fourth-worst performer on the 33-member Topix Pharmaceutical Index, which has dropped 8.8 percent. Ranbaxy shares rose 1.8 percent to 421.3 rupees at 11:30 a.m. in Mumbai.
The FDA in September 2008 blocked the import of more than 30 generic medicines made at two Ranbaxy plants, in Dewas and Paonta Sahib, because of deficiencies in manufacturing processes.
The regulator said in February 2009 that Ranbaxy won’t be allowed to introduce new drugs from the Paonta Sahib factory because of falsified data. U.K. and Australian regulators approved drugs from the plant, located in northern Himachal Pradesh state, after a joint audit.
Awaiting Inspection
Ranbaxy is waiting for FDA officials to inspect the Dewas factory as part of a process to resume drug exports from the plant, it said on Feb. 25. The Paonta Sahib plant remains under the FDA’s Application Integrity Policy list of companies from which the regulator has stopped reviewing drug submissions.
“Ranbaxy is experienced in making medicines at a lower cost and Daiichi Sankyo aims to take full advantage of it after the FDA issue is resolved,” Nakayama said.
Daiichi Sankyo started a unit last month for selling generic drugs in Japan that will utilize Ranbaxy’s cheaper costs, Nakayama said. The company aims to start the operations in October.
Nakayama said he plans to use Daiichi Sankyo’s resources and staff rather than hiring new people in Japan for the unit to reduce costs.
Board Reshuffle
The incoming CEO is replacing Takashi Shoda, who will become chairman, Daiichi Sankyo said on May 12. Nakayama will assume the position on June 28 subject to shareholder approval.
Shoda and senior executive officer Tsutomu Une who serves as Chairman at Ranbaxy, will remain as a board member of the Indian company, Nakayama said. Daiichi Sankyo has a 64 percent stake in Ranbaxy.
Nakayama, currently an executive vice president at Daiichi Sankyo, joined Suntory Holdings Ltd., a Japanese beverage maker, in 1979 after studying bioengineering at Osaka University and completing an MBA at Northwestern University.
He became the head of the biological laboratory at Suntory in 2000 before the company’s drug unit was bought by Daiichi Sankyo’s forerunner Daiichi Pharmaceutical.
Standard Chartered Gets Bids for 2.2 Times Shares
May 28 (Bloomberg) -- Standard Chartered Plc received orders for 2.2 times an estimated $500 million in shares on offer in India as bidders responded to a new rule by committing funds on the final day of the sale.
The London-based lender that makes at least three quarters of its profit in Asia received orders for 447.7 million shares as of 5:25 p.m., according to data from the National and Bombay stock exchanges. It agreed to sell an additional 36 million Indian depository receipts to so-called anchor investors earlier this week.
Indian and overseas funds, who are required to pay the full amount at the time of making their bid under a rule that came into effect this month, waited until the final hours of Standard Chartered’s four-day sale to avoid tying up capital. Europe’s debt crisis has also made it more difficult for companies worldwide to sell new stock.
“From now on, we are likely to see share sales get subscribed only on the last day of the offer because of the new regulations on bid payments,” A. Murugappan, head of investment banking at ICICI Securities Ltd., said in an interview in Mumbai today. It is also “getting increasingly difficult to pull deals off because of the volatility in the markets.”
The bank, which is the first company to seek to sell IDRs, is offering about 240 million shares at 100 rupees to 115 rupees each. It sold 15 percent of the offering to investors including ICICI Prudential Asset Management Co. and Reliance Capital Ltd. for 104 rupees a share, according to a filing this week.
Barring Insurers
Domestic insurers are prohibited from taking part in the sale, limiting potential buyers, Prabodh Agrawal, an analyst at India Infoline Ltd. in Singapore, said in a note to clients on May 24. Record stock purchases by insurers helped boost the benchmark Sensitive Index 81 percent in 2009, making it the third-best performing equity market in Asia.
Still, “the bank emerged unscathed from the recent financial crisis,” said Agrawal, who has a “subscribe” rating on the stock. The company also has a “stable funding base, and a well-capitalized balance sheet.”
Standard Chartered, which is listed in Hong Kong and London, aims to raise as much as $573 million from the India offering, according to data compiled by Bloomberg. Ten IDRs will represent one share of Standard Chartered, the bank said in a filing on May 14.
London, Hong Kong Trading
U.K.-traded shares of Standard Chartered fell 1.4 percent to 1,659 pence today. In Hong Kong, the stock rose 1.2 percent to HK$185.50.
Standard Chartered began the final day of its sale with bids for 11 percent of the stock on offer.
Investors may be deterred by regulatory risks tied to Standard Chartered’s global operations and concern that currency fluctuations affecting the IDRs, whose underlying shares are denominated in British pounds, Abhijit Majumder, an analyst at Prabhudas Lilladher Pvt. in Mumbai, wrote on May 24.
UBS AG, Goldman Sachs Group Inc., JM Financial Services Ltd., Bank of America Corp.’s Merrill Lynch & Co., Kotak Mahindra Capital Co., SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. are managing the sale.
Individuals and employees who bid for 100,000 rupees of shares or less will be eligible for a 5 percent discount on the final price, the bank has said. Retail investors will get up to 30 percent of the issue and employees 2 percent.
Standard Chartered, which counts India as its most profitable overseas market after Hong Kong, and rivals including Credit Suisse Group AG are seeking to win corporate clients in the world’s second-fastest growing major economy. The bank has been in India for more than 150 years.
The London-based lender that makes at least three quarters of its profit in Asia received orders for 447.7 million shares as of 5:25 p.m., according to data from the National and Bombay stock exchanges. It agreed to sell an additional 36 million Indian depository receipts to so-called anchor investors earlier this week.
Indian and overseas funds, who are required to pay the full amount at the time of making their bid under a rule that came into effect this month, waited until the final hours of Standard Chartered’s four-day sale to avoid tying up capital. Europe’s debt crisis has also made it more difficult for companies worldwide to sell new stock.
“From now on, we are likely to see share sales get subscribed only on the last day of the offer because of the new regulations on bid payments,” A. Murugappan, head of investment banking at ICICI Securities Ltd., said in an interview in Mumbai today. It is also “getting increasingly difficult to pull deals off because of the volatility in the markets.”
The bank, which is the first company to seek to sell IDRs, is offering about 240 million shares at 100 rupees to 115 rupees each. It sold 15 percent of the offering to investors including ICICI Prudential Asset Management Co. and Reliance Capital Ltd. for 104 rupees a share, according to a filing this week.
Barring Insurers
Domestic insurers are prohibited from taking part in the sale, limiting potential buyers, Prabodh Agrawal, an analyst at India Infoline Ltd. in Singapore, said in a note to clients on May 24. Record stock purchases by insurers helped boost the benchmark Sensitive Index 81 percent in 2009, making it the third-best performing equity market in Asia.
Still, “the bank emerged unscathed from the recent financial crisis,” said Agrawal, who has a “subscribe” rating on the stock. The company also has a “stable funding base, and a well-capitalized balance sheet.”
Standard Chartered, which is listed in Hong Kong and London, aims to raise as much as $573 million from the India offering, according to data compiled by Bloomberg. Ten IDRs will represent one share of Standard Chartered, the bank said in a filing on May 14.
London, Hong Kong Trading
U.K.-traded shares of Standard Chartered fell 1.4 percent to 1,659 pence today. In Hong Kong, the stock rose 1.2 percent to HK$185.50.
Standard Chartered began the final day of its sale with bids for 11 percent of the stock on offer.
Investors may be deterred by regulatory risks tied to Standard Chartered’s global operations and concern that currency fluctuations affecting the IDRs, whose underlying shares are denominated in British pounds, Abhijit Majumder, an analyst at Prabhudas Lilladher Pvt. in Mumbai, wrote on May 24.
UBS AG, Goldman Sachs Group Inc., JM Financial Services Ltd., Bank of America Corp.’s Merrill Lynch & Co., Kotak Mahindra Capital Co., SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. are managing the sale.
Individuals and employees who bid for 100,000 rupees of shares or less will be eligible for a 5 percent discount on the final price, the bank has said. Retail investors will get up to 30 percent of the issue and employees 2 percent.
Standard Chartered, which counts India as its most profitable overseas market after Hong Kong, and rivals including Credit Suisse Group AG are seeking to win corporate clients in the world’s second-fastest growing major economy. The bank has been in India for more than 150 years.
Wednesday, May 26, 2010
India’s Largest Bourse Plans Short Selling to Lure Investors
May 27 (Bloomberg) -- National Stock Exchange of India Ltd., the nation’s largest bourse, plans to offer short sales within the next few weeks aimed at luring investors to the local market after expanding in the U.S. and Singapore.
The company, which counts Goldman Sachs Group Inc. and Temasek Holdings Pte as shareholders, will introduce short selling to meet a “huge demand,” Chief Executive Officer Ravi Narain said in an interview at his office in Mumbai.
National Stock Exchange is expanding in India as foreigners pumped in a net $4.3 billion this year, 18 percent more than a year earlier, data compiled by Bloomberg show. The nation’s benchmark stock index dropped less than half the MSCI Emerging Markets Index’s 16 percent slide from its April 15 peak.
“My view is that if the whole world is rushing to India, you’d have to be brain dead to be rushing out,” Narain, 54, said yesterday. “Our strategy should be to continue to attract foreign investors to Indian assets onshore and to bringing foreign products to Indian markets.”
Temasek, Singapore’s state-owned investment company, called its 5 percent investment in the National Stock Exchange “a proxy to India’s growth and the development of its capital markets” when it bought out NYSE Euronext’s stake this month. The economy may grow 8 percent in the 12 months through March 31, the central bank predicted April 27. That would follow last year’s 7.2 percent expansion.
China, Germany
National Stock Exchange’s average daily turnover in equities has more than doubled in the past four years, according to data on its website. Narain, who was involved in setting up the Indian bourse since its incorporation in 1992, now wants to broaden the products with the short sales allowing traders to borrow the assets they deal in.
The bourse’s plan comes as China introduced short sales and margin trading two months ago, and this week said it will allow some foreign funds to trade index futures. Germany earlier this month banned uncovered short selling of some bonds and naked short selling on the shares of 10 German financial companies, saying such practices endanger the stability of the economy.
National Stock Exchange is also speeding up the time transactions take to enter and leave its system, and Narain forecast executions will be cut to less than one millisecond by the end of the year from five milliseconds.
Among products due to be available by yearend are an intraday volatility index and other options, said Narain, a Cambridge University-trained economist with a MBA from the Wharton School of University of Pennsylvania.
S&P 500
National Stock Exchange, which began trading equities in November 1994, plans to sell its index futures in the U.S. under an agreement with CME Group Inc., owner of the world’s biggest futures exchange. That will allow Standard & Poor’s 500 Index and Dow Jones Industrial Average futures to trade in rupees on the Indian bourse.
For foreigners, access to India’s capital markets remains restricted by bureaucracy, said Vikas Pershad, Chicago-based chief executive officer of hedge fund Veda Investments LLC. The country last month ordered overseas funds to provide ownership information for money coming into the equity market as the regulator tightens so-called know-your-client norms.
“It takes a long time for foreign investors to register,” he said. “If India’s capital markets have to compete with U.S., Australia, Hong Kong, Japan or Western Europe then the process should be made simpler, faster and less costly.” Pershad declined to say how much he has invested in India.
National Stock Exchange said it’s careful with the introduction of short sales and isn’t rushing to roll it out.
“Very soon, we’ll have finished building our systems and we’ll launch this, and then people will be able to short,” Narain said. “There’s been a huge demand for lending and borrowing of shares.”
The company, which counts Goldman Sachs Group Inc. and Temasek Holdings Pte as shareholders, will introduce short selling to meet a “huge demand,” Chief Executive Officer Ravi Narain said in an interview at his office in Mumbai.
National Stock Exchange is expanding in India as foreigners pumped in a net $4.3 billion this year, 18 percent more than a year earlier, data compiled by Bloomberg show. The nation’s benchmark stock index dropped less than half the MSCI Emerging Markets Index’s 16 percent slide from its April 15 peak.
“My view is that if the whole world is rushing to India, you’d have to be brain dead to be rushing out,” Narain, 54, said yesterday. “Our strategy should be to continue to attract foreign investors to Indian assets onshore and to bringing foreign products to Indian markets.”
Temasek, Singapore’s state-owned investment company, called its 5 percent investment in the National Stock Exchange “a proxy to India’s growth and the development of its capital markets” when it bought out NYSE Euronext’s stake this month. The economy may grow 8 percent in the 12 months through March 31, the central bank predicted April 27. That would follow last year’s 7.2 percent expansion.
China, Germany
National Stock Exchange’s average daily turnover in equities has more than doubled in the past four years, according to data on its website. Narain, who was involved in setting up the Indian bourse since its incorporation in 1992, now wants to broaden the products with the short sales allowing traders to borrow the assets they deal in.
The bourse’s plan comes as China introduced short sales and margin trading two months ago, and this week said it will allow some foreign funds to trade index futures. Germany earlier this month banned uncovered short selling of some bonds and naked short selling on the shares of 10 German financial companies, saying such practices endanger the stability of the economy.
National Stock Exchange is also speeding up the time transactions take to enter and leave its system, and Narain forecast executions will be cut to less than one millisecond by the end of the year from five milliseconds.
Among products due to be available by yearend are an intraday volatility index and other options, said Narain, a Cambridge University-trained economist with a MBA from the Wharton School of University of Pennsylvania.
S&P 500
National Stock Exchange, which began trading equities in November 1994, plans to sell its index futures in the U.S. under an agreement with CME Group Inc., owner of the world’s biggest futures exchange. That will allow Standard & Poor’s 500 Index and Dow Jones Industrial Average futures to trade in rupees on the Indian bourse.
For foreigners, access to India’s capital markets remains restricted by bureaucracy, said Vikas Pershad, Chicago-based chief executive officer of hedge fund Veda Investments LLC. The country last month ordered overseas funds to provide ownership information for money coming into the equity market as the regulator tightens so-called know-your-client norms.
“It takes a long time for foreign investors to register,” he said. “If India’s capital markets have to compete with U.S., Australia, Hong Kong, Japan or Western Europe then the process should be made simpler, faster and less costly.” Pershad declined to say how much he has invested in India.
National Stock Exchange said it’s careful with the introduction of short sales and isn’t rushing to roll it out.
“Very soon, we’ll have finished building our systems and we’ll launch this, and then people will be able to short,” Narain said. “There’s been a huge demand for lending and borrowing of shares.”
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