By Carola Hoyos in London
Published: February 3 2009 02:00 | Last updated: February 3 2009 02:00
Petrobras, Brazil's national oil company, is in direct talks with governments including Washington and Beijing to help finance the $174bn development of its huge reserves.
The partially traded group recently discovered the biggest oil fields in Latin America in the past 30 years and industry leaders, such as Tony Hayward, BP's chief executive, believe the waters off Brazil's south-eastern coast hold oil reserves as big and important as those discovered in the North Sea in the 1970s.
José Sergio Gabrielli de Azevedo, Petrobras's president and chief executive, told the Financial Times that Petrobras had secured almost all of its financing for this year and over the five-year period could finance $120bn from its own cash flow.
But that still leaves the company with a large financial hole it will need to plug to realise its goal of increasing current oil and gas production of 2.2m barrels a day to 3.3m b/d by 2013 and to 5.7m barrels a day by 2020.
"It's going to be tough, it's going to be challenging, but it is not impossible," he said, adding: "We have had several talks with different countries, not only China, even the US. We think this is going to be an important source of financing for us."
The UAE is also thought to have shown interest.
In the US, Mr Gabrielli said Petrobras had held conversations with Export-Import Bank and Overseas Private Investment Corporation, which he said wanted to improve the presence of US companies in Brazil. But he said his conversations in Washington were hampered by the fact there was not one central institution.
He said that, in return for help financing the project, Petrobras would guarantee future oil and oil products.
"In relation to the US, today we are already a net exporter of petroleum products. This is going to increase," Mr Gabrielli said.
Analysts and other oil company executives agree that securing financing would be one of Petrobras's two biggest hurdles, considering the credit crisis and the fall in oil prices of more than $100 a barrel in six months. The second hurdle is expected to be the technical challenge of extracting oil trapped under thick layers of salt, far below the ocean's surface.
An executive from a competing oil company with operations in Latin America and the North Sea said: "They have found a North Sea. It took 15 big companies more than a decade to develop that."
But Mr Gabrielli said he believed companies that had not helped find the pre-salt fields would be left out.
"Brazil's regulatory system rewards the companies that took exploration risk." He noted that these included: BG of the UK, Galp of Portugal, Repsol of Spain, ExxonMobil and Amerada Hess of the US, and Anglo-Dutch Royal Dutch Shell. "The ones who didn't take it [the risk] are not going to be rewarded," he said.
Presenting its business plan for 2009-2013 last week, Petrobras insisted it would push ahead with plans not only to develop its newly discovered fields, but to build three oil refineries, Brazil's first new refineries for almost 30 years. Mr Gabrielli said Petrobras was unique among big oil companies in having big new fields to develop and a big domestic market.
But its plans also involve expanding export sales of value-added refined products rather than crude oil. "To capture [our advantages] we need to build capacity now," Mr Gabrielli said. "If we don't build it now we will miss our chance."
Almir Barbosa, financial director, said Petrobras still needed to raise about $8bn to meet investment targets of $28bn this year and $35bn in 2010. He said the company was striving to reduce its financing needs by a cost-cutting programme, involving renegotiation of all projects, especially those still in their early stages. Additional reporting by Jonathan Wheatley in São Paulo
Monday, February 2, 2009
Sunday, February 1, 2009
KE Favors Kexim, Listrik Debt in Best Start in Decade
Feb. 2 (Bloomberg) -- Debt sold by Asian state-owned companies now offer “better value” than sovereign bonds after an easing global credit crunch helped revive investor demand, KE Capital Partners said.
Bonds with implicit state guarantees yielded as much as 4.95 percentage points above Treasuries last week, according to an index compiled by JPMorgan Chase & Co., three times the average spread in the two years before the collapse of Lehman Brothers Holdings Inc. in September. Rachana Mehta, head of fixed-income at Singapore-based KE Capital, recommends dollar- denominated debt of Export-Import Bank of Korea, or Kexim, and Indonesian power utility Perusahaan Listrik Negara.
“Asian credits will do well over a six- to 12-month horizon, where you are getting attractive yields to compensate for the risks,” she said in a Jan. 28 interview. “Some of the new issues have been well received and credit spreads are still wide compared with historical levels.”
Overseas bond sales by companies and governments in the Asia-Pacific region reached $56.2 billion in January, the best start to the year in at least a decade, according to data compiled by Bloomberg.
A rally in global bond markets last month, fueled by interest-rate cuts, has helped narrow the spread on so-called “quasi-sovereign” debt from as high as 5.8 percentage points, compared with an average 1.45 percentage points in the two years before Lehman.
Note Spreads
KE Capital is a joint venture between Singapore’s Kim Eng Holdings Ltd. and Tokyo-based Mitsubishi UFJ Securities Ltd., a unit of Japan’s largest bank by assets. It acts as investment adviser to Kokusai Asset Management Ltd., the manager of the 20.8 billion yen ($231 million) Kokusai Asia Pacific Sovereign and Quasi Fund. Kokusai also manages the world’s second-biggest bond fund that has $51 billion of investment.
Kexim’s 8.125 percent note maturing in 2014 yielded 8 percent, or 6.2 percentage points more than like-maturity Treasuries on Jan. 30, according to data compiled by Bloomberg News, versus 6.8 percentage points when the bonds were sold on Jan. 13. Investors get as little as 4 percent on benchmark five- year local-currency Korean government bonds, and 5 percent on the nation’s 2014 dollar bonds, according to Bloomberg data.
Listrik Negara
Indonesia’s Perusahaan Listrik Negara’s 7.25 percent note due in October 2011 yielded about 16 percent, Mehta said on Jan. 28. The spread has widened to more than 14 percentage points over Treasuries, from 2.7 percentage points when they were sold in 2006. Investors get about 10 percent on Indonesia’s dollar- denominated 7.25 percent note due April 2015.
Kexim bonds are ranked Aa3 by Moody’s Investors Service, the fourth-highest investment grade and two levels above South Korea’s sovereign rating. Standard & Poor’s Ratings Services put them both A, or the fifth-lowest investment grade.
Listrik securities are rated Ba3 by Moody’s and BB- by S&P, both on par with the country’s sovereign rating and three levels below investment grade.
Investors have demanded a lower premium to own dollar- denominated emerging-market sovereign bonds this year after central banks worldwide pumped cash into financial markets. The average spread narrowed to 6.3 percentage points above Treasuries on Jan. 29, from as high as 8.65 points in 2008, according to the JPMorgan EMBI+ Index.
Bond Rally
In Asia, dollar-denominated bonds posted a third month of gains in January, according to the JPMorgan Asia Credit Index that tracks government, quasi-government and corporate debt. The index rose 12 percent in the longest rally since 2006.
The Philippine government sold $1.5 billion of 10-year global bonds on Jan. 7, drawing bids for four times the amount of debt offered. Indonesia will meet investors from this week on a proposed $4 billion debt offering. Korea Development Bank, the nation’s largest issuer of overseas debt, sold $2 billion of five-year notes last month to yield 6.75 percentage points more than Treasuries.
Indian, Philippine and South Korean local-currency government debt remain attractive as slowing inflation will allow central banks to keep cutting borrowing costs, said Mehta, who has traded Asian bonds for more than 10 years, including as head of Asian and emerging-market debt at DBS Asset Management Ltd. in Singapore.
Currency gains may also increase the appeal of the debt as a slide in commodity prices and slower global growth lower import costs, she said.
“Yields on Indian, Philippine and Korean bonds appeal to me on a total return approach with currency gains,” Mehta said. “Falling oil prices will also have a positive impact for countries with current-account deficits.”
Bonds with implicit state guarantees yielded as much as 4.95 percentage points above Treasuries last week, according to an index compiled by JPMorgan Chase & Co., three times the average spread in the two years before the collapse of Lehman Brothers Holdings Inc. in September. Rachana Mehta, head of fixed-income at Singapore-based KE Capital, recommends dollar- denominated debt of Export-Import Bank of Korea, or Kexim, and Indonesian power utility Perusahaan Listrik Negara.
“Asian credits will do well over a six- to 12-month horizon, where you are getting attractive yields to compensate for the risks,” she said in a Jan. 28 interview. “Some of the new issues have been well received and credit spreads are still wide compared with historical levels.”
Overseas bond sales by companies and governments in the Asia-Pacific region reached $56.2 billion in January, the best start to the year in at least a decade, according to data compiled by Bloomberg.
A rally in global bond markets last month, fueled by interest-rate cuts, has helped narrow the spread on so-called “quasi-sovereign” debt from as high as 5.8 percentage points, compared with an average 1.45 percentage points in the two years before Lehman.
Note Spreads
KE Capital is a joint venture between Singapore’s Kim Eng Holdings Ltd. and Tokyo-based Mitsubishi UFJ Securities Ltd., a unit of Japan’s largest bank by assets. It acts as investment adviser to Kokusai Asset Management Ltd., the manager of the 20.8 billion yen ($231 million) Kokusai Asia Pacific Sovereign and Quasi Fund. Kokusai also manages the world’s second-biggest bond fund that has $51 billion of investment.
Kexim’s 8.125 percent note maturing in 2014 yielded 8 percent, or 6.2 percentage points more than like-maturity Treasuries on Jan. 30, according to data compiled by Bloomberg News, versus 6.8 percentage points when the bonds were sold on Jan. 13. Investors get as little as 4 percent on benchmark five- year local-currency Korean government bonds, and 5 percent on the nation’s 2014 dollar bonds, according to Bloomberg data.
Listrik Negara
Indonesia’s Perusahaan Listrik Negara’s 7.25 percent note due in October 2011 yielded about 16 percent, Mehta said on Jan. 28. The spread has widened to more than 14 percentage points over Treasuries, from 2.7 percentage points when they were sold in 2006. Investors get about 10 percent on Indonesia’s dollar- denominated 7.25 percent note due April 2015.
Kexim bonds are ranked Aa3 by Moody’s Investors Service, the fourth-highest investment grade and two levels above South Korea’s sovereign rating. Standard & Poor’s Ratings Services put them both A, or the fifth-lowest investment grade.
Listrik securities are rated Ba3 by Moody’s and BB- by S&P, both on par with the country’s sovereign rating and three levels below investment grade.
Investors have demanded a lower premium to own dollar- denominated emerging-market sovereign bonds this year after central banks worldwide pumped cash into financial markets. The average spread narrowed to 6.3 percentage points above Treasuries on Jan. 29, from as high as 8.65 points in 2008, according to the JPMorgan EMBI+ Index.
Bond Rally
In Asia, dollar-denominated bonds posted a third month of gains in January, according to the JPMorgan Asia Credit Index that tracks government, quasi-government and corporate debt. The index rose 12 percent in the longest rally since 2006.
The Philippine government sold $1.5 billion of 10-year global bonds on Jan. 7, drawing bids for four times the amount of debt offered. Indonesia will meet investors from this week on a proposed $4 billion debt offering. Korea Development Bank, the nation’s largest issuer of overseas debt, sold $2 billion of five-year notes last month to yield 6.75 percentage points more than Treasuries.
Indian, Philippine and South Korean local-currency government debt remain attractive as slowing inflation will allow central banks to keep cutting borrowing costs, said Mehta, who has traded Asian bonds for more than 10 years, including as head of Asian and emerging-market debt at DBS Asset Management Ltd. in Singapore.
Currency gains may also increase the appeal of the debt as a slide in commodity prices and slower global growth lower import costs, she said.
“Yields on Indian, Philippine and Korean bonds appeal to me on a total return approach with currency gains,” Mehta said. “Falling oil prices will also have a positive impact for countries with current-account deficits.”
ECB’s Wellink Says Crisis Not Over, Sees New Problems
Feb. 1 (Bloomberg) -- The global financial crisis is not yet close to ending as U.S. house prices decline further and more areas of the economy become affected, European Central Bank Governing Council member Nout Wellink said.
“No, I don’t think so,” Wellink said when asked if the crisis is over or about to end, during an interview with Dutch state broadcaster NOS. “New problems are emerging as a result of the worsening of the economy and problems could arise in the sectors such as commercial real estate and credit cards.”
Financial institutions worldwide have written off more than $1 trillion since the credit crisis began in 2007. Wellink, who also heads the Dutch central bank, warned that global economic development may slow as banks withdraw from emerging markets and focus on their domestic customers.
“That is a form of modern protectionism and the ultimate consequence is that the economic development in the world will become less favorable,” Wellink said.
Dutch financial institutions including ING Groep NV have been thrown lifelines by the Dutch government. ING said on Jan. 26 it will transfer the risk on 80 percent of its 27.7 billion euros ($35.5 billion) of Alt-A mortgage securities to the government, limiting further writedowns. The bank, which traces its roots to 1743, was the first to draw on a 20-billion-euro fund set aside to prop up financial firms.
‘Had About Everything’
“In terms of steps that have been taken, we’ve had about everything I think,” Wellink said, adding that the central bank is studying a possible extension for pension funds to recover their coverage ratio. The central bank will come with an opinion before the first of March and will be “pragmatic.”
Pension funds have suffered from the decline in equities and other assets amidst turmoil in the financial markets and falling interest rates. Europe’s Dow Jones Stoxx 600 Index sank 46 percent last year.
The Dutch central bank requires pension funds whose coverage ratio drops below 105 percent to file a recovery plan by April. The number of Dutch pension funds that fail to meet the requirement surged more than fivefold in the third quarter as stock markets fell, according to the central bank.
“No, I don’t think so,” Wellink said when asked if the crisis is over or about to end, during an interview with Dutch state broadcaster NOS. “New problems are emerging as a result of the worsening of the economy and problems could arise in the sectors such as commercial real estate and credit cards.”
Financial institutions worldwide have written off more than $1 trillion since the credit crisis began in 2007. Wellink, who also heads the Dutch central bank, warned that global economic development may slow as banks withdraw from emerging markets and focus on their domestic customers.
“That is a form of modern protectionism and the ultimate consequence is that the economic development in the world will become less favorable,” Wellink said.
Dutch financial institutions including ING Groep NV have been thrown lifelines by the Dutch government. ING said on Jan. 26 it will transfer the risk on 80 percent of its 27.7 billion euros ($35.5 billion) of Alt-A mortgage securities to the government, limiting further writedowns. The bank, which traces its roots to 1743, was the first to draw on a 20-billion-euro fund set aside to prop up financial firms.
‘Had About Everything’
“In terms of steps that have been taken, we’ve had about everything I think,” Wellink said, adding that the central bank is studying a possible extension for pension funds to recover their coverage ratio. The central bank will come with an opinion before the first of March and will be “pragmatic.”
Pension funds have suffered from the decline in equities and other assets amidst turmoil in the financial markets and falling interest rates. Europe’s Dow Jones Stoxx 600 Index sank 46 percent last year.
The Dutch central bank requires pension funds whose coverage ratio drops below 105 percent to file a recovery plan by April. The number of Dutch pension funds that fail to meet the requirement surged more than fivefold in the third quarter as stock markets fell, according to the central bank.
China’s World-Beating Stocks Keep BlackRock Bullish on Economy
Feb. 2 (Bloomberg) -- The world’s largest money managers say China’s steepest monthly stock gain in more than a year shows the fastest-growing major economy will avert a recession.
The Shanghai Composite Index, the broadest measure of shares traded on the mainland, opens after a weeklong celebration of the Lunar New Year and a 9.3 percent gain in January, the best among the world’s 10 biggest markets. Last year, the index fell 65 percent, the worst since at least 1996, according to data compiled by Bloomberg.
Chinese shares rebounded after the central bank lowered interest rates five times since September and the government announced a $585 billion stimulus plan. China’s economy is expected to grow near 8 percent this year even after expanding 6.8 percent in the fourth quarter, the slowest pace since December 2001, according to fund managers Richard Urwin at BlackRock Inc. and Barclays Plc’s Russ Koesterich, who together help manage more than $3 trillion in assets.
“China is going to do what it has to do to keep the economy humming,” Koesterich, the San Francisco-based head of investment strategy at Barclays Global Investors, said in a Bloomberg Television interview Jan. 26. “They can enjoy faster growth than the rest of the world in 2009 and in 2010 as well.”
The Shanghai Composite of 895 stocks fell 0.7 percent to 1990.66 when it last traded on Jan. 23. That pared its third straight weekly gain to 1.9 percent.
China Stimulus
China pressured state-owned banks to increase lending, unveiled the 4 trillion yuan stimulus package, reduced export taxes and agreed to provide support for 10 industries, through tax cuts and subsidies for steel and autos.
The central bank dropped quotas limiting annual lending by banks in the fourth quarter. The government has also urged banks, most of which are state-owned, to lend more to small and medium-sized companies. Money supply and lending surged in December, according to the statistics bureau.
“The Chinese have a pretty strong pro-growth agenda at the moment and they tend to do whatever it takes to stabilize the growth slowdown,” said Urwin, the head of asset allocation at BlackRock in London.
Stephen Roach, chairman of Morgan Stanley Asia Ltd., said it’s a “myth” that China will lead the world out of a recession, especially as the U.S., China’s biggest export market after the European Union, imports less.
‘Going South’
“Most of the juice in the Chinese growth results in the last five or six years have been export-led,” Roach said in a Bloomberg Television interview from Zurich. “How can an export- led economy lead the world out if its export markets are going south?”
The U.S. economy shrank the most since 1982 in the fourth quarter as consumer spending slid. U.S. Treasury Secretary Timothy Geithner said on Jan. 22 that President Barack Obama believes China is “manipulating its currency,” suggesting that the new administration may take a tougher line on China’s exchange-rate regime.
Geithner also said last month that China should focus on “more aggressive” efforts to boost its own economic growth, in concert with the coming U.S. stimulus package. The U.S. House of Representatives on Jan. 29 passed Obama’s $819 billion stimulus plan, aimed at lifting the economy out of recession through tax cuts and new spending.
China’s gross domestic product will expand 6.3 percent this quarter from a year earlier, the median estimate of nine economists surveyed by Bloomberg News showed.
Difficult Year
Chinese Premier Wen Jiabao said on Jan. 28 it will be a “tall order” meeting the nation’s 8 percent growth target. New York University Professor Nouriel Roubini predicts economic growth in China will slow to less than 5 percent.
“This year will be a difficult one for stocks,” said Howard Wang, who oversees $10 billion at JF Asset Management Ltd. in Hong Kong. Government stimulus measures are unlikely to offset a contraction in private real estate investment and capital investment for exporters, Wang said.
Demand for property has sagged in China, with home prices across 70 cities dropping for the first time on record in December.
Chinese stocks are trading at less than one-third of their peak valuations in January 2008. Before the Lunar New Year holiday break, the Shanghai Composite Index was valued at 15.5 times reported earnings, down from a six-year high of 50 times a year ago. That’s still the highest among benchmark indexes in Asia.
Easing Restrictions
Beijing North Star Co., a real estate arm of the municipal government, is among China stocks traded in Hong Kong that gained last week while the mainland market was closed.
The official Xinhua News Agency reported on Jan. 24 that Beijing removed restrictions on the purchase of real estate by foreigners in an effort to create more demand. The city has also eased financing for some buyers and granted developers a delay in payment, UBS AG said in a Jan. 30 report.
Beijing North Star climbed 8.1 percent in Hong Kong trading last week. The Shanghai-traded stock has gained 8.5 percent this year after tumbling 80 percent in 2008.
China Vanke Co., the nation’s largest publicly traded developer and not listed in Hong Kong, has risen 9.2 percent in Shenzhen. It dropped 64 percent last year.
Industrial & Commercial Bank of China Ltd., China’s largest lender, rose 3.4 percent in Hong Kong trading last week, while the so-called H shares of China Construction Bank, the second- biggest, rose 4.3 percent. The shares have gained 3.4 percent and 4.4 percent respectively in Shanghai trading this year.
“China is still a market we continue to be overweight in because it has the best potential for effective policy stimulus,” said Mark Tan, who helps oversee about $3 billion in Asian equities at UOB Asset Management Ltd., a unit of Singapore’s second-largest bank.
The Shanghai Composite Index, the broadest measure of shares traded on the mainland, opens after a weeklong celebration of the Lunar New Year and a 9.3 percent gain in January, the best among the world’s 10 biggest markets. Last year, the index fell 65 percent, the worst since at least 1996, according to data compiled by Bloomberg.
Chinese shares rebounded after the central bank lowered interest rates five times since September and the government announced a $585 billion stimulus plan. China’s economy is expected to grow near 8 percent this year even after expanding 6.8 percent in the fourth quarter, the slowest pace since December 2001, according to fund managers Richard Urwin at BlackRock Inc. and Barclays Plc’s Russ Koesterich, who together help manage more than $3 trillion in assets.
“China is going to do what it has to do to keep the economy humming,” Koesterich, the San Francisco-based head of investment strategy at Barclays Global Investors, said in a Bloomberg Television interview Jan. 26. “They can enjoy faster growth than the rest of the world in 2009 and in 2010 as well.”
The Shanghai Composite of 895 stocks fell 0.7 percent to 1990.66 when it last traded on Jan. 23. That pared its third straight weekly gain to 1.9 percent.
China Stimulus
China pressured state-owned banks to increase lending, unveiled the 4 trillion yuan stimulus package, reduced export taxes and agreed to provide support for 10 industries, through tax cuts and subsidies for steel and autos.
The central bank dropped quotas limiting annual lending by banks in the fourth quarter. The government has also urged banks, most of which are state-owned, to lend more to small and medium-sized companies. Money supply and lending surged in December, according to the statistics bureau.
“The Chinese have a pretty strong pro-growth agenda at the moment and they tend to do whatever it takes to stabilize the growth slowdown,” said Urwin, the head of asset allocation at BlackRock in London.
Stephen Roach, chairman of Morgan Stanley Asia Ltd., said it’s a “myth” that China will lead the world out of a recession, especially as the U.S., China’s biggest export market after the European Union, imports less.
‘Going South’
“Most of the juice in the Chinese growth results in the last five or six years have been export-led,” Roach said in a Bloomberg Television interview from Zurich. “How can an export- led economy lead the world out if its export markets are going south?”
The U.S. economy shrank the most since 1982 in the fourth quarter as consumer spending slid. U.S. Treasury Secretary Timothy Geithner said on Jan. 22 that President Barack Obama believes China is “manipulating its currency,” suggesting that the new administration may take a tougher line on China’s exchange-rate regime.
Geithner also said last month that China should focus on “more aggressive” efforts to boost its own economic growth, in concert with the coming U.S. stimulus package. The U.S. House of Representatives on Jan. 29 passed Obama’s $819 billion stimulus plan, aimed at lifting the economy out of recession through tax cuts and new spending.
China’s gross domestic product will expand 6.3 percent this quarter from a year earlier, the median estimate of nine economists surveyed by Bloomberg News showed.
Difficult Year
Chinese Premier Wen Jiabao said on Jan. 28 it will be a “tall order” meeting the nation’s 8 percent growth target. New York University Professor Nouriel Roubini predicts economic growth in China will slow to less than 5 percent.
“This year will be a difficult one for stocks,” said Howard Wang, who oversees $10 billion at JF Asset Management Ltd. in Hong Kong. Government stimulus measures are unlikely to offset a contraction in private real estate investment and capital investment for exporters, Wang said.
Demand for property has sagged in China, with home prices across 70 cities dropping for the first time on record in December.
Chinese stocks are trading at less than one-third of their peak valuations in January 2008. Before the Lunar New Year holiday break, the Shanghai Composite Index was valued at 15.5 times reported earnings, down from a six-year high of 50 times a year ago. That’s still the highest among benchmark indexes in Asia.
Easing Restrictions
Beijing North Star Co., a real estate arm of the municipal government, is among China stocks traded in Hong Kong that gained last week while the mainland market was closed.
The official Xinhua News Agency reported on Jan. 24 that Beijing removed restrictions on the purchase of real estate by foreigners in an effort to create more demand. The city has also eased financing for some buyers and granted developers a delay in payment, UBS AG said in a Jan. 30 report.
Beijing North Star climbed 8.1 percent in Hong Kong trading last week. The Shanghai-traded stock has gained 8.5 percent this year after tumbling 80 percent in 2008.
China Vanke Co., the nation’s largest publicly traded developer and not listed in Hong Kong, has risen 9.2 percent in Shenzhen. It dropped 64 percent last year.
Industrial & Commercial Bank of China Ltd., China’s largest lender, rose 3.4 percent in Hong Kong trading last week, while the so-called H shares of China Construction Bank, the second- biggest, rose 4.3 percent. The shares have gained 3.4 percent and 4.4 percent respectively in Shanghai trading this year.
“China is still a market we continue to be overweight in because it has the best potential for effective policy stimulus,” said Mark Tan, who helps oversee about $3 billion in Asian equities at UOB Asset Management Ltd., a unit of Singapore’s second-largest bank.
Asian Stocks Fall on Deepening Recession Concern; BHP Declines
Feb. 2 (Bloomberg) -- Asian stocks dropped, led by commodity and technology companies, as shrinking factory output in Australia and declining corporate profits fueled concerns that the global recession is deepening.
BHP Billiton Ltd., the world’s biggest mining company, fell 2.8 percent in Sydney after Australian manufacturing contracted for an eighth month and metal prices declined in London. Hitachi Ltd., the world’s third-largest maker of hard-disk drives, fell 6.7 percent after projecting a record loss. Mizuho Financial Group Inc., Japan’s second-largest listed bank, declined 5.3 percent after posting its second quarterly loss in a row.
“We’ll likely continue to see a series of downward earnings revisions from companies and analysts,” Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television. “With more companies cutting dividends, domestic investors will likely shy away from the equity market.”
The MSCI Asia-Pacific Index lost 1.8 percent to 81.59 as of 9:54 a.m. in Tokyo. Four stocks declined for each that advanced on the gauge, which has lost 8.4 percent this year amid signs the global recession is eroding company profit growth.
Japan’s Nikkei 225 Stock Average dropped 2.4 percent to 7,806. Australia’s S&P/ASX 200 Index fell 1.4 percent. All markets open for trading declined.
In New York, the Standard & Poor’s 500 Index slid 2.3 percent on Jan. 30, capping a fourth weekly drop.
BHP lost 2.8 percent to A$29.61. Australia’s manufacturing index was 36.6 in January, the Australian Industry Group and PricewaterhouseCoopers said in a report today. A reading below 50 signals factory output is shrinking. Manufacturing accounts for a tenth of the nation’s gross domestic product.
Hitachi, Panasonic
Separately, a measure of six metals traded in London dropped for a second day on Jan. 30, losing 1.9 percent.
Hitachi lost 6.7 percent to 294 yen. The company reversed its profit forecast on Jan. 30 to a record net loss of 700 billion yen ($7.81 billion) for the year ending March 31. Demand in the automobile, semiconductor and industrial-equipment industries was declining “rapidly,” the company said.
Panasonic Corp., the world’s largest maker of consumer electronics, dropped 4.6 percent to 1,048 yen. The company may report a 350 billion yen net loss for this business year, the Yomiuri newspaper reported yesterday. The median of analyst estimates compiled by Bloomberg projected 6 billion yen in profit.
Mizuho, the Japanese bank with the biggest subprime writedowns in Asia, slumped 5.3 percent to 215 yen. The company turned to a 145.1 billion yen loss in the three months ended Dec. 31 from a 66 billion yen profit a year earlier.
Japanese companies from car manufacturers to electronics makers have cut their full-year earnings outlooks as the world’s largest economies plunged into recession. Domestic businesses reporting their third-quarter earnings have posted an 85 percent tumble in net income for the quarter, Tokyo-based Shinko Research Institute Co. said in a report dated Jan. 30.
BHP Billiton Ltd., the world’s biggest mining company, fell 2.8 percent in Sydney after Australian manufacturing contracted for an eighth month and metal prices declined in London. Hitachi Ltd., the world’s third-largest maker of hard-disk drives, fell 6.7 percent after projecting a record loss. Mizuho Financial Group Inc., Japan’s second-largest listed bank, declined 5.3 percent after posting its second quarterly loss in a row.
“We’ll likely continue to see a series of downward earnings revisions from companies and analysts,” Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television. “With more companies cutting dividends, domestic investors will likely shy away from the equity market.”
The MSCI Asia-Pacific Index lost 1.8 percent to 81.59 as of 9:54 a.m. in Tokyo. Four stocks declined for each that advanced on the gauge, which has lost 8.4 percent this year amid signs the global recession is eroding company profit growth.
Japan’s Nikkei 225 Stock Average dropped 2.4 percent to 7,806. Australia’s S&P/ASX 200 Index fell 1.4 percent. All markets open for trading declined.
In New York, the Standard & Poor’s 500 Index slid 2.3 percent on Jan. 30, capping a fourth weekly drop.
BHP lost 2.8 percent to A$29.61. Australia’s manufacturing index was 36.6 in January, the Australian Industry Group and PricewaterhouseCoopers said in a report today. A reading below 50 signals factory output is shrinking. Manufacturing accounts for a tenth of the nation’s gross domestic product.
Hitachi, Panasonic
Separately, a measure of six metals traded in London dropped for a second day on Jan. 30, losing 1.9 percent.
Hitachi lost 6.7 percent to 294 yen. The company reversed its profit forecast on Jan. 30 to a record net loss of 700 billion yen ($7.81 billion) for the year ending March 31. Demand in the automobile, semiconductor and industrial-equipment industries was declining “rapidly,” the company said.
Panasonic Corp., the world’s largest maker of consumer electronics, dropped 4.6 percent to 1,048 yen. The company may report a 350 billion yen net loss for this business year, the Yomiuri newspaper reported yesterday. The median of analyst estimates compiled by Bloomberg projected 6 billion yen in profit.
Mizuho, the Japanese bank with the biggest subprime writedowns in Asia, slumped 5.3 percent to 215 yen. The company turned to a 145.1 billion yen loss in the three months ended Dec. 31 from a 66 billion yen profit a year earlier.
Japanese companies from car manufacturers to electronics makers have cut their full-year earnings outlooks as the world’s largest economies plunged into recession. Domestic businesses reporting their third-quarter earnings have posted an 85 percent tumble in net income for the quarter, Tokyo-based Shinko Research Institute Co. said in a report dated Jan. 30.
Saturday, January 31, 2009
Imation, Tuesday Morning, Tyco Electronics: U.S. Equity Preview
Jan. 31 (Bloomberg) -- Shares of the following companies may have unusual fluctuations in U.S. trading on Feb. 2. Stock symbols are in parentheses.
Imation Corp. (IMN:US): The maker of Memorex brand DVDs and videotapes eliminated its dividend, saying the recession has been harsher that it anticipated.
Immucor Inc. (BLUD:US): The maker of blood-testing equipment increased the threshold that triggers a so-called poison pill takeover defense, preventing its activation until a shareholder amasses a 20 percent stake. Immucor said the boost from 15 percent isn’t in response to a bid.
Tuesday Morning Corp. (TUES:US): The discount home- furnishing retailer increased the size of its credit line by 20 percent to $180 million.
Tyco Electronics Ltd. (TEL:US): The world’s biggest maker of electronic connectors said it notified New York State that the cancellation of a statewide wireless network agreement valued at $2 billion is a breach of contract.
Warner Chilcott Ltd. (WCRX:US): The maker of health-care products for women sued an Actavis Group unit to block the marketing of a generic version of the Doryx oral antibiotic.
Imation Corp. (IMN:US): The maker of Memorex brand DVDs and videotapes eliminated its dividend, saying the recession has been harsher that it anticipated.
Immucor Inc. (BLUD:US): The maker of blood-testing equipment increased the threshold that triggers a so-called poison pill takeover defense, preventing its activation until a shareholder amasses a 20 percent stake. Immucor said the boost from 15 percent isn’t in response to a bid.
Tuesday Morning Corp. (TUES:US): The discount home- furnishing retailer increased the size of its credit line by 20 percent to $180 million.
Tyco Electronics Ltd. (TEL:US): The world’s biggest maker of electronic connectors said it notified New York State that the cancellation of a statewide wireless network agreement valued at $2 billion is a breach of contract.
Warner Chilcott Ltd. (WCRX:US): The maker of health-care products for women sued an Actavis Group unit to block the marketing of a generic version of the Doryx oral antibiotic.
Obama Promises New Strategy to Revive Credit Markets
Jan. 31 (Bloomberg) -- President Barack Obama said his administration is readying a plan to unlock credit markets and lower mortgage rates, and vowed that company executives will be stopped from siphoning money intended for economic recovery.
“Soon my Treasury secretary, Timothy Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families,” Obama said today in his weekly radio address. He didn’t provide specifics.
“We’ll help lower mortgage costs and extend loans to small businesses so they can create jobs,” Obama said. “We’ll ensure that CEOs are not draining funds that should be advancing our recovery.”
Obama expressed outrage earlier this week after the New York state comptroller reported that Wall Street firms disbursed $18.4 billion in bonuses last year as the U.S. sank into a recession. While the figure represents a 44 percent decline from the previous year amid record losses in the securities industry, the bonus pool was the sixth-largest ever, the comptroller said in a yearly report.
Geithner will “have something to say about” bonuses as early as next week, Obama’s senior adviser David Axelrod said in an interview yesterday on Bloomberg Television’s “Political Capital with Al Hunt.”
Compensation Limits
Axelrod didn’t embrace a ban on bonuses for companies receiving bailout funds. He said the administration will take steps toward “limiting some of this executive compensation” as part of rallying public support for financial-rescue efforts.
“It’s very hard for the American people to understand how a bank executive should get a multimillion dollar bonus at a time when he’s asking the government to essentially bail out his institution,” Axelrod said.
Senator Claire McCaskill, a Missouri Democrat, yesterday introduced legislation to restrict compensation at companies receiving bail-out money to $400,000, the equivalent of the U.S. president’s salary.
“We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer” by taking multimillion-dollar bonuses, McCaskill said.
Axelrod said the administration is crafting a plan that will “set up new rules of the road” for spending the remaining $350 billion of the financial-rescue package, known as the Troubled Asset Relief Program, approved under the Bush administration.
‘Strong’ Banks
The administration is committed to “a strong, private financial sector” in the bailout, he said when asked whether there are discussions to partially nationalize U.S. banks.
“Obviously, we’re trying to help these institutions on a temporary basis, but that’s our goal,” Axelrod said. “We’re going to provide assistance to these institutions and hope that they -- hope and expect that they’ll -- get back on their feet and that credit will flow.”
Axelrod defended Geithner, who sparked controversy during his confirmation hearings last week by saying Obama believes China is “manipulating its currency.”
“What Tim said was akin to what the president said during the campaign, these are issues that we have to work through,” Axelrod said. “We weren’t blazing new ground there.”
Obama spoke with President Hu Jintao of China this week following Geithner’s testimony. Axelrod wouldn’t say whether Obama reassured the Chinese leader on this issue.
Hurdle Cleared
Obama’s economic recovery plan cleared a hurdle this week with House passage of an $819 billion stimulus measure, which now goes to the Senate for approval.
Even though Obama took the unusual step of traveling to Capitol Hill to ask for support from Republican lawmakers, not a single House Republican voted for the bill.
Obama in his radio address today, said an economic recovery will “take years, not months,” and urged the Senate to pass the $819 billion fiscal stimulus package that cleared the House on Jan. 28.
Senate Republicans say they will push for revisions to the legislation.
“Democratic lawmakers in the House of Representatives produced a massive bill that many analysts say is unlikely to create new jobs or boost the economy anytime soon,” Senate Republican Leader Mitch McConnell of Kentucky said in his party’s weekly radio address today.
‘Wasteful Spending’
“Most of the infrastructure projects it includes won’t impact the economy for at least another year,” McConnell said. “Permanent spending would be expanded by about $240 billion, an increase that would lock in bigger and bigger deficits every year. And the bill is loaded with wasteful spending.”
Senate Democrats also have backed changes to the House bill. The Senate Finance Committee voted this week to add a $70 billion alternative-minimum tax cut to the package.
Obama cautioned that “no one bill, no matter how comprehensive, can cure what ails our economy.” Restoring credit markets must coincide with the stimulus package, he said.
“So just as we jumpstart job creation, we must also ensure that markets are stable, credit is flowing, and families can stay in their homes,” he said.
The economy shrank at a 3.8 percent annual pace in the fourth quarter, the most since 1982, as consumers and companies cut spending, a government report showed yesterday.
Companies from Starbucks Corp. to Eastman Kodak Co. have announced job cuts this month. The Dow Jones Industrial Average dropped 76.70 points this week to 8,000.86, driving its monthly loss to 8.8 percent.
“Soon my Treasury secretary, Timothy Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families,” Obama said today in his weekly radio address. He didn’t provide specifics.
“We’ll help lower mortgage costs and extend loans to small businesses so they can create jobs,” Obama said. “We’ll ensure that CEOs are not draining funds that should be advancing our recovery.”
Obama expressed outrage earlier this week after the New York state comptroller reported that Wall Street firms disbursed $18.4 billion in bonuses last year as the U.S. sank into a recession. While the figure represents a 44 percent decline from the previous year amid record losses in the securities industry, the bonus pool was the sixth-largest ever, the comptroller said in a yearly report.
Geithner will “have something to say about” bonuses as early as next week, Obama’s senior adviser David Axelrod said in an interview yesterday on Bloomberg Television’s “Political Capital with Al Hunt.”
Compensation Limits
Axelrod didn’t embrace a ban on bonuses for companies receiving bailout funds. He said the administration will take steps toward “limiting some of this executive compensation” as part of rallying public support for financial-rescue efforts.
“It’s very hard for the American people to understand how a bank executive should get a multimillion dollar bonus at a time when he’s asking the government to essentially bail out his institution,” Axelrod said.
Senator Claire McCaskill, a Missouri Democrat, yesterday introduced legislation to restrict compensation at companies receiving bail-out money to $400,000, the equivalent of the U.S. president’s salary.
“We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer” by taking multimillion-dollar bonuses, McCaskill said.
Axelrod said the administration is crafting a plan that will “set up new rules of the road” for spending the remaining $350 billion of the financial-rescue package, known as the Troubled Asset Relief Program, approved under the Bush administration.
‘Strong’ Banks
The administration is committed to “a strong, private financial sector” in the bailout, he said when asked whether there are discussions to partially nationalize U.S. banks.
“Obviously, we’re trying to help these institutions on a temporary basis, but that’s our goal,” Axelrod said. “We’re going to provide assistance to these institutions and hope that they -- hope and expect that they’ll -- get back on their feet and that credit will flow.”
Axelrod defended Geithner, who sparked controversy during his confirmation hearings last week by saying Obama believes China is “manipulating its currency.”
“What Tim said was akin to what the president said during the campaign, these are issues that we have to work through,” Axelrod said. “We weren’t blazing new ground there.”
Obama spoke with President Hu Jintao of China this week following Geithner’s testimony. Axelrod wouldn’t say whether Obama reassured the Chinese leader on this issue.
Hurdle Cleared
Obama’s economic recovery plan cleared a hurdle this week with House passage of an $819 billion stimulus measure, which now goes to the Senate for approval.
Even though Obama took the unusual step of traveling to Capitol Hill to ask for support from Republican lawmakers, not a single House Republican voted for the bill.
Obama in his radio address today, said an economic recovery will “take years, not months,” and urged the Senate to pass the $819 billion fiscal stimulus package that cleared the House on Jan. 28.
Senate Republicans say they will push for revisions to the legislation.
“Democratic lawmakers in the House of Representatives produced a massive bill that many analysts say is unlikely to create new jobs or boost the economy anytime soon,” Senate Republican Leader Mitch McConnell of Kentucky said in his party’s weekly radio address today.
‘Wasteful Spending’
“Most of the infrastructure projects it includes won’t impact the economy for at least another year,” McConnell said. “Permanent spending would be expanded by about $240 billion, an increase that would lock in bigger and bigger deficits every year. And the bill is loaded with wasteful spending.”
Senate Democrats also have backed changes to the House bill. The Senate Finance Committee voted this week to add a $70 billion alternative-minimum tax cut to the package.
Obama cautioned that “no one bill, no matter how comprehensive, can cure what ails our economy.” Restoring credit markets must coincide with the stimulus package, he said.
“So just as we jumpstart job creation, we must also ensure that markets are stable, credit is flowing, and families can stay in their homes,” he said.
The economy shrank at a 3.8 percent annual pace in the fourth quarter, the most since 1982, as consumers and companies cut spending, a government report showed yesterday.
Companies from Starbucks Corp. to Eastman Kodak Co. have announced job cuts this month. The Dow Jones Industrial Average dropped 76.70 points this week to 8,000.86, driving its monthly loss to 8.8 percent.
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