July 12 (Bloomberg) -- Retail sales in the U.S. probably increased in June for a second straight month and factory production fell at a slower pace as the recession abated, economists said before reports this week.
Sales gained 0.4 percent after a 0.5 percent increase in May, according to the median estimate in a Bloomberg News survey before the Commerce Department’s report on July 14. The next day, Federal Reserve figures may show industrial output fell 0.6 percent last month after a 1.1 percent drop in May.
Consumers are venturing back into stores, seeking discounts and favoring necessities such as food or fuel. Even as the projected increase in sales and reports this week on housing may show the worst of the downturn has passed, a turnaround is likely to be gradual.
“The spending is more on staples than discretionary purchases,” Tom Porcelli, a senior economist at RBC Capital Markets in New York, said last week. “Aggregate demand is still amazingly weak. Things aren’t falling apart, but don’t expect a robust recovery.”
An index consumer confidence dropped last week on concerns about job losses, sending stocks lower. The Standard & Poor’s 500 Index closed at 879.13 in New York on July 10, down 0.4 percent from the previous day, capping its fourth straight weekly loss. The Dow Jones Industrial Average closed down 0.5 percent to 8146.52.
Car Sales
Car dealers struggled last month, as sales dropped to a 9.7 million annual pace from a 9.9 million rate in May, according to data from Woodcliff Lake, New Jersey-based Autodata Corp.
Sales plunged 42 percent from a year earlier at Auburn Hills, Michigan-based Chrysler Group LLC, and dropped 34 percent at General Motors Corp., located in Detroit. The carmakers, two of the three biggest in the U.S., are restructuring through bankruptcy.
Excluding automobiles, retail sales probably rose 0.5 percent in June, matching the gain in the prior month, according to the Bloomberg survey.
The Commerce report may also show receipts at service stations climbed, in part because of higher fuel prices. Regular unleaded gasoline averaged $2.64 a gallon at the pump in June, up 35 cents from the prior month, according to AAA.
Oil costs also will be reflected in June price reports due from the Labor Department. An index of producer prices, to be released on July 14, and a gauge of consumer prices, due the next day, may show bigger gains compared with May, the survey showed. Excluding food and energy, inflation remains contained, economists said.
Bargain Hunters
Bargain-conscious consumers drove sales gains at chains that sell discounted goods, reports showed last week, including Framingham, Massachusetts-based TJX Cos., owner of T.J. Maxx stores, and Pleasanton, California-based Ross Stores Inc., owner of the Ross Dress for Less chain.
Sales declined more than analysts forecast at San Francisco-based Gap Inc., operator of the Old Navy and Banana Republic chains, and Abercrombie & Fitch Co., a teen-clothing retailer based in New Albany, Ohio.
The International Council of Shopping Centers, which said June retail sales fell by 5.1 percent based on 32 chains, predicted July results may show as much as a 5 percent drop.
“Tough times certainly will linger for most, even through the summer,” Mike Niemira, the New York-based trade group’s chief economist, said in a July 9 telephone interview.
Meanwhile, one area of the economy showing signs of bottoming out is housing.
Housing, Construction
A Commerce Department report due July 17 may show builders broke ground on houses at a 528,000 annual rate in June, after a 532,000 pace the prior month and compared with a record-low 454,000 in April, according to the survey median.
Building permits, which point to future construction, likely rose.
The deterioration in industrial production may ease as companies, which have been slashing output to get rid of excess inventories, make progress in bringing stockpiles closer to demand. Still, the report may also show capacity utilization continued to decline, economists said.
Regional Fed reports from the New York and Philadelphia areas may add to evidence the manufacturing slump is waning, economists said. The reports are due on July 15 and 16.
On July 15, Fed policy makers will release minutes from their two-day meeting in June which will likely contain their most recent forecasts for growth, inflation and unemployment, plus officials’ discussion of monetary policy.
Saturday, July 11, 2009
Friday, July 10, 2009
Japanese Bonds Gain for Fourth Week as Producer Prices Slide
July 11 (Bloomberg) -- Japanese bonds rose for a fourth week after a central bank report showed producer prices fell at a record pace, helping boost the purchasing power of the fixed payments from debt.
Ten-year yields approached a three-month low yesterday after the Bank of Japan said the costs companies pay for commodities and unfinished goods tumbled 6.6 percent in June from a year earlier, after sliding a revised 5.5 percent in May. Demand for bonds this week was tempered as technical charts suggested the recent rally in the securities was excessive.
“The latest producer prices show demand remains much weaker than supply, helping bonds,” said Akio Kato, leader of a six-member team investing in Japanese bonds in Tokyo at Kokusai Asset Management Co., which runs the world’s second-biggest debt fund and has $73 billion in assets.
The yield on the 1.4 percent bond maturing in June 2019 fell two basis points this week to 1.295 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. Yields declined to 1.27 percent on July 9, the lowest level since March 25.
Twenty-year yields fell half a basis point this week to 1.995 percent. Ten-year bond futures for September delivery added 0.40 to 138.84 this week at the Tokyo Stock Exchange.
Inflation Bonds
Five-year inflation bonds yesterday yielded 1.59 percentage points more than similar-maturity regular notes, according to data compiled by Bloomberg. Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
Gains in bonds were limited as technical charts traders use to predict prices suggested the 15 percent gain in 10-year securities and the 8 percent advance in 20-year debt over the past month were excessive.
“Ten-year and 20-year bonds are showing signs that they are struggling to live below 1.3 percent and 2 percent respectively,” Peter Wilson, a yen strategist in London at the local subsidiary of Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by assets, wrote in a note on July 9.
The 14-day relative strength index on 10-year yields was 26 on July 9, below the 30 level that suggests the securities are poised to change direction. The stochastic oscillator on 20-year yields dropped to 5 on July 9, less than the 20 level that signals yields are likely to rebound. A stochastic oscillator chart measures the closing price of a security relative to its highs and lows to try to predict whether it will rise or fall.
Pimco Buys
Pacific Investment Management Co., which runs the world’s largest bond fund, said investors who avoid Japanese government debt may miss out on a rally.
Japan’s benchmark bonds may gain this year, pushing 10-year yields to the lowest since August 2003, as the world’s second- largest economy struggles to emerge from its worst postwar recession and avoid a deflationary spiral, said Tomoya Masanao, a Pimco executive vice president in Tokyo. The Newport Beach, California-based company manages $756 billion in assets.
“There is a huge risk not holding bonds,” Masanao said in an interview with Bloomberg News on July 8. “The growth rate won’t rise much and inflation will remain low.”
Japan’s economy is likely to contract 6 percent in the fiscal year that started April 1, the International Monetary Fund said this week. Economists in a Bloomberg News survey said Japan’s quarterly growth rate will remain below 3 percent through the three months ending June 30, 2010. Consumer prices, excluding fresh food, slid a record 1.1 percent in May from a year earlier, the statistics bureau said last month.
Ten-year yields approached a three-month low yesterday after the Bank of Japan said the costs companies pay for commodities and unfinished goods tumbled 6.6 percent in June from a year earlier, after sliding a revised 5.5 percent in May. Demand for bonds this week was tempered as technical charts suggested the recent rally in the securities was excessive.
“The latest producer prices show demand remains much weaker than supply, helping bonds,” said Akio Kato, leader of a six-member team investing in Japanese bonds in Tokyo at Kokusai Asset Management Co., which runs the world’s second-biggest debt fund and has $73 billion in assets.
The yield on the 1.4 percent bond maturing in June 2019 fell two basis points this week to 1.295 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. Yields declined to 1.27 percent on July 9, the lowest level since March 25.
Twenty-year yields fell half a basis point this week to 1.995 percent. Ten-year bond futures for September delivery added 0.40 to 138.84 this week at the Tokyo Stock Exchange.
Inflation Bonds
Five-year inflation bonds yesterday yielded 1.59 percentage points more than similar-maturity regular notes, according to data compiled by Bloomberg. Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
Gains in bonds were limited as technical charts traders use to predict prices suggested the 15 percent gain in 10-year securities and the 8 percent advance in 20-year debt over the past month were excessive.
“Ten-year and 20-year bonds are showing signs that they are struggling to live below 1.3 percent and 2 percent respectively,” Peter Wilson, a yen strategist in London at the local subsidiary of Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by assets, wrote in a note on July 9.
The 14-day relative strength index on 10-year yields was 26 on July 9, below the 30 level that suggests the securities are poised to change direction. The stochastic oscillator on 20-year yields dropped to 5 on July 9, less than the 20 level that signals yields are likely to rebound. A stochastic oscillator chart measures the closing price of a security relative to its highs and lows to try to predict whether it will rise or fall.
Pimco Buys
Pacific Investment Management Co., which runs the world’s largest bond fund, said investors who avoid Japanese government debt may miss out on a rally.
Japan’s benchmark bonds may gain this year, pushing 10-year yields to the lowest since August 2003, as the world’s second- largest economy struggles to emerge from its worst postwar recession and avoid a deflationary spiral, said Tomoya Masanao, a Pimco executive vice president in Tokyo. The Newport Beach, California-based company manages $756 billion in assets.
“There is a huge risk not holding bonds,” Masanao said in an interview with Bloomberg News on July 8. “The growth rate won’t rise much and inflation will remain low.”
Japan’s economy is likely to contract 6 percent in the fiscal year that started April 1, the International Monetary Fund said this week. Economists in a Bloomberg News survey said Japan’s quarterly growth rate will remain below 3 percent through the three months ending June 30, 2010. Consumer prices, excluding fresh food, slid a record 1.1 percent in May from a year earlier, the statistics bureau said last month.
Indonesia, Vying to Enter BRIC, Has Star Role in ‘Chindonesia’
July 11 (Bloomberg) -- Indonesia’s economy may double in the next six years as the world’s biggest exporter of power- station coal and largest producer of palm oil taps surging demand from India and China, CLSA Asia-Pacific Markets said.
China, India and Indonesia will generate $10 trillion of wealth for investors by 2015, Nicholas Cashmore, head of Indonesia research at CLSA Asia-Pacific Markets, said in a note titled “Chindonesia: Enter the Komodo,” a reference to the reptile found only in eastern Indonesia. The three economies are Asia’s “next growth triangle,” he said.
Feeding the needs of the world’s two most-populated nations as demand from Western countries slows may help President Susilo Bambang Yudhoyono meet his target of boosting growth to 7 percent in his second term. Indonesia wants be included among the so-called BRIC nations of Brazil, Russia, India and China, Emil Salim, a presidential adviser, said.
“Together, China and India are increasingly becoming the biggest marketplace for almost everything sold on the planet,” Cashmore said in the report published yesterday. Indonesia plays a symbiotic role in the emergence of China and India and “as this role becomes more pronounced in years to come, it will boost growth, investment and consumption.”
India’s industrial production increased at the fastest pace in eight months in May, the statistics agency said yesterday. The South Asian nation, the biggest buyer of Indonesia’s palm oil and cashew, may overtake China next year as the world’s fastest growing major economy, according to the World Bank.
BRIC Membership
China’s economy will expand 7.2 percent in 2009 from a year earlier, the Washington-based lender said. Indonesia’s exports to China grew 16 percent last year, compared with a 10.7 percent expansion in demand from the U.S., the second-largest buyer of Indonesian products.
Indonesia’s economic acceleration provides a case for its inclusion among the BRIC economies, Morgan Stanley said in a report to clients last month.
The $433 billion economy can expand “significantly” more than 7 percent once Yudhoyono fixes the nation’s congested roads, neglected ports and ageing power plants, according to Joachim von Amsberg, the World Bank’s representative in Jakarta.
Yudhoyono is set to win a second term after presidential elections this week, providing the 59-year-old former general with a mandate to double spending on roads and power to $140 billion by 2014.
Congested Roads
Fixing Indonesia’s congested roads, neglected ports and ageing power plants needs to be among Yudhoyono’s top priorities for him to achieve his goal of boosting growth and reducing poverty, according to nine of 11 chief executive officers contacted in the past month by Bloomberg News.
He also needs to improve transparency in Indonesia’s legal system and reduce corruption to attract global investors, the survey found.
“Keeping the drive for fair and transparent practices and processes, which helps secure a level playing field for all,” will help business in Indonesia, Stuart Dean, Southeast Asia president of General Electric Co. said in a response to the survey last month.
In 2007, Tata Power Co., which is building a 4,000-megawatt plant in western India, bought a 30 percent stake in two coal mining units owned by Indonesia’s PT Bumi Resources. The $4.14 billion plant will run on coal from the Indonesian mines.
India’s coal imports will more than double to 100 million tons by 2012 from 40 million tons, estimates Kaamil Fareed, a senior trading manager at the Coal & Oil Group, which supplies coal in India and Pakistan. That’s about 40 percent of Indonesia’s estimated coal production for this year.
“As a leading supplier of commodities, Indonesia is leveraged to the growth of Chindia,” Cashmore said referring to China and India. “Indonesia is ready to rise in the world economic hierarchy and take its place alongside China and India.”
China, India and Indonesia will generate $10 trillion of wealth for investors by 2015, Nicholas Cashmore, head of Indonesia research at CLSA Asia-Pacific Markets, said in a note titled “Chindonesia: Enter the Komodo,” a reference to the reptile found only in eastern Indonesia. The three economies are Asia’s “next growth triangle,” he said.
Feeding the needs of the world’s two most-populated nations as demand from Western countries slows may help President Susilo Bambang Yudhoyono meet his target of boosting growth to 7 percent in his second term. Indonesia wants be included among the so-called BRIC nations of Brazil, Russia, India and China, Emil Salim, a presidential adviser, said.
“Together, China and India are increasingly becoming the biggest marketplace for almost everything sold on the planet,” Cashmore said in the report published yesterday. Indonesia plays a symbiotic role in the emergence of China and India and “as this role becomes more pronounced in years to come, it will boost growth, investment and consumption.”
India’s industrial production increased at the fastest pace in eight months in May, the statistics agency said yesterday. The South Asian nation, the biggest buyer of Indonesia’s palm oil and cashew, may overtake China next year as the world’s fastest growing major economy, according to the World Bank.
BRIC Membership
China’s economy will expand 7.2 percent in 2009 from a year earlier, the Washington-based lender said. Indonesia’s exports to China grew 16 percent last year, compared with a 10.7 percent expansion in demand from the U.S., the second-largest buyer of Indonesian products.
Indonesia’s economic acceleration provides a case for its inclusion among the BRIC economies, Morgan Stanley said in a report to clients last month.
The $433 billion economy can expand “significantly” more than 7 percent once Yudhoyono fixes the nation’s congested roads, neglected ports and ageing power plants, according to Joachim von Amsberg, the World Bank’s representative in Jakarta.
Yudhoyono is set to win a second term after presidential elections this week, providing the 59-year-old former general with a mandate to double spending on roads and power to $140 billion by 2014.
Congested Roads
Fixing Indonesia’s congested roads, neglected ports and ageing power plants needs to be among Yudhoyono’s top priorities for him to achieve his goal of boosting growth and reducing poverty, according to nine of 11 chief executive officers contacted in the past month by Bloomberg News.
He also needs to improve transparency in Indonesia’s legal system and reduce corruption to attract global investors, the survey found.
“Keeping the drive for fair and transparent practices and processes, which helps secure a level playing field for all,” will help business in Indonesia, Stuart Dean, Southeast Asia president of General Electric Co. said in a response to the survey last month.
In 2007, Tata Power Co., which is building a 4,000-megawatt plant in western India, bought a 30 percent stake in two coal mining units owned by Indonesia’s PT Bumi Resources. The $4.14 billion plant will run on coal from the Indonesian mines.
India’s coal imports will more than double to 100 million tons by 2012 from 40 million tons, estimates Kaamil Fareed, a senior trading manager at the Coal & Oil Group, which supplies coal in India and Pakistan. That’s about 40 percent of Indonesia’s estimated coal production for this year.
“As a leading supplier of commodities, Indonesia is leveraged to the growth of Chindia,” Cashmore said referring to China and India. “Indonesia is ready to rise in the world economic hierarchy and take its place alongside China and India.”
Asia Stocks Post Weekly Loss on Concern About Global Recovery
July 11 (Bloomberg) -- Asian stocks fell this week, the third weekly decline in four, as concern the global recovery will falter caused commodity prices to drop and the yen to strengthen.
BHP Billiton Ltd., the world’s biggest mining company, dropped for a fifth week after copper and oil prices slumped. Honda Motor Co., which makes 51 percent of its revenue in North America, tumbled 10 percent on concern a stronger yen will hurt the value of its overseas revenue. STX Pan Ocean Co. Ltd., South Korea’s biggest bulk carrier, sank 11 percent as shipping rates declined.
The MSCI Asia Pacific Index lost 2.1 percent in the past five days, adding to last week’s 0.8 percent decline. That pared the measure’s record 28 percent in the three months ended June 30 on optimism the global economy is stabilizing.
“The market is finally returning its focus to the present, rather than looking for an eventual recovery,” said Masaru Hamasaki, a Tokyo-based strategist at Toyota Asset Management Co., which oversees $14 billion. “The economic rebound won’t be rapid. Share prices are beginning to reflect that.”
The Asian stock benchmark, which plunged by a record last year as the global economy slipped into recession, has now climbed 43 percent since reaching a more than five-year low on March 9. Stocks on the gauge now trade at 22.8 times reported earnings, compared with 15 times at the market trough in March and 14.9 for the U.S.’s Standard & Poor’s 500 Index.
Disappointing Data
Shares of Japanese exporters declined as the yen rose 3.4 percent against the U.S. dollar, the most since the five days through May 15. Honda Motor slumped 10 percent to 2,355 yen. Toyota Motor Corp., which gets about 37 percent of revenue in North America, slipped 5.8 percent to 3,430 yen. Sony Corp., a consumer electronics maker that gets almost half of sales from U.S. and Europe, slid 8.6 percent to 2,230 yen.
Disappointing economic data, including worse-than-expected U.S. unemployment figures on July 2, has fanned investor concern that stock gains had outpaced prospects for an economic recovery.
Japan’s government said on July 8 that machinery orders declined 3 percent in May. Economists had estimated a 2 percent increase. Growth in Japanese bank lending slowed to 2.5 percent last month from a year earlier, compared with 3.3 percent growth in May, the Bank of Japan said on the same day.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, declined 10 percent to 538 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, dropped 11 percent to 202 yen.
Chinese Developers
Shares of Chinese property developers retreated on concern the government will restrict lending for real estate investments. China Overseas Land & Investment Ltd., a developer controlled by the country’s construction ministry, plunged 9.4 percent to HK$16.20 in Hong Kong. Shimao Property Holdings Ltd., run by billionaire Xu Rongmao, sank 10 percent to HK$14.16 in Hong Kong.
Industrial & Commercial Bank of China Ltd., the world’s largest financial company by market capitalization, dropped 5.2 percent to HK$5.06. China Construction Bank Corp., the mainland’s No. 2 lender, slipped 5.9 percent to HK$5.60.
Rapid credit growth poses a risk to the nation’s lenders and a concentration of loans to some industries may damage the financial system, a China Banking Regulatory Commission official said in a speech posted on the agency’s Web site on July 7. New loans in mainland China rose almost fivefold in June from a year earlier to 1.53 trillion yuan ($224 billion), the central bank said July 8.
“There could be some scrutiny on credit policy to prevent an overheating in the real estate market rather than an overall shift in the policy stance,” Fan Cheuk Wan, head of Asia Pacific research at Credit Suisse Private Banking, said.
Copper, Oil
Shares of commodity producers declined as copper and oil prices dropped this week. The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.
“The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear,” Shiller, a Yale University professor, said July 9 on Bloomberg Radio’s “Surveillance.” The Great Depression was deepened by a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again,” he said.
BHP Billiton dropped 2.3 percent to A$32.65, its fifth week of decline. Rio Tinto Ltd., the world’s third-largest mining company, fell 2.5 percent to A$48.36. Jiangxi Copper Co. Ltd., China’s biggest producer of the metal, slipped 5.1 percent to HK$12.22 in Hong Kong. Copper for September delivery sank 3.7 percent, its second weekly fall.
Baltic Dry Falls
PetroChina Co., the nation’s biggest oil producer and the world’s largest company by market capitalization, slipped 6.9 percent to HK$7.94. Inpex Corp., Japan’s largest oil explorer, dropped 6 percent to 691,000 yen. Woodside Petroleum Ltd., Australia’s second-largest oil producer, fell 3.7 percent to A$39.90.
The Baltic Dry Index, which measures the cost of shipping commodities, dropped 15 percent in London this week, the most since the five days ended March 20.
STX Pan Ocean slumped 11 percent to 10,350 won in Seoul. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron- ore vessels, dropped 8.6 percent to 542 yen in Tokyo. China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, declined 6.9 percent to HK$8.52.
The first companies to go public in China since September surged. Guilin Sanjin Pharmaceutical Co., the nation’s largest maker of herbal lozenges, surged 82 percent to 36.10 yuan. Zhejiang Wanma Cable Co., which supplies cable to the nation’s dominant electricity distributor, jumped 125 percent to 25.93 yuan.
Funds Diverted
In Hong Kong, Amber Energy Ltd. soared 63 percent to HK$2.71 on its debut, after investors subscribed for more than 1,200 times the shares offered in an initial sale.
Chigo Holdings Ltd., which makes air conditioners, will start trading on July 13 In Hong Kong. BBMG Corp., the No. 1 building materials supplier in China’s Beijing, Tianjin and Hebei areas, will start taking orders from institutional investors next week for this year’s second-largest initial public offering in Hong Kong.
“The market’s pulling back as money is tied up with new stocks,” said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.
-- With contribution from Patrick Rial and Kotaro Tsunetomi in Tokyo. Editors: Nick Gentle, Mike Millard.
BHP Billiton Ltd., the world’s biggest mining company, dropped for a fifth week after copper and oil prices slumped. Honda Motor Co., which makes 51 percent of its revenue in North America, tumbled 10 percent on concern a stronger yen will hurt the value of its overseas revenue. STX Pan Ocean Co. Ltd., South Korea’s biggest bulk carrier, sank 11 percent as shipping rates declined.
The MSCI Asia Pacific Index lost 2.1 percent in the past five days, adding to last week’s 0.8 percent decline. That pared the measure’s record 28 percent in the three months ended June 30 on optimism the global economy is stabilizing.
“The market is finally returning its focus to the present, rather than looking for an eventual recovery,” said Masaru Hamasaki, a Tokyo-based strategist at Toyota Asset Management Co., which oversees $14 billion. “The economic rebound won’t be rapid. Share prices are beginning to reflect that.”
The Asian stock benchmark, which plunged by a record last year as the global economy slipped into recession, has now climbed 43 percent since reaching a more than five-year low on March 9. Stocks on the gauge now trade at 22.8 times reported earnings, compared with 15 times at the market trough in March and 14.9 for the U.S.’s Standard & Poor’s 500 Index.
Disappointing Data
Shares of Japanese exporters declined as the yen rose 3.4 percent against the U.S. dollar, the most since the five days through May 15. Honda Motor slumped 10 percent to 2,355 yen. Toyota Motor Corp., which gets about 37 percent of revenue in North America, slipped 5.8 percent to 3,430 yen. Sony Corp., a consumer electronics maker that gets almost half of sales from U.S. and Europe, slid 8.6 percent to 2,230 yen.
Disappointing economic data, including worse-than-expected U.S. unemployment figures on July 2, has fanned investor concern that stock gains had outpaced prospects for an economic recovery.
Japan’s government said on July 8 that machinery orders declined 3 percent in May. Economists had estimated a 2 percent increase. Growth in Japanese bank lending slowed to 2.5 percent last month from a year earlier, compared with 3.3 percent growth in May, the Bank of Japan said on the same day.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, declined 10 percent to 538 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, dropped 11 percent to 202 yen.
Chinese Developers
Shares of Chinese property developers retreated on concern the government will restrict lending for real estate investments. China Overseas Land & Investment Ltd., a developer controlled by the country’s construction ministry, plunged 9.4 percent to HK$16.20 in Hong Kong. Shimao Property Holdings Ltd., run by billionaire Xu Rongmao, sank 10 percent to HK$14.16 in Hong Kong.
Industrial & Commercial Bank of China Ltd., the world’s largest financial company by market capitalization, dropped 5.2 percent to HK$5.06. China Construction Bank Corp., the mainland’s No. 2 lender, slipped 5.9 percent to HK$5.60.
Rapid credit growth poses a risk to the nation’s lenders and a concentration of loans to some industries may damage the financial system, a China Banking Regulatory Commission official said in a speech posted on the agency’s Web site on July 7. New loans in mainland China rose almost fivefold in June from a year earlier to 1.53 trillion yuan ($224 billion), the central bank said July 8.
“There could be some scrutiny on credit policy to prevent an overheating in the real estate market rather than an overall shift in the policy stance,” Fan Cheuk Wan, head of Asia Pacific research at Credit Suisse Private Banking, said.
Copper, Oil
Shares of commodity producers declined as copper and oil prices dropped this week. The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.
“The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear,” Shiller, a Yale University professor, said July 9 on Bloomberg Radio’s “Surveillance.” The Great Depression was deepened by a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again,” he said.
BHP Billiton dropped 2.3 percent to A$32.65, its fifth week of decline. Rio Tinto Ltd., the world’s third-largest mining company, fell 2.5 percent to A$48.36. Jiangxi Copper Co. Ltd., China’s biggest producer of the metal, slipped 5.1 percent to HK$12.22 in Hong Kong. Copper for September delivery sank 3.7 percent, its second weekly fall.
Baltic Dry Falls
PetroChina Co., the nation’s biggest oil producer and the world’s largest company by market capitalization, slipped 6.9 percent to HK$7.94. Inpex Corp., Japan’s largest oil explorer, dropped 6 percent to 691,000 yen. Woodside Petroleum Ltd., Australia’s second-largest oil producer, fell 3.7 percent to A$39.90.
The Baltic Dry Index, which measures the cost of shipping commodities, dropped 15 percent in London this week, the most since the five days ended March 20.
STX Pan Ocean slumped 11 percent to 10,350 won in Seoul. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron- ore vessels, dropped 8.6 percent to 542 yen in Tokyo. China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, declined 6.9 percent to HK$8.52.
The first companies to go public in China since September surged. Guilin Sanjin Pharmaceutical Co., the nation’s largest maker of herbal lozenges, surged 82 percent to 36.10 yuan. Zhejiang Wanma Cable Co., which supplies cable to the nation’s dominant electricity distributor, jumped 125 percent to 25.93 yuan.
Funds Diverted
In Hong Kong, Amber Energy Ltd. soared 63 percent to HK$2.71 on its debut, after investors subscribed for more than 1,200 times the shares offered in an initial sale.
Chigo Holdings Ltd., which makes air conditioners, will start trading on July 13 In Hong Kong. BBMG Corp., the No. 1 building materials supplier in China’s Beijing, Tianjin and Hebei areas, will start taking orders from institutional investors next week for this year’s second-largest initial public offering in Hong Kong.
“The market’s pulling back as money is tied up with new stocks,” said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.
-- With contribution from Patrick Rial and Kotaro Tsunetomi in Tokyo. Editors: Nick Gentle, Mike Millard.
Thursday, July 9, 2009
G-8’s Economic Dominance Faces Challenge From China, India
July 10 (Bloomberg) -- Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signaling the drift in power away from the financially distressed West.
Five countries with almost half the world’s population -- China, India, Brazil, Mexico and South Africa -- challenged the hegemony of the U.S. dollar, balked at the industrial world’s strategy for fighting climate change and sought more clout in global markets and institutions.
The encounter yesterday in L’Aquila, Italy at the annual Group of Eight summit dramatized the ascendance of emerging nations -- led by China -- as the worst economic calamity since World War II batters the U.S. and its European allies.
“Everyone was of the opinion that the G-8 isn’t any longer the most ideal structure for dealing with the governance of the world economy,” Italian Prime Minister Silvio Berlusconi told reporters after chairing the session.
Leaders of the G-5 -- representing 3 billion people with gross domestic product of $7 trillion -- appeared as a united front for a fifth time at the summit of the G-8, the advanced world’s forum founded in 1975.
“What is happening here is simply the acknowledgment of a reality,” Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said in a Bloomberg Television interview. “Be it the fight against poverty, climate change, trade -- whatever you want that is global in nature -- you need those large emerging economies.”
Climate Clash
The eight -- the U.S., Japan, Germany, Britain, France, Italy and Canada, along with Russia, a member since 1998 -- unite 880 million people with combined GDP of $32 trillion.
Russia, which has joined Brazil, India and China in the BRIC bloc, views the G-8 as a forum for “brainstorming,” said Sergei Prikhodko, an aide to President Dmitry Medvedev. “It’s too early to talk about burying the G-8.”
The G-5 took aim at the advanced economies’ call for a 50 percent cut in greenhouse-gas emissions by 2050, saying the policy would suppress the economic growth needed to lift millions out of poverty. No target can be set until world climate talks wrap up in December, they said, insisting on money and technology to help clean up the atmosphere.
“While we don’t expect to solve this problem in one meeting or one summit, I believe we’ve made some important strides,” President Barack Obama said.
Growth Gap
The contrast was highlighted July 7 when the International Monetary Fund said developing countries are leading the way out of the economic morass spawned by the industrial world.
Emerging economies led by China will expand 4.7 percent next year, the IMF said, up from an April prediction of 4 percent. The Washington-based lender forecast growth of 0.6 percent in the advanced economies, up from expectations of stagnation.
China is “better situated to deal with this crisis,” billionaire investor George Soros said in a Bloomberg Radio interview July 7. “The Chinese in my opinion are going to gain in power and influence in a way that people currently don’t recognize.”
In a statement in L’Aquila, the G-5 warned the industrial world against backsliding on aid commitments and sought “a new global governance,” including better representation in the IMF and United Nations.
After parallel summits July 8 in a region rebuilding from an earthquake in April, the G-8 and G-5 met yesterday to work out a statement to at least paper over the diverging worldviews.
Dollar Dispute
Central to their dispute is the status of the dollar, its role as the world’s dominant reserve currency under threat from the $2.3 trillion in debt run up by the U.S. since the start of 2008 to stem the financial crisis.
The G-5 -- mainly China -- held around $1 trillion in U.S. Treasury debt in April, giving them leverage over decisions made in Washington.
While officials from China, Russia, India and Brazil grumbled outside the conference room about the dollar’s hegemony, there was “not a serious discussion” of currencies on the inside, U.K. Prime Minister Gordon Brown said.
“There has been concern on the dollar, but there hasn’t been a coherent strategy put forth,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “We don’t think that’s going to be an issue weighing on the dollar for the balance of this year. It’s a much longer term issue.”
Brazilian and Russian officials said they intended to raise the issue at a G-20 meeting in Pittsburgh in September. The dollar “may well be” brought up there, Brazilian Foreign Minister Celso Amorim said. Arkady Dvorkovich, Medvedev’s economic aide, said currencies are a G-20 matter.
Hu’s Absence
Chinese President Hu Jintao didn’t need to show up in L’Aquila to project his influence. The Chinese leader hustled back to Beijing before the summit started to deal with ethnic disturbances along China’s western border, leaving State Councilor Dai Bingguo as a representative.
“Hu’s absence ironically demonstrated China’s presence,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo.
Five countries with almost half the world’s population -- China, India, Brazil, Mexico and South Africa -- challenged the hegemony of the U.S. dollar, balked at the industrial world’s strategy for fighting climate change and sought more clout in global markets and institutions.
The encounter yesterday in L’Aquila, Italy at the annual Group of Eight summit dramatized the ascendance of emerging nations -- led by China -- as the worst economic calamity since World War II batters the U.S. and its European allies.
“Everyone was of the opinion that the G-8 isn’t any longer the most ideal structure for dealing with the governance of the world economy,” Italian Prime Minister Silvio Berlusconi told reporters after chairing the session.
Leaders of the G-5 -- representing 3 billion people with gross domestic product of $7 trillion -- appeared as a united front for a fifth time at the summit of the G-8, the advanced world’s forum founded in 1975.
“What is happening here is simply the acknowledgment of a reality,” Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said in a Bloomberg Television interview. “Be it the fight against poverty, climate change, trade -- whatever you want that is global in nature -- you need those large emerging economies.”
Climate Clash
The eight -- the U.S., Japan, Germany, Britain, France, Italy and Canada, along with Russia, a member since 1998 -- unite 880 million people with combined GDP of $32 trillion.
Russia, which has joined Brazil, India and China in the BRIC bloc, views the G-8 as a forum for “brainstorming,” said Sergei Prikhodko, an aide to President Dmitry Medvedev. “It’s too early to talk about burying the G-8.”
The G-5 took aim at the advanced economies’ call for a 50 percent cut in greenhouse-gas emissions by 2050, saying the policy would suppress the economic growth needed to lift millions out of poverty. No target can be set until world climate talks wrap up in December, they said, insisting on money and technology to help clean up the atmosphere.
“While we don’t expect to solve this problem in one meeting or one summit, I believe we’ve made some important strides,” President Barack Obama said.
Growth Gap
The contrast was highlighted July 7 when the International Monetary Fund said developing countries are leading the way out of the economic morass spawned by the industrial world.
Emerging economies led by China will expand 4.7 percent next year, the IMF said, up from an April prediction of 4 percent. The Washington-based lender forecast growth of 0.6 percent in the advanced economies, up from expectations of stagnation.
China is “better situated to deal with this crisis,” billionaire investor George Soros said in a Bloomberg Radio interview July 7. “The Chinese in my opinion are going to gain in power and influence in a way that people currently don’t recognize.”
In a statement in L’Aquila, the G-5 warned the industrial world against backsliding on aid commitments and sought “a new global governance,” including better representation in the IMF and United Nations.
After parallel summits July 8 in a region rebuilding from an earthquake in April, the G-8 and G-5 met yesterday to work out a statement to at least paper over the diverging worldviews.
Dollar Dispute
Central to their dispute is the status of the dollar, its role as the world’s dominant reserve currency under threat from the $2.3 trillion in debt run up by the U.S. since the start of 2008 to stem the financial crisis.
The G-5 -- mainly China -- held around $1 trillion in U.S. Treasury debt in April, giving them leverage over decisions made in Washington.
While officials from China, Russia, India and Brazil grumbled outside the conference room about the dollar’s hegemony, there was “not a serious discussion” of currencies on the inside, U.K. Prime Minister Gordon Brown said.
“There has been concern on the dollar, but there hasn’t been a coherent strategy put forth,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “We don’t think that’s going to be an issue weighing on the dollar for the balance of this year. It’s a much longer term issue.”
Brazilian and Russian officials said they intended to raise the issue at a G-20 meeting in Pittsburgh in September. The dollar “may well be” brought up there, Brazilian Foreign Minister Celso Amorim said. Arkady Dvorkovich, Medvedev’s economic aide, said currencies are a G-20 matter.
Hu’s Absence
Chinese President Hu Jintao didn’t need to show up in L’Aquila to project his influence. The Chinese leader hustled back to Beijing before the summit started to deal with ethnic disturbances along China’s western border, leaving State Councilor Dai Bingguo as a representative.
“Hu’s absence ironically demonstrated China’s presence,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo.
Philippine Exports Decline the Least in Six Months
July 10 (Bloomberg) -- Philippine exports fell the least in six months, adding to signs the global recession that hurt demand for Asian-made electronics is easing.
Shipments abroad declined 27 percent from a year earlier to $3.09 billion in May after dropping 35.2 percent the previous month, the National Statistics Office said in Manila today. That compares with the median forecast for a 32 percent plunge in a Bloomberg News survey of nine economists.
The central bank cut its benchmark interest rate to a record low of 4 percent yesterday to revive the economy after the global slump crimped orders for Philippine-produced Intel Corp. computer chips and other goods. The government predicts growth will accelerate in the coming quarters after slumping to a decade low of 0.4 percent in the first three months.
“The bottom happened in the first quarter and we are now seeing an improvement,” said Arthur Young, chairman of Semiconductor and Electronics Industries of the Philippines Inc., an industry association. “There is pretty good strength in demand from certain markets such as China because of their stimulus plan.”
China’s new loans surged almost fivefold in June from a year earlier, helped by a 4 trillion-yuan government stimulus plan and a loosening of lending restrictions to spur growth. Japan’s industrial output rose for a third month in May and Australian consumer confidence jumped in July to the highest level in 19 months.
Semiconductor Sales
Electronics sales, which make up more than half of Philippine exports, fell 26.8 percent to $1.81 billion in May from a year earlier after dropping 33.2 percent in April.
The Philippine association raised its forecast for exports this year two weeks ago, predicting a drop of 15 percent to 20 percent compared with a previous estimate for a decline of as much as 30 percent, Young said.
Worldwide semiconductor sales rose 5.4 percent in May from April, according to the San Jose, California-based Semiconductor Industry Association.
Shipments abroad declined 27 percent from a year earlier to $3.09 billion in May after dropping 35.2 percent the previous month, the National Statistics Office said in Manila today. That compares with the median forecast for a 32 percent plunge in a Bloomberg News survey of nine economists.
The central bank cut its benchmark interest rate to a record low of 4 percent yesterday to revive the economy after the global slump crimped orders for Philippine-produced Intel Corp. computer chips and other goods. The government predicts growth will accelerate in the coming quarters after slumping to a decade low of 0.4 percent in the first three months.
“The bottom happened in the first quarter and we are now seeing an improvement,” said Arthur Young, chairman of Semiconductor and Electronics Industries of the Philippines Inc., an industry association. “There is pretty good strength in demand from certain markets such as China because of their stimulus plan.”
China’s new loans surged almost fivefold in June from a year earlier, helped by a 4 trillion-yuan government stimulus plan and a loosening of lending restrictions to spur growth. Japan’s industrial output rose for a third month in May and Australian consumer confidence jumped in July to the highest level in 19 months.
Semiconductor Sales
Electronics sales, which make up more than half of Philippine exports, fell 26.8 percent to $1.81 billion in May from a year earlier after dropping 33.2 percent in April.
The Philippine association raised its forecast for exports this year two weeks ago, predicting a drop of 15 percent to 20 percent compared with a previous estimate for a decline of as much as 30 percent, Young said.
Worldwide semiconductor sales rose 5.4 percent in May from April, according to the San Jose, California-based Semiconductor Industry Association.
Wednesday, July 8, 2009
IMF sees end to the global recession
By Krishna Guha and Sarah O'Connor in Washington and,Michael Mackenzie in New York
Published: July 9 2009 03:00 | Last updated: July 9 2009 03:00
The world economy is starting to pull out of recession, the International Monetary Fund said yesterday, marking up its growth forecasts for next year and hinting that it might reduce its estimates for bank losses.
"The recovery is coming," said Olivier Blanchard, IMF chief economist. But he cautioned "it is likely to be a weak recovery" and said policymakers needed to guard against ongoing economic and financial risks. However, investors signalled their doubts about the strength of any economic recovery by selling off commodities, notably oil and gold, and stocks.
The yen, a barometer of risk aversion, also shot up 3 per cent against the euro and the dollar.
Since the release of a much weaker-than-expected US jobs report for June last week, investors' appetite for risky assets has soured.
"When we do get a recovery, it will be pretty anaemic," said Jay Mueller, portfolio manager at Wells Capital. "The third quarter will be tough and the fourth does not look much better. People who had been optimistic that the economy has bottomed are rethinking . . . since last week's jobs report."
The IMF now forecasts global growth of 2.5 per cent next year, up from 1.9 per cent in April, led by strong growth in China and India, a rebound in Japan and positive but sub-trend growth in the US. It upgraded its forecasts for Europe too, but still expects the eurozone to contract 0.3 per cent next year, with Germany declining 0.6 per cent.
The Fund inched down its forecast for global growth this year to minus 1.4 per cent.
The IMF did not update its estimates for losses facing banks. However, José Viñals, IMF financial counsellor, said it would be reasonable to guess that the figures would end up being lowered. He said markdowns on securities "would be likely to be somewhat better now" following the improvements in financial markets.
However, the IMF warned against complacency, saying it was too soon to implement "exit strategies" and highlighting several risks to recovery. It urged further efforts to clean up the banking system, noting that "bank capitalisation remains a concern, notably in Europe".
The Fund also signalled concern that governments on both sides of the Atlantic had only "limited" success in dealing with problem assets.
Mr Blanchard said governments should prepare for the possibility that further stimulus could be needed. "It may be that private demand is going to be very weak for longer than we anticipated.
Published: July 9 2009 03:00 | Last updated: July 9 2009 03:00
The world economy is starting to pull out of recession, the International Monetary Fund said yesterday, marking up its growth forecasts for next year and hinting that it might reduce its estimates for bank losses.
"The recovery is coming," said Olivier Blanchard, IMF chief economist. But he cautioned "it is likely to be a weak recovery" and said policymakers needed to guard against ongoing economic and financial risks. However, investors signalled their doubts about the strength of any economic recovery by selling off commodities, notably oil and gold, and stocks.
The yen, a barometer of risk aversion, also shot up 3 per cent against the euro and the dollar.
Since the release of a much weaker-than-expected US jobs report for June last week, investors' appetite for risky assets has soured.
"When we do get a recovery, it will be pretty anaemic," said Jay Mueller, portfolio manager at Wells Capital. "The third quarter will be tough and the fourth does not look much better. People who had been optimistic that the economy has bottomed are rethinking . . . since last week's jobs report."
The IMF now forecasts global growth of 2.5 per cent next year, up from 1.9 per cent in April, led by strong growth in China and India, a rebound in Japan and positive but sub-trend growth in the US. It upgraded its forecasts for Europe too, but still expects the eurozone to contract 0.3 per cent next year, with Germany declining 0.6 per cent.
The Fund inched down its forecast for global growth this year to minus 1.4 per cent.
The IMF did not update its estimates for losses facing banks. However, José Viñals, IMF financial counsellor, said it would be reasonable to guess that the figures would end up being lowered. He said markdowns on securities "would be likely to be somewhat better now" following the improvements in financial markets.
However, the IMF warned against complacency, saying it was too soon to implement "exit strategies" and highlighting several risks to recovery. It urged further efforts to clean up the banking system, noting that "bank capitalisation remains a concern, notably in Europe".
The Fund also signalled concern that governments on both sides of the Atlantic had only "limited" success in dealing with problem assets.
Mr Blanchard said governments should prepare for the possibility that further stimulus could be needed. "It may be that private demand is going to be very weak for longer than we anticipated.
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