Aug. 24 (Bloomberg) -- Asian stocks rose, led by commodities producers, as copper and oil prices increased and sales of existing homes in the U.S. surged the most on record, fueling speculation a global economic recovery is strengthening.
BHP Billiton Ltd., the world’s biggest mining company, gained 4.1 percent in Sydney. Woodside Petroleum Ltd. rose 3.9 percent, and Komatsu Ltd., a Japanese maker of construction equipment added 2.7 percent. Hyundai Motor Co., South Korea’s largest automaker, climbed 5.3 percent in Seoul after the company appointed a new vice chairman.
“The fundamentals of the global economy and corporate earnings are improving, supporting the resilience of the market,” said Yoshinori Nagano, a senior strategist at Tokyo- based Daiwa Asset Management Co., which oversees the equivalent of $91 billion. “The housing report confirmed the U.S. is clearly on a path to recovery.”
The MSCI Asia Pacific Index rose 2.1 percent to 112.37 as of 10:33 a.m. in Tokyo, with about 14 times as many stocks gaining as retreating. All 10 industry groups climbed, led by materials producers. Japan’s Nikkei 225 Stock Average added 3.1 percent to 10,559.40, with only four stocks falling. All Asian benchmark gauges open for trading advanced.
In New York, the Standard & Poor’s 500 Index climbed 1.9 percent on Aug. 21 to a level not seen since Oct. 6. Purchases of existing U.S. homes jumped 7.2 percent in July, the most since the tallies began in 1999, the National Association of Realtors said. Federal Reserve Chairman Ben S. Bernanke said the global economy is “beginning to emerge” from recession.
Mining, Oil
BHP added 4.1 percent to A$38.11 after copper futures climbed 5.1 percent in New York on Aug. 21, the steepest gain since June 1. Rio Tinto Group Ltd., the world’s third-biggest mining company, advanced 4.2 percent to A$58.70.
Komatsu, the world’s second-largest maker of construction machinery, rose 2.7 percent in Tokyo, and Mitsubishi Corp., a Japanese trading company that gets more than a third of its sales from commodities, advanced 3.6 percent.
Woodside Petroleum, Australia’s second-largest oil and gas producer, rose 3.9 percent to A$48.40. Also in Sydney, Santos Ltd., an explorer seeking to develop three liquefied natural gas projects, climbed 4 percent to A$15.50. Inpex Corp., Japan’s biggest energy explorer, surged 4.3 percent to 750,000 yen.
Oil traded near a 10-month high in New York today on speculation demand will increase as the global economy emerges from the deepest recession since World War II.
Australian Banks
Australian banks rallied on speculation a recovery will reduce loan losses and spur credit growth. National Australia Bank Ltd., the nation’s largest by assets, climbed 2.9 percent to A$26.42 in Sydney. Australia & New Zealand Banking Group Ltd., Australia’s fourth-biggest lender, gained 2.8 percent to A$19.57.
Shares on the MSCI Asia Pacific Index traded at 23.7 times their estimated net income on Aug. 21, the lowest level in a month. The gauge dropped 3.2 percent last week, the most since the five days ended June 19, on concern China will curb bank lending, hampering growth.
Hyundai Motor rallied 5.3 percent to 108,500 won, as the company named Chung Eui Sun, the only son of the company’s chairman, vice chairman in charge of planning and sales.
Japanese exporters got a further boost from the strengthening dollar, which lifts the value of overseas sales at Japanese companies when converted into their home currency. The dollar gained to as much as 94.70 yen today from 93.77 at the close of Tokyo stock trading on Aug. 21.
Canon Inc., the world’s biggest maker of digital cameras and which gets a third of its sales from the Americas, added 4.9 percent to 3,670 yen. Honda Motor Co., a carmaker which gets more than half its sales in North America, gained 3.2 percent to 3,050 yen, while bigger rival Toyota Motor Corp. rose 3 percent to 4,100 yen.
“Japanese exporters are discounted as investors are wary of U.S. consumer spending,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo. “The home-sales report will likely help narrow this discount.”
Monday, August 24, 2009
World Economy Emerging From Worst Recession Since World War II
Aug. 22 (Bloomberg) -- The global economy may be coming out of the worst recession since World War II as record-low interest rates and trillions of dollars in fiscal stimulus spur demand.
Sales of existing U.S. homes jumped in July to the highest level since August 2007, and German service industries expanded this month for the first time in almost a year, reports yesterday showed. The Japanese economy grew for the first time in five quarters, according to a report earlier this week.
“There is no question the global economy is healing and emerging from recession,” Kenneth Rogoff, a Harvard University professor and former chief economist for the International Monetary Fund, said in a Bloomberg Television interview yesterday.
Federal Reserve Chairman Ben S. Bernanke and other global policy makers cautioned that the recovery is likely to be muted, indicating they would not soon remove all the stimulus injected into the financial system.
“Strains persist in many financial markets across the globe,” Bernanke said in a speech yesterday at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. “The economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels.”
The U.S. housing market, which led the way into the recession, is showing signs of righting itself after almost four years of declines. The 7.2 percent rise in sales of existing homes last month was the biggest since the National Association of Realtors began keeping records in 1999.
Housing Stabilizes
U.S. stocks gained for a fourth day, sending the Standard & Poor’s 500 Index to the highest level since October. The S&P 500 added 1.9 percent to 1,026.13, giving it a 2.2 percent advance this week. The dollar and Treasuries fell, while oil rose to a 10-month high.
The news yesterday followed a report earlier in the week that single-family housing starts rose in July for the fifth consecutive month to reach the highest level since October.
“Although some of our markets are still stuck in the mud, many are improving,” Robert Toll, Chairman and Chief Executive Officer of Toll Brothers Inc., told Wall Street analysts on Aug. 12. “It does feel as if the fence sitters are looking for reasons to jump in on the side of buying.” Horsham, Pennsylvania-based Toll is the largest U.S. luxury homebuilder.
Demand has been boosted by government tax credits for first-time buyers and near record-low borrowing costs engineered by the Fed, which has coupled a cut in its benchmark interest rate to near zero with purchases of mortgage-backed securities.
The index of U.S. leading economic indicators, which is supposed to presage activity three to six months ahead, rose in July for a fourth consecutive month, the New York-based Conference Board reported on Aug. 20.
German Sentiment
In Germany, Europe’s largest economy, “business sentiment among service providers strengthened in August and was the most positive since January 2006,” Markit Economics said yesterday, pointing to its purchasing managers’ survey.
“The recession is over,” said Klaus Baader, chief European economist at Societe Generale SA in London, who called the Markit data an “incredible reading.”
German investors are also upbeat. Their confidence jumped to its highest level in more than three years in August, the Mannheim, Germany-based ZEW Center for European Economic Research said on Aug. 18.
Chancellor Angela Merkel, who faces national elections next month, is spending about 85 billion euros ($122 billion) in an effort to rekindle economic growth, including a 2,500-euro payment for consumers who scrap an old car and buy a new one. New-vehicle registrations in Germany rose 23 percent in the first five months of 2009 from the year-earlier period.
Japanese GDP
Japan’s economy is also being boosted by government measures ahead of an election. Prime Minister Taro Aso, whose party is trailing in opinion polls before the Aug. 30 parliamentary elections, has put forward a 25 trillion yen ($265 billion) stimulus plan.
The 3.7 percent rise in Japanese gross domestic product in the second quarter followed an 11.7 percent contraction in the first three months of the year. Exports led the revival of the world’s second-largest economy last quarter, jumping by 6.3 percent.
The IMF may increase its forecast for the global economic rebound next year as signs of growth return, John Lipsky, the fund’s first deputy managing director, said yesterday.
The Washington-based lender last month predicted the world economy will expand 2.5 percent in 2010 after contracting 1.4 percent this year.
Recovery ‘Anticipated’
“We’re on track in broad terms for the kind of recovery we had anticipated,” Lipsky said in a Bloomberg Television interview from Jackson Hole. “But to get that recovery requires continued policy effort -- accommodative monetary policy, stimulative fiscal policy -- to make sure that growth shows up.”
European Central Bank President Jean-Claude Trichet sounded a similar note, telling the Jackson Hole conference that it’s too soon to say a recovery can be sustained and that policy makers need to maintain efforts to restore confidence.
“We know that we have an enormous amount of work to do and we should be as active as possible,” Trichet said. The ECB has cut its benchmark interest rate to a record 1 percent and is buying covered bonds and flooding banks with money.
Sales of existing U.S. homes jumped in July to the highest level since August 2007, and German service industries expanded this month for the first time in almost a year, reports yesterday showed. The Japanese economy grew for the first time in five quarters, according to a report earlier this week.
“There is no question the global economy is healing and emerging from recession,” Kenneth Rogoff, a Harvard University professor and former chief economist for the International Monetary Fund, said in a Bloomberg Television interview yesterday.
Federal Reserve Chairman Ben S. Bernanke and other global policy makers cautioned that the recovery is likely to be muted, indicating they would not soon remove all the stimulus injected into the financial system.
“Strains persist in many financial markets across the globe,” Bernanke said in a speech yesterday at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. “The economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels.”
The U.S. housing market, which led the way into the recession, is showing signs of righting itself after almost four years of declines. The 7.2 percent rise in sales of existing homes last month was the biggest since the National Association of Realtors began keeping records in 1999.
Housing Stabilizes
U.S. stocks gained for a fourth day, sending the Standard & Poor’s 500 Index to the highest level since October. The S&P 500 added 1.9 percent to 1,026.13, giving it a 2.2 percent advance this week. The dollar and Treasuries fell, while oil rose to a 10-month high.
The news yesterday followed a report earlier in the week that single-family housing starts rose in July for the fifth consecutive month to reach the highest level since October.
“Although some of our markets are still stuck in the mud, many are improving,” Robert Toll, Chairman and Chief Executive Officer of Toll Brothers Inc., told Wall Street analysts on Aug. 12. “It does feel as if the fence sitters are looking for reasons to jump in on the side of buying.” Horsham, Pennsylvania-based Toll is the largest U.S. luxury homebuilder.
Demand has been boosted by government tax credits for first-time buyers and near record-low borrowing costs engineered by the Fed, which has coupled a cut in its benchmark interest rate to near zero with purchases of mortgage-backed securities.
The index of U.S. leading economic indicators, which is supposed to presage activity three to six months ahead, rose in July for a fourth consecutive month, the New York-based Conference Board reported on Aug. 20.
German Sentiment
In Germany, Europe’s largest economy, “business sentiment among service providers strengthened in August and was the most positive since January 2006,” Markit Economics said yesterday, pointing to its purchasing managers’ survey.
“The recession is over,” said Klaus Baader, chief European economist at Societe Generale SA in London, who called the Markit data an “incredible reading.”
German investors are also upbeat. Their confidence jumped to its highest level in more than three years in August, the Mannheim, Germany-based ZEW Center for European Economic Research said on Aug. 18.
Chancellor Angela Merkel, who faces national elections next month, is spending about 85 billion euros ($122 billion) in an effort to rekindle economic growth, including a 2,500-euro payment for consumers who scrap an old car and buy a new one. New-vehicle registrations in Germany rose 23 percent in the first five months of 2009 from the year-earlier period.
Japanese GDP
Japan’s economy is also being boosted by government measures ahead of an election. Prime Minister Taro Aso, whose party is trailing in opinion polls before the Aug. 30 parliamentary elections, has put forward a 25 trillion yen ($265 billion) stimulus plan.
The 3.7 percent rise in Japanese gross domestic product in the second quarter followed an 11.7 percent contraction in the first three months of the year. Exports led the revival of the world’s second-largest economy last quarter, jumping by 6.3 percent.
The IMF may increase its forecast for the global economic rebound next year as signs of growth return, John Lipsky, the fund’s first deputy managing director, said yesterday.
The Washington-based lender last month predicted the world economy will expand 2.5 percent in 2010 after contracting 1.4 percent this year.
Recovery ‘Anticipated’
“We’re on track in broad terms for the kind of recovery we had anticipated,” Lipsky said in a Bloomberg Television interview from Jackson Hole. “But to get that recovery requires continued policy effort -- accommodative monetary policy, stimulative fiscal policy -- to make sure that growth shows up.”
European Central Bank President Jean-Claude Trichet sounded a similar note, telling the Jackson Hole conference that it’s too soon to say a recovery can be sustained and that policy makers need to maintain efforts to restore confidence.
“We know that we have an enormous amount of work to do and we should be as active as possible,” Trichet said. The ECB has cut its benchmark interest rate to a record 1 percent and is buying covered bonds and flooding banks with money.
Friday, August 21, 2009
Microsoft, Sony slug it out over living-room "hub"
SAN FRANCISCO (Reuters) - Microsoft Corp's (MSFT.O) Xbox 360 and Sony Corp's (6758.T) PlayStation 3 are locked in a battle to control entertainment in the living room beyond video games, a competition that is only growing more intense with the increasing popularity of digital distribution.
The two rivals have tens of millions of users, making them well-placed to capitalize if a critical mass of consumers begins to move toward a single "digital hub" that offers a buffet of media, including movies, TV shows, music and games.
The all-in-one hub has been touted for years as the future of home entertainment, but consumers have been slow to change, still opting to play their content on a variety of devices.
Although analysts caution that it is still early in the game, they say Microsoft --- which had a four-year head start -- is leading Sony, with steady revenue from paying subscribers and a strong slate of content deals, including partners such as Netflix (NFLX.O) and Facebook.
Although the companies do not provide sales data for their entertainment networks -- Xbox Live and the PlayStation Network (PSN) -- Jesse Divnich, an analyst with EEDAR, said sales have more than doubled year-to-date. He expects their combined revenue to top $1 billion in 2009, with Microsoft well ahead.
"We're seeing the video game systems try to take control of our living room by offering all the different services and entertainment needs we have, all in one box."
Xbox Live and PSN both offer movies, shows and videos, on top of game downloads. Neither offers music downloads, although users can play songs from their libraries.
Xbox Live Gold members pay $50 a year for additional goodies, including online multiplayer gaming and Netflix access. PSN offers online gaming for free.
But Microsoft has over the years amassed a dedicated group of gamers, said Wedbush Morgan analyst Michael Pachter, who estimates 11 million people pay for Xbox Live Gold.
"Microsoft made it simple -- do online games, then move that online game player into watching movies and the next thing you know he's going to be tuning in to Internet television. They've been very smart about it."
David Cole, founder of research firm DFC Intelligence, said the PlayStation 3's Blu-ray player broadens its appeal, but he said people are still mainly buying consoles for games.
"There are so many devices that you can use to watch video or listen to music ... now I've got to go buy a game system to do that, and a fairly expensive one?"
RACE TO BUILD A BROADER PLATFORM
Many set-top boxes, along with Apple Inc's (AAPL.O) Apple TV, offer movies and shows, but analysts say video games give consoles an advantage.
The Xbox 360 is the No. 2 home console in the United States, and sales are showing strength in a difficult economy. The PlayStation 3 is No. 3 and has struggled, but Sony just slashed its price to $299, which should help boost sales.
Nintendo's (7974.OS) Wii is the best-selling home console. Analysts say the Wii has a major opportunity to offer more content, given its huge customer base of families and more casual gamers.
But Nintendo has yet to position the Wii as a broader entertainment hub. "The focus is really about video games," said Cammie Dunaway, Nintendo of America's executive vice president of sales and marketing.
Microsoft and Sony are massive companies, with their game businesses constituting only one small part. But both emphasized their ability to leverage the strengths of the larger company to turn their console into the living room hub.
"I like our position in the race," said Shane Kim, vice president of strategy and business development for Microsoft's interactive entertainment business.
"This is the entire reason why Microsoft got into the Xbox business in the first place, why we made the strategic investment in Xbox Live ... to build a broader consumer entertainment platform."
He said recent deals with streaming-music service last.fm, pay-TV broadcasters Canal Plus and BSkyB show that the Xbox is becoming a one-stop media center.
Xbox Live launched in 2002 and has 20 million members with an installed base of more than 30 million consoles.
At the same time, Sony said its sheer breadth of expertise across technology and content gives it the edge in a battle that will be more of a marathon than a sprint.
"We're a software company, hardware company, music company, a movie studio," said Eric Lempel, director of PlayStation Network operations for Sony Computer Entertainment America.
Sony's PSN, launched in 2006, has more than 26 million members. There are 24 million PS3 consoles on the market, along with 53 million PlayStation Portables, which can also access the network.
Sony has said it plans to better utilize and expand the PSN platform. Lempel said the company has an array of devices -- from Vaio PCs to Sony-Ericsson phones -- that will be able to tap into the content on PSN, giving the company a broad reach.
The two rivals have tens of millions of users, making them well-placed to capitalize if a critical mass of consumers begins to move toward a single "digital hub" that offers a buffet of media, including movies, TV shows, music and games.
The all-in-one hub has been touted for years as the future of home entertainment, but consumers have been slow to change, still opting to play their content on a variety of devices.
Although analysts caution that it is still early in the game, they say Microsoft --- which had a four-year head start -- is leading Sony, with steady revenue from paying subscribers and a strong slate of content deals, including partners such as Netflix (NFLX.O) and Facebook.
Although the companies do not provide sales data for their entertainment networks -- Xbox Live and the PlayStation Network (PSN) -- Jesse Divnich, an analyst with EEDAR, said sales have more than doubled year-to-date. He expects their combined revenue to top $1 billion in 2009, with Microsoft well ahead.
"We're seeing the video game systems try to take control of our living room by offering all the different services and entertainment needs we have, all in one box."
Xbox Live and PSN both offer movies, shows and videos, on top of game downloads. Neither offers music downloads, although users can play songs from their libraries.
Xbox Live Gold members pay $50 a year for additional goodies, including online multiplayer gaming and Netflix access. PSN offers online gaming for free.
But Microsoft has over the years amassed a dedicated group of gamers, said Wedbush Morgan analyst Michael Pachter, who estimates 11 million people pay for Xbox Live Gold.
"Microsoft made it simple -- do online games, then move that online game player into watching movies and the next thing you know he's going to be tuning in to Internet television. They've been very smart about it."
David Cole, founder of research firm DFC Intelligence, said the PlayStation 3's Blu-ray player broadens its appeal, but he said people are still mainly buying consoles for games.
"There are so many devices that you can use to watch video or listen to music ... now I've got to go buy a game system to do that, and a fairly expensive one?"
RACE TO BUILD A BROADER PLATFORM
Many set-top boxes, along with Apple Inc's (AAPL.O) Apple TV, offer movies and shows, but analysts say video games give consoles an advantage.
The Xbox 360 is the No. 2 home console in the United States, and sales are showing strength in a difficult economy. The PlayStation 3 is No. 3 and has struggled, but Sony just slashed its price to $299, which should help boost sales.
Nintendo's (7974.OS) Wii is the best-selling home console. Analysts say the Wii has a major opportunity to offer more content, given its huge customer base of families and more casual gamers.
But Nintendo has yet to position the Wii as a broader entertainment hub. "The focus is really about video games," said Cammie Dunaway, Nintendo of America's executive vice president of sales and marketing.
Microsoft and Sony are massive companies, with their game businesses constituting only one small part. But both emphasized their ability to leverage the strengths of the larger company to turn their console into the living room hub.
"I like our position in the race," said Shane Kim, vice president of strategy and business development for Microsoft's interactive entertainment business.
"This is the entire reason why Microsoft got into the Xbox business in the first place, why we made the strategic investment in Xbox Live ... to build a broader consumer entertainment platform."
He said recent deals with streaming-music service last.fm, pay-TV broadcasters Canal Plus and BSkyB show that the Xbox is becoming a one-stop media center.
Xbox Live launched in 2002 and has 20 million members with an installed base of more than 30 million consoles.
At the same time, Sony said its sheer breadth of expertise across technology and content gives it the edge in a battle that will be more of a marathon than a sprint.
"We're a software company, hardware company, music company, a movie studio," said Eric Lempel, director of PlayStation Network operations for Sony Computer Entertainment America.
Sony's PSN, launched in 2006, has more than 26 million members. There are 24 million PS3 consoles on the market, along with 53 million PlayStation Portables, which can also access the network.
Sony has said it plans to better utilize and expand the PSN platform. Lempel said the company has an array of devices -- from Vaio PCs to Sony-Ericsson phones -- that will be able to tap into the content on PSN, giving the company a broad reach.
Pension Plans’ Private-Equity Cash Depleted as Profits Shrink
Aug. 20 (Bloomberg) -- U.S. pension funds contributed to the record $1.2 trillion that private-equity firms raised this decade. Three of the biggest investors, state pensions in California, Oregon and Washington, plunked down at least $53.8 billion. So far, they only have dwindling paper profits and a lot less cash to show the millions of policemen, teachers and other civil servants in their retirement plans.
The California Public Employees’ Retirement System, the Washington State Investment Board and the Oregon Public Employees’ Retirement Fund -- among the few pension managers to disclose details of their investments -- had recouped just $22.1 billion in cash by the end of 2008 from buyout funds started since 2000, according to data compiled by Bloomberg. That amounts to a shortfall of 59 percent. In total, they haven’t reaped a paper gain from funds formed in the past seven years.
The wisdom of those investment decisions hangs on the remaining value private-equity firms assign to companies they snapped up in 2006 and 2007, during the peak of the buyout boom. For the California, Oregon and Washington plans, that figure totaled $15.8 billion at the beginning of the year.
While some investors say they’re confident the private- equity industry’s traditional practice of taking over companies will pay off, others have been shaken by a credit contraction that froze deal-making, eroded the value of the assets on private-equity firms’ books and prevented them from cashing out in public share sales.
‘Can’t Eat IRRs’
Now pension managers on both ends of the spectrum are looking skeptically at the so-called internal rate of return buyout firms calculate to gauge their results.
“I work for over 400,000 employees, and they can’t eat IRRs,” said Gary Bruebaker, the chief investment officer of the Washington State Investment Board. “At the end of the day, I care about how much do I give you, and how much money do I get back.”
Private-equity firms pool money from so-called limited partners -- pension funds, endowments, wealthy families and sovereign wealth funds -- and use that cash, along with money borrowed from banks, for corporate takeovers. The buyout managers aim to boost profits through cost cuts, acquisitions or added lines of business, then reap a return for themselves and their investors in a public stock offering or a sale to another buyer.
The buyout firms also levy fees, typically 2 percent of the assets they oversee annually and 20 percent of profits from successful investments. That’s helped make the titans of the industry into billionaires.
Avago IPO
Stephen Schwarzman, the 62-year-old co-founder and chairman of Blackstone Group LP, the biggest private-equity firm, ranked 261st on the 2009 Forbes list of the world’s richest people, with an estimated net worth of $2.5 billion. KKR & Co. LP co- founder Henry Kravis, 65, topped that with $3 billion, while Carlyle Group co-founder David Rubenstein, 60, weighed in at $1.4 billion.
Buyout managers, and some pension funds, downplay their cash returns so far this decade and counsel patience, saying that investments often look worse in the years immediately after they’re made. Blackstone’s Schwarzman told backers on an Aug. 6 conference call he expected his New York-based firm to take some of its companies public in 2010. KKR, also in New York, sold shares in Avago Technologies Ltd. through an IPO earlier this month, raising $648 million.
Harvard’s Sales
Pension funds also say that over time, private-equity returns compare favorably to the Standard & Poor’s 500 Index, which declined 28 percent from the beginning of 2000 through the end of last year. Bruebaker says his Washington fund had an 8.2 percent average annual gain from its buyout investments in the past 10 years, compared with a 3.9 percent drop in the S&P.
While investors can sell publicly traded stocks as needed, buyout funds keep money tied up for years, said Steven Kaplan, a professor at the University of Chicago’s Booth School of Business.
“With private equity, you’re taking on a liquidity risk, which people did miscalculate,” said Kaplan, who has studied takeover returns.
University endowments and philanthropic foundations hurt by the worst economic crisis since the Great Depression have struggled to sell their stakes in private-equity funds to raise cash. Investors including Harvard University, in Cambridge, Massachusetts, planned to raise more than $100 billion through so-called secondary sales of limited partnership interests, some at discounts of at least 50 percent, people familiar with the effort said last year.
‘Money in the Ground’
Rubenstein, of Washington-based Carlyle, acknowledges that the buyout industry faces tough questions.
“People have a lot of money in the ground and today it’s probably not worth what they had intended, but a turn-around in valuations is now beginning,” Rubenstein said in an interview. “You’ll probably see general partners and limited partners focused more on multiples of equity rather than just IRRs.”
Representatives of Washington, Calpers and Oregon all said they remain committed to private equity, and pointed to the long-term nature of the investments.
“The market is in a trough,” Oregon spokesman James Sinks said. “The picture would’ve looked different at the end of 2007.” Calpers spokesman Clark McKinley noted that Calpers in June raised its target commitment to private equity to 14 percent of assets from 10 percent.
“That’s an affirmation of our confidence in the asset class,” he said.
Schwarzman and Kravis declined to comment for this article.
‘A Snapshot’
“We are hopefully toward the end of the absolute worst recession of our lifetimes,” said Washington’s Bruebaker. “If you take a snapshot right now, things might not look good. These are 10- to 12-year investments and we believe they’ll be much better than what we see today.”
Bruebaker’s fund and the Oregon Public Employees’ Retirement Fund warmed to buyouts during the 1980s, and Calpers joined in 1990. Today, among U.S. pension plans, Calpers is the largest investor in private-equity funds, while Washington and Oregon are the third- and fourth-biggest, respectively, according to San Francisco-based consulting firm Probitas Partners Inc.
The three state funds, which serve more than 2 million people, collectively more than doubled their buyout commitments in 2005, to $8 billion from $3.1 billion. They ramped up even more the next year, when commitments climbed to $18.7 billion, the data show.
Chrysler, TXU
All told, private-equity firms raked in $1.2 trillion from 2000 through 2008, according to London-based researcher Preqin Ltd. The influx of money, coupled with cheap debt-funding from Wall Street banks eager to collect fees, fueled record-setting takeovers. Nine of the 10 biggest deals were announced from 2005 to mid-2007 as buyout firms acquired the likes of hotel operator Hilton Hotels Corp. and power producer TXU Corp.
The buyouts ground to a halt after the subprime-mortgage market collapsed in late-2007, extinguishing investor demand for high-yield, high-risk debt. The dollar value of deals has dwindled to $42.2 billion so far this year from $212.2 billion in 2008, according to data compiled by Bloomberg.
Private-equity firms unable to cash out of investments have spent much of the credit crisis reworking the capital structures of their debt-laden companies. Chrysler LLC, the carmaker that Cerberus Capital Management LP bought in 2007 for $7.4 billion, and doormaker Masonite International Corp., which KKR purchased in 2005 for C$3 billion ($2.4 billion), filed for bankruptcy this year.
Marked-to-Market
At the same time, changes in accounting rules have cast a spotlight on the current value of private-equity investments.
The Financial Accounting Standards Board’s so-called Statement No. 157, which went into effect at the end of 2007, requires investors, including private-equity managers, to gauge the fair value of holdings that aren’t traded. While most buyout firms typically carried their investments at cost, FAS 157 mandates quarterly assessments of current value.
Such marking-to-market means private-equity funds must tell investors how much their stakes are worth at that moment, even if the managers are planning to hang onto them for years.
“Getting carried away by looking at mark-to-market in my personal view can lead you to an incorrect conclusion for the longer term,” Blackstone’s Schwarzman said on the Aug. 6 conference call.
Blackstone spokesman Peter Rose says it’s premature to judge recent investments, such as those made by the $21.7 billion fund the firm set up in 2007.
‘Profound Losses’
Schwarzman, who created Blackstone in 1985 with Peter G. Peterson, has said their unspent capital -- about $29 billion -- will enable them to buy companies at depressed prices and generate profits as the global economy recovers.
Others see signs that the private-equity business is undergoing a transformation. Carlyle’s Rubenstein predicted that deals in the current environment will be smaller and less reliant on debt. Individual funds already being marketed to investors won’t top $10 billion, and subsequent efforts won’t exceed $5 billion to $6 billion, he said.
“These are major structural changes taking place,” said Dayton Carr, founder of VCFA Group, a New York-based firm that buys interests in private-equity and venture-capital funds. “The basic economy has had huge issues. A lot of the funds will be smaller.”
The upheaval is reflected in the attitudes of pension-fund investors, who are watching and waiting for cash to come in the door.
“When managers are forced to put a hard value on their holdings, we’re seeing some profound losses,” said William Atwood, the executive director of the Illinois State Board of Investment, an $9 billion pension fund. “The rubber hits the road when cash is returned.”
The California Public Employees’ Retirement System, the Washington State Investment Board and the Oregon Public Employees’ Retirement Fund -- among the few pension managers to disclose details of their investments -- had recouped just $22.1 billion in cash by the end of 2008 from buyout funds started since 2000, according to data compiled by Bloomberg. That amounts to a shortfall of 59 percent. In total, they haven’t reaped a paper gain from funds formed in the past seven years.
The wisdom of those investment decisions hangs on the remaining value private-equity firms assign to companies they snapped up in 2006 and 2007, during the peak of the buyout boom. For the California, Oregon and Washington plans, that figure totaled $15.8 billion at the beginning of the year.
While some investors say they’re confident the private- equity industry’s traditional practice of taking over companies will pay off, others have been shaken by a credit contraction that froze deal-making, eroded the value of the assets on private-equity firms’ books and prevented them from cashing out in public share sales.
‘Can’t Eat IRRs’
Now pension managers on both ends of the spectrum are looking skeptically at the so-called internal rate of return buyout firms calculate to gauge their results.
“I work for over 400,000 employees, and they can’t eat IRRs,” said Gary Bruebaker, the chief investment officer of the Washington State Investment Board. “At the end of the day, I care about how much do I give you, and how much money do I get back.”
Private-equity firms pool money from so-called limited partners -- pension funds, endowments, wealthy families and sovereign wealth funds -- and use that cash, along with money borrowed from banks, for corporate takeovers. The buyout managers aim to boost profits through cost cuts, acquisitions or added lines of business, then reap a return for themselves and their investors in a public stock offering or a sale to another buyer.
The buyout firms also levy fees, typically 2 percent of the assets they oversee annually and 20 percent of profits from successful investments. That’s helped make the titans of the industry into billionaires.
Avago IPO
Stephen Schwarzman, the 62-year-old co-founder and chairman of Blackstone Group LP, the biggest private-equity firm, ranked 261st on the 2009 Forbes list of the world’s richest people, with an estimated net worth of $2.5 billion. KKR & Co. LP co- founder Henry Kravis, 65, topped that with $3 billion, while Carlyle Group co-founder David Rubenstein, 60, weighed in at $1.4 billion.
Buyout managers, and some pension funds, downplay their cash returns so far this decade and counsel patience, saying that investments often look worse in the years immediately after they’re made. Blackstone’s Schwarzman told backers on an Aug. 6 conference call he expected his New York-based firm to take some of its companies public in 2010. KKR, also in New York, sold shares in Avago Technologies Ltd. through an IPO earlier this month, raising $648 million.
Harvard’s Sales
Pension funds also say that over time, private-equity returns compare favorably to the Standard & Poor’s 500 Index, which declined 28 percent from the beginning of 2000 through the end of last year. Bruebaker says his Washington fund had an 8.2 percent average annual gain from its buyout investments in the past 10 years, compared with a 3.9 percent drop in the S&P.
While investors can sell publicly traded stocks as needed, buyout funds keep money tied up for years, said Steven Kaplan, a professor at the University of Chicago’s Booth School of Business.
“With private equity, you’re taking on a liquidity risk, which people did miscalculate,” said Kaplan, who has studied takeover returns.
University endowments and philanthropic foundations hurt by the worst economic crisis since the Great Depression have struggled to sell their stakes in private-equity funds to raise cash. Investors including Harvard University, in Cambridge, Massachusetts, planned to raise more than $100 billion through so-called secondary sales of limited partnership interests, some at discounts of at least 50 percent, people familiar with the effort said last year.
‘Money in the Ground’
Rubenstein, of Washington-based Carlyle, acknowledges that the buyout industry faces tough questions.
“People have a lot of money in the ground and today it’s probably not worth what they had intended, but a turn-around in valuations is now beginning,” Rubenstein said in an interview. “You’ll probably see general partners and limited partners focused more on multiples of equity rather than just IRRs.”
Representatives of Washington, Calpers and Oregon all said they remain committed to private equity, and pointed to the long-term nature of the investments.
“The market is in a trough,” Oregon spokesman James Sinks said. “The picture would’ve looked different at the end of 2007.” Calpers spokesman Clark McKinley noted that Calpers in June raised its target commitment to private equity to 14 percent of assets from 10 percent.
“That’s an affirmation of our confidence in the asset class,” he said.
Schwarzman and Kravis declined to comment for this article.
‘A Snapshot’
“We are hopefully toward the end of the absolute worst recession of our lifetimes,” said Washington’s Bruebaker. “If you take a snapshot right now, things might not look good. These are 10- to 12-year investments and we believe they’ll be much better than what we see today.”
Bruebaker’s fund and the Oregon Public Employees’ Retirement Fund warmed to buyouts during the 1980s, and Calpers joined in 1990. Today, among U.S. pension plans, Calpers is the largest investor in private-equity funds, while Washington and Oregon are the third- and fourth-biggest, respectively, according to San Francisco-based consulting firm Probitas Partners Inc.
The three state funds, which serve more than 2 million people, collectively more than doubled their buyout commitments in 2005, to $8 billion from $3.1 billion. They ramped up even more the next year, when commitments climbed to $18.7 billion, the data show.
Chrysler, TXU
All told, private-equity firms raked in $1.2 trillion from 2000 through 2008, according to London-based researcher Preqin Ltd. The influx of money, coupled with cheap debt-funding from Wall Street banks eager to collect fees, fueled record-setting takeovers. Nine of the 10 biggest deals were announced from 2005 to mid-2007 as buyout firms acquired the likes of hotel operator Hilton Hotels Corp. and power producer TXU Corp.
The buyouts ground to a halt after the subprime-mortgage market collapsed in late-2007, extinguishing investor demand for high-yield, high-risk debt. The dollar value of deals has dwindled to $42.2 billion so far this year from $212.2 billion in 2008, according to data compiled by Bloomberg.
Private-equity firms unable to cash out of investments have spent much of the credit crisis reworking the capital structures of their debt-laden companies. Chrysler LLC, the carmaker that Cerberus Capital Management LP bought in 2007 for $7.4 billion, and doormaker Masonite International Corp., which KKR purchased in 2005 for C$3 billion ($2.4 billion), filed for bankruptcy this year.
Marked-to-Market
At the same time, changes in accounting rules have cast a spotlight on the current value of private-equity investments.
The Financial Accounting Standards Board’s so-called Statement No. 157, which went into effect at the end of 2007, requires investors, including private-equity managers, to gauge the fair value of holdings that aren’t traded. While most buyout firms typically carried their investments at cost, FAS 157 mandates quarterly assessments of current value.
Such marking-to-market means private-equity funds must tell investors how much their stakes are worth at that moment, even if the managers are planning to hang onto them for years.
“Getting carried away by looking at mark-to-market in my personal view can lead you to an incorrect conclusion for the longer term,” Blackstone’s Schwarzman said on the Aug. 6 conference call.
Blackstone spokesman Peter Rose says it’s premature to judge recent investments, such as those made by the $21.7 billion fund the firm set up in 2007.
‘Profound Losses’
Schwarzman, who created Blackstone in 1985 with Peter G. Peterson, has said their unspent capital -- about $29 billion -- will enable them to buy companies at depressed prices and generate profits as the global economy recovers.
Others see signs that the private-equity business is undergoing a transformation. Carlyle’s Rubenstein predicted that deals in the current environment will be smaller and less reliant on debt. Individual funds already being marketed to investors won’t top $10 billion, and subsequent efforts won’t exceed $5 billion to $6 billion, he said.
“These are major structural changes taking place,” said Dayton Carr, founder of VCFA Group, a New York-based firm that buys interests in private-equity and venture-capital funds. “The basic economy has had huge issues. A lot of the funds will be smaller.”
The upheaval is reflected in the attitudes of pension-fund investors, who are watching and waiting for cash to come in the door.
“When managers are forced to put a hard value on their holdings, we’re seeing some profound losses,” said William Atwood, the executive director of the Illinois State Board of Investment, an $9 billion pension fund. “The rubber hits the road when cash is returned.”
Thursday, August 20, 2009
Indian Prices Fall as Subbarao Looks Beyond Inflation
Aug. 20 (Bloomberg) -- India’s benchmark wholesale price index extended its longest decline in three decades as central bank Governor Duvvuri Subbarao says an inflation-targeting policy isn’t enough to maintain financial and economic stability.
Wholesale prices fell 1.53 percent in the week to Aug. 8 from a year earlier, the commerce ministry said in New Delhi today. That was more than the median forecast of a 1.49 percent decline in a Bloomberg News survey of 18 economists.
Subbarao is concerned that inflation may gather speed, as evidenced by upward revisions the commerce ministry has been making to the wholesale price index in recent months. The governor told a forum in the southern Indian city of Hyderabad last week that the global financial crisis has shown an exclusive focus by central banks on inflation targeting “doesn’t work.”
“The central bank can’t detach itself from its stated objective of maintaining price stability and at the same time will have to address concerns over growth and orderly financial markets,” said D. H. Pai Panandiker, president of the RPG Foundation, an economic policy group in New Delhi.
Subbarao slashed the Reserve Bank of India’s key interest rates six times between October 2008 and April 2009 to an unprecedented low. On July 28, he left the reverse repurchase rate unchanged at 3.25 percent and kept the repurchase rate at 4.75 percent and said the central bank may have to “reverse” its expansionary measures to subdue inflation.
Weak Monsoon
Bonds were little changed. The yield on the 7.02 percent note due August 2016 was unchanged at 7.10 percent as of 12:04 p.m. in Mumbai, according to the central bank’s trading system.
Gains in wholesale prices may exceed the central bank’s forecast of 5 percent by March next year as a weak monsoon threatens to reduce harvests and push up food prices. Inflation has slowed from a 16-year high of 12.91 percent in August 2008.
The India Meteorological Department on Aug. 10 lowered its monsoon forecast for a second time this season, saying showers between June and September will be 13 percent below average, compared with a 7 percent shortfall estimated in June.
Food costs, as reflected in the consumer-price indexes, are already high. India has four consumer-price gauges and uses the wholesale-price index as the benchmark because the other inflation measures don’t capture the aggregate price picture.
‘Complicates’ Policy
Consumer prices paid by farm workers jumped 11.52 percent in June from a year earlier after gaining 10.21 percent in May. Prices paid by rural workers rose 11.26 percent in June and those paid by industrial workers climbed 9.26 percent.
Subbarao says the discrepancies between these inflation measures “complicates” monetary policy. The governor claims borrowing by Prime Minister Manmohan Singh’s government to fund the widest budget deficit in 16 years also “impedes” the transmission of central bank policy.
Finance Minister Pranab Mukherjee on July 6 unveiled plans to borrow a record 4.51 trillion rupees ($93.3 billion) to fund a budget gap estimated at 6.8 percent of gross domestic product.
The central bank is worried that high government borrowings are “literally negating the interest-rate cuts of the past months,” said the RPG Foundation’s Panandiker.
In its most recent monetary policy statement released July 28, the central bank said its medium-term objective is an inflation rate of 3 percent.
Asset-Price Bubbles
Subbarao last week said inflation targeting can’t do much to provide protection against asset-price bubbles and doesn’t necessarily deliver financial or macroeconomic stability.
“The challenge thrown up by the crisis is what should be the mandate of the central bank,” he said. “If an exclusive focus on targeting of inflation has failed, how do we rejig that mandate?”
The Reserve Bank has done a “fairly decent job” in recent years to tailor its strategy according to an evolving economic environment, said Dharmakirti Joshi, an economist at Mumbai- based Crisil Ltd., the local unit of Standard & Poor’s.
“Though the central bank will have to remain focused on inflation, strict mechanical targeting is not feasible in a country like India,” Joshi said. “One reason for that is that the RBI is juggling a lot responsibilities, including managing government debt and ensuring financial markets stability.”
Wholesale prices fell 1.53 percent in the week to Aug. 8 from a year earlier, the commerce ministry said in New Delhi today. That was more than the median forecast of a 1.49 percent decline in a Bloomberg News survey of 18 economists.
Subbarao is concerned that inflation may gather speed, as evidenced by upward revisions the commerce ministry has been making to the wholesale price index in recent months. The governor told a forum in the southern Indian city of Hyderabad last week that the global financial crisis has shown an exclusive focus by central banks on inflation targeting “doesn’t work.”
“The central bank can’t detach itself from its stated objective of maintaining price stability and at the same time will have to address concerns over growth and orderly financial markets,” said D. H. Pai Panandiker, president of the RPG Foundation, an economic policy group in New Delhi.
Subbarao slashed the Reserve Bank of India’s key interest rates six times between October 2008 and April 2009 to an unprecedented low. On July 28, he left the reverse repurchase rate unchanged at 3.25 percent and kept the repurchase rate at 4.75 percent and said the central bank may have to “reverse” its expansionary measures to subdue inflation.
Weak Monsoon
Bonds were little changed. The yield on the 7.02 percent note due August 2016 was unchanged at 7.10 percent as of 12:04 p.m. in Mumbai, according to the central bank’s trading system.
Gains in wholesale prices may exceed the central bank’s forecast of 5 percent by March next year as a weak monsoon threatens to reduce harvests and push up food prices. Inflation has slowed from a 16-year high of 12.91 percent in August 2008.
The India Meteorological Department on Aug. 10 lowered its monsoon forecast for a second time this season, saying showers between June and September will be 13 percent below average, compared with a 7 percent shortfall estimated in June.
Food costs, as reflected in the consumer-price indexes, are already high. India has four consumer-price gauges and uses the wholesale-price index as the benchmark because the other inflation measures don’t capture the aggregate price picture.
‘Complicates’ Policy
Consumer prices paid by farm workers jumped 11.52 percent in June from a year earlier after gaining 10.21 percent in May. Prices paid by rural workers rose 11.26 percent in June and those paid by industrial workers climbed 9.26 percent.
Subbarao says the discrepancies between these inflation measures “complicates” monetary policy. The governor claims borrowing by Prime Minister Manmohan Singh’s government to fund the widest budget deficit in 16 years also “impedes” the transmission of central bank policy.
Finance Minister Pranab Mukherjee on July 6 unveiled plans to borrow a record 4.51 trillion rupees ($93.3 billion) to fund a budget gap estimated at 6.8 percent of gross domestic product.
The central bank is worried that high government borrowings are “literally negating the interest-rate cuts of the past months,” said the RPG Foundation’s Panandiker.
In its most recent monetary policy statement released July 28, the central bank said its medium-term objective is an inflation rate of 3 percent.
Asset-Price Bubbles
Subbarao last week said inflation targeting can’t do much to provide protection against asset-price bubbles and doesn’t necessarily deliver financial or macroeconomic stability.
“The challenge thrown up by the crisis is what should be the mandate of the central bank,” he said. “If an exclusive focus on targeting of inflation has failed, how do we rejig that mandate?”
The Reserve Bank has done a “fairly decent job” in recent years to tailor its strategy according to an evolving economic environment, said Dharmakirti Joshi, an economist at Mumbai- based Crisil Ltd., the local unit of Standard & Poor’s.
“Though the central bank will have to remain focused on inflation, strict mechanical targeting is not feasible in a country like India,” Joshi said. “One reason for that is that the RBI is juggling a lot responsibilities, including managing government debt and ensuring financial markets stability.”
Dangerous Hurricane Bill could threaten east Canada
MIAMI (Reuters) - Powerful Hurricane Bill, a dangerous Category 4 storm with 135 mph winds, raged across the open Atlantic on Wednesday, days from land but on a path that could menace Canada's eastern provinces next week.
Sweeping past the Caribbean islands and posing no threat to U.S. oil and gas installations in the Gulf of Mexico, the first hurricane of the 2009 Atlantic season was expected to charge between the U.S. East Coast and Bermuda, well offshore.
Residents of Bermuda, a mid-Atlantic British territory and reinsurance capital, were warned to prepare for the storm. The latest forecast track issued by the U.S. National Hurricane Center would take Bill more than 100 miles to the west.
But Bill's massive size -- tropical storm force winds of 39 to 73 mph extend up to 230 miles from its center -- meant Bermuda would get a good dose of heavy weather, forecasters said.
"All (computer) models keep the storm between the United States and Bermuda. Exactly how close it comes to either of those is up for debate," said National Hurricane Center forecaster Eric Blake. "The average error (in the forecast track) is 200 miles at about 3 days."
"Bermuda is expected to see large swells and areas of heavy rain and high winds. Hopefully the core of the hurricane will stay offshore," he said.
The Bermuda Sun newspaper reported that U.S. Secretary of State Hillary Clinton and her husband, former President Bill Clinton, planned to fly to Bermuda on Wednesday for a private vacation of three to four days at a beach resort. The State Department declined to officially confirm where Clinton was.
HEAVY SURF EXPECTED ON U.S. EAST COAST
Forecasters said Bill might get stronger. Its top winds were expected to peak at about 145 mph on Thursday.
Hurricanes of Category 3 or higher on the five-step Saffir-Simpson intensity scale are considered "major" storms and are the most destructive type.
The well-defined eye of Bill was located about 970 miles south-southeast of Bermuda at 5 p.m. EDT (2100 GMT) on Wednesday and the system was moving toward the northwest at 20 mph, the hurricane center said.
Its curving forecast track would take it to a position hundreds of miles (km) east of Miami by early Friday, and well off New York by Sunday.
"How close it gets to the New England coast, there's still the usual uncertainty in that long time period," former NHC director Max Mayfield said. "But the core of the hurricane, most of the models indicate it's going to remain off the coast."
Forecasters said dangerous swells and life-threatening rip currents could affect the northern Caribbean islands, the Bahamas, Bermuda and the U.S. East Coast in the next few days.
The latest forecast track from the hurricane center would take Bill slightly closer to the U.S. East. It shows the storm just south of Nova Scotia by Sunday afternoon as a Category 2 hurricane and moving directly over Newfoundland after that. But five days in advance, the forecast has an average error of several hundred miles.
Asian Stocks Advance on Crude Oil, QBE Earnings; CSL Declines
Aug. 20 (Bloomberg) -- Asian stocks gained, led by energy and finance companies, as oil prices rallied and QBE Insurance Group Ltd. reported higher first-half profit.
Woodside Petroleum Ltd., Australia’s No. 2 oil producer, climbed 4.3 percent in Sydney. QBE, Australia’s largest property and casualty insurer, advanced 7 percent. Isuzu Motors Ltd., Japan’s third-biggest maker of commercial vehicles, rallied 5.4 percent as brokerages recommended buying Japanese automakers. CSL Ltd., the world’s second-largest maker of blood plasma products, slumped 3.4 percent after Citigroup Inc. cut its recommendation on the stock.
“The consensus remains among investors that the global economy is on course for a recovery, but we have to see further improvement in the economy and company earnings for markets to go up higher,” said Kiyoshi Ishigane, a strategist at Mitsubishi UFJ Asset Management Co., which oversees about $53 billion.
The MSCI Asia Pacific Index added 0.6 percent to 110.99 as of 11:14 a.m. in Tokyo. The gauge has rallied 57 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
Japan’s Nikkei 225 Stock Average advanced 0.7 percent to 10,279.19. Australia’s S&P/ASX 200 Index gained 0.4 percent, while South Korea’s Kospi Index added 0.7 percent.
Futures on the Standard & Poor’s 500 Index rose 0.1 percent. The U.S. gauge advanced 0.7 percent yesterday as energy stocks gained, while Merck & Co. led drugmakers higher after a judge upheld a patent.
Rising Valuations
The MSCI Asia Pacific Index rally since March has lifted the average valuation of shares in the gauge to 24 times estimated earnings, compared with 17 times for the S&P 500 and 14 times for the Dow Jones Stoxx 600 Index in Europe.
Woodside Petroleum advanced 5.6 percent to A$46.75 in Sydney. Inpex Corp., Japan’s largest oil explorer, gained 2.3 percent to 717,000 yen in Tokyo.
Crude oil for September delivery rallied 4.7 percent to $72.42 a barrel in New York. U.S. oil stockpiles dropped 8.4 million barrels last week, the most since the week ended May 23, 2008, a report from the Energy Department showed.
QBE Insurance surged 7 percent to A$22.20 in Sydney. The company said first-half profit climbed 19 percent on premium growth and foreign exchange gains.
Isuzu rallied 5.4 percent to 197 yen after Nikko Citigroup raised its recommendation to “hold” from “sell.” Hino Motors Ltd. advanced 2.7 percent to 382 yen after upgrades at Nikko Citigroup and Daiwa Securities.
CSL slumped 3.3 percent to A$32.02. The stock was cut to “hold” from “buy” at Citigroup.
Woodside Petroleum Ltd., Australia’s No. 2 oil producer, climbed 4.3 percent in Sydney. QBE, Australia’s largest property and casualty insurer, advanced 7 percent. Isuzu Motors Ltd., Japan’s third-biggest maker of commercial vehicles, rallied 5.4 percent as brokerages recommended buying Japanese automakers. CSL Ltd., the world’s second-largest maker of blood plasma products, slumped 3.4 percent after Citigroup Inc. cut its recommendation on the stock.
“The consensus remains among investors that the global economy is on course for a recovery, but we have to see further improvement in the economy and company earnings for markets to go up higher,” said Kiyoshi Ishigane, a strategist at Mitsubishi UFJ Asset Management Co., which oversees about $53 billion.
The MSCI Asia Pacific Index added 0.6 percent to 110.99 as of 11:14 a.m. in Tokyo. The gauge has rallied 57 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
Japan’s Nikkei 225 Stock Average advanced 0.7 percent to 10,279.19. Australia’s S&P/ASX 200 Index gained 0.4 percent, while South Korea’s Kospi Index added 0.7 percent.
Futures on the Standard & Poor’s 500 Index rose 0.1 percent. The U.S. gauge advanced 0.7 percent yesterday as energy stocks gained, while Merck & Co. led drugmakers higher after a judge upheld a patent.
Rising Valuations
The MSCI Asia Pacific Index rally since March has lifted the average valuation of shares in the gauge to 24 times estimated earnings, compared with 17 times for the S&P 500 and 14 times for the Dow Jones Stoxx 600 Index in Europe.
Woodside Petroleum advanced 5.6 percent to A$46.75 in Sydney. Inpex Corp., Japan’s largest oil explorer, gained 2.3 percent to 717,000 yen in Tokyo.
Crude oil for September delivery rallied 4.7 percent to $72.42 a barrel in New York. U.S. oil stockpiles dropped 8.4 million barrels last week, the most since the week ended May 23, 2008, a report from the Energy Department showed.
QBE Insurance surged 7 percent to A$22.20 in Sydney. The company said first-half profit climbed 19 percent on premium growth and foreign exchange gains.
Isuzu rallied 5.4 percent to 197 yen after Nikko Citigroup raised its recommendation to “hold” from “sell.” Hino Motors Ltd. advanced 2.7 percent to 382 yen after upgrades at Nikko Citigroup and Daiwa Securities.
CSL slumped 3.3 percent to A$32.02. The stock was cut to “hold” from “buy” at Citigroup.
Wednesday, August 19, 2009
Indian Stocks Fall on Monsoon, China Concerns; Mahindra Drops
Aug. 19 (Bloomberg) -- India’s benchmark stock index fell after the nation’s agriculture minister said farm output may decline because of low monsoon rains. Metal producers declined after their Chinese counterparts plunged.
Mahindra & Mahindra Ltd., India’s largest tractor maker, sank 3.7 percent after Farm Minister Sharad Pawar today said monsoon-sown rice production may decline by 10 million metric tons this year as a result of drought in a third of the country’s 626 districts. Tata Steel Ltd., the biggest producer of the alloy, slid 4 percent.
“There is uncertainty in the minds of investors how the government will overcome the drought situation,” said A.N. Sridhar, a fund manager at Sahara Asset Management Co. in Mumbai. “The rally in commodities seems to have come off as there is uncertainty over demand in China.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 225.62, or 1.5 percent, to 14,809.64. The measure has lost 5.5 percent this month on concern monsoon rainfall will be deficient. The S&P CNX Nifty Index on the National Stock Exchange lost 1.5 percent to 4,394.1. The BSE 200 Index declined 1.6 percent to 1,815.11.
Mahindra lost 3.7 percent to 740.15 rupees. Jaiprakash Associates Ltd., the nation’s biggest maker of dams, slid 2.7 percent to 206.7 rupees.
Hero Honda Motors Ltd., the nation’s biggest motorcycle maker, lost 2.3 percent to 1,359.2 rupees on concern that the weak monsoon will slash spending in agricultural regions. Forty percent of Hero Honda’s sales come from rural demand.
Farm Output
ACC Ltd., India’s biggest cement maker, lost 5.2 percent to 756.3 rupees. Reliance Communications Ltd., India’s second- largest mobile-phone services operator, lost 4.6 percent to 240.2 rupees.
The monsoon season, which brings about three-quarters of India’s annual rainfall, may be the driest in seven years, the weather bureau said last week, hurting farm output in the world’s second-biggest producer of rice, sugar and wheat.
Rain in the June-September season will be 87 percent of the 50-year average, compared with 93 percent forecast in June, the India Meteorological Department said last week.
Production of oilseeds and sugar cane may also drop, Pawar said, without providing a forecast. Monsoon-sown oilseeds were planted in 15.2 million hectares compared with 16.4 million hectares a year earlier, the farm ministry said.
The government will extend a 15 rupees-a-liter subsidy on imported edible oils until March 2010, Pawar said.
China Stocks
Tata Steel lost 4 percent to 433.75 rupees. Hindalco Industries Ltd., the biggest aluminum producer, slid 3.6 percent to 102.7 rupees. Sterlite Industries (India) Ltd., the nation’s biggest copper producer, declined 1.4 percent to 610.2 rupees.
China’s stocks tumbled, briefly driving the benchmark index into a so-called bear market, on concern economic growth will falter as banks rein in lending.
The Shanghai Composite Index lost 4.3 percent to 2,785.58. The gauge has slumped 19.8 percent since Aug. 4, after more than doubling from November as China rolled out a 4 trillion yuan ($585 billion) stimulus package.
A measure of Chinese metals and materials producers dropped 6.6 percent, the worst performer among 10 industry groups on the CSI 300 Index that covers the Shanghai and Shenzhen markets.
Overseas funds sold a net 9.74 billion rupees ($200.1 million) of Indian stocks on Aug. 17, the Securities & Exchange Board of India said on its Web site. The funds have bought 366.3 billion rupees of Indian stocks this year, compared with record net sales of 530 billion rupees for the whole of 2008.
The following stocks were among the most active on the exchange:
Glenmark Pharmaceuticals Ltd. (GNP IN) plunged 15 percent to 223.25 rupees. The Indian pharmaceutical company fell the most in six months after saying its drug for lung disease wasn’t effective in a patient study.
Maruti Suzuki India Ltd. (MSIL IN) climbed 0.1 percent to 1,301.85 rupees. The maker of half the cars sold in India was raised to “buy” from “hold” at Citigroup Inc., which said the company is best positioned to benefit from a recovery in urban consumption.
Reliance Industries Ltd. (RIL IN) lost 2.9 percent to 1,885.85 rupees. India’s most valuable company is looking to sell a stake of as much in 15 percent in the Rewas port project, Mint reported, citing two people briefed on the matter. Reliance needs to sell the stake both to fund the project and to bring in specialists because it does not have expertise in handling cargo such as containers, according to the report.
Unitech Ltd. (UT IN) fell 3.2 percent to 82.5 rupees. The nation’s second-biggest real estate developer said its telecom unit, Unitech Wireless Ltd., has got a 50 billion rupee-loan from State Bank of India.
Mahindra & Mahindra Ltd., India’s largest tractor maker, sank 3.7 percent after Farm Minister Sharad Pawar today said monsoon-sown rice production may decline by 10 million metric tons this year as a result of drought in a third of the country’s 626 districts. Tata Steel Ltd., the biggest producer of the alloy, slid 4 percent.
“There is uncertainty in the minds of investors how the government will overcome the drought situation,” said A.N. Sridhar, a fund manager at Sahara Asset Management Co. in Mumbai. “The rally in commodities seems to have come off as there is uncertainty over demand in China.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 225.62, or 1.5 percent, to 14,809.64. The measure has lost 5.5 percent this month on concern monsoon rainfall will be deficient. The S&P CNX Nifty Index on the National Stock Exchange lost 1.5 percent to 4,394.1. The BSE 200 Index declined 1.6 percent to 1,815.11.
Mahindra lost 3.7 percent to 740.15 rupees. Jaiprakash Associates Ltd., the nation’s biggest maker of dams, slid 2.7 percent to 206.7 rupees.
Hero Honda Motors Ltd., the nation’s biggest motorcycle maker, lost 2.3 percent to 1,359.2 rupees on concern that the weak monsoon will slash spending in agricultural regions. Forty percent of Hero Honda’s sales come from rural demand.
Farm Output
ACC Ltd., India’s biggest cement maker, lost 5.2 percent to 756.3 rupees. Reliance Communications Ltd., India’s second- largest mobile-phone services operator, lost 4.6 percent to 240.2 rupees.
The monsoon season, which brings about three-quarters of India’s annual rainfall, may be the driest in seven years, the weather bureau said last week, hurting farm output in the world’s second-biggest producer of rice, sugar and wheat.
Rain in the June-September season will be 87 percent of the 50-year average, compared with 93 percent forecast in June, the India Meteorological Department said last week.
Production of oilseeds and sugar cane may also drop, Pawar said, without providing a forecast. Monsoon-sown oilseeds were planted in 15.2 million hectares compared with 16.4 million hectares a year earlier, the farm ministry said.
The government will extend a 15 rupees-a-liter subsidy on imported edible oils until March 2010, Pawar said.
China Stocks
Tata Steel lost 4 percent to 433.75 rupees. Hindalco Industries Ltd., the biggest aluminum producer, slid 3.6 percent to 102.7 rupees. Sterlite Industries (India) Ltd., the nation’s biggest copper producer, declined 1.4 percent to 610.2 rupees.
China’s stocks tumbled, briefly driving the benchmark index into a so-called bear market, on concern economic growth will falter as banks rein in lending.
The Shanghai Composite Index lost 4.3 percent to 2,785.58. The gauge has slumped 19.8 percent since Aug. 4, after more than doubling from November as China rolled out a 4 trillion yuan ($585 billion) stimulus package.
A measure of Chinese metals and materials producers dropped 6.6 percent, the worst performer among 10 industry groups on the CSI 300 Index that covers the Shanghai and Shenzhen markets.
Overseas funds sold a net 9.74 billion rupees ($200.1 million) of Indian stocks on Aug. 17, the Securities & Exchange Board of India said on its Web site. The funds have bought 366.3 billion rupees of Indian stocks this year, compared with record net sales of 530 billion rupees for the whole of 2008.
The following stocks were among the most active on the exchange:
Glenmark Pharmaceuticals Ltd. (GNP IN) plunged 15 percent to 223.25 rupees. The Indian pharmaceutical company fell the most in six months after saying its drug for lung disease wasn’t effective in a patient study.
Maruti Suzuki India Ltd. (MSIL IN) climbed 0.1 percent to 1,301.85 rupees. The maker of half the cars sold in India was raised to “buy” from “hold” at Citigroup Inc., which said the company is best positioned to benefit from a recovery in urban consumption.
Reliance Industries Ltd. (RIL IN) lost 2.9 percent to 1,885.85 rupees. India’s most valuable company is looking to sell a stake of as much in 15 percent in the Rewas port project, Mint reported, citing two people briefed on the matter. Reliance needs to sell the stake both to fund the project and to bring in specialists because it does not have expertise in handling cargo such as containers, according to the report.
Unitech Ltd. (UT IN) fell 3.2 percent to 82.5 rupees. The nation’s second-biggest real estate developer said its telecom unit, Unitech Wireless Ltd., has got a 50 billion rupee-loan from State Bank of India.
World emerges from recession, IMF claims
It's official: the recovery has begun – although recovery will be unpredictable and protracted, according to the International Monetary Fund's chief economist.
"The recovery has started," claims Olivier Blanchard in a paper to be published by the IMF on Wednesday. "Sustaining it will require delicate rebalancing acts, both within and across countries."
He warned that recovery would be slow and complicated: "The world is not in a run-of-the mill recession. The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come," he said.
His comments followed the news on Monday that Japan became the latest major economy to return to growth in the second quarter, following a recovery in German and French GDP. The British economy shrank by 0.8pc in the second quarter according to the Office for National Statistics (ONS). Adam Posen, who will join the Bank of England's Monetary Policy Committee next month, conceded yesterday that the UK, along with the US, Italy and Spain, was "lagging" in economic recovery. He added he was "surprised" by news of recovery in Germany and France.
Official figures released yesterday showed that inflation remained at 1.8pc in July for the second month in a row, close to the 2pc target. Economists had predicted a fall to 1.5pc. The figures underlined unexpected resilience to deflationary pressures,
The ONS data suggested that the relative weakness of the pound was responsible, pushing up the price of imported goods and keeping inflation in positive territory despite the recession.
Charles Davis, economist at the Centre for Economics and Business Research, said: "Part of this is due to the sterling depreciation which, despite gains over the last month, is significantly weaker than a year ago."
It means the UK is the only one of the world's six biggest economies to avoid deflation. The pound rose more than
2 cents against the dollar after the inflation figures were published, closing at $1.653.
In July, price rises in games, toys, and hobby-related items – which are largely imported – helped to keep inflation at 1.8pc, offsetting falls in food inflation. Kerri Maddock at Barclays Capital said that the trend should "steer the economy away from the tail risk of outright deflation".
Although falling prices provide some relief for struggling households during recession, a sustained period of deflation in the UK caused by weak demand would likely damage the economy further, prompting businesses to produce less and therefore shed jobs, leading to higher unemployment which would in turn hit spending even further.
The continued strength of the CPI has taken the Bank of England by surprise. Governor Mervyn King said last week that despite the so-called "stickiness" shown by UK prices, the CPI rate was "more likely than not" to fall below 1pc in the coming months.
Despite the figures, economists said that inflation should start to fall again in the coming months as the impact of the weaker pound fades, while electricity and gas bills fall, food inflation drops and the full disinflationary impact of the spare capacity in the economy feeds through.
In a further surprise, the broader retail prices index (RPI), which also includes housing and mortgage costs, actually rose to -1.4pc in July from -1.6pc.
"The recovery has started," claims Olivier Blanchard in a paper to be published by the IMF on Wednesday. "Sustaining it will require delicate rebalancing acts, both within and across countries."
He warned that recovery would be slow and complicated: "The world is not in a run-of-the mill recession. The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come," he said.
His comments followed the news on Monday that Japan became the latest major economy to return to growth in the second quarter, following a recovery in German and French GDP. The British economy shrank by 0.8pc in the second quarter according to the Office for National Statistics (ONS). Adam Posen, who will join the Bank of England's Monetary Policy Committee next month, conceded yesterday that the UK, along with the US, Italy and Spain, was "lagging" in economic recovery. He added he was "surprised" by news of recovery in Germany and France.
Official figures released yesterday showed that inflation remained at 1.8pc in July for the second month in a row, close to the 2pc target. Economists had predicted a fall to 1.5pc. The figures underlined unexpected resilience to deflationary pressures,
The ONS data suggested that the relative weakness of the pound was responsible, pushing up the price of imported goods and keeping inflation in positive territory despite the recession.
Charles Davis, economist at the Centre for Economics and Business Research, said: "Part of this is due to the sterling depreciation which, despite gains over the last month, is significantly weaker than a year ago."
It means the UK is the only one of the world's six biggest economies to avoid deflation. The pound rose more than
2 cents against the dollar after the inflation figures were published, closing at $1.653.
In July, price rises in games, toys, and hobby-related items – which are largely imported – helped to keep inflation at 1.8pc, offsetting falls in food inflation. Kerri Maddock at Barclays Capital said that the trend should "steer the economy away from the tail risk of outright deflation".
Although falling prices provide some relief for struggling households during recession, a sustained period of deflation in the UK caused by weak demand would likely damage the economy further, prompting businesses to produce less and therefore shed jobs, leading to higher unemployment which would in turn hit spending even further.
The continued strength of the CPI has taken the Bank of England by surprise. Governor Mervyn King said last week that despite the so-called "stickiness" shown by UK prices, the CPI rate was "more likely than not" to fall below 1pc in the coming months.
Despite the figures, economists said that inflation should start to fall again in the coming months as the impact of the weaker pound fades, while electricity and gas bills fall, food inflation drops and the full disinflationary impact of the spare capacity in the economy feeds through.
In a further surprise, the broader retail prices index (RPI), which also includes housing and mortgage costs, actually rose to -1.4pc in July from -1.6pc.
Key Financial Ratios – EBITA, PAT, EPS, PE Ratio
What Does EBITDA Margin Mean?
Formula: Operating Profits/ Net sales.
EBITDA Margin is also known as operating margin. It is a ratio which is used to determine operating efficiency of the company. The ratio is used to measure company’s operating profits i.e. what would be the earnings of the company after paying of fixed and variable costs of production. The higher the operating margins its good for the company as it has a higher income available to take care of its other fixed cost such as interest on debt. One must look at the operating margin ratio on Y-O-Y and Q-O-Q basis and also compare the same with the peer group.
What Does PAT Margin Mean?
Formula: PAT/ Net sales.
PAT margin is also known as net margins. It is a ratio which is used to determine the final earnings of the company on every one Rupee of sales generated. It is used to determine the net earnings of the company after paying the production as well as finance expenses. It is a useful tool in analyzing the company’s earnings after tax. For example, a company’s sales could rise, but if costs also rise, that leads to a lower profit margin than what the company had when it had lower profits. This is an indication that the company needs to curb its expenses.
What Does Earnings Per Share (EPS) Mean?
Formula: (PAT – Preference Share Dividend) / Total outstanding equity shares
EPS is the net earnings of the company allocated to each outstanding share of the company. An increasing trend in EPS shows that the company is performing better. While we are looking at the EPS we must also look at the Diluted EPS as it the equity may expand in future if there are convertibles or warrants outstanding in the outstanding shares number.
What Does Price-Earnings Ratio – P/E Ratio Mean?
Formula: CMP / Earnings Per Share (EPS).
PE i.e Price of earnings ratio is a valuation ratio of a company’s current share price compared to its per-share earnings. The P/E is also referred to as the "multiple", because it shows how much investors are willing to pay for per Rupee of earnings. For example, if a company is currently trading at Rs.100 a share and earnings over the last 12 months were Rs.10 per share, the P/E ratio for the stock would be 10 (100/10). EPS is usually from the last four quarters (trailing P/E), but when EPS is taken from the expected earnings of next four quarters then the PE is known as projected PE.
Formula: Operating Profits/ Net sales.
EBITDA Margin is also known as operating margin. It is a ratio which is used to determine operating efficiency of the company. The ratio is used to measure company’s operating profits i.e. what would be the earnings of the company after paying of fixed and variable costs of production. The higher the operating margins its good for the company as it has a higher income available to take care of its other fixed cost such as interest on debt. One must look at the operating margin ratio on Y-O-Y and Q-O-Q basis and also compare the same with the peer group.
What Does PAT Margin Mean?
Formula: PAT/ Net sales.
PAT margin is also known as net margins. It is a ratio which is used to determine the final earnings of the company on every one Rupee of sales generated. It is used to determine the net earnings of the company after paying the production as well as finance expenses. It is a useful tool in analyzing the company’s earnings after tax. For example, a company’s sales could rise, but if costs also rise, that leads to a lower profit margin than what the company had when it had lower profits. This is an indication that the company needs to curb its expenses.
What Does Earnings Per Share (EPS) Mean?
Formula: (PAT – Preference Share Dividend) / Total outstanding equity shares
EPS is the net earnings of the company allocated to each outstanding share of the company. An increasing trend in EPS shows that the company is performing better. While we are looking at the EPS we must also look at the Diluted EPS as it the equity may expand in future if there are convertibles or warrants outstanding in the outstanding shares number.
What Does Price-Earnings Ratio – P/E Ratio Mean?
Formula: CMP / Earnings Per Share (EPS).
PE i.e Price of earnings ratio is a valuation ratio of a company’s current share price compared to its per-share earnings. The P/E is also referred to as the "multiple", because it shows how much investors are willing to pay for per Rupee of earnings. For example, if a company is currently trading at Rs.100 a share and earnings over the last 12 months were Rs.10 per share, the P/E ratio for the stock would be 10 (100/10). EPS is usually from the last four quarters (trailing P/E), but when EPS is taken from the expected earnings of next four quarters then the PE is known as projected PE.
Asian Stocks Fall as China Approaches Bear Market; Qantas Rises
Aug. 19 (Bloomberg) -- Asian stocks fell, with China’s key index approaching levels signaling a bear market, after Maanshan Iron & Steel Co. reported losses and Japanese regulators said new guidelines will hurt insurers’ solvency ratios.
Maanshan Steel, China’s No. 4 listed steelmaker, sank 6.9 percent in Shanghai. Tokio Marine Holdings Inc. dropped 2 percent in Tokyo. Honda Motor Co., Japan’s No. 2 automaker, added 1.7 percent after Nomura Holdings Inc. upgraded Japan’s auto industry. Qantas Airways Ltd., Australia’s biggest airline, advanced 4.6 percent as it signaled improving passenger volumes.
The MSCI Asia Pacific Index fell 0.3 percent to 110.33 as of 2:54 p.m. in Tokyo, erasing an earlier gain of 0.6 percent. The gauge has rallied 56 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
“The earnings season has been surprising,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $95 billion. “It’s given investors confidence the recovery is coming through and that valuations will be supported by strong earnings. Still, markets have rallied a long way and are vulnerable to bad news.”
Maanshan Steel, China’s No. 4 listed steelmaker, sank 6.9 percent in Shanghai. Tokio Marine Holdings Inc. dropped 2 percent in Tokyo. Honda Motor Co., Japan’s No. 2 automaker, added 1.7 percent after Nomura Holdings Inc. upgraded Japan’s auto industry. Qantas Airways Ltd., Australia’s biggest airline, advanced 4.6 percent as it signaled improving passenger volumes.
The MSCI Asia Pacific Index fell 0.3 percent to 110.33 as of 2:54 p.m. in Tokyo, erasing an earlier gain of 0.6 percent. The gauge has rallied 56 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
“The earnings season has been surprising,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $95 billion. “It’s given investors confidence the recovery is coming through and that valuations will be supported by strong earnings. Still, markets have rallied a long way and are vulnerable to bad news.”
Tuesday, August 18, 2009
Check your Awareness........!!
1. What is the expansion ( Full Form ) of YAHOO..?
Yet Another Hierarchy of Officious Oracle
2. What is the expansion ( Full Form ) of ADIDAS?
ADIDAS- All Day I Dream About Sports
3. Expansion of Star as in Star TV Network?
Satellite Television Asian Region
4. What is expansion of "ICICI?"
Industrial credit and Investments Corporation of India
5. The 1984-85 season. 2nd ODI between India and Pakistan at Sialkot - India 210/3 with Vengsarkar 94*. Match abandoned. Why?
That match was abandoned after people heard the news of Indira Gandhi being killed.
6. Who is the only man to have written the National Anthems for two different countries?
Rabindranath Tagore who wrote national anthem for two different countries one is our 's National
anthem and another one is for Bangladesh- (Amar Sonar* *Bangla )
7. From what four word expression does the word `goodbye` derive?
Goodbye comes from the ex-pression: 'god be with you'.
8. How was Agnes Gonxha Bojaxhiu better known?
Agnes Gonxha Bojaxhiu is none other Mother Teresa
9. Name the only other country to have got independence on Aug 15th?
South Korea
10. Why was James Bond Associated with the Number 007?
Because 007 is the ISD code for Russia (or the USSR , as it was known during the cold war)
11. Who faced the first ball in the first ever One day match?
Geoffrey Boycott
12. Which cricketer played for South Africa before it was banned from international cricket and later represented Zimbabwe ?
John Traicos
13. Which is the only country that is surrounded from all sides by only one country (other than Vatican )?
Lesotho surrounded from all sides by South Africa ..
14. Which is the only sport which is not allowed to play left handed?
.. Polo.
India Plans ‘Simpler’ Mining Law to Boost Investment
Aug. 18 (Bloomberg) -- India aims to cut permit delays and attract overseas capital through “simpler” resource investment laws to help double mining’s contribution to the nation’s $1.2 trillion economy to at least 4 percent.
“We hope to increase it to 5 percent but expect it to increase to at least 4 percent in five years,” Mines Minister B.K. Handique said in an interview in New Delhi yesterday. The legislation will be presented to parliament in the winter session this year, he said.
Delays in securing mining licenses have undermined India’s efforts to win more investment, holding up construction of $32 billion projects announced ArcelorMittal and Posco, the world’s largest and sixth-largest steelmakers. The new law will develop the changes to the mineral policy last year that have so far failed to unlock development.
“It will be great if the government is able to cut down the long-winded procedure,” Niraj Shah, an analyst at Centrum Capital Ltd., said today. It will help companies who are serious about building operations in India, he said.
India, which holds the world’s fourth-largest bauxite deposits and the fifth-largest iron ore reserves according to McKinsey & Co., currently regulates mining through the five- decade old Mines & Minerals (Development & Regulation) Act.
“We will introduce a legal framework that ensures sustainable development and includes environment concerns,” Handique said. “We have to ensure it’s more broad-based as if there is resistance from people it will not be possible to translate the act into reality.”
Posco, ArcelorMittal
Land disputes and delays in allocating mining licenses have stopped South Korea-based Posco from proceeding with potentially the biggest overseas investment in India. The company is yet to begin building a $12 billion, 12 million metric ton steel plant in eastern Orissa state, planned for more than five years.
“The policy is aimed to make the rules more transparent and simpler,” Handique said. “Posco is a bad precedent but we know that overseas companies want to invest in India and transparent policy will help that,” he said, adding that he also expects the law changes to spark investment from domestic companies.
“We hope the government approves the mine license soon, then we would like to secure land and start the project as soon as possible,” Choi Doo Jin, a spokesman at Posco, said by phone from Seoul today.
ArcelorMittal has proposed setting up two mills in India, one in Orissa and another in Jharkhand -- with a total capacity of 24 million tons. It signed an accord for the Jharkhand mill in mid- 2005, followed by the one in Orissa.
Besides companies, countries including South Africa, Namibia and Colombia have shown interest in investing in the mining sector, Handique said.
“We hope to increase it to 5 percent but expect it to increase to at least 4 percent in five years,” Mines Minister B.K. Handique said in an interview in New Delhi yesterday. The legislation will be presented to parliament in the winter session this year, he said.
Delays in securing mining licenses have undermined India’s efforts to win more investment, holding up construction of $32 billion projects announced ArcelorMittal and Posco, the world’s largest and sixth-largest steelmakers. The new law will develop the changes to the mineral policy last year that have so far failed to unlock development.
“It will be great if the government is able to cut down the long-winded procedure,” Niraj Shah, an analyst at Centrum Capital Ltd., said today. It will help companies who are serious about building operations in India, he said.
India, which holds the world’s fourth-largest bauxite deposits and the fifth-largest iron ore reserves according to McKinsey & Co., currently regulates mining through the five- decade old Mines & Minerals (Development & Regulation) Act.
“We will introduce a legal framework that ensures sustainable development and includes environment concerns,” Handique said. “We have to ensure it’s more broad-based as if there is resistance from people it will not be possible to translate the act into reality.”
Posco, ArcelorMittal
Land disputes and delays in allocating mining licenses have stopped South Korea-based Posco from proceeding with potentially the biggest overseas investment in India. The company is yet to begin building a $12 billion, 12 million metric ton steel plant in eastern Orissa state, planned for more than five years.
“The policy is aimed to make the rules more transparent and simpler,” Handique said. “Posco is a bad precedent but we know that overseas companies want to invest in India and transparent policy will help that,” he said, adding that he also expects the law changes to spark investment from domestic companies.
“We hope the government approves the mine license soon, then we would like to secure land and start the project as soon as possible,” Choi Doo Jin, a spokesman at Posco, said by phone from Seoul today.
ArcelorMittal has proposed setting up two mills in India, one in Orissa and another in Jharkhand -- with a total capacity of 24 million tons. It signed an accord for the Jharkhand mill in mid- 2005, followed by the one in Orissa.
Besides companies, countries including South Africa, Namibia and Colombia have shown interest in investing in the mining sector, Handique said.
Review : Kaminey
Kaminey is the best Bollywood film I’ve seen this year. It’s an audacious, original rollercoaster ride. Written and directed by Vishal Bharadwaj, Kaminey requires patience and attention but the pay off is more than worth it.
Kaminey is about Charlie and Guddu, twin brothers played by Shahid Kapoor, both of whom suffer from speech impediments and who can’t stand the sight of each other. Charlie, who pronounces S as F, is a small time gangster. Guddu, who stammers, is a mousy NGO worker. Guddu’s life plans, chalked out until 2014 on a chart stuck in his cupboard, are wrecked when he impregnates Sweety, his fiery girlfriend who until now has neglected to tell him that she is the sister of a powerful gangster-politician, Bhope, played by Amol Gupte. Meanwhile Charlie has come to possess a guitar containing cocaine worth 10 crore. The quintessential gambler thinks he’s finally hit the big score. What follows is a frantic, convoluted journey through Mumbai’s mean streets which are of course populated by many Kamineys: corrupt cops, nasty drug dealers, gun wielding henchmen. Eventually, the brothers’ determinedly separate narratives collide and they are forced to come together.
Be warned: there are stretches of Kaminey that will thoroughly confuse you, starting with the first fifteen minutes. The film has eleven-odd characters that you need to keep track of. Snatches of dialogue are in Bengali and Marathi. If you look away from the screen to send a text message, you might miss another twist in this very, very tangled tale. The first half moves slowly. You might be bewildered and perhaps even bored. But stay with the film. Because the pacing picks up in the second half and Vishal ties up the threads in an exhilarating climax, which, incredibly enough, manages to combine stunning violence with humor.
Kaminey is that rarest of things: an unpredictable Hindi movie. Vishal, referencing the crackling gangster dramas of Quentin Tarantino and Guy Ritchie, keeps it gritty and dark. Violence looms large over Kaminey but the tension is layered with black humor. The film reworks Hindi cinema’s favorite formula - twins - into a bloody theater of the absurd. Charlie and Guddu are unlike any twins you’ve seen before. Each one is willing to sacrifice the other to get what he wants. This is the role or roles of a lifetime and Shahid Kapoor, best known for innocuous chocolate-boy romances, sinks his teeth in. Kaminey does for him what Omkara did for Saif Ali Khan. A star has evolved into an actor.
Sweety is this year’s most exciting heroine after Paro in Dev D, and Priyanka plays her with aplomb. Only her perfectly manicured nails struck me as out of synch with her character. Vishal has equal affection for the smaller players: from the coke-addled Mikhail played nicely by Chandan Roy Sanyal to the Jai Maharashtra-spouting Bhope. Each one is flesh and blood.
Kaminey will take some getting used to. It isn’t the comfort food that Bollywood normally dishes out. But I strongly recommend that you see it. This taste is worth acquiring.
INTERVIEW - Greenspan sees strong finish to 2009, worries on 2010
WASHINGTON (Reuters) - The U.S. economy is probably due for two strong quarters of economic growth to close out 2009, but the recovery may falter next year, former Federal Reserve Chairman Alan Greenspan said on Monday.
"I think we're OK for the next six months," Greenspan told Reuters in an interview. "We are getting a recovery in (housing) starts and motor vehicles, but the process doesn't have legs to it."
Auto sales and housing, normally the driving forces behind economic recovery, got a boost from government efforts such as the $3 billion "cash-for-clunkers" trade-in program, which encouraged consumers to buy new cars, but it may not be sustainable.
Greenspan, who stepped down as Fed chairman in 2006 after 18 years at the helm, said the U.S. market for autos was "saturated," with 20 percent more cars and light trucks on the road than there are licensed drivers.
With U.S. consumers' finances still shaky after three years of housing market declines, new vehicle sales may fade once the clunker program's cash is exhausted.
As for new home sales, a sharp drop in construction is helping homebuilders clear inventory, but Greenspan said it was unlikely that the rate of U.S. homeownership would return to the boomtime peak, which will keep home sales subdued.
While he has been lauded for presiding over the longest uninterrupted period of economic growth in modern U.S. history from 1991 to 2001, his record has recently come under harsher scrutiny.
Some economy watchers note that it was during Greenspan's tenure at the Fed that the housing bubble inflated.
Critics argue that under his leadership, the Fed kept short-term borrowing costs too low for too long after the 2001 recession, sowing the seeds of the housing and easy credit bubble that contributed to the financial crisis.
Greenspan has defended his record repeatedly, saying global forces overwhelmed the U.S. central bank's efforts to raise borrowing costs.
He has also maintained that bubbles cannot be detected until they burst.
What gives him confidence that the last half of 2009 will generate strong growth is primarily a sharp drop in inventories of goods.
Consumption has been running about 1-1/4 percentage points above the level of economic output. In order to close that gap, companies need to make more goods, which would generate gross domestic product growth on the order of 4 percent to 5 percent if it happened all in one quarter and 2.5 percent per quarter if spread out over six months.
A rebound in stock markets since March 2009 lows may also add some fuel to the recovery by helping companies obtain cheaper sources of funding and rebuilding household wealth.
"The 50 percent rise in corporate equities in the United States, and more than that in the rest of the world, has created an important buffer for debt," he said. "The consequent major contraction of yield spreads across the globe has added more fiscal stimulus than anybody realizes."
"I think we're OK for the next six months," Greenspan told Reuters in an interview. "We are getting a recovery in (housing) starts and motor vehicles, but the process doesn't have legs to it."
Auto sales and housing, normally the driving forces behind economic recovery, got a boost from government efforts such as the $3 billion "cash-for-clunkers" trade-in program, which encouraged consumers to buy new cars, but it may not be sustainable.
Greenspan, who stepped down as Fed chairman in 2006 after 18 years at the helm, said the U.S. market for autos was "saturated," with 20 percent more cars and light trucks on the road than there are licensed drivers.
With U.S. consumers' finances still shaky after three years of housing market declines, new vehicle sales may fade once the clunker program's cash is exhausted.
As for new home sales, a sharp drop in construction is helping homebuilders clear inventory, but Greenspan said it was unlikely that the rate of U.S. homeownership would return to the boomtime peak, which will keep home sales subdued.
While he has been lauded for presiding over the longest uninterrupted period of economic growth in modern U.S. history from 1991 to 2001, his record has recently come under harsher scrutiny.
Some economy watchers note that it was during Greenspan's tenure at the Fed that the housing bubble inflated.
Critics argue that under his leadership, the Fed kept short-term borrowing costs too low for too long after the 2001 recession, sowing the seeds of the housing and easy credit bubble that contributed to the financial crisis.
Greenspan has defended his record repeatedly, saying global forces overwhelmed the U.S. central bank's efforts to raise borrowing costs.
He has also maintained that bubbles cannot be detected until they burst.
What gives him confidence that the last half of 2009 will generate strong growth is primarily a sharp drop in inventories of goods.
Consumption has been running about 1-1/4 percentage points above the level of economic output. In order to close that gap, companies need to make more goods, which would generate gross domestic product growth on the order of 4 percent to 5 percent if it happened all in one quarter and 2.5 percent per quarter if spread out over six months.
A rebound in stock markets since March 2009 lows may also add some fuel to the recovery by helping companies obtain cheaper sources of funding and rebuilding household wealth.
"The 50 percent rise in corporate equities in the United States, and more than that in the rest of the world, has created an important buffer for debt," he said. "The consequent major contraction of yield spreads across the globe has added more fiscal stimulus than anybody realizes."
Monsoon Revival Boosts India’s Sugar Cane, Rice Crops
Aug. 17 (Bloomberg) -- A revival in India’s monsoon rains is helping ease dry weather that’s caused drought in a third of the nation’s districts and dented sowing of rice and sugar cane, a weather bureau official said.
Prime Minister Manmohan Singh today said that there was “no need to panic” as the nation has “adequate stock of wheat and rice” to face the drought.
Uttar Pradesh, the country’s biggest cane grower, Madhya Pradesh, the largest soybeans producer, and Bihar, a top grower of rice and corn, received “good rain” over the past few days, said Ajit Tyagi, director general of the India Meteorological Department, from New Delhi today.
The monsoon season, which brings about three-quarters of the nation’s annual rainfall, may be the driest in seven years, Tyagi said last week, curbing farm output in the world’s second- biggest producer of rice, wheat and sugar. As many as 209 of 626 districts have declared drought, the farm ministry said.
“A lot of paddy crop has been saved in Punjab, Haryana and Andhra Pradesh because of irrigation,” Cabinet Secretary K.M. Chandrashekhar told reporters in New Delhi earlier today before a meeting of chief ministers with Singh to discuss the drought. Recent rains may have helped the crops, he said.
Rice, the nation’s biggest monsoon-sown crops, has been the worst hit: the crop area has fallen 19 percent from a year ago to 24.7 million hectares as of Aug. 12, the farm ministry said. Cane has been planted to 4.25 million hectares, compared with 4.38 million hectares a year earlier.
More Electricity
The government will divert more electricity to farmers so that pumps can be run for longer hours to draw water from tube- wells for irrigating fields, Chandrashekar said. Farmers will be asked to sow short-duration crops, such as oilseeds and lentils, to counter the fall in farm output, he said.
India’s farmers will have to increase the area of coverage in the winter crop to “salvage” the losses in the monsoon crop, Farm Minister Sharad Pawar said in a statement posted on the government’s Web site today. “Every effort has to be taken to contain and moderate” price increases, including controlling speculative tendencies in the market, he said.
Fuel Subsidy
Pawar last month said the government will give a 10-billion rupee subsidy for diesel used to operate water pumps. The assistance hasn’t reached farmers, said Sukhbir Singh Badal, deputy chief minister of Punjab, the nation’s top grower of rice and wheat.
“Farmers should have got free diesel by now,” he told reporters in New Delhi. “If we get more subsidized power and diesel, we may be able to save the paddy crop and match the target” of 13.7 million tons, he said.
Monsoon rain may be similar to 2002, when showers were 19.2 percent below average and the nation faced its worst drought in 12 years, Tyagi said last week. The deficit since the start of this season on June 1 has widened to 29 percent as of Aug. 12, from 25 percent a week ago, the weather bureau said last week.
Falls were 43 percent below average in the northwest, which includes states of Punjab, Haryana and Uttar Pradesh. Shortfall was 23 percent in peninsular India, which includes Maharashtra, the second-biggest grower of sugar cane and cotton.
The weather office has pared the forecast for August rain to between 85-to-90 percent of the long-period average from 101 percent predicted in June. Showers in July, the wettest month in the June-September season, were more than predicted, following the driest June in 83 years.
Prime Minister Manmohan Singh today said that there was “no need to panic” as the nation has “adequate stock of wheat and rice” to face the drought.
Uttar Pradesh, the country’s biggest cane grower, Madhya Pradesh, the largest soybeans producer, and Bihar, a top grower of rice and corn, received “good rain” over the past few days, said Ajit Tyagi, director general of the India Meteorological Department, from New Delhi today.
The monsoon season, which brings about three-quarters of the nation’s annual rainfall, may be the driest in seven years, Tyagi said last week, curbing farm output in the world’s second- biggest producer of rice, wheat and sugar. As many as 209 of 626 districts have declared drought, the farm ministry said.
“A lot of paddy crop has been saved in Punjab, Haryana and Andhra Pradesh because of irrigation,” Cabinet Secretary K.M. Chandrashekhar told reporters in New Delhi earlier today before a meeting of chief ministers with Singh to discuss the drought. Recent rains may have helped the crops, he said.
Rice, the nation’s biggest monsoon-sown crops, has been the worst hit: the crop area has fallen 19 percent from a year ago to 24.7 million hectares as of Aug. 12, the farm ministry said. Cane has been planted to 4.25 million hectares, compared with 4.38 million hectares a year earlier.
More Electricity
The government will divert more electricity to farmers so that pumps can be run for longer hours to draw water from tube- wells for irrigating fields, Chandrashekar said. Farmers will be asked to sow short-duration crops, such as oilseeds and lentils, to counter the fall in farm output, he said.
India’s farmers will have to increase the area of coverage in the winter crop to “salvage” the losses in the monsoon crop, Farm Minister Sharad Pawar said in a statement posted on the government’s Web site today. “Every effort has to be taken to contain and moderate” price increases, including controlling speculative tendencies in the market, he said.
Fuel Subsidy
Pawar last month said the government will give a 10-billion rupee subsidy for diesel used to operate water pumps. The assistance hasn’t reached farmers, said Sukhbir Singh Badal, deputy chief minister of Punjab, the nation’s top grower of rice and wheat.
“Farmers should have got free diesel by now,” he told reporters in New Delhi. “If we get more subsidized power and diesel, we may be able to save the paddy crop and match the target” of 13.7 million tons, he said.
Monsoon rain may be similar to 2002, when showers were 19.2 percent below average and the nation faced its worst drought in 12 years, Tyagi said last week. The deficit since the start of this season on June 1 has widened to 29 percent as of Aug. 12, from 25 percent a week ago, the weather bureau said last week.
Falls were 43 percent below average in the northwest, which includes states of Punjab, Haryana and Uttar Pradesh. Shortfall was 23 percent in peninsular India, which includes Maharashtra, the second-biggest grower of sugar cane and cotton.
The weather office has pared the forecast for August rain to between 85-to-90 percent of the long-period average from 101 percent predicted in June. Showers in July, the wettest month in the June-September season, were more than predicted, following the driest June in 83 years.
Most Asian Stocks Fall Amid Growth Concerns; James Hardie Rises
Aug. 18 (Bloomberg) -- Most Asian stocks fell, led by commodity companies, after metals prices slumped amid concern the global economic recovery will fail to meet investors’ expectations.
Mitsubishi Corp., which generates nearly half its revenue from trading commodities, sank 2.2 percent in Tokyo, while Fortescue Metals Group Ltd. lost 3.1 percent in Sydney. James Hardie Industries NV, the biggest seller of home siding in the U.S., surged 21 percent after forecasting profit at the high end of analyst estimates. Everbright Securities Co. soared 34 percent on its first trading day in Shanghai.
The MSCI Asia Pacific Index dropped 0.3 percent to 110.26 as of 12:05 p.m. in Tokyo. Two stocks declined for each one that advanced. The gauge sank 3.1 percent yesterday, paring its rally from a more than five-year low on March 9 to 57 percent.
“These technical corrections, profit taking and pullbacks are to be expected, but my feeling is that they’ll be relatively shallow,” said Prasad Patkar, who helps manage about $1.2 billion at Platypus Asset Management in Sydney. “Valuations looked stretched, but as long as earnings keep going up, they will start to look more normal as time goes by.”
Japan’s Nikkei 225 Stock Average gained 0.4 percent. Casio Computer Co. rose 5.8 percent after Credit Suisse Group AG increased its rating on the electronics maker. Hong Kong’s Hang Seng Index added 0.6 percent.
The Shanghai Composite Index lost 0.7 percent, extending yesterday’s 5.8 percent slump, which was the steepest since November. Air China Ltd. sank 7.1 percent on concern it may have paid too much to raise its stake in Hong Kong’s Cathay Pacific Airways Ltd.
Trailing Estimates
Futures on the Standard & Poor’s 500 Index gained 0.3 percent. The gauge fell 2.4 percent yesterday, extending a global stock slump after figures on Japan’s economic growth trailed some economists’ estimates and foreign direct investment in China dropped for a 10th month. The MSCI World Index was little changed today after sinking 2.8 percent yesterday.
Reports last week showed that Chinese exports dropped in July, lending fell, and investment growth slowed, while Australia’s statistics bureau said wage growth stalled last quarter as the worst global slump since the Great Depression drove up unemployment.
Mitsubishi sank 2.2 percent to 1,880 yen. Mitsui & Co., a trading house that generates more than half its profit from metals and energy, lost 1.8 percent to 1,219. Fortescue slumped 3.1 percent to A$4.44, following a 10 percent advance in the four previous trading days.
Metal Prices Gain
A measure of six metals, including copper and zinc, traded on the London Metal Exchange fell 2.7 percent yesterday to the lowest level in a week. Copper futures in New York dropped 2.3 percent, while oil sank 1.1 percent.
The MSCI Asia Pacific Index rallied 62 percent through Aug. 14 from its March 9 low on speculation a global economic recovery will boost earnings. Companies in the gauge trade at 1.57 times book value, compared with 1.03 times at the March low. The benchmark has averaged about 1.7 times book value since 2001.
“We were due for a correction, but the overall rising trend for the market remains as earnings and the economy are on the mend,” said Yoshinori Nagano, a senior strategist at Tokyo- based Daiwa Asset Management Co., which oversees the equivalent of $89 billion.
A third of the 503 companies in the MSCI Asia Pacific Index that have reported results since early July have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.
James Hardie
James Hardie, which reported a first-quarter loss on declining earnings from the U.S., surged 21 percent to A$6.97. The company said it expects full-year operating profit at the high end of analysts’ forecasts, excluding costs relating to asbestos claims, and that the U.S. housing slump may be easing.
Everbright Securities, the first Chinese brokerage to make an initial public offering in almost seven years, soared 34 percent to 28.21 yuan. The company raised 11 billion yuan ($1.6 billion) by selling shares to institutional and retail investors.
Air China, the world’s biggest airline by market value, sank 7.1 percent to 7.29 yuan. The company said it will spend HK$6.3 billion ($813 million) raising its stake in Cathay Pacific to 29.99 percent. Cathay lost 1 percent to HK$11.50.
“Further alignment with Cathay will enhance Air China’s strategic control of China’s most important international gateways -- Beijing and Hong Kong,” said Ally Ma, an analyst at Citigroup Inc. Still, the price “seems too high and disappoints our positive view on Air China.”
In Tokyo, Casio gained 5.8 percent to 788 yen. Credit Suisse upgraded the stock to “outperform” from “underperform” amid optimism the company will restore profits in money-losing businesses.
Mitsubishi Corp., which generates nearly half its revenue from trading commodities, sank 2.2 percent in Tokyo, while Fortescue Metals Group Ltd. lost 3.1 percent in Sydney. James Hardie Industries NV, the biggest seller of home siding in the U.S., surged 21 percent after forecasting profit at the high end of analyst estimates. Everbright Securities Co. soared 34 percent on its first trading day in Shanghai.
The MSCI Asia Pacific Index dropped 0.3 percent to 110.26 as of 12:05 p.m. in Tokyo. Two stocks declined for each one that advanced. The gauge sank 3.1 percent yesterday, paring its rally from a more than five-year low on March 9 to 57 percent.
“These technical corrections, profit taking and pullbacks are to be expected, but my feeling is that they’ll be relatively shallow,” said Prasad Patkar, who helps manage about $1.2 billion at Platypus Asset Management in Sydney. “Valuations looked stretched, but as long as earnings keep going up, they will start to look more normal as time goes by.”
Japan’s Nikkei 225 Stock Average gained 0.4 percent. Casio Computer Co. rose 5.8 percent after Credit Suisse Group AG increased its rating on the electronics maker. Hong Kong’s Hang Seng Index added 0.6 percent.
The Shanghai Composite Index lost 0.7 percent, extending yesterday’s 5.8 percent slump, which was the steepest since November. Air China Ltd. sank 7.1 percent on concern it may have paid too much to raise its stake in Hong Kong’s Cathay Pacific Airways Ltd.
Trailing Estimates
Futures on the Standard & Poor’s 500 Index gained 0.3 percent. The gauge fell 2.4 percent yesterday, extending a global stock slump after figures on Japan’s economic growth trailed some economists’ estimates and foreign direct investment in China dropped for a 10th month. The MSCI World Index was little changed today after sinking 2.8 percent yesterday.
Reports last week showed that Chinese exports dropped in July, lending fell, and investment growth slowed, while Australia’s statistics bureau said wage growth stalled last quarter as the worst global slump since the Great Depression drove up unemployment.
Mitsubishi sank 2.2 percent to 1,880 yen. Mitsui & Co., a trading house that generates more than half its profit from metals and energy, lost 1.8 percent to 1,219. Fortescue slumped 3.1 percent to A$4.44, following a 10 percent advance in the four previous trading days.
Metal Prices Gain
A measure of six metals, including copper and zinc, traded on the London Metal Exchange fell 2.7 percent yesterday to the lowest level in a week. Copper futures in New York dropped 2.3 percent, while oil sank 1.1 percent.
The MSCI Asia Pacific Index rallied 62 percent through Aug. 14 from its March 9 low on speculation a global economic recovery will boost earnings. Companies in the gauge trade at 1.57 times book value, compared with 1.03 times at the March low. The benchmark has averaged about 1.7 times book value since 2001.
“We were due for a correction, but the overall rising trend for the market remains as earnings and the economy are on the mend,” said Yoshinori Nagano, a senior strategist at Tokyo- based Daiwa Asset Management Co., which oversees the equivalent of $89 billion.
A third of the 503 companies in the MSCI Asia Pacific Index that have reported results since early July have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.
James Hardie
James Hardie, which reported a first-quarter loss on declining earnings from the U.S., surged 21 percent to A$6.97. The company said it expects full-year operating profit at the high end of analysts’ forecasts, excluding costs relating to asbestos claims, and that the U.S. housing slump may be easing.
Everbright Securities, the first Chinese brokerage to make an initial public offering in almost seven years, soared 34 percent to 28.21 yuan. The company raised 11 billion yuan ($1.6 billion) by selling shares to institutional and retail investors.
Air China, the world’s biggest airline by market value, sank 7.1 percent to 7.29 yuan. The company said it will spend HK$6.3 billion ($813 million) raising its stake in Cathay Pacific to 29.99 percent. Cathay lost 1 percent to HK$11.50.
“Further alignment with Cathay will enhance Air China’s strategic control of China’s most important international gateways -- Beijing and Hong Kong,” said Ally Ma, an analyst at Citigroup Inc. Still, the price “seems too high and disappoints our positive view on Air China.”
In Tokyo, Casio gained 5.8 percent to 788 yen. Credit Suisse upgraded the stock to “outperform” from “underperform” amid optimism the company will restore profits in money-losing businesses.
Most Asian Stocks Fall Amid Growth Concerns; James Hardie Rises
Aug. 18 (Bloomberg) -- Most Asian stocks fell, led by commodity companies, after metals prices slumped amid concern the global economic recovery will fail to meet investors’ expectations.
Mitsubishi Corp., which generates nearly half its revenue from trading commodities, sank 2.2 percent in Tokyo, while Fortescue Metals Group Ltd. lost 3.1 percent in Sydney. James Hardie Industries NV, the biggest seller of home siding in the U.S., surged 21 percent after forecasting profit at the high end of analyst estimates. Everbright Securities Co. soared 34 percent on its first trading day in Shanghai.
The MSCI Asia Pacific Index dropped 0.3 percent to 110.26 as of 12:05 p.m. in Tokyo. Two stocks declined for each one that advanced. The gauge sank 3.1 percent yesterday, paring its rally from a more than five-year low on March 9 to 57 percent.
“These technical corrections, profit taking and pullbacks are to be expected, but my feeling is that they’ll be relatively shallow,” said Prasad Patkar, who helps manage about $1.2 billion at Platypus Asset Management in Sydney. “Valuations looked stretched, but as long as earnings keep going up, they will start to look more normal as time goes by.”
Japan’s Nikkei 225 Stock Average gained 0.4 percent. Casio Computer Co. rose 5.8 percent after Credit Suisse Group AG increased its rating on the electronics maker. Hong Kong’s Hang Seng Index added 0.6 percent.
The Shanghai Composite Index lost 0.7 percent, extending yesterday’s 5.8 percent slump, which was the steepest since November. Air China Ltd. sank 7.1 percent on concern it may have paid too much to raise its stake in Hong Kong’s Cathay Pacific Airways Ltd.
Trailing Estimates
Futures on the Standard & Poor’s 500 Index gained 0.3 percent. The gauge fell 2.4 percent yesterday, extending a global stock slump after figures on Japan’s economic growth trailed some economists’ estimates and foreign direct investment in China dropped for a 10th month. The MSCI World Index was little changed today after sinking 2.8 percent yesterday.
Reports last week showed that Chinese exports dropped in July, lending fell, and investment growth slowed, while Australia’s statistics bureau said wage growth stalled last quarter as the worst global slump since the Great Depression drove up unemployment.
Mitsubishi sank 2.2 percent to 1,880 yen. Mitsui & Co., a trading house that generates more than half its profit from metals and energy, lost 1.8 percent to 1,219. Fortescue slumped 3.1 percent to A$4.44, following a 10 percent advance in the four previous trading days.
Metal Prices Gain
A measure of six metals, including copper and zinc, traded on the London Metal Exchange fell 2.7 percent yesterday to the lowest level in a week. Copper futures in New York dropped 2.3 percent, while oil sank 1.1 percent.
The MSCI Asia Pacific Index rallied 62 percent through Aug. 14 from its March 9 low on speculation a global economic recovery will boost earnings. Companies in the gauge trade at 1.57 times book value, compared with 1.03 times at the March low. The benchmark has averaged about 1.7 times book value since 2001.
“We were due for a correction, but the overall rising trend for the market remains as earnings and the economy are on the mend,” said Yoshinori Nagano, a senior strategist at Tokyo- based Daiwa Asset Management Co., which oversees the equivalent of $89 billion.
A third of the 503 companies in the MSCI Asia Pacific Index that have reported results since early July have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.
James Hardie
James Hardie, which reported a first-quarter loss on declining earnings from the U.S., surged 21 percent to A$6.97. The company said it expects full-year operating profit at the high end of analysts’ forecasts, excluding costs relating to asbestos claims, and that the U.S. housing slump may be easing.
Everbright Securities, the first Chinese brokerage to make an initial public offering in almost seven years, soared 34 percent to 28.21 yuan. The company raised 11 billion yuan ($1.6 billion) by selling shares to institutional and retail investors.
Air China, the world’s biggest airline by market value, sank 7.1 percent to 7.29 yuan. The company said it will spend HK$6.3 billion ($813 million) raising its stake in Cathay Pacific to 29.99 percent. Cathay lost 1 percent to HK$11.50.
“Further alignment with Cathay will enhance Air China’s strategic control of China’s most important international gateways -- Beijing and Hong Kong,” said Ally Ma, an analyst at Citigroup Inc. Still, the price “seems too high and disappoints our positive view on Air China.”
In Tokyo, Casio gained 5.8 percent to 788 yen. Credit Suisse upgraded the stock to “outperform” from “underperform” amid optimism the company will restore profits in money-losing businesses.
Mitsubishi Corp., which generates nearly half its revenue from trading commodities, sank 2.2 percent in Tokyo, while Fortescue Metals Group Ltd. lost 3.1 percent in Sydney. James Hardie Industries NV, the biggest seller of home siding in the U.S., surged 21 percent after forecasting profit at the high end of analyst estimates. Everbright Securities Co. soared 34 percent on its first trading day in Shanghai.
The MSCI Asia Pacific Index dropped 0.3 percent to 110.26 as of 12:05 p.m. in Tokyo. Two stocks declined for each one that advanced. The gauge sank 3.1 percent yesterday, paring its rally from a more than five-year low on March 9 to 57 percent.
“These technical corrections, profit taking and pullbacks are to be expected, but my feeling is that they’ll be relatively shallow,” said Prasad Patkar, who helps manage about $1.2 billion at Platypus Asset Management in Sydney. “Valuations looked stretched, but as long as earnings keep going up, they will start to look more normal as time goes by.”
Japan’s Nikkei 225 Stock Average gained 0.4 percent. Casio Computer Co. rose 5.8 percent after Credit Suisse Group AG increased its rating on the electronics maker. Hong Kong’s Hang Seng Index added 0.6 percent.
The Shanghai Composite Index lost 0.7 percent, extending yesterday’s 5.8 percent slump, which was the steepest since November. Air China Ltd. sank 7.1 percent on concern it may have paid too much to raise its stake in Hong Kong’s Cathay Pacific Airways Ltd.
Trailing Estimates
Futures on the Standard & Poor’s 500 Index gained 0.3 percent. The gauge fell 2.4 percent yesterday, extending a global stock slump after figures on Japan’s economic growth trailed some economists’ estimates and foreign direct investment in China dropped for a 10th month. The MSCI World Index was little changed today after sinking 2.8 percent yesterday.
Reports last week showed that Chinese exports dropped in July, lending fell, and investment growth slowed, while Australia’s statistics bureau said wage growth stalled last quarter as the worst global slump since the Great Depression drove up unemployment.
Mitsubishi sank 2.2 percent to 1,880 yen. Mitsui & Co., a trading house that generates more than half its profit from metals and energy, lost 1.8 percent to 1,219. Fortescue slumped 3.1 percent to A$4.44, following a 10 percent advance in the four previous trading days.
Metal Prices Gain
A measure of six metals, including copper and zinc, traded on the London Metal Exchange fell 2.7 percent yesterday to the lowest level in a week. Copper futures in New York dropped 2.3 percent, while oil sank 1.1 percent.
The MSCI Asia Pacific Index rallied 62 percent through Aug. 14 from its March 9 low on speculation a global economic recovery will boost earnings. Companies in the gauge trade at 1.57 times book value, compared with 1.03 times at the March low. The benchmark has averaged about 1.7 times book value since 2001.
“We were due for a correction, but the overall rising trend for the market remains as earnings and the economy are on the mend,” said Yoshinori Nagano, a senior strategist at Tokyo- based Daiwa Asset Management Co., which oversees the equivalent of $89 billion.
A third of the 503 companies in the MSCI Asia Pacific Index that have reported results since early July have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.
James Hardie
James Hardie, which reported a first-quarter loss on declining earnings from the U.S., surged 21 percent to A$6.97. The company said it expects full-year operating profit at the high end of analysts’ forecasts, excluding costs relating to asbestos claims, and that the U.S. housing slump may be easing.
Everbright Securities, the first Chinese brokerage to make an initial public offering in almost seven years, soared 34 percent to 28.21 yuan. The company raised 11 billion yuan ($1.6 billion) by selling shares to institutional and retail investors.
Air China, the world’s biggest airline by market value, sank 7.1 percent to 7.29 yuan. The company said it will spend HK$6.3 billion ($813 million) raising its stake in Cathay Pacific to 29.99 percent. Cathay lost 1 percent to HK$11.50.
“Further alignment with Cathay will enhance Air China’s strategic control of China’s most important international gateways -- Beijing and Hong Kong,” said Ally Ma, an analyst at Citigroup Inc. Still, the price “seems too high and disappoints our positive view on Air China.”
In Tokyo, Casio gained 5.8 percent to 788 yen. Credit Suisse upgraded the stock to “outperform” from “underperform” amid optimism the company will restore profits in money-losing businesses.
Monday, August 17, 2009
Stocks Slide on Economy Concern; Yen, Dollar, Treasuries Gain
Stocks fell around the world, led by China, while the yen and the dollar advanced and Treasuries rose as investors speculated that a rally in riskier assets has outpaced the prospects for economic growth.
The MSCI World Index of 23 developed nations sank 1.7 percent at 12:55 p.m. in London, the biggest retreat in a month. Futures on the Standard & Poor’s 500 Index slid 2.3 percent, while China’s Shanghai Composite Index slumped the most since November. The yen strengthened against all 16 of the most-traded currencies tracked by Bloomberg, while the dollar advanced against every one except the yen. The yield on the benchmark 10- year Treasury note dropped to its lowest level this month. Copper and oil declined for a second day.
Equities tumbled after foreign direct investment in China fell, Yunnan Copper Industry Co. said there were “no clear signs” of a recovery and Japan’s economy grew less than economists estimated, reigniting concern that a five-month, 52 percent rally in the MSCI World was overdone. The tally of failed U.S. banks this year climbed to 77 last week, while the Reuters/University of Michigan index of consumer sentiment in America showed an unexpected decrease.
“The rally in risk assets has become overextended as it has run ahead of the improvement in fundamentals,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in an e-mailed report. “The dollar and yen have been boosted by a pickup in safe-haven demand.”
European Stocks
The Dow Jones Stoxx 600 Index of European shares retreated 2.4 percent, the biggest drop in a month. A 41 percent rebound since March 9 has left the regional measure valued at 40.2 times the profits of its companies, near the most expensive since 2003, data compiled by Bloomberg show.
Raw-materials shares declined with metals and oil. Rio Tinto Group, the world’s third-largest metals producer, decreased 5.1 percent in London. Swedbank AB decreased 4.9 percent in Stockholm. The Baltic region’s biggest bank announced a second rights offer in less than a year as it seeks to shore up reserves and exit the Swedish state’s bank support plan. The lender faces soaring loan losses and provisions in Latvia, Lithuania and Estonia.
Lowe’s Cos. slid 11 percent in pre-market New York trading after the second-largest U.S. home-improvement retailer reporting second-quarter profit that missed analysts’ estimates.
The world’s biggest pension funds have lost confidence in stocks as the best long-term investment, cutting holdings or leaving them unchanged during the steepest rally since the 1930s. Funds overseeing money for California teachers and public workers, Dutch government retirees and South Korean private- sector employees reduced their target weightings for equities this year, data compiled by Bloomberg show.
Japan’s Economy
The MSCI Asia Pacific Index lost 3.3 percent, the steepest decline since March. Japan’s gross domestic product expanded at an annual 3.7 percent pace in the three months ended June 30, missing the median estimate for a 3.9 percent increase in a Bloomberg News survey. Sony Corp., the maker of the PlayStation 3 game console, retreated 4.1 percent in Tokyo.
Confidence in the world economy surged to a 22-month high in August on signs the first global recession since World War II is approaching an end, a Bloomberg survey of users on six continents showed last week.
The U.S. unemployment rate dropped in July for the first time since April 2008, data from the Labor Department showed this month, while the German and French economies unexpectedly grew last quarter, government figures indicated last week.
Emerging Markets
China’s Shanghai Composite Index sank 5.8 percent, the steepest slump since Nov. 18, as Ping An Insurance (Group) Co.’s profit missed estimates.
Ping An, China’s second-biggest insurance company, fell 3.9 percent after first-half net income dropped 45 percent. Yunnan Copper sank 10 percent after posting a first-half loss.
The MSCI Emerging Markets Index declined 3.3 percent, the steepest drop since March. Russia’s ruble weakened 2 percent against the dollar and depreciated 1.1 percent against the euro.
The yen advanced the most against the Australian dollar, strengthening 2.5 percent as demand for higher-yielding currencies waned, and rose 1.5 percent versus the euro. The pound slid 1.6 percent against the dollar on growing evidence the U.K.’s sputtering economy is halting the currency’s biggest five-month rally in 24 years.
U.S. Bonds
Gains for Treasuries sent the yield on the benchmark 10- year note down 10 basis points to 3.47 percent. The 30-year yield lost 7 basis points to 4.35 percent.
The cost of protecting European corporate bonds from default rose to the highest since July 23 in the market for credit-default swaps. The Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 4.25 basis points to 99, according to JPMorgan Chase & Co. prices.
Copper for delivery in three months fell 2.9 percent to $6,065 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also declined. Crude oil retreated 2.3 percent to $65.93 a barrel in New York. Gold fell 1.3 percent to $936.10 an ounce, leading a decline in precious metals.
The MSCI World Index of 23 developed nations sank 1.7 percent at 12:55 p.m. in London, the biggest retreat in a month. Futures on the Standard & Poor’s 500 Index slid 2.3 percent, while China’s Shanghai Composite Index slumped the most since November. The yen strengthened against all 16 of the most-traded currencies tracked by Bloomberg, while the dollar advanced against every one except the yen. The yield on the benchmark 10- year Treasury note dropped to its lowest level this month. Copper and oil declined for a second day.
Equities tumbled after foreign direct investment in China fell, Yunnan Copper Industry Co. said there were “no clear signs” of a recovery and Japan’s economy grew less than economists estimated, reigniting concern that a five-month, 52 percent rally in the MSCI World was overdone. The tally of failed U.S. banks this year climbed to 77 last week, while the Reuters/University of Michigan index of consumer sentiment in America showed an unexpected decrease.
“The rally in risk assets has become overextended as it has run ahead of the improvement in fundamentals,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in an e-mailed report. “The dollar and yen have been boosted by a pickup in safe-haven demand.”
European Stocks
The Dow Jones Stoxx 600 Index of European shares retreated 2.4 percent, the biggest drop in a month. A 41 percent rebound since March 9 has left the regional measure valued at 40.2 times the profits of its companies, near the most expensive since 2003, data compiled by Bloomberg show.
Raw-materials shares declined with metals and oil. Rio Tinto Group, the world’s third-largest metals producer, decreased 5.1 percent in London. Swedbank AB decreased 4.9 percent in Stockholm. The Baltic region’s biggest bank announced a second rights offer in less than a year as it seeks to shore up reserves and exit the Swedish state’s bank support plan. The lender faces soaring loan losses and provisions in Latvia, Lithuania and Estonia.
Lowe’s Cos. slid 11 percent in pre-market New York trading after the second-largest U.S. home-improvement retailer reporting second-quarter profit that missed analysts’ estimates.
The world’s biggest pension funds have lost confidence in stocks as the best long-term investment, cutting holdings or leaving them unchanged during the steepest rally since the 1930s. Funds overseeing money for California teachers and public workers, Dutch government retirees and South Korean private- sector employees reduced their target weightings for equities this year, data compiled by Bloomberg show.
Japan’s Economy
The MSCI Asia Pacific Index lost 3.3 percent, the steepest decline since March. Japan’s gross domestic product expanded at an annual 3.7 percent pace in the three months ended June 30, missing the median estimate for a 3.9 percent increase in a Bloomberg News survey. Sony Corp., the maker of the PlayStation 3 game console, retreated 4.1 percent in Tokyo.
Confidence in the world economy surged to a 22-month high in August on signs the first global recession since World War II is approaching an end, a Bloomberg survey of users on six continents showed last week.
The U.S. unemployment rate dropped in July for the first time since April 2008, data from the Labor Department showed this month, while the German and French economies unexpectedly grew last quarter, government figures indicated last week.
Emerging Markets
China’s Shanghai Composite Index sank 5.8 percent, the steepest slump since Nov. 18, as Ping An Insurance (Group) Co.’s profit missed estimates.
Ping An, China’s second-biggest insurance company, fell 3.9 percent after first-half net income dropped 45 percent. Yunnan Copper sank 10 percent after posting a first-half loss.
The MSCI Emerging Markets Index declined 3.3 percent, the steepest drop since March. Russia’s ruble weakened 2 percent against the dollar and depreciated 1.1 percent against the euro.
The yen advanced the most against the Australian dollar, strengthening 2.5 percent as demand for higher-yielding currencies waned, and rose 1.5 percent versus the euro. The pound slid 1.6 percent against the dollar on growing evidence the U.K.’s sputtering economy is halting the currency’s biggest five-month rally in 24 years.
U.S. Bonds
Gains for Treasuries sent the yield on the benchmark 10- year note down 10 basis points to 3.47 percent. The 30-year yield lost 7 basis points to 4.35 percent.
The cost of protecting European corporate bonds from default rose to the highest since July 23 in the market for credit-default swaps. The Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 4.25 basis points to 99, according to JPMorgan Chase & Co. prices.
Copper for delivery in three months fell 2.9 percent to $6,065 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also declined. Crude oil retreated 2.3 percent to $65.93 a barrel in New York. Gold fell 1.3 percent to $936.10 an ounce, leading a decline in precious metals.
Japan emerges from recession but investors remain sceptical
Japan's economy has joined France and Germany in emerging from recession as the country's stimulus package gained some traction.
The economy, the world's second-biggest, recorded growth of 0.9pc in the three months to the end of June from the first quarter of the year. If Japan manages to sustain that rate for 12 months, the economy would enjoy expansion of 3.7pc.
The rebound in the economy was fuelled by Japan's key export markets, including China. Japan's neighbour is its biggest export market and saw growth of 7.9pc in the second quarter. Exports contributed 1.6pc to the quarter's growth, helping to offset other headwinds.
Japanese consumer confidence has also been buoyed by the 25 trillion yen stimulus package thrown at the economy by Prime Minister Taro Asa.
Despite Japan's technical emergence from recession, stock markets focused on the prospect that a robust recovery is unlikely. Tokyo's benchmark Nikkei 225 was down almost 3pc in late afternoon trading. Asian stock markets were also reacting to weak consumer confidence numbers released in the US last Friday.
“Growth was supported by stimulus packages and exports but it’s hard to believe they’ll both keep lifting the economy at this pace,” Takahide Kiuchi, chief economist at Nomura told Bloomberg. “We’re over the worst but Japan is in no condition to achieve a sustainable recovery.”
However, the second quarter's growth does bring to an end four straight quarters of expansion and may provide a political boost to Mr Asa, who faces a general election at the end of this month.
The economy, the world's second-biggest, recorded growth of 0.9pc in the three months to the end of June from the first quarter of the year. If Japan manages to sustain that rate for 12 months, the economy would enjoy expansion of 3.7pc.
The rebound in the economy was fuelled by Japan's key export markets, including China. Japan's neighbour is its biggest export market and saw growth of 7.9pc in the second quarter. Exports contributed 1.6pc to the quarter's growth, helping to offset other headwinds.
Japanese consumer confidence has also been buoyed by the 25 trillion yen stimulus package thrown at the economy by Prime Minister Taro Asa.
Despite Japan's technical emergence from recession, stock markets focused on the prospect that a robust recovery is unlikely. Tokyo's benchmark Nikkei 225 was down almost 3pc in late afternoon trading. Asian stock markets were also reacting to weak consumer confidence numbers released in the US last Friday.
“Growth was supported by stimulus packages and exports but it’s hard to believe they’ll both keep lifting the economy at this pace,” Takahide Kiuchi, chief economist at Nomura told Bloomberg. “We’re over the worst but Japan is in no condition to achieve a sustainable recovery.”
However, the second quarter's growth does bring to an end four straight quarters of expansion and may provide a political boost to Mr Asa, who faces a general election at the end of this month.
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