The publisher of the world's largest-circulated magazine Reader's Digest, sold across dozens of countries including India, today filed for bankruptcy protection in the US.
Reader's Digest Association (RDA) in a statement said that "it has filed voluntary pre-arranged petitions under Chapter 11 of the United State Bankruptcy Code, as part of the company's previously announced restructuring plan".
The filing for bankruptcy protection by RDA is aimed at reducing its debt burden by 75 per cent and to strengthen future financial position.
"The filing applies only to the RDA's US businesses-- its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be part of the filing," RDA said.
RDA, a global multi-brand media and marketing company based in the US, has offices in 44 countries and sells books, magazines, music, video and educational products reaching a customer base of 130 million in 78 countries.
It publishes 94 magazines, including 50 editions of Reader's Digest, the world's largest-circulated magazine and sells approximately 40 million books, music and video products across the world each year.
Prior to the filing, more than 80 per cent of the company's senior secured lenders had signed on to the agreement in principle.
Tuesday, August 25, 2009
Bernanke to Be Nominated by Obama for Second Term as Fed Chief
Aug. 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, who led the biggest expansion of the central bank’s power in its 95-year history to battle the worst economic slump since the Great Depression, will be nominated to a second term by President Barack Obama.
Bernanke “has led the Fed through the one of the worst financial crises that this nation and this world have ever faced,” Obama said in remarks prepared for delivery today in Martha’s Vineyard, Massachusetts, where Bernanke is to join him.
“As an expert on the causes of the Great Depression, I’m sure Ben never imagined that he would be part of a team responsible for preventing another,” Obama said. “But because of his background, his temperament, his courage, and his creativity, that’s exactly what he has helped to achieve.”
Bernanke’s nomination for a second four-year term starting Jan. 31 requires Senate approval and was endorsed by the head of the Banking Committee, Christopher Dodd. The Fed chief will still face tough questioning from lawmakers who say he was slow to recognize the severity of the mortgage crisis and didn’t do enough to protect American consumers while leading bailouts of financial firms including Bear Stearns Cos. and American International Group Inc.
“While I have had serious differences with the Federal Reserve over the past few years, I think reappointing Chairman Bernanke is probably the right choice,” Dodd, a Connecticut Democrat, said yesterday in a statement. “There will be a thorough and comprehensive confirmation hearing.”
Stocks, Treasuries
Asian stocks fell and Treasuries advanced as Bernanke’s nomination confirmed expectations of investors, who focused instead on lower profits at Chinese companies and evidence of increasing loan losses in the U.S. Japan’s Nikkei 225 Stock Average slipped 0.7 percent to 10,506.55 at 2:11 p.m. in Tokyo. The yield on the 10-year Treasury note declined one basis point to 3.46 percent, according to data compiled by Bloomberg.
Obama decided to reappoint Bernanke because he wanted to keep together the team that had weathered the crisis, an administration official said. The official said Treasury Secretary Timothy Geithner, Chief of Staff Rahm Emanuel and National Economic Council Chairman Larry Summers all recommended Bernanke be reappointed.
Bernanke, 55, slashed the main interest rate almost to zero and pumped $1 trillion into the banking system to unfreeze credit markets. He now must guide the world’s largest economy back to growth and reduce unemployment approaching 10 percent while shrinking the Fed’s balance sheet to prevent a surge in inflation.
Challenges Ahead
“It’s not just that he’s done a great job of dealing creatively with the financial crisis,” said Richard Berner, co- head of global economics at Morgan Stanley in New York. “He has the capacity to deal with the challenges that lie ahead -- continuing to help the economy and markets heal and engineering the exit strategy when it’s appropriate to do so.”
Obama, a Democrat, continues a recent tradition of bipartisanship in his decision to nominate Bernanke, a Republican, to a second term.
Bernanke’s predecessor and fellow Republican, Alan Greenspan, served as Fed chief for 18 years while gaining renomination by three presidents, including Bill Clinton, a Democrat. President Ronald Reagan kept Paul Volcker, first selected by Jimmy Carter, for a second term.
Almost 75 percent of investors surveyed in the first Quarterly Bloomberg Global Poll had a favorable view of the chairman in July. By almost a three-to-one margin, they said Bernanke had earned another four-year term.
Exit Strategy
“Wall Street can rest a little easier,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Having a new chairman come in at this late date would put the Fed-engineered solution to both the recovery and the exit strategy at risk.”
The Standard & Poor’s 500 Index has risen 52 percent since a recession low on March 9. The S&P lost 38.5 percent last year. Credit markets have also recovered: The London Interbank Offered Rate for three months loans in dollars fell to 0.39 percent on Aug. 24. The rate surged as high as 4.81 percent in October.
Bernanke’s nomination comes as the world’s biggest economy is poised for renewed growth.
The economy will expand 2 percent or more in the four quarters through June, the first such streak in more than four years, according to the median of 53 forecasts in a Bloomberg News survey of economists. Gross domestic product has fallen 3.9 percent since the recession began in December 2007.
Corporate Bonds
The Libor-OIS spread, a gauge of financial stress, fell to 20 basis points Aug. 24. The spread soared to 364 basis points on Oct. 10 last year after Lehman Brothers Holdings Inc.’s collapse. Greenspan said in a June 2008 interview he wouldn’t consider credit markets back to “normal” until the spread was at 25 basis points.
Companies have sold a record $794 billion of dollar- denominated investment-grade corporate bonds this year, according to data compiled by Bloomberg. That’s up from $599 billion in the same period last year.
“Prospects for a return to growth in the near term appear good,” Bernanke said in an Aug. 21 speech at the Kansas City Fed’s annual symposium in Jackson Hole. Still, he warned of “critical challenges” ahead and added: “We have an enormous amount of work to do.”
Economists predict the unemployment rate, now 9.4 percent, could climb above 10 percent, curbing consumer spending and limiting the strength of the recovery.
MIT Degree
Ben Shalom Bernanke grew up in Dillon, South Carolina, where his family owned a pharmacy opened by his Austrian immigrant grandfather. He went north to Harvard University in Cambridge, Massachusetts, graduating summa cum laude with a bachelor’s degree in economics, then received a doctorate in economics from the neighboring Massachusetts Institute of Technology in 1979.
A self-described “Great Depression buff,” Bernanke joined the central bank as a governor in 2002 after serving as chairman of Princeton University’s economics department. President George W. Bush appointed Bernanke chairman of the Council of Economic Advisers in 2005 before naming him a few months later to the top Fed post.
“I did spend a lot of my career studying the Great Depression and other financial crises,” Bernanke said in a town-hall-style meeting on July 26 organized by PBS television. “And I didn’t expect it would be so helpful, so useful, as it has been.”
By his own admission, Bernanke was slow to recognize the severity of the mortgage meltdown at the heart of the recession.
“I and others were mistaken early on in saying that the subprime crisis would be contained,” he said in an interview last November with the New Yorker magazine.
Discount Rate Cut
In August 2007, the collapse in credit markets forced Fed policy makers to lower the discount rate just two weeks after declaring inflation was their paramount challenge. The next month, the Fed cut its benchmark federal funds rate for the first time in four years.
Bernanke came under fire for failing to prevent the collapse of Lehman Brothers, which triggered the biggest drop in the S&P 500 Index since Sept. 11, 2001, and deepened the credit freeze.
“The sentiment all over the world was that such a dramatic bankruptcy of a signature institution was impossible,” said Jean-Claude Trichet, president of the European Central Bank, in a June 15 interview.
Bernanke called Lehman’s failure “unavoidable” in his Jackson Hole speech. No buyer could be found, he said, and the investment bank didn’t have enough collateral to qualify for a Fed loan large enough to save it.
AIG Bailout
Two days after Lehman’s bankruptcy filing, the Fed took control of AIG in an $85 billion bailout designed to prevent the worst financial collapse in history.
As Lehman’s collapse sent shock waves through financial markets, Bernanke launched unprecedented programs -- one to contain fallout from a run on money-market funds, and another to buy short-term debt from companies such as General Electric Co.
Bernanke also supported then-Treasury Secretary Henry Paulson’s proposal for a $700 billion Troubled Asset Relief Program, initially intended to buy toxic assets from banks and later used to purchases equity stakes in the lenders themselves.
In December, with the economy contracting, the Fed’s key interest rate was slashed almost to zero, where it has remained. In the following months, the Fed launched programs to pump money into the economy through purchases of mortgage-backed debt, U.S. Treasuries and securities backed by auto loans, credit cards and commercial-property mortgages.
‘Uncharted Territory’
“This last couple of years has been clearly a move through uncharted territory, and as we’ve seen it’s taken a lot of unconventional moves to try to deal with the situation,” said Robert Parry, former president of the San Francisco Federal Reserve Bank. “There’s been a lot of innovation that’s gone on, and it seems to me that much of it has been successful.”
Yet the expansion of Fed authority has put Bernanke in the crosshairs of critics in Congress. Some lawmakers have accused the Fed of overstepping its authority and failing to properly supervise the financial firms that packaged and sold the mortgage-backed securities at the heart of the crisis.
“I’ve been astounded and shocked by certain regulatory malfeasance of the Federal Reserve and the reserve banks in the regulatory process in the last several years,” said Alabama Senator Richard Shelby, the ranking Republican on the Banking Committee.
Bank of America
Other lawmakers accused Bernanke of improperly pressuring Bank of America Corp. Chief Executive Officer Kenneth Lewis to proceed with its planned acquisition of Merrill Lynch & Co. The House Oversight Committee subpoenaed and released dozens of Fed e-mails and other documents. Bernanke told the panel in June that the central bank acted with the “highest integrity.”
The Fed chairman “has stepped on some landmines,” said Raymond Stone, managing director at Stone & McCarthy Research in Skillman, New Jersey. “Some were his fault, most weren’t.”
There’s little indication that Bernanke would fail to gain Senate approval. The Fed chief has cultivated relationships with key members of Congress, winning their respect while they criticized some of the central bank’s actions.
Senator Charles Schumer, a member of the Banking Committee and a New York Democrat, endorsed Bernanke’s reappointment, calling him “the right choice for these tough times.”
The recession “could have been considerably worse without Ben Bernanke’s strong and resolute actions,” Schumer said in a statement.
Bernanke “has led the Fed through the one of the worst financial crises that this nation and this world have ever faced,” Obama said in remarks prepared for delivery today in Martha’s Vineyard, Massachusetts, where Bernanke is to join him.
“As an expert on the causes of the Great Depression, I’m sure Ben never imagined that he would be part of a team responsible for preventing another,” Obama said. “But because of his background, his temperament, his courage, and his creativity, that’s exactly what he has helped to achieve.”
Bernanke’s nomination for a second four-year term starting Jan. 31 requires Senate approval and was endorsed by the head of the Banking Committee, Christopher Dodd. The Fed chief will still face tough questioning from lawmakers who say he was slow to recognize the severity of the mortgage crisis and didn’t do enough to protect American consumers while leading bailouts of financial firms including Bear Stearns Cos. and American International Group Inc.
“While I have had serious differences with the Federal Reserve over the past few years, I think reappointing Chairman Bernanke is probably the right choice,” Dodd, a Connecticut Democrat, said yesterday in a statement. “There will be a thorough and comprehensive confirmation hearing.”
Stocks, Treasuries
Asian stocks fell and Treasuries advanced as Bernanke’s nomination confirmed expectations of investors, who focused instead on lower profits at Chinese companies and evidence of increasing loan losses in the U.S. Japan’s Nikkei 225 Stock Average slipped 0.7 percent to 10,506.55 at 2:11 p.m. in Tokyo. The yield on the 10-year Treasury note declined one basis point to 3.46 percent, according to data compiled by Bloomberg.
Obama decided to reappoint Bernanke because he wanted to keep together the team that had weathered the crisis, an administration official said. The official said Treasury Secretary Timothy Geithner, Chief of Staff Rahm Emanuel and National Economic Council Chairman Larry Summers all recommended Bernanke be reappointed.
Bernanke, 55, slashed the main interest rate almost to zero and pumped $1 trillion into the banking system to unfreeze credit markets. He now must guide the world’s largest economy back to growth and reduce unemployment approaching 10 percent while shrinking the Fed’s balance sheet to prevent a surge in inflation.
Challenges Ahead
“It’s not just that he’s done a great job of dealing creatively with the financial crisis,” said Richard Berner, co- head of global economics at Morgan Stanley in New York. “He has the capacity to deal with the challenges that lie ahead -- continuing to help the economy and markets heal and engineering the exit strategy when it’s appropriate to do so.”
Obama, a Democrat, continues a recent tradition of bipartisanship in his decision to nominate Bernanke, a Republican, to a second term.
Bernanke’s predecessor and fellow Republican, Alan Greenspan, served as Fed chief for 18 years while gaining renomination by three presidents, including Bill Clinton, a Democrat. President Ronald Reagan kept Paul Volcker, first selected by Jimmy Carter, for a second term.
Almost 75 percent of investors surveyed in the first Quarterly Bloomberg Global Poll had a favorable view of the chairman in July. By almost a three-to-one margin, they said Bernanke had earned another four-year term.
Exit Strategy
“Wall Street can rest a little easier,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Having a new chairman come in at this late date would put the Fed-engineered solution to both the recovery and the exit strategy at risk.”
The Standard & Poor’s 500 Index has risen 52 percent since a recession low on March 9. The S&P lost 38.5 percent last year. Credit markets have also recovered: The London Interbank Offered Rate for three months loans in dollars fell to 0.39 percent on Aug. 24. The rate surged as high as 4.81 percent in October.
Bernanke’s nomination comes as the world’s biggest economy is poised for renewed growth.
The economy will expand 2 percent or more in the four quarters through June, the first such streak in more than four years, according to the median of 53 forecasts in a Bloomberg News survey of economists. Gross domestic product has fallen 3.9 percent since the recession began in December 2007.
Corporate Bonds
The Libor-OIS spread, a gauge of financial stress, fell to 20 basis points Aug. 24. The spread soared to 364 basis points on Oct. 10 last year after Lehman Brothers Holdings Inc.’s collapse. Greenspan said in a June 2008 interview he wouldn’t consider credit markets back to “normal” until the spread was at 25 basis points.
Companies have sold a record $794 billion of dollar- denominated investment-grade corporate bonds this year, according to data compiled by Bloomberg. That’s up from $599 billion in the same period last year.
“Prospects for a return to growth in the near term appear good,” Bernanke said in an Aug. 21 speech at the Kansas City Fed’s annual symposium in Jackson Hole. Still, he warned of “critical challenges” ahead and added: “We have an enormous amount of work to do.”
Economists predict the unemployment rate, now 9.4 percent, could climb above 10 percent, curbing consumer spending and limiting the strength of the recovery.
MIT Degree
Ben Shalom Bernanke grew up in Dillon, South Carolina, where his family owned a pharmacy opened by his Austrian immigrant grandfather. He went north to Harvard University in Cambridge, Massachusetts, graduating summa cum laude with a bachelor’s degree in economics, then received a doctorate in economics from the neighboring Massachusetts Institute of Technology in 1979.
A self-described “Great Depression buff,” Bernanke joined the central bank as a governor in 2002 after serving as chairman of Princeton University’s economics department. President George W. Bush appointed Bernanke chairman of the Council of Economic Advisers in 2005 before naming him a few months later to the top Fed post.
“I did spend a lot of my career studying the Great Depression and other financial crises,” Bernanke said in a town-hall-style meeting on July 26 organized by PBS television. “And I didn’t expect it would be so helpful, so useful, as it has been.”
By his own admission, Bernanke was slow to recognize the severity of the mortgage meltdown at the heart of the recession.
“I and others were mistaken early on in saying that the subprime crisis would be contained,” he said in an interview last November with the New Yorker magazine.
Discount Rate Cut
In August 2007, the collapse in credit markets forced Fed policy makers to lower the discount rate just two weeks after declaring inflation was their paramount challenge. The next month, the Fed cut its benchmark federal funds rate for the first time in four years.
Bernanke came under fire for failing to prevent the collapse of Lehman Brothers, which triggered the biggest drop in the S&P 500 Index since Sept. 11, 2001, and deepened the credit freeze.
“The sentiment all over the world was that such a dramatic bankruptcy of a signature institution was impossible,” said Jean-Claude Trichet, president of the European Central Bank, in a June 15 interview.
Bernanke called Lehman’s failure “unavoidable” in his Jackson Hole speech. No buyer could be found, he said, and the investment bank didn’t have enough collateral to qualify for a Fed loan large enough to save it.
AIG Bailout
Two days after Lehman’s bankruptcy filing, the Fed took control of AIG in an $85 billion bailout designed to prevent the worst financial collapse in history.
As Lehman’s collapse sent shock waves through financial markets, Bernanke launched unprecedented programs -- one to contain fallout from a run on money-market funds, and another to buy short-term debt from companies such as General Electric Co.
Bernanke also supported then-Treasury Secretary Henry Paulson’s proposal for a $700 billion Troubled Asset Relief Program, initially intended to buy toxic assets from banks and later used to purchases equity stakes in the lenders themselves.
In December, with the economy contracting, the Fed’s key interest rate was slashed almost to zero, where it has remained. In the following months, the Fed launched programs to pump money into the economy through purchases of mortgage-backed debt, U.S. Treasuries and securities backed by auto loans, credit cards and commercial-property mortgages.
‘Uncharted Territory’
“This last couple of years has been clearly a move through uncharted territory, and as we’ve seen it’s taken a lot of unconventional moves to try to deal with the situation,” said Robert Parry, former president of the San Francisco Federal Reserve Bank. “There’s been a lot of innovation that’s gone on, and it seems to me that much of it has been successful.”
Yet the expansion of Fed authority has put Bernanke in the crosshairs of critics in Congress. Some lawmakers have accused the Fed of overstepping its authority and failing to properly supervise the financial firms that packaged and sold the mortgage-backed securities at the heart of the crisis.
“I’ve been astounded and shocked by certain regulatory malfeasance of the Federal Reserve and the reserve banks in the regulatory process in the last several years,” said Alabama Senator Richard Shelby, the ranking Republican on the Banking Committee.
Bank of America
Other lawmakers accused Bernanke of improperly pressuring Bank of America Corp. Chief Executive Officer Kenneth Lewis to proceed with its planned acquisition of Merrill Lynch & Co. The House Oversight Committee subpoenaed and released dozens of Fed e-mails and other documents. Bernanke told the panel in June that the central bank acted with the “highest integrity.”
The Fed chairman “has stepped on some landmines,” said Raymond Stone, managing director at Stone & McCarthy Research in Skillman, New Jersey. “Some were his fault, most weren’t.”
There’s little indication that Bernanke would fail to gain Senate approval. The Fed chief has cultivated relationships with key members of Congress, winning their respect while they criticized some of the central bank’s actions.
Senator Charles Schumer, a member of the Banking Committee and a New York Democrat, endorsed Bernanke’s reappointment, calling him “the right choice for these tough times.”
The recession “could have been considerably worse without Ben Bernanke’s strong and resolute actions,” Schumer said in a statement.
RBS Said Likely to Sell Asia Businesses to Standard Chartered
Aug. 24 (Bloomberg) -- Royal Bank of Scotland Group Plc, the biggest bank owned by the U.K. government, may sell its units in India and China to Standard Chartered Plc as soon as next month, a person familiar with the situation said.
The retail and commercial banking assets are valued at $300 million to $400 million, said the person, who declined to be identified because the talks are confidential. An official at Standard Chartered in London declined to comment.
“RBS is in ongoing discussions with bidders for the remaining assets it has decided to sell in Asia and will make further announcements, as appropriate, in due course,” said Fiona MacRae, an Edinburgh-based spokeswoman for RBS.
The sale of RBS’s assets in China has faltered and has a 30 percent chance of success because more of the RBS customers than Standard Chartered expected are locked into specific products, making it harder to shift them to alternatives, the Financial Times reported today.
RBS is reducing its presence or withdrawing from two thirds of the 54 countries in which it does business after posting the biggest loss in U.K. corporate history last year and receiving government funding.
The retail and commercial banking assets are valued at $300 million to $400 million, said the person, who declined to be identified because the talks are confidential. An official at Standard Chartered in London declined to comment.
“RBS is in ongoing discussions with bidders for the remaining assets it has decided to sell in Asia and will make further announcements, as appropriate, in due course,” said Fiona MacRae, an Edinburgh-based spokeswoman for RBS.
The sale of RBS’s assets in China has faltered and has a 30 percent chance of success because more of the RBS customers than Standard Chartered expected are locked into specific products, making it harder to shift them to alternatives, the Financial Times reported today.
RBS is reducing its presence or withdrawing from two thirds of the 54 countries in which it does business after posting the biggest loss in U.K. corporate history last year and receiving government funding.
Asian Stocks Fall, Treasuries Gain as Demand for Risk Eases
Aug. 25 (Bloomberg) -- Asian stocks fell and Treasuries advanced as lower profit at Chinese companies and evidence of increasing loan losses in the U.S. sapped demand for risky assets. South Africa’s rand and the Australian dollar dropped as commodity prices declined.
Jiangxi Copper Co. sank 5.7 percent in Shanghai after posting a 61 percent decline in first-half net income and metals retreated. Aluminum Corp. of China Ltd., which reported its third quarterly net loss, fell 2.7 percent in Hong Kong. Chinese equities posted the region’s worst performance as the nation’s premier warned the economic recovery isn’t stable yet. KB Financial Group Inc. lost 2.9 percent in Seoul as SunTrust Banks Inc. said U.S. lenders face more credit losses.
The MSCI Asia Pacific Index lost 0.4 percent to 112.95 as of 4:11 p.m. in Tokyo. The index rallied 2.5 percent yesterday, the most since May 19. Companies on the gauge are priced at an average 24 times estimated earnings, up from 13.7 times at the end of 2008.
“Companies aren’t yet seeing the signs of improvement coming through, even though the market is anticipating it,” said Matt Riordan, who helps manage about $3.8 billion at Paradice Investment Management in Sydney. “We need to start seeing some pretty broad profit upgrades coming through driven by revenues rather than cost cutting. Until then, we’ll be cautious.”
China’s Shanghai Composite Index sank 2.6 percent after the Wen Jiabao, the nation’s premier, said yesterday that excess industrial capacity may limit growth and authorities can’t be “blindly” optimistic. Japan’s Nikkei 225 Stock Average slipped 0.8 percent. Hong Kong’s Hang Seng Index lost 1.1 percent.
NGK, Woolworths
Among stocks that gained today, NGK Insulators Ltd. rallied 3.7 percent in Tokyo after the Nikkei newspaper said the company won an order from Abu Dhabi. Australia’s Woolworths Ltd., the country’s biggest retailer, rose 2.2 percent on plans for a joint venture with U.S. home-improvement chain Lowe’s Cos.
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The U.S. gauge dropped 0.1 percent yesterday, erasing an earlier 0.9 percent advance, following SunTrust’s comments. Taylor, Bean & Whitaker Mortgage Corp., the 12th-largest U.S. mortgage lender, also filed for bankruptcy protection, while Fitch Ratings said more delinquent U.S. mortgage holders are failing to catch up with their payments.
Treasuries rose for a second day amid speculation the global financial crisis won’t end this year. The yield on the 10-year note declined two basis points to 3.46 percent, according to data compiled by Bloomberg.
Fading Momentum?
“I’m favoring longer maturities,” said Hideo Shimomura, who oversees $4 billion in non-yen bonds as chief fund investor in Tokyo at Mitsubishi UFJ Asset Management Co., a unit of Japan’s largest bank. “Looking toward next year, the momentum in the economy will fade. The trend for inflation is down.”
Jiangxi Copper, China’s biggest producer of the metal, sank 5.7 percent to 37.20 yuan after saying first-half profit slumped 61 percent because of lower prices.
Copper futures in New York sank 1.4 percent in after-hours trading, following yesterday’s 1.3 percent gain. Oil prices lost 1 percent, erasing yesterday’s advance.
South Africa’s rand lost 0.5 percent versus the dollar today, while the Australian dollar fell 0.4 percent. The two currencies have moved along with the Reuters/Jefferies CRB Index of 19 raw materials about 90 percent of the time this year, Bloomberg data show. The commodities gauge, which hasn’t yet traded today, rose 0.8 percent yesterday.
‘Cautious’ Investors
“We’re not out of the woods on a global recovery basis so, though things look better, investors are being cautious,” said Phil Burke, chief foreign-exchange dealer at JPMorgan Chase Bank in Sydney.
Aluminum Corp., known as Chalco, lost 2.7 percent to HK$8.96. The company aims to break even or at least curb losses in the second half on expectations of an improvement in the market, Chairman Xiong Weiping said at a news conference today.
About 18 percent of the 538 companies in the MSCI Asia Pacific Index that posted results since early July have missed analysts’ profit estimates, according to data compiled by Bloomberg. A third of those companies have reported better-than- estimated earnings, helping drive the stock index to the highest level in almost 11 months on Aug. 14.
“The market is no longer cheap,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. “The question is whether the rally is justified by the pick-up in economic data and earnings.”
Empty Shelves
Wesfarmers Ltd. slumped 3.5 percent to A$24.80. Australia’s second-largest retailer is stocking more fresh fruit and vegetables than it can sell to reverse the reputation its Coles supermarket division has for empty shelves and win market share, CEO Richard Goyder said in an interview.
KB Financial retreated 2.9 percent to 54,400 won following comments from James Wells III, chief executive officer of Atlanta-based SunTrust. Mizuho Financial Group Inc., Japan’s third-biggest bank by market value, slipped 1.8 percent to 225 yen. Daiwa Securities Group Inc. Japan’s second-largest brokerage, fell 3.2 percent to 551 yen.
“This credit cycle has yet to play itself out,” Wells said in a speech to the Rotary Club of Atlanta. “We do not expect things to improve for the banking industry in the very near future.”
China Construction Bank Corp. fell 4.3 percent to 5.53 yuan in Shanghai. Chairman Guo Shuqing said yesterday “excess liquidity” from explosive loan growth in the first half of the year has led to asset bubbles.
Credit Losses
Global credit losses and writedowns by financial institutions have totaled $1.6 trillion since 2007, according to data compiled by Bloomberg. The financial crisis helped drag the U.S. and Japan into recession and caused the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos.
Nouriel Roubini, the New York University professor who predicted the financial crisis, wrote in the Financial Times yesterday the chance of a double-dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.
Suncorp-Metway Ltd., Australia’s third-largest insurer, sank 2.8 percent to A$7.58. Net income in the 12 months ended June 30 fell 40 percent to A$348 million ($291 million) as the company set aside more money to cover bad debt. Impairment losses on loans soared 10-fold to A$710 million.
NGK climbed 3.7 percent to 2,270 yen. The company won a 60 billion yen ($639 million) order from Abu Dhabi to supply rechargeable batteries for power management systems, the Nikkei newspaper reported.
Woolworths rose 2.2 percent to A$28.63. The company said it will start a joint venture with North Carolina-based Lowe’s and open more than 150 stores over the next five years.
South Korea’s Daewoo Engineering & Construction Co. surged 9.2 percent to 14,800 won after Edaily reported Blackstone Group LP, KKR & Co. and Permira Holdings Ltd. may bid for the company.
Jiangxi Copper Co. sank 5.7 percent in Shanghai after posting a 61 percent decline in first-half net income and metals retreated. Aluminum Corp. of China Ltd., which reported its third quarterly net loss, fell 2.7 percent in Hong Kong. Chinese equities posted the region’s worst performance as the nation’s premier warned the economic recovery isn’t stable yet. KB Financial Group Inc. lost 2.9 percent in Seoul as SunTrust Banks Inc. said U.S. lenders face more credit losses.
The MSCI Asia Pacific Index lost 0.4 percent to 112.95 as of 4:11 p.m. in Tokyo. The index rallied 2.5 percent yesterday, the most since May 19. Companies on the gauge are priced at an average 24 times estimated earnings, up from 13.7 times at the end of 2008.
“Companies aren’t yet seeing the signs of improvement coming through, even though the market is anticipating it,” said Matt Riordan, who helps manage about $3.8 billion at Paradice Investment Management in Sydney. “We need to start seeing some pretty broad profit upgrades coming through driven by revenues rather than cost cutting. Until then, we’ll be cautious.”
China’s Shanghai Composite Index sank 2.6 percent after the Wen Jiabao, the nation’s premier, said yesterday that excess industrial capacity may limit growth and authorities can’t be “blindly” optimistic. Japan’s Nikkei 225 Stock Average slipped 0.8 percent. Hong Kong’s Hang Seng Index lost 1.1 percent.
NGK, Woolworths
Among stocks that gained today, NGK Insulators Ltd. rallied 3.7 percent in Tokyo after the Nikkei newspaper said the company won an order from Abu Dhabi. Australia’s Woolworths Ltd., the country’s biggest retailer, rose 2.2 percent on plans for a joint venture with U.S. home-improvement chain Lowe’s Cos.
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The U.S. gauge dropped 0.1 percent yesterday, erasing an earlier 0.9 percent advance, following SunTrust’s comments. Taylor, Bean & Whitaker Mortgage Corp., the 12th-largest U.S. mortgage lender, also filed for bankruptcy protection, while Fitch Ratings said more delinquent U.S. mortgage holders are failing to catch up with their payments.
Treasuries rose for a second day amid speculation the global financial crisis won’t end this year. The yield on the 10-year note declined two basis points to 3.46 percent, according to data compiled by Bloomberg.
Fading Momentum?
“I’m favoring longer maturities,” said Hideo Shimomura, who oversees $4 billion in non-yen bonds as chief fund investor in Tokyo at Mitsubishi UFJ Asset Management Co., a unit of Japan’s largest bank. “Looking toward next year, the momentum in the economy will fade. The trend for inflation is down.”
Jiangxi Copper, China’s biggest producer of the metal, sank 5.7 percent to 37.20 yuan after saying first-half profit slumped 61 percent because of lower prices.
Copper futures in New York sank 1.4 percent in after-hours trading, following yesterday’s 1.3 percent gain. Oil prices lost 1 percent, erasing yesterday’s advance.
South Africa’s rand lost 0.5 percent versus the dollar today, while the Australian dollar fell 0.4 percent. The two currencies have moved along with the Reuters/Jefferies CRB Index of 19 raw materials about 90 percent of the time this year, Bloomberg data show. The commodities gauge, which hasn’t yet traded today, rose 0.8 percent yesterday.
‘Cautious’ Investors
“We’re not out of the woods on a global recovery basis so, though things look better, investors are being cautious,” said Phil Burke, chief foreign-exchange dealer at JPMorgan Chase Bank in Sydney.
Aluminum Corp., known as Chalco, lost 2.7 percent to HK$8.96. The company aims to break even or at least curb losses in the second half on expectations of an improvement in the market, Chairman Xiong Weiping said at a news conference today.
About 18 percent of the 538 companies in the MSCI Asia Pacific Index that posted results since early July have missed analysts’ profit estimates, according to data compiled by Bloomberg. A third of those companies have reported better-than- estimated earnings, helping drive the stock index to the highest level in almost 11 months on Aug. 14.
“The market is no longer cheap,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. “The question is whether the rally is justified by the pick-up in economic data and earnings.”
Empty Shelves
Wesfarmers Ltd. slumped 3.5 percent to A$24.80. Australia’s second-largest retailer is stocking more fresh fruit and vegetables than it can sell to reverse the reputation its Coles supermarket division has for empty shelves and win market share, CEO Richard Goyder said in an interview.
KB Financial retreated 2.9 percent to 54,400 won following comments from James Wells III, chief executive officer of Atlanta-based SunTrust. Mizuho Financial Group Inc., Japan’s third-biggest bank by market value, slipped 1.8 percent to 225 yen. Daiwa Securities Group Inc. Japan’s second-largest brokerage, fell 3.2 percent to 551 yen.
“This credit cycle has yet to play itself out,” Wells said in a speech to the Rotary Club of Atlanta. “We do not expect things to improve for the banking industry in the very near future.”
China Construction Bank Corp. fell 4.3 percent to 5.53 yuan in Shanghai. Chairman Guo Shuqing said yesterday “excess liquidity” from explosive loan growth in the first half of the year has led to asset bubbles.
Credit Losses
Global credit losses and writedowns by financial institutions have totaled $1.6 trillion since 2007, according to data compiled by Bloomberg. The financial crisis helped drag the U.S. and Japan into recession and caused the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos.
Nouriel Roubini, the New York University professor who predicted the financial crisis, wrote in the Financial Times yesterday the chance of a double-dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.
Suncorp-Metway Ltd., Australia’s third-largest insurer, sank 2.8 percent to A$7.58. Net income in the 12 months ended June 30 fell 40 percent to A$348 million ($291 million) as the company set aside more money to cover bad debt. Impairment losses on loans soared 10-fold to A$710 million.
NGK climbed 3.7 percent to 2,270 yen. The company won a 60 billion yen ($639 million) order from Abu Dhabi to supply rechargeable batteries for power management systems, the Nikkei newspaper reported.
Woolworths rose 2.2 percent to A$28.63. The company said it will start a joint venture with North Carolina-based Lowe’s and open more than 150 stores over the next five years.
South Korea’s Daewoo Engineering & Construction Co. surged 9.2 percent to 14,800 won after Edaily reported Blackstone Group LP, KKR & Co. and Permira Holdings Ltd. may bid for the company.
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