By Berni Moestafa
Aug. 23 (Bloomberg) -- PT Perusahaan Listrik Negara, Indonesia's state-owned power producer, said its first-half net loss widened to 1 trillion rupiah ($109 million) from 944 billion rupiah as a doubling of oil prices raised fuel expenses.
First-half revenue increased to 79 trillion rupiah from 52 trillion rupiah a year earlier, the power company said in a statement published in the Bisnis Indonesia newspaper today.
Fuel and lubricant costs jumped to 53 trillion rupiah from 29 trillion rupiah, Listrik Negara said. Surging oil prices eroded the company's margins as crude oil futures jumped 97 percent in the 12 months through June 30.
To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net
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Saturday, August 23, 2008
Jim Rogers Says Oil Price Rise to Continue for Decade
By Chan Tien Hin
Aug. 23 (Bloomberg) -- Jim Rogers, who in April 2006 correctly forecast the oil price would reach $100 a barrel and gold $1,000 an ounce, said he expects oil to continue to increase over the next decade.
``Over the course of time, it's a bull market,'' the chairman of Rogers Holdings said today after an investor conference in Kuala Lumpur. While the oil price could fall to $75 or rise to $175, the market will continue to increase over the next 10 years, he said.
Crude oil futures have dropped 22 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983. Oil slid more than $6 a barrel yesterday, falling the most in percentage terms since December 2004, as the rising dollar curbed demand for commodities as an inflation hedge and BP Plc restored shipments on a Caspian Sea pipeline through the former Soviet republic of Georgia to Turkey.
Rogers said Aug. 21 in Bangkok that declines in commodity prices from record highs represented a temporary reverse in a bull market that will last for several years.
David Cohen, director of Asian forecasting at Action Economics in Singapore, said the rise in the crude oil price ``was a recognition'' of the growing demand of emerging economies like China and India.
``Those countries will continue with their development process and continue to outpace global growth,'' he said.
Dollar Gains
Soybeans, copper, platinum and crude oil have dropped from all-time highs after a rally in the dollar curbed demand for raw materials as a hedge against inflation and concerns increased that economic growth will slow. The Reuters/Jefferies CRB Index plunged 10 percent in July, the biggest drop in 28 years.
Crude-oil futures for October delivery fell $6.59, or 5.4 percent, to $114.59 a barrel on the New York Mercantile Exchange yesterday. Crude oil may rise next week because of a weakening dollar, rising tension between the U.S. and Russia, the world's second-biggest crude exporter after Saudi Arabia, and falling gasoline stockpiles.
Sixteen of 29 analysts surveyed by Bloomberg News, or 55 percent, said prices will increase through Aug. 29. Seven of the respondents, or 24 percent, said oil will be little changed and six said there would be a drop in prices. Last week, 63 percent expected prices to increase.
`` I can certainly see crude continuing above $100 a barrel for the longer term,'' Cohen said. ``The fundamentals of supply and demand should be supportive'' of prices.
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net
Read more...
Aug. 23 (Bloomberg) -- Jim Rogers, who in April 2006 correctly forecast the oil price would reach $100 a barrel and gold $1,000 an ounce, said he expects oil to continue to increase over the next decade.
``Over the course of time, it's a bull market,'' the chairman of Rogers Holdings said today after an investor conference in Kuala Lumpur. While the oil price could fall to $75 or rise to $175, the market will continue to increase over the next 10 years, he said.
Crude oil futures have dropped 22 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983. Oil slid more than $6 a barrel yesterday, falling the most in percentage terms since December 2004, as the rising dollar curbed demand for commodities as an inflation hedge and BP Plc restored shipments on a Caspian Sea pipeline through the former Soviet republic of Georgia to Turkey.
Rogers said Aug. 21 in Bangkok that declines in commodity prices from record highs represented a temporary reverse in a bull market that will last for several years.
David Cohen, director of Asian forecasting at Action Economics in Singapore, said the rise in the crude oil price ``was a recognition'' of the growing demand of emerging economies like China and India.
``Those countries will continue with their development process and continue to outpace global growth,'' he said.
Dollar Gains
Soybeans, copper, platinum and crude oil have dropped from all-time highs after a rally in the dollar curbed demand for raw materials as a hedge against inflation and concerns increased that economic growth will slow. The Reuters/Jefferies CRB Index plunged 10 percent in July, the biggest drop in 28 years.
Crude-oil futures for October delivery fell $6.59, or 5.4 percent, to $114.59 a barrel on the New York Mercantile Exchange yesterday. Crude oil may rise next week because of a weakening dollar, rising tension between the U.S. and Russia, the world's second-biggest crude exporter after Saudi Arabia, and falling gasoline stockpiles.
Sixteen of 29 analysts surveyed by Bloomberg News, or 55 percent, said prices will increase through Aug. 29. Seven of the respondents, or 24 percent, said oil will be little changed and six said there would be a drop in prices. Last week, 63 percent expected prices to increase.
`` I can certainly see crude continuing above $100 a barrel for the longer term,'' Cohen said. ``The fundamentals of supply and demand should be supportive'' of prices.
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net
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Japan Bonds Complete Fourth Weekly Gain on Stock Indexes Slump
By Theresa Barraclough
Aug. 23 (Bloomberg) -- Japanese government bonds completed a fourth weekly gain as local stock indexes slumped, boosting the attraction of fixed income assets.
Benchmark 10-year yields this week touched the lowest in four months after the Bank of Japan said it became more pessimistic about the outlook for the economy and kept interest rates at 0.5 percent. A government report on Aug. 21 showed Japan's trade surplus narrowed, as shipments to the U.S. dropped for an 11th month.
``The data has been poor, all the numbers look poor, which is enough reason for bond prices to rally,'' said Stefan Liiceanu, a Tokyo-based senior fixed-income strategist with Barclays Capital Inc., the U.K.'s third-largest bank. There has been some ``asset reallocation'' from stocks to bonds, he said.
The yield on the 1.5 percent bond due June 2018 fell 1 basis point this week to 1.445 percent, according to Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 0.085 yen to 100.472 yen. The yield fell to as low as 1.41 percent on Aug. 21, the lowest since April 21.
Ten-year bond futures for September delivery were unchanged at 137.69 on the Tokyo Stock Exchange. A basis point is 0.01 percentage point.
The Nikkei 225 Stock Average lost 2.7 percent this week and the broader Topix index dropped 2.5 percent.
Japan's 10-year yields had a correlation of 0.68 with the Nikkei 225 in July, compared with 0.50 in June, according to Bloomberg data. A value of 1 means the two moved in lockstep.
Bond Returns
Benchmark bonds have handed investors a return of about 0.8 percent so far this month through Aug. 21, compared with a 1.1 percent return for holders of U.S. Treasuries, according to indexes compiled by Merrill Lynch & Co. The Nikkei 225 lost 4.7 percent in the same period.
The demand for bonds this week was limited on speculation yields that fell to the lowest since April deterred investors from buying the securities.
Bonds are looking ``pretty expensive,'' said Tatsuo Ichikawa, a senior strategist in Tokyo at RBS Securities Japan Ltd., one of the 26 primary dealers required to bid at government auctions.
Ten-year yields have fallen from an 11-month high of 1.895 percent reached on June 16 on mounting evidence Japan, the world's second-largest economy, is slowing. A government report on Aug. 13 showed gross domestic product shrank an annualized 2.4 percent in the three months ended June 30, bringing the nation to the brink of its first recession in six years.
The demand for bond futures was also tempered as a technical chart that traders use to predict changes in prices, suggested it may decline, according to Daiwa Securities SMBC Co. The contracts approached 138.14, which is a 61.8 percent reversal of the drop from a high on March 19 of 141.91 to a June 13 low of 132.05, according to the Fibonacci series of numbers.
`Strong Resistance Level'
``Many people are looking at the 138.14 level as it is a strong resistance level,'' said Keiko Onogi, a debt strategist at Daiwa Securities, another primary dealer. ``People are cautious of this level and we don't have enough factors to drive the market above it.''
Bank of Japan board members said there are few signs that rising commodity prices will prompt companies to increase wages and fan inflation, minutes of the July 14-15 meeting released yesterday showed. The minutes came two days after the central bank cut its economic assessment, saying growth in the world's second-largest economy is ``sluggish'' for the first time in 10 years.
``Many members said that wages had not risen markedly in Japan and to date there had been no sign of second-round effects from the rise in prices of petroleum products and food,'' according to the minutes.
BOJ Rate Outlook
Economists say the benchmark interest rate is unlikely to increase from 0.5 percent until next year at the earliest. The rate was last raised in February 2007.
``Still, market speculation of a BOJ rate cut probably will not vanish in coming months, leaving room for further modest JGB yields declines, as the economic slump likely continues,'' Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp., wrote in a research note.
There is a 7 percent chance the central bank will reduce interest rates to 0.25 percent by year-end, according to calculations by JPMorgan Chase & Co. using overnight interest- rate swaps.
Japan's government isn't considering selling new bonds to fund an economic stimulus package that will be unveiled next week, Finance Minister Bunmei Ibuki said yesterday.
``I'm not making the assumption that the government will issue bonds'' to finance the relief measures, Ibuki said at a press conference in Tokyo yesterday. He said the package may be funded by an extra budget for the current fiscal year as well as next year's regular budget.
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
Read more...
Aug. 23 (Bloomberg) -- Japanese government bonds completed a fourth weekly gain as local stock indexes slumped, boosting the attraction of fixed income assets.
Benchmark 10-year yields this week touched the lowest in four months after the Bank of Japan said it became more pessimistic about the outlook for the economy and kept interest rates at 0.5 percent. A government report on Aug. 21 showed Japan's trade surplus narrowed, as shipments to the U.S. dropped for an 11th month.
``The data has been poor, all the numbers look poor, which is enough reason for bond prices to rally,'' said Stefan Liiceanu, a Tokyo-based senior fixed-income strategist with Barclays Capital Inc., the U.K.'s third-largest bank. There has been some ``asset reallocation'' from stocks to bonds, he said.
The yield on the 1.5 percent bond due June 2018 fell 1 basis point this week to 1.445 percent, according to Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 0.085 yen to 100.472 yen. The yield fell to as low as 1.41 percent on Aug. 21, the lowest since April 21.
Ten-year bond futures for September delivery were unchanged at 137.69 on the Tokyo Stock Exchange. A basis point is 0.01 percentage point.
The Nikkei 225 Stock Average lost 2.7 percent this week and the broader Topix index dropped 2.5 percent.
Japan's 10-year yields had a correlation of 0.68 with the Nikkei 225 in July, compared with 0.50 in June, according to Bloomberg data. A value of 1 means the two moved in lockstep.
Bond Returns
Benchmark bonds have handed investors a return of about 0.8 percent so far this month through Aug. 21, compared with a 1.1 percent return for holders of U.S. Treasuries, according to indexes compiled by Merrill Lynch & Co. The Nikkei 225 lost 4.7 percent in the same period.
The demand for bonds this week was limited on speculation yields that fell to the lowest since April deterred investors from buying the securities.
Bonds are looking ``pretty expensive,'' said Tatsuo Ichikawa, a senior strategist in Tokyo at RBS Securities Japan Ltd., one of the 26 primary dealers required to bid at government auctions.
Ten-year yields have fallen from an 11-month high of 1.895 percent reached on June 16 on mounting evidence Japan, the world's second-largest economy, is slowing. A government report on Aug. 13 showed gross domestic product shrank an annualized 2.4 percent in the three months ended June 30, bringing the nation to the brink of its first recession in six years.
The demand for bond futures was also tempered as a technical chart that traders use to predict changes in prices, suggested it may decline, according to Daiwa Securities SMBC Co. The contracts approached 138.14, which is a 61.8 percent reversal of the drop from a high on March 19 of 141.91 to a June 13 low of 132.05, according to the Fibonacci series of numbers.
`Strong Resistance Level'
``Many people are looking at the 138.14 level as it is a strong resistance level,'' said Keiko Onogi, a debt strategist at Daiwa Securities, another primary dealer. ``People are cautious of this level and we don't have enough factors to drive the market above it.''
Bank of Japan board members said there are few signs that rising commodity prices will prompt companies to increase wages and fan inflation, minutes of the July 14-15 meeting released yesterday showed. The minutes came two days after the central bank cut its economic assessment, saying growth in the world's second-largest economy is ``sluggish'' for the first time in 10 years.
``Many members said that wages had not risen markedly in Japan and to date there had been no sign of second-round effects from the rise in prices of petroleum products and food,'' according to the minutes.
BOJ Rate Outlook
Economists say the benchmark interest rate is unlikely to increase from 0.5 percent until next year at the earliest. The rate was last raised in February 2007.
``Still, market speculation of a BOJ rate cut probably will not vanish in coming months, leaving room for further modest JGB yields declines, as the economic slump likely continues,'' Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp., wrote in a research note.
There is a 7 percent chance the central bank will reduce interest rates to 0.25 percent by year-end, according to calculations by JPMorgan Chase & Co. using overnight interest- rate swaps.
Japan's government isn't considering selling new bonds to fund an economic stimulus package that will be unveiled next week, Finance Minister Bunmei Ibuki said yesterday.
``I'm not making the assumption that the government will issue bonds'' to finance the relief measures, Ibuki said at a press conference in Tokyo yesterday. He said the package may be funded by an extra budget for the current fiscal year as well as next year's regular budget.
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
Read more...
Blackstone Executive's Father-In-Law Arrested in Extortion Plot
By Joel Rosenblatt
Aug. 23 (Bloomberg) -- The father in-law of Blackstone Group LP London office head David Blitzer was arrested with a lawyer on charges of trying to extort money from Blitzer, New York District Attorney Robert Morgenthau said.
Stuart Ross, 71, of Aventura, Florida, is estranged from his daughter, Allison Blitzer, who is married to David Blitzer, the prosecutor said yesterday in a statement. Ross and his lawyer, Stuart Jackson, 79, threatened to ruin David Blitzer's life unless he paid the two men as much as $11 million, according to the statement.
Earlier this year, Blitzer responded to Ross's request for money for a new business by sending him $65,000, according to Morgenthau. After Blitzer told Ross in May that he wouldn't send more, Ross continued to pursue Blitzer, saying in a June voice- mail message he would ``commit open warfare'' if he didn't get more cash, according to the statement. Jackson sent letters to Blizter's attorney that provided an ``imprimatur of legality'' to the threats, Morgenthau said.
Ross told Blitzer he would ``harass Blitzer with incessant phone calls, and would contact Blitzer's supervisors, the media, and law enforcement with accusations that he claimed would damage Blitzer's reputation, ruin his career, and even lead to his arrest,'' Morgenthau said in the statement.
Blitzer sued Ross in a separate civil lawsuit filed yesterday in New York Supreme Court. Ross was once a successful businessman who had licensing rights to the Smurf cartoon characters and lost his fortune to profligate spending, bad business decisions and a drinking problem, according to the complaint. When Allison Blitzer was pregnant, Ross told her he hoped the child would die and that Allison's gravestone should be carved with a vile obscenity, according to the complaint.
$195,000 Stolen
In addition to the $65,000 described in Morgenthau's statement, Blitzer claims he gave Ross $75,000 for an Internet venture and put another $120,000 in escrow to be released on conditions not specified in the lawsuit. Ross stole the entire $195,000, according to the complaint.
Ross demanded increasing amounts of money in a harassment campaign that included ``countless telephone calls to Blitzer's personal phone and office, at all hours of the day and night,'' according to Blitzer's complaint. Ross threatened to send a note to Blackstone Chairman Stephen Schwarzman, and made calls and sent e-mails to Blitzer's superiors at the company, Blitzer alleged.
Blackstone is the New York-based manager of the world's biggest buyout fund.
`Your Worst Nightmare'
According to the complaint, Ross called Blitzer after he dispatched Jackson to meet with him, telling Blitzer, ``David, this is your worst nightmare. Your father in law Stuart Ross. You have been a discourteous prick to Stuart Jackson. I am going to continue to harass you. I am going to call you every day -- four or five times a day -- I am going to keep calling -- I will continue to harass you.''
Ross and Jackson were charged with two counts of grand larceny and face as much as seven years in prison if convicted, Morgenthau said.
Jackson wasn't immediately available to comment. Phone calls to his office got a busy signal yesterday.
Morgenthau spokeswoman Maxey Greene and Blitzer's lawyer, Roger Stavis, didn't immediately return calls made after business hours yesterday.
To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.
Read more...
Aug. 23 (Bloomberg) -- The father in-law of Blackstone Group LP London office head David Blitzer was arrested with a lawyer on charges of trying to extort money from Blitzer, New York District Attorney Robert Morgenthau said.
Stuart Ross, 71, of Aventura, Florida, is estranged from his daughter, Allison Blitzer, who is married to David Blitzer, the prosecutor said yesterday in a statement. Ross and his lawyer, Stuart Jackson, 79, threatened to ruin David Blitzer's life unless he paid the two men as much as $11 million, according to the statement.
Earlier this year, Blitzer responded to Ross's request for money for a new business by sending him $65,000, according to Morgenthau. After Blitzer told Ross in May that he wouldn't send more, Ross continued to pursue Blitzer, saying in a June voice- mail message he would ``commit open warfare'' if he didn't get more cash, according to the statement. Jackson sent letters to Blizter's attorney that provided an ``imprimatur of legality'' to the threats, Morgenthau said.
Ross told Blitzer he would ``harass Blitzer with incessant phone calls, and would contact Blitzer's supervisors, the media, and law enforcement with accusations that he claimed would damage Blitzer's reputation, ruin his career, and even lead to his arrest,'' Morgenthau said in the statement.
Blitzer sued Ross in a separate civil lawsuit filed yesterday in New York Supreme Court. Ross was once a successful businessman who had licensing rights to the Smurf cartoon characters and lost his fortune to profligate spending, bad business decisions and a drinking problem, according to the complaint. When Allison Blitzer was pregnant, Ross told her he hoped the child would die and that Allison's gravestone should be carved with a vile obscenity, according to the complaint.
$195,000 Stolen
In addition to the $65,000 described in Morgenthau's statement, Blitzer claims he gave Ross $75,000 for an Internet venture and put another $120,000 in escrow to be released on conditions not specified in the lawsuit. Ross stole the entire $195,000, according to the complaint.
Ross demanded increasing amounts of money in a harassment campaign that included ``countless telephone calls to Blitzer's personal phone and office, at all hours of the day and night,'' according to Blitzer's complaint. Ross threatened to send a note to Blackstone Chairman Stephen Schwarzman, and made calls and sent e-mails to Blitzer's superiors at the company, Blitzer alleged.
Blackstone is the New York-based manager of the world's biggest buyout fund.
`Your Worst Nightmare'
According to the complaint, Ross called Blitzer after he dispatched Jackson to meet with him, telling Blitzer, ``David, this is your worst nightmare. Your father in law Stuart Ross. You have been a discourteous prick to Stuart Jackson. I am going to continue to harass you. I am going to call you every day -- four or five times a day -- I am going to keep calling -- I will continue to harass you.''
Ross and Jackson were charged with two counts of grand larceny and face as much as seven years in prison if convicted, Morgenthau said.
Jackson wasn't immediately available to comment. Phone calls to his office got a busy signal yesterday.
Morgenthau spokeswoman Maxey Greene and Blitzer's lawyer, Roger Stavis, didn't immediately return calls made after business hours yesterday.
To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.
Read more...
Taiwan Cuts GDP Forecast, Underscoring Signs of Asia Slowdown
By Victoria Batchelor and Janet Ong
Aug. 23 (Bloomberg) -- Taiwan cut its forecast for 2008 growth as exports and consumer spending cool, the latest sign a slowdown in the world's largest economies is spreading across Asia.
The economy will expand 4.3 percent this year, the weakest pace since 2003 and down from an estimate of 4.78 percent made three months ago, Taiwan's statistics bureau said yesterday. Growth this quarter will be the slowest in more than three years, it predicted.
Asia's stocks fell for a fourth week, driving down the region's key index to a two-year low. Taiwan joins governments in Singapore and the Philippines in cutting growth estimates this month as fallout from the global credit squeeze worsens while soaring fuel and food prices damp household spending.
``The U.S.-led global slowdown is taking a toll on Asian economies,'' said Lim Ji Won, an economist at JPMorgan Chase & Co. in Seoul. ``Demand for the region's electronics exports is easing and, compounding the problem, Asian consumers are struggling with soaring living costs.''
Economists at Goldman Sachs Group Inc. on Aug. 21 said countries that account for half of the world economy face recession, while analysts at JPMorgan estimate a global expansion of 1 percent this quarter, the weakest in seven years.
The benchmark MSCI Asia Pacific Index fell yesterday to its lowest since July 26, 2006, and has slumped 23 percent in 2008.
Taiwan's Taiex index of shares declined 4 percent this week, the biggest drop in five weeks.
Asian Exporters
Demand for Toyota Motor Corp.'s cars, Samsung Electronics Corp.'s flat-screen televisions and Acer Inc.'s laptop computers has eased as the U.S. housing recession damps shipments to Asia's largest overseas market.
Singapore, which lowered its growth estimate on Aug. 8, said this week that exports fell for a third month in July. The island state also reported retail sales declined 3.2 percent in June, the first drop in four months, as consumers bought fewer mobile phones and computers.
The Philippines this week cut its economic growth forecast for the second time this year. Gross domestic product may expand 5.5 percent to 6.4 percent in 2008, from an earlier forecast of as much as 6.6 percent, Economic Planning Undersecretary Augusto Santos said in an interview from Manila on Aug. 20.
South Korea's department store sales rose by the least in five months in July as consumers cut purchases of new clothes as their budgets came under pressure from surging living costs, its government said on Aug. 18.
Central Banks
``Asia is cooling like the rest of the world, and we'll see the region's economies slow further in the second half,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. ``That's why it's appropriate that central banks are beginning to turn their focus to growth and away from inflation.''
The Reserve Bank of Australia said on Aug. 19 that it may soon lower interest rates for the first time in seven years to avoid a deeper slowdown. The bank raised borrowing costs twice in 2008.
The Bank of Japan cut its economic assessment on Aug. 21, saying growth is ``sluggish'' for the first time in a decade. Asia's biggest economy contracted last quarter as exports fell and consumers spent less, bringing Japan to the brink of its first recession in six years.
``Inflation is close to the peak and central banks have bought into that and, around the region, are really starting to talk more about the need to shore up growth,'' said Tim Condon, chief Asia economist at ING Groep NV in Singapore. ``Inflation is yesterday's story.''
Chinese Demand
The economic news hasn't been all bad this week. Demand from China, the world's fastest growing major economy, is still helping to shore up Asia nations.
A report two days ago showed Japan's exports to China climbed to a record in July, exceeding the value of those sent to the U.S. for the first time since the government began compiling monthly figures in 1950.
Thailand's overseas shipments surged 43.9 percent in July from a year ago, the fastest growth since at least 1992, figures on Aug. 21 showed.
Melbourne-based BHP Billiton Ltd., the world's biggest mining company, this week posted a 30 percent gain in fiscal second-half profit after boosting production to benefit from rising prices.
``Raw-materials demand in China is going to be very strong for decades to come,'' Chief Executive Officer Marius Kloppers said on Aug. 18. While a global economic slowdown may lead to ``higher volatility'' in prices in the short term, China's demand remains ``resilient,'' he said.
To contact the reporter on this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.
Read more...
Aug. 23 (Bloomberg) -- Taiwan cut its forecast for 2008 growth as exports and consumer spending cool, the latest sign a slowdown in the world's largest economies is spreading across Asia.
The economy will expand 4.3 percent this year, the weakest pace since 2003 and down from an estimate of 4.78 percent made three months ago, Taiwan's statistics bureau said yesterday. Growth this quarter will be the slowest in more than three years, it predicted.
Asia's stocks fell for a fourth week, driving down the region's key index to a two-year low. Taiwan joins governments in Singapore and the Philippines in cutting growth estimates this month as fallout from the global credit squeeze worsens while soaring fuel and food prices damp household spending.
``The U.S.-led global slowdown is taking a toll on Asian economies,'' said Lim Ji Won, an economist at JPMorgan Chase & Co. in Seoul. ``Demand for the region's electronics exports is easing and, compounding the problem, Asian consumers are struggling with soaring living costs.''
Economists at Goldman Sachs Group Inc. on Aug. 21 said countries that account for half of the world economy face recession, while analysts at JPMorgan estimate a global expansion of 1 percent this quarter, the weakest in seven years.
The benchmark MSCI Asia Pacific Index fell yesterday to its lowest since July 26, 2006, and has slumped 23 percent in 2008.
Taiwan's Taiex index of shares declined 4 percent this week, the biggest drop in five weeks.
Asian Exporters
Demand for Toyota Motor Corp.'s cars, Samsung Electronics Corp.'s flat-screen televisions and Acer Inc.'s laptop computers has eased as the U.S. housing recession damps shipments to Asia's largest overseas market.
Singapore, which lowered its growth estimate on Aug. 8, said this week that exports fell for a third month in July. The island state also reported retail sales declined 3.2 percent in June, the first drop in four months, as consumers bought fewer mobile phones and computers.
The Philippines this week cut its economic growth forecast for the second time this year. Gross domestic product may expand 5.5 percent to 6.4 percent in 2008, from an earlier forecast of as much as 6.6 percent, Economic Planning Undersecretary Augusto Santos said in an interview from Manila on Aug. 20.
South Korea's department store sales rose by the least in five months in July as consumers cut purchases of new clothes as their budgets came under pressure from surging living costs, its government said on Aug. 18.
Central Banks
``Asia is cooling like the rest of the world, and we'll see the region's economies slow further in the second half,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. ``That's why it's appropriate that central banks are beginning to turn their focus to growth and away from inflation.''
The Reserve Bank of Australia said on Aug. 19 that it may soon lower interest rates for the first time in seven years to avoid a deeper slowdown. The bank raised borrowing costs twice in 2008.
The Bank of Japan cut its economic assessment on Aug. 21, saying growth is ``sluggish'' for the first time in a decade. Asia's biggest economy contracted last quarter as exports fell and consumers spent less, bringing Japan to the brink of its first recession in six years.
``Inflation is close to the peak and central banks have bought into that and, around the region, are really starting to talk more about the need to shore up growth,'' said Tim Condon, chief Asia economist at ING Groep NV in Singapore. ``Inflation is yesterday's story.''
Chinese Demand
The economic news hasn't been all bad this week. Demand from China, the world's fastest growing major economy, is still helping to shore up Asia nations.
A report two days ago showed Japan's exports to China climbed to a record in July, exceeding the value of those sent to the U.S. for the first time since the government began compiling monthly figures in 1950.
Thailand's overseas shipments surged 43.9 percent in July from a year ago, the fastest growth since at least 1992, figures on Aug. 21 showed.
Melbourne-based BHP Billiton Ltd., the world's biggest mining company, this week posted a 30 percent gain in fiscal second-half profit after boosting production to benefit from rising prices.
``Raw-materials demand in China is going to be very strong for decades to come,'' Chief Executive Officer Marius Kloppers said on Aug. 18. While a global economic slowdown may lead to ``higher volatility'' in prices in the short term, China's demand remains ``resilient,'' he said.
To contact the reporter on this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.
Read more...
China Construction Profit Soars 71% as Lending, Fee Income Rise
By Chia-Peck Wong and Luo Jun
Enlarge Image/Details
Aug. 23 (Bloomberg) -- China Construction Bank Corp., the nation's second-biggest, said first-half profit surged 71 percent as it boosted lending revenue and increased fee-based services.
Net income soared to 58.7 billion yuan ($8.59 billion), or 0.25 yuan a share, from 34.2 billion yuan or 0.15 yuan a year earlier, the Beijing-based bank said in a statement to the Hong Kong exchange last night. The median estimate of five analysts surveyed by Bloomberg News was for profit of 59 billion yuan.
CCB, China's largest mortgage provider, increased lending even as the government implemented economic tightening measures to cool credit growth. While Chinese banks are unlikely to repeat the pace of growth for the rest of this year and 2009, they are still attractive investments because asset quality hasn't deteriorated, said an analyst at JPMorgan Chase & Co.
``If the economy goes for a soft landing, profit growth for Chinese banks should be 17 percent to 18 percent next year,'' JPMorgan analyst Samuel Chen said before the results. ``This is slower, but the de-rating of Chinese banks has already happened and so they are reasonably priced'' compared with U.S. rivals.
Construction Bank, established in 1954 to fund roads, bridges, dams and other infrastructure, is China's largest mortgage and real-estate lender. It provides 23.1 percent of the nation's mortgages and about 12 percent of overall loans.
Shares Fall
CCB's shares, traded in Hong Kong, fell 9.7 percent this year, making it the fifth-best performer on the benchmark Hang Seng Index, which has slipped 27 percent. The stock declined 2.3 percent to HK$5.97 on Aug. 21. Hong Kong's bourse was shut yesterday because of a typhoon.
Chinese banks trade at an average 3.2 times book value with a return on equity of 19.2 percent. That compares with a price- to-book ratio of 1.3 and an average return of 8.8 percent for their U.S. counterparts, according to data compiled by Bloomberg.
Net interest income rose 25 percent to 111.1 billion yuan, China Construction said in yesterday's statement. The bank's net interest margin widened to 3.29 percent from 3.11 percent a year earlier.
Chinese banks extended 2.45 trillion yuan of local-currency loans in the first half, taking the total to 28.6 trillion yuan, an increase of 14 percent from a year earlier, even as the economy slowed in the second quarter to 10.1 percent.
Net fees and commissions from services such as credit cards, custodian services and mutual fund sales, surged 59 percent to 20.2 billion yuan, China Construction Bank said.
Industrial & Commercial Bank of China Ltd., the nation's biggest bank, became the world's most profitable bank this week as it announced record first-half earnings of 64.5 billion yuan.
`Overweight' Rating
JPMorgan's Chen has an ``overweight'' rating on China Construction shares and a six-month price target of HK$7.80.
China's government clamped down on loan growth after Premier Wen Jiabao identified overheating and inflation as the two major problems facing the economy. The central bank raised interest rates six times last year and has boosted the proportion of deposits lenders must hold as reserves to a record 17.5 percent.
China's benchmark CSI 300 Index fell 54 percent this year, making it the world's worst-performing primary index.
China Construction's non-performing loan ratio stood at 2.21 percent at the end of June, down from 2.60 percent on Dec. 31.
The bank had $3.25 billion of investments at Fannie Mae and Freddie Mac, the two largest U.S. home loan providers. Yields on bonds guaranteed by Fannie and Freddie this week rose to the highest since 1986 relative to Treasuries.
To contact the reporters on this story: Luo Jun in Shanghai jluo6@bloomberg.netChia-Peck Wong in Hong Kong at cpwong@bloomberg.net
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Aug. 23 (Bloomberg) -- China Construction Bank Corp., the nation's second-biggest, said first-half profit surged 71 percent as it boosted lending revenue and increased fee-based services.
Net income soared to 58.7 billion yuan ($8.59 billion), or 0.25 yuan a share, from 34.2 billion yuan or 0.15 yuan a year earlier, the Beijing-based bank said in a statement to the Hong Kong exchange last night. The median estimate of five analysts surveyed by Bloomberg News was for profit of 59 billion yuan.
CCB, China's largest mortgage provider, increased lending even as the government implemented economic tightening measures to cool credit growth. While Chinese banks are unlikely to repeat the pace of growth for the rest of this year and 2009, they are still attractive investments because asset quality hasn't deteriorated, said an analyst at JPMorgan Chase & Co.
``If the economy goes for a soft landing, profit growth for Chinese banks should be 17 percent to 18 percent next year,'' JPMorgan analyst Samuel Chen said before the results. ``This is slower, but the de-rating of Chinese banks has already happened and so they are reasonably priced'' compared with U.S. rivals.
Construction Bank, established in 1954 to fund roads, bridges, dams and other infrastructure, is China's largest mortgage and real-estate lender. It provides 23.1 percent of the nation's mortgages and about 12 percent of overall loans.
Shares Fall
CCB's shares, traded in Hong Kong, fell 9.7 percent this year, making it the fifth-best performer on the benchmark Hang Seng Index, which has slipped 27 percent. The stock declined 2.3 percent to HK$5.97 on Aug. 21. Hong Kong's bourse was shut yesterday because of a typhoon.
Chinese banks trade at an average 3.2 times book value with a return on equity of 19.2 percent. That compares with a price- to-book ratio of 1.3 and an average return of 8.8 percent for their U.S. counterparts, according to data compiled by Bloomberg.
Net interest income rose 25 percent to 111.1 billion yuan, China Construction said in yesterday's statement. The bank's net interest margin widened to 3.29 percent from 3.11 percent a year earlier.
Chinese banks extended 2.45 trillion yuan of local-currency loans in the first half, taking the total to 28.6 trillion yuan, an increase of 14 percent from a year earlier, even as the economy slowed in the second quarter to 10.1 percent.
Net fees and commissions from services such as credit cards, custodian services and mutual fund sales, surged 59 percent to 20.2 billion yuan, China Construction Bank said.
Industrial & Commercial Bank of China Ltd., the nation's biggest bank, became the world's most profitable bank this week as it announced record first-half earnings of 64.5 billion yuan.
`Overweight' Rating
JPMorgan's Chen has an ``overweight'' rating on China Construction shares and a six-month price target of HK$7.80.
China's government clamped down on loan growth after Premier Wen Jiabao identified overheating and inflation as the two major problems facing the economy. The central bank raised interest rates six times last year and has boosted the proportion of deposits lenders must hold as reserves to a record 17.5 percent.
China's benchmark CSI 300 Index fell 54 percent this year, making it the world's worst-performing primary index.
China Construction's non-performing loan ratio stood at 2.21 percent at the end of June, down from 2.60 percent on Dec. 31.
The bank had $3.25 billion of investments at Fannie Mae and Freddie Mac, the two largest U.S. home loan providers. Yields on bonds guaranteed by Fannie and Freddie this week rose to the highest since 1986 relative to Treasuries.
To contact the reporters on this story: Luo Jun in Shanghai jluo6@bloomberg.netChia-Peck Wong in Hong Kong at cpwong@bloomberg.net
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European Notes Decline in Week on Bets ECB Won't Lower Key Rate
By Agnes Lovasz
Aug. 23 (Bloomberg) -- European government notes snapped a four-week advance amid speculation central bank policy makers will delay lowering interest rates to focus on curbing inflation rather than boosting growth.
The drop pushed the yield on two-year German notes, the securities most sensitive to interest-rate changes, to the highest level in two weeks as futures traders scaled back expectations the European Central Bank will cut its benchmark rate. Oil posted its biggest weekly increase in more than two months after rising almost 5 percent on Aug. 21.
``The rise in oil prices weighs on the bond market,'' said Allan von Mehren, a fixed-income strategist in Copenhagen at Danske Bank AS, the biggest lender in Denmark. ``It puts inflation concerns back on the agenda.''
The two-year note yield rose 6 basis points to 4.14 percent by 4 p.m. in London yesterday, leaving it 14 basis points higher in the week. The price of the 4.75 percent note fell 0.25, or 2.5 euros per 1,000-euro ($1,482) face amount, to 101.01.
The yield on the 10-year German bund, Europe's benchmark government security, rose 7 basis points in the week to 4.23 percent. Yields move inversely to bond prices.
The difference in yield, or spread, between two- and 10-year notes was the narrowest in almost three weeks as rate-sensitive short-maturity debt underperformed. The spread was at 9 basis points, from 16 basis points a week ago.
Slump in Orders
Bonds stayed lower even as a report yesterday showed industrial orders declined the most in more than six years in June. Orders at factories in the 15-nation euro area fell an annual 7.4 percent, the most since December 2001, the European Union statistics office said. Excluding transport, orders slipped 1.5 percent. Economists forecast a 6.3 percent drop in total orders, according to the median of 10 estimates in a Bloomberg survey.
Outgoing European Central Bank council member Klaus Liebscher said the euro-area economy is unlikely to slide into a recession, Reuters reported Aug. 21, citing an interview.
While growth is slowing and will come in at the ``lower end'' of the ECB's 1.5 percent to 2.1 percent projection this year, ``I am far from saying the euro area is in a recession or going into a recession,'' Liebscher was cited as saying.
Liebscher, who retires as head of Austrian central bank at the end of August, said July's 4 percent inflation rate is ``worrisome.''
Growth Signs
Bunds had their biggest drop in more than a month on Aug. 21 after an index of manufacturing in the euro-region economy unexpectedly rose this month. Royal Bank of Scotland Group Plc's composite index was at 48, from 47.8 in July, as the manufacturing component gained. Economists in a Bloomberg survey forecast a drop to 47.7. The factory index climbed to 47.5 from 47.4 in July, while the services index slipped to 48.2 from 48.3.
Traders have reduced bets the ECB will lower interest rates this year to stimulate economic expansion. The implied yield on the December Euribor futures contract gained 2 basis points this week to 5.06 percent.
The European Union said Aug. 14 gross domestic product fell 0.2 percent in the second quarter. Separate data last week showed the German and French economies shrank.
The central bank left its main interest rate at 4.25 percent on Aug. 7 while ECB President Jean-Claude Trichet said that growth will be ``particularly weak'' through the second and third quarters.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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Aug. 23 (Bloomberg) -- European government notes snapped a four-week advance amid speculation central bank policy makers will delay lowering interest rates to focus on curbing inflation rather than boosting growth.
The drop pushed the yield on two-year German notes, the securities most sensitive to interest-rate changes, to the highest level in two weeks as futures traders scaled back expectations the European Central Bank will cut its benchmark rate. Oil posted its biggest weekly increase in more than two months after rising almost 5 percent on Aug. 21.
``The rise in oil prices weighs on the bond market,'' said Allan von Mehren, a fixed-income strategist in Copenhagen at Danske Bank AS, the biggest lender in Denmark. ``It puts inflation concerns back on the agenda.''
The two-year note yield rose 6 basis points to 4.14 percent by 4 p.m. in London yesterday, leaving it 14 basis points higher in the week. The price of the 4.75 percent note fell 0.25, or 2.5 euros per 1,000-euro ($1,482) face amount, to 101.01.
The yield on the 10-year German bund, Europe's benchmark government security, rose 7 basis points in the week to 4.23 percent. Yields move inversely to bond prices.
The difference in yield, or spread, between two- and 10-year notes was the narrowest in almost three weeks as rate-sensitive short-maturity debt underperformed. The spread was at 9 basis points, from 16 basis points a week ago.
Slump in Orders
Bonds stayed lower even as a report yesterday showed industrial orders declined the most in more than six years in June. Orders at factories in the 15-nation euro area fell an annual 7.4 percent, the most since December 2001, the European Union statistics office said. Excluding transport, orders slipped 1.5 percent. Economists forecast a 6.3 percent drop in total orders, according to the median of 10 estimates in a Bloomberg survey.
Outgoing European Central Bank council member Klaus Liebscher said the euro-area economy is unlikely to slide into a recession, Reuters reported Aug. 21, citing an interview.
While growth is slowing and will come in at the ``lower end'' of the ECB's 1.5 percent to 2.1 percent projection this year, ``I am far from saying the euro area is in a recession or going into a recession,'' Liebscher was cited as saying.
Liebscher, who retires as head of Austrian central bank at the end of August, said July's 4 percent inflation rate is ``worrisome.''
Growth Signs
Bunds had their biggest drop in more than a month on Aug. 21 after an index of manufacturing in the euro-region economy unexpectedly rose this month. Royal Bank of Scotland Group Plc's composite index was at 48, from 47.8 in July, as the manufacturing component gained. Economists in a Bloomberg survey forecast a drop to 47.7. The factory index climbed to 47.5 from 47.4 in July, while the services index slipped to 48.2 from 48.3.
Traders have reduced bets the ECB will lower interest rates this year to stimulate economic expansion. The implied yield on the December Euribor futures contract gained 2 basis points this week to 5.06 percent.
The European Union said Aug. 14 gross domestic product fell 0.2 percent in the second quarter. Separate data last week showed the German and French economies shrank.
The central bank left its main interest rate at 4.25 percent on Aug. 7 while ECB President Jean-Claude Trichet said that growth will be ``particularly weak'' through the second and third quarters.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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KDB, Weighing Lehman Investment, Sees `Opportunity'
By Bomi Lim and Shamim Adam
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Aug. 23 (Bloomberg) -- Korea Development Bank, which said it's considering a possible investment in Lehman Brothers Holdings Inc., views the global credit market turmoil that's ravaging banks as a chance to expand abroad.
``It's a good opportunity for investments that can make us a global financial institution,'' Chief Executive Officer Min Euoo Sung said in July, a month after the former Lehman banker was hired to prepare KDB for an initial public offering.
Min, the same age as the 54-year-old Seoul-based bank, is accelerating KDB's transformation into an international investment bank and corporate lender. Speculation has grown that state-owned KDB may use the collapse of the subprime mortgage market that has caused more than $500 billion of losses and writedowns to gain customers and acquire cheap financial assets.
``Korean banks could consider acquisitions of overseas rivals as part of investments for the future,'' Han Jeong Tae, an analyst at Hana DaeToo Securities Co. in Seoul, said in an interview yesterday. ``Their dilemma is how much risk they could take when no one is confident over the soundness of those rivals.''
Lehman, the fourth-largest U.S. securities firm, reported $8.2 billion in losses and asset writedowns since the beginning of 2007 following the collapse of the U.S. subprime mortgage market, according to data compiled by Bloomberg. Lehman has $639 billion of assets.
Possibilities
``KDB is considering all kinds of options, including Lehman Brothers,'' a KDB spokesman said yesterday, declining to elaborate. A Reuters report on Aug. 22 cited a spokesman saying that KDB is ``open to'' possibilities, including a purchase of New York-based Lehman.
Lehman spokesman Mark Lane declined to comment. KDB's Min also declined to comment.
Lehman climbed 69 cents, or 5 percent, to $14.41 in New York Stock Exchange composite trading. Shares of the New York- based firm dropped 78 percent this year, the worst-performer on the 11-company Amex Securities Broker/Dealer Index.
The global banking crisis is accelerating the transformation of Seoul-based KDB, which was founded to fund reconstruction and industrial development after the Korean War. South Korea's government is reducing its holdings in state-owned assets, and the six-month-old administration of President Lee Myung Bak aims to sell a 49 percent stake in the lender by 2010.
Balance Sheet
At the end of 2007, KDB's consolidated balance sheet listed 146.9 trillion won ($138 billion) of assets and 21.7 trillion won of shareholder equity, according to the company's Web site. KDB's 2007 net income of 2.52 trillion won, or $2.37 billion, is just over half of Lehman's $4.2 billion of income during 2007.
KDB may sell stakes to outside investors before the IPO, the Financial Services Commission said in a June e-mail statement. The government also plans to set up a holding company for the bank and its three affiliates in November or December, the statement said.
Net income from KDB's overseas operations dropped 42 percent to $24.6 million in the first half of 2008 from a year earlier, the Financial Supervisory Service said Aug. 22.
Min had worked at Morgan Stanley and Citigroup Inc. in Korea before joining Woori Finance Holdings Co. as chief financial officer and chairman in 2001. He rejoined Lehman in 2005.
He received a bachelor's degree in business administration from Sogang University in Seoul, and a master's in business administration from the State University of New York at Buffalo in 1986.
Five-Year Plan
``Our ultimate goal is to transform into a global investment bank under a corporate and investment bank structure on the back of our vast experiences accumulated as a corporate banking specialist,'' Min is quoted as saying on the bank's Web site. We are embarking ``on our quest to emerge as Asia's leading investment bank within five years.''
KDB acted as a quasi-sovereign borrower and was seen as a proxy for the government in borrowing matters. It was often used by the Korean government as its main policy bank to prop up companies that had nowhere else to turn, prompting its bad debts to surge during the country's 1997-1998 financial crisis. The lender closed some of its securities businesses and cut its workforce because of the debts and rising costs.
The bank's loans to companies in the 1960s and 1970s helped develop the country's manufacturing and chemical industries. Since the 1990s, it has focused on developing information technology-related industries, including semiconductors.
KDB has said it will initially focus on equity investments to bolster its investment banking operations.
The bank has 15 branches in 11 countries, including China, Japan and the U.S., according to the FSS. Its domestic subsidiaries include Daewoo Securities Co., South Korea's third- biggest brokerage by market value, finance leasing company KDB Capital Corp., and KDB Asset Management Corp.
To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net; Shamim Adam in Singapore at sadam2@bloomberg.net
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Aug. 23 (Bloomberg) -- Korea Development Bank, which said it's considering a possible investment in Lehman Brothers Holdings Inc., views the global credit market turmoil that's ravaging banks as a chance to expand abroad.
``It's a good opportunity for investments that can make us a global financial institution,'' Chief Executive Officer Min Euoo Sung said in July, a month after the former Lehman banker was hired to prepare KDB for an initial public offering.
Min, the same age as the 54-year-old Seoul-based bank, is accelerating KDB's transformation into an international investment bank and corporate lender. Speculation has grown that state-owned KDB may use the collapse of the subprime mortgage market that has caused more than $500 billion of losses and writedowns to gain customers and acquire cheap financial assets.
``Korean banks could consider acquisitions of overseas rivals as part of investments for the future,'' Han Jeong Tae, an analyst at Hana DaeToo Securities Co. in Seoul, said in an interview yesterday. ``Their dilemma is how much risk they could take when no one is confident over the soundness of those rivals.''
Lehman, the fourth-largest U.S. securities firm, reported $8.2 billion in losses and asset writedowns since the beginning of 2007 following the collapse of the U.S. subprime mortgage market, according to data compiled by Bloomberg. Lehman has $639 billion of assets.
Possibilities
``KDB is considering all kinds of options, including Lehman Brothers,'' a KDB spokesman said yesterday, declining to elaborate. A Reuters report on Aug. 22 cited a spokesman saying that KDB is ``open to'' possibilities, including a purchase of New York-based Lehman.
Lehman spokesman Mark Lane declined to comment. KDB's Min also declined to comment.
Lehman climbed 69 cents, or 5 percent, to $14.41 in New York Stock Exchange composite trading. Shares of the New York- based firm dropped 78 percent this year, the worst-performer on the 11-company Amex Securities Broker/Dealer Index.
The global banking crisis is accelerating the transformation of Seoul-based KDB, which was founded to fund reconstruction and industrial development after the Korean War. South Korea's government is reducing its holdings in state-owned assets, and the six-month-old administration of President Lee Myung Bak aims to sell a 49 percent stake in the lender by 2010.
Balance Sheet
At the end of 2007, KDB's consolidated balance sheet listed 146.9 trillion won ($138 billion) of assets and 21.7 trillion won of shareholder equity, according to the company's Web site. KDB's 2007 net income of 2.52 trillion won, or $2.37 billion, is just over half of Lehman's $4.2 billion of income during 2007.
KDB may sell stakes to outside investors before the IPO, the Financial Services Commission said in a June e-mail statement. The government also plans to set up a holding company for the bank and its three affiliates in November or December, the statement said.
Net income from KDB's overseas operations dropped 42 percent to $24.6 million in the first half of 2008 from a year earlier, the Financial Supervisory Service said Aug. 22.
Min had worked at Morgan Stanley and Citigroup Inc. in Korea before joining Woori Finance Holdings Co. as chief financial officer and chairman in 2001. He rejoined Lehman in 2005.
He received a bachelor's degree in business administration from Sogang University in Seoul, and a master's in business administration from the State University of New York at Buffalo in 1986.
Five-Year Plan
``Our ultimate goal is to transform into a global investment bank under a corporate and investment bank structure on the back of our vast experiences accumulated as a corporate banking specialist,'' Min is quoted as saying on the bank's Web site. We are embarking ``on our quest to emerge as Asia's leading investment bank within five years.''
KDB acted as a quasi-sovereign borrower and was seen as a proxy for the government in borrowing matters. It was often used by the Korean government as its main policy bank to prop up companies that had nowhere else to turn, prompting its bad debts to surge during the country's 1997-1998 financial crisis. The lender closed some of its securities businesses and cut its workforce because of the debts and rising costs.
The bank's loans to companies in the 1960s and 1970s helped develop the country's manufacturing and chemical industries. Since the 1990s, it has focused on developing information technology-related industries, including semiconductors.
KDB has said it will initially focus on equity investments to bolster its investment banking operations.
The bank has 15 branches in 11 countries, including China, Japan and the U.S., according to the FSS. Its domestic subsidiaries include Daewoo Securities Co., South Korea's third- biggest brokerage by market value, finance leasing company KDB Capital Corp., and KDB Asset Management Corp.
To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net; Shamim Adam in Singapore at sadam2@bloomberg.net
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Boeing's Offer Is Inadequate, Holds `Strike Issues,' Union Says
By Susanna Ray
Aug. 23 (Bloomberg) -- Boeing Co.'s offer to raise pay and benefits as much as $24,000 over three years for machinists in its largest union is inadequate and the proposal still contains ``strike issues,'' the labor group said.
Boeing, aiming to avoid a possible strike when machinists vote on the outcome of negotiations Sept. 3, offered yesterday to raise wages 2.5 percent the first year and 2 percent the following two years. The union had said it was seeking a gain of 9 percent to 13 percent, spread out over the contract, for the machinists, who make an average of about $56,000 a year.
The offer is ``well below expectations and very inadequate in all areas,'' said Connie Kelliher, a spokeswoman in Seattle for the International Association of Machinists and Aerospace Workers. ``The wage package is below industry standards, and it's doubling or tripling health-care costs in some cases.''
The union says workers haven't had raises, except for cost- of-living increases, since 2004 and deserve to share in Boeing's $10.7 billion in profit since then. Boeing has said it needs to make sure the contract is sustainable. The Chicago-based planemaker faces the possibility of deferred or canceled orders as airlines cope with record oil prices.
Boeing executives and union negotiators checked into a Seattle-area hotel Aug. 21 to start a final push before the contract runs out for 27,000 machinists, who build parts and assemble the planes. A deal would cover employees in the Puget Sound area -- the site of Boeing's main factories -- as well as Wichita, Kansas, and Portland, Oregon.
Yesterday's offer rewards workers ``for contributing to the company's success while addressing head on the challenges we face in managing long-term costs,'' Doug Kight, Boeing's vice president for human resources, said in a statement.
Boeing Offer
Under Boeing's proposal, workers would get a $2,500 lump-sum bonus in the first year as well as an incentive-pay program in the second and third years. Pension contributions would be raised by 7.1 percent and employees would pay more each month for health-care insurance, though coverage would be improved.
The company proposed increasing starting wages by $1.28 an hour and giving new hires a 401(k) retirement plan rather than the machinists' current defined-benefit pension program. The typical Seattle-area machinist starts with a pay range of $12.72 to $28.22 an hour.
The machinists, who make up about 17 percent of Boeing's 159,300 workers, will vote Sept. 3 whether to accept the contract or go on strike the next day. A walkout would shut down the company's aircraft production lines and could further delay the 787 Dreamliner. That plane is due to fly for the first time in November and be delivered to customers starting in next year's third quarter, at least 14 months later than first planned.
787 Delays
Boeing's stock is trading near a four-year low and has dropped 35 percent since the first of three 787 delays was announced in October. The shares rose $2, or 3.2 percent, to $65.55 yesterday in New York Stock Exchange composite trading.
Boeing backed off a proposal to put the 700 Wichita workers into a separate bargaining group, a plan the union had opposed. The company is still pushing other ideas the union has said it would encourage a strike over, including the 401(k) plan and the elimination of some retirement medical benefits for new workers. Committees for the two sides have been meeting weekly since May to discuss non-economic matters.
``All the strike issues remain on the table except for Wichita,'' the union's Kelliher said.
To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net
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Aug. 23 (Bloomberg) -- Boeing Co.'s offer to raise pay and benefits as much as $24,000 over three years for machinists in its largest union is inadequate and the proposal still contains ``strike issues,'' the labor group said.
Boeing, aiming to avoid a possible strike when machinists vote on the outcome of negotiations Sept. 3, offered yesterday to raise wages 2.5 percent the first year and 2 percent the following two years. The union had said it was seeking a gain of 9 percent to 13 percent, spread out over the contract, for the machinists, who make an average of about $56,000 a year.
The offer is ``well below expectations and very inadequate in all areas,'' said Connie Kelliher, a spokeswoman in Seattle for the International Association of Machinists and Aerospace Workers. ``The wage package is below industry standards, and it's doubling or tripling health-care costs in some cases.''
The union says workers haven't had raises, except for cost- of-living increases, since 2004 and deserve to share in Boeing's $10.7 billion in profit since then. Boeing has said it needs to make sure the contract is sustainable. The Chicago-based planemaker faces the possibility of deferred or canceled orders as airlines cope with record oil prices.
Boeing executives and union negotiators checked into a Seattle-area hotel Aug. 21 to start a final push before the contract runs out for 27,000 machinists, who build parts and assemble the planes. A deal would cover employees in the Puget Sound area -- the site of Boeing's main factories -- as well as Wichita, Kansas, and Portland, Oregon.
Yesterday's offer rewards workers ``for contributing to the company's success while addressing head on the challenges we face in managing long-term costs,'' Doug Kight, Boeing's vice president for human resources, said in a statement.
Boeing Offer
Under Boeing's proposal, workers would get a $2,500 lump-sum bonus in the first year as well as an incentive-pay program in the second and third years. Pension contributions would be raised by 7.1 percent and employees would pay more each month for health-care insurance, though coverage would be improved.
The company proposed increasing starting wages by $1.28 an hour and giving new hires a 401(k) retirement plan rather than the machinists' current defined-benefit pension program. The typical Seattle-area machinist starts with a pay range of $12.72 to $28.22 an hour.
The machinists, who make up about 17 percent of Boeing's 159,300 workers, will vote Sept. 3 whether to accept the contract or go on strike the next day. A walkout would shut down the company's aircraft production lines and could further delay the 787 Dreamliner. That plane is due to fly for the first time in November and be delivered to customers starting in next year's third quarter, at least 14 months later than first planned.
787 Delays
Boeing's stock is trading near a four-year low and has dropped 35 percent since the first of three 787 delays was announced in October. The shares rose $2, or 3.2 percent, to $65.55 yesterday in New York Stock Exchange composite trading.
Boeing backed off a proposal to put the 700 Wichita workers into a separate bargaining group, a plan the union had opposed. The company is still pushing other ideas the union has said it would encourage a strike over, including the 401(k) plan and the elimination of some retirement medical benefits for new workers. Committees for the two sides have been meeting weekly since May to discuss non-economic matters.
``All the strike issues remain on the table except for Wichita,'' the union's Kelliher said.
To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net
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Obama Picks Biden as Running Mate, Boosts Foreign Policy Image
By Laura Litvan
Aug. 23 (Bloomberg) -- Barack Obama chose Senator Joseph Biden, a Delaware Democrat, to be his vice presidential running mate, selecting one of the party's leading foreign-policy figures and harshest critics of Republican John McCain's national security views.
The Obama campaign sent a text message to supporters at about 3 a.m. New York time announcing the decision. Obama and Biden are scheduled to appear together at a rally in Springfield, Illinois, today at 2 p.m. local time.
The choice of Biden, 65, is aimed at addressing questions about Obama's inexperience on international affairs, his biggest vulnerability against McCain. Biden has led the attacks on the Republican candidate, assailing McCain for supporting President George W. Bush's policies, including his argument that Iraq is the main front in the battle against terrorists.
McCain ``talks about the central concern is the war on terror, yet it's in Afghanistan,'' Biden said at a July 14 news conference in Washington. ``It's in Afghanistan and Pakistan. And John's policy in Iraq prevents us from having a larger strategy to deal with that.''
Biden visited Georgia earlier this month, and is urging that more money be spent there to help the country recover from its conflict with Russia. Biden has emerged as the leading Democrat to weigh in on the crisis.
Working-Class Appeal
Biden, a Roman Catholic and a native of Scranton, Pennsylvania, also might help Obama with working-class, union households, where he ran poorly against Hillary Clinton in the Democratic presidential primaries. In the latest Bloomberg/Los Angeles national survey this month, McCain is running ahead of Obama among Catholic voters.
The outspoken Biden, who once said ``my candor sometimes gets me in trouble,'' has spent more than 35 years in the Senate, placing him fifth in seniority. To some voters, this may seem to conflict with Obama's pledge to change the way business is done in Washington. During the primary debates, Biden on several occasions criticized Obama for his lack of Washington experience.
Last year, Biden said that he didn't believe Obama was ready to be president, citing his lack of foreign policy experience.
`No Harsher Critic'
``There has been no harsher critic of Barack Obama's lack of experience than Joe Biden,'' McCain spokesman Ben Porritt said in a statement. ``Biden has denounced Barack Obama's poor foreign policy judgment and has strongly argued in his own words what Americans are quickly realizing -- that Barack Obama is not ready to be president.''
Biden saw his own presidential ambitions eclipsed by Obama's surging popularity earlier this year, dropping out after January's Iowa caucuses, where he got less than 1 percent of the vote.
It was Biden's second bid for the presidency. His previous campaign for the Democratic nomination collapsed in 1987 after reports that he had plagiarized portions of some speeches as well as a 1965 law school paper. Months later, he suffered a brain aneurysm and almost died; he fully recovered.
Since that campaign two decades ago, respect for Biden has grown among colleagues such as Senators Richard Lugar of Indiana, the ranking Republican on the Foreign Relations Committee, and Chuck Hagel of Nebraska.
Tough Views
Biden would bring some tough foreign policy views to an Obama White House.
For years, he has called on the White House to send more troops to Afghanistan and to pursue terrorists in Pakistan -- two positions Obama has since adopted.
He voted for the final U.S. Senate resolution authorizing the invasion of Iraq, even as Obama, then a state senator, spoke out against it. Later, Biden called for the federalizing of the country, or the setting aside of three mostly autonomous governments for Shiites, Sunnis and Kurds. He has called on Bush to protect United Nations peacekeepers in Darfur and urged the UN to designate China as ``a violator of human rights.''
Biden is also known for his rhetorical stumbles -- including remarks about Obama.
In an interview last year with the New York Observer, Biden said Obama, who is 47, is the ``first mainstream African- American (presidential hopeful) who is articulate and bright and clean.'' He later apologized and said he didn't mean to be dismissive of any past black presidential candidates.
Indian Accent
Biden also drew fire for a perceived slight of Indian- Americans when he said that in Delaware, ``you cannot go into a 7- 11 or Dunkin' Donuts unless you have a slight Indian accent.'' He later explained that he was complimenting Indian entrepreneurship.
Still, he proved a tough campaigner, once disparaging Republican contender Rudy Giuliani for what Biden said was his limited experience. ``There's only three things he mentions in a sentence: A noun and a verb and 9/11,'' Biden said of the former New York mayor during a Democratic debate in October.
First elected in 1972, Biden has spent more than half his life in the U.S. Senate. Only three other senators -- Democrats Robert Byrd of West Virginia, Daniel Inouye of Hawaii and Edward Kennedy of Massachusetts -- share that distinction, according to Congressional Quarterly.
His decades of votes may provide fodder to Republicans, who will comb his record for any potential controversies. The long years of service may also clash with Obama's promise to bring change to Washington.
Abortion Stance
Biden may run into trouble with some feminists and abortion-rights activists because he has repeatedly voted against ``partial birth abortion,'' a late-term-pregnancy procedure. He also opposes public funding of abortion.
``It goes to the question of whether or not you're going to impose a view to support something that is not a guaranteed right but an affirmative action to promote,'' he said on television's ``Meet the Press'' in April 2007.
The son of a Scranton, Pennsylvania, car dealer, he practiced law in Delaware and advanced from a county council post to the U.S. Senate at the age of 29. His wife, Neilia, and an infant daughter were killed in a car accident a month after he won his Senate seat for the first time. He only took the post after urging from Democratic congressional leaders. Biden later married Jill Tracy Jacobs, his current wife.
Judiciary Committee
In the Senate, Biden also served as chairman of the Judiciary Committee from 1987 to 1995, where he helped push through a broad-based anti-crime law and other legislation.
He was criticized for his panel's handling of the 1991 nomination of Clarence Thomas for the Supreme Court. The committee initially didn't give much credence to professor Anita Hill's claims of past sexual harassment by Thomas until after they were leaked to news organizations.
Biden also drew fire from Republicans for his treatment of the two most recent Supreme Court justices, John Roberts and Samuel Alito, during their confirmation hearings. He opposed both, complaining that Roberts was ``brilliantly evasive'' about his views.
``Although I got criticized for being too tough on both of them, the Democratic Party wasn't tough enough,'' he said at a July 2007 presidential candidates' forum.
Biden and Obama are in basic agreement on trade and key economic issues. Both argue that labor and environmental protections should be built into any open-market agreements, a position supported by labor unions.
Both have said they want to rescind Bush's tax cuts on the wealthiest Americans. Biden says even the targets of that initiative would applaud the move.
``Imagine what we could do if we had a president who had the nerve and the wisdom to understand that rich folks are just as patriotic as poor folks -- you just have to ask them,'' he said at a presidential candidates' forum last year. ``I spoke to a group of millionaires about taking away their tax cut, and when I explained how I'd use it, they gave me a standing ovation.''
To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net.
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Aug. 23 (Bloomberg) -- Barack Obama chose Senator Joseph Biden, a Delaware Democrat, to be his vice presidential running mate, selecting one of the party's leading foreign-policy figures and harshest critics of Republican John McCain's national security views.
The Obama campaign sent a text message to supporters at about 3 a.m. New York time announcing the decision. Obama and Biden are scheduled to appear together at a rally in Springfield, Illinois, today at 2 p.m. local time.
The choice of Biden, 65, is aimed at addressing questions about Obama's inexperience on international affairs, his biggest vulnerability against McCain. Biden has led the attacks on the Republican candidate, assailing McCain for supporting President George W. Bush's policies, including his argument that Iraq is the main front in the battle against terrorists.
McCain ``talks about the central concern is the war on terror, yet it's in Afghanistan,'' Biden said at a July 14 news conference in Washington. ``It's in Afghanistan and Pakistan. And John's policy in Iraq prevents us from having a larger strategy to deal with that.''
Biden visited Georgia earlier this month, and is urging that more money be spent there to help the country recover from its conflict with Russia. Biden has emerged as the leading Democrat to weigh in on the crisis.
Working-Class Appeal
Biden, a Roman Catholic and a native of Scranton, Pennsylvania, also might help Obama with working-class, union households, where he ran poorly against Hillary Clinton in the Democratic presidential primaries. In the latest Bloomberg/Los Angeles national survey this month, McCain is running ahead of Obama among Catholic voters.
The outspoken Biden, who once said ``my candor sometimes gets me in trouble,'' has spent more than 35 years in the Senate, placing him fifth in seniority. To some voters, this may seem to conflict with Obama's pledge to change the way business is done in Washington. During the primary debates, Biden on several occasions criticized Obama for his lack of Washington experience.
Last year, Biden said that he didn't believe Obama was ready to be president, citing his lack of foreign policy experience.
`No Harsher Critic'
``There has been no harsher critic of Barack Obama's lack of experience than Joe Biden,'' McCain spokesman Ben Porritt said in a statement. ``Biden has denounced Barack Obama's poor foreign policy judgment and has strongly argued in his own words what Americans are quickly realizing -- that Barack Obama is not ready to be president.''
Biden saw his own presidential ambitions eclipsed by Obama's surging popularity earlier this year, dropping out after January's Iowa caucuses, where he got less than 1 percent of the vote.
It was Biden's second bid for the presidency. His previous campaign for the Democratic nomination collapsed in 1987 after reports that he had plagiarized portions of some speeches as well as a 1965 law school paper. Months later, he suffered a brain aneurysm and almost died; he fully recovered.
Since that campaign two decades ago, respect for Biden has grown among colleagues such as Senators Richard Lugar of Indiana, the ranking Republican on the Foreign Relations Committee, and Chuck Hagel of Nebraska.
Tough Views
Biden would bring some tough foreign policy views to an Obama White House.
For years, he has called on the White House to send more troops to Afghanistan and to pursue terrorists in Pakistan -- two positions Obama has since adopted.
He voted for the final U.S. Senate resolution authorizing the invasion of Iraq, even as Obama, then a state senator, spoke out against it. Later, Biden called for the federalizing of the country, or the setting aside of three mostly autonomous governments for Shiites, Sunnis and Kurds. He has called on Bush to protect United Nations peacekeepers in Darfur and urged the UN to designate China as ``a violator of human rights.''
Biden is also known for his rhetorical stumbles -- including remarks about Obama.
In an interview last year with the New York Observer, Biden said Obama, who is 47, is the ``first mainstream African- American (presidential hopeful) who is articulate and bright and clean.'' He later apologized and said he didn't mean to be dismissive of any past black presidential candidates.
Indian Accent
Biden also drew fire for a perceived slight of Indian- Americans when he said that in Delaware, ``you cannot go into a 7- 11 or Dunkin' Donuts unless you have a slight Indian accent.'' He later explained that he was complimenting Indian entrepreneurship.
Still, he proved a tough campaigner, once disparaging Republican contender Rudy Giuliani for what Biden said was his limited experience. ``There's only three things he mentions in a sentence: A noun and a verb and 9/11,'' Biden said of the former New York mayor during a Democratic debate in October.
First elected in 1972, Biden has spent more than half his life in the U.S. Senate. Only three other senators -- Democrats Robert Byrd of West Virginia, Daniel Inouye of Hawaii and Edward Kennedy of Massachusetts -- share that distinction, according to Congressional Quarterly.
His decades of votes may provide fodder to Republicans, who will comb his record for any potential controversies. The long years of service may also clash with Obama's promise to bring change to Washington.
Abortion Stance
Biden may run into trouble with some feminists and abortion-rights activists because he has repeatedly voted against ``partial birth abortion,'' a late-term-pregnancy procedure. He also opposes public funding of abortion.
``It goes to the question of whether or not you're going to impose a view to support something that is not a guaranteed right but an affirmative action to promote,'' he said on television's ``Meet the Press'' in April 2007.
The son of a Scranton, Pennsylvania, car dealer, he practiced law in Delaware and advanced from a county council post to the U.S. Senate at the age of 29. His wife, Neilia, and an infant daughter were killed in a car accident a month after he won his Senate seat for the first time. He only took the post after urging from Democratic congressional leaders. Biden later married Jill Tracy Jacobs, his current wife.
Judiciary Committee
In the Senate, Biden also served as chairman of the Judiciary Committee from 1987 to 1995, where he helped push through a broad-based anti-crime law and other legislation.
He was criticized for his panel's handling of the 1991 nomination of Clarence Thomas for the Supreme Court. The committee initially didn't give much credence to professor Anita Hill's claims of past sexual harassment by Thomas until after they were leaked to news organizations.
Biden also drew fire from Republicans for his treatment of the two most recent Supreme Court justices, John Roberts and Samuel Alito, during their confirmation hearings. He opposed both, complaining that Roberts was ``brilliantly evasive'' about his views.
``Although I got criticized for being too tough on both of them, the Democratic Party wasn't tough enough,'' he said at a July 2007 presidential candidates' forum.
Biden and Obama are in basic agreement on trade and key economic issues. Both argue that labor and environmental protections should be built into any open-market agreements, a position supported by labor unions.
Both have said they want to rescind Bush's tax cuts on the wealthiest Americans. Biden says even the targets of that initiative would applaud the move.
``Imagine what we could do if we had a president who had the nerve and the wisdom to understand that rich folks are just as patriotic as poor folks -- you just have to ask them,'' he said at a presidential candidates' forum last year. ``I spoke to a group of millionaires about taking away their tax cut, and when I explained how I'd use it, they gave me a standing ovation.''
To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net.
Read more...
Asian Currencies: Korean Won, Philippine Peso Decline This Week
By Lilian Karunungan and Judy Chen
Aug. 23 (Bloomberg) -- South Korea's won slumped to a four- year low on speculation intervention won't halt the currency's slide. The Philippine peso fell this week after the government lowered its economic growth forecast.
The won dropped as much as 0.8 percent yesterday to 1,063 against the dollar, the weakest since December 2004, as refiners bought the U.S. currency to import oil and overseas investors sold local stocks. The won had rallied 0.6 percent before the slide on purchases by the central bank, according to Sam Hong, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second-biggest financial group.
``The government's action is not strong enough to stop the won's slide,'' said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank in Seoul. ``There have been a lot of purchases of the dollar from the local energy companies.''
The won slid 0.7 percent to 1,062.5 per dollar yesterday in Seoul, after touching a high of 1,048, according to Seoul Money Brokerage Services Ltd. It's dropped 4.7 percent this month, the biggest decline among Asia's 10 most-active currencies excluding the yen. The peso fell 0.2 percent to 45.65 per dollar in Manila yesterday, according to Bankers Association of the Philippines, extending this week's losses to 0.3 percent.
Korea's government continues to ``closely'' monitor the currency for ``drastic'' fluctuations, Vice Finance Minister Kim Dong Soo said on Aug. 20.
The nation's foreign-currency reserves dropped $10.58 billion in July to $247.52 billion, a fourth straight monthly decline, as policy makers tried to halt a slide in the won. Central banks intervene in currency markets by selling or buying foreign exchange.
Stock Sales
The won slid 2.2 percent this week, declining for a fourth consecutive time, the longest stretch in a year. Demand for the currency slumped as overseas investors sold 1,226 billion won ($1.15 billion) more shares than they bought, trimming their holdings on all but one of the five trading days, according to stock exchange data.
The Kospi index fell every day this week, sliding 4.8 percent to close at 1,496.91. That's the first time it's been below 1,500 since April 2007.
The peso fell for a fourth week and reached the lowest level in more than a month on concern that demand for the nation's exports from its biggest market in the U.S. will decrease.
Rate Meeting
Slowing economies are ``a global concern of central banks,'' said Roland Avante, treasurer at Chinatrust (Philippines) Commercial Bank in Manila. ``There's a need for currencies to weaken against the dollar. We're still very much reliant on the U.S., they're still one of our major trading partners.''
Philippine central bank Governor Amando Tetangco said yesterday that foreign-exchange inflows will increase in the fourth quarter, boosting the peso. The currency is weaker because ``we are in import season,'' he said in an e-mail. ``There's demand for dollars.''
Economic Planning Undersecretary Augusto Santos this week said gross domestic product would expand 5.5 percent to 6.4 percent this year, instead of a previously forecast 5.7 percent to 6.6 percent. The U.S. accounts for 16 percent of overseas sales.
Six of the seven economists surveyed by Bloomberg News predict the Philippine central bank will increase borrowing costs next week by a quarter-percentage point to 6 percent. One economist forecast a half-percentage-point increase.
Rupiah Gains
The Indonesian rupiah snapped a two-week decline on speculation overseas investors are buying the nation's assets as stocks rise and the government issues Islamic bonds.
The currency completed its best week in more than a month on speculation the central bank is seeking a stronger currency to help temper inflation. Foreign investors bought more Indonesian stocks than they sold in two of the three trading days until Aug. 21. The government closed this week an offering of 5 trillion rupiah ($546.4 million) of seven- and 10-year sukuk Islamic notes.
``Funds overall are really positive on the rupiah,'' said Catherine Tan, head of foreign exchange at Thomson Financial Asia in Singapore. ``The central bank has been very pro-active in hiking interest rates to counter inflation. There's also been quite a lot of inflows into the sukuk.''
The currency rose 0.3 percent to 9,140 yesterday in Jakarta, according to data compiled by Bloomberg. The rupiah, which gained 0.5 percent this week, will strengthen to 9,000 by the end of the year, Tan forecast.
Singapore Dollar Strength
The central bank raised its benchmark interest rate four times this year to 9 percent after inflation accelerated to 11.9 percent in July, the most in 22 months.
Singapore's dollar had its best week in two months as the U.S. currency weakened against the euro and the yen, which are part of the trade-weighted basket managed by the Southeast Asian nation's central bank.
The local dollar was the best performer yesterday among Asia's 10 most-traded currencies outside Japan, rising to a one- week high. The U.S. currency declined this week on concern that widening credit-market losses and a deepening housing recession will prevent the Federal Reserve from raising interest rates.
``The Singapore dollar's strength is from a pullback in the broader U.S. dollar environment,'' said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore.
The Singapore dollar rose 0.6 percent this week, the most since the five days through June 20, to S$1.4081 against the U.S. dollar. It touched S$1.4028, the strongest level since Aug. 14.
Elsewhere, the Malaysian ringgit advanced 0.2 percent to 3.3400 a dollar from 3.3480 last week. The Thai baht fell 0.3 percent to 33.93. Taiwan's dollar declined 0.1 percent to NT$31.370 and Vietnam's dong was at 16,595 per dollar.
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.
Read more...
Aug. 23 (Bloomberg) -- South Korea's won slumped to a four- year low on speculation intervention won't halt the currency's slide. The Philippine peso fell this week after the government lowered its economic growth forecast.
The won dropped as much as 0.8 percent yesterday to 1,063 against the dollar, the weakest since December 2004, as refiners bought the U.S. currency to import oil and overseas investors sold local stocks. The won had rallied 0.6 percent before the slide on purchases by the central bank, according to Sam Hong, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second-biggest financial group.
``The government's action is not strong enough to stop the won's slide,'' said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank in Seoul. ``There have been a lot of purchases of the dollar from the local energy companies.''
The won slid 0.7 percent to 1,062.5 per dollar yesterday in Seoul, after touching a high of 1,048, according to Seoul Money Brokerage Services Ltd. It's dropped 4.7 percent this month, the biggest decline among Asia's 10 most-active currencies excluding the yen. The peso fell 0.2 percent to 45.65 per dollar in Manila yesterday, according to Bankers Association of the Philippines, extending this week's losses to 0.3 percent.
Korea's government continues to ``closely'' monitor the currency for ``drastic'' fluctuations, Vice Finance Minister Kim Dong Soo said on Aug. 20.
The nation's foreign-currency reserves dropped $10.58 billion in July to $247.52 billion, a fourth straight monthly decline, as policy makers tried to halt a slide in the won. Central banks intervene in currency markets by selling or buying foreign exchange.
Stock Sales
The won slid 2.2 percent this week, declining for a fourth consecutive time, the longest stretch in a year. Demand for the currency slumped as overseas investors sold 1,226 billion won ($1.15 billion) more shares than they bought, trimming their holdings on all but one of the five trading days, according to stock exchange data.
The Kospi index fell every day this week, sliding 4.8 percent to close at 1,496.91. That's the first time it's been below 1,500 since April 2007.
The peso fell for a fourth week and reached the lowest level in more than a month on concern that demand for the nation's exports from its biggest market in the U.S. will decrease.
Rate Meeting
Slowing economies are ``a global concern of central banks,'' said Roland Avante, treasurer at Chinatrust (Philippines) Commercial Bank in Manila. ``There's a need for currencies to weaken against the dollar. We're still very much reliant on the U.S., they're still one of our major trading partners.''
Philippine central bank Governor Amando Tetangco said yesterday that foreign-exchange inflows will increase in the fourth quarter, boosting the peso. The currency is weaker because ``we are in import season,'' he said in an e-mail. ``There's demand for dollars.''
Economic Planning Undersecretary Augusto Santos this week said gross domestic product would expand 5.5 percent to 6.4 percent this year, instead of a previously forecast 5.7 percent to 6.6 percent. The U.S. accounts for 16 percent of overseas sales.
Six of the seven economists surveyed by Bloomberg News predict the Philippine central bank will increase borrowing costs next week by a quarter-percentage point to 6 percent. One economist forecast a half-percentage-point increase.
Rupiah Gains
The Indonesian rupiah snapped a two-week decline on speculation overseas investors are buying the nation's assets as stocks rise and the government issues Islamic bonds.
The currency completed its best week in more than a month on speculation the central bank is seeking a stronger currency to help temper inflation. Foreign investors bought more Indonesian stocks than they sold in two of the three trading days until Aug. 21. The government closed this week an offering of 5 trillion rupiah ($546.4 million) of seven- and 10-year sukuk Islamic notes.
``Funds overall are really positive on the rupiah,'' said Catherine Tan, head of foreign exchange at Thomson Financial Asia in Singapore. ``The central bank has been very pro-active in hiking interest rates to counter inflation. There's also been quite a lot of inflows into the sukuk.''
The currency rose 0.3 percent to 9,140 yesterday in Jakarta, according to data compiled by Bloomberg. The rupiah, which gained 0.5 percent this week, will strengthen to 9,000 by the end of the year, Tan forecast.
Singapore Dollar Strength
The central bank raised its benchmark interest rate four times this year to 9 percent after inflation accelerated to 11.9 percent in July, the most in 22 months.
Singapore's dollar had its best week in two months as the U.S. currency weakened against the euro and the yen, which are part of the trade-weighted basket managed by the Southeast Asian nation's central bank.
The local dollar was the best performer yesterday among Asia's 10 most-traded currencies outside Japan, rising to a one- week high. The U.S. currency declined this week on concern that widening credit-market losses and a deepening housing recession will prevent the Federal Reserve from raising interest rates.
``The Singapore dollar's strength is from a pullback in the broader U.S. dollar environment,'' said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore.
The Singapore dollar rose 0.6 percent this week, the most since the five days through June 20, to S$1.4081 against the U.S. dollar. It touched S$1.4028, the strongest level since Aug. 14.
Elsewhere, the Malaysian ringgit advanced 0.2 percent to 3.3400 a dollar from 3.3480 last week. The Thai baht fell 0.3 percent to 33.93. Taiwan's dollar declined 0.1 percent to NT$31.370 and Vietnam's dong was at 16,595 per dollar.
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.
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South Africa's Rand Posts Weekly Advance as Commodities Rally
By Garth Theunissen
Aug. 23 (Bloomberg) -- South Africa's rand snapped two weeks of losses against the dollar as gains in gold and platinum boosted revenue prospects for the world's biggest producer of precious metals.
The rand climbed to the highest level in 14 days versus the U.S. currency yesterday as gold rallied in the week and platinum ended a five-week losing run. The metals rose with other commodities as a weaker dollar and higher oil prices spurred demand for alternative investments and hedges against inflation.
``Commodities are a strong theme for the rand at the moment,'' said Kay Muller, a currency researcher at Rand Merchant Bank in Johannesburg. ``Strong gains in oil and a weaker dollar are fueling gold and platinum, which is positive for the rand.''
The rand climbed 2.5 percent in the week to 7.6776 per dollar by 6 p.m. in Johannesburg yesterday, from 7.8707 on Aug. 15. It advanced 1.8 percent from Aug. 15 to 11.3573 per euro.
``Positive momentum has returned to commodities, which along with a dollar correction, is keeping the rand buoyant,'' said Tolga Ediz, an emerging-markets currency strategist in London at Lehman Brothers Holdings Inc. ``There's still enough risk appetite to help high-yielding currencies.''
Commodities are poised to advance in the week as the dollar traded near the lowest level in more than two weeks against the yen and dropped in the week versus the euro.
Gold climbed 5.7 percent to $828.32 an ounce and platinum rose 3.9 percent from Aug. 15 to $1,437 an ounce. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices.
Crude oil rose this week to $114.59 a barrel.
Government bonds fell this week, with the yield on South Africa's benchmark 13.5 percent security due September 2015 adding 13 basis points to 9.27 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
Read more...
Aug. 23 (Bloomberg) -- South Africa's rand snapped two weeks of losses against the dollar as gains in gold and platinum boosted revenue prospects for the world's biggest producer of precious metals.
The rand climbed to the highest level in 14 days versus the U.S. currency yesterday as gold rallied in the week and platinum ended a five-week losing run. The metals rose with other commodities as a weaker dollar and higher oil prices spurred demand for alternative investments and hedges against inflation.
``Commodities are a strong theme for the rand at the moment,'' said Kay Muller, a currency researcher at Rand Merchant Bank in Johannesburg. ``Strong gains in oil and a weaker dollar are fueling gold and platinum, which is positive for the rand.''
The rand climbed 2.5 percent in the week to 7.6776 per dollar by 6 p.m. in Johannesburg yesterday, from 7.8707 on Aug. 15. It advanced 1.8 percent from Aug. 15 to 11.3573 per euro.
``Positive momentum has returned to commodities, which along with a dollar correction, is keeping the rand buoyant,'' said Tolga Ediz, an emerging-markets currency strategist in London at Lehman Brothers Holdings Inc. ``There's still enough risk appetite to help high-yielding currencies.''
Commodities are poised to advance in the week as the dollar traded near the lowest level in more than two weeks against the yen and dropped in the week versus the euro.
Gold climbed 5.7 percent to $828.32 an ounce and platinum rose 3.9 percent from Aug. 15 to $1,437 an ounce. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices.
Crude oil rose this week to $114.59 a barrel.
Government bonds fell this week, with the yield on South Africa's benchmark 13.5 percent security due September 2015 adding 13 basis points to 9.27 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
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U.K. Pound Falls to One-Week Low Against Euro as Growth Stalls
By Lukanyo Mnyanda
Aug. 23 (Bloomberg) -- The U.K. pound fell to a one-week low against the euro after a government report showed economic growth stagnated in the second-quarter, strengthening the case for lower interest rates.
The pound declined for a fifth week against the dollar, the longest losing streak since February 2006, as the Office for National Statistics said yesterday U.K. gross domestic product was unchanged from the previous three months. Inflation risks ``have probably eased a little,'' the minutes of the Bank of England's August rate meeting showed this week.
``This is a pretty toxic environment for the pound,'' said Lee Hardman, a currency strategist in London at the Bank of Tokyo-Mitsubishi Ltd. ``There's a risk of a rate cut in November if the data continue to deteriorate.''
The U.K. currency dropped as much as 0.7 percent to 79.89 pence per euro, the lowest level since Aug. 14, and was at 79.70 yesterday in London, from 79.32 on Aug. 21 and 78.70 a week ago. It was at $1.8589 from $1.8782 the day before. The pound may drop below $1.80 in 12 months, Hardman forecast. The pound has declined 6.8 percent this month, headed for the biggest monthly drop since October 1992, when it lost 12 percent.
Gross domestic product was unchanged from the first quarter, the Office for National Statistics said, compared with a previous estimate for growth of 0.2 percent. Economists had expected a 0.1 percent expansion, according to the median estimate of 34 economists in a Bloomberg News survey. Growth was 1.4 percent from a year earlier, the weakest since 1992.
The report adds to pressure on the Bank of England to set aside concerns about inflation and cut its benchmark interest rate, currently at 5 percent.
`Support the Market'
Deutsche Bank AG changed its U.K. interest-rate forecast two days ago and said the central bank will lower borrowing costs by 1 percentage point next year. The benchmark rate will be cut to 4 percent in the first three quarters of 2009, George Buckley, the bank's chief U.K. economist, wrote in an e-mailed note.
``The prime focus remains how soon does inflation come off,'' said Simon Derrick, a currency strategist in London at Bank of New York Mellon Corp. ``And how soon can the Bank of England move to get monetary policy down to a level that will help support the market.''
Gilts dropped, with the yield on the 10-year bond rising 6 basis points to 4.63 percent. The 5 percent security due March 2018 fell 0.46, or 4.6 pounds per 1,000-pound face amount, to 102.85. The yield on the two-year gilt, which is more sensitive to interest rate changes, rose 5 basis points to 4.62 percent. Bond yields move inversely to prices.
Economy Falters
The U.K. economy faltered after banks choked off credit following the collapse of the U.S. subprime-mortgage market. Still, an inflation rate at more than twice its 2 percent target has prevented the Bank of England's from lowering interest rates to revive the economy.
``It's a disappointing outturn,'' Ross Walker, an economist at Royal Bank of Scotland Group Plc, the U.K.'s second largest lender, said in a Bloomberg Television interview. ``It raises the risk of an earlier cut in interest rates.''
Morgan Stanley recommended on Aug. 21 that investors put on trades that benefit from a drop in the pound against the Australian dollar and Swiss franc on speculation the economic slowdown in the U.K. will deepen.
Investors should enter the so-called short positions at 2.1360 Australian dollars per pound and target a decline in the British currency to 2.0400, Sophia Drossos, a New York-based strategist, wrote in a client note. They should also hold on to so-called short positions on the pound versus the franc, with a target of 1.95, she wrote. A short position is a bet the value of a currency or security will fall.
U.K. bonds have outperformed their European counterparts in the past three months as evidence the economic slowdown is deepening persuaded investors to remove wagers on rate increases. The implied yield on the March short-sterling futures contract was at 5.27 percent yesterday. It has declined from 5.44 percent at the end of July.
The spread between U.K. government bonds and their German counterparts has narrowed. The 10-year gilt yielded 38 basis points more than the German bund, the smallest amount since July 22. It was at 69 basis points on Feb. 25, the widest this year.
U.K. bonds have returned 4.3 percent in the past two months, compared with 2.9 percent for their European counterparts, according to Merrill Lynch & Co.'s EMU Direct Government and U.K. Gilts Master indexes.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Read more...
Aug. 23 (Bloomberg) -- The U.K. pound fell to a one-week low against the euro after a government report showed economic growth stagnated in the second-quarter, strengthening the case for lower interest rates.
The pound declined for a fifth week against the dollar, the longest losing streak since February 2006, as the Office for National Statistics said yesterday U.K. gross domestic product was unchanged from the previous three months. Inflation risks ``have probably eased a little,'' the minutes of the Bank of England's August rate meeting showed this week.
``This is a pretty toxic environment for the pound,'' said Lee Hardman, a currency strategist in London at the Bank of Tokyo-Mitsubishi Ltd. ``There's a risk of a rate cut in November if the data continue to deteriorate.''
The U.K. currency dropped as much as 0.7 percent to 79.89 pence per euro, the lowest level since Aug. 14, and was at 79.70 yesterday in London, from 79.32 on Aug. 21 and 78.70 a week ago. It was at $1.8589 from $1.8782 the day before. The pound may drop below $1.80 in 12 months, Hardman forecast. The pound has declined 6.8 percent this month, headed for the biggest monthly drop since October 1992, when it lost 12 percent.
Gross domestic product was unchanged from the first quarter, the Office for National Statistics said, compared with a previous estimate for growth of 0.2 percent. Economists had expected a 0.1 percent expansion, according to the median estimate of 34 economists in a Bloomberg News survey. Growth was 1.4 percent from a year earlier, the weakest since 1992.
The report adds to pressure on the Bank of England to set aside concerns about inflation and cut its benchmark interest rate, currently at 5 percent.
`Support the Market'
Deutsche Bank AG changed its U.K. interest-rate forecast two days ago and said the central bank will lower borrowing costs by 1 percentage point next year. The benchmark rate will be cut to 4 percent in the first three quarters of 2009, George Buckley, the bank's chief U.K. economist, wrote in an e-mailed note.
``The prime focus remains how soon does inflation come off,'' said Simon Derrick, a currency strategist in London at Bank of New York Mellon Corp. ``And how soon can the Bank of England move to get monetary policy down to a level that will help support the market.''
Gilts dropped, with the yield on the 10-year bond rising 6 basis points to 4.63 percent. The 5 percent security due March 2018 fell 0.46, or 4.6 pounds per 1,000-pound face amount, to 102.85. The yield on the two-year gilt, which is more sensitive to interest rate changes, rose 5 basis points to 4.62 percent. Bond yields move inversely to prices.
Economy Falters
The U.K. economy faltered after banks choked off credit following the collapse of the U.S. subprime-mortgage market. Still, an inflation rate at more than twice its 2 percent target has prevented the Bank of England's from lowering interest rates to revive the economy.
``It's a disappointing outturn,'' Ross Walker, an economist at Royal Bank of Scotland Group Plc, the U.K.'s second largest lender, said in a Bloomberg Television interview. ``It raises the risk of an earlier cut in interest rates.''
Morgan Stanley recommended on Aug. 21 that investors put on trades that benefit from a drop in the pound against the Australian dollar and Swiss franc on speculation the economic slowdown in the U.K. will deepen.
Investors should enter the so-called short positions at 2.1360 Australian dollars per pound and target a decline in the British currency to 2.0400, Sophia Drossos, a New York-based strategist, wrote in a client note. They should also hold on to so-called short positions on the pound versus the franc, with a target of 1.95, she wrote. A short position is a bet the value of a currency or security will fall.
U.K. bonds have outperformed their European counterparts in the past three months as evidence the economic slowdown is deepening persuaded investors to remove wagers on rate increases. The implied yield on the March short-sterling futures contract was at 5.27 percent yesterday. It has declined from 5.44 percent at the end of July.
The spread between U.K. government bonds and their German counterparts has narrowed. The 10-year gilt yielded 38 basis points more than the German bund, the smallest amount since July 22. It was at 69 basis points on Feb. 25, the widest this year.
U.K. bonds have returned 4.3 percent in the past two months, compared with 2.9 percent for their European counterparts, according to Merrill Lynch & Co.'s EMU Direct Government and U.K. Gilts Master indexes.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
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Financial Times - Aug 23
CITY IS TOO RISKY FOR JOBLESS INSURERS
According to the country's largest online seller of unemployment cover, insurers are turning away City workers seeking unemployment insurance, as they are seen to be at too great a risk in the uncertain economic climate. "If you worked at Lehman or Goldman Sachs or any other investment bank I could have got cover for you several months ago, but not now," said Simon Burgess of British Insurance. Brokers still offering cover to the finance sector stated that the market had tightened in other ways, including rises in premiums or more stringent acceptance criteria. The Association of British Insurers denied, however, that there was any sort of a "black list", stating: "Applications are assessed on an individual basis and the insurer will decide if they are prepared to take on the risk."
CONCERN GROWS OVER 'BOMBSITE BRITAIN' TAX
John Nicholls, chairman of the URC chief executives group and chief executive of the Leicester Regeneration Company, warned that British cities are "beginning to look like broken teeth", with hundreds of properties being demolished as a consequence of a damaging tax on empty property. The levy on empty shops, warehouses and offices is aimed at landlords who deliberately leave buildings empty while waiting for rents to rise. It was intended to raise the supply of properties, reduce rent and earn the Treasury around one billion pounds in tax. However, opponents argue that it has led to properties being demolished, in order to avoid paying the tax. A government spokesman said on Friday that there were no plans to "reverse the changes to empty property rate relief introduced on April 1, but as with all taxes we will keep the position under review."
CARBON PERMIT FUNDS MAY GO TO POOR
The newly appointed head of the Fuel Poverty Advisory Group, Derek Lickorish, told Channel 4 News on Friday that the government could deploy the money raised through the sale of permits in the European Union's emissions trading scheme to help the poor this winter. He added, the cash ought to be spent on "customers who are vulnerable or in receipt of certain benefits who will have difficulty in paying their energy bill this winter". The consumer watchdog, Energywatch, estimated that more than five million people would spend more than ten percent of their disposable income on energy bills, and consequently would fall into its definition for fuel poverty.
CROSSRAIL BIDDERS SHORTLISTED
The company set up to guide the construction of London's 15.9 billion pound east-west Crossrail rail line announced on Friday the shortlist for the key construction contracts. Only Bechtel and Balfour Beatty (BALF.L: Quote, Profile, Research, Stock Buzz) were shortlisted for both of the most important contracts. The largest contract is for a project delivery partner- the bidder that will oversee the building of the 21 kilometre twin tunnels beneath London. The other major contract is for a programme partner, which will supervise overall management of the project.
GUINNESS FAMILY OPENS ITS DOORS
Private investors who have at least 50,000 pounds to their names are being offered the chance to invest in an open-ended investment company, which aims to mirror the Guinness family's personal investment portfolio. The Ireland listed fund will be open to investors from the beginning of September. "To us, the appeal of private offices generally is that these are families who made their fortunes centuries ago and they've kept them intact by not straying too far off the beaten track," said Jon Horton of Chamberlain de Broe, a London advisory company and a member of the group that convinced the Guinnesses to open the fund. The fund, established by the Guinness family's office, Iveagh Ltd, aims to offer exposure to an assortment of assets, including hedge funds and private equity.
AON OF US AGREES TO BUY BENFIELD FOR 844 MILLION POUNDS CASH
The world's largest reinsurance broker is to be created after Benfield has agreed to be taken over by Aon of the US for 844 million pounds cash. Aon's 350 pence-a-share offer price is a 40 percent premium to Benfield's average share price over the last 30 days, and slightly above Friday's closing price of 345.5 pence. The deal is scheduled to be completed by year-end and is subject to a one percent break fee. Investors holding 25.4 percent of Benfield have already agreed to sell to Aon, with analysts describing the price as fair.
THREE ARRESTED IN GP NOBLE PENSION INQUIRY
Three men have been arrested in connection with the Serious Fraud Office's investigation into independent pension trustee company GP Noble. The move follows the Pensions Regulator last week using its emergency powers to remove GP Noble from control of 29 schemes. Money Portal, the City of London investment firm that owns GP Noble, said: "We shall do all we can to ensure that justice is done and will co-operate fully both with this inquiry and with the Pensions Regulator, whose actions we fully support".
SIMON TAKES STAKE IN UK RIVAL LIBERTY
Simon Property Group of the US has purchased a 3.5 percent stake in its UK shopping centre rival Liberty International for 120 million pounds. This is the first time that Simon Property, which already owns or has involvement in 383 properties across the world, has become involved in the UK property market, but real estate analysts suggested that it is unlikely to make a sole bid for Liberty. Shares in Liberty closed trading on Friday up 68.5 pence at 943.5 pence.
VITEC DAZZLED BY HOLLYWOOD
Kingston based Vitec Group, which supplies equipment to the broadcast, entertainment and photographic industries, is to purchase California based Litepanels for 7.8 million pounds. Litepanels makes low-powered lights for the video and film industry, and was founded by a group of Hollywood-based lighting designers and directors who will remain with the company. It has developed a range of light-emitting-diode-based (LED) lights for use in studios and film sets, which Vitec chief executive Gareth Rhys Williams said had proved "much more comfortable for newscasters and actors", while also reducing studio power and air-conditioning requirements.
SPECTRIS LIFTED BY GROWING DEMAND FOR EFFICIENCY
Instrument and manufacturing controls maker Spectris has announced an operating profit of 44.7 million pounds in the six months to June 30, up from 38.9 million pounds, on revenues of 358 million pounds. Pre-tax profit was 39.1 million pounds, down from 56.4 million pounds last time around, though this figure had been inflated by a 17.5 million pound contribution from profits on disposals of businesses and other items. Sales in China grew by 15 percent, while business in India, Latin America, Russia, North America and Europe also advanced. Shares in Spectris rose 6.5 pence to 810 pence.
Prepared for Reuters by Durrants
Read more...
According to the country's largest online seller of unemployment cover, insurers are turning away City workers seeking unemployment insurance, as they are seen to be at too great a risk in the uncertain economic climate. "If you worked at Lehman or Goldman Sachs or any other investment bank I could have got cover for you several months ago, but not now," said Simon Burgess of British Insurance. Brokers still offering cover to the finance sector stated that the market had tightened in other ways, including rises in premiums or more stringent acceptance criteria. The Association of British Insurers denied, however, that there was any sort of a "black list", stating: "Applications are assessed on an individual basis and the insurer will decide if they are prepared to take on the risk."
CONCERN GROWS OVER 'BOMBSITE BRITAIN' TAX
John Nicholls, chairman of the URC chief executives group and chief executive of the Leicester Regeneration Company, warned that British cities are "beginning to look like broken teeth", with hundreds of properties being demolished as a consequence of a damaging tax on empty property. The levy on empty shops, warehouses and offices is aimed at landlords who deliberately leave buildings empty while waiting for rents to rise. It was intended to raise the supply of properties, reduce rent and earn the Treasury around one billion pounds in tax. However, opponents argue that it has led to properties being demolished, in order to avoid paying the tax. A government spokesman said on Friday that there were no plans to "reverse the changes to empty property rate relief introduced on April 1, but as with all taxes we will keep the position under review."
CARBON PERMIT FUNDS MAY GO TO POOR
The newly appointed head of the Fuel Poverty Advisory Group, Derek Lickorish, told Channel 4 News on Friday that the government could deploy the money raised through the sale of permits in the European Union's emissions trading scheme to help the poor this winter. He added, the cash ought to be spent on "customers who are vulnerable or in receipt of certain benefits who will have difficulty in paying their energy bill this winter". The consumer watchdog, Energywatch, estimated that more than five million people would spend more than ten percent of their disposable income on energy bills, and consequently would fall into its definition for fuel poverty.
CROSSRAIL BIDDERS SHORTLISTED
The company set up to guide the construction of London's 15.9 billion pound east-west Crossrail rail line announced on Friday the shortlist for the key construction contracts. Only Bechtel and Balfour Beatty (BALF.L: Quote, Profile, Research, Stock Buzz) were shortlisted for both of the most important contracts. The largest contract is for a project delivery partner- the bidder that will oversee the building of the 21 kilometre twin tunnels beneath London. The other major contract is for a programme partner, which will supervise overall management of the project.
GUINNESS FAMILY OPENS ITS DOORS
Private investors who have at least 50,000 pounds to their names are being offered the chance to invest in an open-ended investment company, which aims to mirror the Guinness family's personal investment portfolio. The Ireland listed fund will be open to investors from the beginning of September. "To us, the appeal of private offices generally is that these are families who made their fortunes centuries ago and they've kept them intact by not straying too far off the beaten track," said Jon Horton of Chamberlain de Broe, a London advisory company and a member of the group that convinced the Guinnesses to open the fund. The fund, established by the Guinness family's office, Iveagh Ltd, aims to offer exposure to an assortment of assets, including hedge funds and private equity.
AON OF US AGREES TO BUY BENFIELD FOR 844 MILLION POUNDS CASH
The world's largest reinsurance broker is to be created after Benfield has agreed to be taken over by Aon of the US for 844 million pounds cash. Aon's 350 pence-a-share offer price is a 40 percent premium to Benfield's average share price over the last 30 days, and slightly above Friday's closing price of 345.5 pence. The deal is scheduled to be completed by year-end and is subject to a one percent break fee. Investors holding 25.4 percent of Benfield have already agreed to sell to Aon, with analysts describing the price as fair.
THREE ARRESTED IN GP NOBLE PENSION INQUIRY
Three men have been arrested in connection with the Serious Fraud Office's investigation into independent pension trustee company GP Noble. The move follows the Pensions Regulator last week using its emergency powers to remove GP Noble from control of 29 schemes. Money Portal, the City of London investment firm that owns GP Noble, said: "We shall do all we can to ensure that justice is done and will co-operate fully both with this inquiry and with the Pensions Regulator, whose actions we fully support".
SIMON TAKES STAKE IN UK RIVAL LIBERTY
Simon Property Group of the US has purchased a 3.5 percent stake in its UK shopping centre rival Liberty International for 120 million pounds. This is the first time that Simon Property, which already owns or has involvement in 383 properties across the world, has become involved in the UK property market, but real estate analysts suggested that it is unlikely to make a sole bid for Liberty. Shares in Liberty closed trading on Friday up 68.5 pence at 943.5 pence.
VITEC DAZZLED BY HOLLYWOOD
Kingston based Vitec Group, which supplies equipment to the broadcast, entertainment and photographic industries, is to purchase California based Litepanels for 7.8 million pounds. Litepanels makes low-powered lights for the video and film industry, and was founded by a group of Hollywood-based lighting designers and directors who will remain with the company. It has developed a range of light-emitting-diode-based (LED) lights for use in studios and film sets, which Vitec chief executive Gareth Rhys Williams said had proved "much more comfortable for newscasters and actors", while also reducing studio power and air-conditioning requirements.
SPECTRIS LIFTED BY GROWING DEMAND FOR EFFICIENCY
Instrument and manufacturing controls maker Spectris has announced an operating profit of 44.7 million pounds in the six months to June 30, up from 38.9 million pounds, on revenues of 358 million pounds. Pre-tax profit was 39.1 million pounds, down from 56.4 million pounds last time around, though this figure had been inflated by a 17.5 million pound contribution from profits on disposals of businesses and other items. Sales in China grew by 15 percent, while business in India, Latin America, Russia, North America and Europe also advanced. Shares in Spectris rose 6.5 pence to 810 pence.
Prepared for Reuters by Durrants
Read more...
British business press - Aug 23
The Times
STEEP FALL IN ADVERTISING WILL MEAN CUTS AT CHANNEL 4
Channel 4's chairman Luke Johnson has said the broadcaster will have to reduce its 620 million pound programming budget as it struggles to cope with a severe downturn in advertising. According to the broadcaster's advance booking data, a collapse in September bookings is expected to be followed by difficult trading in the important pre-Christmas period. "In looking at the programming budget, we are going to have to be mindful of the stresses out there," said Johnson.
ASDA GETS SMART WITH SPECIALLY TIMED PRICE CUTS
Asda has introduced a series of substantial price cuts as it steps up efforts to win cash-conscious customers. The move was a reflection of decreasing spending power, the supermarket said. "We are finding that people are buying more of our own-brand value range and this is particularly happening on the third week of the month as salaries run down." Sales of items in the "Smart Price" range have soared, particularly in areas such as South Wales where disposable income has been hit hardest.
ARRIVA PROFITS UP 40 PERCENT AS MOTORISTS LEAVE THE CAR AT HOME
Arriva reported a 40 percent increase in pre-tax profit and said the worsening economy and surging fuel costs are encouraging people out of their cars and on to public transport. Revenue increased 59 percent in the six months to June 30, rising to 1.4 billion pounds compared with 902 million pounds a year earlier. Pre-tax profits rose from 47.3 million pounds to 66.3 million pounds for the first half of the year. David Martin, chief executive, said: "Our focus on Europe's diverse transport markets gives us resilience and great potential for further growth." Shares rose 4.2 percent to 743 pence.
The Daily Telegraph
TNK-BP'S CHIEF ACCUSES RUSSIANS OF POWER ABUSE
Robert Dudley, the exiled chief executive of BP's joint venture TNK-BP, has written an open letter accusing the Russian authorities of abusing their powers in hounding him out of the country. "There has been an abuse of power by the State Labour Inspectorate," Dudley claims, before setting out a list of grievances and demanding an immediate investigation. Chief of the inspectorate, Mikhail Malyuga, denied Dudley's claims of bias, saying: "All the checks that took place at the firm were done by the law".
ITV'S DIRECTOR OF TELEVISION DISMISSES IN-HOUSE PRODUCTION QUOTA
Peter Fincham, ITV's (ITV.L: Quote, Profile, Research, Stock Buzz) new director of television, has cast aside Michael Grade's controversial target of commissioning three-quarters of the broadcaster's programmes from its in-house production teams. Questioned on the 75 percent quota set by Grade last September, Fincham said: "That's not a target. When that was said it was making the point that the in-house arm could aspire to that . For broadcasters like ITV it's very important to maximise our own production capability while working with the best indies."
WPP SHOWS GROWTH IN FACE OF SLOWDOWN
Advertising giant WPP , run by Sir Martin Sorrell, beat market expectations for sales and profits in the first half and stood by its full-year profit target as it reported strong growth in Central and Eastern Europe, Africa, the Middle East, Latin America and Asia. But Sorrell warned that cooling developed economies meant a slowdown in advertising spending. WPP's interim dividend, payable on November 10, is up 20 percent to 5.19 pence. The shares rose 16 pence to 491.5 pence.
The Independent
HALIFAX TO CLOSE 53 ESTATE AGENTS
Halifax, the UK's biggest mortgage lender, is closing 53 estate agent branches because of the slump in house sales. The closure of the branches - around a quarter of its network - will result in 100 job losses, with 450 other employees transferred within the retail bank, Halifax said. The cuts are the latest by HBOS , Halifax's parent, which announced the closure of a mortgage business and 425 job reductions a week ago. It is also merging two business banking divisions, an exercise that will lead to a further 650 redundancies.
RENTOKIL RECOVERY MAY TAKE FIVE YEARS
Rentokil Initial reported a halving of profits in the first half of the year and admitted it could take five years to turn the business around. Pre-tax profits fell to 39.3 million pounds, compared with 88 million pounds a year earlier. Rentokil blamed a deterioration of its washroom and textiles business, losses at its parcel delivery business, and market conditions generally. One analyst said a rights issue was "a distinct possibility". The shares fell 4.5 pence to 69.25 pence.
LIBERTY FLIES HIGH ON SIMON PROPERTY BID TALK
Shares in Liberty International were propelled to pole position on the FTSE 100 on Friday after Simon Property Group, the US's largest public real estate group, revealed it had built a 3.45 percent stake in the UK company, sparking talk of a possible bid. Analysts were not as optimistic as the market, talking down the probability of a full bid by Simon given the challenge of funding the acquisition in current market conditions. The shares closed up 70 pence at 945 pence.
The Guardian
JOHN LEWIS BLAMES BEIJING FOR POOR SALES
The department store chain John Lewis has blamed the distraction of the Olympics and school exam results for poor sales, which fell 4.2 percent in the week to August 16. Sales were particularly subdued because of distractions such as A-level results and sporting events, John Lewis said. It was the tenth week in 15 that sales have suffered as consumers cut back on spending because of higher mortgage, food and fuel costs and the economic uncertainty.
AON TO BUY REINSURER BENFIELD FOR 844 MILLION POUNDS
Aon, the world's largest insurance broker, has made an 844 million pound recommended cash offer for Benfield , the British reinsurer. The 350 pence-a-share offer - agreed unanimously by both boards - represented a premium of more than 29 percent to Thursday's closing price. Shares in Benfield rose more than 27 percent on the news, closing at 345.5 pence. Aon said Benfield would be integrated into its existing reinsurance business, Aon Re Global.
BHP BID FOR RIO TINTO MAY BREACH COMPETITION RULES
Australia's competition regulator said on Friday that mining group BHP Billiton's 69 billion pound bid for rival Rio Tinto could raise competition issues in the iron ore sector. Analysts say a combined group would control about 35 percent of the world market for seaborne traded iron ore. The competition and consumer commission, which will rule in October, said the deal could drive up global iron ore prices, pushing up costs for Australia's steelmakers.
Prepared for Reuters by Durrants
Read more...
STEEP FALL IN ADVERTISING WILL MEAN CUTS AT CHANNEL 4
Channel 4's chairman Luke Johnson has said the broadcaster will have to reduce its 620 million pound programming budget as it struggles to cope with a severe downturn in advertising. According to the broadcaster's advance booking data, a collapse in September bookings is expected to be followed by difficult trading in the important pre-Christmas period. "In looking at the programming budget, we are going to have to be mindful of the stresses out there," said Johnson.
ASDA GETS SMART WITH SPECIALLY TIMED PRICE CUTS
Asda has introduced a series of substantial price cuts as it steps up efforts to win cash-conscious customers. The move was a reflection of decreasing spending power, the supermarket said. "We are finding that people are buying more of our own-brand value range and this is particularly happening on the third week of the month as salaries run down." Sales of items in the "Smart Price" range have soared, particularly in areas such as South Wales where disposable income has been hit hardest.
ARRIVA PROFITS UP 40 PERCENT AS MOTORISTS LEAVE THE CAR AT HOME
Arriva reported a 40 percent increase in pre-tax profit and said the worsening economy and surging fuel costs are encouraging people out of their cars and on to public transport. Revenue increased 59 percent in the six months to June 30, rising to 1.4 billion pounds compared with 902 million pounds a year earlier. Pre-tax profits rose from 47.3 million pounds to 66.3 million pounds for the first half of the year. David Martin, chief executive, said: "Our focus on Europe's diverse transport markets gives us resilience and great potential for further growth." Shares rose 4.2 percent to 743 pence.
The Daily Telegraph
TNK-BP'S CHIEF ACCUSES RUSSIANS OF POWER ABUSE
Robert Dudley, the exiled chief executive of BP's joint venture TNK-BP, has written an open letter accusing the Russian authorities of abusing their powers in hounding him out of the country. "There has been an abuse of power by the State Labour Inspectorate," Dudley claims, before setting out a list of grievances and demanding an immediate investigation. Chief of the inspectorate, Mikhail Malyuga, denied Dudley's claims of bias, saying: "All the checks that took place at the firm were done by the law".
ITV'S DIRECTOR OF TELEVISION DISMISSES IN-HOUSE PRODUCTION QUOTA
Peter Fincham, ITV's (ITV.L: Quote, Profile, Research, Stock Buzz) new director of television, has cast aside Michael Grade's controversial target of commissioning three-quarters of the broadcaster's programmes from its in-house production teams. Questioned on the 75 percent quota set by Grade last September, Fincham said: "That's not a target. When that was said it was making the point that the in-house arm could aspire to that . For broadcasters like ITV it's very important to maximise our own production capability while working with the best indies."
WPP SHOWS GROWTH IN FACE OF SLOWDOWN
Advertising giant WPP , run by Sir Martin Sorrell, beat market expectations for sales and profits in the first half and stood by its full-year profit target as it reported strong growth in Central and Eastern Europe, Africa, the Middle East, Latin America and Asia. But Sorrell warned that cooling developed economies meant a slowdown in advertising spending. WPP's interim dividend, payable on November 10, is up 20 percent to 5.19 pence. The shares rose 16 pence to 491.5 pence.
The Independent
HALIFAX TO CLOSE 53 ESTATE AGENTS
Halifax, the UK's biggest mortgage lender, is closing 53 estate agent branches because of the slump in house sales. The closure of the branches - around a quarter of its network - will result in 100 job losses, with 450 other employees transferred within the retail bank, Halifax said. The cuts are the latest by HBOS , Halifax's parent, which announced the closure of a mortgage business and 425 job reductions a week ago. It is also merging two business banking divisions, an exercise that will lead to a further 650 redundancies.
RENTOKIL RECOVERY MAY TAKE FIVE YEARS
Rentokil Initial reported a halving of profits in the first half of the year and admitted it could take five years to turn the business around. Pre-tax profits fell to 39.3 million pounds, compared with 88 million pounds a year earlier. Rentokil blamed a deterioration of its washroom and textiles business, losses at its parcel delivery business, and market conditions generally. One analyst said a rights issue was "a distinct possibility". The shares fell 4.5 pence to 69.25 pence.
LIBERTY FLIES HIGH ON SIMON PROPERTY BID TALK
Shares in Liberty International were propelled to pole position on the FTSE 100 on Friday after Simon Property Group, the US's largest public real estate group, revealed it had built a 3.45 percent stake in the UK company, sparking talk of a possible bid. Analysts were not as optimistic as the market, talking down the probability of a full bid by Simon given the challenge of funding the acquisition in current market conditions. The shares closed up 70 pence at 945 pence.
The Guardian
JOHN LEWIS BLAMES BEIJING FOR POOR SALES
The department store chain John Lewis has blamed the distraction of the Olympics and school exam results for poor sales, which fell 4.2 percent in the week to August 16. Sales were particularly subdued because of distractions such as A-level results and sporting events, John Lewis said. It was the tenth week in 15 that sales have suffered as consumers cut back on spending because of higher mortgage, food and fuel costs and the economic uncertainty.
AON TO BUY REINSURER BENFIELD FOR 844 MILLION POUNDS
Aon, the world's largest insurance broker, has made an 844 million pound recommended cash offer for Benfield , the British reinsurer. The 350 pence-a-share offer - agreed unanimously by both boards - represented a premium of more than 29 percent to Thursday's closing price. Shares in Benfield rose more than 27 percent on the news, closing at 345.5 pence. Aon said Benfield would be integrated into its existing reinsurance business, Aon Re Global.
BHP BID FOR RIO TINTO MAY BREACH COMPETITION RULES
Australia's competition regulator said on Friday that mining group BHP Billiton's 69 billion pound bid for rival Rio Tinto could raise competition issues in the iron ore sector. Analysts say a combined group would control about 35 percent of the world market for seaborne traded iron ore. The competition and consumer commission, which will rule in October, said the deal could drive up global iron ore prices, pushing up costs for Australia's steelmakers.
Prepared for Reuters by Durrants
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Closing Market Recap: Friday Brings Reverse of Thursday's Moves
Closing Market Recap: Friday Brings Reverse of Thursday's Moves
23 Agustus 2008 4:44
(CEP News) - Oil prices remain the key driver of financial markets as a $6 decline in crude prices pulled down Canadian stocks and boosted the U.S. dollar.
Read more...
23 Agustus 2008 4:44
(CEP News) - Oil prices remain the key driver of financial markets as a $6 decline in crude prices pulled down Canadian stocks and boosted the U.S. dollar.
Read more...
Friday's News Recap: Crude Oil Sells Off, Bernanke Says Growth to Fall Short
Friday's News Recap: Crude Oil Sells Off, Bernanke Says Growth to Fall Short
23 Agustus 2008 4:17
(CEP News) - It was a relatively light day for scheduled economic releases, though a more than $6 drop in crude oil kept markets occupied. Earlier in the day, Fed chairmen Ben Bernanke delivered comments on economic growth and inflation, which some economists characterized as dovish. In Canada, the federal government announced a $1.7 billion surplus in June.
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23 Agustus 2008 4:17
(CEP News) - It was a relatively light day for scheduled economic releases, though a more than $6 drop in crude oil kept markets occupied. Earlier in the day, Fed chairmen Ben Bernanke delivered comments on economic growth and inflation, which some economists characterized as dovish. In Canada, the federal government announced a $1.7 billion surplus in June.
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US Dollar: Don't Dismiss the Possibility of Pre-Labor Day Volatility
Daily Forex Fundamentals | Written by Global Forex Trading | Aug 22 08 22:31 GMT |
Today's Biggest Percentage Movers
NZD/USD ( - 118 pips or 1.64%)
AUD/USD( - 137 pips or 1.55%)
USD/JPY( + 160 pips or 1.48%)
The Stories in the Currency Market
US Dollar: Don't Dismiss the Possibility of Pre-Labor Day Volatility
Over the past 2 days, volatility has ripped through the currency markets.On Thursday, we saw the biggest decline in the US dollar against the Japanese Yen since the beginning of the month and today, we saw strongest rally.What are the culprits?The financials and oil. The health of Lehman Brothers has been a big story this week and the speculation today that they may be acquired by a Korean bank has sent stocks through the roof.Not only would this M&A deal be positive for the US dollar, but it would also help to eradicate one of the market's biggest fears.This of course is only speculation as there has been no official announcement from Lehman. There are still problems with Fannie Mae and Freddie Mac. As we suspected, in his speech today at Jackson Hole, Bernanke strayed away from talking tough on inflation given the problems in the financials.In the current environment of financial market instability, traders needed Bernanke to reassure them that he will take care of the financials first and worry about inflation later - which was exactly what was delivered. However don't be mistaken, the Fed is still looking to raise interest rates in 2009.This morning, the Fed chief said that interest rates are "relatively low" and as a result, we expect at least 1 rate hike next year.Oil prices on the other hand have erased all of yesterday's gains on a pipeline restart.Going into the new week, everyone expects trading to be light given the upcoming Labor Day Holiday in the US. However, with a lot of US economic releases on the calendar and a possible announcement from Lehman Brothers, we caution against dismissing the possibility of pre-Labor Day volatility.In 2007 and 2006, the EUR/USD consolidated within a tight range in the week before Labor Day, but in 2005, the EUR/USD surged to a new 3 month high.As for economic data, we are keeping a close eye on the existing and new home sales reports as well as durable goods, second quarter GDP and consumer confidence.
Stagnant Growth Drives British Pound to a 2 Year Low
The British pound dropped to a 2 year low against the US dollar as growth stagnated in the second quarter.Even though retail sales surged in July, that number will be included in the third and not second quarter data.Consumer spending in the second quarter was actually weaker than the first, which is part of the reason why annualized GDP growth was the slowest in 16 years.We strongly believe that the UK economy is in trouble and as long as oil prices remain at current levels or lower, the Bank of England could be one of the first central banks to cut interest rates.The market has already priced in at least 50bp of easing by the BoE over the next year and it should only be a matter of time before the central bank Governor King acknowledges it.The volatility in oil prices over the past 2 trading days has certainly made it difficult for central bankers to determine whether the drop in commodity prices is here to stay. In the week ahead, the UK economic calendar is light with only Nationwide House prices and the CBI Distributive Trades Survey due for release.As a result, we expect the near term fate of the British Pound to be determined by the US dollar.
Euro: Vulnerable to Weaker Economic Data
This week, the Euro was driven primarily by dollar sentiment and even though this relationship could continue in the coming week, there are few pieces of Eurozone economic data that could shake things up for the currency. The primary releases that we are watching for from the Eurozone are the German IFO and employment reports.Given the problems in the financial markets and the deterioration in the Eurozone economy, we expect German business confidence to remain weak.The same is true for the German employment report.According to the latest manufacturing and service sector PMI numbers, the labor market deteriorated this month.We agree with the recent comments by ECB member Liebscher who said that Eurozone growth will be low this year but a recession is unlikely.Meanwhile Switzerland will be releasing their employment report, UBS Consumption index and the KoF Leading Indicators report next week.We continue to expect steady numbers which will keep the Swiss National Bank on hold at their next monetary policy meeting.
Will the Liquidation out of Commodity Currencies Continue?
The drop in oil and gold prices has hit the Canadian, Australian and New Zealand hard. The AUD/USD and the NZD/USD are the day's biggest percentage movers with the former dropping 1.50 percent and the latter falling 1.68 percent.Interestingly enough, there was no economic data released from Australia or New Zealand which indicates that commodity prices and the US dollar are behind the move. The rally in stocks also confirms that risk aversion is not the problem.The economic calendar for Australia continues to be devoid of any significant data.New Zealand on the other hand will be releasing its trade balance on Monday evening while Canada has their GDP report scheduled for Friday.Whether the liquidation out of commodity currencies continue will be determined by the sustainability of the current sell-off in oil. In addition to the Caspian Sea pipeline reopening which triggered today's reversal, OPEC oil production is expected to rise in August while Labor Day travel is expected to drop to an 8 year low.
Japanese Yen: Busy Economic Calendar
The US dollar staged an impressive recovery against the Japanese Yen, but unfortunately that move has not translated into strength for all carry trade currencies.The sharp selloff in the AUD/USD and NZD/USD prevented meaningful gains for AUD/JPY and NZD/JPY.Like the rest of the world, the Bank of Japan is worried about inflation according to the minutes from their July 14-15 monetary policy meeting but unfortunately for the time being, they face the same problems that everyone else does – which is the inability to respond to rising inflationary pressures through monetary policy.The Japanese economy has suffered greatly from the slowdown in global growth and the rise in commodity prices.The economic calendar for Japan next week is extremely heavy as they will be releasing their employment, consumer spending and inflation reports.Unfortunately, we expected the data, which are all expected on Thursday evening to have a limited impact on the Japanese Yen.
USD/JPY:Currency Pair in Play Over the Next 24 Hours
The most potentially market moving piece of economic data due on Monday is the US Existing Home Sales Report (12:30 AM GMT)
The currency pair that we are keeping an eye on is the USD/JPY. It has entered our “Buy Zone” which is established using Bollinger Bands.On a weekly chart, we also see that the currency pair has closed above the 50 percent Fibonacci Retracement of the 124.15 to 95.83 sell-off that lasted from June 2007 to March 2008.At this point, we expect further gains. The levels to watch are 110.67, the August 15 high and 109.50, which is shorter term support.A close below that level negates the uptrend.
GFT Forex
Kathy Lien
http://www.gftforex.com
DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.
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Today's Biggest Percentage Movers
NZD/USD ( - 118 pips or 1.64%)
AUD/USD( - 137 pips or 1.55%)
USD/JPY( + 160 pips or 1.48%)
The Stories in the Currency Market
US Dollar: Don't Dismiss the Possibility of Pre-Labor Day Volatility
Over the past 2 days, volatility has ripped through the currency markets.On Thursday, we saw the biggest decline in the US dollar against the Japanese Yen since the beginning of the month and today, we saw strongest rally.What are the culprits?The financials and oil. The health of Lehman Brothers has been a big story this week and the speculation today that they may be acquired by a Korean bank has sent stocks through the roof.Not only would this M&A deal be positive for the US dollar, but it would also help to eradicate one of the market's biggest fears.This of course is only speculation as there has been no official announcement from Lehman. There are still problems with Fannie Mae and Freddie Mac. As we suspected, in his speech today at Jackson Hole, Bernanke strayed away from talking tough on inflation given the problems in the financials.In the current environment of financial market instability, traders needed Bernanke to reassure them that he will take care of the financials first and worry about inflation later - which was exactly what was delivered. However don't be mistaken, the Fed is still looking to raise interest rates in 2009.This morning, the Fed chief said that interest rates are "relatively low" and as a result, we expect at least 1 rate hike next year.Oil prices on the other hand have erased all of yesterday's gains on a pipeline restart.Going into the new week, everyone expects trading to be light given the upcoming Labor Day Holiday in the US. However, with a lot of US economic releases on the calendar and a possible announcement from Lehman Brothers, we caution against dismissing the possibility of pre-Labor Day volatility.In 2007 and 2006, the EUR/USD consolidated within a tight range in the week before Labor Day, but in 2005, the EUR/USD surged to a new 3 month high.As for economic data, we are keeping a close eye on the existing and new home sales reports as well as durable goods, second quarter GDP and consumer confidence.
Stagnant Growth Drives British Pound to a 2 Year Low
The British pound dropped to a 2 year low against the US dollar as growth stagnated in the second quarter.Even though retail sales surged in July, that number will be included in the third and not second quarter data.Consumer spending in the second quarter was actually weaker than the first, which is part of the reason why annualized GDP growth was the slowest in 16 years.We strongly believe that the UK economy is in trouble and as long as oil prices remain at current levels or lower, the Bank of England could be one of the first central banks to cut interest rates.The market has already priced in at least 50bp of easing by the BoE over the next year and it should only be a matter of time before the central bank Governor King acknowledges it.The volatility in oil prices over the past 2 trading days has certainly made it difficult for central bankers to determine whether the drop in commodity prices is here to stay. In the week ahead, the UK economic calendar is light with only Nationwide House prices and the CBI Distributive Trades Survey due for release.As a result, we expect the near term fate of the British Pound to be determined by the US dollar.
Euro: Vulnerable to Weaker Economic Data
This week, the Euro was driven primarily by dollar sentiment and even though this relationship could continue in the coming week, there are few pieces of Eurozone economic data that could shake things up for the currency. The primary releases that we are watching for from the Eurozone are the German IFO and employment reports.Given the problems in the financial markets and the deterioration in the Eurozone economy, we expect German business confidence to remain weak.The same is true for the German employment report.According to the latest manufacturing and service sector PMI numbers, the labor market deteriorated this month.We agree with the recent comments by ECB member Liebscher who said that Eurozone growth will be low this year but a recession is unlikely.Meanwhile Switzerland will be releasing their employment report, UBS Consumption index and the KoF Leading Indicators report next week.We continue to expect steady numbers which will keep the Swiss National Bank on hold at their next monetary policy meeting.
Will the Liquidation out of Commodity Currencies Continue?
The drop in oil and gold prices has hit the Canadian, Australian and New Zealand hard. The AUD/USD and the NZD/USD are the day's biggest percentage movers with the former dropping 1.50 percent and the latter falling 1.68 percent.Interestingly enough, there was no economic data released from Australia or New Zealand which indicates that commodity prices and the US dollar are behind the move. The rally in stocks also confirms that risk aversion is not the problem.The economic calendar for Australia continues to be devoid of any significant data.New Zealand on the other hand will be releasing its trade balance on Monday evening while Canada has their GDP report scheduled for Friday.Whether the liquidation out of commodity currencies continue will be determined by the sustainability of the current sell-off in oil. In addition to the Caspian Sea pipeline reopening which triggered today's reversal, OPEC oil production is expected to rise in August while Labor Day travel is expected to drop to an 8 year low.
Japanese Yen: Busy Economic Calendar
The US dollar staged an impressive recovery against the Japanese Yen, but unfortunately that move has not translated into strength for all carry trade currencies.The sharp selloff in the AUD/USD and NZD/USD prevented meaningful gains for AUD/JPY and NZD/JPY.Like the rest of the world, the Bank of Japan is worried about inflation according to the minutes from their July 14-15 monetary policy meeting but unfortunately for the time being, they face the same problems that everyone else does – which is the inability to respond to rising inflationary pressures through monetary policy.The Japanese economy has suffered greatly from the slowdown in global growth and the rise in commodity prices.The economic calendar for Japan next week is extremely heavy as they will be releasing their employment, consumer spending and inflation reports.Unfortunately, we expected the data, which are all expected on Thursday evening to have a limited impact on the Japanese Yen.
USD/JPY:Currency Pair in Play Over the Next 24 Hours
The most potentially market moving piece of economic data due on Monday is the US Existing Home Sales Report (12:30 AM GMT)
The currency pair that we are keeping an eye on is the USD/JPY. It has entered our “Buy Zone” which is established using Bollinger Bands.On a weekly chart, we also see that the currency pair has closed above the 50 percent Fibonacci Retracement of the 124.15 to 95.83 sell-off that lasted from June 2007 to March 2008.At this point, we expect further gains. The levels to watch are 110.67, the August 15 high and 109.50, which is shorter term support.A close below that level negates the uptrend.
GFT Forex
Kathy Lien
http://www.gftforex.com
DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.
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Asian Stocks Fall for Fourth Week on Credit, Economic Concerns
By Kyung Bok Cho
Aug. 23 (Bloomberg) -- Asian stocks fell for a fourth week, dragging the region's benchmark index to the lowest since July 2006, after technology companies and banks dropped on renewed concern credit-market turmoil and higher oil prices will hurt profits.
Samsung Electronics Co., the world's biggest computer- memory maker, fell 4 percent after U.S. wholesale prices rose and housing starts decreased. Sumitomo Mitsui Financial Group Inc. lost 6.9 percent after Citigroup Inc. predicted more losses at U.S. banks. Singapore Airlines Ltd., Asia's most profitable carrier, lost 2.5 percent.
``Consumer spending is shrinking from rising oil prices and higher inflation is increasing the costs of companies,'' said Choi Min Jai, who helps manage about $5 billion at KTB Asset Management Co. in Seoul. ``It doesn't help that this is happening while the subprime problem in the U.S. seems to be getting worse.''
The MSCI Asia Pacific Index lost 2.6 percent to 121.62 this week, the lowest since July 21, 2006. It's dropped 23 percent this year as soaring food and fuel prices threatened consumer spending and corporate profits, while writedowns and credit losses at the world's largest financial companies topped $500 billion.
Japan's Nikkei 200 Stock Average dropped 2.7 percent. Benchmark indexes declined in most markets.
Samsung slipped 4 percent to 557,000 won in Seoul. Nintendo Co., the maker of the top-selling video-game console, declined 5.2 percent to 49,200 yen in Osaka.
Banks Decline
U.S. housing starts slumped 11 percent last month to the lowest level in 17 years, the government said. Prices paid to U.S. producers in July rose 1.2 percent on escalating energy costs, doubling economists' projection of 0.6 percent.
Sumitomo Mitsui, Japan's second-largest publicly traded bank, fell 6.9 percent to 637,000 yen. The four-week decline is the longest losing streak since the period ended Jan. 4. Commonwealth Bank of Australia, Australia's biggest mortgage lender, lost 5.3 percent to A$41.38.
Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion in the third quarter, Citigroup analyst Prashant Bhatia said. Separately, HSBC Holdings Plc cut its rating on Sumitomo Mitsui shares to ``underweight'' from ``overweight.''
Banks also fell on speculation the U.S. will bail out Freddie Mac and Fannie Mae, the country's biggest home-loan financiers, after Barron's reported the government expects them to fail to raise enough equity to offset credit losses.
Babcock Plunges
A bailout ``adds to the speculation that no one really knows the extent of assets that were infected by the subprime contagion,'' said Olan Caperina, who helps manage about $6.7 billion at BPI Asset Management Inc. in Manila.
Singapore Airlines slid 2.5 percent to S$14.88, the biggest weekly loss since July 4. Korean Air Lines Co., the largest South Korean carrier, declined 7.4 percent, to 41,150 won.
Crude oil rose 0.8 percent to $114.59 a barrel in New York this week. Jet fuel is typically the biggest expense for Asian airlines.
Babcock & Brown Ltd., the worst-performing stock on the regional benchmark this year, tumbled 44 percent to A$2.48, a record low, after the appointment of Chief Executive Officer Michael Larkin failed to convince investors the company can be saved. Babcock is selling assets at a loss to reduce debt after bankers raised interest rates following a slump in the shares.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Aug. 23 (Bloomberg) -- Asian stocks fell for a fourth week, dragging the region's benchmark index to the lowest since July 2006, after technology companies and banks dropped on renewed concern credit-market turmoil and higher oil prices will hurt profits.
Samsung Electronics Co., the world's biggest computer- memory maker, fell 4 percent after U.S. wholesale prices rose and housing starts decreased. Sumitomo Mitsui Financial Group Inc. lost 6.9 percent after Citigroup Inc. predicted more losses at U.S. banks. Singapore Airlines Ltd., Asia's most profitable carrier, lost 2.5 percent.
``Consumer spending is shrinking from rising oil prices and higher inflation is increasing the costs of companies,'' said Choi Min Jai, who helps manage about $5 billion at KTB Asset Management Co. in Seoul. ``It doesn't help that this is happening while the subprime problem in the U.S. seems to be getting worse.''
The MSCI Asia Pacific Index lost 2.6 percent to 121.62 this week, the lowest since July 21, 2006. It's dropped 23 percent this year as soaring food and fuel prices threatened consumer spending and corporate profits, while writedowns and credit losses at the world's largest financial companies topped $500 billion.
Japan's Nikkei 200 Stock Average dropped 2.7 percent. Benchmark indexes declined in most markets.
Samsung slipped 4 percent to 557,000 won in Seoul. Nintendo Co., the maker of the top-selling video-game console, declined 5.2 percent to 49,200 yen in Osaka.
Banks Decline
U.S. housing starts slumped 11 percent last month to the lowest level in 17 years, the government said. Prices paid to U.S. producers in July rose 1.2 percent on escalating energy costs, doubling economists' projection of 0.6 percent.
Sumitomo Mitsui, Japan's second-largest publicly traded bank, fell 6.9 percent to 637,000 yen. The four-week decline is the longest losing streak since the period ended Jan. 4. Commonwealth Bank of Australia, Australia's biggest mortgage lender, lost 5.3 percent to A$41.38.
Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. will write down a combined $6.4 billion in the third quarter, Citigroup analyst Prashant Bhatia said. Separately, HSBC Holdings Plc cut its rating on Sumitomo Mitsui shares to ``underweight'' from ``overweight.''
Banks also fell on speculation the U.S. will bail out Freddie Mac and Fannie Mae, the country's biggest home-loan financiers, after Barron's reported the government expects them to fail to raise enough equity to offset credit losses.
Babcock Plunges
A bailout ``adds to the speculation that no one really knows the extent of assets that were infected by the subprime contagion,'' said Olan Caperina, who helps manage about $6.7 billion at BPI Asset Management Inc. in Manila.
Singapore Airlines slid 2.5 percent to S$14.88, the biggest weekly loss since July 4. Korean Air Lines Co., the largest South Korean carrier, declined 7.4 percent, to 41,150 won.
Crude oil rose 0.8 percent to $114.59 a barrel in New York this week. Jet fuel is typically the biggest expense for Asian airlines.
Babcock & Brown Ltd., the worst-performing stock on the regional benchmark this year, tumbled 44 percent to A$2.48, a record low, after the appointment of Chief Executive Officer Michael Larkin failed to convince investors the company can be saved. Babcock is selling assets at a loss to reduce debt after bankers raised interest rates following a slump in the shares.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Usd Recovers on Talks Lehman will be Purchased, Oil Drops
Daily Forex Fundamentals | Written by AC-Markets | Aug 22 08 22:27 GMT |
The Usd regained momentum in today's trading session, based on weak economic data out of Europe as well as major news in the financial sector. The EurUsd fell over 120 pips to the high 1.47 level, while the UsdJpy rose sharply the low 110 price. The GbpUsd declined substantially trading with a 1.85 handle, mostly due to the GDP figure which was released today. Equity markets rallied strong in the US and Europe, after a week of losses stemming from higher oil prices. Commodities declined across the board with oil leading the way down 6% from yesterday's close at 114, in addition, gold fell 5% to 827. Bond yields were higher by 11bps on the 2yr treasury, which is signaled a strong increase in risk appetite from the bearish sentiment Traders have held since the early part of the week.
UK GDP was flat at 0.0% vs. the 0.1% exp. teetering on a negative reading may suggest that the economy is heading for a recession. If so, investors should expect to see additional losses in the cable as the central bank will have to lower rates to generate growth. Several other data points came in negative and lower than estimates, particularly exports which were released at -0.5% vs. 0.4%. We maintain our bearish outlook, with trading range between 1.86-1.82 in the near-term. In the Eurozone, industrial new orders came in better than expected at -0.3% vs. the consensus figure of -1.1%. . While the data beat expectations, both the actual and projected figures were negative, which serves as insight to how dismal the economic outlook is for the region. Our desks expects the EurUsd to extend its recent decline to levels closer to 1.40 by year-end, largely due in part to the contraction in growth most of the region is likely to experience.
The market was submerged with a new sense of optimism regarding the timeline the US will need to recover from the recent downturn. Korea Development Bank is in talks to purchase Lehman Brothers, which provided investors with major relief regarding the state financial institutions in the US. Shares in Lehman Brothers surged on the news, as this transaction shows there are still buyers who see relative value in some of the ailing banks. This also removes pressure from the Fed, as they are closely monitoring Freddie and Fannie for the possibility of the banks to fail. These factors contribute to the probability in which the Fed will raise rates next meeting. Bernanke spoke at a forum in Jackson Hole, WY, in which he addressed both his concerns growth and dollar strength. The FOMC is scheduled next week, and we may be able to extract more information as to what the central bank's outlook is for the US economy.
AC Markets
http://www.ac-markets.com
Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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The Usd regained momentum in today's trading session, based on weak economic data out of Europe as well as major news in the financial sector. The EurUsd fell over 120 pips to the high 1.47 level, while the UsdJpy rose sharply the low 110 price. The GbpUsd declined substantially trading with a 1.85 handle, mostly due to the GDP figure which was released today. Equity markets rallied strong in the US and Europe, after a week of losses stemming from higher oil prices. Commodities declined across the board with oil leading the way down 6% from yesterday's close at 114, in addition, gold fell 5% to 827. Bond yields were higher by 11bps on the 2yr treasury, which is signaled a strong increase in risk appetite from the bearish sentiment Traders have held since the early part of the week.
UK GDP was flat at 0.0% vs. the 0.1% exp. teetering on a negative reading may suggest that the economy is heading for a recession. If so, investors should expect to see additional losses in the cable as the central bank will have to lower rates to generate growth. Several other data points came in negative and lower than estimates, particularly exports which were released at -0.5% vs. 0.4%. We maintain our bearish outlook, with trading range between 1.86-1.82 in the near-term. In the Eurozone, industrial new orders came in better than expected at -0.3% vs. the consensus figure of -1.1%. . While the data beat expectations, both the actual and projected figures were negative, which serves as insight to how dismal the economic outlook is for the region. Our desks expects the EurUsd to extend its recent decline to levels closer to 1.40 by year-end, largely due in part to the contraction in growth most of the region is likely to experience.
The market was submerged with a new sense of optimism regarding the timeline the US will need to recover from the recent downturn. Korea Development Bank is in talks to purchase Lehman Brothers, which provided investors with major relief regarding the state financial institutions in the US. Shares in Lehman Brothers surged on the news, as this transaction shows there are still buyers who see relative value in some of the ailing banks. This also removes pressure from the Fed, as they are closely monitoring Freddie and Fannie for the possibility of the banks to fail. These factors contribute to the probability in which the Fed will raise rates next meeting. Bernanke spoke at a forum in Jackson Hole, WY, in which he addressed both his concerns growth and dollar strength. The FOMC is scheduled next week, and we may be able to extract more information as to what the central bank's outlook is for the US economy.
AC Markets
http://www.ac-markets.com
Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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