By Demian McLean
Sept. 6 (Bloomberg) -- Tropical Storm Hanna neared hurricane strength and threatened to batter the U.S. East Coast with heavy winds and rain, while Hurricane Ike charted a path from open sea toward the Caribbean.
Hanna, with winds of 70 miles (113 kilometers) per hour, was centered 60 miles east-southeast of Charleston, South Carolina, the U.S. National Hurricane Center said at 11 p.m. Miami time yesterday.
``People have battened down things that could get blown around,'' said Mark Kruea, a spokesman for the City of Myrtle Beach, South Carolina. ``It's a good tune-up to ward off complacency about other storms, including Ike, which has the potential to be really scary.''
Hanna is expected to move across eastern North Carolina early today, then move along the mid-atlantic coast later, dumping as much as 7 inches (18 centimeters) of rain by tonight on New York City and Washington, where a tropical storm warnings have been issued.
Although no significant change in strength is forecast before landfall, it would only take a small increase in wind speed for Hanna to become a hurricane, the center said. Weakening is expected after landfall and Hanna should become an extratropical storm early tomorrow.
Hanna devastated Haiti, which was also hit by Hurricane Gustav and Tropical Storm Fay in the past month. The latest storm killed about 495 people, MSNBC News said on its Web site yesterday, citing Haiti's police commissioner.
Up to 600,000 people may need assistance in Haiti, according to the United Nations humanitarian affairs chief John Holmes.
Stockpiling Food
Across the border, North Carolina Governor Mike Easley declared a state of emergency in preparation for Hanna and Hurricane Ike, which is forecast to hit the U.S. East Coast within a week. North Carolina put 12 water-rescue crews, 270 members of the National Guard and 144 Highway Patrol troopers on standby.
The state's Department of Crime Control and Public Safety in Raleigh was advising people to store three to five days' worth of food and water, and to stay off the roads during the storm.
Amtrak canceled some East Coast rail service as the storm approached. New York urged construction sites to halt crane operations and asked residents to bring in lawn furniture and remove satellite dishes.
A tropical-storm warning stretched from Georgia to New Jersey, the National Weather Service said. Winds may blow at 39 mph or faster amid heavy rains.
Nascar Postpones Race
Nascar postponed its race at Richmond International Raceway in the top Sprint Cup Series until at least Sept. 7 because Hanna is threatening the central Virginia track. The track will be shut until then, Richmond International Raceway president Doug Fritz said at a press conference.
More than 110,000 people were expected to attend tomorrow's Sprint Cup event. The 800-acre complex has more than 1,000 camping spots that were filled with everything from tents to the $1 million-plus motor coaches used by the race teams. Recreational vehicles will be allowed to remain on the site, Fritz said.
Fans camped in tents were undeterred by the prospect of rain or flooding.
``We're here for the duration,'' said David Soule, a 39- year-old fast-food worker who drove 12 hours from Dansville, Michigan, for the race. ``We're used to snow and sleet. This rain and wind is nothing.''
Ike Churns at Sea
Out at sea, Ike churned as a Category 3 hurricane, the middle of the five-step Saffir-Simpson scale, with sustained winds of 115 mph and higher gusts.
The system was about 360 miles east-northeast of Grand Turk Island, and moving toward the west-southwest. On that track, the center predicts Ike will pass near or over the Turks and Caicos Islands and the southeast Bahamas later today or early tomorrow. Ike is expected to be a major hurricane as it nears the Bahamas.
Hanna ripped shingles from roofs and flooded streets as it blew through the Bahamas this week with winds of 65 mph, said Stephen Russell, commander of the National Emergency Management Agency.
``We're mindful that what's coming is twice as strong'' as Hanna, Russell said by phone from Nassau. ``We know the devastation hurricanes such as Ike can bring.''
Residents in the southeast Bahamas -- where Ike is expected to land -- were warned to watch for storm surges, which could measure 18 feet (5.4 meters), he said. Shelters, emptied after Hanna's departure, will be reopened.
Andrew, a Category 5 hurricane, killed at least four people and caused $250 million in damage when it tore through island country in 1992. Storm winds topped 155 mph.
To the east of Ike, Tropical Storm Josephine weakened Further to a tropical depression, with sustained winds of 35 mph. It was about 785 miles west of the west of the Cape Verde Islands and moving west-northwest.
FEMA and American Red Cross officials said they will be able to respond effectively to Hanna, Ike and Josephine.
To contact the reporter on this story: Demian McLean in Washington at dmclean8@bloomberg.net.
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Saturday, September 6, 2008
Paulson Plans to Bring Fannie, Freddie Under Government Control
By Alison Vekshin and Dawn Kopecki
Sept. 6 (Bloomberg) -- Treasury Secretary Henry Paulson is preparing to announce plans to bring Fannie Mae and Freddie Mac under government control, seeking to halt the crisis of confidence in the companies that make up almost half the U.S. mortgage market.
Paulson met with Fannie Mae Chief Executive Officer Daniel Mudd and Freddie Mac CEO Richard Syron yesterday to brief them on the decision to put the companies into a conservatorship, where they would be removed from their jobs, according to a person briefed on the discussions. A public announcement is expected this weekend, the person said.
The decision follows the Treasury chief's repeated comments to lawmakers in July that he wasn't likely to use taxpayer funds to prop up the federally chartered, shareholder-owned firms hit by $14.9 billion in losses the past year. The shares of both companies slid since Paulson won powers to inject unlimited funds in the companies, and their borrowing costs rose.
Pacific Investment Management Co., manager of the world's biggest bond fund, and other large investors may put in their own money once the Treasury decides to inject government funds, said Newport Beach, California-based Pimco fund manager Bill Gross, in a Bloomberg Television interview.
``They have to open their wallet,'' Gross said, predicting that the Treasury will act this weekend before the Federal Housing Finance Agency releases an assessment of Fannie's and Freddie's capital.
Briefing Campaigns
Paulson gathered with Federal Reserve Chairman Ben S. Bernanke, FHFA director James Lockhart, Syron and Mudd in Washington. The Treasury plans to brief Democratic presidential candidate Barack Obama's campaign team today and has contacted Republican contender John McCain's staff about its intentions.
The meetings come a month after Paulson hired Morgan Stanley to advise on any use of taxpayer funds to recapitalize Fannie and Freddie, which account for almost half of the $12 trillion mortgage market. A government takeover would be the latest attempt to blunt the impact of the yearlong credit crisis, after the Fed provided financing for Bear Stearns Cos.'s takeover by JPMorgan Chase & Co.
Washington-based Fannie and Freddie dropped in after-hours trading. Fannie fell $2.25, or 32 percent, to $4.79 at 5:50 p.m. in New York Stock Exchange trading and Freddie slumped $1.40, or 27 percent, to $3.70.
Shareholder Fate
The Washington Post reported that the government would make quarterly injections of funds as the companies' losses warranted, avoiding a large up-front taxpayer cost, citing sources it didn't name. Debt and preferred shares would be protected, and common stock would be diluted while not wiped out, the Post said.
The New York Times said most or all of both the common and preferred shares would be worth little or nothing.
``We are making progress on our work with Morgan Stanley, FHFA and the Fed,'' Treasury spokeswoman Brookly Mclaughlin said yesterday in Washington, declining to comment on any specific plans. FHFA spokeswoman Stefanie Mullin declined to comment, as did Mark Lake at Morgan Stanley.
Bernanke participated in yesterday's meetings because the central bank was given a consultative role in overseeing Fannie's and Freddie's capital under legislation approved in July. Paulson's decision won the approval of Bernanke and Lockhart, the person briefed on the discussions said.
The FHFA has the authority to place Fannie or Freddie into conservatorships or receiverships under the law. The legislation that President George W. Bush signed July 30 also gave the Treasury the power through the end of next year to extend unlimited credit to or make equity purchases in the firms.
Conserve Assets
Under a conservatorship, the authorities would aim to preserve Fannie and Freddie assets, rather than dispose of them, the law says.
The FHFA was scheduled to release its assessment of the companies' capital levels as early as this week as part of a quarterly appraisal of their finances.
Analysts have speculated that the Treasury would wipe out common shareholders, while seeking to shield preferred stockowners from total loss. Fannie and Freddie preferred shares are typically owned by banks and insurance companies. Their $5.2 trillion of debt outstanding is held by investors including Asian central banks, and would probably be guaranteed, analysts said.
``Treasury's main concern is the debt markets, and if it was to say that it will do whatever is necessary to keep Fannie and Freddie running, the better it is for their funding,'' said Alex Pollock, fellow at the American Enterprise Institute in Washington and former president of the Chicago Federal Home Loan Bank.
The two companies need to sell billions of dollars of bonds each month to pay off maturing debt, and have continued to issue securities this week.
Losses Mount
Fannie and Freddie have reported $14.9 billion in net losses for the past four quarters as loan delinquencies rose. Fannie had $47 billion of capital as of June 30, according to company filings. The company is required by its regulator to hold $37.5 billion. Freddie's capital stood at $37.1 billion, compared with a requirement of $34.5 billion, filings show.
Mudd was accompanied in his meetings at FHFA yesterday by Fannie General Counsel Beth Wilkinson and Chairman Stephen Ashley. Last week, he shook up the company's management in an effort to restore investor confidence, replacing three top deputies.
The market capitalizations of Fannie and Freddie slid with their shares this year as investors lost confidence in their ability to offset losses. Fannie's is now $7.6 billion, down from $38.9 billion at the end of last year. Freddie's has fallen to $3.3 billion, from $22 billion over the same period.
Fannie Mae was created in 1938 as part of President Franklin D. Roosevelt's New Deal plan. With the Vietnam War pressuring the federal budget, Fannie Mae was split from the government in 1968, and shares in the company were sold to the public. Freddie Mac was created in 1970 to provide competition for Fannie Mae.
To contact the reporter on this story: John Brinsley in Washington at jbrinsley@bloomberg.net; Dawn Kopecki in Washington at dkopecki@bloomberg.net.
Read more...
Sept. 6 (Bloomberg) -- Treasury Secretary Henry Paulson is preparing to announce plans to bring Fannie Mae and Freddie Mac under government control, seeking to halt the crisis of confidence in the companies that make up almost half the U.S. mortgage market.
Paulson met with Fannie Mae Chief Executive Officer Daniel Mudd and Freddie Mac CEO Richard Syron yesterday to brief them on the decision to put the companies into a conservatorship, where they would be removed from their jobs, according to a person briefed on the discussions. A public announcement is expected this weekend, the person said.
The decision follows the Treasury chief's repeated comments to lawmakers in July that he wasn't likely to use taxpayer funds to prop up the federally chartered, shareholder-owned firms hit by $14.9 billion in losses the past year. The shares of both companies slid since Paulson won powers to inject unlimited funds in the companies, and their borrowing costs rose.
Pacific Investment Management Co., manager of the world's biggest bond fund, and other large investors may put in their own money once the Treasury decides to inject government funds, said Newport Beach, California-based Pimco fund manager Bill Gross, in a Bloomberg Television interview.
``They have to open their wallet,'' Gross said, predicting that the Treasury will act this weekend before the Federal Housing Finance Agency releases an assessment of Fannie's and Freddie's capital.
Briefing Campaigns
Paulson gathered with Federal Reserve Chairman Ben S. Bernanke, FHFA director James Lockhart, Syron and Mudd in Washington. The Treasury plans to brief Democratic presidential candidate Barack Obama's campaign team today and has contacted Republican contender John McCain's staff about its intentions.
The meetings come a month after Paulson hired Morgan Stanley to advise on any use of taxpayer funds to recapitalize Fannie and Freddie, which account for almost half of the $12 trillion mortgage market. A government takeover would be the latest attempt to blunt the impact of the yearlong credit crisis, after the Fed provided financing for Bear Stearns Cos.'s takeover by JPMorgan Chase & Co.
Washington-based Fannie and Freddie dropped in after-hours trading. Fannie fell $2.25, or 32 percent, to $4.79 at 5:50 p.m. in New York Stock Exchange trading and Freddie slumped $1.40, or 27 percent, to $3.70.
Shareholder Fate
The Washington Post reported that the government would make quarterly injections of funds as the companies' losses warranted, avoiding a large up-front taxpayer cost, citing sources it didn't name. Debt and preferred shares would be protected, and common stock would be diluted while not wiped out, the Post said.
The New York Times said most or all of both the common and preferred shares would be worth little or nothing.
``We are making progress on our work with Morgan Stanley, FHFA and the Fed,'' Treasury spokeswoman Brookly Mclaughlin said yesterday in Washington, declining to comment on any specific plans. FHFA spokeswoman Stefanie Mullin declined to comment, as did Mark Lake at Morgan Stanley.
Bernanke participated in yesterday's meetings because the central bank was given a consultative role in overseeing Fannie's and Freddie's capital under legislation approved in July. Paulson's decision won the approval of Bernanke and Lockhart, the person briefed on the discussions said.
The FHFA has the authority to place Fannie or Freddie into conservatorships or receiverships under the law. The legislation that President George W. Bush signed July 30 also gave the Treasury the power through the end of next year to extend unlimited credit to or make equity purchases in the firms.
Conserve Assets
Under a conservatorship, the authorities would aim to preserve Fannie and Freddie assets, rather than dispose of them, the law says.
The FHFA was scheduled to release its assessment of the companies' capital levels as early as this week as part of a quarterly appraisal of their finances.
Analysts have speculated that the Treasury would wipe out common shareholders, while seeking to shield preferred stockowners from total loss. Fannie and Freddie preferred shares are typically owned by banks and insurance companies. Their $5.2 trillion of debt outstanding is held by investors including Asian central banks, and would probably be guaranteed, analysts said.
``Treasury's main concern is the debt markets, and if it was to say that it will do whatever is necessary to keep Fannie and Freddie running, the better it is for their funding,'' said Alex Pollock, fellow at the American Enterprise Institute in Washington and former president of the Chicago Federal Home Loan Bank.
The two companies need to sell billions of dollars of bonds each month to pay off maturing debt, and have continued to issue securities this week.
Losses Mount
Fannie and Freddie have reported $14.9 billion in net losses for the past four quarters as loan delinquencies rose. Fannie had $47 billion of capital as of June 30, according to company filings. The company is required by its regulator to hold $37.5 billion. Freddie's capital stood at $37.1 billion, compared with a requirement of $34.5 billion, filings show.
Mudd was accompanied in his meetings at FHFA yesterday by Fannie General Counsel Beth Wilkinson and Chairman Stephen Ashley. Last week, he shook up the company's management in an effort to restore investor confidence, replacing three top deputies.
The market capitalizations of Fannie and Freddie slid with their shares this year as investors lost confidence in their ability to offset losses. Fannie's is now $7.6 billion, down from $38.9 billion at the end of last year. Freddie's has fallen to $3.3 billion, from $22 billion over the same period.
Fannie Mae was created in 1938 as part of President Franklin D. Roosevelt's New Deal plan. With the Vietnam War pressuring the federal budget, Fannie Mae was split from the government in 1968, and shares in the company were sold to the public. Freddie Mac was created in 1970 to provide competition for Fannie Mae.
To contact the reporter on this story: John Brinsley in Washington at jbrinsley@bloomberg.net; Dawn Kopecki in Washington at dkopecki@bloomberg.net.
Read more...
Asian Currencies Fall in Week, Led by Won, on Capital Outflows
By Anil Varma and Kim Kyoungwha
Sept. 6 (Bloomberg) -- Asian currencies had a weekly decline, led by South Korea's won and Indonesia's rupiah, on signs investors are dumping emerging-market assets as a deepening U.S. slowdown threatens to damp global growth.
The won fell for a sixth week, the longest losing streak since 2001, as global funds sold local stocks and a central bank report confirmed yesterday that Asia's fourth-biggest economy expanded at the slowest pace in more than a year.
``Market players are cautious about unrest in global financial markets, which is strengthening sentiment for the dollar,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. ``Importers' deals and stock sales are knocking the wind out of the won.''
The currency fell 2.6 percent to 1,117.80 per dollar this week in Seoul, according to Seoul Money Brokerage Services Ltd. It rose 1 percent yesterday. It is the worst performer among the 10 most-active Asian currencies outside of Japan this year, with a 16.6 percent loss.
The won's slide this year, the steepest since at least 2000, sparked speculation South Korea may witness a repeat of 1997, when the currency lost half its value and the country turned to the International Monetary Fund to help companies repay debt. UBS AG and ABN Amro Bank NV this week predicted investors will continue selling the currency, betting the economy will falter.
Enough Reserves
``There is no need to be dispirited by assuming a very bad scenario,'' Bank of Korea Governor Lee Seong Tae told lawmakers on Sept. 4, adding the credit crunch is a ``global phenomenon.'' Lee said the central bank has enough foreign-currency reserves to help protect the economy from external shocks.
Gross domestic product grew 4.8 percent in the second quarter from a year earlier, the central bank said yesterday.
The currency extended a rebound from near a four-year low yesterday on speculation the Bank of Korea bought the won to stem losses. Central banks intervene in currency markets by arranging sales or purchase of foreign exchange.
Indonesia's rupiah had its worst week since June 2007 as the Jakarta Composite Index plunged to a one-year low yesterday. Foreigners were net sellers of Indonesian equities this month. The Philippine peso completed a sixth weekly loss as the local benchmark stock index declined 1.1 percent yesterday, the biggest drop since Aug. 19.
Paring Holdings
``Risk aversion is making investors pare holdings of commodities and stocks and cutting down exposures to emerging markets,'' said Enrico Tanuwidjaja, an economist at Oversea- Chinese Banking Corp. in Singapore.
The rupiah weakened 1.3 percent yesterday and 2.4 percent through the week to 9,375 to the dollar, according to data compiled by Bloomberg. The peso fell 2 percent this week to 46.833 in Manila, according to Tullett Prebon Plc. It weakened 0.7 percent yesterday.
Malaysia's ringgit fell to the lowest level in almost a year as investors reduced their holdings of local assets on signs an economic slowdown is spreading beyond the U.S.
The currency completed its worst week in 15 months as the MSCI Asia-Pacific Index of shares fell for a fifth day and political turmoil in Malaysia and Thailand escalated.
``The political-risk premium has increased in the region, so that's not helping,'' said Suresh Kumar Ramanathan, a strategist at CIMB Investment Bank Bhd. in Kuala Lumpur.
The ringgit fell 1.9 percent this week to 3.4595 per dollar in Kuala Lumpur, Bloomberg data show. It dropped 0.8 percent yesterday. The Thai baht weakened 1 percent to 34.59 in Bangkok, with yesterday's loss at 0.5 percent.
Protests, Referendum
Malaysian Prime Minister Abdullah Ahmad Badawi said on Sept. 4 the ringgit's decline hasn't ``reached a worrying level.''
Thailand plans to hold a referendum on how to end an impasse after protesters seeking to oust Prime Minister Samak Sundaravej occupied Government House in Bangkok. Samak said on Sept. 4 he won't step down. Malaysian opposition leader Anwar Ibrahim has pledged to topple Abdullah's government by Sept. 16 through defections by lawmakers.
Elsewhere, the Singapore dollar declined 1.7 percent this week to S$1.4382 against the U.S. currency and the Taiwan dollar slid 1.1 percent to NT$31.875. India's rupee weakened 1.7 percent to 44.66 and Vietnam's dong slipped 0.4 percent to 16,595.
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net
Read more...
Sept. 6 (Bloomberg) -- Asian currencies had a weekly decline, led by South Korea's won and Indonesia's rupiah, on signs investors are dumping emerging-market assets as a deepening U.S. slowdown threatens to damp global growth.
The won fell for a sixth week, the longest losing streak since 2001, as global funds sold local stocks and a central bank report confirmed yesterday that Asia's fourth-biggest economy expanded at the slowest pace in more than a year.
``Market players are cautious about unrest in global financial markets, which is strengthening sentiment for the dollar,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. ``Importers' deals and stock sales are knocking the wind out of the won.''
The currency fell 2.6 percent to 1,117.80 per dollar this week in Seoul, according to Seoul Money Brokerage Services Ltd. It rose 1 percent yesterday. It is the worst performer among the 10 most-active Asian currencies outside of Japan this year, with a 16.6 percent loss.
The won's slide this year, the steepest since at least 2000, sparked speculation South Korea may witness a repeat of 1997, when the currency lost half its value and the country turned to the International Monetary Fund to help companies repay debt. UBS AG and ABN Amro Bank NV this week predicted investors will continue selling the currency, betting the economy will falter.
Enough Reserves
``There is no need to be dispirited by assuming a very bad scenario,'' Bank of Korea Governor Lee Seong Tae told lawmakers on Sept. 4, adding the credit crunch is a ``global phenomenon.'' Lee said the central bank has enough foreign-currency reserves to help protect the economy from external shocks.
Gross domestic product grew 4.8 percent in the second quarter from a year earlier, the central bank said yesterday.
The currency extended a rebound from near a four-year low yesterday on speculation the Bank of Korea bought the won to stem losses. Central banks intervene in currency markets by arranging sales or purchase of foreign exchange.
Indonesia's rupiah had its worst week since June 2007 as the Jakarta Composite Index plunged to a one-year low yesterday. Foreigners were net sellers of Indonesian equities this month. The Philippine peso completed a sixth weekly loss as the local benchmark stock index declined 1.1 percent yesterday, the biggest drop since Aug. 19.
Paring Holdings
``Risk aversion is making investors pare holdings of commodities and stocks and cutting down exposures to emerging markets,'' said Enrico Tanuwidjaja, an economist at Oversea- Chinese Banking Corp. in Singapore.
The rupiah weakened 1.3 percent yesterday and 2.4 percent through the week to 9,375 to the dollar, according to data compiled by Bloomberg. The peso fell 2 percent this week to 46.833 in Manila, according to Tullett Prebon Plc. It weakened 0.7 percent yesterday.
Malaysia's ringgit fell to the lowest level in almost a year as investors reduced their holdings of local assets on signs an economic slowdown is spreading beyond the U.S.
The currency completed its worst week in 15 months as the MSCI Asia-Pacific Index of shares fell for a fifth day and political turmoil in Malaysia and Thailand escalated.
``The political-risk premium has increased in the region, so that's not helping,'' said Suresh Kumar Ramanathan, a strategist at CIMB Investment Bank Bhd. in Kuala Lumpur.
The ringgit fell 1.9 percent this week to 3.4595 per dollar in Kuala Lumpur, Bloomberg data show. It dropped 0.8 percent yesterday. The Thai baht weakened 1 percent to 34.59 in Bangkok, with yesterday's loss at 0.5 percent.
Protests, Referendum
Malaysian Prime Minister Abdullah Ahmad Badawi said on Sept. 4 the ringgit's decline hasn't ``reached a worrying level.''
Thailand plans to hold a referendum on how to end an impasse after protesters seeking to oust Prime Minister Samak Sundaravej occupied Government House in Bangkok. Samak said on Sept. 4 he won't step down. Malaysian opposition leader Anwar Ibrahim has pledged to topple Abdullah's government by Sept. 16 through defections by lawmakers.
Elsewhere, the Singapore dollar declined 1.7 percent this week to S$1.4382 against the U.S. currency and the Taiwan dollar slid 1.1 percent to NT$31.875. India's rupee weakened 1.7 percent to 44.66 and Vietnam's dong slipped 0.4 percent to 16,595.
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net
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Taiwan Cabinet Plans Stock-Boosting Measures, United Daily Says
By Yu-huay Sun
Sept. 6 (Bloomberg) -- Taiwan's Cabinet will propose measures to boost stocks at its next weekly meeting on Sept. 11, the United Daily News reported, citing Vice Premier Paul Chiu.
Possible steps include cutting the securities transaction tax, narrowing the permitted range for daily stock-price fluctuations, and increasing government subsidies on some mortgage loans, the Taipei-based, Chinese-language newspaper said, without saying where it obtained the information.
Taiwan's Taiex index declined 1.6 percent yesterday, falling for a fifth day to its lowest since July 19, 2006. The measure has dropped 26 percent this year.
To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net
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Sept. 6 (Bloomberg) -- Taiwan's Cabinet will propose measures to boost stocks at its next weekly meeting on Sept. 11, the United Daily News reported, citing Vice Premier Paul Chiu.
Possible steps include cutting the securities transaction tax, narrowing the permitted range for daily stock-price fluctuations, and increasing government subsidies on some mortgage loans, the Taipei-based, Chinese-language newspaper said, without saying where it obtained the information.
Taiwan's Taiex index declined 1.6 percent yesterday, falling for a fifth day to its lowest since July 19, 2006. The measure has dropped 26 percent this year.
To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net
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Asian Stocks Post Biggest Weekly Slump in 13 Months; BHP Drops
By Chen Shiyin
Sept. 6 (Bloomberg) -- Asian stocks fell, driving the region's benchmark index to its largest weekly drop in 13 months, on concern that slowing global economic growth will dent demand for raw materials and other goods.
BHP Billiton Ltd. and Cnooc Ltd. plunged more than 10 percent this week after metal and crude oil prices tumbled. LG Electronics Inc., the world's No. 3 television maker, dropped 7.4 percent after a slump in South Korea's overseas shipments sparked fears of an economic slowdown. Hon Hai Precision Industry Co. lost 11 percent, leading technology companies lower, following its first earnings decrease in seven years and as U.S. consumer spending waned and jobless claims increased.
``It's been a painful last couple of months,'' said Ivan Leung, Hong Kong-based chief investment strategist at JPMorgan Private Bank, which oversees $400 billion in assets globally. ``The economic uncertainty means there'll be massive pressure on commodity stocks in the short term.''
The MSCI Asia Pacific Index dropped 6.7 percent to 116.85, the biggest slump since the five days ended Aug. 17, 2007. All 10 industry groups retreated, with measures tracking energy and mining companies posting the biggest losses.
The regional gauge has dropped 26 percent this year to the lowest since June 13, 2006, as soaring fuel prices damped consumer spending and eroded corporate profits, while writedowns and credit losses at the world's largest financial companies topped $500 billion.
Japan's Nikkei 200 Stock Average fell 6.6 percent to 12,212.23, while the Kospi index dropped 4.7 percent in South Korea. Hong Kong's Hang Seng Index plunged 6.3 percent to close below 20,000 for the first time since April 2007. Thailand's SET Index tumbled 5.7 percent after Prime Minister Samak Sundaravej declared a state of emergency.
Metals, Oil
BHP, the world's largest mining company, tumbled 11 percent to A$37, its largest weekly loss since the five days ended March 21. Rio Tinto Group, the third-biggest mining company, retreated 14 percent to A$110.80.
A measure of six metals traded on the London Metal Exchange dropped 6.5 percent as the slowdown in the OECD deepened, adding to speculation that world demand will ease. Meanwhile, crude oil for October delivery retreated 8.0 percent this week to $106.23 a barrel in New York, the lowest since April 4.
Cnooc, China's largest offshore oil explorer, lost 13 percent to HK$10.44 in Hong Kong. Inpex Holdings Inc., Japan's biggest oil explorer, declined 13 percent to 1.03 million yen.
No Place to Hide
``There no place to hide within Asia right now,'' said Beat Lenherr, who oversees more than $20 billion of assets as Singapore-based chief global strategist at LGT Capital Management. ``We're cautious on the commodities sector given there is an intermediate peak in oil prices, which will put a lid on energy-related stocks.''
LG Electronics fell 6.8 percent to 94,600 won, its third straight weekly retreat. South Korean exports, which make up more than half of gross domestic product, rose 20.6 percent in August from a year earlier, missing the 23.3 percent median estimate of economists surveyed by Bloomberg News.
Speculation that investors are avoiding the nation's assets as economic growth falters sent South Korea's won down by 2.6 percent this week, its biggest weekly loss since August 1998. The rout in share prices and the currency prompted finance ministry officials to say that rumors the country is facing a financial crisis are groundless.
Kookmin Bank, South Korea's largest bank, fell 6.5 percent to 56,000 won. Woori Finance Holdings Co., which controls the nation's second-largest bank, plunged 9.3 percent to 13,100 won.
Hon Hai, Elpida
Hon Hai, the world's largest contract manufacturer for customers including Apple Inc. and Dell Inc., tumbled 11 percent to NT$143, its biggest weekly loss since a similar period ended Dec. 14. Second-quarter profit fell 24 percent from a year earlier and missed all eight analyst estimates in a Bloomberg News survey, prompting analysts at Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley to cut their price estimates for the stock.
The shares also fell after the U.S. Commerce Department said last week that consumer purchases rose in July at a third of the previous month's pace, while prices surged the most in 17 years.
The number of people staying on jobless rolls rose to 3.435 million in the U.S., the highest since November 2003, in the week ended Aug. 23, the Labor Department said on Sept. 4. European central bank President Jean-Claude Trichet said on the same day the economy is undergoing an ``episode of weak activity.''
Elpida Memory Inc., Japan's largest memory-chip maker, plunged 19 percent to 1,934 yen, a record low. Nomura Securities Co. cut on Sept. 2 its rating for the shares to ``neutral'' from ``buy'' on concern a slump in demand for the devices will be longer than expected.
Bangkok Bank Pcl fell in Thailand after anti-government demonstrators defied the emergency decree and continued their occupation of the prime minister's office. Samak said this week he would not resign to end the impasse.
Shares of Bangkok Bank, the nation's biggest lender, fell 6 percent to 110 baht.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
Read more...
Sept. 6 (Bloomberg) -- Asian stocks fell, driving the region's benchmark index to its largest weekly drop in 13 months, on concern that slowing global economic growth will dent demand for raw materials and other goods.
BHP Billiton Ltd. and Cnooc Ltd. plunged more than 10 percent this week after metal and crude oil prices tumbled. LG Electronics Inc., the world's No. 3 television maker, dropped 7.4 percent after a slump in South Korea's overseas shipments sparked fears of an economic slowdown. Hon Hai Precision Industry Co. lost 11 percent, leading technology companies lower, following its first earnings decrease in seven years and as U.S. consumer spending waned and jobless claims increased.
``It's been a painful last couple of months,'' said Ivan Leung, Hong Kong-based chief investment strategist at JPMorgan Private Bank, which oversees $400 billion in assets globally. ``The economic uncertainty means there'll be massive pressure on commodity stocks in the short term.''
The MSCI Asia Pacific Index dropped 6.7 percent to 116.85, the biggest slump since the five days ended Aug. 17, 2007. All 10 industry groups retreated, with measures tracking energy and mining companies posting the biggest losses.
The regional gauge has dropped 26 percent this year to the lowest since June 13, 2006, as soaring fuel prices damped consumer spending and eroded corporate profits, while writedowns and credit losses at the world's largest financial companies topped $500 billion.
Japan's Nikkei 200 Stock Average fell 6.6 percent to 12,212.23, while the Kospi index dropped 4.7 percent in South Korea. Hong Kong's Hang Seng Index plunged 6.3 percent to close below 20,000 for the first time since April 2007. Thailand's SET Index tumbled 5.7 percent after Prime Minister Samak Sundaravej declared a state of emergency.
Metals, Oil
BHP, the world's largest mining company, tumbled 11 percent to A$37, its largest weekly loss since the five days ended March 21. Rio Tinto Group, the third-biggest mining company, retreated 14 percent to A$110.80.
A measure of six metals traded on the London Metal Exchange dropped 6.5 percent as the slowdown in the OECD deepened, adding to speculation that world demand will ease. Meanwhile, crude oil for October delivery retreated 8.0 percent this week to $106.23 a barrel in New York, the lowest since April 4.
Cnooc, China's largest offshore oil explorer, lost 13 percent to HK$10.44 in Hong Kong. Inpex Holdings Inc., Japan's biggest oil explorer, declined 13 percent to 1.03 million yen.
No Place to Hide
``There no place to hide within Asia right now,'' said Beat Lenherr, who oversees more than $20 billion of assets as Singapore-based chief global strategist at LGT Capital Management. ``We're cautious on the commodities sector given there is an intermediate peak in oil prices, which will put a lid on energy-related stocks.''
LG Electronics fell 6.8 percent to 94,600 won, its third straight weekly retreat. South Korean exports, which make up more than half of gross domestic product, rose 20.6 percent in August from a year earlier, missing the 23.3 percent median estimate of economists surveyed by Bloomberg News.
Speculation that investors are avoiding the nation's assets as economic growth falters sent South Korea's won down by 2.6 percent this week, its biggest weekly loss since August 1998. The rout in share prices and the currency prompted finance ministry officials to say that rumors the country is facing a financial crisis are groundless.
Kookmin Bank, South Korea's largest bank, fell 6.5 percent to 56,000 won. Woori Finance Holdings Co., which controls the nation's second-largest bank, plunged 9.3 percent to 13,100 won.
Hon Hai, Elpida
Hon Hai, the world's largest contract manufacturer for customers including Apple Inc. and Dell Inc., tumbled 11 percent to NT$143, its biggest weekly loss since a similar period ended Dec. 14. Second-quarter profit fell 24 percent from a year earlier and missed all eight analyst estimates in a Bloomberg News survey, prompting analysts at Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley to cut their price estimates for the stock.
The shares also fell after the U.S. Commerce Department said last week that consumer purchases rose in July at a third of the previous month's pace, while prices surged the most in 17 years.
The number of people staying on jobless rolls rose to 3.435 million in the U.S., the highest since November 2003, in the week ended Aug. 23, the Labor Department said on Sept. 4. European central bank President Jean-Claude Trichet said on the same day the economy is undergoing an ``episode of weak activity.''
Elpida Memory Inc., Japan's largest memory-chip maker, plunged 19 percent to 1,934 yen, a record low. Nomura Securities Co. cut on Sept. 2 its rating for the shares to ``neutral'' from ``buy'' on concern a slump in demand for the devices will be longer than expected.
Bangkok Bank Pcl fell in Thailand after anti-government demonstrators defied the emergency decree and continued their occupation of the prime minister's office. Samak said this week he would not resign to end the impasse.
Shares of Bangkok Bank, the nation's biggest lender, fell 6 percent to 110 baht.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
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