Western Australia to End Barley, Canola Export Restrictions

By Madelene Pearson

March 11 (Bloomberg) -- Western Australia, the nation’s biggest grain-growing state, will end export restrictions on barley, lupins and canola to boost competition.

The state government will repeal legislation giving control of exports to the Grain Licensing Authority, Terry Redman, the minister for agriculture said today in a statement on the department’s Web site.

Australia, the world’s fourth-largest wheat exporter, last year ended its monopoly on overseas sales of the grain, giving 22 traders permits to ship wheat. Western Australia usually produces about 40 percent of the nation’s total grains and most of the state’s crops are exported.

“Removing the export restrictions of these grains would improve market competition which would reduce costs for traders and provide growers with more selling options and potentially higher prices,” Redman said.

The export market for barley, lupins and canola will be deregulated before the start of the next 2009-2010 harvest.

The authority oversees bulk exports of barley, canola and lupins, with the main licence for shipments being held by Grain Pool Pty, a unit of CBH Group, the state’s biggest grain handler, according to the authority’s Web site.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

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Rio’s Chinalco Accord Should Be Blocked, Australian Greens Say

By Rebecca Keenan

March 11 (Bloomberg) -- Rio Tinto Group’s proposed $19.5 billion investment agreement with Aluminum Corp. of China, or Chinalco, should be rejected by the Australian government, said the Australian Greens political party.

“It is hazardous for the Treasurer (Wayne Swan) to entertain the proposed deal between Rio Tinto and Chinalco when the Communist dictatorship will be pulling the strings behind the scenes,” Greens’s leader Senator Bob Brown said today in an e- mailed statement. He said he will move a motion in the Senate tomorrow calling for Swan to reject the proposed deal.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net

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Copper Drops in Asia as China Imports Raise Oversupply Concern

By Glenys Sim

March 11 (Bloomberg) -- Copper fell in Asia after Chinese imports climbed to the highest since at least 2003, raising investor concerns of a supply glut in the world’s largest consumer of the metal.

China’s imports of copper and the metal’s products jumped 42 percent in February from the previous month to 329,311 metric tons, according to preliminary customs data today. The country’s investment spending surged as the nation poured money into roads, railways and power grids to counter a plunge in exports, which a separate report showed fell by a record in February.

“Looking at the outflow of inventory from LME warehouses, it looks like imports may stay high this month as well,” Li Junchao, an analyst at Western Mining Co.’s futures department, said from Shanghai today. “China’s demand is just about the only reason for higher prices and the worry now is whether all this metal can be used up, or whether we’ll face an oversupply situation like in 2007.”

London Metal Exchange copper for delivery in three months dropped as much as 2 percent to $3,645 a ton, and traded at $3,647 at 2:53 p.m. Singapore time.

Copper for June delivery on the Shanghai Futures Exchange fell 0.6 percent to close at 29,030 yuan ($4,244) a ton. The most active contract climbed as much as 1.4 percent to 29,620 yuan earlier.

Inventories in London Metal Exchange warehouses in South Korea, the closest location to China, have fallen for 13 straight days and are almost half their levels at the start of the year.

Copper also declined as the Shanghai price premium over the London market narrowed, said Li. The Shanghai premium dropped to about $540 a ton yesterday from about $700 on March 5. Chinese buyers can profit from purchasing cheaper material overseas and selling on the domestic market.

Among other LME-traded metals, zinc lost 2.3 percent to $1,236 a ton, lead fell 0.7 percent to $1,285 a ton, and nickel slid 1.1 percent to $9,825 a ton. Aluminum added 0.7 percent to $1,331 a ton, while tin hadn’t traded as of 2:38 p.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net

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Yanzhou Coal Talks With Felix Resources Said to Stall on Price

By Cathy Chan

March 11 (Bloomberg) -- Yanzhou Coal Mining Co.’s talks to take over Felix Resources Ltd., whose stock gained 9 percent last year, have stalled after price disagreements, two people with knowledge of the matter said.

Shareholders of Brisbane-based Felix Resources, which supplies coal to Korea and Japan, have sought at least A$2.9 billion ($1.9 billion), one of the people said, declining to be identified because discussions are private. Yanzhou Coal, China’s fourth biggest producer, may be willing to pay as much as A$2.35 billion, the other person said. No formal offer has been made, the people said.

Talks began late last year and the two companies have been unable to agree on terms as Felix investors want at least twice as much as the current market price of A$7 a share, said the people. Chinese companies have become more prudent in making overseas acquisitions after losing billions in the U.S., Europe and Africa since the global financial crisis began in 2007.

“While China is encouraging its companies to spend more on commodities and energy assets overseas, these acquisitions are still highly regulated because on concerns of improper use of their cash,” said Huo Teh-ming, professor of China Center for Economic Research at Peking University.

Zhang Baocai, a spokesman at Shandong-based Yanzhou Coal, didn’t reply to calls made to his office. Felix Managing Director Brian Flannery is out of Australia and unable to comment, his personal assistant said. Peter Brookes, a spokesman for Felix, declined to immediately comment.

Price Gaps

Felix surged 37 percent to A$7.43 on Dec. 5, the biggest gain since February 1989, after the Australian Financial Review reported Yanzhou was in talks to buy the company for more than A$3 billion. Since then, Felix has slipped 11 percent. Yanzhou gained 5.4 percent yesterday in Hong Kong, paring the stock’s drop this year to 20 percent.

Yanzhou may be willing to offer only A$10 to A$12 per share, valuing Felix at up to A$2.35 billion, one of the people said. Felix may want at least A$15 per share, said the other person.

China’s investment in resource producers totaled $22 billion last month, including Aluminum Corp. of China’s stake in Rio Tinto Group, as prices of commodities including coal and oil fell from July’s records. Yanzhou acquired its only overseas asset, Australia’s Austar energy coal mine, in 2005.

China, the world’s largest coal producer and user, uses the fuel to generate almost 80 percent of its electricity. As part of the government’s $585 billion economic stimulus plan announced in November, China accelerated approvals for the construction of power plants, underpinning growth in coal demand.

Managers Meet

Senior management of both companies met in the third week of February in Hong Kong and made little progress, the people said, asking not to be identified because the meeting was private. No date has been set for further talks, one of the people said.

Flannery said March 6 that Felix in February shelved talks to sell itself to an unidentified company. Felix “decided to move on,” he said in an interview at the time.

Felix had said in a Feb. 27 statement that the talks with the unidentified company were unlikely to be concluded in the “near term” because of the global financial crisis.

The company’s major shareholders include Flannery, 57, and Chairman Travers Duncan, each owning 15 percent. Hans Mende is a director who controls American Metals and Coal International Inc., which owns 19 percent of Felix. David Knappick, former chief financial officer, owns 7.4 percent of Felix, according to Felix’s 2008 annual report.

American Metals and Coal International Inc., a closely held mining investment company, bought a 19.2 percent stake in Felix for A$188 million on March 21, 2007. Felix sells part of its coal through AMCI.

Felix Resources is also studying acquisitions of energy coal assets in India and Indonesia, Flannery said in the interview last week. The Australian coal producer said last month first-half profit more than tripled to A$166 million as contract prices for thermal and coking coal rose to a record in 2008 on rising demand from utilities and steel mills in Asia.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net.

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Oil Falls as U.S. Supplies May Have Gained, China Imports Drop

By Grant Smith and Christian Schmollinger

March 11 (Bloomberg) -- Crude oil fell for a second day amid speculation a government report today will show U.S. inventories gained as demand weakened.

The Energy Department may say supplies rose 250,000 barrels last week, according to the median of 14 analyst responses in a Bloomberg News survey. China, the world’s second-biggest energy user, cut net crude-oil imports to the lowest in at least two years in February as a slowing economy caused refiners to reduce purchases.

“The market is caught right now between concerns over the decline in demand, and the prospect of another reduction in OPEC production levels,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “Things are quiet ahead of this afternoon’s figures.”

Crude oil for April delivery fell as much as 61 cents, or 1.3 percent, to $45.10 a barrel on the New York Mercantile Exchange, trading for $45.33 at 9:06 a.m. London time. Yesterday, futures fell $1.36 to $45.71 a barrel. Prices are up 1.6 percent so far this year.

China’s crude oil purchases dropped to 11.73 million metric tons, the customs bureau said on its Web site today. For the first two months of the year, imports fell 13 percent to 24.55 million tons, or 3.12 million barrels a day.

U.S. Stockpiles

An U.S. inventory gain today would be the 20th in 24 weeks. The Energy Department will release its weekly report at 10:30 a.m. in Washington.

The industry-funded American Petroleum Institute said supplies fell 419,000 barrels to 345.3 million barrels last week, in a report released yesterday after the close of trading.

Oil-supply totals from the API and DOE moved in the same direction 75 percent of the time over the past four years, according to data compiled by Bloomberg.

Brent crude oil for April settlement fell as much as 51 cents, or 1.2 percent, to $43.45 a barrel on London’s ICE Futures Europe exchange, and traded at $43.91 a barrel at 9:02 a.m. London time.

The Organization of Petroleum Exporting Countries, which will meet in Vienna on March 15, has reduced output three times since September.

OPEC must comply fully with existing reduction agreements before making new ones, Qatar’s oil minister said. Saudi Arabia wants OPEC to comply with its output ceiling and opposes a further curtailment in production, Al-Hayat newspaper reported, citing an unidentified person.

‘Perception of Uncertainty’

“There is a perception of uncertainty around what OPEC will do and that may be a factor taking the edge off the oil price,” said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. “If OPEC says they’ll leave output unchanged, that will be a negative for the oil price, because people are worried about the strength in demand and inventories seem reasonably high.”

A gain in U.S. inventories in today’s report would add to stockpiles of 350.6 million barrels, near their highest level since July 2007.

Gasoline stockpiles probably dropped 1 million barrels in the week ended March 6 from 215.5 million the week before, according to the Bloomberg News survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably rose 200,000 barrels.

Refineries probably operated at 83.1 percent of capacity, unchanged from the week before, according to the median of responses in the survey. U.S. refineries often shut units for maintenance during the first quarter as attention shifts away from heating oil and before gasoline use rises.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

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Paulson May Make $428 Million Shorting Lloyds, HBOs

By Andrew MacAskill

March 11 (Bloomberg) -- Paulson & Co., the hedge-fund firm that made more than $3 billion betting the U.S. housing market would collapse, may have made 311 million pounds ($428 million) since September by short selling Lloyds Banking Group Plc and HBOS Plc.

Paulson, run by billionaire John Paulson, took short positions in Lloyds and HBOS valued at about 367 million pounds in September, based on the holdings and share prices on the dates they were reported. The position equaled 0.79 percent of London-based Lloyds, or 129.1 million shares, after the banks merged and holdings were diluted by a government investment. That position was worth about 56 million pounds on March 9, when it fell below the reporting threshold.

Lloyds, which surrendered control to the government on March 7 in return for asset guarantees, is down 82 percent since Paulson first disclosed a short position in the bank. Paulson made at least 295 million pounds by shorting Royal Bank of Scotland Group Plc when the fund closed its position in the bank in January after five months.

“They have called the market right,” Leigh Goodwin, a financial analyst at Fox-Pitt Kelton Ltd. in London, said of Paulson’s firm. “They obviously have decided that the downside is limited, so there is not a great benefit from here on in holding that position.”

Paulson’s potential profit from shorting U.K. banks stands at 606 million pounds. Armel Leslie, a spokesman for New York- based Paulson & Co., declined to comment.

Lloyds closed at 43.7 pence a share on March 9, down 82 percent since Sept. 23, when Paulson’s short position peaked. Short sellers sell borrowed shares with plans to buy them back later at a lower price.

Betting On Subprime

Paulson’s Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 percent, compared with a loss of 19 percent for hedge funds on average.

Paulson, which oversees about $30 billion, has held a short position of 1.17 percent in Barclays Plc since Oct. 30, according to regulatory filings. Shares of the third-largest U.K. bank have fallen 67 percent since that date.

Prime Minister Gordon Brown’s government has taken control of four British banks since the run on Northern Rock Plc in September 2007 as it seeks to boost lending and stimulate economic growth.

Lloyds agreed to buy HBOS in September in a government- brokered deal, saddling it with risky loans and investments that slashed profit and forced it to turn to the government for capital and asset guarantees.

Ban Lifted

The Financial Services Authority, the U.K. market regulator, lifted a short-selling ban on financial companies on Jan. 16. The restrictions were imposed in September as politicians and investors blamed hedge funds for destabilizing markets.

Hedge funds are private, largely unregulated pools of capital whose managers can bet on falling as well as rising asset prices, and participate substantially in profits from money invested.

Paulson had a short position of 1.76 percent in Lloyds on Sept. 23, when the stock traded for 261.75 pence, the firm said in a regulatory statement. It held a 0.95 percent position in HBOS on Sept. 19, when the stock traded for 216.83 pence.

Paulson’s position in Lloyds Banking Group, created by the merger of the two banks, fell below the reporting threshold of 0.25 percent on March 9.

To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net

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Germany’s DAX Pares Losses; Deutsche Bank, BMW Shares Advance

By Christiane Lenzner

March 11 (Bloomberg) -- German stocks pared losses as Deutsche Bank AG and Bayerische Motoren Werke AG advanced. The benchmark DAX Index slipped 0.1 percent to 3,882.92 as of 10:24 a.m. in Frankfurt after falling as much as 1.5 percent earlier.

Deutsche Bank, the country’s largest, and BMW, the world’s biggest maker of luxury cars, added more than 4 percent each.

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U.K. Stocks Fall, Led by Energy Producers; Tullow Oil Retreats

By Sarah Jones

March 11 (Bloomberg) -- U.K. stocks fell for the first time in four days, led by energy producers and utilities as Tullow Oil Plc reported a drop in oil and gas production and International Power Plc said lower prices will hurt profitability in 2009.

Tullow Oil lost 3.1 percent, snapping three days of gains, as crude oil fell. Cairn Energy Plc slid 4.2 percent after the company announced a share sale. International Power lost 4.3 percent as the company said it faced a “near term challenge” in the U.K. and the U.S.

The FTSE 100 Index dropped 16.52, or 0.4 percent, to 3,698.71 in London at 9:25 a.m., having gained 4.9 percent yesterday. The FTSE All-Share Index lost 0.4 percent, while Ireland’s ISEQ Index fell 1.6 percent.

“After yesterday’s stellar gains the market will do well just to consolidate,” said London-based trader Paul Chesterton at CMC Markets. “We saw a pull back in the oil price overnight and some weakness in commodity and energy stocks.”

Tullow oil lost 2.3 percent to 794 pence. The company, which today posted a fourfold increase in earnings to 223.2 million pounds ($306 million), said oil and gas production fell 9 percent to 66,600 barrels of oil.

The oil producer this week said it raised $2 billion in loans from 14 banks to fund developments and refinance debt.

BG Group Plc, the U.K.’s third-biggest natural gas producer, fell 1.5 percent to 984 pence as crude oil fell in New York, extending yesterday’s 2.9 percent decline, amid speculation a government report today will show U.S. inventories gained as demand weakened.

Shell Retreats

Royal Dutch Shell Plc, Europe’s largest oil company, declined 1 percent to 1,564 pence.

Cairn Energy dropped 4.2 percent to 1,792 pence as the U.K. oil and gas explorer in India said it plans to place up to 6.5 million shares to help “strengthen” the company’s equity capital base.

International Power declined 4.3 percent to 196.1 pence. The British utility that produces electricity in 20 countries said the company faced challenges from weaker prices in the U.K. and the U.S.

“There is some concern around the outlook in the U.S.,” Nathalie Casali, a London-based analyst at JPMorgan Chase & Co. said in a telephone interview today.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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European Stocks Decline, Led by JCDecaux; Asian Shares Advance

By Adam Haigh

March 11 (Bloomberg) -- European stocks slipped after their biggest gain of 2009 as JCDecaux SA forecast its first annual sales decline and utilities slumped. U.S. index futures fluctuated, while Asian shares climbed.

JCDecaux tumbled 16 percent as the world’s second-largest seller of outdoor advertising scrapped its dividend. E.ON AG extended its two-day decline to 7.3 percent after Germany’s biggest utility predicted a profit drop.

“Company outlook statements are dire and earnings visibility is extremely low across the market,” said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which has $60 billion. “Earnings revisions may need to come down.”

The Dow Jones Stoxx 600 Index fell 0.2 percent to 165.63 at 9:30 a.m. in London, extending its 2009 slump to 17 percent. The regional gauge surged 5.1 percent yesterday, the steepest jump since Dec. 8, as Citigroup Inc.’s Chief Executive Officer Vikram Pandit said the bank is having its best quarter since 2007.

The MSCI Asia Pacific Index added 2.6 percent today after HSBC Holdings Plc also said earnings are improving.

Futures on the Standard & Poor’s 500 Index added 0.1 percent after falling 0.5 percent. The benchmark index for U.S. equities surged 6.4 percent yesterday, rebounding from a 12-year low as all 10 industry groups advanced. The rally only lifted the S&P 500 to the highest level since Feb. 27.

Losses at financial companies reaching almost $1.2 trillion worldwide and disappointing results from Anglo American Plc to Bayer AG have sent the MSCI World Index of 23 developed markets 21 percent lower this year.

Earnings Results

Earnings for 269 companies in the Stoxx 600 that have reported earnings since Jan. 12 dropped 94 percent, according to Bloomberg data. That compares to a 58 percent contraction in profit for the 469 companies that have reported results in the S&P 500 during the same period.

JCDecaux slid 16 percent to 8.24 euros. The company reported a 51 percent drop in 2008 profit and said the decision to omit last year’s dividend was made “to maintain financial flexibility.”

JCDecaux forecast so-called organic revenue will decline this year for the first time in the company’s history. The company didn’t give a specific full-year forecast “given the reduced visibility.”

Utilities were the worst-performing industry group in the Stoxx 600, falling 2.1 percent.

E.ON dropped 3.1 percent to 18.75 euros. The company said yesterday it expects 2009 profit before writedowns on assets and hedging derivatives will fall 10 percent.

UBS Loss

UBS AG slipped 0.9 percent to 9.7 Swiss francs after earlier falling 3.9 percent. Switzerland’s largest bank posted a 20.9 billion-franc ($18 billion) loss for 2008 after costs to settle a U.S. tax investigation and writedowns on securities.

The bank’s 2008 loss is the biggest in Switzerland’s history. UBS amassed more than $50 billion in writedowns and losses since the beginning of the subprime crisis, forcing it to raise more than $32 billion in capital from investors including the Swiss government, and cut 11,000 jobs.

SBM Offshore NV declined 2.5 percent to 10.14 euros as the world’s largest supplier of floating oil-production platforms reported a 15 percent fall in profit last year and declined to give an earnings outlook for 2009.

Cairn Energy Plc slid 5.5 percent to 1,768 pence after saying it is placing up to 6.5 million new ordinary shares in the company, representing as much as 5 percent of its existing share capital.

Pirelli Advances

Pirelli & C. SpA surged 9.8 percent to 16 euro cents. Deutsche Bank AG raised Europe’s third-largest tiremaker to “buy” from “hold.”

Toshiba Corp. rose 9.5 percent to 242 yen in Tokyo. The chipmaker will probably have operating profit of about 100 billion yen ($1 billion) in the year to March 2010, the Nikkei newspaper said, without saying where it got the information.

The S&P 500’s rebound from the 665 level is a bullish sign to traders who base predictions on so-called Fibonacci patterns in price charts. The index has rallied 7.9 percent since sinking to 666.79 on March 6. The low was within 0.3 percent of 665, a level at which the benchmark index would give up 61.8 percent of the 25-year rally beginning in 1982.

Fibonacci analysts use a system pioneered by 13th century mathematician Leonardo Pisano. To adherents, the performance of a stock or index when it approaches a 61.8 percent “retracement” can be used to forecast whether it will keep falling or recover.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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Astra Rises Most in One Month After JPMorgan Upgrades Rating

By Berni Moestafa and Shiyin Chen

March 11 (Bloomberg) -- PT Astra International, Indonesia’s biggest auto retailer, rose the most in more than a month after its rating and target price were raised by JPMorgan Chase & Co. on higher domestic sales.

JPMorgan upgraded Astra to “neutral” from “underweight” and raised its target price 43 percent to 11,000 rupiah, citing the company’s indication of an improved February performance. Indonesia’s auto sales gained for the first time in seven months in February.

“While we do not yet have confidence that the February stability is a precursor to a recovery, we opt to upgrade the stock to ‘neutral’ believing that from here the risk-reward no longer favors selling,” JPMorgan’s Jakarta-based analyst Aditya Srinath wrote in a report today. “Longer-term investors could even consider positioning themselves over the next quarter or so for an eventually cyclical recovery.”

Monthly vehicle sales had fallen since July after the central bank raised interest rates six times up to October, making the auto loans most Indonesians need costlier. As rates were since cut to a near four-year low, February sales may have risen 7.5 percent to 34,000, Freddy Sutrisno, secretary general of the Indonesian Automotive Industries Association, said today.

The stock rose 4.4 percent to 11,800 rupiah at the midday break, the biggest gain since Jan. 27.

JPMorgan also raised Astra’s target price after the stock underperformed shares of the company’s plantation and heavy equipment units, PT Astra Agro Lestari and PT United Tractors. Shares of Astra has risen 12 percent so far this year, compared with a gain of 29 percent and 30 percent at Astra Agro and United Tractor respectively over the same period.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.netBerni Moestafa in Jakarta at bmoestafa@bloomberg.net

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Hong Kong Stocks Advance for Second Day; Banks, Developers Gain

By Hanny Wan and Patrick Rial

March 11 (Bloomberg) -- Hong Kong stocks rose for a second day, led by bank shares on speculation the global financial system is headed for recovery after Citigroup Inc. and HSBC Holdings Plc said earnings are improving.

HSBC, Europe’s biggest bank, added 2.3 percent while its unit Hang Seng Bank Ltd. jumped 5.5 percent. Citigroup said it’s having its best quarter since 2007 and HSBC reported higher profits in China. China Overseas Land & Investment Ltd. rose 2.7 percent after the nation said spending on factories and property surged. China Resources Power Holdings Co., a mainland generator, surged 6.6 percent after saying electricity sales rose last month.

“The U.S. market should provide a short-term boost to stocks here,” said Michiya Tomita, a Hong Kong-based fund manager of Chinese stocks at Mitsubishi UFJ Asset Management Co., which oversees $61 billion. “Whether we embark on a rising trend remains to be seen. This market is not about to drastically recover, as you’ll see advances and retreats continue.”

The Hang Seng Index added 236.61, or 2 percent, to close at 11,930.66, extending its gains in the past two days to 5.2 percent. The benchmark index has lost 17 percent this year, dragging its valuation to 10 times estimated earnings, down from 18.6 times at the beginning of 2008.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, advanced 1.9 percent to 7,007.74.

HSBC, which is raising 12.5 billion pounds ($17.2 billion) in a rights offer, added 2.3 percent to HK$38.45. HSBC Asia- Pacific Chief Executive Officer Sandy Flockhart said he’s “110 percent confident” that the rights offer will succeed and that he’s seen a positive response from institutional investors.

Hang Seng Bank

Separately, HSBC, which operates the largest branch network among foreign banks in China, said pretax profit rose 85 percent to 2.19 billion yuan ($320 million) last year in the world’s fastest-growing major economy.

Hang Seng Bank added 5.5 percent to HK$72.10. BOC Hong Kong (Holdings) Ltd., controlled by Bank of China Ltd., climbed 2.3 percent to HK$6.60.

Citigroup was profitable in January and February and is having its best quarter since the third quarter of 2007, Chief Executive Officer Vikram Pandit wrote in an internal memorandum.

Futures on the Standard & Poor’s 500 Index rose less than 0.1 percent. The gauge jumped 6.4 percent in New York yesterday, its best gain since November as financial stocks rallied, led by Citigroup, which soared 38 percent.

China Overseas Land, a developer controlled by the country’s construction ministry, rose 2.7 percent to HK$11.40. China Resources Land Ltd., a government-controlled developer, climbed 4 percent to HK$9.90.

Spending Beats Expectations

China’s fixed-asset investment in urban areas advanced 26.5 percent to 1.03 trillion yuan ($150 billion) from a year earlier, the statistics bureau said. That was more than the 21.5 percent median estimate in a Bloomberg News survey of economists.

China Resources Power added 6.6 percent to HK$14.30, halting a five-day, 7.5 percent decline. The mainland generator said yesterday electricity sales rose 17 percent to 4.64 million megawatt-hours last month from a year earlier.

All but six stocks on the 42-member Hang Seng Index advanced. March futures climbed 2.9 percent to 11,933.

The following stocks rose or fell. Stock symbols are in parentheses after company names.

Cathay Pacific Airways Ltd. (293 HK), Hong Kong’s biggest carrier, added 5.9 percent to HK$7.41 after reporting annual sales jumped 15 percent to HK$86.6 billion ($11.2 billion). That’s higher than the median HK$81.7 billion estimated by analyst. The airline reported a 2008 loss of HK$8.56 billion, its first in 10 years, after making wrong-way bets on fuel prices and a charge for an air-cargo price-fixing fine levied by the U.S.

Industrial & Commercial Bank of China Ltd. (1398 HK) added 1.6 percent to HK$3.26. The world’s largest bank by market value was raised to “outperform” from “neutral” at Macquarie Group Ltd., which said the company’s “defensive balance sheet mix” amid falling interest rates and its cost controls will be an advantage this year.

Lenovo Group Ltd. (992 HK) advanced 4.1 percent to HK$1.53. The computer maker’s Chairman Liu Chuanzhi said Lenovo will outperform the industry within a year, though he can’t predict when the company will return to profit.

To contact the reporters on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net; Patrick Rial at prial@bloomberg.net

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Japan Stocks Rally on Bank-Recovery Optimism; Toshiba Soars

By Masaki Kondo

March 11 (Bloomberg) -- Japanese stocks rallied after Citigroup Inc. said it had a profit in the first two months of this year, triggering speculation a recovery of the global financial system is in sight.

Mizuho Financial Group Inc., the Japanese bank with the biggest subprime writedowns, gained 5.4 percent, following a worldwide rebound in equities. Mitsubishi UFJ Financial Group Inc. advanced 4.1 percent, even after a real estate company to which it lent money became Japan’s third-biggest bankruptcy this year. Toshiba Corp. leapt 9.5 percent on a newspaper report it may return to profit next fiscal year.

The Nikkei 225 Stock Average jumped 321.14, or 4.6 percent, to close at 7,376.12 in Tokyo, the biggest gain since Jan. 27. The broader Topix index added 18.78, or 2.7 percent, to 722.28, with three stocks rising for each that slumped.

“The global rally spurred by Citi may indicate a retreat of excess pessimism,” said Mitsushige Akino, who oversees about $615 million at Ichiyoshi Investment Management Co. “With governments globally bringing out stimulus measures, the world’s economy is likely to start recovering in the second half of this year, which may bring back Japanese manufacturers to the black.”

The Nikkei has lost a fifth of its value from this year’s high of 9,239.24 on Jan. 7 as optimism faded that governments and regulators globally can jumpstart growth and overhaul banks. The Yomiuri newspaper reported today Japan’s government may propose a new economic stimulus plan as early as this month.

Stocks Undervalued?

The Nikkei’s constituents traded at 0.81 times their corporate net worth as of yesterday, the lowest level on record dating back to July 1989, according to Nikkei Inc. The price-to- book ratio indicates the stocks are undervalued, Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television.

In New York, the Standard & Poor’s 500 Index leapt 6.4 percent yesterday, while the MSCI World Index gained 5.3 percent from the lowest level in more than 13 years. Citigroup was profitable in January and February and is having its best quarter since the third quarter of 2007, Chief Executive Officer Vikram Pandit wrote in an internal memorandum.

Mizuho, Japan’s second-largest listed bank, jumped 5.4 percent to 176 yen, while No. 3 Sumitomo Mitsui Financial Group Inc. rose 4.8 percent to 2,820 yen. Tokio Marine Holdings Inc., the nation’s biggest casualty insurer, climbed 7.4 percent to 2,025 yen, and Nomura Holdings Inc., the nation’s No. 1 brokerage, gained 10 percent to 458 yen.

12th Bankruptcy

Mitsubishi UFJ rose 4.1 percent to 411 yen, while Aozora Bank Ltd., the Japanese lender controlled by Cerberus Capital Management LP, added 9.2 percent to 107 yen. The banks are among lenders to Pacific Holdings Co., a real-estate manager that filed for bankruptcy yesterday with 163.6 billion yen ($1.66 billion) in liabilities, according to the company’s annual report issued this month.

Pacific Holdings became the 12th listed Japanese business to go under this year and the third-biggest bankruptcy, as the recession drives down property prices and prompts banks to cut off lending. The shares tumbled by the daily limit of 300 yen, or 16 percent, to 1,614.

Toshiba, Japan’s biggest chipmaker, surged 9.5 percent to 242 yen, breaking a three-day losing streak. The company may forecast operating profit of about 100 billion yen for the year to March 2010, due in part to lower costs, the Nikkei newspaper reported today. The company, which expects a loss of 280 billion yen for this fiscal year, today said it has not determined its earnings estimate.

Fanuc Ltd., the world’s largest maker of industrial robots, jumped 5.7 percent to 5,900 yen, while Daikin Industries Ltd., the biggest Japanese maker of air conditioners, rose 7.2 percent to 2,450 yen. Japanese machinery orders fell less than economists had expected in January, raising speculation demand for capital goods isn’t as weak as originally thought.

Nikkei futures expiring in March added 5 percent to 7,390 in Osaka and gained 4.6 percent to 7,370 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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Asian Stocks Surge on Bank-Recovery Speculation; HSBC, ANZ Gain

By Jonathan Burgos and Masaki Kondo

March 11 (Bloomberg) -- Asian stocks surged, sending the benchmark index up the most in six weeks, after Citigroup Inc. and HSBC Holdings Plc said earnings are improving, and China’s factory and property spending jumped.

HSBC, Europe’s biggest bank, climbed 2.3 percent in Hong Kong after an official said there was “very strong” interest in its rights issue and profit in China jumped. Australia & New Zealand Banking Group Ltd. rose 3.2 percent after Citigroup said it was headed for its best quarter since 2007. BHP Billiton Ltd., the world’s No. 1 mining company, rose 4.2 percent after metals prices advanced yesterday.

“The global rally spurred by Citi may indicate a retreat of excess pessimism,” said Mitsushige Akino, who oversees $615 million at Ichiyoshi Investment Management Co. “With governments globally bringing out stimulus measures, the world’s economy is likely to start recovering in the second half.”

The MSCI Asia Pacific Index added 2.5 percent to 73.11 as of 5:40 p.m. in Tokyo, the sharpest jump since Jan. 27, when markets surged on plans by Japan and Australia to support banks and revive growth. The gauge has slumped 18 percent this year, extending last year’s record 43 percent drop as the global recession decimated profits.

Japan’s Nikkei 225 Stock Average rose 4.6 percent to close at 7,376.12, recovering from a 26-year low, while Hong Kong’s Hang Seng Index gained 2 percent. Most markets open for trading in the region advanced.

Toshiba, Proton

China’s Shanghai Composite Index fell 0.9 percent, reversing a gain as much as 2.1 percent, as a record drop in exports overshadowed a bigger-than-estimated increase in the nation’s factory and property investments.

Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge leapt 6.4 percent in New York yesterday, its best gain since November as financial stocks rallied, led by Citigroup’s 38 percent climb.

Citigroup was profitable in January and February and is having its best quarter since the third quarter of 2007, Chief Executive Officer Vikram Pandit wrote in an internal memorandum.

Toshiba Corp., Japan’s biggest chipmaker, surged 9.5 percent after the Nikkei newspaper said the company may report an operating profit next fiscal year. Proton Holdings Bhd., Malaysia’s state-owned automaker, added 3.2 percent after the government said it will subsidize new car purchases. Chartered Semiconductor Manufacturing Ltd. sank to a record low in Singapore, two days after announcing a $300 million rights offer.

January Performance

HSBC’s January performance was better than expected across all segments and response by institutional investors to a rights offer was “very strong,” HSBC Asia Chief Executive Sandy Flockhart said in an interview with Bloomberg Television today.

The company, which operates the largest branch network among foreign banks in China, said pretax profit there rose 85 percent last year, benefiting from the nation’s stimulus efforts.

HSBC jumped 2.3 percent to HK$38.45, extending yesterday’s 14 percent surge and recovering further from a 24 percent plunge on March 9. Mizuho Financial Group Inc., the Japanese lender with the biggest subprime-related writedowns, rose 5.4 percent to 176 yen in Tokyo. Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, climbed 4.1 percent to 411 yen.

“Valuations of Asian banks look attractive but going forward we have to determine which ones will be able to better manage their asset quality,” said Terrace Chum, who manages Greater China equities at Manulife Asset Management, which has about $240 billion in assets. “The asset quality of Asian banks is just starting to deteriorate. Let’s wait for another six months and see what happens.”

Bond Risk

ANZ gained 3.2 percent to A$13.15 in Sydney. Commonwealth Bank of Australia gained 3 percent to A$28.61. Tokio Marine Holdings Inc., Japan’s biggest casualty insurer, climbed 7.4 percent to 2,025 yen.

The cost of protecting investors in Asia-Pacific bonds from default fell from records, according to traders of credit default swaps, indicating investor perception of credit quality is improving. Meanwhile, New Zealand home sales rose to a 12- month high in February, adding to signs that low interest rates and falling prices are helping the property market recover.

Governments have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. The Yomiuri newspaper said today Japan’s government may propose a new economic plan as early as this month, and Malaysia yesterday unveiled an additional $16 billion in spending and tax incentives over the next two years. Chinese Premier Wen Jiabao reiterated last week the government’s pledge to “significantly increase” investment in 2009.

Exports Tumble

China’s spending on factories and property surged 26.5 percent to 1.03 trillion yuan ($150 billion) in the first two months of the year, the statistics bureau said today, exceeding analyst estimates. Anhui Conch Cement Co. Ltd., China’s biggest cement producer, rose 1.5 percent to HK$38 in Hong Kong.

A rally in Chinese stocks fizzled after data released by the customs bureau during the lunch-time break showed exports tumbled by a record 25.7 percent from a year earlier, while imports fell 24.1 percent.

“It’s going to be very difficult for China to shake off the global recession,” said Fraser Howie, a Singapore-based managing director at CLSA Asia-Pacific Markets. “China has become increasingly integrated with the international trading system so you can’t expect it to stand independent of global forces.”

BHP Billiton rose 4.2 percent to A$30.50 while smaller rival Rio Tinto Ltd. added 3.1 percent to A$49.80 after metals prices rallied. Nippon Mining Holdings Inc., Japan’s biggest copper producer, climbed 4.8 percent to 353 yen.

Raising Capital

Copper futures for May delivery jumped 2.7 percent in New York yesterday on speculation China increased imports of the metal. A measure of six primary metals traded in London advanced 2.7 percent. Copper retreated in Asian trading today.

Chartered Semiconductor slumped 12 percent to a record low of 11 cents in Singapore. The company said on March 9 it will sell shares to existing shareholders at a 66 percent discount, raising $300 million that will help shore up its balance sheet.

Proton gained 3.8 percent to 1.63 ringgit in Kuala Lumpur. The Malaysian government, announcing a second economic stimulus package yesterday, said it will finance part of a 5,000 ringgit ($1,358) discount on purchases of new Protons.

Toshiba rose 9.5 percent to 242 yen. The chipmaker will probably have operating profit of about 100 billion yen ($1 billion) in the year to March 2010, enabling it to break even, the Nikkei newspaper said today, without saying where it got the information.

To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net

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