Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Sep 01 09 05:19 GMT |

Asian stocks advance as Chinese manufacturing data continues to expand As expected, the RBA left interest unchanged at 3%. In its accompanying statement, the central bank said that the current policy is appropriate for the time being. Following the comments from the RBA, the AUD moved into negative territory, as markets continue to seek guidance as to when the RBA will begin hiking rates. China's Aug PMI manufacturing rose to 54.0 from 53.3, which was the highest level since April 2008. The PMI data was driven by increases in output and new orders. The Chinese official PMI data, was confirmed by the Aug CLSA PMI manufacturing data, which rose to 55.1 from 52.8. In terms of Australian economic data, the Aug AIG performance of manufacturing index rose to 51.7, which was the highest level since April 2008. Australia's Q2 current account deficit was worse than market expectations, as net exports subtracted 0.2 percentage points from Q2 GDP (AUSTRALIA Q2 CURRENT ACCOUNT BALANCE (A$): -13.3B V -10.7BE;). Australia's Q2 GDP data is due on tomorrow's session. In other Australian data, July building approvals were better than expected, adding to the signs of recovery in the country's property market. In the currency markets, the USD dollar is weaker against the European major and commodity currencies. However, the AUD/USD is trading lower following comments from the RBA. The Japanese yen is gaining against the USD and AUD, but weaker against the EUR, GBP, CHF, CAD and NZD. In equities, the Nikkei 225 is higher by more than 0.30% on gains in shares of telecom and oil/gas companies. At the time of writing, the Shanghai Composite is higher by more than 0.50%, led by telecoms and financials. However, Chinese basic materials companies are trading lower. Australia's S&P ASX 200 is higher by more than 0.50%, led by retailers. Taiwan's Taiex is gaining by more than 2%, led by industrial and technology names. The Kospi has advanced by more than 0.70% on gains in shares of health care and consumer goods companies. Hong Kong's Hang Seng is higher by more than 0.25%, tracking the equity gains in China. Crude oil prices are higher and trading above $70/bbl, after declining by more than 3% in NY floor trading. Crude prices have been supported by the Chinese PMI data and gains in equities. Looking ahead, oil prices may receive some direction from upcoming US ISM manufacturing data and weekly API inventories. Spot Gold is higher by more than $2, after declining by more than $5 on the COMEX. The Friday release of US nonfarm payrolls data, is seen as a key event risk for gold prices. (Note: All quotes are as of 01:11 EST). Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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Daily Technical Outlook

Daily Forex Technicals | Written by Innerfx | Sep 01 09 06:08 GMT |

EURUSD Support formed by the rising trend line coming from 1.4045 has provided a reversal point on yesterday's downside test and the euro holds steady into the 1.4350 region, 50 points below last week's top side. Above 1.4000, next upside barrier is emerging at 1.4045/50 which is also the yearly high. Since the euro holds steady into this elevated region, pips away from the mentioned high, it is quite obvious that it is only a matter of time until it will break higher, aiming towards fresh highs like 1.4620-1.4700. This week's economic schedule is full of important events such as the ISM Manufacturing Index later today, the FOMC Meeting Minutes tomorrow and the EU Interest Rate Decision along with the US NFP release later this week. Short term sentiment is positive and will remain intact as long as 1.4200 provides support on potential pullbacks. Current quote is 1.4352 @05:50 GMT Support: 1.4290/00, 1.4250 and 1.4175/00 Resistance: 1.4400, 1.4445/50 and 1.4500 GBPUSD On yesterday's report I mentioned about the indecision suggested by the last two candlesticks. Well, yesterday's candle would be 3′rd, as the behavior was similar - being rejected by the tested levels then returning into the day opening zone. Upside seem favored today - therefore keep an eye on 1.6375/00 which is an important upside objective. If market indecision is to remain valid, 1.6375/00 should cap, limiting gains before a pullback back into the 1.6250-1.6300 region. Personally I suspect a potential break above 1.6375/00 - to as high as 1.6440/50 which is the 61.8% of the last down leg from 1.6620. Short term sentiment is bearish, a breach above 1.6400/50 being required to confirm a trend reversal. Current quote is 1.6300 @05:50 GMT Support: 1.6250, 1.6150/80 and 1.6100 Resistance: 1.6375/00, 1.6440/50 and 1.6500 USDCAD It is quite interesting how the trend line from 1.0630 has provided both support and resistance throughout the entire month of August, as seen on the chart below. Downside is now under pressure since reaching the mentioned trend line on yesterday but the pair could deal with a parallel band lower, around 1.0835. If so, expect a bounce on 1.0800/35. Current quote is 1.0919 @05:50 GMT Support: 1.0900, 1.0835 and 1.0800 Resistance: 1.0950, 1.1000 and 1.1090/00 Innerfx Legal disclaimer and risk disclosure InnerFX and/or its author(s) shall not be responsible for any loss arising from any investment or trading decision based on any recommendation, forecast, strategy or other information herein contained. The contents of this article should not be construed as an express or implied promise, guarantee or implication by InnerFX and/or its author(s) that readers and subscribers will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations / strategy in an analysis, especially leveraged investments such as Foreign Exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. Trading in the Currency Exchange market is a challenging opportunity where above average returns are available to educated and experienced investors who are willing to take above average risk. Past performance does not guarantee similar performance in the future. Check http://www.innerfx.com/disclaimer for full disclaimer. You may not post this (or part of this) article to forums, newsgroups, mailing lists, electronic bulletin boards, websites, or other services, without the prior written consent of InnerFX.

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Technical Analysis for Crosses

Daily Forex Technicals | Written by ecPulse.com | Sep 01 09 06:15 GMT |

GBP/JPY Despite the bearish structure of the double top formation which pushed the pair below the up trend line as we discussed before, but the pair is currently in a stage of stability as the momentum indicators have reached oversold areas. Hence we expect consolidation areas between 153.60 and 149.80. An upside correction -to retest the mentioned resistance- is needed on the intraday basis before resuming the downside rally. Trading range for today is among key support at 146.80 and key resistance at 156.30. The general trend is to the downside as far as 167.40 remains intact with target at 116.00. Support: 151.00, 150.45, 149.80, 149.00, 148.35 Resistance: 152.30, 153.00, 153.60, 154.65, 155.00 Recommendation: Based on the charts and explanations above our opinion is, buying the pair from 151.20 targeting 153.50 and stop loss below 149.25 might be appropriate EUR/JPY The pair is supported around the critical support level of 132.50 that assisted it to show the ability to form an intraday bullish structure. Hence we think that the pair is to move mildly upwards, testing the upper line of the descending channel before resuming the major downside rally of [C] wave of our suggested Elliott sequence. Trading range for today is among key support at 129.50 and key resistance now at 136.10. The general trend is to the downside as far as 141.44 remains intact with targets at 100.00 followed by 88.97 levels. Support: 133.00, 132.50, 131.55, 131.00, 129.50 Resistance: 133.70, 134.15, 134.85, 135.50, 136.10 Recommendation: Based on the charts and explanations above our opinion is, buying the pair from 133.30 targeting 134.80 and stop loss below 132.10 might be appropriate. EUR/GBP The royal pair has been capable of forming a continuation pattern [Pennant] as seen on the above four-hour chart. Therefore we will keep our outlook to the upside over the intraday basis, targeting 0.8905 area- 161.8% Fibonacci expansion level of our captured harmonic bullish pattern-. A breakout above 0.8825 areas, which represents the upper line of Keltner channel, will accelerate these upside movements. Trading range is among the key support at 0.8615 and key resistance now at 0.8960. The general trend is to the upside as far as 0.8020 area remains intact with targets at 1.0000 followed by 1.0400 levels. Support: 0.8790, 0.8760, 0.8720, 0.8700, 0.8650 Resistance: 0.8830, 0.8845, 0.8875, 0.8905, 0.8960 Recommendation: Based on the charts and explanations above our opinion is, buying the pair from 0.8780 targeting 0.8890 and stop loss below 0.8700 might be appropriate. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

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Australia’s Current Account Deficit Widens on Exports

By Jacob Greber

Sept. 1 (Bloomberg) -- Australia’s current account deficit widened more than expected in the three months through June as exports of coal, iron ore and farm goods tumbled.

The shortfall on goods, services and investment more than doubled from the first quarter to A$13.3 billion ($11 billion), the most in a year, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg survey of 17 economists was for a A$10.7 billion gap.

Central bank Governor Glenn Stevens will probably keep the benchmark interest rate at a 49-year low of 3 percent today for a fifth month to spur domestic demand that may be waning as government handouts to consumers end, economists predict. Net exports subtracted 0.2 percentage points from gross domestic product in the quarter, the statistics bureau said.

“The blowout in the deficit is driven by the global recession,” and falling coal and iron ore prices, said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney. Australia’s economy probably expanded in the second quarter, “but only just,” she added.

Exports tumbled 19 percent to A$47.6 billion in the quarter as shipments of rural goods slid 9 percent, coal slumped 26 percent and iron ore declined 21 percent, today’s report said.

The Australian dollar rose to 84.40 U.S. cents at 12:05 p.m. in Sydney from 84.32 cents just before the report was released. The two-year government bond yield rose 1 basis points to 4.58 percent. A basis point is 0.01 percentage point.

Demand Plunges

The current account is the broadest measure of trade because it includes investment flows as well as goods and services shipments. A deficit represents money Australia has to borrow overseas to pay for the goods and services it imports, and to finance investment not covered by local savings.

BHP Billiton Ltd., the world’s largest mining company, reported last month a 65 percent decline in second-half profit after metals prices and demand plunged during the global recession. Chief Executive Officer Marius Kloppers said on Aug. 20 that global demand for metals won’t rise beyond what is required to rebuild stockpiles for the remainder of this year.

“The weakness in the global economy over the past year has contributed to a significant decline in commodity prices and Australia’s terms of trade,” a measure of income from exports, the central bank said on Aug. 7.

The terms of trade will fall by about 20 percent from their 2008 peak, the central bank predicted last month. This would still leave them around 45 percent above the average that prevailed during the 20 years through 2000.

Interest Rates

To offset falling global demand for exports of natural resources, the government has distributed more than A$20 billion in cash to households since the collapse of Lehman Brothers Holdings Inc. almost a year ago, and is spending another A$22 billion upgrading schools, railways, roads and ports.

Policy makers also slashed the benchmark interest rate by a record 4.25 percentage points between September and April. All 17 economists surveyed by Bloomberg News expect Governor Stevens will keep the rate unchanged at 2:30 p.m. today in Sydney.

Gross domestic product probably expanded 0.6 percent from the first quarter, when it gained 0.4 percent, according to the median forecast in a Bloomberg survey of economists taken yesterday. The GDP figures will be published tomorrow at 11:30 a.m. in Sydney.

The net income deficit widened to A$11.49 billion in the second quarter from A$10.43 billion in the previous three months, today’s report showed. The goods and services trade balance swung to a deficit of A$1.67 billion from a A$4.27 billion surplus.

A separate report published today showed home-building approvals rose in July for a second month, climbing 7.7 percent. Approvals to build apartments surged 35.3 percent.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Australian August Manufacturing Expands for First Month in 14

By Jacob Greber

Sept. 1 (Bloomberg) -- Australian manufacturing grew in August for the first time in 14 months as companies reported an increase in orders and rebuilt inventories.

The performance of manufacturing index rose 7.2 points from July to 51.7, the highest level since March 2008, the Australian Industry Group and PricewaterhouseCoopers said in a survey released in Canberra today. A reading above 50 signals manufacturing is expanding.

Today’s report supports central bank Governor Glenn Stevens’ view that the economy is rebounding faster than the the bank forecast at the start of the year as consumer and business confidence jumps. Stevens will keep the benchmark lending rate at a 49 year-low of 3 percent at 2:30 p.m. in Sydney today, all 17 analysts surveyed by Bloomberg News said.

“Manufacturing activity has been improving month by month,” said Heather Ridout, chief executive officer of the Australian Industry Group. Still, “conditions are uneven and pressures remain on employment.”

“There is a risk, particularly if interest rates are raised too early in the recovery phase, that as the effect of stimulus measures wane, the nascent recovery will fail to get traction,” Ridout added.

The manufacturing survey, which is similar to the U.S. ISM index, asked more than 200 companies about production, new orders, deliveries, inventories and employment.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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South Korean Exports Fell 20.6% in 10th Monthly Drop

By Heejin Koo

Sept. 1 (Bloomberg) -- South Korea’s exports fell for a tenth consecutive month as global demand for the nation’s automobiles, mobile phones, textiles and steel faltered.

Shipments dropped 20.6 percent from a year earlier to $29.1 billion, compared with a revised 21.8 percent drop in July, the Ministry of Knowledge Economy said today in Gwacheon. Imports fell 32.2 percent to $27.4 billion, resulting in a trade surplus of $1.67 billion. The median estimate of 12 economists surveyed by Bloomberg News was for a 20.7 percent decrease in exports.

“It’s too early to expect exports to post growth as global economies haven’t yet turned around at a full pace,” said Lee Sung Kwon, an economist at Good Morning Shinhan Securities Co. in Seoul. “However, the decline in exports will narrow before we see demand pick up as we see a gradual recovery around the world.”

Exports, which make up more than half of the economy, may increase by more than a tenth next year as demand from global customers picks up, Minister of Knowledge Economy Lee Youn Ho said in an interview on Aug. 11. Samsung Electronics Co. and Kia Motors Corp. reported a surge in quarterly profits, boosted by exports, as the economy expanded at the fastest pace in almost six years in the second quarter.

“We expect both imports and exports to rise to similar levels of previous years starting in September,” the ministry said in its statement today. “The trade surplus will continue to remain in double digits, but will not approach the level of the first half of this year.”

Export Forecast

The ministry forecast earlier this year that exports for all of 2009 would fall 14.4 percent. Imports for the year will drop 24.2 percent, leaving a trade surplus of about $31 billion, the ministry said July 1.

A weaker currency has helped South Korean exporters perform better than their Asian neighbors during the deepest global recession since the Great Depression. Exports in Japan fell 36.5 percent in July from a year earlier, while Taiwan exports dropped 24.4 percent.

Shipments to China, South Korea’s biggest overseas market, fell 13.2 percent from a year earlier in the first 20 days of August, today’s report showed. Exports to the U.S. slid 13.1 percent in the period, while shipments to Japan fell 20.7 percent, today’s report showed.

Exports of liquid crystal display devices in August jumped 32 percent from a year ago to $2.2 billion, largely on demand from China as well as the European Union and North America, the ministry said. Exports of petroleum products, ships, steel and computers led declines.

Weak Demand

Weaker consumer demand led to declines in imports of raw materials such as crude oil, petroleum products and gas, as well as steel plates, steel pipes and other steel products, the ministry said.

Samsung Electronics Co., which accounts for about 15 percent of South Korea’s exports, in July reported its biggest quarterly profit in more than two years. Kia Motors Corp., South Korea’s second-biggest carmaker, more than quadrupled quarterly profit to the highest since 2003 as domestic and Chinese sales allowed it to avoid the worst of a global auto market meltdown.

South Korea’s industrial production increased at the fastest pace in four months in June, a sixth consecutive increase, while department store sales rose for a fifth month and manufacturers’ confidence reached a 14-month high.

To contact the reporter on this story: Heejin Koo in Seoul at hjkoo@bloomberg.net

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Australia Keeps Key Interest Rate Unchanged to Gauge Recovery

By Jacob Greber

Sept. 1 (Bloomberg) -- Australia’s central bank kept interest rates unchanged for a fifth month to spur an economy that probably cooled in the second quarter.

Reserve Bank Governor Glenn Stevens left the overnight cash rate target at 3 percent in Sydney today, as forecast by all 17 economists surveyed by Bloomberg News.

Australia’s currency and bond yields fell as traders pared bets rates could be raised as soon as next month after Stevens said “the present accommodative setting of monetary policy remains appropriate for the time being.” Economic growth slowed in the second quarter as exports and inventories slumped, a report will show tomorrow, according to a survey of analysts.

“They aren’t in a rush” to raise borrowing costs, said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “They want to wait and see whether the economy holds up. That rules out October for a hike.”

The Australian dollar fell to 84.18 U.S. cents at 2:46 p.m. in Sydney from 84.40 cents just before the decision was announced. The two-year government bond yield slumped 7 basis points to 4.48 percent. A basis point is 0.01 percentage point.

While the bank’s record 4.25 percentage points of interest- rate cuts between September and April prompted consumers and businesses to bring forward spending plans, “in those areas demand may soften in the near term,” Stevens said today.

“Some types of capital spending are also likely to be held back for a while by financing constraints,” he added.

Economic Growth

Traders cut a forecast that the central bank will raise the benchmark rate by a quarter percentage point as early as next month, according interbank futures on the Sydney Futures Exchange. They tipped a 32 percent chance of an increase at 3:34 p.m. in Sydney. Before today’s decision, they forecast a greater than 50 percent chance.

GDP probably expanded 0.3 percent in the second quarter from the previous three months, when it gained 0.4 percent, according to the median estimate of 15 economists surveyed by Bloomberg News today. They also predict the economy grew 0.4 percent from a year earlier. The figures will be published at 11:30 a.m. in Sydney tomorrow.

Today’s forecast follows revisions by some economists to their second-quarter GDP predictions after reports today and yesterday showed inventories tumbled by a record 3.4 percent and the current account deficit more than doubled A$13.3 billion ($11.2 billion) as exports of coal and iron ore slumped.

They previously estimated GDP rose 0.6 percent in the quarter and 0.7 percent from a year earlier.

Inflation Outlook

While inflation should continue “to moderate in the near term,” the likelihood that annual consumer price gains will remain below the bank’s target range of between 2 percent and 3 percent “now looks low,” Stevens said today.

While the central bank’s last meeting four weeks ago “was about removing the easing bias, today’s statement was about reaffirming that the next move is up, but not until a durable recovery is seen,” said Spiros Papadopoulos, an economist at National Australia Bank Ltd. in Melbourne.

“We expect that in November they will be confident enough to start raising rates without choking off confidence and demand prematurely,” Papadopoulos added.

Measures of confidence have recovered, and increased construction work and “public demand will also start to provide more support to spending soon and, hence, growth is likely to firm going into 2010,” Stevens said today.

Reports published earlier today showed building approvals rose and manufacturing expanded in August for the first time in 14 months.

Consumer Confidence

Australia’s central bank scrapped its forecast last month for the economy to contract this year, instead predicting gross domestic product will expand 0.5 percent. The bank expects growth will accelerate to 2.25 percent in 2010 and 3.75 percent in 2011.

Consumer and business confidence has surged to the highest levels in almost two years after the government distributed more than A$20 billion in cash to households since the collapse of Lehman Brothers Holdings Inc. almost a year ago.

Sentiment is also being buoyed by the government spending another A$22 billion on upgrading roads, schools, hospitals and railways.

“The economic stimulus at the moment is vital in supporting business,” Treasurer Wayne Swan told reporters in Brisbane yesterday. “Of course, stimulus is temporary” and “designed to be withdrawn from year’s end as the economy recovers.”

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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India’s Growth May Falter as Drought Threatens Crops

By Cherian Thomas

Sept. 1 (Bloomberg) -- India’s economic rebound, which last quarter lagged behind recoveries in China and Japan, may falter as a drought threatens to curb harvests and rural incomes.

Growth in Asia’s third-largest economy may slow to 5.9 percent this quarter from the 6.1 percent expansion in the previous three months reported yesterday, according to the median forecast of nine economists in a Bloomberg News survey. India has declared drought or drought-like conditions in almost half the country.

Prime Minister Manmohan Singh’s government today cut the nation’s growth target for the five-year period to March 2012 at a meeting of policy advisers. India is also less likely to reap the benefits of a global recovery as trade accounts for just a third of the $1.2 trillion economy.

“Below-average monsoon rains represent a downside risk to growth in the next few quarters,” said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong. “Poor public finances have limited the size of fiscal stimulus.”

As the worldwide slump hit India, Singh’s government cut taxes and stepped up spending on roads and subsidies to cushion the economy. His scope for further action is restricted as the budget deficit is already estimated to touch a 16-year high of 6.8 percent of gross domestic product in the year to March 31 from 6.2 percent in the previous year, according to Finance Ministry estimates.

Drought Areas

The government’s record spending could stoke inflation, the Reserve Bank of India said on Aug. 27. The central bank, which has injected about 5.6 trillion rupees ($115 billion) into the economy, estimates that combined fiscal and monetary stimulus amounts to more than 12 percent of Indian GDP.

Drought or drought-like conditions have been declared in 278 districts in India, or 44 percent of the nation’s total, as rainfall has been 25 percent below average so far in the four- month monsoon season that started June 1, the farm ministry said Aug. 27.

Before the rains turned scanty, the central bank on July 28 forecast the economy would grow 6 percent “with an upward bias” in the year to March 31, the weakest pace since 2003.

India’s woes comes as China’s economy expanded 7.9 percent in the three months through June 30 from a year earlier, up from 6.1 percent in the previous quarter. Japanese GDP increased at an annual 3.7 percent last quarter following an 11.7 percent decline in the prior three months.

Slower Growth

India’s average annual economic growth rate will be 7.8 percent in the five years through March 2012, falling short of a targeted 9 percent expansion, the Planning Commission, a government agency that sets growth and investment targets, said today in New Delhi.

Growth may slow to 6.3 percent in the fiscal year ending March 31, from 6.7 percent in the preceding 12 months, as a drought hurts farm output, the planning body said today.

“India’s April-June GDP release was nowhere near as spectacular as some of the other Asian figures but still a solid set of numbers,” said Robert Prior-Wandesforde, a senior economist at HSBC Group Plc in Singapore.

India’s current pace of expansion continues to make it the fastest growing major economy in the world after China, attracting overseas companies including Harley-Davidson Inc., the biggest U.S. motorcycle maker. Harley-Davidson said last week it plans to start sales in India from next year.

New Factories

Volkswagen AG, Toyota Motor Corp. and other car manufacturers have announced plans to spend more than $6 billion through 2012 to build factories in India.

Morgan Stanley economist Chetan Ahya said the drought will trim farm production though its impact on industry and services will be limited because of the lagged impact of monetary and fiscal stimulus. Services including banking and software make up 55 percent of India’s economy, while industry accounts for a quarter.

“Low rainfall will definitely have an impact, but it’s difficult to assess at this point of time the effect on agricultural growth,” said Ashok Chawla, the top bureaucrat in India’s finance ministry.

HSBC’s Prior-Wandesforde said history suggests that drought years have seen a fall in agriculture output averaging 3 percent since 1951, adding that the “big downside risk” for India’s prospects in the months ahead is the drought.

Arable Land

Only 40 percent of India’s arable land is irrigated, leaving the country at the mercy of the vagaries of rain. Even though agriculture makes up about a fifth of the economy, its vitality is critical for rural areas where three-fifths of India’s 1.2 billion people live.

The doubt over India’s economic recovery comes amid concerns raised by the central bank on inflation because of gains in crude oil and other commodity prices and food shortage.

On July 28, the central bank raised its inflation forecast to 5 percent from 4 percent by the end of the financial year. The key wholesale price inflation index fell 0.95 percent in the week to Aug. 15.

Inflation could stymie consumer demand, though an accompanying slowdown in growth constrains the central bank’s ability to raise borrowing costs to check the rise in prices, the Reserve Bank of India said on Aug. 27.

“India’s battle against downside risks is far from over,” said Sherman Chan, an economist at Moody’s Economy.com in Sydney. “The Reserve Bank is between a rock and a hard place.”

To contact the reporter on this story: Cherian Thomas in New Delhi at Cthomas1@bloomberg.net.

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Chicago Purchasers’ Index Rose More Than Forecast

By Courtney Schlisserman

Aug. 31 (Bloomberg) -- Business activity in the U.S. rose more than forecast in August, adding to signs the economy is improving.

The Institute for Supply Management-Chicago Inc. said today its business barometer increased to 50, the highest level since September, from 43.4 in July. A reading of 50 is the dividing line between contraction and expansion.

Automakers are likely to be at the epicenter of a rebound in manufacturing over coming months as assembly lines speed up after the government’s “cash-for-clunkers” plan left dealer lots bare. Increasing demand from overseas and a record reduction in inventories mean a pickup in factory orders and production may last for much of the rest of the year.

It’s “a manufacturing-led recovery,” said Robert Stein, a senior economist at First Trust Advisors in Lisle, Illinois. “Much of this is probably related to the revival in auto production over the past month or so.”

Economists surveyed by Bloomberg News forecast the index would rise to 48, according to the median of 53 projections. Estimates ranged from 46 to 52.5.

Stocks Retreat

Stocks dropped globally on speculation the six-month rally has outpaced prospects for earnings. The Standard & Poor’s 500 index fell 0.8 percent to close at 1,020.62. Treasury securities rose, pushing the yield on the 10-year Treasury down to 3.41 percent at 4:12 p.m. in New York, compared with 3.45 percent at the end of last week.

Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. The Institute for Supply Management is scheduled to release its August factory report tomorrow. According to a Bloomberg survey, that measure will show expansion for the first time since January 2008.

Other reports this month also showed manufacturing improving. The Federal Reserve Bank of Philadelphia’s economic index expanded this month for the first time since September, and the New York Fed’s barometer gained for the first time since April 2008.

The Chicago report’s orders gauge climbed to 52.5, the highest level in a year, from 48 in July and the production index rose to 52.9 from 43.3.

The employment index increased to 38.7 from 35.3. A measure of prices paid for raw materials jumped to 50 from 35, while a gauge of delivery times increased to 54.6 from 49.6.

Factories at General Motors Co. and Chrysler Group LLC are resuming production after exiting bankruptcy proceedings. Also, plants have boosted output to meet demand from the government’s “cash-for-clunkers” trade-in program, which ended Aug. 24.

‘Clunkers’

The plan offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel- efficient vehicles. The program produced almost 700,000 auto sales before it ended, the Transportation Department said Aug. 26.

Whirlpool Corp. is among manufacturers continuing to cut payrolls. The world’s largest appliance maker said Aug. 28 it will close its Evansville, Indiana, plant, resulting in the elimination of 1,100 jobs. The job cuts will occur next year and some of the production from the facility will be moved to an existing factory in Mexico.

Smaller inventories will contribute to a rebound in output as orders rise to restock shelves. Inventories dropped at a record $159.2 billion annual rate in the second quarter, the Commerce Department said last week. They dropped at a $113.9 billion in the first three months of the year.

Some companies are not optimistic of a fast turnaround. Chicago-based Boeing Co. executives said Aug. 27 they wouldn’t be able to give a forecast for 2010 until January.

“I fully expect the pressures of the current economic climate to remain with us for some time to come,” Chief Executive Officer Jim McNerney said in an employee newsletter, adding that he wasn’t seeing many signs of a quick recovery. “That’s going to mean another tight year for us in 2010.”

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net.

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China Manufacturing Grows at Fastest Pace Since 2008

By Bloomberg News

Sept. 1 (Bloomberg) -- China’s manufacturing expanded at the fastest pace in 16 months in August, driven by record lending in the first half of the year, two surveys showed.

The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said in an e-mailed statement today in Beijing. A PMI released by HSBC Holdings Plc also climbed.

Gains in output, orders and jobs added to evidence that Premier Wen Jiabao can meet his 8 percent growth target for the year as a stimulus package counters falling exports. The Shanghai Composite Index plunged into a bear market yesterday on concern that the world’s third-biggest economy will slump as banks rein in credit growth to avert asset bubbles and bad loans.

“China’s equity market has taken a battering in the past few weeks, but the economic data suggests that the recovery remains on track,” said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong. “Beijing still faces the difficult task of managing liquidity conditions to avoid a bubble or a bust.”

Asian stocks rose. The Shanghai stock index gained 1.8 percent as of 1:13 p.m. local time. It tumbled 6.7 percent yesterday, capping its biggest monthly loss since October.

New loans plunged to 355.9 billion yuan ($52 billion) in July, less than a quarter of June’s level, and may slump to 200 billion yuan in August, the Beijing-based business magazine Caijing reported yesterday without citing anyone.

‘Economic Rebound’

The official PMI “shows that China’s economic rebound will maintain momentum,” Zhang Liqun, a researcher at the State Council Development and Research Center, said in today’s statement. Zhang cautioned that there were “uncertainties” in the economy and a mix of “positive and negative factors.”

Eighteen industries, including petrochemicals, beverages, metal processing and equipment manufacturing reported expansions. Only textiles and pharmaceuticals contracted.

The output index rose to 57.9 from 57.3 in July. The measure of new orders climbed to 56.3 from 55.5. An export-order index was unchanged at 52.1. An employment index gained to 51.4 from 50.8. Readings above 50 indicate expansions.

“This clearly shows that we are in a broad-based economic recovery,” said Sun Mingchun, chief China economist at Nomura Holdings Inc. in Hong Kong. The gain in jobs was “very encouraging, as it shows that firms are confident enough to increase hiring, which will also help boost consumption for the rest of the year,” he said.

Cars, Appliances

Subsidies for purchases from cars to home appliances are aiding manufacturers by stoking domestic demand as the global recession cuts exports. Shenzhen-based BYD Co., a Warren Buffett-backed maker of cars and rechargeable batteries, said first-half profit almost doubled as stimulus measures boosted sales.

The State Council, China’s cabinet, said last month that it saw signs of a recovery in manufacturing and also announced plans to curb overcapacity in the steel and cement industries.

“A continued rise in the PMI fueled by domestic demand may have reinforced the authorities’ concern” about excess capacity, said Sherman Chan, a Sydney-based economist with Moody’s Economy.com.

The HSBC PMI, previously released by CLSA Asia-Pacific Markets, showed an overall increase to 55.1 from 52.8 in July and a jump in export orders.

Export Recovery

Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong, said a rise in the import index in the official PMI signaled a looming export recovery as the nation sourced materials to be processed into overseas shipments.

Both surveys showed inflation pressures, with indexes of input prices rising to 13-month highs. The central bank said in July that consumer prices may rebound after bottoming out in the third quarter. Prices have fallen for six straight months.

China’s economic growth accelerated to 7.9 percent in the second quarter from a year earlier on the nation’s $585 billion stimulus package and more than $1 trillion of new loans in the first half. The 6.1 percent expansion in the first three months of the year was the weakest in almost a decade.

Growth will continue to quicken in the third and fourth quarters, reaching 8.3 percent for the year, according to a Bloomberg News survey of 21 economists.

In contrast, former Morgan Stanley Asia economist Andy Xie predicts the Shanghai Composite Index may fall a further 25 percent because China’s recovery “isn’t sustainable.”

Government efforts to control lending have included requiring lenders to raise reserves to 150 percent of non- performing loans by the end of this year. Bank of China Ltd., which advanced the most new credit in the first half, said Aug. 27 that it will slow loan growth in the second half and improve loan quality.

To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

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Dollar to Drop to 87 Yen If July Low Broken: Technical Analysis

By Candice Zachariahs

Sept. 1 (Bloomberg) -- The U.S. dollar may slide 6 percent toward 87 yen if it falls below support clustered around the July low of 91.74 yen, JPMorgan Securities Inc. said, citing trading patterns.

The decline in the dollar yesterday “took on a more impulsive bias with the break of the key 93.20-93.10 support area and raising the risk of a deeper decline and retest of the critical” July low, wrote Niall O’Connor, a technical currency analyst in New York at JPMorgan, in a note to clients today. “The short-term setup argues for some bounce from this area, but note there is still no sign of a basing pattern.”

The greenback is likely to weaken to the January-December “double bottom” toward 87 yen, should it drop below 91.74, O’Connor said. A double bottom occurs when a currency makes two consecutive troughs of about the same depth, and indicates it may rebound.

The dollar declined for a second day, losing 0.1 percent to 93.06 yen as of 9:53 a.m. in Tokyo. That’s below the 61.8 percent Fibonacci retracement at 93.13 from this year’s low of 88.91 yen reached on Jan. 23. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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Corn Declines as Improved Crop Ratings May Boost U.S. Harvest

By Jae Hur

Sept. 1 (Bloomberg) -- Corn slumped as the U.S. Department of Agriculture predicted improved conditions may produce the country’s second-largest crop on record. Wheat also fell.

About 69 percent of the U.S corn crop was in good or excellent condition as of Aug. 30, compared with 61 percent a year earlier, the USDA said yesterday in a report.

“No doubt there will be another bumper crop for corn in the U.S.,” Hiroyuki Kikukawa, general manager of research at IDO Securities Co., said today by phone.

Corn for December delivery fell as much as 1.2 percent to $3.2575 a bushel in electronic trading on the Chicago Board of Trade and traded at $3.2625 as of 12:58 p.m. Singapore time. The most-active contract lost 5.7 percent in August, the third monthly drop.

The USDA has predicted a crop of 12.761 billion bushels, 5.5 percent more than last year and the second-largest ever.

Soybeans for November delivery were 0.5 cent lower at $9.79 a bushel after trading between $9.7375 and $9.89. The oilseed dropped 3.1 percent yesterday.

“The U.S. soybean crop, following planting delays, will be vulnerable if early frost hits,” Kikukawa said. “This may reduce crop yields.”

About 93 percent of soybean plants were setting pods and beginning to fill them with beans as of Aug. 30, compared with 85 percent a week earlier and the five-year average of 96 percent, the USDA said. Pod-setting is the most critical crop development period in determining final yields.

Midwest Cold

“While the core of the chilliest air will settle a bit farther to the south and east tonight, unseasonably cool conditions will hang over much of the Midwest through Tuesday night,” AccuWeather.com forecast yesterday. “A warmer flow behind an area of high pressure will help temperatures climb a bit more during the second half of the week.”

About 75 percent of corn plants in the top 18 producing states were filling kernels with sugars and starch as of Aug. 30, up from 57 percent a week earlier, the USDA said. The average in the previous five years was 88 percent.

An estimated 32 percent of the crop was denting, when kernels begin to advance toward maturity, down from 42 percent a year ago and the five-year average of 60 percent, the USDA said.

Wheat for December delivery in Chicago dropped 0.3 percent to $4.9725 a bushel as of 1:07 p.m. in Singapore. The price yesterday touched $4.8075, the lowest level since Dec. 8. The contract dropped 5.6 percent last month, the third consecutive decline, partly because of slack demand for U.S. inventories.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Yen Trades Near 7-Week High on Concern Asset Prices Overblown

By Ron Harui

Sept. 1 (Bloomberg) -- The yen traded near a seven-week high against the dollar amid speculation asset prices are overblown, boosting demand for the relative safety of the Japanese currency.

The yen may gain for a second day versus Singapore’s dollar after a technical chart signaled Asian stocks’ 62 percent rally since the March low was excessive. Australia’s dollar retreated from close to its highest level this year against the greenback after the nation’s central bank held interest rates at 3 percent and said monetary policy is appropriate. The euro rose toward a three-week high versus the dollar before a German report that may show retail sales in Europe’s largest economy rose in July.

“Investors are turning risk averse amid worries over the sustainability of the economic rebound,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The bias is for the yen to strengthen.”

The yen traded at 93.03 per dollar as of 6:25 a.m. in London from 93.13 in New York yesterday, when it rose to 92.55, the highest level since July 13. The currency was at 133.56 per euro from 133.48. The euro climbed to $1.4355 from $1.4334. It touched $1.4406 on Aug. 27, the strongest level since Aug. 7.

The Australian dollar fell to 84.17 U.S. cents from 84.39 cents. It reached 84.78 cents on Aug. 14, the highest level since Sept. 22, 2008. The so-called Aussie declined to 78.31 yen from 78.57 yen.

Japan’s currency traded at 64.60 versus Singapore’s dollar from 64.61 yesterday. The MSCI Asia Pacific Index of regional shares advanced 0.7 percent today, having rallied 62 percent from a more than five-year low on March 9.

Technical Charts

The stock index’s 14-day stochastic oscillator climbed to 82.9 today from 69.5 yesterday, exceeding the 80 threshold that indicates an asset price may have risen too fast and is poised to decline. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in an asset’s value.

Benchmark interest rates are 0.1 percent in Japan and as low as zero in the U.S., compared with 3 percent in Australia, making the South Pacific nation’s assets attractive to investors seeking higher returns. The risk in such trades is that currency market moves may erase any profits.

Yen strength was limited after a Chinese government report showed the nation’s manufacturing expanded in August at the fastest pace in 16 months, allaying concerns the country’s economic recovery may falter. The nation’s benchmark Shanghai Composite Index rebounded 2.2 percent from yesterday’s 6.7 percent plunge.

“The data suggest the Chinese economy may be on a positive track,” said Masashi Kurabe, head of currency sales and trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in Hong Kong. “It could be supportive for risk appetite and mildly negative for the yen.”

China’s PMI

The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion.

Australia’s dollar fell for the first time in four days against its U.S. counterpart after Reserve Bank of Australia Governor Glenn Stevens said in a statement today the central bank’s current stance of keeping borrowing costs low to foster economic growth is appropriate.

“Despite growing expectations for a tightening bias and a referral to the ‘currently inappropriate emergency cash rate,’ the RBA today defied the hawks and published a firmly neutral supporting statement,” Annette Beacher, senior strategist in Singapore at TD Securities, wrote in a research note today. “In reaction to the non-hawkish statement, the Australian dollar was 84.43 cents into the release and now 84.14 cents half an hour later.”

RBA Rate Bets

Traders pared bets the RBA will raise the benchmark rate by a quarter-percentage point as early as next month, according to interbank futures on the Sydney Futures Exchange. They tipped a 36 percent chance of an increase following the statement. Before today’s decision, they forecast a greater than 50 percent chance.

The euro advanced for a second day versus the dollar as the Federal Statistics Office in Wiesbaden may say today Germany’s retail sales, adjusted for inflation and seasonal swings, climbed 0.7 percent in July after a 1.3 percent drop in the previous month, a Bloomberg survey of economists showed.

“An improvement in retail sales could be a plus for the euro-zone economy,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s currency broker. “The euro may trade in a firm manner.”

European Central Bank Governing Council member Ewald Nowotny said yesterday he doesn’t expect a double-dip recession in the 16-nation euro region as long as policy makers don’t hurry to remove emergency stimulus measures.

“I don’t see a perspective of a W-shaped recession if there’s no premature exit strategy,” Nowotny said in a panel discussion in Alpbach, Austria. “What I see is the danger that we’ll have very low rates of positive growth for some time.”

The European Central Bank will keep its main refinancing rate at 1 percent at its Sept. 3 meeting, according to all 58 analysts surveyed by Bloomberg.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.

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Rubber Gains on Speculation Car Sales Recovery to Boost Demand

By Aya Takada

Sept. 1 (Bloomberg) -- Rubber increased for a fourth day in five on speculation demand for the commodity used in tires will increase on a recovery in car sales in Japan.

Futures in Tokyo gained as much as 1.2 percent, extending a 3.9 percent increase last month. Japanese sales of new vehicles rose 5 percent from a year earlier to about 200,000 in August, the first increase since July last year, the Nikkei newspaper reported today.

“Rubber was supported by expectations for strong figures for car sales,” Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co., said today by phone.

February-delivery rubber rose as much as 2.5 yen to 205.7 yen a kilogram ($2,209 a metric ton) before trading at 205 yen on the Tokyo Commodity Exchange at 10:38 a.m. local time.

Toyota Motor Corp., the world’s largest carmaker, boosted domestic sales by 16 percent last month thanks to robust demand for its Prius hybrid cars, the Nikkei reported. Sales at Honda Motor Co. increased 20 percent, the paper said.

Rubber futures also increased as the Japanese currency retreated from a seven-week high against the dollar, raising the appeal of yen-denominated contracts, Saito said.

The yen weakened to 93.19 per dollar as of 10:48 a.m. in Tokyo from 93.12 in New York yesterday, when it touched 92.55, the strongest level since July 13.

January-delivery rubber on the Shanghai Futures Exchange lost 1.2 percent to 18,145 yuan ($2,656) a ton at 9:49 a.m. local time.

Prices dropped after stockpiles monitored by the exchange increased to the highest since March 2008, raising concern that demand in China, the world’s largest consumer, may be slowing.

Rubber inventories increased 7,577 tons to 82,517 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the exchange said Aug. 28.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net

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Gold May Break Out to Record, Grabham Says: Technical Analysis

By Glenys Sim

Sept. 1 (Bloomberg) -- Gold may advance to a record $1,325 an ounce if it first breaks out of a symmetrical, triangular pattern, a move that may occur in the next one or two weeks, Standard Bank Group Ltd. said, citing trading patterns.

A so-called topside breakout would be indicated by a close at more than $980.85 an ounce, Darran Grabham, the bank’s technical analyst, wrote in a note yesterday. That would signal a short-term bull trend to at least $1,100 an ounce, he said. Gold traded today at $952.80.

In addition to the triangular pattern, gold rising to more than this year’s peak of $1,006.29 would “confirm the completion of a continuation head-and-shoulders pattern -- the eventual target is $1,325,” Grabham wrote. The precious metal’s record stands at $1,032.70, touched on March 17, 2008.

A head-and-shoulders pattern is formed when a commodity makes three consecutive peaks, with the middle being the highest. It forms during a series of increases over time, according to technical analysts, who say that past moves of an asset may be used to predict future trends.

Symmetrical triangle patterns are unpredictable, and gold may tumble if it declines to less than the support trendline at $935 an ounce, Grabham wrote. “The ensuing sell-off is likely to encounter support around the $906.50 level, before a break lower yields a move to a secondary objective of $890,” he added.

“The minimum target of the triangle is highlighted at $850, with potential for the bear trend to test the corrective low recorded in January,” he wrote. Gold traded as low as $802.59 that month.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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China’s Stocks Rise; Bank of China Gains, Jiangxi Copper Drops

By Bloomberg News

Sept. 1 (Bloomberg) -- China’s stocks rose, following the Shanghai Composite Index’s biggest drop since June 2008, as financial companies gained on speculation recent declines were excessive and as country’s manufacturing expanded.

Bank of China Ltd. added 2.5 percent, climbing from a three-month low. China Life Insurance Co. added 3.7 percent, snapping a three-day retreat, after UBS AG raised its rating on the stock. Jiangxi Copper Co. slid 3.9 percent, leading losses by commodity producers, after metal prices fell. Zhongjin Gold Corp. lost 5.7 percent.

The Shanghai Composite Index added 12.09, or 0.5 percent, to 2,679.84 at the 11:30 a.m. break after swinging between gains and losses more than 10 times. The gauge plunged 6.7 percent yesterday and entered a bear market on concern a slowdown in lending growth may derail a rebound in the world’s third-largest economy. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, rose 0.3 percent to 2,839.41.

“Investors are watching to see what the government’s policies on liquidity will be,” said Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co. in Shanghai. “China’s economy appears to be recovering, but any sign that the pace of recovery is slowing would leave the market very vulnerable.”

Manufacturing expanded at the fastest pace in 16 months in August, driven by record lending in the first half of the year, two surveys showed.

Manufacturing Surveys

The official Purchasing Managers’ Index added to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said. The HSBC PMI, previously released by CLSA Asia-Pacific Markets, showed an overall increase to 55.1 from 52.8 in July.

Bank of China, the country’s third-largest bank, added 2.5 percent to 3.76 yuan. The stock’s 14-day relative strength index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 27.3 yesterday. Readings below 30 indicate to some traders a security may be poised to rise.

China Minsheng Banking Corp., the nation’s first privately owned bank, gained 2 percent to 6.19 yuan.

China Life rallied 3.7 percent to 26.03 yuan, ending a three-day, 11 percent drop. The stock was the biggest contributor to gains on the Shanghai index. Ping An Insurance (Group) Co. climbed 3.1 percent to 44.48 yuan, rising from a three-month low.

UBS raised its ratings on China Life to “buy” from “neutral” and for Ping An to “neutral” from “sell.” The country’s “low life-insurance penetration rate” means there is high premium growth potential, while any improvement in the investment environment could boost earnings, UBS said in a note.

‘Good Opportunity’

“Stocks are cheap now relative to the current economic fundamentals,” said Zhang Kun, a strategist at Guotai Junan Securities Co. in Shanghai. “It’ll be a good opportunity to buy equities when the market stabilizes.”

The Shanghai gauge slumped 22 percent in August, the worst monthly performance since October, as banks reined in lending to avert asset bubbles and policy makers advised industries such as steel and cement to curb overcapacity. The decline stopped a rally that had sent the measure up 103 percent from a November low on prospects the government’s 4 trillion yuan ($586 billion) stimulus program and a record amount of new loans will ensure the economy grows at least 8 percent this year.

New loans plunged to 355.9 billion yuan ($52 billion) in July, less than a quarter of June’s level, and may slump to 200 billion yuan in August, the Beijing-based business magazine Caijing reported yesterday without citing anyone.

‘Deep Bubble’

The Shanghai Composite may fall another 25 percent as China’s economic recovery isn’t “sustainable,” former Morgan Stanley Asian economist Andy Xie said.

“The market is in deep bubble territory,” Xie, 49, who correctly predicted in April 2007 that China’s equities would tumble, said in an interview with Bloomberg Television yesterday.

Jiangxi Copper slid 3.9 percent to 31.99 yuan, extending a three-day, 14 percent loss. Zhongjin Gold slumped 5.7 percent to 47.17 yuan. Copper lost 4.2 percent yesterday, the most since June 22, while gold fell 0.6 percent, the biggest decline since Aug. 24.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

Chongqing Changan Automobile Co. (000625 CH), the Chinese partner of Ford Motor Co. and Mazda Motor Corp., rose 2 percent to 9.43 yuan after saying it bought back 8.37 million so-called B-shares, which are denominated in Hong Kong dollars, from June 23 to Aug. 31, for a combined HK$30.8 million ($3.97 million).

Xi’an Aircraft International Corp. (000768 CH) slid 7.7 percent to 14.58 yuan after saying it plans to add 71.3 million yuan of investment to its unit in Tianjin that assembles wings for Airbus SAS A320 planes.

--Zhang Shidong. Editors: Richard Frost, Linus Chua

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

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Asian Stocks Advance on Hon Hai Earnings, China Manufacturing

By Patrick Rial and Masaki Kondo

Sept. 1 (Bloomberg) -- Asian stocks rose, led by technology and mining companies, after Hon Hai Precision Industry Co. earnings beat estimates and China’s manufacturing expanded at the fastest pace in 16 months.

Hon Hai Precision Industry Co., the world’s largest contract maker of electronics, climbed 6.8 percent in Taipei as Goldman Sachs Group Inc. raised its share-price target. Samsung Electro-Mechanics Co., an electronic-parts maker, rose 9.5 percent in Seoul after Woori Investment & Securities Co. lifted its share-price estimate. Rio Tinto Group, the mining company that got 19 percent of its revenue in China last year, added 2 percent in Sydney.

The MSCI Asia Pacific Index rose 0.5 percent to 113.96 as of 1:41 p.m. in Tokyo. Two shares advanced for each one that fell on the gauge. Speculation of a global economic recovery drove the index to the highest in more than 10 months on Aug. 14. The measure has lost 0.2 percent since then.

“I don’t see why the stock market should collapse,” said Khiem Do, head of the multi-asset group at Baring Asset Management (Asia) Ltd. in Hong Kong, which holds $7 billion assets. “We are not looking at a reversal of the growth trend in China. Technology is among the sectors benefiting from this global recovery, particularly those in Taiwan and South Korea.”

China’s Shanghai Composite Index, which yesterday fell by the most since June 2008, added 0.5 percent. Hong Kong’s Hang Seng Index rose 0.6 percent.

Global Rally

Japan’s Nikkei 225 Stock Average gained 0.3 percent. Nippon Sheet Glass Co. rose 3.4 percent after the Nikkei newspaper said solar glass sales are rising. Clarion Co., a navigation-systems maker, rose 4.2 percent after the Nikkan Kogyo newspaper said the company took on more workers to meet orders.

Futures on the U.S. Standard & Poor’s 500 Index added 0.2 percent. The gauge dropped 0.8 percent yesterday amid concern the global rally in equities has outpaced the prospects for an economic recovery. The MSCI World Index sank 0.8 percent yesterday, the most since Aug. 17.

MSCI’s Asia Pacific measure rallied 61 percent from a more than five-year low on March 9 through yesterday. That lifted the average price of stocks on the index to 23.5 times estimated net income, higher than 17 times for the S&P 500, data compiled by Bloomberg show.

Hon Hai climbed 6.8 percent to NT$118.50. Second-quarter net income rose 27 percent to NT$15.1 billion ($459 million) from a year earlier. Hon Hai was expected to report profit of NT$11.7 billion, according to analyst estimates compiled by Bloomberg.

Beating Estimates

Goldman Sachs raised its share-price target on the stock by 4.7 percent to NT$135.

The rally in Asian stocks since March has been driven in part by profit reports in the past month that have exceeded analyst estimates. Some 35 percent of the 633 companies in the MSCI Asia Pacific Index that have reported net income since early July have beaten analyst predictions, while about 21 percent have missed, according to data compiled by Bloomberg.

Samsung Electro-Mechanic jumped 9.5 percent to 97,800 won. Kevin Lee, an analyst at Woori Investment, raised the target price on the stock to 110,000 won from 83,000 won. The analyst increased his operating-profit estimate, a report today said.

Rio gained 2 percent to A$57.24 on optimism industrial demand for metals in China will increase. BHP Billiton Ltd., the world’s largest mining company, added 1 percent to A$37.15.

The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said in an e-mailed statement today in Beijing. A reading above 50 indicates an expansion.

Growing Economies

“China is seen as one of the few growing economies and it has influence over the commodity market because of its demand prospects,” said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong.

Speculation that Chinese demand will fall caused crude oil to dive 3.8 percent to $69.96 a barrel in New York yesterday, the biggest decline since Aug. 14. Copper lost 4.2 percent, the most since June 22.

The Shanghai Composite Index fell into a bear market yesterday on concern that the world’s third-biggest economy will slump as banks rein in credit growth to avert asset bubbles and bad loans. The measure sank 21 percent in the past month, the world’s worst performing major index in that time.

Nippon Sheet, a maker of glass for autos, solar panels and buildings, rose 3.1 percent to 336 yen after the Nikkei newspaper reported sales of glass for solar cells in the April- to-September period will likely rise 15 percent to about 15 billion yen ($161 million).

Increasing Orders

Clarion gained 4.2 percent to 99 yen. The company tripled the number of its non-regular employees to meet orders from Ford Motor Co., the Nikkan Kogyo newspaper reported. Kazumasa Okazawa, the company’s public relations representative, confirmed the report and said domestic orders were also increasing.

STATS Chippac Ltd., a provider of chip testing and packaging services, rose 5.6 percent to 85 Singapore cents. The company said its parent Temasek Holdings Pte is still considering if it will take the company private and delist it from the exchange.

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

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