Asian Stocks Drop as Jobs Report Adds to Growth Concern

By Adam Haigh - Jun 4, 2012 9:01 AM GMT+0700

Asian stocks fell after a U.S. payrolls report showed fewer jobs were added to the world’s largest economy than the most pessimistic forecast, adding to concern the global economy is slowing. Japan’s Topix Index is headed for its lowest closing level since 1983.

Sony Corp. (6758), a Japanese exporter of consumer electronics that gets about one fifth of its sales in the U.S., fell 1.4 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company, dropped 1.9 percent as metals prices declined. Cnooc Ltd. (883), China’s largest offshore oil producer, lost 3.6 percent as crude extended last week’s slump.

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June 4 (Bloomberg) -- Nick Maroutsos, co-founder of Sydney-based Kapstream Capital, talks about the outlook for global financial markets, the U.S. economy and his investment strategy. Maroutsos also discusses Europe's sovereign debt crisis. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

The MSCI Asia-Pacific Index dropped 2.1 percent to 109.01 as of 10:46 a.m. in Tokyo. The gauge tumbled 10 percent in May, the biggest monthly loss since October 2008, when global markets tumbled in the wake of the collapse of Lehman Brother Holdings Inc. Equities continued declines into June as the U.S. jobs report added to concern global growth is slowing and Europe’s debt crisis is worsening.

“People are more concerned about a return ‘of’ their capital, as opposed to a return ’on’ their capital,” said Nick Maroutsos, who oversees about A$3 billion ($2.9 billion) as managing director and co-founder of Sydney-based Kapstream Capital. “The recovery is still going to continue to have fits and starts. We need something more substantial” from central banks “that’s going to get investors back into the market. Until we get that, we’re not going to see risk assets perform well.”

Japan’s Topix fell 2.1 percent, below the lowest level seen during the 2008-2009 financial crisis and headed for its lowest close since December 1983. The gauge has fallen more than 20 percent from this year’s high on March 27, entering a so-called bear market. The Nikkei 225 Stock Average dropped 2.1 percent.

U.S. Payrolls

In Seoul, the Kospi index dropped 2.6 percent. Australia’s S&P/ASX 200 Index slid 1.7 percent and Hong Kong’s Hang Seng Index retreated 2.4 percent.

Futures on the Standard & Poor’s 500 Index lost 0.7 percent today. The index slumped 2.5 percent in New York on June 1 and the Dow Jones Industrial Average erased its 2012 gains after the jobs report.

U.S. payrolls climbed by 69,000 last month and the jobless rate rose to 8.2 percent. The Institute for Supply Management’s factory index fell after reaching a 10-month high.

“The poor U.S. payrolls number should start to deflate investor optimism about U.S. growth that we’ve encountered, leaving few places for investors to hide,” said Gerard Minack, global developed-market strategist at Morgan Stanley in Sydney.

Sony, Toyota

Sony fell 1.4 percent to 999 yen, dropping below 1,000 yen in Tokyo trading for the first time since 1980. Toyota Motor Corp., Asia’s biggest carmaker, retreated 3.6 percent to 2,903 yen. Honda Motor Co., the third-biggest, slid 2.7 percent to 2,392 yen and Nissan Motor Corp. declined 3.1 percent to 712 yen.

China’s non-manufacturing industries expanded at the slowest pace in more than a year as export orders declined and weakness in real estate countered strength in retailing and leasing, an official survey indicated.

The purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in statements yesterday in Beijing. That’s the lowest reading since March 2011 when the federation started seasonally adjusting the data.

The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. tumbled 3.4 percent to 87.22 on June 1 in New York, the biggest slump since Nov. 21.

Metals, Oil

The London Metal Exchange Index of prices for six industrial metals including copper and aluminum dropped 0.8 percent on June 1 and the Thomson Reuters/Jefferies CRB Index of raw materials slumped 1.7 percent.

BHP Billiton lost 1.9 percent to A$31.13. Rio Tinto Group, the world’s third- largest mining company, declined 3.3 percent to A$53.71.

Oil dropped for a fifth day, trading at the lowest level in almost eight months. Crude for July delivery fell as much as 0.8 percent lower in electronic trading on the New York Mercantile Exchange after falling 8.4 percent last week.

Cnooc lost 3.6 percent to HK$13.24. Woodside Petroleum Ltd. (WPL), Australia’s second-largest oil producer, retreated 3 percent to A$30.99.

Declines in the equity market has dragged valuations on the Asian benchmark down to 11.4 times estimated earnings on average through June 1, compared with 12.2 times for the S&P 500 and 9.8 times for the Stoxx 600.

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

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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Spain Seeks Joint Bank Effort as Pressure Rises on Merkel

By Patrick Donahue - Jun 4, 2012 5:01 AM GMT+0700

Spanish Prime Minister Mariano Rajoy said European leaders should reinforce efforts to protect euro- area banks, ratcheting up pressure on German Chancellor Angela Merkel to back new ideas for a resolution of the debt crisis.

With markets bracing for further deterioration in Spain’s finance sector and a possible Greek departure from the 17-member euro area, Rajoy on June 2 added his voice to calls for a more robust “banking union” in Europe, lending his support for a centralized system to re-capitalize lenders. On the same day, Merkel toughened her opposition to euro-area debt sharing, telling members of her party in Berlin that “under no circumstances” would she agree to German-backed euro bonds.

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Angela Merkel, Germany's chancellor. Photographer: Michele Tantussi/Bloomberg

“The EU needs to reinforce its common institutional architecture so that investors regain confidence in the single currency,” Rajoy said in the Spanish coastal town of Sitges near Barcelona. “Spain will emerge from the storm through its own efforts and with the support of our European partners.”

As euro-area unemployment reached its highest level on record, manufacturing output contracted for a 10th straight month in May and the currency plunged close to a two-year low against the U.S. dollar, leaders continued to wrangle over the details of support for the currency bloc. President Barack Obama meanwhile laid the blame for sluggish U.S. employment at the feet of euro-area leaders, saying they haven’t done enough to resolve the crisis, now in its third year.

Bailout Pressure

Merkel’s isolation was underlined yesterday by the new French Finance Minister Pierre Moscovici, who said that aid for troubled European banks should come through the European Stability Mechanism rather than through governments. “We need to go toward a banking union,” Moscovici said on RTL radio.

Any request for bank aid must be made by sovereign states, Norbert Barthle, budget spokesman for Merkel’s Christian Democrats in parliament, said in a May 29 interview, citing the need for national governments to act as guarantors.

Merkel and Finance Minister Wolfgang Schaeuble have urged Rajoy to accept an international bailout, Der Spiegel magazine reported, without saying where it obtained the information. Spain’s El Pais said yesterday that the European Union is also pressing Spain to accept funds, citing unidentified officials in Brussels. Merkel’s chief spokesman Steffen Seibert and a Spanish government official declined to comment on the reports.

‘Future of Europe’

Cyprus, the bloc’s third-smallest economy, is also increasingly likely to seek a bailout if recapitalization efforts for Cyprus Popular Bank’s fail, ECB Governing Council member Panicos Demetriades said yesterday. Greece, Ireland and Portugal have already received assistance.

Billionaire investor George Soros, speaking yesterday in Trento, Italy, said that European leaders, foremost among them Merkel, have a three-month window in which to “correct their mistakes and reverse the current trends.”

“We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be,” Soros said. “The future of Europe depends on it.”

Yields on German two-year notes fell below zero for the first time ever last week as investors fled riskier sovereign debt. Spanish bonds dropped for a fourth week, pushing the country’s 10-year yields above 6.5 percent -- nearing the 7 percent threshold which triggered the three earlier bailouts.

‘Cede Sovereignty’

Struggling to shore up confidence in Spain’s banking industry, Rajoy urged euro-area nations to “cede more sovereignty” to a central fiscal authority and endorsed the European Commission’s call for a banking union that would entail a single regulator and a deposit-guarantee fund.

Such a union, comprising a central rescue fund for lenders and centralized deposit guarantees, would only emerge “at the end of a long path,” Bundesbank Vice President Sabine Lautenschlaeger told the June 2 edition of Frankfurter Allgemeine Zeitung.

The shared risk implied by a supranational euro fund “can only be a success in a fiscal union with central controls and intervention rights,” Lautenschlaeger told the newspaper.

Facing down criticism that Germany needs to relent in its opposition to a range of proposals from jointly issued debt to channeling funds to banks, Merkel added nuance to her position on centralized controls last week by welcoming a set of Commission proposals calling for such measures and referring to “possibilities for greater cooperation.” The German leader meets European Commission President Jose Barroso in Berlin today.

‘New Possibilities’

“We could certainly make clearer to international financial markets what’s going on in Europe in terms of new institutions and new possibilities in order to relieve the concern that perhaps banks are unstable,” Merkel told reporters in Stralsund, Germany, on May 31, following a reference to banking insurance. She added that certain changes would require treaty amendments and suggested a time line of “five to 10 years.”

The chancellor’s hard line on debt sharing has been challenged by Italian Prime Minister Mario Monti, who told Greece’s To Vima yesterday that euro bonds will occur in some form. Monti will host a meeting with Merkel, Rajoy and French President Francois Hollande in Rome on June 22, ahead of the next EU summit at the end of the month.

Euro Break-Up

Those meetings take place after Greece holds its second election in as many months on June 17, with polls signaling a risk that no party will win an absolute majority. The possibility that a coalition supporting the European bailout package will again fall short has stoked speculation that the country could leave the monetary union and fragment a bloc designed to be unbreakable.

As crisis-resolution talks continue, Obama has become more vociferous in his call to action, with the impact of Europe’s troubles increasingly cited beyond the EU’s borders. The U.S. president said on June 1 that the slowest month of employment growth in a year was partly “attributable to Europe and the cloud that’s coming over from the Atlantic.”

Obama dispatched Lael Brainard, Treasury undersecretary for international affairs, to Europe last week for a three-day visit for talks with officials overseeing the crisis. She traveled to Athens, Madrid, Paris, Frankfurt and Berlin.

“Europe is having a significant crisis in part because they haven’t taken as many of the decisive steps as were needed to deal with the challenge,” Obama said in Minneapolis.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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China’s Non-Manufacturing Industries Grow at Slower Pace

By Bloomberg News - Jun 4, 2012 7:58 AM GMT+0700

China’s non-manufacturing industries expanded at the slowest pace in more than a year, as export orders declined and weakness in real estate countered strength in retailing and leasing, an official survey indicated.

The purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. That’s the lowest reading since March 2011 when the federation started seasonally adjusting the data.

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Non-manufacturing industries, including construction, account for about 40 percent of China's economy. Photographer: Nelson Ching/Bloomberg

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June 4 (Bloomberg) -- Alistair Thornton, a Beijing-based economist with IHS Global Insight, talks about the outlook for China's economy and central bank monetary policy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

The report adds to evidence of slower growth in the world’s second-biggest economy as Europe’s debt crisis crimps overseas demand and government curbs on real estate feed through to more industries. A Chinese manufacturing index had the weakest reading in five months in May, federation data last week showed, helping push Brent crude below $100 a barrel for the first time in almost eight months.

“The data reinforce the message that the slowdown has spread from the manufacturing sector to the services sector,” said Tim Condon, chief Asia economist at ING Financial Markets in Singapore. “The current slowdown is more complicated to read than the 2008 global financial crisis and is stressing the authorities’ vaunted fine-tuning skills.”

Service industries now account for 43 percent of the economy, the federation said in yesterday’s statement. That compares with almost 90 percent in the U.S. Under China’s current five-year plan, the government aims to raise the share of services in gross domestic product to 47 percent by 2015, according to a Xinhua news agency report on May 28.

Government Support

U.S. and European (SXXP) stocks fell for the fourth week in five as weaker-than-estimated manufacturing output in the U.S. and China plus record unemployment in the euro area heightened concerns the global economy is slowing.

The benchmark Shanghai Composite Index rose for the first time in four weeks on speculation the government will take steps to boost the economy after a manufacturing PMI compiled by the statistics bureau and logistics federation expanded at the slowest pace since December.

The 50.4 reading for May was barely above the 50 mark that divides expansion from contraction and compared with a 52.0 median estimate in a Bloomberg News survey of 27 economists. A separate gauge from HSBC Holdings Plc and Markit Economics released the same day showed a seventh straight contraction, the longest since the global financial crisis.

Weak Momentum

The manufacturing surveys present “clear signs of weak economic growth momentum,” China International Capital Corp. analysts led by Beijing-based Peng Wensheng said in a June 1 note. “The National Development and Reform Commission has recently expedited project approvals but whether this can effectively stabilize investment and GDP growth still depends on monetary and credit policies.”

The economists forecast two to three more cuts in banks’ reserve requirements this year and estimate a reduction in benchmark lending rates is likely “in the near term.”

Premier Wen Jiabao and the State Council, or Cabinet, warned last month that the economy faces increasing downward pressure. They pledged to put a greater focus on growth and “actively” raise domestic demand.

The government announced new subsidies to boost sales of energy-saving household appliances including refrigerators and washing machines after the expiry of a previous program last year. Gome Electrical Appliances Holding Ltd. (493), China’s second- biggest electronics retailer, said May 25 its first-quarter net income slumped 88 percent from a year earlier as the end of the incentives led to a drop in consumer demand.

Growth Slowdown

The government is also stepping up approvals for infrastructure and corporate investment projects to counter the economic slowdown that Credit Suisse Group AG estimates will push growth down to 7 percent or “slightly below” this quarter compared with a year earlier. Expansion moderated to 8.1 percent in the first three months of the year, the fifth straight quarterly slowdown.

The National Development and Reform Commission said on May 25 it gave Baosteel Group Corp., the parent of China’s largest listed steelmaker, approval for an $11 billion plant more than seven years after the project was conceived.

Inflation indicators in both the non-manufacturing and manufacturing PMIs declined in May, giving policy makers more room to implement stimulus to combat the slowdown. Consumer prices rose 3.4 percent in April from a year earlier, below the government’s 4 percent target for 2012 for the third month.

‘Obvious’ Decline

A gauge of input prices in yesterday’s survey fell to 53.6 from 57.9 in April, while an index measuring prices charged for goods contracted, showing a below-50 reading for the first time this year, according to a statement from the statistics bureau. The official manufacturing PMI showed input prices contracting for the first time since December.

The “obvious” decline in prices “could take some pressure off inflation,” Cai Jin, a federation vice chairman, said in a statement.

The non-manufacturing PMI is based on a survey of about 1,200 companies covering 27 industries including construction, transport and telecommunications. The federation and statistics bureau started publishing a seasonally adjusted index for the non-manufacturing PMI from the March survey, and revised readings back to March 2011.

A separate services industries gauge will be released by HSBC and Markit tomorrow.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Bloomberg News in Beijing at xzhou68@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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AIG Chief Sees Retirement Age as High as 80 After Crisis

By Boris Cerni and Zachary Tracer - Jun 4, 2012 5:00 AM GMT+0700

American International Group Inc. (AIG) Chief Executive Officer Robert Benmosche said Europe’s debt crisis shows governments worldwide must accept that people will have to work more years as life expectancies increase.

“Retirement ages will have to move to 70, 80 years old,” Benmosche, who turned 68 last week, said during a weekend interview at his seaside villa in Dubrovnik, Croatia. “That would make pensions, medical services more affordable. They will keep people working longer and will take that burden off of the youth.”

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American International Group Inc. Chief Executive Officer Robert Benmosche speaks during an interview at his villa in Dubrovnik. Photographer: Gianluca Colla/Bloomberg

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American International Group Inc. Chief Executive Officer Robert Benmosche speaks during an interview at his villa in Dubrovnik. Photographer: Gianluca Colla/Bloomberg

The crisis, now in its third year, threatens to destroy Europe’s 17-nation currency union as Greece contemplates exiting the euro and Spain sees its bond yields rise and banking industry falter. German Chancellor Angela Merkel hardened her opposition to joint debt sharing in the euro region as U.S. President Barack Obama singled out Europe’s leaders for not doing enough to arrest the crisis.

Greece abandoning the euro could be a disaster for the country and Europe must work to keep that from happening, said Benmosche, whose company was the world’s biggest insurer before it took a U.S. bailout.

“People in Greece have to see there is no easy way out of this” and the government must get them to work longer, he said in the June 2 interview on the Adriatic coast. “If not, and if they go to their own currency, I think they will see huge inflation and it will be devastating for people on fixed incomes.”

Life Expectancy

Greece, where the average life expectancy is 81.3 years, has an effective retirement age of 59.6, among the lowest in Europe, according to data compiled by Bloomberg. French President Francois Hollande, the Socialist who was sworn in last month, has pledged to cut the retirement age to 60 from 62 while increasing corporate and bank taxes and introducing a 75 percent levy on earnings of more than 1 million euros ($1.2 million).

Peter Hancock, CEO of AIG’s Chartis property-casualty unit, said last week the insurer has assigned staff from Argentina to advise their counterparts in Athens as the company prepares for a possible Greek exit from the euro, with the common currency at its lowest against the U.S. dollar since June 2010. Argentina defaulted on a record $95 billion of debt in 2001 and later abandoned a decade-long 1-to-1 peso peg to the greenback.

“We have gone through the crisis in Argentina and other countries over time, so we have experience there,” Benmosche said.

Taxpayer Rescue

Benmosche has sold non-U.S. life insurers, a consumer lender and other businesses to pay back its taxpayer rescue, which swelled to $182.3 billion as the U.S. extended more credit and lowered the interest charged. The Treasury Department has cut its stake to 61 percent from 92 percent through three share sales totaling about $17.6 billion. In the most recent two, AIG bought back a total of $5 billion in stock.

AIG still seeks to divest its plane-leasing unit and sell its remaining stake in Hong Kong-based insurer AIA Group Ltd.

“The overhang from the government’s ownership interest in AIG is in the process of going away,” Paul Newsome, an analyst at Sandler O’Neill & Partners LP, wrote in a May 30 research note. “AIG should have sufficient enough capital to facilitate the Treasury Department’s exit.”

Treasury raised $5.8 billion in the first offering in 2011, selling for $29 a share. At the same time, AIG sold 100 million shares for $2.9 billion to demonstrate access to the capital markets and satisfy a condition of its bailout. The insurer bought half of the $6 billion in stock the department divested at $29 apiece in March and $2 billion of a $5.75 billion offering that went for $30.50 a share in May. The government needs to average $28.72 to break even on its investment.

Lack Confidence

AIG slid 6.8 percent on June 1 to close the week at $27.21 after U.S. employers created the fewest jobs in a year and the nation’s jobless rate rose to 8.2 percent. Reports also showed manufacturing grew less than estimated in the U.S. and China, and contracted for a 10th month in the euro region.

Benmosche said people and businesses in the U.S. lack confidence and are hesitant to invest as financial regulation and tax policies remain unsettled.

“I am optimistic that we’ll continue to grow, and if we get past this period of uncertainty and gain confidence again in the U.S. economic system, that will help lead the world out of the situation we are in today.”

To contact the reporters on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net; Zachary Tracer in New York at Ztracer1@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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Hon Hai-Sharp Alliance Tested by Plunge in TV Maker Share Price

By Tim Culpan and Mariko Yasu - Jun 4, 2012 4:00 AM GMT+0700

Hon Hai Precision Industry Co. (2317), the assembler of Apple Inc. iPads, may seek to renegotiate a planned 133 billion-yen ($1.7 billion) alliance with Sharp Corp. (6753) after the Japanese TV maker’s shares fell to the lowest in 34 years.

Hon Hai agreed to buy 9.9 percent of Sharp, Japan’s largest maker of liquid-crystal displays, for 550 yen per share. Sharp shares have plunged 29 percent below that to 391 yen, meaning if the deal closed today at the agreed price, Hon Hai would have a paper loss of $247 million, equal to 49 percent of the Taipei- based manufacturer’s net income last quarter.

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An employee of Hon Hai Precision Industry Co. Ltd. works on a production line in Shenzhen, China. Hon Hai, flagship of the Foxconn group, and its affiliates will buy 121.65 million new shares in Sharp at 550 yen each, Sharp and Hon Hai said March 27. Gou and related companies will buy 46.5 percent in Sharp Display, a venture with Sony Corp., they said the same day. Photographer: Thomas Lee/Bloomberg

“With the current stock price, Hon Hai won’t be willing to pay that much, and given Hon Hai has more say in this alliance than Sharp, the Taiwanese company may request a review,” said Takashi Watanabe, an analyst at Goldman Sachs Group Inc.

Sharp fell to its lowest level since 1978 after the Osaka- based company forecast a wider-than-expected annual loss for the current fiscal year because of its unprofitable solar, panel, and audiovisual and communications divisions. Sharp Display Products Corp. is counting on a separate 66 billion-yen tie-up with Terry Gou, whose Foxconn Technology Group includes Hon Hai, and related investment companies to return to profitability.

Simon Hsing, the spokesman for Hon Hai, said the company remains committed to the deal, and he declined to comment on whether it would seek to renegotiate terms, including the price.

Gou’s Investment

“This is the most important deal we’ve had recently to realize our goal of greater vertical integration in the supply chain,” Hsing said. “We worked on it for nine months and plan to proceed.”

Sharp “currently doesn’t have a plan to change the price,” Miyuki Nakayama, a spokeswoman for the Tokyo-based company, said by phone.

Hon Hai, flagship of the Foxconn group, and its affiliates will buy 121.65 million new shares in Sharp at 550 yen each, Sharp and Hon Hai said March 27. Gou and related companies will buy 46.5 percent in Sharp Display, a venture with Sony Corp. (6758), they said the same day.

The alliance would give Hon Hai access to advanced display as the Taiwanese manufacturer looks to expand beyond assembly.

Sharp’s shares, which reached a 34-year low of 366 yen on May 21, rose on May 24 after Hon Hai said it may build a display factory with the Japanese company in Chengdu, China.

Sony Stake

Gou’s and Sharp’s stakes in Sharp Display will be diluted to 37.61 percent each after Sony said May 24 it will sell its entire 7.04 percent holding to the display unit by June 30, and Toppan Printing Co. (7911) and Dai Nippon Printing Co. said they would merge their operations at Sakai, Japan, with the display maker, giving them a 9.54 percent stake each.

“Hon Hai should try to renegotiate the price, because the loss on the value of the stake and capital expenditure to Sharp won’t be good for them in the short term,” said Laura Chen, a Taipei-based analyst at BNP Paribas SA who downgraded the stock to hold last week and cut her share-price estimate by 16 percent.

“In the long term, Hon Hai still wants the deal because Sharp has strong technology in panels, solar and electronics components.”

Hon Hai’s second-quarter earnings per share may fall 61 percent from the prior period partly because of the decline in Sharp’s share price, KC Kao, who rates the stock buy at Deutsche Bank AG in Taipei, wrote in a May 21 report. The investment and the Japanese company’s financial situation also increase the risk Hon Hai will need to raise funds, he wrote.

Capital Injection

Based on the May 21 closing price of 366 yen, Hon Hai would realize a loss of NT$6.3 billion ($213 million) on the Sharp stake, Kao wrote. BNP’s Chen estimates the loss for this period would be at least NT$5 billion if the transaction value remains unchanged.

The amount of capital injection needed by Sharp, coupled with a likely desire by Hon Hai to limit its equity exposure to the Japanese company, reduces the scope for them to renegotiate the deal, said Steve Myers, who rates Hon Hai sell at JI Asia in Tokyo. The two sides have until March to close the transaction, and there’s no immediate need to model for Sharp’s share-price declines in Hon Hai income statements because the deal hasn’t been completed, he said.

Seven Visits

Gou has traveled to Japan seven times since the deal was announced, Hon Hai’s Hsing said, an indication of the importance he places on the transaction. The Foxconn chairman also plans to proceed with his own investment in Sharp Display, Hsing said.

“The deal with Sharp is not just about panels,” Hsing said. “They have many different products that are of interest to us.”

Sharp on April 27 forecast a net loss of 30 billion yen for the year ending March 31, 2013, wider than the 7.6 billion yen average loss forecast of 23 analyst estimates compiled by Bloomberg. The LCD and solar businesses may contribute 10 billion yen in losses each, while the communications equipment and audio-visual unit may lose about 5 billion yen, Sharp said.

Sharp has 20 billion yen of bonds maturing in June and about 200 billion yen of convertible bonds maturing in September 2013, according to data compiled by Bloomberg. The company’s cash and near cash stood at 195.3 billion yen as of March 31, a drop of 19 percent from a year earlier.

A decreasing cash balance and forecasts for continuing losses may put Sharp in a weak position to refuse renegotiation, the Tokyo-based Watanabe said.

“I’m not so certain the March agreement will survive as it is,” said Shiro Mikoshiba, an analyst at Nomura Holdings Inc. in Tokyo. “There are also the uncertainties over Sharp’s earnings outlook that makes it unclear whether now is the right time to invest in Sharp.”

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Mariko Yasu in Tokyo at myasu@bloomberg.net.

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.

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Sony Drops Below 1,000 Yen, First Time Since 1980: Tokyo Mover

By Mariko Yasu - Jun 4, 2012 7:36 AM GMT+0700

Sony Corp. (6758) dropped below 1,000 yen in Tokyo trading for the first time since 1980, when the Walkman was new, after Japan’s currency gained and U.S. economic data added to concerns the global economy is slowing.

The shares fell as much as 2.3 percent to 990 yen and traded at 1,000 yen ($12.80) as of 9:25 a.m. on the Tokyo Stock Exchange. Sony, which recorded an all-time intraday high of 16,950 yen in March 2000, last traded below 1,000 yen on Aug. 7, 1980, according to data compiled by Bloomberg.

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Kazuo Hirai, president and chief executive officer of Sony Corp. Photographer: Tomohiro Ohsumi/Bloomberg

Sony, a trendsetter in the 1980s with the music player and the first compact-disc player, has posted four straight annual losses as it failed to come up with hit products and the yen surged, while consumers flocked to devices made by Apple Inc. and Samsung Electronics Co. Japan’s currency gained against all 16 major counterparts last week, rising to the highest level against the euro in more than 11 years.

Sony, Japan’s biggest exporter of consumer electronics, extended a 28-percent drop this year amid concerns the U.S. recovery is faltering while growth slows in China and Europe’s debt crisis worsens. U.S. payrolls climbed by 69,000 last month, less than the most-pessimistic forecast in a Bloomberg News survey, Labor Department figures showed June 1 in Washington.

Japan’s currency reached 95.60 against the euro last week, the strongest since Nov. 30, 2000, and touched 77.66 against the U.S. dollar on June 1, the highest since Feb. 14, as investors sought haven assets.

Record Loss

Chief Executive Officer Kazuo Hirai has already presided over a 42 percent decline in Sony’s market value since starting in the job on April 1. The 51-year-old executive took over from Howard Stringer after the maker of Bravia televisions posted a record loss last fiscal year, when Japan’s strongest earthquake and floods in Thailand crippled plants, while attacks by hackers disrupted Sony’s online entertainment network.

Sony posted a record 457 billion-yen loss in the year ended March. Its main television operation lost about 700 billion yen over the past eight years amid falling prices for TVs and competition from South Korea’s Samsung and LG Electronics Inc. The Tokyo-based company’s run of four straight full-year losses is the worst since Sony was listed in 1958.

Worth $125 billion in March 2000, Sony is now valued at less than $13 billion, compared with $525 billion for Cupertino, California-based Apple Inc. (005930) and $150 billion for Suwon, South Korea-based Samsung Electronics Co.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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