By Mike Cohen and Karl Maier
Sept. 3 (Bloomberg) -- Workers in Luanda are putting the finishing touches on a 22-story, glass-and-steel office tower for Angola's state oil company, complete with a helicopter pad. Two miles east, thousands of residents live on another of the capital's landmarks: a mountain of trash known as Boa Vista.
The disparity between Angola's oil-powered rich and its desperately impoverished lies at the heart of the country's first parliamentary election campaign in 16 years. The ruling Popular Movement for the Liberation of Angola, or MPLA, is being challenged by UNITA, whose 27-year rebellion ended in 2002 when government troops killed its leader, Jonas Savimbi.
UNITA, led by former diplomat Isaias Samakuva, and other opposition parties are looking to capitalize on growing discontent among the urban poor, who lack running water, proper sanitation and other services. At the same time, the oil company, Sonangol SA, posted sales of $17 billion last year.
``The peace dividends have not benefited the great majority of the population,'' said Paula Roque, an analyst at the Pretoria, South Africa-based Institute for Security Studies, who is observing the poll. ``The wealth of the elite is constantly flaunted before them.''
The economy of Angola, Africa's largest oil producer, grew 21 percent last year and probably will expand 16 percent this year, according to the International Monetary Fund. Annual growth averaged 15 percent between 2004 and 2007.
$2 a Day
Even so, about 70 percent of Angola's 12.5 million people live on less than a $2 a day, while the World Bank estimates one-quarter of Angolan children died before their fifth birthday in 2006. Both figures are the same as six years ago. The United Nations Development Program ranks Angola 162nd out of 177 countries in human development.
Campaign promises center around spending some of the oil revenue. State television shows frequent clips of President Jose Eduardo Dos Santos, 66, and his ministers opening new roads, clinics and schools. The MPLA pledges to provide electricity and running water to all urban areas and give free education to all children.
UNITA has in turn promised to end the status quo. It says 90 percent of the nation's wealth is controlled by less than 1 percent of the people.
``We need to ensure the taxes we have are properly spent,'' Jardo Muekalia, UNITA's campaign manager, said in a Sept. 1 interview.
Though the election is being contested by 10 political parties and four coalitions, the MPLA's billboards, flags, posters and T-shirts dominate in Luanda. Last weekend, ruling party candidates staged roadside barbeques, handing out free wine and food before the Sept. 5 election.
`Good Job'
``In any country, there are poor people,'' said hairdresser Vanda Melo, 43, who attended one such gathering. ``Health and housing are improving. The MPLA is doing a good job.''
The residents of trash mountain Boa Vista, which means Good View in Portuguese, live in tin shacks, buried under garbage slides during the rainy season, 3 kilometers from downtown.
``Life here is more than difficult,'' said Antonio Manuel, 39, who has lived with his family in Boa Vista for the past 14 years and earns $120 a month as a security guard. ``I want the government to give us proper houses as soon as possible.''
Meanwhile, Suzuki Motor Corp. and Toyota Motor Co. sports- utility vehicles lumber down the streets of Luanda. Restaurants selling $20 burgers and pizzas on the Ilha, a sandy strip jutting into Luanda bay and is the epicenter of the city's nightlife, are packed full.
Scarce Housing
A virtual absence of locally made goods and housing shortages have made Luanda the world's most expensive place for foreigners to live, according to ECA International, an international human resources association.
A report released by Berlin-based Transparency International in April this year ranked Sonangol as among the least publicly accountable of 42 oil companies.
The last time elections were held, in 1992, the MPLA won 129 seats and UNITA 70 in the 220-seat single house. Savimbi's party accused the MPLA of rigging the vote and resumed a civil war that ultimately claimed more than a million lives.
The credibility of this election is also under threat, according to New York-based Human Rights Watch, which says it has documented MPLA members beating up opposition supporters. It also says the government has undue influence over the commission organizing the vote.
``It's clear Angolans aren't able to campaign free from intimidation or pressure,'' Georgette Gagnon, Human Rights Watch's Africa director, said in an e-mailed statement.
Violence
UNITA says five of its members have been killed and at least 19 injured by the ruling party during the campaign. Rui Pinto de Andrade, the MPLA's director of information, denied his party was responsible.
Even if the poll is disputed, a return to the armed conflict that erupted after Angola won independence from Portugal in 1975 is unlikely: None of the opposition parties has shown the means or inclination toward violence.
``Unless there is direct and obvious fraud, or the perception thereof, and the outcomes are close, violence is likely to be restricted to some hotspots,'' London-based research Chatham House said in a report published Sept. 1.
To contact the reporters on this story: Mike Cohen in Luanda at mcohen21@bloomberg.net; Karl Maier in Rome at kmaier2@bloomberg.net.
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Wednesday, September 3, 2008
Japan Wind Eyes Tripling Market Share on Battery-Supported Farm
By Megumi Yamanaka and Mike Firn
Sept. 3 (Bloomberg) -- Japan Wind Development Co., the country's third-largest wind-power generator, plans to triple market share by building more battery-supported plants capable of supplying electricity even on windless days.
President Masayuki Tsukawaki wants to capture a third of the country's market by 2020, he said in an interview aired on Bloomberg Television today. The Tokyo-based company, known as JWD, is in talks with utilities in the U.S., Europe and Canada to build plants like its wind farm at Futamata in northern Japan, a world first, where power is stored in batteries and released to the grid during peak demand.
The technology enables the company to sell electricity when prices are highest, even if the wind isn't blowing. JWD is doing final tests at Futamata and is due to start full commercial power output this year. Tsukawaki said the plant is the linchpin of JWD's push to triple profit by the year ending March 2011.
``With the Futamata project making a smooth start, it's possible to achieve that target,'' said Nobuyoshi Sato, an analyst at Ichiyoshi Securities Co. in Tokyo. ``We need to wait and see how the project will contribute to full-year earnings and how much progress the company can make in building more battery- supported farms domestically and abroad.''
The Futamata plant, one of 24 wind-power plants operated by JWD, is supported by NGK Insulators Ltd.-made sodium-sulfur batteries, which have 4.3 times the capacity of conventional lead-acid devices. The units help JWD release power to the grid on demand, enabling it to sell through wholesaler Japan Electric Power Exchange at a better price than local power companies.
Better Prices
``The battery-supported wind farm is yielding profit, even though we are still at the testing stage,'' Tsukawaki said. ``We have been selling at prices five to seven times higher than the level at which we have been selling to regional utilities.''
The power exchange, which opened in 2005 as part of efforts to deregulate Japan's electricity market, allows utilities and new entrants to trade 1 megawatt-hour lots of electricity for delivery in the next 24 hours or monthly as far as a year ahead. JWD joined the bourse in 2007.
JWD sells power generated at Futamata at an average price of 20 yen per kilowatt-hour through the exchange compared with about 3 yen a kilowatt-hour paid by regional utilities.
``I want to allocate most of our resources to building new battery-supported wind farms,'' said Tsukawaki, who founded the company in 1999. ``These projects will boost cash flow and strengthen our earning power.''
Tsukawaki declined to say how much the company will spend on expansion or how much capacity he aims to create. ``We'll see a clearer picture after we finish the test of the Futamata project,'' he said.
Profit Outlook
JWD, which predicts a loss for the first-half of this fiscal year, forecast profit of 1.1 billion yen ($10 million) for the full year, up 68 percent from a year ago, according to the company's statement. Wind-power companies in Japan typically report losses in the first half because there is less wind in spring and summer.
The stock has climbed 27 percent this year. It declined 3.7 percent to trade at 313,000 yen at 2:04 p.m. Tokyo time.
Wind-energy capacity, which amounted to 0.5 percent of global consumption in 2007, will rise by 21 percent a year through 2012 as companies seek sources of power that don't emit greenhouse gases, the Brussels-based Global Wind Energy Council estimated in January.
Former Japanese Prime Minister Yasuo Fukuda announced in June that Japan will start carbon trading on a trial basis in the fall as part of efforts to cut emissions of the gases blamed for global warming. The government is still studying the plan and has not said whether it will include mandatory caps on emissions.
`Paradigm Shift'
Tsukuwaki, 49, who worked previously as an oil trader at Mitsui & Co., said he has long believed that renewable energy would be a focus in the future. ``I think we will witness a paradigm shift from a world dominated by oil now that the necessary technology is in place,'' he said.
Tsukawaki estimates wind-power capacity in Japan may increase to between 5 and 7 gigawatts in 2020, compared with 1.49 gigawatts in the year ended March 2007. Japan's trade ministry aims to double capacity to about 3 gigawatts by the year ending March 2011.
Shell Plc, Exxon Mobil Corp. and BP Plc. ``were the energy majors of the 20th century,'' he said. ``I believe the energy majors of the 21st century will come from the wind and solar industries. My target is to become a next-generation energy major.''
To contact the reporter for this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.
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Crude Oil Falls on Minimal U.S. Storm Damage, Stronger Dollar
By Nesa Subrahmaniyan
Sept. 3 (Bloomberg) -- Crude oil fell for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and a strengthening dollar curbed the appeal of commodities as an inflation hedge.
An aerial survey of platforms and rigs in the Gulf of Mexico found no structural damage and no oil spills, the U.S. Coast Guard said. Oil fell to a five-month low yesterday after the dollar rose to near a seven-month high against the euro on speculation the U.S. economy will outperform Europe and Asia.
``Gustav was more hype than action and there was very little damage so investors rushed for the exit,'' said Tetsu Emori, a fund manager at Astmax Co. in Tokyo. ``The dollar's gain is also prompting funds to lower their exposure to commodities, and another concern is demand as U.S. refiners are due to shut for maintenance soon.''
Crude oil for October delivery fell as much as $1.20, or 1.1 percent, to $108.51 a barrel, and traded at $108.94 at 3:10 p.m. Singapore time on the New York Mercantile Exchange. Prices are up 48 percent from a year ago. Yesterday, futures lost $5.75, or 5 percent, to settle at $109.71 a barrel, the lowest close since April 8.
Gustav made landfall in Louisiana Sept. 1 as a Category 2 hurricane, with winds close to 110 miles (177 kilometers) an hour. It has since been downgraded to a tropical storm as it heads toward northeastern Texas.
All of the Gulf's 1.3 million barrels a day of oil output and 95 percent of its gas production, or 7.06 billion cubic feet, remained shut, the U.S. government said yesterday.
Shell, Total
Royal Dutch Shell Plc, Total SA, ConocoPhillips and Valero Energy Corp. are among oil and gas producers, and refiners that have started initial inspections of facilities.
Oil, down more than $37 from its July record, dropped because Gustav inflicted less damage to states along the Gulf than occurred in 2005 when Hurricanes Katrina and Rita struck.
ConocoPhillips, the second-largest U.S. refiner, said its 247,000-barrel-a-day Alliance refinery in southern Louisiana sustained ``minor damage'' and a complete assessment of the refinery was scheduled to be made Sept. 1, according to spokesman Bill Tanner.
New York gasoline for October delivery was at $2.7177 a gallon, down 1.60 cents, at 3:04 p.m. Singapore time.
Oil's 26 percent slide from its July 11 record of $147.27 a barrel is a ``symptom'' of an economic slowdown in the U.S. and Europe and may continue over the next six months, investor Marc Faber said yesterday in a Bloomberg Television interview.
Moving Average
New York crude oil yesterday breached the 200-day average as slowing economic growth and unprecedented fuel costs slash U.S. demand for oil products.
The dollar traded at $1.4431 per euro at 1:51 p.m. Singapore time from $1.4617 on Sept. 1. It touched $1.4467, the strongest level since Feb. 8.
Brent crude oil for October settlement fell as much as $1.09, or 1 percent, to $107.25 a barrel and traded at $107.62 at 3:10 p.m. Singapore time. Yesterday, the contract declined $1.07, or 1 percent, to $108.34 a barrel on London's ICE Futures Europe exchange, the lowest close since April 10.
The 13 members of the Organization of Petroleum Exporting Countries, which pump about 40 percent of the world's output, will meet on Sept. 9 in Vienna to review production targets.
Oil prices are unlikely to drop below $100 a barrel because OPEC will cut production to support the price, billionaire hedge-fund manager Boone Pickens told CNBC yesterday.
``OPEC likes it up here,'' Pickens said in a televised interview from the New York Mercantile Exchange. ``I think they'll support it and cut production.''
Pickens, 80, is the founder and chairman of Dallas-based BP Capital LLC. He manages funds linked to both energy commodities and equities.
Analysts Differ
Analysts were split over whether U.S. crude-oil inventories rose or fell last week, a Bloomberg News survey showed.
U.S. refineries often shut units for maintenance, or turnaround, in September and October as gasoline demand falls and heating-oil use has yet to rise.
Supplies of crude oil probably rose 450,000 barrels last week from 305.8 million barrels, according to the median of responses by 10 analysts before an Energy Department report this week. Six expected an increase and four expected a drop.
Refineries probably operated at 87.5 percent of capacity in the week ended Aug. 29, up 0.2 percentage point from the week before, the survey showed. Plants ran at 92.1 percent of capacity during the same week last year.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.
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Sept. 3 (Bloomberg) -- Crude oil fell for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and a strengthening dollar curbed the appeal of commodities as an inflation hedge.
An aerial survey of platforms and rigs in the Gulf of Mexico found no structural damage and no oil spills, the U.S. Coast Guard said. Oil fell to a five-month low yesterday after the dollar rose to near a seven-month high against the euro on speculation the U.S. economy will outperform Europe and Asia.
``Gustav was more hype than action and there was very little damage so investors rushed for the exit,'' said Tetsu Emori, a fund manager at Astmax Co. in Tokyo. ``The dollar's gain is also prompting funds to lower their exposure to commodities, and another concern is demand as U.S. refiners are due to shut for maintenance soon.''
Crude oil for October delivery fell as much as $1.20, or 1.1 percent, to $108.51 a barrel, and traded at $108.94 at 3:10 p.m. Singapore time on the New York Mercantile Exchange. Prices are up 48 percent from a year ago. Yesterday, futures lost $5.75, or 5 percent, to settle at $109.71 a barrel, the lowest close since April 8.
Gustav made landfall in Louisiana Sept. 1 as a Category 2 hurricane, with winds close to 110 miles (177 kilometers) an hour. It has since been downgraded to a tropical storm as it heads toward northeastern Texas.
All of the Gulf's 1.3 million barrels a day of oil output and 95 percent of its gas production, or 7.06 billion cubic feet, remained shut, the U.S. government said yesterday.
Shell, Total
Royal Dutch Shell Plc, Total SA, ConocoPhillips and Valero Energy Corp. are among oil and gas producers, and refiners that have started initial inspections of facilities.
Oil, down more than $37 from its July record, dropped because Gustav inflicted less damage to states along the Gulf than occurred in 2005 when Hurricanes Katrina and Rita struck.
ConocoPhillips, the second-largest U.S. refiner, said its 247,000-barrel-a-day Alliance refinery in southern Louisiana sustained ``minor damage'' and a complete assessment of the refinery was scheduled to be made Sept. 1, according to spokesman Bill Tanner.
New York gasoline for October delivery was at $2.7177 a gallon, down 1.60 cents, at 3:04 p.m. Singapore time.
Oil's 26 percent slide from its July 11 record of $147.27 a barrel is a ``symptom'' of an economic slowdown in the U.S. and Europe and may continue over the next six months, investor Marc Faber said yesterday in a Bloomberg Television interview.
Moving Average
New York crude oil yesterday breached the 200-day average as slowing economic growth and unprecedented fuel costs slash U.S. demand for oil products.
The dollar traded at $1.4431 per euro at 1:51 p.m. Singapore time from $1.4617 on Sept. 1. It touched $1.4467, the strongest level since Feb. 8.
Brent crude oil for October settlement fell as much as $1.09, or 1 percent, to $107.25 a barrel and traded at $107.62 at 3:10 p.m. Singapore time. Yesterday, the contract declined $1.07, or 1 percent, to $108.34 a barrel on London's ICE Futures Europe exchange, the lowest close since April 10.
The 13 members of the Organization of Petroleum Exporting Countries, which pump about 40 percent of the world's output, will meet on Sept. 9 in Vienna to review production targets.
Oil prices are unlikely to drop below $100 a barrel because OPEC will cut production to support the price, billionaire hedge-fund manager Boone Pickens told CNBC yesterday.
``OPEC likes it up here,'' Pickens said in a televised interview from the New York Mercantile Exchange. ``I think they'll support it and cut production.''
Pickens, 80, is the founder and chairman of Dallas-based BP Capital LLC. He manages funds linked to both energy commodities and equities.
Analysts Differ
Analysts were split over whether U.S. crude-oil inventories rose or fell last week, a Bloomberg News survey showed.
U.S. refineries often shut units for maintenance, or turnaround, in September and October as gasoline demand falls and heating-oil use has yet to rise.
Supplies of crude oil probably rose 450,000 barrels last week from 305.8 million barrels, according to the median of responses by 10 analysts before an Energy Department report this week. Six expected an increase and four expected a drop.
Refineries probably operated at 87.5 percent of capacity in the week ended Aug. 29, up 0.2 percentage point from the week before, the survey showed. Plants ran at 92.1 percent of capacity during the same week last year.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.
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South Korea Won Falls as UBS, ABN Say Outflows Will Accelerate
By Kim Kyoungwha and William Sim
Sept. 3 (Bloomberg) -- South Korea's won, Asia's worst- performer this year, weakened to the lowest since 2004 as UBS AG and ABN Amro Bank NV predicted investors will continue selling the currency on expectations that the economy will falter.
The currency slumped for a fourth day as UBS and ABN predicted overseas investors will keep selling the nation's assets as government intervention fails to halt the drop. The economy grew 4.8 percent in the second quarter from a year earlier, the slowest pace in more than a year and the trade balance, which swung to a deficit for the first time in five years, recorded a shortfall of $3.23 billion in August.
``Given that the psychologically important 1,150 barrier was broken through, I can't tell for sure what will be the next line,'' said Chu In Young, a dealer with state-run Korea Development Bank in Seoul. ``Without strong intervention, the won has only one way to go.''
The won dropped 1.3 percent to 1,148.50 per dollar as of the 3 p.m. close in Seoul, from 1,134.00 yesterday, according to Seoul Money Brokerage Services Ltd. The currency weakened to as low as 1,159.05. It will fall to 1,300 for the first time in six years during the next 12 months, Duncan Wooldridge, a Hong Kong- based economist at UBS, Switzerland's biggest bank, wrote in a research note.
The won has slumped 19 percent this year as accelerating inflation and a slowing economy prompted funds including Pictet Asset Management Ltd. and Aberdeen Asset Management Plc to move money out of the country. Consumer prices climbed 4.7 percent during the first eight months from a year earlier.
Lower Forecasts
Investors should bet the won will weaken to 1,200 per dollar this year, the weakest since 2003, according to Irene Cheung, a Singapore-based strategist at ABN Amro.
The drop surprised strategists, who predicted at the start of the year that the won would climb 5 percent to 890 per dollar, according to a Bloomberg News survey of 22 estimates. The median of forecasts over the past month is still stronger at 1,049.
Moody's Investors Service said yesterday South Korea won't face a repeat of 1997, when the country was forced to turn to the International Monetary Fund for a $57 billion bailout and the currency lost about half of its value.
Currency, bond and stock markets will stabilize as concerns the nation is facing a financial crisis subside, Deputy Minister Shin Je Yoon said today.
``There's no need to worry because the situation is totally different from the 1997 financial crisis,'' Shin told reporters in Gwacheon today.
External Debt
Some investors have been concerned by an increase in the nation's short-term debt. External borrowings that mature in a year almost tripled to $175.65 billion as of June 30 from $65.9 billion at the end of 2005, official figures show.
South Korea's debt levels are in better shape now that they were in 1997, according to Credit Suisse, with corporate net debt-to-equity standing at an estimated 18 percent compared with 218 percent in 1997. Total foreign exchange reserves now exceed short-term external debt by about $72 billion, compared with in 1997 when the short-term external debt was over $40 billion more than the reserves, Credit Suisse said in a note today.
Stocks rose with the Kospi stock index gaining 1.4 percent, to 1,426.89, after heads of brokerages and asset managers called on investors to use the declines to purchase equities.
``The recent decline is excessive relative to domestic economic fundamentals,'' the Korea Securities Dealers Association said in a statement today. ``The stock market should recover and we recommend investors that the declines may provide a buying opportunity.''
Bonds Climb
Five-year government bonds rose for the first time in three days, on speculation yields near the highest in six weeks are attracting investors.
Crude prices near a five-month low are also adding to ``the positive mood'' in the bond market, allaying concerns inflation may accelerate, according to Lee Jai Shin, a fund manager with Good Morning Shinhan Securities Co. in Seoul.
The yield on the 5.25 percent note due March 2013 5 basis points to 5.98 percent, according to Korea Exchange. The price of the security rose 0.21 or 21 won per 10,000 face amount to 99.66. A basis point is 0.01 percentage point.
The Bank of Korea raised its benchmark rate for the first time in a year last month to 5.25 percent, saying that inflation poses a greater threat than slowing economic growth. The bank reviews rates again on Sept. 11.
The central bank may raise interest rates from an eight- year high in September or October as the weakening won fans inflation, Goldman Sachs Group Inc. said, after previously predicting no change. The won's declines could trigger ``an inflation-depreciation spiral if allowed to persist,'' Kwon Goohoon, a Goldman Sachs Group Inc. economist in Seoul wrote in a Sept. 2 report.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net
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Asian Currencies: Won Extends Drop, Ringgit Falls for 5th Day
By Anil Varma and Kim Kyoungwha
Sept. 3 (Bloomberg) -- Asian currencies declined, with South Korea's won falling past 1,150 per dollar for the first time since August 2004, on speculation investors are pulling out of emerging markets amid a global economic slump.
The won slumped for a fourth day as importers may have bought the dollar, which gained against the yen and euro. A decline of almost 5 percent in oil prices this week stoked speculation the Federal Reserve's monetary policy will help the U.S. economy outperform Europe and Asia.
``There is more downside to Asian currencies from a re-flow of capital out of Asia,'' said Irene Cheung, a Singapore-based strategist at ABN Amro Bank. ``The decline could accelerate in the next two months because banks in the U.S. and Europe are pulling out. They are short of cash and need to recapitalize toward year-end.''
Korea's won traded at 1,152.90 per dollar as of 1:30 p.m. in Seoul, from 1,134.00 yesterday, according to Seoul Money Brokerage Services Ltd. The won has slumped 19 percent this year, the worst performance among major Asian currencies, according to data compiled by Bloomberg. Six of the 10 most-active Asian currencies outside of Japan declined.
Crude oil settled at $109.71 a barrel yesterday on the New York Mercantile Exchange, the lowest close since April 8. The commodity has fallen almost 26 percent from a record high of $147.27 touched in July.
`Further Sell-Offs'
``Given that the psychologically important 1,150 barrier was broken through, I can't tell for sure what will be the next line,'' said Chu In Young, a dealer with state-run Korea Development Bank in Seoul. ``Without strong intervention, the won has only one way to go.''
South Korea will take ``stern action'' to stem the won's slide and concerns the nation is facing a financial crisis are ``groundless,'' the nation's Vice Finance Minister Kim Dong Soo said in Gwacheon yesterday.
The won will weaken to 1,200 per dollar by year's end, the weakest since 2003, amid ``further sell-offs'' of Korean stocks, ABN's Cheung forecasts.
Malaysia's ringgit fell for a fifth day to an 11-month low after a slide in oil prices and a slump in regional stocks boosted demand for the U.S. currency. The Kuala Lumpur Composite Index dropped for a second day.
``The dollar strength is quite overwhelming not only against the ringgit but across the region,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. ``Asian growth is also slowing down and there appears to be little support from the central bank for the ringgit.''
The ringgit fell 0.4 percent to 3.4415 per dollar, the weakest since Sept. 24, 2007, according to data compiled by Bloomberg. The currency may weaken to 3.4450 this week, Yahya said.
Chinese Yuan
The Chinese yuan dropped for a second day on speculation cheaper crude oil will bolster economic growth in the U.S., the world's No. 1 energy user.
Traders pared bets since mid-July on how far the yuan will rise in the next 12 months as the dollar rebounds. The People's Bank of China has managed the yuan's exchange rate against a basket of currencies, including the euro, the yen and the British pound, since a peg to the dollar was abolished in 2005.
``The dollar is rising so fast against major currencies,'' said Wen Li, a Beijing-based dealer at Bank of China Ltd., the country's biggest foreign currency trader. ``Traders have turned more cautious and refrained from betting on the yuan's one-way appreciation.''
The yuan dropped 0.2 percent to 6.8475 a dollar, according to the China Foreign Exchange Trade System.
Thailand Intervenes
Thailand's baht rose, snapping a three-day slump that took it to the lowest in more than a year, on speculation the central bank will support the currency after Prime Minister Samak Sundaravej declared a state of emergency.
The currency yesterday fell to the weakest since August 2007 after clashes in Bangkok between thousands of pro- and anti-government protesters left one dead and 43 injured. The central bank ``intervened'' to support the baht, Deputy Governor Atchana Waiquamdee said yesterday.
``I don't think the currency has stabilized,'' said Tetsuo Yoshikoshi, a Singapore-based market analyst at Sumitomo Mitsui Banking Corp. ``Even after the suspected intervention, the dollar-baht pair has been bid quite nervously. With general fears that Asian economies are slowing, the exacerbated political turmoil in Thailand is just adding coal to the fire.''
The baht rose 0.1 percent to 34.43 against the dollar, according to data compiled by Bloomberg. It slumped to 34.54 yesterday, the weakest level since Aug. 23, 2007. The currency may fall to 35 over the next two weeks, Yoshikoshi said.
Elsewhere, the Singapore dollar weakened 0.4 percent to S$1.4388. Vietnam's dong fell 0.3 percent to 16,610. India's financial markets in Mumbai were closed for a local holiday.
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
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Sept. 3 (Bloomberg) -- Asian currencies declined, with South Korea's won falling past 1,150 per dollar for the first time since August 2004, on speculation investors are pulling out of emerging markets amid a global economic slump.
The won slumped for a fourth day as importers may have bought the dollar, which gained against the yen and euro. A decline of almost 5 percent in oil prices this week stoked speculation the Federal Reserve's monetary policy will help the U.S. economy outperform Europe and Asia.
``There is more downside to Asian currencies from a re-flow of capital out of Asia,'' said Irene Cheung, a Singapore-based strategist at ABN Amro Bank. ``The decline could accelerate in the next two months because banks in the U.S. and Europe are pulling out. They are short of cash and need to recapitalize toward year-end.''
Korea's won traded at 1,152.90 per dollar as of 1:30 p.m. in Seoul, from 1,134.00 yesterday, according to Seoul Money Brokerage Services Ltd. The won has slumped 19 percent this year, the worst performance among major Asian currencies, according to data compiled by Bloomberg. Six of the 10 most-active Asian currencies outside of Japan declined.
Crude oil settled at $109.71 a barrel yesterday on the New York Mercantile Exchange, the lowest close since April 8. The commodity has fallen almost 26 percent from a record high of $147.27 touched in July.
`Further Sell-Offs'
``Given that the psychologically important 1,150 barrier was broken through, I can't tell for sure what will be the next line,'' said Chu In Young, a dealer with state-run Korea Development Bank in Seoul. ``Without strong intervention, the won has only one way to go.''
South Korea will take ``stern action'' to stem the won's slide and concerns the nation is facing a financial crisis are ``groundless,'' the nation's Vice Finance Minister Kim Dong Soo said in Gwacheon yesterday.
The won will weaken to 1,200 per dollar by year's end, the weakest since 2003, amid ``further sell-offs'' of Korean stocks, ABN's Cheung forecasts.
Malaysia's ringgit fell for a fifth day to an 11-month low after a slide in oil prices and a slump in regional stocks boosted demand for the U.S. currency. The Kuala Lumpur Composite Index dropped for a second day.
``The dollar strength is quite overwhelming not only against the ringgit but across the region,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. ``Asian growth is also slowing down and there appears to be little support from the central bank for the ringgit.''
The ringgit fell 0.4 percent to 3.4415 per dollar, the weakest since Sept. 24, 2007, according to data compiled by Bloomberg. The currency may weaken to 3.4450 this week, Yahya said.
Chinese Yuan
The Chinese yuan dropped for a second day on speculation cheaper crude oil will bolster economic growth in the U.S., the world's No. 1 energy user.
Traders pared bets since mid-July on how far the yuan will rise in the next 12 months as the dollar rebounds. The People's Bank of China has managed the yuan's exchange rate against a basket of currencies, including the euro, the yen and the British pound, since a peg to the dollar was abolished in 2005.
``The dollar is rising so fast against major currencies,'' said Wen Li, a Beijing-based dealer at Bank of China Ltd., the country's biggest foreign currency trader. ``Traders have turned more cautious and refrained from betting on the yuan's one-way appreciation.''
The yuan dropped 0.2 percent to 6.8475 a dollar, according to the China Foreign Exchange Trade System.
Thailand Intervenes
Thailand's baht rose, snapping a three-day slump that took it to the lowest in more than a year, on speculation the central bank will support the currency after Prime Minister Samak Sundaravej declared a state of emergency.
The currency yesterday fell to the weakest since August 2007 after clashes in Bangkok between thousands of pro- and anti-government protesters left one dead and 43 injured. The central bank ``intervened'' to support the baht, Deputy Governor Atchana Waiquamdee said yesterday.
``I don't think the currency has stabilized,'' said Tetsuo Yoshikoshi, a Singapore-based market analyst at Sumitomo Mitsui Banking Corp. ``Even after the suspected intervention, the dollar-baht pair has been bid quite nervously. With general fears that Asian economies are slowing, the exacerbated political turmoil in Thailand is just adding coal to the fire.''
The baht rose 0.1 percent to 34.43 against the dollar, according to data compiled by Bloomberg. It slumped to 34.54 yesterday, the weakest level since Aug. 23, 2007. The currency may fall to 35 over the next two weeks, Yoshikoshi said.
Elsewhere, the Singapore dollar weakened 0.4 percent to S$1.4388. Vietnam's dong fell 0.3 percent to 16,610. India's financial markets in Mumbai were closed for a local holiday.
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
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Ruble Falls Against Currency Basket as It Slides Versus Dollar
By Emma O'Brien
Sept. 3 (Bloomberg) -- Russia's ruble fell against a dollar- euro currency basket used by policy makers to contain its fluctuations. It dropped versus the dollar and pared gains against the euro.
The managed Russian currency slipped 0.3 percent against the basket to 29.9131 at 11:23 a.m. in Moscow, from 29.8319 yesterday. The basket is made up of about 55 percent dollars and 45 percent euros.
The ruble dropped 0.6 percent per dollar to 24.9333, from 24.7883. Against the euro, it traded at 35.9580 after earlier advancing as high as 35.8663.
Russia's central bank keeps the ruble within a trading band versus the basket to limit the effect of fluctuations on the competitiveness of the country's exports.
The Federal Statistics Agency releases its weekly inflation update today. Consumer price growth was unchanged at 9.5 percent in the year through Aug. 25.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Sept. 3 (Bloomberg) -- Russia's ruble fell against a dollar- euro currency basket used by policy makers to contain its fluctuations. It dropped versus the dollar and pared gains against the euro.
The managed Russian currency slipped 0.3 percent against the basket to 29.9131 at 11:23 a.m. in Moscow, from 29.8319 yesterday. The basket is made up of about 55 percent dollars and 45 percent euros.
The ruble dropped 0.6 percent per dollar to 24.9333, from 24.7883. Against the euro, it traded at 35.9580 after earlier advancing as high as 35.8663.
Russia's central bank keeps the ruble within a trading band versus the basket to limit the effect of fluctuations on the competitiveness of the country's exports.
The Federal Statistics Agency releases its weekly inflation update today. Consumer price growth was unchanged at 9.5 percent in the year through Aug. 25.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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South Africa's Rand Falls Against Dollar as Commodities Slump
By Garth Theunissen
Sept. 3 (Bloomberg) -- South Africa's rand fell for a third day against the dollar as the country's stocks dropped on concern a slide in commodity prices would trim export earnings for the world's biggest producer of precious metals.
The rand declined to the weakest level in more than two weeks as the Reuters/Jeffries CRB Index of 19 commodities slumped to a 6 1/2 month low on bets a global economic slowdown would crimp demand for raw materials. Commodities account for more than half of South Africa's exports, according to data from the Department of Minerals and Energy.
``Negative sentiment towards commodities is certainly acting as a drag on the rand,'' said Ulrich Leuchtmann, an emerging- markets currency strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``A drop in commodity prices puts pressure on South Africa's ability to fund its current account deficit.''
The rand dropped as much as 1.2 percent to 7.8668 per dollar, the weakest level since Aug. 18, and was at 7.8618 by 10:30 a.m. in Johannesburg, from 7.7755 yesterday. It slipped to 11.3092 per euro, from 11.2897 yesterday.
South Africa's FTSE/JSE Africa All Share Index fell for a fourth day, losing as much as 0.8 percent, led by a slide in mining stocks as gold dropped below $800 an ounce.
Gold lost as much as 0.9 percent as lower oil prices and a stronger dollar reduced the appeal of the metal as a hedge against inflation. Platinum fell as much as 0.2 percent. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with their prices.
Current Account
South Africa needs foreign purchases of stocks and bonds to finance its current-account gap, which swelled to 9 percent of gross domestic product in the first quarter, the most in 26 years.
Government bonds fell, with the yield on the benchmark 13.5 percent security due September 2015 adding 2 basis points to 9.26 percent. The yield on the 13 percent note maturing in August 2010, which is more sensitive to interest-rate expectations, climbed 3 basis points to 9.90 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg at gtheunissen@bloomberg.net
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Sept. 3 (Bloomberg) -- South Africa's rand fell for a third day against the dollar as the country's stocks dropped on concern a slide in commodity prices would trim export earnings for the world's biggest producer of precious metals.
The rand declined to the weakest level in more than two weeks as the Reuters/Jeffries CRB Index of 19 commodities slumped to a 6 1/2 month low on bets a global economic slowdown would crimp demand for raw materials. Commodities account for more than half of South Africa's exports, according to data from the Department of Minerals and Energy.
``Negative sentiment towards commodities is certainly acting as a drag on the rand,'' said Ulrich Leuchtmann, an emerging- markets currency strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``A drop in commodity prices puts pressure on South Africa's ability to fund its current account deficit.''
The rand dropped as much as 1.2 percent to 7.8668 per dollar, the weakest level since Aug. 18, and was at 7.8618 by 10:30 a.m. in Johannesburg, from 7.7755 yesterday. It slipped to 11.3092 per euro, from 11.2897 yesterday.
South Africa's FTSE/JSE Africa All Share Index fell for a fourth day, losing as much as 0.8 percent, led by a slide in mining stocks as gold dropped below $800 an ounce.
Gold lost as much as 0.9 percent as lower oil prices and a stronger dollar reduced the appeal of the metal as a hedge against inflation. Platinum fell as much as 0.2 percent. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with their prices.
Current Account
South Africa needs foreign purchases of stocks and bonds to finance its current-account gap, which swelled to 9 percent of gross domestic product in the first quarter, the most in 26 years.
Government bonds fell, with the yield on the benchmark 13.5 percent security due September 2015 adding 2 basis points to 9.26 percent. The yield on the 13 percent note maturing in August 2010, which is more sensitive to interest-rate expectations, climbed 3 basis points to 9.90 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg at gtheunissen@bloomberg.net
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U.K. Pound Declines as Confidence Stays at Lowest in Four Years
By Lukanyo Mnyanda
Sept. 3 (Bloomberg) -- The U.K. pound traded at the lowest level in 2 1/2 years against the dollar after a report showed confidence among Britain's consumers stayed at the weakest in at least four years.
The pound slipped for a seventh day after Nationwide Building Society said its index of sentiment taken from the responses of 1,000 people remained at 52 in August, the same as a month earlier, which was the lowest since the survey began in May 2004. A report today will probably show the nation's services industry shrunk last month, adding to evidence the economy is headed toward a recession.
The currency yesterday traded below $1.78 for the first time since April 2006 even as Prime Minister Gordon Brown announced measures to reverse a plunge in property values. The pound also fell to a record low against the euro on bets the Bank of England will resist cutting interest rates tomorrow, delaying an economic recovery.
Brown's measures ``have had little impact,'' analysts led by Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman & Co., wrote in a client note yesterday. ``Failure to cut rates on Thursday may put further weight on the pound.''
The pound fell as much as 0.8 percent to $1.7703, the lowest level since April 2006, and was trading at $1.7738 at 8:06 a.m. in London, from $1.7839 yesterday. The U.K. currency traded at 81.44 pence per euro, after falling yesterday to 81.64 pence, an all-time low.
Brown yesterday proposed spending 1 billion pounds ($1.79 billion) sooner than planned to help the housing market recover from its worst slump in at least 18 years. Britain's building industry contracted last month, a survey showed yesterday.
Darling's Views
Gilts rose today, with the yield on the 10-year note falling 4 basis points to 4.46 percent. The 5 percent security due March 2018 gained 0.29, or 2.9 pounds per 1,000-pound face amount, to 104.16. The yield on the two-year note, more sensitive to interest-rate changes, fell 5 basis points to 4.42 percent.
The pound's depreciation accelerated since Chancellor of the Exchequer Alistair Darling told the Guardian newspaper at the weekend the U.K. faces its biggest economic slowdown in 60 years. He said later he was referring to the global economy.
``We face a unique set of circumstances that we have not seen in a generation,'' Darling said in an interview broadcast on U.K. television channels yesterday. ``I remain optimistic that we can get through it. We will get through it.''
BNP Paribas SA, the most accurate currency forecaster in a 2007 Bloomberg survey, yesterday changed its year-end forecast for the pound against the dollar to $1.71, from a previous prediction of $1.88.
The Chartered Institute of Purchasing and Supply will probably say today its index based on a survey of about 700 service companies dropped to 47 points last month, from 47.4 in July, according to economists polled by Bloomberg. That would be the fourth month the reading has been below the 50 level that indicates expansion. The data is scheduled for release at 9:30 a.m. in London.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
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Sept. 3 (Bloomberg) -- The U.K. pound traded at the lowest level in 2 1/2 years against the dollar after a report showed confidence among Britain's consumers stayed at the weakest in at least four years.
The pound slipped for a seventh day after Nationwide Building Society said its index of sentiment taken from the responses of 1,000 people remained at 52 in August, the same as a month earlier, which was the lowest since the survey began in May 2004. A report today will probably show the nation's services industry shrunk last month, adding to evidence the economy is headed toward a recession.
The currency yesterday traded below $1.78 for the first time since April 2006 even as Prime Minister Gordon Brown announced measures to reverse a plunge in property values. The pound also fell to a record low against the euro on bets the Bank of England will resist cutting interest rates tomorrow, delaying an economic recovery.
Brown's measures ``have had little impact,'' analysts led by Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman & Co., wrote in a client note yesterday. ``Failure to cut rates on Thursday may put further weight on the pound.''
The pound fell as much as 0.8 percent to $1.7703, the lowest level since April 2006, and was trading at $1.7738 at 8:06 a.m. in London, from $1.7839 yesterday. The U.K. currency traded at 81.44 pence per euro, after falling yesterday to 81.64 pence, an all-time low.
Brown yesterday proposed spending 1 billion pounds ($1.79 billion) sooner than planned to help the housing market recover from its worst slump in at least 18 years. Britain's building industry contracted last month, a survey showed yesterday.
Darling's Views
Gilts rose today, with the yield on the 10-year note falling 4 basis points to 4.46 percent. The 5 percent security due March 2018 gained 0.29, or 2.9 pounds per 1,000-pound face amount, to 104.16. The yield on the two-year note, more sensitive to interest-rate changes, fell 5 basis points to 4.42 percent.
The pound's depreciation accelerated since Chancellor of the Exchequer Alistair Darling told the Guardian newspaper at the weekend the U.K. faces its biggest economic slowdown in 60 years. He said later he was referring to the global economy.
``We face a unique set of circumstances that we have not seen in a generation,'' Darling said in an interview broadcast on U.K. television channels yesterday. ``I remain optimistic that we can get through it. We will get through it.''
BNP Paribas SA, the most accurate currency forecaster in a 2007 Bloomberg survey, yesterday changed its year-end forecast for the pound against the dollar to $1.71, from a previous prediction of $1.88.
The Chartered Institute of Purchasing and Supply will probably say today its index based on a survey of about 700 service companies dropped to 47 points last month, from 47.4 in July, according to economists polled by Bloomberg. That would be the fourth month the reading has been below the 50 level that indicates expansion. The data is scheduled for release at 9:30 a.m. in London.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
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Yuan Onshore Forwards More Bullish Than Offshore for First Time
By Belinda Cao
Sept. 3 (Bloomberg) -- Traders of yuan forward contracts inside China are more bullish than those outside for the first time as overseas investors pared bets on the currency's gains versus the dollar.
One-year yuan non-deliverable forwards contracts, traded between international banks, yesterday declined 1 percent to 6.7490 per dollar in Tokyo, showing traders are betting on a 1.3 percent gain in the Chinese currency in the next 12 months. That compares with 6.7440 per dollar traded in Shanghai for similar- dated contracts, implying a 1.4 percent advance.
The reversal occurred after China reined in the yuan on concerns attempts to curb inflation through currency appreciation were hurting exporters. A smaller difference between forward rates reduces incentives for arbitrage by investors able to trade inside and outside of China, said David Mann, a strategist at Standard Chartered Plc in Hong Kong.
``There's a less obvious one-way bet over the longer term for the yuan,'' Mann said. ``Also the liquidity on the onshore market is rising.''
China had allowed the yuan to rise faster in the first half of 2008 as it sought to curb inflation and trim a record trade surplus with a stronger currency. Forward rates on Jan. 2 showed investors expected the yuan to gain 9 percent versus the dollar in one year's time. The currency strengthened 6.6 percent in the first half, following a 6.9 percent advance for the whole of 2007.
The yuan dropped for a second day against the dollar, sliding along with currencies including the euro and the pound on speculation cheaper crude oil will bolster economic growth in the U.S. China's currency fell 0.12 percent to 6.8476 per dollar as of 12:21 p.m. in Shanghai, from 6.8397 yesterday, according to the China Foreign Exchange Trade System.
Policy Shift
In August, policy makers switched focus to sustaining growth as well as cooling inflation, after expansion in the world's fourth-biggest economy declined for four straight quarters amid a global slowdown. Inflation slowed to 6.3 percent in July, from a 12-year high of 8.7 percent in February.
``The central bank may be satisfied with a gaining pace of 2 to 3 percent in a year,'' said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the country's largest foreign currency trader. ``Overseas opinions are divided on the currency's pace of appreciation.''
China's currency fell 0.05 percent in August, the first monthly loss since May 2006 and closed at 6.8397 a dollar yesterday.
``The gap between the two market prices is at historically low levels now as offshore prices tend to move with those onshore,'' Shi said.
Negative Spread
The yuan's gains have only played a limited role in fighting inflation, said Zhang Xiaojing, director of the institute of economics at the China Academy of Social Sciences. ``The authorities have come to an agreement that they will no longer rely on fast yuan gains to stem inflation,'' he said.
The yuan spread between the two 12-month contracts today was minus 0.03 as of 1:45 p.m. in Shanghai, data compiled by Bloomberg showed. International traders cut bets on the currency's gains yesterday by the most in almost three months, making rates traded offshore weaker than those onshore.
The biggest difference this year between offshore and onshore rates was 0.23 yuan, reached in July. Yuan forwards weren't traded between banks in China until August 2005, when the government scrapped the currency's peg to the dollar.
Forwards are agreements to buy and sell assets at current prices for delivery at a specified time and date. Non- deliverable contracts are used for currencies that can't be freely converted and are settled in dollars.
Domestic Influence
China may need to let domestic banks trade non-deliverable forwards overseas to stress the influence of Chinese institutions in pricing forwards, Tang Liang, a currency trader at the Beijing Branch of Industrial and Commercial Bank of China Ltd., said in an interview.
He said the volume of yuan forwards traded by customers at his bank more than doubled in the first six months of 2008 from a year ago.
The yuan forward market is becoming more like that of the other currencies where it's normal for the onshore market to be more liquid and have more influence in driving markets, according to Mann at Standard Chartered.
``It's returning to normality now as it's abnormal previously for the offshore market to have more influence,'' he said.
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
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Sept. 3 (Bloomberg) -- Traders of yuan forward contracts inside China are more bullish than those outside for the first time as overseas investors pared bets on the currency's gains versus the dollar.
One-year yuan non-deliverable forwards contracts, traded between international banks, yesterday declined 1 percent to 6.7490 per dollar in Tokyo, showing traders are betting on a 1.3 percent gain in the Chinese currency in the next 12 months. That compares with 6.7440 per dollar traded in Shanghai for similar- dated contracts, implying a 1.4 percent advance.
The reversal occurred after China reined in the yuan on concerns attempts to curb inflation through currency appreciation were hurting exporters. A smaller difference between forward rates reduces incentives for arbitrage by investors able to trade inside and outside of China, said David Mann, a strategist at Standard Chartered Plc in Hong Kong.
``There's a less obvious one-way bet over the longer term for the yuan,'' Mann said. ``Also the liquidity on the onshore market is rising.''
China had allowed the yuan to rise faster in the first half of 2008 as it sought to curb inflation and trim a record trade surplus with a stronger currency. Forward rates on Jan. 2 showed investors expected the yuan to gain 9 percent versus the dollar in one year's time. The currency strengthened 6.6 percent in the first half, following a 6.9 percent advance for the whole of 2007.
The yuan dropped for a second day against the dollar, sliding along with currencies including the euro and the pound on speculation cheaper crude oil will bolster economic growth in the U.S. China's currency fell 0.12 percent to 6.8476 per dollar as of 12:21 p.m. in Shanghai, from 6.8397 yesterday, according to the China Foreign Exchange Trade System.
Policy Shift
In August, policy makers switched focus to sustaining growth as well as cooling inflation, after expansion in the world's fourth-biggest economy declined for four straight quarters amid a global slowdown. Inflation slowed to 6.3 percent in July, from a 12-year high of 8.7 percent in February.
``The central bank may be satisfied with a gaining pace of 2 to 3 percent in a year,'' said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the country's largest foreign currency trader. ``Overseas opinions are divided on the currency's pace of appreciation.''
China's currency fell 0.05 percent in August, the first monthly loss since May 2006 and closed at 6.8397 a dollar yesterday.
``The gap between the two market prices is at historically low levels now as offshore prices tend to move with those onshore,'' Shi said.
Negative Spread
The yuan's gains have only played a limited role in fighting inflation, said Zhang Xiaojing, director of the institute of economics at the China Academy of Social Sciences. ``The authorities have come to an agreement that they will no longer rely on fast yuan gains to stem inflation,'' he said.
The yuan spread between the two 12-month contracts today was minus 0.03 as of 1:45 p.m. in Shanghai, data compiled by Bloomberg showed. International traders cut bets on the currency's gains yesterday by the most in almost three months, making rates traded offshore weaker than those onshore.
The biggest difference this year between offshore and onshore rates was 0.23 yuan, reached in July. Yuan forwards weren't traded between banks in China until August 2005, when the government scrapped the currency's peg to the dollar.
Forwards are agreements to buy and sell assets at current prices for delivery at a specified time and date. Non- deliverable contracts are used for currencies that can't be freely converted and are settled in dollars.
Domestic Influence
China may need to let domestic banks trade non-deliverable forwards overseas to stress the influence of Chinese institutions in pricing forwards, Tang Liang, a currency trader at the Beijing Branch of Industrial and Commercial Bank of China Ltd., said in an interview.
He said the volume of yuan forwards traded by customers at his bank more than doubled in the first six months of 2008 from a year ago.
The yuan forward market is becoming more like that of the other currencies where it's normal for the onshore market to be more liquid and have more influence in driving markets, according to Mann at Standard Chartered.
``It's returning to normality now as it's abnormal previously for the offshore market to have more influence,'' he said.
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
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Euro Falls Against Dollar Before Reports on European Spending
By Stanley White
Sept. 3 (Bloomberg) -- The euro fell to the lowest in more than seven months against the dollar before reports that will probably show European consumers are spending less as the economy contracts.
The 15-nation currency approached the lowest in five months versus the yen on speculation the European Central Bank will signal concern about the region's economy this week. The pound traded near a two-year low against the dollar on concern the U.K. is heading for a recession as house prices plunge. The South Korean won declined to the weakest in four years on speculation international investors are selling the country's assets.
``The euro and pound will continue to be sold,'' said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``The outlook for European economies has deteriorated a lot in a very short time span. It's only natural to speculate about when officials will have to lower rates.''
The euro declined to $1.4412, the lowest since Jan. 22, before trading at $1.4430 as of 8:21 a.m. in London from $1.4520 yesterday. It may drop to $1.44 today, Amikura said. The dollar was at 109.03 yen from 108.61 yen. The pound dropped to $1.7703, the lowest level since April 2006. The euro traded at 157.34 yen from 157.68 yen.
The South Korean won declined to a four-year low of 1,159.05 per dollar before closing at 1,148.55 from 1,133.75 yesterday. UBS AG and ABN Amro Bank NV predicted further declines in the currency, Asia's worst performer, as overseas investors will keep selling the nation's assets.
European Retail
European retail sales fell 2.1 percent in July from a year earlier, after a record 3.1 percent decline the previous month, according to the median forecast of 18 economists surveyed by Bloomberg News. The European Union's statistics office, which started to compile the data in 1995, is scheduled to release the report at 11 a.m. today in Luxembourg.
Revised data today may confirm that the euro zone economy shrank 0.2 percent in the second quarter, the first contraction since the euro's debut in 1999.
The U.S. currency surged 6 percent versus the euro in August, its biggest monthly gain since the European currency started trading in 1999. The economies of Europe and Japan shrank in the second quarter, while U.S. gross domestic product expanded at a 3.3 percent annual pace.
The European Central Bank will hold its main refinancing rate at a seven-year high of 4.25 percent at its meeting tomorrow, according to all but one of the 53 analysts surveyed by Bloomberg News.
`Grind Lower'
``The euro seems poised to grind lower,'' said Mitsuru Sahara, senior currency sales manager in Tokyo at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly listed lender. ``Higher-yielding currencies are losing their luster because the economic outlook suggests interest rates in several countries are going to start falling.''
The euro may decline to $1.4430 today, he said.
Federal Reserve Chairman Ben S. Bernanke has gone from a dollar liability to an asset, sparking a rally that even bears say shows few signs of ending.
While the U.S. Dollar Index fell to a record low in March as the Fed cut interest rates at the fastest pace in two decades, traders now anticipate lower borrowing costs will help America recover from a global economic slowdown before Asia or Europe. Investors bought four times as many dollars in August as the average over the previous 12 months, according to Bank of New York Mellon, a custodian for more than $23 trillion in assets.
Forecast Change
Standard Chartered Plc and BNP Paribas SA raised their forecasts for the U.S. currency yesterday. London-based Standard Chartered predicts the dollar will rise to $1.44 per euro by year-end and $1.36 by March 31, compared with previous forecasts of $1.49 and $1.42. BNP, based in Paris, forecasts the dollar will gain to $1.42 versus the euro and $1.71 against the pound by year-end, stronger than the old forecasts of $1.45 and $1.88.
The dollar rose against the yen on speculation a decline in oil prices will support economic growth in the world's largest energy consumer.
Crude oil for October delivery fell 0.7 percent to $108.90 a barrel, near a five-month low of $105.46 reached yesterday.
``The dropping commodity prices tend to benefit the dollar,'' said Magnus Prim, chief foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. ``Even without that, focus has shifted to the weakness in the euro area. That hasn't fully been priced in yet.''
`Sterling Struggling'
The pound was at 81.47 pence per euro, near a record low of 81.64 pence reached yesterday. U.K. consumer confidence stayed at a four-year low in August, according to the findings of a survey published today by Nationwide Building Society, the nation's second-biggest mortgage lender. The Bank of England will keep its target lending rate unchanged at 5 percent tomorrow, according to all of the 61 economists surveyed by Bloomberg News.
U.K. inflation will reach about 5 percent in coming months and may slow to below the central bank's 2 percent target in two years if the benchmark rate remains unchanged, BOE Governor Mervyn King said Aug. 13.
``Sterling is struggling to shore up support ahead of the BOE meeting,'' analysts led by Mansoor Mohi-uddin, Zurich-based chief currency strategist at UBS AG, the world's second-largest currency trader, wrote in a research note yesterday. ``Sterling weakness will continue while the BOE remains trapped by above- target inflation.''
Nonfarm Payrolls
Gains in the dollar may be limited by speculation a weakening U.S. labor market will damp consumer spending.
U.S. nonfarm payrolls fell by 75,000 jobs in August, faster than the previous month's decline of 51,000, according to the median estimate in a Bloomberg News survey before the Labor Department releases the report Sept. 5.
``I don't think the U.S. fundamentals at all support the idea of a stronger U.S. dollar going into next year,'' said Clifford Bennett, chief economist at Sonray Capital Markets Ltd., in an interview with Bloomberg Television. ``The dollar is going to turn around at some point.''
The euro's decline through $1.4555, an extension of a decline from a ``double top,'' signaled the European currency may fall to $1.4310, a level last reached in December, wrote Kevin Edgeley, an analyst at Goldman Sachs Group Inc. in London who uses charts to predict currency movements, in a research note yesterday.
A double top occurs when a currency makes two successive peaks, often indicating a trend's reversal. The euro reached $1.6019 on April 22, dropped to a two-month low of $1.5285 on May 8, and rose to the record of $1.6038 on July 15.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net.
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Carney May `Keep the Powder Dry' and Hold Canada's Rate at 3%
By Greg Quinn
Sept. 3 (Bloomberg) -- The Bank of Canada will likely keep borrowing costs unchanged today as inflation stays above its upper limit, and may express greater concern about an economy that just missed contracting for a second straight quarter.
Governor Mark Carney and his five deputies will leave the target rate on overnight loans between commercial banks at 3 percent for a third straight meeting, according to 27 of 28 economists surveyed by Bloomberg.
Carney and his counterparts from the Group of Seven industrialized nations are struggling to sustain growth as high energy costs fuel inflation and curb demand. Canada's economy grew at a 0.3 percent annualized pace in the second quarter, avoiding what most economists would have dubbed the first recession since 1991. Inflation quickened to 3.4 percent in July, outside the bank's 1 percent to 3 percent target.
``Inflation has to start coming down,'' said Michael Gregory, senior economist at BMO Capital Markets in Toronto. ``Until you get a sense of how things are playing out, the best strategy is to keep the powder dry.''
Still, today's statement may include stronger language that highlights the risks to growth. Deputy Governor David Longworth said Aug. 26 that growth and inflation this year will both be slower than expected in July, when policy makers said they saw ``balanced'' risks.
The decision in Ottawa is scheduled for 9 a.m. New York time. The bank may cut rates in the first quarter of next year, according to the weighted average of eight economists surveyed by Bloomberg.
`Downside' Risk?
``Instead of saying the risks are balanced, they could say `roughly balanced with a risk to the downside,''' said Eric Lascelles, chief economist with TD Securities Inc. in Toronto. Should the bank move rates this year, before most economists expect, Lascelles said it's more likely to be a reduction than an increase, because ``the Canadian economy is going slowly.''
There's little sign slumping exports to the U.S. will rebound. Sales to Canada's main trading partner were behind Carney's assertion in July that the economy will grow just 1 percent this year, the slowest since 1992.
The U.S. economy grew at a 0.2 percent annualized pace in the second quarter excluding trade, indicating there's been little growth in American domestic demand as that country recovers from the subprime mortgage meltdown.
Canada's total shipments abroad fell 1.5 percent in the second quarter, the fourth straight three-month period that saw a decline. Exporters were also hurt by the Canadian dollar's appreciation to a record last year.
Ontario `Challenges'
``We are still in a fairly good economy, but we're seeing some slowdown,'' Luc Vanneste, chief financial officer at Bank of Nova Scotia, Canada's third-biggest lender, said in an interview in Toronto. Vanneste cited ``challenges in Ontario,'' Canada's biggest province and factory heartland.
Canadian factories laid off 32,300 people in July, mostly in Ontario, where the struggling automotive industry is based. Total Canadian employment fell by a net 55,200 workers, the biggest decline in 17 years.
The layoffs, coupled with high gasoline prices, are crimping the spending Carney and Conservative Party Prime Minister Stephen Harper need to sustain growth.
Harper, 49, may call elections this week because he says Canada's minority-led Parliament isn't working. Liberal Party Leader Stephane Dion, head of the biggest opposition bloc, says Harper wants a vote now to try and win a fresh mandate before the economy worsens.
Household Spending
Already, growth in spending by households slowed for a second straight quarter from April to June to 0.6 percent on lower car and truck purchases, Statistics Canada said Aug. 29.
Rona Inc., Canada's biggest home-improvement retailer, said Aug. 12 that profit dropped for the third straight quarter as consumers reined in spending on renovation projects.
``The Bank of Canada is accepting the fact that growth is going to be pretty awful,'' BMO's Gregory said.
To be sure, slow growth doesn't change the bank's mandate of keeping inflation at 2 percent as often as possible and always between 1 percent and 3 percent. July's rate was the fastest since 2003, and the central bank says inflation will peak at 4.3 percent in the first quarter of 2009 before returning to 2 percent later that year.
Retail gasoline prices though have waned from a peak of C$1.39 ($1.30) per liter in mid-July to C$1.28 last week. Crude oil fell to a five-month low yesterday as energy firms prepared to resume production after Hurricane Gustav caused less damage than anticipated.
Inflation could slow faster than forecast, such as in 2003 when energy pushed the rate above 4 percent and it slowed to the bank's target within six months.
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.
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AWB Wins Approval to Change Dual-Share Structure
By Madelene Pearson
Sept. 3 (Bloomberg) -- AWB Ltd., Australia's largest wheat exporter, won approval from its farmer shareholders to end the company's dual-share structure.
AWB got 77 percent of votes to abolish the so-called A-class shares, which are held by grain growers and are non-tradable, Brendan Stewart, chairman of the Melbourne-based company, said today at a meeting.
``The resolution is carried,'' Stewart said at the meeting, broadcast on the company's Web site. ``I now declare that the resolution has been passed and accordingly I direct that the A- class shares now be redeemed.''
AWB failed to get the 75 percent support needed to end the dual-share structure in its first attempt in February and adjourned a second meeting last month because of low voter turnout. The company is abolishing the grower shares to help access funds and diversify after the loss of its monopoly on wheat exports.
AWB's B-class shares, which are traded on the Australian stock exchange, rose 17 cents, or 5.7 percent, to A$3.07 on the exchange at 3:03 p.m. in Sydney.
The company got 18,898 votes in favor of ending the dual- share structure, or 77 percent, and 5,644, or 23 percent, against, Stewart said.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Sept. 3 (Bloomberg) -- AWB Ltd., Australia's largest wheat exporter, won approval from its farmer shareholders to end the company's dual-share structure.
AWB got 77 percent of votes to abolish the so-called A-class shares, which are held by grain growers and are non-tradable, Brendan Stewart, chairman of the Melbourne-based company, said today at a meeting.
``The resolution is carried,'' Stewart said at the meeting, broadcast on the company's Web site. ``I now declare that the resolution has been passed and accordingly I direct that the A- class shares now be redeemed.''
AWB failed to get the 75 percent support needed to end the dual-share structure in its first attempt in February and adjourned a second meeting last month because of low voter turnout. The company is abolishing the grower shares to help access funds and diversify after the loss of its monopoly on wheat exports.
AWB's B-class shares, which are traded on the Australian stock exchange, rose 17 cents, or 5.7 percent, to A$3.07 on the exchange at 3:03 p.m. in Sydney.
The company got 18,898 votes in favor of ending the dual- share structure, or 77 percent, and 5,644, or 23 percent, against, Stewart said.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Palm Oil in Malaysia Climbs on Expectations Demand to Increase
By Glenys Sim and Claire Leow
Sept. 3 (Bloomberg) -- Palm oil futures in Malaysia climbed, paring yesterday's 5.2 percent drop, on expectations that demand for the tropical commodity will increase for use in alternative fuels and as a food ingredient during Asia's festive season.
``Palm oil prices are currently undervalued,'' Thomas Mielke, chief editor of OilWorld, the trade publication, said from Siem Reap, Cambodia. ``At this level, palm oil consumption for energy is set to rise sharply.''
Palm oil, the world's most consumed vegetable oil, can be mixed with regular diesel to stretch fossil fuel supplies. The futures contract has tumbled 44 percent from a record 4,486 ringgit a metric ton in March amid concerns that global supply may exceed demand and as funds cut commodity investments.
Palm oil for November rose as much as 66 ringgit, or 2.7 percent, to 2,550 ringgit ($741) a ton on the Malaysia Derivatives Exchange, and was at 2,523 ringgit at 12:30 p.m. local time. The contract slumped yesterday as crude oil prices fell.
``Palm oil prices will rebound in the fourth quarter,'' Tan Ting Min, a research analyst at Credit Suisse Group, wrote in a report today. ``Malaysian palm oil exports in August grew to hit an all-time high, driven primarily by a strong pick-up in exports to India and Pakistan ahead of the festive seasons.''
Malaysia's palm oil exports rose 6.6 percent in August from July, Societe Generale de Surveillance, an independent cargo surveyor, estimated yesterday. Intertek, a rival surveyor, said in a separate report that exports gained 8 percent in August.
Consumption of palm oil, the world's most-traded vegetable oil, typically picks up during the Muslim holy month of Ramadan, which started this month, and during China's week-long Mid-Autumn Festival, also due this month.
``We expect a pick-up in September,'' wrote Tan. ``Palm oil exports to the Middle Eastern countries should also be higher ahead of the festive season.''
OilWorld's Mielke forecast that the price of palm oil may rise to average $1,120 a ton in the year ending June 2009. That compares with an average of $1,041 a ton the previous year.
Increased demand for the tropical oil as feedstock for biofuel would support palm oil prices unless crude oil declined, he said.
To contact the reporters for this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Claire Leow in Siem Reap at cleow@bloomberg.net
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Sept. 3 (Bloomberg) -- Palm oil futures in Malaysia climbed, paring yesterday's 5.2 percent drop, on expectations that demand for the tropical commodity will increase for use in alternative fuels and as a food ingredient during Asia's festive season.
``Palm oil prices are currently undervalued,'' Thomas Mielke, chief editor of OilWorld, the trade publication, said from Siem Reap, Cambodia. ``At this level, palm oil consumption for energy is set to rise sharply.''
Palm oil, the world's most consumed vegetable oil, can be mixed with regular diesel to stretch fossil fuel supplies. The futures contract has tumbled 44 percent from a record 4,486 ringgit a metric ton in March amid concerns that global supply may exceed demand and as funds cut commodity investments.
Palm oil for November rose as much as 66 ringgit, or 2.7 percent, to 2,550 ringgit ($741) a ton on the Malaysia Derivatives Exchange, and was at 2,523 ringgit at 12:30 p.m. local time. The contract slumped yesterday as crude oil prices fell.
``Palm oil prices will rebound in the fourth quarter,'' Tan Ting Min, a research analyst at Credit Suisse Group, wrote in a report today. ``Malaysian palm oil exports in August grew to hit an all-time high, driven primarily by a strong pick-up in exports to India and Pakistan ahead of the festive seasons.''
Malaysia's palm oil exports rose 6.6 percent in August from July, Societe Generale de Surveillance, an independent cargo surveyor, estimated yesterday. Intertek, a rival surveyor, said in a separate report that exports gained 8 percent in August.
Consumption of palm oil, the world's most-traded vegetable oil, typically picks up during the Muslim holy month of Ramadan, which started this month, and during China's week-long Mid-Autumn Festival, also due this month.
``We expect a pick-up in September,'' wrote Tan. ``Palm oil exports to the Middle Eastern countries should also be higher ahead of the festive season.''
OilWorld's Mielke forecast that the price of palm oil may rise to average $1,120 a ton in the year ending June 2009. That compares with an average of $1,041 a ton the previous year.
Increased demand for the tropical oil as feedstock for biofuel would support palm oil prices unless crude oil declined, he said.
To contact the reporters for this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Claire Leow in Siem Reap at cleow@bloomberg.net
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China to Ease Soybean Import Dependence, Boost Foreign Controls
By William Bi
Sept. 3 (Bloomberg) -- China, the world's biggest soybean buyer, will ease its dependence on imported beans and increase controls on investments by overseas processors, the top economic planner said.
China should slow the growth of its soybean imports by ``appropriately'' allowing more imports of soybean oil and by expanding domestic oilseed output, the National Development and Reform Commission said today in a statement on its Web site.
China will also increase regulations on overseas-owned soybean processors, which have ``rapidly'' taken market share, the statement said. The government will help domestic-controlled firms expand overseas by leasing land to grow the crop and set up logistical and processing facilities, it said.
To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net
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Sept. 3 (Bloomberg) -- China, the world's biggest soybean buyer, will ease its dependence on imported beans and increase controls on investments by overseas processors, the top economic planner said.
China should slow the growth of its soybean imports by ``appropriately'' allowing more imports of soybean oil and by expanding domestic oilseed output, the National Development and Reform Commission said today in a statement on its Web site.
China will also increase regulations on overseas-owned soybean processors, which have ``rapidly'' taken market share, the statement said. The government will help domestic-controlled firms expand overseas by leasing land to grow the crop and set up logistical and processing facilities, it said.
To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net
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Gold Falls for Fourth Day in London as Oil Drops; Silver Slides
By Rachel Graham
Sept. 3 (Bloomberg) -- Gold declined for a fourth day in London as crude-oil prices dropped, reducing demand for the metal as a hedge against inflation. Silver also fell.
Crude oil also slid for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and a stronger dollar curbed the appeal of commodities.
``Oil is heading lower,'' Andrew Millie, a trader at ODL Securities Ltd., said by phone from London today. ``Gold could come off further.''
Gold for immediate delivery fell $10.83, or 1.3 percent, to $794.52 an ounce as of 8:28 a.m. in London. Futures for December delivery dropped $12.50, or 1.5 percent, to $798 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.
Switzerland's Zuercher Kantonalbank, which manages exchange- traded funds backed by precious metals, expects gold to rise between now and the end of the year, ZKB analyst Susanne Toren said by phone from Zurich. Some investors view gold as a haven investment against economic weakness.
``We are not completely over the credit crisis,'' Toren said. ``The economic problems that pushed gold higher haven't disappeared fully.''
She said gold may rise to $900 an ounce between now and the end of the year. ZKB retains its one-year target of $800 an ounce.
Among other metals for immediate delivery, silver fell 25 cents, or 1.9 percent, to $12.82 an ounce. Platinum fell $1, or 0.1 percent, to $1,401 an ounce and palladium rose $2.50, or 0.9 percent, to $292 an ounce.
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
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Sept. 3 (Bloomberg) -- Gold declined for a fourth day in London as crude-oil prices dropped, reducing demand for the metal as a hedge against inflation. Silver also fell.
Crude oil also slid for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and a stronger dollar curbed the appeal of commodities.
``Oil is heading lower,'' Andrew Millie, a trader at ODL Securities Ltd., said by phone from London today. ``Gold could come off further.''
Gold for immediate delivery fell $10.83, or 1.3 percent, to $794.52 an ounce as of 8:28 a.m. in London. Futures for December delivery dropped $12.50, or 1.5 percent, to $798 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.
Switzerland's Zuercher Kantonalbank, which manages exchange- traded funds backed by precious metals, expects gold to rise between now and the end of the year, ZKB analyst Susanne Toren said by phone from Zurich. Some investors view gold as a haven investment against economic weakness.
``We are not completely over the credit crisis,'' Toren said. ``The economic problems that pushed gold higher haven't disappeared fully.''
She said gold may rise to $900 an ounce between now and the end of the year. ZKB retains its one-year target of $800 an ounce.
Among other metals for immediate delivery, silver fell 25 cents, or 1.9 percent, to $12.82 an ounce. Platinum fell $1, or 0.1 percent, to $1,401 an ounce and palladium rose $2.50, or 0.9 percent, to $292 an ounce.
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
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Australian, N.Z. Dollars Weaken as Commodity Prices Decline
By Ron Harui
Sept. 3 (Bloomberg) -- The Australian and New Zealand dollars fell to their lowest in a year on speculation declines in commodity prices will slow the economies of the two nations.
The Australian dollar also weakened and the nation's bonds advanced after a government report showed the economy grew at the slowest pace in more than three years, backing up the central bank's decision to cut interest rates yesterday. The two currencies declined for a fourth day on concern reduced export earnings will spur policy makers to cut borrowing costs further.
The growth report ``will encourage the Reserve Bank of Australia to continue easing and it shows that they were right to cut yesterday,'' said Adam Carr, senior economist at ICAP Australia Ltd. in Sydney. ``For the Aussie dollar, it's been sold off fairly aggressively lately. The data flow, the fact that the RBA is cutting and some of the recent moves in commodity prices are all negative.''
The Australian dollar declined to 82.93 U.S. cents as of 4:56 p.m. in Sydney, from 83.37 cents late in Asia yesterday. It reached 82.39 cents, the lowest since Sept. 11, 2007. It may weaken to 80 cents by year-end, Carr said. The currency, known as the Aussie, declined to 90.25 yen from 90.70 yen. It touched 89.69 yen, the weakest since March 24.
The New Zealand dollar fell to 67.72 U.S. cents from 68.51 cents late in Asia yesterday. It reached 67.36 cents, the lowest since Aug. 17, 2007. The currency dropped to 73.71 yen from 74.53 yen yesterday. It touched 73.24 yen, the weakest since Aug. 11, 2006.
Commodities Fall
Australia's currency declined after the Bureau of Statistics said gross domestic product rose 0.3 percent in the second quarter from the first, when it increased a revised 0.7 percent. The median estimate of economists surveyed by Bloomberg News was for growth of 0.4 percent.
Australian Treasurer Wayne Swan said today the data supported the bank's decision to lower interest rates.
Gold, Australia's third most-valuable commodity export, headed for a fourth day of losses, falling 0.7 percent. New Zealand's commodity export price index posted its biggest decline in seven years in August led by aluminum and dairy products, ANZ National Bank Ltd. said today.
``Commodities appear to be in a downtrend, which means commodity-linked currencies such as the Australian and New Zealand dollars are likely to be sold,'' said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co., Japan's fifth-largest bank.
The commodity export price index dropped 3.3 percent in August from a record high in July, ANZ said in a report released in Wellington. Prices rose 3.6 percent from a year earlier.
Raw materials account for 60 percent of Australia's exports and sales of commodities such as lumber make up 70 percent of New Zealand's overseas shipments.
Rate Cut Bets
The Australian dollar has tumbled 14 percent this quarter against the U.S. dollar, the worst performer of the 16 most- traded currencies, as the RBA lowered interest rates for the first time in seven years, taking the benchmark to 7 percent.
New Zealand's dollar has dropped 11.5 percent since June 30 as the Reserve Bank of New Zealand reduced its key rate in July by a quarter-percentage point to 8 percent.
The odds that the RBA will cut borrowing costs by a quarter-percentage point at its Oct. 7 meeting were 66 percent, according to interest-rate contracts on the Sydney Futures Exchange. A Credit Suisse Group index based on interest-rate swaps showed traders are certain that RBNZ will cut rates at its Sept. 11 meeting.
UBS AG, the world's second-largest currency trader, lowered its one-month forecasts for the Australian and New Zealand dollars against the U.S. currency, according to a research note published yesterday.
Australia's dollar will trade at 85 cents and New Zealand's dollar will reach 68 cents in a month, compared with previous predictions of 89 cents and 70 cents, UBS said.
Government Bonds
Benchmark interest rates of 7 percent in Australia and 8 percent in New Zealand compare with 0.5 percent in Japan, making them favorite targets for so-called carry trades.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.
Australian two-year government notes rose for a fourth day, reversing losses after the release of the GDP report. The yield fell 3 basis points, or 0.03 percentage point, to 5.66 percent, the lowest since June 2006, according to data compiled by Bloomberg. The price of the 5.25 percent note due August 2010 rose 0.049, or A$0.49 per A$1,000 face amount, to 99.258.
New Zealand government bonds gained, pushing down the yield on the benchmark 10-year note by 2 basis points, or 0.02 percentage point, to 5.98 percent. The price of the 6 percent security maturing in December 2015 rose 0.106, or NZ$1.06 per NZ$1,000 face amount, to 100.154.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
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Sept. 3 (Bloomberg) -- The Australian and New Zealand dollars fell to their lowest in a year on speculation declines in commodity prices will slow the economies of the two nations.
The Australian dollar also weakened and the nation's bonds advanced after a government report showed the economy grew at the slowest pace in more than three years, backing up the central bank's decision to cut interest rates yesterday. The two currencies declined for a fourth day on concern reduced export earnings will spur policy makers to cut borrowing costs further.
The growth report ``will encourage the Reserve Bank of Australia to continue easing and it shows that they were right to cut yesterday,'' said Adam Carr, senior economist at ICAP Australia Ltd. in Sydney. ``For the Aussie dollar, it's been sold off fairly aggressively lately. The data flow, the fact that the RBA is cutting and some of the recent moves in commodity prices are all negative.''
The Australian dollar declined to 82.93 U.S. cents as of 4:56 p.m. in Sydney, from 83.37 cents late in Asia yesterday. It reached 82.39 cents, the lowest since Sept. 11, 2007. It may weaken to 80 cents by year-end, Carr said. The currency, known as the Aussie, declined to 90.25 yen from 90.70 yen. It touched 89.69 yen, the weakest since March 24.
The New Zealand dollar fell to 67.72 U.S. cents from 68.51 cents late in Asia yesterday. It reached 67.36 cents, the lowest since Aug. 17, 2007. The currency dropped to 73.71 yen from 74.53 yen yesterday. It touched 73.24 yen, the weakest since Aug. 11, 2006.
Commodities Fall
Australia's currency declined after the Bureau of Statistics said gross domestic product rose 0.3 percent in the second quarter from the first, when it increased a revised 0.7 percent. The median estimate of economists surveyed by Bloomberg News was for growth of 0.4 percent.
Australian Treasurer Wayne Swan said today the data supported the bank's decision to lower interest rates.
Gold, Australia's third most-valuable commodity export, headed for a fourth day of losses, falling 0.7 percent. New Zealand's commodity export price index posted its biggest decline in seven years in August led by aluminum and dairy products, ANZ National Bank Ltd. said today.
``Commodities appear to be in a downtrend, which means commodity-linked currencies such as the Australian and New Zealand dollars are likely to be sold,'' said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co., Japan's fifth-largest bank.
The commodity export price index dropped 3.3 percent in August from a record high in July, ANZ said in a report released in Wellington. Prices rose 3.6 percent from a year earlier.
Raw materials account for 60 percent of Australia's exports and sales of commodities such as lumber make up 70 percent of New Zealand's overseas shipments.
Rate Cut Bets
The Australian dollar has tumbled 14 percent this quarter against the U.S. dollar, the worst performer of the 16 most- traded currencies, as the RBA lowered interest rates for the first time in seven years, taking the benchmark to 7 percent.
New Zealand's dollar has dropped 11.5 percent since June 30 as the Reserve Bank of New Zealand reduced its key rate in July by a quarter-percentage point to 8 percent.
The odds that the RBA will cut borrowing costs by a quarter-percentage point at its Oct. 7 meeting were 66 percent, according to interest-rate contracts on the Sydney Futures Exchange. A Credit Suisse Group index based on interest-rate swaps showed traders are certain that RBNZ will cut rates at its Sept. 11 meeting.
UBS AG, the world's second-largest currency trader, lowered its one-month forecasts for the Australian and New Zealand dollars against the U.S. currency, according to a research note published yesterday.
Australia's dollar will trade at 85 cents and New Zealand's dollar will reach 68 cents in a month, compared with previous predictions of 89 cents and 70 cents, UBS said.
Government Bonds
Benchmark interest rates of 7 percent in Australia and 8 percent in New Zealand compare with 0.5 percent in Japan, making them favorite targets for so-called carry trades.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.
Australian two-year government notes rose for a fourth day, reversing losses after the release of the GDP report. The yield fell 3 basis points, or 0.03 percentage point, to 5.66 percent, the lowest since June 2006, according to data compiled by Bloomberg. The price of the 5.25 percent note due August 2010 rose 0.049, or A$0.49 per A$1,000 face amount, to 99.258.
New Zealand government bonds gained, pushing down the yield on the benchmark 10-year note by 2 basis points, or 0.02 percentage point, to 5.98 percent. The price of the 6 percent security maturing in December 2015 rose 0.106, or NZ$1.06 per NZ$1,000 face amount, to 100.154.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
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Soybeans Decline as Rain in U.S. Midwest May Increase Output
By William Bi
Sept. 3 (Bloomberg) -- Soybeans fell on speculation rain in the main U.S. growing region will aid crops and on a report this year's output may be more than expected.
Increasing shower activity in the western part of the Midwest this week should be favorable to soybeans, Meteorlogix LLC said yesterday. The soybean harvest this year will be 3.003 billion bushels compared with 2.973 billion forecast by the government last month, FCStone Group Inc. said yesterday.
``There will certainly be corrections if rain falls in early September,'' Wei Dong, chief representative of FCStone's China operations, said by phone. ``The market is bound to be turbulent as more organizations come up with divergent forecasts.''
Soybean futures for November delivery fell as much as 11.25 cents, or 0.9 percent, to $12.8725 a bushel, in after-hour trading on the Chicago Board of Trade. It was at $12.90 at 1:46 p.m. in Beijing. Earlier it had risen as much as 15.50 cents, or 1.2 percent to $13.14.
About 57 percent of U.S. soybeans were rated good or excellent, down from 61 percent a week earlier and up from 56 percent a year ago, the U.S. Department of Agriculture said yesterday. About 61 percent of the corn crop got the top ratings, compared with 64 percent a week earlier and 59 percent a year ago, it said.
Corn futures for December delivery fell as much as 2.25 cents, or 0.4 percent, to $5.67 a bushel, and traded at $5.7025 at 1:50 p.m. in Beijing. December-delivery wheat lost as much as 8.5 cents, or 1.1 percent, to $7.5825, and last traded at $7.67.
To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net
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Sept. 3 (Bloomberg) -- Soybeans fell on speculation rain in the main U.S. growing region will aid crops and on a report this year's output may be more than expected.
Increasing shower activity in the western part of the Midwest this week should be favorable to soybeans, Meteorlogix LLC said yesterday. The soybean harvest this year will be 3.003 billion bushels compared with 2.973 billion forecast by the government last month, FCStone Group Inc. said yesterday.
``There will certainly be corrections if rain falls in early September,'' Wei Dong, chief representative of FCStone's China operations, said by phone. ``The market is bound to be turbulent as more organizations come up with divergent forecasts.''
Soybean futures for November delivery fell as much as 11.25 cents, or 0.9 percent, to $12.8725 a bushel, in after-hour trading on the Chicago Board of Trade. It was at $12.90 at 1:46 p.m. in Beijing. Earlier it had risen as much as 15.50 cents, or 1.2 percent to $13.14.
About 57 percent of U.S. soybeans were rated good or excellent, down from 61 percent a week earlier and up from 56 percent a year ago, the U.S. Department of Agriculture said yesterday. About 61 percent of the corn crop got the top ratings, compared with 64 percent a week earlier and 59 percent a year ago, it said.
Corn futures for December delivery fell as much as 2.25 cents, or 0.4 percent, to $5.67 a bushel, and traded at $5.7025 at 1:50 p.m. in Beijing. December-delivery wheat lost as much as 8.5 cents, or 1.1 percent, to $7.5825, and last traded at $7.67.
To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net
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Avoid Thailand, Malaysia Stocks on Politics, Credit Suisse Says
By Chen Shiyin and Chan Tien Hin
Sept. 3 (Bloomberg) -- Investors should avoid stocks in Thailand and Malaysia as political turmoil in the two Southeast Asian nations intensifies, Credit Suisse Group said.
Thailand, which entered a state of emergency yesterday, isn't a buying opportunity yet because violence there will continue and the nation will become ``ungovernable,'' the brokerage said in a report today. Credit Suisse analysts also kept their ``underweight'' rating on Malaysian stocks, saying a power struggle between the government and opposition leader Anwar Ibrahim is heightening risks to the economy.
``These kinds of events will be a long-term negative,'' said Scott Lim, who helps manage $431 million as chief investment officer at CMS Dresdner Asset Management Sdn. in Kuala Lumpur. ``For long-term investors, who are a lot more risk averse, they don't see it as an opportunity. They want to stay out of the market.''
Thailand's SET Index has dropped 24 percent in 2008, and fell yesterday to the lowest since February 2007 after Prime Minister Samak Sundaravej issued the emergency decree. Malaysia's Kuala Lumpur Composite Index has retreated 25 percent after the ruling coalition had its worst electoral performance in five decades in March. They're the worst performers among Southeast Asian stock markets this year, after Vietnam.
The political upheavals come as economic expansion in the two countries slows. Growth in Thailand may ease to 5.5 percent in the second half because of a decline in exports, Finance Minister Surapong Suebwonglee said last week. A state agency said on Aug. 25 the economy expanded 5.7 percent in the first half.
Economic Growth
Malaysia's economy grew 6.3 percent in the three months ended June, down from 7.1 percent in the first quarter, the central bank said on Aug. 29. Gross domestic product may expand 5.7 percent this year, the slowest pace in three years, the Ministry of Finance estimated.
Thailand's SET Index dropped 2.3 percent yesterday, the most since July 16, after clashes between pro- and anti-government factions in Bangkok left one person dead and 43 injured.
The gauge fell as much as 0.8 percent today. Protestors are vowing to continue the standoff, with unions threatening a major strike today.
``Political upheaval provides a buying opportunity only if a resolution is within sight,'' Credit Suisse analysts Dan Fineman and Cem Karacadag said in a report today. ``The current situation remains far from reaching anything resembling equilibrium.''
They advised investors to avoid building-material companies and buy shares of telecommunications, consumer and media companies. The analysts didn't name any stocks.
Siam Cement Pcl, Thailand's biggest maker of the construction material, has dropped 32 percent in 2008. Advanced Info Service Pcl, the country's largest mobile-phone carrier, has dropped 8.8 percent this year.
`None The Wiser'
In Malaysia, Anwar is seeking to oust the ruling coalition on Sept. 16 by convincing ruling lawmakers to defect to the opposition. The opposition leader, who last week was sworn in as a lawmaker after winning a by-election, was charged last month with engaging in homosexual relations. He pleaded not guilty.
The charge heightens the political tension that has weighed on the country's stock market since the March election, which weakened Prime Minister Abdullah Ahmad Badawi's leadership.
``While we are a step closer to political conclusion, we really are none the wiser as to what that outcome will be,'' Stephen Hagger, a Kuala Lumpur-based analyst at Credit Suisse, wrote in a report today. ``Malaysia offers some value versus the region, but it is not really cheap enough to justify the risk.''
Other brokerages are also forecasting tougher times for the two markets. Southeast Asian markets have ``not yet approached levels where visible risks have been fully discounted,'' Goldman Sachs Group Inc. said in a Sept. 1 report, citing concerns over the political outlook in Malaysia and Thailand.
``We've been underweight in Thailand for the better part of the last two years because of a continuation of the negative domestic political sentiment,'' said Beat Lenherr, who oversees more than $20 billion of assets as Singapore-based chief global strategist at LGT Capital Management. ``Malaysia faces similar problems and we're heavily underweight there as well.''
To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net.
Read more...
Sept. 3 (Bloomberg) -- Investors should avoid stocks in Thailand and Malaysia as political turmoil in the two Southeast Asian nations intensifies, Credit Suisse Group said.
Thailand, which entered a state of emergency yesterday, isn't a buying opportunity yet because violence there will continue and the nation will become ``ungovernable,'' the brokerage said in a report today. Credit Suisse analysts also kept their ``underweight'' rating on Malaysian stocks, saying a power struggle between the government and opposition leader Anwar Ibrahim is heightening risks to the economy.
``These kinds of events will be a long-term negative,'' said Scott Lim, who helps manage $431 million as chief investment officer at CMS Dresdner Asset Management Sdn. in Kuala Lumpur. ``For long-term investors, who are a lot more risk averse, they don't see it as an opportunity. They want to stay out of the market.''
Thailand's SET Index has dropped 24 percent in 2008, and fell yesterday to the lowest since February 2007 after Prime Minister Samak Sundaravej issued the emergency decree. Malaysia's Kuala Lumpur Composite Index has retreated 25 percent after the ruling coalition had its worst electoral performance in five decades in March. They're the worst performers among Southeast Asian stock markets this year, after Vietnam.
The political upheavals come as economic expansion in the two countries slows. Growth in Thailand may ease to 5.5 percent in the second half because of a decline in exports, Finance Minister Surapong Suebwonglee said last week. A state agency said on Aug. 25 the economy expanded 5.7 percent in the first half.
Economic Growth
Malaysia's economy grew 6.3 percent in the three months ended June, down from 7.1 percent in the first quarter, the central bank said on Aug. 29. Gross domestic product may expand 5.7 percent this year, the slowest pace in three years, the Ministry of Finance estimated.
Thailand's SET Index dropped 2.3 percent yesterday, the most since July 16, after clashes between pro- and anti-government factions in Bangkok left one person dead and 43 injured.
The gauge fell as much as 0.8 percent today. Protestors are vowing to continue the standoff, with unions threatening a major strike today.
``Political upheaval provides a buying opportunity only if a resolution is within sight,'' Credit Suisse analysts Dan Fineman and Cem Karacadag said in a report today. ``The current situation remains far from reaching anything resembling equilibrium.''
They advised investors to avoid building-material companies and buy shares of telecommunications, consumer and media companies. The analysts didn't name any stocks.
Siam Cement Pcl, Thailand's biggest maker of the construction material, has dropped 32 percent in 2008. Advanced Info Service Pcl, the country's largest mobile-phone carrier, has dropped 8.8 percent this year.
`None The Wiser'
In Malaysia, Anwar is seeking to oust the ruling coalition on Sept. 16 by convincing ruling lawmakers to defect to the opposition. The opposition leader, who last week was sworn in as a lawmaker after winning a by-election, was charged last month with engaging in homosexual relations. He pleaded not guilty.
The charge heightens the political tension that has weighed on the country's stock market since the March election, which weakened Prime Minister Abdullah Ahmad Badawi's leadership.
``While we are a step closer to political conclusion, we really are none the wiser as to what that outcome will be,'' Stephen Hagger, a Kuala Lumpur-based analyst at Credit Suisse, wrote in a report today. ``Malaysia offers some value versus the region, but it is not really cheap enough to justify the risk.''
Other brokerages are also forecasting tougher times for the two markets. Southeast Asian markets have ``not yet approached levels where visible risks have been fully discounted,'' Goldman Sachs Group Inc. said in a Sept. 1 report, citing concerns over the political outlook in Malaysia and Thailand.
``We've been underweight in Thailand for the better part of the last two years because of a continuation of the negative domestic political sentiment,'' said Beat Lenherr, who oversees more than $20 billion of assets as Singapore-based chief global strategist at LGT Capital Management. ``Malaysia faces similar problems and we're heavily underweight there as well.''
To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net.
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Hong Kong Stocks Drop; Cnooc, Chalco Fall, Huiyuan Juice Jumps
By Hanny Wan
Sept. 3 (Bloomberg) -- Hong Kong stocks dropped, pushing the benchmark index to the lowest in two weeks, led by Cnooc Ltd. and Aluminum Corp. of China Ltd. after commodities declined the most since March.
Cnooc, China's third-largest oil company, retreated 5.1 percent. Aluminum Corp. tumbled 6.4 percent. Industrial & Commercial Bank of China Ltd. slipped 2.6 percent after state media said the nation's producer price inflation may have accelerated. China Huiyuan Juice Group Ltd. surged as much as 172 percent after Coca-Cola Co. offered to buy the company for HK$17.9 billion ($2.3 billion).
``Investors are unloading commodities, plus the entire market has gotten more cautious, so the upside for commodities is quite limited,'' said Renault Kam, a senior portfolio manager at Atlantis Investment Management in Hong Kong, which oversees $5 billion.
The Hang Seng Index lost 331.59, or 1.6 percent, to 20,710.87 as of 2:47 p.m. local time, set for its worst close since Aug. 21. The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese mainland companies, declined 2.3 percent to 11,193.89.
Cnooc, the second-biggest percentage loser on the Hang Seng Index, plunged 5.1 percent to HK$10.80. PetroChina Co., the nation's largest oil producer, slipped 2.5 percent to HK$9.70.
Chalco, as Aluminum Corp. is known, retreated 6.4 percent to HK$6.46, making the nation's largest producer of the lightweight metal the biggest loser by percentage on the Hang Seng Index. Zijin Mining Group Co., owner of China's largest gold mine, sank 6 percent to HK$4.56. Jiangxi Copper Co., the second-biggest smelter in China, dropped 4.4 percent to HK$11.42.
Commodities
The Reuters/Jefferies CRB Index of commodities declined the most since March 19, led by energy prices, as Hurricane Gustav spared U.S. Gulf petroleum rigs the destruction caused by Katrina and Rita in 2005. Commodities also slumped after the U.S. dollar jumped to the highest since October against six major currencies, eroding the appeal of raw materials priced in the U.S. currency.
Gold futures for December delivery fell 3 percent yesterday, the most since Aug. 11, in New York, while copper declined 3.4 percent. Crude oil dropped 5 percent to $109.71 a barrel after touching $105.46 yesterday, the lowest since April 4.
Industrial & Commercial Bank of China, or ICBC, the world's most profitable bank, dropped 2.6 percent to HK$5.21 on concern that higher inflation may prevent the central bank from loosening lending rules.
China's producer-price inflation may have accelerated to 10.3 percent in August, the official China Securities Journal reported, citing Fan Jianping, the head of the economic forecast department of the State Information Center. The statistic will be released on Sept. 10.
Huiyuan Juice
Huiyuan Juice, China's biggest maker of pure fruit juice, soared 164 percent to HK$10.94. The stock resumed trading today after being suspended Sept. 1. Atlantic Industries, a unit of Coca-Cola, the world's biggest soft-drink maker, offered to buy Huiyuan Juice at HK$12.20 a share and will buy all the outstanding convertible bonds of the Chinese company, Huiyuan Juice said. That's triple Huiyuan Juice's closing price of HK$4.14 on August 29.
Other Chinese beverage makers also rose. Yantai North Andre Juice Co., a Chinese producer of apple juice concentrate, surged 13 percent to 61 Hong Kong cents, after jumping as much as 31 percent. China Mengniu Dairy Co., the nation's biggest producer of liquid milk, added 1.3 percent to HK$22.80.
Shangri-La Asia Ltd. declined 2.6 percent to HK$13.64. Asia's biggest luxury-hotel operator said yesterday first-half profit fell 15 percent to $135.7 million as costs increased and occupancy dropped because of rising airfares, natural disasters and tightened visa rules in China.
Almost five stocks on the 43-member Hang Seng Index declined for each that climbed. September futures slipped 2.4 percent to 20,641.
To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net
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Sept. 3 (Bloomberg) -- Hong Kong stocks dropped, pushing the benchmark index to the lowest in two weeks, led by Cnooc Ltd. and Aluminum Corp. of China Ltd. after commodities declined the most since March.
Cnooc, China's third-largest oil company, retreated 5.1 percent. Aluminum Corp. tumbled 6.4 percent. Industrial & Commercial Bank of China Ltd. slipped 2.6 percent after state media said the nation's producer price inflation may have accelerated. China Huiyuan Juice Group Ltd. surged as much as 172 percent after Coca-Cola Co. offered to buy the company for HK$17.9 billion ($2.3 billion).
``Investors are unloading commodities, plus the entire market has gotten more cautious, so the upside for commodities is quite limited,'' said Renault Kam, a senior portfolio manager at Atlantis Investment Management in Hong Kong, which oversees $5 billion.
The Hang Seng Index lost 331.59, or 1.6 percent, to 20,710.87 as of 2:47 p.m. local time, set for its worst close since Aug. 21. The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese mainland companies, declined 2.3 percent to 11,193.89.
Cnooc, the second-biggest percentage loser on the Hang Seng Index, plunged 5.1 percent to HK$10.80. PetroChina Co., the nation's largest oil producer, slipped 2.5 percent to HK$9.70.
Chalco, as Aluminum Corp. is known, retreated 6.4 percent to HK$6.46, making the nation's largest producer of the lightweight metal the biggest loser by percentage on the Hang Seng Index. Zijin Mining Group Co., owner of China's largest gold mine, sank 6 percent to HK$4.56. Jiangxi Copper Co., the second-biggest smelter in China, dropped 4.4 percent to HK$11.42.
Commodities
The Reuters/Jefferies CRB Index of commodities declined the most since March 19, led by energy prices, as Hurricane Gustav spared U.S. Gulf petroleum rigs the destruction caused by Katrina and Rita in 2005. Commodities also slumped after the U.S. dollar jumped to the highest since October against six major currencies, eroding the appeal of raw materials priced in the U.S. currency.
Gold futures for December delivery fell 3 percent yesterday, the most since Aug. 11, in New York, while copper declined 3.4 percent. Crude oil dropped 5 percent to $109.71 a barrel after touching $105.46 yesterday, the lowest since April 4.
Industrial & Commercial Bank of China, or ICBC, the world's most profitable bank, dropped 2.6 percent to HK$5.21 on concern that higher inflation may prevent the central bank from loosening lending rules.
China's producer-price inflation may have accelerated to 10.3 percent in August, the official China Securities Journal reported, citing Fan Jianping, the head of the economic forecast department of the State Information Center. The statistic will be released on Sept. 10.
Huiyuan Juice
Huiyuan Juice, China's biggest maker of pure fruit juice, soared 164 percent to HK$10.94. The stock resumed trading today after being suspended Sept. 1. Atlantic Industries, a unit of Coca-Cola, the world's biggest soft-drink maker, offered to buy Huiyuan Juice at HK$12.20 a share and will buy all the outstanding convertible bonds of the Chinese company, Huiyuan Juice said. That's triple Huiyuan Juice's closing price of HK$4.14 on August 29.
Other Chinese beverage makers also rose. Yantai North Andre Juice Co., a Chinese producer of apple juice concentrate, surged 13 percent to 61 Hong Kong cents, after jumping as much as 31 percent. China Mengniu Dairy Co., the nation's biggest producer of liquid milk, added 1.3 percent to HK$22.80.
Shangri-La Asia Ltd. declined 2.6 percent to HK$13.64. Asia's biggest luxury-hotel operator said yesterday first-half profit fell 15 percent to $135.7 million as costs increased and occupancy dropped because of rising airfares, natural disasters and tightened visa rules in China.
Almost five stocks on the 43-member Hang Seng Index declined for each that climbed. September futures slipped 2.4 percent to 20,641.
To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net
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Japan Stocks Rise After Oil Drop Eases Cost Concern; Oji Gains
By Masaki Kondo
Sept. 3 (Bloomberg) -- Japan's stocks rose for the first time in three days, led by paper and tire makers, after crude oil slumped to a near five-month low, easing production costs.
Oji Paper Co., Japan's biggest user of high-sulfur fuel oil, climbed 6.9 percent to the highest in 11 months, while Sumitomo Rubber Industries Inc., the nation's third-largest tiremaker, surged 8.1 percent. JFE Holdings Inc. led steelmakers lower after rival ArcelorMittal said it will cut prices.
``If crude prices decline further, then so much the better for manufacturers,'' said Mitsushige Akino, who oversees about $468 million at Ichiyoshi Investment Management Co. in Tokyo. ``Higher oil prices no doubt increase production costs.''
The Nikkei 225 Stock Average climbed 80.12, or 0.6 percent, to close at 12,689.59 in Tokyo, following a two-day, 3.5 percent slump. The broader Topix index rose 8.18, or 0.7 percent, to 1,220.55. Twenty of 33 Topix industry groups gained.
Crude oil futures fell as much as 8.7 percent to $105.46, the lowest since April 4, before closing at $109.71 yesterday after Hurricane Gustav appeared to cause only light damage to oil installations in the Gulf of Mexico. Oil has fallen more than $37 from its July record.
Oji, Japan's largest papermaker, leapt 6.9 percent to 586 yen, the highest since October 2007. Smaller rival Nippon Paper Group Inc. surged 9.1 percent to 336,000 yen, leading gains on the Nikkei. Sumitomo Rubber added 8.1 percent to 1,002 yen and posted the second-biggest gain on the MSCI World Index after Nippon Paper. Makers of paper and rubber were the two biggest winners among Topix groups.
Inpex Holdings Inc., Japan's largest oil and gas explorer, slumped 3.9 percent to 1.025 million yen, the lowest since Aug. 6. Mitsui & Co., a trading company that gets half of its profit from commodities, plunged 7.3 percent to 1,660 yen, the lowest since December 2006 and leading declines on the Nikkei.
China Demand
A $1 change in the price of a barrel of crude alters Mitsui's annual net income by 1.8 billion yen ($17 million), according to Mitsubishi UFJ Securities Co.
Komatsu Ltd., the world's second-biggest maker of earthmoving equipment, tumbled 7.1 percent to 2,095 yen, the lowest since December 2006. Demand from emerging markets such as China is significantly declining, Teruo Isozaki, an analyst at Mitsubishi UFJ Securities, wrote in a Japanese-language report dated yesterday. He cut his rating on the stock to ``market perform'' from ``outperform.''
Defensive Stocks
``A slowdown in China gets investors worried about the outlook for the global economy,'' said Koji Toda, chief fund manager at Resona Trust & Banking Co. in Tokyo. ``Pessimists are shifting their funds to defensive stocks, shoring up today's Japanese market.''
Tokyo Electric Power Co., Asia's biggest utility, soared 3.9 percent to 3,230 yen, while Kansai Electric Power Co. added 4 percent to 2,715 yen. Power generators, whose earnings are deemed relatively insulated from an economic slowdown, posted the third- sharpest advance among Topix industry groups.
JFE tumbled 4.1 percent, the most since Aug. 12, to 4,500 yen, while smaller rival Sumitomo Metal Industries Ltd. retreated 4.4 percent to 462 yen.
``With a slowdown in the Chinese economy becoming increasingly noticeable, steelmakers there have started exporting more products, which is expected to drive down prices,'' said Ichiyoshi's Akino.
ArcelorMittal, the world's biggest steelmaker, said it will cut prices in South Africa for long products, mainly used in construction, citing ``domestic market conditions.'' Charlie Dove-Edwin, an analyst at MF Global Securities based in London, said that may trigger price cuts for steel around the world.
Elpida Memory Inc., Japan's largest maker of computer-memory chips, tumbled 11 percent to 2,045 yen, the worst slump since it listed on the bourse in November 2004. Nomura Securities Co. lowered its rating on the stock to ``neutral'' from ``buy,'' citing a longer-than-expected decline in demand for the devices.
Nikkei futures expiring in September added 0.6 percent to 12,680 in Osaka and gained 0.5 percent to 12,685 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Asia Stocks Fall to 2-Year Low on Oil, Gold Drop; Huiyuan Jumps
By Chua Kong Ho and Shani Raja
Sept. 3 (Bloomberg) -- Asian stocks fell, sending the region's benchmark index to a two-year low, after a slump in oil and gold dragged down commodities producers.
Cnooc Ltd., China's largest offshore oil explorer, and Sumitomo Metal Mining Co., Japan's biggest gold producer, both dropped more than 5 percent. Nippon Steel Corp. declined after ArcelorMittal said it will cut South African steel prices. China Huiyuan Juice Group Ltd. leapt 167 percent in Hong Kong after Coca-Cola Co. offered to buy it.
``There'll probably be more pain in the near term for commodities,'' said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management in Sydney.
The MSCI Asia Pacific Index declined 0.4 percent to 120.58 at 3:45 p.m. in Tokyo, headed for the lowest close since July 19, 2006. Raw-materials and energy shares had the biggest losses among the index's 10 groups, while utility companies led gains.
The measure has declined 24 percent this year as the global economy slowed and financial companies reported more than $500 billion in writedowns and credit losses.
Australia's S&P/ASX 200 Index dropped 1.1 percent after the country's economic expansion slowed in the second quarter to 0.3 percent, the weakest pace in two years. Newcrest Mining Ltd. fell.
Japan's Nikkei 225 Stock Average added 0.6 percent to 12,689.59. Bridgestone Corp., the world's largest tiremaker, gained 5.6 percent as raw-material costs declined. South Korea's Kospi Index rose 1.4 percent. Hyundai Motor Co. advanced after workers agreed to a pay increase, signaling an end to stoppages.
Commodities Drop
Most Asian markets open for trading declined, while India's markets are closed for a holiday. U.S. stocks declined yesterday as a slump in commodity producers overshadowed gains in airlines and consumer companies, sending the Standard & Poor's 500 Index down 0.4 percent. S&P 500 futures were little changed today.
BHP Billiton Ltd., the world's biggest mining company, fell 3.4 percent after the Reuters/Jefferies CRB Index of commodities declined the most since March 19 as Hurricane Gustav spared U.S. Gulf petroleum rigs the destruction caused by Katrina and Rita in 2005. Commodities also slumped after the U.S. dollar jumped to the highest since October against six major currencies, eroding the appeal of raw materials priced in the U.S. currency.
Cnooc tumbled 5.3 percent to HK$10.78 in Hong Kong. Inpex Holdings Inc., Japan's largest oil explorer, lost 3.9 percent to 1.025 million yen. Sumitomo Metal sank 6.4 percent to 1,252 yen, while Newcrest Mining, Australia's largest gold producer, slumped 9 percent to A$22.60. BHP dropped 3.4 percent to A$37.95.
Concerns Deepen
``Concerns have deepened that commodities and energy prices will drop further,'' said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which oversees $285 million.
Gasoline futures tumbled 9.2 percent. Oil futures fell as much as 8.7 percent to $105.46, the lowest since April 4, before closing at $109.71 yesterday. Gold futures lost 3 percent, the biggest drop since Aug. 11.
Fuel-dependent companies gained on speculation lower energy costs will bolster earnings. Tokyo Electric Power Co., the world's second-biggest non-state buyer of liquefied natural gas, rose 3.9 percent to 3,230 yen. Korean Air Lines Ltd., South Korea's largest carrier, rose 13 percent to 34,800 won.
Bridgestone added 5.6 percent to 1,951 yen. About seven gallons of oil are required to produce a car tire, according to the Rubber Manufacturers Association. Oji Paper Co., Japan's biggest user of high-sulfur fuel oil, climbed 6.9 percent to 586 yen, the highest since Oct. 11, 2007.
``Relief from falling energy prices provides a significant boost to earnings of fuel-dependent companies,'' said Platypus Asset's Patkar.
Coca-Cola Takeover
Huiyuan Juice, China's biggest maker of pure fruit juice, jumped 167 percent to HK$11.06. Coca-Cola offered to buy the company for HK$17.9 billion ($2.3 billion), Beijing-based Huiyuan said in a statement.
Hyundai Motor, South Korea's largest automaker, rose 0.6 percent to 71,100 won, after workers tentatively agreed yesterday to a 5.6 percent increase in basic pay.
Nippon Steel, the world's second-largest steelmaker, fell 2.9 percent to 503 yen, the most in two weeks, after rival ArcelorMittal said it will cut South African steel prices, raising concern prices will drop in Asia.
JFE Holdings Inc., Japan's No. 2 steelmaker, dropped 4.1 percent to 4,500 yen. South Korea's Posco declined 2.5 percent to 471,500 won. BlueScope Steel Ltd., Australia's largest steelmaker, lost 4.2 percent to A$8.88.
Komatsu Ltd., the world's second-largest maker of earthmoving equipment, dropped 7.1 percent to 2,095 yen, the most since Feb. 6. Mitsubishi UFJ cut its rating to ``market perform'' from ``outperform,'' citing increased concern that Komatsu may miss its profit forecast due to falling demand for construction machinery globally.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
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