Yen Falls as Haven Allure Fades on Stock Gains After Obama Plan

By Bo Nielsen and Stanley White

Dec. 8 (Bloomberg) -- The yen fell against the euro as stocks rallied around the world after U.S. President-elect Barack Obama’s unveiled the biggest economic stimulus plan since the 1950s, cutting the appetite for Japan’s currency as a haven.

The yen also slid against the Australian dollar as U.S. lawmakers neared agreement on bridge loans for General Motors Corp. and Chrysler LLC to help the automakers survive this month. The dollar fell against the euro as Obama’s plans lowered pressure on finance companies to hoard the U.S. currency amid the credit crisis.

“Anything that brings down risk aversion and causes stock markets to rally is bad for the yen,” said Ulrich Leuchtmann, head of foreign-exchange research in Frankfurt at Commerzbank AG, Germany’s second-biggest bank. “Obama and his team will run a very proactive type of recession-fighting, causing the fear of a global slowdown to abate. The yen has mostly profited from the high level of global risk aversion.”

The yen fell to 120.14 per euro as of 8:21 a.m. in London from 118.18 in New York on Dec. 5. It weakened to 93.75 against the dollar from 93.03. The Japanese currency slid to 61.39 per Australian dollar from 60.02. The euro rose to $1.2836 from $1.2718.

The MSCI World Index added 3 percent, Standard & Poor’s 500 Index futures jumped 2.7 percent and Europe’s Dow Jones Stoxx 600 Index advanced 6 percent. The MSCI Asia-Pacific index rose 4.4 percent, its biggest gain in a month.

Obama’s Plans

The U.S. House and Senate will meet this week to debate extending $15 billion in loans to GM and Chrysler as a global recession crimps consumer spending, making it difficult for the automakers to pay their bills. U.S. car companies originally requested $34 billion.

Obama, in a television interview yesterday on NBC, reiterated his commitment to the biggest investments in the nation’s infrastructure since President Dwight D. Eisenhower created the interstate highway system half a century ago. The U.S. President-elect takes office on Jan. 20.

The yen’s losses may be limited by speculation a U.S. rescue of GM and Chrysler may not prevent the two firms from filing for bankruptcy protection or being acquired.

GM’s Chief Executive Richard Wagoner should be replaced as a condition for federal aid and Chrysler may have to merge to survive, Senate Banking Committee Chairman Chris Dodd said on CBS television yesterday. GM is willing to accept strict conditions for a U.S. loan to stay afloat, including a promise to return the money and file for bankruptcy if the company doesn’t fulfill the terms, Wagoner said Dec. 5.

‘No Guarantee’

“The bias is for the yen to appreciate,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “There’s no guarantee that this bailout will come together and prevent these companies from going under. That discourages any sort of risk trade and boosts the yen.”

The yen may advance to 92.50 per dollar and 117.60 against the euro today, he said.

Futures traders increased bets the yen will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission show.

Gains in the euro may be limited by speculation worsening investor confidence in Germany, Europe’s largest economy, will give the European Central Bank more room to cut interest rates.

ZEW Survey

The ZEW Center for European Economic Research’s index of German investor and analyst expectations fell to minus 57 in December from minus 53.5 the previous month, according to a Bloomberg News survey. The research center will release the data tomorrow in Mannheim.

The ECB lowered its benchmark rate to 2.50 percent from 3.25 percent on Dec. 4 after data last month showed Europe’s inflation rate fell by the most in almost two decades.

“Inflation expectations have fallen faster than the ECB is cutting rates,” analysts led by Hans-Guenter Redeker, London- based global head of currency strategy at BNP Paribas SA, France’s biggest bank, wrote in a research note on Dec. 5. “European fiscal and monetary authorities’ slow response to the credit crunch will keep the euro under pressure.”

The cooling global economy is halting the spread of monetary union into eastern Europe and may lead to another year of losses for the Polish zloty, Hungarian forint and Czech koruna, New York-based Morgan Stanley and UBS AG in Zurich said.

‘Mirage’

The zloty fell 21 percent against the euro since July as Poland headed for its biggest economic slowdown in almost a decade, while Hungary turned to the World Bank, International Monetary Fund and European Union for a bailout as the forint weakened 16 percent. Koruna volatility almost tripled as it fell 13 percent. The two-year mandatory trial period before adopting the euro allows swings of no more than 15 percent.

Hungary’s plans to enter the pre-euro stability test by 2010 are a “mirage,” said Istvan Hamecz, chief executive officer of OTP Fund Management, Hungary’s largest fund management company, with $6.4 billion of assets. “Nobody needs us in that club.”

Less than three months after announcing a target of 2012, Polish Finance Minister Jacek Rostowski said the date isn’t “dogma.” The main opposition party says rushing into the currency will hurt growth and trigger inflation.

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

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Copper Rebounds From 3-Year Low in London as Asian Stocks Rally

By Li Xiaowei and Feiwen Rong

Dec. 8 (Bloomberg) -- Copper rose from the lowest in three years in London as Asian stocks rallied on economic stimulus plans in the U.S. and a cut to interest rates in India, boosting sentiment for raw material investment.

Base metal prices advanced as the MSCI Asia Pacific Index gained as much as 4.6 percent to 83.18, the most since Nov. 5, after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates by 1 percentage point.

“Copper’s rebound followed the gains in the stock market, and was technical as there’s nothing new in fundamentals,” Tan Wentao, research manager at HNA Topwin Futures Co., said today by phone from Shanghai.

Copper for three-month delivery rose as much as 5.6 percent to $3,220.50 a ton on the London Metal Exchange and traded at $3,200 at 3:13 p.m. in Shanghai. It fell to as low as $2,991 on Dec. 5, the first time it has dipped below $3,000 since May, 2005.

The exchange-monitored stockpiles have advanced 51 percent this year as slowing global economic growth crimps demand for raw materials. The copper price is down by 52 percent, heading for the first annual drop since 2001.

“The weakening economic outlook continued to pressure the industrial metals and copper may have a further decline of $300- $500 a ton,” Zeng Chao, analyst at Everbright Futures Co., said in a report today.

February-delivery copper on the Shanghai Futures Exchange closed 1.7 percent higher at 25,130 yuan ($3,656) a ton, after falling the exchange-imposed limit of 6 percent from the previous settlement price.

Aluminum for January delivery in Shanghai rose 0.4 percent to 10,730 yuan a ton, after dropping limit down. Trading of February and March delivery contracts was suspended.

Among other LME-traded metals, aluminum was 3 percent up at $1,535 a ton, zinc rose 3.8 percent to $1,112.25, lead added 4.6 percent to $1,015, nickel jumped 6.1 percent to $9,600 and tin was 4 percent up at $11,850 as of 3:27 p.m. in Shanghai.

To contact the reporter for this story: Li Xiaowei in Shanghai at xli12@bloomberg.net

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Soybeans Rise First Time in Two-Weeks on Crude Oil Gain, China

By William Bi

Dec. 8 (Bloomberg) -- Soybeans futures gained the most in two weeks on speculation a rise in crude oil prices may spark a rebound in agricultural commodities and on expectation that lower prices may spur buying from China. Corn also gained.

Crude oil in New York jumped 5 percent, the first gain in seven days as producers pledged to cut production. Soybean’s 10- day Relative Strength Index fell to 14 on Dec. 5. A measure below 30 suggests the commodity is oversold and poised to rise. U.S. exporters sold 110,000 metric tons of soybeans to China, the U.S. Department of Agriculture said.

“Crude oil is on a rebound, so the sellers may be taking cues to take their profits,” said Nie Ben, manager at Shanghai Continent Futures Co., by telephone from Dalian. “Demand for soybean oil and meal in China hasn’t been weakened.”

Soybeans for January delivery rose 1.9 percent to $7.98 at 11:28 a.m. in Beijing, in after-hour electronic trading on the Chicago Board of Trade. The commodity gained as much as 2.1 percent in early trading today after losing 3.4 percent in the last regular trading session on Dec. 5.

On the Dalian Commodity Exchange, May-delivery soybeans rose as much as 1.8 percent to 2,959 yuan ($430) a ton, and ended the morning session at 2,944 yuan.

March-delivery corn on the Chicago exchange jumped as much as 2.1 percent to $3.1575 a bushel, and last traded at $3.155. China is a net exporter of corn.

Wheat for March delivery rose as much as 8 cents, or 1.7 percent, to $4.835 a bushel and last traded at $4.8175.

January-delivery rough rice gained as much as 6.5 cents, or 0.5 percent, to $14.195 per 100 pounds.

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

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India Sugar Output Falls 21% as Mills Delay Crushing

By Thomas Kutty Abraham

Dec. 8 (Bloomberg) -- Sugar production in India, the world’s second-biggest producer, fell 21 percent in the first two months of the crop year that began Oct. 1 after farmers in the biggest cane-growing states delayed crushing.

Output was 1.4 million tons in October and November, down from 1.77 million tons a year ago, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd., said in a phone interview from New Delhi.

Lower output may reduce exports from the South Asian nation, worsening a global shortfall and bolstering a 13 percent gain in raw sugar in New York. Global sugar supply will be 5.8 million tons short of demand in the 2008-09 season as tightening credit and weaker prices spur producers to restrain output, Czarnikow Group Ltd. said last week.

Raw-sugar futures for March delivery rose as much as 4.1 percent, to 11 cents a pound today in after-hour electronic trading in New York’s ICE Futures. It traded at 10.95 cents at 1:23 p.m. in Mumbai.

Harvesting in the western Maharashtra state, India’s biggest producer, was delayed by three weeks because of rains. Mills in the northern Uttar Pradesh state, the second-biggest, held back processing cane after a price dispute with the state government.

“Processing is on in full swing now in Uttar Pradesh,” said Kumar.

Uttar Pradesh state government in October ordered mills to pay farmers 140 rupees ($2.8) for 100 kilograms (220 pounds) of cane, up from 125 rupees a year ago, prompting mills to delay crushing as they challenged the order. A court in Allahabad may give its verdict this week on the petition, Kumar said.

Production this year may drop 25 percent to 20 million tons and exports may drop to about 800,000 tons from almost 5 million tons last year, he said.

Sugar cane production may decline to 294.66 million tons in the year ending June 30, 13.5 percent less than last year, after farmers shifted to crops such as grains, according to the farm ministry.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.

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Vietnamese Coffee Crop Smaller Than Forecast, Tu Says

By Nguyen Dieu Tu Uyen and Claire Leow

Dec. 8 (Bloomberg) -- Vietnam, the world’s biggest coffee grower after Brazil, will harvest 4 percent less than forecast because poor weather earlier this year cut the size of beans, said Luong Van Tu, Vietnam Coffee and Cocoa Association chairman.

The country will produce as little as 17 million bags, down from a previous estimate of 17.5-18 million bags and the same amount as last year, Tu said in an interview. That compares with trade estimates as high as 21 million bags. Each bag weighs 60 kilograms (132 pounds).

A lower crop may help stem the plunge in prices of the bitter-tasting robusta variety used in espresso and in instant coffee by Nestle SA and Kraft Foods Inc. Prices have slumped 32 percent since the end of June as world production increased and the global credit freeze reduced investor demand for commodities.

“I’d put the crop at 1.20-1.25 million tons,” said Jens Nielsen from Singapore-based Oriental Coffee & Commodities Pte. That’s the equivalent of 20-20.8 million bags. The median of a survey of five traders in Ho Chi Minh City was 21 million bags.

Farmers resumed harvesting in the country’s largest growing region after rains cleared, traders and local government officials said last week. About two weeks of prolonged rains interrupted the harvest, delaying the picking of berries and hampering efforts to dry the crop.

Robusta prices are finding support “probably on account of the climatic difficulties delaying the harvesting of the 2008-09 crop in Vietnam,” Nestor Osorio, Executive Director of the International Coffee Organization, said in his November report.

USDA Estimate

Vietnam’s coffee crop will be 19.5 million bags in the 2008-09 marketing year, down from 21.5 million estimated in June and compared with 18.3 million the previous year, the U.S. Department of Agriculture said Dec. 5.

The country’s coffee industry cultivates as much as 500,000 hectares (1.2 million acres) with annual production of about 1 million tons, according to data posted on the Ministry of Industry and Trade’s Web site Sept. 9.

World output of robusta and the milder-tasting arabica in all exporting countries is expected to be 132.5 million bags in 2008-09, up from 115.4 million bags the previous year, the ICO said. Consumption in 2008 is estimated at 128 million bags, up from 125 million in 2007 “despite the current economic crisis,” it said.

“No significant surplus on the market is likely to be created since it will be used to reconstitute stocks as well as to respond to requirements for domestic consumption and exports,” the ICO added.

Smaller Beans

The Vietnamese coffee crop in 2009-10 may be even smaller as trees recover from stress after two good years, Tu said at the conference today.

Flowering for the next crop, normally in the first quarter or two months after the harvest, may be reduced as some trees are already flowering with the current rains, he said. The rainfall results in larger cherries with smaller beans, he said.

“In some areas, which have already been harvested, recent rains have made the trees flower,” said Le Ngoc Bau, vice director of the Vietnamese Coffee Research Institute. “It’s about two months earlier than normal and will harm the formation of cherries. That will hurt next year’s output.”

Difficulties in getting credit will hurt farmers trying to get fertilizers, which will also affect yield, Tu added.

Robusta coffee for March delivery dropped 0.7 percent to $1,598 a metric ton on Friday in London.

To contact the reporter on this story: Claire Leow at cleow@bloomberg.net;

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China Stocks Have ‘Bottomed’ on Stimulus Plan, JPMorgan Says

By Chua Kong Ho

Dec. 8 (Bloomberg) -- China’s stock markets have probably “bottomed” as the slowdown in economic growth reaches its trough this quarter, according to JPMorgan Chase & Co.

The benchmark CSI 300 Index has advanced 24 percent in the past month, the best-performer among 90 benchmarks tracked by Bloomberg, paring the year’s drop to 62 percent as the global economy sank into a recession. The rebound coincided with the announcement of a 4 trillion yuan ($581 billion) spending package last month and the biggest cut in interest rates in 11 years.

“We have had a nice bounce for the A share market and we have probably seen the bottom,” said Frank Gong, China strategist at JPMorgan told reporters in Shanghai today. China stocks traded in Shanghai and Shenzhen are listed as A shares, those traded in Hong Kong are H shares. “The worst in economic news flow is probably over.”

Gong and his team were top-ranked for China research in Institutional Investor’s 2008 investor survey.

China’s economy will probably grow 2 percent this quarter, compared with the prior three months, with full-year growth in 2009 at 8 percent, Gong said. He favors cement, infrastructure- related stocks and banks among those that will benefit from the fiscal stimulus package.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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India's Stocks, Rupee Rise on Interest-Rate Cut, Stimulus Boost

By Pooja Thakur and Glenys Sim

Dec. 8 (Bloomberg) -- Indian stocks and the rupee rose to a three-week high while bonds gained after the central bank cut interest rates for the third time in less than two months and the government unveiled additional spending to bolster the economy.

Tata Motors Ltd., the No. 1 truckmaker, gained 5.3 percent after the government announced a 200-billion rupee ($4 billion) stimulus package, including a cut in consumption tax. Housing Development Finance Corp., the biggest mortgage lender, rose 6.1 percent, following a one percentage point cut in interest rates.

``What you really need is fiscal stimulus at this time,'' Tom Byrne, senior vice president at Moody's in Singapore, said in an interview in Singapore today.

The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, added 3.1 percent to 9,246.06 at 10:57 a.m. local time, set for its highest since Nov. 17. The S&P CNX Nifty Index on the National Stock Exchange gained 3.5 percent to 2,809.80. The yield on the benchmark 10-year bond dropped to the lowest in almost four years and the rupee gained to the strongest since Nov. 17.

The local currency strengthened as much as 0.8 percent to 49.185 a dollar before trading at 49.255 in Mumbai, according to data compiled by Bloomberg. The yield on the 8.24 percent bond due April 2018 fell 5 basis points to 6.70 percent, according to the central bank trading system. The price gained 0.43, or 43 paise per 100-rupee face amount, to 110.60. It reached 6.57 percent earlier, the lowest since March 2005.

Economic Woes

India, where domestic consumption makes up 60 percent of GDP, is being buffeted by the global recession; exports fell 12.1 percent in October, their first drop in seven years. Its economic woes have been compounded by the terrorist attack on luxury hotels, a cafe and other places in its financial capital of Mumbai on Nov. 26, in which 163 people were killed.

The government said yesterday it will spend the equivalent of 0.3 percent of GDP on tax cuts, infrastructure projects and cash boosts to exporters during the year ending March 31. The Reserve Bank of India cut rates by 1 percentage point, lowering the benchmark repurchase rate to 6.5 percent.

Tata Motors Ltd. gained 5.3 percent to 161.2 rupees, leading automakers higher. The stimulus package will include a 4 percent cut on sales levies, coming after fuel prices were cut on Dec. 5.

Housing Development Finance Corp. rose 6.1 percent to 1,518.05 rupees. Lower interest rates will allow Indian companies to turn to local banks for funding rather than rely on lenders in the U.S. and Europe, where credit has dried up for many borrowers.

``This is a clear signal to commercial banks to cut lending rates,'' Paresh Nayar, chief of currency and fixed-income trading at Development Credit Bank Ltd. in Mumbai. ``This is clearly done to boost demand in the economy. Equities should benefit, and the rupee should too.''

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

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Japan Stocks Post Biggest Rally in Two Weeks on U.S. Spending

By Patrick Rial and Toshiro Hasegawa

Dec. 8 (Bloomberg) -- Japan stocks surged, sending the Nikkei 225 Stock Average to the steepest jump in two weeks, on speculation U.S. demand will rebound after President-elect Barack Obama pledged the biggest public works program since the 1950s.

Komatsu Ltd., the world’s No. 2 maker of earthmovers, soared by its trading limit after Obama said he’s planning the largest spending program since President Dwight D. Eisenhower created the interstate highway system. Bridgestone Corp., the world’s leading tiremaker, jumped 6.5 percent after oil prices dropped the most since 1991 last week, reducing costs. Tokio Marine Holdings Inc., Japan’s largest listed insurer, gained 8.9 percent after targeting a ninefold boost in profit by 2012.

The Nikkei climbed 411.54, or 5.2 percent, to 8,329.05 at the close in Tokyo, the biggest rally since Nov. 25. The broader Topix index rose 26.06, or 3.3 percent, to 812.08, with almost seven shares rising for each that fell.

“At the moment, governments are the only ones feeding cash into the system, and I think it’s a fair bet to say the policies of the U.S. will support demand,” said Masaru Hamasaki, who helps oversee about $3.3 billion as a senior strategist at Toyota Asset Management Co. in Tokyo. “Stocks are up on hopes that U.S. spending on public works will help businesses grow and falling oil prices will lower costs.”

Obama will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs, he said on Dec. 6 in his weekly radio speech. In an interview broadcast yesterday on NBC’s “Meet the Press,” he said the recession would worsen before a recovery took hold. The Labor Department said on Dec. 5 that U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993.

Public Spending

Komatsu added 11 percent to 1,007 yen, after having lost a fifth of its value in the previous five days. Hitachi Construction Machinery Co., the world’s largest maker of giant excavators, leapt 12 percent to 963 yen. Nippon Sheet Glass Co., which makes glass used for building facades, jumped 8.1 percent to 279 yen, the steepest gain since Nov. 4.

“A worsening employment situation usually gives lawmakers a mandate to take countermeasures,” Chisato Haganuma, a Tokyo- based strategist at Nomura Securities Co., said in an interview with Bloomberg Television. “These policies may trigger a rally in equity markets.”

Bridgestone rallied 6.5 percent to 1,466 yen. Tokyo Electric Power Co., Asia’s largest electricity generator, added 2.2 percent to 3,050 yen. Kao Corp., a user of petrochemicals as the nation’s biggest maker of household and personal care products, rose 3.9 percent to 2,910 yen.

Oil Slides

Crude oil tumbled 25 percent last week to $40.81 a barrel, the biggest weekly drop since 1991, as the recession deepened in the U.S., Europe and Japan. The contract for January delivery added 5.3 percent today after the Organization of Petroleum Exporting Countries’ president said there was consensus for a “significant” production cut when the group meets next week.

Tokio Marine gained 8.9 percent to 2,315 yen. The company said after the close of trading on Dec. 5 it aims to boost net income to 220 billion yen ($2.4 billion) by March 2012 as two overseas acquisitions begin contributing to earnings.

Rival Sony Financial Holdings Inc. surged 13 percent, while Mitsui Sumitomo Insurance Group Holdings Inc. advanced 10 percent.

Mizuho Financial Group Inc., Japan’s second-largest listed bank, rose 3.6 percent to 218,300 yen, while Sumitomo Trust & Banking Co. leapt 8.8 percent to 420 yen. Regional lender Fukuoka Financial Group Inc. climbed 5.9 percent to 305 yen, boosted by an upgrade to “neutral” from HSBC Holdings Plc.

Aeon Rallies

Loans, excluding those by credit associations, increased 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today. That was the biggest advance since at least 1992, when the measure was initiated.

Aeon Co., Japan’s second-largest retailer, jumped 6.2 percent to 879 yen, while Mitsubishi Corp., Japan’s largest trading house by value, rose 8.5 percent to 1,093 yen. Mitsubishi will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.

Nikkei futures expiring in December added 6 percent to 8,370 in Osaka and gained 5.8 percent to 8,350 in Singapore.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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Germany Stocks Update: DAX Index Rises 275.73 to 4,657.20

By Daniel Hauck

Dec. 8 (Bloomberg) -- Germany's benchmark stock index, the DAX Index, rose 6.29 percent at 9:05 a.m.

The index of 30 companies traded on the Frankfurt Stock Exchange rose 275.73 to 4,657.20. Among the stocks in the index, 30 rose and none fell.

Gains in the DAX were led by E.on Ag, Siemens Ag and Allianz Se. About 6.95 million shares traded in the DAX.

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Global Stocks, U.S.-Index Futures Rally; CRH, GM, Daimler Climb

By Sarah Jones

Dec. 8 (Bloomberg) -- Stocks in Europe and Asia rallied and U.S. index futures climbed after U.S. President-elect Barack Obama pledged the largest infrastructure-spending package since the 1950s to stimulate economic growth.

CRH Plc, the world’s second-biggest building materials maker, and Siemens AG jumped more than 6 percent as Obama said he’s planning the biggest public works program since President Dwight D. Eisenhower created the interstate highway system. Daimler AG led carmakers higher after U.S. lawmakers agreed in principle with the Bush administration on providing funds to prevent the collapse of General Motors Corp. and Chrysler LLC. GM surged 25 percent in Germany. BHP Billiton Ltd. and Royal Dutch Shell Plc rose with copper and oil.

The MSCI World Index added 2.7 percent to 871.63 at 8:47 a.m. in London as all 10 industry groups increased. Standard & Poor’s 500 Index futures jumped 2.5 percent, and Europe’s Dow Jones Stoxx 600 Index advanced 5.5 percent. The MSCI Asia Pacific Index increased 4.3 percent as India cut interest rates and unveiled a $4 billion stimulus plan.

Obama’s spending plan “is important in terms of it being another sign that policy response is ongoing and we should expect to see more from authorities through 2009,” said Robert Talbut, who helps manage $31 billion of assets as chief investment officer at Royal London Asset Management. “That should help restore confidence in equity markets.”

Governments worldwide have introduced measures this year to buttress their economies from the worst financial crisis since the Great Depression as more than $31 trillion has been erased from the value of global equities. Debt losses and writedowns by the world’s largest lenders and insurers have approached $1 trillion.

Profits for Free

Stocks have fallen so far that 2,267 companies around the globe are offering profits to investors for free. That’s eight times as many as at the end of the last bear market, when the shares rose 115 percent over the next year.

Companies in the MSCI World trade for an average $1.17 per dollar of net assets, the lowest since at least 1995, and 39 percent sell at a discount to shareholder equity, data compiled by Bloomberg show.

CRH rallied 7.4 percent to 18.80 euros in Dublin and Germany’s Siemens, Europe’s largest engineering company, advanced 6.5 percent to 47.70 euros after Obama said on Dec. 6 he will boost investment in roads, bridges and public buildings to create and preserve 2.5 million U.S. jobs.

Daimler, the world’s second-biggest producer of luxury cars, gained 7.5 percent to 24.105 euros. Bayerische Motoren Werke AG, the largest luxury-car maker, climbed 5 percent to 20.805 euros. GM surged 25 percent to $5.09 in German trading.

Carmaker Bailout

U.S. lawmakers are working to hammer out details of legislation to bail out ailing auto companies, after reaching an agreement in principle with the Bush administration.

The legislation is taking shape after House Speaker Nancy Pelosi dropped her opposition to drawing on $25 billion in funds from the Energy Department intended to help automakers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified.

BHP, the world’s largest mining company, climbed 11 percent to 1,078 pence. Shell, Europe’s biggest energy producer, added 7.4 percent to 1,677 pence.

Copper for delivery in three months snapping a seven-day losing streak, rising 4.5 percent in London.

Oil rebounded after six days of declines, with crude for January delivery gaining as much as $2.57, or 6.3 percent, to $43.38 a barrel in after-hours electronic trading.

Eni, Deutsche Boerse

Eni SpA gained 10 percent to 16.99 euros after the Italian government said the Libyan Energy Fund is interested in buying a stake in Italy’s biggest oil company.

Il Sole 24 Ore reported yesterday Libya could buy as much as 10 percent of Eni for as much as 9 billion euros ($11.5 billion), citing Libyan Ambassador to Italy Hafed Gaddur.

Deutsche Boerse AG, which runs the Frankfurt stock exchange, rallied 7.6 percent to 54.30 euros after saying the company had considered a merger offer for NYSE Euronext, operator of the world’s largest stock market. Deutsche Boerse said the talks had “ended without any conclusion.”

HSBC Holdings Plc gained 3.1 percent to 732 pence. Europe’s largest bank said it will increase the amount of money it loans for U.K. home mortgages next year by 20 percent to 15 billion pounds ($22 billion).

The announcement came less than a day after the bank created a $5 billion fund to increase access to credit for small and medium-sized businesses.

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

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Congress, White House Work to Forge Auto Aid Accord

By Lorraine Woellert and John Hughes

Dec. 8 (Bloomberg) -- U.S. lawmakers are working to reach an agreement today on automaker aid as they decide conditions such as when to name a so-called “car czar” and whether to replace executives.

Congress is considering loans for at least the $14 billion General Motors Corp. and Chrysler LLC say they need to keep operating through March 31. The legislation may be introduced tomorrow, lawmakers said. Senate Banking Committee Chairman Christopher Dodd predicted a plan would have the votes to pass. GM was trading up 22 percent in Germany.

“None of us want to wake up on Jan. 1 and discover we don’t have an industry to save,” Dodd, a Connecticut Democrat, said yesterday on CBS’s “Face the Nation.” Dodd said GM Chief Executive Officer Richard Wagoner should be replaced as a condition for the aid. “You’ve got to consider new leadership,” Dodd said. Wagoner, he said, “has to move on.”

GM spokesman Steve Harris said he didn’t interpret Dodd’s comments as making Wagoner’s exit a condition for aid, adding that the company management, employees and dealers “all feel like Rick is the right guy to lead us at this difficult time.”

President-elect Barack Obama said that if the management team “that’s currently in place doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go.”

“If, on the other hand, they are willing, able and show themselves committed to making those important changes, then that raises a different situation,” Obama said at a Chicago news conference yesterday.

Shares Surge

Detroit-based GM, the biggest U.S. automaker, was trading at the equivalent of $4.96 as of 9:23 a.m. in Frankfurt, up 88 cents compared with the close on Dec. 5. Dearborn, Michigan- based Ford Motor Co., the No. 2, advanced 53 cents, or 19 percent, to $3.25.

Michigan Senator Carl Levin said he expects there to be an administrator to be selected during the next 60 to 90 days who will make sure that “there will be real oversight.”

A draft proposal from the White House would create a “financial viability advisor” within the U.S. Commerce Department that would be responsible for helping automakers achieve a plan for long-term financial success.

The adviser could provide financing to an automaker to keep operating for no more than three and a half months. The financing would be supplied only if the adviser concludes the automaker will otherwise go bankrupt during the period of negotiating the plan and if stakeholders are negotiating in good faith.

Pelosi Drops Objections

The prospect for aid improved Dec. 5 when House Speaker Nancy Pelosi, a California Democrat, dropped objections to the Bush administration’s preference for tapping some of $25 billion in Energy Department loans for the assistance. The loans authorized in the 2007 energy bill had been targeted for building fuel-efficient vehicles.

The administration of President George W. Bush has held “constructive discussions” with members of Congress, White House spokeswoman Dana Perino said Dec. 6. “We hope to continue to make progress toward assistance for the automakers” provided public money can be safeguarded.

Pelosi said she expects to bring legislation to the floor this week. The Senate plans to return to work today and the House reconvenes tomorrow.

Passage is uncertain. Senator Richard Shelby of Alabama said he supports a filibuster, a procedural tactic which stalls legislation to allow endless debate. Sixty votes are needed to end filibusters.

“I think we need to debate it and that’s what filibusters allow and this week would be a good time to do it,” Shelby said on “Fox News Sunday.”

Alabama Republican Senator Jeff Sessions said on “Face the Nation” he has “doubts it will pass, but it’s a lot closer than it was” when automakers were asking for $34 billion.

To contact the reporters on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net; John Hughes in Washington at Jhughes5@bloomberg.net.

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Asian Stocks Rise on U.S., India Stimulus Plans; Komatsu Gains

By Chua Kong Ho and Ian C. Sayson

Dec. 8 (Bloomberg) -- Asian stocks and U.S. futures rose as U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India cut interest rates.

Komatsu Ltd., the world’s No. 2 maker of construction machinery, rose 11 percent after Obama planned the largest spending package since President Dwight D. Eisenhower created the interstate highway system. India’s Housing Development Finance Corp. added 7.1 percent on a $4 billion government stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 16 percent after a government official said a plan that permits Chinese nationals to buy the city’s shares is still on track.

“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”

The MSCI Asia Pacific Index gained 4.6 percent to 83.18 as of 5:21 p.m. in Tokyo, the most since Oct. 30. About 13 stocks rose for each that fell. The gauge lost 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The index is valued at 12 times estimated profit, almost a third below its level at the start of 2008.

Japan’s Nikkei 225 Stock Average advanced 5.2 percent to 8,329.05. China’s CSI 300 Index advanced 4.1 percent, a sixth- straight gain and its longest winning streak this year, amid optimism an annual government economic conference that starts today will spur measures to stimulate growth.

Government Support Measures

Hong Kong’s Hang Seng Index surged 8.7 percent, while South Korea’s Kospi Index climbed 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, on takeover speculation. Most markets in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.

Governments worldwide have introduced measures this year to buttress their economies from the worst financial crisis since the Great Depression. The MSCI World Index has lost 45 percent in 2008, wiping out more than $30 trillion in value as the U.S., Japan and Europe entered recession. The MSCI Asia Pacific Index slumped 47 percent in that time.

Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. In Beijing, Chinese leaders may decide to cut personal income taxes at this week’s economic conference, Daiwa Institute of Research’s Kevin Lai said.

Futures on the Standard & Poor’s 500 Index climbed 2.6 percent. The stock gauge rose 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.

U.S. Stimulus

Komatsu, which counts the Americas as its biggest overseas market, jumped by its daily limit of 100 yen to 1,007, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.

Obama said on Dec. 6 he will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. Reports last week showed U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993.

“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”

‘Through Train’

Housing Development, India’s biggest mortgage lender, rose 7.1 percent to 1,532 rupees. Reliance Industries Ltd., the country’s largest non-state company, gained 2 percent to 1,144.5 rupees. The Reserve Bank of India cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.

Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 16 percent to HK$71.50. China Overseas Land & Investment Ltd., the Hong Kong-listed developer controlled by China’s construction ministry, jumped 15 percent to HK$12.42.

China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.

Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.

Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.4 percent to HK$4.37 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 10 percent to HK$4.85, while Bank of China Ltd. rose 9.8 percent to HK$2.58.

Bond Risk

In Japan, Mizuho Financial Group Inc. added 3.6 percent to 218,300 yen. Sumitomo Mitsui Financial Group Inc. gained 2.4 percent to 303,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.

Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.

The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.

Takeover Speculation

Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post said.

The report was “pure speculation,” Santos said in a statement. Liu Weijiang, a spokesman for China National Petroleum, didn’t immediately answer calls seeking comment.

Aeon Co., Japan’s largest supermarket operator, jumped 6.2 percent to 879 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.

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Oilsands Stocks Whipsawed by Merger Speculation as Crude Falls

By John Kipphoff

Dec. 8 (Bloomberg) -- Canada’s oilsands miners, developing the largest reserves outside Saudi Arabia, are being roiled by takeover speculation after the 72 percent drop in crude prices delayed projects and ruined the outlook for profits.

Nexen Inc. and Opti Canada Inc., owners of the Long Lake oilsands mine in Alberta, soared as much as 53 percent last week on the Toronto Stock Exchange after the Financial Times said France’s Total SA planned a C$19.7 billion ($15.4 billion) offer for Nexen. Both retreated more than 10 percent a day later when the Times of London said Total won’t bid.

“There’s a risk you’ll see these companies go,” said John Stephenson, who helps to oversee about $1.5 billion, including Nexen and Opti shares, at First Asset Investment Management Inc. in Toronto. “They’re pretty much on bended knees at this point. The commodity is so much weaker now that it builds the case for takeovers.”

Companies from Exxon Mobil Corp. to Suncor Energy Inc. are putting projects on hold after oil slid more than $106 a barrel as recessions in the U.S., Europe and Japan cut energy demand. Crude under $95 a barrel makes it unprofitable to develop oilsands, in which bitumen dug from mines or coaxed from the ground using steam is turned into oil, according to Ryan Todd, an analyst for Deutsche Bank AG in New York.

An equal-weighted index of four oilsands developers -- Opti, Nexen, UTS Energy Corp. and Petro-Canada -- dropped 78 percent this year, compared with a 41 percent decline in the Standard & Poor’s/TSX Composite Index and a 43 percent retreat in a broader gauge of Canadian energy producers.

No Cash

Opti lost 89 percent in 2008 to C$1.77 after delaying expansion of the C$6.1 billion Long Lake mine, saying it doesn’t have enough cash. UTS, an investor in the C$25.3 billion Fort Hills, Alberta, project, became a penny stock, slipping from C$6.09 in May, while partner Petro-Canada retreated as much as 65 percent from its peak that month.

Nexen fell to its cheapest valuation on Oct. 10, when the shares traded for 3.2 times earnings over the previous 12 months. That’s 80 percent below the average price-to-earnings ratio over the past five years. Larger rival Suncor fell to 5.6 times earnings on Nov. 20, versus a five-year average of 23.

“It’s an opportunistic way to get in if you want to grow production and reserves,” said Gareth Watson, who helps manage about $46 billion as associate director at ScotiaMcLeod’s portfolio advisory group in Toronto. “The stocks are cheap on a historical basis. But it’s a timing issue. It depends on how long the recession will be and what oil prices do.”

Alberta’s tar-soaked sands may hold 173 billion barrels of oil, enough to supply the U.S. for about 24 years, according to the Canadian Center for the Study of Living Standards, an economic research firm based in Ottawa.

Fast Start

UTS, Petro-Canada, Opti and Nexen benefited from the surge in oil prices earlier this year, rising an average 24 percent through June, compared with a 4.6 percent gain in the S&P/TSX and a 22 percent advance in Canadian energy stocks, according to data compiled by Bloomberg.

As crude retreated, producers such as Irving, Texas-based Exxon and Royal Dutch Shell Plc, based in The Hague, delayed decisions on oilsands development, while Suncor cut its 2009 capital budget by a third.

Suncor decreased 59 percent this year, while Canadian Oil Sands Trust, lead owner in Syncrude Canada Ltd., the biggest oilsands producer, is down 49 percent after reducing its dividend in October. Both companies are based in Calgary.

Costs Rise

Petro-Canada, also based in Calgary, raised the cost estimate for its Fort Hills project by more than half in September. Last month, it deferred until 2009 a final decision on the development, which it began when oil was trading above $80 a barrel. The company has already spent $1 billion on Fort Hills.

UTS trades at 83 cents, valuing it at C$393 million. The Calgary-based company must raise about $3 billion for Fort Hills, according to Andrew Potter, a UBS AG analyst in Calgary.

“One of the problems is how do you raise capital,” said First Asset’s Stephenson. “The smaller pieces are logical candidates for being taken out.”

Calgary-based Nexen surged as much as 33 percent to C$29.10 Dec. 2 after the Financial Times reported that Paris-based Total may bid C$38 a share. It fell as much as 24 percent, its steepest intraday drop in 21 years, a day later. Opti Canada rose more than 40 percent two days in a row in November.

“Longer-term, these assets are good,” said Francois Bourdon, who helps oversee about $14 billion as a senior portfolio manager at Fiera Capital Inc. in Montreal. “In the short run, the price of oil and the lack of available credit make these assets too expensive.”

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.

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Comercial Mexicana, Perdigao, Positivo: Latin Equity

By William Freebairn and Paulo Winterstein

Dec. 8 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses and share prices reflect the previous close.

The MSCI Latin America Index fell 2.6 percent on Dec. 5 to 1,780.62. Markets in Argentina, Chile, Colombia and Peru are closed for a holiday today.

Brazil

Positivo Informatica SA (POSI3 BS): Brazil’s largest computer maker said it increased its market share by 1.6 percentage points in the third quarter to 13.2 percent. Positivo fell 3.1 percent to 4.75 reais.

Sadia SA (SDIA4 BS) and Perdigao SA (PRGA3 BS): Itajai port in the southern Brazilian state of Santa Catarina has resumed operations, the country’s Navy said. Fator Corretora analyst Renato Prado said last month that the closure of the port, where operations were halted Nov. 21, would force Perdigao, Brazil’s biggest food company, to redirect half of its fourth-quarter exports, increasing costs. Sadia, the second- biggest food company, would have to reroute 30 percent of projected exports. Perdigao rose 4.8 percent to 35.01 reais, while Sadia rose 1.5 percent to 3.30 reais.

Mexico

Controladora Comercial Mexicana SAB (COMERUBC MM): The third-largest Mexican supermarket operator said a court rejected its appeal of a decision that blocked it from entering bankruptcy. The company said it hasn’t hired advisers and isn’t planning to sell subsidiaries. Comercial Mexicana fell 3 percent to 2.90 pesos.

Desarrolladora Homex SAB (HOMEX* MM): Moody’s Investors Service lowered the outlook for the credit rating of Mexico’s biggest homebuilder to stable from positive. Homex may grow less than previously forecast as Mexico’s economy slows and mortgage financing becomes tighter, Moody’s said in a report Dec. 5. Homex rose 5.5 percent to 42.88 pesos.

To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net
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Cheapest Stocks Since 1995 Show Cash Exceeds Market

By Michael Tsang and Alexis Xydias

Dec. 8 (Bloomberg) -- Stocks have fallen so far that 2,267 companies around the globe are offering profits to investors for free. That’s eight times as many as at the end of the last bear market, when the shares rose 115 percent over the next year.

Bank of New York Mellon Corp. in New York, Danieli SpA in Buttrio, Italy and Seoul-based Namyang Dairy Products Co. hold more cash than the value of their stock and debt as the slowing world economy wiped out $32 trillion in capitalization this year. Companies in the MSCI World Index trade for an average $1.17 per dollar of net assets, the lowest since at least 1995, and 39 percent sell at a discount to shareholder equity, data compiled by Bloomberg show.

The cash-rich companies allow investors to pay nothing for future earnings streams, providing opportunities to buyers concerned about deflation, according to Jean-Marie Eveillard, whose $16 billion First Eagle Global Fund has beaten 98 percent of competitors this year. Microsoft Corp. and Novo Nordisk A/S, which generate the most money compared with debt, can expand even if lower consumer demand erodes profits.

“Cash is king, not necessarily for the investor but for corporations,” Eveillard said in an interview from New York last week. His fund holds both Microsoft and Namyang Dairy. “It’s useful to sit on a ton of cash, No. 1 to survive, as opposed to going bankrupt, and No. 2 to seize opportunities either to make acquisitions cheaply or to squeeze competitors.”

Falling Prices

Stocks plunged this year after almost $1 trillion in bank losses and writedowns froze credit markets and pushed the U.S., Europe and Japan into the first simultaneous recessions since World War II. The 40 percent drop in the Standard & Poor’s 500 Index is the steepest since 1931, while the MSCI World’s 45 percent plummet is the biggest since the gauge started in 1970.

The slump left prices in the global measure at 1.17 times companies’ so-called book value, or assets minus liabilities, on Nov. 20, the lowest on record, data compiled by Bloomberg show.

The MSCI World climbed 2.8 percent at 8:40 a.m. in London, while S&P 500 futures advanced 2.6 percent after U.S. President- elect Barack Obama pledged the biggest investment in the nation’s infrastructure since the 1950s to stimulate the economy.

Stagnating growth is heightening the risk of deflation. In the U.S., consumer prices plunged 1 percent in October, the biggest drop since records began in 1947. They may slow next year by the most since 1983, squeezing earnings, according to the International Monetary Fund in Washington.

‘Good Cash Flow’

Businesses with reserves will be cushioned from insolvency and may even benefit from deflation because buying power and the value of dividends increase as prices retreat, said Arlene Rockefeller, chief investment officer for global equities at State Street Global Advisors, which oversees $1.7 trillion.

“You want stocks with good cash flow and are self-funding,” Rockefeller said in an interview last week. “This is an opportunity for companies that are large and that do not have a lot of debt to go out and acquire other companies to gain market share.”

The firm’s SSgA Disciplined Equity Fund held shares of BNY Mellon, the world’s largest custodian of financial assets. The bank had $24 billion in so-called negative enterprise value, or the amount of cash that exceeds the value of its shares and debt. The stock climbed 24 percent since Nov. 20, when the S&P 500 fell to an 11-year low, outpacing the index’s 16 percent gain.

BNY Mellon, Danieli

BNY Mellon is among 49 companies with a market capitalization greater than $1 billion that hold more cash than the value of their stock and debt, out of 2,267 overall, data compiled by Bloomberg show.

Danieli, Italy’s biggest maker of equipment for the steel industry, has $1.49 billion in cash, or almost 40 percent more than the combined value of its shares and debt after a 73 percent stock plunge this year, Bloomberg data show.

Just 276 companies had cash that exceeded the value of their stock and debt when the S&P 500 bottomed in 2002. Those shares posted a median total return of 115 percent over the next 12 months, according to data compiled by Bloomberg. That’s more than triple the return for the S&P 500 during the same span.

Of the 50 largest companies in the Dow Jones Stoxx 600 Index of European companies, Novo Nordisk, the world’s biggest insulin maker, is one of two whose cash exceeds debt by four times.

Novo Nordisk Chief Financial Officer Jesper Brandgaard said on Oct. 30 that the Bagsvaerd, Denmark-based company is earmarking as much as $2 billion for takeovers in the next 12 months as the financial crisis forces biotechnology companies to seek buyers. The company has $1.35 billion and generated $1.83 billion in free cash flow in the first three quarters of 2008.

‘Going to Win’

“The ones that are going to win are those that can generate cash,” Horacio Valeiras, who oversees $11.2 billion as chief investment officer at Nicholas Applegate Capital Management in San Diego, said in a telephone interview last week. His Nicholas Applegate International Growth Fund bought shares of Novo in the third quarter, data compiled by Bloomberg show. The stock has since gained 8.5 percent, while the Stoxx 600 slumped 26 percent.

Eveillard at First Eagle increased his fund’s position in Microsoft, the world’s biggest software maker, by 83 percent to 8.16 million shares last quarter.

Microsoft, Apple

The Redmond, Washington-based company is one of only two in the S&P 500 with cash and marketable securities worth more than $20 billion and less than $2 billion in debt, according to data excluding financial firms compiled by Bloomberg. Apple Inc., the Cupertino, California-based maker of iPhones and Macintosh computers, is the other.

Microsoft and Apple outperformed the MSCI World since its low on Nov. 20, posting advances of 13 percent and 17 percent, respectively.

Eveillard’s fund is also the biggest overseas shareholder of Namyang Dairy, which has no debt and $270 million in cash. The cash pile is 44 percent higher than the value of its shares. Reserves at the company, one of South Korea’s biggest dairies, account for 65 percent of its $418 million in so-called tangible book value, a measure of shareholder equity that excludes assets that can’t be sold in liquidation.

“Cash provides a break against a potential catastrophe,” said Eveillard. “At the end of the day, cash is still worth 100 cents on the dollar.”

That helps explain why investors have rushed to Treasuries this year. Yields on three-month Treasury bills fell to 0.01 percent last week as investors paid a premium for the safest, most liquid assets. The level was the lowest since 1940, according to monthly figures compiled by the Federal Reserve.

Private Equity

One reason so many cash-rich companies are available now is because leveraged buyout firms such as Henry Kravis’s KKR & Co. and Blackstone Group LP have been hamstrung by the credit crunch, according to Tom Rozycki at Principal Global Investors, which held shares of Danieli.

Private-equity deals fell more than 70 percent from last year’s record $727 billion as banks stopped funding takeovers, Bloomberg data show. The $43 billion buyout of energy producer TXU Corp. by KKR and TPG Inc. in 2007 was the biggest ever.

“You don’t wish for this kind of environment, but it’s nice to have private equity out of the way so we can get some of these bargains too,” Rozycki, who helps oversee $2 billion from Des Moines, Iowa, said in an interview from New York last week.

The Principal MidCap Blend Fund, which he helps manage, has beaten 92 percent of competing funds this year. “For the longest time, a lot of these companies had premiums in them because people were pointing around at who’s going to be acquired next.”

‘Nothing Wrong’

Many stocks are cheap because investors doubt their reported asset values and ability to generate enough earnings to survive, said Sergi Martin, who oversees $9 billion as chief executive officer at Credit Andorra’s Credit Invest asset management unit in Andorra La Vella, Andorra.

“You have to screen very selectively for companies that will survive, and not for future corpses,” Martin said in a telephone interview last week. “There will be more bankruptcies, and where valuations are absurd and there is nothing wrong with the company, time will correct that.”

Grahame Exton, a money manager at Tilney Private Wealth Management in Liverpool, England, says clients want the margin of safety provided by reserves.

“We have always been paid to look for cash generators,” said Exton, whose firm had $9.9 billion under management at the end of September. “I just think that now people will put a greater emphasis on them.”

To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.

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Policymakers to set tone for next year's economic work

Updated: 2008-12-08

By Wang Xu (China Daily) Top policymarkers will convene Monday to discuss how to grapple with the challenge of ensuring at least 8 percent economic growth next year while at the same time pushing forward with the nation's economic restructuring, economists have said.

The annual Central Economic Work Conference, to be held from Monday to Wednesday in Beijing, will set the tone for next year's economic policy. The three-day event is expected to shed more light on how the government will use fiscal and monetary measures to bolster employment and domestic demand, while reducing excessive dependence on exports.

"The meeting will detail measures for achieving at least 8 percent growth in 2009, the minimum required to keep the unemployment situation under control," said Song Hong, a researcher with the Chinese Academy of Social Sciences (CASS). Song was one of the two economists who attended a Nov 28 meeting with top Party officials to discuss economic priorities for 2009.

The nation's economic growth dropped to 9 percent in the third quarter, compared with 11.4 percent for 2007. The global economic slowdown may even drag down China's growth to 7.5 percent in 2009, the lowest in two decades, the World Bank forecast earlier.

Such growth, considered high for many economies, is however not deemed enough for a nation that needs to churn out 10 million jobs for fresh job seekers each year. Over the past months, a number of factories in the costal export bases have closed down, leading to the layoffs of hundreds of thousands of migrant workers.

The bleak situation has led the government to unveil a host of measures such as a $586-billion stimulus package and hefty cuts in interest rates to jack up domestic demand.

Analysts said the government may elaborate at the conference on how it plans to finance the massive stimulus package, which is critical to make up for declining foreign demand.

Zhang Ping, minister of the National Development and Reform Commission, said earlier that the package could bolster annual GDP growth by 1 percentage point by 2010. Previous statistics show 1 percentage point in GDP growth could create about 1 million jobs.

"Policymakers may put forward further fiscal and monetary stimulus measures," Song said. "The $586 billion package may prove insufficient, given the worsening world economy."

It was reported earlier that policymakers would also discuss raising the threshold of personal income tax from 2,000 yuan to 3,000 yuan a month. The move, combined with tax cuts already announced for local businesses, is expected to boost domestic consumption and corporate investment.

Some analysts also expect the yuan to start to depreciate after the conference, which could benefit the nation's struggling exporters.

While most analysts are looking at the conference for more pro-growth measures, some say policymakers will also reiterate the message that they have no intention of delaying the transformation of the country's development pattern.

"The current crisis could be an opportunity to reduce the economy's excessive reliance on exports," Zhao Tao, deputy secretary-general of the Policy Research Office of the CPC Central Committee, wrote in commentary published on Saturday in Outlook Weekly, a publication of the Xinhua News Agency.

According to Zhao, the nation's polices will be directed at boosting domestic demand, consumption in particular, rather than low-end manufacturing for exports.

And the nation will strive to reduce its dependence on foreign trade, as a share of GDP, from 60 percent last year to 40 percent by 2020 and eventually to less than 25 percent.

The government will also unveil more measures to encourage consumption, which should account for about 75-80 percent of the GDP by 2020, Zhang said.

Final consumption, which includes household and community spending, now makes up about a half of the nation's economy, compared with an average of 70 percent in developing countries and 80 percent in developed economies. This forces China to rely heavily on foreign demand, which also makes it vulnerable to economic downturns abroad.

"Policymakers should make clear that growth should not come at the expense of a delay of the nation's economic restructuring," said Zhang Xiaojing, an economist with the CASS, the country's top think tank. "Or we risk repeating today's plight in a few years."


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China kicks off key economic conference

Updated: 2008-12-08

(Xinhua) BEIJING - China's decision makers gathered here on Monday to determine economic work for 2009 amid efforts to offset adverse impacts of global financial crisis and maintain stable and sound economic growth.

Analysts expected this year's meeting to work out specific strategies and resolutions for the problems China would confront next year, including the risk of economic slowdown, difficulties in small and medium-sized enterprises and the transformation of economic growth pattern.

The Central Economic Work Conference, an event initiated more than a decade ago, is held at the end of every year.


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