Asian Currencies Drop, Led by Won, on Weakening Exports, Growth

By Bob Chen

Feb. 24 (Bloomberg) -- Asian currencies fell, with the South Korean won approaching an 11-year low, after a slide in U.S. stocks prompted investors to avoid emerging-market assets.

The Korean currency shed 17 percent this year, the biggest drop among the 10 most-traded Asian currencies excluding the yen, as the Standard & Poor’s 500 Index slumped to a 12-year low. Taiwan’s dollar declined, after yesterday touching a five-year low, before reports today that will probably show slumping export orders and industrial production.

“There’s pressure on all Asian currencies at the moment,” said Thomas Harr, senior currency strategist at Standard Chartered Plc in Singapore. “We’re seeing very weak economic data in Asia, because the growth in exports to developed countries is very weak. Our view is that the economy in Asia will bottom out around the end of the second quarter.”

The won fell 1.5 percent to 1,510 per dollar as of 11:01 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. Taiwan’s dollar dropped 0.3 percent to NT$34.717, according to Taipei Forex Inc. The ringgit declined 0.5 percent to 3.6685, near the lowest since October 2006.

The worst is yet to come for Asia’s export-dependent economies as the global recession stifles demand, said Marc Faber, publisher of the “Gloom, Boom & Doom Report.” A National Association for Business Economics survey signaled the U.S. recession will be the worst in more than three decades.

Reports this week will show Malaysia and India’s economies expanded at the slowest pace in at least four years, according to economists in Bloomberg surveys. Taiwan export orders will show a 38 percent drop in January from a year earlier, economists forecast.

Slumping Exports

“People don’t realize that what we’ve seen so far may be just the ‘appetizer’ of a global economic slump and that economic conditions, with a time lag, will worsen far more,” Faber said in a telephone interview from Chiang Mai, Thailand.

The MSCI Asia Pacific Index of regional shares fell 2.2 percent, bringing declines this year to 17 percent. The Kospi stock index slumped 2.9 percent as overseas investors sold more Korean shares than they bought for an 11th straight day.

“The unrest in global financial markets is rocking traders’ confidence again,” said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. “There’s caution against intervention above 1,500 that will prevent the won from plunging.”

Finance Minister Yoon Jeung Hyun urged companies to hire more workers and increase their investment spending today as the economy faces a recession. He also said after a meeting with business leaders that the government should “refrain” from officially commenting on the currency.

Asian Economies

The economies of Asia’s developing countries will probably grow 5.5 percent this year, the slowest pace since 1998, the International Monetary Fund said in last month’s update of its World Economic Outlook report. Singapore, Taiwan, Hong Kong and Japan are already in recessions. Thailand’s government yesterday warned its economy may enter a recession this quarter.

Central banks from South Korea to Malaysia have cut interest rates to spur demand, while Asian governments have pledged more than $685 billion in spending over five years to spur growth.

The ringgit fell as some economists predict Bank Negara Malaysia will today keep its overnight policy rate on hold even as the economy expanded at the slowest pace in seven years in the final quarter of 2008. Bank Negara will keep its benchmark rate at 2.5 percent, according to eight of 15 economists in a Bloomberg News survey.

Malaysia Slowdown

“Wealth destruction is causing risk aversion in the market and that’s affecting the ringgit,” said Yeah Kim Leng, chief economist in Kuala Lumpur at RAM Holdings Bhd., the nation’s biggest rating company. “The region is facing a confidence issue, and a rate cut may not be sufficient in itself to address falling exports and growth.”

Malaysia’s economy expanded 1.4 percent in the final quarter of last year, versus 4.7 percent in the preceding three months, a separate survey shows. The central bank will report the data on Feb. 27.

Elsewhere, the Indonesian rupiah dropped 0.8 percent to 12,025 against the dollar and the Philippine peso declined 0.3 percent to 48.175.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.

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Taiwan Dollar Declines as Export Orders May Show Record Drop

By Bob Chen

Feb. 24 (Bloomberg) -- Taiwan’s dollar fell on speculation the island’s exports will extend a record slump as the global financial turmoil curbs demand for computer chips, laptops and mobile phones.

The decline in the currency took losses this month to 2.6 percent, following a drop of a similar magnitude in January. A survey from the National Association for Business Economics yesterday said the U.S. recession will be the worst in more than three decades. A report today is forecast to show Taiwan’s export orders fell by the most ever last month, according to a Bloomberg News survey.

“Taiwan’s dollar has been hurt by slowing growth expectations and falling exports,” said Thomas Harr, senior currency strategist at Standard Chartered Plc in Singapore. “It’s one of the economies hit the most by weaker growth. I think the central bank will tolerate a modestly weaker currency as long as it’s gradual and weakening in line with other Asian currencies.”

Taiwan’s dollar traded at NT$34.710 as of 9:53 a.m. local time from NT$34.628 at yesterday’s close, according to Taipei Forex Inc. It weakened as much as 0.5 percent to NT$34.792, after yesterday reaching a five-year low of NT$34.862.

The report on export orders, an indication of shipments in the next one to three months, will show a 38 percent drop in January from a year earlier, economists forecast, following declines of 33 percent in December and 28.5 percent in November. The data are due at 4 p.m. local time.

The government is also set to report industrial production for January at the same time today. Factory output dropped by a record 38 percent, according to a separate Bloomberg survey, after contracting in the previous four months.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.

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South Korea Exchange to Allow Broader Range of Currency Futures

By Sangim Han and Saeromi Shin

Feb. 24 (Bloomberg) -- Korea Exchange plans to allow trading in a broader range of maturities for currency futures and will reduce the minimum value of the contracts to encourage their use, South Korea’s financial regulator said.

The Financial Services Commission will gradually implement the changes from the end of April, it said in an e-mailed statement today in Seoul. The adjustments will enable more exporters and importers to use currency futures to hedge against won fluctuations, the regulator said.

The won has dropped 17 percent versus the dollar this year, the biggest loss among Asian currencies. It plunged 26 percent in 2008, the most in 11 years.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net

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Yen Falls to 12-Week Low Against Dollar as Haven Allure Weakens

By Ron Harui and Yasuhiko Seki

Feb. 24 (Bloomberg) -- The yen fell to a 12-week low against the dollar before government reports this week that may show the world’s second-largest economy is deteriorating, reducing the allure of the currency.

Japan’s currency also approached the weakest level in a month versus the euro after Prime Minister Taro Aso’s approval rating slumped 6.8 percentage points to 11.4 percent in a survey published today by Sankei newspaper. The dollar declined versus the euro on speculation a U.S. report today will show home prices fell at the fastest pace on record in December.

“The yen appears to be losing some of its safe-haven status,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Japan’s economic and political situation is poor. The yen is weakening.”

Japan’s currency fell to 95.21 per dollar as of 7:49 a.m. in London from 94.61 yesterday in New York. It touched 95.35 today, the weakest level since Dec. 1. The yen has dropped 8.4 percent since hitting a 13-year high on Jan. 21. Japan’s currency declined to 121.29 per euro from 120.10 yesterday, when it reached 121.93, the lowest since Jan. 19.

The dollar dropped to $1.2739 per euro from $1.2694 yesterday. It fell to $1.4533 against the British pound from $1.4487 and traded at 1.1640 Swiss francs from 1.1686. Against the pound, the euro was at 87.66 pence from 87.57 pence.

Asian Currencies

Asian currencies declined against the dollar, with the South Korean won approaching an 11-year low, after a slide in U.S. stocks spurred investors to cut holdings of emerging-market assets. The won lost 1.8 percent to 1,516.30, according to Seoul Money Brokerage Services Ltd. The Nikkei 225 Stock Average fell 1.5 percent after the Standard & Poor’s 500 Index slipped yesterday to the lowest close since 1997.

“The global rout in equities is expected to see a more supported dollar against Asian currencies,” Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore, wrote in a research note today.

Japan’s currency declined for a fifth day against the euro, the longest stretch since September, before a Ministry of Finance report tomorrow that may show the trade deficit widened to 1.2 trillion yen ($12.7 billion) in January, according to a Bloomberg News survey. That would be the largest in 23 years.

Japan’s core consumer prices probably fell for the first time in more than a year in January, economists surveyed by Bloomberg predict a government report will show on Feb. 27.

The yen also dropped as the relationship between the currency and equity markets has weakened, according to National Australia Bank Ltd., Australia’s biggest lender by assets.

‘Breakdown’ in Correlation

“A breakdown in the correlation between the yen and stock markets and the likely longer-term nature of the deterioration in Japan’s current-account surplus suggest that the currency is losing its ‘safe haven’ appeal,” John Kyriakopoulos, head of currency strategy at National Australia Bank in Sydney, wrote in a research note today.

The dollar-yen now moves in the opposite direction to the Nikkei 225, compared with the same direction about a week ago, according to data compiled by Bloomberg. The correlation between the two has been minus 0.89 since Feb. 16 when Japan’s gross domestic product report was released. The relationship was positive 0.86 in the 12 months to Feb. 16. A reading of 1 would mean the two moved in lockstep.

Demand for the yen as a haven also declined after U.S. financial regulators said yesterday they will begin examinations this week to determine if banks have enough capital. Citigroup Inc. and Bank of America Corp. jumped on the announcement even as the S&P 500 closed at the lowest level in 12 years.

‘Help Stabilize’

“The injection of additional capital into banks should gradually help stabilize the financial system in the U.S., which is saddled with a bad-debt problem,” said Masashi Hashimoto, a Tokyo-based foreign-exchange analyst at Bank of Tokyo Mitsubishi UFJ Ltd., an unit of Japan’s biggest banking group. “This will support the dollar” against the yen, he said.

The dollar dropped against the euro on concern an industry report today will show U.S. home prices fell the most since year-on-year records began in 2001.

The S&P/Case-Schiller index of house prices in 20 cities declined 18.3 percent in December from a year earlier, according to a Bloomberg News survey of economists before the report due at 9 a.m. in Washington.

“U.S. economic data due this week may underscore the unabated decline of the housing market, which should bode ill for the dollar,” said Shinya Furue, an economist in Tokyo at Norinchukin Research Institute Ltd. “If the housing data are weak enough, the dollar may fall back to between 90 yen and 92 yen.”

Business Confidence

The ICE’s Dollar Index, which tracks the greenback against six major trading partners including the euro and the yen, dropped 0.2 percent to 87.075. It reached 88.254 on Feb. 18, the highest level since Nov. 21.

Federal Reserve Chairman Ben S. Bernanke is scheduled to deliver his semi-annual monetary policy report before the Senate Banking Committee today and before the House Financial Services Committee tomorrow.

Demand for the euro may wane on speculation a German report will show business confidence held near the lowest level in more than 26 years, backing the case for the European Central Bank to lower interest rates.

The Ifo Institute report today will show the business climate index held at 83 in February, close to the weakest since November 1982, a separate Bloomberg survey showed. The Ifo will release the report at 10 a.m. in Munich.

“Given mounting economic challenges in the eurozone and neighboring countries, the European Central Bank is unlikely to be able to signal an end to the rate cutting cycle,” said Yousuke Hosokawa, a senior foreign-exchange dealer at Chuo Mitsui Trust and Banking Co. in Tokyo. “This may potentially be a euro negative.”

To contact the reporters on this story: Ron Harui in Tokyo at rharui@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.

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Australia, N.Z. Dollars Fall as Stock Slump Damps Yield Demand

By Candice Zachariahs

Feb. 24 (Bloomberg) -- The Australian and New Zealand dollars fell against the greenback as a slump in U.S. and Asian stocks damped demand for the South Pacific nations’ higher- yielding assets.

Australia’s currency rallied from its biggest drop in two weeks against the yen before a government report tomorrow that economists say will show Japan’s trade deficit widened, pointing to further deterioration in its economy. Australia’s benchmark stock index closed at its lowest level in five years after the Standard and Poor’s 500 Index fell to the weakest since 1997.

“The currency market continues to trade off equity market risk sentiment,” said Nick Jonas, a currency trader at Suncorp- Metway Ltd. in Brisbane. “The short-term bias is to the downside,” for the Australian dollar.

Australia’s currency fell 0.4 percent to 64.75 U.S. cents as of 4:54 p.m. in Sydney from late in Asia yesterday. The currency bought 61.65 yen from 61.62 yesterday, after earlier sliding as much as 2.2 percent. The so-called Aussie will trade between 63.50 and 65 U.S. cents today, Jonas said.

New Zealand’s dollar declined 0.4 percent to 51.29 U.S. cents, and slumped to 48.72 yen from 48.83 yen.

The Australian currency has fallen 6.6 percent this year and New Zealand’s dollar has lost 11 percent as falling equities around the world reduced the appeal of so-called carry trades that use low-cost funds to buy the South Pacific nations’ bonds.

The risk with carry trades is that market moves can erase those profits. Interest rates are 3.25 percent in Australia and 3.5 percent in New Zealand, compared with as low as zero in the U.S. and 0.1 percent in Japan.

Rate Cuts

The central banks of both Australia and New Zealand will cut their benchmark interest rates to 2.75 percent when they meet March 3 and March 12, respectively, according to the median estimates of separate surveys of economists by Bloomberg News.

Next month’s reduction may bring the Reserve Bank of Australia near the end of its most aggressive round of policy easing, interest-rate swaps show.

The RBA will drop its cash rate target by half a percentage point at its next meeting on March 3, according to a Credit Suisse Group index based on swaps trading. The rate will be 2.25 percent in 12 months, a separate index shows. The lowest benchmark borrowing cost in the Reserve Bank of Australia’s 50- year history is 2.89 percent in January 1960. The RBA started setting a cash-rate target in 1990.

Australian government bonds gained for a third day. The yield on the benchmark 10-year note fell three basis points, or 0.03 percentage point, to 4.12 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security maturing in March 2019 rose 0.244, or A$2.44 per A$1,000 face amount, to 109.187.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.27 percent from 3.28 yesterday.

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

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Rubber Futures Drop as Slump in Equities Deepen Growth Concern

By Aya Takada

Feb. 24 (Bloomberg) -- Natural rubber futures declined as a sell-off in global equity markets deepened concern that worsening economic slump will weaken demand for the commodity used in tires.

Prices in Tokyo lost as much as 3.5 percent. Asian equities slid, dragging the regional benchmark to the lowest in more than five years. The MSCI Asia Pacific Index is set for its lowest close since Aug. 28, 2003.

“A slump in global equities spurred investors to cut holdings of risk assets,” Jun Nishimuta, an analyst at Kanetsu Asset Management Co. in Tokyo, said today by phone.

Rubber for July delivery lost 2 percent to 133.2 yen a kilogram ($1,401 a metric ton) on the Tokyo Commodity Exchange at the 12:54 p.m. local time. Rubber for August delivery, listed on the exchange today, ended the morning session at 134.5 yen after trading between 132.5 and 135.4.

Rubber futures also declined as falling crude oil pared the cost of making rival synthetic product, Nishimuta said.

Oil fell for a third day on speculation that U.S. stockpiles will rise for the 19th week of the past 22 as the slowdown crimps fuel demand.

May-delivery rubber on the Shanghai Futures Exchange, the most-active contract, lost 4 percent to 12,585 yuan ($1,840 a ton) at 11:30 a.m. local time.

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

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Corn, Soybeans Drop as Global Recession Lowers Demand Prospect

By Jae Hur

Feb. 24 (Bloomberg) -- Corn and soybeans declined on speculation that the deepening global recession will curb demand for food, animal feed and alternative fuel. Wheat dropped for a third day.

Asian stocks fell, dragging the regional benchmark toward the lowest close in more than five years. A drop in U.S. stocks yesterday sent the Standard & Poor’s 500 Index to a 12-year low. The widening global recession has driven down corn prices for seven straight weeks while soybeans fell in five of the past seven weeks.

“Basically the grains and oilseed complex was believed to be less sensitive to an economic slowdown, but it’s no longer safe now as the global economy plunges by this much and no one can see the end of this slowdown,” said Toshimitsu Kawanabe, an analyst at Central Shoji Co. in Tokyo.

Corn for March delivery fell 0.6 percent to $3.4975 a bushel at 1:09 p.m. Singapore time in electronic trading after gaining 0.4 percent yesterday. The contract touched $3.42 on Feb. 20, the lowest for a most-active contract since Dec. 12. Corn is still down 56 percent from a record $7.9925 on June 27.

Soybeans for May delivery lost 0.2 percent to $8.7425 a bushel after adding 1.5 percent yesterday. The contract is down 47 percent since reaching a record $16.3675 in July and on Feb. 20 touched $8.5425, the lowest since Dec. 16.

The MSCI Asia Pacific Index fell as much as 2.5 percent to 74.33, heading for the lowest close since August 2003. The S&P 500 declined 3.5 percent to its lowest close since April 1997. The six-day losing streak in the U.S. stock benchmark ranks as its longest since October.

Oil Drops

Crude oil for April delivery fell as much as 2.1 percent to $37.65 a barrel in electronic trading on the New York Mercantile Exchange and was at $38.07 at 1:26 p.m. Singapore time. A decline in crude oil may reduce demand prospects for corn and soybeans as a source for biofuel.

The U.S. Department of Agriculture inspected 26.4 million bushels of corn for export in the week ended Feb. 19, down 24 percent from the previous week and 49 percent a year earlier, the USDA said yesterday in a report. Inspections for soybeans were 27.5 million bushel, down 43 percent from the previous week, the USDA said.

The USDA inspected 10.03 million bushels of wheat for export in the week, down 5.5 percent from the previous week and 48 percent from a year earlier, it said.

Wheat for May delivery was 0.1 percent lower at $5.2075 a bushel at 1:24 p.m. Singapore time after losing 1.7 percent yesterday. The contract on Feb. 20 touched $5.15, the lowest since Dec. 16, and has dropped 62 percent from a record $13.495 in February 2008.

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

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Sugar Drops by Limit in India as Government Plans Stock Curbs

By Thomas Kutty Abraham

Feb. 24 (Bloomberg) -- Sugar prices in India, the world’s second-biggest producer, declined by the daily limit after the government said it will limit the quantity traders can hold to cool prices ahead of general elections.

The stockpile limits and curbs on the amount traders can sell will be enforced for four months, Home Minister Palaniappan Chidambaram said yesterday. The rule will be notified today.

Retail prices of sugar in capital New Delhi have gained 23 percent in the October-January period as production falls for a second year. The jump comes as Prime Minister Manmohan Singh’s government prepares for elections that need to be held by May. Inflation can mar poll prospects in a country where more than half the people survive on less than $2 a day.

“Government intervention will continue to arrest any significant rise in prices,” Sangeetha Saranathan, an analyst at India Infoline Ltd., said. “Sugar is an essential commodity and an increase in prices won’t be a positive with elections round the corner.”

The curbs on stockpiling sugar mirror those on cooking oil, oilseeds, rice and paddy.

March-delivery sugar on the National Derivatives & Commodity Exchange Ltd. in Mumbai slipped 4 percent to 2,101 rupees per 100 kilograms. Futures were at 2,124 rupees at 12:55 p.m. local time.

Sugar production in the year ending Sept. 30 may total 16 million tons compared with 26.4 million tons last year, Vivek Saraogi, managing director of Balrampur Chini Mills Ltd., the nation’s second-biggest producer, said Feb 3.

India last week allowed duty-free imports of raw sugar to fill the shortfall. Importers can buy sugar at zero duty until Sept. 30 only if they export a matching quantity in two years.

‘Knee-Jerk Reaction’

Shares of Balrampur Chini fell as much as 9 percent to 48.2 rupees in Mumbai, the lowest since Jan. 23. Bajaj Hindusthan Ltd., the biggest mill, dropped as much as 9.3 percent to 45.2 rupees, while Shree Renuka Sugars Ltd. dropped 7.5 percent to 76.3 rupees.

The sell-off may be a “knee-jerk reaction” as the drop in output is “supportive” for sugar mills, said Saranathan.

“The gain in global sugar price index on the back of India import plans signal that prices will remain firm.”

Prices of raw sugar have risen 10 percent this year in New York on forecasts of India importing the sweetener for the first time in three years.

Futures for May delivery fell 0.6 percent to 12.99 cents a pound yesterday on ICE Futures U.S. in New York. Prices reached 13.64 cents on Feb. 10, the highest since Oct. 2.

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

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Copper Falls After U.S., Asian Stocks Tumble on Recession

By Li Xiaowei

Feb. 24 (Bloomberg) -- Copper declined in London after U.S. stocks slumped to a 12-year low and Asian stocks fell to the lowest in more than five years on concern that a deepening recession will erode earnings.

The MSCI Asia Pacific Index is set for its lowest close since Aug. 28, 2003 after the Standard & Poor’s 500 Index fell to its lowest close yesterday since April 1997. Copper demand is still “very weak” as global economic growth declines, said Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly-traded producer of the metal.

“The plunge in U.S. stocks fueled concerns about a deepening recession and took metals markets down as well,” Wang Lei, an analyst at Haitong Futures Co., said in an e-mailed report today.

Copper for three-month delivery on the London Metal Exchange fell as much as 2.3 percent to $3,157 a metric ton before trading at $3,185 a ton at 3:02 p.m. in Shanghai.

May-delivery copper on the Shanghai Futures Exchange lost 2.7 percent to 26,550 yuan ($3,882).

Japan’s copper wire and cable shipments plunged 21.2 percent in January from a year earlier, the biggest monthly drop in more than three decades, as the construction sector was hit by recession.

China Zinc

China’s State Reserve Bureau will seek to buy zinc tomorrow from the largest domestic producers, said three company executives who declined to be identified. The bureau bought 59,000 tons of the metal in January and made two purchases of aluminum to support the metals industry.

“Unless the second zinc purchase doubles the first, we won’t see much support for Chinese zinc prices because of a big surplus,” Yu Ye, an analyst at Minmetals Starfutures Co., said by phone from Shenzhen today. The surplus has swelled as some production was brought back on-line after cuts and imports climbed, she said.

London zinc was 0.2 percent up at $1,100 and Shanghai zinc closed down 1.2 percent at 10,105 yuan.

Among other LME-traded metals, aluminum was up 0.5 percent at $1,295 a ton, lead fell 1.3 percent to $1,010 a ton, nickel slid 0.6 percent to $9,450 a ton, and tin was little changed at $10,400 a ton.

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

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Gold Little Changed as Equities Decline on Earnings Concerns

By Claire Leow and Glenys Sim

Feb. 24 (Bloomberg) -- Gold traded little changed as global stocks tumbled, sending the Asian regional benchmark toward a five-year low, on concern a deepening recession is hurting company earnings.

The MSCI Asia Pacific Index fell 2.3 percent to 74.51 at 12:19 p.m. in Singapore, and is set for its lowest close since August, 2003. Gold has gained 12 percent this year as the index plunged 16 percent.

“Gold experienced profit-taking and long liquidation,” said Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg. “However precious metals remain well supported by macro-economic turmoil and tumbling global equities.”

Gold for immediate delivery traded at $990.78 an ounce at 2:59 p.m. in Singapore, after earlier dropping much as 0.7 percent to $984.53. The price is down 1.5 percent from the 11- month high of $1,006.29 reached on Feb. 20. Silver rose 0.5 percent to $14.4925 an ounce.

“Because gold is losing some of its momentum, consolidation seems imminent,” de Wet wrote in an e-mail today. “At the current gold price, participants are wary, and price moves higher are becoming lethargic. However, we believe the metal will re- test $1,000 in the next week or two.”

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, stood unchanged at 1,028.98 metric tons yesterday, according to figures on the company’s Web site.

Platinum Gains

Platinum advanced 0.9 percent to $1,087 an ounce at 3 p.m. Singapore time, extending a five-week rally, while palladium added 2.3 percent to $202.50 an ounce.

Platinum may average $1,050 an ounce in 2009 and rise to $1,250 in 2012, compared with earlier estimates of $847 and $942 respectively, Goldman Sachs JBWere Investment Research analysts led by Malcolm Southwood wrote in a report.

“We expect the fall in industrial demand this year to be partly offset by stronger discretionary off-take for jewelry and investments,” said Southwood. “Platinum in particular has a tendency, under certain circumstances, to mimic gold’s price performance as a safe-haven investment.”

“In the medium term, we see platinum in deficit,” which will support the price, Southwood added.

To contact the reporter for this story: Claire Leow in Singapore at cleow@bloomberg.net

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Crude Oil Falls a Third Day as U.S. Inventories May Have Gained

By Christian Schmollinger

Feb. 24 (Bloomberg) -- Crude oil fell for a third day on speculation that U.S. stockpiles increased for the 19th week in 22 as the global recession saps fuel demand.

Crude-oil inventories probably gained 1 million barrels in the week ended Feb. 20 from 350.6 million the week before, a Bloomberg survey showed. Supplies fell 138,000 barrels in the week ending Feb. 13. The MSCI Asia-Pacific Index fell 2.5 percent today to the lowest since August 2003, increasing concern that the worldwide economic contraction is deepening.

“If we do see a hefty build, that would suggest that last week’s draw wasn’t an indication that we’re getting close to a supply-demand balance,” said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. “Looking at the equity markets as a gauge for the demand outlook, it doesn’t look as if there is any sign of a recovery soon.”

Crude oil for April delivery fell as much as 79 cents, or 2.1 percent, to $37.65 a barrel in electronic trading on the New York Mercantile Exchange. It was at $38.02 a barrel at 3:28 p.m. Singapore time.

The contract dropped $1.59 yesterday to settle at $38.44 a barrel. Prices are down 62 percent in the past year.

The S&P 500 slumped 3.5 percent yesterday to 743.33, its lowest close since April 1997. The six-day losing streak in the U.S. stock benchmark ranks as its longest since October. The Dow Jones Industrial Average tumbled 250.89 points, or 3.4 percent, to 7,114.78, its lowest since May 1997.

Crude Imports

“Equities are something of the main driver as far as sentiment is concerned,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “Imports are becoming a key factor now because refinery runs are falling because of maintenance and low demand.”

U.S. crude oil inventories dropped in the week ending Feb. 13 as the country’s imports fell 8.9 percent to 8.7 million barrels a day, the lowest since September.

Analysts were split over whether gasoline stockpiles rose or fell last week. Supplies were probably unchanged at 218.7 million, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell 1.5 million barrels from 140.8 million.

The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington.

Crude oil supplies at Cushing, Oklahoma, where New York- traded West Texas Intermediate crude is delivered, declined 52,000 barrels to 34.9 million barrels in the week ended Feb. 13, Energy Department data shows. Inventories in the week ended Feb. 6 were the highest since at least April 2004, when the department began keeping records for the location.

Brent Premium

The high inventories at Cushing have depressed the West Texas price so that Brent crude oil traded in London is at a premium to the U.S. grade. Brent is selling more than $2 a barrel higher than WTI.

“People are looking at the high inventory levels now and not really paying attention to the quality premium that normally exists for WTI,” said Astmax’s Emori.

Brent crude oil for April settlement fell as much as 56 cents, or 1.4 percent, to $40.43 a barrel on London’s ICE Futures Europe exchange. It was at $40.71 a barrel at 3:22 p.m. Singapore time. The contract yesterday declined 90 cents, or 2.1 percent, to end the session at $40.99 a barrel.

OPEC Cuts

The 11 OPEC members with quotas, all except Iraq, reduced output by 3.8 percent to 25.3 million barrels a day in February, according to consultant PetroLogistics Ltd. of Geneva.

Supply from OPEC will average 25.3 million barrels a day in February, down from 26.3 million barrels in January, Conrad Gerber, founder of PetroLogistics, said in an interview yesterday. Members have a quota of 24.845 million barrels a day.

Iran, Venezuela and Iraq said last week that OPEC is prepared to cut production again when it meets on March 15. The group agreed Dec. 17 on output constraints that would reduce supplies in January by 2.2 million barrels a day from December levels. That followed pledges to remove 2 million barrels a day in the fourth quarter of last year.

The OPEC cuts aren’t raising oil prices “because people don’t see any sign of the economic recovery,” said Astmax’s Emori. “All of the economic data say the situation is still gloomy and it’s difficult for anyone to see a better demand picture for the future.”

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

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European Stock-Index Futures Decline; Total, BHP May Retreat

By Adria Cimino

Feb. 24 (Bloomberg) -- European stock-index futures retreated, indicating the Dow Jones Stoxx 600 Index may extend a six-year low, and Asian shares fell as the deepening recession curbs earnings. U.S. index futures rose.

TomTom NV, Europe’s largest maker of car-navigation devices, and Akzo Nobel NV, the world’s biggest maker of paints, may be active after reporting fourth-quarter losses. U.S.-traded shares of Total SA slipped as crude oil retreated. BHP Billiton Ltd., Australia’s largest oil producer, dropped in Asia.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 1.3 percent to 1,974 at 7:38 a.m. in London. The U.K.’s FTSE 100 Index may decrease 46, according to Cantor Index, a betting firm.

Europe’s broader Stoxx 600 has lost 12 percent this year as companies from Anglo American Plc to Cie. de Saint-Gobain SA fueled concern the worsening recession will wipe out profits. The gauge closed yesterday at the lowest level since March 2003.

“It’s difficult to see anything other than a wholesale shift in trader sentiment being able to reverse the current trend,” Matthew Buckland, a dealer at CMC Markets in London, wrote in a note. “The market still seems intent of taking more value out.”

U.S. stocks fell yesterday, sending the Standard & Poor’s 500 Index and the Dow Jones Industrial Average to the lowest levels since 1997, as concern the recession will erode earnings offset the government’s pledge to give more capital to banks. Futures on the S&P 500 added 1 percent today.

The MSCI Asia Pacific Index fell 1.8 percent to 74.90, poised for the lowest close since August 2003.

$1.1 Trillion

The MSCI World Index of 23 developed countries retreated 52 percent since the start of last year as credit-related losses at financial firms worldwide climbed to $1.1 trillion and Europe, the U.S. and Japan fell into the first simultaneous recessions since World War II.

Confidence among U.S. consumers probably dropped in February to the lowest level on record, signaling spending will slump further as unemployment climbs, economists said before a report today. Separate data may show the drop in home values accelerated in December.

German business confidence may hold steady in February as executives weigh the government’s stimulus program and interest- rate cuts from the European Central Bank, a survey of economists shows. The Ifo institute will release the figures at 10 a.m. in Munich.

TomTom reported a loss after writing down the value of its mapmaking unit Tele Atlas. Akzo Nobel posted a loss after sliding demand for household paints forced the company to book a 1.2 billion-euro ($1.5 billion) writedown on its Imperial Chemical Industries unit.

Total, BHP

American depositary receipts of Total, Europe’s biggest oil refiner, slid 3 percent from the stock’s close in Paris. BHP Billiton lost 1.2 percent in Australia.

Crude oil fell for a third day on speculation that U.S. stockpiles increased for the 19th week in 22 as the recession saps fuel demand. Copper and gold declined in Asian trading.

Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, was cut to “underweight” from “overweight” at Morgan Stanley, which said sales may fall by one-third by 2010.

Vestas Wind

Vestas Wind Systems A/S, the largest wind-turbine maker, was cut to “underweight” from “neutral” at JPMorgan, which cited “risks to near-term and long-term industry profitability.”

Norsk Hydro ASA, the world’s fifth-largest aluminum producer, was cut to “underweight” from “overweight” at JPMorgan, which said demand for the metal “remains weak and prices are under pressure.”

KBC Group NV, Belgium’s biggest bank and insurer by market value, may decline. Deutsche Bank AG cut its recommendation on the stock to “sell” from “hold.”

American International Group Inc. got bids from MetLife Inc. and Axa SA for a life-insurance unit spanning more than 50 countries, a sale that may mark the biggest step yet in the firm’s dismantling, said three people familiar with the situation.

Peter Stack, a spokesman for New York-based MetLife, declined to comment, as did Christina Pretto of New York-based AIG and Emmanuel Touzeau of Paris-based Axa.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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BMW, Demag, Draegerwerk, Q-Cells, Solon: German Equity Preview

By Nadja Brandt and Mike Gavin

Feb. 24 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in Germany. Stock symbols are in parentheses, and share prices are from the previous close.

DAX Index futures expiring in March declined 1.2 percent to 3,897.5 as of 8:31 a.m. in Frankfurt. The DAX fell 2 percent to 3,936.45 yesterday.

Bayerische Motoren Werke AG (BMW GY): The world’s largest maker of luxury cars was lowered to “underweight” from “overweight” at Morgan Stanley, which said sales may fall by one-third by 2010. The stock slid 5.4 percent to 20.15 euros.

Demag Cranes AG (D9C GY): The world’s biggest maker of mobile harbor cranes named Aloysius Rauen as chairman of the management board, replacing Harald Joos. Joos is leaving “by mutual consent with the supervisory board because of differing views,” effective March 31, Demag said yesterday. The shares added 0.4 percent to 17.40 euros.

Draegerwerk AG (DRW3 GY): The maker of the Infinity ACS patient-monitoring system proposed a dividend of 35 cents per preferred share after full-year net income declined 23 percent to 46.6 million euros ($59.4 million). The shares retreated 0.5 percent to 19.92 euros.

ProSiebenSat.1 Media AG (PSM GY): Germany’s biggest private broadcaster was given a “short-term buy” rating at UBS AG, which cited its “scope for outperformance” around its full-year earnings scheduled for next month. The brokerage maintained its 12-month “neutral” recommendation. The shares fell 3 percent to 1.31 euros.

Q-Cells SE (QCE GY): Germany’s largest solar company cut its sales outlook for this year as prices for its products tumble. Profit and sales in 2008 beat a forecast from December. The shares declined 7.2 percent to 13.44 euros.

Solon SE (SOO1 GY): The solar company said full-year earnings before interest and taxes rose to 60 million euros from 35.2 million euros. The shares sank 7.8 percent to 8.70 euros.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net; Mike Gavin in Frankfurt at mgavin2@bloomberg.net

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Cheapest Exchange Stocks Dropping on Profits, Trading Decline

By Nandini Sukumar and Edgar Ortega

Feb. 24 (Bloomberg) -- The world’s biggest stock exchanges are trading at the cheapest levels ever compared with earnings and profits may suffer as trading slumps in the worst start to a year for equities on record.

Deutsche Boerse AG, owner of the Frankfurt exchange, will say today that quarterly profit dropped for the first time since 2004, according to analysts’ estimates compiled by Bloomberg. London Stock Exchange Group Plc’s revenue from trading fell for two quarters, while NYSE Euronext reported this month that fees from its European bourses decreased 4.1 percent.

Trading fees tumbled as much as 13 percent along with stock volume as the MSCI World Index of 23 developed countries dropped 18 percent this year and competition from so-called electronic platforms increased. Investors already devalued the companies, whose shares trade at less than 7 times earnings.

“We live in a new world now,” said Bernard Isagba, head of trading at Redmayne Bentley Stockbrokers in London, which owns LSE stock. “There’s a lot of competition and many of the trading desks and banks that generated the volumes are just gone; 2009 is going to be very difficult for volumes. Exchanges are going to have to struggle to stand still.”

Equity volume is drying up. Trading on the LSE averaged 2.3 billion shares a day over the last year, the lowest since at least 2004. Volume dropped 19 percent from the previous year as more than $1 trillion of bank losses froze credit markets and reduced speculation by hedge funds that rely on borrowed money.

NYSE daily trading averaged 1.45 billion in the last year, down 9.5 percent from a year earlier, according to data compiled by Bloomberg.

Tumbling Values

Revenue from electronic trading may fall by more than 50 percent for the exchanges in 2009, according to Sanford C. Bernstein & Co. analyst Dirk Hoffmann-Becking in London. Earnings per share at Deutsche Boerse and LSE may drop more than 20 percent, he said.

Deutsche Boerse trades at 6.6 times profit, the cheapest on a weekly basis since going public in 2001, after the Frankfurt- based company’s shares slumped 74 percent since the start of last year. Fourth-quarter earnings probably fell after last year’s income was boosted by a gain from a property sale.

Net income may slip 24 percent to 206.6 million euros ($264.6 million) from 270.5 million euros, according to the median forecast of seven analysts.

Nasdaq OMX Group Inc., the electronic exchange that handles the most shares in the U.S., failed to wrest business with its four-month-old pan-European platform, which handled 0.1 percent of the value traded in January. Last year, Chief Executive Officer Robert Greifeld called the system Nasdaq’s single biggest opportunity for growth.

Nasdaq Earnings

The company may report a 36 percent gain in fourth-quarter net income on Feb. 26, according to the average estimate of eight analysts surveyed by Bloomberg.

Analysts expect overall trading on venues owned by Nasdaq to rise in the fourth quarter, helped by the July acquisition of the Philadelphia Stock Exchange, the third-biggest U.S. options market. Matched trading on all Nasdaq platforms increased 11 percent in January from December, the company said Feb. 12, as it gained business in NYSE-listed stock.

New York-based Nasdaq’s shares dropped 60 percent since the start of 2008, leaving them valued at 10.7 times profit.

LSE, Europe’s oldest independent exchange, trades at 6.5 times earnings, compared with 9.7 for the Stoxx 600, weekly data show. New York-based NYSE Euronext, which operates markets in Paris, Amsterdam, Brussels and Lisbon, is valued at 6.2 times profit, about half the 10.5 ratio for the Standard & Poor’s 500 Index.

Trading Sinks

Average daily volume for NYSE’s European cash trading last month dropped 30 percent to 1.3 million transactions, and average daily trading on the LSE fell 30 percent to 881,609 transactions, data compiled by the exchanges and Bloomberg show. German stock- exchange trades slipped 68 percent from a year earlier to 105.5 billion euros in January.

“We believe the uncertainty regarding the volume outlook in 2009 will continue to weigh on Deutsche Boerse and other exchanges,” Nese Guner, an analyst at Nomura International Inc. in London, wrote in a Feb. 18 note.

Guner estimates Deutsche Boerse’s stock trading is falling 25 percent in the first quarter. Trading at the exchange’s Eurex derivatives unit will slip 20 percent instead of gaining 10 percent, the analyst said.

Electronic trading platforms are also eating into the exchanges’ market share. London-based Turquoise and Chi-X Europe Ltd. captured 15 percent of European trades measured by value of shares in January, according to data compiled by Kansas City, Missouri-based Bats Trading Inc.

Deutsche Boerse, LSE and NYSE Euronext, which had a virtual monopoly over trading in their own markets three years ago, handled a total of 65 percent of the value traded.

To contact the reporters on this story: Nandini Sukumar in London at nsukumar@bloomberg.net; Edgar Ortega in New York at ebarrales@bloomberg.net.

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Asian Stocks Drop to Five-Year Low; Nomura Slumps on Share Sale

By Shani Raja and Toshiro Hasegawa

Feb. 24 (Bloomberg) -- Asian stocks fell, dragging the regional benchmark index to the lowest in more than five years, as the deepening global recession hurts company earnings and forces companies to sell shares.

Nomura Holdings Inc., Japan’s largest brokerage, slumped 9.3 percent on concern it will sell $3.1 billion of stock at a discount. PetroChina Co., China’s largest oil producer, lost 4.6 percent in Hong Kong after crude oil dropped. Suncorp-Metway Ltd., Australia’s third-largest general insurer, declined 4.8 percent as its first-half profit tumbled.

“Pessimism about company earnings hasn’t yet run its course,” said Naoyuki Torii, general manager of equities at Fukoku Mutual Life Insurance Co., which manages about $59 billion. “As massive losses are eating into companies’ capital, investors are expecting more businesses will sell new shares and dilute shareholders’ equity.”

The MSCI Asia Pacific Index fell 1.8 percent to 74.90 at 4:06 p.m. in Tokyo, set for its lowest close since Aug. 28, 2003. The MSCI World Index declined for an 11th day. The slump has wiped at least $2.7 trillion off the value of global stocks even as the U.S., China and Australia passed stimulus policies to bolster their economies.

Japan’s Nikkei 225 Stock Average lost 1.5 percent to 7,268.56. A close below 7,162.90 today would have been the lowest since October 1982. Hong Kong’s Hang Seng Index slumped 3.2 percent, while South Korea’s Kospi Index dropped 3.2 percent. All markets fell except Malaysia.

Baoshan Iron & Steel Co., China’s largest steelmaker, slid 5.6 percent after UBS AG said producers had overestimated demand. Engineering company Ausenco Ltd. slumped 19 percent in Sydney after saying clients had canceled projects. Modec Inc., which makes offshore oil and gas equipment, plunged by 20 percent in Tokyo as it forecast profits to tumble.

Deeper Recession

Futures on the U.S. Standard & Poor’s 500 Index added 0.9 percent, following the benchmark index’s 3.5 percent slide to the lowest level since April 1997 yesterday. U.S. regulators said they will begin examining which banks have enough capital to survive a deeper recession. Banks that need more funds and cannot raise the money from private investors will be able to tap taxpayer funds.

The MSCI Asia Pacific Index has lost 49 percent in the past year as the global slowdown worsened, cutting the average valuation of companies on the gauge by 10 percent to 13 times reported profit. Advanced economies are already in “depression”, IMF Managing Director Dominique Strauss-Kahn said this month.

“The economics statistics aren’t that flash at the moment and the market remains quite nervous,” said Paul Xiradis, who manages the equivalent of $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney. “There’s no doubt good value, but the momentum is still negative.”

‘People Are Nervous’

Thailand’s government said yesterday the economy shrank 4.3 percent, pushing the country closer to its first recession in a decade. Economists in a Bloomberg survey expect Hong Kong to say tomorrow its economy contracted in the same period by the most since 2003.

Nomura slumped 9.3 percent to 420 yen. The company will sell shares valued at as much as 291.2 billion yen ($3.1 billion) to replenish capital eroded by four-straight quarterly losses, according to filings to the Ministry of Finance yesterday. Nikko Citigroup Ltd. cut its share price estimate for Nomura by more than a third to 530 yen with a “hold” rating.

“Investors are dumping risk assets and flocking to cash amid heightening uncertainty,” Mamoru Shimode, a Tokyo-based equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. “People are nervous about companies’ financial health.”

Profit Concerns

PetroChina declined 4.6 percent to HK$5.66 after oil futures declined 4 percent to $38.44 a barrel in New York yesterday on concern the global economic slump will cut demand for fuels. Cnooc Ltd., China’s biggest offshore oil company, dropped 4.4 percent to HK$6.71. BHP Billiton Ltd., Australia’s largest oil producer, lost 1.2 percent to A$28.97.

Suncorp fell 4.8 percent to A$4.75 after saying first-half profit slumped 33 percent. The company slashed its dividend for the period to 20 Australian cents a share, down from 52 cents a year earlier.

Baoshan Iron slid 5.6 percent to 5.71 yuan in Shanghai after a UBS report said global steelmakers have raised output too quickly in response to a bounce in Chinese demand. Australia’s BlueScope Steel Ltd., which said yesterday it may have a second-half loss, slumped 8.3 percent to A$2.55.

Ausenco, based in the Australian city of Brisbane, plummeted 19 percent to A$2.05 after saying some clients had sought to extend the timing of new projects.

In Tokyo, Modec tumbled 20 percent to 1,207 yen. The company said it expects operating profit, or sales minus the cost of goods sold and administrative expenses, of 500 million yen for the year started Jan. 1, compared with 1.97 billion yen in the year just ended.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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Japan Stocks Drop, Led by Nomura; Nikkei Touches 26-Year Low

By Masaki Kondo and Toshiro Hasegawa

Feb. 24 (Bloomberg) -- Japanese stocks fell for a third day as Nomura Holdings Inc.’s equity sale to rebuild capital raised concern shareholder value will be reduced.

Nomura, the nation’s largest brokerage, lost 9.3 percent on its plan to replenish funds after four quarterly losses. Orix Corp., Japan’s No. 1 non-bank financial company, plunged by at least 10 percent for a second day after the bankruptcy of lender SFCG Co. Nintendo Co., the world’s top maker of handheld game players, added 6.4 percent in Osaka after KBC Securities Japan raised its rating and the yen weakened.

“Pessimism about company earnings hasn’t yet run its course,” said Naoyuki Torii, general manager of equities at Fukoku Mutual Life Insurance Co., which manages about $59 billion. “As massive losses eat into companies’ capital, investors are expecting more businesses will sell new stock and dilute shareholders’ equity.”

The Nikkei slid 107.60, or 1.5 percent, to close at 7,268.56 in Tokyo, recovering from a 3 percent drop that sent the gauge to the lowest since October 1982. The broader Topix index fell 5 points, or 0.7 percent, to 730.28, a level not seen since December 1983. The market value of stocks on the Tokyo bourse’s main section tumbled to the lowest level since May 2003.

Nomura will sell shares valued at as much as 291.2 billion yen ($3.1 billion) to boost capital that was eroded by four- straight quarterly losses, according to company filings yesterday. Nikko Citigroup Ltd. cut its share price estimate for Nomura by more than a third to 530 yen.

Nomura plunged 9.3 percent to 420 yen, while closest domestic rival Daiwa Securities Group Inc. lost 5.8 percent to 358 yen. Shinko Securities Co. retreated 4.7 percent to 181 yen. A gauge of brokerages was the biggest loser among 33 industry groups on the Topix, followed by consumer lenders.

Better Than Vietnam

The Nikkei has lost 18 percent in 2009, with consumer lenders and brokerages posting drops of more than 35 percent. Among the measure’s 225 constituents, 74 traded at 52-week lows today. With the Nikkei lagging behind all stock benchmarks in Asia except Vietnam’s, Japanese Finance Minister Kaoru Yosano today said the government should consider establishing a state- run investment fund to shore up the market.

“Even if the government manages to curb a decline in stocks, it wouldn’t help improve company earnings,” said Fukoku’s Torii. “What’s needed now is to stimulate the economy through public spending.”

Orix plummeted 10 percent to 1,854 yen, adding to yesterday’s 13 percent tumble. Takefuji Corp., Japan’s third- biggest consumer finance company by value, fell 7.9 percent to 362 yen, extending its nine-day slump to 50 percent. SFCG, a provider of loans for small businesses, yesterday said it filed for bankruptcy protection, becoming the 10th publicly traded company to go bust in Japan this year.

Rising Bankruptcies

“The collapse of SFCG may spark a new round of bankruptcies, especially among small businesses,” said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages about $14 billion. “That will increase loan defaults and depress the balance sheets of small lenders.”

Nintendo, maker of the Wii video-game player, climbed 6.4 percent to 26,750 yen on the Osaka Securities Exchange, breaking a five-day losing stretch. KBC boosted its rating on the stock to “hold” from “sell,” citing “robust” overseas demand.

The Topix narrowed its loss in the afternoon session as the local currency weakened, boosting the value of repatriated overseas sales for Japanese manufacturers. The yen depreciated to as weak as 95.35 today, a level not seen since Dec. 1, from 93.02 at the close of stock trading earlier in Tokyo.

Nikkei futures expiring in March retreated 2.3 percent to 7,210 in Osaka and slumped 2.2 percent to 7,210 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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China Stocks Drop to Two-Week Low; PetroChina, Baoshan Decline

By Zhang Shidong

Feb. 24 (Bloomberg) -- China’s stocks declined to the lowest level in more than two weeks, led by commodities producers and financial companies, on concern the global recession will curb demand for raw materials and erode profits.

PetroChina Co. and China Petroleum & Chemical Corp., the nation’s biggest oil producers, slumped more than 4 percent after crude prices dropped. Baoshan Iron & Steel Co. retreated 5.6 percent after UBS AG said global steelmakers have raised output too quickly. Citic Securities Co. tumbled 9.8 percent on concern that recent gains were excessive relative to earnings prospects.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 105.12, or 4.6 percent, to 2,200.65, the lowest close since Feb. 6. More than five stocks dropped for each that rose. The decline pared the gauge’s 2009 advance to 21 percent.

“Stocks have risen too fast and I don’t think fundamentals have really caught up,” said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which manages the equivalent of about $285 million.

The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, lost 4.5 percent.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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Asian Equity Sales Unlikely to Recover This Year, UBS Says

By Jonathan Burgos

Feb. 24 (Bloomberg) -- Stock sales by Asian companies are unlikely to recover this year after slumping by more than half in 2008, as economies slow and initial public offerings dry up, a senior UBS AG banker said.

Share sales by Australian, Chinese and Singaporean companies will likely dominate fundraising this year, said Sutha Kandiah, joint head of equity capital markets in Asia at UBS. The value of equity capital market transactions in the region plunged 53 percent to $109 billion in 2008, with initial public offerings falling 71 percent to $22 billion, according to data compiled by Bloomberg.

“Volumes will be flat to down this year but I don’t think we’ll be down 50 percent,” Singapore-based Kandiah said in an interview on Feb. 18. “We’re starting from a very low base.”

Equity fundraising evaporated last year as the global financial crisis prompted stock markets to plummet, caused the collapse of Lehman Brothers Holdings Inc. in September and dragged the world’s biggest economies into recession. About $30 trillion was wiped from the value of global equities in 2008.

This year, companies have gone to the stock and bond markets for money as banks, seeking to preserve capital, become wary of lending. Some $5 billion of loans have been issued in Asia outside Japan this year, compared with $54.4 billion in the first quarter of 2008, data compiled by Bloomberg show.

Companies in the region have raised $15.9 billion through share sales in 2009, of which just $244 million came from IPOs, according to Bloomberg data. In the same period of 2008, firms raised $17.8 billion, with IPOs accounting for $5.1 billion.

Risk Aversion

STX Enpaco Co., an engine-parts unit of South Korea’s STX Group, and Australian Gemstone House Ltd. are among companies that canceled IPO plans in the past six months as skittish investors avoided new listings.

“IPOs are going to be very small and very few because risk aversion is still very high,” Kandiah said. “During the year, we are going to see extreme volatility.”

Real Gold Mining Ltd., a Chinese bullion producer, is the region’s biggest IPO so far this year according to Bloomberg data. Shares of the company, which raised $133 million, jumped as much as 14 percent on its debut in Hong Kong yesterday as gold’s price rallied above $1,000 an ounce for the first time in almost a year as investors sought safe haven amid plummeting stock prices.

Other sales have fared worse. Westminster Travel Ltd., a travel agency in Hong Kong, raised $6.6 million last month in a Singapore IPO and has plunged 50 percent from the offer price since trading started on Jan. 23.

‘Strong’ Companies Favored

Singapore’s DBS Group Holdings Ltd., Southeast Asia’s biggest bank, raised $2.8 billion last month by selling shares to existing investors at a 45 percent discount. The sale came after the lender posted its biggest profit drop in more than three years as fee income slipped and credit costs increased.

“What we are seeing is better capitalized companies, with strong balance sheets going back to shareholders in the form of rights issues and being given the capital,” Kandiah said.

DBS Group has a capital adequacy ratio of 10 percent, slightly above the average among the world’s 50 largest commercial banks by market value, according to Bloomberg data.

Other Asian banks including PT Bank Danamon Indonesia, the nation’s fifth-largest lender, and Shinhan Financial Group Co., owner of South Korea’s third-biggest bank, have announced plans this month to raise capital in rights offerings. Bank Danamon will raise $332 million, and Shinhan Financial plans to raise $1.1 billion.

In Australia, Westfield Group Ltd., the world’s biggest shopping-center owner by market value, is raising $1.8 billion by selling new shares to investors at a 13 percent discount in a bid to repay debt and strengthen its balance sheet.

Westfield has a debt-to-capital ratio of 36 percent, compared with the average 48 percent among the world’s 50 largest real estate investment trusts by market value, according to Bloomberg data.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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