Australian Economy Shrinks for First Time in 8 Years

By Jacob Greber

March 4 (Bloomberg) -- Australia’s economy unexpectedly shrank in the fourth quarter for the first time in eight years as exports and housing slumped, increasing pressure on the central bank to resume cutting interest rates.

Gross domestic product fell 0.5 percent from the third quarter, when it increased 0.1 percent, the Bureau of Statistics said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for 0.2 percent growth.

The nation’s currency dropped on concern Australia is now in its first recession in two decades. Central bank Assistant Governor Malcolm Edey, part of a board that slashed the benchmark interest rate by a record four percentage points to a 45-year low of 3.25 percent before pausing this week, said today the economy faces more “short-term weakness.”

“The downturn has arrived,” said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. “The global recession will bear down on Australia’s economy in 2009. There will be more Reserve Bank rate cuts later in the year.”

The Australian dollar dropped to 63.32 U.S. cents at 1:40 p.m. in Sydney from 63.78 cents before today’s report, taking the currency’s decline in the past 12 months to 32 percent. The benchmark S&P/ASX 200 stock index slid 1.4 percent, and is now down 15 percent this year after slumping 41 percent in 2008.

The Australian economy grew 0.3 percent in the fourth quarter from a year earlier to complete 17 years of expansion, today’s report showed. Economists tipped 1.2 percent growth.

Housing, Exports

Housing investment fell 1.2 percent, detracting 0.1 percentage points from growth in the quarter. Exports dropped 0.8 percent, cutting 0.2 percentage points from GDP. A rundown in inventories detracted 1.4 percentage points. Consumer spending made no contribution to growth, today’s report showed.

“There are no quick fixes to the global recession, and many of its effects are yet to be fully felt,” Treasurer Wayne Swan said in Canberra today.

To stoke household spending, the government distributed A$8.9 billion ($5.6 billion) in cash handouts in December, helping fuel a 3.8 percent surge in retail sales in that month. Prime Minister Kevin Rudd said last month he will spend another A$42 billion on infrastructure and bonuses to families.

The U.S. economy shrank at a 6.2 percent annual pace in the fourth quarter, the biggest contraction since 1982. Japan’s economy contracted at the fastest pace since the 1974 oil shock. Exports from China, Australia’s biggest trading partner, slumped 17.5 percent in January, the most in almost 13 years.

Economies in the U.K., Germany, France, Italy and Canada also contracted during the December quarter.

Global Rates

Central banks around the world have slashed borrowing costs to try to protect their economies.

The U.S. Federal Reserve’s benchmark rate is close to zero, the Bank of England’s is the lowest since its creation in 1694 and the European Central Bank will probably trim its main rate on March 5 to 1.5 percent, the lowest level in 10 years of setting policy, according to economists.

“The Australian economy has not experienced the sort of large contraction seen elsewhere,” central bank Governor Glenn Stevens said yesterday after keeping the overnight cash rate target unchanged for the first time in seven months. The bank’s earlier rate cuts and government spending will provide “significant support” to growth, he said.

That boost will be needed as mining companies Rio Tinto Group and BHP Billiton Ltd. renegotiate contracts for iron ore destined for China amid expectations prices will fall. The world’s biggest miners secured price increases last year of as much as 97 percent.

Commodity Prices

Commodity exports from Australia, the world’s biggest shipper of iron ore, coal and wool, are forecast to decline in fiscal 2010 for the first time in six years, the Australian Bureau of Agricultural and Resource Economics said yesterday.

Sales may drop 17 percent from a record to A$162 billion in the 12 months ending June 30, 2010, the bureau said.

“The international deterioration has been so abrupt that it won’t be possible to avoid some short-term weakness here,” Assistant Governor Edey said today. This year “is shaping up as a very difficult year for the global economy.”

Traders forecast a 72 percent chance of a half-point reduction in the central bank’s benchmark rate when policy makers meet next on April 7, a Credit Suisse Index based on swaps trading showed at 1:36 p.m. in Sydney today.

Car Sales Drop

“Policy makers still have a lot more work to do,” said Ben Dinte, an economist at Macquarie Group Ltd. “The Australian economy is by no means immune from the sharp downturn globally. Investor and consumer confidence remain very fragile.”

Manufacturing contracted at a record pace last month as companies received fewer orders, fired workers and cut production, a report showed this week. Separate reports today showed demand for services shrank last month and sales of new cars slumped 21.9 percent from a year earlier.

The chain price index, a measure of retail prices, climbed 8.5 percent in the fourth quarter from a year earlier, today’s report showed.

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

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China Manufacturing Index Rises on Stimulus Spending

By Li Yanping and Nipa Piboontanasawat

March 4 (Bloomberg) -- A Chinese manufacturing index climbed for a third month, adding to evidence that a 4 trillion yuan ($585 billion) stimulus package is pushing the world’s third-biggest economy closer to a recovery.

The Purchasing Manager’s Index rose to a seasonally adjusted 49 in February from 45.3 in January, the China Federation of Logistics and Purchasing said today in an e-mailed statement. A reading below 50 indicates a contraction.

Stocks rose after output and new orders expanded for the first time in five months. Chinese Premier Wen Jiabao may announce extra measures to reverse the nation’s economic slide at the annual meeting of the National People’s Congress starting in Beijing tomorrow.

“There are more noticeable signs that China’s economy is bottoming out,” said Zhang Liqun, an economist at the State Council Development and Research Center.

The Shanghai Composite Index rose 2.4 percent as of 10:47 a.m. local time.

While manufacturing contracted for a fifth straight month as the worst financial crisis since the Great Depression cut exports, the PMI is up from a record low of 38.8 in November.

Surging loans, growth in retail sales in January, and an increase in electricity output and consumption from the middle of last month are signs that government measures have shown “preliminary results,” according to Premier Wen.

Recovery ‘Very Likely’

A recovery in the first half is “very likely,” central bank Vice Governor Su Ning said yesterday.

Industrial-output growth in January and February may be higher than in November and December, Zhang forecast. Still, he cautioned that “seasonal factors” may have boosted the output and new-order indexes, which could fall again.

“The government’s stimulus investment has finally started to take effect,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “However, a recovery may be short-lived as export demand may get worse in the second half and the outlook for consumption is uncertain.”

The manufacturing index likely got a boost from factories resuming production after a Chinese Lunar New Year holiday in January, Xing said.

The output index jumped to 51.2 from 45.5 in January and the new-order index climbed to 50.4 from 45.

Export Orders

A measure of export orders rose to 43.4 from 33.7. The employment index rose to 46.1 from 43, the first increase in six months.

The premier may unveil a record 950 billion yuan budget deficit for this year to cover government spending on the economy and welfare, according to the China Business Journal and Wen Wei Po newspapers.

The slowdown has triggered speculation that the government will increase the stimulus package announced in November. An unidentified planning-agency official said today that more will be spent, Reuters reported.

Officials have indicated 8-10 trillion yuan of “government-sponsored investment” is possible, Stephen Green, Shanghai-based head of China research at Standard Chartered Bank Plc said yesterday.

A separate purchasing managers’ index, released on March 2 by CLSA Asia-Pacific Markets, showed manufacturing contracted for a seventh month in February.

“Manufacturing activities may only start to recover from March after more projects break ground in spring,” said Sun Mingchun, an economist at Nomura Holdings Ltd. in Hong Kong. “Economic growth may start to pick up from the second quarter onwards.”

Steel Glut

A glut of steel at ports in China, the world’s biggest maker of the alloy, shows mills were too quick to boost output on expectations the stimulus package unveiled in November would spur demand, according to Bank of Nova Scotia.

Steel stockpiles at Shanghai’s main port have jumped 44 percent this year to 2.1 million metric tons on Feb. 27, the highest since Bloomberg began compiling the data in June 2006.

While China’s economy is the only one of the world’s five biggest still expanding, the pace has slowed for six straight quarters. Growth in the three months through December was 6.8 percent from a year earlier, the smallest gain in seven years. That compares with a 13 percent expansion for all of 2007.

Tongling Nonferrous Metals Group Co., China’s second- biggest copper smelter by output, said Feb. 27 that profit tumbled last year after prices slumped in the fourth quarter.

Lenovo Group Ltd., the world’s fourth-biggest personal- computer maker, said Feb. 25 that it will cut 450 jobs in China to reduce costs after demand fell in the U.S. and China.

20 Million Jobs

China’s government said last month that 20 million migrant workers had lost their jobs because of the slowdown.

Jia Qinglin, a member of the Communist Party’s Politburo, urged a “vigorous employment policy” in his speech yesterday at the opening meeting of the Chinese People’s Political Consultative Conference.

“China will pick up in the second half of this year as the stimulus package” begins working, Vivek Tulpule, the chief economist at London-based Rio Tinto Group, said yesterday in Canberra, Australia. Rio is the world’s third-biggest mining company.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net; Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

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Bernanke’s AIG Blast May Mean More Curbs on Risk, Concentration

By Craig Torres and Christine Harper

March 4 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke’s blast at American International Group Inc. in Senate testimony yesterday suggests regulators plan further curbs on risk and concentration in the financial-services industry.

“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke told the Senate Budget Committee yesterday. The crippled insurer, which is now under government control, “exploited a huge gap in the regulatory system,” he said.

Bernanke’s remarks, echoed in separate testimony by Treasury Secretary Timothy Geithner, mean Citigroup Inc., Bank of America Corp. and Morgan Stanley can expect new restrictions as policy makers assemble what may become the broadest overhaul to financial rules since the 1930s, said Kevin Fitzsimmons, managing director at Sandler O’Neill & Partners LP in New York.

“There will either be more extensive regulation, a requirement for more capital, or a stated preference against companies getting too big, or, more likely, all of the above,” Fitzsimmons said.

The biggest obstacle may be that regulators have to keep those same conglomerates alive for now to prevent a bigger collapse in financial markets.

“AIG is a huge, complex, global insurance company attached to a very complicated investment bank, hedge fund that was allowed to build up without any adult supervision,” Geithner said yesterday during testimony to the House Ways and Means Committee.

Tumbling Shares

The Standard & Poor’s 500 Financials Index retreated 1.6 percent yesterday for its third straight drop. The index has tumbled 45 percent this year compared with a 23 percent decline for the S&P 500.

Bernanke’s comments come as President Barack Obama seeks legislative proposals within weeks for a regulatory overhaul of finance, especially companies deemed vital to the stability of the financial system. After a meeting yesterday at the White House, Obama and British Prime Minister Gordon Brown said stabilizing banks is crucial to reviving economies worldwide.

“We’ve got to isolate bad assets,” Brown told reporters. “A bad bank anywhere can affect a good bank anywhere.”

The new regulatory framework may stop short of re- instating the Glass-Steagall Act of 1933, which separated commercial and investment banking and was repealed in 1999 by the Gramm-Leach-Bliley Act. Still, banks may separate their business lines in order to avoid strong regulatory scrutiny, analysts said.

Simpler Banking

“Their models for banking are going to be simpler, and less leveraged, and they are going to have a new regulator, the Federal Reserve, that is going to take a pretty conservative stance,” Fitzsimmons of Sandler O’Neill predicted. Congress has yet to determine the federal regulator that will hold such power.

Paul Volcker, chairman of Obama’s economic advisory board and a former Fed chairman, has also advocated curtailing risk- taking by systemically vital institutions.

In January, Volcker led a panel of former central bankers, finance ministers and academics known as the Group of Thirty in calling for capital limits on proprietary trading and a ban preventing large banks from running hedge funds.

Such restrictions would mean a change for Goldman Sachs Group Inc., which Chief Executive Officer Lloyd Blankfein has promoted as able to serve as an investor, adviser and financier.

Called for Distinctions

Volcker’s report also called for differentiation between commercial banks that take deposits and make loans and other institutions that are active primarily in capital markets.

“We are making a distinction between what appears to be institutions that are becoming larger and doing banking business,” Volcker said Jan. 15. “They should give their loyalty to their clients and customers. Those functions should not be carried out in the context of an institution that is carrying out very risky capital market activities.”

John Mack, chief executive officer of Morgan Stanley, said in an interview on the Charlie Rose Show on Feb. 23 that he anticipates the firm may have to restrict some of its business activities in response to new regulation.

“Without question some of the businesses that we have been in in the past are going to be curtailed,” he said.

FDIC Chairman Sheila Bair said regulators must construct a sound capital framework that will prevent a repeat of the credit crisis. She was critical of the Basel II model, which allows banks to deploy their capital on the basis of risk models.

Wrong Assumptions

The approach “assumes banks’ internal, quantitative risk estimates are reliable,” Bair told a banking conference in Washington on March 2. “To say the assumptions turned out to be wrong would be an understatement.”

The U.S. government has deepened its commitment to prevent AIG’s collapse three times since September as the company accumulated the worst losses of any U.S. company. AIG is getting as much as $30 billion in new government capital and relaxed terms on its bailout announced yesterday.

“We’re doing our absolute best in partnership with the Fed and Treasury to unwind the very issues that Chairman Bernanke is talking about in a way that preserves systemic stability and pays back taxpayers,” said Christina Pretto, an AIG spokeswoman.

Bernanke faced criticism from the Senate Budget Committee members yesterday for the rising cost of the federal rescues.

“The public has just about had it with continuous capitalization,” Senator Lindsey Graham, a Republican from South Carolina, told the Fed chairman. “Don’t underestimate how hard it is going to be for you and others to continue to print money to solve this problem.”

Bernanke said he understands why taxpayers are angry. “It isn’t fair that money is going to big corporations,” he said. “We need to think very hard as a country how we make sure this doesn’t happen again.”

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.

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Mom, Dad Have No Right to Deny Obama-Like Leader: William Pesek

Commentary by William Pesek

March 4 (Bloomberg) -- The most cynical moment in recent Japanese politics featured the nation’s top reformer.

It was in September, when Junichiro Koizumi announced his retirement from politics. As prime minister from 2001 to 2006, he took on the corporate establishment, shook up the economy and called for new politics.

Then Koizumi got to the real point of the heavily attended press conference: Oh, here’s my son, Shinjiro Koizumi, who should succeed me in the job.

It was a numbing moment for observers who once saw Koizumi as the change agent that the second-biggest economy desperately needs. It was a stark reminder that even those supposedly committed to improving Japan’s situation treat the government like a mom-and-pop shop.

Parents owning fruit stands, shoe factories or trading firms often hope to pass the torch to their kids. They don’t call it a “family business” for nothing. What happens, though, when politicians treat their country the same way?

Since Koizumi left the top job in September 2006, Japan has had three prime ministers, none of them remotely up to the task. Stress did in Shinzo Abe (September 2006-September 2007), political gridlock sank Yasuo Fukuda (September 2007-September 2008) and widespread voter dissatisfaction will soon nudge Taro Aso from power. And not a second too soon.

Family Dynasties

Other than a knack for botching the job, Abe, Fukuda and Aso have something important in common: They are part of family dynasties.

It’s a key characteristic of Japan’s history, from the emperor’s 1,400-year lineage to the father-son inheritance of Kabuki theater roles. The Cabinet chosen by Aso, the grandson of one ex-prime minister and the son-in-law of another, fits a similar pattern.

Among Aso’s original lineup were descendents of former lawmakers for 11 of 17 positions. That beat Fukuda’s eight such appointments. Even Koizumi, who in 2005 used outsider candidates to win 68 percent of lower house seats, turned around and gave nine Cabinet posts to legislators’ relatives.

The penchant for recycling family members is holding Japan back at a time when it needs to be planning for the future. Nothing short of a political earthquake will alter this dynamic.

Japan’s obsession with seniority doesn’t help. A lawmaker doesn’t matter until they rise through the ranks decade after decade. Once true power is granted, that politician has been co- opted by a system that serves itself, not the people.

Seniority Rules

Seniority matters everywhere. Yet the idea of a 47-year-old junior lawmaker akin to U.S. President Barack Obama becoming Japan’s prime minister is unthinkable. Perhaps it’s possible when that smart, articulate Japanese Obama is 67.

Not that Obama is sure to succeed, yet Japan doesn’t have 20 years to wait for a fresh-faced leader who might think differently from the status quo. Its massive public-debt load, fast-aging population, shaky pension system and waning competitiveness can’t wait that long.

A fast-deepening recession raises the stakes. Even the vaunted Toyota Motor Corp. is seeking government loans. The government plans to tap its foreign-exchange reserves to help a state-run bank increase loans to companies operating abroad.

Japan has formidable problems and its leaders are in over their heads. Aso’s focus isn’t the economy, but keeping his party in power. Kaoru Yosano, Japan’s new finance minister, is in damage-control mode, not looking-five-years-ahead mode.

Clean-Up Job

Yosano’s job isn’t an easy one. He must clean up after his predecessor’s embarrassing and job-ending performance in Rome last month. Shoichi Nakagawa’s claim that he wasn’t drunk at a Group of Seven press conference didn’t pass muster.

Rather than grasping at new ideas, Yosano is opening Japan’s tired playbook. He ordered a study into ways to bolster stocks with government funds. It’s better to do the opposite: implement sound policies that cheer investors.

The Liberal Democratic Party’s focus on bloodline over talent and competence helps explain why Japan is where it is today. The party that has run the nation for all but 10 months since 1955 is devoid of vision.

Sankei newspaper polled voters soon after Aso became prime minister in September. Fifty-eight percent agreed “it’s a problem” that prime ministers are descendents of former lawmakers. The opposition Democratic Party of Japan is considering a ban on family members inheriting campaign funds to discourage dynasties.

We Are Family

Family politics aren’t unique. Look no further than the Bushes of the U.S., the Gandhis of India, the Kirchners of Argentina, the Bhuttos of Pakistan, the Macapagals of the Philippines and the Sukarnos of Indonesia.

Japan’s we-are-family governing system has a counterpart in the private sector known as “amakudari.” Literally translated as “descent from heaven,” the practice hands out executive posts to former public officials. In other words, you scratch my back when you’re in government, I’ll scratch yours with a cushy job when you’re ready.

The corruption that amakudari engenders is one reason it took Japan’s banks so long to come clean on the magnitude of their bad loans in the 1990s. It also explains why government policies are skewed toward huge, politically connected companies, not startups that might reinvigorate the economy.

Picking leaders based on merit would pay great dividends in Japan. Instead, it’s all about who your mom and dad are.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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Japanese Company Accused of Exporting Nuclear Enrichment Parts

By Shigeru Sato and Yuji Okada

March 4 (Bloomberg) -- Horkos Corp., a Japanese machinery maker, is accused of violated national security laws for exporting devices that can be used for nuclear fuel enrichment plants to China and South Korea, Japan’s trade ministry said.

Horkos Corp., which was founded in 1940 and is based in Hiroshima, produced and exported the unspecified devices to China and South Korea since 2001 without permission from the ministry, it said in a statement.

Police arrested four Horkos employees, a Hiroshima police spokesman said, on condition of anonymity. He declined to identify those arrested. Investigations, which started in July last year, are continuing, the trade ministry said.

Under the Foreign Exchange and Foreign Trade Act, usually referred to as the national security law, an entity must obtain permission from the trade minister when exporting products that may threaten international peace and safety.

No one is available to comment on the arrests, a Horkos employee who picked up the phone and wouldn’t give her name said, when contacted by Bloomberg News. Masao Sugata, president of Horkos, wasn’t in the office, she said.

Horkos has 665 employees and annual revenue of 20.3 billion yen ($206 million), according to its Web site.

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net.

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Arrow Energy Rises Amid Speculation It Will Drop Bid for Pure

By Angela Macdonald-Smith

March 4 (Bloomberg) -- Arrow Energy Ltd., Royal Dutch Shell Plc’s partner in coal-seam gas, gained the most in three weeks on speculation it will drop its bid for Pure Energy Resources Ltd. and follow Shell in accepting BG Group Plc’s rival offer.

The Brisbane-based company rose as much as 16 cents, or 6.6 percent, to A$2.59 in Sydney trading and was at A$2.52 at 2:05 p.m. local time.

Arrow may join Shell in accepting BG’s A$1.03 billion ($658 million) cash offer for Pure, the Australian Financial Review said today. Shell yesterday agreed to sell its 11.2 percent stake in Brisbane-based Pure to BG, the U.K.’s third-biggest natural gas company, in the absence of a higher bid. Arrow said today in a statement it’s still considering its position.

“Given that BG has now acquired a significant stake in Pure and that Shell will now be voting its shares in favor of the offer, I would have thought that doesn’t leave Arrow with much room to move,” said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management. “Potentially they could cash in their chips and walk away with a nice profit.”

Pure Energy gained 1 cent to A$8.18 at 2:09 p.m. local time. Pure has almost tripled since Arrow’s initial offer on Dec. 22 of A$673 million in cash and stock.

BG had 29.5 percent of Pure as of March 2 and Shell’s stake would raise its interest to 40.7 percent, while Arrow has 20.2 percent. Arrow’s stake is worth about A$207 million at BG’s latest offer price. Arrow spent A$1 million in September 2006 for a 14 percent stake in Pure when Pure carried out a A$5 million initial share offer.

BG is offering A$8.25 a share in cash for Pure should it reach 90 percent acceptances. Otherwise, shareholders will get A$8 a share in the U.K. company’s unconditional offer. Arrow’s latest bid is A$3 in cash and 1.57 shares for each Pure share, valuing the target at A$6.82 a share at yesterday’s closing price.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

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Cheap Oil Beats Obama as Economic Stimulus: Chart of the Day

By Mike Anderson

March 4 (Bloomberg) -- The cheapest oil in five years, a sign of the global recession, may deliver the biggest boost in purchasing power since at least 1980, Longview Economics said.

The CHART OF THE DAY shows oil spending will be about 2 percent of worldwide gross domestic production in 2009, down from 4.9 percent in 2008, Longview Chief Executive Officer Chris Watling said in March 2 report. Assuming an average price of $41.90 this year, the world is poised to save $1.72 trillion on oil compared with last year, Watling estimates.

“It’s a savings which is approximately three times larger than the entire announced 2009 fiscal stimulus of China and the western economies combined,” Watling said. “The savings from the fall in the price of oil will go straight into consumers’ and businesses’ pockets, will not be impeded by bureaucracy and will happen, unlike parts of the fiscal stimulus, which are likely to be delayed.”

President Barack Obama announced a $787.2 billion stimulus plan last month, with $185 billion allocated for 2009 to fight the worst recession in seven decades. The downturn that began in December 2007 will probably last through the first half of this year, making it the longest retrenchment since 1933, according to economists surveyed last week. The U.S. economy shrank at an annual pace of 6.2 percent pace in the fourth quarter.

Crude oil traded as low as $33.98 on Feb. 12, and the average price this year on the New York Mercantile Exchange is $40.71, according to data compiled by Bloomberg. That’s the lowest since 2004, when the average price was $38.57.

While London-based Longview forecasts “some strengthening” in prices later this year, even a 25 percent rally wouldn’t undermine significant savings on oil, Watling said in an interview.

To contact the reporter responsible for this story: Mike Anderson at manderson34@bloomberg.net

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Vietnam Budgets 300 Trillion Dong to Bolster Growth

By Ta Bao Long

March 4 (Bloomberg) -- Vietnam will spend 300 trillion dong ($17 billion) this year to halt a slowdown in economic growth amid the global financial crisis, Prime Minister Nguyen Tan Dung said in a statement on the government’s Web site late yesterday.

The amount, almost a quarter of the Southeast Asian nation’s $71 billion economy, will be used to develop infrastructure, spur exports, and fund other social security projects, Dung said.

Vietnam expanded 6.2 percent last year, the least in nine years, as recessions in the U.S, Japan and Europe hurt demand for exports. The nation plans to sell U.S. dollar-denominated bonds for the first time in more than three years this month to fund measures to spur an economy the prime minister has said will worsen in 2009, the finance ministry said yesterday.

Vietnam’s National Assembly approved a plan to raise 55 trillion dong selling bonds this year to fund extra spending, according to a statement dated March 2 on the Vietnam Banks Association’s Web site.

The state treasury said on Feb. 4 that it may increase local-currency bond sales by 6 percent to 22 trillion dong in the first quarter to fund the stimulus measures.

To contact the reporter on this story: Ta Bao Long in Hanoi at longta@bloomberg.net

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Australian Dollar Touches One-Month Low After Economy Shrinks

By Candice Zachariahs

March 4 (Bloomberg) -- Australia’s dollar touched a one- month low after the economy shrank for the first time in eight years, increasing pressure on the central bank to add to a record round of interest-rate cuts. New Zealand’s dollar slid.

Australia’s currency also fell versus the yen after the Bureau of Statistics said Australia’s gross domestic product fell 0.5 percent in the fourth quarter, when analysts had forecast 0.2 percent growth. The currencies pared losses on speculation Chinese Premier Wen Jiabao will announce a new stimulus package tomorrow.

The GDP numbers “dealt quite a severe blow to the Aussie dollar, more so because the risk was skewed to the upside,” said Mitul Kotecha, Hong Kong-based head of global foreign- exchange strategy at Calyon, the investment-banking unit of French bank Credit Agricole SA. “The general environment continues to be one of high risk aversion, a strong U.S. dollar and that’s playing negatively for the Aussie as well.”

Australia’s currency fell to as low as 62.86 U.S. cents, the weakest since Feb. 3, before trading down 1.4 percent at 63.32 cents as of 2:57 p.m. in Sydney, from late in Asia yesterday. The currency slumped 0.6 percent to 62.30 yen.

New Zealand’s dollar slid 0.6 percent to 49.52 U.S. cents. It advanced 0.1 percent to 48.74 yen.

The Australian dollar may trade between 62 U.S. cents and 65.25 cents for the next month, Kotecha said.

Only three of 23 economists polled by Bloomberg News forecast a contraction in fourth-quarter growth, three expected a flat reading and 17 estimated positive growth.

Closer to Recession

“It’s looking like we are that much closer to a recession so we’d have to assume that the short-term prospects for the Australian dollar are negative,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney.

Australian demand for services shrank in February at a faster pace and New Zealand’s commodity export price index fell a seventh straight month, plunging 31 percent from a year ago.

The slide in New Zealand raw-materials prices to the lowest since March 2006 was led by wool, beef and seafood, as the index dropped 4.6 percent from January when it declined 4.3 percent, ANZ National Bank Ltd. said today in Wellington.

The Australian and New Zealand currencies earlier weakened after Federal Reserve Chairman Ben S. Bernanke said the banking system hasn’t stabilized.

Bernanke, IMF

Bernanke, testifying before the Senate Budget Committee, spurred concern that the U.S. government won’t be able to shore up a financial system battered by $1.1 trillion in global credit losses. Policy makers may need to take aggressive measures even at the cost of soaring fiscal deficits, he said, according to his Senate testimony.

The International Monetary Fund sees a “serious risk” of a contraction in the global economy this year and will probably cut its 0.5 percent growth estimate in April, Managing Director Dominique Strauss-Kahn said yesterday in Johannesburg.

A deepening global recession means Australia’s economy is likely to experience short-term weakness, central bank Assistant Governor Malcolm Edey said.

“The international deterioration has been so abrupt that it won’t be possible to avoid some short-term weakness here,” Edey said in a speech in Sydney today. “There’s no doubt 2009 is shaping up as a very difficult year for the global economy.”

Global trade looks “pretty terrible” this year, said Pascal Lamy, director-general of the World Trade Organization, said today at the Australian Bureau of Agricultural and Resource Economics conference today in Canberra.

Australian government bonds fell for a second day. The yield on 10-year notes rose three basis point, or 0.03 percentage point, to 4.34 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.24, or A$2.40 per A$1,000 face amount, to 107.33.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, advanced to 3.27 percent from 3.24 percent yesterday.

To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net

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Dollar Gains as Investors Seek Refuge After Australia GDP Data

By Theresa Barraclough and Ron Harui

March 4 (Bloomberg) -- The dollar rose to the highest level in more than three months against the euro after a government report showed Australia’s economy unexpectedly shrank last quarter, boosting demand for the U.S. currency as a refuge.

The greenback climbed versus 14 of the 16 most-active currencies, pushing the Dollar Index to the strongest since April 2006. The Australian dollar fell to a one-month low against the U.S. currency. South Korea’s won approached the weakest in 11 years on concern prolonged financial turmoil in global markets will undermine the nation’s ability to service its overseas debt.

“We’re going to go back to the theme of heightened risk aversion,” said Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore. “This favors the dollar.”

The dollar climbed to $1.2487 per euro as of 1:29 p.m. in Tokyo from $1.2561 late in New York yesterday. It earlier reached $1.2457, the highest since Nov. 21. The greenback rose to 98.48 yen from 98.16 yen. The U.S. currency appreciated to $1.4019 per pound from $1.4050, and advanced to 1.1814 Swiss francs from 1.1760.

The yen strengthened to 122.96 per euro from 123.31. Japan’s currency climbed 0.6 percent to 62.25 against Australia’s dollar.

The Dollar Index, which the ICE uses to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, rose 0.6 to 89.417 as investors sought shelter in the world’s reserve currency.

‘Sobering’ GDP

Australia’s gross domestic product contracted 0.5 percent from the previous three months, the Bureau of Statistics said in Sydney, compared with economists’ estimates for 0.2 percent growth. The GDP figures are “sobering,” Treasurer Wayne Swan said today in Canberra after the data was released. The Reserve Bank of Australia kept the benchmark interest rate at 3.25 percent yesterday, after cutting it by four percentage points since September.

The U.S. currency advanced for a fourth day against the euro on speculation Dallas Fed President Richard Fisher and Atlanta Fed President Dennis Lockhart will today stress the need to increase financial assistance to the banking system.

Fed Chairman Ben S. Bernanke said yesterday in testimony prepared for the Senate Budget Committee that policy makers may have to expand aid to banks beyond the $700 billion already approved and take other measures even at the cost of soaring fiscal deficits.

‘Stronger Initiatives’

“Bernanke is telling the public that the Fed and the government will act to support the banking system, which is a support for the U.S. dollar,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA. “Stronger initiatives by the U.S. will be the driving force of currency markets.”

Fisher speaks at 8 a.m. in Fort Worth, Texas and Atlanta, and Lockhart speaks at 12 p.m. in Miami, Florida.

Gains in the yen may be limited after an aide to Japan’s opposition leader was arrested in a funding probe, signaling further political turmoil in the nation.

The senior aide to Ichiro Ozawa, head of the Democratic Party of Japan, was arrested on suspicion of receiving illegal political donations from a construction company, local media reported yesterday. “I did absolutely nothing illegal,” Ozawa told reporters today in Tokyo, vowing to stay on as leader.

“There is still instability in Japanese politics,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG. “This may increase foreign investors’ negative perception of Japan. The yen is likely to be sold” to 98.70 against the dollar and 124 per euro today, he said.

Worst Month

Japan’s currency had its worst month in February since 1995 after a government report showed the world’s second-largest economy shrank the most since 1974 last quarter and Finance Minister Shoichi Nakagawa quit amid accusations he was drunk at a press conference, eroding confidence in the government.

Korea’s won dropped as much as 1.7 percent to 1,578.80 per dollar today, near the 1,596 reached on March 2 that was the weakest level since March 1998. It traded at 1,552.60 from 1,551.95 yesterday.

“We believe intervention may be needed as officials are worried that domestic confidence in the won is being increasingly undermined,” said Joseph Lau, an analyst with Credit Suisse Group AG.

To contact the reporters on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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Vietnam Cuts Rice Shipments to Boost Reserves, Thanh Nien Says

By Ta Bao Long

March 4 (Bloomberg) -- Vietnam, the world’s second-biggest rice exporter, will cut back planned shipments to ensure sufficient reserves, the Thanh Nien Daily said.

The country will hold back 300,000 metric tons that would have been exported, cutting planned first-half shipments to 3.4 million tons, the report said today, citing the meeting between the agricultural ministry and the trade and industry ministry.

A total of 800,000 tons will be exported this month, the report said, without giving a year-ago comparison.

To contact the reporter on this story: Ta Bao Long in Hanoi at longta@bloomberg.net.

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Platinum Drops as Auto Sales Plunge; Gold Falls for Eighth Day

By Glenys Sim

March 4 (Bloomberg) -- Platinum dropped for a third day, trading near a three-week low, as slumping demand from the auto industry cut demand for the metal that’s used mainly to make catalytic converters. Gold extended declines.

Toyota Motor Corp., the world’s biggest carmaker, suffered a record drop in U.S. sales last month as the recession cut demand, according to a company statement. Honda Motor Co., Japan’s second-largest carmaker, had a 38 percent drop and Nissan Motor Co.’s sales fell 37 percent.

“Demand for platinum-group metals from automakers might remain lethargic,” Walter de Wet, an analyst at Standard Bank Ltd., wrote in an e-mail.

Platinum for immediate delivery fell as much as 0.4 percent to $1,029.50 an ounce, and traded at $1,033 at 10:08 a.m. Singapore time. The metal dropped to as low as $1,028.25 yesterday, the lowest since Feb. 10. Palladium lost 0.3 percent to $193.50 an ounce.

Toyota has turned to Japan’s government to borrow money for U.S. car loans as private investors demand as much as 50 percent more in interest for the company’s debt. Honda may do the same. General Motors Corp. and Chrysler LLC are surviving on $17.4 billion in U.S. government loans.

Gold declined for a eighth straight day as “investor enthusiasm waned,” said David Moore, chief commodity strategist at Commonwealth Bank of Australia.

Gold for immediate delivery fell as much as 0.6 percent to $910.42 an ounce, before trading at $914.40 at 10:11 a.m. in Singapore. Silver dropped 0.3 percent at $12.785 an ounce.

Holdings in the SPDR Gold Trust, the biggest such fund backed by bullion, remained at a record 1,029.29 metric tons for a fourth day yesterday. Holdings in ETF Securities Ltd.’s Physical Gold exchange-traded fund fell to 2.37 million ounces from 2.377 million ounces two days ago.

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

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Vietnam Cuts Coffee Harvest Estimate on Poor Weather

By Nguyen Dieu Tu Uyen

March 4 (Bloomberg) -- Vietnam, the world’s second-largest coffee producer, may harvest 16 million bags this year, 6 percent less than initially forecast after poor weather trimmed the size of beans, according to a producers’ group.

“Bad weather at the start of the crop has considerably raised the proportion of small beans,” Luong Van Tu, chairman of the Vietnam Coffee and Cocoa Association, said today. The association in December had forecast a crop of 17 million bags in the year to Sept. 30. A bag weighs 60 kilograms (132 pounds).

A smaller-than-expected 2008/09 crop may help to arrest a drop in robusta prices, which have declined 45 percent over the past year, including falls over the five days to yesterday. The nation’s crop was estimated at 20 million bags in January, according to a forecast from Belgian bank Fortis.

“We’ve also had to reject more black beans that were caused by rains during the picking and drying period,” Tu said in a telephone interview from Hanoi, Vietnam’s capital. Black beans are of low quality and don’t meet standards for international shipment; most are discarded.

Robusta coffee for May delivery dropped $17, or 1.1 percent, to $1,504 a metric ton yesterday, the lowest closing price since the 10-ton contract started trade on London’s Liffe exchange in January 2008.

Two weeks of prolonged rains last year interrupted the harvest, according to traders including Nguyen Ngoc Thu in Ho Chi Minh City for Madrid-based Icona Cafe, which is among the 10 biggest importers of Vietnamese produce. The rains delayed the picking of berries and hampered drying, they said.

Vietnam’s 2008/09 crop might have been lower than 19.5 million bags due to the heavy rains, smaller beans and increase in the quantity of black beans, Hong Kong-based SW Commodities said in a March 2 note. F.O. Licht has estimated the crop at 20 million bags, up from 18 million a year earlier.

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net.

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China Growth Will ‘Pick Up’ in Second Half, Rio Says

By Rebecca Keenan and Jesse Riseborough

March 4 (Bloomberg) -- Growth in China, the world’s third largest economy, will “pick up” in the second half as the government’s 4 trillion yuan ($585 billion) stimulus package takes effect, according to Rio Tinto Group.

“We are looking for more economic activity in China,” Vivek Tulpule, the chief economist at London-based Rio, said today in an interview in Canberra, Australia. “It is important for the industry to see that improvement.”

China, in the midst of the worst slump in more than a decade, will likely recover in the first half and the government is confident of achieving its 8 percent growth target, officials said yesterday. Rio, which agreed to a $19.5 billion capital injection by state-owned Aluminum Corp. of China last month, relies on China because it’s the world’s biggest metals consumer.

“China will pick up in the second half of this year as the stimulus package” begins working, Tulpule earlier said at the Australian Bureau of Agricultural and Resource Economics conference. “We will see some small improvement in our markets towards the end of this year.”

Rio dropped 2.7 percent to A$42.84 at 10:40 a.m. Sydney time on the Australian stock exchange. The stock has gained 12 percent this year.

China may double the spending plan after economic growth cooled to the weakest pace in seven years and 20 million migrant workers lost their jobs, according to Standard Chartered Bank Plc. Metals prices slumped 49 percent last year, according to the London Metal Exchange Index of six metals.

Earnings, Debt

Earnings at Rio, the second-largest producer of iron ore and aluminum, and rivals including BHP Billiton Ltd. may drop as a slump in demand for metals cuts prices.

Iron ore prices may drop 30 percent, the first decline in seven years, from April as the global recession crimps demand for cars and buildings, according to the median estimate of eight analysts surveyed by Bloomberg News. Iron ore accounts for nearly one-third of Rio’s sales.

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net; Jesse Riseborough in Melbourne at jriseborough@bloomberg.net;

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Lihir Gold Seeking to Sell $325 Million in Shares

By Jesse Riseborough

March 4 (Bloomberg) -- Lihir Gold Ltd., the second-largest producer on the Australian stock exchange, plans to sell $325 million in new stock to fund expansion of a plant in Papua New Guinea.

The Port Moresby-based company is seeking to sell about 171.7 million new shares, or 7.8 percent of the issued stock, from a floor price of A$3 each, according to a copy of the term sheet seen by Bloomberg News. That’s 9.4 percent lower than yesterday’s closing price of A$3.31, it said.

Chief Executive Officer Arthur Hood is targeting bullion output of more than 1 million ounces this year from its four mines in Papua New Guinea, Australia and Ivory Coast. The plant expansion will cost $700 million and may start to boost production from next year, Lihir said today.

The funds will also be used for other growth opportunities, including in West Africa, where Lihir mines in Ivory Coast, as well as “to provide continued financial strength and flexibility,” the company said.

Goldman Sachs JBWere Pty and Macquarie Capital Advisers Ltd. are advising Lihir on the share sale, according to the term sheet. The sale will close at 8:00 p.m. local time today and the shares are expected to resume trading tomorrow, it said.

Lihir is also being advised by Caliburn Partnership.

To contact the reporters on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net;

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Korea Pension’s Bonds Prevent Loss as Stocks Tumble

By Saeromi Shin

March 4 (Bloomberg) -- South Korea’s National Pension Service avoided losses on its 236 trillion won ($152 billion) of assets last year as bond investments countered losses in the fund’s equities holdings.

The fund’s local bonds posted an 11 percent gain last year, while the value of its Korean equities declined 38 percent as stock markets were roiled by the credit turmoil, the Ministry for Health, Welfare and Family Affairs, which oversees the pension fund, said in an e-mailed statement today. The fund had a gain of less than 0.01 percent last year.

The performance was crucial as bonds, which made up the bulk of its portfolio, offset losses in a year when pension funds worldwide reported declining returns after a global rout wiped out more than $28 trillion in stock values. The California Public Employees’ Retirement System, the second-largest U.S. public pension fund, posted a 26 percent drop last year.

Korea’s fund “performed relatively well, and that’s quite natural given its really high portion of safer assets,” said Kim Yong Tae, a fund manager at Yurie Asset Management Co. in Seoul, which oversees the equivalent of $1.9 billion.

The MSCI World Index slumped 42 percent, its worst year on record, while the Standard & Poor’s 500 Index lost 38 percent. Government funds worldwide also posted losses. Temasek Holdings Pte, Singapore’s state-owned investment company, reported a 31 percent drop in investments to S$127 million ($82 million) in the eight months through Nov. 30.

Asset Allocation

Korea’s benchmark Kospi index fell 41 percent last year, its worst annual performance since 2000, when the technology bubble burst. The drop was the first for the measure since 2002. The index rose 0.3 percent to 1,028.94 as of 11:11 a.m. on the Korea Exchange today.

“It turned out that the fund didn’t post heavy losses, compared with overseas pension funds, even amid a difficult environment from the global financial crisis,” its statement today said.

National Pension, which was set up in 1988 and which covers private-sector employees and those who are self-employed, had posted returns of more than 5 percent between 2003 and 2007. Last year’s return was its worst in its two-decade history.

Domestic stocks will account for 17 percent of its assets by the end of 2009, up from an estimated 12 percent in 2008, the fund said in December. That’s a drop from its initial target of 20.3 percent, it added.

Bonds will make up 69.3 percent of assets in 2009, down from an estimated 77.7 percent in 2008, it said at the time, raising the allocation from an initial 60.4 percent.

“This year presents a great opportunity to pick up stocks at bargains, and the fund should steer its portfolio into gradually lifting risky assets in order not to miss out on returns when markets start to recover,” said Yurie Asset’s Kim.

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

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Japan Resource Stocks Advance on China Hope; Automakers Slump

By Masaki Kondo

March 4 (Bloomberg) -- Japanese resource shares advanced on speculation an expanded stimulus program in China will boost demand for energy and materials, while automakers fell after U.S. car sales tumbled to a 27-year low.

Inpex Corp., Japan’s biggest oil explorer, climbed 2.9 percent after Reuters reported China will widen its $585 billion stimulus package and oil prices increased. Toyota Motor Corp. and Honda Motor Co. lost at least 2.5 percent after their U.S. sales tumbled by more than a third. Tokio Marine Holdings Inc., Japan’s No. 1 casualty insurer, sank 3.8 percent after Federal Reserve Chairman Ben S. Bernanke said the U.S. banking system hasn’t stabilized.

“China is one of the few spots in the world where we can see signs of recovery,” said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages about $14 billion. “Its resurgence may help lift commodity prices that have been in free fall.”

The Nikkei 225 Stock Average added 32.32, or 0.5 percent, to 7,262.04 as of 12:44 p.m. in Tokyo, erasing an early 1.7 percent drop. The broader Topix index rose 0.69, or 0.1 percent, to 727.49, with almost two stocks climbing for each that fell.

The Nikkei slid 18 percent in 2009 through yesterday, narrower than the Standard & Poor’s 500 Index’s 23 percent drop in the U.S. Japanese Finance Minister Kaoru Yosano said last week he ordered a study into ways to bolster equities, spurring speculation the government may buy shares to support prices.

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

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Most Asian Stocks Advance Amid Government Policy Speculation

By Jonathan Burgos

March 4 (Bloomberg) -- Most Asian stocks rose as optimism governments will widen efforts to bolster growth offset plunging U.S. auto sales and a contraction in Australia’s economy.

Aluminum Corp. of China Ltd. rose 4.4 percent in Shanghai as a former statistics chief said Premier Wen Jiabao will announce a new stimulus package tomorrow. Toyota Motor Corp., the world’s biggest carmaker, lost 2.6 percent in Tokyo after U.S. sales sank by a record last month. Commonwealth Bank of Australia slumped 2.8 percent in Sydney as the country’s economy shrank in the fourth quarter for the first time in eight years.

“We’re seeing some bright spots in China,” Pauline Dan, chief investment officer at Samsung Investment Trust Management Co. in Hong Kong, which oversees $61 billion. “Domestic consumption seems to be doing better given the government’s pump priming efforts.”

More than two stocks gained for each one that fell on the MSCI Asia Pacific Index, which added 0.1 percent to 71.92 at 12:47 p.m. Tokyo time. The gauge slumped 20 percent in 2009, extending last year’s record 43 percent tumble, as recessions in the world’s largest economies hurt earnings at exporters such as Toyota and Honda Motor Co.

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

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China’s Stocks Advance Most in Two Weeks; Aluminum Corp. Gains

By Chua Kong Ho

March 4 (Bloomberg) -- China’s stocks rose, driving the benchmark index to its biggest gain in two weeks, on optimism the government will increase spending to boost the world’s third-largest economy.

Aluminum Corp. of China Ltd. gained 4.4 percent after the former head of the Statistics Bureau said Premier Wen Jiabao will announce a new stimulus package tomorrow at the opening of the annual meeting of lawmakers. China Vanke Co. rose 5.1 percent after the Guangdong provincial government unveiled measures to support the property market. Stocks also gained after the official manufacturing index climbed for a third month in February.

“It’s important for the Chinese government not to lose momentum in stimulating the economy,” said Winson Fong, who helps manage $2 billion at SG Asset Management H.K. Ltd. in the city. “It’s encouraging that the economy seems to be responding.”

The benchmark Shanghai Composite Index added 2.7 percent to 2,126.55 at the 11:30 a.m. local-time break, set for the biggest gain since Feb. 16. The CSI 300 Index, which tracks shares on both the Shanghai and Shenzhen exchanges, climbed 3.3 percent.

The Shanghai Composite has rallied 17 percent this year, the world’s best performer, on expectations the government’s 4 trillion yuan ($585 billion) spending plan will shield the economy from recessions in the U.S., Europe and Japan.

Wen will announce a new stimulus package tomorrow, former statistics bureau head Li Deshui said. Li spoke outside a meeting of the economic group of the Chinese People’s Political Consultative Conference in Beijing today. He didn’t say whether spending would be more than the 4 trillion yuan announced in November.

‘Likely’ Recovery

The government may double the spending plan after economic growth cooled to the weakest pace in seven years and 20 million migrant workers lost their jobs, according to Standard Chartered Bank Plc.

Aluminum Corp., the nation’s biggest producer of the metal, climbed 4.4 percent to 9.21 yuan. Jiangxi Copper Co. gained 6.9 percent to 16.26 yuan.

There are already signs the government’s spending is taking effect. The Purchasing Manager’s Index rose to a seasonally adjusted 49 in February from 45.3 in January, the China Federation of Logistics and Purchasing said today in an e-mailed statement. A reading below 50 indicates a contraction.

An economic recovery in the first half is “very likely,” central bank Vice Governor Su Ning told reporters yesterday. The government is “confident” of achieving its 8 percent growth target, Minister of Industry and Information Li Yizhong said.

Developers Climb

China Vanke, the nation’s largest developer by market value, gained 5.1 percent to 7.80 yuan. Poly Real Estate Group Co., the second-biggest developer, rose 6.7 percent to 19.5 yuan. Gemdale Corp. added 9 percent to 8.85 yuan.

The southern province of Guangdong will allow real estate developers to delay payments on land purchases for as long as two years as part of measures aimed at supporting the industry, according to a statement on the government’s Web site.

The following shares also rose or fell in China trading. Stock symbols are in parentheses after company names:

Chongqing Changan Automobile Co. (200625 CH), the manufacturer of Changan mini cars, added 5.7 percent to HK$2.98. The company said it will pay up to HK$3.68 per share to buy back as many as 423 million of its so-called B-shares.

Guangzhou Shipyard International Co. (600685 CH), a shipyard operator, climbed 6.5 percent to 17.67 yuan after the company and its unit Guangzhou Hongfan Information Technique Co. were designated “high-tech” enterprises by tax authorities in Guangdong for the years 2008-10. This allows them a tax rate of 15 percent, compared with 25 percent previously, Guangzhou Shipyard said.

SDIC Huajing Power Holdings Co. (600886 CH), a power generation company, gained 10 percent to 10 yuan after resuming trade for the first time since Dec. 8. The company said it will swap 7 billion yuan of shares for assets from its parent, according to a filing today to Shanghai’s stock exchange. The company will swap 825 million shares at 8.49 yuan each, it said.

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

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China to Send Investment Mission to Europe This Week

By Li Yanping and Belinda Cao

March 3 (Bloomberg) -- China will send a delegation to Europe this week to investigate investment opportunities, including mergers and acquisitions, Commerce Minister Chen Deming said in Beijing today.

The group will go to Switzerland, Spain, the U.K. and Germany, Chen told reporters before a meeting of the advisory body to the nation’s legislature. Those are the same countries visited by a purchasing mission last month.

Chinese companies spent almost $15 billion in the previous four-country purchasing tour, Chen said. German businesses signed $10 billion of trade agreements with the mission, which China said was intended to bolster global trade and counter the deepening economic slump. Chen said today that China needs to increase outbound investment to help balance its international payments.

China’s exports and imports in February will both lag behind figures from a month earlier, Chen added. The nation had a $39.1 billion trade surplus in January, the second biggest on record, as imports fell 43.1 percent from a year earlier.

To contact the reporters on this story: Li Yanping in Beijing at
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