Yung Departure May Prompt ‘Drastic’ Changes at Citic

By Theresa Tang and Wendy Leung

April 9 (Bloomberg) -- Larry Yung’s resignation as Citic Pacific Ltd.’s chairman may prompt “drastic” changes as Chang Zhenming today takes the reins of a company mired in a police probe and $1.9 billion of currency losses.

Citic Pacific shares surged 12 percent in Hong Kong after Yung, 67, and Managing Director Henry Fan, 60, quit yesterday, following a police raid on the offices of the investment company controlled by China’s cabinet. Chang, 52, was appointed to both posts by Citic’s Beijing-based parent.

“We believe drastic changes are needed to turn the company around,” analysts at Bank of America Corp.’s Merrill Lynch & Co. unit led by Christie Ju wrote in a report to clients. Yung’s resignation was “positive, but not enough,” according to the analysts, who wrote in an April 5 report that Citic Pacific may need to sell some of its assets.

Citic Pacific jumped to HK$10.62, the highest level since Jan. 12, at the 4:00 p.m. close. The stock resumed trading today after it was suspended April 3 because of the police raid. The Hang Seng index rose 3 percent.

“With Chang as the CEO, the company will move to a new direction,” said Liu Yang, who helps manage $1.8 billion at Atlantis Investment Management Ltd. in Hong Kong. “To some extent it’s very positive for the company going forward” with Yung’s departure, Liu said.

Simpler Structure

Chairman since Citic Pacific’s inception in 1990, Yung expanded into aviation, power plants, real estate development and steelmaking. The son of a former Chinese Vice President, he was forced to seek a bailout from Beijing after Citic disclosed losses on wrong-way currency bets that had been designed to hedge an iron-ore project in Australia.

“Citic Pacific may want to simplify the structure,” said shareholder activist David Webb, adding that the company has too many businesses. “Otherwise, they may just become a zombie conglomerate with no great strategy at all.”

China has previously turned to Citic Group’s Chang when investors’ confidence in its companies has been shaken. Chang was appointed acting chairman of state-owned lender China Construction Bank Corp. after then Chairman Zhang Enzhao resigned for undisclosed reasons. Chang helmed the lender’s public share sale in 2005.

“We expect the chairman to speed up the progress of non- core asset disposals,” Citigroup Inc. analysts led by Anil Daswani wrote in a report distributed today about the start of Chang’s reign. The company may sell its power assets, Hong Kong tunnel holdings and its stake in Cathay Pacific Airways Ltd., the analysts wrote.

Chang may meet the press in a few days to talk about his new position, Radio Television Hong Kong reported today, citing the executive. No other details were provided.

First Annual Loss

Moody’s Investors Service and Standard & Poor’s Ratings Services both said the management change at Citic Pacific won’t have an immediate impact on its debt ratings. Moody’s has a ‘Ba1’ rating and Standard & Poor’s has a ‘BB+’ recommendation.

Citic Pacific on March 25 reported its first annual loss of HK$12.7 billion. The company announced its currency losses in October from contracts to fund an iron ore mine in Australia. Bets that the Australian dollar would gain incurred losses after the currency tumbled.

Financial Director Leslie Chang and Financial Controller Chau Chi Yin were ousted because of the bets. Carl Yung and Frances Yung, the son and daughter of Larry, left the company, the Standard newspaper reported today, citing unidentified people. Zhao Tong at Brunswick Group Ltd., an outside spokeswoman for Citic Pacific, declined to comment.

Citic Bailout

As part of the bailout, Citic Group bought convertible bonds, which it used to double its stake in the Citic Pacific to 57.6 percent, and assumed some of the currency losses. Yung’s stake was diluted to 11.5 percent from 19.1 percent.

The Hong Kong Commercial Crime Bureau on April 3 demanded that Citic Pacific and its directors provide information on currency contracts entered in 2007 and 2008, and statements made between July 1, 2007, and March 16, 2009. The Securities and Futures Commission is investigating Yung, Fan and 15 directors.

The police raid “had a great impact in society,” Citic Pacific said in its statement to the Hong Kong stock exchange yesterday. “Faced with this reality, Mr. Yung believed that his resignation would be in the best interest of the company.”

There haven’t been any charges or arrests, Citic Pacific said. The Securities and Futures Ordinance allows civil or criminal punishment for market misconduct. The maximum penalty is 10 years in prison and a fine of HK$10 million.

Son of Rong

Born in Shanghai in 1942, Yung is the son of former Chinese Vice President Rong Yiren. When many of China’s wealthy fled the nation before the Communist Party took power in 1949, Rong stayed and in 1956 handed over the family’s mainland holdings to the government. Rong was named Shanghai vice major the next year and was vice president of China from 1993 to 1998.

Mao Zedong called the Rong family: “China’s first batch of indigenous capitalists; the one true Chinese conglomerate in the world.” In 1979, Rong set up China’s first state-owned investment corporation, today called Citic Group, under the direction of Deng Xiaoping.

His family’s wealth afforded Yung, the Cantonese pronunciation of Rong, a red convertible sports car in his teens, with which he drove friends around 1950s Shanghai. He also regularly treated friends to dinners, Yung told the Guangzhou, southern China-based Yangcheng Evening News in 2002.

Yung and Fan established Citic Pacific in Hong Kong in 1990. The company’s backdoor listing helped make Yung China’s richest man as recently as 2005, according to Forbes Magazine.

Race Horses

That wealth allowed Yung to acquire racehorses in Hong Kong, where he was one of 12 board members, or stewards, at the Hong Kong Jockey Club from 1994 to 2004. He’s had 13 racehorses compete at the club and won almost HK$100 million in prize money, race records showed.

Yung’s wealth has plummeted since Citic announced its currency losses. He fell to 63 on Forbes’s 2008 list of China’s richest, released after the losses, with $660 million of estimated wealth. Yung had been ranked the nation’s ninth richest man in Forbes’s 2007 list with $3.65 billion.

To contact the reporters on this story: Wendy Leung in Hong Kong at wleung12@bloomberg.net; Theresa Tang in Hong Kong at ttang3@bloomberg.net

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Brazil’s Real Rises to Three-Month High on Stocks, Commodities

By Renato Andrade

April 9 (Bloomberg) -- Brazil’s real rose to the highest in more than three months as gains in commodity prices and global stocks boosted demand for emerging-market assets.

The real strengthened 1 percent to 2.1810 per U.S. dollar at 10:08 a.m. New York time, from 2.2032 yesterday. It touched 2.1761, the strongest since Jan. 7. The currency is poised for a second consecutive weekly gain, increasing 1.3 percent since April 3. Brazilian markets will be closed for the Good Friday holiday tomorrow.

“The real is in tandem with commodity and stock prices, that’s the reason behind the currency’s gain today,” said Tony Volpon, chief strategist at CM Capital Markets in Sao Paulo.

The UBS Bloomberg Constant Maturity Commodity Index rose 2 percent, while stocks rallied as investors speculated government measures globally to revive economic growth are working.

“It seems the worst of the crisis is over, what we expect from now on is some improvements,” said Paulo Nepomuceno, a strategist at brokerage Coinvalores, in an interview with Bloomberg Television in Sao Paulo.

The optimism halted the trend of falling yields on the overnight futures market in Sao Paulo, where the contract for January 2010, the most-traded on the BM&F commodity and futures exchange, rose one basis point, or 0.01 percentage point, to 9.74 percent.

“If things start to change for the better, the central bank will not need to be so aggressive, and the overnight market will halt the trend of reducing yields,” said Volpon.

The yield on the nation’s zero-coupon bonds due January 2010 was unchanged at 9.82 percent, according to Banco Votorantim.

To contact the reporter on this story: Renato Andrade in Sao Paulo at randrade11@bloomberg.net

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Korea Sells $3 Billion of Bonds to Bolster the Won

By Kim Kyoungwha and Seonjin Cha

April 9 (Bloomberg) -- South Korea sold $3 billion of dollar-denominated bonds overseas, after attracting orders for more than double that amount, to bolster its defense of the won.

Five-year notes maturing in April 2014 were sold at a yield of 5.864 percent, 400 basis points more than similar-maturity U.S. Treasuries, and 10-year bonds at a premium of 437.5 basis points, the finance ministry said in a statement. A security expiring in September 2014 yesterday yielded 318 basis points more than U.S. debt, according to prices from BNP Paribas SA.

Proceeds from South Korea’s first international bond sale since 2006 will be used to support a currency that tumbled 27 percent against the dollar in the past 12 months, Asia’s worst performance. The won slumped as overseas banks hoarded dollars following the September collapse of Lehman Brothers Holdings Inc. and a global recession battered exports, starving South Korea’s banks and companies of foreign exchange needed to pay debt.

“Any risk of short-term liquidity or balance of payments shocks have now become negligible,” said Ernesto Bettoni, a London-based investment specialist at Fortis Investments, which oversees $225 billion globally. He said the funds he helps manage bid for the 10-year bonds in yesterday’s sale.

South Korea’s currency reserves slid to $206 billion at end-March, from a record $264 billion a year earlier, as policy makers lent money to enable banks and companies to pay overseas debt. The government has expanded its access to foreign exchange in the past six months via currency swaps with the U.S., Japan and China, and this week said it will extend a $100 billion state guarantee on banks’ foreign debt until the end of 2009.

‘Prepare For Uncertainty’

Moody’s Investors Service rates South Korea’s debt A2, the sixth-highest investment grade. That’s on a par with Poland, whose dollar-denominated bonds due January 2014 yielded 5.317 percent yesterday, 55 basis points less than the new Korean five-year bond, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.

South Korea sold $1.5 billion of each tranche of bonds, boosting this year’s tally for global debt sales by emerging- market nations to $27 billion. That compares with $30 billion for the whole of 2008, according to data compiled by Bloomberg.

The finance ministry said yesterday’s sale drew orders totaling $8 billion and was a pre-emptive measure to “prepare for uncertainty in global financial markets.”

The Korean currency strengthened 0.9 percent to 1,343.05 per dollar as of 12:10 p.m. in Seoul, paring this year’s loss to 6.1 percent, still the biggest drop among the 10 most-traded Asian currencies tracked by Bloomberg. It’s jumped 16 percent in the past month, a performance second only to the New Zealand dollar among some 170 currencies tracked by Bloomberg.

Improving Outlook

Investor interest in the sale “fits in with the fact that the optimism in emerging markets is continuing,” said Win Thin, senior currency strategist at Brown Brothers Harriman & Co. in New York in a telephone interview. “The outlook is improving and Korea has been holding up. Its currency really was getting hammered earlier in the year, and it’s kind of snapped back.”

The extra yield investors demanded to own developing-nation debt instead of U.S. Treasuries increased four basis points to 573 yesterday, according to JPMorgan Chase & Co.’s EMBI+ Index. The spread averaged 650 points this year, down from a six-year high of 865 in October.

South Korea’s government in September scrapped plans to sell $1 billion of bonds as borrowing costs soared after Lehman’s bankruptcy filing.

Bank Finances

The new bonds will act as a benchmark for companies and banks tapping overseas debt markets. State-owned Export-Import Bank of Korea plans to meet investors in the U.S. to gauge demand for a potential bond sale later this year, a company official said on March 25.

Hana Bank, South Korea’s fourth-biggest lender, sold $1 billion of three-year notes backed by the government last week, becoming the first company to tap the state guarantee. The 6.5 percent debt was priced to yield 543 basis points more than Treasuries of similar maturity.

The government’s 4.875 percent dollar bond due in September 2014, which was sold in September 2004, yielded 5.03 percent yesterday. That’s 15 basis points more than a similar-maturity note issued by the Philippines, whose BB- rating at Standard & Poor’s is seven levels below South Korea’s A grade.

“Korea is A rated and trading like BB,” Fortis’ Bettoni said. “Although the country is being hit hard by the global downturn and its private sector short-term debt rollovers are significant, a lot of this is priced in.”

To contact the reporter on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.netSeonjin Cha in Seoul at scha2@bloomberg.net

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Hong Kong Ready to Start Trade Settlement in Yuan

By Bob Chen and Nipa Piboontanasawat

April 9 (Bloomberg) -- Hong Kong plans to be the first city outside mainland China to start settling trade in yuan, expanding use of the currency in a city whose exchange rate is pegged to the dollar, Chief Executive Donald Tsang said.

“It will reduce foreign-exchange risks for companies, create more business for Hong Kong banks and diversify use of yuan funds,” Tsang said at a press briefing in the city. “The policy has already been approved. It’s almost here.”

China is seeking to promote the yuan as an international currency after signing 650 billion yuan ($95 billion) in swap agreements with Hong Kong, Argentina, Indonesia, South Korea, Malaysia and Belarus in the past four months. The yuan has gained 21 percent against the dollar since its fixed exchange rate was scrapped in 2005, eroding the value of China’s central bank reserves and exporters’ profits.

“These are baby steps toward liberalization of China’s capital account and internationalization of the renminbi,” said Tim Condon, head of Asia research at ING Groep NV in Singapore. “Access to renminbi is not going to be an issue. China is using its financial might to hedge any risk it might face in terms of supplies of central raw materials for its growth and demand in other markets for its products.”

China’s State Council said yesterday it allowed yuan settlement for international trade in Shanghai and four cities in Guangdong province to promote global use of the currency and protect companies from swings in the dollar. The cabinet will release related regulations “as early as possible,” it said in a statement on its Web site.

Hong Kong

While China allowed the currency to be used for trading goods and services in December 1996, it had to be converted before cross-border payments were made. Hong Kong banks have been able to accept yuan deposits since 2004 and stores have increasingly welcomed payment in China’s currency since 2003, when a relaxation of visa controls led to a surge of mainlanders visiting the city.

Hong Kong has pegged its dollar to the U.S. currency since 1983 and allows it to trade 5 cents on either side of HK$7.80 per dollar. It was at HK$7.7507 as of 12:08 p.m. local time. When asked how the program would affect the link, Tsang signaled his support for the exchange-rate system.

‘An Anchor’

“Hong Kong’s U.S. dollar peg is an anchor to Hong Kong’s financial stability,” Tsang said today.

The four other Chinese cities permitted in the program are Guangzhou, Shenzhen, Zhuhai and Dongguan. The statement didn’t say with which countries the five cities will settle trade with. There is no upper limit for yuan settlements in Hong Kong, said K.C. Chan, the Secretary for Financial Services and the Treasury, in a Radio Television Hong Kong report.

“In the endgame, we know it’s going to be one country, one currency,” said ING’s Condon. “The Hong Kong dollar will go the way of the Macanese pataca in time, but that can be 15 years away. It’ll be a series of these baby steps.”

The pataca is the official currency of Macau, even though most of the money in circulation in the former Portuguese territory is Hong Kong dollars.

The Dollar Index traded on ICE futures in New York, which tracks the currency against those of six trading partners, has fallen 16 percent this decade and plunged 2.9 percent last month, the worst performance this year, on concern Federal Reserve purchases of Treasuries will boost the supply of the greenback.

The yuan was little changed at 6.8354 per dollar, according to China Foreign Exchange Trade System. The government has allowed it to decline 0.2 percent this year against the U.S. currency as manufacturers complained its appreciation has eroded the value of their overseas income. Exports tumbled a record 25.7 percent in February, narrowing its trade surplus to $4.8 billion, the smallest in three years.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Nipa Piboontanasawat in Hong Kong at Or npiboontanas@bloomberg.net

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Taiwan Dollar Gains as Risk Appetite Lifts Stocks; Bonds Drop

By Carmen Ng and Yu-huay Sun

April 9 (Bloomberg) -- Taiwan’s dollar rose, following its biggest two-day drop in eight years, as prospects for additional stimulus spending by Japan fueled demand for Asian assets. Government bonds fell.

The island’s currency climbed as the MSCI Asia Pacific Index of regional shares rose for the first time in three days and a Japanese report today showed February machinery orders unexpectedly increased in the world’s second-biggest economy. Taiwan’s benchmark Taiex index of shares surged 4.1 percent, the most in four months, as overseas investors purchased more of the local shares than they sold.

“The Taiwan dollar has been closely tracking the global stocks move,” said Sebastien Barbe, the Hong Kong-based head of emerging-market strategy at Calyon, the investment banking unit of France’s Credit Agricole SA. “Whenever the U.S. market rebounds, the Taiex will rally on better risk appetite.”

The local currency strengthened 0.4 percent to NT$33.777 against the greenback as of the local 4 p.m. close, according to Taipei Forex Inc. Overseas investors today added NT$11 billion ($326 million) of Taiwan shares to their holdings, after selling NT$17.4 billion in the previous two days, when the currency dropped 2 percent.

The island’s dollar dropped almost 2 percent in the last two days, the most since May 2001, as a government report on April 7 showed exports slid for a seventh month in March.

The Central Bank of the Republic of China (Taiwan) said yesterday in a statement that the currency was “relatively stable.” It bought between $400 million and $500 million of U.S. dollars on April 7 to weaken the local currency, the Commercial Times reported yesterday. Local banks were told not to speculate on gains in the island’s dollar, the newspaper said, citing unidentified traders.

Equities-Driven

“The rise today is not a big one, it’s an equities-driven correction,” Calyon’s Barbe said. “The main uncertainties here are still the earnings ahead.” He predicted the currency may extend this year’s 2.8 percent slide in the coming two weeks.

Taiwan’s overseas sales shrank 36 percent last month from a year earlier. Japan yesterday said its exports halved in February and Germany, the world’s No. 1 exporter, reported a fourth decline in monthly shipments.

Taiwan’s economy contracted 8.4 percent in the fourth quarter, pushing the island into its first recession since 2001. The jobless rate climbed to a record 5.6 percent in February.

Japan’s ruling Liberal Democratic Party will propose the government implement a 15.4 trillion ($154 billion) stimulus package to help revive the economy, according to a document obtained by Bloomberg News.

Bonds Drop

Taiwan’s 10-year government bonds fell, snapping a two-day advance, as stock gains lured investors away from debt.

“The market is very dull,” said James Wang, a bond trader at Yuanta Securities Co. in Taipei. “Yields climbed, mainly because of the impact from stocks.”

The yield on the 1.375 percent bond maturing March 2019 climbed one basis point to 1.54 percent as of the 1:30 p.m. close in Taipei, according to Gretai Securities Market, Taiwan’s biggest exchange for bonds. Its price fell 0.089, or NT$89 per NT$100,000 face amount, to 98.5317. A basis point is 0.01 percentage point.

To contact the reporters on this story: Carmen Ng in Hong Kong at cng98@bloomberg.net; Yu-huay Sun in Taipei ysun7@bloomberg.net

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Australian, N.Z. Dollars Rise, Reversing Losses, as Stocks Gain

By Candice Zachariahs

April 9 (Bloomberg) -- The Australian and New Zealand dollars erased earlier losses as Asian equities gained and U.S. stock futures pointed to a higher open, raising speculation investors will buy higher-yielding assets.

New Zealand’s currency gained for a second day as home sales advanced to the highest since November 2007. Australia’s dollar earlier dropped after the unemployment rate unexpectedly rose by the most in 18 years to 5.7 percent, exceeding the median estimate in a Bloomberg News survey of 5.4 percent.

“U.S. equity futures are up at this stage so once the data washes through, the market is going to get back to watching what’s happening to equity market futures,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. “You continue to see support for the Aussie at the mid to low 70 U.S. cent level, driven off equity market optimism.”

Australia’s dollar rose 0.4 percent to 71.30 U.S. cents as of 4:25 p.m. in Sydney from 71.01 cents in New York yesterday. The currency gained 0.7 percent to 71.33 yen.

New Zealand’s dollar advanced 0.6 percent to 58.28 U.S. cents from 57.97 in New York and bought 58.36 yen from 57.83 yen.

Asian stocks rose for the first time in three days as Japan’s ruling party proposed $154 billion of extra spending and the country’s machinery orders unexpectedly increased.

Gains in the Australian dollar towards 71.50 cents would “represent very good selling opportunities,” Cavenagh said.

N.Z. House Sales, Prices

New Zealand’s home sales in March totaled 6,694 in March from a record-low 3,706 in January and 5,228 in February, the Auckland-based Real Estate Institute of New Zealand Inc. said today. House prices fell 9.4 percent last month from a year earlier, the biggest drop since the series began in 2005, according to Quotable Value New Zealand Ltd., the Wellington- based government valuation agency.

Traders estimate the Reserve Bank of New Zealand will lower its benchmark at least 25 basis points at the April 30 board meeting, according to a Credit Suisse index based on swaps trading. Policy makers cut borrowing costs by 5.25 percentage points since July, to 2.75 percent on April 30,

Australian government bonds declined. The yield on 10-year notes added four basis points, or 0.04 percentage point, to 4.59 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.36, or A$3.60 per A$1,000 face amount, to 105.25.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.86 percent from 3.89 yesterday.

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

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Asian Currencies: Won Rallies on Bond Sale; Taiwan Dollar Gains

By David Yong and Lilian Karunungan

April 9 (Bloomberg) -- South Korea’s won rose, leading gains in Asian currencies, after the government sold $3 billion of global bonds, boosting the nation’s foreign-exchange reserves and its capacity to defend the currency.

The won snapped a two-day loss after the central bank kept the benchmark interest rate at a record low today, citing signs that manufacturing is improving. A gauge of regional stocks rebounded after Japan’s machinery orders rose for the first time in five months as the government prepares a $154 billion stimulus package to pull Asia’s biggest economy out of recession. Taiwan’s dollar advanced as risk appetite in emerging markets improved.

“Investors would want exposure to Korea for a turnaround story,” said Singapore-based Scott Bennett, who helps manage $28 billion in the region at Aberdeen Asset Management Asia Ltd. “The currency has come back a lot.”

The won climbed 2.4 percent to 1,322.50 per dollar at the 3 p.m. local close, according to Seoul Money Brokerage Services Ltd. It appreciated 17 percent over the past month and reached a three-month high of 1,306 on April 6. Taiwan’s dollar rose 0.4 percent to NT$33.777 and Malaysia’s ringgit strengthened 0.5 percent to 3.6125.

Korea sold $1.5 billion each in notes maturing in five and 10 years in its first overseas debt offering since November 2006, attracting $8 billion of orders, the finance ministry said.

Bank of Korea

The sale was a pre-emptive measure to “prepare for uncertainty on global financial markets,” the ministry said in a statement. Korea’s foreign-currency reserves rose to $206.3 billion at the end of March from $201.5 billion a month earlier, the Bank of Korea said on April 2.

Korea’s central bank today kept the seven-day repurchase rate at 2 percent, as expected by nine of 11 economists surveyed by Bloomberg News.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, halted a two-day decline, rising 0.3 percent. The MSCI Asia Pacific Index of stocks climbed 3.2 percent, the biggest gain in a week.

The yen declined to 132.85 per euro in London from 132.48 in New York yesterday as investors reduced demand for safer currencies. It was little changed at 99.99 per dollar from 99.76.

Japan Orders

Japanese machinery orders, an indicator of capital investment in the next three to six months, climbed 1.4 percent in February from a month earlier, the Cabinet Office said today in Tokyo. The median estimate of 28 economists surveyed by Bloomberg was for a 6.9 percent drop.

Taiwan’s dollar rose following its biggest two-day drop in eight years as prospects for additional stimulus spending by Japan fueled a rally in stocks. The island’s Taiex index surged 4.1 percent to the highest level since Oct. 3.

“The Taiwan dollar has been closely tracking the global stocks move,” said Sebastien Barbe, the Hong Kong-based head of emerging-market strategy at Calyon, the investment banking unit of France’s Credit Agricole SA. “Whenever the U.S. market rebounds, the Taiex will rally on better risk appetite.”

Malaysia’s ringgit held gains, snapping a two-day slump, after a government report showed industrial production fell 15 percent in February from a year earlier. Figures for January were revised higher to a 19.8 percent drop. The Kuala Lumpur Composite Index of shares climbed 1.2 percent after two days of losses.

Thai Protests

Thailand’s baht was little changed at 35.44 per dollar after losing as much as 0.3 percent. Prime Minister Abhisit Vejjajiva today said he has no reason to resign as anti-government protests escalated. The government can handle those protests without using emergency powers, he said yesterday.

“The mentality for the time being is that the protests are occurring in a civilized manner,” said Kobsidthi Silpachai, head of capital markets research at Kasikornbank Pcl in Bangkok, the nation’s third-largest lender. “Risk appetite is rebounding a bit. It doesn’t take a whole lot of money to move it around.”

Elsewhere, the Singapore dollar traded at S$1.5147 from S$1.5153 yesterday, and China’s yuan was little changed at 6.8351 against the greenback. Vietnam’s dong traded at 17,775 versus 17,783.50 yesterday.

Markets in the Philippines and Indonesia are closed today, and will shut along with Singapore, Hong Kong and India tomorrow for public holidays.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

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Rupee Pain Means Exporters Gain as Indians Beat China

By Anoop Agrawal

April 9 (Bloomberg) -- Gokaldas Exports Ltd., India’s biggest garment exporter, says the rupee’s slide to a record low helped to win orders from rivals in China, where the yuan gained against the dollar in the past year.

“The yuan’s stability and the rupee’s drop is an advantage for every local exporter to get more business,” Rajendra Hinduja, managing director of the Bangalore-based company, said in an interview. “We are now competing and winning.”

Gokaldas, which makes Gap sweatshirts and Nike tracksuits, and Sarju International Ltd., a producer of Reebok sportswear, say they are becoming more competitive after India’s currency fell 20 percent in the past year to 49.89 per dollar, while the yuan rose 2.4 percent. The rupee was the worst performer after the South Korean won among Asia’s 10 most-active currencies in the past 12 months as economic growth slowed and the global credit crisis prompted funds to sell emerging-market assets.

The rupee will weaken another 5.9 percent to 53 per dollar this year, according to the median estimate of seven exporters surveyed by Bloomberg last week. The Reserve Bank of India may favor a weaker currency to bolster Asia’s third-biggest economy, said Richard Yetsenga, a Hong Kong-based strategist at HSBC Holdings Plc, who forecasts a steeper rupee decline to 54.

“The central bank won’t mind an orderly movement in the currency, even if it means a weaker rupee,” Yetsenga said. “They will allow exporters to take that advantage.”

Slower Growth

India’s $1.2 trillion economy grew at a 5.3 percent annual rate in the three months ended Dec. 31, the slowest pace since 2003. India’s goods exports, which account for about 20 percent of gross domestic product, tumbled 22 percent in February from a year earlier, the most since at least 1995, a Commerce Ministry report showed on April 1. China’s slid 26 percent, according to Chinese customs data.

Fuda Worldwide Sdn., a Malaysian company that imports printing machinery from China, is turning to Mumbai-based Deluxe Printing Machinery Co. for some parts to curb expenditures.

“Our costs have increased because of the yuan,” said Reimund Chong, Fuda’s Kuala Lumpur-based managing director. “We have either asked for discounts, or we have replaced some of the parts-sourcing in India.”

Sebastien Barbe, the Hong Kong-based head of emerging- market strategy at Calyon, the investment banking unit of France’s Credit Agricole SA, is more bullish on the rupee, predicting it will rise 8 percent in the coming year as a global economic recovery lures investors back to emerging markets. MSCI Inc.’s index for developing-nation equities climbed 29 percent in the past month.

‘Over-Optimistic’

The median estimate of 25 analysts surveyed by Bloomberg predicts the currency will strengthen 1.8 percent to 49 this year. The rupee rose 0.6 percent to 49.89 per dollar today.

“It would be over-optimistic for exporters to expect a further drop in the rupee,” Barbe said. “We expect risk appetite to increase because India is less vulnerable to global recession. India’s limited openness to global trade is limiting the pressure on the rupee.”

Non-deliverable forwards indicate the currency may fall. Traders are betting the rupee will weaken 2.9 percent in a year to 51.36, while the yuan may rise 1.4 percent to 6.7390 per dollar, the contracts show. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are used for currencies that aren’t freely convertible.

‘Best Chance’

“China’s stronger currency reflects how it has managed to weather the global financial-markets storm though at the cost of its exports,” said A. Sakthivel, president of the Federation of Indian Export Organisations in New Delhi. “At present, an Indian exporter stands the best chance to outbid a regional rival.”

Gokaldas, controlled by New York-based Blackstone Group LP, expects a further 5.9 percent drop in the rupee in 2009 to boost export revenue by 20 percent in the year ending March 31, 2010, said Hinduja. The company, a supplier for San Francisco-based Gap Inc. and Beaverton, Oregon-based Nike Inc., now exports 2.5 million garments a month and has sales of more than 10 billion rupees ($200 million) annually.

Amit Goyal, managing director at Mumbai-based apparel exporter Sarju, predicts the rupee will end the year at 53 per dollar. Sarju, a supplier for Herzogenaurach, Germany-based Adidas AG’s Reebok International Ltd. unit, shipped $40 million of goods to countries including the U.S., U.K., France and Russia in the year ended June 30.

Turning Around

“We expect to be one up on rivals in China,” Goyal said. “A general recession in major partner countries has shrunk the market but we expect that to reverse in the third quarter.”

Sona Koyo Steering Systems Ltd., India’s biggest maker of steering wheels for passenger cars, has “significantly increased” its competitiveness because of the rupee’s decline, said Chairman Surinder Kapur.

Shipments from New Delhi-based Sona Koyo, which supplies parts to Hyundai Motor Co. in Seoul and Toyota Motor Corp. in Toyota City, Japan, climbed 35 percent to 1.15 billion rupees in the three months ended Dec. 31, from a year ago.

“The situation has turned for us,” said Kapur, who sees the rupee at 54 in a few months. “Our competitors in China and others in Asia will be pushed down.”

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

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Yen Falls as Gain in Stocks Adds Demand For Higher-Yield Assets

By Oliver Biggadike and Ye Xie

April 9 (Bloomberg) -- The yen weakened against most of the world’s most actively traded currencies as the five-week rally in stocks signals renewed demand for higher-yielding assets.

The dollar rose against the euro this week by the most in three months on speculation investors are shifting funds to U.S. assets. The British pound depreciated against the Australian dollar, South African rand and U.S. dollar after the Bank of England said it will keep pumping money into the economy by purchasing government bonds. Norway’s krone gained by the most this week versus Japan’s currency.

“There was panic in the market and now there’s clearly a lot of cash on the sidelines which is still not invested,” said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. “Those who can afford it have started to do so.”

The yen declined 07 percent to 100.46 per dollar at 12:11 p.m. in New York, from 99.76 yesterday. Japan’s currency weakened 1.6 percent to 71.96 to the Australian dollar and by 0.5 percent to 15.04 versus the Norwegian krone.

The dollar gained 1 percent to $1.3147 against the euro from $1.3486 on April 3. The yen depreciated as the Standard & Poor’s 500 Index headed for its fifth weekly gain, the longest rally since October 2007. The MSCI World Index of global shares advanced 2.5 percent today.

Risk Appetite

“High-yield corporate bonds have priced in a very high default rate that is not realistic,” said Pu Yonghao, head of Asia-Pacific research at UBS, in a Bloomberg Television interview from Hong Kong. “Over the longer term equity does look attractive in terms of valuation even if in the short term we see potential volatility and potential corrections.”

Credit-default swaps on high-risk, high-yield debt sold by Asian companies and governments fell yesterday for the fifth time in six days to the lowest level in more than a month, according to data compiled by Bloomberg. The contracts decline as perceptions of default risk improve.

Predictions for swings in the yen against the dollar slid to the lowest since Lehman Brothers Holdings Inc. failed in September, as a perceived easing of the global financial crisis reduced the lure of Japan’s currency, according to Daiwa Securities Group Inc.

Volatility on one-month yen-dollar options fell to as low as 15.25 percent this week, the least since Sept. 15, when Lehman failed, data compiled by Bloomberg show.

Policy ‘Safety Net’

“Expectations that policy actions around the world will provide a safety net have reduced the risk of yen appreciation and pushed down volatility,” said Takahide Nagasaki, senior currency strategist at Daiwa Securities SMBC Co. in Tokyo.

European Central Bank council member Ewald Nowotny said cutting the benchmark rate below 1 percent is still open for debate and it would be “sensible” for the bank to buy corporate debt as it fights for an economic recovery.

“It’s my personal opinion that the benchmark rate should not go below 1 percent, but this is a point that’s open for discussion,” Nowotny, who heads Austria’s central bank, said in a telephone interview from Vienna late yesterday. The purchase of commercial paper and corporate bonds is “a sensible and efficient measure” that would take time to prepare, he said.

The Deutsche Bank trade-weighted euro index, measured against the dollar, the yen, the Swiss franc, the pound and the Swedish krona, rose to 136.65 from 136.42 yesterday.

The euro will rise to $1.40 in three months and $1.45 in six and 12 months, according to Goldman Sachs Group Inc.

The Dollar Index, which the ICE uses to track the greenback versus the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell 0.2 percent to 85.156 from 85.361.

Deeper German Recession

Gains in the euro may be tempered after a German government report today showed industrial production fell for a sixth month, adding to concern the nation’s recession is deepening.

“We would argue there’s more weakness coming in the euro,” said Robert Doll, who oversees $280 billion as chief investment officer for global equities at BlackRock Inc., speaking in a Bloomberg Television interview. “The euro zone’s been slow to recognize the problem, slow to reduce interest rates. Therefore it’s going to be much slower to recover.”

Output fell a seasonally adjusted 2.9 percent from January, when it slumped 6.1 percent, the most since data for a reunified Germany began in 1991, the Economy Ministry in Berlin said. Inflation slowed to the least in almost 10 years last month as consumer demand eased, a separate report showed today.

The dollar extended its gains against the euro after a government report showed U.S. trade deficit unexpectedly narrowed in February to the lowest level in nine years.

Imports of Asian cars, toys and electronics collapsed, narrowing the difference between goods brought in from overseas and exports by 28 percent to $26 billion.

“It’s a big deal,” said Alan Ruskin, head of international currency strategy in North America at RBS Securities Inc. in Greenwich, Connecticut. “It suggests that global rebalancing has taken another big step forward, which is very good for the dollar.”

To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net

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U.S. Wheat Supplies to Fall as Use Rises, USDA Says

By Tony C. Dreibus

April 9 (Bloomberg) -- U.S. wheat inventories at the end of the current marketing year will be 2.2 percent smaller than estimated last month because of increased domestic demand for use of the grain as livestock feed, the government said.

About 696 million bushels will be in storage on May 31, down from 712 million estimated in March, the U.S. Department of Agriculture said today in a report. Inventories of hard winter wheat were projected at 278 million bushels, down 0.7 from the month-ago forecast. Hard spring supplies will total 173 million bushels, down 4.9 percent from the March estimate, USDA said.

“We really picked up some usage,” said Dennis DeLaughter, the owner of Progressive Farm Marketing Inc. in Edna, Texas. “They lowered stocks of hard winter and hard spring so that should get a firm reaction.”

Wheat futures for May delivery rose 5 cents, or 0.9 percent, to $5.37 a bushel at 6 a.m. on the Chicago Board of Trade. The price still is down 12 percent this year, partly on increased global production.

Livestock producers will use 250 million bushels of the grain to feed animals in the year ending May 31, up 8.7 percent from last month’s estimate, the USDA report said. About 79 million bushels will be used as seed, up from 78 million projected last month, the department said.

Domestic use will total 1.254 billion bushels, up 1.7 percent from the March estimate, the USDA said. There were 306 million bushels of unsold wheat on hand on May 31, 2008.

Imports of the grain may total 125 million bushels, up 4.2 percent from the March projection, the government said.

Wheat is the fourth-biggest U.S. crop, valued at $16.6 billion in 2008, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.

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Cotton Climbs to 2-Month High as Rising U.S. Exports Cut Supply

By Shruti Date Singh

April 9 (Bloomberg) -- Cotton prices jumped to the highest in almost two months on a forecast for tighter supplies as exports rise from the U.S., the world’s largest exporter.

The U.S. will ship 12.5 million bales in the year ending July 31, up from 12 million forecast last month, the Department of Agriculture said today in a report. U.S. cotton output will fall to 12.83 million bales, down from 13.04 million forecast in March, USDA said. U.S. inventories will be 6.7 million bales on July 31, down from USDA’s March estimate of 7.3 million.

“We’ve seen the exports, which were good, and the world supply and demand report came out quite bullish for U.S. fundamentals,” said Andy Ryan, an FCStone Group Inc. risk- management consultant in Nashville, Tennessee.

Cotton futures for July delivery rose 0.41 cent, or 0.8 percent, to 49.8 cents a pound at 10:07 a.m. on ICE Futures U.S. in New York. The price earlier reached 50.02 cents, the highest for a most-active contract since Feb. 10.

A weaker dollar and higher soybean and grain prices helped cotton rise, Ryan said.

The U.S. Dollar Index, which measures the greenback against six major currencies including the euro and yen, fell as much as 0.5 percent, making commodities traded in New York cheaper for overseas buyers.

Soybeans rose as much as 2 percent in overnight trading on the Chicago Board of Trade while corn gained 1 percent, increasing the incentive for farmers to plant less cotton. U.S. farmers may sow cotton on about 8.8 million acres this year, down from 9.47 million in 2008, to grow more soybeans and grains, the USDA said on March 31.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

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Palm Oil Advances to Six-Month High on Crude, Lower Stockpiles

By Claire Leow

April 9 (Bloomberg) -- Palm oil rose to a six-month high as commodities including crude oil rallied and stockpiles of the vegetable oil declined in Malaysia, the second-largest producer.

Crude oil, leads palm oil as the tropical commodity is often used in biofuels, rose as much as 4.2 percent. Malaysian palm oil stockpiles fell for a fourth month in March to about 1.5 million tons, Minister of Plantation Industries and Commodities Peter Chin said on April 7.

“The crude palm oil pricing up-cycle would sustain,” said an AMResearch Bhd. report today that raised its average forecast for this year and 2010. “There is a possibility that palm oil inventory could touch a low of 1.3 million tons by the year- end,” from a record 2.27 million tons in November.

June-delivery palm oil on the Malaysia Derivatives Exchange rose 104 ringgit, or 4.8 percent, to 2,269 ringgit ($628) a ton in Kuala Lumpur, the highest since Sept. 26. Futures have gained for seven weeks.

AMResearch, which also said a weak U.S. dollar would support higher palm oil prices, raised its average forecast by 25 percent to 2,500 ringgit a ton this year, and 17 percent to 2,700 ringgit for 2010. Palm oil has averaged 1,928 ringgit a ton this year.

Chin’s comment “is adding to the buoyancy,” Ben Santoso, an analyst at DBSVickers Securities, said. Malaysia’s palm oil board may announce monthly data tomorrow or on April 13.

Indonesia and Malaysia account for about 90 percent of the world’s palm oil, also used in foods. While Indonesia doesn’t announce monthly stockpile data, Sahat Sinaga, executive director at the Indonesian Confederation of Vegetable Oil Industries, said in March that stockpiles held by producers and at ports probably declined to 1.3 million tons from 1.5 million tons in February.

China Tariffs

Still, China, the biggest user of vegetable oils, indicated today it may raise a tariff on shipments of soybeans, crushed to produce an oil that competes with palm oil.

China’s dependence on imported oilseeds is “too high,” increasing the risks to the nation’s food security, He Yanli, deputy director of industries at the National Development and Reform Commission, said in Beijing.

The nation is buying oilseeds “from their own farmers to keep them quiet and build reserves,” Santoso said. “Demand from China will be muted,” potentially reducing global prices for palm oil and soybeans, he said.

Soybeans may fall to $7.40 a bushel, Santoso forecast, which may drag down palm oil prices. Soybeans futures for May delivery in Chicago were at $10.23 at 6:06 p.m. in Singapore.

“Palm oil cannot trade at a premium to soybean oil,” he said. “The outlook for the next six months is bearish.”

Soybean oil for May delivery was at 35.44 cents a pound at 6:06 p.m. in Singapore, 24 percent premium to palm oil, according to data on the Bloomberg.

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

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Wheat Futures Fall After USDA Increases Global Supply Estimate

By Tony C. Dreibus

April 9 (Bloomberg) -- Wheat fell for the fourth straight day, erasing earlier gains, after the U.S. Department of Agriculture said global stockpiles will be 2.3 percent higher than forecast last month.

About 158.1 million metric tons of wheat will be in storage at the end of the marketing year on May 31, the USDA said today in a report. That’s up from a March projection of 155.9 million tons. Argentina’s estimated supplies at the beginning of the marketing year were raised to 1.6 million tons from 300,000 tons a month ago.

“When you look at the world ending stocks you did see a little bit of an increase,” said Dewey Strickler, president of Ag Watch Market Advisers in Nashville, Tennessee. “Wheat has been the weakest market of all the grains.”

Wheat futures for May delivery fell 7.25 cents, or 1.4 percent, to $5.2475 a bushel at 11:35 a.m. on the Chicago Board of Trade. The price is down 14 percent this year, partly on increased global production and declining demand for U.S. grain.

Futures earlier gained as much as 2.2 percent after the USDA projected U.S. stockpiles would decline from last month’s projection. Domestic inventories will total 696 million bushels (18.9 million tons), down from a March estimate of 712 million bushels.

Wheat is the fourth-biggest U.S. crop, valued at $16.6 billion in 2008, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.

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Oil Rises More Than $2 as Equity Gains Signal Demand May Climb

By Mark Shenk

April 9 (Bloomberg) -- Crude oil rose more than $2 a barrel as equities gained, signaling that some investors expect economies to stabilize, bolstering energy demand.

Oil rose as much as 6 percent after stocks increased on better-than-estimated earnings at Wells Fargo & Co. and speculation banks will pass government stress tests. Prices were also higher because a government report showed a smaller gain in U.S. supplies than the industry indicated a day earlier.

“When equities bounce, you see oil, industrial metals and grains lift as well,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “The commodity markets are awaiting the return of global growth, and the stock market is an early signal that the economy is recovering.”

Crude oil for May delivery rose $2.19, or 4.4 percent, to $51.57 a barrel at 10:36 a.m. on the New York Mercantile Exchange. Prices are up 16 percent this year.

The Standard & Poor’s 500 Index added 3 percent to 849.45. The Dow Jones Industrial Average rose 2.6 percent to 8,044.16.

“Oil prices are likely to hover around $50 a barrel for now,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. “The proximity of this psychologically important level, rising equity markets and a smaller-than-feared increase in U.S. oil inventories have given the price a boost.”

Two Reports

U.S. crude oil supplies increased 1.65 million barrels to 361.1 million last week, the highest since July 1993, the report yesterday from the U.S. Energy Department showed. The industry- funded American Petroleum Institute said April 7 that stockpiles jumped by 6.94 million barrels to the highest since 1990.

“People were a little bit shocked yesterday that the crude number was so different than the API number,” said Ray Carbone, president of Paramount Options Inc. in New York and a trader at the New York Mercantile Exchange. “We’re just in a range between $47.25 and $53 and nothing has broken us out of that range.”

Global oil demand falls to an annual low during the second quarter as refineries close to perform maintenance after winter in the Northern Hemisphere.

“If prices stay where they are, at about $50, or even drop a little, it will be a good thing because we should not forget that the global economy is shrinking,” Algerian Oil Minister Chakib Khelil told the state-run Algerie Presse Service yesterday.

The market continues to be oversupplied, and the Organization of Petroleum Exporting Countries will decide at its May 28 meeting whether to cut production, depending on the state of the global economy, he said.

“OPEC is generally OK with oil at this level,” O’Grady said. “It’s too low to spur a lot of exploration but high enough for most members to meet their budgets.”

Fuel Supplies

Gasoline stockpiles rose 656,000 barrels to 217.4 million in the week ended April 3. Total daily fuel demand averaged over the past four weeks was 18.9 million barrels, down 4.4 percent from a year earlier, the Energy Department said. It was the lowest consumption for a four-week period since October.

Stockpiles at Cushing, Oklahoma, where New York-traded West Texas Intermediate crude oil is delivered, fell 878,000 barrels to 29.98 million last week, the lowest since the week ended Dec. 26. Supplies in the week ended Feb. 6 were the highest since at least April 2004, when the Energy Department began keeping records for the location.

Cushing supplies are still above their average of 20.5 million barrels over the past five years. The excess in inventories has weighed on the May Nymex oil contract, which trades at a discount to June futures, a situation known as contango. The difference between the two is now at $2.34 a barrel, up from 69 cents a barrel a month ago.

Texas Discount

Brent crude oil for May settlement rose $1.74, or 3.4 percent, to $53.33 a barrel on London’s ICE Futures Europe exchange.

Brent is trading at a premium of $1.76 a barrel to the West Texas Intermediate contract in New York, swinging from a discount of 43 cents on March 31.

“The WTI-Brent differential does appear to us to be justified by the extreme imbalance” in inventories, Paul Horsnell, head of commodities research at Barclays Capital in London, said in a report today.

Still, Barclays is “not overly concerned about the absolute size of the crude inventory overhang,” saying cuts by the Organization of Petroleum Exporting Countries will siphon off the excess.

To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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Emerging-Market Stocks Extend Biggest Rally in Year; Bonds Gain

By Laura Cochrane and Michael Patterson

April 9 (Bloomberg) -- Emerging-market stocks rose and headed for their longest stretch of weekly gains in a year as energy companies climbed on higher oil prices and speculation mounted government aid will revive economic growth.

Russian, Taiwanese and Hungarian equities helped drive the MSCI Emerging Markets Index up 3.7 percent to 632.47 at 11:24 a.m. in New York. The gauge rose 3.1 percent this week and was poised for the highest close in almost six months. Bonds rallied from Turkey to Brazil and Indonesia while the South Korean won led advances in developing-nation currencies against the dollar.

“There has been more risk-taking appetite generally and people have become more comfortable with the stock market gains off the recent lows,” said Dmitry Gourov, an economist at UniCredit SpA in Vienna.

Emerging-market stocks have surged 33 percent from this year’s low on March 2, paring losses in the past 12 months to 45 percent, as oil climbed and Group of 20 leaders pledged to triple the lending stockpile of the International Monetary Fund to $750 billion. The lender has already allocated more than $70 billion to help emerging economies including Hungary, Pakistan and Romania to avoid default.

“This package has been a definite confidence-building measure,” Gourov said today in a phone interview.

This week’s gains would extend a five-week rally for the MSCI developing-nation index, the longest rise since the six- week period ended May 2. Markets from Warsaw to Johannesburg and Mumbai will be closed tomorrow for holidays.

‘Bear Market Rally’

The surge in stocks since March is a “bear market rally” and equities may retreat as a global recession persists, Aberdeen Asset Management Plc’s Hugh Young and BlackRock Inc.’s Dan Chamby said this week. The number of Americans filing first- time claims for unemployment insurance exceeded 600,000 for a 10th straight week, a sign the labor market remains weak, the Labor Department said today. Industrial production in Germany dropped for a sixth month in February, the Economy Ministry said.

The MSCI index, up 11 percent this year, extended gains after Wells Fargo & Co., the second-biggest U.S. home lender, said its first-quarter earnings will top analysts’ estimates. The Micex Index in Russia, the world’s biggest energy-exporting economy, advanced 10 percent as state-owned oil pipeline OAO Transneft jumped 21 percent. Brazil’s Bovespa index added 2.9 percent as Petroleo Brasileiro SA gained 3.4 percent.

Oil advanced as much as 6 percent to $52.35 a barrel, and higher copper, aluminum and zinc prices improved outlooks for emerging markets relying on exports.

Japan Stimulus

Asian stocks gained on speculation Japan will unveil a $154 billion stimulus package to help revive the economy, according to a document obtained by Bloomberg News, adding to optimism efforts by governments around the world will pull the global economy out of its worst recession since World War II. Taiwan’s benchmark Taiex index surged 3.5 percent to the highest in six months.

Emerging-market equities may climb as much as 15 percent in the “next few weeks,” tracking a pattern seen during the stocks’ initial rebound from the bear market that ended in 2001 Jonathan Garner, Morgan Stanley’s London-based chief Asian and emerging-market strategist, wrote in a research note.

An increase in bonds reduced yields by 15 basis points to 5.58 percentage points over U.S. Treasuries, according to JPMorgan Chase & Co.’s EMBI+ Index. Both gauges are set for their fifth week of gains. A basis point is equal to 0.01 percentage point.

Turkey, Brazil Bonds

The spread between yields on Turkey’s bonds and Treasuries narrowed 27 basis points to a more than six-month low of 4.33 percentage points, according to JPMorgan indexes, on speculation the government is near an agreement with the IMF on a loan and the country’s central bank will cut interest rates more than forecast.

The yield spread on Brazil’s bonds fell 10 basis points today to 3.66 percentage points, while the nation’s currency, the real, appreciated 1 percent to 2.1808 per dollar.

The Czech koruna climbed as much has 0.16 percent against the euro. The koruna will be the “clear outperformer” among eastern European currencies for the next 12 months as the region starts to recover from the global credit crisis, Goldman Sachs Group Inc. analysts said.

“Though we see some further currency weakness in the next three months, relative to the spot levels, we have moved our forecasts stronger across the board,” Rory MacFarquhar, a Goldman Sachs economist in Moscow, wrote in a note to clients today.

To contact the reporter on this story: Laura Cochrane in London at lcochrane3@bloomberg.net

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S&P 500 May Drop 7% After Rally, JPMorgan Strategist Lee Says

By Alexis Xydias

April 9 (Bloomberg) -- The Standard & Poor’s 500 Index will likely fall to about 780 from last week’s 842.50 close, said JPMorgan Chase & Co.’s top strategist, who cited historical market “corrections” since 1900.

Since the start of the last century, every 20 percent-plus increase within a two-month period in the Dow Jones Industrial Average, another U.S. equities benchmark, was followed by an average decline of 7 percent from the peak, New York-based strategist Thomas Lee wrote in a report dated yesterday.

The S&P 500 has climbed 22 percent from a 12-year low March 9 on speculation the worst of the economic slump is over. The peak of this rebound was reached on April 3, with the measure dropping 2.1 percent this week. The strategist reiterated his forecast that the index may reach its bottom at 750-775 in “coming months.”

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

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Clearwater, FuelCell, Moog, Nordstrom, Wynn: U.S. Equity Movers

By Lu Wang

April 9 (Bloomberg) -- Shares of the following companies are having unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 11:45 a.m. in New York.

Banks climbed after Wells Fargo & Co., the second-biggest U.S. home lender, said first-quarter net income was about $3 billion and that results at Wachovia Corp., acquired about three months ago, were exceeding expectations.

Wells Fargo (WFC US) climbed 19 percent to $17.75. Bank of America Corp. (BAC US) gained 19 percent to $8.41. JPMorgan Chase & Co. (JPM US) rose 14 percent to $31.31. Citigroup Inc. (C US) advanced 9.3 percent to $2.95.

SunTrust Banks Inc. (STI US) gained 19 percent to $12.88. Fifth Third Bancorp (FITB US) jumped 20 percent to $3.17. U.S. Bancorp (USB US) increased 9.3 percent to $15.69.

A-Power Energy Generation Systems Ltd. (APWR US) rallied 29 percent to $5.75 and earlier jumped 39 percent, the most intraday since Oct. 13. The Chinese wind turbine manufacturer said fourth-quarter profit tripled to $10 million.

Apple Inc. (AAPL US) climbed 2.5 percent to $119.27 and earlier rose to $119.88, the highest intraday price since Sept. 26. Credit Suisse Group AG raised its fiscal second quarter earnings estimate for the company by 12 percent to $1.09 per share, citing better-than-expected demand for both Macintosh computers and iPhones. The firm also raised its price target for the stock by 11 percent to $133

Autoliv Inc. (ALV US) rose 10 percent to $24.09 and earlier jumped to $25.25, the highest intraday price since Oct. 15. The world’s largest maker of vehicle air bags was upgraded to “buy” from “hold” at Societe Generale SA.

Cash America International Inc. (CSH US) gained 18 percent to $20.31 and earlier rallied 21 percent, the most intraday since September 1999. The world’s largest pawn shop operator said first-quarter profit was at least 76 cents a share, topping its earlier forecast. The result also exceeded the average estimate of 66 cents in a Bloomberg survey of analysts.

Charlotte Russe Holding Inc. (CHIC US) gained 14 percent to $10.45 and earlier climbed to $10.72, the highest intraday price since Sept. 30. The retailer of clothing for young women said it probably had a fiscal second-quarter per-share profit of 2 cents to 5 cents excluding costs to pay severance and conduct a strategic review. The company had previously said it would have a loss of at least 10 cents on that basis.

Clearwater Paper Corp. (CLW US) rose 16 percent to $9.20 and earlier climbed 16 percent, the most intraday since March 19. The maker of pulp and paperboard was raised to “buy” from “neutral” by D.A. Davidson & Co.

Costco Wholesale Corp. (COST US) fell 3.1 percent to $46.22 and earlier lost 4.5 percent, the most intraday since Feb. 4. The largest U.S. warehouse club reported its weakest monthly sales performance since November as gasoline prices declined and a stronger U.S. dollar ate into international revenue. Sales at stores open at least a year fell 5 percent in the five weeks ended April 5.

Excel Maritime Carriers Ltd. (EXM US) surged 12 percent to $6.66 and earlier climbed to $7.10, the highest intraday price since Feb. 13. Profit from operations excluding some charges and one-time items was $1.71 per share, beating the $1.66 per share estimate of Cantor Fitzgerald LP analyst Natasha Boyden.

FuelCell Energy Inc. (FCEL US) rose 12 percent to $2.94 and earlier rallied 13 percent, the most intraday since March 11. The maker of pollution-free power plants said it won final approval by Connecticut utility authorities to install 27.3 megawatts of the plants around the state.

General Motors Corp. (GM US) rose 3.6 percent to $2. The biggest foreign automaker in China said it expects to double its annual sales in the country to over 2 million vehicles over the next five years.

Gymboree Corp. (GYMB US) jumped 21 percent to $26.47 and earlier advanced 24 percent, the most intraday since Nov. 20. The children’s clothing retailer boosted its first-quarter earnings forecast to at least 50 cents a share from an earlier projection of 25 cents at most.

Hospitality Properties Trust (HPT US) fell the most in the Russell 1000 Index, sliding 21 percent to $10.78. The real estate investment trust with interest in hotels suspended its dividend, citing market conditions.

Moog Inc. (MOG/A US) slid 9.9 percent to $22.91 and earlier slumped 15 percent, the most intraday since at least February 1988. The maker of flight-control systems reduced its earnings forecast for 2009, saying it expects profit excluding a change to be around $2.20 a share. The company previously projected $2.80.

Movado Group Inc. (MOV US) fell 9.8 percent to $7.50 and earlier lost 14 percent, the most intraday since March 5. The watchmaker said it isn’t in compliance with one of the financial covenants in its credit agreements.

Nordstrom Inc. (JWN US) rose 14 percent to $21.21 and earlier advanced to $21.66, the highest intraday price since Oct. 8. The luxury department-store chain said March sales at stores open at least one year dropped 13.5 percent. Analysts surveyed by Retail Metrics Inc. expected a decline of 14 percent.

Shaw Group Inc. (SGR US) dropped 5.2 percent to $27.57 and earlier lost 8.3 percent, the most intraday since March 2. The builder of power plants said 2009 per-share profit will be $2.10 to $2.30, excluding Westinghouse results. The Baton Rouge, Louisiana-based company had previously forecast a profit of $2.50 to $2.70 a share.

Textron Inc. (TXT US) surged 52 percent to $13.86 for the biggest jump in the Standard & Poor’s 500 Index. Kuwait’s Al- Watan newspaper reported a United Arab Emirates consortium is preparing to buy the maker of Cessna aircraft and Bell helicopters for $21 a share. Textron spokeswoman Karen Gordon Quintal declined to comment.

Wal-Mart Stores Inc. (WMT US) dropped 4.3 percent to $50.35 for the biggest decline in the Dow Jones Industrial Average. The world’s largest retailer reported comparable-store sales in March that rose less than some analysts estimated. Revenue from U.S. stores open at least a year advanced 1.4 percent in the five weeks ended April 3, missing the 3.2 percent average estimate compiled by Retail Metrics Inc.

Other retailers that reported worse-than-expected sales also declined. Abercrombie & Fitch Co. (ANF US) lost 10 percent to $23.04. BJ’s Wholesale Club Inc. (BJ US) slid 5 percent to $32.37.

Wynn Resorts Ltd. (WYNN US) rose 9.9 percent to $30.42. The casino company had its share-price estimate increased to $30 from $27 by Sanford C. Bernstein & Co., which said Wynn will be able to meet its debt covenants.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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