Wednesday, April 22, 2009

Caterpillar Says China, Not U.S., ‘Has It Right’ on Stimulus

By Melita Marie Garza

April 22 (Bloomberg) -- Caterpillar Inc., the world’s largest maker of bulldozers and earth-moving equipment, said China’s stimulus plan is getting money into the economy faster than the U.S. program that President Barack Obama championed.

“We think China has it right,” Chief Financial Officer Dave Burritt said in an interview after the Peoria, Illinois- based company reported its first quarterly net loss in 16 years. “The majority of their package is on infrastructure spending. We are seeing life there. We are seeing the turnaround. We would like to see a more robust infrastructure package” in the U.S.

Obama visited Caterpillar in Peoria to rouse support on Feb. 12, the day before Congress passed the $787 billion plan, and Chief Executive Officer Jim Owens is a member of his Economic Recovery Advisory Board. Caterpillar yesterday said full-year profit may be half what it predicted in January as a credit crunch and recession cut demand from builders and miners.

“China, with an economy one-third the size of the United States, is allocating over three times as much for infrastructure,” Caterpillar said in an economic analysis in with the earnings report. “Initial results from this package look promising.”

United Technologies Corp. and Eaton Corp. also said they are seeing early results from China.

White House press secretary Robert Gibbs said the U.S. spending represents “the single greatest infrastructure investment in this country” since President Dwight Eisenhower started the interstate highway system in the 1950s. Obama agrees “infrastructure needs have been neglected” and will work with Congress to address additional spending on such projects when the next highway bill comes up, Gibbs said yesterday.

China Spending

Caterpillar said it expects some benefit this year from China, which enacted a 4 trillion yuan ($585 billion) stimulus package and cut central bank interest rates. The actions will let China’s economy grow at a rate of more than 7.5 percent this year, the company said.

The U.S. may disburse as much as $70 billion this year to build infrastructure, about 6.5 percent of last year’s total construction spending and not enough to offset the drop in private projects, Caterpillar said. The U.S. plan included about $28 billion for bridge and highway construction.

“The infrastructure portion of the stimulus package was disappointing in that it was less aggressive than other countries and missed an opportunity to correct past underinvestment in U.S. infrastructure,” Caterpillar said in its analysis with the earnings report.

China Results

United Technologies Corp., Eaton Corp. and DuPont Co. all said they are starting to see results from China’s plan. This week all three reported first-quarter sales declines ranging from 12 percent to 20 percent.

United Technologies’ fire and security division “is seeing some benefits from the stimulus already in terms of the dollars which are flowing through to infrastructure” from China’s plan, Akhil Johri, the head of investor relations, said yesterday. The Hartford, Connecticut-based company makes Otis elevators, Carrier air-conditioners and Pratt & Whitney engines.

At Wilmington, Delaware-based DuPont, the third-biggest U.S. chemical maker, “electronics customers are reporting some benefit from the China stimulus package,” CEO Ellen Kullman told analysts on a call yesterday.

Eaton CEO Sandy Cutler earlier this week described China as “the first market where we can really string things through to government stimulus activity.” Eaton is a Cleveland-based maker of circuit breakers and fuel pumps.

Caterpillar Forecasts

Caterpillar predicted the U.S. recession in October 2007, two months before it officially began, and said yesterday it expects the world economy to decline about 1.3 percent this year. Owens, 63, joined the company in 1972 as an economist.

The first-quarter net loss of $112 million, or 19 cents a share, compared with net income of $922 million, or $1.45, a year earlier. Revenue dropped 22 percent to $9.23 billion.

Excluding some costs for eliminating jobs, profit was 39 cents a share, more than the 5-cent average estimate in a Bloomberg survey of 20 analysts. Caterpillar rose 91 cents to $31.39 in composite trading on the New York Stock Exchange. The shares have fallen 30 percent so far this year.

Full-year profit will be about $1.25 a share excluding severance and other costs, or half the company’s January forecast, Caterpillar said.

During his February visit, Obama said “you can measure America’s bottom line by looking at Caterpillar’s bottom line.”

To contact the reporter on this story: Melita Marie Garza in Chicago at mgarza4@bloomberg.net

Japan Exports Slide Slows in Sign Recession May Ease

By Jason Clenfield

April 22 (Bloomberg) -- Japan’s export slump slowed in March, ending a four-month streak of record drops and adding to signs the recession may start to ease.

Overseas shipments slumped 45.6 percent from a year earlier, compared with February’s unprecedented 49.4 percent plunge, the Finance Ministry said today in Tokyo. Economists predicted exports would drop 46.4 percent.

Shipments to the U.S. and China, Japan’s two largest markets, fell at a slower pace. Federal Reserve Chairman Ben S. Bernanke said last week the “sharp decline” in the U.S. may be slowing. Goldman Sachs Group Inc. today raised its economic growth forecast for China to 8.3 percent this year from 6 percent previously, citing Premier Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus package.

“It looks as if the fog has cleared and the worst is over,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “But the downturn that began with the slump in overseas demand is spreading to the domestic economy.”

The Nikkei 225 Stock Average climbed 0.8 percent at 10:05 a.m. in Tokyo. The yen traded at 98.58 against the dollar from 98.60 before the report was published.

Exports to China sank 31.5 percent compared with a 39.7 percent drop in February. Shipments to the U.S. fell 51.4 percent in March after a 58.4 percent drop the previous month.

Japanese manufacturers planned to increase output in March and April, ending a five-month drop, a government report showed last month. Gauges of confidence among consumers, merchants and small businesses all rose in March.

‘Hit Bottom’

“We’re seeing that the ground is being built for the economy to hit bottom by the end of this year,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Co. in Tokyo. Still, “the pace of the recovery will be very moderate.”

Gross domestic product may have contracted at an annual 10.9 percent pace in the first quarter, economists surveyed by Bloomberg predict, after shrinking 12.1 percent pace in the previous three months, the steepest drop since 1974.

Bank of Japan Governor Masaaki Shirakawa said this month that weakening spending by companies and consumers will impair growth even as declines in exports and production moderate. The central bank’s Tankan survey of business sentiment this month showed plunging demand has saddled companies with too many employees, signaling unemployment is likely to rise from its current level of 4.4 percent.

31-Year Low

Toyota Motor Corp., Japan’s largest automaker, may cut domestic production in the current business year to a 31-year low, the Yomiuri newspaper reported yesterday. Output will fall 30 percent from its 2007 peak, putting pressure on the automaker to start cutting full-time workers, the newspaper said.

Prime Minister Taro Aso this month unveiled a record 15.4 trillion yen ($156 billion) stimulus plan, a bid to pull the economy out of its deepest recession since 1945. The package will boost gross domestic product by 2 percentage points this fiscal year and create up to 500,000 jobs a year, the government said.

Toshiba Corp. last week said it will cut 3,900 temporary jobs this fiscal year, on top of 4,500 eliminations announced in January. The chipmaker will also reduce research and development spending by 18 percent.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

India’s Steepest String of Rate Cuts May End as Slowdown Eases

By Cherian Thomas

April 22 (Bloomberg) -- India’s central bank may be coming to the end of its steepest string of interest-rate cuts on record after saying Asia’s third-largest economy is faring better than most in the global recession.

The Reserve Bank of India expects economic growth, which slowed to a six-year low of 5.3 percent in the December quarter, to pick up to as much as 6 percent over the next year. The bank yesterday reduced rates for the sixth time in as many months.

Governor Duvvuri Subbarao urged commercial lenders to follow the central bank’s lead and lower rates on loans for companies and consumers. India’s economy, which is less dependent on exports than its Asian neighbors, is this year likely to be the second-fastest growing in the region after China as record harvests boost rural incomes.

“The fiscal and monetary stimulus measures initiated coupled with lower commodity prices could cushion the downturn in the growth momentum” over 2009 to 2010, the central bank said. “Notwithstanding the contraction of global demand, growth prospects in India continue to remain favorable compared to most countries.”

Before yesterday’s rate decision, the central bank had estimated its policy measures, along with increased government spending and tax cuts, were worth as much as $85 billion, or almost 7 percent of gross domestic product.

“The Reserve Bank is close to the end of the rate-cutting cycle,” said Sailesh Jha, an economist at Barclays Capital Plc in Singapore. “Growth has either bottomed out or is close to bottom. The monetary and fiscal loosening so far will start to kick in from the second half of this year.”

Banking System

By September, the central bank will inject another 1.2 trillion rupees ($23.8 billion) into the banking system by purchasing government bonds via auctions and buying back market stabilization bonds, which were sold in the past four years to drain money from the economy. The injection will be equivalent to a 3 percentage point reduction in the cash reserve ratio, the Reserve Bank said yesterday.

Part of Subbarao’s optimism stems from forecasts that this year’s monsoon rains will be normal. That will help sustain the unprecedented 4.3 percent average farm production recorded since 2005, boosting incomes for the three-fifths of India’s 1.2 billion people who depend on agriculture for their livelihood.

India is also less vulnerable to the global economic slump than most of its neighbors as exports make up about a quarter of its $1.2 trillion economy, compared with about half of GDP for developing Asia as a whole.

Critical Challenge

A challenge to keep domestic demand buoyant will be to lower the cost of funds in the economy, the central bank said.

The Reserve Bank, which cut its reverse repurchase rate by a quarter point to 3.25 percent yesterday, has lowered the benchmark by 275 basis points since October. The repurchase rate has been reduced by 425 basis points over the same period.

India’s lenders haven’t fully passed on those rate cuts to their customers. ICICI Bank Ltd., India’s biggest non-state- owned financial institution, has reduced its lending rates by only 50 basis points in the past six months. State-run banks have lowered their borrowing costs by about 200 basis points after government prodding.

“I was not expecting much more from RBI,” said Sunirmal Talukdar, chief financial officer at Hindalco Industries Ltd., India’s biggest aluminum producer. “What needs to be done is to ensure that more funds are made available to companies as banks have artificially kept lending rates high.”

Postal Deposits

Lenders say state-run savings plans such as postal deposits, which compete with banks’ deposits, offer returns of as much as 8 percent and prevent them from cutting rates. The rates on these plans are set by the government and haven’t changed since the central bank started cutting borrowing costs to counter the global recession.

Banks are also holding high-cost term deposits because the central bank’s key rates were double current levels until October 2008 after inflation touched a 16-year high of 12.91 percent in August.

Inflation has subsequently slowed to 0.18 percent in the week ended April 4. The central bank expects inflation to accelerate to about 4 percent by the end of March.

“Inflation risks have clearly abated,” Subbarao said. “Banks should not be overly apprehensive about reducing deposit rates for fear of competition from small savings, especially as the overall systemic liquidity remains highly comfortable. There is scope for the overall interest rate structure to move down.”

To contact the reporter on this story: Cherian Thomas in Mumbai at Cthomas1@bloomberg.net.

India Attracts LNG Cargoes as Asia, Europe Buyers Cut Imports

By Dinakar Sethuraman and Archana Chaudhary

April 22 (Bloomberg) -- India may rank among the largest markets for spot cargoes of liquefied natural gas this year as Japan, South Korea and Spain slash purchases.

India faces a shortage of 80 million cubic meters of gas a day, or more than half of domestic demand, even as economic growth slows, said Upendra Datta Choubey, chairman of gas distribution monopoly GAIL India Ltd.

The emergence of India in the spot LNG market may prop up prices that fell 70 percent from last year’s peak, while diverting tankers from the U.S. and Europe. India is importing at least nine so-called spot cargoes outside of long- term contracts in March and April, compared with two from November to February, AIS Live ship-tracking data compiled by Bloomberg show.

“This recession has no effect on demand of natural gas in India,” Choubey said by telephone from New Delhi. “Currently we’re meeting hardly 60 percent of gas demand in India.”

New Delhi-based Petronet LNG Ltd., Royal Dutch Shell Plc, Total SA and GAIL-led Ratnagiri Gas are doubling the country’s import capacity this year at three facilities on India’s west coast, anticipating higher demand for LNG as prices fall.

“India may be the only serious buyer for spot LNG in Asia,” said Tony Regan, a Singapore-based independent consultant who worked for Shell and was involved in spot LNG trades. “Cargoes are turning back from Northeast Asia.”

LNG Trade

Global LNG trading probably declined in 2008 for the first time in three decades, slipping 0.3 percent to about 172 million metric tons, based on preliminary numbers from Alexis Aik, a consultant with Facts Global Energy.

Asia’s demand for LNG, or gas chilled to a liquid for transportation by tanker, may drop by as much as 10 percent this year, Poten & Partners said in March.

Spot LNG sells for $4.60 per million British thermal units, a 47 percent discount to crude oil, JPMorgan Chase & Co. said in a note on April 3. LNG sold for a premium to oil in 2008.

Utilities in Asia paid more than $20 per million Btu last year for spot cargoes, according to official data from Japan, South Korea and Taiwan.

“We should expect a fall in LNG prices to around $6 or so,” GAIL India’s Choubey said. The level is about 70 percent below the record reached last year.

Asian LNG buyers typically pay a few dollars more than gas costs at the U.K.’s benchmark National Balancing Point to attract spot cargoes from Europe and the Americas, according to Andy Flower, an independent consultant and a former BP Plc employee. U.K. natural gas for immediate delivery sold yesterday for $3.68 per million Btu.

China Imports

China, the world’s second-largest energy user, has increased imports of the cleaner-burning fuel to reduce coal consumption and pollution.

China bought three spot cargoes in April after a seven- month halt. Japan, the world’s biggest LNG buyer, reduced spot imports 50 percent in February after the recession lowered electricity demand from manufacturers.

Reliance Industries Ltd. started pumping gas from the Krishna Godavari area off India’s east coast on April 2 and plans to increase production to 80 million cubic meters a day, almost double current output, Indian Oil Secretary R.S. Pandey said.

Reliance’s gas may cost $6.50 per million Btu, cheaper than the $7 per million Btu charged for LNG from Petronet and Shell, said an official from one of India’s biggest fertilizer makers, declining to be identified because prices are confidential. Naphtha, a competing oil-based energy source, costs about $10.50 in Gujarat, India’s most industrialized state, he said.

2010 ‘Worse’

“Next year will be worse for spot LNG because Reliance’s output is expected to rise from 15 million cubic meters a day to 80 million,” said Ballabh Modani, a Mumbai-based analyst at Enam Securities Ltd. “So most of India’s demand will be covered.”

India’s gap between gas demand and production is equal to about half of consumption in South Korea, the world’s second- largest LNG buyer. South Korea’s LNG purchases fell 14 percent in March, according to the Korea International Trade Association.

Japan’s LNG imports dropped 9.5 percent in February, with spot LNG purchases from the Americas and Europe falling more than 50 percent, according to data from the Ministry of Finance. Tokyo Electric Power Co., the world’s biggest LNG buyer, said in March it may cut imports this year by about 9 percent.

Shipments to Spain, the dominant LNG importer in the Americas and Europe, may decline because of a deteriorating economy and plans to start up a second gas pipeline from Algeria, PanEurasian Enterprises Inc., a Raleigh, North Carolina-based consultant, said in a report.

To contact the reporters on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net; Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.

Australian Dollar May Rise 17% Versus Yen, St. George Bank Says

By Ron Harui

April 22 (Bloomberg) -- The Australian dollar may rise 17 percent against the yen by the end of this year on signs of “improved risk appetite” and a “sharply weaker” Japanese economy, according to St. George Bank Ltd.

Australia’s currency is also likely to strengthen versus the yen because of a “tapering-off” of Japanese fiscal year- end repatriation flows, Sydney-based economists Besa Deda and Amanda Tan wrote in a research note yesterday. St. George Bank forecasts the Aussie, as the currency is known, will climb to 81.60 yen by December.

“The Australian dollar has benefited from the recent general improvement in risk aversion and appreciated against most currencies as a result,” the economists wrote. “Further, the focus has shifted to the sharp deterioration in Japanese economic fundamentals.”

Australia’s dollar traded at 69.67 yen at 9:55 a.m. in Sydney from 70.24 yen in New York yesterday. The currency touched 73.49 yen on April 14, the highest level since Oct. 14.

The Aussie strengthened 9.4 percent this year against the yen as the VIX volatility index, a barometer of risk aversion, fell from its October high of 89.53 to 37.14 yesterday. The index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes, reached 33.68 on April 17, the lowest since Sept. 26.

“The trends in risk appetites reflect the market view for the global growth outlook,” the economists wrote. “The consensus view is that the global economy could start to recover toward the end of this year or early next year.”

Signs Recession Deepening

The yen also may weaken on increasing signs of a deepening recession in the Japanese economy, according to St. George Bank.

Japan’s overseas shipments slumped 45.6 percent from a year earlier, compared with February’s unprecedented 49.4 percent plunge, the Finance Ministry said today in Tokyo. The government cut its evaluation of business sentiment after the Bank of Japan’s Tankan survey showed this month that confidence at large manufacturers declined to a record low in March.

“Over August 2008 to February 2009, the Japanese trade balance was in the red,” the economists wrote. “Corporate sentiment in Japan touched record lows in the first quarter. These developments have weighed heavily on the yen.”

The Australian dollar will likely appreciate to 71.40 yen by the end of this quarter and to 75.90 yen by the end of September, according to St. George Bank.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net

Korean Won Gains as Geithner Comments Bolster Risk Appetite

By Bob Chen

April 22 (Bloomberg) -- South Korea’s won rose for the first time in three days after Treasury Secretary Timothy Geithner said the “vast majority” of U.S. banks have enough capital, helping revive a global stocks rally and bolster demand for emerging-market assets.

Overseas investors yesterday turned net sellers of Korean shares, contributing to a drop in the won, after Bank of America Corp. set aside more money for bad loans. South Korea’s stock and currency markets are “stable” and the economy is showing both positive and negative signs, Vice Finance Minister Hur Kyung Wook said today.

“The Korea won is a touch stronger on the back of better equities in the U.S.,” said Dwyfor Evans, a Hong Kong-based strategist at State Street Global Markets. “We’ve had five weeks of very strong equity performance that’s driven the emerging-market currencies stronger, but that’s been more hit- and-miss in the last few days.”

The won climbed 0.4 percent to 1,343.70 per dollar as of 10:05 a.m. in Seoul, according to data compiled by Bloomberg. The currency has strengthened in each of the last six weeks and touched a three-month high of 1,298.05 on April 10.

The Kospi stock index climbed 0.7 percent, headed for its highest close since October. The Standard & Poor’s 500 Index of U.S. shares climbed 2.1 percent yesterday, its biggest gain in more than a week.

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

Crude Oil Climbs as Stock Market Advances, Dollar Weakens

By Mark Shenk and Samantha Zee

April 22 (Bloomberg) -- Crude oil climbed for a second day, following gains in U.S. stocks, after Treasury Secretary Timothy Geithner said the “vast majority” of the nation’s banks have more capital than needed.

Crude futures rose as financial shares led U.S. equities higher. Energy prices also increased as the euro climbed against the dollar, bolstering the appeal of commodities as an alternative investment.

“The equity markets are higher and the dollar is giving back some of its recent gains,” Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, said yesterday. “None of this is particularly germane to the oil business, but it’s giving the market a lift.”

Crude oil for June delivery rose as much as 38 cents, or 0.8 percent, to $48.93 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $48.76 at 9:20 a.m. Sydney time.

The May contract, which expired yesterday, was less expensive than the following months, allowing buyers to profit from storing oil. Crude oil for May delivery rose 63 cents to settle at $46.51 a barrel, after earlier plunging as much as 4.5 percent.

“Crude oil is in a rather interesting area right now,” said Stephen Schork, president of Schork Group Inc. of Villanova, Pennsylvania. Yesterday’s contract expiration was behind “a lot of the volatility we’re seeing,” he said.

Stocks Gain

The Standard & Poor’s 500 Index rose 2.1 percent to 850.08 yesterday after dropping as much as 0.7 percent earlier. The Dow Jones Industrial Average increased 1.6 percent to 7,969.56.

An Energy Department report today will probably show U.S. crude oil supplies climbed 2.5 million barrels last week, according to the median of 15 responses in a Bloomberg News survey.

Inventories rose 5.67 million barrels to 366.7 million in the week ended April 10, the highest since 1990 and 13 percent greater than the five-year average for the period.

“We’ve been stuck between the mid-$50s and the mid- $40s,” Schork said. “Prices may move to the low $40s” if stockpiles rise and markets react, he said.

The department’s inventory report is due at 10:30 a.m. New York time today.

API Report

The industry-funded American Petroleum Institute reported after floor trading ended yesterday that oil supplies fell for the first time since the week ended March 6. Stockpiles declined 1.01 million barrels to 370.2 million last week, API said. The report was released at 4:30 p.m. in Washington.

“Not much of a draw, but it breaks the seemingly relentless pattern of crude stock builds experienced since early March,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington.

API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The Energy Department requires reports to be filed for its weekly supply survey.

Gasoline stockpiles probably dropped 700,000 barrels from 216.5 million the prior week, according to the Bloomberg survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell 1 million barrels from 139.6 million.

Production Cuts

Iran, the second-largest producer among the Organization of Petroleum Exporting Countries, may back further output cuts when the group meets May 28, the country’s OPEC governor, Mohammad Ali Khatibi, said yesterday, according to a report by the Islamic Republic News Agency.

The current oil price near $50 a barrel is “appropriate in the current global economic climate,” Khatibi said. In the longer term, Iran wants prices around $75 to $80 to support the country’s investment in its oil and gas industry.

OPEC agreed at three meetings last year that the 11 members with quotas would cut output by 4.2 million barrels a day to 24.845 million. The members with production targets, all except Iraq, pumped 25.567 million barrels a day in March, according to a monthly report the organization released April 15.

“OPEC has probably reached a point where they can’t afford to make further cuts,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York. “Given the lack of cooperation, they will probably sit back and hope that the lower oil prices will act as a stimulus and bolster demand.”

Petroleos Mexicanos, the state-owned oil company, said output fell 6.6 percent to 2.65 million barrels a day in March compared with a year earlier. Mexico was the second- biggest source of U.S. crude oil imports during the first two months of the year, according to the U.S. Energy Department.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Samantha Zee in San Francisco at szee@bloomberg.net.

Incitec Says Fazzino to Act as CEO After Segal Quits

By Madelene Pearson

April 22 (Bloomberg) -- Incitec Pivot Ltd., Australia’s largest fertilizer maker, named James Fazzino as acting chief executive officer after Julian Segal resigned and took a position with Caltex Australia Ltd. Incitec’s shares declined.

Segal quit for “family reasons,” the Melbourne-based company said today in a statement to the Australian stock exchange. Chief Financial Officer Fazzino, 42, joined the company in May 2003 and previously worked for Orica Ltd., according to Incitec’s annual shareholders’ report.

Segal, 54, will become chief executive officer and managing director at Sydney-based Caltex Australia, Caltex said today in a separate statement.

“Julian, together with James, has led a talented and dedicated management team,” Incitec Chairman John Watson said in the statement. “This has transformed Incitec Pivot from an Australian fertilizer business to a leading international chemicals company.”

Incitec, which has slumped 72 percent over the past year, declined as much as 8.9 percent to A$2.06, and traded at A$2.13 at 10:11 a.m. in Sydney. The benchmark S&P/ASX 200 Index gained 0.3 percent.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

China Life, Greentown, Hopson, HSBC: Hong Kong Equity Preview

By Hanny Wan

April 22 (Bloomberg) -- The following companies may have unusual price changes in Hong Kong trading. Stock symbols are in parentheses, and share prices are as of the last close.

The Hang Seng Index slipped 3 percent to 15,285.89. The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese companies, slid 2.1 percent to 9,039.09.

Insurers: China’s insurance regulator plans to start a trial program that would let insurers invest in property, securities backed by pools of loans and real-estate investment trusts, it said yesterday.

China Life Insurance Co. (2628 HK), the nation’s biggest insurer, dropped 1.6 percent to HK$27.75. Ping An Insurance (Group) Co. (2318 HK), the second largest, fell 2.8 percent to HK$51.25.

Greentown China Holdings Ltd. (3900 HK): The largest builder in the country’s Zhejiang province is seeking to repurchase all $400 million of 9 percent senior notes due in 2013 at 85 cents on the dollar. It will fund the purchase from “internal resources,” it said yesterday. The stock slid 5.9 percent to HK$4.47 before being suspended yesterday. Trading resumes today.

Hopson Development Holdings Ltd. (754 HK): The Hong Kong- based developer of real estate in China was raised to “outperform” from “neutral” at Credit Suisse Group, which cited the company’s “high earnings visibility” in 2009. The stock climbed 1.1 percent to HK$6.23.

HSBC Holdings Plc (5 HK): Europe’s largest bank said yesterday it eliminated 100 positions at its private-banking department in Hong Kong, which employed 1,200 people.

Separately, the bank may reduce its 48.9 percent stake in British Arab Commercial Bank Ltd. after talks with other shareholders. British Arab’s shareholders and regulators would need to approve any change in the ownership structure, HSBC said yesterday. The stock fell 5.1 percent to HK$52.15.

Huaneng Power International Inc. (902 HK): China’s largest electricity generator said first-quarter profit more than doubled to 549.9 million yuan ($80.5 million) on higher power prices. The stock slid 1.7 percent to HK$5.18.

Yue Yuen Industrial (Holdings) Ltd. (551 HK): The world’s largest supplier of branded athletic and casual shoes said yesterday it agreed to borrow $500 million to help repay convertible bonds and a loan. The stock fell 1.4 percent to HK$17.20.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net

Japan Machinery Stocks Rise on China Growth Bets; KDDI Declines

By Masaki Kondo

April 22 (Bloomberg) -- Japanese machinery shares rose after Caterpillar Inc. said China’s stimulus plan is boosting demand, while KDDI Corp. led a decline by telecommunications shares.

Komatsu Ltd., which counts China as its fastest growing market, jumped 2.5 percent, while closest rival Hitachi Construction Machinery Co. added 1.4 percent. Elpida Memory Inc., Japan’s top maker of computer-memory chips, surged 16 percent after saying it plans to raise prices. KDDI, Japan’s No. 2 mobile-phone carrier, dropped 3.9 percent after Deutsche Bank AG said the company’s growth is slowing.

“Investors’ appetite for stocks has somewhat recovered,” Hiroichi Nishi, general manager at Nikko Cordial Securities Co., said in an interview with Bloomberg Television. “We’d like to see more positive news to bring investors back.”

The Nikkei 225 Stock Average climbed 37.75, or 0.4 percent, to 8,749.08 as of 9:47 a.m. in Tokyo. The broader Topix index rose 3.91, or 0.5 percent, to 834.63, with almost the same number of stocks rising and falling.

Shares climbed as Japan’s exports fell at a slower pace in March, ending a four-month stretch of record drops. Overseas shipments dropped 45.6 percent from a year earlier, the Ministry of Finance said today before markets opened, compared with February’s unprecedented 49.4 percent tumble.

Komatsu added 2.5 percent to 1,247 yen, while Hitachi Construction advanced 1.4 percent to 1,334 yen. Kubota Corp., Asia’s top tractor maker, climbed 2 percent to 606 yen.

U.S.-based Caterpillar, the world’s biggest maker of construction machinery, posted first-quarter profit of 39 cents a share, surpassing analysts’ average estimate of 5 cents a share. Chief Executive Officer Jim Owens said China’s stimulus spending may benefit the company this year and set the stage for growth in 2010.

Elpida soared 16 percent to 1,264 yen. The company plans to raise prices by as much as 50 percent next month after industry- wide production cuts eased a glut, President Yukio Sakamoto said in an interview yesterday.

KDDI dived 3.9 percent to 446,000 yen, while Nippon Telegraph & Telephone Corp., the nation’s biggest phone provider, sank 2.2 percent to 3,640 yen. Kenji Nishimura, an analyst for Deutsche Bank, yesterday lowered his price estimate on KDDI by 16 percent to 525,000 yen, citing slowing growth.

Nikkei futures expiring in June dipped 0.2 percent to 8,750 in Osaka and added 0.1 percent to 8,750 in Singapore.

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

Tuesday, April 21, 2009

India Cuts Rates Unexpectedly While Japan Initiates New Bonds Sale

Daily Forex Fundamentals | Written by ecPulse.com | Apr 21 09 09:28 GMT |

Opposing all market expectations, the Reserve Bank of India shocked markets after cutting rates for the sixth consecutive time taking the reverse repurchase rates down to a record low of 3.25 percent from 3.5 percent in an attempt to stimulate growth in Asia's third largest economy as it is now expected to slow down at the weakest pace since 2003 to reach 6 percent. The repurchase rate was also cut by 25 basis points to 4.75 percent yet the cash reserve ratio was unchanged at 5 percent.

It's a quite difficult time for the economy as they fail to increase spending during a time of elections. The government can't afford to increase spending and has failed to encourage lending at the same time which continues to place downside pressures to growth.

Several sectors are still contracting and facing the impact of the global recession as exports collapsed to a record low in March, marking the longest decline in ten years whereas industrial production had fallen 1.2 percent during February.

According to the Bank governor, the central bank in a statement today said that it will use 'a combination of monetary and debt-management tools' to help the economy as well as provide the financial system with 1.2 trillion rupees in the six months starting April through the purchase of government bonds and market stabilization bonds in an attempt to halt further borrowings from the government that have reached 4.35 trillion rupees so far.

In addition, it seems like he's placing bets that the climate in the nation will be able to help spur consumer demand and pick up growth as rain may result in the boost of farm output.

Elsewhere in the region, Governor Glenn Stevens of the Reserve Bank of Australia said that despite the economy had slid into the first recession in eighteen years, he still believes that the stimulus package created alongside the well developed banking system and China's performance will be sufficient to help the economy rebound and climb out of the slump. Prime Minister Kevin Rudd also said today that he may introduce a new stimulus package by May 12 different from the A$90 billion that has been previously introduced last October.

The economy had contracted 0.5 percent during the last quarter yet many believe the fact that the economy will as a matter of fact rebound after signs of global economic recovery has emerged. Stevens said that in Australia 'public finances remain in very sound shape, with modest debt levels and a medium-term path for the budget back towards balance.'

Finally, the Finance Minister Kaoru Yosano stated earlier today that the government is to sell 10.8 trillion yen worth of new bonds to help support the stimulus package. The 10.8 trillion will be separated to 7.3 trillion yen in construction bonds and 3.5 trillion yen in deficit-covering bonds.

Unfortunately the main problem they face will be their public debt which was already 170 percent of GDP which is expected by the Organization for Economic Cooperation and Development to reach as high as 197 percent in the upcoming year

Asian stock indices reacted negatively today as they retreated on growth concerns and mounting banking losses. The MSCI Asia pacific index retreated 1.8 percent at 5:21 p.m. to reach 88.37 points whereas the Nikkei 225 stock average slumped 2.4 percent, Hang Seng fell 3 percent and the S&P/ASX200 also fell 2.4 percent.

Ecpulse

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Daily FX Report

Daily Forex Technicals | Written by Varengold Bank | Apr 21 09 09:13 GMT |

Good morning from wonderful Hamburg. Unfortunately, it seems that the bad news around the world about the financial crisis could appoint the markets again. However, we wish you a prosperous trading day

Markets review

The GBP fell against the JPY, the USD and the CHF as the index for Bank shares, the FTSE 350 Banks Index, dropped 5.3 %. Yesterday the GBP/JPY declined 3.02 % from 146.76 to 142.32 at its closing. As well the Confederation of British Industry lowered its forecast for the U.K. economy and expects a contract of 3.9 % in 2009. The USD rose versus the EUR near to a five-week high on concerns that the global recession could worsen. So it boosted demand for the USD as a refuge. The EUR/USD traded at 1.2888 at its lowest point from 1.3049 at its opening. Since the middle of March the EUR traded close to the weakest level against the JPY on speculation the ECB will lower its key interest rate. 'In this environment, the dollar and the yen are likely to be bought as safe-haven currencies' said Yuji Saito, head of the foreignexchange group in Tokyo at Societe Generale SA.

The CAD declined to the lowest level in more than a week as stocks and crude oil tumbled and the Bank of Canada prepared to make a decision on interest rates and issue a report on monetary policy today. The EUR/CAD rose 1.14 % from 1.5828 at its opening to 1.6009 at its closing.

Technical analysis

GBP/CHF

Since the beginning of April, the currency pair has been trading in a bullish trend-channel and climbed over the 1.7200 level. Yesterday the GBP/CHF crossed within two 120- minutes candlesticks its trend-channel and lost this support. It seems that the currency pair would test its next support at 1.6930 but a lot of dojis at least could be a sign for a new trend-reversal.

USD/CAD

The USD/CAD traded within the first half of April in a bearish trend-channel and fell at the inflection point under the 1.2000 level. After touching a year low, the currency pair started a strong bullish movement and left the trendchannel, crossed its resistance at 1.2308 again and tested the 1.2400 barrier. Though the RSI shows a strong overbought market and demonstrate the risk on the downside.

Pivot Points - Daily FX Support and Resistance Levels

Daily Calendar & Key FX Events

Varengold Bank

IMPORTANT NOTIFICATION TO BE READ IN CONJUNCTION WITH THE CONTENTS OF THIS DOCUMENT

This document is issued and approved by Varengold WPH Bank AG. The document is only intended for market counterparties and intermediate customers who are expected to make their own investment decisions without undue reliance on the information set out within the document. It may not be reproduced or further distributed, in whole or in part, for any purpose. Due to international laws/regulations not all financial instruments/services may be available to all clients. You should have informed yourself about and observe any such restrictions when considering a potential investment decision. This electronic communication and its contents are intended for the recipient only and may contain confidential, non public and/or privileged information. If you have received this electronic communication in error, please advise the sender immediately, and delete it from your system (if permitted by law). Varengold does not warrant the accuracy, completeness or correctness of any information herein or the appropriateness of any transaction. Nothing herein shall be construed as a recommendation or solicitation to purchase or sell any financial product. This communication is for informational urposes only. Any market or other views expressed herein are those of the sender only as of the date indicated and not of Varengold. Varengold reserves the right to consider any order sent electronically as not received unless it is confirmed verbally or through other means.

Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Apr 21 09 08:17 GMT |

EUR/USD

Current level-1.2921

EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated between the 50- and 200-Day SMA, currently projected at 1.2951 and 1.3834.

The pair reached our first target at 1.2942 and after brief consolidation we will expect continuation of the downtrend, towards 1.2738 and 1.2578. First resistance on the upside is 1.3092, followed by the crucial 1.3383

Resistance		Support
intraday	intraweek	intraday	intraweek
1.3092	1.3582	1.2867	1.2576
1.3390	1.3740	1.2738	1.2328

USD/JPY

Current level - 98.11

A short-term bottom has been set at 87.12 and a large consolidation is unfolding since. Trading is situated between the 50- and 200-day SMA, currently projected at 94.12 and 99.36.

The downtrend is intact with nearest resistance at 98.52, followed by the crucial 99.75. Further drowning is to be expected, towards 95.83 and 93.58

Resistance		Support
intraday	intraweek	intraday	intraweek
98.52	102.16	97.76	93.38
99.75	103.55	96.01	89.82

GBP/USD

Current level- 1.4518

The pair is in a corrective phase, after bottoming at 1.3506. Trading is situated between the 50- and 200-day SMA, currently projected at 1.4259 and 1.6470.

As expected, the downtrend from 1.5065 broke through 1.4583 support and is aiming at 1.4111 and 1.38+. Current consolidation is expected to be limited below 1.4583-4603.

Resistance		Support
intraday	intraweek	intraday	intraweek
1.4582	1.5065	1.4467	1.4107
1.4735	1.5727	1.4582	1.30+

DeltaStock Inc. - Online Forex & Securities Broker
www.deltastock.com

RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

US Equities Plunge, USD Bounces

by Korman Tam

The dollar and the yen strengthened against the majors at the start of the week on the heels of risk-averse buying. A steep sell-off in the European and US equity bourses prompted heavy demand in the safe-haven currencies, which dragged the euro lower beneath the 1.29-level versus the dollar toward the 126-region against the yen.

The major US equity indexes were all lower by over 3% in the afternoon session, with the S&P 500 plunging by 3.77%, the Nasdaq down by 3.53% and the Dow Jones lower by 3.1%. Given the sharp run-up in US equities over the recent weeks, traders took profits despite a strong earnings report from Bank of America – which posted a $4.2 billion first quarter profit and tripling from the previous quarter. The catalyst for renewed fears in the financial sector were revelations that BofA needed to bolster its reserves amid burgeoning losses stemming from commercial real estate, consumer and credit card debt.

The economic calendar in the week ahead consists of February home prices, weekly jobless claims, March home sales, durable goods and new home sales. The major FX moves will again take direction from the equity market, with key earnings reports due out from IBM, Bank of New York, Coca-Cola, Yahoo, Apple, Microsoft and PepsiCo.
Euro Tumbles to One-Month Low

The euro slumped to its lowest level since March 17th against the dollar beneath the 1.29-level to 1.2890. With the ECB still seemingly split as to whether further monetary stimulus is warranted given the current economic outlook of the Eurozone, traders continue to punish the euro. Economic reports in the coming session will see Germany’s April ZEW sentiment survey, due out at 5:00 AM. Consensus estimates call for the current conditions component to deteriorate to -90.0 from -89.4. Meanwhile, the April economic sentiment is seen improving to 1.5 from -3.5 a month earlier.

EURUSD will encounter support at 1.29-figure, followed by 1.2870 and 1.2840. Subsequent floors are eyed at 1.28, backed by 1.2760 and 1.2720. On the upside, gains will target interim resistance at 1.2930, followed by 1.2970 and 1.30. Additional resistance will emerge at 1.3035, backed by 1.3065 and 1.31.

Read more...

Australian, N.Z. Dollars Near 3-Week Lows on U.S. Bank Concerns

By Patricia Lui and Garfield Reynolds

April 21 (Bloomberg) -- The Australian dollar traded near its lowest in almost three weeks and New Zealand’s was close to the weakest in a month as concern U.S. banking losses will deepen damped investors’ appetite for risk.

The currencies fell yesterday by the most in more than two months as Bank of America Corp. tumbled after increasing future loan loss provisions 57 percent to $13.4 billion. Australian policy makers cut borrowing costs two weeks ago because rising unemployment increased the likelihood inflation will slow, according to minutes of their April 7 meeting, released in Sydney today.

“The big concern is that the market got overly complacent on risk in recent weeks and we are now moving into a period where we are questioning this,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “The recent weeks are about as good as it gets between risk appetite and economic data sentiment.”

Australia’s dollar traded at 69.94 U.S. cents as of 11:44 a.m. in Sydney, from 69.66 cents yesterday in New York, when it touched the lowest since April 1. It was at 68.60 yen from 68.20 yen. New Zealand’s currency bought 55.22 U.S. cents from 55.25 cents yesterday, when it reached as low as 54.88 cents, the weakest since March 19. It bought 54.18 yen from 54.06 yen.

U.S. stocks tumbled yesterday after six straight weeks of gains as concern grew that credit losses are worsening while lower commodity prices dragged down energy and material prices, key exports of Australia and New Zealand.

U.S. Banks

Bank of America, the lender that lost three-quarters of its market value in the past year, plunged 24 percent as rising charge-offs for uncollectible loans overshadowed better-than- estimated earnings. Citigroup Inc. dropped 19 percent after Goldman Sachs Group Inc. said the bank’s credit losses are growing at a “rapid rate.” U.S. Steel Corp. and Exxon Mobil Corp. declined as oil and industrial metal prices decreased.

“A bit of reality seems to have sunk in overnight, following Bank of America’s earnings results,” wrote analysts led by Cameron Bagrie, chief economist at ANZ National Bank Ltd. in Wellington. “With investors rushing for the exit doors from risky assets, the U.S. dollar and the yen rose strongly.”

The Australian dollar will remain weak in coming sessions and investors should take the opportunity to “sell into strength” if the currency rebounds to 70.20 U.S. cents to 70.50 U.S. cents, Westpac’s Rennie said.

Growth Slowing

Australia’s economic growth is “slowing dramatically,” Treasurer Wayne Swan said in an interview on Australian Broadcasting Corp. radio today. “It’s inevitable there will be a period of negative growth. It’s also important that we underline the strengths in the Australian economy.”

“The effect of recent international and domestic information had been that the near-term outlook for demand and output in Australia was now weaker than expected,” Reserve Bank policy makers said, according to minutes of their April 7 meeting.

Prime Minister Kevin Rudd said yesterday for the first time that a recession in Australia is inevitable amid a slump in global growth that is eroding demand for natural resources from the world’s biggest shipper of coal and iron ore. Central bank Governor Glenn Stevens and his board cut the benchmark rate by a quarter-point to a 49-year low of 3 percent this month, the sixth reduction since September.

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net Garfield Reynolds in Sydney at greynolds1@bloomberg.net

Emerging Market Government Credit ‘Markedly’ Worse, S&P Says

By Kim Kyoungwha

April 21 (Bloomberg) -- Emerging-market governments’ credit quality “markedly” deteriorated in the past six months and policy responses will be key to avoid ratings downgrades, Standard & Poor’s Ratings Services said.

The agency lowered 10 of 43 sovereign ratings among such debt issuers, including one default, and another 10 had their outlooks cut to negative in the six months ended March 31, S&P said in a report yesterday in New York. Eighteen emerging markets are on negative outlook and none have positive outlooks, according to the statement.

“That said, we think that the credit fundamentals of this asset class remain broadly intact,” said John B. Chambers, chairman of the Sovereign Ratings Committee. “For those sovereigns with negative outlooks, policy responses will be key, with any lowering of ratings likely to be modest in scope, as has been the case historically.”

Emerging-market currencies including South Korea’s won, the Russian ruble and Brazil’s real weakened in the past year, increasing the cost of servicing overseas debt, as fallout from the global credit crunch rippled through their export-dependent economies. Governments worldwide lowered borrowing costs at an unprecedented pace, increased public spending and reduced taxes to shore up growth in their economies.

China, Brazil, Chile, Czech Republic, Peru, Poland, Slovak Republic, and Tunisia -- which are investment-grade sovereigns with a stable outlook -- should weather the current global recession, the ratings agency said.

Those ratings are backed by policy makers’ efforts in building up international reserves, reducing government debt burdens, improving economic competitiveness, keeping inflation low and bolstering the solvency of financial systems, S&P said.

The extra yield investors demand to own developing-nation debt instead of U.S. Treasuries was 5.69 percentage points yesterday, according to JPMorgan Chase & Co.’s EMBI+ Index. The spread averaged 6.70 points in the past six months and peaked in 2008 at 8.65 points on Oct. 24.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.

Yen Declines on Speculation This Week’s Gains Were Excessive

By Ron Harui

April 21 (Bloomberg) -- The yen weakened against the euro and fell against the dollar as technical indicators showed the Japanese currency’s recent gains were excessive.

The yen pared the past week’s advance versus the 16-nation euro to 3.2 percent as the European currency’s 14-day stochastic oscillator against Japan’s dropped to 8 today, below the 20 level that signals the euro may have fallen too quickly and is poised to strengthen.

“There’s a sense the yen has been overbought,” said Toshihiko Sakai, head of trading for foreign exchange and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest bank. “Market participants are probably unwinding long yen positions.” A long position is a bet an asset will gain.

The yen dropped to 126.94 per euro as of 10:25 a.m. in Tokyo from 126.48 in New York yesterday. It earlier reached 126.09, the strongest level since March 16. Japan’s currency declined to 98.18 per dollar from 97.89.

The dollar traded at $1.2929 per euro from $1.2921 yesterday, when it reached $1.2889, the highest level since March 16. The U.S. currency was at $1.4532 versus the British pound from $1.4539.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.

Japan Yen, Indian Rupee, Thailand Baht: Asian Currency Preview

By Bob Chen

April 21 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today. Exchange rates are from the previous session.

Japanese yen: Chief Cabinet Secretary Takeo Kawamura and Finance, Economic and Fiscal Policy Minister Kaoru Yosano will hold media briefings after a cabinet meeting in the morning. Kawamura will address reporters again at 4 p.m. in Tokyo.

The yen was at 97.99 against the dollar at 7 a.m. in Tokyo.

Indian rupee: The central bank may refrain today from reducing its benchmark interest rate from a record low of 3.5 percent, according to nine of 15 economists in a Bloomberg News survey. It will reduce the repurchase rate, its overnight lending rate, by half a percentage point to 4.5 percent, nine of 16 economists said in a separate survey. The decisions are due at noon in Mumbai.

The rupee was at 50.325.

Thai baht: The Ministry of Commerce will report March exports, imports and trade balance at 2 p.m. local time. Exports fell 11 percent in February, while imports plunged 40 percent.

The baht was at 35.60.

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

South Korean Won Drops by Most in Two Weeks on Credit Loss Woes

By Kim Kyoungwha

April 21 (Bloomberg) -- South Korea’s won dropped the most in almost two weeks as widening credit losses in the U.S. damped risk appetite, curbing demand for emerging-market assets.

The currency weakened for a second day, following a run of six straight weekly gains, after Bank of America Corp. set aside more money for bad loans and Goldman Sachs Group Inc. said Citigroup Inc.’s credit losses are growing at a “rapid rate.” Korean shares retreated after a 4.3 percent plunge in the Standard & Poor’s 500 Index, the steepest slide in seven weeks.

“A drop in U.S. stocks is buoying the flight-to-quality sentiment again,” said James Lee, an economist with JPMorgan Chase & Co. in Seoul. “And a consolidation in the won after a recent rally was overdue as people turned a bit cautious about chasing the currency further.”

The won fell 1.3 percent to 1,352.13 per dollar as of 9:52 a.m. in Seoul, according to data compiled by Bloomberg. The currency has lost 6.9 percent this year, the biggest drop among Asia’s 10 most-traded currencies outside of Japan. The Kospi index of local equities slid 1.5 percent today.

Emerging-market governments’ credit quality “markedly” deteriorated in the past six months and policy responses will be key to avoid ratings downgrades, Standard & Poor’s Ratings Services said yesterday in New York.

The International Monetary Fund will cut its forecast for Korea’s economic growth next year to about 1.5 percent, the Chosun Ilbo newspaper reported. The estimate, which will be announced in the IMF’s World Economic Outlook report tomorrow, is lower than the fund’s previous projection of 4.2 percent growth, the newspaper reported, without saying where it obtained the information.

The Bank of Korea this month forecast the economy will expand 3.5 percent in 2010, after shrinking 2.4 percent in 2009.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;

Copper Futures in Shanghai Slump 5% Limit to 37,370 Yuan a Ton

By Glenys Sim

April 21 (Bloomberg) -- Copper futures slumped by the exchange-imposed 5 percent daily limit in Shanghai, tracking an overnight decline in London, as the economic outlook in the U.S., the world’s second-largest consumer of the metal, dimmed.

Copper for July delivery on the Shanghai Futures Exchange tumbled 1,970 yuan from the previous settlement price to 37,370 yuan ($5,469) a metric ton.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net

Want Want China Prices Taiwan Stock at Top of Range

By Weiyi Lim

April 21 (Bloomberg) -- Want Want China Holdings Ltd., the country’s largest maker of rice cakes, raised NT$3.26 billion ($96.43 million) after selling depositary receipts in Taiwan at the top of the price range.

The company, controlled by Taiwanese billionaire Tsai Eng- meng, sold 210 million Taiwan Depositary Receipts at NT$15.50 each, the company said in a filing to Hong Kong’s stock exchange today. They had been offered at between NT$12.50 and NT$15.50 each, underwriter Grand Cathay Securities Corp. said in a statement April 13. The shares will start trading on April 28.

The Shanghai-based company is the first from the mainland to sell shares on the island’s exchange after Taiwan eased restrictions to boost the capital markets. Taiwan’s regulator in July said it will scrap the rule barring share sales by companies with major stakeholders from China.

Want Want withdrew from its Singapore listing in September 2007 and raised HK$8.15 billion ($1.1 billion) on the Hong Kong exchange in March 2008.

To contact the reporter on this story: Weiyi Lim in Taipei at wlim26@bloomberg.net

Japanese Stocks Slump on Bank Loss Concern, Oil; Sony Declines

By Masaki Kondo

April 21 (Bloomberg) -- Japanese stocks slumped the most this month after an increase in reserves at Bank of America Corp. renewed concern credit losses will swell at lenders.

Sumitomo Mitsui Financial Group Inc., Japan’s No. 3 listed bank, fell 2.8 percent after Bank of America’s results sparked the biggest drop in U.S. stocks in seven weeks. Sony Corp., which gets a quarter of its sales from the U.S., retreated 5.8 percent as Nikko Citigroup Ltd. cut its rating on the company to “hold,” and after the yen strengthened. Mitsui & Co., a trading house that gets more than half its profit from commodities, lost 5.7 percent after oil and metals prices fell.

The Nikkei 225 Stock Average declined 263.93, or 3 percent, to 8,660.82 as of 9:39 a.m. in Tokyo, set for the sharpest drop since March 30. The broader Topix index fell 22.41, or 2.6 percent, to 825.89.

“People have focused too much on the bright side of news coming out, and it’s high time to correct this excess optimism,” Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion, said in an interview with Bloomberg Television.

In New York, the Standard & Poor’s 500 Index slid 4.3 percent, the most since March 2, led by financial companies, after Bank of America said it increased reserves for future loan losses by 57 percent since the end of December.

Sumitomo Mitsui dived 2.8 percent to 2,945 yen, and market leader Mitsubishi UFJ Financial Group Inc. lost 2.6 percent to 483 yen. Orix Corp., the nation’s largest non-bank financial company, slid 5.7 percent to 4,480 yen after Nomura Holdings Inc. lowered its rating on the stock to “neutral” from “buy.”

‘Ambiguous Hope’

The Nikkei has risen by more than a quarter from a 26-year low on March 10 amid speculation the worst of the global recession has passed. The gauge’s members yesterday traded at 220 times their estimated net income for this fiscal year, according to index compiler Nikkei Inc., the highest level since January 2002.

“There is little chance to win if investors bet on ambiguous hope the economy will recover,” Norihiro Fujito, senior investment strategist at Tokyo-based Mitsubishi UFJ Securities Co., wrote in a Japanese-language report yesterday. “It’s hard to ignore that shares have become more expensive from a valuation standpoint.”

Prospects for more bank losses spurred demand for the yen as an investment haven. The Japanese currency touched 97.66, a level not seen since March 31, compared with 98.89 at the close of stock trading in Tokyo yesterday. A stronger local currency diminishes the value of overseas sales for Japanese companies.

Sony, Nissan

Sony, the world’s second-biggest maker of consumer electronics, declined 5.8 percent to 2,500 yen as Nikko Citigroup reduced Sony from “buy,” saying an earnings recovery will take time. Canon Inc., which gets a third of its sales from the Americas, slid 5.2 percent to 2,930 yen. Nissan Motor Co., Japan’s No. 3 automaker, dropped 4.2 percent to 480 yen.

Mitsui, Japan’s second-biggest trading house by market value, dived 5.7 percent to 1,124 yen. Bigger competitor Mitsubishi Corp. slid 5.6 percent to 1,586 yen, while Itochu Corp. fell 5.2 percent to 549 yen.

Crude oil for May delivery dived 8.8 percent to $45.88 a barrel in New York yesterday, the lowest settlement since March 11. Copper futures for July delivery slid 4.2 percent, the sharpest plunge since Feb. 17. Oil and copper extended declines today.

Mitsubishi may have a 100 billion-yen ($1.02 billion) drop in net income for the year to March 2010 because of falling prices for coking coal, the Nikkei newspaper said today. Mitsui and Itochu may also see lower coal prices hurt their profits by 10 billion yen to 30 billion yen, Nikkei said.

Nikkei futures expiring in June retreated 3 percent to 8,660 in Osaka and slumped 3.1 percent to 8,660 in Singapore.

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

Asian Stocks Slump on Growth Concerns; Orix, BHP Billiton Fall

By Patrick Rial and Shani Raja

April 21 (Bloomberg) -- Asian stocks slumped, led by financial and mining companies, as higher loan-loss reserves at Bank of America Corp. and a drop in commodity prices derailed optimism the global economy is recovering.

Orix Corp., Japan’s largest non-bank financial company, slid 6.1 percent after Nomura Holdings Inc. downgraded the shares. BHP Billiton Ltd., the world’s largest mining company, lost 3.6 percent after oil and metals prices sank. Mitsubishi Corp., Japan’s No. 1 trading company, dropped 5.2 percent after the Nikkei newspaper said falling coal prices will erode profits.

“You’re seeing cold water being poured on the theme of a sharp rebound in growth,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. “Last night’s data, along with indications that the rapid run we’ve experienced in the last six weeks may be coming to an end, has fed on itself.”

The MSCI Asia Pacific Index lost 1.9 percent to 88.34 as of 9:52 a.m. in Tokyo, retreating from a more than three-month high. A 27 percent rally through yesterday from a five-year low reached on March 9 had lifted the valuation of companies on the gauge to the highest since November 2007.

Japan’s Nikkei 225 Stock Average tumbled 2.5 percent to 8,701.29, while Australia’s S&P/ASX 200 Index slumped 2.7 percent. All markets open for trading declined.

Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge slid 4.3 percent yesterday, the most since March 2, led by financial companies, after Bank of America said it increased reserves for future loan losses by 57 percent since the end of December.

Yen, Commodities

Prospects for more bank losses spurred demand for the yen as an investment haven. The Japanese currency touched 97.66, a level not seen since March 31, compared with 98.89 at the 3 p.m. close of stock trading in Tokyo yesterday.

Speculation the worst of the global recession has passed drove valuations on the MSCI Asia Pacific Index to 19 times reported profit yesterday, the highest since Nov. 2, 2007. The 14-day relative strength index for the gauge rose to 67.7 yesterday, nearing the 70 threshold that some traders see as a sign to sell.

Financial companies accounted for 26 percent of the MSCI Asia Pacific Index’s decline today. Orix, whose shares have more than doubled in the past month, retreated 6.1 percent to 4,460 yen. Westpac Banking Corp., Australia’s third-largest bank, dropped 3.2 percent to A$19.61.

BHP sank 3.6 percent to A$31.71. Crude oil for May delivery dived 8.8 percent to $45.88 a barrel in New York yesterday, the lowest settlement since March 11. Copper futures for July delivery slid 4.2 percent, the sharpest plunge since Feb. 17.

Mitsubishi Corp., which owns a coal-mining venture with BHP, slumped 5.2 percent to 1,592 yen. Mitsubishi may have a 100 billion yen ($1.02 billion) drop in net income for the year to March 2010 because of falling prices for coking coal, the Nikkei newspaper reported today.

Rivals Mitsui & Co. and Itochu Corp. may also see lower coal prices hurt their profits by 10 billion yen to 30 billion yen, Nikkei said.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.