By Craig Torres and Dawn Kopecki
Sept. 20 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson is sending a financial-rescue plan worth about $800 billion to Congress as Democrats prepare to turn it into a vehicle to help people with high-cost mortgages stay in their homes.
The Treasury will run the program to take on illiquid mortgage-related debt, with the Federal Reserve consulting on its design, officials said. Treasury aides are spending the weekend with congressional staff to negotiate a compromise that the House and Senate can vote on next week.
Paulson, Fed Chairman Ben S. Bernanke and other regulators are eager to stop a contagion of credit risk that has toppled three financial giants and forced one into a merger as capital flight began to squeeze Wall Street. Democrats are indicating they want to target relief for households by restructuring loans of struggling borrowers.
``We're going to be buying up a lot of mortgage paper,'' said House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat. ``Between Fannie Mae and Freddie now owned by the federal government and the mortgage paper we'll be acquiring here'' and the Federal Deposit Insurance Corp. running failed bank IndyMac Bancorp Inc., ``we should now be able substantially to reduce foreclosures,'' he said.
Frank said the Treasury was due to present the plan to lawmakers late yesterday.
$800 Billion
The program may be worth about $800 billion, split into $50 billion tranches, said four people briefed on drafts of the Treasury's proposal who spoke on condition of anonymity because details haven't been finalized. The funds, which would last for at least two years, will likely accept mortgage-backed securities and collateralized debt obligations, they said.
The Treasury plans to hire asset managers to purchase the assets through so-called reverse auctions, seeking the lowest prices, one of the people said. Congress will need to raise the limit for the federal debt to allow the government to borrow enough to fund the program, the person said.
Republicans warned against turning the bailout into an agenda.
``Congress and the administration must keep this plan as simple and straightforward as possible,'' said John Boehner, the leading Republican in the House. ``Loading it up to score political points or fit a partisan agenda will only delay the economic stability that families, seniors, and small businesses deserve.''
Last Resort
The Treasury is stepping up as the buyer of last resort for mortgage-linked assets that few other financial institutions in the world want to buy. To avoid giving a direct subsidy to Wall Street, officials must structure the fund so taxpayers either get fees, a high rate of interest, or some participation in the full recovery of the assets.
``Illiquid assets are choking off the flow of credit that is so vitally important to our economy,'' Paulson said yesterday at a press conference in Washington. ``As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to have significant effects on our financial system and our economy.''
Senator Richard Shelby, an Alabama Republican who has advocated that markets should be allowed to penalize bad bets, warned that bailout could saddle taxpayers with large debts.
``This could be the biggest bailout in the history of the country and could ultimately cost $500 billion to $1 trillion,'' Shelby, the ranking Republican on the Senate Banking Committee, said in a Bloomberg Television interview yesterday. ``Congress is not going to rubber stamp something.''
Delinquencies Soar
Nearly one-in-10 American mortgages is delinquent or in foreclosure. The government would be buying debt backstopped by the U.S. home values that have been falling in value for eight consecutive quarters, according to the S&P Case-Shiller U.S. Home Price Index.
Senator Christopher Dodd, the Banking Committee chairman, said the plan's framers should consider the full debt load of U.S. consumers, possibly including credit cards.
``We'' have ``got some strong concerns about what's included here,'' said Dodd, a Connecticut Democrat. ``They haven't limited this conversation exclusively to residential mortgages. So I know that other securitized debt is also going to be considered.''
Investors are unlikely to tolerate partisan wrangling and brinksmanship. U.S. stocks surged in the biggest two-day global rally in history as talk of the plan began to circulate Sept. 18.
The House will pass legislation to implement the plan by the end of next week, and the Senate will act soon after, Frank said yesterday in an interview on Bloomberg Television's ``Political Capital with Al Hunt.''
Stimulus Spending
The temporary plan is likely to include a ``second stimulus'' proposal with infrastructure funds, low-income energy aid and Medicaid assistance, Frank said. Congress will begin weighing broad regulation of hedge funds, private-equity firms and investment banks when it reconvenes next year, he said.
Frank, in a separate C-Span interview, said he expects Wall Street executives to give up pay and other perks in exchange for the federal intervention.
Officials devising the plan ``need to make sure that they keep that hard-headed approach so that people are not profiting off this,'' said Martin Baily, who was chairman of the Council of Economic Advisers under Democratic President Bill Clinton.
``To some extent that's unavoidable,'' said Baily, now a senior fellow at the Brookings Institution in Washington. ``Anytime you do something like this you have the problem of bailing people out and creating moral hazard. That's the reason why you hold your nose. But it's better than the alternative.''
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Dawn Kopecki in Washington at dkopecki@bloomberg.net
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Saturday, September 20, 2008
U.K. Small-Scale Wind-Power Turbine Installs May Double in 2008
By Nicholas Larkin
Sept. 20 (Bloomberg) -- U.K. installations of small-scale wind-power turbines may more than double this year as the government aims to meet renewable-energy targets and as consumers face rising electricity costs, an industry group said.
Private turbine installs may reach 7,844, compared with 3,459 in 2007, the British Wind Energy Association said yesterday in a report, using projections from manufacturers. The number of installs last year in Europe's windiest country climbed 80 percent from 2006, it said.
Britain is seeking as much as 35 percent of its electricity from ``green'' sources by 2020, according to the Department for Business, Enterprise and Regulatory Reform. European governments want to increase alternative-energy production to curb greenhouse gas emissions, blamed by scientists for climate change.
The U.K.'s six biggest energy suppliers haves raised household bills twice this year, as wholesale fuel costs reached records. U.K. electricity for the six months ending March 2009 traded at a record 99.10 pounds ($181.77) a megawatt-hour yesterday, according to broker GFI Group Inc.
The increase in installations is being driven by technology improvements and the ``realization that there are huge savings to be made by deploying small turbines,'' the BWEA said in the report, adding that more than 13,000 units may be set up in 2009.
So-called micro-generation is production from units with a capacity of as much as 1.5 kilowatts and small wind systems are those with a capacity of up to 50 kilowatts. The generators can be freestanding or mounted to walls or roofs of buildings.
Renewables Obligation
The U.K. government said in June it's proposing to modify the country's Renewables Obligation, which requires suppliers to sell a rising portion of alternative energy. The obligation increased renewable generation to about 4.4 percent of power supplies in 2006 from 2 percent in 2001. The government may raise or abolish a cap on the mechanism and make payments for longer.
Other measures proposed in June include so-called feed-in tariffs for domestic generators, which provide fixed prices for power produced in homes and small businesses.
As many as 3 million generators using solar or wind energy to produce electricity may be installed by 2020 with government support, consultant Element Energy Ltd. said in June. That would reduce losses during transmission and cut emissions of carbon dioxide. There are fewer than 100,000 in the country so far, it said at the time.
A typical coal-fired power station in the U.K. has a capacity of about 500 megawatts. A megawatt is a thousand kilowatts.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
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Sept. 20 (Bloomberg) -- U.K. installations of small-scale wind-power turbines may more than double this year as the government aims to meet renewable-energy targets and as consumers face rising electricity costs, an industry group said.
Private turbine installs may reach 7,844, compared with 3,459 in 2007, the British Wind Energy Association said yesterday in a report, using projections from manufacturers. The number of installs last year in Europe's windiest country climbed 80 percent from 2006, it said.
Britain is seeking as much as 35 percent of its electricity from ``green'' sources by 2020, according to the Department for Business, Enterprise and Regulatory Reform. European governments want to increase alternative-energy production to curb greenhouse gas emissions, blamed by scientists for climate change.
The U.K.'s six biggest energy suppliers haves raised household bills twice this year, as wholesale fuel costs reached records. U.K. electricity for the six months ending March 2009 traded at a record 99.10 pounds ($181.77) a megawatt-hour yesterday, according to broker GFI Group Inc.
The increase in installations is being driven by technology improvements and the ``realization that there are huge savings to be made by deploying small turbines,'' the BWEA said in the report, adding that more than 13,000 units may be set up in 2009.
So-called micro-generation is production from units with a capacity of as much as 1.5 kilowatts and small wind systems are those with a capacity of up to 50 kilowatts. The generators can be freestanding or mounted to walls or roofs of buildings.
Renewables Obligation
The U.K. government said in June it's proposing to modify the country's Renewables Obligation, which requires suppliers to sell a rising portion of alternative energy. The obligation increased renewable generation to about 4.4 percent of power supplies in 2006 from 2 percent in 2001. The government may raise or abolish a cap on the mechanism and make payments for longer.
Other measures proposed in June include so-called feed-in tariffs for domestic generators, which provide fixed prices for power produced in homes and small businesses.
As many as 3 million generators using solar or wind energy to produce electricity may be installed by 2020 with government support, consultant Element Energy Ltd. said in June. That would reduce losses during transmission and cut emissions of carbon dioxide. There are fewer than 100,000 in the country so far, it said at the time.
A typical coal-fired power station in the U.K. has a capacity of about 500 megawatts. A megawatt is a thousand kilowatts.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
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Aisin to Build Car-Parts Plant in Northern Japan, Nikkei Says
By Stuart Biggs
Sept. 20 (Bloomberg) -- Aisin Seiki Co., a Japanese auto- parts maker affiliated with Toyota Motor Corp., will open an engine components factory in Japan's northeast Tohoku region as early as next year, the Nikkei newspaper reported.
Aisin will spend about 10 billion yen ($93 million) on the factory to supply cast-metal engine parts to Toyota factories in eastern Japan, the Nikkei reported today, without saying where it obtained the information. Toyota will build an auto assembly plant in the region in 2010, the newspaper said.
The Aisin group already has a production base in the Tohoku region for electronic and plastic auto parts, the report said. The newspaper said the new factory will have capacity for ``tens of thousands of tons'' of cast-metal parts.
To contact the reporter on this story: Stuart Biggs in Tokyo at sbiggs3@bloomberg.net.
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Sept. 20 (Bloomberg) -- Aisin Seiki Co., a Japanese auto- parts maker affiliated with Toyota Motor Corp., will open an engine components factory in Japan's northeast Tohoku region as early as next year, the Nikkei newspaper reported.
Aisin will spend about 10 billion yen ($93 million) on the factory to supply cast-metal engine parts to Toyota factories in eastern Japan, the Nikkei reported today, without saying where it obtained the information. Toyota will build an auto assembly plant in the region in 2010, the newspaper said.
The Aisin group already has a production base in the Tohoku region for electronic and plastic auto parts, the report said. The newspaper said the new factory will have capacity for ``tens of thousands of tons'' of cast-metal parts.
To contact the reporter on this story: Stuart Biggs in Tokyo at sbiggs3@bloomberg.net.
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Tokyo Electric Will Consider Halving Planned Rate Increase
By Stuart Biggs
Sept. 20 (Bloomberg) -- Tokyo Electric Power Co. will consider the views of the government before deciding on an increase in rates, it said in a statement to the Tokyo Stock Exchange today.
Asia's biggest utility, also known as Tepco, may limit a rate rise to about half of an earlier planned 12 percent after the government urged power producers to hold down any increase, the Nikkei newspaper reported today.
The Tokyo-based company hasn't yet decided on the increase, it said in the statement, adding that it will consider the views of Economy, Trade and Industry Minister Toshihiro Nikai.
Nikai met with electric company chiefs yesterday to persuade them to reconsider rate increases planned for January in light of the impact of those costs on people's lives, the Nikkei reported.
To contact the reporter on this story: Stuart Biggs in Tokyo at sbiggs3@bloomberg.net.
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Sept. 20 (Bloomberg) -- Tokyo Electric Power Co. will consider the views of the government before deciding on an increase in rates, it said in a statement to the Tokyo Stock Exchange today.
Asia's biggest utility, also known as Tepco, may limit a rate rise to about half of an earlier planned 12 percent after the government urged power producers to hold down any increase, the Nikkei newspaper reported today.
The Tokyo-based company hasn't yet decided on the increase, it said in the statement, adding that it will consider the views of Economy, Trade and Industry Minister Toshihiro Nikai.
Nikai met with electric company chiefs yesterday to persuade them to reconsider rate increases planned for January in light of the impact of those costs on people's lives, the Nikkei reported.
To contact the reporter on this story: Stuart Biggs in Tokyo at sbiggs3@bloomberg.net.
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European Stocks Fall in Week; Record One-day Rally Trims Drop
By Henrietta Rumberger
Sept. 20 (Bloomberg) -- European stocks fell this week, as a slump in commodities shares offset a record one-day rally by the Dow Jones Stoxx 600 Index after central banks and regulators stepped in to shore up financial markets.
The benchmark index was headed for its steepest weekly retreat since July 2002, before financial shares yesterday rallied the most in at least 17 years after the U.S. government moved to cleanse banks of troubled assets and international regulators banned investors from betting the value of banking stocks will fall.
``I can't recall ever seeing a roller-coaster market like this before,'' said Carsten Klude, an investment strategist at M.M. Warburg & Co. in Hamburg, which oversees the equivalent of $25 billion. ``The whole financial system in the U.S. has gotten out of joint this week.''
The Dow Jones Stoxx 600 Index fell 0.8 percent this week even after the 8.3 percent rally yesterday, the biggest since data for the index begins in 1987. The index had slumped 8.4 percent between Sept. 12 and Sept. 18. The U.K.'s FTSE 100 Index posted a record advance yesterday and Russia's RTS Index jumped 22 percent after a two-day suspension and President Dmitry Medvedev's pledge of $20 billion to prop up the market.
UBS AG, the European bank with the highest losses from the subprime crisis, slumped as much as 33 percent between Sept. 15 and Sept. 17 after bank lending seized up in the wake of the U.S. government's takeover of American International Group Inc. The stock recovered to close the week 11 percent lower.
`Market Fragility'
The U.S. Federal Reserve agreed Sept. 16 to an $85 billion bailout of the nation's biggest insurer by assets after private efforts failed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a Fed statement.
The week began with European banking shares dropping as Bank of America Corp., the biggest U.S. consumer bank, agreed Sept. 15 to acquire Merrill Lynch & Co., the world's biggest brokerage firm, for about $50 billion and Lehman Brothers Holdings Inc. filed for bankruptcy Sept. 16 after Barclays Plc and Bank of America abandoned talks to buy the crippled firm.
The Dow Jones Europe Stoxx Banks Index has slumped 30 percent this year as financial firms worldwide reported more than $510 billion in credit-related losses. That was the worst performance among 19 groups in the broader Stoxx 600, which has fallen 24 percent.
Banned
The gauge rallied 17 percent Sept. 19, the biggest surge since 1991, after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed removing troubled assets from the balance sheets of financial companies. Separately, the U.K.'s Financial Services Authority banned speculators from betting against financial shares until Jan. 16 and the U.S. Securities and Exchange Commission temporarily stopped short-selling in shares of 799 financial companies to curtail the market rout.
In a concerted action, the world's largest central banks said they will pump $247 billion into the financial system. The Fed said Sept. 18 it authorized other central banks to auction $247 billion in dollar funds to financial institutions in a coordinated bid to ease the worst crisis facing financial markets since the 1920s. The Bank of Canada and the Swiss National Bank also participated.
National benchmark indexes declined in 13 of the 18 western European markets. France's CAC 40 slipped 0.2 percent. The U.K.'s FTSE 100 retreated 2 percent, while Germany's DAX fell 0.7 percent.
Lloyds Declines
Lloyds TSB Group Plc, the U.K.'s biggest provider of checking accounts, declined 1.3 percent, while HBOS Plc plunged 21 percent, the biggest decline in the banking index.
Lloyds agreed Sept. 18 to buy HBOS for 12.2 billion pounds ($22.2 billion) as the government backed a deal to keep Britain's largest mortgage lender from succumbing to the worsening global credit crisis.
Barclays rose 11 percent. Britain's third-biggest bank said Sept. 17 it will buy the North American investment-banking business of bankrupt Lehman Brothers for $1.75 billion, three days after abandoning plans to buy the entire firm.
ArcelorMittal, the world's largest steelmaker, led a decline in raw material producers, sliding 9 percent, as commodity prices retreated on speculation the seizure in financial markets will hurt the global economy.
Xstrata Plc, the world's fourth-largest copper producer, dropped 3.9 percent and BG Group Plc, the U.K.'s third-biggest oil and natural-gas producer, declined 3.6 percent. Copper has tumbled 24 percent from its July 2 peak of $8,940 a ton because of the risk that the global credit crunch will slow economic growth, reducing demand for industrial raw materials.
``The economic prospects still look poor,'' Neil Dwane, chief investment officer for Europe at Allianz Global Investors' RCM unit, said in a Bloomberg Television interview.
To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.
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Sept. 20 (Bloomberg) -- European stocks fell this week, as a slump in commodities shares offset a record one-day rally by the Dow Jones Stoxx 600 Index after central banks and regulators stepped in to shore up financial markets.
The benchmark index was headed for its steepest weekly retreat since July 2002, before financial shares yesterday rallied the most in at least 17 years after the U.S. government moved to cleanse banks of troubled assets and international regulators banned investors from betting the value of banking stocks will fall.
``I can't recall ever seeing a roller-coaster market like this before,'' said Carsten Klude, an investment strategist at M.M. Warburg & Co. in Hamburg, which oversees the equivalent of $25 billion. ``The whole financial system in the U.S. has gotten out of joint this week.''
The Dow Jones Stoxx 600 Index fell 0.8 percent this week even after the 8.3 percent rally yesterday, the biggest since data for the index begins in 1987. The index had slumped 8.4 percent between Sept. 12 and Sept. 18. The U.K.'s FTSE 100 Index posted a record advance yesterday and Russia's RTS Index jumped 22 percent after a two-day suspension and President Dmitry Medvedev's pledge of $20 billion to prop up the market.
UBS AG, the European bank with the highest losses from the subprime crisis, slumped as much as 33 percent between Sept. 15 and Sept. 17 after bank lending seized up in the wake of the U.S. government's takeover of American International Group Inc. The stock recovered to close the week 11 percent lower.
`Market Fragility'
The U.S. Federal Reserve agreed Sept. 16 to an $85 billion bailout of the nation's biggest insurer by assets after private efforts failed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a Fed statement.
The week began with European banking shares dropping as Bank of America Corp., the biggest U.S. consumer bank, agreed Sept. 15 to acquire Merrill Lynch & Co., the world's biggest brokerage firm, for about $50 billion and Lehman Brothers Holdings Inc. filed for bankruptcy Sept. 16 after Barclays Plc and Bank of America abandoned talks to buy the crippled firm.
The Dow Jones Europe Stoxx Banks Index has slumped 30 percent this year as financial firms worldwide reported more than $510 billion in credit-related losses. That was the worst performance among 19 groups in the broader Stoxx 600, which has fallen 24 percent.
Banned
The gauge rallied 17 percent Sept. 19, the biggest surge since 1991, after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed removing troubled assets from the balance sheets of financial companies. Separately, the U.K.'s Financial Services Authority banned speculators from betting against financial shares until Jan. 16 and the U.S. Securities and Exchange Commission temporarily stopped short-selling in shares of 799 financial companies to curtail the market rout.
In a concerted action, the world's largest central banks said they will pump $247 billion into the financial system. The Fed said Sept. 18 it authorized other central banks to auction $247 billion in dollar funds to financial institutions in a coordinated bid to ease the worst crisis facing financial markets since the 1920s. The Bank of Canada and the Swiss National Bank also participated.
National benchmark indexes declined in 13 of the 18 western European markets. France's CAC 40 slipped 0.2 percent. The U.K.'s FTSE 100 retreated 2 percent, while Germany's DAX fell 0.7 percent.
Lloyds Declines
Lloyds TSB Group Plc, the U.K.'s biggest provider of checking accounts, declined 1.3 percent, while HBOS Plc plunged 21 percent, the biggest decline in the banking index.
Lloyds agreed Sept. 18 to buy HBOS for 12.2 billion pounds ($22.2 billion) as the government backed a deal to keep Britain's largest mortgage lender from succumbing to the worsening global credit crisis.
Barclays rose 11 percent. Britain's third-biggest bank said Sept. 17 it will buy the North American investment-banking business of bankrupt Lehman Brothers for $1.75 billion, three days after abandoning plans to buy the entire firm.
ArcelorMittal, the world's largest steelmaker, led a decline in raw material producers, sliding 9 percent, as commodity prices retreated on speculation the seizure in financial markets will hurt the global economy.
Xstrata Plc, the world's fourth-largest copper producer, dropped 3.9 percent and BG Group Plc, the U.K.'s third-biggest oil and natural-gas producer, declined 3.6 percent. Copper has tumbled 24 percent from its July 2 peak of $8,940 a ton because of the risk that the global credit crunch will slow economic growth, reducing demand for industrial raw materials.
``The economic prospects still look poor,'' Neil Dwane, chief investment officer for Europe at Allianz Global Investors' RCM unit, said in a Bloomberg Television interview.
To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.
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Essar Steel to Invest $4 Billion to Expand in America
By Debarati Roy
Sept. 20 (Bloomberg) -- India's Essar Steel Holdings Ltd., which acquired Minnesota Steel Industries LLC last year, plans to invest $4 billion to expand its operations in North America.
The Mumbai-based steelmaker plans to invest $1.6 billion to develop an iron-ore mine and set up a steel plant in the region, it said in an e-mailed statement.
Essar Global, which owns 88 percent of Essar Steel Ltd., agreed to buy Canada's Algoma Steel Inc. last year for $1.63 billion to gain access to North American markets and supply the alloy to carmakers such as General Motors Corp.
``This expansion is in line with Essar's plan to build a strong base in the U.S.,'' said Sanjay Makhija, vice president at Mumbai-based Fortune Financial Service India Ltd. ``Also, Minnesota's iron ore reserves will help the company contain its steelmaking costs.''
Indian steelmakers are expanding abroad to secure access to raw materials. The price of iron ore, the main material used in steelmaking, has surged in the past five years, prompting companies including ArcelorMittal to seek greater control over supplies.
Minnesota has 1.4 billion tons of iron ore resources in the Mesabi range, the statement said. The company's iron-ore reserves are enough for about a century of production, based on planned output of 2.5 million tons a year of finished steel, John Elmore, Minnesota Steel's chief executive officer, said last year.
Essar plans to raise annual output to as much as 25 million tons by 2012. It will increase output at Canadian unit Algoma Steel to 4 million tons a year and is also building a 2.5 million ton plant in Trinidad and Tobago. The company has capacity to produce 4.6 million tons in India.
To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net
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Sept. 20 (Bloomberg) -- India's Essar Steel Holdings Ltd., which acquired Minnesota Steel Industries LLC last year, plans to invest $4 billion to expand its operations in North America.
The Mumbai-based steelmaker plans to invest $1.6 billion to develop an iron-ore mine and set up a steel plant in the region, it said in an e-mailed statement.
Essar Global, which owns 88 percent of Essar Steel Ltd., agreed to buy Canada's Algoma Steel Inc. last year for $1.63 billion to gain access to North American markets and supply the alloy to carmakers such as General Motors Corp.
``This expansion is in line with Essar's plan to build a strong base in the U.S.,'' said Sanjay Makhija, vice president at Mumbai-based Fortune Financial Service India Ltd. ``Also, Minnesota's iron ore reserves will help the company contain its steelmaking costs.''
Indian steelmakers are expanding abroad to secure access to raw materials. The price of iron ore, the main material used in steelmaking, has surged in the past five years, prompting companies including ArcelorMittal to seek greater control over supplies.
Minnesota has 1.4 billion tons of iron ore resources in the Mesabi range, the statement said. The company's iron-ore reserves are enough for about a century of production, based on planned output of 2.5 million tons a year of finished steel, John Elmore, Minnesota Steel's chief executive officer, said last year.
Essar plans to raise annual output to as much as 25 million tons by 2012. It will increase output at Canadian unit Algoma Steel to 4 million tons a year and is also building a 2.5 million ton plant in Trinidad and Tobago. The company has capacity to produce 4.6 million tons in India.
To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net
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China, Thai Central Bankers Signal Asia Coping With U.S. Crisis
By Suttinee Yuvejwattana and Judy Chen
Sept. 20 (Bloomberg) -- China and Thailand's central bankers said there has been limited fallout for their banks from the U.S. credit crisis that sent Lehman Brothers Holdings Inc. into bankruptcy and wiped $19 trillion from world stocks in the past year.
``There is not much impact on Asia this time because the problems haven't taken place here,'' Bank of Thailand Governor Tarisa Watanagase told reporters today in Bangkok, where she is hosting a meeting of central bankers. ``So far the impact on Thai banks is very little.''
The region's policy makers this week played down concerns that their countries will be subjected to a meltdown similar to that of 1997, saying contagion from the U.S. turmoil is unlikely to infect their financial systems. Asia's key stock index rebounded yesterday from a three-year low as central banks pumped cash into money markets and the U.S. worked on plans to shore up banks and insurers.
``The direct impact of the subprime crisis is currently limited,'' China central bank Deputy Governor Su Ning said at a financial conference today in Shanghai. Still, ``China will be highly alert to the negative effects of unstable global financial markets and decreasing overseas demand.''
The MSCI Asia Pacific index rose 5.5 percent yesterday and Asian currencies, including the South Korean won, Philippine peso and Indonesia rupiah, advanced. The U.S. government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.
`More Confidence'
The U.S. plan ``should help encourage new investors to have more confidence to inject liquidity into U.S. financial institutions,'' Paisarn Lertkowit, a foreign-exchange dealer at Bangkok Bank Pcl, said today in a telephone interview.
``Capital outflows from Asia may continue for a while,'' he said. ``When it becomes clear that the U.S. is gradually recovering, funds will start to flow back.''
Central banks in Japan and Australia pumped $113 billion into money markets this week, joining European and U.S. counterparts in supporting the financial system and attempting to revive confidence. Earlier in the week, China cut interest rates for the first time in six years and allowed most banks to set aside less reserves.
``We central bankers need to be watchful and decisive,'' Tarisa said today. ``We have a swap arrangement between us and standby credit to inject liquidity if problems arise.''
Central banks around the region have boosted cooperation to strengthen their financial markets and set up emergency measures to bail out their systems in case of crisis. Japan, South Korea, China and Asean countries are discussing the creation of a pool of $80 billion in Asian foreign-exchange reserves to be tapped in case the nations need to protect currencies.
Regional Safeguards
The reserve pool is an expansion of a current arrangement that only allows for bilateral currency swaps. It is designed to ensure central banks have enough to shield their currencies from speculative attacks like those that depleted the reserves of some countries during the Asian financial crisis a decade ago.
The region has since accumulated more than $3.3 trillion of reserves, about half of the global total.
Thailand, which triggered the Asian financial crisis with the devaluation of its baht in July 1997, has no shortage of capital and the nation's lenders are ``strong and resilient,'' Tarisa said this week.
AIG Retail Bank Pcl, a Thai unit of American International Group Inc., has adequate assets and isn't affected by the problems that led to the U.S. government's $85 billion takeover of its parent, President Charly Madan said on Sept. 18.
Chinese Banks
Chinese banks may sustain limited negative effects from the plummeting value of related investments, said Ken Peng, an economist at Citigroup Inc. in Shanghai.
Lehman filed the biggest bankruptcy in history on Sept. 15, listing $613 billion of debt. Chinese banks including Industrial & Commercial Bank of China and Bank of Communications have $454 million at risk as a result, according to data compiled by Bloomberg.
``The direct linkages between Chinese financial institutions and American ones are fairly limited,'' Peng said today in a telephone interview. ``The direct holdings are very small compared to the asset base of Chinese firms, so the direct effect is not that significant.''
China will strike a balance between controlling inflation and supporting economic growth, the central bank's Su said today.
``We should continue to be alert to inflation,'' he said. ``We are confident about maintaining the stability of the financial market.''
While China's growth is the fastest of the world's 20 biggest economies, policy makers are concerned that weakening global growth has increased the risk of a slump. The People's Bank of China cut the one-year lending rate to 7.20 percent from 7.47 percent on Sept. 15.
To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.
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China's Hu Criticizes Officials for Lax Work, China Daily Says
By Mark Lee
Sept. 20 (Bloomberg) -- China President Hu Jintao criticized some officials for their lax work attitude in ``recent accidents'' such as a mudslide that killed more than 200 people in Shanxi province and the discovery of a toxic chemical in dairy products, China Daily reported today.
``Some officials have ignored public opinion and turned a blind eye to peoples' hardships,'' Hu was cited by the English- language newspaper as saying in an address to a meeting of Communist Party members yesterday.
The governor of northern China's Shanxi province resigned and the vice-governor was fired after a mudslide linked to an unlicensed mine killed 254 people, the state-run Xinhua News Agency reported on Sept. 14.
On Sept. 17, Premier Wen Jiabao forced 22 companies to recall milk powder after melamine, used to make plastics and to tan leather, was found in their products, and ordered an overhaul of the domestic dairy industry.
To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net
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Sept. 20 (Bloomberg) -- China President Hu Jintao criticized some officials for their lax work attitude in ``recent accidents'' such as a mudslide that killed more than 200 people in Shanxi province and the discovery of a toxic chemical in dairy products, China Daily reported today.
``Some officials have ignored public opinion and turned a blind eye to peoples' hardships,'' Hu was cited by the English- language newspaper as saying in an address to a meeting of Communist Party members yesterday.
The governor of northern China's Shanxi province resigned and the vice-governor was fired after a mudslide linked to an unlicensed mine killed 254 people, the state-run Xinhua News Agency reported on Sept. 14.
On Sept. 17, Premier Wen Jiabao forced 22 companies to recall milk powder after melamine, used to make plastics and to tan leather, was found in their products, and ordered an overhaul of the domestic dairy industry.
To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net
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China to Control Inflation, Support Growth, Bank Official Says
By Judy Chen and Lee Spears
Sept. 20 (Bloomberg) -- China will strike a balance between controlling inflation and supporting economic growth, central bank Deputy Governor Su Ning said.
``We should continue to be alert to inflation,'' Su said at a financial conference in Shanghai today. ``We are confident about maintaining the stability of the financial market.''
China cut borrowing costs for the first time in six years on Sept. 15 as an export slowdown and a global credit crisis threatened to undermine growth in the world's fourth-biggest economy. The central bank remains concerned that inflation will rebound after easing to a 14-month low in August.
``China will be highly alert of the negative effects of unstable global financial markets and decreasing overseas demand'' for Chinese goods, Su said. ``Even though the direct impact of the subprime crisis is limited, uncertainty about China's economic growth has increased.''
The People's Bank of China reduced the one-year lending rate to 7.20 percent from 7.47 percent. It also lowered the proportion of deposits that the nation's smaller banks are required to set aside as reserves.
Consumer prices rose 4.9 percent in August, down from a 12- year high of 8.7 percent in February. Central bank Governor Zhou Xiaochuan said Sept. 8 that ``we can't relax'' as inflation may still accelerate.
While China's growth is the fastest of the world's 20 biggest economies, policy makers are concerned that weakening global growth has increased the risk of a slump. The nation's economy expanded 10.1 percent in the second quarter, the least in more than two years.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Lee Spears in Beijing at lspears2@bloomberg.net.
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Sept. 20 (Bloomberg) -- China will strike a balance between controlling inflation and supporting economic growth, central bank Deputy Governor Su Ning said.
``We should continue to be alert to inflation,'' Su said at a financial conference in Shanghai today. ``We are confident about maintaining the stability of the financial market.''
China cut borrowing costs for the first time in six years on Sept. 15 as an export slowdown and a global credit crisis threatened to undermine growth in the world's fourth-biggest economy. The central bank remains concerned that inflation will rebound after easing to a 14-month low in August.
``China will be highly alert of the negative effects of unstable global financial markets and decreasing overseas demand'' for Chinese goods, Su said. ``Even though the direct impact of the subprime crisis is limited, uncertainty about China's economic growth has increased.''
The People's Bank of China reduced the one-year lending rate to 7.20 percent from 7.47 percent. It also lowered the proportion of deposits that the nation's smaller banks are required to set aside as reserves.
Consumer prices rose 4.9 percent in August, down from a 12- year high of 8.7 percent in February. Central bank Governor Zhou Xiaochuan said Sept. 8 that ``we can't relax'' as inflation may still accelerate.
While China's growth is the fastest of the world's 20 biggest economies, policy makers are concerned that weakening global growth has increased the risk of a slump. The nation's economy expanded 10.1 percent in the second quarter, the least in more than two years.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Lee Spears in Beijing at lspears2@bloomberg.net.
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Thailand Sees Little Impact on Banks From U.S. Crisis So Far
By Suttinee Yuvejwattana
Sept. 20 (Bloomberg) -- The U.S. financial crisis that led to the failure of Lehman Brothers Holdings Inc. has had little impact on Thailand's banks, said Tarisa Watanagase, governor of the nation's central bank.
Asian policy makers this week downplayed concerns that their countries will be hit by a crisis similar to the economic meltdown of 1997, saying contagion from the U.S. turmoil is unlikely to infect their financial systems.
``There is not much impact on Asia this time because the problems haven't taken place here,'' Tarisa told reporters at a meeting of central bank governors in Bangkok today. ``We have a swap arrangement between us and standby credit to inject liquidity if problems arise.''
Central banks from Tokyo to New York injected extra cash into the financial system in the past week in a bid to calm markets roiled by the demise of Lehman and the U.S. government bailout of American International Group Inc.
To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net
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Sept. 20 (Bloomberg) -- The U.S. financial crisis that led to the failure of Lehman Brothers Holdings Inc. has had little impact on Thailand's banks, said Tarisa Watanagase, governor of the nation's central bank.
Asian policy makers this week downplayed concerns that their countries will be hit by a crisis similar to the economic meltdown of 1997, saying contagion from the U.S. turmoil is unlikely to infect their financial systems.
``There is not much impact on Asia this time because the problems haven't taken place here,'' Tarisa told reporters at a meeting of central bank governors in Bangkok today. ``We have a swap arrangement between us and standby credit to inject liquidity if problems arise.''
Central banks from Tokyo to New York injected extra cash into the financial system in the past week in a bid to calm markets roiled by the demise of Lehman and the U.S. government bailout of American International Group Inc.
To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net
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Haier Electronics Profit Rises 77% on Washing Machines, Heaters
By Mark Lee
Sept. 20 (Bloomberg) -- Haier Electronics Group Co., a unit of the Chinese company that may buy General Electric Co.'s appliance arm, said first-half profit jumped 77 percent as economic growth in China spurred sales.
Net income rose to HK$128.3 million ($16.5 million), or 6.6 Hong Kong cents a share, in the six months ended June 30, from HK$72.5 million, or 3.9 cents a share, a year earlier, Haier said last night in a statement to the Hong Kong stock exchange. Sales rose 48 percent in the first half to HK$5.31 billion from HK$3.58 billion.
The Hong Kong-listed appliance maker, in which Qingdao, eastern China-based Haier Group Corp. controls a 78.5 percent stake, expanded sales by adding stores in smaller cities. Rising household income in China, the world's fastest-growing major economy, fuelled demand for washing machines and water heaters.
``The directors are confident that the group will continue to perform well in the second half,'' the company said in the statement. Selling and distribution costs increased 43 percent ``as a result of our strategy of promoting sales in third and fourth tier markets, and extending our distribution network in the rural areas.''
Haier Electronics had 32 percent of the market for washing machines in China in the first half, and 22 percent of the nation's water heater sales, the company said, citing data from research company China Market Monitor.
China's retail sales rose 23.2 percent in August, after growing at the fastest pace for nine years in the previous month, according to government data. Urban disposable incomes increased 14.4 percent in the first half, helping to drive domestic consumption as exports and fixed-asset investment slow.
Haier Electronics shares rose 11 percent to 70 Hong Kong cents in Hong Kong trading yesterday, narrowing the stock's decline this year to 58 percent, compared with a 31 percent drop in the city's benchmark Hang Seng Index. The company will pay an interim dividend of 2 cents and a special dividend of 2 cents.
Potential Acquisitions
Parent Haier Group is considering GE's appliance unit, the biggest provider of refrigerators, ovens and dishwashers for new U.S. homes, as well as other ``opportunities'' as it seeks acquisitions overseas, Zhang Tieyan, the parent's chief executive officer for Asia outside of China, said in August.
GE Chief Executive Officer Jeffrey Immelt in May identified Haier Group and Korea's LG Electronics Inc. as potential suitors. A purchase of the century-old division would give Haier, which sells products through Wal-Mart Stores Inc., Best Buy Co. and Home Depot Inc., a household name to help its U.S. expansion.
The GE unit may fetch $3 billion to $8 billion, according to estimates from Citigroup Inc. and Goldman Sachs Group Inc.
To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net
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Sept. 20 (Bloomberg) -- Haier Electronics Group Co., a unit of the Chinese company that may buy General Electric Co.'s appliance arm, said first-half profit jumped 77 percent as economic growth in China spurred sales.
Net income rose to HK$128.3 million ($16.5 million), or 6.6 Hong Kong cents a share, in the six months ended June 30, from HK$72.5 million, or 3.9 cents a share, a year earlier, Haier said last night in a statement to the Hong Kong stock exchange. Sales rose 48 percent in the first half to HK$5.31 billion from HK$3.58 billion.
The Hong Kong-listed appliance maker, in which Qingdao, eastern China-based Haier Group Corp. controls a 78.5 percent stake, expanded sales by adding stores in smaller cities. Rising household income in China, the world's fastest-growing major economy, fuelled demand for washing machines and water heaters.
``The directors are confident that the group will continue to perform well in the second half,'' the company said in the statement. Selling and distribution costs increased 43 percent ``as a result of our strategy of promoting sales in third and fourth tier markets, and extending our distribution network in the rural areas.''
Haier Electronics had 32 percent of the market for washing machines in China in the first half, and 22 percent of the nation's water heater sales, the company said, citing data from research company China Market Monitor.
China's retail sales rose 23.2 percent in August, after growing at the fastest pace for nine years in the previous month, according to government data. Urban disposable incomes increased 14.4 percent in the first half, helping to drive domestic consumption as exports and fixed-asset investment slow.
Haier Electronics shares rose 11 percent to 70 Hong Kong cents in Hong Kong trading yesterday, narrowing the stock's decline this year to 58 percent, compared with a 31 percent drop in the city's benchmark Hang Seng Index. The company will pay an interim dividend of 2 cents and a special dividend of 2 cents.
Potential Acquisitions
Parent Haier Group is considering GE's appliance unit, the biggest provider of refrigerators, ovens and dishwashers for new U.S. homes, as well as other ``opportunities'' as it seeks acquisitions overseas, Zhang Tieyan, the parent's chief executive officer for Asia outside of China, said in August.
GE Chief Executive Officer Jeffrey Immelt in May identified Haier Group and Korea's LG Electronics Inc. as potential suitors. A purchase of the century-old division would give Haier, which sells products through Wal-Mart Stores Inc., Best Buy Co. and Home Depot Inc., a household name to help its U.S. expansion.
The GE unit may fetch $3 billion to $8 billion, according to estimates from Citigroup Inc. and Goldman Sachs Group Inc.
To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net
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Australian Dollar Crosses: Reversal Opportunities
| Daily Forex Technicals | Written by DailyFX | Sep 20 08 05:43 GMT | | |
| Reversals from depressed levels in the Australian Dollar crosses present short term bullish opportunties. AUDCHFThe AUDCHF has rallied over 500 pips from the low earlier this week. Still, as long as price is below the line drawn off of the November 2007 and July 2008 highs, the trend is considered down. Potential resistance is in the .9320-.9616 zone.
AUDCADThe long term triangle appears to be playing out. “The AUDCAD will eventually drop below the 2006 low of .8118 to complete wave C of the triangle.” The AUDCAD fell to .8388 before reversing (today). This rally should reach at least .8944 (38.2% of .9842-.8389).
AUDNZDLast update, I wrote that “the AUDNZD should turn up from above 1.1791 in order to complete a 5th wave in the 5 wave bull sequence from 111.46.” The low yesterday was 1.1811 and the pair is now above 1.21. The advance should continue over the next several weeks (and perhaps longer) and break above 1.2968 before a more significant top forms.
TREND ANALYSIS is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ.
Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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Aussie Home Loans Says `Low-Doc' Lending Dead, Australian Says
By Madelene Pearson
Sept. 20 (Bloomberg) -- Aussie Home Loans, Australia's biggest mortgage broker, said `low-doc' loans are dead as lenders flee from high-risk products amid the disaster in the financial sector, the Australian said, citing the company's founder.
The proportion of low-doc loans, those with little or no proof of a borrower's ability to make repayment, written by the broker has fallen to below 2 percent, from 15 percent, the newspaper said, citing Aussie Home Loan founder John Symond.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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Sept. 20 (Bloomberg) -- Aussie Home Loans, Australia's biggest mortgage broker, said `low-doc' loans are dead as lenders flee from high-risk products amid the disaster in the financial sector, the Australian said, citing the company's founder.
The proportion of low-doc loans, those with little or no proof of a borrower's ability to make repayment, written by the broker has fallen to below 2 percent, from 15 percent, the newspaper said, citing Aussie Home Loan founder John Symond.
To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net
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ETelecare Agrees to Providence, Ayala Purchase for $290 Million
By Ian C. Sayson
Sept. 20 (Bloomberg) -- ETelecare Global Solutions Inc., the Philippines' largest provider of outsourced business services, agreed to be bought by U.S.-based Providence Equity Partners Inc. and Manila-based Ayala Corp. for $290 million.
The buyers' offered to buy all the company's shares at $9 each, a 76 percent premium over the stock price of $5.10 on Sept. 18, ETelecare said in a statement on Business Wire. Two-thirds of the owners of ETelecare's stocks and American depositary shares must accept the offer for the purchase to proceed, it added.
Providence is a private equity company with $21 billion in capital that invests in media and communications. Ayala, which owns shares in ETelecare through a unit, is the oldest business group in the Philippines, where it owns the largest developer, the No. 1 bank by value and second-biggest mobile phone company.
ETelecare American depositary shares jumped 67 percent to $8.50 as of 10:15 a.m. in New York, the most since being listed in March 2007. Shares traded in the Philippines fell 7.7 percent to 300 pesos at the noon close of trading in Manila.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
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Sept. 20 (Bloomberg) -- ETelecare Global Solutions Inc., the Philippines' largest provider of outsourced business services, agreed to be bought by U.S.-based Providence Equity Partners Inc. and Manila-based Ayala Corp. for $290 million.
The buyers' offered to buy all the company's shares at $9 each, a 76 percent premium over the stock price of $5.10 on Sept. 18, ETelecare said in a statement on Business Wire. Two-thirds of the owners of ETelecare's stocks and American depositary shares must accept the offer for the purchase to proceed, it added.
Providence is a private equity company with $21 billion in capital that invests in media and communications. Ayala, which owns shares in ETelecare through a unit, is the oldest business group in the Philippines, where it owns the largest developer, the No. 1 bank by value and second-biggest mobile phone company.
ETelecare American depositary shares jumped 67 percent to $8.50 as of 10:15 a.m. in New York, the most since being listed in March 2007. Shares traded in the Philippines fell 7.7 percent to 300 pesos at the noon close of trading in Manila.
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
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Filinvest's Home Bookings Rise on Overseas Filipinos' Demand
By Ian C. Sayson
Sept. 20 (Bloomberg) -- Filinvest Land Inc., the fourth- largest Philippine developer by value, said bookings for new homes rose 34 percent in the first seven months, driven by overseas-based Filipinos who bought more of its five-story apartments.
Buyers booked 3.9 billion pesos ($84 million) worth of homes between January and July, compared with 2.9 billion pesos in the same period of 2007, Chief Financial Officer Nelson Bona said in an interview. Buyers typically book apartments as they're being built by paying a deposit.
``Overseas Filipino workers are sending home the money and they are the ones driving demand,'' Bona said yesterday. ``As long as remittances don't drop, we will grow.''
Rising orders from overseas Filipinos may help Filinvest shares rebound from a 53 percent slump this year, compared with the 41 percent decline in the Philippine Stock Exchange Property Index. Shares have dropped on concern home sales will weaken on record oil prices and slowing global economic growth.
Funds sent by the more than 8 million overseas Filipinos, which account for 10 percent of the economy, reached $9.6 billion in the first seven months of the year, 18 percent more than in the same period of 2007. The central bank forecast remittances will rise 11 percent to a record $16.6 billion pesos this year.
Rising Construction Costs
``The strong take-up shows demand from overseas Filipinos hasn't let up yet,'' said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila. ``The risk is a surge in prices of raw materials will push up construction costs and squeeze margins.''
Philippine steel bar and pipe prices are expected to rise in the fourth quarter when construction resumes after the rainy season, BusinessWorld and Philippine Daily Inquirer reported this month.
Filinvest relies on overseas Filipinos for half of its home sales. Units priced between 300,000 pesos and 4 million pesos, or what local property analysts refer to as affordable and middle-income homes, make up 70 percent of its residential sales.
``Unlike high-end homes where the cycle could be peaking, low- to middle-income homes have the highest unmet demand,'' said Jody Santiago, a strategist at UBS AG's Manila unit. Filinvest shares, which closed at 64 centavos yesterday, may climb to 1.10 pesos in 12 months, according to Santiago, who rates the stock a ``buy.''
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
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Sept. 20 (Bloomberg) -- Filinvest Land Inc., the fourth- largest Philippine developer by value, said bookings for new homes rose 34 percent in the first seven months, driven by overseas-based Filipinos who bought more of its five-story apartments.
Buyers booked 3.9 billion pesos ($84 million) worth of homes between January and July, compared with 2.9 billion pesos in the same period of 2007, Chief Financial Officer Nelson Bona said in an interview. Buyers typically book apartments as they're being built by paying a deposit.
``Overseas Filipino workers are sending home the money and they are the ones driving demand,'' Bona said yesterday. ``As long as remittances don't drop, we will grow.''
Rising orders from overseas Filipinos may help Filinvest shares rebound from a 53 percent slump this year, compared with the 41 percent decline in the Philippine Stock Exchange Property Index. Shares have dropped on concern home sales will weaken on record oil prices and slowing global economic growth.
Funds sent by the more than 8 million overseas Filipinos, which account for 10 percent of the economy, reached $9.6 billion in the first seven months of the year, 18 percent more than in the same period of 2007. The central bank forecast remittances will rise 11 percent to a record $16.6 billion pesos this year.
Rising Construction Costs
``The strong take-up shows demand from overseas Filipinos hasn't let up yet,'' said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila. ``The risk is a surge in prices of raw materials will push up construction costs and squeeze margins.''
Philippine steel bar and pipe prices are expected to rise in the fourth quarter when construction resumes after the rainy season, BusinessWorld and Philippine Daily Inquirer reported this month.
Filinvest relies on overseas Filipinos for half of its home sales. Units priced between 300,000 pesos and 4 million pesos, or what local property analysts refer to as affordable and middle-income homes, make up 70 percent of its residential sales.
``Unlike high-end homes where the cycle could be peaking, low- to middle-income homes have the highest unmet demand,'' said Jody Santiago, a strategist at UBS AG's Manila unit. Filinvest shares, which closed at 64 centavos yesterday, may climb to 1.10 pesos in 12 months, according to Santiago, who rates the stock a ``buy.''
To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net
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South Korea Plans to Build 5 Million Homes by 2018
By Seyoon Kim
Sept. 20 (Bloomberg) -- South Korea plans to build 5 million homes over the next 10 years to bolster an economy that is facing a decline in consumer spending and a slowdown in export demand.
The project is estimated to cost about 12 trillion won ($10.6 billion) a year, the Ministry of Land, Transport and Maritime Affairs said on its Web site yesterday. The government will build an average 500,000 homes a year through 2018, including 300,000 annually in metropolitan Seoul.
Increased construction may buoy an industry that accounts for 18 percent of the economy and has been losing jobs since the fourth quarter of 2007. President Lee Myung Bak's six-month-old government, which has experienced a slump in popularity, announced plans this month to cut income taxes, build roads and ports and provide aid to small businesses.
``The government wants to protect the property market from seeing a drastic slump like the U.S.,'' said Ryu Seung Sun, an economist at HMC Investment Securities Co. in Seoul. ``The measures are likely to help stabilize the housing market, but there's a risk this may result in an oversupply of homes.''
The $970 billion economy grew 4.8 percent last quarter, the slowest annual pace in more than a year, as consumers cut back on discretionary spending as living costs soared. Construction investment shrank in the first two quarters of the year, according to a central bank report.
Popularity Decline
Voter support for the government halved to 24 percent from a 52 percent approval rating at the start of the Lee administration in March, according to a Chosun Ilbo newspaper poll on Aug. 25.
The government announced plans last week to spend 50 trillion won building roads, free economic zones and ports over the next five years. The administration on Sept. 1 said it will lower income taxes, provide aid to small business and remove some property taxes to spur economic growth.
``We need to continue supplying homes to meet an estimated annual demand for 500,000 homes and to stabilize the housing market,'' the ministry said in the statement. ``There's also a need to help homeless people to own homes.''
To contact the reporters on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
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Sept. 20 (Bloomberg) -- South Korea plans to build 5 million homes over the next 10 years to bolster an economy that is facing a decline in consumer spending and a slowdown in export demand.
The project is estimated to cost about 12 trillion won ($10.6 billion) a year, the Ministry of Land, Transport and Maritime Affairs said on its Web site yesterday. The government will build an average 500,000 homes a year through 2018, including 300,000 annually in metropolitan Seoul.
Increased construction may buoy an industry that accounts for 18 percent of the economy and has been losing jobs since the fourth quarter of 2007. President Lee Myung Bak's six-month-old government, which has experienced a slump in popularity, announced plans this month to cut income taxes, build roads and ports and provide aid to small businesses.
``The government wants to protect the property market from seeing a drastic slump like the U.S.,'' said Ryu Seung Sun, an economist at HMC Investment Securities Co. in Seoul. ``The measures are likely to help stabilize the housing market, but there's a risk this may result in an oversupply of homes.''
The $970 billion economy grew 4.8 percent last quarter, the slowest annual pace in more than a year, as consumers cut back on discretionary spending as living costs soared. Construction investment shrank in the first two quarters of the year, according to a central bank report.
Popularity Decline
Voter support for the government halved to 24 percent from a 52 percent approval rating at the start of the Lee administration in March, according to a Chosun Ilbo newspaper poll on Aug. 25.
The government announced plans last week to spend 50 trillion won building roads, free economic zones and ports over the next five years. The administration on Sept. 1 said it will lower income taxes, provide aid to small business and remove some property taxes to spur economic growth.
``We need to continue supplying homes to meet an estimated annual demand for 500,000 homes and to stabilize the housing market,'' the ministry said in the statement. ``There's also a need to help homeless people to own homes.''
To contact the reporters on this story: Seyoon Kim in Seoul at skim7@bloomberg.net
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Japan's 2-Year Debt Completes Weekly Drop; Crisis Concerns Ease
By Theresa Barraclough
Sept. 20 (Bloomberg) -- Japan's two-year notes declined for a fourth week after the U.S. government proposed moving troubled assets from the balance sheets of American financial companies into a new institution.
The yields climbed to the highest in 2 1/2 months after the Nikkei 225 Stock Average advanced yesterday, reducing demand for debt. The Bank of Japan on Sept. 18 said it agreed with the U.S. Federal Reserve to supply dollars in Japan for the first time as part of a joint action by central banks worldwide to ease tensions in markets.
The measures ``might support financial markets and they may save some institutions,'' said Guthrie Williamson, portfolio manager in Sydney at Principal Global Investors, which manages $244.9 billion in assets globally. ``We could see bond yields rising for a few days.''
The yield on the 0.7 percent note due September 2010 rose 4.5 basis points this week to 0.785 percent in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.087 yen to 99.834 yen.
Two-year yields yesterday fell half a basis point to 0.785 percent after reaching 0.85 percent, the highest since July 9. A basis point is 0.01 percentage point.
Ten-year bond futures for December delivery dropped 0.33 this week to 137.02 at the Tokyo Stock Exchange. Japan's Nikkei 225 yesterday advanced 3.8 percent and the broader Topix index gained 4.7 percent.
The nation's bonds often move in the opposite direction to stocks. Benchmark 10-year yields had a correlation of 0.87 with the Nikkei 225 this month, according to Bloomberg data. A value of 1 means the two moved in lockstep.
Rescue Measures
Congressional leaders who met with Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson on Sept. 18 in Washington said they aim to pass legislation soon. The initiative, which may also insure money-market funds, is aimed at removing the devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression.
``The news of the U.S. government plan and the central bank's efforts to supply dollars have halted the deterioration of the credit crisis,'' reducing demand for bonds, said Akihiko Inoue, an analyst at Mizuho Investors Securities Co. in Tokyo.
The difference in yields between Japanese and U.S. five-year debt fell to 1.42 percentage points on Sept. 15, the narrowest since at least 1999, according to data compiled by Bloomberg. The spread was 1.66 percentage points yesterday and averaged about 3.19 percentage points last year.
``Banks are still short of capital,'' PGI's Williamson said. ``This will restrict credit growth and weigh on growth of the real economy for some time to come.''
Money Market Rate
The Fed on Sept. 18 increased the amount of dollars that the European Central Bank, the BOJ and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.''
``The ongoing financial market turmoil resulting from U.S. financial-sector concerns has created some upward pressure on domestic money-market rates,'' Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. wrote in a research report on Sept. 18.
The BOJ added 2 trillion yen ($18.6 billion) to the financial system yesterday, its fourth day of fund injections to help ease a global credit crisis. Japan's overnight call loan rate was at 0.45 percent after the BOJ's operation yesterday at 9:05 a.m. in Tokyo, falling from as high as 0.585 percent, according to Tokyo Tanshi Co.
The decline in bonds was limited by speculation the worst of the financial crisis may not be over yet, boosting demand for the safe haven of government securities. Five-year yields fell 1.5 basis points yesterday to 1.11 percent.
`Like Aspirin'
``Bonds are the best buy,'' said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages the equivalent of $54 billion in assets. The recent rescue plans and money injections are ``like an aspirin for the market -- it takes away the headache, but it doesn't cure the problem.''
Benchmark bonds have handed investors a return of about 0.8 percent so far this quarter through Sept. 18, according to indexes compiled by Merrill Lynch & Co., which sold itself to Bank of America this week.
Demand for bonds also declined this week on speculation the suspension of Lehman Brothers Holdings Inc., which declared bankruptcy on Sept. 15, as a primary dealer of Japanese notes, reduced the appeal of the nation's sovereign debt.
Japan is considering ``various ways'' to cover Lehman's failure to pay for 128.7 billion yen of government debt sold to the company last month, according to the Ministry of Finance.
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
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Sept. 20 (Bloomberg) -- Japan's two-year notes declined for a fourth week after the U.S. government proposed moving troubled assets from the balance sheets of American financial companies into a new institution.
The yields climbed to the highest in 2 1/2 months after the Nikkei 225 Stock Average advanced yesterday, reducing demand for debt. The Bank of Japan on Sept. 18 said it agreed with the U.S. Federal Reserve to supply dollars in Japan for the first time as part of a joint action by central banks worldwide to ease tensions in markets.
The measures ``might support financial markets and they may save some institutions,'' said Guthrie Williamson, portfolio manager in Sydney at Principal Global Investors, which manages $244.9 billion in assets globally. ``We could see bond yields rising for a few days.''
The yield on the 0.7 percent note due September 2010 rose 4.5 basis points this week to 0.785 percent in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.087 yen to 99.834 yen.
Two-year yields yesterday fell half a basis point to 0.785 percent after reaching 0.85 percent, the highest since July 9. A basis point is 0.01 percentage point.
Ten-year bond futures for December delivery dropped 0.33 this week to 137.02 at the Tokyo Stock Exchange. Japan's Nikkei 225 yesterday advanced 3.8 percent and the broader Topix index gained 4.7 percent.
The nation's bonds often move in the opposite direction to stocks. Benchmark 10-year yields had a correlation of 0.87 with the Nikkei 225 this month, according to Bloomberg data. A value of 1 means the two moved in lockstep.
Rescue Measures
Congressional leaders who met with Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson on Sept. 18 in Washington said they aim to pass legislation soon. The initiative, which may also insure money-market funds, is aimed at removing the devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression.
``The news of the U.S. government plan and the central bank's efforts to supply dollars have halted the deterioration of the credit crisis,'' reducing demand for bonds, said Akihiko Inoue, an analyst at Mizuho Investors Securities Co. in Tokyo.
The difference in yields between Japanese and U.S. five-year debt fell to 1.42 percentage points on Sept. 15, the narrowest since at least 1999, according to data compiled by Bloomberg. The spread was 1.66 percentage points yesterday and averaged about 3.19 percentage points last year.
``Banks are still short of capital,'' PGI's Williamson said. ``This will restrict credit growth and weigh on growth of the real economy for some time to come.''
Money Market Rate
The Fed on Sept. 18 increased the amount of dollars that the European Central Bank, the BOJ and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.''
``The ongoing financial market turmoil resulting from U.S. financial-sector concerns has created some upward pressure on domestic money-market rates,'' Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. wrote in a research report on Sept. 18.
The BOJ added 2 trillion yen ($18.6 billion) to the financial system yesterday, its fourth day of fund injections to help ease a global credit crisis. Japan's overnight call loan rate was at 0.45 percent after the BOJ's operation yesterday at 9:05 a.m. in Tokyo, falling from as high as 0.585 percent, according to Tokyo Tanshi Co.
The decline in bonds was limited by speculation the worst of the financial crisis may not be over yet, boosting demand for the safe haven of government securities. Five-year yields fell 1.5 basis points yesterday to 1.11 percent.
`Like Aspirin'
``Bonds are the best buy,'' said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages the equivalent of $54 billion in assets. The recent rescue plans and money injections are ``like an aspirin for the market -- it takes away the headache, but it doesn't cure the problem.''
Benchmark bonds have handed investors a return of about 0.8 percent so far this quarter through Sept. 18, according to indexes compiled by Merrill Lynch & Co., which sold itself to Bank of America this week.
Demand for bonds also declined this week on speculation the suspension of Lehman Brothers Holdings Inc., which declared bankruptcy on Sept. 15, as a primary dealer of Japanese notes, reduced the appeal of the nation's sovereign debt.
Japan is considering ``various ways'' to cover Lehman's failure to pay for 128.7 billion yen of government debt sold to the company last month, according to the Ministry of Finance.
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
Read more...
Asia Stocks Fall for Third Week as Government Rescues Pare Loss
By Chua Kong Ho
Sept. 20 (Bloomberg) -- Asia's benchmark stock index fell for a third week after Lehman Brothers Holdings Inc. collapsed and the U.S. took control of American International Group Inc. Declines narrowed on government measures to support markets.
Macquarie Group Ltd., Australia's largest investment bank, and Cathay Financial Holding Co., Taiwan's biggest financial services company, both tumbled 18 percent. Bank of China Ltd. trimmed a weekly loss after the government pledged to buy more of its equity. Newcrest Mining Ltd., Australia's largest gold producer, soared 22 percent as investors sought safety in the precious metal.
The MSCI Asia Pacific Index fell 1.8 percent to 114.15 this week. The gauge fell to a three-year low on Thursday as concerns grew that more financial companies will collapse, before rebounding yesterday as central banks pumped cash into money markets and the U.S. worked on plans to shore up banks and insurers.
``Investors don't believe that things will be over so quickly,'' said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages the equivalent of $54 billion in assets. ``It's like an aspirin for the market; it takes away the headache, but it doesn't cure the problem.''
Lending Seized
Bank lending seized up this week following Lehman Brothers' bankruptcy filing and the U.S. government's takeover of American International Group. The deepening credit crunch resulted in Morgan Stanley tumbling by the most in its history on Sept. 17. Bank of America Corp. bought Merrill Lynch & Co., followed by Lloyd's TSB Group Plc's takeover of HBOS Plc, Britain's biggest mortgage lender, as their plunging shares fanned concern about further bank failures.
``Investors couldn't help but see Lehman's collapse setting off a chain reaction of bank failures worldwide,'' said Mitsushige Akino, who oversees about $468 million at Ichiyoshi Investment Management Co. in Tokyo. ``This is a dangerous state of mind.''
Since the start of 2007, global financial companies have reported more than $510 billion in credit losses and writedowns linked to the slump in the U.S. housing market and slowing economic growth.
Macquarie fell 18 percent to A$35.90, as it battled speculation rising funding costs in the wake of the Lehman collapse will imperil the investment bank. Cathay Financial slumped 18 percent to NT$48.75, as Taiwanese financial institutions and investors reported NT$80 billion ($2.5 billion) tied to Lehman-related securities.
Asian Governments
Asian governments joined their European and U.S. counterparts in support of stock markets.
Japanese equities yesterday surged the most in eight months, cutting by more than half a slump this week as the Bank of Japan pumped more money into the financial system than it has in at least six years. It joined the Federal Reserve in offering financial institutions as much as $60 billion to ease a dollar shortage.
China's benchmark stock index, the world's third-worst performer this year, yesterday rallied the most since the gauge was created in April 2005, erasing most of the CSI 300 Index's losses this week. The government said it will buy shares in three of the largest state-owned banks and scrapped the tax on equity purchases to halt a slide that erased $2.64 trillion of market value.
Earlier in the week, China cut interest rates for the first time in six years and allowed most banks to set aside less reserves.
`Immediate Impact'
``The stimulus package had an immediate impact on restoring investor confidence, which has been crushed by expectations of economic slowdown,'' said Hu Xiaodong, a Shanghai-based fund manager at Martin Currie Investment Management Ltd., which oversees $4 billion in Greater China. ``The government may come up with more loosening measures to boost the economy.''
The rebound left Industrial & Commercial Bank of China Ltd., the nation's biggest lender, down 10 percent for the week, at 3.78 yuan. China Construction Bank Corp. fell 11 percent to 4.19 yuan, while Bank of China Ltd. slid 3.7 percent to 3.36 yuan.
Australia joined the U.S. and U.K. in limiting or banning types of short-selling to shield financial companies from investors bent on driving their shares lower. Thailand's stock exchange said it plans to spend 2 billion baht ($58.3 million) buying shares in the nation's companies, while Taiwan's government said ``conditions are right'' for the state-owned fund to buy equities.
Inner Mongolia Yili Industrial Group Co., a Chinese milk producer which pulled melamine-tainted infant formula from stores shelves nationwide, tumbled 24 percent before its shares were suspended by the stock exchange in Shanghai. Bright Dairy & Food Co., another producer involved in the widening scandal that's claimed at least four deaths and sickened thousands.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
Read more...
Sept. 20 (Bloomberg) -- Asia's benchmark stock index fell for a third week after Lehman Brothers Holdings Inc. collapsed and the U.S. took control of American International Group Inc. Declines narrowed on government measures to support markets.
Macquarie Group Ltd., Australia's largest investment bank, and Cathay Financial Holding Co., Taiwan's biggest financial services company, both tumbled 18 percent. Bank of China Ltd. trimmed a weekly loss after the government pledged to buy more of its equity. Newcrest Mining Ltd., Australia's largest gold producer, soared 22 percent as investors sought safety in the precious metal.
The MSCI Asia Pacific Index fell 1.8 percent to 114.15 this week. The gauge fell to a three-year low on Thursday as concerns grew that more financial companies will collapse, before rebounding yesterday as central banks pumped cash into money markets and the U.S. worked on plans to shore up banks and insurers.
``Investors don't believe that things will be over so quickly,'' said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages the equivalent of $54 billion in assets. ``It's like an aspirin for the market; it takes away the headache, but it doesn't cure the problem.''
Lending Seized
Bank lending seized up this week following Lehman Brothers' bankruptcy filing and the U.S. government's takeover of American International Group. The deepening credit crunch resulted in Morgan Stanley tumbling by the most in its history on Sept. 17. Bank of America Corp. bought Merrill Lynch & Co., followed by Lloyd's TSB Group Plc's takeover of HBOS Plc, Britain's biggest mortgage lender, as their plunging shares fanned concern about further bank failures.
``Investors couldn't help but see Lehman's collapse setting off a chain reaction of bank failures worldwide,'' said Mitsushige Akino, who oversees about $468 million at Ichiyoshi Investment Management Co. in Tokyo. ``This is a dangerous state of mind.''
Since the start of 2007, global financial companies have reported more than $510 billion in credit losses and writedowns linked to the slump in the U.S. housing market and slowing economic growth.
Macquarie fell 18 percent to A$35.90, as it battled speculation rising funding costs in the wake of the Lehman collapse will imperil the investment bank. Cathay Financial slumped 18 percent to NT$48.75, as Taiwanese financial institutions and investors reported NT$80 billion ($2.5 billion) tied to Lehman-related securities.
Asian Governments
Asian governments joined their European and U.S. counterparts in support of stock markets.
Japanese equities yesterday surged the most in eight months, cutting by more than half a slump this week as the Bank of Japan pumped more money into the financial system than it has in at least six years. It joined the Federal Reserve in offering financial institutions as much as $60 billion to ease a dollar shortage.
China's benchmark stock index, the world's third-worst performer this year, yesterday rallied the most since the gauge was created in April 2005, erasing most of the CSI 300 Index's losses this week. The government said it will buy shares in three of the largest state-owned banks and scrapped the tax on equity purchases to halt a slide that erased $2.64 trillion of market value.
Earlier in the week, China cut interest rates for the first time in six years and allowed most banks to set aside less reserves.
`Immediate Impact'
``The stimulus package had an immediate impact on restoring investor confidence, which has been crushed by expectations of economic slowdown,'' said Hu Xiaodong, a Shanghai-based fund manager at Martin Currie Investment Management Ltd., which oversees $4 billion in Greater China. ``The government may come up with more loosening measures to boost the economy.''
The rebound left Industrial & Commercial Bank of China Ltd., the nation's biggest lender, down 10 percent for the week, at 3.78 yuan. China Construction Bank Corp. fell 11 percent to 4.19 yuan, while Bank of China Ltd. slid 3.7 percent to 3.36 yuan.
Australia joined the U.S. and U.K. in limiting or banning types of short-selling to shield financial companies from investors bent on driving their shares lower. Thailand's stock exchange said it plans to spend 2 billion baht ($58.3 million) buying shares in the nation's companies, while Taiwan's government said ``conditions are right'' for the state-owned fund to buy equities.
Inner Mongolia Yili Industrial Group Co., a Chinese milk producer which pulled melamine-tainted infant formula from stores shelves nationwide, tumbled 24 percent before its shares were suspended by the stock exchange in Shanghai. Bright Dairy & Food Co., another producer involved in the widening scandal that's claimed at least four deaths and sickened thousands.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
Read more...
Friday, September 19, 2008
Asian Currencies: Won, Peso Gain on U.S. Plans to Calm Markets
By Lilian Karunungan and Kim Kyoungwha
Sept. 20 (Bloomberg) -- South Korea's won and the Philippine peso were among Asian currencies to advance yesterday after the U.S. government stepped up efforts to stem losses in the credit markets, helping revive demand for regional stocks.
Taiwan's dollar and the Indonesian rupiah also rose as Asian shares climbed from a three-year low following the biggest rally in U.S. equities in six years on Sept. 18. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke sought legislation to remove troubled assets from banks and alleviate a credit squeeze.
``It's predominantly a confidence issue and what we are seeing is probably a temporary reprieve in the market,'' said Wan Murezani Mohamad, a senior analyst at Malaysian Rating Corp. in Kuala Lumpur. ``There may be value in Asian stocks and currencies'' after the recent sell-off, he said.
Korea's currency rose 1.2 percent to 1,139.70 against the dollar as of the 3 p.m. close in Seoul yesterday, according to Seoul Money Brokerage Services Ltd. The won fell 2.7 percent on the week. The Philippine peso gained 0.9 percent to 46.552 in Manila, according to Tullett Prebon Plc. The peso gained 0.7 percent from a week ago.
``The won got an early boost from the good news from the U.S.,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. ``Whether the gains can be sustained is still in doubt.''
The won's advance reduced this year's loss to 18 percent, the worst among the 10 most-active Asian currencies. The currency will trade between 1,100 and 1,160 in the coming week, according to 10 strategists and traders surveyed by Bloomberg.
Blow to Won
Gains in the won may be curbed after HSBC Holdings Plc, Europe's largest bank, abandoned the $6 billion purchase of Korea Exchange Bank from Lone Star Funds.
``The withdrawal of the deal is a blow to a market that was expecting some inflows of dollar supplies from the sale of the bank to foreign investors,'' Hong said.
The Bank of Korea is ready to take action when necessary to calm concerns about the global turmoil, including adding liquidity to the financial system, Governor Lee Seong Tae said yesterday.
Central banks in Japan and Australia pumped $113 billion into money markets this week, pushing down borrowing costs to revive confidence among banks.
`Risk Aversion'
The Philippine peso snapped a seven-week slide as central banks in the world's biggest economies made $180 billion available to the global financial system.
``The joint effort of central banks to pump liquidity into the market lessened risk aversion and is positive for Asian currencies including the peso,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila.
India's rupee climbed from more than a two-year low on speculation stock gains will help stem capital outflows.
``The rupee fell victim to panic reaction, and now, like other assets, is recovering lost ground,'' said Jayant Chiney, treasurer at state-owned Bank of India in Mumbai. ``The rupee should be at levels much higher than at present.''
The local currency rose 1.4 percent to 45.83 a dollar, according to data compiled by Bloomberg. The rupee dropped 0.3 percent this week.
Overseas funds have sold $8.9 billion more Indian equities than they bought this year, driving the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, to its first annual loss since 2001. The gauge has slumped 31 percent this year.
Indonesia Intervention
Indonesia's rupiah rose for a fourth day yesterday as Deputy Governor Hartadi Sarwono said Sept. 17 that Bank Indonesia has been intervening to boost the currency.
There is ``some respite from the risk-aversion sentiment because overnight there was some positive developments on Wall Street,'' said Joanna Tan, a regional economist and market analyst at Forecast Singapore Pte Ltd. ``Bank Indonesia is always in the market to support the rupiah.''
The rupiah traded at 9,375 in Jakarta, from 9,400 on Sept. 18, according to data compiled by Bloomberg. The currency rose 0.6 percent this week.
Elsewhere, the Singapore dollar fell 0.5 percent to S$1.4362 against the U.S. currency yesterday. Malaysia's ringgit rose 0.5 percent to 3.4527 and the Taiwan dollar gained 0.2 percent to NTS32.158. The Thai baht declined 0.1 percent to 34.17, while Vietnam's dong dropped 0.5 percent to 16,715.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net
Read more...
Sept. 20 (Bloomberg) -- South Korea's won and the Philippine peso were among Asian currencies to advance yesterday after the U.S. government stepped up efforts to stem losses in the credit markets, helping revive demand for regional stocks.
Taiwan's dollar and the Indonesian rupiah also rose as Asian shares climbed from a three-year low following the biggest rally in U.S. equities in six years on Sept. 18. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke sought legislation to remove troubled assets from banks and alleviate a credit squeeze.
``It's predominantly a confidence issue and what we are seeing is probably a temporary reprieve in the market,'' said Wan Murezani Mohamad, a senior analyst at Malaysian Rating Corp. in Kuala Lumpur. ``There may be value in Asian stocks and currencies'' after the recent sell-off, he said.
Korea's currency rose 1.2 percent to 1,139.70 against the dollar as of the 3 p.m. close in Seoul yesterday, according to Seoul Money Brokerage Services Ltd. The won fell 2.7 percent on the week. The Philippine peso gained 0.9 percent to 46.552 in Manila, according to Tullett Prebon Plc. The peso gained 0.7 percent from a week ago.
``The won got an early boost from the good news from the U.S.,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. ``Whether the gains can be sustained is still in doubt.''
The won's advance reduced this year's loss to 18 percent, the worst among the 10 most-active Asian currencies. The currency will trade between 1,100 and 1,160 in the coming week, according to 10 strategists and traders surveyed by Bloomberg.
Blow to Won
Gains in the won may be curbed after HSBC Holdings Plc, Europe's largest bank, abandoned the $6 billion purchase of Korea Exchange Bank from Lone Star Funds.
``The withdrawal of the deal is a blow to a market that was expecting some inflows of dollar supplies from the sale of the bank to foreign investors,'' Hong said.
The Bank of Korea is ready to take action when necessary to calm concerns about the global turmoil, including adding liquidity to the financial system, Governor Lee Seong Tae said yesterday.
Central banks in Japan and Australia pumped $113 billion into money markets this week, pushing down borrowing costs to revive confidence among banks.
`Risk Aversion'
The Philippine peso snapped a seven-week slide as central banks in the world's biggest economies made $180 billion available to the global financial system.
``The joint effort of central banks to pump liquidity into the market lessened risk aversion and is positive for Asian currencies including the peso,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila.
India's rupee climbed from more than a two-year low on speculation stock gains will help stem capital outflows.
``The rupee fell victim to panic reaction, and now, like other assets, is recovering lost ground,'' said Jayant Chiney, treasurer at state-owned Bank of India in Mumbai. ``The rupee should be at levels much higher than at present.''
The local currency rose 1.4 percent to 45.83 a dollar, according to data compiled by Bloomberg. The rupee dropped 0.3 percent this week.
Overseas funds have sold $8.9 billion more Indian equities than they bought this year, driving the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, to its first annual loss since 2001. The gauge has slumped 31 percent this year.
Indonesia Intervention
Indonesia's rupiah rose for a fourth day yesterday as Deputy Governor Hartadi Sarwono said Sept. 17 that Bank Indonesia has been intervening to boost the currency.
There is ``some respite from the risk-aversion sentiment because overnight there was some positive developments on Wall Street,'' said Joanna Tan, a regional economist and market analyst at Forecast Singapore Pte Ltd. ``Bank Indonesia is always in the market to support the rupiah.''
The rupiah traded at 9,375 in Jakarta, from 9,400 on Sept. 18, according to data compiled by Bloomberg. The currency rose 0.6 percent this week.
Elsewhere, the Singapore dollar fell 0.5 percent to S$1.4362 against the U.S. currency yesterday. Malaysia's ringgit rose 0.5 percent to 3.4527 and the Taiwan dollar gained 0.2 percent to NTS32.158. The Thai baht declined 0.1 percent to 34.17, while Vietnam's dong dropped 0.5 percent to 16,715.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net
Read more...
S&P 500 Is Unchanged, Wall Street Forever Altered: Chart of Day
By Nick Baker and Jeff Kearns
Sept. 20 (Bloomberg) -- U.S. stocks were little changed this week.
The CHART OF THE DAY shows the swings in the Standard & Poor's 500 Index that left the equity benchmark up 0.3 percent since Sept. 12. That's the smallest weekly move for the S&P 500 in a month, even as it posted the biggest daily plunges in seven years and the steepest two-day surge since the aftermath of the October 1987 stock-market crash.
The index tumbled more than 4.7 percent twice after Lehman Brothers Holdings Inc.'s bankruptcy, Bank of America Corp.'s takeover of Merrill Lynch & Co. and the government seizure of American International Group Inc. The S&P 500 ended the week by jumping 8.5 percent in two days on the government's plan to purge banks of bad assets and crack down on short sellers.
``We moved around a lot to get nowhere,'' said Douglas Peta, a New York-based market strategist at J&W Seligman & Co., which manages about $20 billion. ``If you were away for a week and just came back and looked at the indexes, you'd say to the person next to you, `nothing happened while I was gone, huh?'''
The S&P 500 added 3.38 points to 1,255.08 this week.
To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.
Read more...
Sept. 20 (Bloomberg) -- U.S. stocks were little changed this week.
The CHART OF THE DAY shows the swings in the Standard & Poor's 500 Index that left the equity benchmark up 0.3 percent since Sept. 12. That's the smallest weekly move for the S&P 500 in a month, even as it posted the biggest daily plunges in seven years and the steepest two-day surge since the aftermath of the October 1987 stock-market crash.
The index tumbled more than 4.7 percent twice after Lehman Brothers Holdings Inc.'s bankruptcy, Bank of America Corp.'s takeover of Merrill Lynch & Co. and the government seizure of American International Group Inc. The S&P 500 ended the week by jumping 8.5 percent in two days on the government's plan to purge banks of bad assets and crack down on short sellers.
``We moved around a lot to get nowhere,'' said Douglas Peta, a New York-based market strategist at J&W Seligman & Co., which manages about $20 billion. ``If you were away for a week and just came back and looked at the indexes, you'd say to the person next to you, `nothing happened while I was gone, huh?'''
The S&P 500 added 3.38 points to 1,255.08 this week.
To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.
Read more...
FX Thoughts for the Day
| Daily Forex Technicals | Written by Kshitij Consultancy Services | Sep 19 08 12:53 GMT | | |
USD-CHF @ 1.1241/45... Could remain calmR: 1.1235 / 1.1260 / 1.1290 / 1.1330 The pair has seen a sharp rise towards 1.1280 during the day. However, facing Resistance there the pair has slipped towards 1.12 since then. The day ahead might see calm trading between 1.1180 and 1.1280 as its a Friday with no economic data scheduled for release. Early next week the pair could see some volatility that could lead to a rise towards 1.1430. However, a break of Support at 1.1100 instead would mean that the pair could slip towards 1.09 once again. A test of Support at 1.09 might not hold this time round. To see the chart click on: http://www.kshitij.com/graphgallery/chfcandle.shtml GBP-USD @ 1.8024/28.... Potential to riseR: 1.8050 / 1.8095 / 1.8135 / 1.8160 Cable has broken below the Support at 1.80, only to find Support on a dip to 1.79. Since then a rise towards 1.8040 has been seen. The day ahead could see a rise towards 1.81, if the Resistance at 1.8050 gives way. If however, 1.8050 holds and a dip is seen instead, the pair could slide towards 1.79, possibly even to 1.7850. To see the chart of the pair click on: http://www.kshitij.com/graphgallery/gbpma.shtml Overall the pair is bullish above 1.78 and could rise towards 1.83-84 over the next week if a close above 1.8050 is seen today. AUD-USD @ 0.8103/07... Immediate Resistance at 0.81R: 0.8100 / 0.8165 / 0.8184-8200 / 0.8235 The pair is unable to rise beyond 0.8140 after testing it a couple of times over. In the day ahead, if the Resistance is broken past, look for a sharp rise towards 0.82. A breakout above 0.8140 remains preferred during the day as long as the Support at 0.8060 holds. A break of Support at 0.8060 would be bearish for the pair in the near term and could lead to further decline towards 0.80. The US session could remain quite unless the credit crisis throws a fresh surprise in the face of the market. Happy Trading! Kshitij Consultancy Service Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved. | |
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Daily Technical Strategist
| Daily Forex Technicals | Written by FXTechstrategy | Sep 19 08 13:03 GMT | | |||||||||||||||||||||||||||||||||||||||
| Today's Focus: EURUSD & GBPUSD
EURUSDEUR's follow-through to the upside on the back of its Wednesday upmove failed to hold above its Sept 15'08 high at 1.4481 and its invalidated LT rising trendline currently at 1.4510 turning the pair lower and printing a hammer candle pattern. This brings to two the number of failures recorded at that zone with the first one occurring in mid-Sept'08 and this has now increased the odds of downside losses targeting its major support at the 1.3882/52 area, its Sept 11'08/July'07 lows at 1.3882/52.While other support levels line up before this zone, price action at this levels could create two scenarios with a hold at that level drawing a double bottom or a failure of that level triggering the resumption of the pair's medium term decline off the 1.6038 level towards the 1.3361 level, its Aug'07 low. Upside targets are now seen at the 1.4366/10 area, its Jan'08/Dec'07 lows where a break could set up the pair aiming at the 1.4429 level, its Sept 08'08 high with scope for price extension towards the 1.4481 level and then its eroded LT rising trendline/Sept 18'08 high at 1.4510/42.Momentum indicators remain suggestive of more strength. On the whole, having failed to sustain gains above 1.4481/1.4542 area, EUR now runs the risk of pushing towards its key support at 1.3882/52.
GBPUSDGBP gave back its intra day gains Thursday collapsing off the 1.8277 high and printing a doji candle at the end of the session. A follow-through lower was seen in early trading today pushing it back below the 1.8123 level, its Sept 15'08 high and opening up further risk towards the 1 .7976 level, its Sept 08'08 high ahead of the 1.7766 level, its Sept 15'08 low. If more losses are triggered below here, its key support residing at the 1.7447 level, its Sept 11'08 low will be targeted.However,on any recovery from here, GBP should aim at the 1.8090 level, its Jun'06 low at first and then the 1.8123 level with a clearance of there setting the stage for additional upside gains towards its Sept 18'08 high at 1.8277.Beyond there will put the pair on the path to the 1.8482/1.8513 zone, its .382 Ret(2.0157-1.7447 decline)/Aug 15'08.Daily studies are bullish and trending up suggesting that further upside gains could still be seen. All in all, while the current failure and weakness continue to suggest lower prices in line with our medium term outlook, decisively breaking and closing below the 1.7447 level is required to trigger that trend.
Mohammed Isah This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report | |||||||||||||||||||||||||||||||||||||||
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London Session Recap
| Daily Forex Fundamentals | Written by Forex.com | Sep 19 08 12:13 GMT | | |
| The buck saw a mixed performance against the majors in London trading as markets continued to digest the latest US bailout. The proposal by the US Treasury and Federal Reserve to shift distressed mortgage assets from bank balance sheets to a new government institution (details still upcoming) coupled with the SEC’s ban on short selling of roughly 800 US financial companies sent global stock markets soaring. Equity marts in Asia jumped more than 4%, and nearly 10% in some cases. Europe meanwhile has added about 7% thus far. The flight to risk assets helped the JPY crosses accelerate gains in the London session. USD/JPY added another 50 pips to a close near 107.50 while EUR/JPY popped another 120 pips into the 152.90/95 zone. Also helping the matter was the massive selling in bonds. This was most evident in the reversal in US 2-year yields which have jumped more than 35 bps thus far into 2.05% -- after falling as low as 1.35% yesterday. EUR/USD sat on the sidelines for the most part and ended the session up roughly 40 pips near the 1.4230/35 area. GBP/USD meanwhile shed about -40 pips towards a close near the 1.7990 mark. The focus in the NY session will once again be on the goings on in equity markets and further details of the proposed government bailout. JPY crosses are likely to see most of the price action again as Europe and the US remain on the same boat in terms of credit market turmoil and as such the direction in EUR/USD is likely to be mostly sideways. Upcoming Economic Data Releases (NY Session) Prior Estimate
Forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. | |
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Mid-Day Report: Massive Carry Trade Comeback on Stock Rally
| Market Overview | Written by ActionForex.com | Sep 19 08 13:52 GMT | | |
| Carry trades finally make a massive come back on another as stock markets soars for another day. DOW opens sharply higher and reaches as high gain more than 400 pts following announcement of US Government's market rescue plan and banning of short selling of nearly 800 financial stocks. Yen crosses finally get out of hesitation and surged sharply across the board, confirming a short term reversal. While the greenback maintains strength in USD/JPY, it gives back earlier gains against other majors currencies as Euro, Sterling, Aussie and Canadian dollar are boosted in yen crosses. USD/JPY Mid-Day OutlookDaily Pivots: (S1) 104.36; (P) 105.07; (R1) 106.12; More. USD/JPY's rally from 103.54 extends further to as high as 108.02 in early US session and is now pressing 107.97 resistance. At this point, intraday bias remains on the upside as long as 106.63 minor support holds. Decisive break of 107.97 will confirm that decline from 110.66 has completed at 103.54 after drawing support form 103.76 support. In other wise, whole medium term rebound is possibly in still force and further rally should be seen to retest 110.66 high first. On the downside, below 106.63 will turn intraday outlook neutral. In the bigger picture, the failure to sustain below 103.76 support and subsequent strong rebound from there argues that fall from 110.66 is corrective in nature. In other words, medium term rebound from 95.77 might still be in progress. Break of 107.79 will affirm this case and bring retest of 110.66 high first. Break will confirm medium term rebound from 95.77 has resumed. However, once again, note bearish divergence condition in daily MACD and USD/JPY is still limited below 55 days EMA. Break of 103.76 will revive the case that medium term rebound from 95.77 has completed at 110.66. The three wave structure of the rise from 95.77 to 110.66 argues that it's merely a correction in the larger down trend. Hence, in such case, deeper medium term decline should be seen to retest this 95.77 low.
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Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:45 | NZD | New Zealand Current account (nzd) Q2 | -3.19B | -3.50B | -2.16B | -2.11B |
| 5:00 | JPY | Japan Leading indicators Jul F | 91.4 | 91.6 | 91.6 | |
| 6:00 | EUR | Germany PPI M/M Aug | -0.60% | -0.40% | 2.00% | |
| 6:00 | EUR | Germany PPI Y/Y Aug | 8.10% | 8.40% | 8.90% |
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Brown Faces Mutiny as His Cabinet Members Jostle
By Mark Deen and Gonzalo Vina
Sept. 19 (Bloomberg) -- As U.K. Prime Minister Gordon Brown tries to put down a mutiny, 15,000 Labour Party activists and lawmakers gather in Manchester tomorrow with their eyes on potential successors.
Calls by more than a dozen Labour lawmakers this week for a vote to replace Brown have put Cabinet newcomers David Miliband and Ed Balls on the spot as they jostle with Jack Straw, Alan Johnson and other leadership elders for backing should Brown be forced out.
``These relatively young ministers are well regarded by their colleagues, though the public find it quite hard to pick out any of them from the pack,'' said Andrew Cooper, chief executive officer of pollster Populus Ltd. ``They need to start changing that now because time will rapidly catch up with them.''
At the five-day annual conference, the ministers will walk a tightrope. They have to display loyalty to Brown, 57, while signaling readiness to take his job as David Cameron's Conservative Party enjoys its highest popularity ratings since Margaret Thatcher's third term 20 years ago.
Ministers who stray from their assigned policy areas to articulate a wider vision in speeches and back-room wrangling may be seen as challenging Brown.
``There are huge dangers,'' said Andrew Hawkins of pollster ComRes. ``We know what happens to the person who wields the knife.''
Heseltine's Lesson
In 1990, after Conservative minister Michael Heseltine orchestrated Thatcher's exit, he was portrayed as a hatchet man in the press, and the Conservatives picked John Major to replace her.
Rising unemployment, collapsing home prices and this month's worldwide market turmoil have complicated things for successor hopefuls. Brown helped broker the takeover of HBOS Plc by Lloyds TSB Plc to avert the collapse of Britain's largest mortgage lender in the wake of Lehman Brothers Holdings Inc.'s bankruptcy.
Brown says his decade as finance minister makes him the best person to lead Britain through the slump, and today pledged to coordinate action with other countries to restore stability to world markets.
``The government appears to be imploding just when bold leadership is needed,'' said Ben Read, senior economist at the Centre for Economics and Business Research in London. ``Any talk of replacing the prime minister will be taken very badly.''
Labour Concerns
Cabinet members are under pressure from lawmakers who are concerned that they'll lose their seats in the next election, which must be called by 2010, unless Brown is replaced. Brown this week fired three lawmakers from government posts after they called for a leadership vote.
A survey published in today's Independent newspaper showed 54 percent of 788 Labour members want Brown to quit, and 45 percent said a change of leader would improve the party's chances.
Striking the right tone will be trickiest for Foreign Secretary Miliband, 43, because he wrote in the Guardian newspaper July 30 that the Labour Party must offer ``real change.'' The piece, which didn't mention Brown, was interpreted by lawmakers as an attempt to test the waters for a leadership bid.
``Miliband has got to be very careful,'' said Wyn Grant, a professor of politics at Warwick University. ``Anyone who wants to be prime minister will have to appear very loyal at the conference and not rock the boat.''
Miliband's Rise
The son of an academic who started his career in a research institute, Miliband obtained his degree at Oxford University. He served as an adviser to Tony Blair when he was prime minister and Miliband joined his Cabinet in 2006. Brown appointed him to his current position last year, making him Britain's youngest foreign secretary since the 1970s.
Miliband has said he doesn't favor a leadership contest, though he didn't rule out running if there is one. The minister was favored by the biggest percentage of adults surveyed by the Independent, 24.6 percent, in the event that Brown stands down.
A premiership bid by Miliband would expose divisions between Labour's old guard -- including the unions that provide most of its funding and are pushing to raise taxes on the wealthy -- and its intellectuals, who want to keep Britain attractive for investors.
`Crazy, Destructive'
``Why should we elect a young fresh face when we have already got one in Cameron with policies that are not dissimilar,'' Derek Simpson, joint general secretary of Unite, Britain's largest union, said Sept. 7.
Balls, 41, another potential successor, last year became schools secretary. Also an Oxford graduate, he wrote for the Financial Times' before entering politics. On Sept. 1, he said ousting Brown would be ``crazy, destructive and divisive.''
A divided party could turn to Health Secretary Johnson, 58, or to Justice Secretary Straw, 62, who has been in politics since the 1970s.
``Straw is seen as a safe pair of hands,'' said Mark Wichham-Jones, a Bristol University professor and author of a book on the Labour Party. ``Johnson is an old union man.''
The potential successors barely register on the public's radar. Among the 2,144 voters surveyed by YouGov Plc, Straw was seen as the best next leader, with 14 percent support. Miliband got 12 percent.
``A large minority of people have a vague sense of the name David Miliband,'' Cooper said. ``Do they have an informed view of what he's like? No, let alone the more remote figures.''
To contact the reporters on this story: Mark Deen in London at markdeen@bloomberg.net; Gonzalo Vina in London at gvina@bloomberg.net
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