IMF Says World Economy Will Contract in 2009

By Nasreen Seria

March 10 (Bloomberg) -- Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said the global economy will contract this year and warned that growth will be the worst “in most of our lifetimes.”

The slump in global trade and commodity prices will hurt poor countries, increasing the threat of political conflict and even war, Strauss-Kahn said in a speech to African central bank governors and finance ministers in Dar es Salaam, Tanzania today.

“The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes,” Strauss- Kahn said. “Continuing deleveraging by world financial institutions, combined with the collapse in consumer and business confidence is depressing domestic demand across the world.” He called the crisis a ‘great recession.’

The IMF had forecast in January that the global economy would expand 0.5 percent this year. The World Bank said in a March 8 report that the international economy was likely to shrink for the first time since World War II, and trade will decline by the most in 80 years.

European governments from Dublin to Athens have committed more than 1.2 trillion euros ($1.5 trillion) to protect their banking systems and leaders pledged to spend a combined 200 billion euros to try and lift their economies out of the worsening slump. The U.S. is spending $787 billion on an economic stimulus package to revive its economy.

To contact the reporter on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net

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EU Ministers to Tell Germany to Cut Spending Starting in 2011

By Rainer Buergin and Meera Louis

March 10 (Bloomberg) -- The next government in Germany, Europe’s largest economy, should start to cut spending by 2011 at the latest to help achieve a balanced budget, European Union finance ministers will say today, according to a draft document obtained by Bloomberg News.

After conducting “expansionary” fiscal policy this year and next to combat its deepest recession since World War II, Germany should “reverse the fiscal stimulus in order to support significant budgetary consolidation,” the EU finance chiefs say in the document, which will be discussed at a meeting in Brussels today.

As the global financial and economic crisis intensified, European governments pumped billions of euros into their economies in an effort to revive growth, swelling budget deficits. The EU forecasts the 27-nation bloc’s overall budget shortfall will more than double this year to 4.4 percent of gross domestic product, the biggest in at least 13 years.

Chancellor Angela Merkel’s government forecasts the German budget, which was almost balanced last year, will show a deficit of 3 percent of GDP in 2009 and 4 percent next year. To reduce new borrowing, the government to be formed after the Sept. 27 elections should implement a planned budget rule for the federal level and the nation’s 16 states that seeks to bring the combined budget close to balance, according to the EU document.

Public Finances

Finance Minister Peer Steinbrueck said yesterday the government is “not discussing any additional measures” to support the economy, highlighting his concern that public finances may become unsustainable. The government last month more than doubled the fiscal-stimulus package to about 80 billion euros ($101 billion), including tax cuts and subsidies to encourage consumers to buy new cars.

German unemployment rose in February for a fourth straight month as falling exports and the worsening recession prompted companies to cut production and fire workers. Heidelberg-based Heidelberger Druckmaschinen AG, the world’s biggest printing- press maker, is cutting 2,500 jobs amid a slump in demand from customers hurt by the financial crisis.

Ludwigshafen-based BASF SE, the world’s largest chemical company, reported its first quarterly loss in seven years last month and is closing plants and shrinking its workforce to preserve cash and counter deteriorating markets. ThyssenKrupp AG, Germany’s largest steelmaker, plans to halt one of its four active blast furnaces as orders tumble, spokesman Erwin Schneider said on March 5.

Steel Production

German raw iron and steel production plunged in February as industrial output fell and manufacturing orders extended the worst decline on record. The International Monetary Fund expects the German economy to contract 2.5 percent this year, its worst postwar performance.

The deepening slump has pushed yields on German bonds lower even as spending increased. The yield on the benchmark two-year note closed yesterday at 1.27 percent, down from 2.27 percent in December. The price of the 2.25 percent security due in December 2010 finished yesterday at 101.69 euros.

The euro has slid 10 percent against the U.S. dollar so far this year after a 4.3 percent drop in 2008. The 16-nation common currency traded at $1.2637 as of 10:43 a.m. in Tokyo today, down from a record $1.60 last April.

As Germany’s elections approach, growing concern that job losses will increase is turning voters away from the parties in Merkel’s coalition of Christian Democrats, their Christian Social Union sister party and the Social Democratic Party, surveys show.

Forsa Poll

Support for the CDU/CSU dropped one percentage point to 33 percent, according to a Forsa poll released on March 4. That’s more than two points below their score in the 2005 election that forced Merkel into a coalition with the Social Democrats.

The Social Democrats, Merkel’s rivals in the Sept. 27 vote, rose one point to 24 percent support. That is still 10 points below their 2005 score. In a separate Forsa poll, 84 percent of respondents said they are either very or somewhat worried about rising state debt.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

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Saudi Aramco Maintains Japan Oil Supply Reductions

By Shigeru Sato and Yuji Okada

March 10 (Bloomberg) -- Saudi Aramco maintained cuts in contracted supplies of oil to Japan in April, refinery officials said, fueling speculation OPEC’s largest producer may not urge a further reduction in crude output when the group meets March 15.

The Dhahran, Saudi Arabia-based producer will lower shipments to Japanese processors including Nippon Oil Corp. and Idemitsu Kosan Co. by between 11 percent and 14 percent from levels agreed under annual contracts, said officials at three refiners who received notices from the company late yesterday. The April cuts match the size of the reduction in shipments the previous month, the officials said. They asked not to be identified because of confidentiality agreements.

The Organization of Petroleum Exporting Countries will decide whether to trim the group’s output for a fourth time when ministers gather in Vienna on March 15. Crude oil rose for a third day in New York, trading near the highest levels for two months on signs lower OPEC output is lowering global supplies.

“The Saudis seem to have avoided a deeper reduction in April supplies to Japan, hinting that the kingdom may oppose an additional reduction,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo.

Some Japanese refiners had expected a cut of more than 15 percent in April supplies, the officials said, citing recent sluggish demand for fuels in Asia. April will be the fifth month in which Saudi Aramco’s shipments to Japan have been below contracted levels.

OPEC will announce another cut in production when it meets March 15, said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York. “OPEC has stopped the development of large surpluses and is responsible for a tightening of supply. The signs are that they have already decided to announce an additional cut.”

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net.

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Zombies of Regulation Awaken From 8-Year Sleep: Cindy Skrzycki

By Cindy Skrzycki

March 10 (Bloomberg) -- For business lobbyists, U.S. regulators are becoming like the zombies in George Romero’s horror flick, “Night of the Living Dead”: relentless, merciless and everywhere.

Not since President Franklin Roosevelt sat in the Oval Office has business faced so much prospective regulation from so many directions at once. While the Bush administration offered regulatory cooperation with business on many issues, the Obama White House is moving to advance rules that fulfill campaign promises and deal with global warming, health-care costs and the collapse of the economy.

Add to this a Democratic Congress that is scheduling hearings daily on plans to provide new worker protections, punish financial misdeeds and regulate even the cigars stuck between the lobbyists’ clenched teeth.

“The return of the regulator is driven by the economic crisis, and it meshes with the political culture in town today,” said Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce.

That means some of the regulatory initiatives that were buried or moderated by Bush will be back. The biggest-ticket item is a rule intended to prevent repetitive-stress injuries in the workplace, an initiative that was killed off by special legislation in 2001. Labor groups and congressional committees already are considering strategy for achieving the goal, perhaps by pushing for regulations industry-by-industry.

Another rule being examined is a Labor Department standard that allows employees to take time off from work to attend to sick relatives or to deal with other family problems. Employers succeeded in the last administration in making it harder for workers to take the leave. The regulation is likely to be expanded to cover more workers under President Barack Obama and Democratic proponents in Congress.

‘Strengthen It’

“We need to look at the rule and strengthen it so it does what it was intended to do,” said Representative Lynn Woolsey, a California Democrat and the chairman of the House Education and Labor subcommittee on workforce protections.

Environmental groups are pushing for reinstatement of a 1987 rule that allows the Environmental Protection Agency to collect from companies extensive information about chemical pollution. Two years ago, the Bush administration reduced how much information had to be submitted to the government and the public.

Last week, the Obama administration reversed an Interior Department rule adopted in December 2008 that eliminated consultation with scientists about whether federally funded development would harm an endangered species.

“That barn door is open and the rules are flowing out,” said Thomas Sullivan, an attorney with Nelson Mullins in Washington who formerly worked in the Bush administration.

Submit Plans

The administration also moved ahead with setting new corporate fuel-economy standards, asking vehicle manufacturers to submit future product plans through the 2020 model years.

“This will indeed be a new day in some respects,” said Rick Melberth, director of federal regulatory policy for OMB Watch, a non-profit watchdog group in Washington.

“Regulation is a critical government function,” Melberth said. “If they are going to tackle the big problems, legislation just doesn’t get it done. You have to have implementation.”

Rules that were in process, and never made it though the pipeline, will start to move. These include reducing worker exposure to silica at excavation sites and to diacetyl, the chemical used to give a buttery flavor to microwave popcorn.

Last month, legislation was introduced that would require the Occupational Health and Safety Administration to regulate industrial dusts, such as sugar dust, that can build up to hazardous levels and explode. The legislation is in response to several fatal accidents.

‘A Pendulum Shift’

“All of these things have been in a state of constipation over the last eight years,” said Baruch A. Fellner, a management attorney partner in Gibson, Dunn & Crutcher’s Washington, D.C. office. “It’s definitely a pendulum shift.”

The new administration also is putting its money where its mouth is. The Obama 2010 budget plan signaled that it wanted more funds for new rules and enforcement at the Securities and Exchange Commission, the Labor Department and the EPA -- all big regulators.

“EPA is back on the job,” said Lisa Jackson, the new head of the agency declared last month. The Obama administration proposed $10.5 billion for the EPA, an increase of $3 billion from the 2008 funding levels and the largest in the agency’s 39- year history.

The public’s doubt about the safety of products such as pet food and peanut butter is another powerful incentive to regulate.

Ramped Up

Right after she became SEC chairman, Mary Schapiro told the Practising Law Institute, a non-profit legal education organization in New York, that the agency’s regulatory functions would be ramped up immediately.

“In addition to our enforcement priorities, the commission will of course also have a full plate when it comes to our policy and rulemaking agenda,” said Schapiro, singling out improving the quality of credit ratings, regulating centralized clearinghouses for credit default swaps, strengthening oversight of broker-dealers and investment advisers, and improving the quality of audits for nonpublic broker-dealers.

Considering the state of the economy, the National Association of Manufacturers is urging caution.

“A tipping point could be a 1 percent incremental increase in costs which an agency like the EPA might not think is significant,” said Rosario Palmieri, NAM vice president of regulatory policy. “We hope that we only do what is absolutely necessary to protect human health and safety.”

(Cindy Skrzycki is a regulatory columnist for Bloomberg News. She can be reached at cskrzycki@bloomberg.net)

For Related News and Information:

To contact the writer of this column: Cindy Skrzycki at cskrzycki@bloomberg.net.

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CNPC to Cut Oil, Gas Lifting Costs, Project Spending

By Winnie Zhu

March 10 (Bloomberg) -- China National Petroleum Corp., the nation’s biggest oil and gas producer, plans to cut extraction costs, project spending and overseas travel this year as slowing economic growth erodes fuel demand.

The company’s oil and gas lifting costs will be reduced by at least 5 percent from a year earlier and spending on projects will be cut by more than 10 percent, the Beijing-based company said in a statement in its newsletter China Oil News today. The budget for overseas business travel and car purchases will be lowered by at least 10 percent, it said.

China’s economy, which expanded 6.8 percent in the fourth quarter, may grow 6.7 percent in 2009, the smallest gain in almost two decades, according to the International Monetary Fund. China National’s cost-cutting efforts follow similar moves by oil producers including Total SA and BP Plc as the global recession damps demand and after oil prices fell more than 70 percent from a record in July 2008.

The oil producer, the parent of Hong Kong-listed the parent of PetroChina Co., didn’t give exact cost figures in the statement. PetroChina’s oil and gas lifting cost was $7.75 a barrel in 2007, up 15 percent from a year earlier, it said on March 19.

China National will reduce the use of electricity and water by more than 5 percent this year, it said in today’s statement. The company will encourage teleconferences, ban off-site meetings and won’t construct any new buildings until 2010, it said.

China National said Dec. 16 that market uncertainties and the slowing global economy will make 2009 a “difficult year.” The state oil producer plans to cut oil and gas output this year from 2008 levels, Vice President Yu Baocai said March 7.

Oil prices in New York traded at $47.18 a barrel at 11:24 a.m. in Singapore. Prices have fallen from a record $147.27 reached on July 11 last year. China National expects crude oil prices to average $40 a barrel in 2009, Vice President Yu said March 7.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net

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Pertamina May Import 5 Million Barrels of Gasoline in April

By Bambang Dwi Djanuarto

March 10 (Bloomberg) -- PT Pertamina, Indonesia’s state- owned oil company, plans to import 5 million barrels of gasoline in April, Marketing Director Achmad Faisal said.

Pertamina is seeking to draw down its diesel stockpiles, Faisal said in a telephone interview from Jakarta today. The company holds inventories equivalent to 35 days of consumption and is trying to lower that to 25 days.

The refiner is in negotiations to sell 30,000 kiloliters of diesel fuel to PT Aneka Kimia Raya Corporindo Tbk, Faisal said.

To contact the reporter on this story: Bambang Dwi Djanuarto in Jakarta at bbjakarta@bloomberg.net

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Hedge Funds May Cut a Record 20,000 Jobs as Losses Erode Fees

By Katherine Burton and Saijel Kishan

March 10 (Bloomberg) -- Hedge funds may cut 20,000 workers worldwide this year, a record 14 percent of the industry’s jobs, as investment losses and client withdrawals erode fees.

The dismissals will come on top of the 10,000 jobs that disappeared last year at the investment partnerships, according to estimates by New York-based Options Group, an executive-search firm. Employment peaked at 155,000 in 2007, and has since dropped to about 145,000, the firm said.

“Hiring activity is much reduced and it’s going to get worse,” said Hank Higdon, managing partner at Higdon Partners LLC, a New York-based search firm focused on financial services. “I don’t see markets improving at all.”

About 920 hedge funds, or 12 percent, closed last year, according to data compiled by Chicago-based Hedge Fund Research Inc. Of the 6,800 single-manager funds that remain, 70 percent lost money in 2008, meaning they can’t resume collecting performance fees until the losses are recouped. Those fees, generally 20 percent of investment profits, are the primary source of cash used to pay bonuses.

Hedge funds eliminated about 6.5 percent of jobs last year, when client assets fell 37 percent to $1.2 trillion from their peak in June, according to Hedge Fund Research. Banks and brokers have fired more than 272,450 workers, or 5.9 percent of their payrolls, since mid-2007, according to data compiled by Bloomberg.

Hedge-fund assets may fall an additional $250 billion, or 21 percent, this year, estimates Huw van Steenis, a financial- services analyst at Morgan Stanley in London. That would leave hedge funds, which cater to wealthy individuals and institutions, overseeing about $950 billion, the lowest since 2004.

Citadel, SAC Capital

Last year, Citadel Investment Group LLC, the Chicago-based firm run by Kenneth Griffin, cut about 150 people, or 11 percent of its workforce, as it exited investment areas including emerging markets and reinsurance. Griffin, 40, still employs 1,200 people at the firm, which manages $12 billion, and is hiring in its market-making business. The firm’s biggest funds lost about 55 percent in 2008.

Steve Cohen’s SAC Capital Advisors LP, based in Stamford, Connecticut, cut 100 people, or 13 percent of its staff. The reductions included fixed-income traders as Cohen, 52, scaled back bond investing in favor of trading stocks. He manages $12 billion.

There are some pockets of hiring, recruiters said.

Higdon Partners this year helped Breeden Capital Management LLC find a portfolio manager in London for its European stock fund. The Greenwich, Connecticut-based firm is run by Richard Breeden, former head of the U.S. Securities and Exchange Commission. Higdon also worked with New York-based Cantillon Capital Management LLC, founded by William von Mueffling, to hire a sales and marketing executive.

High-Frequency Trading

“Some funds are looking for investment people, maybe better analysts or portfolio managers,” said Higdon. There’s also a limited demand for distressed-debt managers, risk specialists, and marketing and sales people to help replace assets that were lost last year.

Several hedge funds are also looking for “high-frequency” traders, according to Brian Grover, founder of New York-based recruiting firm Broadreach Group.

High-frequency trading uses computer programs to buy and sell securities for time periods as short as 10 minutes. In volatile markets, such dealing can be profitable. Misha Malyshev, who was head of high-frequency trading at Citadel, quit last month after he helped to generate returns of 40 percent in 2008.

Hedge funds are also taking a longer time to fill the few positions they have, recruiters said.

“The hiring process is turning back to the 1990s, when candidates had 15 to 30 interviews before being hired,” said Michael Karp, chief executive officer of Options Group.

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net

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Indonesia Rupiah Gains on Speculation Central Bank Intervening

By Lilian Karunungan

March 10 (Bloomberg) -- Indonesia’s rupiah, the worst- performing currency in Asia over the past three months, rose on speculation the central bank will intervene to slow the decline.

Bank Indonesia Governor Boediono said on March 6 that the nation’s foreign-exchange reserves increased to $53.7 billion after the government sold $3 billion in overseas bonds. Deputy Governor Hartadi Sarwono said last week the central bank doubled a currency swap deal with Japan to $12 billion in February.

“There is positive sentiment on the rupiah,” said Lindawati Susanto, head of currency trading at PT Bank Resona Perdania in Jakarta. “We know that the central bank is in the market to guard the volatility.”

The rupiah strengthened 0.7 percent to 12,003 per dollar as of 1:19 p.m. in Jakarta, compared with 12,090 on March 6, according to data compiled by Bloomberg. Local markets were shut yesterday for a holiday. Central banks intervene by arranging purchases or sales of currencies to influence exchange rates.

Bank Indonesia wants to expand its currency swap agreements to include Australia and the U.S., moves that may help bolster confidence in the rupiah as exports slump, Sarwono said.

The currency dropped about 9 percent in the past three months, the biggest loss among Asia’s 10 most-used currencies.

Non-deliverable forwards contracts signal traders are betting the rupiah will fall 1.2 percent to 12,145 per dollar in a month, compared with expectations for a rate of 12,225 yesterday. Forwards are agreements in which assets are bought and sold at current prices for delivery at a future specified time and date.

Bonds Fall

Ten-year government bonds declined, after gaining last week when the central bank lowered its benchmark interest rate by 50 basis points to 7.75 percent. A basis point is 0.01 percentage point.

“Although secondary market yields on the 10-year bond might look attractive to domestic buy-hold investors, demand would be limited as the long-end is still viewed as prone to foreign outflows,” said Helmi Arman, a bond strategist at PT Bank Danamon in Jakarta.

The yield on the 11.5 percent note due September 2019 rose 7 basis points to 13.95 percent, according to midday prices at the Inter Dealer Market Association. The price declined 0.3556, or 3,556 rupiah per 1 million rupiah face amount, to 86.7160.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

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Taiwan Dollar Rises as Drop in Exports Slows; Bonds Decline

By Bob Chen and Yu-huay Sun

March 10 (Bloomberg) -- Taiwan’s dollar rose by the most in more than two months after a government report late yesterday showed a contraction in exports slowed in February and as stocks gained. Bonds fell.

The currency touched a two-week high as the 29 percent drop in overseas sales was less than in the previous two months and a record 44 percent plunge in January, the Ministry of Finance said after markets closed. Taiwan’s Taiex index of shares gained 0.6 percent, rising for the fifth time in six days.

“You can take the last few months as indicating that the plunge is bottoming out,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “At least exports are no longer in free fall. Clearly it’s a serious recession, there’s no escaping that, and the Taiwan dollar will slip a little further.”

Taiwan’s dollar gained 0.5 percent to NT$34.64 as of 11:31 a.m. local time, according to Taipei Forex Inc. It reached NT$34.623, the strongest level since Feb. 23. It touched a seven- year low of NT$35.297 on March 3. A decline to NT$38 this year “is certainly” possible, Cohen said.

Taiwan Memory Co., the company being formed by the government to reorganize the island’s chip industry, may receive as much as NT$30 billion ($866 million) in state funds, John Hsuan, who was appointed last week to oversee the formation of the company, told reporters in Hsinchu, Taiwan.

Bonds Fall

Taiwan’s 10-year bonds fell for the first time in three days on speculation the government will increase debt sales as tax revenue falls.

The Economic Daily News reported today that Taiwan expects tax collections to fall by NT$100 billion because of the financial crisis, citing Minister of Finance Lee Sush-der.

“The market is affected by the news that the finance ministry said the government’s income may be falling,” said Chen Hung-hsiu, a bond trader at Grand Cathay Securities Corp. in Taipei. “Everybody knows the amount of bonds to be sold will remain an issue.”

The yield on the 1.375 percent bond maturing March 2019 climbed three basis points to 1.56 percent, according to Gretai Securities Market, Taiwan’s biggest exchange for bonds. Its price fell 0.2897, or NT$289.7 per NT$100,000 face amount, to 98.2749.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Yu-huay Sun in Taipei ysun7@bloomberg.net

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Malaysian Ringgit Gains as Stimulus May Spur Growth; Bonds Fall

By David Yong

March 10 (Bloomberg) -- Malaysia’s ringgit rose to the strongest this month on optimism a second public spending program to be announced in parliament today will help prevent the economy from slipping into a recession. Bonds declined.

The currency declined 2.3 percent over the past three months even after Deputy Prime Minister Najib Razak implemented a $1.9 billion package announced in November. The new spending may be as much as 35 billion ringgit ($9.4 billion), Agence France-Presse reported March 8, citing a government official it didn’t identify.

“The stimulus will help the economy and the key is not so much the amount but the implementation,” said Zulkifli Hamzah, head of research at MIDF Amanah Investment Bank Bhd. in Kuala Lumpur. “It may take time to remove the gloom in the economy and the ringgit.”

The ringgit gained 0.4 percent to 3.7015 per dollar as of 12:42 p.m. in Kuala Lumpur, from 3.7175 on March 6, according to data compiled by Bloomberg. Financial markets were closed yesterday for a public holiday.

Government reports over the past month showed the nation’s exports shrank for a fourth month in January and industrial production slumped in December by the most in more than 6 1/2 years. Bank Negara Malaysia has slashed its overnight policy rate to a record low of 2 percent from 3.5 percent in three meetings since November. The Southeast Asian economy may shrink this year amid a slump in global demand, it said on Feb. 24.

Bonds Tumble

Bonds tumbled, pushing benchmark five-year yields to the highest in four months, on speculation the government will sell more debt to fund its extra spending.

The yield on the 5.094 percent note due in April 2014 jumped 15 basis points to 3.75 percent in Kuala Lumpur, according to Bursa Malaysia. The price dropped 0.707, or 7.07 ringgit per 1,000 ringgit face amount, to 106.22. A basis point is 0.01 percentage point.

“The bond and rates markets are bearing the brunt of market speculation about the size of the stimulus, some of which are on the extreme side,” said Suresh Kumar Ramanathan, a strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “This increased the worry about the government’s ability to finance the stimulus package.”

The finance ministry will sell an additional 4.5 billion ringgit of the 2014 notes in an auction on March 12, the single biggest offering since it sold 5 billion ringgit of three-year notes in June 2004.

The sale will take this year’s tally to 20 billion ringgit, the busiest start to a year since at least 1999, according to data published by the central bank. The government sold a record 60 billion ringgit of bonds in 2008.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.

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Baht Gains as Stocks Rise, Central Bank May Ease Export Rules

By Shanthy Nambiar

March 10 (Bloomberg) -- Thailand’s baht advanced on speculation gains in the nation’s stock market will help attract global funds.

The baht trimmed this year’s loss to 3.8 percent as the SET Index of stocks advanced as much as 0.8 percent today. The Bank of Thailand may ease “some foreign exchange rules to help facilitate exports,” Suchada Kirakul, an assistant governor, said yesterday, without providing details.

“Offshore players are selling dollars to buy baht,” said Chatchawan Jumruswittayawong, a foreign-exchange trader at Bank of Ayudhya Pcl in Bangkok. “The stock market has moved up a little bit. It’s in line with other markets in the region.”

The baht rose 0.2 percent to 36.08 as of 10:40 p.m. in Bangkok, according to data compiled by Bloomberg. The currency will end the year at 35.80, according to the median estimate of 23 analysts surveyed by Bloomberg News.

The currency isn’t “that volatile,” and is moving “in line” with other currencies in Asia, Suchada said. “The inflows and outflows are quite balanced,” she said.

Thailand’s overseas sales, which account for 70 percent of gross domestic product, plunged 25 percent in January from a year earlier, according to the central bank. Reduced shipments curbed exporters’ demand for baht.

To contact the reporter on this story: Shanthy Nambiar; in Bangkok at snambiar1@bloomberg.net

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Korean Won Gains Most in 2 Months on Foreigner Share Purchases

By Kim Kyoungwha

March 10 (Bloomberg) -- South Korea’s won rose for a third day versus the dollar, extending its rebound from an 11-year low, as overseas investors bought more local shares than they sold.

The advance, the biggest in almost two months, was also supported by speculation policy makers sold dollars to bolster the currency, Asia’s worst performer this year. The Kospi stock index gained 1.9 percent, climbing in tandem with equity benchmarks across most of the region’s emerging markets.

“There are offshore players who are selling dollars for the won after an excessive overshoot in the exchange rate in recent weeks,” said Roh Sang Chil, a currency dealer with Kookmin Bank in Seoul. “Rising stocks are lending support to the currency market. From April, we’ll see the overall situation improving.”

The won rose 2.5 percent to 1,511.50 per dollar as of 3 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency has dropped 17 percent so far this year and touched 1,597 on March 6, the lowest since 1998.

The Bank of Korea said today the bank’s foreign-exchange reserves are liquid and cashable whenever needed, rebuffing speculation that they can’t be mobilized immediately. The bank said it skipped a weekly auction to supply dollars to local lenders, a sign a shortage of the U.S. currency may be easing.

South Korean banks had $92.6 billion of foreign debt as of Jan. 31, including $38.3 billion maturing by the end of this year, according to data provided on Feb. 27 by the Bank of Korea. The foreign debt included loans, bonds and other securities, the central bank said.

Dividend Season

The won may come under renewed pressure this month as banks pay foreign debt and overseas shareholders repatriate dividend payments from Korean companies, said Lim Ji Won, a currency dealer with JPMorgan Chase & Co. in Seoul. South Korea’s economy may shrink 4.5 percent this year, Goldman Sachs Group Inc. said today, revising an earlier forecast for a 1 percent contraction.

“Without the government’s action, the won still remains vulnerable,” Lim said. “In addition, March is a typical month in which the market sees seasonally high demand for dollars linked to dividend payments.”

The yield on benchmark three-year government bonds fell 2 basis points, or 0.02 percentage points, to 3.64 percent, while the five-year bond yield rose 2 basis points to 4.63 percent, according to Korea Financial Investment Association.

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

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Australian Dollar Rises From One-Week Low; N.Z. Dollar Declines

By Candice Zachariahs

March 10 (Bloomberg) -- The Australian dollar rose from a one-week low as stock gains revived demand for the currency. New Zealand’s dollar slipped on speculation policy makers will cut the country’s interest rates from a record low.

Australia’s currency also climbed as a gauge of commodities shipping costs yesterday advanced to the highest since Oct. 9. Gains in the currency were limited before a report this week economists say will show unemployment climbed to the highest since April 2006. The Reserve Bank of New Zealand may reduce borrowing costs the same day, according to a Bloomberg survey.

“The equity market has recovered nicely after a big sell- off at the open, helping the Australian dollar,” said Jim Vrondas, manager of corporate business at online foreign- exchange dealer OzForex Ltd. in Sydney. The currency “will likely face stiff resistance around the 64 U.S.-cent mark,” he said.

Australia’s dollar fell as low as 63.07 U.S. cents, the weakest since March 4, before trading 0.6 percent higher at 63.86 cents as of 4:34 p.m. in Sydney from 63.49 cents late in Asia yesterday. The currency rose 0.5 percent to 63.12 yen.

New Zealand’s dollar slid as low as 49.15 U.S. cents, also the weakest since March 4, before trading down 0.1 percent at 49.72 cents. It bought 49.15 yen from 49.24.

Australia’s S&P/ASX 200 Index advanced for a second day after earlier falling as much as 1 percent. The Baltic Dry index rose for a seventh day yesterday, signaling there may be stronger demand for commodities that account for more than half of Australia’s exports.

Interest Rates

The Australian and New Zealand dollars earlier weakened as U.S. stocks yesterday extended the worst weekly slump in the Standard & Poor’s 500 Index since November, after Warren Buffett said the economy “has fallen off a cliff.”

New Zealand’s dollar may extend losses before a meeting where economists estimate the central bank will lowers rates by at least half a percentage point to 3 percent, according to a survey of 13 analysts by Bloomberg News. Australia’s central bank held rates unchanged at 3.25 percent on March 3.

The “real vulnerability” for New Zealand’s dollar is if it falls through 49.10 cents, “opening up further downside towards 47.50,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne.

Higher interest rates in Australia and New Zealand, compared with as low as zero in the U.S. and 0.1 percent in Japan, attract investors to the South Pacific nations’ assets. The risk is currency market moves will erase profits.

Jobs, Sentiment

Australia’s dollar earlier fell after reports showed business confidence held near an all-time low in February and job-vacancy advertisements dropped by a record.

The number of people employed probably fell by 20,000 and the unemployment rate likely rose to 5 percent in February, according to economists surveyed by Bloomberg News before the March 12 reports.

Australian government bonds fell for the first day in three. The yield on 10-year notes rose 15 basis points, or 0.15 percentage point, to 4.26 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 1.25, or A$12.50 per A$1,000 face amount, to 107.97.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.16 percent from 3.18 yesterday.

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

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Yuan Needs 3% Gain to Stop Exit of ‘Hot Money,’ Researcher Says

By Judy Chen

March 10 (Bloomberg) -- China should let the yuan rise 3 percent against the dollar in 2009 to deter capital outflows and help the country make overseas acquisitions, said Wang Jian, a researcher affiliated with the nation’s top planning agency.

China’s foreign-exchange reserves grew by the least in more than four years in the fourth quarter as sliding exports prompted traders to step up bets on yuan depreciation. People’s Bank of China Governor Zhou Xiaochuan pledged last week to maintain yuan stability as investors pull money out of emerging- market assets because of slowing global economic growth.

“A weaker currency will prompt massive amounts of foreign capital to flee the country,” said Wang, secretary general of the China Society of Macroeconomics, a Beijing-based research institute under the National Development and Reform Commission that advises the government. “It won’t help exports. Foreign consumers still won’t have enough money to buy.”

At least $1 trillion of “hot money” may have entered China, Wang estimated, as the yuan gained 21 percent against the dollar since the central bank ended a fixed exchange rate in July 2005. Depreciation would risk spurring a sudden exit of those funds, causing turmoil in the financial system, he said in an interview yesterday.

The currency, which dropped 0.25 percent this year, closed at 6.84 per dollar yesterday in Shanghai, according to the China Foreign Exchange Trade System. Yuan 12-month non-deliverable forwards show traders are betting it will fall 1.7 percent to 6.96 in a year.

Attracting Capital

China should allow a “moderate” appreciation this year as the country seeks to diversify its $1.95 trillion in foreign- exchange reserves from U.S. Treasuries, according to Wang. Chinese investors held $696 billion of U.S. Treasuries as of Dec. 31, an increase of 46 percent from the prior year.

“A 3 percent in appreciation would attract more foreign capital into China to help us acquire assets overseas,” said Wang. “We should take advantage of the low prices and use reserves to buy more commodities, oil fields and valuable assets in the U.S.”

The Reuters/Jefferies CRB Index that tracks 19 commodities dropped 56 percent from a record high of 473.97 reached in July. Oil prices fell 68 percent from July’s all-time peak of $147.27 a barrel.

Merrill Lynch & Co.’s U.S. Treasury Master index shows the securities declined 0.5 percent last month, after falling 3.1 percent in January, as President Barack Obama sells record amounts of debt to fund his $787 billion bailout. Increased issuance of U.S. currency to help fund stimulus spending may also weaken the dollar, Wang said.

“If President Obama can’t raise enough money by selling government debt to save the economy, he will probably print more dollars, which will lead to declines in the U.S. dollar,” Wang said.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net;

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Asian Currencies Gain, Led by Won, Taiwan Dollar as Stocks Rise

By Kim Kyoungwha

March 10 (Bloomberg) -- Asian currencies strengthened, led by South Korea’s won and the Taiwan dollar, as stock gains helped draw funds to emerging markets.

The Korean currency strengthened for a third day, extending its rebound from an 11-year low, and Taiwan’s dollar rose as MSCI’s benchmark of regional stocks outside Japan climbed from a three-month low. U.S. shares slumped yesterday after Warren Buffett said the nation’s economy “has fallen off a cliff” and the World Bank predicted a global contraction.

“Emerging-market currencies in Asia and elsewhere are in for a brief rebound,” said Dariusz Kowalczyk, a currency strategist with SJS Markets Ltd. in Hong Kong. “Most of the negative news is out as yesterday brought a flood of pessimistic commentary from Buffett and the World Bank. So it’s time to buy riskier assets in a short-term opportunistic trade.”

The Korean won rose 1.7 percent to 1,523.55 per dollar as of 12:49 p.m. in Seoul. It touched 1,597 on March 6, the lowest since 1998. Taiwan’s dollar gained 0.5 percent to NT$34.64 and Singapore’s dollar strengthened 0.5 percent to S$1.5435.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, added 0.4 percent to 102.16. It last week touched 101.08, the lowest since November 2004. The MSCI Asia Pacific excluding Japan Index rose 1.4 percent, paring this year’s loss to 16 percent. Standard & Poor’s 500 Index futures were up 0.8 percent, after the U.S. share benchmark slid 1 percent yesterday.

‘Excessive Overshoot’

The yen fell for a third day versus the euro before government reports that analysts say will show Japan’s recession is deepening, reducing the appeal of the nation’s currency. The yen dropped to 125.38 versus the euro in Tokyo from 124.65 late in New York yesterday. The currency was at 98.91 per dollar from 98.84.

The won, whose 17 percent drop this year makes it Asia’s worst performer, strengthened as overseas investors bought more Korean shares than they sold for the first time in three days. The Kospi stock index climbed 0.9 percent.

“There are offshore players who are selling dollars for the won after an excessive overshoot in the exchange rate in recent weeks,” said Roh Sang Chil, a currency dealer with Kookmin Bank in Seoul. “Rising stocks are lending support to the currency market. From April, we’ll see the overall situation improving.”

‘Bottoming Out’

Taiwan’s dollar also rose in tandem with shares after a government report late yesterday showed the island’s exports dropped at a slower pace in February. Overseas sales dropped 29 percent from a year earlier, following a record 44 percent decline in January.

“You can take the last few months as indicating that the plunge is bottoming out,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “At least exports are no longer in free fall.”

Malaysia’s ringgit advanced on optimism a second public spending program to be announced in parliament today will prevent the economy from slipping into a recession.

The currency declined 2.3 percent over the past three months even after Deputy Prime Minister Najib Razak implemented a $1.9 billion stimulus package in November. The new spending may be as much as 35 billion ringgit ($9.4 billion), Agence France-Presse reported March 8, citing a government official it didn’t identify.

Stimulus Program

“The stimulus will help the economy and the key is not so much the amount but the implementation,” said Zulkifli Hamzah, head of research at MIDF Amanah Investment Bank Bhd. in Kuala Lumpur. “It may take time to remove the gloom in the economy and the ringgit.”

The ringgit gained 0.5 percent to 3.7015 per dollar in Kuala Lumpur and Indonesia’s rupiah strengthened 0.7 percent to 12,090 in Jakarta. Financial markets in both cities were shut yesterday for public holidays.

Elsewhere, the Thai baht rose 0.2 percent to 36.08 per dollar and the Philippine peso added 0.5 percent to 48.35.

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

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Yen, Dollar Weaken as Stock Gains Boost Higher-Yield Currencies

By Yasuhiko Seki and Ron Harui

March 10 (Bloomberg) -- The yen and the dollar weakened on speculation gains in Asian stocks and U.S. equity futures fueled demand for higher-yielding assets.

The euro approached a two-month high against Japan’s currency on expectations European investors will bring home overseas earnings before the end of the first quarter. South Korea’s won gained the most in almost two months against the dollar as overseas investors bought more of the nation’s shares than they sold. The Australian and New Zealand dollars advanced as Asian stocks rose.

“We’ve got a lot of green on the board in Asian equities and that’s good for risk-taking appetite,” said Sean Callow, a senior currency strategist at Westpac Banking Corp., Australia’s biggest lender by market value. “It would certainly fit into the yen weakness that’s been one of the biggest stories over the past month. That also works to the detriment of the dollar.”

The yen dropped to 125.42 versus the euro as of 7:51 a.m. in London from 124.65 late in New York yesterday. The dollar dropped to $1.2706 per euro from $1.2611. The U.S. currency declined to 98.69 yen from 98.84 yen.

Japan’s currency fell 1 percent to 63.04 versus the Australian dollar, and weakened 0.7 percent to 49.06 against the New Zealand dollar from late in New York yesterday.

The yen slid against 14 of the 16 most actively traded currencies after a Cabinet Office report today showed the leading index of business conditions fell to 77.1 in January from 80 in December, below the consensus forecast of 77.4 in a Bloomberg News survey. The coincident index, which shows current economic activity, dropped to 89.6 from 92.4.

Machine Orders

Japanese machinery orders slumped 4.8 percent in January from December following a record decline of 16.7 percent in the last quarter of 2008 from the previous three months, according to a separate Bloomberg survey of economists before a Cabinet Office report tomorrow.

“The incoming data is likely to illustrate the vulnerability of the Japanese economy,” said Takashi Matsumura, a Tokyo-based economist at Mizuho Research Institute Ltd., a unit of Japan’s second-largest banking group. “The weak data will be yen-negative.”

The Dollar Index, which the ICE uses to track the U.S. currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell 0.4 percent to 88.659. The index touched 89.624 on March 4, the highest level since April 2006.

The MSCI Asia Pacific excluding Japan rose 2 percent and Standard & Poor’s 500 Index futures climbed 0.9 percent.

‘Repatriating Funds’

The euro pared this year’s loss to 9.2 percent against the dollar on speculation European investors bought the currency to repatriate income from abroad as they close their books before March 31.

“Investors in central and eastern Europe appear to be repatriating funds,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage.

The euro may strengthen to $1.27 and 126.50 yen this week, according to Amikura.

U.K. Chancellor of the Exchequer Alistair Darling called on the European Union to bolster a facility used to support nations facing financial difficulties, saying the EU must do more to help former communist states.

“Our priority must be to support those countries most at risk from the aftershock of the global financial crisis, starting with those on our own doorstep in Europe,” Darling wrote in a letter published in the Guardian newspaper today.

The Korean won rose 2.5 percent to 1,511.50 per dollar, according to Seoul Money Brokerage Services Ltd. The currency has dropped 17 percent this year, after sliding 26 percent in 2008, and touched 1,597 on March 6, the lowest level since 1998.

‘Offshore Players’

“There are offshore players who are selling dollars for the won after an excessive overshoot in the exchange rate in recent weeks,” said Roh Sang Chil, a currency dealer with Kookmin Bank in Seoul. “Rising stocks are lending support to the currency market. From April, we’ll see the overall situation improving.”

Daily momentum charts such as the stochastic oscillator and moving average convergence/divergence are showing “buy” signals for the euro, said Masashi Hashimoto, a currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo.

“If the euro can break the 21-day moving average of $1.2726, which has capped its gains recently, we may want to be bullish on the prospect of the single currency,” he said.

Yuan Policy

Asian currencies may be supported after a researcher affiliated with China’s top planning agency said the nation should let the yuan rise 3 percent against the dollar in 2009 to deter capital outflows and help the country make overseas acquisitions.

“A weaker currency will prompt massive amounts of foreign capital to flee the country,” said Wang Jian, secretary general of the China Society of Macroeconomics, a Beijing-based research institute under the National Development and Reform Commission that advises the government. “Foreign consumers still won’t have enough money to buy.”

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

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Kingsgate Says Sales to Double on Higher Thai Gold Mine Output

March 10 (Bloomberg) -- Kingsgate Consolidated Ltd., owner of Thailand’s biggest gold mine, said sales may double for the year ending June on increased production from its Chatree project and higher prices.

“We have reinvested all our profit last year,” Chief Executive Officer Gavin Thomas said in an interview today in Bangkok. “Sales around A$150 million ($96 million) would be our high end this year.” The company had revenue of A$74.3 million a year ago.

Kingsgate is boosting production as the price of gold soars past $1,000 an ounce this year as investors seek a store of value to withstand the global equity rout. The Sydney-based company plans to sell shares in Thailand, Thomas also said, without giving details.

Production from the Thai mine, 350 kilometers (217 miles) north of Bangkok, will probably climb to 150,000 ounces this year from around 74,000 ounces a year earlier, Thomas said. The company plans to double capacity of its plant to process as much as 5 million metric tons of ore in 2010, he said.

Kingsgate has gained 31 percent this year in Sydney trading this year, beating the 15 percent decline on the benchmark Australian index.

For Related News and Information: Top Metals: METT Most-read commodity news: MNI CMD News on Australia’s mining industry: TNI AUD MNG News on Kingsgate Consolidated Ltd.: KCN AU CN

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Natural Rubber Futures Little Changed Amid Rally in Crude Oil

March 10 (Bloomberg) -- Natural rubber futures traded little changed after advancing for three of the past four days as higher crude oil prices increased the cost of making the rival synthetic product.

Futures in Tokyo gained as much as 0.4 percent. Oil in New York climbed for a third day after Saudi Arabia told Asian refiners that it will reduce supplies next month. U.S. stocks fell after Warren Buffett said the economy “has fallen off a cliff” and the World Bank predicted a global contraction.

“Higher oil provided support to futures, but investor appetite for risk assets was low because of a sell-off in global equities,” Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd., said today by phone.

Rubber for August delivery, the most-active contract, added 0.1 percent to 137.6 yen a kilogram ($1,392 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

Futures often move in the same direction as oil as synthetic rubber is made from naphtha, distilled from petroleum. Crude oil in New York rose 3.4 percent to close at $47.07 a barrel yesterday, the highest settlement since Jan. 6.

The Organization of Petroleum Exporting Countries has cut production targets three times since September to combat price declines and prevent a glut on world markets. There is speculation the group will decide to reduce output when ministers gather in Vienna on March 15.

Rubber futures were also supported by the first increase in India’s passenger-car sales in five months in February.

Sales rose 22 percent from a year earlier to 115,386, the Society of Indian Automobile Manufacturers said in a statement yesterday in New Delhi. Lower auto-loan rates spurred demand for the hatchbacks of Maruti Suzuki India Ltd., Hyundai Motor Co. and General Motors Corp.

Gains in rubber were curbed as a slump in global equities deepened concern a worsening recession may cut raw material demand further.

July-delivery rubber on the Shanghai Futures Exchange, the most-active contract, rose 1.2 percent to 12,240 yuan ($1,790) a ton at 11:29 a.m. local time.

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


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Posco Wins 63% Cut in Pulverized Coal Prices, Macquarie Says

By Sungwoo Park

March 10 (Bloomberg) -- Posco, Asia’s third-biggest steelmaker, has settled the first pulverized coal contracts for 2009 at $90 a metric ton with several Australian producers, Macquarie Group Ltd. said, citing a Platts report.

That is a 63 percent cut from fiscal 2008 prices which were between $240 a ton and $245 a ton, Macquarie analysts including Jim Lennon and Adam Rowley wrote in an investor note yesterday, citing Platts. Suppliers of low volatility pulverized coal injection (PCI) coal “apparently agreed” to cancel 2008 carryover volumes, they said, without identifying the producers.

Posco last year acquired a 10 percent stake in Brisbane- based Macarthur Coal Ltd., the world’s biggest exporter of pulverized coal used in steelmaking.

Posco spokeswoman Ko Min Jin declined to comment on the report. Ian McAleese, executive manager of corporate development for Macarthur Coal also declined to comment.

Platts also said that 2 million tons of hard coking coal were sold to China in the spot market at $140 a ton, including costs and freight, the Macquarie report said.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

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Wheat Increases as Dry Weather in U.S. Erodes Crop Prospects

By Sungwoo Park

March 10 (Bloomberg) -- Wheat rose as crops deteriorated in Kansas and Oklahoma, the largest U.S. producers of winter varieties, because of drought in the southern Great Plains.

Texas, Oklahoma and Kansas were mostly dry in the past week, according to National Weather Service data. About 45 percent of Kansas wheat was in good or excellent condition in the week ended March 8, compared with 50 percent a week earlier, the U.S. Department of Agriculture said in a report. In Oklahoma, 21 percent of the crop gained the top ratings, down from 23 percent.

“Dryness through the hard red winter production areas in Oklahoma and Texas” was helping drive up prices, Campbell Roydhouse, a senior trader at Louis Dreyfus Commodities Asia Pte, said from Singapore. “It doesn’t look like those areas will get much rain in the next two weeks and it has been quite warm.”

Wheat for May delivery gained as much as 4 cents, or 0.8 percent, to $5.2725 a bushel on the Chicago Board of Trade and traded at $5.2575 a bushel at 11 a.m. Seoul time. The price fell 0.7 percent yesterday.

Futures rose 1.1 percent last week on concern production will drop, halting a five-week slide. Still, the price is down 61 percent from a record $13.495 in February last year.

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

Soybeans for May delivery climbed 1 percent at $8.74 a bushel at 11:13 a.m. Seoul time, while corn was little changed at $3.6575 a bushel.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

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BHP Says Hay Pt. Seas Still Too Rough for Coal Export

By Angela Macdonald-Smith

March 10 (Bloomberg) -- BHP Billiton Ltd., the world’s biggest mining company, said seas at the Hay Point coal-export terminal in Queensland are still too rough as a result of a tropical cyclone for ships to berth.

Loading at Hay Point, owned by BHP Billiton Mitsubishi Alliance, the largest exporter of coal used in steelmaking, “will only begin when it is safe to do so,” Samantha Evans, a spokeswoman for Melbourne-based BHP, said today in an e-mail. Gladstone port, further to the south, re-opened this morning, she said, without commenting on ship-berthing at the site.

Australian authorities evacuated resort islands off Queensland’s coast during the weekend and put emergency services on alert as the cyclone brought damaging winds and high seas. The Bureau of Meteorology is warning of “very high to phenomenal seas” in areas in the region of the storm, a category 4 cyclone, the second-highest ranking.

Ship loadings are also yet to resume at Dalrymple Bay, adjacent to Hay Point, said Greg Smith, operations manager at the Babcock & Brown Infrastructure Group unit that owns the port.

“There is quite a large ground swell that is being generated by the cyclone, so probably the first ship they will try and berth later this afternoon or this evening, obviously depending on whether that swell comes down,” Smith said in a telephone interview.

Dalrymple Bay, Australia’s second-biggest coal-export terminal, is used by miners including Anglo American Plc, Rio Tinto Group and Macarthur Coal Ltd.

Trains, Ships

QR, the state-owned company that owns the coal rail system in Queensland, said yesterday it re-opened the Blackwater, Goonyella and Newlands coal rail systems that were shut down during the weekend because of heavy rain. Hay Point resumed accepting trains yesterday morning, Evans said. Coal trains are also arriving at Dalrymple Bay, Smith said.

The resumption of exports from Dalrymple Bay also depends on the return of the coal ships that sailed for calmer waters in advance of the cyclone, Smith said. Only two of 21 ships that sailed off have returned, with all the carriers that headed south yet to return to anchor, he said.

The vessels at Hay Point are back at anchor, Evans said.

Hamish was 320 kilometers (199 miles) east of Gladstone and 140 kilometers northeast of sandy Cape at 7 a.m. local time today, moving southeast at 11 kilometers an hour. The storm is expected to slow and weaken during the day, then turn toward the coast tomorrow, the bureau said on its Web site.

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

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Gold Drops a Second Day as Equities Rebound, Deflation Persists

By Glenys Sim

March 10 (Bloomberg) -- Gold declined for a second day in Asia as demand for the metal as a haven asset waned amid a rebound in equities.

Bullion also weakened as China’s consumer prices fell for the first time since 2002 and producer prices dropped the most in a decade, raising the risk that deflation will become entrenched. Asian shares rose for a first day in three as gains in bank stocks offset declines in automakers and consumer- electronics companies.

“Gold as an inflation hedge is not working right now because of the deflationary pressures,” Paul Schulte, head of multi-strategy research at Nomura International, said in a Bloomberg Television interview today. “As people de-leverage, they’re forced to sell assets to repay debt. That deflation counts against gold.”

Gold for immediate delivery fell as much as $9.01, or 1 percent, to $912.97 an ounce, extending yesterday’s 1.9 percent decline. The metal, which gained a total 3.6 percent between March 5 and March 6, traded at $916.45 at 2:12 p.m. in Singapore.

Assets in the SPDR Gold Trust, the biggest such fund backed by bullion, were unchanged yesterday after falling for the first time in two months on March 6.

Still, gold may climb as inflationary pressures build following trillions of dollars worth of stimulus packages announced by governments around the world, according to Nomura’s Schulte.

“People have been investing in gold as a safe haven, as an alternative to stocks,” Christopher Wyke, product manager at London-based Schroders, said in a Bloomberg Television interview today. “What’s really impressive is the gold price is up about 25 percent in the last four months at a time when the dollar’s been strong and no one’s worried about inflation.”

Among other precious metals for immediate delivery, silver fell 1 percent to $12.87 an ounce, platinum was down 0.5 percent at $1,056 an ounce, and palladium was 0.8 percent lower at $196 an ounce as of 2:03 p.m. in Singapore.

-- With reporting by Bernard Lo and Haslinda Amin. Editors: Richard Dobson, Tan Hwee Ann

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

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