Jet Airways’s Koh Says Discounts, Slumdog, Rupee Filling Seats

By Sandy Hendry

March 16 (Bloomberg) -- Kay Yew Koh, regional manager for Hong Kong, Taiwan, Japan and Korea at Jet Airways (India) Ltd., comments on demand for travel to India in Asia following the Mumbai terrorist shootings in late November that killed 164 people, fare cutting and the past year’s 22 percent decline in the rupee. Jet Airways, the nation’s biggest domestic carrier, sponsored screenings of the Oscar-winning movie “Slumdog Millionaire” for travel agents around Asia to promote India. He spoke in an interview at a March 14 book signing.

“We find there is an increase in interest in India. The screening of the movie as well as the number of Oscars it has won have been a godsend. It has greatly helped India to offset the negative image from the November incident.

“Bookings were slow until February and I would attribute that partly to the recession, partly to the aftermath of the November incident. But we have attempted to stimulate the market by dropping fares and by working with retail agents to drop prices for packages to India. We have found that as long as the price is right people will still travel because there is still disposable cash lying around. I would say we dropped fares by about 20 percent.

“On the daily Hong Kong to Mumbai route we have seen the seat factor climb from the low sixties to the high sixties. Of course, we hope to bring it over 70 percent in April with the Easter holidays.

“The rupee has helped us but the decline is not as dramatic as the decline in the Korean won. We are also encouraging the government of India to do more advertising. If you have the time and the disposable cash, 2009 is the best time to travel because you will have bargains all over the world, especially in India.”

“Slumdog is certainly an advert for India, even though the focus is on the slums, it gives a very balanced, colorful perspective of the slums. This rags-to-riches story is quite typical of many Indian success stories, our own Chairman Naresh Goyal started out as a humble office boy earning $40 a month and today he is one of the wealthiest men in India so his story typifies the story that is in the book and the movie.”

“So far, the Taj Mahal is one of the icons of India but I think Slumdog is a more recent version of the vibrance of India. The real story is the vibrance of India and success amidst adversity. We are exploring different avenues for marketing tie- ins with the movie.

To contact the reporter on this story: Sandy Hendry at shendry@bloomberg.net

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Malaysia’s Ringgit Strengthens as Stocks Advance; Bonds Decline

By Lilian Karunungan

March 16 (Bloomberg) -- Malaysia’s ringgit rose the most in three weeks on speculation a global stocks rally will damp risk aversion and help revive demand for emerging-market assets. Bonds fell.

The currency also advanced to a two-week high after Second Finance Minister Nor Mohamed Yakcop said the government’s 60 billion ringgit ($16.3 billion) stimulus plan may add as much as 3 percent to gross domestic product, the Edge weekly reported at the weekend. Without the spending, Malaysia’s economy might shrink by at least 2.5 percent, Nor was cited as saying.

“The ringgit is stronger because there are expectations that risk appetite will diffuse from Wall Street to Asia,” said Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore.

The ringgit strengthened 0.9 percent to 3.6715 per dollar as of 4:53 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency, which has dropped 5.6 percent this year, reached 3.6700, the highest since Feb. 27.

The Standard & Poor’s 500 Index of U.S. shares and the MSCI Asia-Pacific Index of regional equities last week posted their biggest gains of the year after Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp. said they were profitable in the first two months, fueling optimism a global financial crisis will ease. The MSCI index rose 2 percent today.

Non-deliverable forwards contracts signal traders are betting the ringgit will weaken 0.4 percent to 3.6875 in a month, compared with expectations for a rate of 3.7240 on March 13. Forwards are agreements in which assets are bought and sold at current prices for delivery at a future specified time and date.

Three-year government bonds fell for a second day, with the yield at its highest in three weeks.

The yield on the 3.833 percent note due in September 2011 rose seven basis points to 2.84 percent, according to Bursa Malaysia Bhd. The price dropped 0.180, or 1.80 ringgit per 1,000 ringgit face amount, to 102.400. A basis point is 0.01 percentage point.

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

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Taiwan Dollar Rises as Stock Gains Draw Investors; Bonds Climb

By Bob Chen and Yu-huay Sun

March 16 (Bloomberg) -- Taiwan’s dollar rose versus the U.S. currency, adding to gains in the last two weeks, as a global stocks rally helped revive demand for emerging-market assets. Bonds advanced.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, and the MSCI Asia-Pacific Index of shares both climbed, adding to their biggest weekly gains of the year. Overseas investors bought more Taiwan shares than they sold for the past four trading days, stock exchange data show.

“Short-term, with the rally in equities continuing and the buying of Asian stocks having picked up in recent days, that’s very positive for Asian currencies,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon, the investment- banking unit of French bank Credit Agricole SA. “I’m not exactly positive for the medium term. We’re still in a high- risk-aversion environment.”

Taiwan’s dollar gained 0.2 percent to NT$34.416 versus the greenback at 4 p.m. local time, the strongest close since Feb. 16, according to Taipei Forex Inc. The currency climbed 0.8 percent last week, its best performance since Dec. 20.

Taiwan’s 10-year bonds climbed for a fourth day on speculation global funds are boosting their holdings of the securities. Overseas investors have moved large sums “in and out” of Taiwan, and some of them bought Taiwan government bonds, Perng Fai-nan, governor of the Central Bank of the Republic of China (Taiwan), told lawmakers on March 12.

“There’s a liquidity rally, propelled by fund inflows into bonds,” said Eric Hsing, a bond trader at First Taisec Securities Inc. in Taipei. “When funds are coming in, Taiwan- dollar assets are lifted.”

The yield on the 1.375 percent bond maturing March 2019 declined two basis points to 1.50 percent as of the 1:30 p.m. close in Taipei, according to Gretai Securities Market, Taiwan’s biggest exchange for bonds. Its price climbed 0.133, or NT$133 per NT$100,000 face amount, to 98.8096.

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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Pound Rises, Gilts Fall as Barclays, Stocks Fuel Risk Appetite

By Lukanyo Mnyanda

March 16 (Bloomberg) -- The U.K. pound advanced to the highest level in a week against the dollar and gilts fell after Barclays Plc reported a “strong start” to 2009, spurring gains by stocks amid a resumption in risk appetite.

The pound climbed for a second day versus the euro as the FTSE 350 Banks Index rose to a two-week high after the U.K.’s third-largest lender said its businesses continue to perform well. The British currency also gained as finance chiefs from the Group of 20 vowed to work together to clean up the toxic assets that led to more than $1 trillion in losses.

“Any spike in risk appetite will help sterling as it’s one of the most under-valued currencies among the Group of 10,” said Henrik Gullberg, a foreign exchange strategist in London at Deutsche Bank AG, the world’s biggest currency trader. “I’m pretty positive.”

The pound strengthened as much as 1.6 percent to $1.4229, the highest level since March 6, and was at $1.4198 by 11:11 a.m. in London. It appreciated 0.6 percent to 91.81 pence per euro.

The MSCI World Index of stocks rose for a fifth straight day, climbing 1.4 percent. The FTSE 100 Index gained 2 percent.

The pound slumped 23 percent versus the euro and 26 percent against the dollar in 2008 as the economy slipped into its first recession since 1991, prompting the Bank of England to cut the benchmark interest rate to a record low this year.

Gains my be limited as the economy remains mired in the throes of its worst contraction for three decades, threatening to exacerbate losses at banks. The average asking price for a home dropped an annual 9 percent this month as buyers struggled to obtain home loans, Rightmove Plc said today.

Investors should sell the pound against the dollar and the euro during the next 24 hours, analysts at UBS AG, the second- biggest foreign-exchange trader, wrote in a note today.

Gilts Slip

The yield on the 10-year gilt rose four basis points to 2.98 percent. The 4.5 percent security due March 2019 slipped 0.29, or 2.9 pounds per 1,000-pound face amount, to 113.03. The yield on the two-year note climbed six basis points to 1.45 percent. Bond yields move inversely to prices.

The difference in yield, or spread, between two- and 10-year notes narrowed to the least in more than two months. The gap was at 153 basis points today, the least since Jan. 9. A so-called narrowing of the spread indicates investors are buying fewer shorter-dated gilts, which are perceived to be safer.

U.K. bonds earned investors 1.3 percent this year, compared with a 2.9 percent loss for Treasuries, according to Merrill Lynch & Co.’s U.K. Gilts and U.S. Treasury Master indexes.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

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Korea Won Gains Most in 3 Months After G-20 Meeting; Bonds Fall

By Kim Kyoungwha

March 16 (Bloomberg) -- South Korea’s won rose by the most in three months on speculation U.S. authorities will boost the supply of dollars to emerging markets to ease the global financial crisis. Bonds fell.

The currency strengthened for a second day against the dollar and regional stocks rallied after Group of 20 finance ministers pledged over the weekend to restore global banks to health. Finance Minister Yoon Jeung Hyun asked the U.S. to expand a $30 billion currency swap with South Korea, Chosun Ilbo reported, citing a government official it didn’t identify.

“The global trend of rising stocks and a weaker dollar is giving support to the won,” said Lee Young Chul, a currency dealer with Korea Exchange Bank in Seoul. “What is weighing on the won this week though is that there will be increased demand for the dollar stemming from dividend payments to foreigners.”

The won rose 3 percent to 1,440 per dollar as of 3 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. That’s the biggest gain since Dec. 10 and trims this year’s loss to 13 percent. The MSCI Asia Pacific Index of regional shares advanced 1.8 percent.

Yoon asked U.S. Treasury Secretary Timothy Geithner to increase the amount of a currency swap agreed with the U.S. from $30 billion as well as an extension of the maturity, the Chosun Ilbo said. The two finance ministers met last week ahead of the G-20 meeting in southern England.

Trade Surplus

South Korea’s trade surplus is likely to reach a record of more than $4 billion in March as imports shrink at a faster pace than exports, a government official said.

Overseas shipments will probably fall about 22 percent this month from last year, while imports may shrink about 33 percent, Lee Dong Geun, deputy minister for international trade and investment at the Ministry of Knowledge Economy was cited as saying by a ministry spokesman today. The decline in imports is mainly the result of low crude oil prices, he said.

Local currency bonds fell, weighed down by concern that the government will step up debt sales as it boosts spending to help end the nation’s first recession since 1998.

The government has said it plans to unveil an additional stimulus package this month to bolster the 51 trillion won ($35 billion) of tax cuts, handouts and infrastructure spending already announced.

The yield on three-year government bonds rose two basis points to 3.74 percent and the five-year yield added six basis points to 4.50 percent, according to Korea Financial Investment Association.

The finance ministry sold 800 billion won of 10-year bonds at a yield of 4.97 percent. Investors offered to buy 968 billion won of government bonds in total, 1.21 times the amount on offer, the ministry said on its Web site.

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

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Asian Currencies Climb, Led by Won, as G-20 Vows to Ease Crisis

By Kim Kyoungwha and Bob Chen

March 16 (Bloomberg) -- Asian currencies advanced, led by the South Korean won, after the Group of 20 nations pledged over the weekend to restore the financial system to health, spurring a rally in regional stocks.

The Korean currency strengthened the most in three months on speculation the U.S. will expand a currency-swap agreement. Malaysia’s ringgit had its biggest gain in three weeks on optimism share gains will damp risk aversion and revive demand for emerging-market assets. The MSCI Asia Pacific Index of shares climbed to its high for the month.

“Short-term, with the rally in equities continuing and the buying of Asian stocks picking up in recent days, that’s very positive for Asian currencies,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon, the investment- banking unit of French bank Credit Agricole SA. “I’m not exactly positive for the medium term. We’re still in a high- risk-aversion environment.”

The won strengthened 3 percent to 1,440 per dollar as of 3 p.m. in Seoul, its biggest gain since Dec. 10. The advance pared this year’s loss to 13 percent. The ringgit rose 0.8 percent to 3.6850. The Bloomberg-JPMorgan Asian Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed 0.5 percent.

The MSCI Asia Pacific Index gained 1.8 percent to 76.03 after finance chiefs from the G-20 set guidelines on how governments should rid banks of distressed assets that have prompted lenders including Citigroup Inc. and Royal Bank of Scotland Group Plc to seek state aid. The G-20 called the fight its “key priority.”

Weaker Yen

The yen fell for a third day against the dollar on speculation a Bank of Japan plan to buy government debt will spur investors to seek higher-yielding assets overseas. The yen slid to 98.22 versus the dollar from 97.95 late in New York last week. It reached 99.68 on March 5, the lowest since Nov. 5.

The Korean won rose for a second day as Finance Minister Yoon Jeung Hyun asked the U.S. to expand a $30 billion currency swap between the two countries, Chosun Ilbo reported, citing a government official it didn’t identify.

“The global trend of rising stocks and a weaker dollar is giving support to the won,” said Lee Young Chul, a currency dealer with Korea Exchange Bank in Seoul. “What is weighing on the won this week though is that there will be increased demand for the dollar stemming from dividend payments to foreigners.”

Yoon asked U.S. Treasury Secretary Timothy Geithner last week to increase the amount of a currency swap from $30 billion and extend the agreement’s maturity, the Chosun Ilbo said. South Korea’s finance ministry said today it expects a record trade surplus of more than $4 billion for March because cheaper oil is causing imports to tumble faster than exports.

Elsewhere, Singapore’s dollar rose 0.4 percent to S$1.5353 versus the greenback and Taiwan’s dollar strengthened 0.2 percent to NT$34.416. The Philippine peso gained 0.1 percent to 48.485 and Thailand’s baht climbed 0.3 percent to 35.85. Indonesia’s rupiah and the Indian rupee were little changed at 11,980 and 51.4750, respectively.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net. Bob Chen in Hong Kong at bchen45@bloomberg.net.

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Euro Gains on Rising Stocks, G-20 Providing More IMF Funds

By Bo Nielsen

March 16 (Bloomberg) -- The euro climbed against the dollar for a fifth day, the longest run in three months, as stock markets rose and policymakers from the Group of 20 nations said they would double the International Monetary Fund’s resources.

The yen fell against the euro and the dollar before the Bank of Japan starts a two-day meeting tomorrow at which it may announce plans to repurchase government debt, spurring investors to seek higher-yielding assets overseas. The pound rose versus the U.S. currency and the euro after Barclays Plc, the U.K.’s third-biggest lender, said it had a “strong start” to 2009.

“We may be seeing a turnaround in the euro,” said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. “The bounce in stock markets and the G-20 providing the IMF with more money to help eastern Europe is giving the euro a real boost.”

The euro rose 0.9 percent to $1.3044 as of 11:05 a.m. in London from $1.2928 in New York late last week. The yen slid to 98.29 versus the dollar from 97.95 and declined to 128.20 per euro from 126.65. The pound climbed to $1.4204 from $1.4002.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

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Gold Falls For First Day in Four as Stocks, Dollar Climb

By Glenys Sim

March 16 (Bloomberg) -- Gold weakened for the first time in four days in Asia as a rally in global equities and the dollar’s strength curbed demand for a haven investment.

Asian shares climbed after Group of 20 finance ministers pledged to combat the global recession and restore the financial system. Bullion has fallen 1.7 percent this month as the benchmark MSCI Asia Pacific Index gained 0.7 percent.

“Gold will continue to have this loose relationship with the stock market and the dollar, trading in a broad $900 to $950 range as investors weigh their investment options,” Chen Yonglin, an analyst at Citic Securities Co., said from Shanghai.

Gold for immediate delivery fell as much as 0.7 percent to $923.47 an ounce, and traded at $926.16 at 2:26 p.m. in Singapore, paring the 3.5 percent gain in the last three days.

The dollar advanced against the euro for the first day in five on speculation European nations’ reluctance to boost spending will extend the region’s recession and add pressure for lower interest rates.

Assets in the SPDR Gold Trust, the biggest such fund backed by bullion, advanced 1.5 percent to a record 1,056.82 metric tons March 13, according to figures on the company’s Web site.

Quantitative Easing

The Bank of England said March 5 it will start printing money to buy government and corporate bonds to ward off deflation, a practice known as quantitative easing. The Swiss central bank cut its interest rate close to zero March 12 and started buying foreign currencies to stem the franc’s appreciation.

These moves increase the chances of the Federal Reserve “also moving to quantitative easing steps that trigger U.S. dollar weakness,” according to Deutsche Bank AG.

“We believe this would provide a more solid foundation to the gold price,” Deutsche analysts led by Michael Lewis, said in weekly a report. “If U.S. dollar weakness fails to appear we believe gap risk in the gold market will remain to the downside.”

Gold prices may rebound on demand for an alternative to currencies. Twenty of 30 traders, investors and analysts surveyed from Tokyo to Chicago last week advised buying gold this week. Four said to sell, and six were neutral.

Among other precious metals for immediate delivery, silver was down 1.1 percent at $13.07 an ounce, platinum gained 0.6 percent to $1,063 an ounce, and palladium was unchanged at $199 an ounce.

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

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China February Copper, Alloy Imports Jump to Record

By Li Xiaowei

March 16 (Bloomberg) -- Imports of copper and alloys by China, the world’s largest consumer, jumped in February to a record as consumers and traders benefited from lower prices to boost stockpiles on expectations of a revival in construction.

Inbound shipments advanced 55 percent to 283,461 metric tons last month, the Beijing-based customs office said. That’s the highest level since at least 2004, according to data compiled by Bloomberg. Commodities researcher CBI China Co. analyst Qu Yi said purchases were a record.

China increased purchases of copper as the government boosted spending and supplies of scrap plummeted. China’s State Reserve Bureau may buy as much as 900,000 tons of copper this year, tripling the amount it is believed to have already acquired, Macquarie Group Ltd. said.

“The jump could point to an improvement in demand, if stockpile changes also confirm it,” CBI’s Qu said from Beijing. If the low amount of scrap imports are taken into account, the copper purchases overall didn’t gain that much, she added.

Copper climbed 19 percent this year in London on optimism spending in China and the U.S., the second-biggest user, will boost demand for cables and pipes. China has unveiled 4 trillion yuan ($585 billion) in stimulus spending and Premier Wen Jiabao said the 8 percent growth target this year is within reach. The U.S. government has pledged $9.7 trillion to revive its economy.

Scrap shipments were 220,000 tons in February, similar to the previous month and half the amount of a year ago, customs data showed today.

Scrap Slump

Copper concentrate imports declined 14 percent to 440,000 tons from January, the data showed.

Copper scrap supply in China may decline by 500,000 tons to 700,000 tons this year, or about 10 percent of the country’s annual demand for the metal, Macquarie Group Ltd. said.

China’s demand for refined metal and copper concentrates “should remain solid despite the deteriorating economic outlook” because of the scrap supply shortage, Macquarie analysts led by Bonnie Liu said in an e-mailed report March 14.

The SRB has reportedly bought 300,000 tons of copper so far, and there is speculation that it could buy a further 600,000- 900,000 during the rest of 2009, the analysts said.

To contact the reporter for this story: Li Xiaowei in Shanghai at xli12@bloomberg.net

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Rio Tinto’s China Deal Needs Revision, Investor Says

By Jesse Riseborough

March 16 (Bloomberg) -- Rio Tinto Group will hand Aluminum Corp. of China “significant influence” over its operations through a $19.5 billion investment and should revise the deal, the mining company’s largest Australian-based shareholder said.

“It’s back into their court to consider the views of their shareholders to see whether they can come up with something that’s more acceptable,” Ross Barker, managing director of Australian Foundation Investment Co., said today in an interview. Aluminum Corp., or Chinalco, “is not just another commercial enterprise, it is owned by a sovereign government, which is a competitor as well as a customer,” he said.

Legal & General Plc, the second-largest institutional shareholder in Rio’s U.K. stock, last month called for an alternative to the injection from Chinalco, which agreed to buy $7.2 billion of convertible bonds and spend $12.3 billion on stakes in Rio projects. Rio should include other investors in its bond sale to quell concern, ING Groep NV said.

“We would’ve found that convertible note very attractive,” said Barker at Australian Foundation, an 80-year-old Melbourne- based investment company with A$3.2 billion ($2.1 billion) in funds. “Pre-emption is part of this issue. The fact that one shareholder gets this deal and the others are left out.”

London-based Rio fell 2.4 percent to A$50.75 on the Australian stock exchange. Australian Foundation sold A$3.5 million of Rio stock in the first two months of this year. The company owns about 0.9 percent of Rio’s Australian-traded stock, according to a Feb. 16 UBS AG report.

‘Deeply Concerned’

Amanda Buckley, a Melbourne-based spokesman for Rio, couldn’t immediately be reached for comment. Rio sought Chinalco’s investment because of $38.9 billion of debt.

Rio is Australian Foundation’s eighth-largest holding with its stake worth A$112 million and it also holds A$414 million of BHP Billiton Ltd. shares at Feb. 28, according to a presentation today. The company was “deeply concerned about Chinalco becoming involved in the running of the business,” it said.

“We are surrendering some of our control to them without a premium being paid,” Barker said. “Chinalco are going to have significant influence in the company at various levels of its operations.”

The Chinalco deal needs the approval of 51 percent of Rio shareholders and the Australian government. Rio may consider changes and Chief Executive Officer Tom Albanese will listen to investors, JPMorgan Cazenove Ltd. said last month, citing a briefing with Albanese.

75 Percent

“If Western companies are in financially bad shape, then they are going to be happy if somebody buys part of the company,” Marc Faber, the publisher of the Gloom, Boom & Doom report, said in Hong Kong. “Western companies and governments, they want to do business with China because China is going to be one day and, in many fields, they’re already the biggest customer today. They will think twice about rejecting a China offer.”

Rio shareholders want the company to require 75 percent approval before it proceeds with the investment, the Financial Times reported today, citing the Association of British Insurers. Institutional investors want the proposed deal to be tabled as a special resolution, requiring higher shareholder approval than an ordinary resolution, Peter Montagnon, the ABI’s director of investment affairs told the newspaper.

The 75 percent proposal is “a reasonable position to hold,” Australian Foundation’s Barker said.

Australia extended its examination of Chinalco’s proposal for as long as 90 days, Patrick Colmer, general manager of the foreign investment and trade policy division of treasury, said today in a statement on the government gazette Web site.

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

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Steel Authority, JSW See Sales Gain, Bucking Global Steel Slump

By Debarati Roy

March 16 (Bloomberg) -- Steel Authority of India Ltd., the nation’s second-biggest producer, and JSW Steel Ltd. forecast higher sales as a $14 billion federal program to build houses and roads revives demand.

JSW will run its mills at full capacity as orders will probably double to 600,000 metric tons this month from a year ago, JSW Vice Chairman and Managing Director Sajjan Jindal said at a conference in Hyderabad today. Steel Authority’s sales in the January to March quarter may beat the 3 million tons produced a year earlier, Finance Director Soiles Bhattacharya said.

Prime Minister Manmohan Singh’s government has approved 700 billion rupees ($14 billion) of projects since August to build roads, ports and bridges. State spending will help the Indian steelmakers weather the global recession that’s curbing orders at ArcelorMittal and Tata Steel Ltd.’s Corus unit.

“Demand is slowly picking up,” said Bharath S., an analyst at Sundaram BNP Paribas Mutual Fund. “With interest rates coming down, people are again starting to build houses and look at buying cars.”

In the next fiscal year, the Indian government plans to spend $7.95 billion under the Bharat Nirman program to build rural infrastructure, including roads, and networks of telephones, electricity and irrigation.

Steel Authority shares rose 1.8 percent to 83.5 rupees in Mumbai today. JSW gained 1.7 percent to 184.50 rupees, while Tata Steel climbed 1.7 percent to 169.75 rupees. The benchmark Sensitive Index rose 2.1 percent.

Retail Shops

Mumbai-based JSW, India’s third-biggest producer, plans to build a nationwide network of sales outlets with as many as 600 branches, Jindal said today. Earlier this month, the company said it expects sales to rise as much 60 percent this quarter from the previous three months.

New Delhi-based Steel Authority, which sold 12.3 million tons in the last fiscal year, said earlier sales last month rose 9 percent to 1.17 million tons from a year ago. Tata Steel said March 6 sales in India, excluding its Corus unit, surged 47 percent in February.

“Demand is picking up because people think prices have bottomed,” Steel Authority’s Bhattacharya said in an interview, while attending the industry conference in Hyderabad.

Sales should be sustained for at least the next two quarters, aided mainly by rural construction, Jindal told reporters at the conference today. JSW completed expanding annual capacity to 6.8 million tons last month from 3.8 million tons.

Coal Rates

Long-term annual coking coal rates starting April are likely to drop to less than $100 a ton, Jindal said. JSW in January slashed coking coal rates paid to Rio Tinto Group by 43 percent to $175 a ton for the last three months of an annual contract ending March 31.

Tata Steel, the nation’s biggest producer after purchasing U.K.-based Corus, also renegotiated lower prices, it said in January, without providing details.

Steel Authority has yet to renegotiate coking coal prices with suppliers, Steel Secretary Pramod Rastogi said today. The company pays $305 a metric ton for coking coal it buys from international miners such as BHP Billiton Ltd.

Luxembourg-based ArcelorMittal, the world’s biggest steelmaker, has lowered output more than 30 percent as the global recession curbs orders for cars, houses and electronic goods. Tata Steel’s Corus unit slashed production because of the slowdown in Europe.

Global crude steel output fell 24 percent in January from a year earlier, the World Steel Association said Feb. 20.

To contact the reporter for this story: Debarati Roy in Mumbai at droy5@bloomberg.net

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China May Boost State Reserve Copper Buying in 2009

By Li Xiaowei

March 16 (Bloomberg) -- China’s State Reserve Bureau may purchase a further 900,000 tons of copper this year, triple the amount it has probably already bought, Macquarie Group Ltd. said.

“The SRB has reportedly bought 300,000 tons of copper so far, and there is speculation that it could buy a further 600,000-900,000 during the rest of 2009,” Macquarie analysts led by Bonnie Liu said in an e-mailed report dated March 16.

The reserve bureau has purchased aluminum and zinc and other government agencies have acquired corn and cotton this year as China seeks to support the economy after exports tumbled. The government is implementing a 4 trillion yuan ($585 billion) stimulus plan after the country expanded at its slowest pace in seven years in the fourth quarter.

“It makes good sense for them to get the amount as a way to diversify foreign currency reserves,” Zhao Kai, an analyst at Jinrui Futures Co., said from Shenzhen. Still, “it’s needless for them to buy that much so soon as this year’s global surplus is estimated at only 300,000 tons.”

China, which has primarily held its $1.95 trillion in currency reserves in low-yielding U.S. government debt, should diversify investment to “fend off risks,” Premier Wen Jiabao said after the annual meeting of the legislature last week.

Record Imports

The reserve purchases have “just started” with total buying likely to be near to 800,000 tons in two years as long as prices remain low, Na Liu, an analyst with Scotia Capital Inc., a unit of Toronto-based Bank of Nova Scotia, said March 3.

Imports of copper and copper alloys advanced 55 percent to a record in February from the previous month, according to data compiled by Bloomberg, on expectations of a construction revival and as scrap supplies plunged. China imported 283,461 tons, the Beijing-based customs office said today. Commodities researcher CBI China Co. analyst Qu Yi said that was the highest ever.

Falling scrap supplies also lifted copper production in the first two months by 18 percent to 606,000 tons, according to data released by the statistics bureau.

China may boost imports of refined copper by 37 percent this year to about 2 million tons as scrap supplies drop and government spending sustains consumption, Simon Collins, general manager of Trafigura Trading Shanghai Co., said Feb. 24.

Macquarie said in February that the state reserve bought 100,000 tons of refined copper from Chile and parts of Europe. The state agency may have bought forward contracts on the London Metal Exchange up to July, Great Wall Futures Co.’s analyst Li Rong said this month.

Inventories in LME warehouses in South Korea, the closest location to China, have fallen for 17 straight days and are less than half their levels at the start of the year.

To contact the reporter on this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net

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China’s Rally Doomed by PetroChina’s Hong Kong Gap

By Michael Tsang and Chua Kong Ho

March 16 (Bloomberg) -- China, the world’s best-performing stock market, is looking increasingly expensive after valuations climbed to the highest in a year compared with mainland companies traded in Hong Kong.

Stocks listed in Shanghai and Shenzhen rose 21 percent since the end of 2008 as local investors snapped up shares on speculation the government’s 4 trillion yuan ($585 billion) stimulus package will boost the slowest growth in seven years. Shares in the yuan-denominated CSI 300 Index traded at 16.2 times earnings this month, compared with 8.6 times for 43 mainland companies in Hong Kong. PetroChina Co., the country’s biggest company, fetches twice the valuation in China as in Hong Kong.

The growing gap shows that international investors are losing confidence both in China’s earnings growth and in the country’s ability to help revive the global economy. The last time the difference in multiples was this wide, Chinese shares lost 19 percent in 30 days.

“I can’t see any way that China is the locomotive that pulls the world out of recession,” said Andrew Milligan, the head of global strategy at Standard Life Investments, which oversees $181 billion in Edinburgh. “It’s difficult for people to buy the China story.”

The Hang Seng China Enterprises Index, which tracks 43 so- called H shares that trade in Hong Kong, has fallen 7.7 percent in 2009. The drop left H shares trading at a 41 percent discount to those on the mainland, which are off limits to most foreigners, according to data compiled by Bloomberg.

Narrowing the Gap

The CSI 300 Index would have to decline 15 percent from its peak valuation gap to match its four-year average premium over Hong Kong stocks and 47 percent before it reached the multiple on H shares, data compiled by Bloomberg show.

The benchmark index of shares in Shanghai and Shenzhen lost 0.5 percent on March 13, trimming its gain this year to 21 percent. That’s still the biggest of the 91 indexes worldwide tracked by Bloomberg. The H share index rose 4.6 percent.

Restrictions on foreign and local investment that prevent arbitrage with H shares helped make mainland equities more expensive. Investors outside China could only invest a combined $10 billion in local-currency securities under the government’s qualified foreign institutional investor program as of last month. That compares with China’s $2.11 trillion stock market.

Premier Wen Jiabao said this month that the stimulus package, which includes spending on low-rent housing, infrastructure in rural areas and airports, will keep the government’s 8 percent growth target for this year within reach.

‘Difficult But Possible’

The goal is “difficult but possible,” because China can spend more money to revive the economy “at any time,” Wen told reporters in Beijing on March 13.

International investors aren’t counting on the plan’s success. At least 57 Chinese companies have shares traded on both the mainland and in Hong Kong, data compiled by Bloomberg show. Just one -- Shenzhen-based ZTE Corp., China’s second- biggest maker of phone equipment -- has performed better in Hong Kong.

The average gain in China is 23 percent this year, while the same companies are down 4.8 percent in Hong Kong, data compiled by Bloomberg show.

China is among three of the four so-called BRICs economies where local shares are providing bigger returns than are available to foreigners. Goldman Sachs Group Inc. Chief Economist Jim O’Neill coined the term BRICs in 2001 for Brazil, Russia, India and China, the biggest emerging markets.

Falling BRICs

Russia’s Micex index, up 21 percent in rubles since Dec. 31, gained 2.5 percent when measured in dollars. A 9.2 percent decline in India’s Sensitive Index widens to 14 percent in dollars. The exception is Brazil, where the Bovespa Index has risen 5.7 percent, versus a 3.9 percent gain in reais.

PetroChina has climbed 4.3 percent in Shanghai this year, giving the oil company a market valuation equal to $267 billion, even though Chairman Jiang Jiemin said on March 5 he expects profit this year will be less than 2008 and analysts forecast a 21 percent decline. Beijing-based PetroChina, which earned an average of $16.8 billion in each of the past five years, trades at 16.58 times earnings in Shanghai. In Hong Kong, PetroChina sells for 7.92 times profit.

That’s similar to the 7.96 times earnings investors pay for Exxon Mobil Corp., the only company in the world bigger by market value. The Irving, Texas-based company earned an average $37.4 billion the past five years and has a market value of $332 billion, according to data compiled by Bloomberg.

Airline Losses

China Eastern Airlines Corp., the nation’s third-largest carrier, may report its third annual loss in four years as a slowing economy stems air travel, according to analysts’ estimates compiled by Bloomberg. The Shanghai-based airline said last week that its parent company will receive a second infusion of capital from the government, increasing its total bailout to 9 billion yuan.

In Hong Kong, China Eastern has fallen 11 percent in 2009 and trades at 11.8 times reported profit. The airline has risen 11 percent in Shanghai, where it’s valued at 58.6 times earnings.

At that level, the stock is trading at close to the same price-earnings ratio as semiconductor maker Intel Corp. in March 2000 during the dot-com bubble. Santa Clara, California-based Intel has tumbled 80 percent from its record high that year.

“It’s difficult to believe the numbers that are coming out” of China, said Fraser Howie, managing director at CLSA Asia-Pacific Markets in Singapore. “How can Wen Jiabao say confidently in March that you’re going to have 8 percent growth for the year in such an environment?”

Slowing Growth

While China is the only one of the world’s five biggest economies still expanding, the pace has slowed for six quarters after peaking at 12.6 percent between April and June in 2007. The world’s third-largest economy may expand 6.7 percent this year, the slowest rate in almost two decades, according to the Washington-based International Monetary Fund.

In the U.S., the economy shrank the most since 1982 in the fourth quarter. The World Bank in Washington said the global economy will contract for the first time since World War II in 2009 as trade falls by the most in 80 years.

The drop in demand around the world is hurting China’s exports. Gross exports accounted for more than 40 percent of the nation’s growth this decade, based on data compiled by the United Nations. Chinese shipments declined by the most in at least 14 years in February, while exports of coal, steel and aluminum plunged at least 40 percent in 2009 from a year earlier.

‘Prefer to See’

“Overseas investors prefer to see evidence of a turnaround in the economy and corporate earnings,” said Gabriel Gondard, Shanghai-based deputy chief investment officer at Fortune SGAM Fund Management Co., which oversees about $7.2 billion.

Paul Chow, chief executive officer of Hong Kong Exchanges & Clearing Ltd., said in an interview last week that the valuation gap between the A and H shares is “determined by the market.” Jonathan Li, a spokesman at Hong Kong’s Securities and Futures Commission, declined to comment.

Zhang Wangjun, spokesman for the China Securities Regulatory Commission, wasn’t reached at his office and didn’t respond to an e-mailed request for comment.

The Shanghai Composite Index, the 896-stock benchmark that tracks both yuan-denominated A shares and dollar-denominated B shares listed on the larger of China’s two stock exchanges, has gained 17 percent this year.

“The A-share market is a closed world,” said Michiya Tomita, a Hong Kong-based fund manager at Mitsubishi UFJ Asset Management Co., which oversees $61 billion. “Valuations are more appropriate in the H-share market because more foreigners are paying attention.”

Reaction Times

Victoria Mio at Robeco Group says mainland investors are quicker to anticipate changes in the local economy and have an incentive to spend their savings on stocks after the central bank cut interest rates five times since September.

“Domestic investors seem to have looked beyond 2009 and are focusing on the recovery that the fiscal and monetary stimulus will bring,” said Mio, who oversees Chinese equities in Hong Kong for Robeco, including A shares. The firm had about $155 billion in assets under management as of Dec. 31, according to its Web site.

Even if China’s economy recovers faster than international investors anticipate, the bigger bargains are still in Hong Kong, according to ING Groep NV’s Uri Landesman.

Investors are “always going to look at the relative valuation, and if they want to play, they’re going to play Hong Kong,” said Landesman, who oversees about $2.5 billion as head of global growth and international equities at ING’s asset management unit in New York. “It’s the more reliable market, the more transparent market. It’s a no-brainer.”

To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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Pakistan Stocks Rise Most in 9 Months as Gilani Restores Judges

By Farhan Sharif and Liza Lin

March 16 (Bloomberg) -- Pakistan stocks rose the most in nine months after Prime Minister Yousuf Raza Gilani pledged to reinstate Supreme Court justices fired under military rule in 2007, ending a confrontation with the opposition.

Chief Justice Iftikhar Chaudhry and other deposed judges will be restored on March 21, Gilani said in a 6 a.m. televised address in Islamabad, meeting the demands of thousands of protesters who are challenging President Asif Ali Zardari. Authorities will also lift a ban on rallies and release detained protesters, he said.

The benchmark Karachi Stock Exchange 100 Index rose 304.93, or 5.3 percent, to 6,055.40 at 9:40 a.m. local time, the most since June 24, 2008. Oil & Gas Development Co. and Pakistan Petroleum Ltd. led gains on the index.

“Political developments are in favor of the market,” said Tariq Iqbal Khan, chief executive officer of National Investment Trust, the country’s biggest money manager, which manages 78 billion rupees in stocks ($970 million). Terrorism is “the only negative left” for the nation’s stock market, he said.

Oil & Gas Development, the biggest fuel explorer, added 5 percent to 59.38 rupees. Pakistan Petroleum, the nation’s largest gas explorer, advanced 5 percent to 156.36 rupees. The two stocks made up a fifth of the index’s advance today.

The reinstatement is a victory for opposition leader Nawaz Sharif, who yesterday defied house arrest to rally thousands of supporters in Lahore. Sharif responded to Gilani’s pledge by calling off a rally planned for today in Islamabad. The U.S. issued a statement praising the government and calling the reinstatement of the judges a “substantial step.”

‘Acted Quite Wisely’

“The government has acted quite wisely and we expect the political tension has now defused,” said Atif Malik, head of international equity sales at JS Global Capital Ltd. in Karachi. “If there is political stability, then we might see foreigners returning back.”

Overseas investors sold $356 million of Pakistani stocks in the seven months ended Jan. 31, after they purchased $400,000 of shares a year earlier, according to central bank data.

Sharif and Gilani will meet in the capital today, Dawn News television reported. Protests have weakened Zardari’s grip on the nuclear-armed nation since the current Supreme Court barred Sharif and his brother from running for office last month.

Gilani didn’t say whether the government would lift its temporary federal rule of Punjab, the province that includes Lahore, where Sharif’s brother Shahbaz was chief minister until his ban.

The U.S. had urged Zardari, 52, and Sharif, 59, to calm the conflict, which it says distracts Pakistan from fighting Islamic militant guerrillas. Secretary of State Hillary Clinton called both men on the issue over the weekend, their aides said.

“Now that the political tension has been removed, we might see some consensus among the big political parties in the coming days and that might pave the way for a strengthening in the government,” said Sajid Bhanji, a dealer at Arif Habib Securities Ltd. in Karachi. “Definitely we might see some going forward of the index in coming days.”

To contact the reporters on this story: Farhan Sharif in Karachi at fsharif2@bloomberg.net; Liza Lin in Singapore at Llin15@bloomberg.net.

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Japan Stocks Rise on Policy Expectations; Mitsui Fudosan Climbs

By Masaki Kondo and Satoshi Kawano

March 16 (Bloomberg) -- Japanese stocks rose in their biggest two-day gain in almost four months amid confidence central bank and government measures will ease lending and revive global economic growth.

Mitsui Fudosan Co. jumped 7.3 percent as a newspaper report the Bank of Japan will buy banks’ subordinated debt stoked speculation developers will have easier access to funding. Mitsubishi UFJ Financial Group Inc., which last month cut its annual profit target owing to soured stock investments, climbed 5.3 percent. Nintendo Co., the maker of the Wii game machine, added 2.4 percent after U.S. Treasury Secretary Timothy Geithner called on Group of 20 nations to increase stimulus spending.

The Nikkei 225 Stock Average climbed 134.87, or 1.8 percent, to 7,704.15 in Tokyo, the highest since Feb. 16. The gauge’s two-day, 7 percent climb was the most since Nov. 25. The broader Topix index added 17.39, or 2.4 percent, to 741.69.

“Should nothing be done, massive losses on stockholdings will discourage banks from lending, and businesses will suffer from increasingly difficult funding,” said Nobuyuki Kashihara, who helps oversee $26 billion at Tokyo-based Mizuho Asset Management Co. “The Bank of Japan’s purchase of subordinated loans is expected to prevent this downward spiral effect between finance and the economy.”

The Nikkei jumped 5.5 percent last week, its best since the period ended Nov. 28. The gauge is still down 13 percent in 2009 as a recession-sparked plunge in demand and lending triggered 13 bankruptcies among listed companies, including eight in the real estate industry. Nikkei members traded at 0.84 times their corporate net worth as of March 13, according to Nikkei Inc.

Bolstering Capital

The Bank of Japan is considering buying subordinated debt from banks as a means of shoring up lenders’ capital ratios, the Nikkei newspaper reported today. The central bank is also considering boosting its purchases of long-dated government bonds, the newspaper said on March 14.

Mitsui Fudosan, Japan’s largest property developer, leapt 7.3 percent to 1,012 yen, while closest rival Mitsubishi Estate Co. surged 7.6 percent to 1,050 yen. Orix Corp., whose business ranges from property development to corporate loans, jumped 9.9 percent to 2,275 yen, sending a gauge of non-bank financial companies to the biggest gain among the Topix’s 33 groups.

Mitsubishi UFJ, Japan’s largest listed bank, advanced 5.3 percent to 441 yen, and Sumitomo Mitsui Financial Group Inc., the No. 3, surged 6 percent to 3,020 yen. Shinsei Bank Ltd., Tokyo’s worst-performing bank stock in the past year, jumped 17 percent to 95 yen, the sharpest gain since its listing in February 2004.

2% Pledge

The number of unsold condominiums in Tokyo and surrounding areas fell to below 10,000 units in February for the first time since November 2007, as property companies offered discounts, the Real Estate Economic Research Institute today said. Akio Fukuda, a manager at the Tokyo-based research company, said a recovery in the nation’s condominium market is in sight.

Nintendo, the world’s biggest maker of handheld game players, climbed 2.4 percent to 29,530 yen in Osaka, while Toshiba Corp., Japan’s biggest chipmaker, rose 5.1 percent to 247 yen. Canon Inc., the world’s biggest digital-camera maker, surged 4.9 percent to 2,595 yen after Mito Securities Co. raised its rating on the stock to “neutral” from “neutral minus.”

G-20 finance ministers and central bankers said after a meeting over the weekend that they will take “whatever action is necessary” to restore the growth of the world’s economy. Geithner lobbied attendees to follow the U.S. in injecting fiscal stimulus equivalent to at least 2 percent of their economy’s gross domestic product this year.

Oil Tumbles

“The U.S.’s recommendation of more spending is sustaining investor optimism that additional fiscal measures will be introduced,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “People in the market have calmed down and started noticing authorities worldwide are doing what they can to revive the global economy.”

Inpex Corp., Japan’s biggest oil and gas explorer, slumped 4.6 percent to 644,000 yen. The Organization of Petroleum Exporting Countries left its production quotas unchanged at a weekend meeting. Oil prices tumbled as much as 5.2 percent to $43.85 per barrel in trading today.

Nikkei futures expiring in June added 2.3 percent to 7,680 in Osaka and rose 2.1 percent to 7,675 in Singapore.

To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.

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Asian Stocks Rise as G-20 Ministers Pledge Coordinated Action

By Jonathan Burgos and Masaki Kondo

March 16 (Bloomberg) -- Asian stocks rose, led by financial companies and automakers, as Group of 20 finance ministers vowed to combat the global recession and OPEC refrained from cutting output quotas to bolster economic growth.

Mizuho Financial Group Inc., which has the most credit- related losses of any Asian bank, gained 5.6 percent in Tokyo following a pledge by G-20 officials for coordinated action to clean up banks’ toxic assets. Mazda Motor Corp. jumped 8.4 percent on optimism production will rebound. Virgin Blue Holdings Ltd., Australia’s No. 2 airline, climbed 17 percent after reporting surging passenger figures and as oil slumped on the Organization of Petroleum Exporting Countries’ decision.

“People in the market have calmed down and started noticing authorities worldwide are doing what they can to revive the global economy and restore the financial system,” said Kiyoshi Ishigane, a strategist at Tokyo-based Mitsubishi UFJ Asset Management Co., which oversees about $61 billion.

The MSCI Asia Pacific Index rose 2 percent to 76.24 as of 6:07 p.m. in Tokyo, with about seven stocks gaining for every two that declined. Japan’s Nikkei 225 Stock Average climbed 1.8 percent to 7,704.15, while Hong Kong’s Hang Seng Index jumped 3.6 percent. All markets in Asia rose except in South Korea, Malaysia, Thailand, Sri Lanka and the Philippines.

Pakistan’s Karachi Stock Exchange 100 Index rose 5.3 percent, the most since June 24, 2008, after Prime Minister Yousuf Raza Gilani pledged to reinstate Supreme Court justices fired under military rule in 2007.

Political Developments

Foxconn International Holdings Ltd., the world’s biggest contract maker of mobile phones, soared 15 percent in Hong Kong following a brokerage upgrade. HSBC Holdings Plc, Europe’s biggest bank, rose 4.6 percent after the South China Morning Post quoted the company’s chief financial officer as saying the lender won’t need a bailout from the British government and Barclays Plc said it had a “strong start” to 2009.

Futures on the Standard & Poor’s 500 Index gained 0.9 percent. The benchmark gauge rose 0.8 percent on March 13, capping an 11 percent rally for the week, as takeover speculation lifted health-care companies.

The MSCI Asia Pacific Index jumped 3.9 percent last week, its best performance this year. The gauge is still down 15 percent in 2009, extending last year’s record 43 percent drop as the global recession decimated profits at companies from Mazda to Canon Inc., the world’s biggest maker of digital cameras.

Estimated earnings for companies included in the benchmark are down 66 percent from a year ago, according to data compiled by Bloomberg. Companies on the index trade at an average of 1.1 times book value, near its October record low of 1 times book.

‘Key Priority’

Mizuho Financial, which has declared $7.6 billion of credit-related losses, added 5.6 percent to 189 yen. Sumitomo Mitsui Financial Group Inc., Japan’s third-biggest lender, gained 6 percent to 3,020 yen. Mitsubishi UFJ Financial Group Inc., the nation’s publicly traded bank, jumped 5.3 percent to 441 yen in Tokyo.

The Bank of Japan is considering buying subordinated debt from banks to shore up capital, the Nikkei reported today.

The cost of protecting investors in Asian bonds from default fell after the G-20’s weekend pledges. The Markit iTraxx Japan index of credit-default swaps dropped 5 basis points, Barclays Capital prices show. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan also lost 5 basis points, according to ICAP Plc.

G-20 officials at the weekend outlined guidelines on how governments should rid banks of distressed securities. The “key priority” now is to restore lending, a G-20 statement on March 14 said. Federal Reserve Chairman Ben S. Bernanke said in an interview broadcast by CBS Corp. yesterday that the risk of depression has been “averted.”

Time To Invest?

Stocks rose in Asia even as Germany’s Chancellor Angela Merkel provided her third rebuttal in as many days to calls for more government stimulus by U.S. President Barack Obama. Current investments should first be given a chance to work, she told reporters on March 14.

China and other emerging markets offer value over the next two years as growth picks up, investor Marc Faber said.

“Rapidly growing countries have setbacks from time to time,” Faber, the publisher of the Gloom, Boom & Doom report, told Bloomberg Television in an interview in Hong Kong. “I think we’re going to test the lows again but over the next two years, it’s probably a good time to invest.”

Mazda, partly owned by Ford Motor Co., climbed 8.4 percent to 155 yen. The company will resume full production at two domestic plants in July, the Nikkei newspaper said on March 14. Nissan Motor Co. Ltd., Japan’s No. 3 automaker, rose 3 percent to 352 yen. Hyundai Motor Co., the biggest South Korean automaker, rose 3.3 percent in Seoul.

Foxconn, HSBC

Virgin Blue climbed by a record 17 percent to 20.5 Australian cents in Sydney. International passenger numbers rose 33.4 percent in January from a year earlier, while domestic passengers increased 7.4 percent, the airline said.

Airlines also advanced on optimism fuel costs will decline after oil prices in New York tumbled as much as 5.2 percent to $43.85 per barrel in trading today. Qantas Airways Ltd., Australia’s largest carrier, rose 3.1 percent to A$1.65. Eva Airways Corp. jumped 6.9 percent to NT$7.47 in Taipei.

Woodside Petroleum Ltd., Australia’s second-largest oil producer, fell 4.6 percent to A$36.04 in Sydney. Inpex Corp., Japan’s largest oil explorer, slipped 4.6 percent to 644,000 yen in Tokyo.

Foxconn gained 15 percent to HK$2.85 in Hong Kong after Macquarie Group raised its rating for the stock to “outperform” from “neutral” because it expects the company to return to profit this year.

No Bailout Needed

HSBC, which is raising $17.7 billion from a rights offering, rose 4.6 percent to HK$40 in Hong Kong. The bank won’t need a bailout from the British government even if economic conditions in the U.S. and the U.K. worsen, the South China Morning Post reported, citing Chief Financial Officer Douglas Flint.

Philippine Long Distance Telephone Co., the nation’s biggest phone company, slumped 12 percent to 1,895 pesos, after agreeing to raise its stake in Manila Electric Co., the biggest local power retailer. JPMorgan Chase & Co. downgraded its rating on the stock to “neutral” from “overweight”.

Buying the stake “directly raises the risk profile of PLDT,” JPMorgan analysts Luis Hilado and Tim Storey wrote in a report dated March 13.

To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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Stada’s Plunging Stock Turns Generics Hunter to Prey

By Naomi Kresge

March 16 (Bloomberg) -- Stada Arzneimittel AG, the German generic-drug maker that said as recently as November it might sell shares to fund acquisitions, may be turning from hunter to prey after losing three quarters of its value in eight months.

Falling drug prices in Germany and an ill-timed expansion into eastern Europe have pushed the stock down as low as 10 euros, less than the cost of a 30-pill supply of its version of Merck & Co.’s Zocor cholesterol drug. With a market value of about 655 million euros ($847 million), Stada shares trade about 6.4 times estimated earnings, compared with a median of 14 for other western European drugmakers, according to Bloomberg data.

The share retreat puts Stada out of the running to buy Ratiopharm GmbH of Germany and Iceland’s Actavis Group hf just as those companies are being put up for sale, said Leslie Iltgen of Bankhaus Lampe KG. Instead, pharmaceutical companies Sanofi- Aventis SA, AstraZeneca Plc and Teva Pharmaceutical Industries Ltd. may be adding Stada to their list of potential targets, said Thomas Maul, a Frankfurt-based analyst at DZ Bank AG.

“They’re in a so-called sandwich position,” said Iltgen, a Dusseldorf-based analyst who recommends buying the shares. “It makes it harder for them to take over a bigger company, because they’d have to get financing or do a capital increase.”

Stada shares rose as much as 6.3 percent, and traded up 69 cents at 11.84 euros at 9:32 a.m. in Frankfurt trading. The stock has fallen 73 percent from its peak of the past year, reached July 23.

Merger Conceivable

As recently as Nov. 13, Chief Executive Officer Hartmut Retzlaff said a capital increase to fund acquisitions was “imaginable.” The Bad Vilbel-based company also said it had more than 500 million euros in unused short-term credit available for purchases. A merger would be conceivable, though Stada would want to retain the “controlling position,” Retzlaff told analysts in August. Stada spokesman Axel Mueller declined to comment for this story.

Acquisitions by Teva, Novartis’s Sandoz and Mylan Inc. have widened the gap between Stada and the industry leaders in a $75 billion market that is driven by volume. The drugmaker, which competes with Ratiopharm and Sandoz on its home market, had fallen to sixth from fifth worldwide by Sept. 30. Ratiopharm and Actavis, fourth and fifth-placed, are being sold to pay down debt owed by their billionaire owners.

“Stada is the last publicly traded pure-play generics company in western Europe,” said DZ Bank’s Maul. “One could speak of paying a scarcity premium.”

Currency Woes

Stada expanded in eastern Europe from 2005 to 2007, just before currencies in the region plunged and economies weakened. Its 480 million-euro acquisition of Serbia’s Hemofarm Koncern AD in 2006 was the company’s biggest. Stada also bought Russia’s Makiz for as much as 135 million euros in 2007 and Nizhpharm OAO in 2005.

Currency declines in Serbia and Russia contributed to a 27 percent drop in net income last year, Stada said March 3. The company backed away from further Russian acquisitions last month, saying it has “no interest” in takeovers in the region. Stada had been among possible bidders for Russia’s OAO Veropharm, Kommersant reported last month.

On March 2, Stada said net income slid 27 percent last year and cut its dividend. The company predicted earnings will fall in the first half of this year, and said a second-half recovery may not be sufficient to prevent a full-year decline. The shares slumped to an eight-year low.

Stada’s enterprise value -- a measure used to price takeovers by subtracting a company’s cash from its debt and market capitalization -- now is about equal to its annual sales, according to Ulrich Huwald of MM Warburg Investment Research. The median for European drugmakers’ is about 2.7 times sales, according to Bloomberg data.

Consider Offers

“At this level, I could imagine it would be interesting for some firms,” said Daniel Wendorff, an analyst at Commerzbank in Frankfurt. Stada’s earnings performance in the next six months may sway its management to consider offers, Wendorff said. “If we don’t see a turnaround, I could imagine it.”

Drugmakers are turning to the generic drugs market as a way to diversify their businesses and fight slowing growth in branded pharmaceuticals.

DZ Bank’s Maul put Stada atop a list of takeover candidates in July after Sanofi, France’s largest drugmaker, offered to buy control of Czech generic-drug maker Zentiva NV and Teva agreed to buy Barr Pharmaceuticals Inc. for $7.46 billion. Sanofi completed its 1.8 billion-euro purchase of Zentiva this month.

Possible Suitors

Paris-based Sanofi and Petah Tikva, Israel-based Teva, potential bidders for Actavis and Ratiopharm, are also possible suitors for Stada, Maul said. London-based AstraZeneca may also be interested in Stada, he said.

Jean-Marc Podvin, a spokesman for Paris-based Sanofi, declined to comment on the company’s acquisition strategy. CEO Chris Viehbacher said he’s seeking “small to medium-sized” acquisitions to replace revenue lost to generic competition. Zentiva is “a typical example of the type of acquisition that I want our company to make,” Viehbacher said last month.

Teva spokeswoman Ayala Miller and AstraZeneca spokeswoman Sarah Lindgreen declined to comment.

Stada may be attractive because, unlike Ratiopharm, it has cut costs and transferred production to lower-cost countries, Bankhaus Lampe’s Iltgen said.

“I think Ratiopharm still has to do some work,” Iltgen said. “Why not take the player that is better set up to compete?”

To contact the reporter on this story: Naomi Kresge in Zurich at nkresge@bloomberg.net

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