Yen Gains Amid Speculation Japan Investors Bringing Back Funds

By Ron Harui and Yoshiaki Nohara

Aug. 14 (Bloomberg) -- The yen rose for a second day against the dollar amid speculation Japanese investors are bringing back income they will receive from U.S. government debt.

The yen headed for its biggest weekly gain in a month against the dollar before the U.S. makes $79.2 billion in redemption and coupon payments for Treasuries, according to estimates from Bank of Tokyo-Mitsubishi UFJ Ltd. The euro was poised for a weekly loss versus the yen before a European report forecast to show consumer prices fell. The dollar ended three days of losses against the euro before a U.S. report that may show consumer confidence improved in August.

“The yen is being bought as Japanese investors may bring home redemptions and coupons from Treasuries,” said Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “That’s been happening throughout this week.”

The yen climbed to 135.91 per euro as of 7:45 a.m. in London from 136.46 in New York yesterday. It rose to 134.09 on Aug. 12, the strongest since July 30. Japan’s currency gained to 95.21 yen against the dollar from 95.48. The euro declined to $1.4274 from $1.4292.

The yen may rise to as high as 94 versus the dollar next week, Kudo said.

Asian equities advanced, with Japan’s Nikkei 225 Stock Average rising 0.8 percent and the MSCI Asia Pacific Index of regional shares adding 0.4 percent.

European Prices

Foreign investors bought 292.9 billion yen ($3.07 billion) more Japanese stocks than they sold during the week ended Aug. 8 and domestic investors were net buyers of 125 billion yen in overseas bonds and notes, according to figures from Japan’s Ministry of Finance yesterday.

Japanese investors are the biggest foreign holders of Treasuries after China with $677.2 billion of the securities in May. Japan’s foreign reserves total $1.02 trillion.

The euro weakened as consumer prices in the euro area dropped 0.6 percent in July, unchanged from the preliminary estimate, according to a Bloomberg News survey of economists. The European Union’s statistics office will release the data today in Luxembourg.

“The European report may suggest deflation is becoming entrenched in the euro area, which would be very bad for the economy,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “A weaker euro would be better in a deflationary situation and any interest-rate hikes would be off the table.”

The European Union’s statistics office said yesterday gross domestic product in the region fell 0.1 percent last quarter following a 2.5 percent decline in the previous three months.

Australia Rates

The Australian and New Zealand dollars touched the highest level since September after Reserve Bank of Australia Governor Glenn Stevens said today it will be appropriate to increase interest rates in the future.

“Stevens’ upbeat testimony has helped lift the Aussie dollar,” said Sue Trinh, a senior currency strategist at RBC Capital Markets, a unit of Canada’s biggest lender. “That barrier at 85 cents is still ripe for the picking but the real question is whether the Aussie can sustain those levels over the shorter term.”

Benchmark interest rates of 3 percent in Australia and 2.5 percent in New Zealand compare with as low as zero in the U.S. and 0.1 percent in Japan, making the South Pacific nations’ assets attractive to investors seeking higher returns.

The Australian dollar traded at 84.31 U.S. cents, after reaching 84.78 cents, the highest since Sept. 22. New Zealand’s currency was at 68.01 U.S. cents. It earlier reached 68.31 cents, the highest since Sept. 29.

‘Floor for Dollar’

Losses in the U.S. dollar were tempered before a report that economists say will show confidence among U.S. consumers gained this month, adding to signs the recession is easing in the world’s largest economy.

The Reuters/University of Michigan final index of consumer sentiment probably rose to 69 in August from 66 in July, a Bloomberg News survey of economists showed before the data due today.

“Michigan confidence data are showing signs of stabilization in the economy, providing a floor for the dollar against the euro,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo.

The dollar may trade between $1.4 and $1.435 per euro next week, Nihei said.

The Dollar Index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners, was at 78.418 from 78.489 yesterday.

‘Bearish Trend Reversal’

The euro may fall toward 130.85 yen with a close below 135.34 signaling a “bearish trend reversal” and the return of higher levels of risk aversion across equity, commodity and currency markets, RBC Capital Markets said.

The euro is testing the base of an ascending channel with daily momentum charts showing a “double top in overbought territory,” George Davis, chief technical analyst for fixed- income and currency strategy in Toronto at the unit of Canada’s biggest lender, wrote in a note to clients yesterday.

“A daily close below 135.34 would produce a bearish trend reversal that would have significant cross-asset implications,” Davies said. That “would push risk aversion levels higher and project additional losses toward support at 132.81, followed by 130.85.”

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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Top Brazil Real Forecaster Says Currency to Reach 11-Year High

By Fabio Alves

Aug. 14 (Bloomberg) -- Brazil’s real, the best-performing currency this year, will climb 18 percent by the end of 2010 as exports to China surge and stock inflows grow, said Standard Chartered Plc, the firm that most accurately forecast the rally.

The real will rise to 1.8 per dollar by the end of this year from 1.8236 and reach an 11-year high of 1.55 by December 2010, according to the London-based bank that gets most of its revenue from developing nations. The real gained 27 percent this year, more than all other 171 currencies tracked by Bloomberg.

Rising demand for Brazilian sugar, coffee and orange juice helped the trade surplus expand 16 percent between January and July from the same period in 2008 as China overtook the U.S. as the country’s biggest export market, according to Brazil’s Trade Ministry. The dollar revenue likely will overwhelm central bank efforts to staunch the real’s advance by intervening in the foreign-exchange market, said Mike Moran, a senior currency strategist at Standard Chartered in New York.

“We’re going to see a tremendous amount of more trade between Brazil and China,” Moran said in a telephone interview. “The positive trade flows will be quite supportive for the currency.”

Central bank President Henrique Meirelles told Brazilian President Luiz Inacio Lula da Silva that he plans to step up dollar purchases to quell the real’s gains, Folha de S. Paulo reported yesterday, without saying how it obtained the information.

‘Excess Euphoria’

Asked about the report yesterday, Meirelles told reporters in Goiania, a city in central Brazil, that “the central bank buys according to market flows and doesn’t try to influence the rate.” Last week he said investors needed to be cautious about “excess euphoria” as the nation’s currency and stocks surge, reiterating a concern he’s stated several times this year.

Brazil’s foreign reserves climbed to a record $213 billion from $199 billion at the end of February after the central bank re-started its dollar-purchasing program in May.

The real is benefiting from a rebound in commodities, which account for about two-thirds of Brazilian exports. Prices have climbed 31 percent since the end of February, according to the UBS Bloomberg Constant Index of 26 raw materials.

Increased demand for Brazilian stocks and bonds also is lifting the real as Latin America’s largest economy recovers from a recession and interest rates remain high relative to developed markets, said Douglas Smith, Standard Chartered’s chief economist for the Americas in New York.

Stocks Rally

The Bovespa stock index has risen 52 percent this year, the world’s 12th-best performer among 89 measures tracked by Bloomberg, as foreign investors moved 13.7 billion reais into the market through July, the most since the exchange began tracking data in 1993. Brazilian local bonds returned 37 percent in dollar terms after falling 13.8 percent in 2008, according to JPMorgan Chase & Co.’s ELMI+ index.

The nation’s 8.75 percent benchmark interest rate, while down from 13 percent a year ago, remains the second-highest among the 10 countries in the Americas tracked by Bloomberg. Only Argentina’s benchmark rate is higher at 11.5 percent.

Standard Chartered’s real forecast for the end of 2010 would surpass the 1.5545 level it reached in August 2008 before tumbling 33 percent over the next five months as credit markets seized up and commodities tumbled.

In January, when the real traded as weak as 2.3996, Moran and Smith predicted it would rebound to 1.9 by the end of this year, compared with the 2.24 median forecast in a Bloomberg survey. The median forecast since has shifted to match Standard Chartered’s initial outlook, highlighting how the real’s rally caught most economists off guard. Moran and Smith, meanwhile, adjusted their year-end call in June to 1.8 per dollar.

‘Severe Undervaluation’

“We saw a severe undervaluation of the currency at the end of 2008,” said Moran, 35. “The real was heavily oversold.”

The real has soared 34 percent since sliding to a 2 1/2- month low of 2.4501 per dollar on March 2. It touched a 10-month high of 1.8065 last week.

“Everybody was surprised by the rally,” said Aryam Vazquez, an emerging-market economist at Wells Fargo & Co. in New York. He’s changed his year-end real forecast to 1.8 from 2.5 at the start of the year. “The resilience of the Brazilian economy to weather this crisis has been spectacular and has been the driving force behind the real,” Vazquez said.

Retail Sales

The International Monetary Fund predicts Brazil’s gross domestic product will shrink 1.3 percent this year, less than the 7.3 percent contraction it forecasts for Mexico, Latin America’s second-biggest economy, and the 3.8 percent drop projected for advanced economies. Brazilian retail sales rose 5.6 percent in June, almost double the 2.9 percent pace in May, a government report showed yesterday.

A recovering economy “supports the strong direct investment in Brazil,” said Smith, 39, who began covering Brazil as an economist at the U.S. Treasury Department in 1998.

Standard Chartered’s projection for the real at the end of 2010 is more bullish than the 1.8 per dollar median forecast of analysts surveyed by Bloomberg.

“The outlook for Brazil remains positive,” said Smith. It “highlights Brazil as a good destination” for foreign investment, he said.

To contact the reporter on this story: Fabio Alves in New York at falves3@bloomberg.net

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China May Boost Energy, Mining Acquisitions by Half

By John Duce

Aug. 14 (Bloomberg) -- China, unfazed by failures to invest in Rio Tinto Group and Unocal Corp., will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped.

State-owned Yanzhou Coal Mining Co. yesterday agreed to buy Australia’s Felix Resources Ltd. for about A$3.5 billion ($2.9 billion), a day after Sinochem Corp., China’s biggest chemicals trader, offered to buy Emerald Energy Plc for 532 million pounds ($881 million) to gain oil fields in Syria and Colombia.

China National Petroleum Corp.’s plan to buy Repsol YPF SA’s Argentine unit may push Chinese purchases of overseas commodity assets to $43 billion this year, a 48 percent increase on 2008, according to data compiled by Bloomberg.

“The Chinese don’t have enough nickel, don’t have enough oil, and they don’t have enough copper,” Jim Rogers, chairman of Rogers Holdings and the author of books including “Investment Biker” and “Adventure Capitalist”, said in a telephone interview yesterday. “There’s a crisis coming. They are going around the world buying up what they can. They’re preparing for a rainy day.”

Bids for resources by China, whose $2.1 trillion in currency reserves are the world’s largest, have been met with opposition in the U.S. and Australia. Neither concern over its growing influence nor the arrest of four Rio executives in Shanghai have stopped Chinese companies from buying assets abroad as the nation’s 4 trillion yuan ($585 billion) economic stimulus spurs demand.

‘Bolder Deals’

“China will see larger and bolder deals,” said Brian Gu, the Hong Kong-based head of mergers and acquisitions for greater China at JPMorgan Chase & Co., the third-ranked adviser by transaction value this year. “The growing outbound mergers and acquisitions activity is going to be a long-term trend and the volume and activity are here to stay.”

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, dropped 36 percent last year, the biggest annual decline since at least 1957. The measure has gained 15 percent this year on signs that the recession may be ending.

Chinese energy companies have spent at least $13 billion on overseas assets since December as they take advantage of lower valuations caused by the slowdown.

Yanzhou, China’s fourth-biggest coal miner, is offering A$18 a share for Felix, including a dividend and stock in a spin off of a unit of the Australian company.

‘Inferior’ Offer

The offer, recommended by Felix’s board, is “inferior” and shareholders should reject it, Sophie Spartalis, an analyst with Macquarie Group Ltd., said in a report today. A bid of between A$23 to A$25 a share would be “more reasonable,” she wrote.

Felix rose 4.4 percent to A$17.64 at 1:30 p.m. Sydney time. Yanzhou climbed as much as 7.3 percent in Hong Kong trading to HK$13 and was at HK$12.23, while its Shanghai shares rose 4 percent to 20.79 yuan.

The state-owned parents of PetroChina Co., China Petroleum & Chemical Corp. and Cnooc Ltd. are studying investments in companies in Africa, Latin America, the Middle East and Central Asia, according to JPMorgan’s Gu and Mike Arruda, a lawyer at Jones Day in Hong Kong who advises on mergers and acquisitions in the oil and gas industry. Both declined to disclose details of deals they are advising on.

Controlling Stake

China National Petroleum, the parent of PetroChina and the nation’s biggest oil company, is considering offering $13 billion to $14.5 billion for a controlling stake in Repsol’s unit, three people familiar with the matter said last month.

China Petrochemical Corp., the country’s second-biggest oil company, in June agreed to buy Geneva-based Addax Petroleum Corp. for C$8.3 billion ($7.6 billion) in China’s biggest overseas takeover to date.

Purchasing Addax, which has oil reserves in Iraq’s Kurdish territory, shows Chinese oil companies are “going for bigger transactions,” said Arruda, who is advising on what he described as “significant” acquisitions. “These deals seem to reflect an appetite we have not seen before.”

China bought record volumes of oil and iron ore in July, according to customs figures released Aug. 11.

The world’s fastest-growing major economy consumes more than a third of the world’s aluminum output, a quarter of its copper production, almost a tenth of its oil and accounts for more than half of trading in iron ore. Last year, China bought $211 billion worth of iron ore, refined copper, crude oil and alumina, according to government data.

Demand, Imports

China’s oil consumption doubled in the last decade, rising to 8 million barrels a day last year from 4.2 million barrels in 1998, according to BP Plc’s Statistical Review. The world’s third-largest economy imported 3.6 million barrels of oil a day last year, meeting about 45 percent of its needs.

China’s increasing reliance on imported crude means the scale of acquisition deals has to increase, said Paul Ting, president of New Jersey-based Paul Ting Energy Vision LLC, a consulting company specializing in Chinese oil and gas markets.

The country’s crude needs may rise to more than 11 million barrels a day in five years with China’s ageing oilfields unable to produce the extra capacity needed, Ting said.

China National Petroleum said on May 13 it wants overseas crude production to match domestic output by 2020. Chairman Jiang Jiemin said CNPC produces less than 8 percent of its oil overseas and foreign acquisitions and ventures must be increased. “We want overseas production to contribute half,” he said at the time.

Australian Opposition

Bids for resources by China have been met with opposition from lawmakers in Australia.

Melbourne-based Rio, the world’s third-largest mining company, abandoned a tie-up with Aluminum Corp. of China, or Chinalco, in June. The arrest of four Rio executives in July has strained relations between the countries. They were formally arrested on charges of trade secrets infringement and bribery, China’s Supreme People’s Procuratorate said Aug. 11, according to a Xinhua report.

Some 57 percent of Australians said Chinese mining investments should be resisted because the nation’s interests would be “better served” with local ownership, according to a poll of 890 people conducted by Essential Research in April.

Opposition to Chinese investment helped block Cnooc’s $18.5 billion bid for Unocal in 2005 while Haier Group Corp. lost out in the race to acquire U.S. appliance maker Maytag Corp. in the same year.

Unocal, Repsol

Cnooc, 66 percent-controlled by state-owned China National Offshore Oil Corp., abandoned its cash offer for Unocal after being outmaneuvered by Chevron Corp, the second-largest U.S. oil company. Chevron purchased the El Segundo, California-based oil and gas producer for $17.8 billion amid political opposition to the Chinese approach in Washington.

CNPC’s approach for Repsol’s Argentine unit is unlikely to face such obstacles from Spain, according to Nitin Sharma, an analyst at JPMorgan Cazenove Ltd. in London.

“We do not believe that the Spanish government will veto Repsol YPF plans to divest a controlling stake in YPF,” Sharma wrote in a report last month.

To contact the reporter on this story: John Duce in Hong Kongt . Jduce1@bloomberg.net

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Gold Heads for Fifth Weekly Gain as Dollar Drop Fuels Demand

By Kim Kyoungwha

Aug. 14 (Bloomberg) -- Gold climbed for a third day and headed for a fifth weekly advance as investors sought an alternative to a weakening dollar and commodities rose on signs of an economic turnaround.

Bullion is on course for the longest weekly winning streak since November 2007. The Dollar Index, a six-currency gauge of the greenback’s value, fell as much as 0.7 percent yesterday after the German economy, Europe’s largest, unexpectedly expanded in the second quarter. Hong Kong’s economy probably grew 1.2 percent last quarter from the previous three months, a Bloomberg survey showed.

“Investors are seeking shelter from a weakening dollar,” said Steve Chun, a trader with Hyundai Futures Co. in Seoul. “We expect physical demand for gold to rebound, with some gap of time, as global economies are recovering gradually.”

Gold for immediate delivery rose 0.2 percent to $956.47 an ounce at 2:03 p.m. in Singapore. The metal is up 8.4 percent this year and 0.2 percent this week. Crude oil for September delivery rose 0.5 percent to $70.89 a barrel.

Thirteen of 27 traders, investors and analysts surveyed by Bloomberg News, or 48 percent, said bullion would gain next week. Six forecast lower prices and eight were neutral.

There remains the risk of a gold price decline on the back of the liquidation of speculative long positions that are “at a high level at present,” Eugen Weinberg and other analysts with Commerzbank AG wrote in a note yesterday. “The prevalent dollar weakness is currently preventing this development,” they said. Long positions are bets that prices will gain.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,065.49 metric tons as of Aug. 13, according to the company’s Web site.

Among other precious metals for immediate delivery, silver was up 0.3 percent at $15.075 an ounce, platinum rose 0.6 percent to $1,275.25 an ounce and palladium added 0.9 percent to $278.75.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Corn Heads for Weekly Gain on Crude Oil Rally, Dollar Weakness

By Jae Hur

Aug. 14 (Bloomberg) -- Corn headed for its second weekly gain in three as rising crude oil prices and a weaker dollar increased the grain’s appeal to investors and purchasers outside the U.S.

Futures have gained 1.7 percent this week as a three-day rally in oil prices made the grain more attractive as a source of biofuel. The Dollar Index, a six-currency gauge of the greenback’s strength, fell for a fourth day, boosting demand from overseas importers holding other currencies.

“Corn and soybeans got a boost from higher oil prices and the dollar’s weakness,” Toshimitsu Kawanabe, an analyst at Tokyo-based commodity broker Central Shoji Co., said today. “Favorable crop weather in the U.S. Midwest may limit further gains in the grain and oilseed complex.”

Corn for December delivery was unchanged at $3.32 a bushel at 1:52 p.m. in Singapore after gaining as much as 1.1 percent earlier in after-hours electronic trading on the Chicago Board of Trade.

The grain dropped 1.3 percent yesterday on speculation warm, wet weather in the U.S. would boost the crop before farmers begin harvesting next month.

Crude oil for September delivery rose 0.4 percent to $70.83 a barrel on the New York Mercantile Exchange. The Dollar Index slipped to 78.456 after declining to 78.235 yesterday, the lowest level since Aug. 7.

U.S. exporters reported sales of 116,000 metric tons of corn to South Korea, the U.S. Department of Agriculture said yesterday. The corn is for delivery in the year that begins Sept. 1, the USDA said.

Favorable Weather

Soybeans for November delivery dropped 0.6 percent to $10.13 a bushel after trading between $10.01 and $10.31. The oilseed lost 2.4 percent yesterday and has lost 2.5 percent this week, headed for its first decline in three weeks.

Warm temperatures and mostly adequate soil moisture favors late pollinating and filling corn in the U.S. Midwest and increases crop development, weather forecaster DTN Meteorlogix LLC said in a report yesterday. The weather also favors pod setting and filling soybeans.

Wheat for December delivery in Chicago slipped 0.3 percent to $5.08 a bushel after losing 1.6 percent yesterday as favorable weather improved prospects for the spring crop in the U.S. The contract declined 1.6 percent this week, extending last week’s 2.2 percent drop.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Corn Heads for Weekly Gain on Crude Oil Rally, Dollar Weakness

By Jae Hur

Aug. 14 (Bloomberg) -- Corn headed for its second weekly gain in three as rising crude oil prices and a weaker dollar increased the grain’s appeal to investors and purchasers outside the U.S.

Futures have gained 1.7 percent this week as a three-day rally in oil prices made the grain more attractive as a source of biofuel. The Dollar Index, a six-currency gauge of the greenback’s strength, fell for a fourth day, boosting demand from overseas importers holding other currencies.

“Corn and soybeans got a boost from higher oil prices and the dollar’s weakness,” Toshimitsu Kawanabe, an analyst at Tokyo-based commodity broker Central Shoji Co., said today. “Favorable crop weather in the U.S. Midwest may limit further gains in the grain and oilseed complex.”

Corn for December delivery was unchanged at $3.32 a bushel at 1:52 p.m. in Singapore after gaining as much as 1.1 percent earlier in after-hours electronic trading on the Chicago Board of Trade.

The grain dropped 1.3 percent yesterday on speculation warm, wet weather in the U.S. would boost the crop before farmers begin harvesting next month.

Crude oil for September delivery rose 0.4 percent to $70.83 a barrel on the New York Mercantile Exchange. The Dollar Index slipped to 78.456 after declining to 78.235 yesterday, the lowest level since Aug. 7.

U.S. exporters reported sales of 116,000 metric tons of corn to South Korea, the U.S. Department of Agriculture said yesterday. The corn is for delivery in the year that begins Sept. 1, the USDA said.

Favorable Weather

Soybeans for November delivery dropped 0.6 percent to $10.13 a bushel after trading between $10.01 and $10.31. The oilseed lost 2.4 percent yesterday and has lost 2.5 percent this week, headed for its first decline in three weeks.

Warm temperatures and mostly adequate soil moisture favors late pollinating and filling corn in the U.S. Midwest and increases crop development, weather forecaster DTN Meteorlogix LLC said in a report yesterday. The weather also favors pod setting and filling soybeans.

Wheat for December delivery in Chicago slipped 0.3 percent to $5.08 a bushel after losing 1.6 percent yesterday as favorable weather improved prospects for the spring crop in the U.S. The contract declined 1.6 percent this week, extending last week’s 2.2 percent drop.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Rubber Heads for Biggest Weekly Advance in Seven Months on Oil

By Jae Hur

Aug. 14 (Bloomberg) -- Rubber advanced to a 10-month high and is poised for the biggest weekly gain in seven months, as crude oil extended gains, increasing demand for the commodity used to make tires.

Futures in Tokyo advanced as much as 2.4 percent to the highest since Oct. 8 as oil rose for a third day after U.S. stocks rallied and the German and French economies unexpectedly grew, sparking hopes for an economic recovery. A rise in crude prices boosts the appeal of rubber against synthetic product.

“Higher oil prices and rising stock markets have fueled optimism that the global economy may rebound and demand for rubber and other commodities will increase,” Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd., said today.

January-delivery rubber climbed as much as 5.0 yen to 214.0 yen a kilogram ($2,246 a metric ton) on the Tokyo Commodity Exchange. The price was up 0.5 percent at 210.1 yen at 11:15 a.m. in Tokyo. The most-active contract has gained 9.5 percent this week, the most since Jan. 9.

Rubber in Tokyo has risen 54 percent this year as crude oil has gained 60 percent and car sales in China have jumped. Crude oil for September delivery added 1.2 percent to $71.36 a barrel on the New York Mercantile Exchange.

The 14-day relative strength index for rubber futures, a gauge of momentum, has risen above 70 since yesterday, a level some investors use as an indicator that prices may decline.

The MSCI Asia Pacific Index gained 1 percent to 114.50 as of 11:18 a.m. in Tokyo, on course for its highest close since Sept. 25, after the Standard & Poor’s 500 Index added 0.7 percent yesterday.

Shippers in Thailand raised offers for RSS-3 grade rubber for September shipment to $2.05 a kilogram yesterday from $1.98 on Aug. 12, according to Takaki Shigemoto, an analyst at Tokyo- based commodity broker Okachi & Co.

Rubber for January delivery on the Shanghai Futures Exchange, the most-active contract, fell for the first time in five days, losing 0.9 percent to 19,480 yuan ($2,851) a ton by 10:14 a.m. local time. The most-active contract has jumped 80 percent this year.

Rubber inventories grew 6,644 tons to 62,778 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the exchange said Aug. 7. That was the sixth weekly increase and up 52 percent from 41,393 tons on June 25.

To contact the reporters on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Sugar Production in Indonesia May Rise 7% in 2010 on Prices

By Yoga Rusmana

Aug. 14 (Bloomberg) -- Sugar mills in Indonesia, Southeast Asia’s biggest buyer, may raise production of white sugar as much as 7 percent next year because of higher prices.

The nation may produce between 2.9 million and 3 million metric tons of the refined product in 2010 compared with an estimated 2.8 million tons for this year, said Colosewoko, senior adviser of the Indonesian Sugar Association.

White sugar futures in London’s Liffe Exchange jumped yesterday to the highest price since the contract started trading in 1983 on expectations an improving economic outlook may buoy demand amid a supply shortfall. Indonesia’s retail price has risen 31 percent this year, according to data from the Ministry of Trade.

“Surging local prices will encourage farmers to grow more sugar cane next year,” Colosewoko, who uses only one name, said in a telephone interview in Jakarta yesterday.

Indonesia may produce 36 million tons of sugar cane next year, up from this year’s target of 34.8 million tons, said Colosewoko. The area planted with the sweeteners may increase to 450,000 hectares (1.1 million acres) next year from 444,500 hectares, he said.

“The use of proper fertilizers and good irrigation systems will boost productivity and reduce the impact of dry weather should the El Nino occur,” Colosewoko said, adding yield is expected to rise 2 percent to 80 tons per hectare.

Mills had produced 43 percent of this year’s output target, or 1.2 million tons, until the end of July, he said.

Indonesia has 61 mills located in Java, Sumatra and Sulawesi islands. The crushing season runs from April until October. Sugar produced from farms is used for domestic household consumption. Industrial users must import refined sugar or buy from domestic processors.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net.

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Japan Stocks Rise on Metal Prices, Outlook for Chinese Demand

By Masaki Kondo

Aug. 14 (Bloomberg) -- Japanese stocks rose, capping a fifth weekly gain, as commodities companies and machinery makers advanced on higher metal prices and speculation Chinese demand will boost earnings.

Mitsubishi Corp., a trading company that gets more than a third of sales from commodities, added 3.3 percent after a top- ranked analyst at Goldman Sachs Group Inc. said a recovery in steel production made trading companies more attractive. Komatsu Ltd. the world’s No. 2 maker of earthmoving equipment, and Hitachi Construction Machinery Co., a smaller rival, gained more than 5 percent after analysts said demand is picking up in China.

The Nikkei 225 Stock Average added 80.14, or 0.8 percent, to close at 10,597.33 in Tokyo. The broader Topix index rose 5.16, or 0.5 percent, to 973.57.

“Demand for construction machinery will likely hold up for some time in China,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees the equivalent of $3.7 billion. “The point is whether the recovery in demand will spread across countries such as Brazil or Middle Eastern nations as commodities prices pick up.”

For the week, both benchmark gauges advanced 1.8 percent for a fifth week of gains, the longest streak since the five weeks ended April 10.

The Nikkei has climbed 50 percent from a more than quarter- century low on March 10, as improved economic statistics and corporate earnings fanned optimism the global economy is recovering. Stocks on the gauge traded at 1.41 times their corporate net worth, a level not seen in 11 months, according to data compiled by Bloomberg.

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

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Asian Stocks Gain on Earnings Speculation; Leighton Advances

By Jonathan Burgos

Aug. 14 (Bloomberg) -- Asian stocks advanced, driving the MSCI Asia Pacific Index to a 10-month high, after increased earnings and profit forecasts from the construction industry and Wal-Mart Inc.’s biggest clothing and toys supplier.

Leighton Holdings Ltd., Australia’s biggest construction company, surged 7.3 percent after predicting higher earnings. Hong Kong’s Li & Fung Ltd., which sells its products to Wal-Mart and Target Corp., gained 7.7 percent on better-than-estimated profit. Mitsubishi Corp., which gets more than a third of its sales from resources, climbed 3.3 percent in Tokyo after metal prices rose. Yanzhou Coal Mining Co. rallied 6.3 percent in Shanghai after agreeing to buy Felix Resources Ltd.

“Potential earnings estimate upgrades will help support a bull run in equities as long as interest rates remain low,” said Khiem Do, head of the multi-asset group at Baring Asset Management (Asia) Ltd., which holds $7 billion of assets.

The MSCI Asia Pacific Index rose 0.4 percent to 113.85 as of 3:33 p.m. in Tokyo, on course for its highest close since Sept. 25. The gauge has gained 61 percent from a more than five- year low on March 9 amid speculation stimulus measures and lower borrowing costs worldwide will help revive the global economy. The measure added 2.8 percent this week.

Japan’s Nikkei 225 Stock Average added 0.8 percent to 10,597.33. Australia’s S&P/ASX 200 Index climbed 0.6 percent, while South Korea’s Kospi Index advanced 1.7 percent.

Hong Kong’s Hang Seng Index slipped 0.7 percent. China’s Shanghai Composite Index sank 2.2 percent, set for the biggest weekly decline since February, amid concern its 68 percent rally this year had overvalued earnings prospects.

Noble, Nexus

Noble Group Ltd., the Hong Kong-based supplier of raw materials from soybeans to coal, advanced 3.5 percent in Singapore after reporting higher earnings. Nexus Energy Ltd. jumped 20 percent on speculation it will find a partner for a venture in Australia. LG Display Co., the world’s No. 2 liquid- crystal-display maker, gained 3.3 percent in Seoul after Nomura Holdings Inc. recommended investors buy the stock.

Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge rose 0.7 percent yesterday as better-than-estimated earnings from Wal-Mart Stores Inc. overshadowed an unexpected decline in retail sales. Banks gained after investor John Paulson’s hedge fund bought stakes in lenders.

The S&P 500 had dropped as much as 0.5 percent following government reports on retail sales and initial jobless claims that were worse than economists had predicted.

Mergers, Acquisitions

Confidence in the global economy and better-than-estimated earnings have driven the equity rally since March, lifting the average valuation of the MSCI Asia Pacific’s companies to a four-month high of 25 times estimated profit on July 28. Stocks on the gauge now trade at 24.8 times earnings, higher than the MSCI World Index’s 17 times.

Data in the past week show that the euro-region economy barely contracted in the second quarter as Germany and France unexpectedly returned to growth. The U.S. jobless rate dropped and Japanese machinery orders increased.

Leighton climbed 7.3 percent to A$33.30. The company said net income may rise to about A$600 million ($507 million) in the year ending June 30, similar to 2008’s record earnings.

Li & Fung, which supplies retailers including Wal-Mart Stores and Target Corp., advanced 7.7 percent to HK$27.40. The company said first-half profit rose 13 percent to HK$1.4 billion ($181 million) after it cut costs. That beat the average estimate of HK$1.2 billion in a Bloomberg News analyst survey.

A third of the 490 companies in the MSCI Asia Pacific Index that have reported quarterly results in the latest earnings season have beaten analysts’ profit estimates, while 17 percent have missed, according to data compiled by Bloomberg.

One-Time Gain

Noble Group rose 3.5 percent to S$2.07. The company said second-quarter profit more than doubled to $248.8 million, from $122.5 million, a year earlier, helped by a one-time gain from the acquisition of Gloucester Coal Ltd.

Chiangmai Frozen Foods Pcl advanced 8.3 percent to 3.64 baht in Bangkok. The exporter of frozen vegetables and fruits said second-quarter profit increased 46 percent.

Mitsubishi gained 3.3 percent to 1,994 yen. Rio Tinto Group, the world’s third-largest mining company, added 2 percent to A$59.99 in Sydney. A gauge of six metals in London climbed 3.6 percent yesterday to the highest level since Sept. 30. Copper rose 3.2 percent in New York.

Yanzhou Coal, China’s fourth-biggest producer of the fuel, gained 6.3 percent to 21.24 yuan. The company will pay about A$3.5 billion ($2.9 billion), or A$18 a share for Felix, including a dividend and stock in a unit. Felix rose 4.1 percent to A$17.60.

Mergers, Acquisitions

“China has been trying to accumulate resources to support its economic growth,” Baring Asset’s Do said. “That will continue to drive M&A activities in the resource sector, supporting valuations.”

Nexus Energy jumped 20 percent to 41.5 Australian cents, amid speculation it’s close to finding a partner for its Crux condensate venture in northern Australia. Jodie Phillips, a Melbourne-based spokeswoman for Nexus, couldn’t immediately be reached for comment.

LG Display climbed 3.3 percent to 37,200 won, taking gains in the past four days to 10 percent. Nomura raised its rating on the stock to “buy’ from “reduce”

To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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Coloplast, LVMH Moet, Swatch, Volkswagen: Europe Equity Preview

By Nadja Brandt

Aug. 14 (Bloomberg) -- The following companies may have unusual price changes in European trading. Stock symbols are in parentheses, and share prices are from the previous close.

The Dow Jones Stoxx 600 climbed 0.8 percent to 230.48. The Dow Jones Stoxx 50 Index increased 0.5 percent to 2,347.13. The Euro Stoxx 50 Index, a benchmark for the nations using the euro, added 0.7 percent to 2,705.74.

Coloplast A/S (COLOB DC): The world’s largest provider of ostomy and urology products may report third-quarter net income of 217.4 million kroner ($41.7 million), according to analysts’ estimates compiled by Bloomberg. Its shares rose 5.5 kroner, or 1.4 percent, to 389.50 kroner.

Hochtief AG (HOT GY): Germany’s biggest builder is scheduled to release second-quarter results. The shares increased 3.5 percent to 44.32 euros.

Huegli Holding AG (HUE SW): The Swiss maker of soups and sauces reports first-half earnings. The shares rose 6 francs, or 1.1 percent, to 540 francs.

LVMH Moet Hennessy Louis Vuitton SA (MC FP): The world’s largest luxury company bought 50 percent stakes in French winemakers Cheval Blanc and SAS La Tour du Pin, both producers of Saint-Emilion wines. It didn’t give financial terms. The shares gained 48 cents, or 0.8 percent, to 63.50 euros.

Swatch Group AG (UHR VX): The world’s biggest watchmaker reports first-half earnings. The shares gained 4.5 franc, or 2.2 percent, to 210.1 francs.

ThyssenKrupp AG (TKA GY): Germany’s largest steelmaker is scheduled to report quarterly results.

Separately, Wirtschaftswoche reported the company has changed strategy and now plans to hold on to its Blohm + Voss shipyard unit. The publication cited an unidentified member of the shipyard supervisory board. The shares advanced 2.9 percent to 22.68 euros.

Unique Zurich Airport AG (UZAN SW): The operator of Switzerland’s busiest airport said passenger traffic fell 0.8 percent in July from a year earlier. The shares rose 50 centimes, or 0.2 percent, to 293 francs.

Volkswagen AG (VOW GY): Europe’s largest carmaker will pay about 3.3 billion euros ($4.71 billion) for a 42 percent stake in Porsche SE’s automotive unit as part of a plan for the gradual merger of the two manufacturers. Volkswagen shares fell 0.1 percent to 226 euros. Porsche (PAH3 GY) shares advanced 1.6 percent to 44.60 euros.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

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Blockbuster, China GrenTech, King, Lifeway: U.S. Equity Preview

By Lu Wang

Aug. 14 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Ares Capital Corp. (ARCC US): The investment company said it’s offering to sell 8 million shares and plans to use part of the money to pay debt. The creation of additional shares may dilute future earnings for existing shareholders.

Blockbuster Inc. (BBI US): The largest movie-rental chain reported a loss excluding some items of 19 cents a share, 62 percent wider than the average analyst estimate, according to Bloomberg data.

China GrenTech Corp. (GRRF US): The wireless products and services company reported second-quarter profit of 8 cents a share, four times the average analyst estimate.

King Pharmaceuticals Inc. (KG US): The drugmaker betting its future on safer painkillers won U.S. approval to sell the first pain pill that users can’t easily manipulate to get high.

Lifeway Foods Inc. (LWAY US): The maker of dairy products said it earned 15 cents a share in the second quarter, more than double Taglich Brothers’ estimate.

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

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Fortescue Halted in Sydney Ahead of Deal Completion

By Rebecca Keenan

Aug. 13 (Bloomberg) -- Fortescue Metals Group Ltd., Australia’s third biggest producer of iron ore, is completing a commercial negotiation and asked for shares to be halted in Sydney trading until next week.

Trading will be suspended to Aug. 17 when it expects to release a document regarding the negotiation, the Perth-based company said a statement to the Australian stock exchange. It didn’t provide details.

The company, run by Andrew Forrest, said yesterday it is reviewing financing options for planned expansions of its mine, port and rail operations in Western Australia. Fortescue is in talks with China Investment Corp. to sell convertible bonds worth $1 billion, Reuters reported this week, citing two unidentified people familiar with the deal.

Fortescue may need between $3 billion and $4 billion to proceed with plans to almost double output, Hunan Valin Iron & Steel Group, its second-largest shareholder, said in May. The mill in April put planned expansions on hold amid a cash squeeze.

Fortescue rose 2.3 percent to A$4.45 on the Australian stock exchange before the trading halt. It has more than doubled this year.

CIC, as China’s $200 billion sovereign wealth fund is known, is in talks with Fortescue to invest about $3 billion in the company, three people familiar with the deal said in February. Talks with CIC were continuing, director Chris Catlow said in March.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net;

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Space Images Forewarn of Indian Groundwater Crisis

By Jason Gale

Aug. 13 (Bloomberg) -- Orbiting satellites measuring the gravitational pull of water below the earth’s surface confirm what authorities in India suspected for more than 20 years: groundwater is shrinking in some of the nation’s driest areas.

Three northwest Indian states lost a volume of water from underground supplies equal to more than twice the capacity of Lake Mead, the biggest U.S. reservoir, between August 2002 and October 2008, scientists said in the journal Nature yesterday.

The findings suggest that pumping water from wells for irrigation is damaging India’s resources more than the government has estimated. Without measures to curb demand, dwindling groundwater supplies may cause drinking-water shortages and erode crop production in a region inhabited by 114 million people, the authors said.

“That part of northern India is really experiencing rapid groundwater decline that’s mostly human-driven,” said co-author Jay Famiglietti, associate professor of earth system science at the University of California, Irvine, in a telephone interview yesterday. “What they are doing is not sustainable.”

About a fifth of water used globally comes from under the ground, the Stockholm International Water Institute has said. Withdrawals are predicted to increase 50 percent by 2025 in developing countries, and 18 percent in developed countries, according to the policy group based in the Swedish capital.

India’s area of irrigation almost tripled to 33.1 million hectares (82 million acres) from 1970 to 1999, the authors said, spurred by the so-called Green Revolution that began in the 1960s to bolster production of wheat, rice and other staples.

River Contamination

Surface water supplies are also strained. Three-quarters of the country’s rivers, lakes and dams are contaminated by human and agricultural waste and industrial effluent, according to a report by the Ministry of Urban Development in September.

Groundwater stocks in Rajasthan, Punjab and Haryana states are being lowered at an average rate of about 4 centimeters (1.6 inches) a year, Famiglietti and colleagues said. The depletion is equal to about 17.7 cubic kilometers (4.7 trillion gallons) of water a year, exceeding the estimate of 13.2 cubic kilometers by the Ministry of Water Resources, the researchers said.

More than a quarter of the land area in the three states is irrigated accounting for about 95 percent of the groundwater consumed, they said. Levels of subsurface water also appeared to be declining in western Uttar Pradesh. That state, along with Punjab and Haryana are India’s largest wheat-producing states.

Monsoon Forecast

This year’s monsoon may be the weakest in five years, the India Meteorological Department said this week. That’s exacerbating demand for watering crops and prompted some governments to divert electricity to farms to pump water, said Sunita Narain, director of the New Delhi-based Centre for Science and Environment, who was not part of the study.

India’s government established a Central Ground Water Authority in 1986 to regulate pumping from aquifers. Groundwater hasn’t been developed evenly across India, and exploitation has led to a drop in water levels and seawater intrusion in some areas, the Ministry of Water Resources said on its Web site. Of 5,723 sites assessed, 839 are “over-exploited,” 226 are “critical” and 550 are “semi-critical.”

“I don’t think that the water issues are going to get the attention they deserve until we reach crisis mode,” Famiglietti said. “In that part of India, they are certainly reaching crisis mode.”

Pumping costs are being ratcheted up by the falling water table and the need to drill deeper wells, said Steven Gorelick, professor of earth sciences at California’s Stanford University.

Cost of Pumping

“The problem of declining groundwater levels will become self-limiting at some point,” Gorelick said in an e-mail yesterday. “Use will curtail when it is simply too costly to pump the water to the surface from great depths, or when the quality of deeper and deeper groundwater is no longer suitable.”

Famiglietti and colleagues used hydrological modeling and data from the Gravity Recovery and Climate Experiment, or Grace, to quantify groundwater losses over more than six years. Groundwater depletion over the study period was equivalent to a net loss of 109 cubic kilometers of water, which is enough to fill India’s largest surface-water reservoir twice and Lake Mead almost three times, the authors said.

Grace’s twin satellites, launched in March 2002, detect subtle changes in the earth’s gravity field influenced by the motion of water and air. The satellites detect relative differences in gravitational pull since they occupy different positions in space, according to the mission’s Web site.

Across Borders

“What is remarkable about this study is that such small declines in groundwater levels can be detected using remote sensing based on Grace satellite data,” said Gorelick. “The approach is like trying to track new construction of urban skyscrapers by sequentially measuring the average elevation of an entire city.”

The technique will enable scientists to gauge water levels in aquifers that cross international borders, Famiglietti said.

“This is the first time that we have been able to go into the region with essentially no data on the ground and be able to come up with a pretty reasonable number for the rate of groundwater depletion,” he said. “We have the power now to be able to get that holistic synoptic of view of what’s going on over a large area.”

To contact the reporter on this story: Jason Gale



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China’s Mills Should Refrain From Expansion for Three Years

By Bloomberg News

Aug. 13 (Bloomberg) -- Steelmakers in China, the world’s largest producer, should refrain from expansion for the next three years to curb overcapacity, the industry minister said.

Steelmakers have the capacity to produce 660 million metric tons of steel a year, more than annual demand of 470 million tons, Li Yizhong, minister of industry and information technology said today in a televised press briefing in Beijing.

“China’s iron and steel industry is the worst in the country in terms of excess capacity,” Li said. “Plans to purely expand capacity of mills won’t be approved. I would like to call on the industry: No new projects for three years.”

The Asian nation is trying to stop a supply glut from stalling a price and profit revival for larger mills including Baosteel Group Corp. Excess production by high energy-consuming and polluting small mills has also led to the over-importing of the raw material iron ore and raised costs, the China Iron & Steel Association said last month.

“The overcapacity in the steel industry would stir a price war, hurting profits of the mills,” said Hu Yanping, an analyst at Umetal Research Institute. “But if this is just Li’s personal appeal, the effect would be very limited.”

Li’s comments that the ministry won’t approve capacity expansion echoes a government policy set in 2005, which said it won’t allow expansion plans unless older plants with similar capacity were closed.

About 35 percent of installed hot-rolled wide strip capacity in China was built without state approval, Umetal’s Hu said.

To contact the reporters on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net; Eugene Tang in Beijing at eugenetang@bloomberg.net

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Rubber Soars to 10-Month High as Oil Rally May Increase Demand

By Jae Hur

Aug. 13 (Bloomberg) -- Rubber jumped to a 10-month high as crude oil’s gains for a second day amid growing optimism of a global economic recovery may boost demand for the commodity used to make tires.

Futures in Tokyo added as much as 4.4 percent to the highest since Oct. 9 as oil extended gains after U.S. equities increased and the Federal Reserve said the recession is easing and pledged to keep interest rates low. A rise in oil prices boosts the appeal of natural rubber against synthetic product.

“Rubber got a boost from higher crude oil prices and relatively higher Shanghai futures,” said Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co.

January-delivery rubber rose as much as 8.9 yen to 209.9 yen a kilogram ($2,183 a metric ton) on the Tokyo Commodity Exchange. The price, which fell 1.7 percent yesterday, ended up 4 percent at 209 yen.

Rubber in Tokyo has risen 54 percent this year as crude oil has gained 59 percent and car sales in China have jumped. Crude oil for September delivery added 1.1 percent to $70.90 a barrel on the New York Mercantile Exchange after gaining 1 percent yesterday.

The MSCI Asia Pacific Index gained 1.6 percent to 112.92 as of 3:32 p.m. in Tokyo after the Standard & Poor’s 500 Index advanced 1.2 percent as the Fed said the economy is “leveling out” and that the benchmark interest rate will stay “exceptionally low” for an “extended period.”

Shanghai Prices

Rubber for January delivery on the Shanghai Futures Exchange, the most-active contract, rose for a fourth day, gaining 1.5 percent to 19,665 yuan ($2,878) a ton by 2:35 p.m. local time. The most-active contract has jumped 82 percent this year.

There’s speculation that some funds have been buying Shanghai rubber futures, prompting traders to purchase physical material from producing countries and Japan to take advantage of higher local prices, prompting an increase in stockpiles in Shanghai, said Shigemoto.

Rubber inventories expanded 6,644 tons to 62,778 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the exchange said Aug. 7. That was the sixth straight weekly increase and up 52 percent from 41,393 tons on June 25.

“Current inventory levels in Shanghai are believed well above the actual demand in the country,” Shigemoto said. “The market may plunge at some point if current speculative funds start unwinding their bets” on a price rise, he said.

Hyundai Motor Co. boosted sales in China 66 percent in the first seven months of the year to 300,816 vehicles, Xinhua said, citing the automaker.

To contact the reporters on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Kloppers Says BHP Has No Plans to Give Investors Cash

By Jennifer Joan Lee and Brett Foley

Aug. 13 (Bloomberg) -- BHP Billiton Ltd. Chief Executive Officer Marius Kloppers said the world’s largest mining company doesn’t have plans to return any surplus cash to shareholders.

“At this point in time we have no plans to return any surplus cash,” Kloppers said in a Bloomberg Television interview in London yesterday. “We believe we have good plans to put that money to work in our business.”

The Melbourne-based company plans $10.7 billion of capital expenditure this year and will spend $5.8 billion to create an iron ore venture with Rio Tinto Group, Kloppers said. It’s also studying potential acquisitions, including some in oil and gas, and will spend “billions of dollars” in coming years to develop the Jansen potash project in Canada, he said.

The company yesterday posted second-half net income of $3.26 billion, a drop of 65 percent from a year earlier, beating the $3.1 billion median estimate of six analysts surveyed by Bloomberg. Net operating cash flow was a record $18.9 billion.

Declines in metal prices also cut profit at Brazilian rival Vale SA by 84 percent in the second quarter and at Switzerland’s Xstrata Plc by 77 percent in the first six months of the year. Xstrata’s operating cash flow slid to $819 million in the second half from $3.1 billion.

‘Financial Clout’

“The scale and financial clout which BHP enjoys over its peer group is clearly evident when you compare its result to that of its smaller rival Xstrata,” said Cameron Peacock, a Melbourne-based analyst at IG Markets. “To produce a record net operating cash flow of $18.9 billion against the backdrop of the global financial crisis is certainly impressive.”

BHP, which increased its full-year dividend 17 percent, gained 0.7 percent to A$38.26 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The stock has gained 26 percent this year compared with the 19 percent gain in the benchmark S&P/ASX 200 Index.

Kloppers, 46, cut output of some metals and eliminated jobs after commodity prices slumped in the second half of 2008.

BHP, which suspended a share buyback in December 2007, scrapped a hostile bid for London-based Rio last November. The transaction would have been the first major acquisition since BHP bought WMC Resources Ltd. for $7.6 billion in 2005.

In addition to the acquisition opportunities it’s studying, BHP plans to become one of the world’s biggest potash producers by developing Canadian assets, Kloppers said. It spent $95 million developing Jansen, which will have an annual capacity of 8 million metric tons of potash, he added.

Portfolio Diversification

“We think that it would round out the diversification of our portfolio nicely,” he said referring to the fertilizer. “It has a different set of drivers and hence would fit well.”

The company’s iron ore unit, the biggest earner in the year ended June 30, accounted for about 20 percent of sales. BHP’s base metals unit, which includes copper, silver, lead and uranium, suffered a 52 percent drop in sales, making it the fourth-biggest earner, down from the biggest previously.

Iron ore producers agreed this year with some steelmakers to cut annual contract prices for the first time in seven years. Talks with Chinese mills, the biggest buyers, are continuing.

BHP said yesterday it had $6 billion of exceptional items in the fiscal year ended June 30, including $3.6 billion for the suspension of the Ravensthorpe mine, $510 million for the sale of the Yabulu refinery and $450 million for the lapsed offer for Rio.

Commodity prices have rallied 15 percent this year as the global recession abates. The rebound may be extended into next year, Nouriel Roubini, the New York University economist who predicted the financial crisis, said on Aug. 3.

China bought record volumes of oil and iron ore in July as automakers, steel producers and builders expanded output to meet rising demand. Oil imports jumped 18 percent and iron ore purchases rose 5 percent, the country’s customs office said on Aug. 11.

For Related News and Information: To see more on BHP: BHP AU CN To see more metal news: METT

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Soybean Futures Rise as USDA Lowers Global Inventory Estimate

By Luzi Ann Javier

Aug. 13 (Bloomberg) -- Soybean futures rose for a third day after the U.S. reduced its estimate on global stockpiles and reported sales of 113,000 metric tons of the American oilseed to China, signaling strong demand for the commodity.

The U.S. Department of Agriculture yesterday cut its estimate for soybean global ending inventories next year to 50.3 million metric tons, down 3 percent from the July forecast of 51.8 million tons, and lowered output projections for the U.S., the world’s biggest grower and exporter, and China.

“The figures coming through just continue to support the higher prices for soybeans,” Ben Barber, a futures adviser at Bell Commodities Ltd., said by phone from Melbourne today.

Soybeans for November delivery gained as much as 1 percent to $10.545 a bushel in after-hours electronic trading on the Chicago Board of Trade, before trading at $10.5225 at 2:35 p.m. Singapore time.

U.S. exporters sold 113,000 tons of soybeans to China, the biggest importer, for delivery in the marketing year beginning Sept. 1, the USDA said yesterday. The total included 58,000 tons earlier reported as being sold to unknown buyers.

Exporters are required in the U.S. to report any transaction of 100,000 tons or more for any commodity sold in one day to a single destination.

The USDA cut its U.S. soybean production forecast by 1.9 percent to 87.1 million tons, or 3.199 billion bushels, in the 2009-2010 marketing year.

China’s Inventories

Next year’s inventory forecast for China was reduced 2.8 percent to 7.06 million tons as excessive moisture in the northeast curbs yields.

“Soybeans may drag corn and wheat prices a little bit higher,” Bell’s Barber said.

Corn for December delivery rose 0.9 percent to $3.3925 a bushel at 2:43 p.m. Singapore time, extending yesterday’s 1.6 percent gain.

Global corn trade will rise faster next year, the USDA said, boosted by import demand in Mexico and Taiwan. The global trade forecast was raised to 84.48 million tons next year, from 81.73 million tons projected in July. That compares with an estimated 80.66 million tons in the 2008-2009 marketing year.

Wheat for December delivery fell as much as 0.7 percent to $5.14 a bushel before trading unchanged at $5.1775 a bushel.

The USDA forecast global wheat inventories next year at 183.56 million tons, up 1.3 percent from its July outlook. The production forecast for the U.S., the world’s biggest exporter, was raised by 3.4 percent to 59.4 million tons, or 2.18 billion bushels, as yields rise.

Korean Purchase

In the export market, South Korea’s Major Feedmill Group purchased 110,000 tons of U.S. corn for feed production through private negotiations yesterday, according to two industry executives who were familiar with the trade. The volume was in addition to the Korea Feed Association’s purchase of 55,000 tons in a tender yesterday.

Corn for May delivery on the Dalian Commodity Exchange gained as much as the 4 percent daily limit from the previous settlement price to 1,736 yuan ($254) a ton, the highest level since Sept. 26, before trading at 1,725 yuan at 2:57 p.m. local time.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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Japan Stocks Rise on U.S. Rate Outlook; Kawasaki Heavy Advances

By Masaki Kondo

Aug. 13 (Bloomberg) -- Japanese stocks rebounded from their biggest decline in a month yesterday after the U.S. Federal Reserve said it will keep its benchmark interest rate low.

Honda Motor Co., which gets almost half its sales in North America, climbed 1.3 percent. Toray Industries Inc. gained 6 percent after the Nikkei newspaper said it developed an insulin nasal spray. Kawasaki Heavy Industries Ltd., which makes bullet trains, jumped 6.9 percent after the Nikkei separately reported that Vietnam will use Japan’s high-speed-train technology.

The Nikkei 225 Stock Average added 82.19, or 0.8 percent, to close at 10,517.19 in Tokyo. The broader Topix index rose 8.54, or 0.9 percent, to 968.41, with seven stocks gaining for every two that fell. Yesterday, both gauges dropped the most in a month.

“The Fed’s commitment to a low interest rate eased concern higher borrowing costs will hamper the U.S. economic recovery,” said Mitsushige Akino, who oversees the equivalent of $624 million at Ichiyoshi Investment Management Co. “Some players such as individuals are continuing to buy and sell stocks based on a short-term view, but big investors probably won’t shift serious money invested with a long-term strategy.”

The Nikkei has risen 49 percent since a more than quarter- century low on March 10, keeping its estimated price-earnings ratio at the highest level among benchmark indexes of the world’s biggest equity markets, according to data compiled by Bloomberg. At the same time, the number of shares traded on the main board of the Tokyo Stock Exchange has held below this year’s daily average for more than a week.

Low Interest Rates

In New York, the Standard & Poor’s 500 Index rebounded 1.2 percent yesterday from its biggest decline in a month the day before. The Fed said the benchmark interest rate will stay “exceptionally low” for an “extended period” and said the recession is easing. The Fed’s Open Market Committee left the rate between zero and 0.25 percent after its two-day meeting.

Toyota Motor Corp., the world’s biggest automaker, rose 1.5 percent to 4,090 yen, while smaller rival Honda Motor Co. advanced 1.3 percent to 3,080 yen. Denso Corp., a car-parts maker affiliated with Toyota, gained 3.4 percent to 2,875 yen after Mitsubishi UFJ Financial Group Inc. lifted the stock to “strong outperform” from “market perform.”

Kawasaki Heavy climbed 6.9 percent to 263 yen, the steepest increase in the Nikkei. Nippon Sharyo Ltd., a maker of train cars, gained 8.9 percent to 652 yen. Kinki Sharyo Co. added 8.7 percent to 913 yen.

Bullet Trains

Vietnam Railways Corp. will use Japan’s bullet-train technology for a planned $56 billion link connecting Hanoi and Ho Chi Minh City, the Nikkei newspaper reported, citing an interview with Chief Executive Officer Nguyen Huu Bang. The Vietnamese government aims to build the line in sections and start running high-speed trains by 2020, the report said.

Toray rallied 6 percent to 568 yen, the highest close since Sept. 19. Toray and Japan’s Hoshi University developed an insulin spray for treating diabetes, the Nikkei said. A team of researchers plans to tie up with a drugmaker to begin clinical trials of the treatment, the Nikkei reported, without saying where it obtained the information.

T&D Holdings Inc., Japan’s largest listed life insurer, sank 1.6 percent to 3,070 yen, sending a gauge of insurers to the biggest decline among the Topix’s 33 industry groups. Pretax profit dropped by a fifth in the quarter to June 30 as proceeds from sales of securities holdings inflated income a year earlier, the company said.

Nikkei futures expiring in September added 1 percent to 10,540 in Osaka and gained 1.1 percent to 10,540 in Singapore.

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

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