Corn Declines on Speculation Drier Weather to Aid U.S. Harvest

By Luzi Ann Javier

Nov. 13 (Bloomberg) -- Corn fell for a third day, trimming a weekly gain, on speculation drier weather in growing regions in the U.S. will accelerate harvesting in the world’s biggest exporter of the grain.

Iowa, Nebraska and Minnesota, three of the four biggest U.S. corn-producing states, were forecast to have normal to below- normal precipitation between Nov. 18 and Nov. 22, according to the U.S. Climate Prediction Center Web site.

“The market is interested in the rain forecast at the moment,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia in Sydney, said by phone today. Prices are reacting on prospects that farmers will be “able to complete the harvests, particularly in the U.S.”

Corn for December delivery slumped as much as 0.9 percent to $3.87 a bushel in after-hours electronic trading on the Chicago Board of Trade. The most-active contract traded at $3.88 a bushel, down 0.5 percent at 3:08 p.m. Singapore time, curbing the weekly gain to 5.9 percent.

Corn futures jumped 7.5 percent in the first two trading days of the week as the U.S. Department of Agriculture cut its forecast for the nation’s output and on speculation delays in harvest may curb yields further.

About 37 percent of the corn crop in the 18 largest U.S. growing states, had been harvested as of Nov. 8, compared with the past five-year average of 82 percent, the USDA said Nov. 9.

Production Forecast

The USDA on Nov. 10 reduced its corn production forecast for the world’s biggest exporter to 12.921 billion bushels, down 0.7 percent from its October estimate after heavier-than-normal rainfall and freezing temperatures helped reduce yield potential.

Soybeans for January delivery in Chicago were little changed at $9.91 a bushel, taking the weekly gain to 3.8 percent.

About 75 percent of the soybean crop in 18 largest U.S. producing states have been collected as of Nov. 8, compared with the past five year average of 92 percent, the USDA said Nov. 9.

Wheat for March delivery declined as much as 0.7 percent to $5.485 a bushel before trading at $5.495. The March contract has gained 6.2 percent rally this week.

Rough rice for January delivery jumped as much as 2.3 percent to $15.07 per 100 pounds in Chicago on speculation Thailand, the world’s biggest exporter, may delay sales, limiting supplies as the Philippines prepares for a record tender.

The Philippines is seeking to buy 600,000 metric tons of rice on Dec. 1 after cyclones damaged crops in the world’s biggest importer.

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

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Frontline Chief Says Fujairah Ban Will Spur Tanker Scrapping

By Alaric Nightingale

Nov. 13 (Bloomberg) -- Owners of single-hulled tankers are more likely to scrap their ships, buoying freight rates, after the Port of Fujairah said it would ban them next year, according to Frontline Ltd., the biggest supertanker company.

Fujairah, in the United Arab Emirates, is the most common regional refueling point for ships carrying crude from the Persian Gulf. About 90 supertankers, or 17 percent of the global fleet, have single hulls, according to Lloyd’s Register-Fairplay data on Bloomberg.

“It’s another nail in the coffin for single-hull ships,” Jens Martin Jensen, Singapore-based chief executive officer of Frontline’s management unit, said by phone today. Fujairah’s ban is “a push in the right direction” that may contribute to the fleet shrinking next year, he said.

The International Maritime Organization, a United Nations agency with 169 members, will implement a global ban on single- hull tankers from next year. Nations can opt out until 2015. The European Union called the ship design “more accident-prone” in 2003 and London-based BP Plc says it won’t hire them because of the risk of leaking, favoring double-hulled ships instead.

Frontline operated a fleet of 84 tankers including seven single-hull carriers according to its quarterly earnings report on Aug. 28. The majority of its single-hulled ships are leased out on fixed fees until the end of next year.

Daily returns from the Saudi Arabia-to-Japan voyage rose 16 percent to $21,584 yesterday, according to the Baltic Exchange.

To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net

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Most Asian Stocks Decline on Earnings Concern; ICBC Advances

By Jonathan Burgos and Ian Sayson

Nov. 13 (Bloomberg) -- Most Asian stocks dropped, paring the MSCI Asia Pacific Index’s first weekly advance in four, as commodity prices fell and Japanese glassmakers posted losses.

BHP Billiton Ltd., the world’s biggest mining company and Australia’s largest oil producer, sank 1.4 percent in Sydney. Central Glass Co. and Nippon Sheet Glass Co. dropped more than 6 percent in Tokyo after reporting losses. Industrial & Commercial Bank of China Ltd. climbed 2 percent after its chairman predicted loan profitability among Chinese lenders will improve.

Five stocks fell for every four that rose on the MSCI Asia Pacific Index. The gauge was little changed at 117.87 as of 5:12 p.m. in Tokyo, on course for a 1.3 percent gain for the week. The measure has dropped 2.8 percent from a 13-month high on Oct. 20 amid concern governments will withdraw stimulus efforts.

“There are still skeptical investors out there who don’t think the global recovery will be sustained and this is tempering the advance in equities,” said Allan Yu, who helps manage $4 billion at Manila-based Metropolitan Bank & Trust Co.

Japan’s Nikkei 225 Stock Average dipped 0.4 percent to 9,770.31. Leopalace21 Corp., a real-estate company, slumped 7.5 percent after Mitsubishi UFJ Securities downgraded the stock.

Australia’s S&P/ASX 200 Index sank 0.9 percent as Paladin Energy Ltd. dropped 2.6 percent after its loss in the September quarter widened. The Shanghai B-Share Stock Price Index, a gauge of dollar-denominated Chinese shares, rallied 9.4 percent to its highest since May 2008 after regulators increased the amount of foreign currency individuals can exchange.

Oil, Metal Prices

Futures on the Standard & Poor’s 500 Index were little changed. The gauge slid 1 percent yesterday from a 13-month high, dragged down by energy producers.

Crude-oil futures fell 3 percent to $76.94 a barrel in New York yesterday, the lowest settlement since Oct. 14. The Energy Department reported that supplies of crude oil rose 1.76 million barrels to 337.7 million last week. Analysts surveyed by Bloomberg News forecast a 1 million-barrel gain.

The London Metals Index, a measure of six metals including copper and zinc, dropped 0.8 percent yesterday, its steepest slump this week.

BHP Billiton dropped 1.4 percent to A$39.01. Rio Tinto Ltd., the world’s third-biggest mining company, slipped 0.5 percent to A$69.52. PetroChina Co., the nation’s largest oil producer, lost 1.3 percent to HK$9.95 in Hong Kong. Jiangxi Copper Co. Ltd., China’s biggest producer of the metal, declined 1.4 percent to HK$18.30.

In Manila, Philex Mining Corp. slumped 14 percent to 16.75 pesos. Philex said yesterday third-quarter profit fell 42 percent to 617.5 million pesos ($13 million) while First Pacific Co. said it’s in no hurry to boost its 21 percent stake in the miner.

Justifying Valuations

The MSCI Asia Pacific Index has climbed 67 percent from a more than five-year low on March 9. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Dow Jones Stoxx 600 Index.

“We’ll have to see whether corporate earnings will continue to surprise positively,” said Michiya Tomita, who helps manage $67 billion at Mitsubishi UFS Asset Management Co. in Hong Kong. “That will help justify valuations.”

The MSCI gauge fell 1.3 percent in October, the first monthly decline since February, as Australia’s central bank raised interest rates, while India shifted policy focus toward stemming inflation.

China, World

China will take further steps to boost domestic demand, President Hu Jintao said. The International Monetary Fund doesn’t expect the world to experience a double-dip recession, though the economic recovery is fragile and sluggish, IMF Managing Director Dominique Strauss-Kahn said. Hu and Strauss- Kahn spoke in Singapore.

Paladin Energy declined 2.6 percent to A$4.12. The uranium producer said its loss widened to $20 million in the three months ended in September from a loss of $5.1 million a year earlier.

In Tokyo, Central Glass tumbled 6.8 percent to 370 yen after posting first-half net loss of 451 million yen ($5 million). Nippon Sheet Glass, which posted a first-half net loss of 26.2 billion yen, declined 8.2 percent to 261 yen, the steepest decline in the MSCI Asia Pacific Index.

Leopalace21 slumped 7.5 percent to 410 yen after it was cut to “underperform” from “market perform” by Kouki Ozawa, an analyst at Mitsubishi UFJ Securities.

Nintendo Co. declined 1.4 percent to 22,980 yen. Sales of the company’s Wii console fell for the eighth straight month in the U.S., as a 20 percent price reduction failed to lift purchases of the world’s leading video-game platform.

In Hong Kong, Industrial & Commercial Bank advanced 2 percent to HK$6.80. China Construction Bank Corp., China’s No. bank by market value, added 1.4 percent to HK$7.13.

ICBC Chairman Jiang Jianqing said this year’s record lending won’t lead to an increase in bad debts in 2010, and predicted loan profitability among Chinese banks will improve. Jiang also said he expects China to maintain its current monetary policy.

To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.

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European Stock-Index Futures Are Little Changed; BA May Move

By Adria Cimino

Nov. 13 (Bloomberg) -- European stock-index futures were little changed as a report that showed Germany’s economic recovery accelerated in the third quarter helped offset lower commodity prices. Most Asian shares declined.

BHP Billiton Ltd., the world’s biggest mining company and Australia’s largest oil producer, slipped 1.4 percent in Sydney. Porsche SE, the maker of the 911 sports car, may be active after posting a full-year pretax loss. British Airways Plc will probably move after agreeing to a plan for a $7 billion merger with Spanish carrier Iberia Lineas Aereas de Espana SA.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark gauge for the euro region, slipped 0.1 percent to 2,868 as of 7:23 a.m. in London. The U.K.’s FTSE 100 Index may decrease 11, according to Cantor Index, a betting firm.

Market moves today may come from news on mergers and acquisitions or commodity prices, according to James Hughes, a market analyst at CMC Markets in London. “Otherwise we could well see the week end with a whimper,” he wrote in a note.

Europe’s Stoxx 600, poised for its second straight weekly advance, has rallied 56 percent since March amid speculation government stimulus programs and record-low interest rates are helping to drag the economy out of recession. Gains have pushed its valuation to about 54 times reported earnings, near the highest level since 2003.

Gross domestic product in Germany, Europe’s largest economy, increased a seasonally adjusted 0.7 percent from the second quarter, when it rose 0.4 percent, the Federal Statistics Office said in Wiesbaden today. The median estimate in a Bloomberg News survey of 35 economists was for growth of 0.8 percent. The second-quarter figure was revised from 0.3 percent.

U.S. Futures

U.S. equity benchmark indexes yesterday fell from 13-month highs as energy shares slumped following bigger-than-estimated growth in oil stockpiles, erasing an earlier advance spurred by Hewlett-Packard Co.’s takeover of 3Com Corp.

Standard & Poor’s 500 Index futures added 0.2 percent today, while the MSCI Asia Pacific Index dropped 0.1 percent.

BHP Billiton declined 1.4 percent to A$39.01 in Australia.

Crude oil was little changed after falling to the lowest level in a month in New York on concern that fuel demand has not recovered in the world’s biggest energy consumer. The contract for December delivery declined as much as 94 cents, or 1.2 percent, to $76 a barrel on the New York Mercantile Exchange.

The London Metals Index, a measure of six metals including copper and zinc, retreated 0.8 percent yesterday, the steepest drop this week.

Porsche, BA

Porsche posted a full-year pretax loss after writing down the value of options on shares of Volkswagen AG, the company it’s merging with after a failed takeover bid.

The 4.4 billion-euro ($6.5 billion) loss in the year ended July 31 compared with an 8.6 billion-euro profit a year earlier, the company said. Porsche plans a dividend of 5 cents per preferred share, a reduction of 93 percent from the 70-cent payout for fiscal 2008.

BA agreed to a plan for a $7 billion merger with Iberia, ending more than a year of talks on a tie-up aimed at fighting a slump in travel and closing the gap with competitors.

Under the all-share deal, BA shareholders will get one share in the combined company for every existing share they hold in BA and Iberia investors will get 1.0205 shares in the enlarged company for every Iberia share they hold, the companies said yesterday after the market closed.

Compagnie Financiere Richemont SA, the world’s largest jewelry maker, said its operating profit fell to 390 million euros in the first half from 635 million euros the year earlier. Currency effects will have a negative impact on results in the second half, Richemont said.

Dexia, Technip

Dexia SA, France’s biggest lender to local governments, reported a third-quarter profit after selling its U.S. bond insurance unit. Net income was 274 million euros, following a 1.54 billion-euro loss in the year-earlier period, the Paris- and Brussels-based bank said. That compares with a 272 million- euro median estimate of nine analysts surveyed by Bloomberg.

Technip SA, Europe’s second-largest oilfield services provider, confirmed its full-year sales outlook and reported third-quarter net income of 108 million euros.

Siemens AG, Europe’s biggest engineering company, may gain after UBS AG rated the shares a “short-term buy.”

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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U.S. Stock Fund Inflows Reach 11-Month High, EPFR Global Says

By Shiyin Chen

Nov. 13 (Bloomberg) -- Investors poured the most money into U.S. stock funds in 11 months, leading global equity inflows amid a recovery in earnings and on expectations the Federal Reserve will keep borrowing costs low, EPFR Global said.

Investors funneled $6.97 billion into U.S. equity funds, the most since the second week of December 2008, contributing to total inflows of $10 billion to stock funds during the week ended Nov. 11, EPFR said in a statement dated yesterday. It added that funds investing in China shares took in $256 million, the most in nine weeks, pacing a $2.46 billion gain in overall emerging-market stock investments.

The Standard & Poor’s 500 Index and the MSCI Emerging Markets Index both gained 5 percent during the week, helped by pledges by the Group of 20 nations to maintain their stimulus measures. Cisco Systems Inc. and HSBC Holdings Plc were among companies that rose after reporting earnings.

“There’s going to be a slow but steady recovery,” Richard Lacaille, global chief investment officer at State Street Global Advisors, which oversees $1.74 billion in assets, said in a Bloomberg Television interview in Hong Kong. “We’ve gone through the bottom, earnings have troughed, we now face growth.”

Policy makers from the U.S. to Japan said at the G-20 meeting last week it’s too early to withdraw fiscal steps designed to support global recovery. The Fed also said on Nov. 4 it will keep interest rates near zero for “an extended period.”

Cisco, China

Cisco, the world’s largest maker of networking equipment, reported profit excluding stock compensation and some other costs of 36 cents last week, beating the 31-cent average estimate in a survey of analysts. HSBC, Europe’s biggest bank, said third-quarter profit was “significantly” higher than a year ago on lower loan provisions.

China equities gained as economic data showed the nation’s recovery strengthening. Industrial production rose 16.1 percent in October, the most since March 2008, the statistics bureau said on Nov. 11. Retail sales gained an annual 16.2 percent during the month, while urban fixed-asset investment climbed 33.1 percent in the first 10 months of the year.

“In addition to being seen as a haven from dollar weakness, emerging markets benefited during the first full week of November from some robust Chinese macroeconomic data showing GDP growth on track to exceed 10 percent during the fourth quarter of 2009,” said EPFR, which tracks funds with $10 trillion in assets.

Developing Markets

Global emerging-market stock funds drew $1.48 billion, while Asia took in $630 million, Cambridge, Massachusetts-based EPFR said. Latin America and developing Europe, the Middle East and African stock funds also attracted a combined $350 million, it said.

Funds investing in the BRIC nations of Brazil, Russia, India and China also had a ninth straight week of inflows, taking in $224 million, according to the statement. Total inflows for the year have reached a record $66.4 billion, according to estimates by Morgan Stanley.

“In emerging markets, you’ve got a secular growth story and a lot more robustness in terms of growth,” Lacaille said.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

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Japanese Stocks Fall; Nikkei 225, Topix Decline for Third Week

By Akiko Ikeda and Kotaro Tsunetomi

Nov. 13 (Bloomberg) -- Japanese stocks fell, dragging benchmark indexes to a third consecutive weekly decline, after crude-oil and metal prices slumped and companies reported losses.

Nippon Mining Holdings Inc., an oil refiner and Japan’s biggest copper producer, sank 1.4 percent after oil retreated yesterday in New York to a four-week low and metals slid in London. Japan Petroleum Exploration Co. lost 2.9 percent. Nippon Sheet Glass Co. plunged 8.2 percent, the steepest drop in the Nikkei 225 Stock Average, after the glassmaker reported a loss. Central Glass Co. tumbled 6.8 percent after reporting a half- year loss and cutting its full-year profit forecast in half.

“Lower commodity prices illustrate anxiety about the economy,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $56 billion.

The Nikkei 225 fell 0.4 percent to 9,770.31 at the 3 p.m. market close in Tokyo. The broader Topix index retreated 0.1 percent to 866.80, the lowest close since July 15, with about three stocks declining for every two that advanced.

Losses widened to 0.2 percent this week for the Nikkei and 0.8 percent for the broad gauge. The Topix has drifted between gains and losses in seven of the past eight sessions. Closing levels have moved less than 1 percent on 22 of the 30 trading days since Oct. 1, reducing its 30-day volatility to the lowest level since August 2007, according to data compiled by Bloomberg.

The index has fallen 11 percent since Yukio Hatoyama was elected as Japan’s prime minister on Aug. 30. That’s the second- biggest drop among 89 benchmarks tracked by Bloomberg worldwide. Equities in the Japanese measure trade at 36 times estimated earnings, more than double the 17 times for the MSCI World Index.

Shrinking Economy

Investors have shunned stocks on concern the new government will struggle to revive growth after the global recession sapped demand for companies’ products and the stronger yen hurt earnings at exporters.

Japan’s economy will shrink 5.4 percent this year, faster than contractions of 2.7 percent expected in the U.S. and 4.2 percent in the euro area, according to forecasts released on Oct. 1 by the International Monetary Fund.

In New York yesterday, the Standard & Poor’s 500 Index slid 1 percent from a 13-month high the previous day, dragged down by energy producers on a bigger-than-estimated increase in oil stockpiles.

Crude oil for December delivery fell 3 percent to $76.94 a barrel on the New York Mercantile Exchange yesterday, the lowest settlement since Oct. 14. The Energy Department report showed supplies of crude oil rose 1.76 million barrels to 337.7 million last week. Analysts surveyed by Bloomberg News forecast a 1 million-barrel gain.

Oil, Metals

Nippon Mining dropped 1.4 percent to 366 yen. AOC Holdings Inc., an oil and gas explorer declined 2.3 percent to 606 yen. Japan Petroleum Exploration sank 2.9 percent to 4,360 yen, its lowest in more than five weeks.

The London Metals Index, a measure of six metals including copper and zinc, dropped 0.8 percent yesterday, its steepest slump this week.

Nippon Sheet Glass tumbled 8.2 percent to 256 yen. The glassmaker posted a first-half net loss of 26.2 billion yen, compared with a year-earlier profit, as sales fell 32 percent.

Central Glass plunged 6.8 percent to 370 yen, losing the most in 10 months. The company cut its full-year forecast for net income in half, citing a slump in sales and losses related to inventory. It booked a first-half loss of 451 million yen, missing the profit of 200 million yen it expected.

Nippon Suisan Kaisha Ltd. jumped 7.6 percent to 268 yen, the steepest advance in the Nikkei 225. The seafood company was boosted to “buy” from “underperform” by Ritsuko Tsunoda, a Tokyo-based analyst at Bank of America Corp.’s Merrill Lynch & Co. unit on the outlook for a recovery in earnings.

Sharp Corp. advanced 3.8 percent to 1,001 yen, rising the most since July 30. Japan’s biggest maker of liquid-crystal displays was lifted to “buy” from “hold” by Yasuo Nakane, an analyst at Deutsche Bank AG.

To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Kotaro Tsunetomi at ktsunetomi@bloomberg.net.

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KKR’s Dollar General Raises $716 Million in IPO Sale

By Michael Tsang

Nov. 13 (Bloomberg) -- Dollar General Corp., the discount retailer controlled by private-equity firm KKR & Co., raised $716 million in an initial public offering selling shares at the low end of the range it sought.

The company, KKR and other owners sold 34.1 million shares at $21 each, the Goodlettsville, Tennessee-based retailer said in a statement yesterday, after they asked for as much as $23. The IPO gives the merchant a capitalization of $7.2 billion and values it at 26.9 times reported earnings, a 77 percent premium to Wal-Mart Stores Inc., the world’s biggest retailer, Bloomberg data show. Dollar General will receive 67 percent of the proceeds, while selling stakeholders will get the rest.

Dollar General is the fifth U.S. company IPO in November and comes after an eight-month, 61 percent rally in the Standard & Poor’s 500 Index spurred the most American offerings in almost two years. While sellers reaped $9.6 billion unloading stock, Dollar General’s IPO price suggests institutional buyers are starting to extract bigger concessions from underwriters after three deals were pulled in the past two weeks and more than half of the IPOs since September fell below their offer price.

“It’s definitely going to be more of a buyers’ market as opposed to a sellers’ market now,” said Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset in Cincinnati. “Deals are going to get a lot more scrutiny.”

Taken Private

Citigroup Inc., Goldman Sachs Group Inc. and KKR of New York, among Dollar General’s biggest shareholders, also served as lead underwriters for the IPO, along with Charlotte, North Carolina-based Bank of America Corp.’s investment banking unit Merrill Lynch & Co. and New York-based JPMorgan Chase & Co.

The retailer, which will use the proceeds to pay down debt, begins trading today on the New York Stock Exchange under the ticker DG. Dollar General’s IPO comes less than 2 1/2 years after it was acquired by KKR in July 2007 in a $7.3 billion purchase. The deal was KKR’s last leveraged buyout before the credit markets froze in August that year.

The IPO price values the company at 26.9 times reported net income of 78 cents a share in the 12 months ended in July, according to a regulatory filing on Nov. 9.

Walmart, which has a capitalization of $205 billion, trades at 15.2 times reported profits, Bloomberg data show. The Bentonville, Arkansas-based company said yesterday that third- quarter profit rose 3.2 percent and forecast sales this quarter would be little changed.

Relative Value

Dollar General’s price-earnings ratio falls to 18.5 times if its first-half profits of $177 million are averaged over a year and adjusted for the decline in interest expenses following the IPO, according to Francis Gaskins, president of IPODesktop.com in Marina del Rey, California.

That’s 25 percent higher than Walmart’s ratio of 14.8 times estimated 2009 profit, Bloomberg data show.

“The deal they’re bringing out is one that happens to be doing well in this environment,” said Eric Cinnamond, the Jacksonville Beach, Florida-based manager of the $249 million Intrepid Small Cap Fund that has gained 51 percent in the past year, beating 91 percent of competitors. “They’re winning the relative game in retail right now.”

Same-store sales at Dollar General rose 8.6 percent in its fiscal quarter ended July, according to data compiled by Bloomberg, amid the deepest U.S. recession since the 1930s. Sales at Walmart stores declined 1.5 percent in the same period.

Debt Burden

Dollar General, which had $4.1 billion in long-term borrowings at the end of July, used about 39 percent of its operating income for interest payments, Bloomberg data show. That’s more than 10 times the median amount that interest expenses trim from operating income at 10 competing retailers.

“The debt burden is definitely going to be an issue,” said Nick Einhorn, a Greenwich, Connecticut-based analyst at Renaissance Capital LLC, which has specialized in IPO research since 1991. “They have done a good job in the past couple years definitely, but there is a question of how much of that is real improvement. How much of that is a one-time boost because of the economy that may go away?”

The U.S. economy returned to growth last quarter after a yearlong contraction, expanding at a 3.5 percent pace, the Commerce Department said last month.

KKR, founded by Henry Kravis with his first cousin George Roberts and their Bear Stearns Cos. colleague Jerome Kohlberg in 1976, is listing Dollar General as investors suffer the worst returns on U.S. IPOs since at least 1995.

AEI, Aviv

AEI, the George Town, Cayman Islands-based former unit of Enron Corp., and Chicago-based Aviv REIT Inc., the real-estate investment trust that operates nursing homes in 21 U.S. states, postponed offerings in the past two weeks. Both companies were backed by private-equity firms.

Rue21 Inc., a teen apparel retailer, sold 6.77 million shares in an IPO yesterday at $19 each, raising about $129 million. The price exceeded the $16 to $18 a share that the Warrendale, Pennsylvania-based company originally sought.

The IPOs of 18 U.S. companies that went public in September and October have outperformed the S&P 500 by 0.1 percentage point on average in the first month of trading, the worst performance in Bloomberg data going back 14 years. Offerings by American companies have beaten the S&P 500 by an average 21.3 percentage points since 1995, the data show.

‘It’s Probably Overpriced’

“IPO means, ‘It’s probably overpriced,’” said billionaire investor Kenneth Fisher, who oversees $35 billion as chairman of Woodside, California-based Fisher Investments Inc. “IPOs have never been done for the benefit of the purchaser. IPOs are done for the benefit of the company by definition. So the history of IPOs is very clear that they’re money losing activities.”

Fisher said he’s not interested in Dollar General’s IPO.

KKR and its co-investors, Goldman Sachs and Citigroup, Boston-based Wellington Management Co. and the Canada Pension Plan Investment Board, spent $2.8 billion to take over Dollar General, and borrowed the rest. Including $384 million in net debt that Dollar General had at the time, the deal was valued at $7.32 billion.

The stakeholders reaped $239 million from selling 11.4 million shares. That would increase to $347 million if the underwriters exercise an option to purchase an additional 5.12 million shares for their clients.

In September, Dollar General paid a dividend of $239 million to its owners, which matches the amount they received in the IPO and exceeds the company’s operating income in its fiscal second quarter. The retailer doesn’t plan to pay any dividends as a public company, according to the Nov. 9 filing. Citigroup, Goldman Sachs and KKR will also collect fees as underwriters.

‘In the Bank’

The dividend may have been paid to offset any loss of income had the underwriters failed to drum up enough buyers for the IPO, according to Renaissance Capital’s Einhorn.

“If you don’t get the IPO done at the price you want, at least that money is sitting in the bank already,” he said.

Using KKR’s own valuation models, the “fair value” of Dollar General’s common stock was $12.95 each at the end of May, according to the regulatory filing. Dollar General used two methods to determine the value of its stock: one that estimates the present value of future cash flows and another based on comparable publicly traded companies, the filing showed.

That valuation was used to set the exercise price for 731,821 stock options that Dollar General granted on May 28.

Fair Value

The IPO price range of $21 to $23 that KKR sought from institutional buyers “was not derived using a formal determination of fair value.” Dollar General said higher sales growth versus its rivals in the first six months of 2009, a 17 percent increase in the S&P 500 from May 28 through Oct. 27, and the “dramatic improvement” in the market for IPOs since September helped to account for the valuation gap.

The IPO implies a so-called enterprise value, or the sum of Dollar General’s stock and debt minus its cash, of about $11 billion, Bloomberg data show. That’s about 50 percent more than the total deal value of KKR’s takeover in 2007.

To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net.

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Wakeup Call: Possible Retracements In Risk

Daily Forex Fundamentals | Written by Saxo Bank | Nov 12 09 08:35 GMT |

Fake-break above 1101 in S&P500 and Break-Even Inflation Rates are down 3 bps. after a big rally in the past two weeks. EURUSD struggling to close above 1.50. We could see retracement today. Calendar Economic Data Releases Country Name Time (GMT) Expectation Prior Comment EC 10:00 Industrial Production MoM (SEP) 0.5% 0.9% US 13:30 Initial Jobless Claims (Nov) 510K 512K US 13:30 Continuing Claims (OCT) 5700K 5749K What's going on? Fake-break above 1101 in S&P500 and Break-Even Inflation Rates are down 3 bps. after a big rally in the past two weeks. EURUSD struggling to close above 1.50. Stock market futures and Asian markets are down. We believe that a retracement of risk is in the cards today. Sell on rallies. Also in commodities Only important data today is the E-Z Industrial Production and a Treasury auction of $16B 30-year bonds. FX FX Daily stance Comment EURUSD 0/- May struggle past 1.5020, capped max at 1.5060 for retracement lower to 1.4960 USDJPY 0/- Looks capped at 89.90-00 area. Sell for a re-test of 89.65 suppt, stop abv 90.25 EURJPY 0/- Prefer to sell rallies to 135.15-25 for a retracement back to 134.0, stop abv 135.50 GBPUSD - Expect rally to be contained at 1.6615 lvl for next leg down. Tgt 1.6490, stop abv 1.6675 AUDUSD 0/+ Buy dips to 0.9315-30 for a rebound back through 0.9370 towards 0.94, stop below 0.9270 Equities Equities Daily stance Comment DAX 0/- Sell on rallies towards 5640 targeting 5588. S/L above 5665. FTSE 0/- Sell on rallies towards 5235 targeting 5190. S/L above 5256. S&P500 0/- Sell on rallies towards 1096 targeting 1087. S/L above 1101. Nasdaq100 0/- DJIA 0/- Futures Commodities Daily Stance Comment Gold 0/- Sell at the break of 1115 and target 1100. Stop above 1120. Silver 0/- Sell at the break of 17.60 and target 17.50. Stop above 17.70. Oil (CLZ9) 0/- Sell on rallies towards 80 and target 78. Stop above 80.65 FX Options FX-Options Comment EURUSD Frontend vols mainly offered yesterday. Talk abt large 1.50 strike expiring tomorrow and latest price action point to the strike having a good hold in EURUSD AUDUSD Vols were offered from the start of the Asia session, market makers searching for bids. No clear direction on interest, look for spot to stay in range. Saxo Bank Analysis Disclosure & Disclaimer Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. Saxo Bank utilizes financial information providers and information from such providers may form the basis for an analysis. Saxo Bank accepts no responsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in Saxo Bank's analysis derive from objective fundamental macro economical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations to buy or sell a specific financial instrument, such recommendation should be seen as Saxo Bank's opinion that the specific instrument will respectively outperform the relevant market or underperform compared to the market. Saxo Bank's recommendations should statistically correspond to an even distribution between buy and sell recommendations. The recommendations may expire promptly due to market volatility and in general, Saxo Bank does not anticipate its recommendations to be valid more than one month. An analysis will be updated if and only if a market development or other issues relevant to the analysis render a new analysis on the same topic relevant. Saxo Bank's analysis does not cover any specific financial product over time but only products which Saxo Bank's strategy team finds it important to cover at any given point in time. In order to prevent conflicts of interest, Saxo Bank has established appropriate business procedures, incl. procedures applicable to research and analysis to ensure objective research reports. Saxo Bank's research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. Saxo Bank is under supervision by the Danish Financial Supervisory Authority. Saxo Bank does not engage in corporate finance activities and accordingly, Saxo Bank's employees, incl. the persons responsible for an analysis, do not receive remuneration associated with investment banking transactions.

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Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Nov 12 09 08:03 GMT |

EUR/USD closed lower on Tuesday as it consolidated some of last week's rally. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI remain bullish signalling that sideways to higher prices are possible near-term. If it extends this week's rally, October's high crossing is the next upside target. Closes below Tuesday's low crossing are needed to confirm that a top has been posted. USD/JPY closed higher on Tuesday due to short covering. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bullish signalling that additional gains are possible. If it extends this week's rally, the reaction high crossing is the next upside target. Closes below the 10-day moving average crossing are needed to confirm that a short-term top has been posted. GBP/USD closed lower on Tuesday as it consolidated some of last week's rally. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI remain bullish signalling that sideways to higher prices are possible near-term. If it extends this week's rally, October's high crossing is the next upside target. Closes below Tuesday's low crossing are needed to confirm that a top has been posted. USD/CHF closed higher on Tuesday due to short covering. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bullish signalling that additional gains are possible. If it extends this week's rally, the reaction high crossing is the next upside target. Closes below the 10-day moving average crossing are needed to confirm that a short-term top has been posted. HY Markets http://www.hymarkets.com

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FX Technical Analysis

Daily Forex Technicals | Written by Mizuho Corporate Bank | Nov 12 09 07:37 GMT |

EURUSD Comment: Consolidating neatly just under this year's high at 1.5064 and short term indicators are neutral. Though the Euro is not overbought we shall continue to allow for consolidation around 1.5000 for another week or two. Strategy: Attempt small longs at 1.4990; stop below 1.4900. Short term target this year's high at 1.5064, then more medium term. Direction of Trade: → Chart Levels: Support Resistance 1.4978 " 1.5021 1.4938 1.5049 1.49 1.5064** 1.485 1.5085 1.4822/1.4811* 1.5115 GBPUSD Comment: Sterling sold across the board as the Bank of England governor again suggests a weak pound will help economic recovery. Nevertheless Cable is holding above immediate trendline support and the 9-day moving average. Expect it to try and hold above here today and move back toward 1.6750 again. Strategy: Attempt small longs at 1.6575; stop below 1.6500. First target 1.6700/1.6750 Direction of Trade: → Chart Levels: Support Resistance 1.6556 " 1.6627/1.6638 1.6536 1.67 1.65 1.675 1.6465 1.68 1.6400* 1.6844 USDJPY Comment: A small 'spike low' yesterday might make things a bit more difficult today. However, as bearish momentum has increased and moving averages set to cross to bearish any moment now, eventually we ought to break down. Today and tomorrow continue to allow for very slow work, cautiously probing the downside. Strategy: Sell at 89.85; stop above 90.40. Short term target 89.35, eventually 88.25. Direction of Trade: → Chart Levels: Support Resistance 89.60 " 89.99/90.04 89.29 90.19/90.38* 89.18/89.00* 90.86 88.85 91.34* 88.25* 91.65** EURJPY Comment: The 'triangle' of the last seven days or so may look neat and pretty but it gives no indication of the next direction and how far it might go. In fact it is a waste of space. At the moment while very frustrating, there is no reason to question our slightly bearish outlook. Strategy: Attempt shorts at 134.65/135.00; stop above 135.75. Short term target 133.00, then 132.00. Direction of Trade: → Chart Levels: Support Resistance 134.00 " 135.02 133.8 135.15 133.2 135.40/135.76* 132.5 136 131.00* 137 Mizuho Corporate Bank Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.

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Japan Broadens Financial Scrutiny, Targets Art, Racehorse Funds

By Takahiko Hyuga

Nov. 12 (Bloomberg) -- Japan’s financial surveillance agency said it is investigating funds that bet on art and racehorses as regulators broaden their scope to protect individual as well as institutional investors.

The Securities and Exchange Surveillance Commission is probing the activities of nine funds and brokers that sell so- called low-liquidity products to individuals, according to its Web site. It didn’t look at any last fiscal year, SESC data shows.

“We are expanding our coverage to protect individual investors,” Shuichi Sonoda, the director of the inspection division at SESC, said yesterday in an interview. “We will make an effort to check the activities of new targets.”

Sonoda said regulators began to take a wider view of their role after the government started enforcing the Financial Instruments and Exchange Law in September 2007, seeking to bolster protection for investors and unlock the 796 trillion yen ($8.9 trillion) held in cash and bank deposits in Japan.

The SESC began a probe of Epsom Aiba-Kai, a fund that invests in race horses, with an inspection of its offices in Tokyo’s Setagaya district last month. Commission staff are also investigating Art Investment Bank Ltd.

Epsom Aiba-Kai collects money from individuals to invest in racehorses and pays a dividend when the horse wins. Art Investment collects funds from individuals to purchase contemporary art, providing them with a capital gain when it sells the pieces.

‘Vulnerable Position’

Sonoda declined to provide details on the investigations and would not say whether or not they were routine.

An official at Epsom Aiba-Kai, who declined to be identified, said she had no comment. Art Investment President Kazuo Tanaka also declined to comment.

The number of Japanese brokerages inspected by the SESC dropped to 89 in the 12 months through June 30, from 107 five years earlier, according to its annual report. The number of foreign banks that came under scrutiny fell 59 percent to 7 from during the same period.

“Individual investors are in a vulnerable position and could get hurt if the government doesn’t step up scrutiny,” said Takao Saga, a director at Japan Securities Research Institute.

Saga, who also teaches securities regulation at Waseda University in Tokyo, said small funds are proliferating in Japan, presenting individuals with the chance to make or lose money on everything from wine and noodle shops to bikini models.

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

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Taiwan Billionaires Send Cash Home as Currency Climbs

By Yu-huay Sun and Lilian Karunungan

Nov. 12 (Bloomberg) -- The biggest inflow of capital to Taiwan in four years is prompting investors to bet that the central bank will give up efforts to keep the world’s second- worst performing major currency from strengthening.

Pictet Asset Management, which oversees $3.9 billion of emerging-market debt, added to holdings of Taiwan’s dollar last month even as the central bank stepped up sales, limiting gains in 2009 to 1.7 percent. A Nov. 10 ban on foreigners’ opening of time deposits won’t hurt investment in the island’s markets, HSBC Holdings Plc said. The bank predicts the currency will rise 11 percent against the U.S. dollar by the end of 2010.

Billionaires from Tsai Eng-meng, who earned $3.6 billion selling rice crackers made at China-based factories, to Wei Ing- chou, whose Chinese noodle business earned him $3.2 billion, are sending money home after President Ma Ying-jeou reversed his predecessor’s stance that such investment made Taiwan too dependent on the mainland. Overseas investors also bought $11.8 billion more Taiwan shares than they sold this year through yesterday, helping lift the Taiex stock index 67 percent.

“We expect funds to come back into Taiwan,” said Wee-Ming Ting, the head of Asian fixed income at Pictet Asset, the investment unit of Pictet & Cie, Switzerland’s largest closely held private bank. “At some point, the central bank has to step away.”

Capital Inflows

Taiwan’s central bank has sought to prevent inflows from pushing up the currency and making Taiwan’s exports uncompetitive amid a global recession. Funds from China are increasing as Ma’s government pushes for an agreement that would allow mainland investors to buy the island’s stocks, acquire stakes in companies and build ports and airports. China says Taiwan is part of its territory, though the two sides have been ruled separately since a civil war in 1949.

Taiwan’s financial account surplus, which gauges investment flows, in the July to September period probably matched the $4.65 billion of the second quarter, which was the highest since 2005, Singapore-based Action Economics estimated before a Nov. 20 report. That compares with an average deficit of $1.5 billion in the past decade, central bank data show.

The Central Bank of the Republic of China (Taiwan) has intervened in markets by arranging purchases of U.S. dollars. Foreign-exchange reserves rose by $63 billion in the past year to $341.2 billion, according to a Nov. 5 central bank report. October’s increase of $9 billion was the biggest this year.

Holding Pattern

The Taiwan dollar traded within a range of NT$33.2 per dollar and NT$32 for the past six months, and was at NT$32.266 today. Its gain for 2009 compares with a 36 percent increase for the Brazilian real and a 35 percent climb for the Australian dollar. Only the yen rose less with a 0.5 percent advance.

The 12-month non-deliverable forward contract for the currency has risen 10 percent in the past eight months to NT$31.09, pricing in a 4 percent appreciation. Forwards are agreements to buy and sell assets for delivery at a specified time. Non-deliverable contracts are settled in dollars.

Gains in the currency may be gradual, making Taiwan bonds a better way of investing than NDFs, said Warren Hyland, a money manager in London at Schroder Investment Management Ltd., which oversees $200 billion in assets. Hyland forecasts the currency will be as strong as NT$27 per dollar in two years’ time.

“The Taiwanese central bank is very determined not to appreciate the currency and seems to set a limit of NT$32,” he said. “It has been very difficult for me to make money.”

‘Sitting Idle’

Central bank Deputy Governor George Chou said on Nov. 10 the ban on opening time deposits will “make sure” foreign investors return to placing their money in capital markets. Governor Perng Fai-nan said Oct. 14 that overseas investors have NT$500 billion ($15 billion) of funds “sitting idle,” which may be used for speculation.

Pictet’s Ting said the central bank will scale back intervention to avoid flooding the market with its own currency as growth returns. Taiwan’s economy may expand in the October- to-December period after contracting for five straight quarters, the statistics bureau said in August.

Overseas sales dropped 4.7 percent from a year earlier in October, the smallest decline since September 2008, the Finance Ministry said on Nov. 9. Shipments to China, Taiwan’s biggest market, rose 9.8 percent from a year earlier.

“The balance the central bank has to play is to attract capital inflows without stalling exports,” said Robert Reilly, the co-head of fixed-income at Societe Generale SA in Hong Kong. SocGen recommends buying the currency against the Swiss franc.

‘Driving Force’

HSBC’s forecast of NT$29 by the end of 2010 is the most bullish in a Bloomberg survey of 13 strategists. The median is for the Taiwan dollar to appreciate 6 percent.

“So far foreigners have played a role in pushing the currency higher,” said Perry Kojodjojo, a strategist at HSBC, Europe’s largest bank. “In 2010, the driving force will be the wealthy Taiwanese who have kept their money offshore.”

Wei Ing-chou’s Ting Hsin International Group recently increased its stake in Taipei 101, East Asia’s tallest building, to 37 percent from 32 percent, according to Michael Liu, spokesman for the skyscraper’s owner. Frank Lin, chief financial officer at Wei’s noodle maker Tingyi Holding Corp., said direct flights had made it easier to shuttle between Taiwan and China, while declining to discuss the Wei’s investments.

Belief in Future

Tsai Eng-meng, chairman of rice-cracker maker Want Want China Holdings Ltd., bought the island’s second biggest business daily last year. Tsai didn’t respond to e-mails and telephone calls seeking comment. Tsai is the third-richest man in Taiwan and Wei is the fifth, according to Forbes Asia magazine.

“Nobody used to believe in the future of the country and when entrepreneurs made money they would just take it out,” said Neo Teng Hwee, Singapore-based head of portfolio management for Asia at Bank Julius Baer, which oversees about $141 billion in assets. “This year we are seeing more of the offshore money coming back.”

Julius Baer bought property and bank stocks in May.

Mainland-based Taiwanese companies invested NT$35 billion on the island in the first nine months, 88 percent more than in 2008, the economic ministry said in an e-mailed response to questions. The government in Taipei estimates that Taiwanese investments in the mainland exceed $150 billion.

As recently as July 2008, Taiwan companies were barred from investing more than 40 percent of their net worth in China. During the era of martial law between 1949 and 1987, Taiwanese businessmen could be tried for treason by their government for investing in China.

“It’s a trend for relatively successful China-based Taiwanese businesses to come home with glory,” said C.Y. Huang, head of investment banking for the greater China market at Polaris Finance Group, which controls Taiwan’s biggest investment trust company. “There’s a peace dividend.”

To contact the reporters on this story: Yu-huay Sun in Taipei at ysun7@bloomberg.net; Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.

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South Korea’s Central Bank Maintains Key Rate at 2%

By Seyoon Kim

Nov. 12 (Bloomberg) -- South Korea’s central bank kept its benchmark interest rate at a record low for a ninth month, seeking to strengthen the economy’s recovery before increasing borrowing costs.

Governor Lee Seong Tae left the seven-day repurchase rate at 2 percent in Seoul, and the Bank of Korea said it “will maintain an accommodative policy stance for the time being with an emphasis on sustaining the recovery of economic activity.”

South Korea is projected to be one of the first in Asia to boost rates as it helps lead the region out of a financial crisis-induced slowdown. Economic growth accelerated to 2.9 percent in the third quarter from three months earlier, the fastest pace in seven years, as companies including Samsung Electronics Co. and Hyundai Motor Co. reported surging profits.

“The sense is that the recovery is proceeding and the central bank will be looking to begin raising rates as we move into next year, probably sometime in the first quarter,” said David Cohen, director of Asian forecasting at Action Economics in Singapore.

Governor Lee and Finance Minister Yoon Jeung Hyun said last month gross domestic product may expand this year, reversing earlier predictions of a contraction. Lee said today economic growth is unlikely to be as strong in the three months through December as it was in the second and third quarters.

Currency Gains

The nation’s currency has climbed more than 8 percent this year. The won was little changed after the decision, trading at 1,157.80 against the dollar as of 1:23 p.m. in Seoul, according to data compiled by Bloomberg.

“Consumer price inflation has continued to be stable, influenced by the appreciation of the Korean won against the U.S. dollar,” the Bank of Korea said in a statement today. “The upward trend of real estate prices appears to have faltered.”

President Lee Myung Bak’s administration increased spending to support consumer purchases and cushion the economy from the worst global recession since World War II. The central bank cut the benchmark rate by 3.25 percentage points between October 2008 and February, the most aggressive easing since it began setting a policy rate a decade ago.

Low rates have spurred consumer borrowing, with bank lending to households rebounding in October, rising 1.4 trillion won ($1.2 billion) to 405.6 trillion won, according to the Bank of Korea. South Korea’s financial regulator tightened rules on non-banking finance companies’ mortgage lending for people buying homes in and around Seoul from Oct. 12 to slow an increase in borrowing.

Inflation Outlook

Governor Lee told reporters in Seoul today that the central bank needs to “normalize” interest rates while assessing developments in the economy.

“It’s evident the 2 percent level of interest rates is a historically low level and we’re weighing whether there are more benefits or losses to the economy,” he said. “It’s hard to be confident how strongly private demand and corporate investment will help support the economy. I can’t say whether a rate increase will be within the year, the first or second quarters of next year.”

Cohen of Action Economics said the inflation outlook gives the Bank of Korea flexibility to wait. Inflation remained below the central bank’s target of between 2.5 percent and 3.5 percent for a fifth month in October.

“Inflation is still contained, and I think that gives them a little bit of flexibility,” Cohen said. “Like central banks around the world, they’re able to be patient right now because inflation is still fairly subdued.”

Interest Rates

The Group of 20 nations said at the weekend interest rates should be kept low and record budget deficits maintained until recoveries take hold. That boosted stock markets including South Korea’s Kospi, which has gained about 42 percent this year.

Even so, Australia’s central bank Governor Glenn Stevens raised the benchmark interest rate by a quarter point for the second straight month on Nov. 3 to 3.5 percent as his nation’s economy rebounds, becoming the first policy maker to increase rates twice this year.

Finance Minister Yoon has said repeatedly that it’s too early to unwind policy steps taken to support the economy. While it’s “up to the central bank” to determine rates, South Korean policy makers “understand it’s premature” to implement an exit strategy from stimulus measures, he said on Oct. 26.

Industrial Production

Industrial production gained 5.4 percent in September from August. Other reports showed manufacturers’ confidence stayed near a two-year high and the unemployment rate fell to a nine- month low of 3.4 percent in October.

Samsung, Asia’s biggest maker of computer chips, flat screens and mobile phones, said Oct. 30 that third-quarter profit tripled to a record 3.72 trillion won as sales, including those of overseas affiliates, climbed 19 percent.

The company forecast a “solid” fourth quarter and said it plans to boost capital spending on semiconductors and displays next year to more than 8.5 trillion won.

Hyundai, South Korea’s largest automaker, more than tripled third-quarter profit to 979.2 billion won on surging sales in the U.S. and China.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

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Wen Says World Faces Slow, Bumpy Economic Recovery

By Bloomberg News

Nov. 12 (Bloomberg) -- Chinese Premier Wen Jiabao said the world faces a gradual and uneven recovery from the worst financial crisis since the Great Depression.

“The worst is over,” Wen said in speech televised from a forum in Beijing. “The global economy is starting to recover but a total recovery will be a slow and bumpy process.”

Risks include trade protectionism, the sustainability of fiscal stimulus measures, and “price uncertainties,” China’s central bank said yesterday. Confidence in the world economy dipped in November as governments withdrew some emergency measures, sparking concern that a recovery may falter, a survey of Bloomberg users showed.

“It’s going to take a couple of years before we can settle back into steady growth of above 5 percent,” said Tim Condon, chief Asia economist at ING Groep NV in Singapore. While economies may see “very big bounces in 2010,” that will only be “because 2009 was so bad,” Condon added.

China will maintain a moderately loose monetary policy and a “proactive” fiscal stance and continue to fine-tune its 4 trillion yuan ($586 billion) stimulus plan, Wen said. He also reiterated that policy makers need to manage inflation expectations.

He didn’t comment on China’s currency, which has been held at close to 6.83 per dollar since July last year to help exporters as demand slumped. The central bank yesterday triggered speculation that the currency could rise, by dropping a pledge to keep the yuan “basically stable” from its third- quarter monetary-policy report.

Shouldering Its Load

China will “continue opening up, cooperating and shouldering its responsibilities” to help restore stable global growth, Wen said today.

The nation’s industrial production and trade surplus climbed in October, according to data released yesterday. The world’s third-largest economy can maintain stable and relatively fast growth, the central bank said in its report.

China’s expansion has led Asia and the global economic recovery. Its gross domestic product expanded 8.9 percent from a year earlier in the third quarter, while U.S. GDP rose at an annual rate of 3.5 percent from the previous three months.

The Bloomberg Professional Global Confidence Index fell to 60.3 from 61.7 in October, the highest level in the series that began two years ago. The index exceeded 50 for a fourth month, which means there were more optimists than pessimists.

For Related News and Information: Most-read stories on China: MNI CHINA 1W Most-read China economy stories: TNI CHECO MOSTREAD BN For top economic news: TOP ECO For top China news: TOP CHINA Credit crunch page: WCC Government relief programs: GGRP

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