Ukraine Seeks Russia Gas Fine Waiver, Warns on Supply

By Kateryna Choursina

Nov. 19 (Bloomberg) -- Ukraine is seeking an amendment to its gas contracts with Russia to waive fines for buying less gas than contracted this year, Ukrainian President Viktor Yushchenko said in a letter on his Web site addressed to his Russian counterpart Dmitry Medvedev.

Unless existing gas contracts between Ukraine and Russia are changed, state-run NAK Naftogaz Ukrainy may be unable to prepare for the heating season starting at the end of next year, which could lead to “potential threats to the reliability of gas shipments to Ukraine and transit to other European states,” Yushchenko said in the letter.

The president wants to reduce volumes of natural gas that Ukraine imports under the contract to no more than 30 billion cubic meters a year, the letter reads. Yushchenko also wants the contracts to include the minimum amount of transit volumes on the “pump or pay” principle and “symmetrical responsibility of both parties for risks and symmetrical economically justified fines.”

The prime ministers of Russia and Ukraine in January signed a 10-year gas supply and transit contract after a spat which cut gas shipments to about 20 European nations for almost three weeks. Ukraine’s Prime Minister Yulia Timoshenko said yesterday that the gas contract was not in the agenda of her meeting with Russian counterpart Vladimir Putin at the Commonwealth of Independent States heads of state meeting in Yalta today.

To contact the reporter on this story: Kateryna Choursina in Moscow at kchoursina@bloomberg.net

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U.K. Royal Mint Quadruples Production of Gold Coins

By Thomas Biesheuvel and Nicholas Larkin

Nov. 19 (Bloomberg) -- The U.K.’s Royal Mint, established in the 13th century, more than quadrupled production of gold coins in the third quarter after demand for the metal increased as investors sought to hedge against a weakening dollar.

Output rose to 32,735.8 ounces from 7,500.2 ounces a year before, according to data obtained by Bloomberg News under a Freedom of Information Act request. Production in the first nine months more than tripled to 100,391.3 ounces, the data show.

Gold is set for a ninth annual gain as countries have cut interest rates to near zero percent and spent $2 trillion to pull the global economy out of the worst recession since World War II. The metal reached a record in London yesterday and has gained about 30 percent this year, while the dollar has dropped 7.8 percent against a basket of six currencies.

“There’s still a total lack of confidence in the financial system,” David Russell, a director at Dublin-based brokerage and bullion dealer GoldCore Ltd., said in an interview. “Investors are seeing the benefits of diversifying into gold. Smaller investors are clued into the fact that inflation possibilities are a worry for the future.”

Sales of American Eagle gold coins by the U.S. Mint more than doubled in the first nine months to 954,000 ounces, its Web site showed. Harrods Ltd., the London department store, began selling gold bars and coins for the first time in October.

Tangible Asset

Muenze Oesterreich AG, the Austrian mint that’s the world’s largest marketer of pure gold coins, sold 1.9 million ounces of gold so far in 2009, its President Kurt Meyer said last month. That was 23 percent more last year’s total sales, he said.

“It’s a tangible asset, and its value can be quickly and easily realized,” Russell said. “We’re seeing very good demand in the coin market. Many investors are aware that they’ve been poorly diversified over the past few years.”

Bullion holdings in some exchange-traded funds have risen to records in recent months. India last month bought 200 metric tons, followed by a smaller purchase by Mauritius. Analysts at Bank of America Merrill Lynch, Societe Generale SA and Barclays Capital have forecast further purchases by central banks.

Gold fell for the first time in five days in London. Bullion for immediate delivery declined $10.38, or 0.9 percent, to $1,135.13 an ounce by 9:26 a.m. local time.

The U.K. mint moved to Llantrisant in Wales from London’s Tower Hill in 1968, three years before Britain switched to a decimal currency system. It makes coins including the 22-carat 2010 Gold Proof Sovereign, weighing 7.99 grams (0.26 ounce) and costing 299 pounds ($500), the state agency’s Web site shows.

The mint’s use of silver rose 56 percent from a year earlier to 94,343.3 ounces in the third quarter, the figures show. Production in the first nine months increased 31 percent to 270,382.6 ounces.

To contact the reporters on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

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Pound Drops for Third Day Versus Dollar on Bank Lending Concern

By Paul Dobson

Nov. 19 (Bloomberg) -- The pound fell for a third day against the dollar on speculation the country’s banks will disclose more credit losses.

The U.K. currency had its biggest decline in more than a week against the yen as demand increased for the relative safety of the Japanese and U.S. currencies. The Daily Telegraph said in a report today that U.K. lenders were in a worse state than those elsewhere, citing Experian Plc, the world’s largest credit-checking company. The FTSE 350 Banks index fell 0.2 percent.

“There are ongoing concerns about the state of the banking sector in the U.K. that is weighing on sterling,” Jeremy Stretch, a senior currency strategist at Rabobank International in London, said in a Bloomberg Television interview.

The pound fell 0.6 percent to $1.6654 as of 8:14 a.m. in London, and weakened 1 percent to 148.11 yen, the biggest intraday drop against the Japanese currency since Nov. 11. Sterling rose 0.1 percent to 89.22 pence per euro.

“The most troubling part is that I’m not convinced defaults have yet peaked,” the Telegraph cited Experian Plc’s Chief Executive Officer Don Robert as saying.

U.K. government bonds were little changed with the yield on the 10-year gilt at 3.68 percent and the yield on the two-year security 1 basis point lower at 1.24 percent.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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Obama Aims to Allay Auto Lobby Concern on Korea Trade

By Edwin Chen and Julianna Goldman

Nov. 19 (Bloomberg) -- President Barack Obama said he is committed to pushing through a free trade agreement with South Korea that has been stalled by the U.S. auto lobby and unions, who argue it doesn’t do enough to open up Korean markets.

Obama’s joint press conference in Seoul today with South Korean counterpart Lee Myung Bak was a last chance on his four- nation Asia trip to show he opposes protectionism. The accord has been held up in Congress, where lawmakers are demanding wider access for Chrysler Group LLC, Ford Motor Co. and General Motors Co. Lee said today he is willing to reopen talks on the auto industry.

The U.S. Chamber of Commerce estimates that failure to enact the accord means the loss of $35 billion in exports and 345,000 jobs. South Korea signed a rival agreement with the European Union last month that calls for 99 percent of commerce to be duty-free within five years.

“Team Obama talked the talk, now we’ll see if they walk the walk,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington. “Possibly in Seoul the president will achieve another breakthrough” with a commitment to seek ratification of the U.S.-South Korea pact.

U.S. automakers sold 6,980 vehicles in South Korea last year, or 0.72 percent of the passenger car market, according to the Korea Automobile Importers & Distributors Association. Those figures exclude GM’s local Daewoo unit, which captured 7 percent of the market in the first nine months of this year.

Hyundai Motor Co., Korea’s biggest carmaker, accounted for almost half of all sales at home. Through October this year, Hyundai raised its U.S. sales 4.1 percent to 373,222 vehicles.The U.S. market share for Hyundai and its Kia Motors Corp. affiliate was 7.3 percent in October. Hyundai says about a quarter of the cars the group sells in the U.S. are made there.

Trade Imbalances

Obama said he would work to address the issues in the U.S. that were holding up the free trade agreement.

“There is obviously also a concern within the United States around the incredible trade imbalances that have grown over the last several decades,” Obama said. While that imbalance was not so marked with South Korea, “there has been a tendency I think to lump all of Asia together when Congress votes on trade agreements.”

While in Asia, Obama has been called on by regional leaders, including Malaysian Prime Minister Najib Razak and Chinese President Hu Jintao, to demonstrate the U.S. will work to reduce trade barriers. At the Asia-Pacific Economic Cooperation summit in Singapore, Obama expressed interest in joining and expanding a regional free-trade group that so far includes Chile, New Zealand, Singapore and Brunei.

Forging an agreement that would ensure passage of the Korea trade accord will be “politically tough back in the U.S.,” Hufbauer said.

Tax Hurdle

Democrats, who have majorities in the House and Senate, are holding up a vote on the agreement. Representative Sander Levin, a Michigan Democrat and chairman of the House Ways and Means Committee’s trade panel, said South Korea first must remove tax and regulatory obstacles to sales of U.S. autos, refrigerators and other manufactured goods.

Lee’s comments appear to mark an about-face. Yesterday, Ahn Ho Young, South Korea’s deputy minister for trade, said there would be “no re-negotiation.”

South Korea is the seventh-biggest U.S. trading partner. Last year, two-way trade totaled $82.9 billion, according to the Commerce Department.

China, the second-biggest U.S. trading partner after Canada, has been subjected to a series of trade sanctions by the Obama administration on tires and steel pipe in the months leading up to the president’s Asia trip. China called the pipe tariffs “discriminatory” and said it would start its own anti-dumping probe of American cars.

Keeping Quiet

Obama didn’t mention trade during a joint appearance with Hu Nov. 17 at Beijing’s Great Hall of the People. Hu urged Obama to “oppose and reject protectionism in all its manifestations in an even stronger stand.”

Still, U.S. companies used the president’s visit to help cement business ties in China. Tempe, Arizona-based First Solar Inc. advanced its plan to build the world’s biggest plant directly converting sunlight to electricity in Inner Mongolia, signing an agreement in Beijing Nov. 17 with U.S. Energy Secretary Steven Chu and Chinese Vice Premier Li Keqiang in attendance.

China is the third-biggest export market for the U.S., with outbound shipments last year amounting to $71.5 billion, an increase of 9.5 percent from 2007. The U.S. imported $337.8 billion from China last year, more than from any other country, according to the Commerce Department.

North Korea

Obama and Lee reiterated their commitment to bringing North Korea back to multilateral talks on ending its nuclear weapons program. China is host to six-party negotiations that include the two Koreas, Japan, Russia and the U.S. The talks were broken off after North Korea launched a rocket in April in violation of a United Nations resolution.

Obama said he and Lee “both agree on the need to break a pattern that has existed in the past in which North Korea behaves in a provocative fashion; it then is willing to return to talks; it talks for a while, and then it leaves the talks seeking further exceptions and is never actually making progress on the core issues.”

--Julianna Goldman, Edwin Chen, Michael Forsythe. With assistance from Seyoon Kim, Bomi Lim and Seonjin Cha in Seoul, Mark Drajem in Washington and Belinda Cao in Beijing. Editors: Joe Sobczyk, Ben Richardson.

To contact Bloomberg News staff on this story: Julianna Goldman in Seoul at +1-202-654-4304 or jgoldman6@bloomberg.net; Michael Forsythe in Beijing at +8610-6649-7580 or mforsythe@bloomberg.net; Edwin Chen in Beijing at + 1-202-624-1844 or echen32@bloomberg.net

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Swiss Franc Weakens Against Euro, Extends Drop Versus Dollar

By Daniel Tilles

Nov. 19 (Bloomberg) -- The Swiss franc weakened against the euro and extended its decline versus the dollar.

The Swiss currency slipped 0.1 percent to 1.5126 per euro as of 9:07 a.m. in Zurich, and depreciated 0.7 percent to 1.0172 against the dollar.

To contact the reporter on this story: Daniel Tilles in London at dtilles@bloomberg.net

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Crude Oil Declines for First Time in Four Days as Dollar Gains

By Rachel Graham

Nov. 19 (Bloomberg) -- Crude oil fell for the first time in four days as the dollar gained against the euro, dulling the appeal of commodities as a currency hedge.

Oil fell from a one-week high reached yesterday after the U.S. Department of Energy said crude stockpiles fell unexpectedly last week. The dollar traded as high as $1.4847 against the euro on speculation European lenders will disclose more credit losses.

“We have a stronger dollar today,” Sintje Diek, an analyst with HSH Nordbank, said by phone from Hamburg. “If the dollar goes to $1.50 or above, we might see some more movement on oil.”

Crude oil for December delivery dropped as much as 58 cents, or 0.7 percent, to $79 a barrel in electronic trading on the New York Mercantile Exchange and traded at $79.22 a barrel at 8:54 a.m. London time.

The crude contract nearest delivery traded above $80 a barrel yesterday for the first time since Nov. 11 after the release of the Department of Energy data. The December contract expires tomorrow. The more actively traded January contract was at $79.73 at 8:46 a.m. London time today.

The Energy Department data showed crude inventories declined 887,000 barrels to 336.8 million last week. Stockpiles were forecast to increase 300,000 barrels, according to a Bloomberg News survey of analysts.

Brent crude oil for January settlement dropped as much as 52 cents, or 0.7 percent, to $78.95 a barrel on the London-based ICE Futures Europe exchange and traded at $79.22 as of 8:53 a.m. local time.

To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net

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Yen, Dollar Advance as Falling Stocks Boost Demand for Safety

By Matthew Brown and Yoshiaki Nohara

Nov. 19 (Bloomberg) -- The yen and the dollar strengthened against the euro as stock markets fell, boosting demand for the perceived safety of the Japanese and U.S. currencies.

The yen rose against all 16 of its major counterparts as the MSCI World Index of shares dropped 0.5 percent. The New Zealand dollar slid the most this month against the greenback as the nation’s main opposition party said it will no longer accept the central bank’s primary policy of targeting inflation.

“It’s a risk off day,” said Daragh Maher, deputy head of global foreign-exchange strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “Equity markets are down and in that kind of environment the dollar and the yen get bid.”

The yen appreciated to 132.34 per euro as of 8:38 a.m. in London, the strongest level since Nov. 3, from 133.64 yesterday in New York. The Japanese currency rose to 89.07 against the dollar, from 89.32. The dollar climbed to $1.4869 against the euro, from $1.4963.

The New Zealand dollar declined 1.8 percent to 73.30 U.S. cents, its biggest drop since Oct. 30 based on closing prices, and slid 2 percent to 65.29 yen.

The pound fell for a third day versus the dollar after the Daily Telegraph cited Experian Plc, the world’s largest credit- checking company, as saying that U.K. banks are in a worse state than those elsewhere.

Sterling dropped 0.5 percent to $1.6671. The pound rose 0.2 percent to 89.16 pence per euro.

To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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Copper Falls From 14-Month High on Stronger Dollar: LME Preview

By Anna Stablum

Nov. 19 (Bloomberg) -- Copper slipped from a 14-month high in London as the dollar strengthened, making dollar-priced metals more expensive for holders of other monies.

Market News:

Metals News:

Metals Prices:

-- Copper declined 0.9 percent to $6,821 a metric ton on the
London Metal Exchange at 8:19 a.m. It reached $6,992 yesterday,
the highest intraday price since Sept. 24 last year. Relative
Strength Index 63.
-- Aluminum slid 0.7 percent to $2,051.5 a ton. RSI 65.
-- Zinc eased 0.3 percent to $2,240.5 a ton. RSI 58.
-- Lead fell 2 percent to $2,358 a ton. RSI 55.
-- Nickel was 1.5 percent lower at $16,890 a ton. RSI 43.
-- Tin fell 1 percent to $15,050 a ton. RSI 56.

Other markets:      Last           % Change  % YTD
Dollar Index        74.997           0.6       -7.1
Crude oil           $79.10          -0.6       77
Gold                $1,138.88       -0.6       29
MSCI World Index    1,165.45        -0.5       27

Economic Events:
                               Forecast       Prior     Time
                                                      (London)
U.S. Initial Jobless Claims        504K         502K     13:30
U.S. Leading Indicators            0.4%         1.0%     15:00
U.S. Philadelphia Fed.             12.2         11.5     15:00

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net

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Gold Falls From Record in London as Stronger Dollar Spurs Sales

By Nicholas Larkin and Glenys Sim

Nov. 19 (Bloomberg) -- Gold fell for the first time in five days in London as a stronger dollar curbed the metal’s appeal as an alternative investment, spurring sales of bullion after its rally to a record.

The dollar gained as much as 0.8 percent against the euro today. Gold, which typically moves inversely to the greenback, reached an all-time high of $1,152.85 an ounce yesterday. The metal has climbed 29 percent this year as the U.S. currency has dropped 5.9 percent against the euro.

“We’re down on the back of the stronger dollar,” Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva, said today by phone. “We’ve seen a little profit- taking. The market got a bit too bullish, too early.”

Gold for immediate delivery slid $8.97, or 0.8 percent, to $1,136.53 an ounce by 9:47 a.m. local time. Gold futures for December delivery on the New York Mercantile Exchange’s Comex division lost 0.4 percent to $1,136.50 an ounce.

The “long-term trend of gold is on the upside,” Bob Takai, general manager of financial services at Japanese trading company Sumitomo Corp., said in a Bloomberg Television interview today. “I worry a little bit about the speed of the price rise for the past two, three months, so I think there is going to be a quick pullback in the near future.”

Stronger Demand

The rally has pushed spot gold’s 14-day relative strength index, a gauge of whether a commodity or security is overbought or oversold, above the level of 70 viewed by some investors and analysts who follow technical charts as signaling a decline. Today’s reading for immediate-delivery gold was 70.67.

Gold demand climbed 10 percent in the third quarter from the previous three months after investors bought the metal as a currency hedge and jewelry purchases picked up, the World Gold Council said today.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose 3.66 metric tons to 1,117.49 tons yesterday, the first gain since Nov. 9. Investments in ETFs backed by gold surged 68 percent this year through September as the financial crisis wracked the global economy and the sliding dollar ignited inflation concern, the council said yesterday.

“There are plenty of cheap dollars around,” Takai said. “Gold is now chosen by investors as a target investment” as a result of this “excessive liquidity,” he said.

Among other precious metals for immediate delivery in London, silver slid 1.8 percent to $18.23 an ounce. Platinum fell 0.8 percent to $1,431 an ounce, while palladium was 1.7 percent lower at $364.25 an ounce.

Platinum held in ETF Securities Ltd.’s exchange-traded products rose 0.7 percent to a record 422,527 ounces yesterday, according to the company’s Web site. Palladium holdings increased 0.7 percent to a record 595,258 ounce.

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

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HSBC Must Pay Madoff Investors Only If Luxembourg Court Says So

By Stephanie Bodoni

Nov. 19 (Bloomberg) -- HSBC Holdings Plc’s Luxembourg unit must compensate investors only if a local court finds the bank breached its custodial duties over a dissolved fund that placed assets with conman Bernard Madoff, the country’s financial regulator said.

The Commission de Surveillance du Secteur Financier, in a statement posted yesterday on its Web site, ordered HSBC Securities Services (Luxembourg) SA “to review and complete the necessary internal rules and relevant forms in order to fulfill all the tasks relating to its function” as custodian bank of local mutual funds “within a period of three months.”

Europe-based custodian banks face increased scrutiny by the European Commission following the Madoff scandal. Madoff, 71, pleaded guilty in March in federal court in Manhattan and was sentenced on June 29 to 150 years in prison for using money from new clients to pay earlier investors. He directed a multibillion-dollar Ponzi scheme from his now-defunct New York money management firm.

HSBC’s Luxembourg unit was custodian for Herald (Lux) US Absolute Return Fund, which was managed by Bank Medici. Investors in France, Ireland and Luxembourg, the world’s second- largest mutual fund market after the U.S., are suing custodians, seeking the repayment of billions of dollars.

The decision whether HSBC’s unit “committed a civil tort which would oblige it to contribute, together with all other persons held liable” to pay damages “falls exclusively to the courts and tribunals,” the regulator said.

Bank Comment

“HSBC believes that it has complied with all its obligations as the depositary bank of the Herald Lux SICAV and agrees with the commission that it is exclusively up to the civil courts to determine the outcome of this matter,” the London-based bank said in an e-mailed statement yesterday. “HSBC continues to believe that it has good defenses to any claims brought against it and will vigorously defend itself against any such claims.”

Luxembourg Finance Minister Luc Frieden, in an interview in June, said custodian banks for Luxembourg-based mutual funds, such as HSBC’s unit, had “clear” obligations to compensate investors for Madoff-related losses. Yesterday is the first time the regulator, an independent body that is part of the government administration, expressed itself on HSBC’s liabilities. The CSSF said it concluded its HSBC review Nov. 17.

HSBC, Europe’s largest bank by market value, is facing investor complaints in Ireland for allegedly failing in its duties as custodian handling money in the Irish Thema International Fund Plc. The European funds at issue are known as Undertakings for Collective Investment in Transferable Securities, or UCITS. Custodians manage cash inflows and payments to investors.

UBS Cases

UBS AG is also being sued in Luxembourg over its role as custodian for two local funds, including Access International Advisors LLC’s LuxAlpha Sicav-American Selection fund, which once had assets of $1.4 billion, and invested 95 percent with Bernard L. Madoff Investment Securities LLC.

The CSSF in a May 27 finding after its review into UBS’s liabilities said the Swiss bank’s local unit had to indemnify mutual fund investors “according to its obligations as a Luxembourg depositary bank, subject to valid and opposable contractual clauses to the contrary.”

In its three-page statement yesterday, the regulator clarified its position further, saying that the final decision concerning contractual liabilities between private parties “can only be taken conclusively by a competent Luxembourg court.”

Madoff Links

The regulator also reacted to a lawsuit and press reports saying it knew before Madoff’s December 2008 arrest of links between him and three local funds that went into liquidation this year.

“The documents submitted to the CSSF” for the registration of the three funds “included no reference neither to the identity of BMIS nor, more importantly, to the multiplicity of functions carried on de facto by one entity,” the regulator said, referring to Madoff’s firm.

Between the funds’ creation and Madoff’s arrest “the CSSF was never informed in a transparent manner, by the professionals involved, of the structure actually set in place nor of the role played in practice by BMIS.”

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

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Asian Stocks Fall on Japan Share-Sale Plans; Singapore Climbs

By Masaki Kondo and Shani Raja

Nov. 19 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index down for a third day, as share-sale plans at Japanese companies raised concern the value of existing holdings will be reduced.

Mitsubishi UFJ Financial Group Inc. sank 3.7 percent and Nomura Real Estate Residential Fund Inc. slumped 8.6 percent after filing to sell stock. Industrial & Commercial Bank of China Ltd. lost 2.4 percent on concern China Minsheng Banking Corp.’s share sale will lure investors away from pricier stocks. Singapore Technologies Engineering Ltd. rose 2.6 percent on its home exchange, where the Straits Times Index climbed 0.5 percent after the city-state forecast increased economic growth.

“What you’re seeing is very much Japan related,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which holds $75 billion in assets. “Everywhere else in Asia you have a very strong growth profile, but Japan has a lot of long- term structural issues that still need to be tackled.”

The MSCI Asia Pacific Index lost 0.9 percent to 117.55 as of 7:22 p.m. in Tokyo. The gauge has fallen 3 percent from a 13- month high on Oct. 20 amid speculation governments will start withdrawing stimulus measures that have helped revive the global economy. Singapore’s trade ministry said today the city-state plans to scale back its support programs.

Japan’s Nikkei 225 Stock Average retreated 1.3 percent and the Topix sank 1.5 percent, the biggest declines in the region. Hong Kong’s Hang Seng Index dropped 0.9 percent.

Trading Debuts

The Kospi Index advanced 1 percent in Seoul. Korea Line Corp. rose 2 percent after commodity-shipping fees climbed for a 15th day. Grand Korea Leisure Co., a casino operator, soared 32 percent on its first day of trading. Maxis Bhd., Malaysia’s biggest mobile-phone operator, climbed 8.4 percent on its debut.

Futures on the Standard & Poor’s 500 Index lost 0.6 percent. The gauge fell 0.1 percent yesterday, amid disappointing profit forecasts from Autodesk Inc. and Salesforce.com.

Mitsubishi UFJ declined 3.7 percent to 466 yen after registering to raise as much as 1 trillion yen ($11.2 billion) in its second share sale since January as regulators demand banks bolster capital to prevent another financial crisis.

A sale of that size would be Japan’s biggest public sale of additional common shares, according to data compiled by Bloomberg.

Nomura Real Estate sank 8.6 percent to 352,000 yen. It plans to raise as much as 11.5 billion yen ($129 million) from a sale of new shares, according to a filing with Japan’s Finance Ministry.

Risk Aversion

“Risk aversion is taking hold somewhat, bringing down Japan’s stocks, as serious concerns remain about the financial sector,” said Masahide Tanaka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s No. 2 lender.

In Hong Kong, ICBC, China’s No. 1 bank by market value, lost 2.4 percent to HK$6.85. Bank of China, the third largest, slid 2.3 percent to HK$4.72. ICBC shares are valued at 3.3 times book value, while Bank of China is at 2.3 times.

China Minsheng Banking’s HK$30.1 billion ($3.9 billion) share sale was priced at 1.77 times estimated 2010 book value, people familiar with the matter said. The Hang Seng Index has risen 100 percent from its March 9 low, bringing the average price of its constituents to 2.2 times book value. That’s twice the level stocks were valued at during this year’s low.

“For the short term, valuations seem quite high already,” said Chris Leung, a Hong Kong-based portfolio manager at Taifook Asset Management Ltd., which oversees about $400 million. “I think they’re close to the cycle peak in the short term.”

Rising Valuations

The MSCI Asia Pacific Index has climbed 67 percent from a more than five-year low on March 9 on speculation of a global recovery. Companies on the gauge are priced at an average 1.5 times book value, up from 1 at the March low. Stocks on the S&P 500 trade at 2.2 times, while those on Europe’s Dow Jones Stoxx 600 Index are at 1.7 times.

The International Monetary Fund raised its forecast for growth in the global economy next year to 3.1 percent from 2.5 percent, led by a 9 percent expansion in China and 6.4 percent in India, the Washington-based organization said on Oct. 1. That compares with growth of 1.7 percent in Japan, 1.5 percent in the U.S. and 0.3 percent in the euro region.

Singapore’s economy will grow 3 percent to 5 percent in 2010 after shrinking as much as 2.5 percent this year, the trade ministry said today. Gross domestic product climbed a revised annualized 14.2 percent last quarter from the previous three months, the second consecutive expansion, it said.

‘Reasonably Attractive’

Singapore Technologies, Asia’s biggest aircraft maintenance company, climbed 2.6 percent to S$3.16. United Overseas Bank Ltd., Singapore’s second-largest bank by market value, climbed 0.6 percent to S$19.50, while Oversea-Chinese Banking Corp. added 1.2 percent to S$8.46.

Asian banks are “reasonably attractive” even after recent gains, especially when compared with Western banks, investor Marc Faber said in an interview with Bloomberg Television yesterday in Singapore. He said he holds shares of United Overseas Bank and Oversea-Chinese Banking.

Korea Line added 2 percent to 45,150 won after the Baltic Dry Index, a measure of shipping costs for commodities, jumped 6 percent yesterday. The gauge’s 15-day advance is the longest winning streak since June 3.

Pacific Basin Shipping Ltd., Hong Kong’s largest operator of dry-bulk vessels, climbed 3.5 percent to HK$6.84. China Shipping Development Co., the dry-bulk arm of the nation’s second-biggest shipping group, advanced 3.4 percent to HK$12.82.

In Seoul, Grand Korea Leisure surged 32 percent to 15,850 won from its initial share offer price of 12,000 won.

The stock was rated “buy” as Daewoo Securities Co. initiated coverage on the stock with a 16,000 won price target. Earnings at the company will continue to grow in 2010, the brokerage said today in a report.

Maxis rose 8.4 percent to 5.42 ringgit on its debut. The Kuala Lumpur-based carrier raised 11.2 billion ringgit ($3.3 billion) for its parent Maxis Communications Bhd. in the share sale, in which institutional investors bid for 3.7 times the stock on offer.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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European Stocks Fall for Third Day; Danone, Fresnillo Retreat

By Sarah Jones

Nov. 19 (Bloomberg) -- European stocks retreated for a third day as Groupe Danone SA cut its sales forecast and mining companies dropped with metal prices. U.S. index futures and Asian shares declined.

Danone sank 5.1 percent after the world’s largest yogurt maker cut its target for medium-term annual sales growth, citing “profound” changes in consumer spending. Fresnillo Plc and Xstrata Plc led basic-resource producers lower. Infineon Technologies AG rose 1.3 percent after Europe’s second-biggest maker of semiconductors returned to profit.

The Dow Jones Stoxx 600 Index lost 0.1 percent to 249.29 at 8:26 a.m. in London. The gauge has advanced 58 percent since March 9, pushing its valuation to more than 53 times its companies reported earnings, near the most expensive level since 2003.

U.S. stocks declined yesterday, dragging the Standard & Poor’s 500 Index from a 13-month high. Technology companies led the retreat after profit forecasts at Autodesk Inc. and Salesforce.com Inc. trailed some analyst estimates. S&P 500 futures lost 0.5 percent today.

The MSCI Asia Pacific Index fell for a third day, dropping 0.9 percent, as share-sale plans at Japanese companies including Mitsubishi UFJ Financial Group Inc. raised concern the value of existing holdings will be reduced.

Danone Drops

Danone slid 5.1 percent to 40.36 euros. The company late yesterday said annual sales excluding acquisitions and currency fluctuations will expand at least 5 percent in the medium term, which is about three years, reducing its previous forecast of 8 percent to 10 percent growth.

The yogurt maker confirmed its target for sales growth of about 4 percent in the second half of this year and said annual free cash flow from operations will reach 2 billion euros ($3 billion) by 2012.

Fresnillo, the world’s largest primary silver producer, sank 3.6 percent to 886.5 pence and Xstrata, the fourth-biggest copper supplier, dropped 1.9 percent to 1,106 pence. A measure of basic-resources shares fell the most among the 19 industry groups in the Stoxx 600 as copper, nickel, gold and silver retreated.

Infineon advanced 1.3 percent to 3.51 euros. The semiconductor maker returned to profit after 10 consecutive quarters of losses as demand improved for its automotive and industrial customers.

SABMiller Plc rose 2.1 percent to 1,691 pence. The world’s second-largest brewer said first-half earnings before interest, taxes and amortization slipped 1.7 percent to $2.19 billion, beating the $2.13 billion median estimate of 10 analysts surveyed by Bloomberg.

Voestalpine AG gained 2.5 percent to 25.92 euros. Austria’s biggest steelmaker posted a 97 percent drop in second-quarter net income to 8.4 million euros as demand for steel declined. Analysts had predicted a loss of 33.5 million euros, according to the average estimate of 8 analysts surveyed by Bloomberg.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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Facebook Common Stock Valuation Jumps 42% to $9.5 Billion

By Brian Womack

Nov. 19 (Bloomberg) -- The price of Facebook Inc. stock on exchanges for private companies has jumped as much as 42 percent in the past four months as membership of the site topped 300 million users and the company turned cash flow positive.

Facebook shares are currently selling for about $21 each at SecondMarket, said Adam Oliveri, managing director at the New York-based company. That’s up from $14.77 in July.

SecondMarket and Santa Monica, California-based SharesPost Inc. are among services that allow current and former Facebook employees to sell shares. Facebook, the most-popular social networking site, may sell stock through an initial public offering in the next 12 to 18 months, said Paul Bard, an analyst at Renaissance Capital LLC, which has specialized in IPO research since 1991.

“The fact that the stock on these private exchanges moved -- I’m sure that has to do with the fact that people think a deal is coming sooner rather than later,” said Bard, whose firm is based in Greenwich, Connecticut.

At $21 each, Facebook’s common shares are valued at about $9.5 billion, Oliveri said. Facebook also has preferred shares, which are typically owned by venture capital investors. When companies have IPOs, preferred stock holders can convert their holdings to common shares, allowing them to sell them on the public market.

Following Google

A Facebook IPO may attract the same level of attention as Google Inc.’s share sale in 2004, Oliveri said. Google sold 19.6 million shares for $1.67 billion in August 2004, giving the company a market value of $23 billion. The stock closed at $576.65 yesterday on the Nasdaq Stock Market.

“The perception is that that the company is going to IPO, and it’s going to be the next kind of Google IPO situation where you’re going to have massive interest,” Oliveri said. “Investors are coming out of the woodwork, trying to figure out a way to get exposure.”

Larry Yu, a spokesman for Palo Alto, California-based Facebook, declined to comment. The company said in September that it has more than 300 million users and that it is generating positive cash flow.

In the past 60 days, SecondMarket has handled about a dozen transactions of Facebook shares, with the most recent occurring last week, said Mark Murphy, a SecondMarket spokesman. On SharesPost, buyers have offered $20 for Facebook shares on the site, up 35 percent from three months ago, the company said. The last transaction was 15,000 shares sold for $12 each in August, according to SharesPost.

‘A Barometer’

Private companies such as Facebook and Twitter Inc. can use these private markets to gauge how much interest there is in their stock, said Scott Sweet, senior managing partner of IPO Boutique, a Web site in Tampa, Florida, that tracks IPOs.

“It’s a barometer,” Sweet said. “You get virtual channel checks on the appetite on IPOs.”

Facebook Chief Executive Officer Mark Zuckerberg, who started the company in 2004 while he was a student at Harvard University, said in May that he expects the company to have an IPO, though he wasn’t focused on it.

“It’s something we’ll do when we’re ready for it,” Zuckerberg, 25, said on a conference call at the time. “It’s something we don’t see on the immediate horizon.”

Digital Sky

A $200 million investment in Facebook by Russia’s Digital Sky Technologies in May is also boosting expectations for an IPO, Oliveri said. At the time of the investment, Digital Sky said it would offer to purchase at least $100 million of additional Facebook stock from current and former employees whose shares had vested. In July, Digital Sky offered to pay $14.77 for each common share of Facebook, giving the company a valuation of $6.5 billion.

Digital Sky Technologies’ $200 million investment, which consisted of preferred stock, valued Facebook at $10 billion. In 2007, Microsoft Corp. bought a 1.6 percent stake in Facebook that valued the company at $15 billion.

After shareholders decide to sell to another party on services such as SecondMarket and SharesPost, the company is alerted and often has the right to buy the shares first. The U.S. Securities and Exchange Commission allows trading in shares of private companies, as long as investors meet certain criteria, such as having an annual income of more than $200,000 or a minimum net worth of $1 million, said Tom Kim, a lawyer specializing in executive compensation in Palo Alto, California.

Transaction Volume

Shares of venture-backed private companies are often kept at an outside law firm, and money is held in escrow until the stock has been transferred to the new owner, Oliveri said.

SecondMarket said it has handled about $75 million of private company share transactions since last year, when it started the service.

Employees of private companies have been able to sell their shares for years, Kim said. There were instances of Google shareholders selling their stock prior to its IPO, he said. Even so, the new exchanges make the process easier.

“People are holding shares in Twitter or in Facebook and they want to unload some of the shares, maybe even 50 percent of what they own,” said Kim, who has helped manage some transfers of Facebook shares. “They don’t need 5 million shares.”

Until July, Facebook’s common shares on SecondMarket had followed the rise and fall of the Nasdaq Stock Market, Oliveri said. While they have gained 42 percent on SecondMarket since July, the Nasdaq Composite Index has climbed 19 percent.

The rising value of Facebook’s shares doesn’t necessarily mean the company is about to go public, said Lise Buyer, founder of Class V Group, an IPO advisory firm in Portola Valley, California.

Offering Liquidity

“The fact that they offered employees liquidity just a few months ago suggests that an IPO is not right around the corner,” said Buyer, who helped run Google’s IPO. “People who are buying it here clearly believe that when there is an IPO, it will be at an even higher valuation than the last round paid. But I don’t think it suggests anything at all about that timing.”

Eighteen U.S. companies had IPOs in September and October, more than at any time in almost two years, according to data compiled by Bloomberg. The IPO market dried up last year, after Lehman Brothers Holdings Inc. filed for bankruptcy and the global economy fell into recession.

“There’s a lot of speculation that the IPO market might recover next year,” SharesPost CEO Greg Brogger said. “It almost certainly will be better than this year because it almost couldn’t be worse.”

-- With assistance from Michael Tsang in New York. Editors: Jonathan Thaw, Nick Turner

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Nov 18 09 10:58 GMT |

Gains in EUR/USD accelerated in European hours before EUR buyers emerged at 1.4960. Softer stocks in Japan kept the lid on the risk trade in Asian hours but a better tone in European equities indices has coincided with a softer USD against the EUR, AUD and the NZD. Sterling has been subjected to a choppy morning. The pound initially plunged on the back of the release of the Nov MPC minutes. However, the unit has subsequently recovered. The softer USD has spurred gold to a high of USD1148.10 /troy ounce this morning. The minutes of the Nov BoE meeting showed that further easing is not quite off the agenda yet. The Bank discussed potentially lowering the bank deposit rate and stated that this may be useful in future. On the topic of QE, seven of the members voted in favour of the GBP 25 bln extension. One member voted for no change and one for a larger extension of GBP 40 bln. While the voting pattern in itself is no indication of any commitment towards increasing QE further, the tone of the minutes was in keeping with the dovish tone of Governor King last week. The minutes suggested that the committee was concerned over a number of factors which could restrain demand; not least 'a large fiscal consolidation'. Cable dropped from USD1.6824 ahead of the data to an intraday low of USD1.6758 before bouncing. It is presently little changed from the London open. The bounce in EUR/GBP following the data failed at GBP0.8910. EUR/GBP is still higher on the day but has settled below 0.8890. The ability of the pound to bounce from its lows can be linked with yesterday's stronger than expected CPI data. In all likelihood the CPI index will rise to 3.0% y/y early next year. Expectations of higher inflation have led to speculation that the BoE may be forced into hiking sooner than previously expected. This is unlikely. The expected rise in CPI can be attributed to base effects linked with the higher petrol and the unwinding of the temporary VAT tax cut on Jan1. Higher VAT and petrol prices will take money out of consumers' pockets and will not cause the BoE to hike rates early particularly given the Bank's view that excess capacity will suppress inflation medium-term. On balance, the bias in BoE policy at present it is still tilted towards easing. AUD/USD has recovered back to the 0.9330 area this morning on the back of the improved appetite for risk. Australian Q3 wage growth data was in line with expectations but at 3.6% y/y, the rate eased back from 3.8% in Q2 suggesting that the RBA may have scope to hold back from hiking rates again until February. President Obama has concluded his trip to China during which President Hu made no mention of the effective CNY peg to the USD. US CPI data this afternoon should highlight a lack of inflationary pressures. US housing starts are expected to show an improvement. Canadian CPI is also due. Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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Technical Analysis Daily: GBP/USD

Daily Forex Technicals | Written by iFOREX.bg | Nov 18 09 09:05 GMT |

GBP/USD 1.6789 GBP/USD Open 1.6813 High 1.6868 Low 1.6757 Close 1.6810 On Tuesday Pound/Dollar traded hesitantly, reaching a top at 1.6868, than dropping down to the 1.6757, closing the day at 1.6810. Our expectations remain bullish in the short term with objectives towards 1.7000, followed by attempts towards 1.7140. However, the CCI indicator is in the overbought zone and downward of the 3 hour chart, so be careful for potential downward pressure with potential test of the 1.6755 support. Break bellow this level might trigger subsequent descending momentum. The CCI indicator is about to cross up the 100 line on the 1 hour chart, suggesting bullish pressure. Technical resistance levels: 1.6870 1.7000 1.7140 Technical support levels: 1.6755 1.6630 1.6480 Trading range: 1.6875 - 1.6850 Trend: Upward Buy at 1.6789 SL 1.6759 TP 1.6839 iFOREX.bg Forecasts and Trading Signals http://www.zifx.com

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Nov 18 09 10:06 GMT |

EUR/USD Current level-1.4901 EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated above the 50- and 200-Day SMA, currently projected at 1.4793 and 1.3523. Yesterday's slide bottomed at 1.4809 and current bias is positive for 1.4987 dynamic resistance. A break above 1.5015 will confirm, that the prolonged consolidation below 1.5050 is already over and the focus will be set on 1.5130 and 1.5280. Intraday crucial level is 1.4869. Resistance Support intraday intraweek intraday intraweek 1.4987 1.5290 1.4869 1.4623 1.5060 1.6040 1.4793 1.4444 USD/JPY Current level - 89.12 A short-term bottom has been set at 87.12 and a large consolidation is unfolding since. Trading is situated below the 50- and 200-day SMA, currently projected at 94.86 and 94.84. With yesterday's high at 89.56, the bias has turned into negative again and is currently focusing on 88.73, en route to 88.21. Intraday resistance comes at 89.21. Resistance Support intraday intraweek intraday intraweek 89.21 92.40 88.73 88.01 90.75 97.79 88.21 83.53 GBP/USD Current level- 1.6801 The pair is in a downtrend after peaking at 1.7042. Trading is situated above the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258. A minor top is set at 1.6877 and current corrective slide is testing 1.6752 support before next leg upwards, to 1.6957. The GBP is well supported at 0.8913 in EUR/GBP. Resistance Support intraday intraweek intraday intraweek 1.6877 1.7042 1.6752 1.6515 1.6932 1.7442 1.6702 1.5706 DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

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Obama, Hu Vow Cooperation Amid Divisions Over Trade

By Julianna Goldman and Edwin Chen

Nov. 18 (Bloomberg) -- President Barack Obama and Chinese President Hu Jintao concluded their formal meetings in Beijing yesterday with promises of increased cooperation amid lingering friction over currency, trade and human rights.

Obama said the world’s most populous nation played a vital role in helping end a global recession and will be a key partner in dealing with challenges from curbing the nuclear ambitions of Iran and North Korea to combating climate change.

“The relationship between the United States and China has never been more important to our collective future,” Obama said in an appearance with Hu at the Great Hall of the People.

Hu, speaking first, said that the U.S. and China “share extensive common interests” on issues that affect “mankind’s peace and stability and development.”

The U.S. president wrapped up his first trip to China today by meeting with Chinese Premier Wen Jiabao in Beijing and touring a section of the Great Wall north of the city before leaving for South Korea. The most substantive talks took place yesterday, during which Obama and Hu pledged to continue a strategic and economic dialogue and left their biggest differences unresolved.

Obama called on the Chinese leader to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis.

“I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time,” Obama said. “Doing so based on economic fundamentals would make an essential contribution to the global rebalancing effort.”

Yuan Peg

Hu, in his remarks, made no mention of the yuan peg to a weakening dollar, which has forced central banks across Asia to sell their currencies to limit appreciation and maintain export competitiveness with China. The Indonesian rupiah gained 10 percent against the yuan in the past six months, and the Korean won rose 9.2 percent.

The yuan has been pegged at about 6.83 to a dollar since July 2008. Maintaining the peg has also helped make China the biggest foreign holder of U.S. government debt, with $797.1 billion in August, up 10 percent from Jan. 1, Treasury data show.

In a briefing, China’s vice foreign minister, He Yafei, told reporters that the stability of the exchange rate has helped settle financial markets.

‘Trade Frictions’

Hu said both parties will work on easing “trade frictions.” He also stressed that the two countries “need to oppose and reject protectionism in all its manifestations.”

America’s trade deficit with China widened to a 10-month high in September, raising concern that the combination of a recovering U.S. economy and a fixed yuan exchange rate against the dollar will worsen global imbalances.

It also has fueled calls for action against China from lawmakers, unions and some manufacturers. Obama’s administration responded by imposing duties of 35 percent on $1.8 billion worth of automobile tires imported from China, and duties of as much as 99 percent on Chinese steel pipes, in a case brought by U.S. Steel Corp. and other companies.

While Obama stresses cooperation, he faces skepticism at home. Seven in 10 people polled for CNN Nov. 13-15 said they consider China an economic threat to the U.S. China also represents unfair competition for U.S. companies, according to 67 percent of the 1,014 Americans surveyed, while 27 percent viewed China as a potential market.

Wider Relationship

The U.S.-China relationship “goes far beyond any single issue,” Obama said. Obama invited Hu to visit the U.S. next year, an offer Hu accepted, according to the administration.

In Beijing today, Wen told Obama that he hopes the U.S. and China will be able to take the relationship to “a new level.” In a statement before a working lunch with Wen, Obama said the ties between the two countries are moving beyond trade and economics to “a whole host of issues on which U.S.-China cooperation is critical.”

Among those areas Obama has cited on his trip are climate change and energy. The U.S. and China are the two largest consumers of energy. With expectations for a global treaty on emissions coming out of a summit in Copenhagen next month now gone, Obama and Hu agreed to move forward on a new two-stage plan that may aim to have an agreement next year.

On North Korea, Obama said he thanked Hu for China’s efforts to bring North Korea back into negotiations aimed at dismantling its nuclear weapons that also include Japan, South Korea and Russia.

“North Korea has a choice,” Obama said, between further isolation and provocation or becoming a full part of the international community, “which can give a better life to its people.”

Iran Concerns

On Iran, Obama said he and Hu agreed that the government in Tehran must provide solid and verifiable assurances that its nuclear program is peaceful.”

If Iran “fails to take this opportunity,” Obama said, “there will be consequences.”

China has balked at further sanctions against Iran. Hu reiterated that China seeks to resolve the dispute through negotiations.

Obama also addressed human rights, repeating language he used Nov. 16 when addressing students in Shanghai. Freedom of religion and political speech are fundamental, he said, and not limited to any particular country or culture.

On Tibet, Obama said that while Tibet is part of China, the U.S. “supports the early resumption on dialogue between the Chinese government and representatives of the Dalai Lama to resolve any concerns and differences.”

Obama travels this evening to Seoul, the last stop on his eight-day Asia trip.

To contact the reporters on this story: Julianna Goldman in Beijing at jgoldman6@bloomberg.net; Edwin Chen in Beijing at echen32@bloomberg.net

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Philippines’ 10-Month Budget Deficit Climbs to Record

By Karl Lester M. Yap and Max Estayo

Nov. 18 (Bloomberg) -- The Philippines’ budget deficit climbed to a record in the ten months through October as the government increased spending and revenue faltered, pushing the shortfall beyond the official full-year target.

A monthly shortfall of 28.5 billion pesos ($610 million) in October widened the 10-month deficit to 266.1 billion pesos, the government said in Manila today, exceeding the 250 billion-peso full-year estimate. Spending increased 12.3 percent in October from a year earlier and revenue dropped 7.6 percent.

Faltering tax revenue amid the global slowdown has prompted President Gloria Arroyo to sell dollar-denominated bonds overseas three times this year. The Philippines is looking at a worst-case deficit of 300 billion pesos for 2009, Finance Secretary Gary Teves said today, adding that the “likely” budget shortfall is 280 billion pesos.

“A widening deficit will keep positive markets in check,” said Rico Gomez, who helps manage $1 billion at Rizal Commercial Banking Corp. in Manila. “A 280 billion-peso deficit will still be acceptable; 300 billion pesos will be hard for the market.”

The yield on the 6.25 percent January 2014 bond rose earlier today before falling two basis points to 6.055 percent at 4:21 p.m., according to Tradition Financial Services Inc.

Dave Estacio, a fixed-income trader at First Metro Investment Corp., said investors “have started to price in” a 300 billion-peso deficit since Teves first raised it as a “worst-case scenario” on Oct. 14.

Asset Sales

The Philippines won’t need to borrow to fund the wider- than-expected shortfall this year, Treasurer Roberto Tan said today. The government is trying to sell its 50 billion-peso stake in San Miguel Corp., the nation’s largest food-and-drinks company, to prevent a 300 billion-peso shortfall, Teves said.

Teves said the government has yet to decide whether to privatize PNOC Exploration Corp. The plan to sell a 13 billion- peso Food Terminal Inc. property and a piece of government-owned land in Japan remains, Finance Undersecretary Crisanta Legaspi said today.

The Bureau of Internal Revenue, responsible for more than 60 percent of state profit, collected 54.9 billion pesos in October, 3.6 percent lower than a year earlier, according to the budget report today.

The bureau is likely to miss its revenue goals this month and next, agency head Joel Tan-Torres said late yesterday. Last month’s drop was due to “revenue erosion” from tax exemptions to individuals, lower corporate taxes and slower economic activity that may have worsened after recent storms, he said.

‘Shot in the Dark’

The agency is almost sure it will fail in delivering the 2009 goal and hitting it is “a shot in the dark,” Tan-Torres said. “What we’re doing now is directed towards preparing the framework of coming up with an enhanced tax collection effort that will hopefully bear fruit in 2010.”

Collection at the Bureau of Customs, responsible for a fifth of state revenue, fell 25.8 percent in October.

The Philippines’ $167 billion economy grew 1.5 percent in the second quarter from a year earlier, accelerating from a decade-low 0.6 percent in the previous three months.

To contact the reporters on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net; Max Estayo in Manila at mestayo@bloomberg.net

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