asia

Asian Stocks Slide On News Of Kim Jong Il’s Death

by AP on December 19, 2011

Huffington Post…

SHANGHAI — Asian stock markets slid Monday amid news that the mercurial leader of nuclear-armed North Korea has died, raising fears of increased political instability in the region. South Korea’s Kospi index dived 4.1 percent to 1,765.15. Japan’s Nikkei 225 index was down 1.1 percent at 8,304.47, Hong Kong’s Hang Seng slid 2.5 percent to 17,833.42 and the Shanghai Composite Index fell 2.6 percent to 2,167.68. Kim Jong Il’s death was announced Monday by the state television from the North Korean capital, Pyongyang. It raises the possibility of increased instability on the divided Korean peninsula as the reclusive regime undergoes a leadership succession. Kim, who had been ailing after suffering what is thought to have been a stroke in 2008, died at age 69 on Saturday. Kim had presented his third son, the twenty-something Kim Jong Un, as his hereditary successor, putting him in high-ranking posts. But even with an apparent successor, some North Korean observers fear a behind-the-scenes power struggle or nuclear instability. South Korea put its military on “high alert” and President Lee Myung-bak convened a national security council meeting after the news of Kim’s death. Markets in Taiwan, Singapore, Australia, New Zealand and Indonesia also fell. “Particularly with the bearish market sentiment now, any negative news will make the market much more gloomy,” said Kwong Man Bun, chief operating officer at KGI Securities in Hong Kong. The Hong Kong benchmark dipped 100 points after the news hit which “reflects concern over potential political instability,” he said. Kim’s death overshadowed what already was a gloomy start to the week as jitters about Europe’s debt crisis weighed on sentiment. Fitch Ratings said late last week it could downgrade the credit ratings of six European countries – heavyweights Italy and Spain, as well as Belgium, Cyprus, Ireland and Slovenia. Meanwhile, Moody’s Investors Services downgraded Belgium’s credit rating and Ireland released data showing its economy is in worse shape than expected, with third-quarter GDP falling 1.9 percent. Coming just a week after EU leaders struck a deal they thought would contain the continent’s debt crisis, the onslaught of negative news shredded hopes of a lasting solution to the turmoil that is endangering the euro – the currency used by 17 European nations – and threatening the entire global economy. “Everyone is waiting to see what comes from the next conference of European nations. Hopefully something good,” said Jackson Wong of Tanrich Securities, in Hong Kong. Chinese markets fell Monday after rebounding at the end of last week on speculation that the government might further ease reserve requirements for banks to help increase the amount of money available for lending to support growth. “Everything came up empty” over the weekend, Wong said. “We are giving back the gains we had Friday.” Benchmark oil was down 56 cents at $92.97 a barrel in electronic trading on the New York Mercantile Exchange.

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Asian Stocks Slide On News Of Kim Jong Il’s Death

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Police Arrest 5 At Occupy Atlanta Protest [LATEST UPDATES]

by AP on November 7, 2011

Huffington Post…

ATLANTA – Atlanta protesters aren’t going quietly, despite warnings from police and the mayor. In the latest act of defiance, five people were arrested early Monday at or near a downtown park that has been an off-and-on site of Wall Street protests similar to the ones being held in other U.S. cities. (CLICK HERE OR SCROLL DOWN FOR LATEST UPDATES) The developments came a day after 19 demonstrators were taken to jail by officers in riot gear when a rally spilled into the streets. Atlanta police said one protester draped in an American flag inside Woodruff Park was arrested after refusing to leave by a Sunday night curfew, and four other people on bicycles were arrested near the park – three for traffic violations and one for obstruction of a law enforcement officer. The 23-year-old woman in the park was warned three times in English and Spanish to leave before she was arrested, police spokesman Carlos Campos said. At the time, dozens more demonstrators chanting slogans like “We’re hungry! We’re poor! What are you wasting our money for?” stood behind barricades surrounding the park, where police had warned they would enforce an 11 p.m. curfew. Occupy Atlanta organizer Tim Franzen said having one person protesting was just as powerful as several. Atlanta police have arrested protesters several times since Mayor Kasim Reed revoked an executive order permitting the demonstrators to sleep in the park overnight. The protest group held its general assembly meeting earlier in the evening, then marched back to Woodruff Park. Campos said officers were watching and warned people to stay out of the park. Most complied. Occupy Atlanta organizers earlier said they planned to again camp at the park, setting up yet another showdown with police and the mayor. There have been other arrests at similar protests across the country in recent weeks, most for curfew violations. Some of the most intense confrontations between demonstrators and police have been in Oakland, Calif., where two Iraq War veterans have been hurt in separate clashes with officers. Over the weekend in Atlanta, 19 people were arrested on charges they refused to leave the park after curfew or blocked city roads, police said. Franzen said most got out of jail Sunday, while one person charged with aggravated assault and obstruction likely won’t be bailed out until sometime this week. Before Saturday’s 11 p.m. curfew, a crowd of several hundred protesters had set up tents at Woodruff Park, the scene of about 50 arrests of demonstrators last month. As the deadline approached, protesters began decamping peacefully. Dozens of officers were on hand, herding protesters away from the park’s entrances and installing barricades around it. A police helicopter flew overhead. While most protesters left the park, a few people stayed behind. Many spilled onto Peachtree Street, blocking roads. An officer on a motorcycle, with its lights and siren turned on, drove into a crowd marching on the street. Video of the incident appears to show two people pushing against the front of the motorcycle as the engine revs. A scuffle ensues when a third person intervenes, which leads to a sometimes tense confrontation between protesters and officers. Police officers in riot gear and on horseback filled the street, warning protesters to stay on the sidewalk. The protesters shouted at the officers, chanting slogans such as, “Shame! Shame!” and “What about your pensions?” A small group yelled more insulting things like, “Put the pigs back in their sty, we the people occupy.” Protesters began camping out in Woodruff Park on Oct. 7. Reed initially issued an executive order allowing them to stay overnight, but later revoked it after he said there were increasing security concerns. “Mayor Reed was clear earlier this week in his public statements that the City of Atlanta would arrest any persons who violated the law,” Police Chief George Turner said. —- Associated Press writer Kate Brumback contributed to this report from Atlanta. Atlanta police said one protester draped in an American flag inside Woodruff Park was arrested after refusing to leave by a Sunday night curfew, and four other people on bicycles were arrested near the park – three for traffic violations and one for obstruction of a law enforcement officer. The 23-year-old woman in the park was warned three times in English and Spanish to leave before she was arrested, police spokesman Carlos Campos said. At the time, dozens more demonstrators chanting slogans like “We’re hungry! We’re poor! What are you wasting our money for?” stood behind barricades surrounding the park, where police had warned they would enforce an 11 p.m. curfew. Occupy Atlanta organizer Tim Franzen said having one person protesting was just as powerful as several. Atlanta police have arrested protesters several times since Mayor Kasim Reed revoked an executive order permitting the demonstrators to sleep in the park overnight. The protest group held its general assembly meeting earlier in the evening, then marched back to Woodruff Park. Campos said officers were watching and warned people to stay out of the park. Most complied. Occupy Atlanta organizers earlier said they planned to again camp at the park, setting up yet another showdown with police and the mayor. There have been other arrests at similar protests across the country in recent weeks, most for curfew violations. Some of the most intense confrontations between demonstrators and police have been in Oakland, Calif., where two Iraq War veterans have been hurt in separate clashes with officers. Over the weekend in Atlanta, 19 people were arrested on charges they refused to leave the park after curfew or blocked city roads, police said. Franzen said most got out of jail Sunday, while one person charged with aggravated assault and obstruction likely won’t be bailed out until sometime this week. Before Saturday’s 11 p.m. curfew, a crowd of several hundred protesters had set up tents at Woodruff Park, the scene of about 50 arrests of demonstrators last month. As the deadline approached, protesters began decamping peacefully. Dozens of officers were on hand, herding protesters away from the park’s entrances and installing barricades around it. A police helicopter flew overhead. While most protesters left the park, a few people stayed behind. Many spilled onto Peachtree Street, blocking roads. An officer on a motorcycle, with its lights and siren turned on, drove into a crowd marching on the street. Video of the incident appears to show two people pushing against the front of the motorcycle as the engine revs. A scuffle ensues when a third person intervenes, which leads to a sometimes tense confrontation between protesters and officers. Police officers in riot gear and on horseback filled the street, warning protesters to stay on the sidewalk. The protesters shouted at the officers, chanting slogans such as, “Shame! Shame!” and “What about your pensions?” A small group yelled more insulting things like, “Put the pigs back in their sty, we the people occupy.” Protesters began camping out in Woodruff Park on Oct. 7. Reed initially issued an executive order allowing them to stay overnight, but later revoked it after he said there were increasing security concerns. “Mayor Reed was clear earlier this week in his public statements that the City of Atlanta would arrest any persons who violated the law,” Police Chief George Turner said. ___ Associated Press writer Kate Brumback contributed to this report from Atlanta.

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Police Arrest 5 At Occupy Atlanta Protest [LATEST UPDATES]

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Watch: WikiLeaks Spills Apple’s Plan to Fight Chinese Counterfeits

September 1, 2011

Whistleblowing website Wikileaks has published a classified U.S. diplomatic cable, detailing Apple’s attempts to crack down on Chinese counterfeits of the corporation’s products. The Mac Observer reports that Apple have hired the team who were highly successful in helping pharmaceutical giant Pfizer combat the proliferation of counterfeit Viagra-style drugs. However, according to ZD net, Chinese officials are reluctant to tackle the infringement of the iconic computer company’s products. One highlight [of a report] shows that Beijing “refused to investigate” a manufacturing plant of fake Apple products because it would “threaten local jobs”, adding that any raids on a imitation Apple store could drive away shoppers from a local mall. The memo is of special interest at present because of the recent escalation of bootleg Apple products in China. As HuffPost Tech reported back in July, entire counterfeit Apple stores are springing up in China.

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Matthew DeBord: Young People Are Losing Interest in Cars, But That Doesn’t Mean the End of the Road for Automakers

July 1, 2011

As expected Cars 2 has hit movie theaters and legions of 7-year-olds have put it on top of the box office. But the world has changed in the 10 years since the first Cars movie, and automotive culture — the adrenalin rush of horsepower, the thrill of speed and gas-fueled adventure — is looking more and more like the preoccupation of a bygone era. Lightning McQueen may as well take his place next to Thomas the Tank Engine: The reign of the car as the central fetish of American life is drawing to a close. Increasingly, young people don’t care about cars, according to surveys and forward-looking market analysis. Roland Berger Strategy Consultants recently published a study of the 2025 auto market that documented the car’s decline. For example, among current Japanese students and graduates in their 20s and 30s, cars rank well below fashion, music, and video games in terms of interest. Young Germans are expressing a declining enthusiasm for driving, but an increasing desire to ride a bike or take public transportation. Even In China, where car sales are surging, youths are expected to begin losing their interest in automobiles by 2015. The U.S. is leading this wave. In 2008, only a third of American 16-year-olds had a driver’s license in 2008. Last year, a study revealed that the percentage of new cars sold to 21-34 year-olds had fallen to 27 percent , down from 38 percent in the mid-1980s. The trend is being called “demotorizing,” and it’s all about the idea that, while getting around is great, owning a vehicle is not all that exciting. For people under 30, in fact, it’s an encumbrance. Their lives are increasingly organized around updating their electronic gadgets, communicating with each other in small, ongoing text-bites, curating their various online identities and migrating to complex virtual experiences. Transportation means just getting to where they need to go, period. Cars are fine, but even better in the minds of young people is choosing a place to live that offers abundant transportation options. Ironically, as this is occurring, cars themselves are morphing from mechanical contraptions into rolling pieces of computerized technology. But they can’t morph fast enough, even as ever more gadget-ized rides, such as the hybrid-electric Chevy Volt and the all-electric Nissan Leaf, arrive in the marketplace. Automakers are currently engaged in something of an arms race to bring more communications and GPS-driven technology to cars. Over the next decade, a vehicle that can’t seamlessly integrate with an iPhone or a tablet computer will struggle to sell. They are all ultimately waging a losing battle, however. For almost its entire history, the automobile has relied on the excitement it embodies. For Boomers and even members of Gen X, cars represented many things, chiefly freedom. If you can remember who Fonzie was, you probably share this collective emotional attachment to convertibles, leather seats, car stereos, spoilers, and acceleration. Automakers have had to introduce new models every four years because consumers have always yearned for the next model, the next ride. But that charge has been replaced by a cell phone upgrade every two years (and, fairly soon, a new tablet computer on roughly the same schedule). Meanwhile, there’s a move afoot to make transportation into a commodity that can be accessed on demand, without any of the responsibilities associated with ownership. Car sharing is rapidly gaining in popularity — and investor appeal. Big coastal cities are under increasing pressure to expand their mass-transit offerings, particularly when it comes to connecting urban centers to airports. The overall U.S. auto market may be recovering from the depths of its 2009 collapse, but it’s anyone’s guess whether it will return to its 2005 pinnacle of 17 million vehicles sold. There are still rumblings of the car cult in the developing world, where more than 80 percent of automotive production and sales growth is predicted to occur. But as China and Brazil modernize, their economies are leapfrogging whole swaths of the industrial playbook. If it’s not necessary to lay telephone cables because people have mobile phones rather than land lines, then why construct a 20th-century-style highway system when the population is migrating to cities and has little use for the open road? If the youth of China have high-speed rail lines and an abundance of domestically produced, electric “city cars” that can be rented for a few hours or a few days, how can the familiar Western rite of passage of getting a drivers license compete with the average Shanghai teenager’s lust for the latest mobile gaming platform? A passport is infinitely more valuable. The demotorizing trend is already strong in Asia. Over the next 15 years, it will begin to take hold in the U.S. It will be part of a larger movement away from ownership, and it will introduce problems — not least that in advanced capitalist economies, somebody has to own stuff, and it’s generally not good when most of that stuff is in the hands of a select few. But demotorizing doesn’t have to spell economic doom for the auto industry. General Motors and Toyota can just as easily build vehicles that are designed to be collectively owned and shared as they can the personal vehicles of today. A larger problem may be the loss of the financing of personal mobility, something that has generated huge profits for automakers in the past and, not incidentally, helped create a thriving middle class by providing both jobs building cars and the credit to purchase a crucial component of middle-class life that would formerly have been completely out of reach. For many living in poverty today, a computer is. But not being able to enable the masses to access a middle-class lifestyle is preferable to going out of business. The automakers will adjust — or be replaced. Perhaps we’ll lose something from our psyches as we create a world in which an emotional engagement with what we drive is no longer part of being a mainstream American. But that will be progress, even if it’s hard for many people to say goodbye to Radiator Springs and the way of life it symbolizes.

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Nell Merlino: Expanding Into Foreign Markets: Advice, Caution and Building a Strategy

May 19, 2011

Did you know that the word “millionaire” in Hindi is masculine? What does that mean for women in India who wants to grow a multi-million dollar business? I learned about this conundrum from a colleague Nalini Mehta who attended our Make Mine a Million $ Business event in San Francisco last Fall. I often hear from small business owners who are looking for advice on how to break into and navigate international markets like China, India or even Vietnam. It’s a hot economic trend and with good reason. A report released this week by TD Economics revealed that from 2004-2009, exports by small U.S. firms to all countries grew 30%, while exports to China and India doubled. In addition, according to the U.S.-China Business Council, a private, nonpartisan, nonprofit organization of roughly 220 American companies, China has been our fastest growing export market since it joined the World Trade Organization. What’s more, it’s the only major market since 2000 to have averaged the 15 percent growth per year needed to meet President Barack Obama’s goal of doubling US exports by 2014. The Council also reports that America’s small- and medium-sized companies are succeeding in China, but those companies still need more help accessing China’s markets. So I asked my good friend Ned Cloonan, a former vice president at AIG and the current president of Ned Cloonan Associates, an advisory firm focused on international market access, strategic philanthropy and business intelligence, for some of his thoughts. Ned was one of the first in corporate America to seriously invest in gender equity issues around the world (including Count Me In). He’s also been at the forefront of just about every major market opening in the world over the last 15 to 20 years and he has great advice for women wanting to do business abroad. For example: 1. UNDERSTAND THAT THIS IS A LONG-TERM COMMITMENT. It’s going to take time and capital for you to get access and be able to establish a business in countries like China, India or Vietnam. It’ll be longer and cost you more than probably anything you’ve done to date. To be on the safe side, you might want to build the new markets into a long-term business and financing strategy. 2. YOUR BUSINESS, PRODUCT OR SERVICE STANDS THE BEST CHANCE OF BEING SUCCESSFUL IF IT IS RELEVANT TO THE CURRENT ECONOMIC PLANNING AND PRIORITIES OF THOSE COUNTRIES. For example, in China, they have great interest in product or service that can help in energy efficiency or alternative energy. They are also facing an aging population because of the country’s longstanding one child policy, so if you have a product or service that is related to healthcare or healthcare related services that could be of interest to them. You need to offer something that these countries need and want at that time. 3. SPEND TIME AND EFFORT TO UNDERSTAND SOME OF THE DIFFERENCES IN THE WAYS DECISIONS AND POLITICS ARE MANAGED. It’s important to know the difference between local, regional and federal or central government interests. It’s critical for you to know the decision makers in the process in the regional and local governments. To that end, see if you can participate in a trade mission with the governor’s office, state department of commerce, the Asia Society, or U.S./India business council. There’s a wealth of information and knowledge that may help you understand more fully not just the challenges but also the opportunities and maybe some potential partners. Participating in trade missions and reaching out to chambers — both here and abroad — can be a cost effective way for a small business owner to meet more senior decision makers and get better advice and information in these countries. You stand a better chance to “punch above your weight.” 4. POLITICS MATTERS. Your business can easily be affected by the ebbs and flows of the political relationships between the US and those countries. Even if you’re small or medium sized, you can feel the pressure if the relationship is strained or if there’s a desire for the relationship to expand or grow and prosper. M3 awardees receive a one-year legislative membership with Women Impacting Public Policy (WIPP), a non-profit, nonpartisan public policy advocacy organization with over half a million members (including 54 business organizations) educating and advocating on economic issues for women in business. It’s been a valuable resource to those interested in breaking into foreign markets. 5. FIND A PARTNER IN THAT COUNTRY. If you’re small or medium-sized, you’re going to have to find a compatible partner to assist you in navigating through all of the challenges each one of these countries presents to any business that wants to be successful there — particularly a foreign investor. Choosing a partner could include a reference to a model that has worked in the past is finding someone educated here but from there. 6. CONSIDER A “SECONDARY CITY” STRATEGY. In China, for example, the government is encouraging investment in smaller, interior cities, and not just Shanghai or Beijing. So, it’s important to be flexible.

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Infinera Appoints Andrew Bond-Webster Vice President for Asia Pacific

April 13, 2011

SINGAPORE–(Marketwire – Apr 13, 2011) – Infinera ( NASDAQ : INFN ) announced the appointment of Andrew Bond-Webster as Vice President of Sales for Asia Pacific to accelerate Infinera’s focus on marketing Digital Optical Network solutions in the Asia Pacific region.

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The Japanese Yen declines versus the euro and the dollar during the Asia session

March 1, 2011

The Japanese Yen declines versus the euro and the dollar during the Asia session

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Hamish McLennan: Making the Left- & Right-Brain Work Together: It’s Good Business

December 20, 2010

Over the past few years, the business of marketing is being driven by two seemingly contradictory impulses. On the one hand, the digital world has helped carry the banner of accountability, with its data-driven intelligence-gathering proficiencies. But at the same time, marketers who need to reach customers know painfully well that engaging consumers is not only what you know, but how you express it. The need to creatively connect with our clients’ customers has never been stronger. And so we have been watching the see-saw of left-brain, right-brain thinking. Digital companies have proliferated. But so have the “idea” shops. This dichotomization has been the hallmark of much of the business world. As I look towards 2012 and beyond, it’s becoming clear that the path to long-term business growth is the seamless melding of left- and right-brain thinking. Everyone needs to sit at the same table. Indeed, using that tension of striking a right balance between the best creative and business minds from the beginning of every project is the key to success in today’s ever-changing media landscape. The Daily is Setting the Perfect Example I believe The Daily, the first newspaper designed specifically for the Ipad — and a left-brain/right-brain venture– will become the fastest-growing APP ever. An archetype for future publications? No doubt. A game-changer for the business world? Perhaps. There’s lots of evidence. It starts from the top — a truly interesting match of minds, exemplified by the partnership of News Corp’s Rupert Murdoch and Apple’s Steve Jobs. Both visionaries, but unmistakably different kinds of thinkers. Murdoch brings his great passion for newspapers. Steve Jobs brings the most buzzed-about new consumer platform, the iPad. They are attracting an incredible level of talent on a daily basis. Right from the start, however, Murdoch and Jobs have insisted on one thing. The business side is working side-by-side with the best creative and editorial minds in the business. Not on a need-to-know basis, but as an ensemble act. They know they will be better together. Striking a balance between the left-brain and right-brain is our business model at Young & Rubicam. It is how we work for and with our clients. Just today, we helped our client, the consumer electronics giant, LG, launch an innovative, interactive digital billboard in New York’s Times Square dedicated entirely to good news. LG’s data showed an overwhelming majority of Americans — 83%, in fact — feel that they are suffering from a good news deficit, with six in 10 Americans, saying they don’t even know where to look for good news. With a brand motto of “Life’s Good,” LG’s good news billboard, which you can tweet and text and be answered by an animated good news ambassador, is a complex and elaborate dance of innovative technology and imagination. And within the first hour that it went live, the billboard became the conduit of a marriage proposal. What’s Next? I can’t help but think that the left-brain and right-brain approach is the ideal cultural blueprint for innovative corporations around the world in 2011. The most interesting part, of course, is that there is no exact plan for executing this philosophy. Companies will have to find ways to merge the two ways of thinking that work best for them — and that’s the key to long-term success. Hamish McClennan is the global CEO of Young & Rubicam, the youngest person to hold the post in its history, and the first CEO from the Asia-Pacific Region. Its 186 agencies in 81 countries and whole brain philosophy have contributed to its huge creative and client successes this year. The agency was #1 in the US at Cannes and #3 in the world, there. Y&R was named the Network of the Year three times and was the most-awarded agency at major regional competitions, as well.

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AXT Announces an Expansion of Its Sales Presence in Asia With the Appointment of Dr. Liming Zhu as Vice President of Sales, Asia

November 8, 2010

FREMONT, CA–(Marketwire – November 8, 2010) – AXT, Inc. ( NASDAQ : AXTI ), a leading manufacturer of compound semiconductor substrates, today announced that it has appointed Liming Zhu, Ph.D. vice president of sales for the Asia region. Zhu previously served as AXT’s vice president of quality and quality systems for the company’s manufacturing facility in Beijing, China. This appointment represents an expansion of AXT’s direct, local sales presence in Asia, marking the increasing strategic importance of this geographic region.

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Joseph Lim Joins Datamax-O’Neil as Regional General Manager for Asia-Pacific

October 20, 2010

ORLANDO, FL–(Marketwire – October 20, 2010) –  Datamax-O’Neil, part of Dover Corporation’s Product Identification Group and global provider of label and receipt printing solutions, today announced the appointment of Joseph Lim to the position of regional general manager for the Asia-Pacific region. Mr. Lim will be responsible for leading the Datamax-O’Neil sales teams, driving revenue, and extending the company’s sales leadership throughout the region.

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Video: Metzl Says U.S. Needs Allies to Pressure China on Yuan: Video

September 23, 2010

Sept. 23 (Bloomberg) — Jamie Metzl, executive vice president of the Asia Society, discusses the meeting between Chinese Premier Wen Jiabao and U.S. President Barack Obama at the United Nations in today New York and the outlook for relations between the two nations. The leaders pledged their countries to closer cooperation on economic issues to foster the global recovery. Metzl speaks with Carol Massar and Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Video: Metzl Says U.S. Needs Allies to Push China on Yuan: Video

September 16, 2010

Sept. 16 (Bloomberg) — Jamie Metzl, executive vice president of the Asia Society, talks with Bloomberg’s Mark Crumpton and Julie Hyman about Treasury Secretary Timothy Geithner’s testimony to lawmakers today on the U.S. stance on China’s currency policy. (Source: Bloomberg)

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GlobalLogic Appoints New Chief of Asia Pacific / Managing Director for India

September 16, 2010

MCLEAN, VA–(Marketwire – September 16, 2010) – GlobalLogic, the leader in software R&D services, has appointed Sunil Singh as Chief of Asia Pacific and Managing Director of India. A current resident of Silicon Valley, Singh will relocate to New Delhi to manage GlobalLogic’s Indian operations and market development, as well as guide the company’s overall business strategy in the Asia Pacific region.

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Video: HSBC’s Wong Says China Listing Depends on Regulator: Video

August 2, 2010

Aug. 3 (Bloomberg) — Peter Wong, HSBC Holdings Plc’s Asia-Pacific chief executive officer, talks with Bloomberg’s Susan Li about the outlook for a potential stock listing in Shanghai. Wong also discusses the Asia-Pacific economy, the company’s earnings and Hong Kong’s property market. HSBC said first-half net income doubled as the North American unit returned to profit for the first time in three years and as bad-debt provisions fell by 46 percent. (Source: Bloomberg)

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Video: Metzl Says Geithner Is in `Difficult Position’ on Yuan: Video

July 9, 2010

July 9 (Bloomberg) — Jamie Metzl, executive vice president of the Asia Society, discusses a U.S. Treasury report on exchange rates, China’s currency policy and the political and economic relationship between the two countries. The U.S. pledged to monitor China’s “undervalued” yuan in the next three months for signs that Asia’s fastest-growing market is living up to its commitments to help rebalance the global economy. Metzl speaks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Private Banks Touting Asia Expansion Plans Make Clariden Leu’s Lee `Puke’

June 16, 2010

By Joyce Koh June 17 (Bloomberg) — Private banks touting plans to step up hiring in Asia are undermining the industry by driving up compensation expectations, said the regional head of Credit Suisse Group AG ’s Clariden Leu unit. “If you go by the numbers, it makes me puke: I don’t know who these people are, and why they’re talking like that,” Singapore-based Jimmy Lee , a 20-year private banking veteran, said in an interview on June 11. “They’re shooting themselves in the foot.” UBS AG , Standard Chartered Plc and Morgan Stanley are among companies that have announced plans to hire more private bankers to help Asia’s swelling ranks of millionaires manage their money. Wealth in the Asia-Pacific region outside Japan is expected to grow at twice the global rate, the Boston Consulting Group said this month. Increased competition for Asia’s riches has led to a shortage of qualified private bankers in Singapore, and turnover among advisers in search of bigger paychecks is antagonizing clients concerned about privacy, said Lee, who joined Clariden Leu in March 2009. “It takes time to build these people,” he said. “It affects me because when I talk to other relationship managers, they’ll say if so many banks are growing, they’ll feel good, and they tend to ask for much higher salaries which are unrealistic sometimes.” The Asia-Pacific region’s share of global wealth will rise to almost 20 percent in 2014 from 15 percent last year, with China and India driving growth, according to the Boston Consulting Group report. ‘Merry Go-Round’ The industry may need an additional 900 wealth managers in the next five years to cope with growth in the region, according to a September research note from UBS. Switzerland’s biggest bank said last month it is reviving an effort to recruit and train people who don’t have industry experience for its Asian unit as competition for private bankers heats up. Many private banks expect “instant gratification” and look for wealth managers who can bring existing relationships and assets, Chris Claridge, managing partner at the Consulting Partnership , a Singapore-based headhunting firm, said in an interview yesterday. Pay increases for advisers who switch firms is averaging about 15 percent to 30 percent amid a “ridiculous merry go- round” among staff, Claridge said. “There’s a fair bit of wishful thinking going on,” he said. Banks in Asia are talking about hiring “without really thinking through” where the new employees will come from. Private banking clients are concerned the turnover in advisers will threaten privacy, said Lee, 48. Hiring at Clariden Leu, 89 percent owned by Credit Suisse, will depend on the availability of qualified people, he said. “My information is shared with six other banks if my private banker moves to six banks, and that is a problem,” he said. “You’re actually causing trouble for your clients if you keep moving around. That’s something this industry should look to minimize.” To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net

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Asian Stocks, Metals Drop on U.S. Housing Data Yen Strengthens on Spain

June 16, 2010

By James Poole and Masaki Kondo June 17 (Bloomberg) — Asian stocks dropped for the first time in six days and metals fell after U.S. housing starts plunged the most in more than a year. The yen gained as Spain’s plan to publish bank stress tests renewed European debt concern. The MSCI Asia Pacific Index declined 0.2 percent to 115.55 at 11:30 a.m. in Tokyo after five consecutive gains that pushed the gauge to a four-week high. Copper decreased 1.4 percent, sliding for a second day. The yen rose 0.5 percent against the euro, and strengthened against all 16 major counterparts. Futures on the Standard & Poor’s 500 Index fell 0.4 percent. Housing starts slumped 10 percent, the biggest decline since March 2009, according to figures from the Commerce Department. European Union leaders may agree on ways to tighten financial-market regulation at a summit meeting today and Spain’s central bank said yesterday it plans to publish the results of stress tests carried out on the nation’s lenders to counter speculation it needs international aid. “Investors are inclined to book profit,” said Mitsushige Akino , who oversees $450 million at Tokyo-based Ichiyoshi Investment Management Co. Uncertainty “and a loss of confidence have driven down the market even though the global economy remains resilient.” The MSCI Asia Pacific Index has lost 4.1 percent this year on concern that Greece and other European countries will struggle to curb their budget deficits. The Hong Kong and Taiwan markets reopened after a holiday and Chinese stocks resumed trading after a three-day break. Japan, Australia Japan’s Nikkei 225 Stock Average declined 0.4 percent, the biggest drop among equity benchmarks in the Asia-Pacific region. South Korea’s Kospi Index gained 0.1 percent. Australia’s S&P/ASX 200 Index lost 0.3 percent. Toyota Motor Corp. , which gets 28 percent of sales from North America, declined 0.8 percent in Tokyo. James Hardie Industries SE , the biggest seller of home siding in the U.S., lost 3.1 percent in Sydney. BHP Billiton Ltd. , the world’s biggest mining company, slipped 1.1 percent in Australia after oil and metal prices slumped. Mitsubishi Estate Co. led Japanese real-estate developers higher after Goldman Sachs Group Inc. raised their investment ratings. The yen strengthened on speculation European Union leaders will agree on ways to tighten financial-market regulation. The euro weakened for a second day versus the dollar after Spain’s central bank said yesterday it plans to publish stress tests. ‘More Rules’ “The EU heads may call for more rules, which may weigh on growth,” said Tsutomu Soma , a bond and currency dealer at Okasan Securities Co. in Tokyo. “Risk aversion may persist, so the yen and the dollar could be bought.” The yen climbed to 111.98 per euro in Tokyo from 112.56 in New York yesterday, when it fell to 113.32, the lowest level since June 4. The currency rose to 91.32 versus the greenback from 91.44, and gained 0.5 percent to 78.61 per Australian dollar. The euro declined to $1.2284 from $1.2311. The EU summit today will discuss the region’s economic growth and the so-called stability and growth pact. The Bank of Spain plans to make the stress tests public so markets have full knowledge of the state of the banking system, Miguel Angel Fernandez Ordonez , the governor, said yesterday in a speech. South Korea’s won slid 0.6 percent to 1,218.40 per dollar and Malaysia’s ringgit retreated 0.3 percent to 3.2680 on concern Europe’s debt crisis will bolster demand for dollars. Copper, Oil “Should the European debt crisis worsen, you will see the flight to quality for the dollar and that will weigh on the Asian currencies,” said Yeo Chin Tiong , head of treasury at OSK Investment Bank Bhd. in Kuala Lumpur. Copper for three-month delivery on the London Metal Exchange fell as much as 1.8 percent to $6,530 a metric ton, and traded at $6,554. Futures in Shanghai resumed trading after a three-day holiday, gaining as much as 2.5 percent to 52,680 yuan ($7,713) a ton. Oil fell from a six-week high after a government report showed U.S. crude supplies increased last week as refiners cut processing rates. Crude oil for July delivery dropped as much as 64 cents, or 0.8 percent, to $77.03 a barrel in electronic trading on the New York Mercantile Exchange, and was at $77.10. The cost of protecting Asia-Pacific corporate and sovereign bonds from non-payment fell, according to traders of credit- default swaps. The Markit iTraxx Japan index declined 2 basis points to 135 basis points in Tokyo, according to Morgan Stanley. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 2 basis points to 131 basis points in Singapore, Royal Bank of Scotland Group Plc prices show. To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net . James Poole at jpoole4@bloomberg.net

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Asia Stocks Gain for Fifth Day Dollar, Metals Rise on U.S. Growth Outlook

June 15, 2010

By Rocky Swift and Yoshiaki Nohara June 16 (Bloomberg) — Asian stocks rose for a fifth day, and metals and the dollar advanced as economic reports added to optimism a U.S. recovery will support global growth. The MSCI Asia Pacific Index climbed 0.9 percent to 115.46 at 11:50 a.m. in Tokyo, set for the highest close since May 18. The dollar strengthened versus 12 of 16 major counterparts. Copper headed for its longest winning streak in 11 months and oil rose for a third day. Standard & Poor’s 500 Index futures slipped 0.2 percent. Economists said a report today will show U.S. industrial production expanded in May by the most in four months, adding to evidence the global recovery may shrug off Europe’s debt crisis. The Federal Reserve Bank of New York said yesterday its manufacturing gauge advanced for an 11th month, helping send the S&P 500 index up 2.4 percent yesterday. “Stocks seem to have become more resilient after taking into account a lot of negative factors,” said Masahide Tanaka , a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “Risk sentiment is improving somewhat as economies in the U.S. and China seem to be holding steady, easing concern about a double dip.” Japan’s Nikkei 225 Stock Average rose 1.6 percent, the biggest increase among equity benchmarks in the Asia-Pacific region. South Korea’s Kospi Index advanced 0.4 percent and Australia’s S&P/ASX 200 gained 1.1 percent. Markets in Hong Kong, China and Taiwan are closed today for a holiday. Relative Value MSCI’s Asian gauge has slumped 11 percent from its 52-week high on April 15 as swelling budget deficits prompted credit downgrades of Greece, Spain and Portugal. The retreat has driven down the average price of shares in the gauge to 14.8 times estimated earnings . The ratio sank to 13.8 times on May 18, the lowest level since December 2008. Toyota Motor Corp. , a carmaker that gets about 28 percent of its sales from North America, increased 1.4 percent in Tokyo. Samsung Electronics Co., a chipmaker that earns about 20 percent of its revenue in America, rose 1.8 percent in Seoul. Nintendo Co. jumped 4.7 percent in Osaka, Japan, after the company introduced a handheld video-game player. Material and information-technology companies led gains today among the MSCI gauge’s 10 industry groups. BHP Billiton Ltd. , the world’s largest mining company, rose 2.1 percent in Sydney and was the biggest contributor to the index’s increase. Rio Tinto Group , the world’s third-ranked mining company, increased 2 percent. Mitsubishi Corp., which gets about 40 percent of sales from commodities, gained 2.1 percent in Tokyo. Copper’s Winning Streak Copper advanced for a seventh day, the longest streak since July 2009. Oil extended yesterday’s 2.4 percent increase, trading at $77.16 a barrel in New York. “Market worries about some of the more pessimistic economic scenarios appear to have abated,” David Moore , commodity strategist at Commonwealth Bank of Australia, wrote in an e-mailed report today. “Strong gains on international equity markets imparted a positive spin on base metal market sentiment.” Three-month copper on the London Metal Exchange gained as much as 1.3 percent to $6,763.75 a metric ton in Singapore. Among other LME-traded metals, aluminum rose 0.7 percent to $2,025 a ton, zinc increased 0.7 percent to $1,852 a ton and nickel added 1.1 percent to $20,450 a ton. Woori Finance Holdings Co. advanced 4 percent after it was named as a potential takeover target by the chairman-nominee at KB Financial Group Inc., owner of the nation’s biggest lender. Euh Yoon Dae , nominated as chairman of KB Financial yesterday, discussed potential bids for companies including Woori with a panel that recommended him to the post, committee head Lim Suk Sig said. Korean Inflows South Korea’s won rose 1.2 percent to 1,212.95 per dollar, reaching its highest level in almost two weeks, as overseas investors added to their holdings of Korean shares for a fourth day. The Philippine peso climbed 0.7 percent to 46.20 per dollar before the central bank announces figures for remittances from overseas workers for April. “We’re seeing some positive signs from Europe, but we’re still being cautious,” said Jae Sung Park , a currency dealer at Woori Investment & Securities. It will be hard for the won to trade below 1,200 against the dollar today “because the authorities will want to intervene at that level.” The U.S. currency gained as much as 0.2 percent to 91.53 yen in Tokyo. The greenback traded at $1.2312 per euro from $1.2332 in New York yesterday, snapping a two-day loss against the common currency. Industrial Output Output at U.S. factories, mines and utilities increased 0.9 percent in May, the most since January, after a 0.8 percent gain in April, according to a Bloomberg News survey before the Federal Reserve report today. The Fed Bank of New York said yesterday its Empire State Index of manufacturing in the region rose to 19.57 in June from 19.11 the previous month. The cost of protecting Asia-Pacific corporate and sovereign bonds from non-payment fell, according to traders of credit- default swaps. The Markit iTraxx Australia index dropped 7 basis points to 128.5 basis points, according to Nomura Holdings Inc. The index for Japan fell 6 basis points to 138 basis points as of 8:44 a.m. in Tokyo, according to Morgan Stanley prices. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan declined 5 basis points to 133 basis points, Royal Bank of Scotland Group Plc prices show. A basis point is 0.01 percentage point. To contact the reporters on this story: Rocky Swift in Tokyo at rswift5@bloomberg.net ; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net .

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Millionaires’ Ranks Grow 14%, Led by Singaporeans, Boston Consulting Says

June 10, 2010

By Alexis Leondis June 10 (Bloomberg) — The global millionaires’ club expanded by about 14 percent in 2009 with Singapore leading the way, The Boston Consulting Group said. The number of millionaire households increased to 11.2 million, according to the study released today by the Boston- based firm. Singapore posted a 35 percent gain, followed by Malaysia, Slovakia and China. In 2008, the number of millionaire households fell about 14 percent to 9.8 million. “Given the severity and magnitude of the crisis, I’m surprised at how fast global wealth has come back,” Bruce Holley , a senior partner in the firm’s New York office and topic expert for wealth management and private banking for the U.S., said in a telephone interview before the report was released. Global wealth rose by 11.5 percent after falling 10 percent in 2008, as assets under management increased to $111.5 trillion, close to the annual study’s record $111.6 trillion in 2007. North America, defined as the U.S. and Canada, had the greatest gain in assets at $4.6 trillion to $35.1 trillion. The U.S. also had the most millionaire households at 4.72 million, the survey said, while Europe remained the wealthiest region, with $37.1 trillion. Current numbers may differ from those in last year’s report because of currency fluctuations and newer available data, said Peter Damisch, a BCG partner and a co-author of the report. The study looked at 62 countries representing more than 98 percent of global gross domestic product. Wealth Recovery The recovery in wealth last year was a result of resurgent financial markets and increased savings, the report said. The Standard & Poor’s 500 Index rose 20 percent in 2009 and the U.S. savings rate averaged 4.2 percent compared with 2.6 percent a year earlier. Global wealth dropped in 2008 for the first time since the survey’s 2001 inception as the credit crisis sent stock indexes tumbling and slashed the value of real-estate holdings, hedge- fund and private-equity investments. Less than 1 percent of households globally were considered millionaires, which is defined as investable assets of more than $1 million, exclusive of real estate and property such as art. Wealth became more concentrated with millionaire households controlling 38 percent of the world’s assets compared with 36 percent a year earlier, the study said. Singapore also had the highest proportion of millionaire households at 11.4 percent, followed by Hong Kong and Switzerland. The fourth, fifth and sixth spots were in the Middle East — Kuwait, Qatar and the United Arab Emirates. The U.S. was seventh-highest at 4.1 percent. Growth Rate The amount of offshore wealth, defined as assets housed in a country other than the investor’s legal residence, increased to $7.4 trillion after declining to $6.8 trillion in 2008 as global regulators pressured countries such as Switzerland to cut down on bank secrecy. Switzerland remained the largest offshore center, with about 27 percent, or $2 trillion, of assets, the report said. Global wealth will increase at an average annual rate of almost 6 percent from yearend 2009 through 2014, which is higher than the 4.8 percent annual growth rate from yearend 2004 through 2009, the study said. Wealth in the Asia-Pacific region, excluding Japan, is expected to rise almost double the global rate. Last year’s survey said total wealth wouldn’t return to pre-recession levels until 2013. ‘Still Feel Burned’ The report’s authors also looked at the performance of 114 wealth management firms worldwide and found revenue declined by an average of 7.3 percent as assets under management increased an average of 14.3 percent. Reasons for decreased revenue include fewer transactions, tougher price negotiations and a shift to lower-risk asset classes and investments that are liquid and simple, the study said. Investors feel frustrated and distrustful following the market events beginning in 2008, despite the increase in wealth, Holley said. “People still feel burned,” said Holley. “I think the numbers in the report suggest a much rosier experience than how people actually feel.” To contact the reporters on this story: Alexis Leondis in New York aleondis@bloomberg.net .

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BP Spill Shows a Profit Buying 2018 Oil, Selling Spot

June 7, 2010

By Alexander Kwiatkowski and Margot Habiby June 7 (Bloomberg) — The oil market is signaling that prices have nowhere to go but up as the biggest spill in U.S. history curbs drilling and makes it more expensive to develop new fields. Crude’s premium for delivery in eight years compared with today’s price rose 86 percent since the BP Plc -leased Deepwater Horizon rig in the Gulf of Mexico exploded April 20. Oil for December 2018 is $21 a barrel more than next month, compared with $11 before the disaster. More regulation may add $5 to the contracts in coming years, according to Deutsche Bank AG. President Barack Obama extended a ban on new deepwater permits and exploration by Royal Dutch Shell Plc in the Alaskan Arctic for six months, putting off-limits as much as 23.2 billion barrels of potential resources, equal to 76 percent of all reserves proven in the U.S. The number of rigs drilling in the Gulf of Mexico plunged 50 percent last week to the lowest level in 16 years, Baker Hughes Inc. reported June 4. “The president said stop drilling, and now we are seeing the result,” said Adam Sieminski , chief energy economist at Deutsche Bank in Washington. “Before all is said and done, we’re going to lose more rigs in the Gulf.” A one-year worldwide delay in deepwater drilling may cut 500,000 barrels a day from 2013 supply, according to Sanford C. Bernstein analysts. While that’s less than 3 percent of daily U.S. consumption, it’s almost enough to fuel Argentina, Latin America’s third-biggest economy. Future Oil Costly Oil for delivery in December 2018 traded at $92.78 a barrel on the New York Mercantile Exchange on June 4, compared with $71.51 for July 2010 delivery, a premium of $21.27. That spread has grown by $9.82, or 86 percent, since April 19, the day before the accident. To profit from a wider premium, investors would need to buy a December 2018 futures contract and sell one for nearer delivery, and then reverse those trades once the spread expands. As prices approach $100 for delivery in 2018, the latest contract on the Nymex, crude for this year is sinking on concern Europe’s debt crisis will derail the global economic recovery. July oil fell 14 percent in May, the most for one month since December 2008. Prices tumbled 4.2 percent on June 4 after a government report showed that the U.S. added fewer jobs than forecast last month and as the euro fell to a four-year low against the dollar, reducing the appeal of commodities. Share Slump BP shares have collapsed, losing 33 percent of their value since April 19 amid mounting costs of the clean-up and damage to the company’s reputation. The slump has been felt across the industry , leading to a 14 percent decline so far this year in the MSCI World Energy index. The prospect of higher costs and a crackdown on drilling are driving up future prices because world demand in 2015 will rise 2.3 percent from now to 88.4 million barrels a day, according to the International Energy Agency in Paris. “Definitely there’s going to be greater regulatory scrutiny over offshore operations in the deepwater, and that would likely lead to increased costs for the industry,” David Greely, chief commodities strategist at Goldman Sachs, said today at the Asia Oil & Gas Conference in Kuala Lumpur. U.S. output may be cut by 150,000 to 200,000 barrels a day next year because of new limits, Deutsche Bank’s Sieminski said. The total can feed as much as 35 percent of Exxon Mobil Corp.’s refinery in Baytown , Texas, the largest in the U.S. BP estimates its production may be reduced by 75,000 barrels a day in 2015 because of delays. Too Little Those amounts are too little to drive up the cost of crude, said Mike Wittner , head of oil research at Societe Generale SA in London. “In the big picture, I don’t think a half million barrels a day of more or less non-OPEC production is really going to change the global balance,” Wittner said in a telephone interview. “It is still going to be Asian-led demand growth bumping up against a maturing supply base. The big picture does not really change.” Wittner forecasts oil averaging $101 a barrel next year. Brazil has given no signs that limits will be placed on Tupi and related deepwater oil fields, the biggest discovery in the Americas since Mexico’s Cantarell in 1976. The fewer barrels pumped in the U.S., the more refiners need to turn to the 12-nation Organization of Petroleum Exporting Countries and other foreign suppliers. To meet rising demand, OPEC would activate unused fields, curtailing capacity the world needs during times of disruptions, such as wars and hurricanes. A 500,000 barrel-a-day drop in global output in 2013 would put a greater burden on OPEC, Bernstein analyst Neil McMahon said in a May 28 report. Global Context “Although this may seem small in a global context, such a situation would decrease OPEC spare capacity, especially in the second half of the decade, which would lead to an increase in the oil price,” according to the report. The world is growing more dependent on deepwater finds, focusing attention on hard-to-access fields such as Brazil’s Tupi and BP’s Thunder Horse in the Gulf of Mexico. Reservoirs lying more than 1,000 meters (3,280 feet) below the sea surface will make up almost 4 million barrels of daily global production by 2018, more than six times the level this year, according to Bernstein estimates. Offshore production growth may be slower than expected, pushing up prices, said Fatih Birol , IEA chief economist. “There could be definitely a negative impact on the offshore product growth, which may in turn mean upward pressure on prices,” Birol said in a telephone interview. Higher oil prices may provide an incentive to look at alternatives to oil. Environmental Risks OPEC accounted for 41 percent of U.S. imports last year, down from 46 percent in 2008, according to the Energy Department, in keeping with the goals of Obama and previous American presidents to curb dependence on foreign nations. “Much of our future supplies were supposed to come from deepwater drilling,” David Hufton , managing director of London’s PVM Oil Associates Ltd., the world’s largest broker of over-the-counter crude trading, said in a note. “The environmental risks are now all too apparent.” The spill has dumped as much as 19,000 barrels a day into the Gulf, according to government scientists, after the initial explosion killed 11 workers and sank a $365 million rig. BP has spent about $1.25 billion to stop the flow and scour crude from the Gulf, it said today. “We owe all those who’ve been harmed, as well as future generations, a full and vigorous accounting of the events that led to what has now become the worst oil spill in U.S. history,” Obama said in the White House Rose Garden on June 1. Stricter Regulation Oil producers around the world are preparing for stricter regulation. Norwegian government members are calling for an immediate stop to deepwater drilling offshore, while Russia may tighten its rules, according to Energy Minister Sergei Shmatko . “We need to guard against premature changes to regulations that may not turn out to be the right thing,” Andrew Swiger , senior vice president at Exxon Mobil Corp. said in Kuala Lumpur. More regulation means more expenses to consumers through higher commodity prices. Insurers are charging 50 percent more for policies covering oil rigs following the explosion, according to Moody’s Investors Service. “The marginal costs for new supplies have taken a big upturn,” said PVM’s Hufton. “It is surprising that forward oil prices have not reacted more aggressively.” To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net ; Margot Habiby in Dallas at mhabiby@bloomberg.net .

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Prada Said to Consider Initial Public Offering for Fifth Time in 10 Years

June 2, 2010

By Sara Gay Forden, Elisa Martinuzzi and Andrew Roberts June 2 (Bloomberg) — Prada SpA, buoyed by surging profit at the eponymous fashion label, is exploring options to revive an initial public offering, according to four people familiar with the talks. Prada, which has scrapped an IPO four times in the last 10 years, is considering a Hong Kong listing in addition to Milan, said two of the people, who declined to be identified before a decision is made. Prada hasn’t yet appointed banks to manage the transaction, and talks may not lead to an offering, they said. Prada has cut debt and opened new stores in Asia as the industry rebounds from the worst year on record. Perfume maker L’Occitane International SA sold stock in Asia last month to take advantage of demand for IPOs in the region amid optimism that economic growth will exceed expansion elsewhere. “Prada has sailed well through choppy waters, thanks to its presence in Asia and the resilience of its shoe and handbag business,” said Armando Branchini , vice-president of Milan- based consulting firm InterCorporate. “The strong rebound in the first quarter, which may continue through the end of the year, would make it an opportune time to consider an IPO.” The company continues to monitor market conditions, said a Prada spokesman, declining to comment further. While Prada may hold an IPO as soon as this year, it’s more likely the firm will wait for stock markets to rise and sell stock in 2011, according to one person. Surging Profit The fashion company, which is controlled by Chief Executive Officer Patrizio Bertelli , his wife Miuccia Prada and her family, said May 24 first-quarter earnings before interest, taxes, depreciation and amortization surged to 64 million euros ($78.5 million) from 11 million euros a year earlier. Revenue rose 26 percent to 366 million euros, led by a 62 percent gain in the Asia Pacific region. Prada abandoned plans to list in 2008 because of adverse market conditions. The company had hired Intesa Sanpaolo SpA, UniCredit SpA and Goldman Sachs Group Inc. to manage the offering at the time. Prada, founded by head designer Miuccia Prada’s grandfather Mario Prada in 1913, still operates its first outlet in Milan’s 19th century Galleria shopping arcade. To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net ; Sara Gay Forden in Milan via sforden@bloomberg.net ; Andrew Roberts in Paris at aroberts36@bloomberg.net

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Russia IPOs Leave Funds Cold as Deripaska Seeks Sales

June 1, 2010

By Yuriy Humber and Hanny Wan June 1 (Bloomberg) — Billionaire Oleg Deripaska , who listed his United Co. Rusal in Hong Kong this year, says the city is Russia’s best chance to tap into Asian economic growth. Investors, who have watched debt-laden Rusal slump, are yet to be persuaded. “Hong Kong is the gateway to Asia,” Deripaska said in an interview at Hong Kong’s Conrad Hotel. “I focus more and more on Asia because I believe we can do better business in Asia than in struggling economies” such as the U.K. The challenge for the Russian companies seeking to follow Deripaska to Hong Kong will be to show Asian investors why they should care, at a time when initial public offerings worldwide struggle. Funds from RCM Asia Pacific Ltd. to Samsung Investment Trust say Russian IPOs don’t fit with their Asia-focused investment strategy. “Those companies can list here, but who wants to buy them?” said Pauline Dan , Hong Kong-based chief investment officer at Samsung Investment, which oversees about $78 billion. “Our focus is on Hong Kong, China. It’s not as if China doesn’t have resources itself.” That ambivalence may frustrate hopes by Russian companies to avoid European market turmoil by entering Asia, where wealth is accumulating faster than anywhere else, said Chris Weafer , chief strategist at UralSib Financial Corp. Many of them see Hong Kong as an “easy” alternative to London or New York, with regard to its liquidity and trading rules, as they seek to raise $100 billion over five years to repay debt and grow, he said. Faltering Markets Hong Kong, which raised the most IPO funds of any bourse in 2009 according to World Federation of Exchanges data, has not been immune to canceled share sales this year as sovereign-debt concerns in Europe roil global stocks. The MSCI World Index has fallen about 14 percent since its April 15 high. Aluminum maker Rusal has dropped about 32 percent since its $2.24 billion IPO in January, while the benchmark Hang Seng Index has fallen 1.7 percent. At least 20 companies around the world postponed or withdrew IPOs in May, including three from Russia: Deripaska’s Strikeforce Mining & Resources Plc had sought a listing in Hong Kong, sugar producer OAO Rusagro planned a sale in Moscow and fertilizer maker OAO UralChem had targeted London. Rusal’s IPO, Russia’s first in Hong Kong, relied on support from outside Asia. Vnesheconombank , Russia’s state-run bank, took 30 percent of the offering, and two more of the five cornerstone buyers were U.S. funds, including Paulson & Co. “Is Russia on the radar? Honestly? No,” said Ben Collett , head of equities for Louis Capital Markets brokerage in Hong Kong. “If you want to trade Russia then you’re in Europe.” China Fit Danny Yan , a fund manager at Taifook Asset Management Ltd. in Hong Kong, said unless a Russian company can show how a “significant” part of its business is related to China, he won’t buy it. Wariness among Chinese investors may scupper plans for some of the 40 Russian companies that have met with the Hong Kong exchange or enquired about a listing, according to figures from Igor Vdovin, a member of Russian business lobby RSPP. “Hong Kong is ambitious in trying to attract listings from companies that are domiciled elsewhere, but our view so far is that this is not a natural fit,” said Mark Konyn , chief executive officer of RCM Asia Pacific, which oversees $11 billion. Among the Russian companies with “Asian credentials” are the energy and metals exporters such as state-run oil producer OAO Rosneft , gas-export monopoly OAO Gazprom and OAO GMK Norilsk Nickel , UralSib’s Weafer said. Rosneft, Norilsk Rosneft signed a 20-year supply contract with China last year, while Norilsk sold 30 percent of its nickel to the nation and to India. Rusal plans to boost Asian sales to 30 percent of the total this year from 20 percent in 2009. Rusal set its IPO price on Jan. 22, three days after the Hang Seng began a three-week, 10 percent decline. Rusal fell 11 percent on its first trading day, Jan. 27, a “reasonable” move given global market volatility, Deripaska said that day. “It was priced toward the very top of the institutional demand curve before the market turned,” said Elena Khisamova , head of equity capital markets at VTB Capital, one of Rusal’s IPO managers. Still, Rusal’s sale was “a huge help in creating the path for future listings” from Russia, she said. Deripaska, 42, might have struggled to list Rusal in London, where Russian stocks are traditionally brokered, because the U.K. may have insisted on stricter regulation for the debt-saddled company, Weafer said. Deripaska said in April 2008 he would pick a location based on the most “comfortable solution.” Pay Down Debt Rusal completed Russia’s biggest debt restructuring in corporate history in December, agreeing with more than 70 creditors to extend repayments of about $14 billion over seven years. Net debt shrank to $12 billion as of March 31 as the company used the IPO proceeds to repay lenders. Taking into account the debt and Rusal’s $6 billion loss in 2008, the Hong Kong exchange enforced a minimum trading lot of 24,000 shares when the company went public. That put the stock beyond the reach of retail investors, the city’s most active traders, and Rusal isn’t included in any stock index, said Louis Capital’s Collett. Rusal’s subsequent share slump may have hurt other Russian companies hoping to draw Asian investors, said Alisher Djumanov , CEO of Beijing-based Eurasia Capital. “In Hong Kong, IPOs are associated with big gains,” Djumanov said. “Chinese investors kind of assume that if you invest in IPOs you can expect, at least in the beginning, some positive performance.” Last year, IPOs in the city achieved an average first-day gain of 15 percent, according to data compiled by Bloomberg. Perception Vs. Fundamentals The success of Russian IPOs in Hong Kong will depend as much on perception as fundamentals, Collett said. Samsung Investment, for one, didn’t feel “comfortable” with Rusal’s management during the IPO marketing, fund manager Dan said. “The perception of oligarchs here is bad,” Collett said. “The only thing that people know of Rusal is debt and question marks over Deripaska. They don’t know what those question marks are.” Deripaska, a nuclear physics graduate, became director of a Siberian aluminum smelter in 1994, aged 26. At the time, several groups vied for control of the industry, including with contract killings, which gave rise to the name of the “aluminum wars.” At the Siberian plant, Deripaska was supported by Trans- World Group, a trader part-owned by Uzbekistan-born entrepreneur Michael Cherney, who since 2008 has pursued legal claims for part of Deripaska’s aluminum fortune. Planned Listings Even after Rusal’s share decline and the delay of the Strikeforce listing, Deripaska still seeks more IPOs for his EN+ Group, the holding company for his Rusal stake and power utility OAO EuroSibEnergo. Hong Kong is a “priority” location for EN+ assets because of their geographical proximity to China, EN+ spokeswoman Elena Rollins said. Chinese investors need time to “gain understanding” of Russian companies, said Yonghao Pu, UBS Wealth Management’s chief investment strategist for the Asia Pacific region. That may take as long as 10 to 15 years because Russian companies need to build relationships in Asia, Eurasia Capital’s Djumanov said. Khisamova of VTB Capital disagrees. “When we brought first Russian companies to London for equity-raising 5 to 10 years ago, we got the same type of questions,” Khisamova said. “After three, maybe five deals, London became very familiar with Russia and a platform of choice” for the nation’s companies. To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net ; Hanny Wan in Hong Kong at hwan3@bloomberg.net .

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Subbarao Risks `Falling Behind’ on Rates After India’s Growth Accelerates

May 31, 2010

By Unni Krishnan and Kartik Goyal June 1 (Bloomberg) — India’s central bank needs to be less wary of the fallout of Europe’s debt crisis and raise interest rates to curb inflation stoked by growth, economists said. Asia’s biggest economy after Japan and China expanded 8.6 percent last quarter from 6.5 percent in the previous three months, India’s statistics office said in New Delhi yesterday. The acceleration in growth came even as consumer spending slowed, a drag that may lift in coming months, according to HSBC Group Plc economist Frederic Neumann. The Reserve Bank of India said last month it will be “cautious” in tightening the monetary policy even as the country’s consumer-price inflation rate is the highest among Group of 20 nations. India’s stance, in the face of risks to growth posed by Europe’s sovereign-debt crisis, may be echoed across the Asia Pacific this week as central banks from Australia to the Philippines set interest rates. “If India’s central bank pays too much attention to Europe and waits for clarity, then it risks falling behind the curve,” said Ramya Suryanarayanan, an economist at DBS Bank Ltd. in Singapore. “It is important that interest rates are normalized.” She expects a quarter-percentage point increase in rates by the end of June. The Mumbai-based Reserve Bank has raised interest rates twice since mid-March by a quarter-percentage point each time. Consumer Prices The bank’s benchmark reverse-repurchase rate is 3.75 percent while the consumer-price inflation rate for industrial workers touched about 13 percent in April. Prices paid by farm workers are close to 15 percent, hurting the purchasing power of the 650 million people who live in India’s countryside. In contrast, consumer prices are running at 2.9 percent in Australia, 3.9 percent in Indonesia and 4.4 percent in the Philippines. The Reserve Bank of Australia may leave the overnight cash rate target at 4.5 percent today, according to a Bloomberg News survey. Bank Indonesia will probably maintain its benchmark rate on June 4 and borrowing costs in Philippines may be kept unchanged on June 3, separate surveys showed. “The euro jitters may have left policy makers across the world in a more accommodative mood, but in India tightening is now needed to avoid a hard landing later on,” HSBC’s Neumann said. “They should add some urgency to the tightening cycle.” Benchmark 10-year Indian government bond yields rose 17 basis points last week, the biggest increase in more than a month, as traders increased bets Governor Duvvuri Subbarao will boost rates. The yield closed at 7.56 percent yesterday. The rupee lost 4.3 percent against the U.S. dollar last month and the Sensitive Index declined 3.5 percent in the period. Consumption As growth accelerated last quarter, consumption by individuals and companies increased 2.6 percent, the weakest pace in eight years, data from the statistics office showed. “This, presumably, reflects in part soaring food prices, which eroded real disposable incomes and made shoppers generally more cautious,” the Hong Kong-based Neumann said. “With agriculture prices now easing, we expect consumption to get a real kick over the coming quarter, helped, too, by rising incomes as a tightening labor market spurs wage growth.” Rains in this year’s June-September monsoon season will be “normal,” the weather office forecast in April, boosting prospects for agriculture and rural incomes. Salaries are increasing in urban areas as well with companies including Tata Consultancy Services Ltd., India’s biggest exporter of software services, boosting employees’ pay. Tata Consultancy said in April it plans to spend about $200 million on wage increases this year. The central bank acknowledges that consumer demand is strengthening, making inflation a “visible” concern, Subir Gokarn , who is in charge of monetary policy at the Reserve Bank, said in an interview in Warsaw on May 26. Still, he said the “pace and magnitude” of monetary policy actions will be conditioned by global developments. To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net .

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Russian IPOs Fail to Lure China’s Skeptics as Deripaska Seeks More Sales

May 31, 2010

By Yuriy Humber and Hanny Wan June 1 (Bloomberg) — Billionaire Oleg Deripaska , who listed his United Co. Rusal in Hong Kong this year, says the city is Russia’s best chance to tap into Asian economic growth. Investors, who have watched debt-laden Rusal slump, are yet to be persuaded. “Hong Kong is the gateway to Asia,” Deripaska said in an interview at Hong Kong’s Conrad Hotel. “I focus more and more on Asia because I believe we can do better business in Asia than in struggling economies” such as the U.K. The challenge for the Russian companies seeking to follow Deripaska to Hong Kong will be to show Asian investors why they should care, at a time when initial public offerings worldwide struggle. Funds from RCM Asia Pacific Ltd. to Samsung Investment Trust say Russian IPOs don’t fit with their Asia-focused investment strategy. “Those companies can list here, but who wants to buy them?” said Pauline Dan , Hong Kong-based chief investment officer at Samsung Investment, which oversees about $78 billion. “Our focus is on Hong Kong, China. It’s not as if China doesn’t have resources itself.” That ambivalence may frustrate hopes by Russian companies to avoid European market turmoil by entering Asia, where wealth is accumulating faster than anywhere else, said Chris Weafer , chief strategist at UralSib Financial Corp. Many of them see Hong Kong as an “easy” alternative to London or New York, with regard to its liquidity and trading rules, as they seek to raise $100 billion over five years to repay debt and grow, he said. Faltering Markets Hong Kong, which raised the most IPO funds of any bourse in 2009 according to World Federation of Exchanges data, has not been immune to canceled share sales this year as sovereign-debt concerns in Europe roil global stocks. The MSCI World Index has fallen about 13 percent since its April 15 high. Aluminum maker Rusal has dropped about 31 percent since its $2.24 billion IPO in January, while the benchmark Hang Seng Index fell 1.3 percent. At least 20 companies around the world postponed or withdrew IPOs in May, including three from Russia: Deripaska’s Strikeforce Mining & Resources Plc had sought a listing in Hong Kong, sugar producer OAO Rusagro planned a sale in Moscow and fertilizer maker OAO UralChem had targeted London. Rusal’s IPO, Russia’s first in Hong Kong, relied on support from outside Asia. Vnesheconombank , Russia’s state-run bank, took 30 percent of the offering, and two more of the five cornerstone buyers were U.S. funds, including Paulson & Co. “Is Russia on the radar? Honestly? No,” said Ben Collett , head of equities for Louis Capital Markets brokerage in Hong Kong. “If you want to trade Russia then you’re in Europe.” China Fit Danny Yan , a fund manager at Taifook Asset Management Ltd. in Hong Kong, said unless a Russian company can show how a “significant” part of its business is related to China, he won’t buy it. Wariness among Chinese investors may scupper plans for some of the 40 Russian companies that have met with the Hong Kong exchange or enquired about a listing, according to figures from Igor Vdovin, a member of Russian business lobby RSPP. “Hong Kong is ambitious in trying to attract listings from companies that are domiciled elsewhere, but our view so far is that this is not a natural fit,” said Mark Konyn , chief executive officer of RCM Asia Pacific, which oversees $11 billion. Among the Russian companies with “Asian credentials” are the energy and metals exporters such as state-run oil producer OAO Rosneft , gas-export monopoly OAO Gazprom and OAO GMK Norilsk Nickel , UralSib’s Weafer said. Rosneft, Norilsk Rosneft signed a 20-year supply contract with China last year, while Norilsk sold 30 percent of its nickel to the nation and to India. Rusal plans to boost Asian sales to 30 percent of the total this year from 20 percent in 2009. Rusal set its IPO price on Jan. 22, three days after the Hang Seng began a three-week, 10 percent decline. Rusal fell 11 percent on its first trading day, Jan. 27, a “reasonable” move given global market volatility, Deripaska said that day. “It was priced toward the very top of the institutional demand curve before the market turned,” said Elena Khisamova , head of equity capital markets at VTB Capital, one of Rusal’s IPO managers. Still, Rusal’s sale was “a huge help in creating the path for future listings” from Russia, she said. Deripaska, 42, might have struggled to list Rusal in London, where Russian stocks are traditionally brokered, because the U.K. may have insisted on stricter regulation for the debt- saddled company, Weafer said. Deripaska said in April 2008 he would pick a location based on the most “comfortable solution.” Pay Down Debt Rusal completed Russia’s biggest debt restructuring in corporate history in December, agreeing with more than 70 creditors to extend repayments of about $14 billion over seven years. Net debt shrank to $12 billion as of March 31 as the company used the IPO proceeds to repay lenders. Taking into account the debt and Rusal’s $6 billion loss in 2008, the Hong Kong exchange enforced a minimum trading lot of 24,000 shares when the company went public. That put the stock beyond the reach of retail investors, the city’s most active traders, and Rusal isn’t included in any stock index, said Louis Capital’s Collett. Rusal’s subsequent share slump may have hurt other Russian companies hoping to draw Asian investors, said Alisher Djumanov , CEO of Beijing-based Eurasia Capital. “In Hong Kong, IPOs are associated with big gains,” Djumanov said. “Chinese investors kind of assume that if you invest in IPOs you can expect, at least in the beginning, some positive performance.” Last year, IPOs in the city achieved an average first-day gain of 15 percent, according to data compiled by Bloomberg. Perception Vs. Fundamentals The success of Russian IPOs in Hong Kong will depend as much on perception as fundamentals, Collett said. Samsung Investment, for one, didn’t feel “comfortable” with Rusal’s management during the IPO marketing, fund manager Dan said. “The perception of oligarchs here is bad,” Collett said. “The only thing that people know of Rusal is debt and question marks over Deripaska. They don’t know what those question marks are.” Deripaska, a nuclear physics graduate, became director of a Siberian aluminum smelter in 1994, aged 26. At the time, several groups vied for control of the industry, including with contract killings, which gave rise to the name of the “aluminum wars.” At the Siberian plant, Deripaska was supported by Trans- World Group, a trader part-owned by Uzbekistan-born entrepreneur Michael Cherney, who since 2008 has pursued legal claims for part of Deripaska’s aluminum fortune. Planned Listings Even after Rusal’s share decline and the delay of the Strikeforce listing, Deripaska still seeks more IPOs for his EN+ Group, the holding company for his Rusal stake and power utility OAO EuroSibEnergo. Hong Kong is a “priority” location for EN+ assets because of their geographical proximity to China, EN+ spokeswoman Elena Rollins said. Chinese investors need time to “gain understanding” of Russian companies, said Yonghao Pu, UBS Wealth Management’s chief investment strategist for the Asia Pacific region. That may take as long as 10 to 15 years because Russian companies need to build relationships in Asia, Eurasia Capital’s Djumanov said. Khisamova of VTB Capital disagrees. “When we brought first Russian companies to London for equity-raising 5 to 10 years ago, we got the same type of questions,” Khisamova said. “After three, maybe five deals, London became very familiar with Russia and a platform of choice” for the nation’s companies. To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net ; Hanny Wan in Hong Kong at hwan3@bloomberg.net .

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BASF Names Finance Chief Kurt Bock to Replace Hambrecht at Helm Next Year

May 31, 2010

By Richard Weiss May 31 (Bloomberg) — BASF SE , the world’s largest chemical maker, appointed Chief Financial Officer Kurt Bock to run the manufacturer starting next year, choosing a corporate veteran who has helped steer the company away from commodity products. Bock, who turns 52 on July 3, will succeed Juergen Hambrecht as chief executive officer following the annual shareholders meeting in May 2011, Ludwigshafen, Germany-based BASF said today in a statement. BASF has been shifting away from bulk chemicals that Middle Eastern competitors make more cheaply and expanded in fast- growing markets in Asia. Acquisitions that Bock has helped engineer include catalytic-converter maker Engelhard Corp. for $4.8 billion and Degussa AG construction chemicals business for 2.2 billion euros ($2.7 billion), both in 2006, and Ciba in 2009 for about $3 billion. Martin Brudermueller , 49, who runs the Asia-Pacific division as well as performance polymers, polyurethanes and styrenics, will become Bock’s deputy. BASF, which didn’t specify anyone for the CFO position in today’s statement, said it will decide on further executive appointments in early 2011. “Kurt Bock is an entrepreneur with extensive international experience,” Supervisory Board Chairman Eggert Voscherau said in the statement. “Under his leadership, he will continue the company’s success.” Bock was named CFO of the year by industry magazine Chemical Week on May 25. He also is responsible for BASF’s business in North America and for catalysts. A native of Rahden, a town of 17,000 people in northern Germany, Bock started his career at BASF’s finance department in 1985 and spent six years at Robert Bosch GmbH before returning to BASF in 1998 and becoming CFO in 2003. He works at the company’s U.S. headquarters in Florham Park, New Jersey. To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net .

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Indian Economic Growth Accelerates, Increasing Pressure on Interest Rates

May 30, 2010

By Kartik Goyal May 31 (Bloomberg) — India’s economic growth accelerated, adding pressure on the central bank to raise interest rates even as Europe’s sovereign-debt crunch threatens the global recovery. Gross domestic product rose 8.6 percent in the three months ended March 31 from a year earlier after a revised 6.5 percent gain in the previous quarter, the statistics office said in a statement in New Delhi today. That matched the median estimate in a Bloomberg News survey of 22 economists. India and China, the world’s fastest-growing major economies, are weighing the risk of Europe’s debt crisis reducing demand in the market that accounts for a fifth of their exports. For India, the room to pause on monetary tightening is limited because its benchmark inflation rate is more than three times that in China. “The biggest threat in India is from inflation and the risk that the economy overheats,” Kevin Grice , an economist at Capital Economics Ltd. in London, said before the report. “This, in the end, would force the Reserve Bank of India to aggressively hike policy rates, which would inevitably bring far lower growth later on.” India’s central bank said May 19 that it will raise rates only cautiously even though they are “out of line” with the key wholesale-price inflation rate, running at 9.59 percent. In comparison, China’s $4.3 trillion economy expanded 11.9 percent in the first quarter and consumer prices rose 2.8 percent in April from a year earlier. Stocks Gain India’s Sensitive Index extended gains after the GDP report, increasing 0.4 percent to 16,935.70 at 11:10 a.m. on the Bombay Stock Exchange. The yield on the 10-year government bond rose 3 basis points to 7.51 percent from before the report. The rupee was little changed, maintaining the 4.5 percent drop against the U.S. dollar this month, making imports costlier and impeding central bank Governor Duvvuri Subbarao’s efforts to cool inflation. The Reserve Bank’s benchmark reverse repurchase rate is at 3.75 percent after two quarter percentage point increases since mid-March. Manufacturing rose 16.3 percent in the three months through March from a year earlier, compared with a 13.8 percent gain in the previous quarter, today’s report showed. Farm output rose 0.7 percent from a contraction of 1.8 percent and mining grew 14 percent. ‘Source of Strength’ European Central Bank President Jean-Claude Trichet said today that emerging nations have weathered the global recession better and are a “source of strength” for the world economy. GDP in the euro region rose 0.5 percent in the first quarter from a year earlier, according to the European Union’s statistics office. Growth in India’s $1.2 trillion economy, Asia’s largest after Japan and China, is accelerating as rising incomes boost demand for cars, mobile phones and air travel. Salaries in India may increase at the fastest pace in the Asia Pacific in 2010, according to Hewitt Associates Inc., the Lincolnshire, Illinois- based human resources adviser. Car sales by companies including Maruti Suzuki India Ltd. and Tata Motors Ltd. rose 39.5 percent in April from a year earlier, the biggest jump for the month since 1999, according to the Society of Indian Automobile Manufacturers. 3G Auction The government’s auction of high-speed wireless licenses this month highlights corporate enthusiasm for the nation’s prospects. Companies including Newbury, England-based Vodafone Group Plc, the world’s biggest mobile-phone operator by sales, took part and the sale raised 677.2 billion rupees ($14.3 billion), almost double the amount budgeted by Finance Minister Pranab Mukherjee . Services including air travel, which account for about 55 percent of India’s economy, expanded the most in 21 months in April, according to the Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics. The Organization for Economic Cooperation and Development said May 26 that China and India need “a much stronger tightening of monetary policy” to counter inflation and reduce the risk of asset bubbles. Some economists say Indian Prime Minister Manmohan Singh’s government has made slow progress in creating new capacity in infrastructure such as power, roads and ports, which is adding to inflation pressures and limiting economic expansion. Infrastructure Woes “The shortage of infrastructure has an adverse impact on growth and it increases the cost of operations for companies,” said Shashanka Bhide , chief economist at the New Delhi-based National Council of Applied Economic Research. The finance ministry estimates that India produces about 10 percent less electricity than it needs, and roads, which account for 65 percent of the nation’s cargo, are plagued by single lanes and irregular surfaces. India, ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of infrastructure, in March lowered its target for spending on roads and ports, after failing to complete planned projects. Projected investment in electricity, roads and wharves may reach 407 billion rupees in the five years to March 2012, half the original goal, according to the Planning Commission, a government office that sets investment targets. Singh wants to boost growth to a 10 percent pace, which he says is needed to pull the 828 million people living on less than $2 a day out of poverty. To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

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Indian Economic Growth Accelerates, Increasing Pressure on Interest Rates

May 30, 2010

By Kartik Goyal May 31 (Bloomberg) — India’s economic growth accelerated, adding pressure on the central bank to raise interest rates even as Europe’s sovereign-debt crunch threatens the global recovery. Gross domestic product rose 8.6 percent in the three months ended March 31 from a year earlier after a revised 6.5 percent gain in the previous quarter, the statistics office said in a statement in New Delhi today. That matched the median estimate in a Bloomberg News survey of 22 economists. India and China, the world’s fastest-growing major economies, are weighing the risk of Europe’s debt crisis reducing demand in the market that accounts for a fifth of their exports. For India, the room to pause on monetary tightening is limited because its benchmark inflation rate is more than three times that in China. “The biggest threat in India is from inflation and the risk that the economy overheats,” Kevin Grice , an economist at Capital Economics Ltd. in London, said before the report. “This, in the end, would force the Reserve Bank of India to aggressively hike policy rates, which would inevitably bring far lower growth later on.” India’s central bank said May 19 that it will raise rates only cautiously even though they are “out of line” with the key wholesale-price inflation rate, running at 9.59 percent. In comparison, China’s $4.3 trillion economy expanded 11.9 percent in the first quarter and consumer prices rose 2.8 percent in April from a year earlier. Stocks Gain India’s Sensitive Index extended gains after the GDP report, increasing 0.4 percent to 16,935.70 at 11:10 a.m. on the Bombay Stock Exchange. The yield on the 10-year government bond rose 3 basis points to 7.51 percent from before the report. The rupee was little changed, maintaining the 4.5 percent drop against the U.S. dollar this month, making imports costlier and impeding central bank Governor Duvvuri Subbarao’s efforts to cool inflation. The Reserve Bank’s benchmark reverse repurchase rate is at 3.75 percent after two quarter percentage point increases since mid-March. Manufacturing rose 16.3 percent in the three months through March from a year earlier, compared with a 13.8 percent gain in the previous quarter, today’s report showed. Farm output rose 0.7 percent from a contraction of 1.8 percent and mining grew 14 percent. ‘Source of Strength’ European Central Bank President Jean-Claude Trichet said today that emerging nations have weathered the global recession better and are a “source of strength” for the world economy. GDP in the euro region rose 0.5 percent in the first quarter from a year earlier, according to the European Union’s statistics office. Growth in India’s $1.2 trillion economy, Asia’s largest after Japan and China, is accelerating as rising incomes boost demand for cars, mobile phones and air travel. Salaries in India may increase at the fastest pace in the Asia Pacific in 2010, according to Hewitt Associates Inc., the Lincolnshire, Illinois- based human resources adviser. Car sales by companies including Maruti Suzuki India Ltd. and Tata Motors Ltd. rose 39.5 percent in April from a year earlier, the biggest jump for the month since 1999, according to the Society of Indian Automobile Manufacturers. 3G Auction The government’s auction of high-speed wireless licenses this month highlights corporate enthusiasm for the nation’s prospects. Companies including Newbury, England-based Vodafone Group Plc, the world’s biggest mobile-phone operator by sales, took part and the sale raised 677.2 billion rupees ($14.3 billion), almost double the amount budgeted by Finance Minister Pranab Mukherjee . Services including air travel, which account for about 55 percent of India’s economy, expanded the most in 21 months in April, according to the Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics. The Organization for Economic Cooperation and Development said May 26 that China and India need “a much stronger tightening of monetary policy” to counter inflation and reduce the risk of asset bubbles. Some economists say Indian Prime Minister Manmohan Singh’s government has made slow progress in creating new capacity in infrastructure such as power, roads and ports, which is adding to inflation pressures and limiting economic expansion. Infrastructure Woes “The shortage of infrastructure has an adverse impact on growth and it increases the cost of operations for companies,” said Shashanka Bhide , chief economist at the New Delhi-based National Council of Applied Economic Research. The finance ministry estimates that India produces about 10 percent less electricity than it needs, and roads, which account for 65 percent of the nation’s cargo, are plagued by single lanes and irregular surfaces. India, ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of infrastructure, in March lowered its target for spending on roads and ports, after failing to complete planned projects. Projected investment in electricity, roads and wharves may reach 407 billion rupees in the five years to March 2012, half the original goal, according to the Planning Commission, a government office that sets investment targets. Singh wants to boost growth to a 10 percent pace, which he says is needed to pull the 828 million people living on less than $2 a day out of poverty. To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

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America as Export Juggernaut Led by Intel With Surging Chip Manufacturing

May 28, 2010

By Timothy R. Homan and Anthony Feld May 28 (Bloomberg) — Intel Corp., the world’s largest maker of computer chips, is increasing production and commanding higher prices as an export boom puts American manufacturing at the forefront of the economic recovery. Santa Clara, California-based Intel ’s factories are operating at 80 percent of capacity, up from a record low of about 50 percent last year in the midst of the recession. The average selling prices of personal computer processors have risen a total of 12 percent over the past two quarters. Overseas demand for U.S.-made goods from semiconductors to printers is boosting the fortunes of manufacturing , which has been shrinking as a proportion of the economy in 13 of the past 14 years. As a result, trade may add to growth for the first time in a post-recession year since World War II, says Morgan Stanley economist Richard Berner . “U.S. manufacturing has really seen a renaissance of sorts driven by improved competitiveness and strength in global markets,” said Joseph Carson , director of economic research at AllianceBernstein LP in New York. “Exports have been the key driver of growth. We think it’s a new trend.” Net exports, or the difference in value between what the U.S. sends overseas and what it buys from abroad, will add about 0.3 percentage point to gross domestic product this year, according to Berner, Morgan Stanley’s co-head of global economics in New York. He forecasts economic growth of 3.4 percent in 2010 after last year’s 2.4 percent contraction. European Crisis Companies from Palo Alto, California-based Hewlett-Packard Co. to Cisco Systems Inc. are boosting sales forecasts in anticipation of stronger demand for semiconductors, computers and software in the world’s fastest-growing economies. In the near term, exports may suffer from a European debt crisis that’s strengthening the dollar and making euro-zone goods cheaper worldwide. Paul Otellini , chief executive officer of Intel, whose chips run more than 80 percent of the world’s personal computers, said this month that the PC market may expand as much as 16 percent in the next four years. The company’s ability to manufacture more advanced chips is putting it further ahead of the competition , he said. Strong demand and tight supply have allowed Intel to limit the discount it gives its customers and to raise average chip prices, according to Dean McCarron , an analyst at Cave Creek, Arizona-based Mercury Research. U.S. exports to China, the third-biggest market for American-made goods, were up 47 percent in the first quarter this year from the first three months of 2009. Shipments to South Korea, the seventh-largest importer of American-made goods, increased 66 percent during the same period, Commerce Department figures show. Business Spending “Consumer and business demand in the rapidly growing economies have become key factors driving their growth,” Morgan Stanley’s Berner wrote in an April 28 research note. “U.S. exporters will be increasingly leveraged to that fast-growing pie as their share of exports to those regions increases, especially in capital goods and consumer business services.” In an interview yesterday, Berner said the dollar’s almost 7 percent gain against the euro this month hasn’t changed his forecast for U.S. export growth. “We had anticipated in the wake of what was going on that we would see further strengthening of the dollar against the euro,” he said. Shares in companies that make computer and technology goods are poised to weather the recent stock-market downturn better than other industries. The Philadelphia Semiconductor Index is up 0.5 percent so far this year, compared with a 1.1 percent decline in the broader Standard & Poor’s 500 Index . Technology stocks have outperformed the S&P 500 over the last year and are trading near a 52-week high on a relative-performance basis. ‘Many Bargains’ “From a longer-term perspective I’m really bullish on this sector,” said Benjamin Tal , a senior economist at CIBC World Markets Inc. in Toronto, who sees “many bargains in the market” among technology and communications companies. “Those big companies in the manufacturing sector in the U.S. are cheap because they will surprise on the upside two, three, four years from now,” he said. Manufacturing, which accounts for 11 percent of the world’s largest economy, down from 12.3 percent in 2006, helped lead the U.S. out of recession in the second half of last year. The industry contributed to more than half of the expansion in the past two quarters, the economy’s best six-month performance since 2003, as companies stabilized inventories after a record drawdown in 2009, according to Commerce Department figures. Export Forecast Exports will keep growing, some manufacturers forecast. San Jose, California-based Cisco, the world’s biggest provider of networking equipment, is calling for sales of at least $10.7 billion in the current quarter, following record revenue in the quarter ended May 1. Sales of semiconductors in the Asia-Pacific region climbed to a record $12.57 billion in March, up 72 percent from a year earlier, according to the Semiconductor Industry Association, based in San Jose. Worldwide sales in March were $23.1 billion, an increase of 4.6 percent from the previous month, the industry group said on May 3. The recovery is “accelerating,” John Chambers , chief executive of Cisco, said on a May 12 conference call. “I’d say now almost without exception, most people are beginning to slowly turn cautiously optimistic.” The expansion is not without risks. Sovereign-debt concerns in Europe are threatening to impede the global recovery, while a decline in the value of the euro makes European exports cheaper. Still, the crisis may not translate into significant losses for U.S. manufacturing, according to AllianceBernstein’s Carson. “Not all changes in exchange rates turn into product races,” Carson said. During the last nine months “the European demand hasn’t been there, but that still has not stopped one of the most powerful export cycles we’ve ever seen,” he said. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Anthony Feld in New York at afeld2@bloomberg.net

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America as Export Juggernaut Led by Intel With Surging Chip Manufacturing

May 28, 2010

By Timothy R. Homan and Anthony Feld May 28 (Bloomberg) — Intel Corp., the world’s largest maker of computer chips, is increasing production and commanding higher prices as an export boom puts American manufacturing at the forefront of the economic recovery. Santa Clara, California-based Intel ’s factories are operating at 80 percent of capacity, up from a record low of about 50 percent last year in the midst of the recession. The average selling prices of personal computer processors have risen a total of 12 percent over the past two quarters. Overseas demand for U.S.-made goods from semiconductors to printers is boosting the fortunes of manufacturing , which has been shrinking as a proportion of the economy in 13 of the past 14 years. As a result, trade may add to growth for the first time in a post-recession year since World War II, says Morgan Stanley economist Richard Berner . “U.S. manufacturing has really seen a renaissance of sorts driven by improved competitiveness and strength in global markets,” said Joseph Carson , director of economic research at AllianceBernstein LP in New York. “Exports have been the key driver of growth. We think it’s a new trend.” Net exports, or the difference in value between what the U.S. sends overseas and what it buys from abroad, will add about 0.3 percentage point to gross domestic product this year, according to Berner, Morgan Stanley’s co-head of global economics in New York. He forecasts economic growth of 3.4 percent in 2010 after last year’s 2.4 percent contraction. European Crisis Companies from Palo Alto, California-based Hewlett-Packard Co. to Cisco Systems Inc. are boosting sales forecasts in anticipation of stronger demand for semiconductors, computers and software in the world’s fastest-growing economies. In the near term, exports may suffer from a European debt crisis that’s strengthening the dollar and making euro-zone goods cheaper worldwide. Paul Otellini , chief executive officer of Intel, whose chips run more than 80 percent of the world’s personal computers, said this month that the PC market may expand as much as 16 percent in the next four years. The company’s ability to manufacture more advanced chips is putting it further ahead of the competition , he said. Strong demand and tight supply have allowed Intel to limit the discount it gives its customers and to raise average chip prices, according to Dean McCarron , an analyst at Cave Creek, Arizona-based Mercury Research. U.S. exports to China, the third-biggest market for American-made goods, were up 47 percent in the first quarter this year from the first three months of 2009. Shipments to South Korea, the seventh-largest importer of American-made goods, increased 66 percent during the same period, Commerce Department figures show. Business Spending “Consumer and business demand in the rapidly growing economies have become key factors driving their growth,” Morgan Stanley’s Berner wrote in an April 28 research note. “U.S. exporters will be increasingly leveraged to that fast-growing pie as their share of exports to those regions increases, especially in capital goods and consumer business services.” In an interview yesterday, Berner said the dollar’s almost 7 percent gain against the euro this month hasn’t changed his forecast for U.S. export growth. “We had anticipated in the wake of what was going on that we would see further strengthening of the dollar against the euro,” he said. Shares in companies that make computer and technology goods are poised to weather the recent stock-market downturn better than other industries. The Philadelphia Semiconductor Index is up 0.5 percent so far this year, compared with a 1.1 percent decline in the broader Standard & Poor’s 500 Index . Technology stocks have outperformed the S&P 500 over the last year and are trading near a 52-week high on a relative-performance basis. ‘Many Bargains’ “From a longer-term perspective I’m really bullish on this sector,” said Benjamin Tal , a senior economist at CIBC World Markets Inc. in Toronto, who sees “many bargains in the market” among technology and communications companies. “Those big companies in the manufacturing sector in the U.S. are cheap because they will surprise on the upside two, three, four years from now,” he said. Manufacturing, which accounts for 11 percent of the world’s largest economy, down from 12.3 percent in 2006, helped lead the U.S. out of recession in the second half of last year. The industry contributed to more than half of the expansion in the past two quarters, the economy’s best six-month performance since 2003, as companies stabilized inventories after a record drawdown in 2009, according to Commerce Department figures. Export Forecast Exports will keep growing, some manufacturers forecast. San Jose, California-based Cisco, the world’s biggest provider of networking equipment, is calling for sales of at least $10.7 billion in the current quarter, following record revenue in the quarter ended May 1. Sales of semiconductors in the Asia-Pacific region climbed to a record $12.57 billion in March, up 72 percent from a year earlier, according to the Semiconductor Industry Association, based in San Jose. Worldwide sales in March were $23.1 billion, an increase of 4.6 percent from the previous month, the industry group said on May 3. The recovery is “accelerating,” John Chambers , chief executive of Cisco, said on a May 12 conference call. “I’d say now almost without exception, most people are beginning to slowly turn cautiously optimistic.” The expansion is not without risks. Sovereign-debt concerns in Europe are threatening to impede the global recovery, while a decline in the value of the euro makes European exports cheaper. Still, the crisis may not translate into significant losses for U.S. manufacturing, according to AllianceBernstein’s Carson. “Not all changes in exchange rates turn into product races,” Carson said. During the last nine months “the European demand hasn’t been there, but that still has not stopped one of the most powerful export cycles we’ve ever seen,” he said. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Anthony Feld in New York at afeld2@bloomberg.net

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America as Export Juggernaut Led by Intel With Surging Chip Manufacturing

May 28, 2010

By Timothy R. Homan and Anthony Feld May 28 (Bloomberg) — Intel Corp., the world’s largest maker of computer chips, is increasing production and commanding higher prices as an export boom puts American manufacturing at the forefront of the economic recovery. Santa Clara, California-based Intel ’s factories are operating at 80 percent of capacity, up from a record low of about 50 percent last year in the midst of the recession. The average selling prices of personal computer processors have risen a total of 12 percent over the past two quarters. Overseas demand for U.S.-made goods from semiconductors to printers is boosting the fortunes of manufacturing , which has been shrinking as a proportion of the economy in 13 of the past 14 years. As a result, trade may add to growth for the first time in a post-recession year since World War II, says Morgan Stanley economist Richard Berner . “U.S. manufacturing has really seen a renaissance of sorts driven by improved competitiveness and strength in global markets,” said Joseph Carson , director of economic research at AllianceBernstein LP in New York. “Exports have been the key driver of growth. We think it’s a new trend.” Net exports, or the difference in value between what the U.S. sends overseas and what it buys from abroad, will add about 0.3 percentage point to gross domestic product this year, according to Berner, Morgan Stanley’s co-head of global economics in New York. He forecasts economic growth of 3.4 percent in 2010 after last year’s 2.4 percent contraction. European Crisis Companies from Palo Alto, California-based Hewlett-Packard Co. to Cisco Systems Inc. are boosting sales forecasts in anticipation of stronger demand for semiconductors, computers and software in the world’s fastest-growing economies. In the near term, exports may suffer from a European debt crisis that’s strengthening the dollar and making euro-zone goods cheaper worldwide. Paul Otellini , chief executive officer of Intel, whose chips run more than 80 percent of the world’s personal computers, said this month that the PC market may expand as much as 16 percent in the next four years. The company’s ability to manufacture more advanced chips is putting it further ahead of the competition , he said. Strong demand and tight supply have allowed Intel to limit the discount it gives its customers and to raise average chip prices, according to Dean McCarron , an analyst at Cave Creek, Arizona-based Mercury Research. U.S. exports to China, the third-biggest market for American-made goods, were up 47 percent in the first quarter this year from the first three months of 2009. Shipments to South Korea, the seventh-largest importer of American-made goods, increased 66 percent during the same period, Commerce Department figures show. Business Spending “Consumer and business demand in the rapidly growing economies have become key factors driving their growth,” Morgan Stanley’s Berner wrote in an April 28 research note. “U.S. exporters will be increasingly leveraged to that fast-growing pie as their share of exports to those regions increases, especially in capital goods and consumer business services.” In an interview yesterday, Berner said the dollar’s almost 7 percent gain against the euro this month hasn’t changed his forecast for U.S. export growth. “We had anticipated in the wake of what was going on that we would see further strengthening of the dollar against the euro,” he said. Shares in companies that make computer and technology goods are poised to weather the recent stock-market downturn better than other industries. The Philadelphia Semiconductor Index is up 0.5 percent so far this year, compared with a 1.1 percent decline in the broader Standard & Poor’s 500 Index . Technology stocks have outperformed the S&P 500 over the last year and are trading near a 52-week high on a relative-performance basis. ‘Many Bargains’ “From a longer-term perspective I’m really bullish on this sector,” said Benjamin Tal , a senior economist at CIBC World Markets Inc. in Toronto, who sees “many bargains in the market” among technology and communications companies. “Those big companies in the manufacturing sector in the U.S. are cheap because they will surprise on the upside two, three, four years from now,” he said. Manufacturing, which accounts for 11 percent of the world’s largest economy, down from 12.3 percent in 2006, helped lead the U.S. out of recession in the second half of last year. The industry contributed to more than half of the expansion in the past two quarters, the economy’s best six-month performance since 2003, as companies stabilized inventories after a record drawdown in 2009, according to Commerce Department figures. Export Forecast Exports will keep growing, some manufacturers forecast. San Jose, California-based Cisco, the world’s biggest provider of networking equipment, is calling for sales of at least $10.7 billion in the current quarter, following record revenue in the quarter ended May 1. Sales of semiconductors in the Asia-Pacific region climbed to a record $12.57 billion in March, up 72 percent from a year earlier, according to the Semiconductor Industry Association, based in San Jose. Worldwide sales in March were $23.1 billion, an increase of 4.6 percent from the previous month, the industry group said on May 3. The recovery is “accelerating,” John Chambers , chief executive of Cisco, said on a May 12 conference call. “I’d say now almost without exception, most people are beginning to slowly turn cautiously optimistic.” The expansion is not without risks. Sovereign-debt concerns in Europe are threatening to impede the global recovery, while a decline in the value of the euro makes European exports cheaper. Still, the crisis may not translate into significant losses for U.S. manufacturing, according to AllianceBernstein’s Carson. “Not all changes in exchange rates turn into product races,” Carson said. During the last nine months “the European demand hasn’t been there, but that still has not stopped one of the most powerful export cycles we’ve ever seen,” he said. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Anthony Feld in New York at afeld2@bloomberg.net

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Foster’s May Be $11 Billion Takeover Target After Splitting Wine and Beer

May 26, 2010

By Robert Fenner May 27 (Bloomberg) — Foster’s Group Ltd. ’s plan to spin off its wine unit may prompt bids from SABMiller Plc , Asahi Breweries Ltd. and other global beermakers attracted to the wider profit margins in Australia, fund managers said. The brewing business may be worth more than A$13.5 billion ($11 billion) and draw interest from Suntory Holdings Ltd. and Sapporo Holdings Ltd. of Japan, said Theo Maas , who helps manage A$5 billion at Arnhem Investment Management in Sydney. The brewer of Foster’s Lager and Victoria Bitter, Australia’s top- selling brand, controls about 50 percent of the local market. Foster’s Chief Executive Officer Ian Johnston , 62, unveiled the plans yesterday, unwinding a A$6.8 billion wine expansion marred by falling prices and declining profitability . SABMiller will begin brewing in Australia this year through a venture with Coca-Cola Amatil Ltd. , taking on Foster’s and second-ranked Lion Nathan, who together control more than 90 percent of the market. “I wouldn’t be surprised to see Coca-Cola Amatil and SAB bid for the beer business,” said Rhett Kessler , who helps manage about $1.1 billion at Pengana Capital Ltd. in Sydney and doesn’t hold Foster’s shares . Sally Loane , a spokeswoman for Sydney-based Coca-Cola Amatil , Australia’s largest soft-drink maker, declined to comment in an e-mail. Suntory spokeswoman Aya Takemoto said, “we haven’t heard anything about it.” Molson Coors ‘Interested’ Molson Coors Brewing Co. Chairman Peter Coors said it’s too early to speculate whether the Foster’s move makes it more attractive. “Obviously we’re interested because we’ve got a stake in it,” he said today. “We’re just going to wait and see what happens and where it’s valued.” Molson Coors holds about 5 percent in Foster’s through an arrangement with Deutsche Bank AG. Foster’s shares fell 0.4 percent to A$5.51 at 10:44 a.m. in Sydney. The stock rose 7.4 percent yesterday after the plan was announced to close at A$5.53, giving it a market value of about A$10.7 billion. Sapporo spokesman Katsuhito Ogawa and Asahi spokesman Takayuki Tanaka declined to comment. Asahi may buy alcohol and food companies in the Asia-Pacific region, President Naoki Izumiya said last month. Foster’s hasn’t received takeover offers, Johnston said yesterday. Asahi and Suntory have acquired Australasian drink businesses in the past two years. Suntory agreed to buy Groupe Danone SA’s Frucor unit for more than 600 million euros ($732 million) in October 2008. Two months later, Asahi said it would acquire Cadbury Plc’s Schweppes soft-drink business in Australia for 550 million pounds ($792 million). Lion Nathan Multiple Japan’s Kirin Holdings Co. last year acquired the 54 percent of Lion Nathan it didn’t already own in a bid worth 12.5 times forecast earnings. Foster’s yesterday forecast annual earnings before interest, tax and items of as much as A$1.08 billion. “If you put the Lion Nathan multiple on the Foster’s beer business you get a price above A$7 a share,” said Maas, who owns Foster’s and Coca-Cola Amatil stock. The CUB brewing unit generates 85 percent of Foster’s earnings and has a 38.5 percent profit margin . Anheuser-Busch Inbev NV , the world’s largest brewer, has a margin of 27.9 percent, Heineken NV ’s is 12.4 percent and Asahi’s is 5.6 percent, according to data compiled by Bloomberg. “Although Foster’s has been subject to takeover speculation for the past number of years, the major hurdle has been a ‘solve for the wine business’,” Greg Dring , an analyst at Macquarie Group Ltd., said in a note to clients today. “A full demerger of the two businesses is expected to be the solution many have been looking for.” Taking on Duopolists CUB may be worth A$12.5 billion alone, David Errington , an analyst at Bank of America Merrill Lynch, said in a note to clients. Its Foster’s Lager is sold in more than 150 countries. Coca-Cola Amatil and SABMiller “are number one on my list and they are in a position to take one of the duopolists out,” Maas said. “The beer business as a standalone business is not going to remain independent for very long.” Australians drink an average of 85.1 liters (22.5 gallons) annually, ranking them 12th globally, ahead of Spain, according to 2008 data from Kirin. The Czech Republic topped the table at 149.9 liters and the U.S. was 16th with 82.3 liters. The Foster’s wine business, producer of Wolf Blass and Beringer, is the world’s second largest, behind New York-based Constellation Brands Inc. Foster’s paid A$482 million for Mildara Blass Ltd. in 1996. It moved into California with the A$2.6 billion purchase of Beringer Wine Estates Holdings Inc. in 2001, before paying A$3.2 billion in 2005 for Southcorp Ltd., the largest maker of Australian wine. Australia’s Youngest Olympian The Southcorp purchase was led by then CEO Trevor O’Hoy , who resigned in July 2008. Johnston, who was Australia’s youngest Olympian , came out of retirement to take on the role. The company’s stock has had two annual gains since 2001 and was 2.1 percent lower than when it bought Southcorp at yesterday’s close. Foster’s yesterday announced pretax charges worth as much as A$1.3 billion against the wine unit, the biggest in three straight years of writing down the business. Angus McKay , Foster’s chief financial officer, yesterday said the wine business will have assets worth about A$3 billion. The “long awaited” split “potentially makes the two businesses strategically more appealing,” Morgan Stanley analyst Martin Yule said in a note to clients. Foster’s hired Gresham Advisory Partners to assist on the plan, Johnston said. The company has yet to make a decision on management, final structure or debt holdings and no split is likely before 2011, he said. To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net .

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JPMorgan Said to Hire Achintya Mangla, Aloke Gupte Back From Merrill Lynch

May 25, 2010

By Philip Lagerkranser May 25 (Bloomberg) — JPMorgan Chase & Co. hired Achintya Mangla and Aloke Gupte back from Merrill Lynch & Co., about a month after they departed for the U.S. rival, said two people with knowledge of the matter. Mangla will become co-head of equity capital and derivatives markets for Asia outside Japan and Australia together with Arjun Khullar , one of the people said, declining to be identified as no public announcement has been made. Gupte will run convertible bond underwriting for the Asia-Pacific region, the position Mangla previously held, the person said. Investment banks have stepped up hiring in Asia in the past year as the region led the global economy out of a recession. Investment-banking fees in Asia jumped 68 percent in the first four months from a year earlier to a record $5.6 billion, according to New York-based research firm Freeman & Co. Mangla and Khullar will report to Doug Howland and Kester Ng , who were promoted to joint heads of equity capital and derivatives markets for Asia-Pacific, the person said. JPMorgan’s Hong Kong-based spokeswoman Marie Cheung declined to comment, as did Rob Stewart of Merrill Lynch, the investment-banking division of Bank of America Corp. Mangla and Gupte weren’t available, said a person who answered the phone at JPMorgan’s Hong Kong offices. Merrill Lynch hired Mangla in late April to run its convertible bond underwriting business in the Asia-Pacific outside Japan, people with knowledge of the matter said at the time. Gupte joined Merrill Lynch at the same time. Both bankers were on so-called gardening leave and hadn’t yet started work at Merrill Lynch when JPMorgan rehired them, one person said. They will be based in Hong Kong. To contact the reporter on this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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Fees Plummet 17% in Europe for Investment Bankers Forced to Withdraw Deals

May 23, 2010

By Ambereen Choudhury May 24 (Bloomberg) — Investment banking fees in western Europe are falling victim to the Greek debt crisis, as companies from London to Dusseldorf pull stock and bond offerings and put takeovers on hold. Income from advising on mergers and selling shares and bonds in the region dropped 17 percent from a year earlier to $5.9 billion in the first four months of 2010, the lowest in six years, according to estimates from New York-based research firm Freeman & Co. Fees in Europe are at about the same level as in 1999, the year the euro started, the data show. “Companies have been held back from tapping primary markets because of the volatility and uncertainty driven by concerns over sovereign debt,” said Ivor Dunbar , London-based co-head of global capital markets at Deutsche Bank AG, the top- ranked adviser on corporate bond sales and mergers in Europe this year. The decline in fees in Europe contrasts with a 53 percent jump in revenue in the U.S. and a 68 percent increase in Asia, Freeman said. Europe’s sovereign debt crisis, which led to an unprecedented $1 trillion bailout for Greece, sapped confidence among European companies. New York University Professor Nouriel Roubini said May 18 that Greece is the “tip of the iceberg” and European governments may still fail to fix their finances. “We won’t see a move towards normal M&A and capital markets financing volumes until there is clarity on the scale of the issues facing the euro zone,” said Paulo Pereira , a partner at Perella Weinberg Partners LP in London and former head of European mergers at Morgan Stanley. ‘Doesn’t Look Good’ European leaders unveiled the loan package and a program of bond purchases on May 10 to stop fears that Greece will default on its debt from spreading to Portugal, Italy and Spain. Amid the turmoil, ex-Federal Reserve Chairman Paul Volcker said last week he’s concerned the single European currency may break up. “It doesn’t look good,” said Simon Maughan , a banking analyst at MF Global Securities Ltd. in London. European fees may stay depressed until the fourth quarter, he said. The fallout may be lasting, with sluggish growth in Europe being compounded by a regulatory crackdown on banks that may drive some capital markets business away from London to Asian financial centers like Hong Kong, said Tom Troubridge , head of the London capital markets group at PricewaterhouseCoopers. Gross domestic product in the 16-nation euro region may rise 0.9 percent this year after shrinking 4.1 percent in 2009, according to the European Commission. Britain’s coalition government, formed this month, plans to introduce a tax on banks and started a commission that will decide how to separate retail banking from investment banking. European Union finance ministers last week approved draft rules to tighten regulations for hedge and private equity funds. U.S., Asia Fees Rise In the U.S., fees rose to $10 billion in the first four months, from $6.5 billion in the year-earlier period, driven by revenue from stock offerings and sales of high-yield bonds, according to the Freeman data. Revenue in the Asia-Pacific region jumped 68 percent from a year earlier to a record $5.6 billion in the first four months of 2010, Freeman said. At that rate of growth, Asia will become more lucrative than the whole of Europe by next year, the data show. “Asia’s share of global volumes will continue to rise,” said Farhan Faruqui , head of Citigroup Inc.’s Asia-Pacific global banking division in Hong Kong. “Asia is home to a growing list of domestic corporate champions who are keen to move to global champion status” and in doing so will need to make acquisitions and raise funding, he said. China Fee Boom Fees in China and Hong Kong surged 161 percent, according to Freeman, as the country’s economy boomed. China’s economy expanded 11.9 percent in the first quarter, the fastest pace in almost three years. Western banks are adapting to China’s rising importance. HSBC Holdings Plc , Europe’s largest bank, moved its chief executive officer to Hong Kong in February, and is seeking permission to sell shares in Shanghai. JPMorgan Chase & Co. , the second-biggest U.S. bank by assets, is setting up a securities joint venture in China with First Capital Securities Co., people with knowledge of the matter said in March. “Investment banks which have invested heavily in China and some emerging markets are finally seeing the fruits of their labor,” said Scott Moeller , a former Deutsche Bank dealmaker and now a professor at London’s Cass Business school. “The West will go into decline for the next few years.” Greece’s debt crisis froze bond and stock sales as well as takeovers in Europe, said Frank Aquila , a partner in Sullivan & Cromwell LLP’s mergers team in New York. Takeovers Drop The value of European takeovers completed in the first four months dropped 68 percent to $62.4 billion, according to data compiled by Bloomberg. Royal Bank of Scotland Group Plc, Britain’s biggest government-controlled bank, abandoned a sale of its aviation-finance unit and Germany utility E.ON AG decided to pull an auction of its Italian natural gas grid last month. Bond sales also fell, tumbling 44 percent from the same period last year to 271 billion euros. Towergate Partnership Ltd., Europe’s largest independent insurance broker, postponed a 665 million-pound sale of high-yield bonds this month citing market volatility. National Express Group Plc, the U.K. rail and bus operator, postponed its bond sale in late April. Companies raised $9.1 billion in 28 IPOs in western Europe in the first four months, compared with no offerings in the year-earlier period, the data show. Still, the sovereign debt crisis forced Russia’s fertilizer maker UralChem Holding Plc and Germany’s GSW Immobilien AG to shelve IPOs worth a combined $1.23 billion in the past four weeks. “Confidence has returned to issuers in Asia and the U.S., but that has not been the case in Europe,” said Philip Keevil , senior partner at advisory firm Compass Advisers LLP in New York. “Many of them are quite concerned about the recovery, and so haven’t wanted to raise equity or debt to finance expansion or make acquisitions.” To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net

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Hillary Clinton Heads to China as North Korean Crisis Overshadows Agenda

May 20, 2010

By Nicole Gaouette May 21 (Bloomberg) — Secretary of State Hillary Clinton arrives in Asia today for talks with China and U.S. allies now focused on how to manage a crisis over suspected North Korean involvement in the sinking of a South Korean warship. Kurt Campbell , the U.S. assistant secretary of state for East Asia, said the “central issue” for Clinton will be getting assessments of how to respond to North Korea after an international probe blamed the communist regime for firing a torpedo that killed 46 South Korean sailors on March 26. The U.S. is “facing a very serious set of circumstances in the coming days,” Campbell said in Washington on May 19. South Korea demanded a “stern” global response to the findings of the international panel. North Korea threatened “all-out war” if the United Nations toughens sanctions imposed after the country carried out a second nuclear test in 2009. U.S. Defense Secretary Robert Gates said South Korea must take the initiative in any response. “This was an attack on a South Korean ship and the South Koreans need to be in the lead,” he said yesterday. En route to China from the U.S., Clinton is due to stop in Tokyo for a few hours to hold discussions with Japanese officials. The sinking of the warship will be one of the main topics, Japanese Foreign Minister Katsuya Okada said this week. “We’ll discuss what kind message we can send to North Korea on the ship incident, and how Japan, the U.S. and South Korea can coordinate,” including action at the UN Security Council, Prime Minister Yukio Hatoyama told reporters today. Beijing Talks Tension over North Korea is overshadowing the planned centerpiece of the Asia trip. Clinton and Treasury Secretary Timothy Geithner will be in Beijing May 23-25 to take part in the second annual Strategic and Economic Dialogue between the two nations, part of one of the largest groups of U.S. Cabinet and sub-Cabinet officials ever to visit China. While Geithner will press the Chinese to improve domestic demand and address the value of the yuan, Clinton’s agenda with Chinese leaders includes climate change, energy security and sanctions to curb Iran’s nuclear ambitions. U.S. officials said all those issues will take second place to talks about the South Korean finding that its 1,200-ton naval ship “Cheonan” was torpedoed by China’s ally, North Korea. China called for “calm and restraint” yesterday, and Foreign Ministry spokesman Ma Zhaoxu said China was conducting its own assessment of the incident. Seoul Visit Clinton is scheduled to stop in Seoul on May 26, after her visit to China, and focus on the steps that need to be taken in reaction to the South Korean report. “Obviously we have a deep, enduring and profound interest in stability in the Korean peninsula but we will be working closely, particularly with our South Korean friends on the next phase,” Campbell said. The U.S. was “deeply, actively involved in all aspects of the investigation and the United States strongly supports its conclusions,” Campbell said. The talks in China come as both countries are trying to improve ties after strains earlier this year. Chinese censorship of Google Inc. , the Mountain View, California-based Internet- search company, a Washington visit by the Dalai Lama and disagreements over China’s currency weighed on relations. “It felt like both countries went right up to the edge then looked over into the abyss below and backed away from it,” said Taiya Smith, a senior research fellow at the Carnegie Endowment in Washington. “Now the attitude is, we want to be partners, can we use our time at the highest level to engage on issues in ways that are in each countries’ best interests.” Clinton will start the China portion of her fifth trip to Asia in Shanghai, host to the 2010 World Expo , where she will focus on commercial diplomacy and visit the U.S. pavilion. To contact the reporter on this story: Nicole Gaouette with Clinton at Elmendorf Air Force Base, Alaska, at ngaouette@bloomberg.net

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India’s Central Bank Signals `Cautious’ Policy Amid Europe’s Debt Crisis

May 19, 2010

By Anoop Agrawal and Kartik Goyal May 20 (Bloomberg) — India’s central bank signaled it may raise interest rates in a measured manner as Europe’s debt crisis outweighs inflation concerns. Global economic conditions have changed in the past six weeks and a “cautious pace is the best way to go and that is the stance,” Subir Gokarn , the deputy governor in charge of monetary policy at the Reserve Bank of India, told reporters in Thiruvananthapuram, India, yesterday. “I am aware rates are quite out of line with inflation and the growth scenario.” India and China, the world’s fastest-growing major economies, are struggling to control inflation amid risks to growth emanating from debt woes of Greece, Portugal and Spain. Gokarn’s comments indicate the central bank may slow the pace of interest-rate increases even though Governor Duvvuri Subbarao described rising prices as a “big worry.” “Interest rates will go up, but in a gradual way,” said Dharmakirti Joshi , chief economist at Crisil Ltd., the Indian unit of Standard & Poor’s. Subbarao may raise borrowing costs by a quarter percentage point in the next monetary policy announcement on July 27, Joshi said, adding a move before that is unlikely. The Reserve Bank on April 20 raised its benchmark interest rates by a quarter point for the second time in a month, increasing the reverse repurchase rate to 3.75 percent and the repurchase rate to 5.25 percent. Protect Economy The government will protect the Indian economy from the crisis in Europe, Finance Minister Pranab Mukherjee said in an interview with the NDTV Profit television channel yesterday. India’s central bank unveiled its stance after the European Union and International Monetary Fund cobbled together a 110 billion-euro ($136.4 billion) rescue package for Greece on May 2 to prevent contagion. European leaders followed it up with an unprecedented emergency fund of as much as 750 billion euros to back countries facing instability and a program of bond purchases by the European Central Bank. Europe’s problems coincide with rising prices in India, with the benchmark wholesale-price inflation rate climbing 9.59 percent in April as demand for cars and houses increase. India’s industrial production grew 13.5 percent in March, rising more than 10 percent for a sixth straight month. In China, where industrial production rose 17.8 percent in April, consumer prices climbed at the fastest pace in 18 months, adding pressure on policy makers to raise interest rates and allow yuan gains. China has raised banks’ reserve requirements three times this year. Factory Output Factory output is gaining strength in India as wages rise. Salaries in India may grow at the fastest pace in the Asia Pacific this year, according to Hewitt Associates Inc., the Lincolnshire, Illinois-based human resources adviser. Cement production by companies including ACC Ltd. , India’s biggest cement maker, gained 10.1 percent in March, the government said on April 27. Concerns about Europe caused the Sensitive Index to fall the most in about four months yesterday, declining 2.8 percent on the Bombay Stock Exchange. The rupee weakened the most in 15 months, closing at 46.3550 per dollar in Mumbai, while the yield on the 10-year government bond fell five basis points to 7.44 percent, the lowest in more than five months. Subbarao and Gokarn are in Thiruvananthapuram for a meeting of the central bank’s board of directors today. The board includes Azim Premji , chairman of Wipro Ltd., India’s third- largest software provider, and Kumar Mangalam Birla , chairman of Hindalco Industries Ltd., the nation’s largest aluminum producer. To contact the reporter on this story: Anoop Agrawal in Thiruvananthapuram at Aagrawal8@bloomberg.net . Kartik Goyal in New Delhi at kgoyal@bloomberg.net

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Stocks, Commodities Fall as Euro Hits Four-Year Low on German Trading Ban

May 18, 2010

By Patrick Chu May 19 (Bloomberg) — Asia stocks dropped to a three-month low and metals tumbled after Germany banned speculators from some bets against government bonds and financial institutions. Treasuries rallied. The MSCI Asia Pacific Index lost 1.3 percent to 114.95 at 12:55 p.m. in Tokyo. Standard & Poor’s 500 futures fell 0.6 percent following a 1.4 percent decline in the index yesterday. The euro weakened below $1.22 for the first time since April 17, 2006 before recovering. Yields on 10-year Treasury notes slid 2 basis points to 3.33 percent. Oil slumped to a seven-month low below $68 a barrel and copper dropped as much as 2.8 percent. German Chancellor Angela Merkel ’s government shook investor confidence with the new regulations. The nation’s BaFin markets regulator banned investors from naked short sales — speculating on declines of stocks they don’t own — for 10 banks and insurers, as well as naked credit-default swaps on euro-area government bonds starting today. “It almost looked panicked, which further undermines confidence in the markets,” said Michael O’Rourke , chief market strategist at BTIG LLC in Yardley, Pennsylvania, which serves institutional investors. “They’ve done as poor a job as one can do in delivering a message.” The rules hurt demand for European assets on concern that investors will face challenges hedging their holdings or selling assets. The euro weakened to as low as $1.2144 before recovering at $1.2217. The pound slumped to a 13-month low of $1.4278 and the yen gained against all 16 major counterparts. The German ban will last until March 31, 2011, BaFin said yesterday in an e- mailed statement. Concern Increases “If you don’t feel like you can sell bonds and equities in Europe, you’re left with selling the euro to express a negative view,” said Greg Gibbs , a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. The ban “creates a view that the authorities sense bigger problems than what may appear on the surface, creating more nervousness and fear.” The MSCI Asia Pacific Index has declined 11 percent from its high for the year on April 15 as Europe’s debt crisis and concern China will quell inflation eroded investor confidence. A decline of 10 percent is the level some analysts refer to as a correction. All stock markets in the Asia Pacific region fell. Japan’s Nikkei 225 Stock Average dropped 0.9 percent. South Korea’s Kospi Index slumped 1.4 percent and Australia’s S&P/ASX 200 Index declined 1.4 percent. Hong Kong’s Hang Seng Index retreated 1 percent. Share Movers Nippon Sheet Glass Co. , which gets 42 percent of its revenue from Europe, tumbled 3.6 percent to 243 yen in Tokyo as a stronger yen dimmed the earnings prospects for Japan’s exporters. Daiwa Securities Capital Markets Co. cut its rating on the stock to “neutral” from “outperform.” Canon Inc. , a camera maker that counts Europe as its largest market, retreated 1.1 percent to 3,930 yen. Materials companies posted the biggest declines among the MSCI Asia Pacific Index’s 10 industry groups. Woodside Petroleum Ltd. , Australia’s second-largest oil and gas producer, dropped 1.3 percent in Sydney to A$42.50 after oil retreated for a seventh consecutive day. Crude oil for June delivery declined as much as 1.9 percent in New York. Rio Tinto Group , the world’s third-largest mining company, fell 1.7 percent to A$62.76. Banks Fall Financial-services companies dropped as European deficit concerns caused the cost of protecting Asia-Pacific corporate and sovereign bonds from non-payment to rise. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 10 basis points to 131.5 basis points, Royal Bank of Scotland Group Plc prices show. HSBC Holdings Plc slumped 1.3 percent to HK$72.45 in Hong Kong. Commonwealth Bank of Australia , fell 1.8 percent to A$51.70 in Sydney. Guangzhou R&F Properties Co. , the biggest real estate company in the southern Chinese city, dropped 1.3 percent after Goldman Sachs Group Inc. downgraded Chinese developers. Shimao Property Holdings Ltd., controlled by billionaire Xu Rongmao, lost 1.2 percent. Yanlord Land Group Ltd. declined 1 percent. Short Selling Short selling involves the sale of borrowed securities in the hope of profiting by buying them later at a lower price and returning them to the owner. When securities are sold naked, the trader fails to borrow the assets before sending an order to sell. BaFin will prohibit trading in credit swaps on euro-area governments that aren’t used to hedge against losses in the event the government defaults, the regulator said. BaFin said it was taking the step because of “exceptional volatility” in euro-area bonds. “Massive” short-selling was leading to excessive price movements which “could endanger the stability of the entire financial system.” “This is a mistake of a serious fundamental nature and of severe consequence,” Mark Grant , managing director of Southwest Securities Inc., in Fort Lauderdale, Florida, said in a note to institutional clients. Germany is making “an obvious attempt to control financial markets across the globe by this action just as they plead for investors to provide funding,” he said. The MSCI World Index of stocks in 23 developed nations slipped 0.7 percent, erasing a 1.3 percent rally. European financial markets closed before BaFin posted the ban. The Stoxx Europe 600 Index ended the session up 1.3 percent. To contact the reporter on this story: Patrick Chu in Tokyo at pachu@bloomberg.net ;

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Vodafone’s Colao Tackles Indian `Fiasco’ as Call Rates Plummet, Costs Rise

May 18, 2010

By Jonathan Browning May 19 (Bloomberg) — For Vodafone Group Plc Chief Executive Officer Vittorio Colao , India is failing to become the emerging-market powerhouse the company had hoped for. When the world’s biggest mobile-phone operator agreed to buy a 67 percent stake in Hutchison Essar Ltd. for $10.7 billion in 2007, it predicted “major contributions.” Instead, Vodafone yesterday booked a $3.3 billion charge for the unit, citing “intense price competition.” “India continues to look a fiasco,” said Mark James , an analyst at Liberum Capital in London. “There’s no doubt that regulation and competition have moved against them since they went into the country.” Vodafone’s difficulties in India, like those of Norway’s Telenor ASA, show the pitfalls of expanding in emerging markets as European phone companies counter slower growth at home. Vodafone’s outlook for India soured a year after its entry, when six new national licences were awarded. Price competition has pushed call rates to among the cheapest in the world. India’s seven largest operators face rates of less than 1 cent a minute. New operators “triggered very strong price declines,” Colao told reporters yesterday. “We are recognizing the pricing environment is different from what we had put in the acquisition business case.” Seeking Partners Vodafone may have to adjust its spending and seek partnerships with other operators to battle increased competition and rising spectrum auction costs, he said. “They’ve had network-sharing agreements in many other markets, and this is a potential way of avoiding auction prices getting out of control in India,” said Paul Marsch , an analyst at Berenberg Bank in London. Colao, the 48-year-old former McKinsey & Co. partner who took over in July 2008, is tweaking his predecessor Arun Sarin ’s strategy. Under Sarin, Vodafone entered markets such as India and Turkey to counter a slowdown in Europe. Colao is pushing managers to eke out more profit from existing operations. Newbury, England-based Vodafone and rivals are struggling to live up to investors’ expectations in India after growth in the world’s second-largest wireless market attracted a flurry of global companies, eroding prices and pushing up license fees. Telenor, the Nordic phone company that also made an Indian foray with the purchase of a majority stake in Unitech Wireless, on May 5 reported first-quarter income that missed analyst estimates as it extended spending on India. Spending on capital expenditure and investment will be “compatible with the new environment,” Colao said at a meeting with analysts yesterday. Indian Auction After the Essar acquisition in 2007, Vodafone had started a joint venture with Bharti Airtel Ltd., India’s largest mobile- phone operator, to share phone towers to help cut costs. “Having a tower company, sharing and collaborating on the infrastructure front is a mitigation, but for sure there is a limit,” the CEO said. The overcrowded India market also includes Reliance Communications Ltd. and Japan’s NTT DoCoMo Inc. India’s mobile market is still growing. About 19.9 million new mobile-phone connections were added in January, a record, according to an estimate by Shubham Majumder , regional head of telecommunications research at Macquarie Group Ltd. in Mumbai. License Bids Bids for an all-India license to offer faster wireless services reached 165 billion rupees ($3.6 billion) on the 33st day of an auction, the Indian department of telecommunication said yesterday. Nine mobile-phone carriers including Vodafone and Bharti are vying for the spectrum. Vodafone considered “where the auction will end up” when it took the impairment charge and included possible costs, Colao said yesterday. The charges in India may threaten Vodafone’s financial targets, says Morten Singleton , an analyst at Collins Stewart in London. The impairment on India “suggests costs are being squirreled away as exceptional items,” he said. The company yesterday said it targets an annual dividend per share growth of no less than 7 percent for the next three financial years after a 1.7 percent increase in full-year operating profit on job cuts and higher emerging markets sales. The dividend target “will prove much harder to achieve,” Singleton said. With spectrum costs increasing, there may be a time this year “we might be uncovered for the dividend,” Chief Financial Officer Andy Halford said yesterday. Colao remains confident that the Indian investment was the right decision. “We are very glad we have established the joint venture, I think it is a very good thing,” he said yesterday. Essar Option In the 12 months ended March, Vodafone’s Indian unit kept its No. 2 position in the market as it won 32 million customers and in March exceeded the 100 millionth customer mark. Since its entry into India in 2007, the division gained about 1 percentage point annually in revenue market share and moved the business into operating free cash flow generation. The expansion has come at a price. Vodafone said yesterday profitability in the Asia Pacific and Middle East region, based on earnings before interest, taxes, depreciation and amortization, fell in the year ended March by 2.2 percentage points, “primarily reflecting lower margins in India.” Colao’s pledge to cut spending in India may be tested, with another $5 billion investment around the corner. Essar Group’s option to sell its remaining 33 percent stake in the mobile- operator to Vodafone for $5 billion opened in May for 12 months. An Essar spokesman said this month that the company “is happy with its investment in Vodafone Essar” and that “a decision on exercise of the put, if at all it is exercised, will only be taken at the appropriate time.” “You’ve had severe competition, you’ve got a lot of players, you are about to get a spectrum differential between operators,” said Guy Peddy , an analyst at Macquarie Securities in London. “The status quo is probably the one thing that is unsustainable.” To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net .

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Japanese Investors Face 3% Drop After Global Stocks Tumbled During Holiday

May 5, 2010

By Darren Boey and Jonathan Burgos May 6 (Bloomberg) — Japanese stocks may fall more than 3 percent at today’s open after a three-day holiday in which mounting debt concerns in Europe and China’s actions to slow growth erased about $1.5 trillion from world equity markets. Futures on the Nikkei 225 Stock Average expiring in June closed at 10,660 in Chicago yesterday, 3.6 percent below the gauge’s close of 11,057.40 on April 30 in Tokyo. The broader Topix Index ended last week at 987.40. American depositary receipts of Komatsu Ltd. , which exports construction equipment to China, lost 3.5 percent since the end of last week, while ADRs of Honda Motor Co. sank 3.6 percent. “The Nikkei 225 will be opening pretty weak,” said Yoji Takeda , who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Investors have been cutting their risk exposure given concerns about the European debt crisis and tightening in China.” Global stock markets extended losses yesterday, erasing the 2010 advance in the MSCI World Index, and the euro fell to its lowest level against the dollar in more than a year on concern countries in addition to Greece may need a bailout. MSCI’s gauge for the Asia-Pacific region excluding Japan slipped 1.9 percent yesterday, extending its three-day slide to 4.1 percent. The People’s Bank of China said on May 2 it will increase the amount lenders must hold in reserve, the latest official effort to curb property prices and prevent the world’s fastest- growing economy from overheating. European Central Bank council member Axel Weber warned on May 5 that Greece’s fiscal crisis may have “grave contagion effects” in the euro area. Higher Valuations The Topix gained 0.9 percent last week. Companies in the gauge are valued at an average of 20 times estimated profit, compared with 14 times for the MSCI World Index. The Nikkei gained 1.3 percent last week. Komatsu, the world’s second-biggest maker of construction equipment, dropped 1 percent to $19.65 in New York yesterday, extending a 3.6 percent drop the day before, on concern demand from China for excavators and bulldozers will weaken. Kubota Corp. , which makes tractors, may decline in Tokyo today. The People’s Bank of China said on May 2 that the reserve ratio for lenders will increase 50 basis points effective May 10. China has also introduced bans on loans for third-home purchases, higher mortgage rates and down-payment requirements for second homes to curb property prices. Euro Declines China’s manufacturing grew at a slower pace in April, according to a survey of more than 400 companies released May 4 by HSBC Holdings Plc and Markit Economics. The Hang Seng China Enterprises Index, which tracks the so called H shares of Chinese companies listed in Hong Kong, slumped 5.3 percent in the past three days. Japan’s export-related shares may fall after the euro slumped to 119.96 versus the yen, the lowest level since March 2. Honda’s ADRs lost 0.5 percent to $32.60, giving it a four-day slump of 6.1 percent. The company gets about 8 percent of its revenue from Europe. Toyota Motor Corp. , which generates 14 percent of its sales in Europe, has fallen 1.7 percent to $75.77 in U.S. trading since April 30. The euro slumped as the ECB’s Weber said on May 5 the threat of contagion justifies Germany’s contribution to a 110 billion-euro ($142 billion) aid package for Greece. Spanish and Portuguese bonds slid on May 4 amid worries over the countries’ ability to cut budget deficits. Mining Tax William Hess , director of sovereign ratings for Asia at Standard & Poor’s, indicated in a May 3 interview that a fiscal plan scheduled for next month by Japan’s government may signal whether the agency cuts the nation’s sovereign credit rating. Mitsubishi Corp. , which trades commodities, may decline after Australia’s government said on May 2 it will impose a 40 percent tax on resource profits from 2012. Mitsubishi and BHP Billiton Ltd. are partners in the BHP Billiton Mitsubishi Alliance, the world’s largest steelmaking coal exporter. A gauge of material producers in Australia’s S&P/ASX 200 Index slumped 4.8 percent in the two days after the tax regime was announced. It rose 0.2 percent yesterday. “The Japanese market will just catch up with the decline in other markets when it resumes trading,” said Michiya Tomita , a Hong Kong-based fund manager for Mitsubishi UFJ Asset Management Co., which holds $65 billion in assets. To contact the reporters for this story: Darren Boey at in Hong Kong or dboey@bloomberg.net ; Jonathan Burgos in Singapore at jburgos4@bloomberg.net .

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Stocks Fall, Asia Default Swaps Climb on Greece, Portugal Debt

April 28, 2010

By Patrick Chu and Shani Raja April 28 (Bloomberg) — Stocks slid for a second day and the cost to insure against bond losses rose after credit-rating downgrades of Greece and Portugal fueled concern about sovereign defaults. Greek two-year note yields soared to 21.4 percent. The euro strengthened from a one-year low against the dollar. The MSCI Asia Pacific Index declined 1.6 percent to 125.20 at 4 p.m. in Tokyo after the Standard & Poor’s 500 Index lost 2.3 percent, the most since February. The Stoxx Euro 600 fell 0.5 percent. The cost of protecting Asian bonds from default jumped to almost a two-month high. The euro traded at $1.3187 from $1.3145 yesterday. S&P 500 futures were little changed. Stocks, commodities and the euro tumbled, while Treasuries rallied yesterday when S&P lowered Greece’s debt rating to junk and Portugal by two steps. European Central Bank President Jean- Claude Trichet and International Monetary Fund Director Dominique Strauss-Kahn will meet German politicians in Berlin today to promote a financial rescue plan. The euro rebounded on speculation that the IMF will provide more aid to Greece. “People are panicking about the contagion effect,” said Simon Bonouvrie , who helps manage $1.7 billion at Sydney-based Platypus Asset Management. “It’s an overreaction but the risk aversion will remain until these problems are resolved.” The IMF may increase its share of financial aid to Greece by 10 billion euros ($13.2 billion) from the current 15 billion euros, the Financial Times reported today, citing unidentified bankers and officials in Washington. Greece, Portugal Credit-default swaps on European sovereign debt surged to records. Contracts tied to Greek government bonds climbed 111 basis points to 821 and Portugal rose 54 basis points to 365, according to CMA DataVision. Yields on 10-year Treasuries tumbled 12 basis points to 3.68 percent, the biggest decline since Dec. 17, as investors sought the relative safety of U.S. government debt. All 10 industry groups fell in the MSCI Asia Pacific Index, while the MSCI World Index lost 0.6 percent, extending yesterday’s 2.1 percent decline. Japan’s Nikkei 225 Stock Average slumped 2.6 percent and Hong Kong’s Hang Seng Index sank 1.4 percent. Finance companies were the biggest drag on the Asia index, with bank stocks falling as Goldman Sachs Group Inc. executives were grilled by a U.S. Senate panel. HSBC Holdings Plc lost 2.3 percent to HK$79.55 in Hong Kong. Mitsubishi UFJ Financial Group Inc. dropped 2 percent to 499 yen. Exporters Lose Japanese exporters fell as a stronger yen threatened overseas income. The yen appreciated to 122.94 against the euro today from 125.62 at the 3 p.m. close of stock trading in Tokyo yesterday. The yen gained to 93.29 against the dollar from 93.94. Canon Inc. , the camera maker that counts Europe as its largest market, slumped 2.4 percent to 4,280 yen. Toyota Motor Corp. , which gets 10 percent of its revenue in Europe, fell 1.6 percent to 3,635 yen. Billabong International Ltd. , an Australian surfwear maker that makes 23 percent of its revenue in Europe, sank 3.4 percent to A$11.40. Material producers in the MSCI Asia Pacific Index sank 1.6 percent after the London Metal Exchange Index of six industrial metals tumbled 4.6 percent, the most since June 22. Crude oil dropped to $82.44 a barrel yesterday, the lowest settlement price since April 19. Commodity Producers BHP Billiton Ltd. , the world’s No. 1 mining company, fell 2.2 percent to A$41.08, while Rio Tinto Group, the world’s third-largest mining company, declined 2.7 percent to A$74.32. Commodities trader Mitsubishi Corp. 1.7 percent to 2,262 yen. The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan jumped 9 basis points to 109.5 basis points in Singapore, its highest since March 1, according to Deutsche Bank AG and CMA DataVision. The Markit iTraxx Australia index rose 9 basis points to 97, the highest since Feb. 25, according to Nomura Holdings Inc. and CMA. The Markit iTraxx Japan index jumped 8.5 basis points to 106.5, according to CMA. The jump was the biggest since Feb. 5 and puts the index on track for its highest close since April 1, according to CMA. The euro fell to the lowest against the dollar since April 29, 2009 in New York yesterday, and traded at 123.01 yen from 122.88 yen and touched 122.37 yen, the weakest since March 25. German policy makers said Greece must outline further steps to cut its budget deficit before they will endorse the release of funds from a 45 billion euro ($60 billion) rescue package. ‘Signs of Contagion’ “With sovereign problems showing signs of contagion, the euro is losing its allure as an alternative currency to the dollar,” said Akio Yoshino , chief economist in Tokyo at Societe Generale Asset Management (Japan) Inc. “The currency may test the $1.30 mark sooner rather than later.” Yields on 10-year Portuguese bonds jumped 48 basis points to 5.69 percent and Irish 10-year yields surged 19 basis points to 5.10 percent. Japan’s bonds advanced, pushing 10-year yields to the lowest level in four months. The yield fell 2.5 basis points to 1.28 percent. S&P lowered Greece’s credit rating to BB+ from BBB+ and warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. The downgrade marked the first time a euro member has lost its investment grade rating since the currency’s 1999 debut. S&P also reduced Portugal by two steps to A- from A+. To contact the reporters for this story: Patrick Chu in Tokyo at pachu@bloomberg.net ; Shani Raja in Sydney at Sraja4Wbloomberg.net.

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Shell Posts Higher First-Quarter Earnings on Oil Rebound, Refining Margins

April 28, 2010

By Fred Pals April 28 (Bloomberg) — Royal Dutch Shell Plc , which competes with BP Plc as Europe’s biggest oil company, posted a 57 percent increase in first-quarter profit on a rebound in crude prices and improved refining margins. Net income rose to $5.48 billion from $3.49 billion a year earlier, The Hague-based Shell said in a statement today. Excluding gains or losses from holding inventories and one-time items, profit beat analyst estimates. Chief Executive Officer Peter Voser is cutting thousands of jobs and seeking to sell refineries to close a performance gap with BP. Shell is betting on oil-sands ventures in Canada and other unconventional projects such as a gas-to-liquids plant in Qatar and coal-seam gas reserves in Australia to reverse a seven-year decline in production. “Shell can now start to show some significant projects coming on in terms of QatarGas and other projects they have around the world,” George Godber , co-fund manager of the S&W Matterley Undervalued Returns Fund, said before the earnings were released. “The important indicator that I would look for over the next 12 to 18 months is production growth.” Shell is the second of the world’s biggest oil companies to report earnings this week. BP, which is battling a 1,000-barrel- a-day leak in the Gulf of Mexico, said first-quarter profit more than doubled to $6.08 billion. Exxon Mobil Corp. , the largest U.S. oil company, is scheduled to report earnings tomorrow. Excluding one-time items and inventory changes, Shell earned $4.83 billion. That beat the $4.03 billion median estimate of 13 analysts surveyed by Bloomberg. Refining Review Shell wants to dispose of 15 percent of its refining capacity and is selling retail assets in Africa and Latin America, putting a total of 35 percent of its current retail markets under review. Voser is assessing more than 35 projects that may add 8 billion barrels of oil equivalent resources, boosting production until 2020. Shell moved a step closer to shifting the balance of its production in favor of natural gas over oil following a joint A$3.5 billion ($3.2 billion) acquisition of Arrow Energy Ltd. The deal with PetroChina Co. will give Shell access to Arrow Energy’s holdings of coal-seam gas reserves in Australia. As much as 40 percent of the company’s capital spending in the next few years has been earmarked for the Asia Pacific region. Shell, which has been adding more gas than oil to its resources since 2005, expects the share of gas as a proportion of total output to rise to 52 percent in 2012. Perdido, Iraq The Perdido oil and natural gas platform in the Gulf of Mexico has started production and Shell expects it to reach full output of more than 100,000 barrels of oil and 200 million cubic feet of natural gas. The company is in talks on a plan to capture and sell natural gas in Iraq, after winning two contracts to develop two Iraqi oil fields. Crude prices averaged $78.88 a barrel in New York in the first quarter, about 82 percent higher than $43.32 last year. Refining profit margins picked up after slipping to a 15-year low in the fourth quarter. BP’s Global Indicator Margin, a broad measure of the profitability of turning crude in to fuels, averaged $3.08 a barrel in the first quarter after $1.49 in the fourth quarter. To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

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Stocks Plunge, Asia Bond Risk Climbs on Greece, Portugal Default Concerns

April 28, 2010

By Patrick Chu and Shani Raja April 28 (Bloomberg) — Stocks slid worldwide for a second day and the cost to insure against bonds losses rose after credit-rating downgrades of Greece and Portugal fueled concern about sovereign defaults. The euro strengthened from a one-year low against the dollar. The MSCI Asia Pacific Index declined 1.5 percent to 125.28 at 3:17 p.m. in Tokyo after the Standard & Poor’s 500 Index lost 2.3 percent, the most since February. The cost of protecting Asian bonds from default jumped to almost a two-month high. The euro traded at $1.3185 from $1.3145 in New York trading yesterday. S&P 500 futures rose 0.2 percent and those for the Stoxx Euro 50 decreased 1 percent at 7:17 a.m. in London. Stocks, commodities and the euro tumbled, while Treasuries rallied yesterday when S&P lowered Greece’s debt rating to junk and Portugal by two steps. European Central Bank President Jean- Claude Trichet and International Monetary Fund Director Dominique Strauss-Kahn will meet German politicians in Berlin today to promote a financial rescue plan. The euro rebounded on speculation that the IMF will provide more aid to Greece. “People are panicking about the contagion effect,” said Simon Bonouvrie , who helps manage $1.7 billion at Sydney-based Platypus Asset Management. “It’s an overreaction but the risk aversion will remain until these problems are resolved.” The IMF may increase its share of financial aid to Greece by 10 billion euros ($13.2 billion) from the current 15 billion euros, the Financial Times reported today, citing unidentified bankers and officials in Washington. Greece, Portugal Credit-default swaps on European sovereign debt surged to records. Contracts tied to Greek government bonds climbed 111 basis points to 821 and Portugal rose 54 basis points to 365, according to CMA DataVision. Greek two-year note yields soared to almost 19 percent and Portugal’s jumped to 5.7 percent. Yields on 10-year Treasuries tumbled 12 basis points to 3.68 percent, the biggest decline since Dec. 17, as investors sought the relative safety of U.S. government debt. All 10 industry groups fell in the MSCI Asia Pacific Index, while the MSCI World Index lost 0.5 percent, extending yesterday’s 2.1 percent decline. Japan’s Nikkei 225 Stock Average slumped 2.4 percent and Hong Kong’s Hang Seng Index sank 1.3 percent. Finance companies were the biggest drag on the Asia index, with bank stocks falling as Goldman Sachs Group Inc. were grilled by a U.S. Senate panel. HSBC Holdings Plc lost 2.1 percent to HK$79.75 in Hong Kong. Mitsubishi UFJ Financial Group Inc. dropped 1.6 percent to 501 yen. Exporters Lose Japanese exporters fell as a stronger yen threatened overseas income. The yen appreciated to 122.90 against the euro today from 125.62 at the 3 p.m. close of stock trading in Tokyo yesterday. The yen gained to 93.16 against the dollar from 93.94. Canon Inc. , the camera maker that counts Europe as its largest market, slumped 2.4 percent to 4,280 yen. Toyota Motor Corp., which gets 10 percent of its revenue in Europe, fell 1.6 percent to 3,635 yen. Billabong International Ltd. , an Australian surfwear maker that makes 23 percent of its revenue in Europe, sank 3.4 percent to A$11.40. Material producers in the MSCI Asia Pacific Index sank 1.6 percent after the London Metal Exchange Index of six industrial metals tumbled 4.6 percent, the most since June 22. Crude oil dropped to $82.44 a barrel yesterday, the lowest settlement price since April 19. Commodity Producers BHP Billiton Ltd. , the world’s No. 1 mining company, fell 2.2 percent to A$41.08, while Rio Tinto Group, the world’s third-largest mining company, declined 2.7 percent to A$74.32. Commodities trader Mitsubishi Corp. 1.7 percent to 2,262 yen. The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan jumped 9 basis points to 109.5 basis points in Singapore, its highest since March 1, according to Deutsche Bank AG and CMA DataVision. The Markit iTraxx Australia index rose 9 basis points to 97, the highest since Feb. 25, according to Nomura Holdings Inc. and CMA. The Markit iTraxx Japan index jumped 8.5 basis points to 106.5, according to CMA. The jump was the biggest since Feb. 5 and puts the index on track for its highest close since April 1, according to CMA. The euro fell to the lowest against the dollar since April 29, 2009 in New York yesterday, and traded at 123.01 yen from 122.88 yen and touched 122.37 yen, the weakest since March 25. German policy makers said Greece must outline further steps to cut its budget deficit before they will endorse the release of funds from a 45 billion euro ($60 billion) rescue package. ‘Signs of Contagion’ “With sovereign problems showing signs of contagion, the euro is losing its allure as an alternative currency to the dollar,” said Akio Yoshino , chief economist in Tokyo at Societe Generale Asset Management (Japan) Inc. “The currency may test the $1.30 mark sooner rather than later.” Yields on 10-year Portuguese bonds jumped 48 basis points to 5.69 percent and Irish 10-year yields surged 19 basis points to 5.10 percent. Japan’s bonds advanced, pushing 10-year yields to the lowest level in four months. The yield fell 2.5 basis points to 1.28 percent. S&P lowered Greece’s credit rating to BB+ from BBB+ and warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. The downgrade marked the first time a euro member has lost its investment grade rating since the currency’s 1999 debut. S&P also reduced Portugal by two steps to A- from A+. To contact the reporters for this story: Patrick Chu in Tokyo at pachu@bloomberg.net ; Shani Raja in Sydney at Sraja4Wbloomberg.net.

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Chanos Wrong to Say China on `Treadmill to Hell,’ Ex-PBOC Adviser Fan Says

April 26, 2010

By Sophie Leung and Susan Li April 27 (Bloomberg) — Hedge fund manager James Chanos is overly pessimistic about China’s property market because he underestimates government efforts to avoid a bubble, according to Fan Gang , a former People’s Bank of China adviser. Chanos said this month that China is on a “treadmill to hell” because it’s hooked on property development for driving growth. “That statement is under the assumption that Chinese are stupid, Chinese will not do anything to deal with that,” Fan said in a Bloomberg Television interview recorded in Hong Kong yesterday. While some cities show signs of excessive price gains, government efforts are stabilizing the market before the emergence of any “big” bubble such as those seen previously in the U.S. and Japan, Fan said. Officials rolled out the “most draconian” measures yet to cool prices after record gains in March, according to Deutsche Bank AG. In an e-mail, Chanos, the president of hedge-fund firm Kynikos Associates Ltd., declined to respond to Fan’s comments. Last month’s data for 70 major cities showed an 11.7 percent gain in residential and commercial real-estate prices from a year earlier. In the southern city of Haikou, on the island of Hainan, prices jumped 54 percent. Measures to cool the market have included a ban on loans for third-home purchases and raising mortgage rates and down- payment requirements for second-home purchases. Clampdown The government is countering asset-bubble risks because the issue is social and political as well as financial, said Fan, who’s director of the National Institute of Economic Research in Beijing. He is also a former academic member of the central bank’s monetary policy committee. Fan’s comments contrast with Chanos saying this month that the nation has “a world class, if not the world class, property bubble,” primarily from the construction of high-rise buildings. China is in the throes of “a vast property mania,” with expectations for a currency revaluation helping to fuel a market bubble, according to Andy Xie , an independent economist in Shanghai. Xie was formerly Morgan Stanley’s chief economist for the Asia-Pacific region. Fan said China will adopt a more flexible currency regime “sooner or later,” when the global economy stabilizes, after keeping the yuan pegged at about 6.83 per dollar from July 2008 as a crisis measure. “I don’t know when,” he added. He said he preferred gradual change, rather than a “radical” move. Currency Bets Non-deliverable yuan forwards indicate the currency may gain 3.3 percent against the dollar in the next 12 months. U.S. Treasury Secretary Timothy F. Geithner fueled speculation that China may let the yuan appreciate by postponing a report that could label the nation a currency manipulator. “It’s obviously important to the world” that the country makes the shift, Geithner said at a press briefing on April 23, after a meeting with finance chiefs from the Group of 20 nations in Washington. A more flexible Chinese currency could help to limit global imbalances in spending and saving that contributed to the financial crisis. China’s government last month appointed three economists, Zhou Qiren , Xia Bin and Li Daokui , to the central bank’s monetary policy committee to replace Fan, formerly the sole academic member. — With assistance from Momoe Ikeda-Chelminska , Timothy R. Homan . Editors: Paul Panckhurst , Russell Ward . To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

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Volcano May Keep Europe Airports Shut Four More Days

April 18, 2010

By Matthew Brown and Omar R. Valdimarsson April 18 (Bloomberg) — Northern and central Europe may remain closed to air traffic until April 22 as winds push ash from volcanic eruptions in Iceland across the continent, forecasters said. More than 77 percent of flights that cross the European airspace were canceled yesterday as airports from Dublin to Moscow closed. No planes will operate out of the U.K. until at least 1 a.m. London time tomorrow, the National Air Traffic Service said. German airports will remain closed until 8 p.m. Berlin time, the DFS air traffic control agency said. “Expect ongoing interruptions for the next four or five days,” Teitur Atlason, at the Icelandic meteorological office , said in a telephone interview yesterday. “The eruption is still in full swing, and the volcano is spewing pretty dark ashes as high into the air as 5 to 6 kilometers.” Flights were grounded after April 14 when an eruption at the 1,666-meter (5,466-foot) Eyjafjallajökull volcano spewed dust across thousands of miles of European airspace. Canceled flights are costing carriers about $200 million a day, the International Air Transport Association estimates. “The jet stream winds, which extend from 10,000 feet up to 40,000 feet, show no signs of change through Wednesday,” AccuWeather.com Inc. said in a statement . “Any ash plume that is released from the volcano will continue to threaten northern Europe and the British isles.” Melt and Congeal Flights have been halted because of concerns that the ash plume could damage engines and speed sensors. The finest material from the blast is formed of dust akin to glass, which can melt and congeal in a turbine, causing it to stop, said Sue Loughlin , head of vulcanology at the British Geological Survey. “The current in the height the ashes are reaching remains a strong northwesterly wind, which blows the ashes to Scotland and South Scandinavia,” Atlason of the Icelandic Met Office said. “Once the ashes reach those places, other more complex wind systems take over, which spread the ashes across North and Central Europe. This will continue until Wednesday.” Airlines in the Asia-Pacific region canceled most Europe- bound flights, with Qantas Airways Ltd. saying it won’t fly to European destinations before April 20 and can’t confirm when service on those routes will resume. Asia Routes Carriers including Air China Ltd., Japan Airlines Corp., Thai Airways International Pcl, Korean Air Lines Co. and Cathay Pacific Airways Ltd. shut down service to Europe, while Singapore’s Changi Airport reported cancellation of 34 arrivals and departures, including Singapore Airlines Ltd. flights to nine European destinations. Volcanic eruptions may continue for months and curtail European air traffic, said Sigrun Hreinsdottir, a geophysicist at the University of Iceland in Reykjavik. “It could erupt, pause for a few weeks, and then possibly erupt again,” he said. The last eruption of Eyjafjallajökull in December 1821 continued until January 1823. The current blast has sent ash to as high as 7 kilometers (4.5 miles), according to Gudrun Larsen, a vulcanologist at the University of Iceland. The magma had to pierce 200 meters of ice before reaching the air, she said. “We really don’t know if this eruption is going to last as long as the previous one, but we can’t say it’s not a possibility,” Larsen said by telephone. Polish Funeral The volcanic ash cloud also led world leaders, including Barack Obama , German Chancellor Angela Merkel and French President Nicolas Sarkozy to cancel plans to attend the funeral of Polish President Lech Kaczynski , killed with 95 others in an April 10 plane crash. Other delegations, including Russian President Dmitry Medvedev, are struggling to get through via government and military planes, which have clearance to fly at low altitudes. Airline stocks, including British Airways Plc, Deutsche Lufthansa AG and Ryanair Holdings Plc, fell on Friday as fleets were grounded. British Airways Plc , which halted flights from the U.K. from midday on April 15, said no service to and from London will operate today. Its shares tumbled 3.1 percent in the U.K. capital on April 16, the most since Feb 12. French civil aviation authorities said that at 2 p.m. today they will shut airports in the southwest of the country, which had been the last French airports unaffected. The authorities had closed the airports of Nice and Marseille in the south-east at 6 a.m. today. All French airports will remain closed until at least 8 a.m. tomorrow. Rome, Iceland Belarus closed airspace amid predictions the ash will linger for as many as three days, Interfax reported. Italy will keep airspace in the north of the country closed until at least 8 a.m. tomorrow and may curtail flights in the south, ENAC, the nation’s civil aviation authority, said in an e-mailed statement yesterday. Japan Airlines canceled its flight to Rome today due to closure of the city’s Fiumicino Airport, according to the carrier’s Web site . Because of the wind direction, Iceland’s Keflavik airport is open, and North American flights are running on schedule. The U.S.-based Air Transport Association said yesterday that 282 of 337, or 84 percent, of the day’s nonstop flights between the U.S. and Europe were scrubbed. Delta Air Lines Inc. , the world’s largest carrier, scrubbed 91 flights yesterday to and from Europe, said spokesman Anthony Black. AMR Corp. ’s American Airlines canceled 56 flights between the U.S. and Europe, the company said in a recorded message. American was able to operate flights into and out of Spain and Italy, spokesman Tim Smith said. March 20 Eruption Karen Pride , a spokeswoman for Chicago’s Department of Aviation, which operates O’Hare International Airport, Midway International Airport and Gary-Chicago International Airport, said 22 flights bound for Chicago from Europe were canceled. The eruption began on March 20 with a lava flow on the eastern flank of the Eyjafjallajökull volcano, according to the Institute of Earth Sciences at the University of Iceland. After a lull, it resumed early on April 14, directly under the icecap that covers most of the mountain. “The problem here is we have magma interacting with glacier ice, and that leads to explosions,” Hreinsdottir said. “That causes the material to go much higher in the air.” Mike Burton, a researcher at the Italian National Vulcanology Institute who has studied the ash from the latest explosion, said it presents more of a threat to aircraft than would the dust from a typical eruption. “It’s likely that ash production will continue long after all the ice is melted in the volcano as this kind of magma can produce ash without water,” Burton said. “Fine ash is easier to transport long distances and goes higher into the atmosphere. This is not good news for flights.” To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net ; Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net

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Volcano Forces Cancellation of 77% of Europe Flights; May Last to April 22

April 18, 2010

By Matthew Brown and Omar R. Valdimarsson April 18 (Bloomberg) — Northern and central Europe may remain closed to air traffic until April 22 as winds push ash from volcanic eruptions in Iceland across the continent, forecasters said. European airlines canceled more than 77 percent of their flights yesterday as airports from Dublin to Moscow closed. No planes will operate out of the U.K. until at least 7 p.m. London time today, the National Air Traffic Service said. German airports will remain closed until 2 p.m. Berlin time, the DFS air traffic control agency said. “Expect ongoing interruptions for the next four or five days,” Teitur Atlason, at the Icelandic meteorological office , said in a telephone interview yesterday. “The eruption is still in full swing, and the volcano is spewing pretty dark ashes as high into the air as 5 to 6 kilometers.” Flights were grounded after April 14 when an eruption at the Eyjafjallajökull volcano spewed dust across thousands of miles of European airspace. Canceled flights are costing carriers about $200 million a day, the International Air Transport Association estimates. People hoping to travel should check first with their airline, NATS said. “The jet stream winds, which extend from 10,000 feet up to 40,000 feet, show no signs of change through Wednesday,” Accuweather.com Inc. said in a statement. “Any ash plume that is released from the volcano will continue to threaten northern Europe and the British isles.” Melt and Congeal Flights have been halted because of concerns that the ash plume could damage engines and speed sensors. The finest material from the blast is formed of dust akin to glass, which can melt and congeal in a turbine, causing it to stop, said Sue Loughlin , head of vulcanology at the British Geological Survey. “The (air) current in the height the ashes are reaching remains a strong northwesterly wind, which blows the ashes to Scotland and South Scandinavia,” Atlason of the Icelandic Met Office said. “Once the ashes reach those places, other more complex wind systems take over, which spread the ashes across North and Central Europe. This will continue until Wednesday.” Asia Routes Airlines in the Asia-Pacific region canceled most Europe-bound flights, with Qantas Airways Ltd. saying it won’t fly to European destinations before April 20 and can’t confirm when service on those routes will resume. Carriers including Air China Ltd., Japan Airlines Corp., Korean Air Lines Co., Cathay Pacific Airways Ltd. shut down service to Europe, while Singapore’s Changi Airport reported cancellation of 34 arrivals and departures, including Singapore Airlines Ltd. flights to nine European destinations. Volcanic eruptions may continue for months and curtail European air traffic, said Sigrun Hreinsdottir, a geophysicist at the University of Iceland in Reykjavik. “It could erupt, pause for a few weeks, and then possibly erupt again,” he said. The last eruption of Eyjafjallajökull in December 1821 continued until January 1823. The current blast has sent ash to as high as 7 kilometers (4.5 miles), according to Gudrun Larsen, a vulcanologist at the University of Iceland. The magma had to pierce 200 meters of ice before reaching the air, she said. Leaders to Miss Funeral “We really don’t know if this eruption is going to last as long as the previous one, but we can’t say it’s not a possibility,” Larsen said by telephone. The volcanic ash cloud also led world leaders, including Barack Obama and German Chancellor Angela Merkel , to cancel plans to attend the funeral of Polish President Lech Kaczynski , killed with 95 others in an April 10 plane crash. Airline stocks, including British Airways Plc, Deutsche Lufthansa AG and Ryanair Holdings Plc, fell on Friday as fleets were grounded. British Airways Plc , which halted flights from the U.K. from midday on April 15, said no service to and from London will operate today. Its shares tumbled 3.1 percent in the U.K. capital on April 16, the most since Feb 12. Paris, Rome Paris airports will remain shut until 8 a.m. tomorrow, a government official said yesterday. Belarus closed airspace amid predictions the ash will linger for as many as three days, Interfax reported. Italy will keep airspace in the north of the country closed until at least 8 a.m. tomorrow and may curtail flights in the south, ENAC, the nation’s civil aviation authority, said in an e-mailed statement yesterday. Japan Airlines canceled its flight to Rome today due to closure of the city’s Fiumicino Airport, according to the carrier’s Web site. Because of the wind direction, Iceland’s Keflavik airport is open, and North American flights are running on schedule. U.S.-Europe The U.S.-based Air Transport Association said yesterday that 282 of 337, or 84 percent, of the day’s nonstop flights between the U.S. and Europe were scrubbed. Delta Air Lines Inc., the world’s largest carrier, scrubbed 91 flights yesterday to and from Europe, said spokesman Anthony Black. AMR Corp.’s American Airlines canceled 56 flights between the U.S. and Europe, the company said in a recorded message. American was able to operate flights into and out of Spain and Italy, spokesman Tim Smith said. Karen Pride , a spokeswoman for Chicago’s Department of Aviation, which operates O’Hare International Airport, Midway International Airport and Gary-Chicago International Airport, said 22 flights bound for Chicago from Europe were canceled. The eruption began on March 20 with a lava flow on the eastern flank of the Eyjafjallajökull volcano, according to the Institute of Earth Sciences at the University of Iceland. After a lull, it resumed early on April 14, directly under the icecap that covers most of the mountain. ‘Not Good News’ “The problem here is we have magma interacting with glacier ice, and that leads to explosions,” Hreinsdottir said. “That causes the material to go much higher in the air.” Mike Burton, a researcher at the Italian National Vulcanology Institute who has studied the ash from the latest explosion, said it presents more of a threat to aircraft than would the dust from a typical eruption. “It’s likely that ash production will continue long after all the ice is melted in the volcano as this kind of magma can produce ash without water,” Burton said. “Fine ash is easier to transport long distances and goes higher into the atmosphere. This is not good news for flights.” To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net ; Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net

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Asian Commodity Stocks, Copper Rise on Growth; Aussie Advances

April 6, 2010

By Darren Boey and Shani Raja April 6 (Bloomberg) — Asian commodity stocks rose, lifting the MSCI Asia Pacific Index up for the fourth straight day, and copper soared to crack the $8,000-a-ton level on signs the global economic recovery is gathering pace. The euro fell on concern Greece will struggle to repay its debt. The MSCI Asia Pacific Index rose 0.4 percent to 127.43 as of 4 p.m. in Tokyo. Japan’s Nikkei 225 Stock Average dropped 0.5 percent as a stronger yen dragged export shares lower. Copper for May delivery on the London Metal Exchange advanced 1.5 percent to $8,009 a ton, the highest level since Aug. 2008, before the collapse of Lehman Bros. Inc. The Australian dollar, known as the Aussie, climbed after the central bank raised interest rates. The euro sank 0.8 percent to 126.23 yen from 127.25 in New York yesterday. Futures on the Standard & Poor’s Index lost 0.3 percent. The Stoxx Europe 600 increased 0.3 percent to 268.46 at 8 a.m. in London. U.S. reports yesterday flagging growth in the country’s home sales and services industries has put the MSCI Asia Pacific Index on course for its highest close in more than 19 months. The Bank of Japan may raise its economic assessment tomorrow after its Tankan business poll showed the export-driven recovery is gaining momentum. Growth in Asia is “quite strong,” Reserve Bank of Australia Governor Glenn Stevens said today. “Recent U.S. data has been unequivocally positive which has been boosting investor risk appetite globally,” said Prasad Patkar , who helps oversee about $1.7 billion at Platypus Asset Management in Sydney. “I don’t see valuations as being a source of concern if the profit growth that is expected is delivered.” Taiwan’s Taiex Index gained 0.8 percent and Australia’s S&P/ASX 200 Index climbed 0.9 percent. Commodity Producers Taiwan Semiconductor Manufacturing Co. and Mediatek Inc. climbed at least 1.6 percent after the Economic Daily News reported that the chip companies may raise salaries by as much as 3 percent as their business outlook improved. Commodity-related companies in the MSCI Asia Pacific Index advanced amid speculation demand for raw materials will pick up. The MSCI gauge climbed 1.5 percent in the past four days. BHP Billiton advanced 1.6 percent to A$44.63. Rio Tinto Ltd., the world’s third-biggest mining company, gained 1.3 percent to A$80.64. Woodside Petroleum Ltd. , Australia’s second- biggest oil producer, climbed 1.8 percent to A$47.77. “Given the momentum of the economy, stocks aren’t expensive at all and there’s room for valuations to be lifted,” said Wei Wei , an analyst at West China Securities Co. in Shanghai. Crude oil for May delivery lost 0.1 percent to $86.50 a barrel in electronic trading on the New York Mercantile Exchange. Yesterday, the contract rose 2.1 percent to $86.62, the highest settlement since Oct. 8, 2008. Rising Prices “We’ve seen some encouraging economic data the last few days,” said Toby Hassall , a research analyst at CWA Global Markets Pty in Sydney. “It’s keeping the global recovery story in place. Rising prices are reflecting the expectation of improving demand.” Shares of Japan’s exporters declined, dragging the Nikkei 225 Stock Average down by 0.7 percent, as a stronger yen threatened to reduce the value of overseas sales. Canon retreated 1.8 percent to 4,430 yen, having gained 6.9 percent in the past five days. Nintendo Co. , the world’s biggest maker of video-game players, dropped 1.4 percent to 32,350 yen. The yen rose to 94.08 per dollar, from 94.37 yesterday, when it touched 94.79, the lowest since Aug. 24. Europe’s currency dropped 0.5 percent to $1.3416. The euro has weakened 5.3 percent against the yen and 6.3 percent versus the greenback this year as concern Greece’s fiscal shortfall will widen and discord among European leaders over an aid package for the nation damped demand for the single currency. Beyond Greece “People are concerned that it’s not just Greece, there are some definite sovereign debt issues in the region,” said Phil Burke , chief dealer for global foreign exchange and rates at JPMorgan Chase & Co. in Sydney. “The market is still bearish on the euro overall and still wants to sell on rallies.” Greece is looking to raise up to $10 billion from U.S. investors to help cover its May borrowing requirement of about 10 billion euros ($13.4 billion), the Financial Times said. The nation needs to borrow a total of 32 billion euros this year, Petros Christodoulou , director general of the Public Debt Management Agency, said last month. The Australian dollar recently traded at 92.24 U.S. cents from 91.85 cents before the central bank increased the overnight cash rate target to 4.25 percent from 4 percent. The decision was predicted by 13 of 23 economists in a Bloomberg News survey. Yuan Forwards Chinese yuan forwards jumped by the most in nine weeks on speculation the U.S. decision to delay a report on global foreign-exchange policies due April 15 will make China more willing to let the currency resume appreciation. Twelve-month non-deliverable forwards advanced 0.3 percent to 6.6273 per dollar. The contracts reflect bets the currency will climb 3 percent from the spot rate of 6.8259. Treasuries rose as yields over 4 percent lured buyers gauging inflation will remain subdued. The yield on the benchmark 10-year note fell two basis points, or 0.02 percentage point, to 3.97 percent in Tokyo, according to data compiled by Bloomberg. The yield touched 4.0095 percent yesterday, the highest level since Oct. 16, 2008. “The fiscal year is just beginning for Japanese investors who are eager to buy, so 4 percent Treasury yields are attractive to them,” said Manabu Tamaru , a Tokyo-based senior investment manager at Baring Asset Management. “With the disinflation trend continuing, real yields are also attractive.” Credit Default Risk Indicators of corporate credit risk in the Asia-Pacific were on course to fall to the lowest level since March 17. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 1 basis point to 93.5 basis points, Royal Bank of Scotland Group Plc prices show, while the Markit iTraxx Australia index dropped 4 basis points to 80.5 basis points, according to Westpac Banking Corp. Investors use the default-swap indexes to hedge against losses on corporate debt or speculate on creditworthiness, and the swaps typically fall as investor confidence increases. To contact the reporters for this story: Darren Boey at dboey@bloomberg.net ; Shani Raja in Sydney at sraja4@bloomberg.net .

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