asia

Asian Commodity Stocks Rise on Recovery Optimism; Euro Weakens on Greece

April 5, 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, 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 0.3 percent to 127.24 as of 3:22 p.m. in Tokyo. Japan’s Nikkei 225 Stock Average dropped 0.5 percent as a stronger yen dragged export shares lower. The Australian dollar, known as the Aussie, climbed after the central bank raised interest rates for the fifth time in six meetings. 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 and they increased 0.8 percent for the Euro Stoxx 50. 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. Copper for May delivery in New York advanced 1.2 percent to $7,977 a ton after rising to a 20-month high yesterday. 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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Toyota U.S. Sales Rebound on Discounts; Asia Carmakers Win 49% of Market

April 1, 2010

By Alan Ohnsman April 2 (Bloomberg) — Toyota Motor Corp. ’s incentive push after record recalls helped the automaker post a March U.S. sales increase following two months of declines, while Nissan Motor Co. led gains among the largest Asia-based brands. Sales surged 41 percent from a year earlier for Toyota, which offered no-interest loans and discount leases on most of its namesake brand’s models, and 43 percent for Yokohama, Japan- based Nissan. Honda Motor Co. reported a 22 percent increase and Hyundai Motor Co. said it had a 15 percent gain. “Toyota’s numbers this month show that consumers do respond to incentives, especially if they perceive them as unusual,” said Jesse Toprak , vice president of industry trends at forecaster TrueCar.com in Santa Monica, California. “The problem for Toyota is how long can they keep these up and how will consumers respond in April?” The effort by the world’s largest automaker spurred an industrywide incentive surge, which along with improving consumer confidence, brought buyers back to showrooms. Toyota added its discounts, valued by Edmunds.com at $2,256 a vehicle in March, to counter global recalls of more than 8 million vehicles. Japanese and South Korean automakers boosted combined sales 29 percent to 522,775, according to Autodata Corp. Their market share rose to 49 percent from 47.1 percent a year earlier, the Woodcliff Lake, New Jersey-based research firm said. March “will be the highest ever for average combined incentive spending for Japanese automakers, including a record- high month for Toyota,” said Jessica Caldwell , director of industry analysis for Edmunds.com. Incentive Spending Spending industrywide rose to an average of $2,742 a vehicle, from $2,642 in February, according to Santa Monica- based Edmunds.com. Japanese automakers averaged $2,058, up $224 from a month earlier. Industrywide March sales rose 24 percent to 1.07 million, Autodata said. Ford Motor Co. led U.S.-based automakers with a 40 percent jump, while General Motors Co.’s sales increased 21 percent and Chrysler Group LLC’s fell 8.3 percent. Toyota on March 2 began offering incentives such as subsidized leases after the Toyota City, Japan-based automaker’s recalls to fix defects linked to unintended acceleration and to adjust brakes. “Our marketing programs clearly had an impact,” Don Esmond , Toyota’s U.S. senior vice president, said in a conference call yesterday. If customers were concerned about the safety of its vehicles, incentives “wouldn’t matter,” he said. Sales jumped 41 percent for the Toyota brand and 42 percent for the Lexus luxury division. The March gains helped the automaker overcome sales declines the previous two months and post a 7.2 percent increase for the first quarter. Toyota’s market share for March was 17.5 percent, up 2 percentage points from a year earlier, according to Autodata. Honda Leases Honda said it sold 108,262 vehicles in March, rising from 88,379. The Tokyo-based company last month for the first time offered discount leases on all Honda-brand vehicles. John Mendel , Honda’s U.S. executive vice president, said in an interview yesterday at the New York International Auto Show that the lease offer, with no down payment, deposit or payment due for a month, wasn’t more expensive than a typical promotion. “It’s just a math problem,” he said. “Instead of charging $199 a month on an Accord, for example, we forgo the down payment and charge $250 a month. It pretty much works out the same.” Honda’s U.S. market share last month was 10.2 percent, a drop of 0.1 point from a year earlier, according to Autodata. Outselling Chrysler Nissan outsold Chrysler for the second time this year, with an increase to 95,468 vehicles from 66,634. The gains were led by the Altima sedan, Sentra small car and Rogue crossover. “We didn’t fundamentally didn’t change our incentives,” Brian Carolin , senior vice president of the company’s U.S. operations, said in an interview in New York. “We didn’t react to the ‘Toyota lift.’” Nissan’s March market share climbed to 9 percent, from 7.8 percent, according to Autodata. Hyundai reported a sales increase to 47,002 vehicles from 40,721 a year earlier. The Seoul-based company yesterday in New York showed off the U.S. version of its Equus luxury sedan that will cost as much as $60,000. “Hyundai didn’t have as big a percentage increase as some of its competitors as a result of what it did last year,” said Toprak. “It was growing while the market was shrinking.” The company’s market share fell 0.3 point to 4.9 percent in March as its sales rose slower than the industry’s. Kia Motors Corp., Hyundai’s affiliate, said sales rose 23 percent. Fuji Heavy Industries Ltd.’s Subaru, a Toyota affiliate, reported a 46 percent increase for the month. Among other Asia-based brands, Mazda Motor Corp.’s sales grew 5.5 percent and Mitsubishi Motors Corp. reported an 18 percent increase from a year ago. Japan’s Suzuki Motor Corp.’s sales fell 8.3 percent. Automakers were buoyed in March by rising consumer confidence and spring weather after February blizzards in the U.S. Northeast. The Conference Board’s confidence index rose to 52.5 from 46.4 a month earlier as gloom over job prospects began to lift. To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

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Toyota U.S. Sales Rebound on Discounts; Asia Carmakers Win 49% of Market

April 1, 2010

By Alan Ohnsman April 2 (Bloomberg) — Toyota Motor Corp. ’s incentive push after record recalls helped the automaker post a March U.S. sales increase following two months of declines, while Nissan Motor Co. led gains among the largest Asia-based brands. Sales surged 41 percent from a year earlier for Toyota, which offered no-interest loans and discount leases on most of its namesake brand’s models, and 43 percent for Yokohama, Japan- based Nissan. Honda Motor Co. reported a 22 percent increase and Hyundai Motor Co. said it had a 15 percent gain. “Toyota’s numbers this month show that consumers do respond to incentives, especially if they perceive them as unusual,” said Jesse Toprak , vice president of industry trends at forecaster TrueCar.com in Santa Monica, California. “The problem for Toyota is how long can they keep these up and how will consumers respond in April?” The effort by the world’s largest automaker spurred an industrywide incentive surge, which along with improving consumer confidence, brought buyers back to showrooms. Toyota added its discounts, valued by Edmunds.com at $2,256 a vehicle in March, to counter global recalls of more than 8 million vehicles. Japanese and South Korean automakers boosted combined sales 29 percent to 522,775, according to Autodata Corp. Their market share rose to 49 percent from 47.1 percent a year earlier, the Woodcliff Lake, New Jersey-based research firm said. March “will be the highest ever for average combined incentive spending for Japanese automakers, including a record- high month for Toyota,” said Jessica Caldwell , director of industry analysis for Edmunds.com. Incentive Spending Spending industrywide rose to an average of $2,742 a vehicle, from $2,642 in February, according to Santa Monica- based Edmunds.com. Japanese automakers averaged $2,058, up $224 from a month earlier. Industrywide March sales rose 24 percent to 1.07 million, Autodata said. Ford Motor Co. led U.S.-based automakers with a 40 percent jump, while General Motors Co.’s sales increased 21 percent and Chrysler Group LLC’s fell 8.3 percent. Toyota on March 2 began offering incentives such as subsidized leases after the Toyota City, Japan-based automaker’s recalls to fix defects linked to unintended acceleration and to adjust brakes. “Our marketing programs clearly had an impact,” Don Esmond , Toyota’s U.S. senior vice president, said in a conference call yesterday. If customers were concerned about the safety of its vehicles, incentives “wouldn’t matter,” he said. Sales jumped 41 percent for the Toyota brand and 42 percent for the Lexus luxury division. The March gains helped the automaker overcome sales declines the previous two months and post a 7.2 percent increase for the first quarter. Toyota’s market share for March was 17.5 percent, up 2 percentage points from a year earlier, according to Autodata. Honda Leases Honda said it sold 108,262 vehicles in March, rising from 88,379. The Tokyo-based company last month for the first time offered discount leases on all Honda-brand vehicles. John Mendel , Honda’s U.S. executive vice president, said in an interview yesterday at the New York International Auto Show that the lease offer, with no down payment, deposit or payment due for a month, wasn’t more expensive than a typical promotion. “It’s just a math problem,” he said. “Instead of charging $199 a month on an Accord, for example, we forgo the down payment and charge $250 a month. It pretty much works out the same.” Honda’s U.S. market share last month was 10.2 percent, a drop of 0.1 point from a year earlier, according to Autodata. Outselling Chrysler Nissan outsold Chrysler for the second time this year, with an increase to 95,468 vehicles from 66,634. The gains were led by the Altima sedan, Sentra small car and Rogue crossover. “We didn’t fundamentally didn’t change our incentives,” Brian Carolin , senior vice president of the company’s U.S. operations, said in an interview in New York. “We didn’t react to the ‘Toyota lift.’” Nissan’s March market share climbed to 9 percent, from 7.8 percent, according to Autodata. Hyundai reported a sales increase to 47,002 vehicles from 40,721 a year earlier. The Seoul-based company yesterday in New York showed off the U.S. version of its Equus luxury sedan that will cost as much as $60,000. “Hyundai didn’t have as big a percentage increase as some of its competitors as a result of what it did last year,” said Toprak. “It was growing while the market was shrinking.” The company’s market share fell 0.3 point to 4.9 percent in March as its sales rose slower than the industry’s. Kia Motors Corp., Hyundai’s affiliate, said sales rose 23 percent. Fuji Heavy Industries Ltd.’s Subaru, a Toyota affiliate, reported a 46 percent increase for the month. Among other Asia-based brands, Mazda Motor Corp.’s sales grew 5.5 percent and Mitsubishi Motors Corp. reported an 18 percent increase from a year ago. Japan’s Suzuki Motor Corp.’s sales fell 8.3 percent. Automakers were buoyed in March by rising consumer confidence and spring weather after February blizzards in the U.S. Northeast. The Conference Board’s confidence index rose to 52.5 from 46.4 a month earlier as gloom over job prospects began to lift. To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

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Deutsche Bank to Add Prime Brokerage Staff Targeting New Asia Hedge Funds

March 28, 2010

By Tomoko Yamazaki and Komaki Ito March 29 (Bloomberg) — Deutsche Bank AG ’s prime brokerage will hire more staff in Asia as it aims to lure business from hedge-fund startups in the region leading the global economic recovery, said Sean Capstick , head of capital introduction. Frankfurt-based Deutsche Bank has boosted its pan-Asian prime finance staff by about 20 percent over the last 18 months, said Capstick, declining to give details. The increasing number of startup funds in Asia will be key for growth at the division, which provides services to hedge funds, he said. “Within the global prime finance world, Asia is a big focus,” London-based Capstick said in an interview in Tokyo on March 25. “We’ve been very involved in the startup markets and that is something we absolutely plan to continue doing.” The industry may attract $222 billion of capital this year, according to a Deutsche Bank survey of investors this month, marking the first annual net inflow since the global financial crisis hit in 2007. Citigroup Inc. plans to double the size of a team helping pension and government-backed funds manage direct hedge fund investments. In the past 18 months in the Asia-Pacific, Deutsche Bank hired Merrill Lynch & Co.’s Masa Yanagisawa as a director for the hedge fund capital group in Tokyo. Harvey Twomey , Hong Kong- based head of prime finance institutional client group, also joined from Merrill Lynch, said Capstick. Taking Market Share Deutsche Bank has captured an increasing number of clients in the wake of the collapse of Lehman Brothers Holdings Inc. in September 2008 and Bear Stearns Cos.’s hedge funds in 2007 as investors sought businesses with European banks that had more stable balance sheets , Capstick said. The bank increased its market share among prime brokers to 8.2 percent at the end of 2009, ranking fifth, from 5.9 percent the end of 2007, according to Eurekahedge Pte . Top-ranked Goldman Sachs Group Inc. dropped to 17.7 percent from 18.5 percent, while second-place Morgan Stanley dropped to 16.3 percent from 20 percent. Analysts and managers left major financial institutions or global hedge funds and started their own firms last year to capitalize on investment opportunities in the wake of the worst market rout since the Great Depression. There were 102 hedge- fund startups in Asia in 2009, compared with 193 in Europe and 257 in the U.S., according to Eurekahedge, a Singapore-based data provider. Outperforming Investors are coming to Asia as the region’s economic growth helps boost performances among managers. The Eurekahedge Asian Hedge Fund Index returned 26 percent in 2009, beating the 20 percent gain by the global index. Emerging Asia is expected to grow at more than twice the pace of the global economy this year, led by China and India, International Monetary Fund official John Lipsky said earlier this month. Asia’s economy will expand by about 8.5 percent in 2010, Lipsky said, while the world economy is forecast to grow by about 4 percent this year. Forty-five percent of investors in Deutsche Bank’s survey said they would add investments in funds focusing on Asia outside of Japan this year, contrasting with 18 percent in 2009. For Japan, 24 percent of investors plan to add to their Japanese allocations this year, compared with 15 percent in 2009. “People are coming here looking for very good investment ideas and that now is translating directly through the startup market,” Capstick said. “We spend a very large amount of time meeting with people who are starting up hedge funds. Our role is to find which ones are going to flourish.” The eighth Deutsche Bank alternative investment survey polled asset managers, corporations, family offices, foundations and endowments, funds of funds, insurers, private banks, pension funds and investment consultants with more than $1.07 trillion of hedge fund assets in January. Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall. To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net ; Komaki Ito in Tokyo at kito@bloomberg.net

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Dell Dismisses India’s Claim It Discussed Shifting Procurement From China

March 25, 2010

By Mehul Srivastava and Mary Childs March 25 (Bloomberg) — Dell Inc. denied an Indian government release that Chief Executive Officer Michael Dell discussed shifting procurement from China to a “safer environment” with Indian Prime Minister Manmohan Singh . “There was no discussion concerning any change in how or from where Dell will source component parts for the computers it manufactures in Asia,” Minari Shah , a Dell spokeswoman, said in a e-mailed statement today. Dell sources “equipment and parts worth $25 billion from China,” Singh told members of India’s Planning Commission on March 23, according to an e-mailed text of his speech released by India’s Press Information Bureau that evening. “They would like to shift to safer environment with climate conducive to enterprise with security of legal system,” Singh told the plan panel. “So I think this is an area where there are immense opportunities,” he said in the speech. The Web site for the Press Information Bureau, where releases of Singh’s official speeches are posted, no longer has a copy of the remarks. The text was removed after officials from the Round Rock, Texas-based company contacted the Indian press office, Dell’s Shah said. Harish Khare , a media adviser to Singh, declined to comment. Holding the Hammer Dell should avoid damaging relations with the Chinese government because it’s such a large market, said Tom Wirth , senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York, and doesn’t own any shares of Dell. “For Dell as a company, certainly that hurts,” he said. “The fact is China holds the hammer to us — we are indebted to China and not the other way around at this point.” China accounted for more than 60 percent of all personal computers shipped in the Asia-Pacific region last quarter, according to Gartner Inc. Shipments in that area climbed 44 percent, the fastest rate among the regions surveyed, according to the Stamford, Connecticut-based researcher. Michael Dell met Singh the day after Google Inc. started routing China-based users to an unfiltered search service on its Hong Kong site, following through on a Jan. 12 statement to end self-censorship of its Google.cn portal. Dell declined to comment March 23 when asked about Google’s decision. Dell rose 3 cents to $15.02 at 10:11 a.m. New York time in Nasdaq Stock Market trading. The shares had climbed 4.4 percent this year before today. To contact the reporterS on this story: Mehul Srivastava at msrivastava6@bloomberg.net ; Mary Childs in New York at mchilds5@bloomberg.net

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European Services, Manufacturing Grow as German Business Confidence Climbs

March 24, 2010

By Simone Meier and Gabi Thesing March 24 (Bloomberg) — Europe’s services and manufacturing industries grew at the fastest pace since 2007 and German business confidence jumped as the economy rebounded from a fourth-quarter relapse. A composite index based on a survey of euro-area purchasing managers in both industries rose to 55.5 in March from 53.7 in February, London-based Markit Economics said today. That’s the highest since August 2007. The Ifo institute ’s business climate index for Europe’s largest economy jumped more than economists projected to 98.1 from 95.2. The gauge measuring executive’s expectations soared to the highest since June 2007. The euro-region recovery is gathering strength after coming to a near-halt in the fourth quarter as manufacturers boost production to meet reviving export orders. Greece’s fiscal crisis has contributed to the euro’s 11 percent drop against the dollar in the past four months, making euro-area goods more competitive. Rising unemployment and increasing energy costs may keep a lid on consumer demand in Europe. “It’s a great set of numbers and shows Europe is very aggressively participating in the global recovery,” said James Nixon , co-chief European economist at Societe Generale SA in London. Still, “ consumption very much lags what’s happening in the industrial sector.” Nixon expects the 16-nation currency bloc to expand 0.2 percent in the first quarter and 0.4 percent between April and June. Warmer Weather In Germany, warmer weather has paved the way for a resumption of consumer spending and construction, which were hampered by the coldest winter in 14 years. Germany’s services industry index rose to 54.7 from 51.9, signaling “that the recovery in Germany is broadening, although exports will remain the main driver,” said Carsten Brzeski , an economist at ING Group in Brussels. Asian economies are leading a global recovery from the worst slump since World War II. The economy of the “world’s most dynamic region” including China will expand around 8.5 percent in 2010, IMF First Deputy Managing Director John Lipsky said on March 22. That’s more than twice the Washington-based fund’s projected pace for the worldwide economy. Lanxess AG , Germany’s largest publicly traded specialty- chemicals maker, said on March 17 that the Asia-Pacific region is expected to show the most “significant” improvement this year, helping offset a European slowdown. Bayerische Motoren Werke AG , the world’s biggest maker of luxury vehicles, the same day forecast 2010 deliveries will rise with sales in China projected to show a “strong double-digit” percentage gain. Export Orders The euro’s drop against the dollar is bolstering export orders by making European products more competitive abroad. It traded at $1.3361 at 11:07 a.m. in London, down from $1.5134 on Nov. 25. The currency has been pushed lower partly on concern that the Greek government won’t be able to reduce the region’s largest budget deficit. European governments are facing the dilemma of cutting deficits while seeking to bolster recoveries. European investor confidence rose this month, while economic sentiment unexpectedly fell in February. Euro-region unemployment has risen to 9.9 percent, the highest in more than 11 years. European Union Economic and Monetary Affairs Commissioner Olli Rehn said on March 19 that while the “worst is over,” the recovery is “still not self-sustaining and employment has not yet turned for the better.” European Central Bank council member Ewald Nowotny said earlier this month that euro-region growth rates are “positive but weak.” Consumer Spending HeidelbergCement AG , the world’s third-largest cement maker, said on March 18 that January and February were “weak” and that prices will remain little changed this year. Munich- based Siemens AG , Europe’s biggest engineering company, said the same day that it plans to cut an additional 4,200 jobs. With some of Europe’s largest companies eliminating jobs, households may remain reluctant to step up spending, leaving expansion dependent on export demand. Stalling consumer spending was among the reasons the euro region’s recovery came close to stagnating in the fourth quarter. The ECB said on March 4 that it will continue to withdraw some stimulus measures introduced to fight the crisis while keeping its main lending rate at a record low of 1 percent. The Frankfurt-based central bank forecasts the euro-area economy will expand around 0.8 percent this year and about 1.5 percent in 2011 after shrinking 4.1 percent in 2009. Markit is scheduled to release a final figure for its purchasing managers’ index for the European manufacturing and service industries next month. To contact the reporters on this story: Simone Meier in Dublin at smeier@bloombert.net ; Gabi Thesing in London at gthesing@bloombeg.net .

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Rio Says `Broken’ Iron-Ore System May Lead to Quarterly Price Agreements

March 24, 2010

By Rebecca Keenan March 24 (Bloomberg) — Rio Tinto Group , the second-largest iron ore exporter, may settle prices of the steelmaking material on a quarterly basis, as rivals move to end a four-decade-old “broken” tradition of negotiating annually. “The customers are well and truly aware of the pressure on annual prices,” Sam Walsh , head of London-based Rio’s iron ore business, said in an interview in Singapore today. “The system is broken.” Chinese steelmakers, the biggest buyers of iron ore, last year failed to reach an annual price agreement with Rio, deeming the 33 percent price cut offered as insufficient. China this week put four of the company’s executives on trial in Shanghai for accepting bribes to supply the raw material, according to one of the defendants’ lawyers. “Our contracts require us to establish a price each year,” said Walsh who’s attending the Asia Mining Congress. “Whether that price is established on an annual basis or whether it’s established on a quarterly basis, that is up to the negotiation.” Prices are traditionally set for the 12 months starting April 1. Shares of Rio rose 2 percent to close at A$77.20 on the Australian stock exchange. Talks are proceeding with Rio’s customers, Walsh said. BHP Billiton Ltd. and Vale SA are unlikely to have reached a settlement yet, he said. Seeking Changes Brazil’s Vale, the world’s biggest iron ore supplier, is seeking shorter sales contracts that may boost prices 90 percent for the April quarter, Credit Suisse Group AG said yesterday. BHP Billiton, the third-largest supplier, raised the amount of products it sold on shorter-term pricing last year. “If the industry moves to a quarterly pricing, that will in fact be a true market mechanism, not driven by anyone in particular but driven very much by market forces,” Walsh said earlier at the conference. Chinese steelmakers decided to buy more iron ore on the cash markets after prices plunged 68 percent between February and October 2008 during the global recession. Prices have more than doubled since according to Metal Bulletin, an industry publication. Iron ore producers are seeking to change the way prices are negotiated as Chinese demand crimped supplies. The Asian nation may import 610 million tons of the steelmaking ingredient this year, near last year’s record 628 million tons, Shougang Corp. said today at the same conference. Producers in Australia will make $20 billion more a year by selling products at cash levels rather than on annual contracts, Goldman Sachs JBWere Pty said March 1. Rio last year agreed to sell benchmark products to Japanese steelmakers at a 33 percent discount, or $61 a ton, excluding freight. The cost of 62 percent iron-content ore delivered to the port of Tianjin, China, was $144.70 a ton yesterday, according to The Steel Index. To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net ;

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Adam Hanft: Google Is the New "CorporNation" – Half Company, Half Virtual Government

March 23, 2010

Value judgments aside, Google is meddling. Its decision to redirect its filtered Chinese search engine to Hong Kong (where consumers now get an unblocked Google.com.hk) is a public gesture of uninhibited muscle-flexing — and even, one could argue, of moral leadership. For a company whose famous mantra is “Don’t be evil,” it’s a dramatic step that few companies have the clout or, yes, courage to do. In fact, Google’s size and influence (media and economic) are such that it has transcended the lowly frame of a mere corporation and have turned it into a CorporNation A CorporNation’s vast global influence enables it to function simultaneously in two realms: a for-profit company, and as a force that can shape the geopolitical landscape. Google isn’t the only CorporNation; Goldman Sachs is clearly in that category — as the Greek political crisis has revealed, the company has been a partner in deceit with governments that used financial alchemy to disguise deficits as off-balance sheet baubles. Wal-Mart functioned as a CorporNation during Katrina. CorporNations aren’t new. Indeed, they are as old as capitalism, going back to the Dutch East India Company, which was chartered in 1602, became the world’ s first global company and transformed Holland into a colonial power as it dominated the East. Its reach was astounding: ” Between 1602 and 1796 they sent almost a million Europeans to work in the Asia trade on 4,785 ships, and netted for their efforts more than 2.5 million tons of Asian trade goods.” In more recent history, CorporNations like United Fruit ended up having extraordinary influence on local governments in Latin America, using their money and power to effectively run the show, controlling transportation, taxation and land use policies. Hence the term “banana republic.” China doesn’t want to become a “Search Republic” or a Google subsidiary. Its years of occupation by colonial powers are very much part of China’s present day psychic history. So naturally, they are refusing to crumble, to bow to Google’s visible display of pressure, this global dressing-down which must make them nuts. It’s well-acknowledged that China has been both an economic miracle and a free-speech compromise, a delicate political and economic dance that is controlled by the master string-pullers in Beijing. Is this a problem for the Chinese? I’d warrant that Google cares more about filtered words like “Falun Gong” and “Tibet” than the average Chinese citizen does, given that millions of the latter are racing towards middle class status and are more interested in searching for a spiffy little Geely hatchback than for a couple of provocative terms on the Internet. Of course, it is possible that Google is using this as an opportunity for global grandstanding — a way to build deep depositories of good will and deflect attention from some of their more controversial activities, whether it be the digitization of millions of books, privacy issues, the intrusiveness of their street mapping, or other products bubbling in their Google Labs. But moral or tactical or some New Age-y hybrid of both, Google is able to speak more forcefully — and without diplomatic wobble — than the United States government itself. After all, the Obama administration is playing a complex chess game, a push-pull minuet that needs to balance trade and monetary issues — including the valuation of the yuan — environmental concerns, defense policy, Iran, Korea and a host of other hot potatoes. Compared to this required diplomatic nuancing, the full-throated voice of a CorporNation sounds fresh and fearless. It’s an ironic twist. The United States has become a holding company — owning big chunks of banks and car companies, naming board members — while Google is speaking out about human rights and censorship. And Google doesn’t really worry about the political consequences of destabilizing the Chinese political system — after all, it’s not a real government in the end. What Google is, though, is the end-point of a gradual progression in which brands have grown large in the culture, standing for increasingly meaningful issues, belief systems that stretch well beyond their core functional benefit. We’ve gone from Coke=Refreshment, to McDonald’s=Family, to Nike=Empowerment, to Google=The Bill of Rights. Only a true CorporNation can be a stand-in for government. And sometimes, a stand-out.

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Google China Pullout Would Be Permanent, `Burn Bridges,’ Ex-Executive Says

March 18, 2010

By Bloomberg News March 19 (Bloomberg) — Google Inc. would probably be unable to return to China should it withdraw from the market instead of abiding by the country’s censorship laws, a former executive at the company said. The public manner in which Google announced its intention to pull out of the country means they may have “burnt bridges and they’ve burnt the Google brand in China,” Peter Lui , formerly the company’s financial controller for the Asia Pacific region, said in an interview yesterday. “There is no way Google can ever come back.” Gabriel Stricker , a spokesman for Mountain View, California-based Google, declined to comment, as did Jessica Powell , a spokeswoman in Tokyo. The owner of the world’s most-used search engine on Jan. 12 said it would stop filtering its Web site in China even if that meant ending its operations in the country. Speculation that negotiations with the government had faltered intensified after China said last week the plan to stop filtering at its Google.cn site was irresponsible. “China can do without Google. They have other search engines,” said Christopher Tang, professor of business at University of California, Los Angeles. Google “will have a difficult time re-entering the China market,” he said. The U.S. company may announce on March 22 it will pull out of China on April 10, Shanghai-based China Business News reported today, citing an unidentified Chinese sales agent and an unnamed Google official. First Employees Lui, 45, said he was one of the first people at Google China and left the company in 2008 after three years because of disagreements with upper management. Lui then joined online recruiter 51job Inc. in March 2009 as chief financial officer before resigning eight months later. Growing concerns that Google would pull out led some advertising agents to advise clients to promote their products in rival Internet sites such as those of leading Chinese search- engine operator Baidu Inc. China has 384 million Internet users, according to government data, more than the total U.S. population. The number may grow to 840 million, or 61 percent of the population, by 2013, according to estimates at EMarketer Inc. in New York. Google rose $0.15 to $566.40 on the Nasdaq Stock Market yesterday. The shares have dropped 8.6 percent this year. The prospect of a pullout helped bolster shares of Baidu, China’s biggest Internet search engine, 46 percent since the Jan. 12 announcement. All Internet service providers in China must have their licenses reviewed by the Ministry of Industry and Information Technology in March, though the agency may extend the reviews for some companies into April, Shawn Zhao, Google’s managing counsel for greater China, said earlier this week. Google’s possible withdrawal would have no bearing on the overall environment for foreign companies operating in China and would be an “individual business act,” Chinese Foreign Ministry spokesman Qin Gang said this week. “It’s over for Google in China,” Lui said. — John Liu , Mark Lee , Pavel Alpeyev , Brian Womack . Editors: Young-Sam Cho , Mark McCord , Jonathan Annells

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Ford Chief Mulally Says Talks to Sell Volvo Cars Unit to Geely Continuing

March 18, 2010

By Bruce Einhorn and Keith Naughton March 18 (Bloomberg) — Ford Motor Co. Chief Executive Officer Alan Mulally said talks to sell the automaker’s Volvo unit to China’s Zhejiang Geely Holding Group Co. are proceeding, rebutting local media reports the deal could be delayed. “We are making progress on the negotiations,” Mulally said in an interview in Shanghai, without giving a time frame for when the agreement will be made. Ford aims to sign a $2 billion deal to sell Volvo Cars to Geely by the end of this month, three people familiar with the talks said last week. Dearborn, Michigan-based Ford put Volvo up for sale in late 2008, part of a strategy of dropping European luxury lines to focus on its namesake brand. The China Daily said yesterday financing and technology transfer problems could delay the acquisition, citing people familiar with the matter. “There is little chance for the deal to fall apart given that the two companies have both made a lot of efforts on the deal and have seen some progress,” said Vivien Chan , an analyst with SinoPac Securities Asia Ltd. in Hong Kong. Buying Volvo would give the Chinese automaker access to Volvo’s technology and “improve Geely’s image” because Volvo is considered a premium brand in China. Ford ended three years of losses in 2009 by posting $2.7 billion in net income, its first full-year profit since Mulally came from Boeing Co. in 2006. Mulally has focused on refreshing Ford’s lineup, including adding more fuel-efficient small cars, while cutting costs. He reduced the North American workforce by about 47 percent and sold the Jaguar, Land Rover and Aston Martin luxury brands. ‘Great Brand’ Whoever buys the Swedish unit “are gaining a great brand,” Mulally said. “We will continue to support Volvo just like we did with Aston Martin, Jaguar and Tata.” Geely, China’s largest private automaker based on 2008 sales, wants to gain insights into Western vehicle development and manufacturing through buying a mainstream European brand. Mulally, 64, said he sees about 40 percent of global auto sales coming from the Asia-Pacific region over the next 10 years, while 35 percent will be in the European region and 25 percent in the Americas. “We are going to invest whatever we need to support Asia- Pacific,” Mulally said. “It’s clearly the highest growth market going forward.” Top-Selling Automaker Ford gained U.S. market share last year for the first time since 1995 with new models such as the revamped Taurus sedan, while the predecessors of GM and Chrysler Group LLC reorganized in bankruptcy and received federal aid. Ford surpassed General Motors Co. last month to become the top-selling automaker in the U.S. for the first time since 1998. Mulally broke ground in September on a $490 million small- car factory in Chongqing, Ford’s third assembly plant in China. Ford ranks 12th in the nation with 2.8 percent of sales, according to auto researcher J.D. Power & Associates. GM, which emerged from bankruptcy July 10, outsells Ford 3-to-1 in the country, building twice as many vehicles. Ford gained 4.5 percent to $14.10 in New York trading yesterday. To contact the reporters on this story: Bruce Einhorn in Hong Kong at beinhorn1@bloomberg.net ; Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net

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Deutsche Bank’s Zhang Said to Be in Talks on Joining Chinese Lender ICBC

March 15, 2010

By Cathy Chan and Aaron Kirchfeld March 15 (Bloomberg) — One of Deutsche Bank AG ’s top executives in Asia is in discussions about joining Industrial & Commercial Bank of China Ltd. , the world’s largest lender by market value, said people with knowledge of the matter. Lee Zhang , Deutsche Bank’s head of global banking for Asia- Pacific outside Japan, is still with the company and it wasn’t clear what position he would have at Beijing-based ICBC, said the people, speaking on condition of anonymity because the talks are private. Zhang, 45, didn’t respond to phone calls and text messages seeking comment. Zhang would be the most senior investment banker at a western firm to join a Chinese state-controlled lender. A move might entail a pay cut: ICBC Chairman Jiang Jianqing was paid 1.61 million yuan ($236,000) in 2008, about 12 percent of Deutsche Bank Chief Executive Officer Josef Ackermann ’s salary that year. Michael West , a spokesman at Deutsche Bank in Hong Kong, declined to comment. ICBC’s Jiang, asked last week whether the bank was in talks to hire Zhang, had no comment. The Century Weekly magazine earlier reported that Zhang is among candidates for a senior job at a state-owned commercial bank. Asia Growth “Chinese banks are growing both domestically and globally and this may be one of the reasons they’re attracting bankers from the private sector,” said Manfred Jakob , a Frankfurt-based analyst at SEB AG. “Still, Deutsche Bank’s strategy to grow in Asia remains intact.” Deutsche Bank in December said pretax profit may reach a record 10 billion euros ($13.7 billion) in 2011, helped by expansion in Asia. Net revenue in the Asia-Pacific region, excluding Japan, may almost double to about 4 billion euros by 2011, it said. The German company in May named Robert Rankin , former head of investment banking for Asia-Pacific at UBS AG, as CEO for the region, excluding Japan. The most senior executive to join Bank of China from a western bank stayed less than 1 1/2 years with the company. The lender hired Lonnie Dounn in February 2005 from HSBC Holdings Plc as its chief credit risk officer. Dounn resigned after a 16- month stint, citing “personal reasons.” World’s Largest IPO Zhang is a member of the National Committee of the Chinese People’s Political Consultative Conference, an advisory body to the nation’s legislature. He is a financial adviser to the city of Beijing and the governor of Heilongjiang, China’s northernmost province that borders Russia. His team won a role in advising ICBC on the Chinese bank’s share sale in 2006, at the time the world’s biggest initial public offering. That same year, Zhang helped land a $3.1 billion transaction advising Guangdong Development Bank on selling control to Citigroup Inc. Zhang joined Deutsche Bank from Goldman Sachs Group Inc. in February 2001 as head of its China corporate finance business. He was promoted to China chairman in September 2003 and Asia co- head of global banking the next year, reporting to Michael Cohrs . During his first years at Deutsche Bank, Zhang made hires including Jack Zhai , now China president at Macquarie Capital Advisers, and Amanda Lu from Citigroup. He hired Charles Wang from Merrill Lynch & Co. and Zhang Xiuping from JPMorgan Chase & Co. Lu, Wang and Zhang are still with Deutsche Bank. Salary Laggard While China boasts three of the world’s seven largest banks by market value, pay remains a fraction of what executives in the U.S. and Europe get, limiting their allure as employers. ICBC Chairman Jiang, whose bank is the world’s biggest by profit and has more than 385,000 employees, 16,386 branches and more customers than Russia has people, received 800,000 yuan of base salary for 2008. On top of that, he got a bonus of 658,000 yuan plus pension and medical benefits totaling 152,000 yuan, according to ICBC. Ackermann got 1.15 million euros in 2008 salary, according to Deutsche Bank’s annual report for that year. He didn’t get a bonus. Deutsche Bank set aside about 357,000 euros last year in compensation and benefits for each employee at the corporate and investment bank, which includes the securities business and transaction banking. Pay Crackdown London-based HSBC , the world’s third-biggest bank by market value after ICBC and China Construction Bank Corp., moved CEO Michael Geoghegan to Hong Kong from London this year and gave him a 300,000-pound ($455,300) allowance for relocation and “associated additional costs of living,” the lender said this month. China, whose number of billionaires jumped to 64 from 28 in the past year according to Forbes magazine, has joined the U.S. and Europe in seeking to curb banker compensation. The CBRC this month told lenders to defer at least 40 percent of senior executives’ bonuses for at least three years under new guidelines aimed at aligning compensation with performance. Under the rules, which took effect March 1, bank executives’ basic salaries can’t exceed 35 percent of total compensation, with bonuses limited to three times base pay. To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

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Metals, Oil Fall on China Inflation Surge; Yen, Dollar, Asian Stocks Rise

March 11, 2010

By James Poole and Jonathan Burgos March 11 (Bloomberg) — Metals dropped, while the yen and dollar strengthened, after reports on Chinese inflation , factories and loans raised concerns the government would take steps to brake growth. Asian stocks advanced, led by Japanese shares, on speculation the nation’s economy is recovering. Copper for three-month delivery dropped 0.8 percent to $7,380.75 a metric ton and Standard & Poor’s 500 futures lost 0.3 percent by 4:30 p.m. in Tokyo. Euro Stoxx 50 futures slid 0.6 percent. The MSCI Asia Pacific Index rose 0.3 percent to 122.86. The yen climbed to 123.33 per euro from 123.62 in New York yesterday, and the Australian dollar fell for the first time in five days as Chinese imports may slow. China’s increase in consumer prices hit a 16-month high of 2.7 percent in February, increasing pressure on Premier Wen Jiabao , who vowed to suppress inflation after banks flooded the financial system with money to drive a rebound from the global recession. The gain compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. “Accelerating inflation in China raises the possibility of an interest-rate hike,” said Terrace Chum , who helps manage over $5 billion for MFC Global Investment Management in Hong Kong. “The government wants to prevent the economy from over- heating. It may slow growth, but the recovery is on track.” Five stocks rose for every four that declined on the MSCI Asia Pacific Index , as commodity-related companies fell on concern China will pare back measures that boosted growth, while Japanese shares gained on speculation the economy is recovering. BHP, Posco BHP Billiton Ltd. , the world’s largest mining company, dropped 0.5 percent in Sydney, and Posco, South Korea’s biggest steelmaker, also lost 0.9 percent in Seoul. Sony Corp. climbed 1.9 percent in Tokyo after the Nikkei newspaper said the Japanese government will boost its economic outlook. Japan’s Nikkei 225 Stock Average added 1 percent to 10,664.95, the biggest advance among major equity benchmarks in the Asia-Pacific region. The yen rose after the Chinese inflation report, which sparked demand for Japan’s currency as a refuge. The Japanese currency also gained on speculation companies repatriated overseas earnings after the yen fell to a two-week low against the euro yesterday. Japan’s currency strengthened against all 16 of its major counterparts amid speculation exporters brought funds home before the fiscal year ends this month. Australia’s dollar fell from a seven-week high after employers added fewer jobs than economists forecast, damping expectations the Reserve Bank of Australia will raise interest rates in April. China, Australia Chinese measures to curb growth may slow Australia’s exports. China is the country’s biggest market, buying 22 percent of its shipments in the seven months to the end of January, a government report showed this month. “Pressure is mounting on China to raise interest rates,” said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co., which manages $112 billion. “Developing nations are heading toward the exit ahead of developed ones” in terms of paring back stimulus, Muto said. “Strong inflation data should enhance pressure for tightening in China,” said Minoru Shioiri , chief manager of foreign-exchange trading at Mitsubishi UFJ Securities Co. in Tokyo. “The bias is for the yen to rise.” The yen climbed as high as 123.02 per euro from 123.62 in New York yesterday, when it fell to 124.00, the lowest level since Feb. 23. Japan’s currency advanced to 90.37 per dollar from 90.52. The greenback traded at $1.3645 per euro from $1.3657, and was at $1.4979 per pound from $1.4978. Aussie Weakens The Australian dollar dropped to 91.44 U.S. cents from as much as 91.93 yesterday, the most since Jan. 20. Australia’s currency declined 0.3 percent to 82.63 yen. New Zealand’s dollar fell 0.4 percent to 69.92 U.S. cents. “Japanese exporters may be repatriating yen, given the March fiscal year-end is approaching,” said Masanobu Ishikawa , general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “There’s talk they may be behind their sales of euro-yen.” The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan increased 1 basis point to 93 basis points as of 8:12 a.m. in Singapore today, Royal Bank of Scotland Group Plc prices show. Risk benchmarks for Australia and Japan were little changed. The extra yield investors demand to own corporate bonds rather than government debt fell yesterday to 159 basis points, or 1.59 percentage point, the lowest level this year, the Bank of America Merrill Lynch Global Broad Market Corporate Index shows. Yields averaged 4.035 percent. To contact the reporter for this story: James Poole in Singapore jpoole4@bloomberg.net ;

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Asian Stocks Fluctuate as Oil Price, Shipping Rates Drop; Telstra Advances

March 9, 2010

By Shani Raja and Satoshi Kawano March 10 (Bloomberg) — Asian stocks fluctuated as shipping lines declined after a measure of cargo-transport-rates fell, while Australia’s largest telephone company rose on speculation it will avoid a forced break-up. STX Pan Ocean Co., South Korea’s largest bulk-shipping line, dropped 1.9 percent in Seoul, and Kawasaki Kisen Kaisha Ltd., Japan’s third-largest line, fell 1.7 percent in Tokyo after shipping rates fell for the first time in almost two weeks. BHP Billiton Ltd. , Australia’s largest oil producer, lost 0.9 percent as crude oil futures declined for a second day. Telstra Corp. climbed 2.1 percent in Sydney after a newspaper said Australia’s government may fail to force it to split. “We don’t have a strong catalyst, so I’m expecting stocks to drift without a clear direction today,” said Hiroichi Nishi , an equities manager at Nikko Cordial Securities Inc. in Tokyo. The MSCI Asia Pacific Index was little changed at 122.73 as of 10:26 a.m. in Tokyo, with about as many stocks advancing as declining. The index has risen 74 percent since March 9 last year, when it sank to its lowest level since the September 2008 bankruptcy filing of Lehman Brothers Holdings Inc. Japan’s Nikkei 225 Stock Average was little changed at 10,551.54, and no major benchmark in the Asia-Pacific region moved more than 0.6 percent. The MSCI Asia Pacific Index has risen in the past year as governments worldwide bolstered their economies through increased spending. Shares in the gauge trade at 18.6 times estimated earnings on average, compared with 15 times for the Standard & Poor’s 500 Index in the U.S. and 13 times for the Stoxx Europe 600 Index. To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net ; Satoshi Kawano in Tokyo skawano1@bloomberg.net .

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Asia Stocks Rise on Improving Economic Outlook; Pound Drops for Sixth Day

March 2, 2010

By Linus Chua and Weiyi Lim March 2 (Bloomberg) — Asian stocks rose to the highest in five weeks as gains in U.S. consumer spending, South Korean exports and lower unemployment in Japan signal faster economic growth. The Australian dollar and pound declined. The MSCI Asia Pacific Index added 0.6 percent to 119.64 at 4:15 p.m. in Tokyo, the highest since Jan. 25, and the cost of protecting bonds in the region from default fell. The so-called Aussie dropped from a one-week high as the central bank signaled it will slow the pace of interest rates increases. The pound dropped for a sixth day versus the dollar, and futures on the Standard & Poor’s 500 Index were little changed, while those for the Dow Jones Euro Stoxx 50 rose 0.3 percent. U.S. consumer spending, South Korean exports increased for a fourth straight month, India’s manufacturing output gained the most in 1 ½ years, while Japan’s unemployment rate unexpectedly slid in January, one of the first signs that a rebound in overseas shipments is benefitting workers. The data lifted investor optimism for stable economic growth. “We are expecting global recovery to come through, and this should be a reasonable backdrop for stocks,” said Shane Oliver , Sydney-based head of investment strategy at AMP Capital Investors, which oversees $90 billion. “Economic indicators have been consistent, showing a gradual recovery.” South Korea’s Kospi Index climbed 1.3 percent. New Zealand’s NZX 50 Index advanced 0.6 percent. India’s Bombay Stock Exchange’s Sensitive Index, or Sensex, added 1.6 percent to a one-month high. Emerging Markets Indian stocks may “outpace” other emerging markets amid an improvement in the nation’s economic outlook, according to Mark Mobius , chairman of Templeton Asset Management Ltd., which manages $34 billion in developing-nation assets. Tata Motors Ltd. rose 9.7 percent, the most in six months and the best performer on the MSCI Asia Pacific Index today after India’s biggest truckmaker said February sales jumped 58 percent. Technology companies gained the most among the 10 industry groups in the MSCI Asia Pacific Index. South Korea’s Samsung Electronics Co. , the world’s biggest maker of computer memory chips, climbed 3.5 percent. Toshiba Corp. , Japan’s biggest memory-chip maker, rose 2 percent. Taiwan Semiconductor Manufacturing Co. , the world’s biggest maker of customized chips, gained 0.5 percent. Hong Kong’s Hang Seng Index lost 0.8 percent, led by HSBC Holdings Plc, which slumped 7 percent after the bank reported lower-than-estimated profit. Australia’s Rates The currency earlier climbed to 90.31 U.S. cents, its strongest level since Feb. 23, after Governor Glenn Stevens raised the benchmark rate to 4 percent from 3.75 percent in a decision forecast by 14 of 19 economists surveyed by Bloomberg News. The S&P/ASX 200 Index pared gains of as much as 0.6 percent, rising 0.3 percent after the rate increase. “Reading through the statement clearly indicates that the RBA is going to continue with a gradual approach, which was seen as a little dovish,” said David Forrester , a currency strategist at Barclays Capital in Singapore. Australia’s currency fell to 89.71 U.S. cents in Sydney from 89.85 cents before the rate decision and 90.09 cents in New York yesterday. New Zealand’s dollar weakened to 69.44 U.S. cents from 69.97 cents yesterday. The cost of protecting bonds in the Asia-Pacific region from default fell. The Markit iTraxx Australia index dropped 2 basis points to 89.5, according to Citigroup Inc. The Markit iTraxx Japan index lost 2 basis points to 140, Morgan Stanley prices show. Bond Risk The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 1.5 basis points to 109 basis points, according to Citigroup Inc. Credit-default swap indexes are benchmarks for protecting bonds against default, and a drop shows improving perceptions of credit quality. “The market is becoming comfortable that the U.S. recovery is in place,” said Tim Schroeders , who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “There is still a pervading caution given the volatility in markets.” The pound dropped after polls showed Britain may have its first minority government since 1974 and ahead of a report forecast to show that a recovery in consumer confidence stalled in February. The pound was at $1.4867 in Tokyo from $1.4991 in New York yesterday when it dropped to $1.4784, the lowest level since May 1. It was at 90.89 pence per euro from 90.47 pence yesterday after reaching 91.50, the weakest since Dec. 1. Copper Dips Copper for three-month delivery dropped 1.6 percent to $7,281 a metric ton as Codelco and Anglo American Plc ramped up output in Chile after power was restored following the Feb. 27 earthquake. Codelco, the world’s largest copper producer, said it will be able to make up for “minor” production losses at its mines later this year. Oil traded below $80 a barrel in New York as the dollar gained, before a report that is expected to show U.S. crude supplies increased for a fifth week, signaling demand from the world’s biggest energy consumer may be slowing. Oil was trading at $78.56 a barrel after dropping 1.2 percent yesterday as the dollar advanced against the euro, making investments in dollar-denominated commodities less attractive. Crude inventories in the U.S. probably rose 0.5 percent last week, according to a Bloomberg News survey before an Energy Department report this week. To contact the reporters for this story: Linus Chua at lchua@bloomberg.net ; Weiyi Lim in Taipei at wlim26@bloomberg.net

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Prudential Plc to Buy AIG Unit for $35.5 Billion

March 1, 2010

By Kevin Crowley and Zachary R. Mider March 1 (Bloomberg) — Prudential Plc , Britain’s biggest insurer, agreed to buy American International Group Inc. ’s Asian life operations for $35.5 billion in cash and stock to gain more than 20 million customers in the region. Prudential will pay $25 billion in cash and $10.5 billion in stock and other securities for AIA Group Ltd., the London- based insurer said in a statement today. The insurer said it plans to raise $20 billion in a rights offering and sell about $5 billion of bonds to finance the cash part of its offer. Prudential Chief Executive Officer Tidjane Thiam is trying to boost the insurer’s sales in Asia as growth in the U.K declines. By acquiring AIA, Thiam gets a business with more than 90 years in Asia and more than $60 billion of assets in 13 markets in the region. The purchase price is about 50 percent more than Prudential’s market value. “If you look at the price, it shows the company is very bullish on the Asia market,” said Luo Yi , a Shenzhen-based analyst at China Merchants Securities Co. “The Chinese market has vast potential.” Prudential shares fell 11 percent to 537.5 pence as of 10:49 a.m. in London trading. The insurer said it will seek to list its shares on the Hong Kong Stock Exchange following the transaction. The sale would be AIG’s largest since it received a U.S. government bailout in 2008. AIG had planned an initial public offering for the Hong Kong-based unit to help repay its $182.3 billion rescue. Faster Than IPO “We decided that a sale to Prudential enables AIG to realize value on a faster track to repay U.S. taxpayer,” AIG CEO Robert Benmosche said in a statement today. Prudential’s offer may tempt rivals to bid for AIA, especially if AIG were prepared to lower its asking price, said Eamonn Flanagan , a Liverpool-based analyst at Shore Capital Group Plc who has a “buy” rating on Prudential stock. The insurer is paying about 1.69 times the embedded value of AIA in 2009. Embedded value estimates a company’s net worth excluding new business. The acquisition of AIA, founded in Shanghai in 1919, gives Prudential a business with 20,000 employees and 250,000 agents in markets spanning China to Australia. AIA sells life, accident and health insurance policies, and private retirement planning and wealth management services, its Web site shows. McKinsey & Co. has estimated Asia will deliver around 40 percent of global life insurance premium growth over the next five years. ‘The Right Move’ “Strategically it’s probably the right move” for Prudential, said Justin Urquhart Stewart , who oversees about $3.3 billion as director of 7 Investment Management in London, including Prudential shares. “It puts them into a different league.” Thiam said in a Feb. 17 interview that he wants to raise the proportion of sales from Asia to 80 percent by 2015 from 50 percent now. Prudential and AIA combined would have had about 60 percent of new business profit from Asia in 2009, he said today. “This transaction is hugely exciting and a one-off opportunity,” Thiam said in a statement. “It puts us in a strong leadership position in all the critical growth markets in the region.” Prudential has a market value of 15.3 billion pounds. The stock has more than doubled in the past year. Credit Suisse Group AG, JPMorgan Cazenove and HSBC Holdings Plc agreed to underwrite in full the $20 billion rights offer. That would be about equal to Lloyds Banking Group Plc’s 13.5 billion pounds ($20.4 billion) sale in December, still the U.K.’s biggest. ‘Risk Involved’ “If you’ve got backing from a few banks and a few major shareholders, there will be a way to make this deal happen,” said Marcus Barnard , a London-based analyst at Oriel Securities Ltd. with a “sell” rating on the stock. “The question is the cost and the risk involved.” The insurer may be forced to sell assets in India and China to comply with local foreign-ownership regulations, he said. AIG said last May that it would pursue an IPO of AIA after an auction of the business failed to turn up bids that matched what AIG executives thought the company was worth. That included a bid from Prudential that valued AIA at about $15 billion, one of the people said. The sum raised in the sale would exceed the total of more than 20 other asset sales announced by AIG, which has struck deals to raise more than $12 billion by selling units, including a U.S. auto insurer and equipment guarantor. Biggest U.S. Loss AIG had a fourth-quarter net loss of $8.87 billion, narrowing from $61.7 billion a year earlier when the insurer recorded the biggest loss in U.S. corporate history, the company said Feb. 26. The insurer gave stakes in American Life Insurance Co., known as Alico, and AIA, its biggest non-U.S. life insurance units, to the Fed in December. MetLife Inc. has said it is in talks to buy Alico, which operates in more than 50 countries outside the U.S. Citigroup Inc. and Goldman Sachs Group Inc. advised AIG. Prudential Plc has no relation to Newark, New Jersey-based Prudential Financial Inc. and operates in the U.S. through its Jackson National Life Insurance Co. unit.

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Mukherjee May Raise India Taxes to Avoid `China-Like’ Economic Overheating

February 24, 2010

By Cherian Thomas and Kartik Goyal Feb. 25 (Bloomberg) — India’s government may tomorrow raise excise taxes and slow spending in an effort to shrink a 16-year-high budget deficit and foster sustainable growth that avoids the asset bubbles emerging in China. Finance Minister Pranab Mukherjee will promise to cut the deficit to 5.5 percent of gross domestic product from 6.8 percent in his budget speech, according to the National Council of Applied Economic Research in New Delhi and Morgan Stanley economist Chetan Ahya. The challenge for Mukherjee is to unwind 7.5 trillion rupees ($162 billion) of fiscal stimulus and curb consumer-price inflation that’s the highest in the Asia-Pacific region, according to data compiled by Bloomberg. The payoff may be cheaper debt-financing costs and averting investor concerns at the sustainability of faster economic growth such as in China. “India wants to avoid a China-like overheating problem,” said Shashanka Bhide , chief economist at the National Council, a corporate-funded analysis group. “Mukherjee has a tough balancing act — to support growth and cut the budget deficit to control inflation.” Prime Minister Manmohan Singh ’s administration, which won reelection last year, will also aim to avoid stifling an economic rebound that’s yet to produce earnings gains for DLF Ltd. , India’s largest real-estate developer, and has left out an agriculture industry hammered by a poor monsoon. Growth to Quicken The government may tomorrow report GDP growth slowed to 6.9 percent last quarter from a year ago, compared with a 7.9 percent rate the previous three months, the median of 19 forecasts in a Bloomberg News survey shows. At the same time, a waning impact from the hit to farming and strengthening domestic demand is forecast to see the expansion approach 8 percent this year, according to the International Monetary Fund. “You can’t maintain your policy settings at crisis levels” when growth rebounds, Stephen Roach , chairman of Morgan Stanley Asia Ltd., said in an interview in Mumbai Feb. 12. “If monetary and fiscal accommodation persists for an indefinite period, you run the risk” of consumer and asset-price inflation, he said. Roach’s Singapore-based colleague Ahya expects the government to lift excise taxes by 2 percentage points on almost all products and cut expenditure by 0.6 percentage points of India’s GDP, Asia’s third largest. Mukherjee wrote off farm loans, raised government salaries and cut excise taxes by 4 percentage points as the global recession deepened, providing fiscal stimulus worth 3.5 percent of GDP. The budget for the fiscal year beginning April 1 is scheduled for presentation to parliament at 11 a.m. in New Delhi. Debt Burden With a debt level almost quadruple China’s — at an estimated 86 percent of GDP this year according to the IMF — fiscal restraint may help stoke India’s bonds and currency, Goldman Sachs Group Inc. analysts said this month. It may also aid a sovereign-debt rating that’s the lowest among the BRIC nations, which include Brazil, Russia and China. “If the exit path is well articulated and well executed, the local-currency rating could be upgraded,” Moody’s Investors Service sovereign analyst Aninda Mitra said in a Feb. 19 interview. Moody’s ranks India’s rupee-denominated debt at Ba2, two levels below investment grade. Mukherjee may accelerate sales of state-run companies including Coal India Ltd., India’s monopoly coal producer, and Steel Authority of India Ltd. , the nation’s second-largest steelmaker, to boost revenue. India is also aiming to pare a subsidy bill that amounts to 10 percent of spending, by reducing aid to fertilizer producers. Hit to Stocks Debt woes have become an investor focus after a Greek rating downgrade spurred a sell-off in the euro. India’s Sensitive stocks index declined 6.6 percent since Jan. 1, while China’s Shanghai Composite Index fell 8.5 percent this year. Bonds have retreated, with benchmark 10-year Indian government note yields climbing 20 basis points to 7.79 percent this month. Bond sales may rise 2 percent in the fiscal year to a record 4.6 trillion rupees, according to the median forecast in a Bloomberg survey, reflecting the need to refinance a surge in maturing debt. Central bank Governor Duvvuri Subbarao said last month that India’s budget deficit was a “bigger risk” to the economy than any other factor and called on the finance ministry to trim it to help curb inflation. Inflation Rate Prices paid by industrial workers rose almost 15 percent in December from a year earlier, the most in 11 years. Consumer- price inflation for farm workers is 17.2 percent, hurting the purchasing power of the 700 million people who live in the countryside. Industrial production grew 16.8 percent in December, the most since at least 1994, prompting the central bank to say manufacturers are nearing capacity. Even so, earnings have been mixed. New Delhi-based Hero Honda Motors Ltd. , India’s biggest motorcycle maker, reported a better-than-estimated 79 percent increase in profit last quarter. Gurgaon-based DLF’s earnings fell for the sixth straight quarter on subdued office demand. “We have seen some growth in the last two quarters,” Ravi Sud , chief financial officer at Hero Honda, said in an interview. “But is a two-quarter period sufficient to take a call on withdrawal of all the stimulus packages? One is not too sure.” To contact the reporters on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net ; Kartik Goyal in New Delhi at kgoyal@bloomberg.net .

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Video: Polo’s Lauren Says Olympics Gives Brand Global Exposure: Video

February 12, 2010

Feb. 12 (Bloomberg) — David Lauren, senior vice president of advertising, marketing and communications for Polo Ralph Lauren Corp., talks with Bloomberg’s Margaret Brennan about being the official outfitter of the U.S. Olympic team. Lauren also discusses growth opportunities in China and Asia. (Source: Bloomberg)

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Expats Bound for Jobs in India Run Up Against `Out of Line’ Visa Limits

February 12, 2010

By Saikat Chatterjee Feb. 12 (Bloomberg) — T.V. Mohandas Pai says he wants to hire more expatriates for Infosys Technologies Ltd. , India’s second-largest software exporter, as the global economic recovery boosts sales. Stricter visa rules prompted by unskilled Chinese workers are holding him back. Infosys has about 20 foreign workers and needs “many more” to help it expand abroad, said Pai, who runs the Bangalore-based company’s human resources department. Companies in Asia’s third-biggest economy are using annual growth averaging 8.7 percent in fiscal years 2006-2009 to reverse a decades-long “brain drain” to the U.S. and Europe. The government toughened regulations for foreign workers last year after discovering that about 40,000 Chinese building power plants used business visas instead of employment visas, skirting taxes and taking jobs from locals. The crackdown restricted employment visas to skilled people in senior jobs and limited foreigners to 1 percent of a project’s workforce. “We need to get expats to help us understand the complexity of businesses,” Pai said. “But instead of helping, the government has tightened the visa rules. The problem in India is policymakers are totally out of line with reality.” Building Power Plants India is attracting foreign workers facing jobless rates of 9.7 percent in the U.S. and 10 percent in the 16-nation euro region. India doesn’t regularly release unemployment data. Little attention was paid to visas in the past decade as the government sought investments from abroad. The number of registered foreign nationals more than doubled to 351,999 in 2007 from 137,474 the year before, according to the latest data from the Ministry of Home Affairs Web site . Three power plants being built by billionaire Anil Ambani’s Reliance Power Ltd. placed orders with Shanghai Electric Group Co. Lanco Infratech Ltd. awarded a contract for its 1,015- megawatt plant to Deyang, China-based Dongfang Electric Corp. “It has come to the notice of the government that a large number of foreign nationals, including Chinese, were coming for execution of projects/contracts in India on Business Visas instead of the Employment Visas,” Harish Rawat, junior minister for labor, said Dec. 16 in a written response to lawmakers. Foreign workers without employment visas aren’t paying taxes, said Amitabh Singh, a partner at Ernst & Young Pvt. in New Delhi. 7.2 Percent Growth The government forecasts economic growth will reach 7.2 percent in the year ending March. India recorded the highest average pay increase in the Asia-Pacific region in 2009 at 6.3 percent, Lincolnshire, Illinois-based Hewitt Associates Inc. said in October. “It has become a hot destination,” said Jeffrey Joerres , chief executive officer of staffing company Manpower Inc. “India and China are on the front end of the recovery.” Infosys is benefiting from a strong rebound in the financial services industry, Chief Executive Officer S. Gopalakrishnan said Jan. 28. The company on Jan. 12 reported profit that beat analysts’ estimates and raised its annual revenue forecast. Sales may rise as much as 2 percent to $4.76 billion in the year ending March 31, compared with an earlier prediction of a 1.3 percent drop. ‘Hard Work, Sacrifice’ Matthew Barney, 40, left Wisconsin a year ago and moved his family near Bangalore to become head of leadership development for Infosys. “Indian culture today is similar to the original cultural values that drove the U.S.,” said Barney, whose wife is Indian. “Both value hard work and sacrifice today for the next generation to have a better standard of living.” India’s travel and tourism economy is expected to grow 7.7 percent a year in real terms from 2010 to 2019, according to a 2009 report by the World Travel & Tourism Council. Gurgaon-based Air Works India Engineering Pvt. hired American Todd Hattaway as president of airline maintenance last year. “Aviation is developing so fast and to be a major part of that will definitely enhance my career,” Hattaway said. Deepak Gupta , country head and managing director of executive-search firm Korn/Ferry International , said the new rules may dim India’s attractiveness to foreign workers. “The visa system has to be made more friendly,” Gupta said. “It’s not going to help make India a global employment destination.” Favoring Indians The government said Nov. 25 that employment visas would only be granted to professionals including technical experts, senior executives and managers. The visas “will not be granted for jobs for which a large number of qualified Indians are available,” M. Ramachandran, a Home Affairs junior minister, said in a written statement to parliament. The Ministry of Labour and Employment said foreign nationals cannot total more than 1 percent of a workforce, with between five and 20 allowed on a project. The Chinese government received numerous complaints from companies and said, “We hope India will be considerate of the circumstances of Chinese firms there,” state-run China Daily reported Nov. 3. In December, India amended the rules to allow up to 40 foreigners on power and steel projects through June. Companies seeking more overseas workers need labor ministry approval. Pai said limiting foreigners will do more harm than good. “We need substantial relaxation in work permit policies,” he said. “India needs to get many, many more expats.” To contact the reporters on this story: Saikat Chatterjee in New Delhi at schatterjee4@bloomberg.net .

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Video: King Says Leighton `Responsive’ to Opportunities in Asia: Video

February 11, 2010

Feb. 12 (Bloomberg) — Leighton Holdings Ltd. Chief Executive Officer Wal King talks with Bloomberg’s Susan Li about the company’s business strategy and growth outlook. Leighton, Australia’s biggest construction company, said profit more than doubled on contributions from infrastructure and mining construction projects across the Asia-Pacific region. King also discusses the impact of Dubai’s debt crisis on the company. (Source: Bloomberg)

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Video: Thiam Says Prudential Will `Absolutely’ Expand in Asia: Video

January 29, 2010

Jan. 29 (Bloomberg) — Tidjane Thiam, chief executive officer of Prudential Plc, talks with Bloomberg’s Francine Lacqua about the company’s expansion plans for Asia. Thiam speaks at the World Economic Forum in Davos, Switzerland. (Source: Bloomberg)

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Platinum Overtaking Gold as Metal of Choice With Rebounding Sales of Cars

January 25, 2010

By Kim Kyoungwha and Nicholas Larkin Jan. 25 (Bloomberg) — Even after a record 57 percent rally last year, platinum is cheap relative to gold , signaling more gains as demand grows from carmakers and exchange-traded funds. An ounce of platinum buys 1.42 ounces of gold, down 42 percent from the record 2.43 ounces in 2001 and 23 percent less than the 10-year average, data compiled by Bloomberg show. Automakers, the biggest buyers, will expand output 20 percent this year, said Evan Smith , who helps manage $2 billion at U.S. Global Investors. Hedge funds raised their bets 163 percent in 2009, about twice gold’s increase. ETF Securities Ltd. funds lifted holdings to a record 594,465 ounces. “We are long platinum and short gold,” said Jonathan Barratt , the Sydney-based managing director with Commodity Broking Services Pty, who predicted platinum’s rally in September. “Gold remains under pressure. As inflation moves lower and the dollar goes higher, gold isn’t as solid.” Bank of America-Merrill Lynch strategist Michael Widmer raised his forecast for this year by 35 percent to an average of $1,750 and predicted $2,000 for 2011. Standard Chartered Plc forecast platinum will be one of the year’s best commodities. Prices may jump 55 percent to a record $2,400 by mid-year, said Joerg Ceh, head of commodity trading at Landesbank Baden- Wuerttemberg in Stuttgart, Germany’s biggest state-owned lender. Platinum, which advanced 0.3 percent to $1,554 an ounce at 4:20 p.m. in Singapore, is still down 32 percent from its March 2008 record, while gold sold for $1,098.80, within 10 percent of its peak last month. Buying platinum today and selling gold would return 30 percent, should the ratio return to the 10-year average of 1.84 times. South Africa Risk A rally in metals would extend gains in shares of Johannesburg-based Anglo Platinum Ltd. and Impala Platinum Holdings Ltd., the world’s biggest producers. Anglo soared to a 15-month high of 819 rand Jan. 5 and traded at 759.43 rand at 4:23 p.m. in Singapore. Credit Suisse Standard Securities Ltd., the joint venture of Credit Suisse Group AG and Standard Bank Group Ltd., raised the companies to “outperform” on Jan. 19. About 80 percent of the world’s platinum supply comes from South Africa, where power cuts shut mines in 2008 because the generators couldn’t produce enough electricity to meet demand. Energy use may surge again in June and July when the nation hosts soccer’s World Cup. Production this year is at risk because “you’ve got potential problems of electricity capacity coming out of South Africa,” said Chad Walls, head of metals trading in the Asia-Pacific region with Fortis Bank in Hong Kong. The Last Time When the U.S. was exiting the 2001 recession, platinum and gold traded at a ratio of about 1.60 compared with 1.42 today. Platinum prices gained 70 percent in 2002 and 2003 and the ratio climbed to 2.30 in April 2004, data compiled by Bloomberg show. “Platinum prices should be double that of gold,” said Suresh Hundia , president of the Bombay Bullion Association Ltd. in India, the biggest gold consumer. “It’s only about 40 percent more expensive. That means it has more room to rise.” U.S. Global’s Smith is betting on platinum as the world’s worst economic downturn since World War II ends. “We’ve seen growth coming out of the bottom of the recession and we’ll see that develop into the economic rebound,” said Smith, who oversees the $684 million U.S. Global Investors Global Resources Fund in San Antonio, Texas, which gained 68 percent last year. “The benefit of holding platinum is that it has precious metals characteristics, but also a pretty good industrial component as well.” Autos Recover Industrial uses, including the catalytic converters that strip pollution from automotive exhausts, represented about 70 percent of platinum demand in 2008, according to Johnson Matthey Plc. Industrial and dental usage made up about 11 percent of demand for gold, World Gold Council figures show. U.S. auto sales will rise 20 percent to 12.4 million in 2010, the Ann Arbor, Michigan-based Center for Automotive Research said Dec. 15. China, which supplanted the U.S. as the largest market after vehicle sales jumped 46 percent to 13.6 million last year, may sell as many as 15 million in 2010, according to General Motors China Inc. President Kevin Wale . Platinum may have a “modest deficit” in supply this year, according to London-based Johnson Matthey, the producer of about 33 percent of the world’s autocatalysts. An improvement in the economy may spur “some recovery in automotive and industrial demand,” it said in November. Demand for autocatalysts dropped by a third to 2.5 million ounces in 2009, the lowest level in nine years, it said. World Growth “The fundamentals for platinum are turning around,” said Evy Hambro , who manages the $13.9 billion World Mining Fund at BlackRock Investment Management Ltd. in London. “We’ve had a large exposure throughout 2009. If there were to be any weakness in the near term because of other factors, we would take advantage of that and add to our portfolio.” The International Monetary Fund said in October the global economy will expand 3.1 percent this year after a 1.1 percent contraction in 2009. The advance of precious metals, especially gold, has been driven by investors seeking refuge from an 8.5 percent slump in the Dollar Index in the past year and concern that government spending will worsen inflation. The dollar rallied 0.5 percent against the six-currency basket this month after a 4 percent jump in December. The U.S. annual inflation rate was 2.7 percent in December. Florian Siegfried , chief executive officer of Precious Capital AG, called the rally an “overreaction” on concern the global recovery may not be sustained. ‘Question This Recovery’ The MSCI World Index of 23 developed nations’ stocks fell 3.8 percent last week, the biggest decline in almost three months, after European officials called on Greece to take steps to shore up its deteriorating finances, China curbed lending to prevent its economy from overheating and U.S. President Barack Obama announced plans to limit the size of the nation’s banks. “Platinum and palladium depend on industrial usage,” said Siegfried, based in Zurich. “What we see is that investors are very bullish that stimulus packages will eventually turn around the economy and that demand for those metals will increase. We question this recovery. The fundamental for gold is more comfortable in the long term.” Even with the risks to the economy, demand from new investors is increasing. In the U.S., stock exchanges offered securities this month backed by physical platinum and palladium for the first time. The ETFS Platinum Trust held 149,924 ounces as of Jan. 21, according to the ETF Securities Web site. That’s about equal to nine days of world production. ETF Holdings The firm’s exchange-traded funds in Europe and Australia increased holdings 2.2 percent this year to a record 444,541 ounces, the Web site said. The company’s gold pile shrank 0.6 percent, it said. Hedge funds and other large speculators held a net 19,259 contracts betting platinum would rise at the end of 2009, up 163 percent from a year earlier, surpassing gold’s 83 percent gain, according to U.S. Commodity Futures Trading Commission data. As they amassed that position, platinum climbed 62 percent from its 2009 trough. “Prices have obviously come a long way from the lows,” said Dan Smith , an analyst at Standard Chartered in London. “But I think there’s a strong case we’re going to see significant upside from here still.” To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net Nicholas Larkin in London at nlarkin1@bloomberg.net

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EON Reality Strengthens Its Asia Pacific Market Presence by Appointing Pontus Appelqvist as VP of Sales

January 15, 2010

IRVINE, CA–(Marketwire – January 15, 2010) – EON Reality, Inc., the world’s leading interactive 3D software provider, today announced that Pontus Appelqvist has joined the EON Singapore office as VP of sales for the Asia Pacific market region. His industry insight and local market knowledge will be crucial in helping the company to strengthen its position in the Asian Pacific market. In his new position, Pontus Appelqvist will be in charge of sales and business development for EON Reality in Asia Pacific.

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Jefferies to Give Haiti Commissions, $1 Million as Firms Help Quake Effort

January 14, 2010

By Philip Boroff and Katya Kazakina Jan. 14 (Bloomberg) — Jefferies Group Inc. , Morgan Stanley and Goldman Sachs Group Inc . each pledged at least $1 million for relief efforts following the Haiti earthquake, among many U.S. and European businesses offering aid to victims. JPMorgan Chase & Co. , Bank of America Corp., Amgen Inc., United Parcel Service Inc. Lowe’s Cos. , Wells Fargo & Co., Eli Lilly and Co., Walt Disney Co., Western Union Co., France’s Credit Agricole SA and Britain’s Tesco Plc were among others that announced donations. Thousands remain trapped beneath collapsed buildings two days after an earthquake pummeled the Haitian capital of Port- au-Prince. More than 3 million people may have been affected by the quake and its aftermath, U.S. Secretary of State Hillary Clinton said today. “The combination of extreme poverty on the island and a horrific natural disaster — it just cried out for help,” Richard B. Handler , chairman and chief executive officer of Jefferies, said in a telephone interview. Go Daddy Group , a Scottsdale, Arizona, concern that provides Web site design and registration, sent a $500,000 check to Hope for Haiti , a nonprofit organization that supports education and health care in the country. “What touched us was the hopelessness of the situation and devastation,” said Bob Parsons , the 59-year-old chief executive of Go Daddy. “It’s a section of the world that’s in our hemisphere and it’s been forgotten.” U.S. $100 Million President Barack Obama said the U.S. will commit $100 million to relief efforts in Haiti and that the response to the disaster will require “every element of our national capacity.” He ordered agency and department heads to make rescue and relief efforts in Haiti “a top priority.” Financial firms have been among top business givers so far. Goldman, according to a spokesman, is donating to the American Red Cross for the Haitian Relief and Development Fund, Care, Doctors Without Borders, International Rescue Committee, Save the Children and the United Nations World Food Programme. It will also match employee contributions. European Companies Credit Agricole , France’s third-largest bank by market value, said it is committing 1 million euros ($1.45 million) and having its philanthropy arm work with nongovernmental organizations to determine how the money should be spent. SES World Skies, a division of Luxembourg-based SES SA — the world’s largest publicly traded satellite operator — said it is “donating satellite capacity on five of its spacecraft and access to teleport facilities” to help the rescue efforts. “Satellite networks play a quintessential role in disaster recovery, when speed is” essential, said Rob Bednarek , president and chief executive of SES World Skies. Tesco , Britain’s largest retailer, pledged 50,000 pounds ($81,600) to a Haiti emergency appeal set up with the Red Cross. “Our donation will help thousands of families who have survived the earthquake with family kits containing vital items such as blankets, tarpaulins and first aid,” Lucy Neville- Rolfe , an executive director at the company, said in a news release. The City of London Corporation — which promotes London’s financial district, and acts as its local authority — said it would send 25,000 pounds directly to the British Red Cross. “All of us in the City have been moved by the widespread destruction and loss of life in Haiti,” said Nick Anstee, lord mayor of the City of London. Jefferies Commissions Jefferies will donate all net commissions tomorrow, plus volunteered salaries, plus $1 million. In October 2001, it raised $6 million for Sept. 11 relief; $3 million for victims of the Asia tsunami in 2005, and later that year, $2.5 million following Hurricane Katrina. “Clients pay commissions every time they trade securities,” Handler said. “The hope is that they will trade more than normal tomorrow.” Following a major disaster, corporations often announce about $1 million immediately, said Melissa Berman , head of Rockefeller Philanthropy Advisors. “And as the dimensions of the situation get better known they may make additional commitments,” she said. To contact the writers on this story: Philip Boroff in New York at pboroff@bloomberg.net ; Katya Kazakina in New York at kkazakina@bloomberg.net .

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La Go Go Clothing Shop in Beijing Marks China Shift to Economy of Spenders

January 11, 2010

By Bloomberg News Jan. 11 (Bloomberg) — Beijing office worker Wang Hong holds up a $44 black blouse at Chinese clothing store La Go Go and smiles. “It’s like getting a foreign brand at local prices ,” said the 33-year-old Wang, standing in front of racks of clothes at the Jiamao mall. By offering prices as much as 25 percent less than international retailers Esprit and Mango, La Go Go parent Ever- Glory International Group Inc. is transforming itself from a supplier to Levi Strauss & Co. into a Chinese fashion chain. The retail unit’s sales climbed 153 percent in the third quarter from a year earlier. Ever-Glory chairman Edward Kang started La Go Go stores in 2008 to capitalize on rising local affluence and counter a drop in exports. The Nanjing-based company now has 154 La Go Go outlets and plans to open as many as 1,000 by 2015. The shift shows how the nation’s consumers are helping compensate for exports , which yesterday recorded the first annual decline in more than 25 years even as shipments for December climbed almost 18 percent. The government is seeking to boost the domestic economy by creating health-care and pension systems that will encourage spending. Sales Outlook Retail sales in China, poised to become the world’s second- largest economy this year, may rise $409 billion to almost $2.25 trillion, outstripping a $165 billion increase in the U.S. to $4.29 trillion, according to Hong Kong brokerage SJS Markets Ltd. Exports for all of 2009 slumped 16 percent, while December recorded the first advance in 14 months, the customs bureau reported yesterday. China’s consumers remain largely spared from the global economic crisis: Gross domestic product will expand 9 percent this year, the most among major developing markets, according to the International Monetary Fund. “The smart managers are looking to diversify into China’s domestic market,” said Peter Siris , managing partner at Guerrilla Capital Management in New York. With two China funds and a total of $125 million invested in China, he said he was a “decent-sized” investor in Ever-Glory. “If they can succeed, the upside is gigantic.” Siris, a former senior vice president at swimsuit-maker Warnaco Group Inc. who has been visiting China since the 1970s and was a retail analyst for UBS AG, said “China is where the U.S. was 60 years ago, where Europe was after the war: every village had its own stores.” After reaching $5.00 in 2007, Ever-Glory’s stock price fell to a $0.65 low last year. It has now risen to $2.81. Sporting Scene Sportswear maker Peak Sport Products Co. Ltd ., another company that started as an exporter, also stands to benefit from rising consumer incomes, according to Zurich-based Credit Suisse AG. Sports-gear company Xtep International Holdings Ltd. also is a buy, said Russell Hoss , who manages the EPH China Fund from Newport Beach, California. China is “quite easily the biggest consumer story out there,” said Jim O’Neill , chief global economist with Goldman Sachs Group Inc. in London. “I see evidence of it everywhere, from driving past the Lamborghini showroom up the road to tens of thousands of people in rural areas buying flowers for 3 yuan each to put on the grave of Chairman Mao,” he told reporters in Beijing in November. Driving Growth China’s annual consumption will increase more than six times by 2027 to as much as $10 trillion annually and already is an engine of world economic growth, according to O’Neill. “This is a consumption-led recovery in China, it’s not based on unsustainable investment,” he said in a Dec. 11 interview with Bloomberg Television. The Chinese economy may expand as much as 16 percent this year if the government doesn’t wind back stimulus measures, Yao Zhizhong and He Fan , economists with the Chinese Academy of Social Sciences, said in an article published in the official China Securities Journal today. China will take “vigorous” steps to boost household spending and reduce a reliance on investment and exports, President Hu Jintao said Nov. 13. “Our focus in countering the crisis is to expand domestic demand, especially consumer demand,” Hu, 67, said in Singapore at the Asia-Pacific Economic Cooperation group summit in November. We want to “increase people’s ability to spend.” Overtaking the U.K. The government is spending 850 billion yuan over three years to ensure that at least 90 percent of its 1.3 billion citizens have basic health insurance by 2011, it said in January 2009. In June the State Council announced a pilot pension program aiming to cover 10 percent of rural counties. That will help China’s consumer market, already the world’s fifth biggest, overtake the U.K. and Germany to become no. 3 within two years and replace Japan as the second-largest within five years, says China International Capital Corp., the top- ranked China local brokerage by Asiamoney magazine last year. “Chinese people will now spend a lot more money,” Ever- Glory’s Kang said in an interview in Nanjing. “You should see our stores on the weekend: It’s crazy! Young women just spend, spend, spend.” La Go Go’s sales increased to $2.6 million in the third quarter — more than 10 percent of the firm’s total revenue — even as Ever-Glory’s net sales fell 22 percent to $24.9 million on shrinking exports. In addition to San Francisco-based Levi- Strauss, the company supplies Tesco Plc , the U.K.’s largest retailer, based in Cheshunt. Esprit, Mango Esprit Holdings Ltd ., which was founded in San Francisco before shifting headquarters to Hong Kong, is among the international firms seeking to tap rising Chinese demand. The clothier last month agreed to buy out venture partner China Resources Enterprise Ltd., planning to make the country its top market. Barcelona-based women’s wear retailer Mango entered China in 2002 and now has 54 stores with plans to add 20 more outlets this year. Exporters that create domestic brands may see their shares rise even faster than their earnings, said Chris Ruffle , China co-chairman in Shanghai of Edinburgh-based fund manager Martin Currie Investment Management Ltd., which manages about $20 billion. The companies may see their shares double relative to earnings, he said. Rush of Competitors Retail sales were 41 percent of gross domestic product in China for the first nine months of 2009, according to national statistics office figures that include some government purchases. By comparison, consumer spending was 71 percent of U.S. GDP in the third quarter, Commerce Department data show, and Germany’s ratio was 58 percent, according to the Bundesbank in Frankfurt. The rush of new competitors may be the biggest challenge to exporters turning to the domestic market, said Siris. “As demand grows many people will raise capital and chase the opportunity,” he said. “You want to be cautious about how many other people are chasing the same niche.” Taizo Ishida , lead manager for the $222.4-million Matthews Asia Pacific Fund, got rid of his shares of Peak Sport, which sells sports footwear and apparel through 5,667 retail stores, after he saw “zillions and zillions” of shoe stores on a recent trip to Changsha in Hunan province. He had bought Quanzhou-based Peak Sport at its Sept. 29 initial public offering in Hong Kong, which raised HK$1.72 billion and was 20 times oversubscribed. “It just hit me: There’s more supply than demand,” said San Francisco-based Ishida. “I thought, ‘I’m just going to stay away from this sector.’” Price Target Peak Sport’s stock, at HK$4.59, has climbed 11.9 percent from its HK$4.10 a share IPO price. Credit Suisse analyst Catherine Lim expects the stock to rise to HK$5.00 a share over the next 12 months and ICBC International Services Ltd. analyst Carrie Chan has a HK$4.90 price target on the stock. The EPH China fund’s Hoss bought shares of Xtep, which also is based in Quanzhou, because he anticipates investors will pay more for the stock as it builds a track record as a retailer. Its price-to-earnings ratio may match rivals such as Beijing- based sportswear maker Li Ning Co. , he said, declining to offer a stock-price target. Li Ning’s ratio to current earnings is 28.72, compared with Xtep’s 17.37. “In the future you’ll have Nike and Adidas and four or five domestic brands that’ll all be winners,” said Hoss, whose China fund manages almost $50 million in assets. 1,000 More Stores Xtep earned more than 76 percent of its sales from exports in 2005, reduced that to 7.8 percent by 2007 and in 2008 garnered all its revenue from sales of branded goods in China, according to chief financial officer Terry Ho. The company expects its two brands — Xtep and Disney — will be sold by the end of 2009 through more than 5,800 outlets run by third-party wholesalers, up from 5,056 a year earlier, said Ho. It anticipates adding another 800 to 1,000 stores by the end of 2010, he added. Xtep’s share price rose 144 percent in 2009, to HK$4.37 per share. Tai Fook Securities analyst Winnie Fong forecasts that it can reach HK$5.24 over the next 12 months. There’s a “waning popular regard for thrift,” said Ha Jiming , chief China economist at CICC in Hong Kong. “China is emerging as a major global consumer.” To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net

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Video: Credit Suisse’s Fan Discusses Singapore, H.K. Stocks: Video

January 3, 2010

Jan. 4 (Bloomberg) — Fan Cheuk Wan, head of Asia-Pacific research at Credit Suisse Private Banking, talks with Bloomberg’s Susan Li about her investment strategy for Singapore and Hong Kong stocks. (This is an excerpt of the full interview. Source: Bloomberg)

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Video: Ishizuka Says Sony Ericsson Aims to Maintain Asia Growth: Video

December 27, 2009

Dec. 28 (Bloomberg) — Hirokazu Ishizuka, head of the Asia-Pacific region at Sony Ericsson Mobile Communications Ltd., talks with Bloomberg’s Haslinda Amin about the company’s growth strategy in Asia. Ishizuka, who spoke in Singapore on Dec. 7, also discussed subscribers and pricing for the company’s new smartphones. (Source: Bloomberg)

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Stocks Climb in Europe, Asia on Signs Economies Recovering; Oil Advances

December 23, 2009

By Shani Raja and Nicolas Johnson Dec. 23 (Bloomberg) — European and Asian stocks rose and the dollar traded near a three-month high against the euro and oil climbed above $74 a barrel on signs economies around the world are improving. The Dow Jones Stoxx 600 Index added 0.6 percent as of 8:58 a.m. in London and the MSCI Asia Pacific excluding Japan Index climbed 0.9 percent. The dollar was unchanged at $1.4249 versus the euro from yesterday’s close in New York. Japanese markets were closed for a holiday. A measure of risk in emerging-market bonds narrowed to the lowest level in 16 months as confidence in a global recovery increased. Consumer spending in the U.S. probably rose in November for the sixth time in seven months as households took advantage of holiday discounting, while China’s biggest brokerage said the nation’s growth may surge to as much as 12 percent next year. “The recent data indicate the global economy is recovering faster than originally expected,” said Prasad Patkar , who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “It’s too early to say whether the recovery is self- sustaining, but we should know towards the end of first quarter 2010.” Crude oil for February delivery climbed to $74.64 in electronic trading on the New York Mercantile Exchange. Prices closed at $74.40 yesterday, the highest settlement since Dec. 4. Gold gained as much as 0.4 percent to $1,088.72 per ounce, after falling the past two days as a rebounding dollar reduced demand for the precious metal. U.S. Futures Climb Futures on the Standard & Poor’s 500 Index added 0.2 percent. The benchmark U.S. stock index climbed 0.4 percent yesterday to its highest close since October 2008, after the report on November home sales and as a profit forecast by Jabil Circuit Inc. triggered gains in technology shares. U.S. 10-year government bond yields traded near the highest level in four months. U.S. debt yesterday completed the steepest back-to-back decline since July following the housing report. “The more stable data trend is supporting a turnaround in the dollar; increasing the odds that the Fed will be thinking about edging policy rates out of their emergency setting at some stage next year,” Greg Gibbs , a strategist at Royal Bank of Scotland Group Plc in Sydney, wrote in a note to clients. South Korea’s won led declines among Asia-Pacific emerging- market currencies, approaching a seven-week low. The Thai baht fell to its low for the month and Malaysia’s ringgit traded near its weakest level since October. The Dollar Index , which tracks the greenback against the currencies of six major U.S. trading partners, climbed to a three-month high. ‘Downward Pressure’ “Asian currencies continue to be under some downward pressure because of the strength of the dollar in global markets,” said Dariusz Kowalczyk , chief investment strategist at SJS Markets Ltd. in Hong Kong. All major stock markets in the Asia-Pacific Region climbed, led by increases of 2.7 percent in India, 1.1 percent in Hong Kong, 1 percent in New Zealand and 0.8 percent in Australia. Macarthur Coal Ltd. , the world’s biggest exporter of pulverized coal used by steelmakers, climbed 5.6 percent in Sydney after Macquarie Group Ltd. said Hong Kong’s Noble Group Ltd. may be planning a bid. Gloucester Coal Ltd. jumped 28 percent after receiving a takeover offer from Macarthur and Noble advanced 4.7 percent, leading gains in Singapore’s benchmark stock index. European Stocks The MSCI Asia Pacific ex-Japan index has risen 62 percent this year, on course for its steepest annual increase since 1993, as central banks worldwide reduced borrowing costs and governments boosted spending to shore up their economies. Europe’s Dow Jones Stoxx 600 rose to a 14-month high, ahead of the U.S. consumer spending report. DSG International Plc, the U.K.’s biggest consumer-electronics retailer, added 1.2 percent after UBS AG added the stock to its list of “most preferred” shares. Maurel & Prom jumped 4.4 percent after saying a well in Gabon was successful. Antofagasta Plc advanced 1.2 percent as metals prices gained. Bond risk fell in Australia and in Asia outside Japan, as measured by credit-default swaps. The Markit iTraxx Asia ex- Japan investment grade index fell 1 basis point to 96 in Hong Kong, according to BNP Paribas SA prices. “We’re seeing a fairly broad-based improvement in most economic measures,” said Cameron Peacock , an analyst at IG Markets in Melbourne. “Heading into next year, most people are fairly optimistic we’ll see a continued recovery across the global economy.” To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net ; Nicolas Johnson in Tokyo at nicojohnson@bloomberg.net .

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ADB: Asia-Pacific requires $9.7tr in energy investments

December 22, 2009

ADB: Asia-Pacific requires $9.7tr in energy investments

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Darling Weighs Levy on U.K. Bankers' Bonuses, Scrapping Tax Cut …

December 6, 2009

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Indonesia tipped to distressed debt investors | Opalesque Real …

December 6, 2009

From Cityscapeintelligence.com: The Indonesian real estate sector has been identified as one of the areas that distressed – debt investors in the Asia Pacific region could find offers opportunities in the future. …

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Indonesia tipped to distressed debt investors | Opalesque Real …

December 6, 2009

From Cityscapeintelligence.com: The Indonesian real estate sector has been identified as one of the areas that distressed – debt investors in the Asia Pacific region could find offers opportunities in the future. …

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Indonesia tipped to distressed debt investors | Opalesque Real …

December 6, 2009

From Cityscapeintelligence.com: The Indonesian real estate sector has been identified as one of the areas that distressed – debt investors in the Asia Pacific region could find offers opportunities in the future. …

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Obama Says Exports Are Key to U.S. Job Creation, Were Focus of Asian Trip

November 21, 2009

By Nicholas Johnston Nov. 21 (Bloomberg) — President Barack Obama said he focused much of his recent week-long trip to Asia on exploring ways to increase U.S. exports and thereby create jobs. Obama returned Nov. 19 from a trip to Japan, China and South Korea. In his weekly radio and Internet address, he said increased exports to those countries can help the U.S. recover from its highest unemployment rate in decades. “Above all, I spoke with leaders in every nation I visited about what we can do to sustain this economic recovery and bring back jobs and prosperity for our people,” Obama said in the address, which was taped in Seoul. “Increasing our exports is one way to create new jobs and create new prosperity.” The U.S. unemployment rate rose to 10.2 percent in October, the highest level since 1983. Obama said he will continue to focus “relentlessly” on creating new jobs. The administration will host a jobs forum at the White House next month with business executives, economists, financial experts and representatives from labor unions to talk about government policies that can encourage job growth. In today’s address, Obama said the administration won’t make any “ill-considered decisions” about spurring job growth because of the federal budget deficit, which reached a record $1.4 trillion in the fiscal year that ended Sept. 30. Right Direction Obama said the economy, which grew 3.5 percent in the third quarter, is moving in the right direction after government approval of a $787 billion stimulus package in February “The steps we are taking are helping,” he said. “And I will not let up until businesses start hiring again.” Obama said his Asia trip was also marked by productive efforts to develop new clean-energy initiatives and progress in working with China to send a unified message to Iran and North Korea in opposition to the development of nuclear weapons. In today’s Republican address, Senator Mike Crapo of Idaho said health-care legislation proposed by Senate Democratic leaders would increase insurance costs, taxes and government spending while reducing benefits. “This is not true health-care reform and it is not what the American people want,” Crapo said. The Senate is scheduled to take a rare weekend vote today on whether to begin debate on the $848 billion legislation, which is intended to cover 31 million uninsured Americans and curb medical costs. Crapo said the measure would raise taxes by “nearly half- a-trillion dollars,” and cut hundreds of billions of dollars from Medicare, the government health-insurance program for the elderly and disabled. Crapo said a better approach to health-care overhaul would be “step-by-step reforms” proposed by Republicans, such as letting consumers purchase insurance across state lines, allowing small businesses to pool together to purchase insurance for employees, and eliminating waste, fraud and abuse. “These are the kinds of reform that make sense and would really make a difference for all Americans,” he said. To contact the reporter on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net

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Obama Pledges to Allay Auto Lobby’s Concerns on South Korea Trade Accord

November 18, 2009

By Bloomberg News Nov. 19 (Bloomberg) — President Barack Obama is in Seoul today, giving him a last chance on his four-nation Asia trip to show he opposes protectionism. Standing in the way is a U.S. auto lobby that is blocking a free-trade agreement. It’s a tall order. A top item on South Korea’s agenda is the trade accord, which was signed in 2007. The deal has been held up in Congress, where lawmakers are demanding wider access to Korea for Chrysler Group LLC, Ford Motor Co . and General Motors Co. , and neither side shows signs of compromise. The U.S. Chamber of Commerce estimates that failure to enact the accord means the loss of $35 billion in exports and 345,000 jobs. South Korea signed a rival agreement with the European Union last month that calls for 99 percent of commerce to be duty-free within five years. “Team Obama talked the talk, now we’ll see if they walk the walk,” said Gary Hufbauer , a senior fellow at the Peterson Institute for International Economics in Washington. “Possibly in Seoul the president will achieve another breakthrough” with a commitment to seek ratification of the U.S.-South Korea pact. U.S. automakers sold 6,980 vehicles in South Korea last year, or 0.72 percent of the overall passenger car market, according to the Korea Automobile Importers & Distributors Association . Those figures exclude GM’s local Daewoo unit, which captured 7 percent of the market in the first nine months of this year. Hyundai Motor Co. , Korea’s biggest carmaker, accounted for almost half of all sales. Through October this year, Hyundai raised its U.S. sales 4.1 percent to 373,222 vehicles. The collective U.S. market share for Hyundai and its Kia Motors Corp. affiliate was 7.3 percent in October. Trade Barriers While in Asia, Obama has been called on by regional leaders, including Malaysian Prime Minister Najib Razak and Chinese President Hu Jintao , to demonstrate the U.S. will work to reduce trade barriers. At the Asia-Pacific Economic Cooperation summit in Singapore, Obama expressed interest in joining and expanding a regional free-trade group that so far includes Chile, New Zealand, Singapore and Brunei. Forging an agreement that would ensure passage of the Korea trade accord will be “politically tough back in the U.S.,” Hufbauer said. Democrats, who have majorities in the House and Senate, are holding up a vote on the agreement. Representative Sander Levin , a Michigan Democrat and chairman of the House Ways and Means Committee’s trade panel, said South Korea first must remove tax and regulatory obstacles to sales of U.S. autos, refrigerators and other manufactured goods. No Budging The South Korean government’s position remains unchanged. There will be “no re-negotiation,” Ahn Ho Young , South Korea’s deputy minister for trade, said in an interview in Seoul yesterday. “We’re trying to coordinate so that both countries ratify the agreement” as soon as possible. Any breakthrough will come without U.S. Trade Representative Ron Kirk , who accompanied Obama on earlier stops in Singapore and China and is returning home. South Korea is the seventh-biggest U.S. trading partner. Last year, two-way trade totaled $82.9 billion, according to the Commerce Department. China, the second-biggest U.S. trading partner after Canada, has been subjected to a series of trade sanctions by the Obama administration on tires and steel pipe in the months leading up to the president’s Asia trip. China called the pipe tariffs “discriminatory” and said it would start its own anti-dumping probe of American cars. Obama didn’t mention trade during a joint appearance with Hu Nov. 17 at Beijing’s Great Hall of the People. Hu urged Obama to “oppose and reject protectionism in all its manifestations in an even stronger stand.” Currency Issues Obama is pushing to reduce the U.S. trade deficit with China, which widened to a 10-month high in September, by boosting U.S. exports and seeking a revaluation of the yuan, which has remained fixed at about 6.83 to one U.S. dollar since July 2008. In Beijing Nov. 17, Obama suggested he won no new commitment from Hu on revaluation, instead referring to “past statements” made by China “to move toward a more market- oriented exchange rate over time.” In the hour before Obama spoke, Yu Yongding , a former adviser to China’s central bank, told attendees at a Beijing conference that China had no confidence in the U.S. dollar. Obama’s visit had little effect on the value of yuan futures. Twelve-month non-deliverable yuan forwards traded at 6.6205 per dollar as of 5:30 p.m. in Hong Kong, from 6.6237 yesterday. The contracts indicate traders are predicting a 3.1 percent gain in a year. In the spot market, the currency was little changed at 6.8270, according to the China Foreign Exchange Trade System. ‘Mutual Interest’ Administration officials said they weren’t expecting to leave China with a major agreement. The U.S.-China relationship “is based on mutual interest; that is strengthening, that we’ve made progress on,” White House press secretary Robert Gibbs said. “We understand there’s a lot of work to do.” Still, U.S. companies used the president’s visit to help cement business ties in China. Tempe, Arizona-based First Solar Inc. advanced its plan to build the world’s biggest plant directly converting sunlight to electricity in Inner Mongolia, signing an agreement in Beijing Nov. 17 with U.S. Energy Secretary Steven Chu and Chinese Vice Premier Li Keqiang in attendance. China is the third-biggest export market for the U.S., with outbound shipments last year amounting to $71.5 billion, an increase of 9.5 percent from 2007. The U.S. imported $337.8 billion from China last year, more than from any other country, according to the Commerce Department. North Korea In Seoul, Obama will discuss North Korea’s nuclear program with South Korean President Lee Myung Bak in talks today. China is host to six-party talks aimed at removing nuclear weapons from the Korean peninsula. The negotiations, which also include the two Koreas, Japan, Russia and the U.S., were broken off after North Korea launched a rocket in April in violation of a United Nations resolution. Obama is also scheduled to visit U.S. troops today at Osan Air Base south of Seoul. — Julianna Goldman , Edwin Chen , Michael Forsythe. With assistance from Seyoon Kim , Bomi Lim and Seonjin Cha in Seoul, Mark Drajem in Washington and Belinda Cao in Beijing. Editors: Joe Sobczyk , Bill Austin. To contact Bloomberg News staff on this story: Julianna Goldman in Seoul at +1-202-654-4304 or jgoldman6@bloomberg.net ; Michael Forsythe in Beijing at +8610-6649-7580 or mforsythe@bloomberg.net ; Edwin Chen in Beijing at + 1-202-624-1844 or echen32@bloomberg.net

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GE Enlightening China Regions Embracing Emissions Plants to Curb Pollution

November 17, 2009

By Bloomberg News Nov. 17 (Bloomberg) — The Ordos region of Inner Mongolia, home to one of China’s biggest deserts, is being transformed into the site of a pine forest that will stretch across its low hills as far as the eye can see. The local government’s tree-planting program is part of a plan to “assume our green responsibilities and build a civilized way of life,” Du Zi , the local Communist Party secretary, told energy executives at a conference last month in Beijing. Also on tap: the world’s biggest plant to convert sunlight to electricity, built by First Solar Inc. of Tempe, Arizona, part of a 12-gigawatt wind, solar and biomass power-generating zone. And General Electric Co. is helping China cut wastewater emissions into the Yellow River, which borders the region. “This shows what local leadership can do in China these days,” says Kenneth Lieberthal , head of the Brookings Institution’s China Center in Washington, which hosted Du and other provincial officials at the Oct. 21-23 conference. “They’ve gone flat out.” Regions are vying to outdo each other in a race to develop alternative-energy sources and cut pollution. Western China’s Gansu province is building a wind farm equivalent to about 20 nuclear-power facilities. In the east, Zhejiang province is installing solar panels on roofs. Beijing bans motorcycles from the city center in favor of electric bikes. Greenhouse Gases Their efforts demonstrate that China, the world’s largest producer of the pollution blamed for global warming, will continue to accelerate development of energy from renewable sources, even as it resists binding targets for reducing carbon emissions ahead of a United Nations summit in Copenhagen next month aimed at forging a new treaty to curb greenhouse gases. Some regional officials see environmental projects as a way to boost their economies after decades when companies were allowed to poison the air and water without penalties while expanding output. And First Solar surged $12.94, or 11 percent, to $134.41 on the Nasdaq Stock Market Sept. 8, the day Wu Bangguo , China’s second-ranking leader after President Hu Jintao , visited the company’s headquarters. The next day the company made the Ordos agreement public; it has declined to provide the value of the deal. First Solar has fallen about 11 percent since Dec. 31. Du, 54, cites a list of achievements in Ordos: increasing the portion covered by vegetation to 81 percent last year from 20 percent in 2000, closing 1,200 polluting factories and installing 100 megawatts of wind capacity. Biggest Wind Farm The 20-gigawatt, 120 billion yuan ($17.6 billion) Gansu project, set for completion in 2020, would be the world’s biggest wind farm. The Roscoe Wind Complex in Texas, currently the largest, generates less than one gigawatt — a billion watts — of electricity. China is under pressure from the international community to accelerate its push toward alternative energy. It has refused to accept binding restrictions on carbon pollution, saying controls will crimp economic growth. Instead, China has pledged to cut emissions voluntarily in proportion to gross domestic product, without committing to include the policy in a global agreement. Hu called climate change “a grave challenge to mankind” and pledged to work for “positive outcomes” in Copenhagen during a speech Nov. 15 at the Asia Pacific Economic Cooperation forum in Singapore. Hu-Obama Talks Collaboration between the U.S. and China on alternative energy is on the agenda for talks this week in Beijing between Hu and President Barack Obama . Such ventures are already under way in Ordos, Du says. Fairfield, Connecticut-based GE, the world’s biggest maker of power-plant equipment, is working with Elion Chemical Industry Co. of Ordos City to cut wastewater discharge in a project GE said is slated to be completed next year. The value of the contract isn’t disclosed, said Catherine Stengel , a spokeswoman for the Atlanta-based GE Energy Infrastructure unit, of which the water division is a part. First Solar, the largest U.S. producer of solar modules, is looking for more business following the planned groundbreaking next year of the new photovoltaic facility. Today in Beijing, U.S. Energy Secretary Steven Chu and Chinese Vice Premier Li Keqiang attended a signing ceremony with the company, which confirmed the June 1, 2010 start date for the Ordos project. ‘Very Rapidly’ The Chinese government seems “to be moving very rapidly,” First Solar President Bruce Sohn told reporters in Beijing. “We don’t see any roadblocks to prevent us from starting construction” in June. Sohn said a similar solar plant in the U.S. would cost between $4 billion and $5 billion. In China, the price will probably be “somewhat lower,” he said, without elaborating. The Bloomberg World Energy-Alternate Sources Index has risen 21.5 percent in the last year, compared with a 27 percent rise in the Standard and Poor’s 500 Index . Ordos, among the nation’s wealthiest areas, has the means to push big, government-backed projects. It claims one-sixth of China’s proven coal reserves and one-third of its natural gas, giving the region of 1.6 million people a per-capita income of 102,128 yuan, the third highest of any municipality. Hu is signaling he is serious about changing China’s energy mix. The goal is to produce 15 percent from renewable sources by 2020, according to a 2006 energy law . China will see an even greater push by provinces and cities if the Communist Party begins to reward and promote officials on the basis of their ability to promote alternative energy, says John Thornton , a former co-president of New York-based Goldman Sachs Group Inc. who’s now chairman of Brookings and co-hosted the October conference in Beijing. “China is really quite an impressive, well-oiled machine in its ability to do large-scale things decisively,” he says. — Michael Forsythe . With assistance from Rachel Layne in Boston. Editors: Melinda Grenier , Bill Austin To contact Bloomberg News staff on this story: Michael Forsythe in Beijing at +8610-6649-7580 or mforsythe@bloomberg.net

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Obama Calls on Hu to Heed China’s Commitment to Let Currency Appreciate

November 17, 2009

By Bloomberg News Nov. 17 (Bloomberg) — President Barack Obama called on Chinese counterpart Hu Jintao to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis. “I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time,” Obama said during a joint appearance with Hu after a meeting in Beijing today. “Doing so based on economic fundamentals would make an essential contribution to the global rebalancing effort.” America’s trade deficit with China widened to a 10-month high in September, raising concern that the combination of a recovering U.S. economy and a fixed yuan exchange rate against the dollar will worsen global imbalances. China’s dollar purchases to prevent appreciation swelled its foreign-exchange reserves to $2.3 trillion in the third quarter, more than twice as much as any other country. “There is a continued fierce debate in China” on revaluation, said Michael Pettis , a Peking University finance professor and former head of emerging markets at Bear Stearns Cos. “It seems almost impossible that we’re not going to see more focus on trade and trade tensions.” Twelve-month non-deliverable yuan forwards weakened 0.2 percent to 6.6215 per dollar as of 3:31 p.m. in Hong Kong and were little changed after Obama’s comments. The contracts signal traders are predicting a 3.1 percent advance in a year. In the spot market, the currency traded at 6.8266, compared with 6.8270 yesterday, according to the China Foreign Exchange Trade System. Hu Silent on Yuan Hu, in his remarks, made no mention of the yuan peg to a weakening dollar, which has forced central banks across Asia to sell their currencies to limit appreciation and maintain export competitiveness with China. The Indonesian rupiah gained 11 percent against the yuan in the past six months, and the Korean won rose 9.4 percent. Dominique Strauss-Kahn , the managing director of the International Monetary Fund, said today in Beijing that a stronger yuan would be in the interests of China and the world. The yuan has been pegged at about 6.83 to one U.S. dollar since July 2008. Maintaining the peg has also helped make China the biggest foreign holder of U.S. government debt, with $797.1 billion in August, up 10 percent from Jan. 1, Treasury data show. Fighting Protectionism Hu said China and the U.S. “need to oppose and reject protectionism in all its manifestations.” He told Asia-Pacific leaders in Singapore last week that China’s hadn’t foreseen the number of protectionist measures it would face this year including U.S. tariffs on Chinese-made steel and tires. Obama said the two leaders “agreed on maintaining open markets and free flows of commerce.” Controlling currency levels is a form of protectionism, Gempachiro Aihara, the incoming chair of the Asia-Pacific Economic Cooperation’s Business Advisory Council, said last week. China and the U.S. agreed to address trade imbalances, including spurring more domestic demand in China, Obama said. The deepest U.S. recession in decades triggered a collapse in world trade as demand for Asian imports slumped. At the height of the crisis in February, Japan’s exports to the U.S. plunged a record 58 percent. Obama’s speeches during his first trip to Asia as president have focused on the importance of increasing U.S. exports to achieve greater balance with a region that sells far more goods to the U.S. than it buys from American companies. PBOC Signal China’s central bank last week said foreign-exchange policy will take into account global capital flows and changes in major currencies, and scrapped language in a previous report to keep the yuan “basically stable.” The Chinese economy expanded by 8.9 percent in the third quarter from a year earlier. Finance ministers gathered for the Asia Pacific Economic Cooperation forum called for “market-oriented exchange rates that reflect underlying economic fundamentals” in a statement last week. China and the U.S. are both APEC members. China’s partnership has been critical to battling a global recession, Obama said today. The two leaders discussed the next steps to sustain a recovery, he said. For Related News and Information: Top Stories: TOP China’s currency: CNY GP Top foreign exchange stories: TOP FX Currency analysis: NI ANAFX BN Currency comments: NI FXVOICE

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Taiwan’s Stocks, Currency Pare Gains as China Financial Pact Lacks Details

November 16, 2009

By Weiyi Lim Nov. 17 (Bloomberg) — Taiwan stocks and the currency pared earlier gains on concern a financial cooperation agreement with China lacked details and will take months to implement. The benchmark Taiex index fell 0.3 percent to 7,767.85 as of 11:12 a.m. in Taipei, after gaining as much as 1.1 percent at the start of the trading session. The Taiwan dollar rose 0.2 percent to NT$32.124, according to Taipei Forex Inc., after reaching NT$32.029, the highest since Oct. 1. “What the market has been expecting to see is the beef, the details on whether Taiwan companies will be allowed to enter China’s financial markets, not the principles we saw,” said Ernest Chiang , who manages the equivalent of $62 million for IBT Asset Management Co. in Taipei. “The announcement isn’t the bullish news the market has been looking forward to.” The accords will enable Taiwanese banks to accelerate expansion in the world’s fastest-growing economy. For China, it will also meet its objective to deepen economic ties with the island that it claims as part of its territory. Cathay Financial Holding Co. , Taiwan’s largest publicly traded financial services company, lost 1.8 percent to NT$59.80, while Chinatrust Financial Holding Co. , Taiwan’s third-biggest, dropped 2.6 percent to NT$20.50. The two parties will begin talks on an economic cooperation framework agreement, or ECFA, at the next round of cross-Strait talks in Taichung, central Taiwan, sometime in mid-December, according to agencies from both sides. ‘Sell Into Strength’ “I believe people would sell into strength,” said Seow Hock Hin , senior vice-president of institutional sales at MF Global Singapore Pte Ltd. “What investors were previously looking at was for banks on both sides of the straits to be able to invest in one another. They now have to wait for the ECFA, which would only happen in 2010.” Taiwan-China relations have improved since President Ma Ying-jeou took office in May 2008 and dropped the pro- independence stance of predecessor Chen Shui-bian . Closer ties with the island’s biggest trading partner may help Ma hasten a recovery in its export-dependent economy, which shrank 7.5 percent in the second quarter. Taiwan’s benchmark stock index has gained 70 percent this year, set for the best annual performance since 1993. The Taiwan dollar traded within a range of NT$33.2 per dollar and NT$32 for the past six months, and was at NT$32.198 yesterday. Its 2 percent gain for 2009 compares with a 36 percent increase for the Brazilian real and a 35 percent climb for the Australian dollar. Only the yen rose less among the 16 most-active currencies. ‘Opposing Gains’ “It has finally happened, which is great, but there are two forces opposing gains,” said Craig Chan , a Singapore-based strategist at Nomura Holdings Inc. “The first is the central bank intervention and the second is capital controls. I am optimistic in the medium- and long-term, but in the short-term any knee-jerk gain won’t be sustained.” Chan’s forecast is for the currency to rise to NT$31.50 in six months and NT$28.50 by the end of next year. The Central Bank of the Republic of China (Taiwan) has intervened in markets by arranging purchases of U.S. dollars. Foreign-exchange reserves rose by $63 billion in the past year to $341.2 billion, according to a Nov. 5 central bank report. October’s increase of $9 billion was the biggest this year. No Imminent Change The accords were signed yesterday by Sean Chen , chairman of the island’s Financial Supervisory Commission, and Liu Mingkang , head of the China Banking Regulatory Commission, the regulators said in separate statements. The two sides agreed on issues including cross-strait financial supervision, information sharing and risk management, the statements said. “We do not exclude the possibility of some profit-taking once the positive sentiment subsides,” Morgan Stanley analysts led by Jesse Wang and Bruce Chou wrote in a report today. “This is because the signing of MOUs simply represents an important first (baby) step and will not be able to change financial business profitability imminently.” President Hu Jintao said China will strive to make progress on a proposed cross-Strait economic agreement this year, Lien Chan , head of a Taiwanese delegation to the Asia-Pacific Economic Cooperation forum, said in Singapore over the weekend. Taiwan and China have been ruled separately since Chiang Kai-shek’s Kuomintang, or Nationalists, fled to the island after being defeated by Mao Zedong’s Communists in 1949. China regards Taiwan as part of its territory. To contact the reporter on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net

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Nomura Extends Lead in Managing Asian Share Sales With Hitachi, MUFG Deals

November 16, 2009

By Takahiko Hyuga Nov. 17 (Bloomberg) — Nomura Holdings Inc. widened its lead in arranging Asia-Pacific stock sales this year after winning mandates from Mitsubishi UFJ Financial Group Inc. and Hitachi Corp. valued at a combined $14.5 billion. Nomura may reap as much as $300 million in fees from the sales by Mitsubishi UFJ , Japan’s largest bank by market value, and Hitachi, the country’s fourth-biggest company by sales, according to data compiled by Bloomberg. Nomura spokeswoman Keiko Sugai declined to comment. The Tokyo-based brokerage overtook UBS AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. this year in the Asia- Pacific region as Japanese companies raised the most in share sales since 2006. Nomura remains a laggard in markets such as Hong Kong, even after buying the Asian operations of Lehman Brothers Holdings Inc. last year, according to Bloomberg data. “Nomura didn’t miss opportunities to arrange share sales as Japanese firms increasingly boost capital,” said Wataru Kasatani , a senior analyst at MDAM Asset Management Co., which has about $2.5 billion in Japanese stocks. “It needs to work for Chinese companies in Hong Kong to be a real No. 1 in Asia. The next step is to fully integrate Lehman’s operations.” Mitsubishi UFJ picked Nomura, JPMorgan, Morgan Stanley and its own securities unit to arrange the sale of about 1 trillion yen ($11 billion) of shares, people familiar with the matter said yesterday. Hitachi tapped Nomura and Goldman Sachs for its $3.5 billion stock sale. Nomura has managed 37 equity and equity-linked transactions in the Asia-Pacific region in 2009 valued at $20 billion, according to Bloomberg data. The company’s ranking rose from seventh last year, when it worked on $5.1 billion of deals. Hong Kong Sales Outside Japan, Nomura made less headway. Without deals at home, including sales of $8 billion of its own stock , Japan’s biggest brokerage ranked 12th in Asia after arranging nine deals valued at $1.5 billion. Zurich-based UBS, the top underwriter in Asia excluding Japan, arranged 76 deals valued at $14.7 billion, including offerings by Malaysia’s Maxis Bhd. and Australia’s Telstra Corp. UBS ranked second this year in equity sales in Hong Kong, where stock offerings have recovered as Chinese companies and overseas firms including Sands China Ltd. go public on the city’s exchange. Nomura ranks 15th in Hong Kong, and hasn’t worked on any initial public offerings there in 2009, according to Bloomberg data. In 2007, the last full year before Lehman went bankrupt, the Wall Street firm ranked 14th in arranging Hong Kong stock sales, working on $1.1 billion of deals, Bloomberg data show. To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

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China Trade Ministry Says Calls for Yuan Gains `Not Fair’ as Dollar Drops

November 16, 2009

By Bloomberg News Nov. 16 (Bloomberg) — China’s Ministry of Commerce said international pressure for appreciation in the yuan was “not fair,” as U.S. President Barack Obama started a four-day visit calling for a more balanced relationship between the two nations. Seeking a stronger Chinese currency as the dollar weakens “is not conducive to a global economic recovery and is not fair,” ministry spokesman Yao Jian said at a press briefing in Beijing today. “It’s necessary for us to provide a stable and predictable environment in terms of macro-economic and exchange rate policies.” Yuan forwards declined for the first time in four days as the comments eased speculation that China was preparing to allow appreciation after a central bank report last week dropped a pledge to keep the currency “stable.” The government has held the exchange rate at 6.83 per dollar since July last year, after allowing a 21 percent gain in the previous three years, seeking to shield exporters from slumping demand. “The comments from the commerce ministry eased people’s speculation about a resumption in appreciation this year,” said Liu Dongliang , a Shenzhen-based foreign-exchange analyst at China Merchants Bank Co., the country’s sixth-largest lender. “China won’t yield to foreign pressure.” Twelve-month non-deliverable yuan forwards weakened 0.2 percent to 6.6025 per dollar as of 1:47 p.m. in Shanghai, from 6.5875 at the end of last week. The contracts, which earlier touched 6.5835 to match the highest level since Oct. 21, signal traders are predicting a 3.4 percent advance in a year. The central bank set the daily reference rate little changed at 6.8272. Trade Imbalance Officials in Europe and the U.S. have urged China to allow greater flexibility in the yuan, claiming the undervalued currency gives the Asian nation an unfair trade advantage. Leaders from the Asia-Pacific Economic Cooperation group, who met in Singapore over the weekend, declined to back U.S. calls for a stronger yuan. China’s trade surplus in the first 10 months of this year was $159 billion, customs bureau data showed. The U.S. trade deficit with China rose to $22 billion in September from $20 billion in August, according to the U.S. Commerce Department. “This trade could create even more jobs on both sides of the Pacific,” Obama said today in his opening remarks to a group of university students at the Shanghai Science and Technology Museum. “As demand becomes more balanced it could lead to even broader prosperity.” Dollar Decline The Dollar Index, which tracks the greenback against six currencies including the euro and yen, fell 0.4 percent to 75.025 and has dropped 8 percent this year. A weaker dollar is helping the U.S. to be more competitive, Yao said. In China, exporters are only cautiously optimistic and haven’t seen a notable recovery, Yao said. Chinese exports dropped 13.8 percent in October, a 12th month of decline, the customs bureau reported Nov. 11. The appreciation of the yuan is part of the “package of necessary reforms” for China’s economy, said managing director of the International Monetary Fund Strauss-Kahn in a speech in Beijing today. Near-term “concerns about the dollar can be eased with appropriate policy actions from the U.S. authorities,” he said. Encouraging Speculation Financial officials in China and Japan warned the Federal Reserve’s interest-rate policy risks spurring speculative capital that may inflate asset prices and derail the global economic recovery. Emerging economies “might overheat and experience financial turmoil,” Bank of Japan Governor Masaaki Shirakawa said in Tokyo today. Low rates and the dollar’s depreciation present “new, real and insurmountable risks to the recovery of the global economy,” Liu Mingkang , China’s top banking regulator, said yesterday. The comments reflect concern that the Fed’s pledge to keep rates near zero for an “extended period” may lead to a repeat of the financial crisis. MSCI’s emerging-markets stock index has risen 71 percent this year and Asian countries from Singapore to South Korea are trying to rein in surging real-estate prices. “The continuous depreciation in the dollar, and the U.S. government’s indication that, in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” Liu, chairman of the China Banking Regulatory Commission, said in Beijing yesterday. While lower interest rates will help Americans pare debt, “there are also risks involved,,” Shirakawa said today at a Paris Europlace Financial Forum in Tokyo. Having borrowing costs near zero may strain government finances if it spurs speculation that the dollar will continue to slide, he said. “Key international reserve-currency issuing countries haven’t taken responsible fiscal and monetary policies,” Zhu Guangyao , China’s assistant finance minister, said in Beijing today, adding those nations didn’t consider the external effect of their domestic policies. — Li Yanping , Belinda Cao , Judy Chen, Dingmin Zhang. Editors: Paul Panckhurst , John McCluskey . To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net Belinda Cao in Beijing at +86-10-6649-7570 or lcao4@bloomberg.net

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Deripaska Says Rusal’s $14 Billion Debt Restructuring Is Almost Complete

November 16, 2009

By Katrina Nicholas Nov. 16 (Bloomberg) — Oleg Deripaska , the Russian billionaire owner of the world’s largest aluminum producer United Co. Rusal, said the restructuring of more than $14 billion of debt owed by the company is “almost” complete. “We are just going through the bank procedures,” Deripaska said in an interview. “We have 70 banks but I am pretty sure we are practically done.” Rusal needs to agree on the restructuring with foreign lenders before it can proceed with a planned initial public offering in Hong Kong. The Moscow-based company intends to sell 10 percent of its shares to help repay borrowings, which ballooned last year after Rusal bought 25 percent of OAO GMK Norilsk Nickel , Russia’s biggest mining company, before commodities prices collapsed in the second half of 2008. “I have committed a lot of time and effort to restructure the debt,” Deripaska said yesterday in Singapore, where he was accompanying Russian President Dmitry Medvedev who was attending the Asia-Pacific Economic Cooperation forum. “It was not easy to do.” Deripaska, 41, whose Basic Element investment company employs 1 million people in Russia, said Asia is “very important” to Rusal. The company said last week it’s seeking seven or eight major customers in China to secure long-term aluminum deliveries. Rusal’s smelters in Siberia and its hydropower potential offer the region more efficient and environmentally friendly aluminum production, Deripaska said. Asian Partners “We believe we can create a lot of solutions which will cut a lot of waste and create sustainability, but also to attract more partners from this region who are interested in developing new projects with us,” he said. Rusal’s debt almost doubled after it bought 25 percent of Norilsk for $7 billion in cash and a 14 percent stake in Rusal. The aluminum producer had a net loss of $6 billion for 2008, Vedomosti reported last month. Rusal got $4.5 billion from Vnesheconombank in October last year, the biggest state bailout of any Russian company. In December, Rusal announced plans to cut 5 percent of jobs worldwide and reduce aluminum output. “We were able to drop our costs by 25 percent in less than six months,” Deripaska said. “We have more aggressive plans to cut the costs to be even more competitive, and will be considering different opportunities for our business development including building joint ventures.” U.S. Travel Deripaska declined to comment directly on the progress of the IPO. Rusal hired Bank of America Merrill Lynch, the biggest U.S. bank by assets, to replace Goldman Sachs Group Inc. in marketing the offering, which is slated for December. The IPO will be led by Credit Suisse Group AG and BNP Paribas SA, with banks including BOC International Holdings Ltd. and VTB Group helping to manage the sale. Goldman may have abandoned efforts to get a role as an underwriter because of concerns about Deripaska, the Wall Street Journal reported earlier this month. U.S. officials prevented Deripaska from obtaining a visa because of allegations that he is connected to organized crime, the newspaper said. “We maintain a good relationship with Goldman,” Deripaska said. “I have no restrictions to travel to any country.” He traveled to the U.S. twice in the past four months, he said. To contact the reporter on this story: nsaminather1@bloomberg.net Katrina Nicholas in Singapore at knicholas2@bloomberg.net

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Highest P/Es Since 2002 Prompt Invesco to Buy Canada-France-Spain Bargain

November 16, 2009

By Jeff Kearns, Matt Walcoff and Rita Nazareth Nov. 16 (Bloomberg) — Canadian insurers, builders in Spain and Paris-based Vivendi SA are enticing investors in search of cheap stocks after the steepest equity market rally in 70 years. Shares of Manulife Financial Corp. have slipped in Toronto in 2009 even as profit at Canada’s biggest insurer is forecast to double. Obrascon Huarte Lain SA in Madrid is 28 percent below its average earnings multiple this decade, according to data compiled by Bloomberg. Vivendi, owner of the largest music company, trades at a 37 percent discount to global stocks after falling to the cheapest level in three years. Invesco Ltd., Delaware Investments and Delphi Management Inc., which manage a combined $553 billion, are being forced to look harder for bargains after gauges of global bank shares more than doubled in eight months and computer and software makers gained 73 percent. The MSCI World Index’s 68 percent surge since March pushed the measure of 23 developed countries to the highest price compared with reported earnings since 2002, data compiled by Bloomberg show. “A lot of the recovery in the market has been simply a recovery in risk appetite,” said Erik Granade , chief investment officer of global equity at Invesco Global Strategies, a unit of Invesco, which manages $417 billion. “Now that we’re back to more normal levels, it may be typical to see investor interest focusing on a wider area.” Sanofi-Aventis Granade bought shares of Sanofi-Aventis SA, the Paris- based supplier of vaccine for swine flu that is trading for 8.1 times analysts’ prediction for next year’s income, according to data compiled by Bloomberg. Sanofi has added 13 percent this year. Stock prices in Spain, France and Germany are the lowest relative to next year’s projected earnings among the 10 biggest developed nations by market value, with benchmark indexes trading below 12 times profits, according to data compiled by Bloomberg. That compares with 13.8 for the MSCI World and ratios of 19.4 in Japan, 15 in Hong Kong and 14 for the U.S. Overseas shares may be in even greater demand for U.S.- based managers because of the falling dollar, according to John Carey , a money manager at Pioneer Investments, which oversees more than $200 billion. Since March 5, the dollar has lost 15 percent against a basket of six currencies including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, according to data compiled by Bloomberg. That’s the biggest drop over the same number of days since 1986. Currency Translation “You have not only the movement on the shares, but also the currency translation,” Boston-based Carey said. “If the currency is rising versus the dollar, then you have that additional source of return when it’s translated back.” After slumping to a 15-year low of 9.2 in November 2008, the MSCI World’s valuation using reported profits tripled since March as the index climbed 68 percent, the steepest gain in its 39-year history. The Standard & Poor’s 500 Index surged 62 percent over the same period, pushing its ratio to earnings from 10 in March to 21.9, data compiled by Bloomberg show. The advance was the sharpest since the 1930s, data show. The MSCI World Index rose 0.4 percent at 8:16 a.m. in London after the Asia-Pacific Economic Cooperation forum pledged to maintain stimulus spending and Japan’s economy expanded more than forecast. Futures on the S&P 500 added 0.7 percent. Growth Estimates Investors looking for bargains are focusing on price- earnings ratios relative to next year’s analyst estimates, which call for average profit growth in the MSCI World index of 25 percent, data compiled by Bloomberg show. Companies in the measure will earn $67.27 a share in 2009 and $84.23 in 2010, the data show. “Earnings growth estimates are on the high side relative to history, therefore the bar has been raised and the risk of disappointment is now more prevalent,” said Jane Davies , a fund manager at HSBC Global Asset Management in London, which has $390 billion in assets. “The positive earning surprises seen this year have been driven more by cost cutting.” Manulife, the Toronto-based company trading for 9.5 times next year’s profit forecast, has dropped 3.5 percent in 2009 on concern it will be forced to add to reserves for annuities should stocks decline. North America’s largest insurer is projected to boost revenue by an annual rate of more than 8 percent through 2011, estimates compiled by Bloomberg show. “They’ve been hard done by, unfairly marked down,” said Gavin Graham , director of investments at Bank of Montreal Asset Management, which manages C$50 billion ($47 billion) including shares of Manulife, Sun Life Financial Inc. and Great-West Lifeco Inc. “What have equity markets done this year? They’re up 25, 35 percent. If you have exposure to equities, all other things being equal, wouldn’t that be a good thing?” Sun Life Sun Life, located in Toronto, trades for 9.3 times projected 2010 earnings based on its closing price last week of C$27.98, down 1.6 percent for the year. Winnipeg, Manitoba- based Great-West fetches 10.6 times forecast earnings. The stock added 15 percent in 2009 to C$23.81 on the Toronto Stock Exchange. J. Chahine Capital owns shares of Obrascon Huarte Lain, or OHL , according to Chairman Jacques Chahine , who oversees $374 million in Luxembourg. The Spanish builder that operates roads in Brazil trades for 9.2 times forecasts for 2010 profit of 1.95 euros ($2.91) a share, up 11 percent from this year’s income estimate. That compares with an average multiple of 12.7 since 2001, according to data compiled by Bloomberg. Obrascon has gained 80 percent this year. Good Value “Now you can buy on a more rational basis than at the March bottom,” Chahine said. “We bought OHL at the end of July. It’s a good example of value that is left. It is a good stock. We believe even buying a little late it is still a good value.” Delaware Investments added to its stake in Vivendi five months ago, when the media and telephone company’s price- earnings ratio using estimated 2010 income fell to 45 percent less than the MSCI World’s, according to Ned Gray , who helps manage $135 billion in Boston. That was the lowest level relative to the index based on projected earnings for the next calendar year since at least January 2006. Vivendi is forecast to post a fifth straight revenue increase this year. “The rally has left a lot of names that are far more defensive relatively weak in their stock price performance versus the more economically geared names,” said Gray. Vivendi provides “a good, consistent level of cash generation as well as a cheap valuation. They also provide a nice cushion if this economic recovery is to falter.” Vivendi, GE Vivendi’s dividend has increased every year since the payouts were reinstated in 2005. The company owns a 20 percent stake worth about $5 billion in NBC Universal, using the valuation Fairfield, Connecticut-based General Electric Co. and Comcast Corp. of Philadelphia have agreed upon, according to people familiar with the matter. Vivendi has an option to sell its stake every year from Nov. 15 to Dec. 10. Finding value in the stock market today means picking companies that “fell through the cracks” during the rally, said Scott Black , who oversees $900 million as president of Delphi Management in Boston. “Just sloshing money around isn’t very imaginative today at these multiples,” Black said. “That’s what the average idiot does. You have to look hard because the market is well picked over.” To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Matt Walcoff in Toronto at mwalcoff1@bloomberg.net ; Rita Nazareth at rnazareth@bloomberg.net .

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Copenhagen Summit Won’t Yield Agreement on Climate, APEC Leaders Are Told

November 14, 2009

By Julianna Goldman Nov. 15 (Bloomberg) — President Barack Obama and 18 other Asia-Pacific leaders were told this morning that climate talks in Copenhagen next month won’t produce a binding agreement on reducing greenhouse gases, a U.S. official said. Danish Prime Minister Lars Lokke Rasmussen , who is leading the group overseeing United Nations-sponsored climate talks, told the group at a breakfast meeting in Singapore that negotiations haven’t progressed far enough to expect an accord by the time the summit convenes, Michael Froman , Obama’s deputy national security adviser, told reporters after the session. Rasmussen laid out a two-step process for going forward that would have the 191 nations sign on to a politically binding accord that covers “all the major elements of the negotiations including mitigation, adaptation, technology and finance,” Froman said. A second phase of negotiations would be conducted to work on a binding climate accord. Obama endorsed the plan and there was a consensus from the other leaders to proceed on that path, Froman said. Rasmussen’s report to leaders attending the Asia Pacific Economic Cooperation forum in Singapore came at a meeting arranged in the last 36 hours. Climate change was among the main topics on the agenda for the APEC summit, which includes the U.S. and China, the biggest emitters. Industrialized nations want developing countries such as China and India to outline programs that will curb output of heat-trapping gases. The two fastest-growing major economies baulk at binding emission targets because their energy usage is projected to rise as more people are lifted out of poverty. Obama hasn’t decided whether he will attend the Copenhagen meeting, Froman said. The summit is scheduled for Dec. 7-18. To contact the reporters on this story: Julianna Goldman in Singapore at jgoldman6@bloomberg.net ;

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Kirk Says Obama Administration to Work With Congress on Pacific Trade Pact

November 14, 2009

By Rebecca Christie Nov. 14 (Bloomberg) — U.S. Trade Representative Ron Kirk pledged the Obama administration will work with Congress as it seeks to link up with a four-nation Pacific trade alliance in pursuit of broader Asian trade ties. Kirk’s remarks at the Asia Pacific Economic Cooperation forum in Singapore today followed President Barack Obama’s announcement in Tokyo that the U.S. would seek a regional agreement by reaching out to the trade group, which currently includes Singapore, New Zealand, Chile and Brunei. By singling out the Trans-Pacific Partnership, the administration is giving a central role in its Asia trade strategy to a regional alliance among nations with a combined gross domestic product of about $494 billion, less than half that of Australia. Pro-trade lawmakers in the U.S. and industry groups hailed the outreach, which likely will face opposition from some of Obama’s fellow Democrats. “The administration’s biggest challenge is on their left, not on their right, and we’re going to have to put a lot of energy together dealing with the Congress and the Labor unions to get this done,” Tom Donohue , president of the U.S. Chamber of Commerce, said in an interview in Singapore. Lawmaker Support Senators Max Baucus of Montana and Charles Grassley of Iowa, the chairman and top Republican on the Senate Finance Committee, issued statements in support of the initiative. “The world has been waiting for the United States to reassert its leadership on trade, and today’s announcement is an important first step,” Grassley said. “If we can reach an agreement, it will create new opportunities for U.S. exporters and help strengthen our position in the Asia-Pacific region.” Baucus, whose committee oversees international trade, said such negotiations are “right for American jobs, right for American exporters and right for the American economy” because U.S. businesses need broader access to Asian markets. The potential pact is not without detractors as farmers and ranchers worry about a spike in meat and dairy imports from New Zealand and textile producers worry about increased import competition from Vietnam. Obama also pledged to renew efforts to enact a trade deal with South Korea that was negotiated by his predecessor, former President George W. Bush , and has been held up by Democratic critics who say it doesn’t give the U.S. equal access to South Korean markets. Agreement for Future Obama said the U.S. wants to reach out to the Trans Pacific Partnership countries “with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st century trade agreement.” Asian markets can help the U.S. create jobs and pull out of its worst downturn since the Great Depression, Kirk told business leaders meeting in Singapore. He said that while the recovery has started it isn’t yet secure. Echoing Obama, Kirk said the U.S. needs to increase its savings and exports while Asian nations work to shrink their trade surpluses and encourage domestic spending. “We must break down long-standing barriers to trade and investments as well as newer impediments that obstruct trade and slow economic integration in the Asia-Pacific,” he said. As the trade talks proceed, he promised “close consultation with the United States Congress and with stakeholders at home.” The Bush administration announced last year that it would join in negotiations with the four other nations pulling together the trans-Pacific trading group, New Zealand, Chile, Brunei and Singapore. At the end of last year, Peru, Vietnam and Australia said they would join, too. The U.S. already has individual free-trade agreements with Chile, Singapore, Peru and Australia. To contact the reporter on this story: Rebecca Christie in Singapore at rchristie4@bloomberg.net

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Obama Vows U.S. to Seek Broader Engagement With Asia, Beyond Japan, China

November 13, 2009

By Edwin Chen and Julianna Goldman Nov. 14 (Bloomberg) — President Barack Obama promised broader U.S. engagement with Asia and an expanded focus beyond the traditional economic powers such as Japan and China. “We look to rising powers with the view that in the 21st century, the national security and economic growth of one country need not come at the expense of another,” Obama said in the text of an address to an audience of Japanese business and political leaders in Tokyo’s Suntory Hall. Setting out on his first trip to Asia as president, Obama is using today’s speech to outline his administration’s approach to the region, which includes greater engagement on economic and security issues. Obama called for unified efforts to block North Korea’s nuclear weapons development and stressed the importance of increasing U.S. exports to achieve greater balance with countries that sell far more goods to the U.S. than they buy from American companies. The world financial crisis will lead to a rebalancing for the U.S. economy, he said. The U.S. will support “an ambitious and balanced” Doha trade agreement, Obama said. He also vowed to work toward completing a trade agreement with South Korea and enter into discussions for a Pacific trade accord. Japan Alliance “Our efforts in the Asia Pacific will be rooted, in no small measure, through an enduring and revitalized alliance between the United States and Japan,” Obama said. “But while our commitment to this region begins in Japan, it does not end here.” Noting he was born in Hawaii and lived in Indonesia as a child, Obama said the Pacific Rim has “helped shape my world view.” He said his administration will give greater attention to the region’s multilateral organizations, such as the Association of South East Asian Nations. “I know that the United States has been disengaged from these organizations in recent years,” Obama said. “So let me be clear: those days have passed.” To contact the reporters on this story: Edwin Chen in Tokyo at echen32@bloomberg.net ; Julianna Goldman in Tokyo at jgoldman6@bloomberg.net

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U.S. Trade Deficit Jumps Most in a Decade on Demand for Imported Cars, Oil

November 13, 2009

By Bob Willis Nov. 13 (Bloomberg) — The trade deficit in the U.S. widened in September by the most in a decade, reflecting rising demand for imported oil and automobiles as the economy rebounded from the worst recession since the 1930s. The gap grew a larger-than-anticipated 18 percent to $36.5 billion, the highest level since January, from a revised $30.8 billion in August, the Commerce Department said today in Washington. Imports surged by the most in 16 years, swamping a gain in exports. Demand for foreign products may remain elevated in coming months as consumer and business spending improve and companies aim to prevent inventories from collapsing even more. Exports may also rise as expanding economies in Asia and Europe and a weak dollar drive demand for American goods, giving manufacturers such as Dow Chemical Co. a lift. “The recent upturn in imports reflects a stronger U.S. economy,” Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “A rebound in exports is helping the economy transition from recession to recovery.” The trade gap was projected to widen to $31.8 billion, from an initially reported $30.7 billion in August, according to the median forecast in a Bloomberg News survey of 77 economists. Deficit projections ranged from $28.6 billion to $34.1 billion. A collapse in world trade earlier this year brought the gap down to $26.4 billion in May, its lowest level since November 1999, as imports plunged even faster than exports. As commerce begins to pick back up, global leaders agree more needs to be done to strengthen the expansion. Geithner, Obama U.S. Treasury Secretary Timothy Geithner and other finance ministers at the Asia-Pacific Economic Cooperation forum in Singapore this week reiterated a pledge to maintain stimulus efforts “until a durable recovery in private demand is secured.” Asia is “leading the world” back to recovery, Geithner told reporters at a joint press briefing with his APEC counterparts. President Barack Obama began a swing through Asia today as world leaders work toward a rebalancing that will make global growth more reliant on spending by Asian consumers and businesses and less dependent on their American counterparts. Imports climbed 5.8 percent, the most since March 1993, to $168.4 billion. The figures reflected a $4.1 billion increase in imported oil as the cost of a barrel of crude climbed to the highest level since October 2008 and volumes also rose. Auto Imports Purchases of foreign-made autos and parts surged by $1.7 billion to $16.4 billion, due mainly to a $1.3 billion increase in imports from Canada and Mexico as North American vehicle production picked up. Imports from South Korea also climbed. The federal “cash for clunkers” auto trade-in program, which expired in late August, generated momentum in car sales and boosted demand for parts and supplies. Automotive inventory restocking is also boosting demand for foreign-made autos and parts. U.S. sales for South Korea-based Hyundai Motor Co. increased in September for the third month in a row, while Toyota Motor Corp. is boosting production of models such as Corollas and Camry sedans to rebuild its U.S. inventory. “Our inventories are continuing to recover with a very good pipeline as we move into the fourth quarter,” Robert Carter, Toyota’s North America sales chief, said on a conference call last month. Buyers Overseas Exports rose 2.9 percent to $132 billion, the most this year, propelled by sales of civilian aircraft, industrial machines and petroleum products. The dollar this month was down 12 percent from a five-year high reached in March against a trade-weighted basket of currencies from it’s biggest trading partners. China’s economy grew 8.9 percent in the third quarter from the same period in 2008, the best performance in a year. Exports to the Asian nation were the highest since October, even as imports from China also climbed. “The economic outlook for the rest of 2009 appears to be stabilizing, with strong growth in Asia Pacific, especially China, and other emerging geographies,” Andrew Liveris, Dow Chemical’s chief executive officer, said in an Oct. 22 statement. Factory Pickup Dow’s factories around the world ran at 78 percent of capacity in the third quarter, an increase of 3 percentage points, because of increased demand in developing markets, including China and Brazil, as well as relatively low North American ingredient costs that led to increased exports. The largest U.S. chemical maker yesterday said cost cuts and rising sales will boost earnings more than analysts estimate. After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit grew to $41.7 billion, the highest since January. The figures suggest the government may revise down their estimate for third-quarter economic growth. The U.S. is growing again after posting its worst contraction in seven decades. The world’s largest economy expanded at a 3.5 percent annual rate in the third quarter, the best performance in two years. Economists surveyed last month forecast a 3 percent rate of growth this quarter. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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English Says Currency, Reluctant Consumers Slowing New Zealand’s Recovery

November 12, 2009

By Tracy Withers and Jason Bellini Nov. 13 (Bloomberg) — New Zealand’s recovery from recession will be slow because consumers are reluctant to spend and manufacturers are battling to cope as the soaring currency cuts their competitiveness, Finance Minister Bill English said. “We’re on the road to recovery but it’s going to be fairly bumpy,” English said in an interview in Singapore, where he is attending meetings of the Asia-Pacific Economic Cooperation forum. Consumers are confident “but they’re not yet backing that confidence with more spending or more investment,” he said. Slow growth in consumer spending and manufacturing adds to signs New Zealand’s economy won’t accelerate rapidly. The currency has jumped 26 percent this year, heading for a record annual gain. English said growth probably won’t pick up until 2010 after gross domestic product increased 0.1 percent in the three months through June, the first expansion in five quarters. “We didn’t believe it was recovering really quickly anyway,” he said. “It was only in a very technical sense we stopped contracting” in the second quarter. Retail sales , excluding inflation, rose 0.1 percent in the third quarter, according to a government report yesterday. A second report showed manufacturing , which ended 17 months of contraction in September, expanded at a slower pace in October. “Consumers are still making up their mind just how to deal with their overhanging debt,” said English. “They’re not sure where the housing market is going, they still face considerable job insecurity because unemployment is going to keep rising and some of the international commentary is more mixed.” Unemployment New Zealand’s jobless rate rose to a nine-year high of 6.5 percent in the third quarter and the government projects it will increase toward 7 percent in the first half of next year. The nation’s currency has surged 24 percent against the U.S. dollar during the past six months, the best-performing major currency tracked by Bloomberg. The gains have curbed exports and tourism, which make up 40 percent of the economy. “At this stage of the recession, we would normally have a currency low against the U.S. dollar and in the past that’s been one of the things that’s helped us lift out of the recession,” English said. “New Zealand’s got a challenge.” English and Reserve Bank Governor Alan Bollard have said the New Zealand dollar’s gains reflect weakness in the U.S. currency, which has slid against counterparts from the yen to the euro this year as the Federal Reserve keeps interest rates at a record low and the economy remains sluggish. “We’ve all got an interest in where U.S. policy goes because at the moment the dollar looks like it is going to continue to depreciate,” said English. “We have to think through the effects of having a high currency as well as relatively high interest rates which makes us an attractive risk investment for people.” Benchmark Rates New Zealand’s benchmark rate is 2.5 percent compared with the Fed target of 0.25 percent and Japan’s 0.1 percent. The nation’s house prices increased 1.3 percent in October from September, a report showed today. English said New Zealand is introducing reforms to make its companies more competitive even with a high exchange rate, and is taking advantage of free trade agreements with nations including China to counter the disadvantage. Exports to China have increased 25 percent the past year, English said. “We are surprised with what gains we are making,” he said. “The evidence is that despite the currency issue we’ve been able to grab the opportunity presented by the free trade agreement and it’s good news for us in the long term.” To contact the reporters on this story: Tracy Withers in Wellington at twithers@bloomberg.net ; Jason Bellini in Singapore at jbellini@bloomberg.net

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Asia Summit Awaits Obama Trade Policy Promised in May as Agreements Linger

November 12, 2009

By Mark Drajem Nov. 13 (Bloomberg) — President Barack Obama would press for new trade accords only after he set out his approach to international commerce in a speech, U.S. officials said in May. Six months later, trading partners are still waiting. “There is deep frustration at the lack of any trade policy,” said Troy Stangarone, director of congressional affairs at the Korea Economic Institute in Washington, a public policy research group funded mostly by the South Korean government. Trade will be a focus of Obama’s eight-day trip to Asia, beginning today in Japan. He will also attend the Asia-Pacific Economic Cooperation summit in Singapore and make visits to Shanghai, Beijing and Seoul. The region’s leaders are impatient for a clear U.S. approach to trade, said C. Fred Bergsten , director of the Peterson Institute for International Economics in Washington. Governments “are hoping that Obama’s trip will begin the process of re-engaging Asia on trade,” Bergsten, who met with South Korea’s President Lee Myung Bak recently, said in an interview. “Trade is very high on their diplomatic agenda.” Obama inherited bilateral trade accords with Colombia, Panama and South Korea that President George W. Bush completed and Congress never approved. Bush also started the Doha Round of negotiations in the World Trade Organization, which remain unfinished, and said the U.S. would like to join a trade agreement among Singapore, New Zealand, Chile and Brunei. During his presidential campaign, Obama criticized the pending trade deals with Colombia and South Korea. As president, he sided with the United Steelworkers union, imposing duties of 35 percent on automobile tire imports from China in September. He also joined the leaders of the Group of Eight countries in promising to “keep markets open” and “reject protectionism of any kind.” ‘Set a Balance’ Everett Eissenstat , a career official in the U.S. Trade Representative’s office, told a Senate panel in May that Obama wouldn’t press for new agreements until he could give a speech defining his trade agenda and how it fit into his other priorities. The accords have remained in limbo since then, business executives, overseas governments and some lawmakers from Obama’s party have said. “For the past 10 months, the United States has lacked a comprehensive trade agenda,” Senate Finance Committee Chairman Max Baucus , a Montana Democrat, said Nov. 10. “That absence is palpable.” Enforcement, Transparency “Obama laid out a trade agenda in March 2009, and it set out a balance of job-creating market access openings, enforcement, transparency and other policy priorities,” Deborah Mesloh , a spokeswoman for the U.S. Trade Representative , said in e-mailed statement. “On pending free trade agreements, we continue our consultation with stakeholders and Congress to understand concerns and to develop proposals for addressing these concerns.” Obama, in a meeting with his Economic Recovery Advisory Board on Nov. 2, said the U.S. had a “debilitating gridlock of trade policy,” which made it by turns too open or too timid. The president will use his Asia trip to provide more details about how he plans to use trade policy to boost exports to Asia, according to a senior administration official who declined to be identified discussing the president’s intentions. Obama’s position on trade is “a constant question,” said Christopher Wenk , the U.S. Chamber of Commerce’s director for trade. Executives in Geneva Wenk said that during a trade trip with executives from Citigroup Inc ., Ford Motor Co. and General Electric Co. to meet World Trade Organization officials in Geneva, his group was peppered with inquiries about U.S. intentions. “Have you got any indication from the Obama administration as to what their trade policy may be?” Clare Thorpe, Ireland’s agriculture attaché in Washington asked a European Union trade representative at a public forum Oct. 26. Canadian officials are trying to find out if the U.S. will let Canadian-based companies compete for stimulus projects, an irritant since Obama signed that measure in February, said Birgit Matthiesen, the Washington-based adviser to the Canadian Manufacturers & Exporters association. The administration is lacking two of three deputy trade representatives, and the top trade official at the Commerce Department, as those nominees haven’t been confirmed by the Senate. “They don’t have their people in place yet,” Wenk said. By this time in their term, the past two presidents had embraced trade initiatives. Congressional Approval Bush won congressional approval for a trade deal with Jordan and was days away from launching the Doha Round at this point in 2001. President Bill Clinton was in the final lobbying push to get lawmakers to approve the North American Free Trade Agreement, which passed the House on Nov. 17, 1993. No similar action is likely during Obama’s first year, in part because the economy and health-care legislation have dominated his attention, Stangarone, of the Korea Economic Institute, said in an interview. There are economic costs to delay, said Tom Donohue , president of the Washington-based U.S. Chamber of Commerce, the nation’s largest business organization. “We are standing on the sidelines while Asian nations clinch new trade deals,” Donohue said in a statement before leaving to attend the APEC trade meetings. “We’ll pay the price if this continues. It’s time to see action from Washington.” To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net .

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Stocks in U.S. Retreat as Energy Shares Slump on Crude Inventories Report

November 12, 2009

By Mary Childs Nov. 12 (Bloomberg) — U.S. equity benchmark indexes fell from 13-month highs as energy shares slumped following bigger- than-estimated growth in oil stockpiles, erasing an earlier advance spurred by Hewlett-Packard Co.’s takeover of 3Com Corp. The dollar rose the most versus the euro since August. Southwestern Energy Corp. and Range Resources Corp. slid more than 4 percent, helping lead 39 of 40 oil and gas companies in the Standard & Poor’s 500 Index lower as crude tumbled. The dollar strengthened against 14 of 16 major currencies, extending declines in commodities. 3Com rallied 31 percent, its best gain since 2007, as Hewlett-Packard offered to purchase the maker of computer networking equipment for $2.7 billion. The S&P 500 slid 1 percent to 1,087.24 at 4:04 p.m. in New York after climbing to as high as 1,101.97 before the Energy Department’s report. The Dow Jones Industrial Average lost 93.79 points, or 0.9 percent, to 10,197.47. Eight stocks retreated for each that rose on the New York Stock Exchange. “The fundamentals just aren’t quite there yet,” said Sarah Hunt , a money manager who helps oversee about $6.5 billion for Purchase, New York-based Alpine Mutual Funds. “You still have a lot of concerns about the demand side of the equation for energy stocks. We’re getting a bit of a pause. Every time we get these big bursts of enthusiasm they tend to be tempered by the fact that the economy still looks pretty bad.” The S&P 500, which closed at its highest level since October 2008 yesterday, failed to remain above the 1,100 level for a second straight day. The index has rallied 61 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007. ‘Cloud of Hope’ The rebound occurred as government stimulus measures and Federal Reserve interest rate cuts helped end a four-quarter contraction in the U.S. economy. The gains pushed the S&P 500 to about 22 times reported earnings, the highest since 2002, according to weekly data compiled by Bloomberg. “This market has risen on a cloud of hope,” said Robert Arnott , founder of Research Affiliates LLC, which oversees $32 billion in Newport Beach, California. “It’s always dangerous to assume that a liquidity-induced bull market will end before the liquidity flows end. The liquidity flows have some time to go, but the market has gotten way, way, way ahead of fundamentals.” Asian shares and U.S. stock-index futures fell before the open of exchanges in New York after China’s Premier Wen Jiabao spurred concern that the global economic recovery will slow. ‘Slow and Bumpy’ “The worst is over,” Wen said in speech televised from a forum in Beijing. “The global economy is starting to recover but a total recovery will be a slow and bumpy process.” Southwestern Energy, the only oil and natural-gas producer in the S&P 500 to advance last year, slid 4.8 percent to $42.57. Range Resources, the independent energy producer that operates mostly in the southwestern, Appalachian and Gulf Coast regions of the U.S., slid 4.3 percent to $48.98. Chevron Corp., the second-largest U.S. oil company, lost 1.4 percent to $77.42. Energy shares slumped 2 percent collectively, the steepest decline among 10 groups. Oil for December delivery fell 3 percent to $76.94 a barrel in New York. Supplies of crude rose 1.76 million barrels to 337.7 million last week, the Energy Department report showed. Analysts surveyed by Bloomberg News forecast a 1 million-barrel gain on average. Refinery operations declined to the lowest level since September 2008, when units were shut in the aftermath of hurricanes Gustav and Ike. “Demand for oil is not strengthening, despite indications that the economy is showing signs of stabilization and growth,” said Tim Ghriskey , who helps oversee $2 billion as chief investment officer for Solaris Asset Management in Bedford Hills, New York. “It calls into question on a minor basis the strength of the economic recovery.” 3Com Takeover 3Com surged 31 percent to $7.46 after the Hewlett-Packard bid. H-P Chief Executive Officer Mark Hurd is seeking to add to the company’s $118 billion in annual sales after the sharpest slump in PC demand in history. Hewlett-Packard slid 0.6 percent to $49.70. Brocade Communications Systems Inc. dropped 13 percent to $8.08 after ratings downgrades at Piper Jaffray Cos., ThinkEquity LLC and Lazard Capital Markets Ltd. The analysts cited the loss of a potential partnership with Hewlett-Packard, which some investors had speculated would buy Brocade. Wal-Mart Stores Inc. rose 0.5 percent to $53.24. The world’s largest retailer posted third-quarter profit of 84 cents a share, beating the 81-cent average analyst estimate in a Bloomberg survey, while forecasting U.S. sales for the fourth quarter will be little changed. Earnings Season Dow Chemical Co. climbed 7.1 percent to $28.60 after it said cost cuts and rising sales after the acquisition of Rohm & Haas Co. will boost earnings more than analysts estimate. Eighty-one percent of S&P 500 companies that released results have exceeded the average analyst estimate for third quarter earnings per share, a record in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter. U.S. Treasury Secretary Timothy Geithner said there are “early signs” that the world is addressing imbalances in spending and savings that contributed to the global crisis. Asia is “leading the world” back to recovery, Geithner told reporters in a press briefing with counterparts from the Asia-Pacific Economic Cooperation group following a meeting in Singapore. American exports are also growing at a healthier rate, he said. China will probably let the yuan start rising against the dollar in early 2010 after the central bank signaled it may pursue a more flexible currency policy, said Calyon, the investment-banking arm of Credit Agricole SA. China’s Yuan The exchange rate will be guided in a “proactive, controlled and gradual manner and based on international capital flows and movements in major currencies,” the People’s Bank of China said yesterday in a quarterly report. It omitted a pledge made three months earlier to keep the yuan “basically stable.” The dollar strengthened against all of the most-traded counterparts tracked by Bloomberg except for the pound and South Korean Won. It gained 1 percent versus the euro Canadian dollar. The Dollar Index, which tracks the U.S. currency against six major trading partners, added 0.7 percent in its second day of gains after touching a 15-month low. Gold prices climbed to a record $1,123.40 an ounce in New York, flirting with the longest rally in 27 years before declining as the dollar rebounded, curbing demand for the metal as an alternative asset. Banks Drop Financial shares in the S&P 500 posted the second-steepest decline among 10 groups, falling 1.8 percent collectively. Bank of America Corp. dropped 2.3 percent to $16.06 and JPMorgan Chase & Co. lost 2.3 percent to $43.30. The Federal Reserve will prohibit banks from charging overdraft fees on automated teller machines or debit cards, unless a customer has agreed to pay extra charges for exceeding account balances. Lenders collected almost $37 billion in overdraft fees last year, according to research firm Moebs Services Inc. The S&P 500 may drop as much as 15 percent by the end of the year as declines in bank stocks signal an imminent fall, said Mary Ann Bartels , head of technical analysis at Bank of America Corp. The KBW Bank Index that tracks 24 lenders broke out of a so-called triple top pattern in the past two weeks, suggesting that it has entered a period of decline that will extend to the S&P 500, Bartels said in a telephone interview. ‘Triple Top’ The S&P 500 , which closed at 1,098.51 yesterday, may drop to as low as 930 by the end of the year, she said. A triple top, a chart pattern where an asset creates three peaks near the same level, is used by technical analysts to predict the reversal of an uptrend. Treasuries rose as stocks declined and the U.S. completed this week’s three note and bond offerings with a record $16 billion sale of debt maturing in 30 years. The 10-year yield fell five basis points to 3.44 percent. The difference between 2- and 30-year yields reached 3.60 percentage points, the most since June, amid expectations the Treasury will increase sales of longer-term securities. Energy Future Holdings Corp.’s plan to reduce debt by swapping $6 billion of bonds for $4 billion of new securities failed, dealing a blow to the Texas electricity provider’s owners, buyout firms KKR & Co. and TPG. The company, which reduced the maximum exchange amount to $3 billion from $4 billion on Oct. 23, received tenders for $357.5 million of notes, Dallas-based Energy Future said today in a statement. The former TXU Corp. will issue $256.6 million of senior secured notes in exchange for the old bonds. To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net .

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Stocks in U.S. Fall as Drop in Energy Shares Overshadows Technology Rally

November 12, 2009

By Mary Childs Nov. 12 (Bloomberg) — U.S. stocks fell from a 13-month high as energy producers slumped following bigger-than-estimated growth in oil stockpiles, erasing an earlier advance triggered by Hewlett-Packard Co.’s takeover of 3Com Corp. Southwestern Energy Corp. and Range Resources Corp. slid more than 4 percent, leading declines in 39 of 40 energy companies in the Standard & Poor’s 500 Index as oil tumbled. The dollar strengthened against 15 of 16 major currencies, helping to extend declines in commodities. 3Com rallied 31 percent for its best gain since 2007 as Hewlett-Packard offered to purchase the maker of computer networking equipment for $2.7 billion. The S&P 500 slid 0.7 percent to 1,090.9 at 1:37 p.m. in New York after climbing to as high as 1,101.97 before the Energy Department’s report. The Dow Jones Industrial Average lost 62.43 points, or 0.6 percent, to 10,228.83. About four stocks retreated for each that rose on the New York Stock Exchange. “The fundamentals just aren’t quite there yet,” said Sarah Hunt , a money manager who helps oversee about $6.5 billion for Purchase, New York-based Alpine Mutual Funds. “You still have a lot of concerns about the demand side of the equation for energy stocks. We’re getting a bit of a pause. Every time we get these big bursts of enthusiasm they tend to be tempered by the fact that the economy still looks pretty bad.” The S&P 500, which closed at a 13-month high yesterday, failed to remain above the 1,100 level for a second straight day. The index has rallied 61 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007. ‘Slow and Bumpy’ The rebound occurred as government stimulus measures and Federal Reserve interest rate cuts helped end a four-quarter contraction in the U.S. economy. The gains pushed the S&P 500 to 22 times reported earnings, the highest since 2002, according to weekly data compiled by Bloomberg. Asian shares and U.S. stock-index futures fell before the open of exchanges in New York after China’s Premier Wen Jiabao spurred concern that the global economic recovery will be slow. “The worst is over,” Wen said in speech televised from a forum in Beijing. “The global economy is starting to recover but a total recovery will be a slow and bumpy process.” Southwestern Energy, the only oil and natural-gas producer in the S&P 500 to advance last year, slid 4.7 percent to $42.61. Range Resources, the independent energy producer that operates mostly in the southwestern, Appalachian and Gulf Coast regions of the U.S., slid 4.1 percent to $49.10. Chevron Corp., the second-largest U.S. oil company, lost 1.3 percent to $77.51. Energy shares slumped 1.9 percent collectively, the steepest decline among 10 groups. Crude Slumps Oil for December delivery fell 2.4 percent to $77.39 a barrel in New York. Supplies of crude rose 1.76 million barrels to 337.7 million last week, the Energy Department report showed. Analysts surveyed by Bloomberg News forecast a 1 million-barrel gain on average. Refinery operations declined to the lowest level since September 2008, when units were shut in the aftermath of hurricanes Gustav and Ike. “With oil inventories increasing more than expected, it demonstrates that demand for oil is not strengthening, despite indications that the economy is showing signs of stabilization and growth,” said Tim Ghriskey , who helps oversee $2 billion as chief investment officer for Solaris Asset Management in Bedford Hills, New York. “It calls into question on a minor basis the strength of the economic recovery.” 3Com Takeover 3Com surged 31 percent to $7.48 after the Hewlett-Packard bid. H-P Chief Executive Officer Mark Hurd is seeking to add to the company’s $118 billion in annual sales after the sharpest slump in PC demand in history. Hewlett-Packard slid 0.5 percent to $49.77. Brocade Communications Systems Inc. dropped 13 percent to $8.04 after analysts downgraded ratings at Piper Jaffray Cos., ThinkEquity LLC and Lazard Capital Markets Ltd. The analysts cited a the loss of a potential partnership with Hewlett- Packard, which investors had speculated would buy Brocade. Wal-Mart Stores Inc. rose 1.1 percent to $53.56. The world’s largest retailer posted third-quarter profit of 84 cents a share, beating the 81-cent average analyst estimate in a Bloomberg survey. Dow Chemical Co. climbed 6.4 percent to $28.41 after it said cost cuts and rising sales after the acquisition of Rohm & Haas Co. will boost earnings more than analysts estimate. Eighty-one percent of S&P 500 companies that released results have exceeded the average analyst estimate for third quarter earnings per share, a record in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter. Gains Predicted Global equities will rise as much as 30 percent in the next six months on higher earnings and continued economic recovery, according to Burkhard Varnholt , Zurich-based chief investment officer at Bank Sarasin & Co., which manages about $80 billion. U.S. Treasury Secretary Timothy Geithner said there are “early signs” that the world is addressing imbalances in spending and savings that contributed to the global crisis. Asia is “leading the world” back to recovery, Geithner told reporters in a press briefing with counterparts from the Asia-Pacific Economic Cooperation group following a meeting in Singapore. American exports are also growing at a healthier rate, he said. China will probably let the yuan start rising against the dollar in early 2010 after the central bank signaled it may pursue a more flexible currency policy, said Calyon, the investment-banking arm of Credit Agricole SA. The exchange rate will be guided in a “proactive, controlled and gradual manner and based on international capital flows and movements in major currencies,” the People’s Bank of China said yesterday in a quarterly report. It omitted a pledge made three months earlier to keep the yuan “basically stable.” Dollar, Gold The dollar strengthened against 15 of the 16 most-traded counterparts tracked by Bloomberg, gaining 0.8 percent versus the euro and less than 0.1 percent against the British pound. The Dollar Index, which tracks the U.S. currency against six major trading partners, added 0.3 percent in its second day of gains after touching a 15-month low. Gold prices climbed to a record in New York, flirting with the longest rally in 27 years before declining as the dollar rebounded, curbing demand for the metal as an alternative asset. Aecom Technology Corp. rose 7.7 percent to $27.43 and climbed as much as 9.2 percent, the most intraday since June 29. The architectural and engineering company posted earnings excluding some items of 48 cents a share in the fourth quarter, beating the average analyst estimate by 3.5 percent, according to Bloomberg data. Tetra Tech Inc. dropped 4 percent to $10.64. The provider of engineering and technical services reported fourth-quarter earnings of 33 cents a share, and projected first-quarter earnings of between 28 and 30 cents a share, compared with the average analyst estimate of 30 cents in a Bloomberg survey. To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net .

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Stocks in U.S. Fluctuate as 3Com Takeover Spurs Gain in Technology Shares

November 12, 2009

By Mary Childs Nov. 12 (Bloomberg) — U.S. stocks fluctuated as Hewlett- Packard Co.’s takeover of 3Com Corp. triggered a rally in technology shares, overshadowing a prediction from China’s leader that the global economic recovery will be bumpy. 3Com, the maker of networking equipment, jumped 31 percent for its best gain since 2007 after Hewlett-Packard offered to purchase the company for $2.7 billion. Advanced Micro Devices rallied 24 percent and Intel Corp. added 1.8 percent after the two chipmakers agreed to settle antitrust and patent disputes with each other. Wal-Mart Stores Inc. rose 1.3 percent after earnings topped analysts’ estimates. The S&P 500 climbed 0.1 percent to 1,099.67 at 10:08 a.m. in New York, above its highest close in 13 months. The Dow Jones Industrial Average rose 2.72 points, or less than 0.1 percent, to 10,293.98. Europe’s Dow Jones Stoxx 600 Index increased 0.5 percent, while the MSCI Asia-Pacific Index fell for the first time in five days. The S&P 500 has rebounded 62 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007. The rally occurred as government stimulus measures and Federal Reserve interest rate cuts helped end a four-quarter contraction in the U.S. economy. That’s helped push the index to 22 times reported earnings, the highest since 2002, according to weekly data compiled by Bloomberg. Stock-index futures fell before the open of U.S. exchanges after China’s Premier Wen Jiabao spurred concern over the strength of the global economic recovery. ‘Slow and Bumpy’ “The worst is over,” Wen said in speech televised from a forum in Beijing. “The global economy is starting to recover but a total recovery will be a slow and bumpy process.” 3Com surged 31 percent to $7.48 after the Hewlett-Packard bid. Hewlett-Packard Chief Executive Officer Mark Hurd is seeking to add to the company’s $118 billion in annual sales after the sharpest slump in PC demand in history. Hewlett- Packard slid 1.5 percent to $49.25 in New York. Wal-Mart rose 1.1 percent to $53.54. The world’s largest retailer posted third-quarter profit of 84 cents a share, beating the 81 cents average analyst estimate in a Bloomberg survey. Kohl’s Corp., the fourth-biggest U.S. department-store chain, reported third-quarter earnings of 63 cents a share, higher than the average analyst estimate of 61 cents in a Bloomberg survey. Its shares climbed as much as 1.9 percent. Eighty-one percent of S&P 500 companies that released results have exceeded the average analyst estimate for third quarter earnings per share, a record in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter. Gains Predicted Global equities will rise as much as 30 percent in the next six months on higher earnings and continued economic recovery, according to Burkhard Varnholt , Zurich-based chief investment officer at Bank Sarasin & Co., which manages about $80 billion. U.S. Treasury Secretary Timothy Geithner said there are “early signs” that the world is addressing imbalances in spending and savings that contributed to the global crisis. Asia is “leading the world” back to recovery, Geithner told reporters in a joint press briefing with counterparts from the Asia-Pacific Economic Cooperation group following a meeting in Singapore today. American exports are also growing at a healthier rate, he said. China will probably let the yuan start rising against the dollar in early 2010 after the central bank signaled it may pursue a more flexible currency policy, said Calyon, the investment-banking arm of Credit Agricole SA. The exchange rate will be guided in a “proactive, controlled and gradual manner and based on international capital flows and movements in major currencies,” the People’s Bank of China said yesterday in a quarterly report. It omitted a pledge made three months earlier to keep the yuan “basically stable.” To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net .

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