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Vinod Thomas: Global Crises, Social Safety Nets and the Poor

by on July 14, 2011

Huffington Post…

A striking difference between the recent financial, food, fuel and economic crises of previous decades is the attention some nations — Colombia, Georgia, Ethiopia, and Mexico among them — have been able to give this time around to the plight of the poor from the outset. The handle these countries had on helping protect the poor and vulnerable extended from social safety nets that were already in place before the crisis struck. Development organizations, especially the World Bank, financed some of these programs. Much of the Bank’s support to social safety nets over the past decade, $11.5 billion worth, came during 2009-2010. Such efforts were nevertheless insufficient to prevent about 64 million more people from slipping into poverty by the end of 2010 on account of the financial crisis, or to withstand the additional impacts of the food or fuel price hikes. In West Africa, Pakistan, Haiti, and several other places, devastation from natural disasters severely strained vulnerable segments of the population. But the recent experience with safety nets provides precious lessons going forward. First, it pays to build safety net systems in relatively stable times so that the worst poverty impacts from unanticipated events can be cushioned. The recurring nature of financial, food and fuel crises, as well as climate-related disasters, makes clear the need for all nations to be prepared to protect against shocks with social safety nets. Prior preparation is important because during a crisis it is hard to initiate or even scale up social programs or modify target groups to respond adequately. Organizations like the World Bank are most effective when they engage consistently during stable times to help develop social safety net programs and to build sufficient flexibility into them. Second, the coverage of these programs needs to be expanded to more countries. Thus far, middle-income countries such as Brazil and Mexico, which had built up institutional capacity in this respect, have been in the forefront. But low-income countries too need to give priority to such efforts with more support from development agencies. Of particular importance are efforts to strengthen the capacity in low-income countries to design flexible programs that consider the local context. Ethiopia, a low-income country, set up a large public safety net program to handle chronic and repeated poverty due to predictable shocks, such as droughts. Over time it has built-in an automatic contingency mechanism that provides support in times of food insecurity. During the disastrous 2010 floods, Pakistan, a lower-middle-income country, was able to draw on the experiences of the 2005 earthquake and the 2007 national social protection strategy to create the Citizen’s Damage Compensation program using the national database to identify beneficiaries and provide cash grants through debit cards from the private banking sector. Third, it is key for these programs to reach the right beneficiaries, without corruption or leakage. In many programs when the poverty focus is mentioned, it is often in general terms of poverty reduction rather than as part of a time-bound objective directed toward a specific subset of the population. Countries and external financiers need to develop rigorous mechanisms that effectively identify the targeted beneficiaries and build strong results frameworks that focus on supporting the poor and the vulnerable. The cost of well-targeted programs is usually a small share of GDP, typically below one percent. Yet for their sustainability, it is vital that they focus on the right results and ensure that they indeed reach the poor and vulnerable.

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Vinod Thomas: Global Crises, Social Safety Nets and the Poor

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Edward Muzio: Employee Engagement: Nobody Cares

by on July 14, 2011

Huffington Post…

I recently read some new statistics about how terribly disengaged the workforce is today . Well, the article was new, anyway. The conclusion, on the other hand — the fact that a huge percentage of the workforce is either trying to quit, waiting to quit or has already mentally quit — was not. I’ve been reading (and writing) for years about dreadful employee engagement statistics and how they thwart our attempts to produce useful output in our businesses. Unfortunately, nobody cares. Well, that’s an overstatement. Some people care. In fact, some organizations are tackling the challenge of employee engagement and getting good results. If you want to cheer up a little, check out Fortune’s “100 Best Companies to Work For” list . But don’t cheer up too much. On the whole, we’re trending the wrong way. And even if you are lucky enough to work for one of the “good ones,” you almost certainly have a family member, friend or loved one who doesn’t. We’ve all heard first-hand horror stories of workplaces filled with inept, apathetic workers who drag everyone else down. In the process, they cripple their whole group’s ability to produce useful output Clearly, either not enough people care about employee engagement, not enough people know what to do about it, or both. I don’t know about you, but to me, “both” is a troubling notion. Knowledge can lead to interest, and interest can lead to knowledge. But “nobody knows and nobody cares” is a signal flare at the end of the road. It’s an attitude that quickly converts to a pattern of behavior that shuts down information transfer, marginalizes improvement efforts and saps everyone of the creativity they need to solve problems in today’s complex workplace. “I don’t know and I don’t care” is like the organizational flu. Actually, it’s more like the organizational plague. So, as we teeter on the edge of an epidemic — and assuming that you’re still reading this article because you’re one of the people who does care — I’d like to equip you with a little knowledge. Maybe it’s just a reminder of things you already know, or maybe it’s new information for you. Either way, I invite you to read it, ponder it, and then, most importantly, do something with it , preferably in the next few days. Put your interest and knowledge together and become just a little bit of the antidote. Here’s how: First, engage with the engaged . I realize this may seem like the opposite of good sense. Addressing problem areas is human nature; when your car gets a flat tire, you pump up the flat first. But in the case of employee engagement, focusing first on problems is often a mistake. By giving all your time and energy to the few with the biggest engagement problems, you subtly reinforce the message that complaining is a path to attention. What I’m saying is that by pumping up the flat first, you teach the other tires that the only way to get air is to stop the car’s progress. Avoid that trap! Instead, focus praise, attention and resources on those employees who are engaged. Attend first to the pressure levels in the good tires. It sounds a little crazy, yes, but it’s really the only way to send a message that engagement is a reward in itself. Second, ask people about their incentives . That doesn’t mean asking people if they wish they could get paid more. (Let me save you the trouble: they do.) It means asking people, beginning with the most engaged, what they find interesting, engaging or motivating about their job. Some will tell you that they do it for the money, some may say they enjoy the problem-solving challenges, and others may talk about the opportunity to learn. Whatever they tell you, write it down. As you work your way from the most engaged to the least engaged, you’ll collect some specific examples of engagement. By the time someone tells you that he or she finds nothing whatsoever to enjoy about the work, you will be able to answer with some real suggestions. “That’s interesting,” you might say, “other people seem to enjoy some very specific aspects of that same work,” and then share part of your list. Your dialogue might just seed some ideas for the disengaged to rediscover his or her own engagement. Take care to avoid giving the impression of hard-selling anything: you’re a role model, not a dictator. Still, by simply talking with others in this way, your dialogue may lead to some productive conversations about the real engagement challenges people face. That type of conversation is fine, but remember: never take responsibility for another person’s happiness . It doesn’t matter whether you’re the manager, the peer or the employee; if you think you can “make” someone else happy, or talk them into being engaged, think again. You can influence your own level of engagement, you can make improvement suggestions to others, and you can decide where to spend your time and attention, but that’s all. Remember, though, that your decisions about where to spend time will influence your own engagement level. The more time you spend interacting with the disgruntled, the more likely you are to become that way, too, even as your energy feeds their current state. On the other hand, the more time you spend engaging with the engaged, the more connected to the work you’re likely to feel yourself, and the less you will feed the “nobody knows, nobody cares” mentality with your own resources. Here’s a video that gives you some other ideas about how to address engagement in the workplace. But whether you watch the video, try out my suggestions or elect to do something else entirely, please do something! There’s one thing nobody can argue about when it comes to the employee disengagement epidemic: we need more antidote.

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Edward Muzio: Employee Engagement: Nobody Cares

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Ian Fletcher: Why Innovation Needs Big Government

May 31, 2011

Most people realize that the Federal budget deficit and the trade deficit are serious problems. Unfortunately, as I have argued previously, few people grasp the importance of another big deficit in our economy, without which it will be extremely hard to fix the first two: our innovation deficit. Simply put: despite appearances to the contrary, our economy is not innovative enough. And it’s costing us, big-time. Despite our smug self-image as a global innovation leader, the U.S. actually only ranks in the middle of the pack for resources committed to innovation. See the chart below. ( Source .) Of course, spending money on problems isn’t everything. But it is also true that you generally get what you pay for. So unless our R&D is somehow more efficient dollar-for-dollar than that of other nations, we’re not setting the pace here. Our other big problem, of course, is that even when we do succeed in out-innovating other nations, we often can’t hang onto the industries we create. In fact, we have a long record of originating technologies and then “losing our birthright” of commercial dominance in them. To give just a few examples: • high-fidelity sound systems • color television • digital watches • videocassette recorders • semiconductor memories • semiconductor production equipment (like steppers, the machines that “print” computer chips onto silicon) • flat panel displays • robots • lithium-ion batteries • advanced ceramics (turbine blades, not coffee mugs) The weakness of our innovation performance is masked for the time being by the fact that innovations often have long lead times between the stages of the so-called “technology life cycle.” That is, decades can pass between the beginning and the end of the following process: 1. The key underlying science is discovered or key technology invented. 2. The first (exotic and expensive) commercial applications appear. 3. The technology gradually achieves adoption in all uses where it is appropriate. 4. The know-how to build the technology diffuses so much that it becomes a low-cost commodity product that any reasonably competent nation can make. As a result, a nation that was once on the forefront of innovation can still be harvesting technological positions it previously planted years later. We’re coasting. This coasting effect is enhanced by the presence of so-called “standards lock-in” protecting the oligopolies of companies like Microsoft and Intel. Microsoft’s products are, as anyone who uses them knows, in many ways abysmal: its desktop operating system delivers a user experience that is no faster or more reliable than the one sold a dozen years ago. People keep using it because of their need to interface with the installed base of other Microsoft users. Intel is less of a technological laggard, but it still commands a fat market share, and premium prices, based on the difficulty of computer manufacturers adapting to the use of alternative chips. Other lesser-known companies and industries enjoy similar effects. But these effects are a wasting asset which will not last forever. They are vulnerable to both gradual encroachment and to sudden technology shocks that render their existing products obsolete overnight. Another factor masking America’s innovation decline is the short-term gains from offshoring, which can make declining tech companies seem to boom as they ramp up profits by inexorably selling off their crown jewels. When a company offshores the least-productive, and least profitable, parts of its supply chain, both its productivity and profitability must, by definition, go up, in the short run. In the long run, however, this can lead to an insidious logic according to which, in the words of aerospace engineer Dr. L. J. Hart-Smith, who wrote a prescient critique of how Boeing was slowly outsourcing itself to death, the company decides “to outsource everything except a little Boeing decal to slap on the nose of the finished airplane.” So how can we restore America’s innovation engine? As I argued in a previous article , the key bottleneck in America’s innovation system isn’t, as many Republicans seem to think, that the government hamstrings would-be innovators with excess regulation or taxes their profits to death. Outside a few industries with big risks to the environment (nuclear energy) or public health (pharmaceuticals), the regulatory burden is, in fact, relatively light. Neither does our government impose confiscatory taxation on successful innovators. Instead, the key bottleneck in our innovation supply chain is what we can call useful unpatentable ideas . (The more sophisticated term is “infratechnologies.”) These are technological innovations which cannot themselves be commercialized. But innovations that can be commercialized and sold for profit cannot take place without them. As a result, the private sector tends to neglect them. To take one example: nanotechnology is probably the first major technology since the steam engine in which the U.S. is not the dominant player, research in this area being divided roughly equally between the U.S., Europe, and the Far East. And commercial nanotech companies depend, according to Greg Tassey of the National Institute of Standards and Technologies, upon the following infratechnologies: • Techniques for measuring the shapes, dimensions, and electrical characteristics of the various molecules making up nanoscale devices. • Techniques for manipulating and measuring the spin of individual electrons. • Scientific and engineering data for characterizing the fundamental physical behavior and long-term reliability of new nanoelectronic materials. Note that the words “techniques” and “data” figure prominently in the above descriptions. As noted, these are not (usually!) things that can be directly commercialized or patented. Nor are they academic pure science that the National Science Foundation will fund. Reigning neoclassical economics assumes (often without realizing it) that new technologies grow automatically from advances in pure science. It also assumes that these new technologies automatically commercialize themselves. But if, as noted, there are important gaps in the “innovation supply chain,” this isn’t true. Pure laissez faire doesn’t work well in technology any better than it does in other areas of economics. Back in the golden age of the American economy , the Federal government used to fill these gaps much better than it does today. In 1965, it funded 65 percent of all American R&D. But it has been walking away from this task for decades, as the chart below makes clear. ( Source .) One big problem for the U.S., as opposed to other countries, is that our publicly-funded R&D is dominated by mission-oriented agencies–NASA, the Defense Department, the National Institutes of Health, etc. These are fine institutions, but none of them is organized around the economic objective of increasing our GDP. They are all organized around non-economic missions: explore space, defend the nation, cure illness. Other nations tend to focus R&D funding on what will improve their economies. For example, Taiwan’s Industrial Technology Research Institute has one mission: technology development and commercialization. (One consequence is that private industry contributes about a third of its budget; leveraging money this way is key.) It is no accident that while our Defense Department produces 0.1 patent (an imperfect measure for infratechnology research, but it’s what’s available) per million dollars, ITRI generates twenty times that. ( Source .) Proposals have been made to remedy America’s shortfall in this field. In 2008, the liberal Brookings Institution and the industry-funded Information Technology and Innovation Foundation proposed a National Innovation Foundation along the lines of the existing National Science Foundation. Beyond this, what else could we do? Here are some suggestions: • Raise the average level of research and development (R&D) in manufacturing to six percent. This would be roughly a fifty percent increase from today. It wouldn’t push the entire manufacturing sector into the ultra-high R&D category characteristic of true high technology, but it’s a good benchmark of what level we need for the sector to be innovative across the broad range of categories we need. • Shift American R&D more towards long-term “breakthrough” research, as opposed to short-term research oriented to next week’s product launch. • Because long-term research is, by its nature, more speculative, encourage a “portfolio” approach in which many projects are pursued, only a few of which will reach fruition in any given time-frame, as opposed to a “bet the house” approach on one or two things. • Increase the efficiency of America’s R&D spending by supporting a number of policies to this end, like regional technology clusters, supported in part by state governments. Some states are already doing this part on their own.

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Alliance Memory Appoints William Chen as New Sales Representative in Taiwan

May 11, 2011

SAN CARLOS, CA–(Marketwire – May 11, 2011) – Alliance Memory, Inc., a worldwide provider of legacy memory ICs for the communications, computing, industrial, and consumer markets, today announced that William Chen has joined the company as its new sales representative in Taiwan. In his new position, Chen will be responsible for supporting Alliance Memory’s distributors and promoting the company’s SRAM and synchronous DRAM products in Taiwan and China, a territory that will expand to all of Southeast Asia.

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Taiwan Greater China Fund Announces Appointment of Chief Executive Officer

May 9, 2011

NEW YORK, NY–(Marketwire – May 9, 2011) – The Taiwan Greater China Fund ( NYSE : TFC ) (the “Fund”), a diversified closed-end registered management investment company listed on the New York Stock Exchange, announced today that the Fund’s Board of Trustees (the “Board”) had appointed Frederick C. Copeland as the Chief Executive Officer of the Fund. Mr. Copeland also serves as the Chairman of the Fund. At the same time, the Fund’s Board accepted the resignation of Steven R. Champion as President and Chief Executive Officer of the Fund. Mr. Champion will continue to serve as the portfolio manager of the Fund.

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Radiation Fears Threaten To Deepen Japan’s Economic Struggles

March 28, 2011

NEW YORK — Still reeling from a devastating earthquake and tsunami, Japan must also contend with a force that could further stall its delicate economy : fear. The disaster that struck Japan’s northeast coast earlier this month crippled the country’s trade, as ports, roads and factories were destroyed. Failures at nuclear reactors caused rolling blackouts, further complicating production. In the days after the earthquake, the value of Japan’s currency experienced a historic rise, which threatened to make the products the country did manage to export less attractive to foreign buyers. And now, in the wake of the reactor problems, many consumers and even governments have attached a stigma to Japanese goods amid mounting concerns of radiation poisoning. Fears take a variety of forms. Concerns of widespread nuclear contamination have caused some buyers to shun Japanese agriculture. Meanwhile, worries about supply chain disruptions have prompted others to buy certain niche products in large quantities, and a reworking of widely used “just in time” manufacturing methods to account for those shifts could raise prices globally. Such fears will likely strain the country’s economy, and potentially those of other countries, for months to come, or for as long as the full implications of the Japanese disaster remain unknown, economists say. “There’s a huge, huge fear factor involved here. Some of it is justified, some of it is not justified,” said Nariman Behravesh, chief economist of IHS Global Insight, an economic and financial analysis firm. “For Japan, it’s one more negative in terms of long-term growth.” In Asia, shoppers are already avoiding Japanese-grown foods, Bloomberg News reported . Unlike industrial products, food is grown outdoors and cannot always be easily cleaned if it comes into contact with radiation. Reports have emerged of abnormal radiation levels detected in milk, spinach, sweet potatoes and water. On Friday, authorities in Taiwan detected radiation in the paper packaging of udon noodles, Nikkei News reported . These reports are tempered by reminders that the detected radiation levels remain safely within their legal limits. At this point, fears of radiation poisoning in food are probably overblown, according to Arthur Alexander, an economist at Georgetown who specializes in Japan. “There’s a lot of nervousness around. They see there’s radiation in the air,” Alexander said. “Consumers react in a highly emotional way.” But whether such fears are justified seems not to matter. Already, nervousness has caused world powers to shut out Japanese products. Thailand’s Food and Drug Administration has announced that it will destroy a shipment of Japanese sweet potatoes that, it says, contain radioactive iodide. China has banned imports of certain Japanese food products. South Korea has forbidden food imports from the Japanese prefectures affected by the nuclear crisis. The European Union is imposing strict tests on Japanese food products. The United States will prevent all milk, fruit and vegetables from four Japanese prefectures from entering the United States, the Food and Drug Administration said in a statement. Japan’s economy already faces challenges. The week after the earthquake, Wells Fargo cut its forecast for Japan’s second-quarter economic output, now predicting that the economy will slip into recession until the second half of the year. Moody’s Analytics predicts a gross domestic product growth rate of 1 percent for this year, down from the firm’s pre-earthquake forecast of 1.4 percent. That outlook includes a recession projected to continue until the second half of the year. And the strain could become greater. “Consumers and importers everywhere are going to err on the side of caution,” said Jeffrey Garten, a professor of international trade and finance at Yale and a former undersecretary of commerce for international trade in the Clinton Administration. “They simply don’t know how bad this situation could be, and they don’t trust anyone enough to make a definite assessment.” “I think we’re in the early innings of a much longer game,” Garten added. Just as oil investors are making trades based on fears of unknowns, purchasers of Japanese goods seem to be playing it safe. And such a stance strains Japan’s economy, even though food exports accounted for less than 1 percent of the nation’s total exports last year. Such exports have become more important in recent weeks, experts say, as trade in other goods has suffered. The real risk, moreover, isn’t about food. It’s that the stigma now placed on food could spread to other goods as well. Jay Bryson, an economist at Wells Fargo, outlined a potential worst-case scenario. “If there really is a nuclear meltdown there and it contaminates hundreds of squares miles of area in Japan, all those factories cannot produce any more for a long, long period of time,” Bryson said. “You can rebuild a factory, but that takes years.” The effects of Japan’s economic struggles on the rest of the world remain unclear. Certain global manufacturers have been forced to halt production due to shortages of essential components made in Japan. Anticipating more such shortages, some companies have gone on buying sprees. And the current system is generally short on redundancy. One particular type of videotape is only produced by Sony, which has closed a crucial Japanese plant, The New York Times reported . That supply limit has prompted film industry suppliers to buy as much of the film as possible. Such scenarios could easily lead to higher prices as goods become scarce, economists say. “The global trading system over the last 20 years has evolved into very complex and very attenuated supply chains, where if one thing goes wrong in one country you can have reverberations all through the logistical system,” Garten said. “I think that that’s the one thing that you know is going through the minds of CEOs around the world.”

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Inmates Bake Bread For Entire NYC Prison Population

March 24, 2011

NEW YORK — Each morning, and again in the afternoon, the blades of three bread-slicing machines are counted carefully. Only then does the bakery let workers go home – to their jail cells on Rikers Island. Twenty inmates of one of the nation’s largest jail complexes are part of a team that bakes 36,000 loaves of bread a week to feed the city’s entire population behind bars – about 13,000 people. Employees in orange-and-white-striped jumpsuits and surgical caps earn $31 a week churning out whole wheat bread. There’s not an apron in sight The prison bakers say they are learning skills that may keep them gainfully employed once they get out. “I’m learning teamwork,” says prisoner Nikos Alexis, 24, as he walks off in black leather boots caked with flour. He’s serving a four-month sentence for possession of a forged instrument, according to correction records. It’s a privilege to get this work assignment; only inmates already sentenced to one year or less in jail are considered. Most of the other Rikers residents are awaiting trial on charges including murder. The bakers behind bars get up before dawn and climb into a van for the ride to the other side of the 413-acre island in the East River between Queens and the Bronx. Passing a double row of razor wire-topped fences, they enter the mammoth, single-story bakery around 6 a.m., guarded by correction officers with a captain and a deputy warden. By the loading dock, a sign in the glass window of a supervisor’s office reads: “FAKE & BAKE” – a small try at making people smile in this grim community. More than culinary discipline is needed in this kitchen – part of a jail system where arguments between inmates or with guards can erupt in a flash, resulting in stabbings and slashings. In December, a Rikers correction officer had part of his thumb bitten off by an inmate. So far, the bakery itself remains violence-free. But it’s a dynamic, noisy place. Dangers include fast-moving industrial machinery tagged with hands-off warning signs and blinking yellow lights. The baking process starts in giant metal tubs where 1,600 pounds of dough is mixed for each batch – half white flour and half the darker one – and hoisted with a lift into a machine that divides it into balls that are shaped and fed into corn oiled pans. The finished bread is stored in a walk-in refrigerator with the words “Fort Knox” whimsically chiseled into its steel door. The soothing smell of warm, freshly baked bread drifts across the 11,000-square-foot space, a labyrinth of white-coated metal machines mixing, shaping, baking, slicing and packing the loaves. The men take turns at various stations, from mixing the flours in the tubs – “an awesome kind of combination,” says Alexis – to working the ovens. The brows of three young men drip with sweat as they gently load 240 risen loaves into a giant oven – a sea of dough that emerges golden a half hour later. In summer, with only fans whirring overhead, the air is hotter than the bread. “Man, it gets hot – sometimes up to 120 degrees!” says Aubrey Simpson, the supervising baker and a civilian who was once an army officer in his native Guyana. Above a conveyor belt is a sign in Gothic script that reads: “Give Us This Day Our Daily Bread.” And the Rikers bakery does – tens of thousands of wax-paper-wrapped loaves that fill two storage rooms, ready to be trucked out. The bakery’s products are not for sale to the public – even though prisoners agree it’s tasty enough to succeed outside the island. “I would definitely give it a thumbs up and say it’s better than the bread I buy at the store,” says inmate Taiwan Taylor, 32, who’s serving an eight-month sentence for criminal trespass. Taylor loves to bite into a fresh slice on his 10 a.m. break. “It’s delicious when it’s warm, when it first comes out of the oven,” he says. At about 1 p.m., the day’s baking is done. Then come the cleanup and maintenance of equipment, most of it dating to the 1960s. “It’s old, and any minute, something could go wrong,” says chief mechanic Andrew Sonni, also a civilian and Guyanese native who keeps dog-eared repair logs in his tiny office off the bakery floor. Tacked to a wall next to a pinup girl is a booklet with a two-word reminder scribbled on it in bold letters: “COUNT BLADES.” Keeping track of the blades in the slicing machines is a security measure to keep inmates from spiriting away any object “that might be turned into a handmade weapon,” says Stephen Morello, a Department of Correction spokesman. But the incarcerated bakers appear more interested in good behavior that could get them sprung early than in harming each other. Until two years ago, the jail bakery made only white bread. Under Mayor Michael Bloomberg, a nutrition task force opted for the healthier wheat loaves. And to meet city budget cuts, prisoners in New York City now get a maximum ration of six half-inch slices a day, instead of the previous eight – saving the city $350,000 a year. For holidays, the prisoners also make “the best carrot cake I have ever tasted,” Alexis says. Simpson, the senior baker, made some changes in a recipe already in use when he started working at Rikers more than 20 years ago. When fellow baker Kay Fraser – also a civilian employee born in Guyana – arrived about five years ago, she tweaked the recipe some more. “I put in less cloves and allspice, and more ginger,” she says. “And I add a lot of love.” The work is done in 25-loaf batches, using 25 pounds of sugar, 25 pounds of eggs and 25 pounds of shredded carrots. When the cakes – shaped like bread loaves – emerge from the oven, she lets them cool. Then comes her special touch: wrap them in wax paper and refrigerate them “to seal the moisture.” In April, Alexis expects to cross the bridge linking the island jail with Queens – and freedom. “I want to just get back on my feet and do things the right way,” he says, “and bake bread for my mother.” ____ Online: Array

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Trade ministers of Taiwan, China to meet soon

February 21, 2011

Trade ministers of Taiwan, China to meet soon

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Despatch Industries Hires Ellen Cheng as Taiwan Region General Manager

February 15, 2011

MINNEAPOLIS, MN–(Marketwire – February 15, 2011) – Despatch Industries, the world’s leading thermal technology and equipment provider, is pleased to announce that the company has named Dr. Ellen Cheng as General Manager of Despatch Industries Taiwan, Ltd. effective February 14. In her position, Dr. Cheng will be responsible for driving, managing and achieving Despatch’s business objectives in Taiwan for the company’s Solar, Carbon Fiber and Thermal Technology business groups. 

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Taiwan Greater China Fund Announcement Regarding Annual Meeting and Appointment of New Chairman of the Board

January 20, 2011

NEW YORK, NY–(Marketwire – January 20, 2011) – The Taiwan Greater China Fund ( NYSE : TFC ) (the “Fund”), a diversified closed-end registered management investment company listed on the New York Stock Exchange, announced today that, in order to fully consider strategic options available to the Fund, including among other things, the option of becoming an open-end investment management company, it anticipates holding the Fund’s 2010 annual meeting of shareholders in May 2011. 

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Franz-Stefan Gady: Undersea Cables: The Achilles Heel of our Economies

December 21, 2010

In December 2008 within milliseconds, Egypt lost 70 percent of its connection to the outside Internet. In far away India, 50 to 60 percent of online connectivity similarly was lost. In Pakistan, 12 million people were knocked offline suddenly, and in Saudi Arabia, 4.7 million were unable to connect to the Internet. The economic costs of this 24-hour outage: approximately 64 million dollars. The recent revelations by WikiLeaks of U.S. national security interests in critical infrastructure vulnerabilities mention the often neglected underpinning of the current connectivity revolution sweeping the planet–undersea cables. In December 2008, four undersea cables were cut simultaneously, affecting Internet users all over the world. While cable cuts happen from time to time nothing, the scope of the cuts illustrate the exposure of our economies to disruption once we lose connectivity. Hardly any people know that our global digital connectivity rests upon a relatively few fiber optic cables lying at the bottom of the Atlantic, Pacific, and Indian Oceans. They wrongly believe that their international communications are carried via satellite links. The truth is that 99 percent of transcontinental Internet traffic travels through these connecting cables; these are the lifelines of our economies. For proof, simply take a quick look at the financial services sector. In 2004 alone, nine million messages and approximately $7.4 trillion a day were traded via undersea cables worldwide. The Society for Worldwide Interbank Financial Telecommunication (SWIFT), a provider of financial messaging, sends about 15 million messages a day over cables. 1 million of these are financial transactions, amounting to over $4.7 trillion dollars a day commuting via the same undersea cables. The finance hub Hong Kong doubles its dependency, i.e. the volume of messages going through these cables, every 18 months. Most of the cable cuts occur because of ship anchors, natural disasters such as earthquakes or fishing nets. While the technical reliability of these cables is very high, international politics have created three particular problem zones in the world — three cable chokepoints where undersea cables converge and where if cut, outages could have severe consequences. The first is in the Luzon Strait, the second in the Suez Canal-Red Sea-Mandab Strait passage, and the third is in the Strait of Malacca. Let’s take a closer look at the Luzon Strait. The reason why cables go through the Luzon Strait rather than taking an alternative route through the Taiwan Strait to avoid this single point of failure is because of the ongoing political tensions between Taiwan and China. The result is that Hong Kong, a major financial hub, is one of the most vulnerable spots to outages in the world. The Hengchun earthquake in 2006 severed the Luzon Strait cables, which, according to Chinese newspapers, “catastrophically affected financial transactions, particularly in the foreign exchange market.” Simultaneous cuts in the Luzon Strait or the Suez Canal-Red Sea-Mandab Strait chokepoints — again largely the result of the political unwillingness of the countries on the Arabian Peninsula to cooperate with regard to overland cables through their territories — could cut Hong Kong off from New York or London, as terrestrial routes would have insufficient capacity to carry the undersea cable load. Payments suddenly could not be made, orders not processed, and bond trading halting on the stock exchange. Given our volatile economic climate, an incident where a number of these cables are cut could have devastating consequences. When cables are cut at one chokepoint, the loss of connectivity might last from a few days to a few weeks depending on how well the cable system owner, the operator of the repair vessel, and the national government involved coordinate their efforts. A few countries are notorious for delaying repair permits if the cuts appear in their territorial waters. The good news is that there is the chance for “undersea cable diplomacy” to bring countries together. The IEEE Reliability of Global Undersea Communications Cable Infrastructure (ROGUCCI) Report, released earlier this year, provides a thorough analysis of these and other concerns, and, most importantly, provides bold, actionable recommendations for addressing each of these problems in order to strengthen the resilience of the global undersea communications cable Infrastructure (GUCCI). The international, non-profit “think and do tank” EastWest Institute has been recruited to champion international policy aspects of the recommendations and is making encouraging progress. There is hope that China and Taiwan could reduce tensions and build trust by allowing the installation of undersea cables in the Strait of Taiwan. It would be a win-win situation for both sides and the world since it decreases the vulnerability of the global economy to communication outages. The same is true for other chokepoints. Undersea cables might serve as the initial building block in inter-country collaboration in some of the most contested regions of the world. This was a notion already recognized by Queen Victoria in her first cable across the Atlantic in 1858 when she expressed hope that undersea cables would prove “an additional link between the nations whose friendship is founded on their common interest and reciprocal esteem.” Franz-Stefan Gady is a foreign policy analyst at the EastWest Institute.

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Blythe McGarvie: Where the Action Is: Consumer Spending

November 8, 2010

I research and write about economic realities in the interconnected world and their implications for you and your business. I first discovered, in 1983, when I joined the Kellogg Alumni Council, that business school professors provide inspiration, analysis and thoughtful insight into the nature of business. You may be surprised that academia is relevant in these fast-paced and uncertain times. I have learned from them how to rely on quantitative and behavioral research to provide a deeper understanding of what I read in many media outlets. The headlines focus on conflict and controversy, not what happens during the rebuilding process. While professors research and consult, business men and women create and grow businesses. We all succeed by going where the action is. Let’s look at where the action is for consumer spending. Current Consumer Spending The largest component driving the U.S. GDP is consumption. In the last ten years, GDP has been comprised of roughly 70% consumer spending, 15% of exports to other countries, 10% of direct investments, and 5% of government purchases. Today, as some signs indicate an easing of the recession, U.S. consumers continue to hold back from spending. The most recent GDP information for the first half of 2010 shows that Exports increased 10% over last year. Direct Investments have increased 28%, Government Purchases increased by 1%; but, Consumption increased only 2%. Consumers will not be spending at their previous levels for a host of reasons. In fact, according to the President’s economic report in February: The growth that preceded the recession saw high consumption spending, low private saving, excessive housing construction, unsustainable run-ups in asset prices (especially for assets related directly or indirectly to housing), and high budget and trade deficits. That path was unstable — as we have learned at enormous cost — and undermined long-run prosperity. Thus, as the economy recovers, a rebalancing will be necessary. The model used in the report indicates that three factors drive the tradeoff between savings and spending. The higher the sense of wealth, the lower unemployment expectations, and the greater the ability to borrow (and pay back), the more people will spend. The recent stock market rallies and the lowest interest rates in decades suggest some optimism for spending. And, importantly, the GDP is growing at 2.7% and not contracting. Jobs will return in those areas that support exports and direct investments. But, the largest engine for the US GDP is stalled due to consumers’ sentiment about unemployment and their pressing need to pay down their current debt levels. According to a government report released November 1st, U.S. consumer spending rose by less than expected in September as income fell for the first time in 14 months. Inflation remained minimal. Other Countries’ Consumer Spending The news for major developing countries is quite different. Consumer confidence and purchasing behavior indicators in Brazil, Mexico, Taiwan, and Hong Kong are growing strongly (between 1 to 4%) and those of India and China are growing even faster (more than 5%). Each quarter, The Nielsen Company publishes the state of the global consumer and purchasing behavior. Included in this scorecard is the level of advertising spending, a leading factor in consumer spending. The key learning from this data is that the consumer is cautious; but, longer term, with 30 of 31 countries showing positive ad spending in the 2nd quarter of 2010, global consumer spending may receive a boost. Consumers respond to innovations and promotional activities. Tapping into Consumers Global companies continue to innovate. For example, DuPont launched more than 1400 new products in 2009, a 60% increase from 2008. The company filed more than 2,000 patents — its highest number in its history. Sales from emerging markets of $8 billion exceeded 2007 levels and are projected to grow at a 14% annual compounded growth rate to 2012. New companies also are discovering that consumers will spend money on items that they find innovative. The founder Robert Croak of the company selling Silly Bandz states: “I came across a product that a Japanese designer had created for an industrial design contest. I thought it would be really neat if we remolded it, made it thicker, larger and into a fashion accessory — and that’s how Silly Bandz was born.” Knowing “where the action is” helps management to focus on new business opportunities. One of my colleagues, Roger Schmid, recently gave a lecture and wrote about Brazil, where he works with consumer companies which you can find on our website LIFgroup.com . The only way to capitalize on this knowledge of which markets are growing is to be agile and nimble. This means knowing how to adjust your plans of action to find new consumers for your products. Of course, while you are in the markets, keep your eyes open for new competitors and innovative ideas.

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Sonics Opens Design Center in Taiwan

October 13, 2010

Demand for Memory Subsystem Solutions Drives Company’s SoC Development, Growth Strategies in Taiwan; Appoints General Manager for Sonics Taiwan

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Focus on Taiwan: Taiwan seeking investors with vision and mission

October 10, 2010

Focus on Taiwan: Taiwan seeking investors with vision and mission

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Zachary Karabell: The China Blame Game

September 30, 2010

So bipartisanship isn’t dead. By a vote of 348-79, Democrats and Republicans alike put aside their acrimonious differences and agreed, at least for a moment, to stop blaming each other for the sad state of American economic life. Instead, they agreed to blame China. The bill authorizes the president of the United States to impose tariffs on Chinese goods in response to what it considers an illegal subsidy of Chinese exports in the form of an undervalued currency. It helps that the supporters in the House know that this bill has precious little chance of becoming law; it will not pass the Senate and it is unlikely that it would be signed into law by Obama if it ever came to that. As a result, the bill is the perfect campaign gesture, bombastic, angry, self-righteous, and without much real-world consequence. The office AFL-CIO union leader Richard Trumka issued a statement that encapsulated the thinking behind the bill: “the House of Representatives voted to put an end to the Chinese government’s currency manipulation, which has destroyed millions of good American manufacturing jobs. For more than a decade, the Chinese government has deliberately manipulated the value of its currency, ballooning our trade deficit with China and costing American communities good jobs….Working people continue to mobilize to elect candidates who will put America’s workers first and are committed to rebuilding an economy that values working people. This November we will send a powerful message that we will support those who vote for an economy that works for everyone.” The idea is that there is direct line between China, its currency, its exports of lower-cost goods to the United States, and the erosion of middle-class life and now soaring unemployment. But U.S. manufacturing has been bleeding jobs for decades, since the early 1970s, when the Rust Belt began to decay faced with competition from the likes of Japan and Germany. That continued almost unbroken for the next decades, as countries ranging from Taiwan to Mexico became the low-cost producers (remember Ross Perot’s famous warning about NAFTA in 1992 and “the giant sucking sound” of jobs heading south-of-the-border?). California and the state of Washington were hit hard by cuts in defense spending in the early 1990s, and industry throughout the country shed jobs as technology and robotics allowed fewer workers to do more. China is simply the latest example of these trends and hardly a cause. What’s more, the recent loss of millions of jobs since 2008 has everything to do with the collapse of the construction and housing industries along with the near-death of the Big Three American auto makers than with any competitive challenge from China. China has become a large car market for General Motors, but not for export to the United States: for sale in China. It would take a massive leap unsupported by any fact to lay the demise of the U.S. auto industry at the feet of China, or for that matter hold China responsible for the sub-prime and derivative debacles. Those are the cause of recent job loss. Furthermore, China has been revaluing its currency, nearly 20% between 2005 and 2008 and now nearly 3% since June when the government resumed that policy having shelved it during the midst of the global financial crisis. It is in the domestic interest of the Chinese government to raise the value of their currency because they are focused on building up on internal, domestic consumption market. They have no wish to be dependent long-term of the vagaries and whims of American consumers, and higher purchasing power for Chinese consumers is the answer. They are not revaluing quickly enough to suit an America stuck in second gear and looking for someone to blame, but revaluing they are. Of course, reason and fact aren’t driving these measures. Emotion, anger and frustration are. There are good reasons to be angry with the state of affairs in this country and frustrated by the inability of the political class to do more than contribute to the confusion. But blaming China for a series of domestic challenges is not an act of strength or courage. It is an act of desperation, and the only saving grace is that this measure is a gesture, not an actual law – yet. But it suggests that the only thing Congress can agree on is how to shoot ourselves in the foot, which requires minimal skill and even less aim. Railing against Beijing may feel empowering, but seriously grappling with growth, investment, infrastructure and innovation, well that would actually be empowering.

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AIG Reportedly Hatches Plan To Repay Taxpayers

September 14, 2010

Two years after it received at least $180 billion in bailouts, of which $120 billion is still outstanding, American International Group has reportedly hatched a new plan to repay taxpayers and free itself from the government’s clutches. According to the Wall Street Journal , the insurer plans to convert the government’s 79.8 percent stake in the company into shares that the government can sell on the open market. The solution isn’t ideal. Before the shares can be sold, they must be converted from preferred to common stock, a move that would increase the government’s stake in the company to 90 percent, the Journal notes. The whole process would take several years and would only be feasible if AIG continues to recover. The company’s position is now certainly stronger than it was two years ago — the Journal reports that its debt, which back then traded at 30 or 40 cents on the dollar, is now trading at 80 or 90 cents. “We’ll make sure taxpayers get paid back in full, and they will,” AIG CEO Robert Benmosche told the New York Times last month, when the first hints of this plan were announced. Since then, the company has tried and failed to sell its Taiwan business Nan Shan when, as the New York Times reported, Taiwanese regulators objected to one of the potential buyers’ ties to China. Before it can launch the stock conversion plan, AIG would need to repay the Federal Reserve Bank of New York, which is owed $49 billion. More than financial troubles have plagued AIG. Two of its top executives differed on the insurer’s asset sale plans. After a dramatic standoff with the company chairman Harvey Golub , in which Benmosche threatened to quit if Golub didn’t, the CEO finally forced his colleague to resign in July. Last August, the outspoken Benmosche took over for Edward Liddy , who had served as CEO for less than a year. Benmosche’s tenure at AIG began with a two-week vacation, and he’s repeatedly blasted populist attacks against his company. He also reportedly pushed for a time-sharing agreement that would allow him to use the company jet for personal matters ,

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Billionaire Terry Gou, Foxconn CEO: I Have No Idea How Much Money I Have, ‘I’m Working For Society’

September 10, 2010

After a string of eleven suicides this year at Chinese electronics manufacturer Foxconn put the company under intense international scrutiny, the builder of iPhones granted Bloomberg Businessweek exclusive access to the press-shy CEO Terry Gou. Previous investigations have focused on the workers, but Businessweek has gotten Gou’s take on the suicides–and it’s blunt. Here’s Gou: “I should be honest with you. The first one, second one, and third one, I did not see this as a serious problem. We had around 800,000 employees, and here [in Longhua, a factory campus] we are about 2.1 square kilometers. At the moment, I’m feeling guilty. But at that moment, I didn’t think I should be taking full responsibility.” Gou, whom Forbes ranks as Taiwan’s richest man with a $5.9 billion net worth, got his start making television knobs with a $7,500 loan from his mother. He claims to be not quite sure how much money he actually has: “I am not interested in knowing how much I have. I don’t care. I am working not for money at this moment, I am working for society, I am working for my employees.” There’s a joke among executives who work with Foxconn, Businessweek says , that in 20 years everything in the world will be made by Foxconn and sold by Walmart. Author Chang Tien-wen, who wrote a book about Gou, said “Steve Jobs’ achievements wouldn’t be possible without Terry.” His factory in Longhua makes 137,000 iPhones each day, or, to put it in more startling terms, about 90 a minute. The article includes some great tidbits about Gou. His current wife didn’t know how big of a deal he was when he first hired her to teach him to dance, but she did know that he “danced very well for an amateur.” At their wedding, Gou did 30 push-ups on stage, after taking off his tuxedo jacket. To address the high suicide rate , which, to be fair, is lower than the U.S. national average, Foxconn has instituted a “Prevention-Reengineering Caring” program, whose “Campus Loving Heart” Web site and counseling programs are supposed to help workers improve morale. ” Read the entire article at Bloomberg Businwessweek .

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Video: Citi’s Kurz Says Taiwan Listings to `Energize’ Market: Video

September 7, 2010

Sept. 8 (Bloomberg) — Peter Kurz, head of Taiwan research at Citigroup Inc., talks about the prospects for new listings of overseas and Taiwanese companies on the island. Yangzijiang Shipbuilding Holdings Ltd., the first Chinese-owned company to sell shares in Taiwan, rose on the first day of trading for its depositary receipts on the island’s stock exchange. Kurz speaks with Rishaad Salamat on Bloomberg Television. (Source: Bloomberg)

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China Hiarong signs agreement with Taiwan’s SinoPac

September 4, 2010

China Hiarong signs agreement with Taiwan’s SinoPac

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Foxconn Rallies (PHOTOS): iPhone Factory Suicides Spur Corporate Pep Rally

August 18, 2010

SHENZHEN, China (AP)– Following a string of suicides at its Chinese factories, Foxconn Technology Group raised workers’ wages and installed safety nets on buildings to catch would-be jumpers. Now the often secretive manufacturer of the iPhone and other electronics is holding rallies for its workers to raise morale at the heavily regimented factories. The outreach to workers shows how Foxconn has been shaken by the suicides and the bad press they have attracted to the normally publicity shy company. The latest suicide — the 12th this year — occurred August 4 when a 22-year-old woman jumped from her factory dormitory in eastern Jiangsu province. The motivational rallies are titled “Treasure Your Life, Love Your Family, Care for Each Other to Build a Wonderful Future” and will be held at all facilities in China, according to Burson Marsteller, a public relations firm representing Foxconn. “For a long period of time I think we were kind of blinded by our success,” said Louis Woo, special assistant to Terry Gou, the founder of Foxconn’s parent company. “We were kind of caught by surprise.” The rally Wednesday was taking place at Foxconn’s mammoth industrial park in Shenzhen, which employs 300,000 and where most of the suicides took place. Story continues below However, Woo acknowledged that there will be challenges in preventing such tragedies among such a large work force. “No matter how hard we try, such thing will continue to happen,” he said. Foxconn, part of Taiwan’s Hon Hai Precision Industry Co., has built itself into the world’s largest contract maker of electronics, by delivering quality products on thin profit margins for its customers which include Apple Inc., Sony Corp., Dell Inc., Nokia Corp. and Hewlett-Packard Co. Labor activists, however, say that success has come in part from driving workers hard by enforcing a rigid management style, operating a too-fast assembly line and requiring excessive overtime. The company denies that it treats employees inhumanely and has pledged to prevent more suicides and improve worker well-being. The troubles at Foxconn came to light amid high-profile labor unrest in China and highlighted Chinese workers growing dissatisfaction with the low wages and pressure cooker working conditions that helped turn the country into an international manufacturing powerhouse. One activist said Foxconn’s Wednesday rally was unlikely to boost morale and does not replace the need for more thoroughgoing reforms. “I don’t think today’s event is going to achieve anything except provide a bit of theater,” said Geoffrey Crothall, spokesman of the China Labor Bulletin, a labor rights group based in Hong Kong. “Basically what Foxconn needs to do is treat its workers like decent human beings and pay them a decent wage. It’s not rocket science.” “They’re still tackling this from a top-down approach, they are organizing the workers. They’re not allowing the workers to organize themselves,” Crothall said. A similar gathering was held Monday at Foxconn’s campus in the northern city of Taiyuan, which employs about 60,000 workers. A Foxconn official in Taipei said the company decided that day to remove safety nets from the Taiyuan plant, although there are no plans to do the same at its other factories. In May, Gou promised to work harder to prevent more deaths. More counselors were being hired and employees also were being assigned to 50-person groups to watch one another for signs of emotional trouble. Foxconn also announced two raises, more than doubling the basic worker pay to 2,000 yuan ($293) a month at the Shenzhen compound. But workers have to pass a three-month review period before they qualify for the second raise. ___ Associated Press writer Debby Wu contributed to this report from Taipei.

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China’s Slowdown Sends A Chill Through Trade Partners

August 17, 2010

BEIJING — China’s abrupt growth slowdown is sending a chill through Asian economies and as far away as Australia and Africa as its voracious demand for imports fades. Beijing is cooling its economy with lending and investment curbs after explosive 11.9 percent first-quarter growth fed fears of overheating. Growth is slowing more sharply than expected, cutting demand for American and European factory machinery, industrial components from Asia and iron ore and other raw materials from Australia and Africa. The timing is awkward for exporters that were buoyed by China’s quick rebound from the global crisis and are seeing sales elsewhere weaken. The country had become more important than ever to its neighbors as its stimulus-driven expansion helped to cushion the blow of weak U.S. and European sales. “It’s definitely going to show in slower growth in all of the Asian economies that send goods to China,” said Mark Walton, senior economist for brokerage CLSA Asia-Pacific Markets. China, which overtook Japan as the second-biggest economy in the second quarter, is a major market for Asian nations. It buys 28 percent of Taiwan’s exports, 25 percent of South Korea’s and more than 20 percent of mining giant Australia’s. More than half of Hong Kong’s exports go to the mainland. Japan, which Monday reported sharply lower second quarter growth, saw a significant slowing in exports to China during the period. Its exports to China in April were up 41 percent from a year earlier but by June the growth rate had slackened to 22 percent. But suppliers of iron ore for steel production and other raw materials are expected to be hardest-hit by slowing growth in China. They range from Australia, Indonesia and Malaysia to Brazil and parts of Africa and profited from a construction boom fed by China’s 4 trillion yuan ($586 billion) stimulus and a flood of bank lending. “Chinese efforts to prevent overheating in asset markets will have negative effects on our markets,” CEO Tom Albanese of Anglo-Australian miner Rio Tinto Ltd. said this month. Construction faded fast as Beijing wound down its stimulus and clamped down on credit in April to prevent bubbles in real estate and stock prices. That slowed a surge in housing costs but slashed demand for steel, cement and other materials. That prompted some forecasters to cut their growth outlook for this year, though they say China easily can meet the government’s target of 8 percent. The expansion in Chinese factory output, retail sales and investment slowed so sharply that some analysts said Beijing might need to ease its controls to revive growth, which fell to 10.3 percent in the second quarter and is expected to drift lower. July import growth fell to 22.7 percent over a year earlier from June’s 34.1 percent, startling economists who expected a decline of only a few percentage points. Housing sales plunged 19.3 percent from a year earlier and auto sales weakened. Suppliers of manufactured goods also face a hit, though less severe. Taiwan is a major source of components for Chinese factories that make televisions and other electronics, many for export to the United States. The island could suffer a double blow as Chinese and U.S. spending weaken at the same time. “I expect to see smaller economic growth for quarter two than quarter one, and the upcoming quarters will again see smaller growth than quarter two,” said Hu Chung-ying, vice chairman of the Cabinet’s Council for Economic Planning and Development. ___ Associated Press Writers Debby Wu in Taipei and Tanalee Smith in Adelaide, Australia, contributed to this report.

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Singapore, Taiwan to boost trade ties

August 6, 2010

Singapore, Taiwan to boost trade ties

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Dan Dorfman: SEC Eyes $12 Billion of M&A Deals

August 1, 2010

Call it business as usual on Wall Street. In this case, that’s monkey business. Here’s the story. With corporate coffers brimming with cash, borrowing costs puny because of near zero interest rates and companies hungry for growth opportunities in a sluggish economic environment, merger and acquisition activity is percolating again. So, too, is the pace of stock trading investigations by the Securities and Exchange Commission into such transactions. In this context, the SEC, I’ve learned, is looking into the trading that took place in the shares of five companies involved in four multibillion deals — $12 billion all told — that took place this year prior to the official announcements of these transactions. The thrust: To determine, I’m told, whether anyone illegally traded on non-public, inside information. The five M&A deals involve the following transactions: –Continental Airlines’ $3 billion merger with United Airlines. –The $2 billion acquisition of Brink’s Security Holdings by Tyco International. –The $5.8 billion takeover of Sybase by SAP AG, a German business software company. –The $1.2 billion buyout of Palm by Hewlett Packard. The five companies whose trading is under SEC scrutiny are Continental Airlines, Brinks, Sybase, Palm and Hewlett Packard. Whether these investigations are based on any specific knowledge or suspicions of wrongdoing or whether the SEC is simply fishing is unclear, but some regulatory contacts strongly suggest the former. “The commission doesn’t commence investigations based on maybes or guesswork,” one former SEC enforcement attorney told me. The SEC, adhering to its usual policy, declined to discuss the matter. “We don’t confirm or deny investigations,” an agency spokesman, John Heine, said. However, the names of the five companies are disclosed in copies of internal SEC documents that the commission recently sent to the brokerage community in which it requested the names of the clients who traded in the shares in specific time periods. A regulatory source provided me with copies of these documents. In addition to the five companies mentioned above whose trading is being investigated, the SEC recently sent out a bunch of brokerage inquiries involving a number of other companies whose trading is being probed. In some cases, the inquiries to brokerage firms may represent the agency’s quest for additional trading information. Included in these additional trading investigations are some of the best known names in Corporate America. Among them are Tiffany & Co., JP Morgan Chase, Intel, Micron Technology, Federal National Mortgage Association (Fannie Mae), DirecTV and SPDR Gold Trust, one of the country’s leading exchange-traded gold funds. Also the focus of trading probes — all of which are detailed in additional copies of SEC documents in my possession — are Salesforce.com, Thomas Weisel Partners Group, Dollar Thrifty Automotive, Interactive Data, Taiwan Semiconductor Manufacturing Co., Mariner Energy, Fidelity National Information Services, Biovail Corp. and Psychiatric Solutions. Commenting on these assorted investigations, a compliance official at one large brokerage observed: “Maybe one of these days Wall Street will get the message that the regulatory climate has changed in this post-Madoff era, that it’s preferable to live at home rather than in jail.” What do you think? E-mail me at Dandordan@aol.com

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Susan Segal: Hope for Obama’s "Summer of Jobs"

July 21, 2010

To make good on the Obama administration’s pledge that this will be the “Summer of Jobs,” the U.S. needs to step up and follow through on its stalled free trade agreements. President Obama unveiled plans to double U.S. exports over the next five years when he announced his National Export Initiative, promising to push pending free trade deals though Congress. With our unemployment reaching 9.5 percent , concrete steps need to be taken–and political muscle exerted–to ensure that the Colombia, Panama, and South Korea agreements win congressional approval. While Washington hesitates, U.S. businesses are losing their competitive edge in Latin America as Europe, Canada, and Asia sign free trade agreements with our neighbors. The economic crisis presents the opportunity to increase exports, which in turn create and save jobs. Instead, free trade agreements have collected dust for fear that they stifle job growth while other countries take advantage of Latin America’s explosive growth and demand for goods. Since November 2006, the U.S.-Colombia Free Trade Agreement has languished on the desks of U.S. policymakers. Colombia’s Congress approved it in 2007. What is taking us so long? The agreement would open up markets in agriculture, building products, infrastructure and machinery, and textiles, just to name a few. Ohio, where the unemployment rate hovers around 10.5 percent, would benefit from the pact providing access to its agricultural sector. Illinois, with an unemployment rate of 10.4 percent, would see an increase in manufacturing jobs if Caterpillar (whose headquarters are in Peoria, IL) could export their construction supplies without paying the average 11 percent Colombian tariff on infrastructure and machinery products. Michigan, with an unemployment rate of 13.2 percent, would benefit from the elimination of the average 12.7 percent tariff on transportation equipment. This includes railway and tramway cars, which are in strong demand as Colombia expands its infrastructure development projects. Colombia is not the only country eager to sign an FTA with us. Panama has been waiting for over three years for passage of its own pact. An FTA with Panama would create manufacturing jobs for Americans and expand trade in agriculture and textiles industries. As Panama signs agreements with Singapore, Taiwan, and Chile, the U.S. will lose its competitive edge there and elsewhere. We’ve seen positive results for U.S. exporters when we sign trade agreements. The U.S.-Peru FTA was signed in 2006 and, that year, U.S. exports to Peru rose 88%. A large portion of those exports were manufactured goods produced in Texas and Florida. Other states that directly benefited from expanding exports to Peru include Louisiana, Illinois, California, Georgia, and Ohio. On top of that, the Commerce Department reported that 81 percent of the companies exporting goods to Peru were small and medium-sized enterprises with fewer than 500 employees. This is especially relevant as small businesses are the engine of job growth. While I was in Panama in March and Colombia last month for the AS/COA Latin America Cities Conference series, the message was loud and clear: we are moving forward on trade deals with or without the U.S. As Latin America experiences some of the highest global growth rates, we simply cannot afford to miss these opportunities. There are political implications with any trade agreement–there will always be another presidential or congressional race and election cycles are increasingly longer. But, frankly, the rest of the world does not operate on our election calendar and we are quickly losing market access to Canada, China and the European Union, not just in Latin America, but in Asia as well. So I ask: why are labor groups, decision makers, and Congress stalling on trade agreements that would put Americans back to work, boost our exports, and increase our competitiveness in Latin America and Asia? It doesn’t make sense, and I fear the U.S. will be left playing catch up.

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Clifton Ho Joins Intersil as Vice President of Sales for the Asia Pacific Region

July 8, 2010

MILPITAS, CA–(Marketwire – July 8, 2010) –   Intersil Corporation ( NASDAQ : ISIL ), a world leader in the design and manufacture of high-performance analog and mixed-signal semiconductors , today announced Clifton Ho has joined the company as the Vice President of Sales for the company’s Asia Pacific Region, effective Monday, June 28, 2010. Mr. Ho will have responsibility for Intersil sales in China, Taiwan, Korea and South Asia, and will be working from the company’s Hong Kong office.

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Ian Fletcher: The Myth of the Global Economy

July 7, 2010

If there’s one thing everyone knows these days, whether they’re happy about it or not, it’s that we live in a “global” economy. This fact is taken as so obvious that anyone who disputes it is regarded as not so much wrong as simply ignorant — not even worth arguing with. So it may come as a shock to many that, in reality, the cliche that we live in a borderless global economy does not survive serious examination. The key is to ignore the Thomas Friedmanesque rhetoric the media is flooded with and get down to some hard numbers. The easiest hard number is this: Because the U.S. is roughly 25 percent of the world economy, a truly borderless world would imply that imports and exports would each make up 75 percent of our economy, since our purchase and sale transactions would be distributed around the world. This would entail a total trade level (imports plus exports) of 150 percent of GDP. Instead, our total trade level is 29 percent: imports are 17 percent and exports 12 percent. So our economy is nowhere near borderless. Furthermore, as our trade is almost certainly destined to be balanced by import contraction, rather than an export boom, in the next few years, our trade level is almost certainly poised to go down, not up. So unless the U.S. can somehow magically find a way to keep sucking in $300 to $700 billion a year in imports it doesn’t pay for with exports, America in a few years will be importing significantly less and will be a less globalized economy. A truly unified world economy would also mean that rates of interest and profit would have to be equal everywhere–because if they weren’t, the differences would be arbitraged away by the financial markets. But this is nowhere near being the case: Interest rates and corporate profits vary widely around the world. Economists James Anderson and Eric van Wincoop have calculated that the average cost of international trade (ignoring tariffs) is the equivalent of a 170 percent tariff. Even between adjacent and similar nations like the U.S. and Canada, national borders still count: Canadian economist John McCallum has documented that trade between Canadian provinces is on average 20 times as large as the corresponding trade between Canadian provinces and American states. And much of international trade is interregional anyway, not global, being centered on European, North American, and East Asian blocs; this is true for just under 50 percent of both agriculture and manufactured goods. In reality, the world economy remains what it has been for a very long time: a thin crust of genuinely global economy (more visible than its true size due to its concentration in media, finance, technology, and luxury goods) over a network of regionally-linked national economies, over vast sectors of every economy that are not internationally traded at all (70 percent of the U.S. economy, for example). On present trends, it will remain roughly this way for the rest of our lives. The world economy in the early 21st century is not even remotely borderless. Another stubborn reality is that, contrary to what some people seem to think, the nation-state is a long way from being economically irrelevant. Most fundamentally, it remains relevant to people because most people still live in the nation where they were born, which means that their economic fortunes depend upon wage and consumption levels within that one society. Unemployed Americans are learning this the hard way right now. Capital is a similar story. Even in the early 21st century, it hasn’t been globalized nearly as much as often imagined. And it also cares very much about where it lives, frequently for the same reasons people do. (Few people wish to live or invest in Zimbabwe; many people wish to live and invest in California.) For a start, because 70 percent of America’s capital is human capital, a lot of capital behaves exactly as people do, simply because it is people. Another 12 percent has been estimated by the World Bank to be social capital, the value of institutions and knowledge not assignable to individuals. So although liquid financial capital can indeed flash around the world in the blink of an electronic eye, this is only a fraction (under 10 percent) of any developed nation’s capital stock. Even most nonhuman capital resides in things like real estate, infrastructure, physical plant, and types of financial capital that don’t flow overseas — or don’t flow very much. (Economists call this “don’t flow very much” phenomenon home bias, and it is well documented.) As a result, the output produced by all this capital is still largely tied to particular nations. So although capital mobility certainly causes big problems of its own, it is nowhere near big enough to literally abolish the nation-state as an economic unit. Will it do so one day? Even this is unlikely. Even where famously dematerializing and globalizing assets, like fiber optic telecom lines, are added — assets that supposedly make physical location irrelevant–they are still largely being added where existing agglomerations of capital are. For example, although fiber optic backbones have gone into places like Bangalore, India, which were not global economic centers a generation ago, big increments of capacity have also gone into places like Manhattan, Tokyo, Silicon Valley, and Hong Kong, which were already important. As a result, existing geographic agglomerations of capital are largely self-reinforcing and here to stay, even if new ones come into being in unexpected places (often through decisions made by national governments). And these agglomerations have national shape because of past history; legacy effects can be extremely durable. Previous technological revolutions, such as the worldwide spread of railroads, were at least as big as current innovations like the Internet, and they didn’t abolish the nation-state. Ironically, the enduring relevance of the national economy is clearest in some of the “poster child” countries of globalization, like Japan, Taiwan, South Korea, Singapore, and Ireland. In each of these nations, economic success was the product of policies enacted by governments that were in some sense nationalist . Japan industrialized after the Meiji Restoration of 1868 to avoid being colonized by some Western power. Taiwan did it out of fear of mainland China. South Korea did it out of fear of North Korea. Ireland did it to escape economic domination by England. In each case, the driving force was not simply desire for profit. This exists in every society (including resource-rich basket cases like Nigeria, where it merely produces gangsterism), but does not reliably crystallize into the policies needed for economic growth. The driving force was national political needs that found a solution in economic development. There is no getting around politics. Politics is still mostly practiced at the national level, and practiced with sovereignty only at that level. And the reality for almost all people and corporations is that national policies still matter. It matters whether one has good physical infrastructure and basic security. It matters whether one must constantly pay bribes to get things done. It matters whether one gets cut out of the best opportunities in favor of political cronies. It matters whether the local education system produces quality employees. It matters whether one has a sound currency to work with. It matters whether the local population reveres things like science, efficiency, and entrepreneurship. And it matters whether the politicians in charge of all these things are wise enough to keep them that way, and whether the voters (if the country is a democracy) are wise enough to elect the right politicians. Globalization doesn’t make all these things less important — let alone “irrelevant.” They are arguably even more important in a more globalized world because the rewards for getting them right (and the punishments for getting them wrong!) are larger. Without globalization, mediocre industries can just sputter along for decades. But with globalization, these industries can get wiped out. But they can also conquer the world if they’re not mediocre. “Inevitable globalization” is a catchphrase that doesn’t accurately describe current trade, economic, or political reality. That the phrase has so many unthinking users, and the concept so many unthinking boosters — especially among America’s political elite — is disturbing. The American people are being force-fed a concept that lets their leadership off the hook. How, for example, can this leadership be expected to provide jobs if the omnipotent forces of globalization trump anything it might do? The American people are expected to be docile and accept whatever fate globalization hands them. But as globalization makes national policies more important than ever, our political leaders need to start getting these policies right — or eventually suffer the consequences. Ian Fletcher is the author of the Free Trade Doesn’t Work: What Should Replace It and Why (USBIC, 2010, $24.95) An Adjunct Fellow at the San Francisco office of the U.S. Business and Industry Council , a Washington think tank founded in 1933, he was previously an economist in private practice, mostly serving hedge funds and private equity firms. He may be contacted at ian.fletcher@usbic.net .

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Video: Bandid Says Thailand to Consider Interest Rate Increase: Video

July 4, 2010

July 5 (Bloomberg) — Bank of Thailand Deputy Governor Bandid Nijathaworn talked with Bloomberg’s Haslinda Amin from Bangkok on July 2 about the outlook for the country’s economy and central bank monetary policy. Thailand will consider raising its benchmark interest rate, Bandid said, after the nation’s worst political violence in almost two decades ended without derailing the recovery. Thailand has refrained from joining Taiwan, Malaysia, India and Australia in raising borrowing costs this year, choosing to keep its benchmark rate at 1.25 percent in June as local political unrest and Europe’s sovereign-debt crisis threatened the economy. (Source: Bloomberg)

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New Jobless Claims Jump To Highest Level Since March

July 1, 2010

WASHINGTON — Fears that the economic recovery is fizzling grew Thursday after the government and private sector issued weak reports on a number of fronts. Unemployment claims are up, home sales are plunging without government incentives and manufacturing growth is slowing. Meanwhile, 1.3 million people are without federal jobless benefits now that Congress adjourned for a weeklong Independence Day recess without passing an extension. That number could grow to 3.3 million by the end of the month if lawmakers can’t resolve the issue when they return. All of this worries economists. As jobless claims grow and benefits shrink, Americans have less money to spend and the economy can’t grow fast enough to create new jobs. Some are revising their forecasts for growth in the third quarter. Others are afraid the country is on the verge of falling back into a recession. “We find the level and direction in jobless claims somewhat troubling and the increase is likely to feed double-dip fears,” said John Ryding, an economist at RDQ Economics in a note to clients. New claims for benefits jumped by 13,000 to a seasonally adjusted 472,000, the Labor Department said Thursday. The four-week average, which smooths fluctuations, rose to 466,500, its highest level since March. Claims have remained stuck above 450,000 since the beginning of the year. Requests for unemployment benefits dropped steadily last year after reaching a peak of 651,000 in March 2009. Economists say they will feel more confident about sustained job growth when initial claims fall below 425,000 Adding to that is the growing number of people who stand to lose government support while they search for work. For the third time in as many weeks, Senate Republicans blocked a bill Wednesday night that would have continued unemployment checks to people who have been laid off for long stretches. The House is slated to vote on a similar measure Thursday, though the Senate’s action renders the vote a futile gesture as Congress prepares to depart Washington for its holiday recess. During the recession, Congress added up to 73 weeks of extra benefits on top of the 26 weeks typically provided by states. Democrats in the House and Senate want them extended through November. Republicans want the $34 billion cost of the bill to be paid for with money remaining from last year’s stimulus package. Democrats argue that it is emergency spending and should be added to the deficit. Some economists say they may revise their forecasts for growth in the third quarter if the benefits are not extended. “People whose benefits are going to run out will simply not have the spending power necessary to help drive growth,” said Dan Greenhaus, chief economic strategist at Miller Tabak. The housing market is also weighing on the economy. The number of buyers who signed contracts to purchase homes tumbled 30 percent in May, the National Association of Realtors said. And construction spending declined 0.2 percent in May as residential building fell, the Commerce Department said. Both were affected by the expiration of government incentives to buy homes. Buyers had until April 30 to sign sales contracts and qualify for tax credits. The tax credit’s impact also showed up in the jobless claims report. Greater layoffs by construction firms fueled the increase, a Labor Department analyst said. Separately, the Institute for Supply Management, an industry trade group, said its manufacturing index slipped in June. But it is still at a level that suggests growth in the industrial sector, which has helped drive the economic recovery. Surveys released Thursday in China showed a slowdown in factories’ growth as exports faltered and analysts worry that cutbacks in government lending will cool the economy’s rapid rise. Reports from Markit Economics also indicated that manufacturing sector growth in India, South Korea, Australia and Taiwan was slowing. The industrial sector’s growth also cooled slightly in the 16 countries using the euro and the United Kingdom. The troubling information on the economy comes a day before the Labor Department is scheduled to release the June jobs report. That is expected to show a modest rebound in private-sector hiring. Overall, employers are expected to cut a net total of 110,000 positions, but that includes the loss of about 240,000 temporary census jobs. Private employers are projected to add 112,000 jobs, according to a survey of economists by Thomson Reuters. That would be an improvement from May, when businesses added only 41,000 workers. But the economy needs to generate at least 100,000 net new jobs per month to keep up with population growth, and probably twice that number to bring down the jobless rate. The unemployment rate is expected to edge up to 9.8 percent from 9.7 percent in May. Layoffs are rising in the public sector, as states and local governments struggle to close persistent budget gaps. New York City approved a budget Tuesday that cuts about $1 billion in spending and would eliminate 5,300 jobs from the city’s 300,000-person work force. ___ Associated Press Writer Stephen Ohlemacher contributed to this report.

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China signs landmark trade pact with Taiwan

June 29, 2010

China signs landmark trade pact with Taiwan

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Video: DeWoskin Says China-Taiwan Economic Relations `Deep’: Video

June 27, 2010

June 28 (Bloomberg) — Kenneth DeWoskin, a director of Deloitte LLP’s China Research and Insight Center, talks with Bloomberg’s Rishaad Salamat about trade negotiations between China and Taiwan. Taiwan and China aim to sign three agreements in a sixth round of cross-strait talks that will be held later this year, Chiang Pin-kung, chairman of the Taipei-based Straits Exchange Foundation, said. Cross-strait negotiations resumed in 2008 after a nine-year halt during which former Taiwan president Lee Teng-hui described the talks as “state-to-state,” a term Beijing rejected. China claims the self-ruled island as its territory and has threatened force to impose Taiwan’s unification with the mainland. (Source: Bloomberg)

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China, Taiwan brace for landmark trade agreement

June 26, 2010

China, Taiwan brace for landmark trade agreement

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Yuan Gain Limited to 1.9% This Year on Euro Drop, Survey Shows

June 20, 2010

By Bloomberg News June 20 (Bloomberg) — The yuan’s appreciation may be limited to 1.9 percent against the dollar this year as the euro’s slump hurts exporters, a survey of economists showed after China signaled an end to a two-year peg. The currency will probably climb to 6.7 per dollar by Dec. 31, according to the median estimate of 14 analysts interviewed after the People’s Bank of China said yesterday it will allow greater “flexibility.” The central bank ruled out “large- scale appreciation” and said it will prevent “excessive” moves. Gains may be limited because the yuan already strengthened 16.5 percent against the euro this year, eroding earnings for Chinese exporters in the European Union, the nation’s largest market. U.S. Senator Charles Schumer said lawmakers will push ahead with proposals for trade sanctions until they are convinced the advance is fast enough to allow fair competition. “The yuan’s appreciation against the dollar may be limited over the next six months after the Chinese currency gained significantly against the euro,” said Ma Jun , a Hong Kong-based economist for Deutsche Bank AG, who predicts a gain of 1.9 percent. U.S. politicians can only “declare this a partial victory,” he added. The outlook for appreciation in the survey is stronger than that indicated by forwards. The six-month non-deliverable contract jumped 0.5 percent on June 18 to 6.7596 per dollar, reflecting bets the yuan will rise 1 percent from the spot rate of 6.8262. Day One Chinese authorities have prevented the currency from strengthening against the dollar since July 2008 to help exporters cope during the global financial crisis. The currency appreciated 21 percent in the three years after a peg to the dollar was scrapped in July 2005 and replaced by a managed float against a basket of currencies including the euro. The yuan may advance 0.2 percent to 6.815 tomorrow and 0.4 percent this week, according to the median estimate of six analysts who gave forecasts. The central bank sets the reference rate for yuan trading at around 9:15 a.m. every day and allows the currency to fluctuate up to 0.5 percent from the fixing. “The PBOC will probably keep the reference rate stable on Monday,” said Lu Zhengwei , an economist at Industrial Bank Co. in Shanghai, who predicts a 0.1 percent gain this year. “It needs to watch the market’s responses to the flexibility statement. Market participants won’t make bold moves either. They are waiting for more signals from the PBOC.” The central bank, which has accumulated $2.4 trillion in currency reserves intervening in currency markets, said it will maintain the trading band and curb inflows of short-term speculative capital. Depreciation Possible Authorities will “ensure the exchange rate’s fluctuation is controllable and prevent the possibility of market forces causing excessive adjustment in the rate,” the central bank said in a statement today. “We can’t exclude the possibility of yuan depreciation,” said Shen Jianguang , Mizuho Securities Asia Ltd.’s chief economist for Greater China, who said a 2.5 percent drop is possible this year if the dollar-euro rate is unchanged. Even so, he added, China needs to show flexibility in its currency before the Group of 20 summit in Toronto on June 26-27. Textiles makers stand to lose the most from appreciation and some would “face bankruptcy” with profit margins as low as 3 percent, Zhang Wei , vice chairman of the China Council for the Promotion of International Trade, said in March. Europe’s debt crisis has added to pressure on their earnings. Swift Umbrella Co., based in the southern Chinese province of Fujian, was forced by European buyers to cut prices 6 percent this year, Xu Youchuan, sales manager, said in a June 2 interview. Balance of Payments China’s narrowing balance-of-payments gap indicates that there’s no basis for “large-scale appreciation” in the yuan, the central bank said yesterday. The current-account surplus, for trade in goods and services, narrowed 32 percent to $297.1 billion in 2009, government data show. Exports have been rebounding, exceeding imports by $19.5 billion in May, from a $1.68 billion surplus in April and a deficit of $7.24 billion in March. Overseas sales jumped 48.5 percent in May from a year earlier, customs bureau data show. Benefits From Gains The World Bank said last week that a stronger currency would help China cool inflation , which accelerated to a 19-month high of 3.1 percent in May, higher than the government’s full- year target of 3 percent. Yuan gains would also give more room for Asian currencies to strengthen after the euro’s record depreciation prompted exporters from Taiwan to South Korea to call for currency controls to protect their earnings. Companies focused on the Chinese market, including Beijing- based computer maker Lenovo Group Ltd. and Shanghai-based China Eastern Airlines Corp. , said in March that they would gain from lower import costs and stronger consumer purchasing power. “A 3 percent gain against the dollar won’t have any major impact on exports this year,” said Chen Chao, ICBC Credit Suisse Asset Management Co.’s chief economist. “Whether the yuan will rise or fall against the dollar will depend on the dollar’s movement against other currencies.” — Judy Chen , Belinda Cao, Bob Chen, Frances Yoon, Yanping Li. Editors: Sandy Hendry , Paul Panckhurst To contact the reporters on this story: Judy Chen in Shanghai at Xchen45@bloomberg.net .

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U.S. Stocks Have Biggest Two-Week Gain Since November on Economic Recovery

June 19, 2010

By Rita Nazareth June 19 (Bloomberg) — U.S. stocks rose, capping the market’s biggest two-week rally since November, after New York- area manufacturing expanded and Europe’s efforts to contain its debt crisis bolstered confidence in the global economy. Caterpillar Inc. and United Technologies Corp. each advanced at least 4.4 percent this week. Apple Inc. jumped 8.1 percent on optimism over the new version of its iPhone. Intel Corp. climbed 3.7 percent to pace gains in semiconductor stocks after Taiwan Semiconductor Manufacturing Co., the world’s largest contract maker of chips, boosted its market forecast. The S&P 500 rose 2.4 percent over the past five days to 1,117.51, adding to the previous week’s 2.5 percent advance. The Dow Jones Industrial Average advanced 239.57 points, or 2.4 percent, to 10,450.64. Both measures erased losses for the year. “The recovery is on track,” said Philip Orlando , the New York-based chief equity market strategist at Federated Investors, which manages about $400 billion. “Investors are now thinking that the global pressures will not be sufficient to derail the economic rebound. The stock market was significantly undervalued. The trend is higher.” The S&P 500, the U.S. equity benchmark , fell as much as 14 percent from a 19-month high in April on concern that widening budget deficits in Europe would curtail global growth. The decline drove the S&P 500’s price-to-earnings ratio to about 15.2 earlier this month, the cheapest valuation since June 2009. The index rebounded 6.4 percent from a seven-month low on June 7 amid speculation the economic rebound will continue. ‘Relief Rally’ Gains in U.S. equities came as the euro rallied 2.3 percent to almost $1.24, its biggest weekly advance against the dollar in more than a year. Increased demand at a Spanish bond sale and an agreement by European Union leaders to disclose how banks perform on stress tests bolstered confidence that European debt crisis is contained “You’ve got a relief rally,” said Kevin Rendino , who manages about $11 billion in Plainsboro, New Jersey, for BlackRock Inc. , the world’s largest asset manager. “Valuations are incredibly attractive, companies are doing well. We applied the right medicine. The economy continues to recover.” All but four of 57 stocks in the S&P 500 Industrials Index gained after the Federal Reserve Bank of New York’s general economic index increased to 19.6, an 11th-straight month of growth. The report helped trigger a 2.4 percent rally on June 15, the biggest gain of the week, which took the S&P 500 above its 200-day moving average for the first time in more than a month. The index remained above the trend line for the rest of the week, a bullish sign to investors who make trading decisions based on chart patterns. Caterpillar, Boeing Caterpillar, the world’s largest maker of bulldozers, surged 9.3 percent to $65.85, leading the gains in the Dow average. United Technologies , the maker of Pratt & Whitney jet engines and Otis elevators, rose 4.5 percent to $69.18. Boeing Co. gained 4 percent to $67.96. The maker of world’s most widely flown jetliner plans to boost production of its best-selling 737 jet by an additional 3 percent, the second increase in as many months as airlines recover from the recession and add to the plane’s $138 billion order backlog. Semiconductor companies had the biggest gain in the S&P 500 among 24 industries, climbing 4.8 percent as a group. Chipmaker Demand Taiwan Semiconductor Manufacturing said global sales will increase almost 30 percent in 2010, up from its April forecast of 22 percent growth. Intel , the world’s largest chipmaker, advanced 3.7 percent to $21.40. Teradyne Inc. rose 12 percent to $11.80. Micron Technology Inc. jumped 12 percent to $10. Apple rallied 8.1 percent to $274.07. Piper Jaffray Cos. analyst Gene Munster raised his 2010 earnings estimate to $13.07 a share from $12.90, citing sales of the company’s new iPhone. He also boosted his forecasts for iPhone sales in the quarters ending in June and September to 9.5 million each. His previous estimates were for sales of 8.5 million and 9 million, respectively. Apple’s share-price estimate was also increased to $348 from $330 at Piper Jaffray. “Technology companies have great business models and they generate a lot of cash,” said Michael Levine , a money manager at New York-based OppenheimerFunds Inc., which oversees about $165 billion. “The replacement cycle in conjunction with better corporate profits will drive higher spending.” M&A Talks M&T Bank Corp. rose the most in the S&P 500, jumping 16 percent to $90.71, on takeover speculation. Banco Santander SA said it has made no decision on whether to combine its business with of the U.S. bank. Matias Inciarte , the Spanish lender’s third vice-chairman, said “it’s been said” that there have been conversations between the two banks. GameStop Corp. and Best Buy Co. had the two biggest declines in the S&P 500, each dropping at least 8.1 percent. Best Buy, the world’s largest consumer-electronics retailer, reported first-quarter profit excluding some items of 36 cents a share, missing the average analyst estimate in a Bloomberg survey by 28 percent. The company said it plans to let customers trade in their used video games at more than 1,000 U.S. stores to grab sales from competitors. A gauge of 12 homebuilders in S&P indexes declined 3.1 percent. Toll Brothers Inc. , the largest U.S. luxury homebuilder, said deposits have been running 20 percent behind the year-earlier period in the past three weeks as the Gulf of Mexico oil spill and European debt crisis hurt buyer confidence. Toll Brothers fell 4.7 percent to $17.95, a third-straight weekly loss. KB Home declined 5.2 percent to $12.30. D.R. Horton Inc. slid 4.5 percent to $10.75. FedEx Slips FedEx Corp. dropped 2.4 percent to $78.70. The world’s largest air-cargo carrier forecast annual profit that trailed analysts’ estimates, citing rising health-care and pension costs in a “moderate” economic recovery. Quarterly reports scheduled for next week include Adobe Systems Inc. , the world’s biggest maker of graphic-design programs, and Oracle Corp. , the world’s second-largest software maker. Walgreen Co., Carnival Corp., Nike Inc., Bed Bath & Beyond Inc., Lennar Corp. , ConAgra Foods Inc. and H&R Block Inc. will also report. Sales of previously-owned homes rose in May while those of new houses fell, reflecting the timing of a tax credit, and a rise in business spending signaled factories are leading the rebound, economists said before reports next week. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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U.S. Stocks Have Biggest Two-Week Gain Since November on Economic Recovery

June 19, 2010

By Rita Nazareth June 19 (Bloomberg) — U.S. stocks rose, capping the market’s biggest two-week rally since November, after New York- area manufacturing expanded and Europe’s efforts to contain its debt crisis bolstered confidence in the global economy. Caterpillar Inc. and United Technologies Corp. each advanced at least 4.4 percent this week. Apple Inc. jumped 8.1 percent on optimism over the new version of its iPhone. Intel Corp. climbed 3.7 percent to pace gains in semiconductor stocks after Taiwan Semiconductor Manufacturing Co., the world’s largest contract maker of chips, boosted its market forecast. The S&P 500 rose 2.4 percent over the past five days to 1,117.51, adding to the previous week’s 2.5 percent advance. The Dow Jones Industrial Average advanced 239.57 points, or 2.4 percent, to 10,450.64. Both measures erased losses for the year. “The recovery is on track,” said Philip Orlando , the New York-based chief equity market strategist at Federated Investors, which manages about $400 billion. “Investors are now thinking that the global pressures will not be sufficient to derail the economic rebound. The stock market was significantly undervalued. The trend is higher.” The S&P 500, the U.S. equity benchmark , fell as much as 14 percent from a 19-month high in April on concern that widening budget deficits in Europe would curtail global growth. The decline drove the S&P 500’s price-to-earnings ratio to about 15.2 earlier this month, the cheapest valuation since June 2009. The index rebounded 6.4 percent from a seven-month low on June 7 amid speculation the economic rebound will continue. ‘Relief Rally’ Gains in U.S. equities came as the euro rallied 2.3 percent to almost $1.24, its biggest weekly advance against the dollar in more than a year. Increased demand at a Spanish bond sale and an agreement by European Union leaders to disclose how banks perform on stress tests bolstered confidence that European debt crisis is contained “You’ve got a relief rally,” said Kevin Rendino , who manages about $11 billion in Plainsboro, New Jersey, for BlackRock Inc. , the world’s largest asset manager. “Valuations are incredibly attractive, companies are doing well. We applied the right medicine. The economy continues to recover.” All but four of 57 stocks in the S&P 500 Industrials Index gained after the Federal Reserve Bank of New York’s general economic index increased to 19.6, an 11th-straight month of growth. The report helped trigger a 2.4 percent rally on June 15, the biggest gain of the week, which took the S&P 500 above its 200-day moving average for the first time in more than a month. The index remained above the trend line for the rest of the week, a bullish sign to investors who make trading decisions based on chart patterns. Caterpillar, Boeing Caterpillar, the world’s largest maker of bulldozers, surged 9.3 percent to $65.85, leading the gains in the Dow average. United Technologies , the maker of Pratt & Whitney jet engines and Otis elevators, rose 4.5 percent to $69.18. Boeing Co. gained 4 percent to $67.96. The maker of world’s most widely flown jetliner plans to boost production of its best-selling 737 jet by an additional 3 percent, the second increase in as many months as airlines recover from the recession and add to the plane’s $138 billion order backlog. Semiconductor companies had the biggest gain in the S&P 500 among 24 industries, climbing 4.8 percent as a group. Chipmaker Demand Taiwan Semiconductor Manufacturing said global sales will increase almost 30 percent in 2010, up from its April forecast of 22 percent growth. Intel , the world’s largest chipmaker, advanced 3.7 percent to $21.40. Teradyne Inc. rose 12 percent to $11.80. Micron Technology Inc. jumped 12 percent to $10. Apple rallied 8.1 percent to $274.07. Piper Jaffray Cos. analyst Gene Munster raised his 2010 earnings estimate to $13.07 a share from $12.90, citing sales of the company’s new iPhone. He also boosted his forecasts for iPhone sales in the quarters ending in June and September to 9.5 million each. His previous estimates were for sales of 8.5 million and 9 million, respectively. Apple’s share-price estimate was also increased to $348 from $330 at Piper Jaffray. “Technology companies have great business models and they generate a lot of cash,” said Michael Levine , a money manager at New York-based OppenheimerFunds Inc., which oversees about $165 billion. “The replacement cycle in conjunction with better corporate profits will drive higher spending.” M&A Talks M&T Bank Corp. rose the most in the S&P 500, jumping 16 percent to $90.71, on takeover speculation. Banco Santander SA said it has made no decision on whether to combine its business with of the U.S. bank. Matias Inciarte , the Spanish lender’s third vice-chairman, said “it’s been said” that there have been conversations between the two banks. GameStop Corp. and Best Buy Co. had the two biggest declines in the S&P 500, each dropping at least 8.1 percent. Best Buy, the world’s largest consumer-electronics retailer, reported first-quarter profit excluding some items of 36 cents a share, missing the average analyst estimate in a Bloomberg survey by 28 percent. The company said it plans to let customers trade in their used video games at more than 1,000 U.S. stores to grab sales from competitors. A gauge of 12 homebuilders in S&P indexes declined 3.1 percent. Toll Brothers Inc. , the largest U.S. luxury homebuilder, said deposits have been running 20 percent behind the year-earlier period in the past three weeks as the Gulf of Mexico oil spill and European debt crisis hurt buyer confidence. Toll Brothers fell 4.7 percent to $17.95, a third-straight weekly loss. KB Home declined 5.2 percent to $12.30. D.R. Horton Inc. slid 4.5 percent to $10.75. FedEx Slips FedEx Corp. dropped 2.4 percent to $78.70. The world’s largest air-cargo carrier forecast annual profit that trailed analysts’ estimates, citing rising health-care and pension costs in a “moderate” economic recovery. Quarterly reports scheduled for next week include Adobe Systems Inc. , the world’s biggest maker of graphic-design programs, and Oracle Corp. , the world’s second-largest software maker. Walgreen Co., Carnival Corp., Nike Inc., Bed Bath & Beyond Inc., Lennar Corp. , ConAgra Foods Inc. and H&R Block Inc. will also report. Sales of previously-owned homes rose in May while those of new houses fell, reflecting the timing of a tax credit, and a rise in business spending signaled factories are leading the rebound, economists said before reports next week. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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Asia’s Currencies Have Strongest Week in Five Months as Inflows Increase

June 19, 2010

By Lilian Karunungan and Yumi Teso June 19 (Bloomberg) — Asian currencies strengthened this week, led by South Korea’s won and the Philippine peso, as signs the global economic recovery will withstand Europe’s debt crisis boosted demand for riskier assets. The Bloomberg-JPMorgan Asia Dollar Index and the MSCI Asia Pacific Index of shares had their biggest gains in at least five months and the won jumped the most in a year. The Conference Board this week said its leading indicator of China’s economy rose by the most in 14 months and the Organization for Economic Cooperation and Development forecast the fastest growth for South Korea since 2002. Thailand yesterday reported its best export growth in almost two years. “There has been optimism that the impact of Europe’s problems on the Asian economy may be limited, supporting the purchase of regional currencies,” said Minori Uchida , a senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest bank. “Gains in stocks are also a supporting factor.” The won appreciated 3.6 percent to 1,202.65 per dollar, according to data compiled by Bloomberg. The peso climbed 1.6 percent to 45.905 and the Indian rupee was 1.4 percent stronger at 46.1787. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, gained 1.0 percent and the MSCI Asia Pacific Index of shares rose 3.3 percent. Stocks in South Korea and Taiwan attracted about $1.9 billion from abroad, according to data compiled by Bloomberg. Stock Inflows Equity funds investing in Asia excluding Japan took in money for the first time in six weeks, drawing the most since April, according to EPFR Global, which tracks firms overseeing $13 trillion of global assets. Emerging-market stock funds attracted $2.5 billion, the second-highest tally this year. Korean Finance Minister Yoon Jeung Hyun said yesterday growth will likely exceed 5 percent this year and a government report showed spending at the three biggest department stores climbed for a 15th month in May. Gross domestic product will increase 5.8 percent this year as exports surge and domestic demand strengthens, the OECD said this week. “The won has been doing pretty well because of the economic fundamentals,” said Yun Suk Cho , a currency dealer at Korea Exchange Bank in Seoul. “There is a big possibility that we will break 1,200 against the dollar next week as the markets stabilize.” Exports, Jobs Thailand’s exports jumped 42 percent from a year earlier in May, the most since July 2008, Commerce Minister Porntiva Nakasai said yesterday. The Philippines on June 15 raised its economic growth target for this year to as much as 6 percent, from a previous goal of 3.6 percent. Taiwan will next week report an eighth straight gain in export orders and the lowest jobless rate since 2008, according to the median estimates of economists surveyed by Bloomberg. Taiwan’s dollar completed its biggest weekly gain in nine months as an improving economy and the prospect of a trade deal with China spurred inflows. Gross domestic product rose at the fastest pace in more than 30 years in the last quarter and China’s government said June 13 a basic agreement has been reached with the island on goods, services and industries chosen for initial tariff cuts in the planned trade pact. “Funds are flowing back as investors seek riskier assets,” said Tigr Cheng, a strategist at Polaris Securities Co. in Taipei. “People have been upbeat about the economy.” The island’s currency climbed 0.8 percent this week to NT$32.190 against the greenback, according to Taipei Forex Inc. Elsewhere, the Malaysian ringgit gained 0.8 percent to 3.2500, the Singapore dollar strengthened 1.2 percent to S$1.3864 and the Indonesian rupiah appreciated 1.2 percent to 9,096. The Thai baht rose 0.2 percent to 32.40. To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net ; Yumi Teso in Bangkok at yteso1@bloomberg.net .

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Asian Stocks Have Biggest Weekly Advance This Year on U.S. Economic Data

June 18, 2010

By Kana Nishizawa June 19 (Bloomberg) — Asian stocks rose this week, driving the MSCI Asia Pacific Index up the most since December, as U.S. economic reports eased concern that deficits in Europe will slow a global recovery, and brokerages boosted investment ratings. Samsung Electronics Co. , Asia’s biggest semiconductor maker, gained 3.1 percent in Seoul this week on the outlook for chip demand. Nissan Motor Co. jumped 6.2 percent in Tokyo after Citigroup Inc. reiterated its “buy” rating on the carmaker. Cnooc Ltd., China’s largest offshore oil producer, rose 4.7 percent in Hong Kong as crude oil exceeded $75 a barrel and analysts recommended the stock. Nintendo Co. soared 16 percent in Osaka, Japan, after introducing a new video-game player. The MSCI Asia Pacific Index rose 3.3 percent this week, the most since the period ended Dec. 4. It has lost 3.6 percent this year on concern Greece and other European countries will struggle to curb their budget deficits and repay debt. “There was a lot of pessimism about what’s happening in Europe that took the market down,” said Tim Leung , who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. “It’s rebounding from that pessimism.” Japan’s Nikkei 225 Stock Average rose 3 percent this week, South Korea’s Kospi Index climbed 2.2 percent, Hong Kong’s Hang Seng Index gained 2.1 percent, and Taiwan’s Taiex index increased 2.7 percent. China’s Shanghai Composite Index declined 2.2 percent in a two-day week shortened by holidays. Chip Shares Advance Samsung Electronics, which receives about 44 percent of its sales from the Americas and Europe, gained 3.1 percent to 822,000 won this week in Seoul. Tokyo Electron Ltd., the world’s second-biggest maker of semiconductor equipment, increased 2.3 percent to 5,690 yen in Tokyo. Taiwan Semiconductor Manufacturing Co., the world’s biggest maker of custom chips, increased 3.6 percent to NT62.7 in Taipei. Global sales in the chip industry will increase almost 30 percent this year, compared with an April forecast of 22 percent, Morris Chang, chairman and chief executive officer of TSMC, said this week. The MSCI Asia Pacific Index has slumped 10 percent from its high this year on April 15 as swelling budget deficits prompted Standard & Poor’s to cut ratings of Greece, Spain and Portugal. The retreat has driven down the average price of shares in the gauge to about 14.8 times estimated earnings . The ratio sank to 13.8 times on May 18, the lowest level since December 2008. U.S. Boost Stocks rebounded this week, with the MSCI Asia Pacific Index advancing every day . The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for June advanced to the highest level since January 2008, and the Federal Reserve Bank of New York said its general economic index of manufacturing rose in June for an 11th consecutive month. “U.S. economic data remain resilient, and economies continue to improve globally,” said Kiyoshi Ishigane , a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees more than $65 billion. Li & Fung Ltd. , a trading company that generates two-thirds of its sales in the U.S., jumped 7 percent to HK$38.30 in Hong Kong. Honda Motor Co., a carmaker that gets more than 80 percent of its revenue abroad, gained 3.2 percent to 2,690 yen in Tokyo. Hyundai Motor Co., South Korea’s largest automaker, jumped 5.1 percent to 144,500 won. LIG Investment & Securities Co. raised its estimate on the automaker’s share price by 20 percent. Nissan , Japan’s third-biggest carmaker, surged 6.2 percent to 671 yen. Goldman Sachs Group Inc. raised its rating on the company to “buy” from “neutral.” Cnooc advanced 4.7 percent to HK$13.50 this week after HSBC Holdings Plc boosted the company to “overweight” from “neutral.” Nintendo , the world’s biggest maker of video-game machines, soared 16 percent to 28,380 yen this week after the company unveiled a handheld player that shows 3-D images without special glasses. UBS AG boosted its recommendation on the stock to “buy” from “neutral.” To contact the reporters for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net .

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L.A.-San Francisco Bullet-Train Bidding Process May Begin Late Next Year

June 18, 2010

By Alan Ohnsman and Chris Cooper June 18 (Bloomberg) — California, the top recipient of funds from President Barack Obama ’s high-speed rail program, expects to issue a tender for a bullet-train line linking Los Angeles and San Francisco by late 2011. The state expects bids from about 10 trainmakers and construction may start as early as the first half of 2012, Quentin Kopp , a California High Speed Rail Authority board member, said in an interview in Los Angeles yesterday. The train will whisk passengers between the two cities, 432 miles apart, in less than 2 hours 40 minutes, according to the state-backed group’s website . California’s push for high-speed rail, backed by Governor Arnold Schwarzenegger , comes as the most populous U.S. state targets cuts in congestion and greenhouse gas emissions from cars and airplanes. The Obama administration in January awarded $8 billion for high-speed rail projects, causing companies such as Alstom SA , Siemens AG , East Japan Railway Co., China South Locomotive & Rolling Stock Corp. to boost sales efforts. “A high-speed line between Los Angeles and San Francisco makes sense given their large populations and the distance between them,” said Yuuki Sakurai , chief executive officer of Fukoku Capital Management Inc., which manages about $8.3 billion. “There might be some companies trying to sell their technologies even if they don’t make a profit, so they can make a name for themselves.” When fully completed the state anticipates an 800-mile high-speed rail network running from San Francisco to San Diego, near the U.S.-Mexico border. The total cost for the system will be more than $40 billion. Construction From 2012 California won a $2.3 billion federal grant to help build the high-speed link, which is due to enter service in 2020. That’s in addition to a $10 billion bond sale the state approved in 2008 to fund the rail line. The state has until September 2011 to complete an environmental review, Kopp said. “Allow four months for the conclusion of proposals and bids, and I estimate conservatively that construction will begin by the first part of 2012,” said Kopp, who was at a U.S. High Speed Rail Association conference in Los Angeles. Schwarzenegger has proposed running high-speed trains on existing conventional tracks between Los Angeles and San Diego as early as November to spur interest in high-speed rail. Kopp said he doubted whether that timeframe would be met. “Will that happen in the time variant in the governor’s recent proposal?” Kopp said. “ I don’t think so,” he said without elaboration. Amtrak Trains Trains operated by Amtrak, the U.S. long-distance passenger railroad, currently don’t run directly between Los Angeles and San Francisco. Travel between Los Angeles and Oakland, which neighbors San Francisco, on Amtrak’s Coast Starlight line takes about 12 hours or twice as long as traveling by car. Air travel between Los Angeles and the San Francisco Bay Area takes about an hour. “The airlines will certainly lose some of their business,” said Fukoku Capital’s Sakurai. “If you add up the time spent traveling to airports, security checks and delays it makes sense to take the train.” U.S. Transport Secretary Ray LaHood last month visited Japan, where he tried out a JR East bullet train and rode Central Japan Railway Co. ’s magnetic-levitation railway. He also encouraged Japanese trainmakers to compete for U.S. contracts and to set up plants in the country. Japan’s Transport Minister Seiji Maehara is planning a second visit to the U.S. this year to help stoke interest in bullet trains. 320 kmh Train JR East will introduce a bullet train next year that can reach speeds of 320 kmh (199 miles per hour). The fastest train in the U.S., Amtrak’s Acela Express, which is built by Alstom and Bombardier Inc. , is capable of running at up to 150 mph. Japanese trainmakers have previously won overseas deals. Kawasaki Heavy Industries Ltd. made the trains for Taiwan’s $15 billion high-speed line that started operating three years ago between suburban Taipei and Kaohsiung in the south. Hitachi Ltd. built high-speed trains running between London and the south- east of the U.K. China’s Ministry of Railways has teamed up with General Electric Co. in a bid to win U.S. contracts. The two in November agreed a partnership to manufacture equipment for high-speed rail projects. Japan, which started the world’s first bullet-train services in 1964, carried 308 million people by high-speed train in the year ended March 2009, more than triple the number of passengers on domestic airline routes. Amtrak’s Acela Express carried 3.4 million passengers in fiscal 2008. To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net ; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

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

June 16, 2010

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

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Stocks, Oil Recover From Early Drop Treasuries Pare Gain

June 16, 2010

By Michael P. Regan and Esme E. Deprez June 16 (Bloomberg) — U.S. recovered from an early drop as BP Plc’s plan to put $20 billion into a fund to pay damages from the Gulf of Mexico oil spill eased concern about the company’s future. The dollar and Treasuries pared gains and oil rallied on lower refinery operating rates. The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,114.39 at 3:16 p.m. in New York after tumbling 0.7 percent earlier. Oil rose as much as 1.6 percent to a one-month high of $78.13 a barrel. The Dollar Index , which gauges the U.S. currency against six major trading partners, was little changed after jumping 0.5 percent earlier. The yield on the 10-year Treasury note slipped 3 basis point to 3.28 percent. BP’s U.S. shares reversed losses as Chairman Carl-Henric Svanberg agreed to provide $20 billion to pay “all proper claims” from the worst spill in U.S. history, easing concern about the company’s prospects as credit investors price in a record chance it will default within five years. The earlier drop in stocks came after FedEx Corp.’s earnings forecast trailed estimates and housing starts dropped more than forecast. “It quantifies to some degree the amount that BP is going to set aside,” said Marshall Front , chairman of Front Barnett Associates LLC in Chicago, which manages $500 million. “They earn $4.5 billion a quarter so this is not a staggering amount of money.” 200-Day Average The S&P 500 drifted between gains and losses after a 2.4 percent rally yesterday erased the index’s loss for the year. Apple Inc. and JPMorgan Chase & Co. paced gains in computer companies and banks. FedEx, the largest air-cargo carrier, tumbled 3 percent after forecasting annual profit that may trail the average analyst estimates by as much as 13 percent on higher costs for health-care and pensions. U.S. housing starts fell 10 percent, the biggest decline since March 2009, to a 593,000 annual rate, from a revised 659,000 pace in April that was less than previously estimated, Commerce Department figures showed. Building permits, a sign of future construction, unexpectedly fell to a one-year low. Single-family starts suffered the largest drop since 1991. Fannie Mae and Freddie Mac shares tumbled at least 39 percent after their regulator told the two mortgage-finance companies to delist their stock from the New York Stock Exchange. European stocks closed little changed, with the Stoxx Europe 600 Index at the highest level in a month, as gains by insurers offset a decline by auto-industry companies and a slump in technology shares after Nokia Oyj cuts its forecasts. Euro Pares Losses After rallying for two days, the euro slipped 0.3 percent to $1.2301, paring an earlier drop of 0.6 percent. The euro has weakened 14 percent this year against the dollar amid concern the region’s government debt crisis will weaken the currency shared by 16 nations. Spanish and Portuguese bonds fell relative to German bunds amid deepening concern the nations’ economic growth will be curtailed by spending cuts needed to reduce their budget deficits. Prime Minister Jose Luis Rodriguez Zapatero is trying to convince investors he can trim the euro region’s third-largest deficit, shore up the country’s banks and lift the economy out of a two-year slump. Spanish unions called for the first general strike in eight years to protest an overhaul in the country’s labor-laws, which the cabinet approved today. The difference in yield, or spread, between Spanish and German 10-year bunds, Europe’s benchmark government debt securities, widened to a record 221 basis points, from 206 basis points yesterday, according to Bloomberg generic data. The Portuguese-German spread increased 14 basis points to 292 basis points, and the Greek-German yield difference rose 27 basis points to 667 basis points. Spanish Default Swaps Credit-default swaps on Spanish government debt rose 7 basis points to 253, compared with the record-high closing level of 275 basis points on May 6, according to CMA DataVision. The MSCI Asia Pacific Index rallied 1.1 percent to a four- week high. Toyota Motor Corp., a carmaker that gets about 28 percent of its sales from North America, gained 1.2 percent in Tokyo. Nintendo Co. jumped 5.2 percent in Osaka, Japan, after the company introduced a new handheld video-game player. Markets in Hong Kong, China and Taiwan were closed today for a holiday. The MSCI Emerging Markets Index advanced for a seventh day, increasing 0.7 percent. Romania’s BET Index jumped 2.7 percent, the most worldwide, and the country’s government bonds rallied after Prime Minister Emil Boc survived a no-confidence vote. South Korea’s won led gains in emerging-market currencies, strengthening 1.4 percent against the dollar. Gold for immediate delivery slipped 0.4 percent to $1,229.82 an ounce. Copper slipped 0.3 percent to $3.0155 a pound in New York. To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net ; Esme E. Deprez in New York at edeprez@bloomberg.net .

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

June 15, 2010

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

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Japanese, Australian Stock Futures Rise on New York Output Nissan Gains

June 15, 2010

By Masaki Kondo and Toshiro Hasegawa June 16 (Bloomberg) — Japanese and Australian stock futures rose as growth in New York manufacturing stoked expectations a recovery in the global economy will boost corporate earnings. American depositary receipts of Nissan Motor Co. , which counts North America as its biggest market, finished 3.4 percent higher than the Tokyo close. Those of Advantest Corp., the world’s largest maker of memory-chip testers, gained 3.6 percent following a surge in the Philadelphia Semiconductor Index. ADRs of BHP Billiton Ltd., the world’s biggest mining company, climbed 2.3 percent after commodity prices advanced. “Shares have been sold too much, considering the outlook for corporate earnings,” said Hiroichi Nishi , an equities manager in Tokyo at Nikko Cordial Securities Inc. “U.S. manufacturing, supported by low interest rates and the buoyant Chinese economy, are recovering steadily.” Yen-denominated futures on Japan’s Nikkei 225 Stock Average expiring in September closed at 10,035 in Chicago yesterday, 2 percent higher than 9,840 in Osaka. They were bid in the pre- market at 10,040 as of 8:05 a.m. in Osaka. The Nikkei 225 closed at 9,887.89 yesterday. Futures on Australia’s S&P/ASX 200 Index rose 1.5 percent. New Zealand’s NZX 50 Index advanced 1.1 percent. Markets in China, Hong Kong and Taiwan are closed for a national holiday. The MSCI Asia Pacific Index gained for a fourth day yesterday with a 0.2 percent advance as analysts’ ratings boosted shares of Japanese brokerages and automakers. The gauge has fallen 11 percent from a 52-week high on April 15 on concern mounting government deficits will deter some European nations from shoring up their economies through spending. Boeing Gains The slump has driven down the average price of shares in the gauge to 14.6 times estimated earnings, compared with 20.1 times at the beginning of this year. The index’s September futures fell 0.2 percent today. In New York, the Standard & Poor’s 500 Index climbed 2.4 percent yesterday after the Federal Reserve Bank of New York said its general economic index of manufacturing rose in June for an 11th consecutive month. Boeing Co. jumped 4.1 percent after saying it plans to boost production of its best-selling 737 jet. The Philadelphia Semiconductor Index of 21 chip-related companies soared 5.5 percent yesterday after Taiwan Semiconductor Manufacturing Co. raised this year’s market forecast. Global chip-industry sales will increase almost 30 percent this year, Morris Chang, chairman and chief executive officer of the world’s largest contract manufacturer of chips, said yesterday when most Asian markets were still open. This compares with his April forecast of 22 percent growth. Yen Weakens Prospects for higher demand buoyed oil prices by 2.4 percent to $76.94 a barrel in New York yesterday, the highest settlement since May 6. The London Metals Index advanced 0.7 percent. The yen depreciated versus the euro to as much as 112.81 today from 111.73 at the 3 p.m. close of Tokyo stock trading yesterday. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency. KB Financial Group Inc., owner of South Korea’s biggest lender, nominated Euh Yoon Dae as chairman to lead its efforts to create a “mega bank” as the government sells stakes in rivals. He discussed potential bids for Woori Finance Holdings Co., KDB Financial Group Inc. and Korea Exchange Bank during interviews with the directors, said Lim Suk Sig, who led the selection process. To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net ; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net .

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Trade Pact With China May Spark a 15% Rally in Taiwan Shares, Broker Says

June 14, 2010

By Weiyi Lim June 15 (Bloomberg) — Taiwan shares may rise as much as 15 percent by the end of this year as the island pursues trade and investment agreements with China, according to Taiwan’s second- best-performing fund. The benchmark Taiex Index may advance to 8,500 in 2010, Alan Ho , manager of the Union China Fund at Union Securities Investment Trust Co., said in a telephone interview today. The index yesterday climbed 1.2 percent to 7,387.40, a three-week high, after the island and China reached an initial accord to boost trade worth about $110 billion a year. “The government may introduce more policies related to cooperation with China to help lift the stock market,” said Ho, whose 40.5 percent return in the past 12 months was the second best among 384 funds active in Taiwan. “Lower tariffs will mean Taiwan exporters have an easier time entering China’s market.” The Taiex has fallen 9.8 percent this year amid concern Europe’s sovereign debt crisis will lower demand for technology exports from Asia. UBS AG , Switzerland’s biggest bank, in May cut its 2010 target for the index to 7,600, the second reduction in three months. HSBC Holdings Plc this month lowered its forecast by 20 percent to 8,000. The gauge jumped 78 percent last year as Taiwan’s President Ma Ying-jeou helped cement closer ties with China by abandoning his predecessor’s pro-independence stance. Ma has been pushing for an accord to bolster export-dependent Taiwan’s economy after a Chinese trade agreement with the Association of Southeast Asian Nations began this year. Ruled Separately 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 Communist forces in 1949. China regards Taiwan as part of its territory and has threatened to invade if Taiwan declares formal independence. Kuomintang lost seats to the Democratic Progressive party in by-elections in earlier this year, giving the opposition party more than a quarter of the 113-seat parliament. Voters will get a further chance to show whether they support Kuomintang’s policies in municipal elections in the capital Taipei, Tainan, Xinbei, Kaohsiung and Taichung on Nov. 27. The ruling party “is incentivized to provide some positive stimulus to the market,” Peter Kurz , whose team was ranked first for Taiwan research by Institutional Investor for the past three years, said in an interview in Taipei May 25. There is a “basic” accord on the so-called Economic Cooperation Framework Agreement , though the two side are “still working on details,” Tang Wei , head of Taiwan, Hong Kong and Macau affairs at China’s Ministry of Commerce, said June 13 after talks in Beijing with Huang Chih-peng , director-general of Taiwan’s Bureau of Foreign Trade. Lower Tariffs The accord would lower tariffs on more than 200 items including car parts, petrochemicals and machinery traded from China to Taiwan, and on about 500 items in the opposite direction, Tang and Huang told reporters in Beijing. China is the island’s biggest trading partner. Ho said he’s buying shares of companies with businesses on the mainland. His selections include Clevo Co. , the owner of Chinese electronics chain store BuyNow, and Ruentex Industries Ltd. , a Taiwanese company that owns a stake in RT-Mart China, the country’s largest hypermarket chain by retail sales. “China may revalue the yuan this year, so they will boost domestic consumption to help the economy,” said Ho. “Those companies that can profit from the local market in China will benefit.” Reform Mechanism China will reform its exchange-rate mechanism based on developments in the global economy and its own economic performance, Qin Gang , spokesman for the Chinese foreign ministry, said in a statement on the ministry’s website yesterday. China, the world’s fastest-growing major economy, halted the currency’s three-year advance against the dollar in July 2008 to help exporters weather recessions in the U.S., Europe and Japan. In 2009, Taiwan’s exports to China and Hong Kong were worth $84.7 billion while the island’s imports from China and Hong Kong totaled $25.5 billion, Mei Jia-yuan, a section chief at the Directorate-General of Budget, Accounting and Statistics, said by phone yesterday. To contact the reporter on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net

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Honda Workers in China End Strike for Three Days as Union Seeks Pay Raise

June 14, 2010

By Liza Lin and Takako Iwatani June 15 (Bloomberg) — Workers at a southern China parts factory for Honda Motor Co. , Japan’s second-largest automaker, suspended a strike as management and union leaders set a June 18 deadline for reaching a wage agreement. Employees of Honda Lock (Guangdong) Co. in Zhongshan, Guangdong province, agreed yesterday to return to work through June 17 as talks between the two sides continue, said Liu Shengqi, a former protest leader. The company “will listen to workers’ demands again and give an answer” on June 18, said Hirotoshi Sato , a spokesman for Honda Lock in Miyazaki, Japan. The stoppage follows at least two others at Honda’s Chinese suppliers in the past month that crippled the automaker’s car production and forced it to raise wages. Disruptions at foreign manufacturers including Honda and Taiwan’s Foxconn Technology Group reflect pressure for higher pay in China, where a shrinking pool of low-cost labor may boost inflation . “There is a tide of higher wages, and anyone, any company getting in the way, will get knocked over,” said Edwin Merner , who oversees $3 billion as president of Atlantis Investment Research Corp. in Tokyo. Rising prices in China for housing and food “will mean continuing pressure on wages,” he said. Honda rose 0.4 percent to 2,722 yen as of the 11 a.m. trading break in Tokyo, while the Nikkei 225 Stock Average lost 0.2 percent. ‘Dissatisfied Employees’ The Tokyo-based carmaker wholly owns Honda Lock, which operates the Zhongshan factory through a joint venture with the local township government. The plant supplies key systems, door handles and sensors for Honda’s Chinese car production . Honda Lock’s Sato said the company doesn’t disclose what the company has offered or what workers are demanding. Liu, the former protest organizer, and Zhang Jun, a worker at the plant, said Honda Lock has proposed a 200 yuan monthly pay increase. Dayshift workers were offered an additional 3 yuan per day and night workers 14 yuan per shift, Liu said. Employees , who began striking on June 9, have demanded a 72 percent raise to 1,600 yuan ($234) a month and higher overtime wages, Honda said on June 10. The factory employs about 1,400 people. About 90 percent of employees are unhappy with the 200 yuan offer, said Zhang, the plant worker. If a deal isn’t reached later this week, they will go back on strike, Liu said. “There are still some dissatisfied employees,” said Takayuki Fujii, a Beijing-based spokesman for Honda Motor. Honda Car Production It’s too soon to say whether the disruptions at the plant may affect Honda’s car assembly in China, Fujii said. So far, the carmaker has had a sufficient stock of parts to keep factories running. “Over the short term, there is very limited impact on Honda’s sales volume as they have inventories,” said Yankun Hou, an analyst at Nomura Holdings Inc. in Hong Kong. Still, automakers in China will have to get used to paying higher wages, he said. Honda’s two car plants in Guangzhou, Guangdong, are shut today and tomorrow for a public holiday, said Tomoko Uchida , a spokeswoman for the company in Tokyo. Liu, the former strike leader, said he isn’t involved in talks anymore. A new negotiator, Zeng Qinghong , a National People’s Congress representative and part of Guangzhou Honda Automobile Co.’s management, arrived yesterday, he said. ‘Silent Protest’ Liu said he quit his job to take responsibility for helping organize the strike. His wife and brother still work at the plant, he said. About 400 employees held a “silent protest” yesterday and didn’t work, Liu said. Honda Lock hired replacement workers to help restore operations, and some striking employees lost their jobs, the New York Times reported yesterday. Sato declined to say whether Honda Lock had hired or fired any workers. Liu said he saw cars at the protest site with signs saying the company was hiring. Workers attending a June 12 protest at the plant said they were inspired to take action after hearing that Honda raised salaries for striking employees at a parts plant in Foshan, Guangdong, last month. Honda said May 31 it agreed to increase pay by 24 percent at the Foshan component factory to end a walkout that shut production at all four of its Chinese car-assembly plants, the first time labor issues forced Honda to halt local output. To contact the reporters on this story: Liza Lin in Singapore at llin15@bloomberg.net ; Takako Iwatani in Tokyo at tiwatani@bloomberg.net

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Stocks, Oil Rally on Economic Optimism Treasuries Retreat

June 14, 2010

By Rita Nazareth and David Merritt June 14 (Bloomberg) — Stocks rose for a fifth day, the longest streak since October for the MSCI World Index, and commodities rallied as growth in European industrial production added to signs the global economic rebound is strengthening. The euro appreciated, the yen weakened and Treasuries fell. The MSCI World gauge of stocks in 24 developed nations gained 1.3 percent at 1:17 p.m. in New York, paring a rally of as much as 1.8 percent after Moody’s cut Greece’s credit rating. The Standard & Poor’s 500 Index, which is trading near its lowest valuation in 15 months compared with estimated earnings, increased 0.6 percent to 1,098.01 after surging as much as 1.3 percent. Copper advanced for a fifth day, headed for the longest rally in five months. Oil trimmed its advance to 1 percent. Ten- year Treasury yields increased 6 basis points to 3.29 percent and the euro strengthened to more than $1.22. Eighteen of 19 industries in the Stoxx Europe 600 Index rose after industrial production increased more than economists forecast in April, rising 0.8 percent for an 11th month of gains, the European Union said. The Federal Reserve may say on June 16 that output at U.S. factories, mines and utilities grew 0.9 percent last month after a 0.8 percent increase in April, according to economists surveyed by Bloomberg. “Stocks are so oversold it doesn’t take a whole lot to a get a rebound,” said E. William Stone , who oversees $104 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “The U.S. economic recovery is in place. In Europe, we got positive industrial production data. On a day lacking negative news, it won’t be that hard to get a positive move.” Rally Extended The S&P 500 climbed for a third day and added to gains from last week’s 2.5 percent rally, its best since March. A Thomson Reuters/University of Michigan report last week showed improving U.S. consumer sentiment. Apple Inc., maker of the iPhone and iPad, rallied 1.8 percent and Chevron Corp. climbed 1.3 percent to pace gains in technology and energy companies. JetBlue Airways Corp. jumped 6.3 percent and American Airlines parent AMR Corp. rallied 3 percent after Deutsche Bank AG advised buying the shares. The Dow Jones Transportation Average rose 1.8 percent today and is up 7.3 percent in 2010, compared with a 1.3 percent year-to-date drop in the Dow Jones Industrial Average. Some traders watch the performance of airlines, railroads and trucking companies to gauge the outlook for the overall economy. U.S. equities and commodities trimmed gains today as Moody’s Investors Service downgraded Greece’s government bond ratings by four levels to Ba1 from A3. The outlook is stable, Moody’s said. Earnings Estimates Analysts have raised their average 2010 earnings growth forecasts for the S&P 500 to 32 percent from 26 percent at the end of March, according to data compiled by Bloomberg. The improving forecasts came even as the benchmark measure of U.S. equities retreated 13 percent between April 23 and June 4 amid concern some European nations will struggle to finance deficits. The S&P 500 is trading at about 13.5 times analysts’ earnings estimates for the next 12 months, near the lowest level since March 2009, the month the benchmark index slumped to a 12- year low. “What we see is corporate profit growth in a very low- inflation, low-interest-rate environment,” David Bianco , head of U.S. equity strategy at Bank of America-Merrill Lynch, said in a Bloomberg Radio interview today with Tom Keene . “By year- end, we’ll be at 1,300” for the S&P 500. Interest Rate Watch Federal Reserve Bank of St. Louis President James Bullard , speaking in Tokyo today, said Europe’s debt crisis shouldn’t cause the Fed to postpone raising interest rates as the economy recovers. The central bank has kept its benchmark lending rate at a record-low range near zero since December 2008 to foster growth. The Stoxx Europe 600 Index rallied 1.2 percent, while the MSCI Asia Pacific Index climbed 1.6 percent to the highest in almost four weeks. BHP Billiton Ltd. and Rio Tinto Group climbed more than 2.4 percent in London. Axa SA, Europe’s second-biggest insurer, rose 3.7 percent in Paris after saying it’s in talks to sell part of its U.K. life insurance unit to Clive Cowdery ’s Resolution Ltd. for 2.75 billion pounds ($4 billion). BP Plc , struggling to contain its oil spill in the Gulf of Mexico, slipped 9.3 percent to a 13-year low of 355.45 pence in London. The company faces a U.S. deadline today for a plan to raise oil-containment capacity as President Barack Obama demands an escrow account for damages claims related to the worst environmental disaster in the nation’s history. Developing-nation stocks rose for a fifth day, the longest winning streak in two months, with the MSCI Emerging Markets Index gaining 1.7 percent. Benchmark gauges in Taiwan, South Africa, Thailand and Qatar advanced at least 1.2 percent. Won Rallies South Korea’s won strengthened 2 percent against the dollar after policy makers said they will give banks time to meet a new ceiling on forward contracts, holding off from imposing controls on capital flows. Copper futures for July delivery rose 7.5 cents, or 2.6 percent, to $2.979 a pound on the Comex in New York, poised for the fifth straight gain, the longest rally since early January. The metal climbed 3 percent last week. Crude oil futures for July delivery increased 1 percent to $74.54 a barrel on the New York Mercantile Exchange after jumping 3 percent earlier. The yield on the two-year Treasury note increased four basis points to 0.77 percent, and the 30-year bond yield rose seven basis points to 4.22 percent. German 10-year bunds fell, with the yield advancing seven basis points to 2.63 percent. Belgian Bonds The Belgian 10-year yield jumped 11 basis points to 3.46 percent. Flemish nationalists took the lead in Belgium ’s general elections, setting up coalition talks with French-speaking Socialists who face demands from Dutch-speaking voters to give more powers to the nation’s regions. The cost of protecting corporate bonds from default fell in the U.S. and Europe. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses or speculate on creditworthiness, declined 3 basis points to a mid-price of 122.4 basis points, according to Markit Group Ltd. In Europe, the Markit iTraxx Crossover Index of credit- default swaps on 50 mostly junk-rated companies fell 21 basis points to 575, the lowest in 1 1/2 weeks. The yen dropped 0.1 percent to 91.76 per dollar, and weakened 1.5 percent against the euro to 112.64. The euro strengthened 1.4 percent to $1.2276. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net

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Stocks, Commodities Advance on Outlook for Global Recovery Yen Declines

June 14, 2010

By Rita Nazareth and David Merritt June 14 (Bloomberg) — Stocks rose for a fifth day, the longest streak since October for the MSCI World Index, and commodities rallied on speculation government reports this week will show the global economic rebound is strengthening. The yen weakened and Treasuries fell. The MSCI World gauge of stocks in 24 developed nations gained 1.2 percent at 9:38 a.m. in New York and the Standard & Poor’s 500 Index increased 0.5 percent. Copper rallied for a fifth day in London, oil climbed 2.5 percent and sugar jumped for an eighth consecutive session. The yield on the 10-year Treasury note climbed six basis points to 3.3 percent and the yen weakened against all 16 of its most-traded counterparts. The MSCI World advanced above the highest closing level since May 19 after industrial production increased more than economists forecast in April, rising 0.8 percent for an 11th month of gains, the European Union said today. The Federal Reserve may say on June 16 that output at U.S. factories, mines and utilities grew 0.9 percent last month after a 0.8 percent increase in April, according to economists surveyed by Bloomberg. “Stocks are so oversold it doesn’t take a whole lot to a get a rebound,” said E. William Stone , who oversees $104 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “The U.S. economic recovery is in place. In Europe, we got positive industrial production data. On a day lacking negative news, it won’t be that hard to get a positive move.” Rally Extended The S&P 500 rose for a third day and added to gains from last week’s 2.5 percent rally, its best since March. A Thomson Reuters/University of Michigan report last week showed improving U.S. consumer sentiment. Alcoa Inc., the biggest U.S. aluminum producer, rose 1 percent and Exxon Mobil Corp. climbed 0.5 percent to pace an advance in commodity producers. Analysts have raised their average 2010 earnings growth forecasts for the S&P 500 to 32 percent from 26 percent at the end of March, according to data compiled by Bloomberg. The improving forecasts came even as the benchmark measure of U.S. equities retreated 13 percent between April 23 and June 4 amid concern some European nations will struggle to finance deficits. The S&P 500 is trading at about 13.4 times analysts’ earnings estimates for the next 12 months, near the lowest level since March 2009. “Fundamentals remain supportive for equities and equity volatility should revert to lower levels,” Nomura Holdings Inc.’s London-based strategist Ian Scott wrote in a note dated June 11. “The coming earnings announcement season should provide the catalyst for equity investors to focus on the value on offer and for equities to recover.” Fed Watch Federal Reserve Bank of St. Louis President James Bullard , speaking in Tokyo today, said Europe’s debt crisis shouldn’t cause the Fed to postpone raising interest rates as the economy recovers. The central bank has kept its benchmark lending rate at a record-low range near zero since December 2008 to foster growth. The Stoxx Europe 600 Index rallied 1 percent as 18 of 19 industry groups gained, while the MSCI Asia Pacific Index climbed 1.5 percent to the highest in almost four weeks. BHP Billiton Ltd. and Rio Tinto Group climbed more than 2.4 percent in London. Axa SA, Europe’s second-biggest insurer, rose 2.6 percent in Paris after saying it’s in talks to sell part of its U.K. life insurance unit to Clive Cowdery ’s Resolution Ltd. for 2.75 billion pounds ($4 billion). BP Slumps BP Plc , struggling to contain its oil spill in the Gulf of Mexico, slipped 6.5 percent in London. The company faces a U.S. deadline today for a plan to raise oil-containment capacity as President Barack Obama demands an escrow account for damages claims related to the worst environmental disaster in the nation’s history. Developing-nation stocks rose for a fifth day, the longest winning streak in two months, with the MSCI Emerging Markets Index gaining 1.7 percent. Benchmark gauges in Taiwan, South Africa, Thailand and Qatar advanced more than 1 percent. South Korea’s won strengthened 2 percent against the dollar, the best performer among 26 emerging-market currencies, after policy makers said they will give banks time to meet a new ceiling on forward contracts, holding off from imposing controls on capital flows Copper for delivery in three months gained 2.1 percent to $6,614.50 a metric ton on the London Metal Exchange. Prices have climbed for five days in a row, the longest advance since Jan. 4. Crude oil futures for July delivery increased $1.85 to $75.63 a barrel on the New York Mercantile Exchange. White, or refined, sugar for August delivery jumped as much as 0.7 percent to $527.40 a metric ton, the highest price since March, on the Liffe exchange in London. Prices have climbed for eight days, the longest advance since June 2008. Treasuries Drop The yield on the two-year Treasury note increased four basis points to 0.77 percent, and the 30-year bond yield rose eight basis points to 4.23 percent. German 10-year bunds fell, with the yield advancing seven basis points to 2.64 percent. The Belgian 10-year yield jumped 11 basis points to 3.47 percent. Flemish nationalists took the lead in Belgium ’s general elections, setting up coalition talks with French-speaking Socialists who face demands from Dutch-speaking voters to give more powers to the nation’s regions. The cost of protecting European corporate bonds from default fell, with the Markit iTraxx Crossover Index of credit- default swaps on 50 mostly junk-rated companies declining 21 basis points to 575, the lowest in 1 1/2 weeks, according to Markit Group Ltd. The yen dropped 0.2 percent to 91.79 per dollar, and weakened 1.3 percent against the euro to 112.45. The dollar depreciated 1.1 percent to $1.2238 versus the euro. The pound climbed 1.4 percent to $1.4748 and gained 0.2 percent to 83.1 pence per euro after the Office for Budget Responsibility said Britain’s deficit will be 22 billion pounds ($32 billion) lower than the Treasury had forecast for 2010-2015. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net

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Stocks, Commodities Rise as Yen Weakens on U.S. Sentiment Data

June 14, 2010

By Will McSheehy June 14 (Bloomberg) — Asian stocks climbed for a third day and commodities gained after a report showed U.S. consumer sentiment rose to its highest since January 2008. The yen weakened on signs the global recovery is gaining momentum. The MSCI Asia Pacific Index rose 1.4 percent to 113.97 as of 4:10 p.m. in Tokyo, with seven times as many shares advancing as declining. The Stoxx Europe 600 increased 0.9 percent to 251.76 at 8:10 a.m. in London. Futures on the Standard & Poor’s 500 Index rose 0.6 percent. Copper gained for a fifth day. Markets in China and Australia are closed today for holidays. “Investors have been concerned about a double-dip recession in the U.S. later this year,” said Tomochika Kitaoka , a senior strategist at Mizuho Securities Co. in Tokyo. “The report on consumer sentiment showed it is less likely to be the case as the economy continues to recover.” Americans are gaining confidence in the economy even as Europe’s debt crisis roils investors, according to the Thomson Reuters/University of Michigan index of consumer sentiment . The benchmark increased to 75.5, beating the median forecast of 65 economists polled by Bloomberg News, from 73.6 in May. Euro zone industrial output expanded 0.5 percent in April from March, according to a separate economist survey before the European Union publishes data today. Japan’s Nikkei 225 Stock Average climbed 1.7 percent, the biggest increase among equity benchmarks in Asia-Pacific, followed by Taiwan’s Taiex Index, with a gain of 1.2 percent. U.S. Sales Sony Corp ., the electronics maker that gets 21 percent of revenue from the U.S., climbed 1.6 percent in Tokyo. Posco, Asia’s third-biggest steelmaker, advanced 2.6 percent after the Seoul Economic Daily said the company plans to boost steel- product prices next month. Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipyard, advanced 2.1 percent after it received a $568 million order. Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, advanced 1 percent on expectations a trade agreement with China will boost earnings. Three-month copper on the London Metal Exchange added 1.7 percent to $6,589 a metric ton. Copper in London capped its best week since April last week after government reports showed China’s exports jumped 48.5 percent in May from a year ago, surpassing all 32 estimates in a Bloomberg News survey of economists. Currency Forwards The South Korean won strengthened the most in a week after policy makers said they will give banks time to meet a new ceiling on forward contracts, holding off from imposing controls on capital flows. The won climbed 1.9 percent to 1,223.05 per dollar, while the Malaysian ringgit strengthened 0.6 percent to 3.2655. Singapore may report higher retail sales and exports this week, according to a Bloomberg News survey. “The data out of Asia is quite strong, including Singapore this week, and that encourages some fund inflows to the region,” said Akira Banno , a treasury adviser at Bank of Tokyo- Mitsubishi UFJ Bhd. in Kuala Lumpur. Japan’s currency weakened to as low as 111.90 per euro in Tokyo from 111 in New York on June 11 as demand for the currency as a safe haven diminished. The yen was at 91.88 per dollar from 91.65. The euro climbed to as much as $1.2208, the highest level since June 4. Energy Demand Crude oil advanced in New York for the fourth time in five days, rising 1.2 percent to $74.67 a barrel, on speculation sustained growth in the U.S. will boost fuel demand from the world’s biggest energy consumer. “Fundamentals are getting better and the euro is also driving the crude market,” said Ken Hasegawa , a commodity derivative sales manager at Newedge Group in Tokyo. Treasuries extended last week’s decline on diminished demand for the relative safety of government debt. The yield on the benchmark 10-year note rose 3 basis points to 3.26 percent in Tokyo, according to BGCantor Market Data. The cost of insuring Asian bonds with credit-default swaps declined, according to Royal Bank of Scotland Group Plc. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 6.5 basis points to 139 basis points in Singapore, RBS prices show. To contact the reporter on this story: Will McSheehy in Singapore at wmcsheehy@bloomberg.net

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Stocks, U.S. Futures, Commodities Advance on Economic Outlook Yen Weakens

June 14, 2010

By Will McSheehy June 14 (Bloomberg) — Asian stocks climbed for a third day and commodities gained after a report showed U.S. consumer sentiment rose to its highest since January 2008. The yen weakened on signs the global recovery is gaining momentum. The MSCI Asia Pacific Index rose 1.4 percent to 113.97 as of 4:10 p.m. in Tokyo, with seven times as many shares advancing as declining. The Stoxx Europe 600 increased 0.9 percent to 251.76 at 8:10 a.m. in London. Futures on the Standard & Poor’s 500 Index rose 0.6 percent. Copper gained for a fifth day. Markets in China and Australia are closed today for holidays. “Investors have been concerned about a double-dip recession in the U.S. later this year,” said Tomochika Kitaoka , a senior strategist at Mizuho Securities Co. in Tokyo. “The report on consumer sentiment showed it is less likely to be the case as the economy continues to recover.” Americans are gaining confidence in the economy even as Europe’s debt crisis roils investors, according to the Thomson Reuters/University of Michigan index of consumer sentiment . The benchmark increased to 75.5, beating the median forecast of 65 economists polled by Bloomberg News, from 73.6 in May. Euro zone industrial output expanded 0.5 percent in April from March, according to a separate economist survey before the European Union publishes data today. Japan’s Nikkei 225 Stock Average climbed 1.7 percent, the biggest increase among equity benchmarks in Asia-Pacific, followed by Taiwan’s Taiex Index, with a gain of 1.2 percent. U.S. Sales Sony Corp ., the electronics maker that gets 21 percent of revenue from the U.S., climbed 1.6 percent in Tokyo. Posco, Asia’s third-biggest steelmaker, advanced 2.6 percent after the Seoul Economic Daily said the company plans to boost steel- product prices next month. Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipyard, advanced 2.1 percent after it received a $568 million order. Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, advanced 1 percent on expectations a trade agreement with China will boost earnings. Three-month copper on the London Metal Exchange added 1.7 percent to $6,589 a metric ton. Copper in London capped its best week since April last week after government reports showed China’s exports jumped 48.5 percent in May from a year ago, surpassing all 32 estimates in a Bloomberg News survey of economists. Currency Forwards The South Korean won strengthened the most in a week after policy makers said they will give banks time to meet a new ceiling on forward contracts, holding off from imposing controls on capital flows. The won climbed 1.9 percent to 1,223.05 per dollar, while the Malaysian ringgit strengthened 0.6 percent to 3.2655. Singapore may report higher retail sales and exports this week, according to a Bloomberg News survey. “The data out of Asia is quite strong, including Singapore this week, and that encourages some fund inflows to the region,” said Akira Banno , a treasury adviser at Bank of Tokyo- Mitsubishi UFJ Bhd. in Kuala Lumpur. Japan’s currency weakened to as low as 111.90 per euro in Tokyo from 111 in New York on June 11 as demand for the currency as a safe haven diminished. The yen was at 91.88 per dollar from 91.65. The euro climbed to as much as $1.2208, the highest level since June 4. Energy Demand Crude oil advanced in New York for the fourth time in five days, rising 1.2 percent to $74.67 a barrel, on speculation sustained growth in the U.S. will boost fuel demand from the world’s biggest energy consumer. “Fundamentals are getting better and the euro is also driving the crude market,” said Ken Hasegawa , a commodity derivative sales manager at Newedge Group in Tokyo. Treasuries extended last week’s decline on diminished demand for the relative safety of government debt. The yield on the benchmark 10-year note rose 3 basis points to 3.26 percent in Tokyo, according to BGCantor Market Data. The cost of insuring Asian bonds with credit-default swaps declined, according to Royal Bank of Scotland Group Plc. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 6.5 basis points to 139 basis points in Singapore, RBS prices show. To contact the reporter on this story: Will McSheehy in Singapore at wmcsheehy@bloomberg.net

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Asian Stocks, Commodities Rise on Improving Economic Outlook Yen Weakens

June 13, 2010

By Will McSheehy June 14 (Bloomberg) — Asian stocks climbed for a third day and commodities gained after a report showed U.S. consumer sentiment rose to its highest since January 2008. The yen weakened on signs the global recovery is gaining momentum. The MSCI Asia Pacific Index rose 1 percent to 113.54 as of 11:50 a.m. in Tokyo, with seven times as many shares advancing as declining. Futures on the Standard & Poor’s 500 Index rose 0.4 percent and copper gained for a fifth day. Markets in China and Australia are closed today for holidays. “Investors have been concerned about a double-dip recession in the U.S. later this year,” said Tomochika Kitaoka , a senior strategist at Mizuho Securities Co. in Tokyo. “The report on consumer sentiment showed it is less likely to be the case as the economy continues to recover.” Americans are gaining confidence in the economy even as Europe’s debt crisis roils investors, according to the Thomson Reuters/University of Michigan index of consumer sentiment . The benchmark increased to 75.5, beating the median forecast of 65 economists polled by Bloomberg News, from 73.6 in May. Euro zone industrial output expanded 0.5 percent in April from March, according to a separate economist survey before the European Union publishes data today. Japan’s Nikkei 225 Stock Average climbed 1.6 percent, the biggest increase among equity benchmarks in Asia-Pacific. South Korea’s Kospi Index rose 0.9 percent and Taiwan’s Taiex Index gained 0.7 percent. U.S. Sales Sony Corp ., the electronics maker that gets 21 percent of revenue from the U.S., climbed 2.3 percent in Tokyo. Posco, Asia’s third-biggest steelmaker, advanced 2.6 percent after the Seoul Economic Daily said the company plans to boost steel- product prices next month. Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipyard, advanced 2.4 percent after it received a $568 million order. Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, advanced 1 percent on expectations a trade agreement with China will boost earnings. Three-month copper on the London Metal Exchange added 1.3 percent to $6,565 a metric ton. Copper in London capped its best week since April last week after government reports showed China’s exports jumped 48.5 percent in May from a year ago, surpassing all 32 estimates in a Bloomberg News survey of economists. Currency Forwards The South Korean won strengthened the most in a week after policy makers said they will give banks time to meet a new ceiling on forward contracts, holding off from imposing controls on capital flows. The won climbed 1.4 percent to 1,228.30 per dollar, while the Malaysian ringgit strengthened 0.6 percent to 3.2660. Singapore may report higher retail sales and exports this week, according to a Bloomberg News survey. “The data out of Asia is quite strong, including Singapore this week, and that encourages some fund inflows to the region,” said Akira Banno , a treasury adviser at Bank of Tokyo- Mitsubishi UFJ Bhd. in Kuala Lumpur. Japan’s currency weakened to as low as 111.90 per euro in Tokyo from 111 in New York on June 11 as demand for the currency as a safe haven diminished. The yen was at 91.87 per dollar from 91.65. The euro climbed to as much as $1.2208, the highest level since June 4. Energy Demand Crude oil advanced in New York for the fourth time in five days, rising 1 percent to $74.55 a barrel, on speculation sustained growth in the U.S. will boost fuel demand from the world’s biggest energy consumer. “Fundamentals are getting better and the euro is also driving the crude market,” said Ken Hasegawa , a commodity derivative sales manager at Newedge Group in Tokyo. Treasuries extended last week’s decline on diminished demand for the relative safety of government debt. The yield on the benchmark 10-year note rose 3 basis points to 3.26 percent in Tokyo, according to BGCantor Market Data. The cost of insuring Asian bonds with credit-default swaps declined, according to Royal Bank of Scotland Group Plc. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 6 basis points to 139.5 basis points in Singapore, RBS prices show. To contact the reporters on this story: Will McSheehy in Singapore at wmcsheehy@bloomberg.net

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