Asia Opens Mixed With Japan to the Downside
By Patrick Rial
July 9 (Bloomberg) — Japanese stocks fell for a seventh day as the yen strengthened to a four-month high against the dollar and commodity prices extended declines.
Yamaha Motor Co., the world’s second-largest motorcycle maker, dropped 3.3 percent after Nomura Holdings Inc. gave the stock a “reduce” recommendation. Komatsu Ltd., the world’s No. 2 maker of construction machinery that gets more than half its revenue from overseas, retreated 2.5 percent. Japan Petroleum Exploration Co., the nation’s No. 2 oil explorer, lost 3.2 percent after crude fell to a seven-week low yesterday.
The Nikkei 225 Stock Average fell 75.76, or 0.8 percent, to 9,344.99 as of 9:49 a.m. in Tokyo, dropping 6.1 percent in a seven-day losing streak. The broader Topix index lost 1.1 percent to 879.20.
In New York, the Standard & Poor’s 500 Index slipped 0.2 percent, led by telecommunications companies after a brokerage cut their profit estimates. Alcoa Inc., which kicked off second- quarter earnings announcements yesterday, jumped 4.9 percent in late trading after reporting a narrower loss than analysts had expected.
The Topix soared as much as 36 percent from a quarter- century low reached in March on rising confidence government stimulus steps would revive growth. Worse-than-expected U.S. unemployment data on July 2 prompted concern the recovery will be delayed and helped send the gauge lower for seven straight days, its longest losing streak since July 2008.
Defensive Stocks
Shun Maruyama, a strategist at Credit Suisse Group AG, lifted his stance on “defensive” stocks and downgraded cyclical shares on the view that the market won’t make additional gains until concerns about the economy have subsided.
Yamaha fell 3.3 percent to 956 yen. The company’s earnings from U.S. motorcycle and boat sales have suffered as a result of the recession, Shotaro Noguchi, an analyst at Nomura, wrote in a report dated yesterday. Noguchi began coverage yesterday of the auto industry with a “neutral” stance.
“While the demand outlook remains gloomy, we consider automakers capable of transforming Japan’s industrial landscape if that is the price of survival,” the analyst wrote. “We think forex movements represent the greatest risk.”
Komatsu fell 2.5 percent to 1,351 yen, while Kubota Corp., the nation’s largest maker of farm machinery, slid 2.6 percent to 713 yen.
Commodities Fall…
AA Says Stimulus in Asia & The U.S. Should Revive Cash Flow
By Rob Delaney
July 9 (Bloomberg) — Alcoa Inc., the largest U.S. aluminum producer, expects government economic-stimulus spending in China and the U.S. to boost metal demand enough to help the company start generating cash again.
China’s measures have spurred infrastructure projects and boosted consumer spending, pushing domestic aluminum demand beyond supply for the first time since the global recession forced metal producers to curtail output, Chief Executive Officer Klaus Kleinfeld said yesterday.
“One of things that the Chinese government very smartly does these days is that they are stimulating people that it’s good to not have too much savings and to buy new cars and get a new air-conditioner,” Kleinfeld said on a call with analysts.
Alcoa, the first company in the Dow Jones Industrial Average to announce results for the three months through June, yesterday reported a second-quarter loss excluding certain items of 26 cents a share. That was smaller than analysts’ average estimate in a Bloomberg survey for a 38-cent loss. The company will be “free cash flow positive very soon,” Chief Financial Officer Charles McLane said on yesterday’s call.
The loss was New York-based Alcoa’s third straight, the first time that has happened since 1992
Alcoa rose 38 cents, or 4 percent, to $9.84 at 7:59 p.m. in trading after the official close of the New York Stock Exchange. The shares declined 16 percent this year through the close of regular U.S. trading on July 8.
The Chinese government is spending 4 trillion yuan ($585 billion) to stimulate its economy, the world’s third-largest.
U.S. Stimulus
Australia Cuts 21,400 Jobs as Exports Fall
By Jacob Greber
July 9 (Bloomberg) — Australian employment fell in June as the global recession reduced demand for exports such as iron ore and coal, prompting mining companies to fire workers.
The number of people employed dropped 21,400 from May, the statistics bureau said in Sydney today. The median estimate of 21 economists surveyed by Bloomberg was for a decline of 20,000. The jobless rate rose to 5.8 percent, the highest level in almost six years, from 5.7 percent.
Central bank Governor Glenn Stevens left borrowing costs at a half-century low of 3 percent this week for a third month to help stem firings at companies including BHP Billiton Ltd. Advertisements for job vacancies tumbled in June for a 14th month, a sign unemployment may rise in coming months.
“Forward-looking indicators continue to imply a fall in employment at least as pronounced as” when Australia was last in a recession in 1991, Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne, said ahead of today’s report.
The number of full-time jobs dropped 21,900 in June and part-time employment increased 400 today’s report showed.
The Australian dollar traded at 78.17 U.S. cents at 11:44 a.m. in Sydney from 78.04 cents before the report was released. The two-year bond yield was little changed at 3.68 percent.
Australia’s economy has so far skirted the worst global recession since the Great Depression. Gross domestic product rose 0.4 percent in the first quarter, making it one of the few major economies including China and India to expand.
Cash Handouts….
By Bloomberg News
July 9 (Bloomberg) — China’s passenger-vehicle sales rose 48 percent in June, the biggest jump since February 2006, as tax cuts and government subsidies helped the nation extend its lead over the U.S. as the world’s largest auto market this year.
Chinese motorists bought 872,900 cars, sport-utility vehicles and other passenger vehicles last month, the China Association of Automobile Manufacturers said in a statement today. Overall vehicle sales, which include buses and trucks, rose 36 percent to 1.14 million.
In the first half, China’s vehicle sales surpassed the tally in the U.S. by about 27 percent as the government cut retail taxes and handed out subsidies in rural areas to revive consumption and economic growth. U.S. auto sales have plunged on the recession and job concerns, threatening to end the country’s at least 63-year reign as the world’s largest auto market.
China’s first-half vehicle sales rose 18 percent to 6.1 million. Sales of passenger vehicle climbed 26 percent to 4.53 million, while commercial-vehicle sales fell 0.5 percent to 1.57 million, the association said. U.S. vehicle sales dropped 35 percent to 4.8 million.
Bank of Korea Keeps Rates Steady @ 2%
By Seyoon Kim
July 9 (Bloomberg) — The Bank of Korea kept the benchmark interest rate unchanged for a fifth month on signs that record- low borrowing costs and government stimulus are cushioning the economy against the worst of the global recession.
Governor Lee Seong Tae and his board left the seven-day repurchase rate at 2 percent in Seoul today, as expected by all 15 economists surveyed by Bloomberg News. The bank cut rates by 3.25 percentage points between October and February, the deepest reductions since it began setting a policy rate a decade ago.
The bank follows counterparts in Australia and Europe, which both kept key rates unchanged at historic lows in the past week to ensure a recovery in their economies. The International Monetary Fund and Goldman Sachs Group Inc. this week upgraded forecasts for the South Korea’s gross domestic product in 2009, citing the stimulus from rate cuts and extra government spending.
“The central bank is likely to keep rates unchanged throughout this year as it waits until there are clear signs the economic recovery is solid,” said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. “South Korea’s economy has been performing relatively well, but it’s too early to say demand is fully back.”
Korea’s Kospi stock index climbed 15 percent in the three months ended June 30, the most since the second quarter of 2007. The index rose 0.5 percent to 1,438.11 at 10:08 a.m. in Seoul today. The won fell 0.3 percent to 1,279.9 against the dollar.
IMF Outlook
The IMF said yesterday the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes and the pace of contractions from the U.S. to Japan moderates. Japan’s industrial output rose for a third month in May and China’s new lending surged almost fivefold in June, recent reports showed.
South Korea joined India, China and Australia as one of the few major economies to grow in the first quarter, with GDP expanding 0.1 percent from the previous three months. Consumer confidence jumped to the highest in almost two years in June and bank lending to households rose by the most since December 2006.
Exports are also starting to recover. Samsung Electronics Co., the world’s second-largest chipmaker, said this week that second-quarter operating profit probably jumped more than fivefold from the previous quarter….
Taiwan Requests For Tariffs To Be Lifted on Display Panels
By Yu-huay Sun
July 9 (Bloomberg) — Taiwan’s government wants China to remove import tariffs on display panels produced on the island by Taiwanese makers, the Economic Daily News reported, citing an unidentified economic ministry official.
Taiwan will call for the removal of the 3 percent levy when the island negotiates with the mainland on an economic cooperation pact, the Taipei-based, Chinese-language newspaper said. A removal would help Taiwanese makers compete with Korean and Japanese producers, according to the report.
Taiwan and China are in informal talks at an “academic level” on preparing an economic cooperation agreement to ease restrictions on trade, the island’s Deputy Economic Affairs Minister John Deng said July 3.
Hong Kong Wins Approval For $12 bln Bond Sale
By Bob Chen
July 8 (Bloomberg) — Hong Kong legislators today approved the sale of up to HK$100 billion ($12.9 billion) of government bonds to promote the development of the local debt market.
A resolution to authorize the bond issue was approved by 40 lawmakers, more than half the members present, Legislative Council President Jasper Tsang said. The debate was broadcast on local television today.
The sale would bolster Hong Kong’s $88 billion bond market, comprised of 23 percent government debt and 77 percent corporate bonds, according to the Asian Development Bank. Adding to the depth of the sovereign market, often used as a benchmark, would give investors more confidence to buy company bonds.
“We believe that a local bond market with sufficient breadth, depth and liquidity would help develop another effective channel of financial intermediation apart from our banking and equity markets,” Financial Secretary John Tsang told the Legislative Council today.
The government estimates the market can digest HK$10 billion to HK$20 billion of debt a year, Secretary for Financial Services and the Treasury K.C. Chan said April 28. Proceeds will be put in a fund and used to make investments rather than for fiscal purposes, he said.
The plan was opposed by lawmakers including Albert Ho, who said the government didn’t provide sufficiently clear guidelines on how the fund will be administered.
Sharp Shares Blast Off On Upward Guidance of LCD Capacity
By Mariko Yasu
July 9 (Bloomberg) — Sharp Corp., Japan’s largest maker of liquid-crystal displays, rose after the company said it will boost production capacity of LCD panels.
Sharp gained 1.1 percent to 916 yen as of 10 a.m. on the Tokyo Stock Exchange, the biggest advance since June 25 after reversing a drop of as much as 1.7 percent. That compared to a 2 percent decline by rival television maker Panasonic Corp. The benchmark Nikkei 225 Stock Average slid 0.7 percent.
The Osaka-based company said Yoshiaki Ibuchi, an executive vice president, will brief at 3 p.m. today at its headquarters on the plan to boost production of the No. 2 factory in Kameyama, central Japan, the company’s main plant for making LCD displays.
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