Japan’s Stock Exchange CEO Say’s Bailouts & Regulation is the Wrong Road
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TOKYO (AP) — The head of the Tokyo Stock Exchange, the world’s second-biggest bourse, doesn’t like what he sees in the wake of the global financial crisis.
Governments have turned to the wrong tools – massive public bailouts and greater regulation – which threaten to undermine the market’s long-term health, said Atsushi Saito, president and CEO of the Tokyo Stock Exchange Group Inc.
A longtime champion of free markets, he blames the crisis on abuse of the system rather than the system itself.
“It seems to me that the current state of the global economy is one in which the gods of the market have been angered and are now exacting severe punishment on Wall Street for having abused market function solely for its benefit,” Saito told reporters at the Foreign Correspondents’ Club of Japan. “In this sense, it seems that market mechanisms are working.”
Some economists, however, say the global recession would be far worse if the U.S. taxpayer hadn’t bailed out Wall Street banks and critics of free-wheeling capitalism blame loose regulation for allowing the abuses that caused the crisis.
Saito worries that Japan too may be headed toward an era of new restrictions.
Prime Minister Taro Aso’s Liberal Democratic Party is widely expected to lose its grip on parliament in elections next month after nearly 55 years in power. Polls suggest voters are leaning toward the main opposition, the Democratic Party of Japan, which was emboldened by a strong showing in the recent Tokyo municipal elections.
It’s unclear, however, what changes the DPJ will actually seek.
“I cannot figure out what they are thinking,” Saito said. “The market itself is still in confusion because (DPJ leaders) are saying a lot of things in general, very vague.”
But having read DPJ publications, Saito suspects the party wants a more controlled and regulated market – not exactly helpful for a man trying to transform the Tokyo Stock Exchange into an Asian financial hub.
Under Saito, the TSE has increasingly sought out strategic partnerships with counterparts around the world in the name of internationalization. In July 2008, for example, it signed an agreement with the London Stock Exchange to establish a new Tokyo-based market for growing companies.
With 2,362 listed companies, the TSE had a market capitalization of about 309 trillion yen, or $3.3 trillion, as of June 30.
“Tokyo I hope will be defined as the center of Asian capital markets,” Saito said, noting that Japan needs to shift away from relying so heavily on exports. “That is our dream and our business purpose.”
He stressed that improved corporate governance, not more regulation, is the key to attracting regional and global investors to Japan. To better protect shareholder interests, the TSE plans to introduce new corporate governance guidelines by the end of the year.
Asia Moves Slightly Higher On IBM Earnings & Commodities
By Jonathan Burgos
July 17 (Bloomberg) — Asian stocks rose, with the MSCI Asia Pacific Index set for its first weekly gain in three, as commodity prices rose and International Business Machines Corp. earnings beat analyst estimates.
Woodside Petroleum Ltd., Australia’s second-largest oil producer, gained 2.1 percent. Toshiba Corp., Japan’s biggest chipmaker, climbed 2 percent as IBM became the second technology bellwether this week after Intel Corp. to post forecasts that exceeded analyst targets. Macquarie Countrywide Trust jumped 14 percent after selling a stake in U.S. properties. Nomura Holdings Inc., Japan’s largest brokerage, gained 2.2 percent after the Nikkei English News said the nation’s investment banking revenue rose.
“Improved investor risk appetite is being reflected in rising stocks and positive sentiment on commodities,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “The market is starting to surmise that U.S. earnings will not be as weak as forecast.”
The MSCI Asia Pacific Index added 0.3 percent to 102.89 as of 9:40 a.m. in Tokyo, adding to its 4.6 percent advance in the past three days. The gauge has rallied 46 percent from a five- year low on March 9 amid optimism stimulus policies around the world will revive the global economy.
Japan’s Nikkei 225 Stock Average rose 0.3 percent, while South Korea’s Kospi Index added 0.3 percent. Taiwan’s Taiex Index climbed 0.8 percent.
Worst Is Over?
Futures on the Standard & Poor’s 500 Index lost 0.4 percent. The gauge reversed a loss of as much as 0.6 percent to finish 0.9 percent higher in New York yesterday as economist Nouriel Roubini said the worst of the financial crisis is over and reiterated that the recession may end this year. Roubini later said in a statement that his quotes were taken out of context.
“While the consensus is that the U.S. economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery,” Roubini, a New York University professor, said in the statement.
Woodside Petroleum added 2.1 percent to A$42.28 in Sydney. Crude oil for August delivery rose 0.8 percent to $62.02 a barrel in New York. An index of six metals traded in London increased 0.5 percent to the highest since June 12.
Toshiba rose 2 percent to 350 yen. IBM, the world’s biggest computer-services provider, said net income rose 12 percent in the second quarter. For the year, earnings will be at least $9.70 a share, a 50-cent increase from its previous forecast, the company said.
Nomura added 2.2 percent to 730 yen. Japanese investment bank commission revenue in the quarter ended in June rose 90 percent to $874 million from a year earlier, Nikkei English News reported, citing research firm Dealogic.
Macquarie Countrywide climbed 14 percent to 58.5 Australian cents. The company agreed to sell its 75 percent interest in a U.S. portfolio of 86 properties for $1.3 billion.
WMT & BBY Sued By Chinese Firm
By Susan Decker
July 17 (Bloomberg) — Best Buy Co., Wal-Mart Stores Inc. and other companies were sued over dashboard mounts for navigation devices in a rare case of a Chinese company seeking to enforce patent rights in a U.S. court.
Changzhou Asian Endergonic Electronic Technology Co., based in Changzhou, China, claims the retailers are infringing its patent on a design for the dashboard mounts by selling products made by a competitor. It wants cash and a court order to prevent further use of the design. The patent was issued in March.
The closely held company aims to build a market in the U.S. and filed the complaint to deal with “the typical Chinese knockoff,” said Chad Nydegger, a lawyer for Changzhou Asian. The company also is suing the manufacturer in China, accusing it of infringing two Chinese patents, he said.
The complaint, filed July 2 in U.S. District Court in Texarkana, Texas, reflects the rising use of the U.S. patent system by Chinese companies. U.S. patent applications by residents of mainland China, which excludes Hong Kong and Macau, surged 12-fold between fiscal years 2000 and 2008, according to the U.S. Patent and Trademark Office.
“The Chinese are becoming sophisticated enough to take advantage of the patent system in the U.S.,” said Brian Nester, a lawyer with Fish & Richardson in Washington, who often represents South Korean companies in U.S. patent fights. “You will see more Chinese companies filing suit in the U.S.”
Michelle Bradford, a spokeswoman for Wal-Mart, said the company hasn’t been served with the complaint, and had no comment. Kelly Groeler, a spokeswoman for Best Buy, didn’t return messages seeking comment on the suit.
First Case…
LPL Rises on Better Than Expected Q
By Kevin Cho
July 17 (Bloomberg) — LG Display Co., the world’s second- largest liquid-crystal-display maker, rose to the highest in more than a year in Seoul trading after the company reported profit that beat analyst estimates and forecast higher prices.
LG Display gained 1.7 percent to 35,400 won at 9:44 a.m. on the Korea Exchange, the highest since July 8, 2008. The benchmark Kospi index added 0.7 percent.
The company yesterday reported second-quarter profit that beat analyst estimates and forecast prices will rise, fueled by growing demand for LCD panels. Prices in the current period will probably increase “gradually” from the preceding quarter, LG Display said.
Seoul-based LG Display isn’t concerned over potential industry oversupply because of better-than-expected demand and a shortage of panel components, Chief Executive Officer Kwon Young Soo told reporters in Seoul yesterday.
Some analysts at brokerages including BNP Paribas SA have said panel prices will decline in the fourth quarter and the LCD industry will be in oversupply in the first three months of 2010.
“There may be a balance of supply and demand between the fourth quarter and the first quarter of next year,” Kwon said. “If there’s a supply constraint in panel parts, such as glass, then there may not be an oversupply. The fourth quarter should be fine.”
Corning Inc., the world’s biggest maker of glass for flat panel televisions, said last month its capacity in the third quarter will be “constrained,” as demand will be higher than the company’s production ability.
Macquaries Rise 19% on Sale of U.S. Baggage
By Malcolm Scott
July 17 (Bloomberg) — Macquarie CountryWide Trust surged in Sydney trading after the company agreed to sell its 75 percent interest in a U.S. property portfolio for $1.3 billion to repair a balance sheet ravaged by the financial crisis.
Shares of the Sydney-based property trust jumped 9.5 cents, or 18 percent, to 61 cents at 10:10 a.m. local time, taking their gain since a February low to 485 percent.
Global Retail Investors LLC, a joint venture between the California Public Employees’ Retirement System and an affiliate of First Washington Realty Inc., has agreed to buy Macquarie CountryWide’s stake in the portfolio of 86 properties. Settlement of the contracts will occur in three parts, the company said in a statement to the stock exchange today.
So-called “satellite” businesses of Macquarie Group Ltd. including Macquarie CountryWide have been selling assets to pare back debt after the global financial crisis raised interest expenses and cut asset values. Macquarie CountryWide cut the overall book value of its assets by 10 percent in the six months to Dec. 31.
“Gearing and debt will be substantially lessened, providing the trust with greater flexibility to strategically respond to the continuing challenging market conditions,” Macquarie CountryWide’s Chief Executive Officer Steven Sewell said in the statement today.
Bernanke Expected To Quell Any Chinese Fears Over Greenback
By Mark Drajem
July 16 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke will brief Chinese officials at a summit this month about how the U.S. plans to keep inflation in check over the next few years, according to people advised on the plans.
David Loevinger, a U.S. Treasury official coordinating the meeting, told business lobbyists and lawyers in Washington yesterday that the Obama administration was enlisting Bernanke to try to assuage Chinese concerns about long-term U.S. economic health, people at the meeting said on condition of anonymity.
The summit is the first high-level gathering of its kind since President Barack Obama took office this year, and follows Chinese officials’ concern at U.S. monetary expansion and record budget deficits. At stake is continued demand by China, the largest foreign investor in Treasuries, for the unprecedented issuance of American government debt.
The U.S.-China Business Council organized the off-the- record meeting with Loevinger. John Frisbie, the council’s president, declined to comment, citing those ground rules.
A Treasury official said the department anticipates an exchange of views on economic policies at this month’s gathering with the Chinese, and discussions about each nation’s response to the global financial crisis.
Fed spokeswoman Michelle Smith didn’t respond to a request for comment.
Bernanke on Yuan
Bernanke participated in previous summits during the Bush administration, including a meeting in Beijing in December 2006 in which he labeled China’s currency policy a “distortion” and urged it let the value of the yuan appreciate.
This time, his role will differ as he describes U.S. policies and the strategy meant to ensure that increased government spending and the Fed’s interest-rate stance won’t lead to long-term economic or financial woes, the people said.
Since the U.S. financial turmoil last year, and the unveiling of the Obama administration’s $787 billion stimulus program, Chinese officials have expressed concern about the prospects for the country’s economy and the health of their investments.
“We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets,” Chinese Premier Wen Jiabao said during a March 13 press conference. “To speak truthfully, I do indeed have some worries.”
Still Buying
China is still buying U.S. government notes and bonds, increasing its holdings by $38 billion to $801.5 billion in May, according to a U.S. Treasury report released today.
The cash reserves are growing as the central bank sells its currency to prevent an appreciation that would make the country’s exports more expensive.
China’s reluctance to let the yuan appreciate during the global recession means it will keep accumulating U.S. debt, even if the amount of its purchases declines, economists at RGE Monitor, a New York-based research firm headed by economist Nouriel Roubini, wrote in a report this week.
Loevinger had been working from Beijing as the Treasury’s first permanent representative in China before being tapped to direct the Strategic and Economic Dialogue by Treasury Secretary Timothy Geithner.
President Hu Jintao and Obama agreed in April to establish a strategic and economic dialogue that will start in Washington July 27-28. Geithner and U.S. Secretary of State Hillary Clinton will host Vice Premier Wang Qishan and Dai Bingguo, a state council member.
China Holding Iron Ore Price Talks With Vale
By Rebecca Keenan
July 17 (Bloomberg) — The China Iron and Steel Association is holding iron ore price talks with Brazil’s Vale SA instead of Rio Tinto Group after four of Rio’s executives were detained in China on allegations of espionage, the Australian Financial Review reported without saying where it got the information.
The association wants Vale to accept a lower benchmark price for contracted iron ore in exchange for buying more of the raw material from the Brazilian company, the newspaper reported, citing unidentified sources.
Vale spokesman Fernando Thompson said the company doesn’t comment on market speculation. Rio spokesman Gervase Greene wasn’t available when contacted today in Perth.
Steel mills in China, the world’s largest buyer of iron ore, are seeking a bigger price cut than the 33 percent agreed on in May between London-based Rio and Japanese, South Korean and Taiwan producers. Vale, the world’s biggest, has said it’s waiting for Australian producers to set prices with China before concluding its own agreements with Chinese mills.
The price talks are ongoing and may conclude soon, Zou Jian, former chairman of the China Metallurgical Mining Enterprise Association, a body of domestic iron ore mining companies, said in Beijing on July 15. Zou cited information from the association for his comment.
China is Touted As Leading The World Economies Out of Recession
By Bloomberg News
July 17 (Bloomberg) — China’s economic comeback is under way, towing along companies from Intel Corp. to Hyundai Motor Co. and starting to make up for weak demand in other major economies.
The world’s third-largest economy grew 7.9 percent in the second quarter from a year earlier after expanding at the slowest pace in almost a decade in the previous three months, the statistics bureau said yesterday. The first acceleration in growth in more than two years came after the government implemented a 4 trillion yuan ($585 billion) stimulus plan and prodded banks to lend more.
China is the only one of the 10 biggest economies that is expanding, highlighting the role the nation may play in easing the worst global recession since the Great Depression. The U.S. economy is still shrinking, five months after Congress agreed to President Barack Obama’s $787 billion stimulus package.
“China cannot save the world by itself, but its recovery is a definite positive,” said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong. “China has a lot more control over how its banks do business and they were in a lot stronger position than U.S. banks to implement policy stimulus.”
The Chinese economy will expand 8.1 percent this year, according to the median forecast of 16 economists surveyed by Bloomberg News after the government released the second-quarter figure. Growth will accelerate to 9.1 percent in 2010, they estimated. The pickup, driven by tax cuts and government-funded incentives to encourage consumers to buy automobiles and electronics goods, is bolstering demand for imports.
Asian Consumers
Intel says consumers in Asia — especially China — are leading a recovery in demand for personal computers. The Santa Clara, California-based company’s sales in the Asia-Pacific region rose 21 percent to $4.41 billion in the past quarter, while sales in the Americas and Europe plunged.
“We are seeing Asia-Pacific stronger than the rest of the world; in particular, consumption in China looks very good,” Stacy Smith, Intel’s chief financial officer, said in an interview with Bloomberg Television on July 14. “Mature markets are lagging a little bit behind.”
Seoul-based Hyundai’s sales in China surged 56 percent from a year earlier to 257,003 units in the first half, making the country its biggest overseas and fastest-growing market. Sales by South Korea’s largest automaker in the U.S., which used to be its biggest market, dropped 11 percent to 204,686 units, according to the company.
Investment Surge
Government-influenced spending is driving more than four- fifths of China’s expansion, according to the World Bank. Urban fixed-asset investment surged 33.6 percent in the first half, the fastest growth in five years. Industrial production increased 10.7 percent in June from a year earlier, the largest gain in nine months.
“China’s recovery is major positive news, especially for commodities exporters,” said Wang Tao, an economist with UBS AG in Beijing. “The strongest factor in China’s recovery is investment demand, which means it will import more commodities and machinery.”
Chinese imports of copper and its products jumped to a record in June, increasing 13 percent from the previous month. Iron ore imports rose 3.4 percent in June to the second-highest level this year, as rising prices prompted steelmakers to produce more and buy more raw materials.
Komatsu’s Upswing
The Chinese government unveiled its stimulus package in November, four months before Obama’s measures were approved. The stimulus has boosted sales for construction equipment-maker Komatsu Ltd., while subsidies to encourage consumer spending have boosted sales for manufacturers such as Tokyo-based Nissan Motor Co., Japan’s third-largest automaker, and plastics-maker Teijin Ltd. in Osaka.
Tokyo-based Komatsu, the world’s second-biggest maker of earthmovers, said last month its sales in China probably beat expectations in the quarter ended June 30. The company expects the market to grow to about 15 percent of total sales this business year, compared with 10 percent in 2008.
AU Optronics Corp. and Chi Mei Optoelectronics Corp., Taiwan’s two biggest liquid-crystal display makers, said last week they expect third-quarter sales to rise from the previous three-month period, because there is a global shortage of glass while demand from China is strengthening.
In June, China’s TV makers said they planned to purchase $4.4 billion of flat-panel products from Taiwan this year, doubling their December forecast.
‘Cautious Optimism’….
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