Regions

[Muthukali]

Singapore Tightens Rules for Foreign Workers’ Families

Singapore is imposing stricter rules for families of foreigners working in the city-state and tightening its immigration policies after public disquiet over the influx of workers from overseas.

From Sept. 1, foreign workers must earn at least S$4,000 ($3,150) a month compared with the current S$2,800 to sponsor their spouses and children for their stay in Singapore, according to a notice on the manpower ministry’s website. Some workers will also no longer be able to bring their parents and in-laws on long-term visit passes.

Singapore’s companies added 27,200 jobs, fewer than initially estimated, in the three months through March amid stricter labor regulations and weaker global demand. Public anger over immigration policies and the rising wealth gap contributed to the ruling party’s worst performance since independence in last year’s general election.

The planned changes are “part of the overall direction to moderate growth of Singapore’s non-resident population,” the ministry said in a statement on its website. “This will help ease the pressure on our social infrastructure. Nonetheless, Singapore remains a global talent capital.”

Foreign workers whose families are already in Singapore won’t be affected by the changes, according to the statement. Those who switch employers after Sept. 1 will be subject to the new rules.

The government is under pressure to placate voters without disrupting the arrival of talent and labor that helped build the only advanced economy in Southeast Asia. Public discontent surged when the strain on the rail system caused its worst breakdown in December and high property prices boosted inflation.

Economic Contribution
“The key criterion in assessing the level of dependent privileges for a work pass holder is based on his economic contribution and whether he can finance his dependents’ stay in Singapore,” the manpower ministry said in the statement.

The city yesterday also tabled changes in Parliament to its immigration act. Under the proposed amendments, permanent residents who flout the city’s laws or are involved in any activity which “threatens a breach of peace or is prejudicial to public order” will lose their permanent residency status or have their re-entry permit canceled.

Singapore also plans to criminalize marriages of convenience to obtain immigration privileges and the forgery of immigration documents, the Ministry of Home Affairs said in a statement posted on its website yesterday. The last major amendment to the immigration act was in 2004.

The proposed penalty for sham marriages includes a fine of as much as S$10,000 and a jail term of as long as 10 years. Forgery of documents may be punishable with a fine of as much as S$8,000 and a jail term of as long as five years, according to the statement.

The proposed amendments will allow the immigration authority to “stay ahead of the changing modus operandi of immigration offenders” and facilitate the legal entry of bona fide foreigners, the ministry said.

 

[boylover]

muthu the postman...:p

Singapore Tightens Rules for Foreign Workers’ Families

 

[Muthukali]

Eurozone offers Spain €30bn bailout

Eurozone ministers agreed to bail out Spain at talks ending Tuesday, with a first tranche of 30 billion euros ($37 billion) to be offered to relieve its banking sector by the end of the month.

Jean-Claude Juncker, who heads the eurozone finance ministers group, said after nine hours of talks on Monday ended beyond midnight, that the group reached political agreement on a draft memorandum of understanding on Spain and were "aiming at reaching a formal agreement in the second half of July."

The accord "will enable a payment of 30 billion euros by the end of the month" to help Spain's distressed banks, he said, with reimbursement deadlines set "up to 15 years."

The ministers also agreed to extend a 2013 deadline for Spain to cut its public deficit to the EU 3.0 percent limit by one year, he said.

Juncker told a press conference that the deadline was extended in view of the difficult economic conditions Spain faced but the country now had to implement all the measures needed to bring its public finances into line with EU norms.

In exchange for the loans, the eurozone will demand reforms of specific banks as well as the banking sector as a whole, said the EU's Economic Affairs Commissioner Olli Rehn.

Spain would also have to abide by EU ceilings on deficits, trimming its huge deficit to 6.3 percent of gross domestic product this year, 4.5 percent in 2013 and 2.8 percent in 2014, Rehn added.

Spain in May revised its 2011 public deficit -- the shortfall between government revenues and spending, saying that it stood at 8.9 percent of gross domestic product instead of 8.51 percent as reported earlier.

The same month, the EU warned that Spain would miss its public deficit targets this year and next while remaining in recession through 2013.

The conservative government of Prime Minister Mariano Rajoy has pledged to cut Spain's public deficit to 5.3 percent this year.

 

[boylover]

Euro crisis unable to resolve till now is due to petty jealousy among the leaders.

Eurozone offers Spain €30bn bailout

Eurozone ministers agreed to bail out Spain at talks ending Tuesday, with a first tranche of 30 billion euros ($37 billion) to be offered to relieve its banking sector by the end of the month.

Jean-Claude Juncker, who heads the eurozone finance ministers group, said after nine hours of talks on Monday ended beyond midnight, that the group reached political agreement on a draft memorandum of understanding on Spain and were "aiming at reaching a formal agreement in the second half of July."

The accord "will enable a payment of 30 billion euros by the end of the month" to help Spain's distressed banks, he said, with reimbursement deadlines set "up to 15 years."

The ministers also agreed to extend a 2013 deadline for Spain to cut its public deficit to the EU 3.0 percent limit by one year, he said.

Juncker told a press conference that the deadline was extended in view of the difficult economic conditions Spain faced but the country now had to implement all the measures needed to bring its public finances into line with EU norms.

In exchange for the loans, the eurozone will demand reforms of specific banks as well as the banking sector as a whole, said the EU's Economic Affairs Commissioner Olli Rehn.

Spain would also have to abide by EU ceilings on deficits, trimming its huge deficit to 6.3 percent of gross domestic product this year, 4.5 percent in 2013 and 2.8 percent in 2014, Rehn added.

Spain in May revised its 2011 public deficit -- the shortfall between government revenues and spending, saying that it stood at 8.9 percent of gross domestic product instead of 8.51 percent as reported earlier.

The same month, the EU warned that Spain would miss its public deficit targets this year and next while remaining in recession through 2013.

The conservative government of Prime Minister Mariano Rajoy has pledged to cut Spain's public deficit to 5.3 percent this year.

 

[Muthukali]

Iowa broker PFGBest collapses after hiding millions

Reuters) - The U.S. futures industry reeled on Tuesday as Iowa-based broker PFGBest collapsed after regulators accused it of misappropriating customer funds for more than two years, dealing a new blow to trader trust just months after MF Global's demise.

The Commodity Futures Trading Commission (CFTC), which along with industry regulators had given a clean bill of health to dozens of brokers following spot checks in January, alleged that the firm's regulated Peregrine Financial Group (PFG) unit and its owner had defrauded customers and lied to regulators in order to hide a shortfall that now exceeds $200 million.

"The whereabouts of the funds is currently unknown," the CFTC said in a complaint against PFG and its founder and chairman, Russell R. Wasendorf Sr., whose suicide attempt on Monday morning outside the firm's Cedar Falls, Iowa, offices appears to have precipitated the crisis.

On Tuesday evening, Peregrine filed to liquidate under Chapter 7 of the U.S. bankruptcy code, with between $500 million and $1 billion of assets, between $100 million and $500 million of liabilities, and between 10,000 and 25,000 creditors. The Chapter 7 filing suggests the company is winding down.

The funds shortfall represents more than half of PFGBest's client accounts but is modest relative to the estimated $1.6 billion missing from MF Global's accounts.

As more details of the scandal became clear, the circumstances began to look more like a Bernard Madoff-style fraud than MF Global CEO Jon Corzine's desperate bid to stay afloat.

Wasendorf intercepted confidential regulatory documents that were mailed by the National Futures Association to what the industry group believed was U.S. Bank, PFG's bank, a person close to the situation told Reuters. Instead, they were sending the documents, used to independently verify a broker's bank balances, to a post office box that Wasendorf had set up, the source said, who declined to be identified.

The CFTC complaint, which relies on many of the details released on Monday by the NFA, the broker's main regulator, said the bank account that PFG reported was holding $225 million in 1,845 customer accounts actually contained only $5 million.

Wasendorf forged signatures and fabricated bank balances on the documents and simply mailed them back to the Chicago-based NFA, the person said. The scheme apparently began to unravel as the NFA shifted to electronic confirmations.

The NFA "started getting suspicious. He was resisting this new way of confirming the balance," the source said. Wasendorf only recently signed the authorization, a decision that would quickly have led regulators to uncover the discrepancy.

While distinct from MF Global's demise in many ways, news that a second broker has violated sacrosanct segregated customer funds threatens to shatter the fragile confidence in an industry that once prided itself on an unblemished record in protecting client money.

"It's déjà vu all over again," said John Roe, co-founder of the Commodity Customer Coalition (CCC), set up in the aftermath of MF Global's collapse last October to help clients recoup their money.

Wasendorf, 64, a well-known and mostly well-regarded figure in the industry over a four-decade career as a journalist, trader and executive, was reported to be in a coma, the CFTC said. He was found in his car early on Monday morning in an apparent suicide attempt. A spokesman for University of Iowa Hospitals and Clinics said on Tuesday he was unable to comment on Wasendorf's status due to federal privacy laws.

A police report released on Tuesday said he had been found "breathing but incoherent" after running a hose from his exhaust pipe into the car. A suicide note found with him alluded to some kind of discrepancies with accounts at PFG, the report said, confirming what the broker had told its clients a day ago.

The bankruptcy filing showed that Russell Wasendorf Jr, the founder's son, had been empowered to act for Wasendorf Sr in the event the latter became incapacitated, under a power of attorney dated July 3.


REGULATORY IRE, CUSTOMER GRIEF, EMPLOYEE DISMAY
A well-known broker for U.S. foreign exchange and commodity markets for 20 years, PFGBest was among a dozen or so mid-sized, independent brokers that scrambled to reassure customers of the safety of their funds after MF Global's collapse.

In February it posted a notice that the firm "reports daily and monthly to regulators concerning customer segregated accounts". A number of former MF Global customers also moved their accounts to PFGBest.

"We had personal assurances from Wasendorf Sr. as recently as two weeks ago that they were not like MF Global," said Lauren Nelson, director of communications for Attain Capital, an introducing broker specializing in managed futures in Chicago.

"We've been speaking to other (brokers) in the hope we can eventually transfer our accounts over. But the fear is the funds are gone, the regulators have really dropped the ball."

But unlike MF Global, which is believed to have misused customer funds in a mad scramble to meet margin calls on proprietary trades in its waning days, PFGBest's abuse seems to have extended back years, according to the complaint. There is no indication yet of how or why the missing money was used.

The CFTC case filed in the U.S. District Court for the Northern District for Illinois, Eastern Division, alleges that PFG failed to segregate customer funds, committed fraud by misappropriation and reported false data to regulators.

The CFTC complaint says that PFG records showed a balance of $207 million in the 1,845 customer segregated accounts as of February 28, 2010, although the actual bank balance was under $10 million. They said that under $10 million was in the account as of March 30, 2011, when PFG records showed a balance of $218 million. The balance was just $5 million this week, it said.

The NFA order said the accounts were held at U.S. Bank. A source familiar with the situation said PFG's balance had been steady at around $5 million for several years.

JEFFERIES LIQUIDATES POSITIONS
On Tuesday, the firm's clearing broker Jefferies Group Inc, which was responsible for clearing trades through exchanges like those run by CME Group, said it had begun unloading positions held on behalf of PFG's clients after it failed to meet a margin call. It said a "substantial portion" had already been closed and it did not expect to incur losses.

As a "non-clearing" futures commission merchant (FCM), PFGBest acted as a middleman for mostly small-scale or retail traders, passing those trades to Jefferies to clear.

Because it was not a clearing member of the CME, a not-uncommon arrangement for smaller brokers that do not want or are unable to keep enough capital of their own, the regulatory burden falls to the NFA and the CFTC, letting the CME Group -- which suffered harsh criticism as the front-line regulator of MF Global -- off the hook.

PFGBest officials have said nothing beyond a notice to clients on Monday confirming an investigation into "accounting irregularities" and advising customers that they could liquidate open trading positions but would not be able to withdraw cash or initiate any new trades.

WASENDORF SHOCK
The shock was twofold for many in the tight-knit trading industry, who struggled to reconcile the apparent suicide attempt with the industry veteran known for his hometown philanthropy and passion for peregrine falcons.

"I always thought they were straight shooters," said Mark Melin, an author and futures-industry consultant, who worked for PFGBest for about 2-1/2 years.

Others expressed less shock.

One former employee of the firm said he had grown concerned that Wasendorf did not do more to distance the company from a massive $194 million forex-trading Ponzi scheme run by Trevor Cook in Minnesota, who admitted defrauding more than 700 investors. Cook is serving 25 years in prison.

In February, PFGBest, which had acted as Cook's broker, was fined $700,000 by the NFA for failing to notice the scheme. The company was subsequently sued for $48 million by the receiver rounding up the assets from Cook's scheme.

"They never admitted they were aware of what was going on, but they didn't deny it either," said the former employee.

Others wondered about Wasendorf's decision to move the firm's headquarters from Chicago back to his hometown of Cedar Falls, occupying a 50,000 square-foot, three-story glass headquarters that cost $18 million and was celebrated for its eco-friendly construction and four-star cafeteria.

It was a sizeable investment for an industry that has come under enormous strain lately as ultra-low interest rates sap revenue from holding customer funds and electronic trading threatens the role of middleman.

 

[Muthukali]

Singapore GDP Growth Probably Slowed as Europe Crisis Hurt Asia

Singapore’s economic growth probably slowed last quarter as the European debt crisis constrained exports while elevated inflation prompted the central bank to tighten policy.

Gross domestic product rose an annualized 1 percent in the three months through June from the previous quarter, less than the 10 percent pace in the period through March, according to the median of 14 estimates in a Bloomberg News survey. The report is due tomorrow.

Singapore may require a further moderation in its 5 percent inflation rate, the fastest in Southeast Asia after Vietnam, to give the island more scope to join a monetary stimulus drive stretching from Asia to Europe. The People’s Bank of China, the European Central Bank and the Bank of England are among those that eased policy this month to support growth as the turmoil in the euro area threatens the global economy.

“A modest slowdown may be welcome by the authorities, but the key here is that it’s modest,” said Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co. “Weaker growth means less tight labor markets and that should help soften price pressures over time.”

The Singapore dollar is the second-best performer among 11 most-traded Asian currencies tracked by Bloomberg, gaining about 2.6 percent against its U.S. counterpart this year. The island uses the exchange rate to manage inflation, saying in April it would allow faster gains to damp price pressures.

Resilience
Singapore has shown a high degree of resilience to global financial shocks, despite the openness of its economy and dependence on global trade, Moody’s Investors Service said last month. Exports rose less than 4 percent in April and May from a year earlier, and contracted in May from the previous month.

Retail sales rose at a slower pace in April as spending at department stores eased and vehicle purchases fell. Private home sales in May slumped 32 percent from a month ago to their lowest this year.

The Monetary Authority of Singapore guides the local dollar against a basket of currencies within an undisclosed band and adjusts the pace of appreciation or depreciation by changing the slope, width and center of the band.

The city-state added fewer jobs than initially estimated in the first quarter, and the seasonally adjusted unemployment rate for the three months through March rose to 2.1 percent from 2 percent the previous quarter, a report showed last month.

Europe Impact
China may also report weakening growth tomorrow, according to a separate Bloomberg News survey, putting pressure on Premier Wen Jiabao to further ease the government’s crackdown on the property industry.

International Monetary Fund Managing Director Christine Lagarde said last week the lender’s new global growth forecast will be lower than the previous one.

“Europe’s debt crisis is a global drag and growth numbers in Asia will continue to get hurt,” said Harvinder Sian, a London-based senior rates strategist and co-head of research for Europe at Royal Bank of Scotland Group Plc. It “opens up the opportunity” for more easing in the region, he said.

Located at the southern end of the 600-mile (965-kilometer) Malacca Strait and home to one of the world’s busiest container ports, the city-state is vulnerable to fluctuations in overseas demand for manufactured goods, even as the government has boosted financial services and tourism to reduce reliance on exports.

The economy probably expanded 2.3 percent from a year earlier in the second quarter, according to the median estimate of 18 economists surveyed by Bloomberg.

 

[Muthukali]

U.S. Stocks Pare Drop as Investors Dissect Fed Minutes

U.S. stocks pared losses in the final half hour of trading as investors debated whether the Federal Reserve will embark on another economic stimulus program. The Dollar Index touched a two-year high while commodities gained and Treasuries were little changed.

The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,341.45 at 4 p.m. in New York, paring a drop of 0.6 percent. The Dollar Index, a gauge of the currency against six major peers, rose as much as 0.3 percent to 83.61 before paring its gain to 0.1 percent. The S&P GSCI Index of commodities added 1.1 percent as oil rose following a drop in U.S. supplies. Gold lost 0.5 percent. Ten-year Treasury yields rose one basis point to 1.51 percent after approaching a record low.

Stocks slid and the dollar rose as Fed minutes showed two participants said more bond purchases are appropriate, while two others said they would be needed in the absence of “satisfactory progress” in cutting unemployment or if downside risks grew. Equities recovered as analysts dissected the minutes, with Jefferies & Co. economist Ward McCarthy saying in a note there’s a “reasonable probability” a third round of quantitative easing is announced in coming months.

“What often happens is when the market is looking for something positive and doesn’t get it, it will read into the notes and see what the implication of the Fed’s posture is and the posture is clearly more toward an accommodation than it was a month ago,” said Peter Kenny, managing director in institutional sales at Knight Capital Group Inc. in Jersey City, New Jersey.

‘Cheerleading’
The minutes from the June meeting also show policy makers considered the risk that further easing might pose. Some central bankers noted that excessive purchase of Treasuries may lead to deterioration in the functioning of the Treasury market. UBS AG economist Drew Matus wrote in a client note that the language in the Fed minutes indicates the threshold for a third round of quantitative easing is high and should not be taken as a given.

“There is not much cheerleading in these minutes,” Mike Shea, a managing partner at New York-based brokerage firm Direct Access Partners LLC, said in an interview. “We see a lot of discussion on what the real benefits of more stimulus would be, and it appears there is a conclusion that benefits would be modest.”

The Fed minutes come amid growing concern that the U.S. economic recovery is faltering and corporate profits are shrinking. Goldman Sachs Group Inc. cut its estimate for second- quarter U.S. gross-domestic product growth twice today, lowering it to 1.3 percent after data on wholesale inventories and the trade deficit dimmed prospects for the economy.

Earnings Season
Earnings at S&P 500 companies decreased 1.8 percent in the second quarter, according to analyst estimates compiled by Bloomberg. That would mark the first year-over-year decline since 2009.

Technology shares in the S&P 500 slipped 0.6 percent as a group and were the biggest drag on the index for a second day. The group lost 1.2 percent yesterday as reduced sales projections at Advanced Micro Devices Inc. and Applied Materials Inc. (AMAT) spurred concern about profits at technology companies, the group forecast to have the strongest second-quarter earnings growth among 10 industries.

Five-Day Slump
The S&P 500 has slipped for five straight days, the longest slump in almost two months. United Technologies Corp., Boeing Co. and Microsoft Corp. lost at least 1.5 percent to lead declines in 21 of 30 stocks in the Dow Jones Industrial Average (INDU), which fell 48.59 points to 12,604.53. Exxon Mobil Corp. and Chevron Corp. rose at least 0.9 percent as energy shares had the biggest advance in the S&P 500, while Bank of America Corp. rose 2 percent to pace an advance in banks.

Last’s month Fed meeting came before a report July 6 that showed U.S. employers added fewer workers than forecast in June and growth in private payrolls was the slowest in 10 months.

The Dollar Index reversed a decline of as much as 0.4 percent. The U.S. currency strengthened against nine of its 16 major peers, rising the most against the South African rand, Swedish krona and Japanese yen.

Almost two shares fell for each that gained in the Stoxx Europe 600. (SXXP) Burberry Group Plc tumbled 7.4 percent after the U.K.’s largest luxury-goods company reported sales that missed estimates. Britvic Plc plunged 13 percent after the maker of Robinsons fruit drinks said full-year results will be at the bottom end of analysts’ estimates. Bankia SA, the nationalized Spanish lender, tumbled 7.8 percent.

Spain Rally
Spain’s IBEX 35 Index of stocks rallied 1.2 percent and its bonds surged for a second day after Prime Minister Mariano Rajoy said the government will take more measures amounting to 65 billion euros ($79.9 billion) to shore up the budget.

The prime minister announced cuts in jobless benefits and public wages, signaled reductions in pensions and raised sales taxes as part of a 65 billion-euro ($80 billion) package of deficit cuts, risking a deeper recession. As striking miners clamored for aid to keep their industry alive in a march along Madrid’s main boulevard, Rajoy trimmed union funding by 20 percent.

The yield on Spain’s 10-year bond fell 23 basis points to 6.58 percent, while the rate on similar-maturity Italian securities slipped 14 basis points to 5.81 percent.

The yield on 10-year German bunds decreased five basis points to 1.27 percent as the government sold 4.15 billion euros of the securities at a record-low yield of 1.31 percent. Two- year German yields were minus 0.016 percent.

Corn Reverses
Corn fell 2.2 percent to $7.015 a bushel, retreating from a 10-month high on speculation that a drought-fueled rally in prices will curb demand. Earlier, the grain reached $7.48, the highest for the most-active contract since Sept. 13. Today, the USDA cut its domestic production estimate by 12 percent a month after predicting a record harvest. The U.S. is the world’s largest grower and exporter.

Corn prices through yesterday surged 42 percent since mid- June as areas of moderate to extreme drought expanded to 53 percent of the Midwest. Crop conditions as of July 8 were the worst for that date since the drought of 1988, government data show.

Oil in New York rose 2.3 percent to $85.81 a barrel today after the U.S. Energy Department reported supplies dropped and refineries operated at the highest rate in almost five years.

The MSCI Emerging Markets Index fell 0.2 percent, retreating for a sixth day in the longest run of declines since May. Russia’s Micex Index lost 1.3 percent and India’s Sensex slipped 0.7 percent. The Shanghai Composite Index rose 0.5 percent. The Turkish lira strengthened against 13 of 16 major peers after the current-account deficit narrowed.

 

[Muthukali]

UBS: Index can rebound to 2600

Dropping consumer prices, business profits may affect investor expectation
The Chinese stock market could rebound in the second half of this year, but only after further loosening of monetary policies, according to the head of China equity strategy at UBS Securities Co Ltd, Chen Li.

However, the continually decreasing growth rate of consumer prices and sharply dropping business profits may still influence investors' expectations.

Chen said on Wednesday that further loosening of monetary policy could bring the Shanghai Composite Index - which tracks the biggest Chinese company stock prices - back up to 2600 points by the end of this year.

But the market will only rebound if monthly new loans increase by more than 600 billion yuan ($94.25 billion) in the next six months, the interest rate for medium- and long-term lending declines to lower than 7 percent, and financing policies for local governments and property developers are loosened, according to Chen.

"If the stock market slightly rebounds in the next two quarters, I expect the index can give a return of 15 percent," he said.

The Shanghai Composite Index climbed 0.5 percent to close at 2175.38 on Wednesday, ending a two-day falling of 2.7 percent.

So far this year, the index has dropped 1.1 percent, breaking a previous 12 percent rise.

It reached its lowest level since Jan 6 at Tuesday's close.

According to statistics released by Wind Information Co Ltd, the leading provider of Chinese financial data, in the first six months of the year, newly listed companies raised a total of 70 billion yuan, the lowest level since 2009, compared with 212.8 billion yuan in the first half of 2010 and 160.7 billion yuan in the first two quarters of 2011.

Weakened global market demand and China's slowing economic growth have considerably added pressures on the country's stock market, hitting investor confidence, analysts said.

To curb the faster-than-expected economic slowdown, the People's Bank of China has cut benchmark interest rates twice since June.

The weakened profitability of Chinese companies amid the sharply decreased growth rate of consumer and industrial prices is adding investor concern into the second half.

In June, the country's consumer price index, the main gauge of inflation, declined to a 29-month low of 2.2 percent, while the producer price index showed industrial deflation in the fourth month of 2.7 percent, according to the National Bureau of Statistics.

"This year's lowest CPI may be seen in October, and the lowest PPI may show in December," Chen said.

"The full-year estimated return rate of the mainland stock market may be 9 percent, with the estimated profit expected to be raised to 12 times from the third quarter," he added.

 

[Muthukali]

Australian Employers Reduce Payrolls in June, Jobless Rate Rises

Australian employers unexpectedly cut payrolls in June, the first reduction in four months, and the unemployment rate rose as evidence mounts that Europe’s turmoil is discouraging hiring. The local currency fell.

The number of people employed fell by 27,000, almost erasing a revised 27,800 gain in May, the statistics bureau said in Sydney today. That compares with the median estimate for no change in employment in a Bloomberg News survey of 25 economists. The jobless rate rose for a second month, to 5.2 percent from 5.1 percent.

The data validate Reserve Bank of Australia Governor Glenn Stevens’s decision to reduce interest rates by a total of 75 basis points in May and June to 3.5 percent. The Australian economy grew 1.3 percent in the first quarter, more than twice the pace economists forecast as resource investment surged, inflation has cooled and export prices slumped as China’s economic outlook deteriorates.

“Employment growth will remain soft through the third quarter,” Katrina Ell, an economist at Moody’s Analytics in Sydney, said before today’s report. “The service states are faring the worst, but slower Chinese commodity demand has hit mining after a sustained expansion.”

The number of full-time jobs declined by 33,500 in June, and part-time employment rose by 6,600, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, dropped to 65.2 percent in June from a revised 65.4 percent a month earlier, it showed.

Dollar Falls
The Australian dollar dropped after the report, buying $1.0198 at 11:37 a.m. in Sydney from $1.0239 before the data. The so-called Aussie, the world’s fifth-most traded currency, surged 5.2 percent in June.

Europe’s crisis is starting to affect China, and the central bank in Beijing has lowered rates twice in the past month. Premier Wen Jiabao said last week that downward pressure on the economy is still “relatively large” and the government will intensify fine-tuning of policies, according to a report by the official Xinhua News Agency.

China’s gross domestic product probably climbed 7.7 percent in the quarter through June from a year earlier, slowing from 8.1 percent in the previous period, according to a Bloomberg News survey before the data is released tomorrow. That would be the slowest pace since the three months ended March 31, 2009.

Today’s Australian data follow a drop in help-wanted notices in June for a third straight month. Jobs advertised in newspapers and on the Internet fell 1.2 percent from May, when they fell a revised 2.6 percent, according to an Australia & New Zealand Banking Group Ltd. (ANZ) report this week.

Toyota Motor Corp. (7203) and General Motors Co. (GM) have fired workers in Australia this year, citing the strength of a currency fueled by a mining investment bonanza, while banks cut their payrolls as credit growth weakened.

 

[Muthukali]

Consumer Comfort in U.S. Stagnates Amid Unemployment

Consumer confidence stagnated last week as scant improvement in the labor market left Americans more discouraged about the economy.

The Bloomberg Consumer Comfort Index held at minus 37.5 in the week ended July 8. Some 86 percent of those surveyed said the economy was in bad shape, 21 percentage points higher than the average since 1985.

“Consumers remain generally downbeat about the economy and expectations for the future,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Given slower job growth and the recent stabilization of oil and gasoline prices near current levels, there is little impetus to support an improvement in overall sentiment in the near term.”

Gasoline prices that are no longer falling along with the labor market’s worst quarterly performance since the first three months of 2010 risk stifling the consumer spending that accounts for 70 percent of the U.S. economy. Flagging sentiment stretches around the globe, according to a Pew Research Center report that showed Europe’s debt crisis is taking a toll.

The public mood about the economy has worsened since 2008 in eight of 15 countries providing comparable data, the Pew report said. Some 16 percent of Europeans said they believe their economy is doing well, the survey showed.

Stocks dropped, sending the Standard & Poor’s 500 Index lower for a sixth day, on growing concern about global economic growth and corporate earnings. The S&P 500 decreased 0.5 percent to 1,334.76 at the 4 p.m. close in New York.

Jobless Claims
Another report today showed fewer Americans than forecast filed first-time claims for unemployment benefits last week, reflecting the volatility of applications during the annual auto-plant retooling period.

Claims for jobless insurance declined 26,000 in the week ended July 7 to 350,000, the fewest since March 2008, the Labor Department said. Economists surveyed by Bloomberg projected 372,000 claims, according to the median projection.

“You can never take claims at face value because of the July shutdowns,” said Jonathan Basile, an economist at Credit Suisse in New York, who projected the number of applications would drop to 355,000. “We are in a period of uncertainty. This makes for a situation where businesses will hold off on taking risks regarding investment and payrolls.”

Prices of imported goods decreased more than forecast in June as declining energy costs curbed inflation, another Labor Department report showed. The 2.7 percent plunge in the import- price index was the biggest since December 2008 and followed a 1.2 percent drop in May. Prices excluding fuel fell 0.3 percent, the most in almost two years.

European Production
Elsewhere, Euro-area industrial production unexpectedly rebounded in May as growth in Germany, Europe’s largest economy, more than offset a decline in France. Output in the 17-nation euro area rose 0.6 percent from April, when it fell 1.1 percent, the European Union’s statistics office in Luxembourg said.

Fuel costs that are creeping higher and limited job opportunities may be giving Americans less to cheer about. After reaching a recent low of $3.33 a gallon on July 1, the average price of gasoline nationwide was $3.38 yesterday, according to AAA, the country’s biggest motoring organization.

Employment at companies increased 84,000 in June after a 105,000 gain a month earlier, the Labor Department said July 7. The so-called underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 14.9 percent from 14.8 percent.

Not ‘Robust’
“The job market is a strong correlate of consumer confidence,” Gary Langer, president of Langer Research Associated in New York, which compiles the index for Bloomberg, said in a statement. The jobs report “underscores the public’s long-running economic frustration. While consumer sentiment isn’t worsening, it’s far from the levels associated with a robust economy.”

Today’s Bloomberg report showed 71 percent of consumers said it was a “bad time” to buy, 7 percentage points worse than the average since weekly surveys began in 1985.

The Bloomberg index of the state of the national economy fell to minus 72.8, the lowest level since Feb. 19, from minus 71.7 the previous period. The measure of whether consumers consider it a good time to buy climbed to minus 41.5 from minus 42.4 the prior week. The index of personal finances was little changed at 1.9 after 1.8.

Wealthier Americans
Confidence dropped for those with incomes of $100,000 or more. The index decreased to minus 8.2, the lowest reading since January. It marked the second straight week of negative readings after 13 weeks above zero.

In a sign higher-income earners are pulling back, Burberry Group Plc reported sales yesterday that missed analysts’ estimates for a second straight quarter, fueling concern that Europe’s debt crisis and slowing growth in China are taking a toll on demand for high-end goods.

Today’s figures also showed Democrats recording higher sentiment than Republicans for a record 16th consecutive week. Republicans’ confidence dropped to the lowest level since the end of February.

Sentiment among independents rose to minus 43 from minus 46.8 last week. Even with the gain, the figure is one of the five lowest this year and 22.6 percentage points lower than the long-term average for the group.

Survey Details
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old and older. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. The most recent reading is based on the average of responses over the previous four weeks.

The survey is in the process of expanding its reach by adding Spanish-language interviews and contacting respondents via mobile phones.

The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points.

 

[Muthukali]

China Q2 growth slows to 3-year low of 7.6%

China's economy reported 7.6 percent of growth in the second quarter, the lowest since the first quarter of 2009 when the global financial crisis was rampant, amid concerns about the slow-down of the second-largest in the world and the strongest one in the major economies.

The National Bureau of Statistics said on Friday that in the first half, the country's economy grew by 7.8 percent to 22.71 trillion yuan ($3.56 trllion). The growth in the first quarter was 8.1 percent. It is the lowest growth in the past 13 quarters.

China's manufacturing, foreign trade and investment have been slowing down this year, triggering worries about a hard landing of its economy, whose role is more important as the eurozone is still struggling with the debt crisis, the US is still on the way to recover and emerging economies such as India and Brazil are also slowing down.

China's central bank has cut the interest rates twice this year to stabilize the growth. Premier Wen Jiabao also vowed to maintain a stable economy in recent visits in the nation and major conferences.

Leo Abruzzese, global forecasting director at the Economist Intelligence Unit which conducts extensive research on China's economy, thinks the Chinese government's trying to slow down the economy is also a way to cope with the global economy when both Europe and the US are experiencing financial problems.

"If the (Chinese) government were to stimulate the economy hugely the way it did a few years ago, that probably would be the worst thing they could do," said Abruzzese, adding stimulus should be done moderately.

China's growth has been relying on foreign investments and exports, says Abruzzese, adding the Chinese government should drive more domestic consumption.

"China has to get to the point where the consumers in China need to start consuming more. It has to start re-balancing the economy. China is not a wealthy country but it is a middle-class country right now, too," said Abruzzese. "The Chinese government needs to start creating more social safety programs, more social insurance programs, where people then won't feel they need to save quite as much as they do."

Derek Scissors, a senior research fellow at The Heritage Foundation, said China has raised the average of world growth in almost every year of the reform period. It can contribute more to world growth by rebalancing the economy away from investment and toward consumption.

"If China's GDP growth slows but it also rebalances, that is a much greater contribution to the world economy than fast, unbalanced growth," he said.

Scissors expected China to announce GDP growth of 8.2 percent for the full year of 2012.

"However, the days of announcing 10 percent growth or higher are over. For a few years, the range is likely to be 7 to 8.5 percent, then it may get slower. This is natural," he said.

However, Sebastian Mallaby, director of the Center for Geoeconomic Studies, believed China will deliver further fiscal stimulus, both to support its own growth and to contribute to global demand.

"At a time when the eurozone is in trouble, US fiscal stimulus has been pushed as far as it can be, and growth is weak in Japan, India, Brazil and other important economies, the world needs stimulatory policies from major economies that have a strong enough financial position to deliver them safely. China should lead in this respect," he said.

Abruzzese said "a little less saving and a little more spending" would be better for China's and the world's economy.

"China's economy is strong but it's a little bit distorted. When China starts to buy more, everybody else will be a little happier, too," he said.

Abruzzese believed the Chinese government's recent moves of cutting the interest rates shows the country is being more integrated and move involved in the global economy.

"China realizes that it is no longer a minor player (in global economy). If everybody else is taking steps to try to shore up the global economy, so is China by cutting interest rates."

Central banks in different countries have been cutting interest rates recently. China, in particular, has cut interest rates twice in June and July. The moves were seen as unexpected because the People's Bank of China had not cut interest rates since 2008. China's benchmark lending rates were lowered to 6 percent, and deposit rates were down to 3 percent after the second cut.

Both the European Central Bank and Brazil's central bank have also cut their interest rates last week and this week to kick start the slow economy.

 

[Muthukali]

Moody's downgrades Italian govt debt

Ratings agency Moody's on Friday downgraded Italy's government bond rating by two notches, citing the knock-on effects of a possible Greek exit from the eurozone and Spain's banking woes.

In reducing the rating to Baa2 from A3, Moody's said that Italy was now "more likely to experience a further sharp increase in its funding costs or the loss of market access" for borrowing to service its budget.

The move lowered Italy's rating to two notches above junk-bond status, and came just hours before the eurozone heavyweight attempts to raise 5.25 billion euros in a government bond auction.

"The risk of a Greek exit from the euro has risen, the Spanish banking system will experience greater credit losses than anticipated, and Spain's own funding challenges are greater than previously recognized," Moody's Investors Service said in a statement outlining its rationale for downgrading Italy.

"Italy's near-term economic outlook has deteriorated, as manifest in both weaker growth and higher unemployment, which creates risk of failure to meet fiscal consolidation targets.

"Failure to meet fiscal targets in turn could weaken market confidence further, raising the risk of a sudden stop in market funding," it said, reaffirming a negative outlook for Italian debt.

However, Moody's stressed that Italy did have some strengths: a primary budget surplus not counting interest payments on its cumbersome debt, a diverse economy, and the technocratic government's determination to enact reforms.

 

[Muthukali]

Vietnam central bank says bad debt 8.6 pct at end-March

Vietnam's bad debt rose to 8.6 percent of total loans in the banking system at the end of March, doubling the previously published figures, as businesses faced many difficulties in a slowing economy, the central bank said on Thursday.

The value of the bad debt amounted to VND202 trillion (US$9.69 billion), the State Bank of Vietnam said in a statement, citing investigative results by its inspectors.

The central bank estimates were far higher than those it had issued earlier based on banks' estimates, which had put the ratio of bad debts to outstanding loans at 4.47 percent at the end of May.

The ratio and the value of non-performing loans in Vietnam's banking system have been fraught with uncertainty, with several different figures so far this year.

Governor Nguyen Van Binh had been previously reported as saying non-performing loans had risen to 10 percent from 6 percent of total loans, without giving a timeframe for the figure.

Non-performing loans stood at 3.07 percent at the end of last year, the central bank said.

The central bank said that by the end of March, 84 percent of non-performing loans were mortgage-based and the value of the mortgages was equivalent to 135 percent of the bad debts.

Lenders had set aside provisions worth VND67.3 trillion ($3.23 billion), or 57.2 percent of the bad debt value, by the end of May to deal with the debts, the statement said.

The reason for the large gap between the central bank inspectorate's figures and banks' data was that lenders tended to report bad debt at a lower ratio, it said.

"Several banks did not comply with the regulations about debt classification, recording non-performing loans below the actual figure to reduce their provisions," the statement said.

This is the first time Vietnam's central bank acknowledged the actual non-performing loans were higher than previously reported figures.

Analysts have said Vietnam banking system's real bad debt ratio could be two to three times the official figure while Fitch Ratings has put it at 13 percent.

Vietnam recorded an average credit growth at 26.56 percent a year in the 2008-2011 period while non-performing loans expanded at an average 51 percent a year, the central bank said.

Bad debt rose swiftly in the past few years due to the economic instability, high inventories, rapid credit expansion, risk management weakness and poor supervision of lenders, the statement said.

The central bank unveiled banking reforms in March that envisaged the sale of mortgaged bad debts to the Finance Ministry's Debt and Asset Trading Co and would allow banks to convert loans into stakes in borrowers' firms.

The government will consider buying property projects which were used as the mortgages for loans and use them for social welfare purposes and state agencies' use, the plan said.

The central bank also aims to establish a national asset management firm to speed up resolution of bad debts, state media has reported.

 

[Muthukali]

Vietnam’s bonds fall for fifth day as banks prioritize lending

Vietnam’s bonds dropped for a fifth day on Thursday on speculation banks will focus on boosting lending to meet the central bank’s annual target amid urgings from policy makers. The dong gained.

Governor Nguyen Van Binh ordered banks on July 7 to “be determined and quick in reducing lending rates to help companies.” Credit expanded 0.76 percent this year as of June 30, short of the targeted 14 percent to 15 percent for the full year and 8 percent to 10 percent for the second half, the State Bank of Vietnam said in a July 7 statement.

“The bond market has been quiet, partially due to slow credit growth,” said Tran Kieu Hung, a Hanoi-based fixed-income trader at Bank for Investment & Development of Vietnam. “Banks will try to give out more loans to meet the target.”

The yield on benchmark five-year notes rose two basis points, or 0.02 percentage point, to 9.83 percent in Hanoi, according to a daily fixing from banks compiled by Bloomberg.

The dong appreciated 0.1 percent to 20,870 per dollar as of 3:50 p.m. Thursday in Hanoi, according to data compiled by Bloomberg. The central bank set the daily reference rate at 20,828, unchanged since Dec. 26, its website showed. The currency is allowed to trade up to 1 percent on either side of the rate.

 

[Muthukali]

JPMorgan Blaming Marks on Traders Baffles Ex-Employees

JPMorgan Chase & Co. (JPM)’s assertion that traders at its London chief investment office may have intentionally mismarked trades, masking losses that total at least $5.8 billion, makes little sense, according to former executives with direct knowledge of the unit’s operation.

The bank restated first-quarter results, paring profit by $459 million, in part because an internal review revealed that U.K. traders had priced their books “aggressively,” Mike Cavanagh, head of Treasury & Securities Services, said in a July 13 meeting with analysts. The mispricing made losses on a portfolio of credit derivatives look smaller than they were, and executives concluded that traders may have sought to hide the “full amount of losses,” JPMorgan said in a presentation.

JPMorgan requires traders to mark their positions daily so the firm can track their profits, losses and risk. An internal control group double-checks the marks against market prices monthly and at the end of each quarter, said three former executives from the CIO and a senior executive in market risk. The firm uses the control group’s prices, not what individual traders submit, to calculate earnings, making it difficult for one trader or trading desk to rig prices, the people said.

“We just have questions about whether the traders were doing what they need to do for accounting, which is put a mark on their positions where they think they can exit,” Cavanagh, who led the internal review, said on a conference call with reporters. “Instead, it felt more like they were pricing their marks a little bit more aggressively, but generally inside the bid-ask spread.”

The spread is the difference between what an investor would pay to buy a security and the price at which someone is willing to sell the same asset.

London Whale
Bruno Iksil, known as the London Whale because his positions grew so large, ran the credit derivatives book that generated the losses. He personally apologized in recent weeks to almost everyone in the London unit for causing turbulence within the group, according to one of the former CIO executives who had been told about it by two people in the unit.

Iksil and Raymond Silverstein, whom the New York Times identified as his attorney, didn’t return phone and e-mail messages. The newspaper quoted Silverstein saying that Iksil is innocent of wrongdoing.

The decision to restate results for the first three months of 2012 was made one day before New York-based JPMorgan reported second-quarter net income of $4.96 billion, and after executives and lawyers interviewed employees, and reviewed thousands of hours of calls and about 1 million e-mails, said Cavanagh, 46.

Joe Evangelisti, a spokesman for the bank, declined to comment on the doubts expressed by the former executives.

Illiquid Bets
JPMorgan, led by Chief Executive Officer Jamie Dimon, has seen its market value plunge $32 billion since April 5, when Bloomberg News first reported that the London unit’s illiquid bets on credit derivatives were big enough to move markets. The trade, a wrong-way bet on credit derivatives, cost the bank $5.8 billion in the first six months of this year and the tab could climb by $1.7 billion, the bank said.

Chief Investment Officer Ina Drew, 55, who retired four days after the initial losses were disclosed on May 10, voluntarily forfeited as much as two years of compensation. JPMorgan said it ousted the three London executives responsible for the loss and that it will claw back as much as two years of their bonuses, without naming the individuals.

Iksil’s boss, Javier Martin-Artajo, and former Europe CIO head Achilles Macris were among executives who also oversaw the trades.

Price Verification
Some securities, such as interest-rate derivatives or foreign-exchange contracts, are easier to price because they’re generally traded on exchanges, making them more transparent to investors. Credit derivatives and other securities traded by Iksil were more difficult to price because they traded less frequently, and not on open exchanges.

Even then, traders have to submit documentation verifying their pricing and the internal control group generally would solicit prices from about two dozen outside firms to verify the marks, the people said. Executives including Dimon had said previously that Iksil’s positions were “marked-to-market,” indicating that they were available market prices that confirmed his valuations.

The CIO also valued some trades at prices that differed from those of JPMorgan’s investment bank, people familiar with the matter said in May.

Short Position
JPMorgan, the largest U.S. lender by assets, shut down all synthetic trading at the chief investment office and transferred the rest of the position to the investment bank. The CIO has retained an $11 billion short position in “basically liquid indexes” to hedge other credit assets, Dimon, 56, said during the meeting with analysts. Positions in Series 9 of the Markit CDX North America Investment Grade Index, a credit-swaps benchmark known as IG9 that’s at the heart of much of the loss, were cut by 70 percent, he said.

The investment bank has “the expertise” to manage it, Dimon said. The bank transferred about $30 billion of risk- weighted assets to the investment bank, an amount that is “down substantially” from the peak and back to levels at the end of 2011, he said.

The stock jumped 6 percent on July 13 as investors expressed “relief that it wasn’t worse,” said Gary Townsend, head of Hill-Townsend Capital LLC, said of the trading loss. It was “substantially better than many of the estimates that I was hearing,” he said.

Justice Department
The loss has prompted regulators and investors to scrutinize the CIO. Agencies reviewing the matter include the Securities and Exchange Commission, U.S. Justice Department and Federal Bureau of Investigation. Dimon transformed the unit in recent years to boost profit by buying higher-yielding assets such as structured credit, equities and derivatives, Bloomberg News reported on April 13, citing former employees.

Dimon dismissed initial news reports about the London operation as a “tempest in a teapot” when the bank reported first-quarter earnings April 13. He reversed course less than four weeks later, disclosing a $2 billion loss that he said could grow to $3 billion or more during the quarter.

 

[Muthukali]

Vietnam stocks may climb as economic growth recovers: finance minister

Vietnamese stocks may rise from the end of the current quarter as economic growth recovers and boosts corporate earnings, Finance Minister Vuong Dinh Hue said.

“Companies’ performance should improve by that time, bolstered by a domestic macroeconomic recovery,” Hue said in an interview on Saturday after a conference in Ho Chi Minh City.

Vietnam needs to spur investor confidence by improving the transparency of corporate earnings, particularly among state-owned enterprises, he also said.

A finance ministry proposal that state companies publish audited results is awaiting approval from the prime minister, Hue said.

Vietnam’s economy expanded less than 5 percent for the second straight quarter in the three months through June from a year earlier.

Deputy Prime Minister Vu Van Ninh has said the nation may miss its 6 percent growth target this year.

The VN Index of stocks has declined about 14.6 percent since a recent high in May.

 

[Muthukali]

Friday relief rally caps week of political tension - Thailand

Recap: Local stocks fluctuated on regional factors and concern about the Constitution Court ruling on Friday. The SET index moved sideways in a range of 1,186.32 and 1,212.08 points. But the index jumped 17.16 points on Friday after the court dismissed the petitions against the charter amendment bill to close at 1,210.29 points, up 0.85% from the previous week.

Average daily trading was thin at around 23 billion baht. Foreign investors were net sellers on Friday but were buyers of 2.046 billion baht in stocks for the week. Retail investors were net sellers of 5.58 billion, institutional investors bought 2.14 billion and brokers 1.39 billion baht.

Big movers: Banks and domestic plays were active amid speculation about good Q2 earnings. BBL closed at 196 baht, up 2.55% from the previous week. KBANK rose 1.2% to 164.50 baht and SCB gained 1.9% to 155 baht. Anticipation of good telecom results lifted ADVANC 4.8% to 207 baht and DTAC 6.8% to 81 baht. The hospital operator BGH, after a big-lot sale at midweek, closed down 6.3% at 102.5 baht.

Newsmakers: Moody's on Friday downgraded Italy's government bond rating by two notches, from A3 to Baa2, citing the knock-on effects of a possible Greek exit from the euro and Spain's banking woes.

- China's economy grew by 7.6% in the second quarter, the slowest since 6.6% in Q1 2009, when China and the rest of the world were struggling to emerge from the financial crisis through massive stimulus actions.

- Finance Minister Kittiratt Na-Ranong expressed confidence that the economy in 2012 would grow by 5-6% as forecast by the IMF. He noted that the government's 2.27-trillion-baht spending plan was mostly for infrastructure over seven years, though some might not be completed on schedule.

- Exports in May expanded 7.68% year-on-year, rebounding from a 3.7% drop in April, to US$20.932 billion, the Commerce Ministry reported. Exports over the first four months of 2012 were down 1.47% year-on-year while imports increased 11.55%. The trade deficit stood at $9.794 billion. Thai exporters say they are starting to feel real impact from the continuing euro-zone debt crisis and want the government to help. Hard-hit sectors include jewellery, electronics, textiles and rubber products.

- Oil prices are unlikely to fall much further this year but could come under pressure in 2013 as the global economy falters due to slower US and Chinese growth, said the International Energy Agency.

- Bumrungrad Hospital sold its 24.99% stake in Bangkok Chain Hospital (KH), the operator of the Kasemrad Hospital chain, for 4.56 billion baht, saying it wanted to refocusing on its main facility in Sukhumvit Soi 3.

- Bangkok Dusit Medical Services, Thailand's largest hospital group, is studying a possible investment in Myanmar, with a decision expected in a couple of months.

Coming up this week: While the Constitution Court decision has defused tensions to some extent, Asia Plus Securities (ASP) says political risk will persist as the government will likely raise the constitution for discussion when Parliament reconvenes on Aug 1. A censure debate is expected as well.

- Banks will announce their Q2 results later this week. ASP estimates a net profit margin at 4%. It says small and medium-sized banks _ BAY, TCAP and TISCO _ with a focus on hire-purchase will show significant growth. Leasing companies such as ASK, GL and KCAR will grow with expansion of the automobile business.

Stocks to watch: ASP recommends stocks that offer high dividends and low P/E ratios. Top picks are NWR, KCAR, ASK, TCAP, PTT and BANPU.

- Capital Nomura recommends companies expected to outperform for Q2 such as AMATA, BBL, BH, CENTEL, INTUCH and THCOM.

Technical view: ASP sees support this week at 1,185 points and resistance at 1,248. Capital Nomura Securities sees support at 1,195 points and resistance at 1,220.

 

[Muthukali]

Japan Stocks Swing From Gains, Losses on Yen, Utilities

Japan stocks swung between gains and losses after the yen rose to a one-month high, outweighing speculation China may take steps to boost its slowing economy. Utilities fell amid renewed concern about nuclear plants, while drugmakers rose after they were upgraded by Nomura Research.

Sony Corp. dropped 1.6 percent after the yen rose to a one- month high against the dollar, cutting the outlook for Japan’s biggest exporter of consumer electronics. Utilities dropped on reports alarms went off when Kansai Electric Power Co. prepared to restart one a reactor. Astellas Pharma Inc. gained 3.1 percent after the sector was raised to neutral by Nomura. Create Restaurants Holdings Inc. advanced 7.9 percent after it said it will buy back almost half its shares.

The Nikkei 225 Stock Average rose 0.4 percent to 8,762.54 as of 10:48 a.m. in Tokyo. The broader Topix Index (TPX) was little changed at 746.22 after falling as much as 0.4 percent earlier as it reopened from a three-day weekend.

“As tightening measures have slowed China’s growth, the market’s focus is shifting to stimulus measures such as an interest-rate cut,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees about 15 trillion yen ($190 billion) in assets. “One thing to remember is that the yen is on the rise. Japan’s equities are sensitive to the yen’s level, which is likely to put a lid on the market.”

 

[Muthukali]

RBA Saw Growth Momentum in July 3 Rate Pause: Minutes

Australia’s central bank kept borrowing costs unchanged this month as domestic job growth and previous interest-rate reductions help the local economy weather global disruptions, minutes of its July 3 policy meeting showed.

“Consumption was being supported by a favorable labor market and recent liaison had a firmer tone,” according to minutes released today in Sydney explaining why the overnight cash-rate target was left at 3.5 percent. “With recent signs that the domestic economy had a little more momentum than had earlier been indicated, members saw no need for any further adjustment to the cash rate at this meeting.

Traders pared bets on a rate cut next month and the currency gained as policy makers highlighted the economy’s strength in the first quarter, when it grew at the fastest annual pace in five years. Government reports since RBA Governor Glenn Stevens’s latest decision painted a mixed picture of the economy: retail sales rose by more than twice the pace forecast and consumer confidence strengthened, while the unemployment rate increased in June and home-loan approvals sank.

Growth “probably slowed a little from that reported for the first quarter to be around trend pace,” policy makers said in the minutes. “Mining investment had been a little stronger than had been expected, and members noted that growth in much of the non-resource economy had remained modest.”

China Optimism
In their debate, the RBA officials indicated concern that the recovery in the U.S. had slowed and European activity declined, while data for May suggested China’s economy wasn’t slowing as much as previously anticipated.

The minutes provided “just a few more indications that, ever so subtly, they’re seeing things a little bit better,” said Michael Turner, an economist at RBC Capital Markets Ltd. in Sydney, citing the more optimistic comments on China. “They sound very comfortable without precluding any sort of action from here -- things offshore are pretty fluid at the moment.”

The so-called Aussie dollar, the world’s fifth-most traded currency, bought $1.0298 as of 12:51 p.m., up 0.5 percent from yesterday in New York. It touched $1.0304, the strongest since July 5.

“Developments had been more positive for the Chinese economy following some weaker data released the previous month,” the minutes said. “Members noted that the situation in Europe could deteriorate again and spill-over to other economies remained a substantial risk.”

Rate-Cut Bets
Traders are pricing in a 62 percent chance that policy makers will resume rate cuts next month, and lower borrowing costs by a quarter percentage point to 3.25 percent, down from 76 percent yesterday, Bloomberg data based on swaps trading shows.

Two days after Stevens paused, China’s central bank announced the second rate cut in a month and has reduced banks’ reserve requirement ratio three times starting in November. China’s gross domestic product increased 7.6 percent in the second quarter from a year earlier, the slowest pace in more than three years, the government reported July 13.

Powering the Australian economy is the biggest resource boom since prospectors set off a gold rush in the 1850s. The latest bonanza -- for iron ore, coal and natural gas -- is bringing investment projects the government estimates to be worth A$500 billion. The nation’s unemployment rate, at 5.2 percent last month, is lower than 8.2 percent in the U.S. and 11.1 percent in the euro area.

Business Credit
“Forward-looking indicators and liaison implied modest employment growth over coming months,” RBA policy makers said in the minutes. Business credit, after a long period of weakness, “had picked up noticeably over the past four months” and officials saw no dislocation in domestic financial markets, the minutes said.

The resource expansion has fueled a 45 percent gain in the local currency since the start of 2009 against the U.S. dollar, which has hurt businesses and workers in the tourism, education and manufacturing industries, while lowering import prices.

“The Australian dollar appreciated over the month, bolstered by positive economic data and further buying of Australian government debt by offshore investors,” the minutes showed. Inflation pressures remained contained, in part reflecting “the still high level of the exchange rate and a softening in global prices, in particular for oil and other commodities,” they said.

BHP, Rio
Mining companies including BHP Billiton Ltd. (BHP) and Rio Tinto Group are benefiting from surging demand for steel and electricity in emerging economies including China and India.

Australia’s gross domestic product expanded 4.3 percent in the first quarter this year from a year earlier. Consumer confidence rose to a five-month high as households responded to 1.25 percentage points of RBA rate cuts since November.

The RBA has reduced the overnight cash rate target four times in the past eight months -- by 25 basis points at successive meetings in November and December, by 50 points on May 1 and by another 25 points on June 5.

Policy makers noted that after the June decision, most lenders reduced their standard variable housing rate by about 20 basis points. “As a result, the average interest rate on outstanding housing loans was about 60 basis points below the post-1996 average,” they said.

 

[Muthukali]

OCBC Gets Offers for $2.1 Billion Beverage, Brewery Stakes

Oversea-Chinese Banking Corp. (OCBC), Singapore’s second-biggest bank, and its insurance unit received an offer for their S$2.7 billion ($2.1 billion) stakes in a drinks maker and a brewery partly owned by Heineken NV. (HEIA)

OCBC and its Great Eastern Holdings Ltd. unit are in talks with the bidder, whose name wasn’t disclosed, for the stakes in Fraser & Neave Ltd. (FNN), Singapore’s biggest beverage maker, and Asia Pacific Breweries Ltd. (APB), according to an exchange filing yesterday. The Fraser & Neave stake was worth S$2.04 billion as of yesterday, and their share of Asia Pacific Breweries was valued at S$709 million.

Shares of Fraser & Neave and Asia Pacific Breweries rose to a record today, extending its gains for this year to more than 34 percent, as beer makers globally consolidate to bolster sales. Anheuser-Busch InBev NV, the world’s biggest brewer, in June agreed to buy the remainder of Mexico’s Grupo Modelo SAB for $20.1 billion in cash to gain full control of the Corona maker and expand in emerging markets.

“On the face of it, it looks like an offer intriguing enough for the bank to think about,” said Sam Hilton, a Hong Kong-based analyst at Keefe, Bruyette & Woods Asia Ltd. “If the deal goes through, there are going to be capital issues on what they do with the proceeds: Do they invest in something else or distribute it as special dividends.”

OCBC and Great Eastern hold 18.2 percent of Fraser & Neave and 7.92 percent of Asia Pacific Breweries, according to their statement to the Singapore stock exchange yesterday. The two companies “will make appropriate announcements at the relevant time should circumstances merit such announcements,” they said.

Stock Performance
Shares of OCBC, which owns about 85 percent of Great Eastern, rose 1.2 percent to S$9.29 as of 10:18 a.m. local time. Great Eastern (GE), Singapore’s biggest life insurer, climbed 4.5 percent to S$13.60, the largest gain in more than two years.

Asia Pacific Breweries climbed 2.1 percent to S$35.40. The stock has gained 24 percent this year, compared with a 14 percent advance in the Singapore benchmark Straits Times Index. Fraser & Neave rose 5.2 percent to S$8.31.

Fraser & Neave trades at 15.7 times earnings, while Asia Pacific Breweries is valued at a multiple of 24, exceeding the 10 times price-earnings ratio for the Straits Times Index, according to data compiled by Bloomberg.

The beverage maker said in May its second-quarter profit dropped 21 percent to S$103.5 million from a year earlier, following a charge for terminating a proposed divestment in China. Demand in Asia and policy easing are expected to push growth in the region, which may offer opportunities to expand, Fraser & Neave said at that time.

Kirin’s Purchase
Kirin Holdings Co. (2503), Japan’s largest brewer by market value, bought a 14.7 percent of the company two years ago for S$1.34 billion.

Asia Pacific Breweries said last week it will buy 27.5 million ordinary shares of Mongolian Beverages Co. from Grandkhaan Holdings Ltd. and its controlling shareholder. The partnership will expand into vodka business, it said, which will provide a new income stream and “improve the position of the brewer as a multi-beverage player with product offerings in both beer and vodka.”

SABMiller Plc, the world’s second-biggest beermaker by volume, agreed to buy Foster’s Group Ltd. in Australia last year for about A$10.5 billion.

In China’s fragmented beer market, overseas companies are acquiring or setting up new breweries across the country to widen the reach for their premium brands. Kingway Brewery Holdings Ltd., controlled by the Guangdong provincial government in January, put its assets up for sale in January. Kingway in June said the acquisition talks are continuing, without specifying potential buyers.