Stocks rallied, driving the Stoxx Europe 600 Index to an 18-month high, and commodities jumped as manufacturing expanded in China, Japan and the U.K. The Swiss franc appreciated to a record against the euro for a second day.
The Stoxx Europe 600 rose 1.4 percent to 267.29 at 9:01 a.m. in New York, the highest since September 2008. Futures on the Standard & Poor’s 500 Index gained 0.6 percent and the MSCI Emerging Markets Index climbed for a fifth day, its longest rally of the year. Copper and platinum reached their highest levels since August 2008 and oil climbed to a 17-month high. The Swiss franc strengthened as much as 0.6 percent versus the euro.
China’s manufacturing accelerated, while a Bank of Japan survey showed confidence among the nation’s largest manufacturers rose for a fourth quarter. An index of U.K. output climbed to its highest point since 1994, and European factory production increased at a faster pace than initially estimated in March. U.S. jobless claims fell and the Institute for Supply Management may say its factory index rose last month.
“The strength of the economic recovery was underestimated and the positive dynamic is still under way,” said Rudolf Buxtorf, who helps manage about $500 million at RBS Coutts Bank in Zurich. “It’s too early to be euphoric but the positives have moved to the foreground.”
S&P 500 futures rose as the average number of U.S. jobless claims over the past month fell to the lowest level since 2008, boosting optimism the labor market is improving. Tomorrow, when many U.S. stock markets are closed for holidays, the government will report March payrolls. The median of economists’ forecasts in a Bloomberg survey is for an increase of 182,000, the biggest in three years.
European Shares
The Stoxx Europe 600 advanced as BHP Billiton Ltd., the world’s largest mining company, gained 1.9 percent in London after metals climbed. Rio Tinto Group, the third-biggest mining company, rose 2.9 percent. Cie. Financiere Richemont SA, the world’s largest jewelry maker, increased 2 percent in Zurich after agreeing to buy the remainder of Net-a-Porter LLC, valuing the online fashion retailer at 350 million pounds ($533 million). The MSCI Asia Pacific Index closed 0.9 percent higher.
Mergers and acquisitions gained momentum in the first quarter, with more than 2,034 cross-border transactions and 10 hostile takeovers signaling a recovery from the worst deal market in six years, according to data compiled by Bloomberg.
Emerging Markets
The MSCI emerging markets index rallied to the highest level in almost three months, and China’s Shanghai Composite Index advanced 1.2 percent. Romania’s BET Index jumped 1.9 percent, extending last quarter’s 30 percent rally. Stocks in the smallest developing markets, including Romania, Ukraine and Nigeria, beat their larger peers by the most in almost five years last quarter as the MSCI Frontier Markets Index added more than 10 percent. Russia’s Micex index climbed 1.8 percent, advancing for a sixth day.
Copper for delivery in three months rose 1.6 percent to $7,916 a metric ton on the London Metal Exchange, after earlier reaching $7,938. Aluminum, nickel and zinc also gained. Platinum for immediate delivery jumped 1.1 percent to $1,665 an ounce, and earlier touched $1,667.90. Crude oil for May delivery added 1 percent to $84.63 a barrel in New York.
“Robust economic growth among emerging economies has supported commodity prices,” said Tobias Merath, head of commodity research at Credit Suisse AG in Zurich. “Now the U.S. and Europe are getting increasingly important, as demand there has started to pick up.”
Treasury Sales
The yield on the 10-year Treasury note rose 2 basis point to 3.85 percent, climbing for the first time in three days, as analysts said the U.S. government will announce plans to auction $82.2 billion of securities next week.
The sales will include a record-tying $40 billion in three- year notes, based on a Bloomberg survey of nine primary dealers, companies required to bid at auctions. They will also consist of $8.2 billion in 10-year Treasury Inflation Protected Securities, $21 billion in 10-year notes and $13 billion in 30-year bonds, the dealers forecast. The auctions will take place over four days, starting with the TIPS on April 5.
The Swiss franc strengthened to less than 1.42 per euro for the first time, after a report showed the nation’s manufacturing expanded at the fastest pace in more than three years in March.
Thursday, April 1, 2010
JPMorgan’s Dimon Regrets Using FDIC Guarantee Program (Update2)
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said he regrets using the Federal Deposit Insurance Corp.’s guarantee program to issue $40 billion in unsecured debt during the height of the financial crisis.
“We didn’t need it,” Dimon, 54, said in his annual letter to shareholders, which was released yesterday. “And it just added to the argument that all banks had been bailed out and fueled the anger directed toward banks.”
Dimon said the New York-based company was “highly criticized” for issuing debt backed by the FDIC and for accepting $25 billion from the Troubled Asset Relief Program. The company repaid all TARP funds in June, stopped using the FDIC’s program last April and shunned participation in other federal programs “to avoid the stigma,” he said.
JPMorgan, which ranks second behind Bank of America Corp. in deposits and assets among U.S. lenders, remained profitable through the crisis with combined net income of $17.3 billion in the last two years. The company issued $20.8 billion in FDIC- guaranteed long-term debt in 2008, and $19.7 billion in 2009.
“It was not a question of access or need,” Dimon said of the FDIC program, whose government backing helped keep interest rates low. “The markets always were open to us, but the program did save us money.”
Dimon apologized for what he said were the bank’s mistakes. He said the two biggest were lowering mortgage underwriting standards and making too many leveraged loans that “may have contributed to the financial crisis.” At the same time, he claimed some credit for helping to stabilize markets through JPMorgan’s purchases of Bear Stearns and Washington Mutual.
Finding His Successor
He also sought to deflect some of the public anger toward financial companies and to correct the perception that all banks would have failed if the federal government hadn’t intervened.
“We should acknowledge that the worst offenders among financial companies no longer are in existence,” Dimon said. “And while it is true that some of the surviving banks would not, or might not, have survived, not all banks would have failed.”
Dimon, who took over as CEO in 2005, said his “number-one priority” this year is to find his successor.
“Poor CEO succession has destroyed many a company,” Dimon said, adding that the board believes there are several strong internal candidates that could “do my job today.” He said JPMorgan will continue rotating senior staff across the business to ensure they could smoothly take over the company.
The company also intends to expand retail banking, which accounted for $97 million of JPMorgan’s $11.7 billion in net income last year. Dimon said the bank will add 2,700 personal bankers, 400 investment sales representatives and 120 more branches this year, even though consumer lending lost $3.8 billion in 2009. The bank plans to ramp up its branch expansion in California and Florida over the next two years, building on its acquisition of Washington Mutual, he said.
“We didn’t need it,” Dimon, 54, said in his annual letter to shareholders, which was released yesterday. “And it just added to the argument that all banks had been bailed out and fueled the anger directed toward banks.”
Dimon said the New York-based company was “highly criticized” for issuing debt backed by the FDIC and for accepting $25 billion from the Troubled Asset Relief Program. The company repaid all TARP funds in June, stopped using the FDIC’s program last April and shunned participation in other federal programs “to avoid the stigma,” he said.
JPMorgan, which ranks second behind Bank of America Corp. in deposits and assets among U.S. lenders, remained profitable through the crisis with combined net income of $17.3 billion in the last two years. The company issued $20.8 billion in FDIC- guaranteed long-term debt in 2008, and $19.7 billion in 2009.
“It was not a question of access or need,” Dimon said of the FDIC program, whose government backing helped keep interest rates low. “The markets always were open to us, but the program did save us money.”
Dimon apologized for what he said were the bank’s mistakes. He said the two biggest were lowering mortgage underwriting standards and making too many leveraged loans that “may have contributed to the financial crisis.” At the same time, he claimed some credit for helping to stabilize markets through JPMorgan’s purchases of Bear Stearns and Washington Mutual.
Finding His Successor
He also sought to deflect some of the public anger toward financial companies and to correct the perception that all banks would have failed if the federal government hadn’t intervened.
“We should acknowledge that the worst offenders among financial companies no longer are in existence,” Dimon said. “And while it is true that some of the surviving banks would not, or might not, have survived, not all banks would have failed.”
Dimon, who took over as CEO in 2005, said his “number-one priority” this year is to find his successor.
“Poor CEO succession has destroyed many a company,” Dimon said, adding that the board believes there are several strong internal candidates that could “do my job today.” He said JPMorgan will continue rotating senior staff across the business to ensure they could smoothly take over the company.
The company also intends to expand retail banking, which accounted for $97 million of JPMorgan’s $11.7 billion in net income last year. Dimon said the bank will add 2,700 personal bankers, 400 investment sales representatives and 120 more branches this year, even though consumer lending lost $3.8 billion in 2009. The bank plans to ramp up its branch expansion in California and Florida over the next two years, building on its acquisition of Washington Mutual, he said.
Stock Traders Sleep, Bond Markets Work as Data Hit (Update1)
Tom Schrader, co-head of U.S. stock trading at Stifel Nicolaus & Co., plans to sleep in tomorrow. That’s not an option for all of his bond-market colleagues, said William Heinzerling, the firm’s head of fixed income.
The New York Stock Exchange observes the Christian holiday of Good Friday. The U.S. government doesn’t, sticking to its regular schedule of releasing economic reports with the potential to move markets.
This year, there’s an added wrinkle for at least the fourth time since 1996: Good Friday, whose timing depends on the cycles of the moon, coincides with the Labor Department’s employment report that’s sent out on the first Friday of every month. It’s the most influential planned event for the bond market, according to David Ader, head of government-bond strategy at CRT Capital Group LLC in Stamford, Connecticut.
“I will get up and check the numbers, but I won’t worry about it for the rest of the day,” said Schrader, who works in Baltimore for St. Louis-based Stifel. “There’s nothing anybody in equities can do anyway.”
The Labor Department will publish the data at 8:30 a.m. in Washington tomorrow. Trading of futures linked to the Standard & Poor’s 500 Index and Dow Jones Industrial Average, the benchmark measures of U.S. stocks, will continue until 45 minutes later on CME Group Inc.’s Chicago Mercantile Exchange.
Shares of individual companies won’t change hands on the NYSE and Nasdaq Stock Market. Exchanges from London and Sao Paulo to Paris, Frankfurt and Toronto will also be shut.
Trading Volume
The jobs report may boost stock-trading volume on April 5, when traders and investors return to work, said David Bellantonio. He’s the head of U.S. trading in New York at Instinet, which says it handles about 4 percent of the nation’s equity transactions.
Employers in the U.S. added positions in March, economists said before the report. Payrolls probably rose by 182,000, the most since March 2007, according to the median of 82 forecasts in a Bloomberg News survey.
The smaller-than-estimated decline in payrolls the month before triggered a 1.4 percent rally in the S&P 500 on March 5 and a jump in the benchmark 10-year Treasury note’s yield to 3.68 percent from 3.60 percent. Optimism that the economic recovery will last has driven the S&P 500 up 2.7 percent since then, and the Treasury note’s yield reached 3.92 percent, the highest since June, last week.
The last time monthly employment data, Good Friday and a closed stock market coincided was in 2007.
More Than Estimated
After the Labor Department said on April 6, 2007, that employers added 50,000 more jobs than economists projected, the 10-year Treasury yield jumped to an eight-week high of 4.75 percent from 4.68 percent. June futures on the S&P 500 climbed 0.4 percent. On Monday, April 9, the S&P 500 and Dow rose 0.1 percent to six-week highs. Gains were limited by a 4.3 percent retreat in the price of crude oil, which dragged down shares of energy producers.
Good Friday on April 5, 1996, saw the 10-year Treasury yield jump 0.20 percentage point, the most in a month, after an increase in payrolls was more than twice as large as estimated. When the NYSE reopened on April 8, the S&P 500 slid 1.8 percent and the Dow fell 1.6 percent.
While the bond market will be open tomorrow, the Securities Industry and Financial Markets Association recommended that trading end early at 12 p.m. in New York. In 2008 and 2009, Sifma recommended no trading on Good Friday given the absence of major economic news.
“It’s business as usual for us,” said Mark Porterfield, a spokesman for Pacific Investment Management Co. in Newport Beach, California, which manages the world’s biggest bond fund.
Any changes in bond prices tomorrow won’t be reflected in mutual fund share prices until April 5. Mutual funds are governed by their prospectus language, which typically states that a share price is calculated on days when the NYSE is open, said Peter Salmon, director of operations and technology at the Investment Company Institute in Washington.
“Funds are closed when the NYSE is closed,” Salmon said.
The New York Stock Exchange observes the Christian holiday of Good Friday. The U.S. government doesn’t, sticking to its regular schedule of releasing economic reports with the potential to move markets.
This year, there’s an added wrinkle for at least the fourth time since 1996: Good Friday, whose timing depends on the cycles of the moon, coincides with the Labor Department’s employment report that’s sent out on the first Friday of every month. It’s the most influential planned event for the bond market, according to David Ader, head of government-bond strategy at CRT Capital Group LLC in Stamford, Connecticut.
“I will get up and check the numbers, but I won’t worry about it for the rest of the day,” said Schrader, who works in Baltimore for St. Louis-based Stifel. “There’s nothing anybody in equities can do anyway.”
The Labor Department will publish the data at 8:30 a.m. in Washington tomorrow. Trading of futures linked to the Standard & Poor’s 500 Index and Dow Jones Industrial Average, the benchmark measures of U.S. stocks, will continue until 45 minutes later on CME Group Inc.’s Chicago Mercantile Exchange.
Shares of individual companies won’t change hands on the NYSE and Nasdaq Stock Market. Exchanges from London and Sao Paulo to Paris, Frankfurt and Toronto will also be shut.
Trading Volume
The jobs report may boost stock-trading volume on April 5, when traders and investors return to work, said David Bellantonio. He’s the head of U.S. trading in New York at Instinet, which says it handles about 4 percent of the nation’s equity transactions.
Employers in the U.S. added positions in March, economists said before the report. Payrolls probably rose by 182,000, the most since March 2007, according to the median of 82 forecasts in a Bloomberg News survey.
The smaller-than-estimated decline in payrolls the month before triggered a 1.4 percent rally in the S&P 500 on March 5 and a jump in the benchmark 10-year Treasury note’s yield to 3.68 percent from 3.60 percent. Optimism that the economic recovery will last has driven the S&P 500 up 2.7 percent since then, and the Treasury note’s yield reached 3.92 percent, the highest since June, last week.
The last time monthly employment data, Good Friday and a closed stock market coincided was in 2007.
More Than Estimated
After the Labor Department said on April 6, 2007, that employers added 50,000 more jobs than economists projected, the 10-year Treasury yield jumped to an eight-week high of 4.75 percent from 4.68 percent. June futures on the S&P 500 climbed 0.4 percent. On Monday, April 9, the S&P 500 and Dow rose 0.1 percent to six-week highs. Gains were limited by a 4.3 percent retreat in the price of crude oil, which dragged down shares of energy producers.
Good Friday on April 5, 1996, saw the 10-year Treasury yield jump 0.20 percentage point, the most in a month, after an increase in payrolls was more than twice as large as estimated. When the NYSE reopened on April 8, the S&P 500 slid 1.8 percent and the Dow fell 1.6 percent.
While the bond market will be open tomorrow, the Securities Industry and Financial Markets Association recommended that trading end early at 12 p.m. in New York. In 2008 and 2009, Sifma recommended no trading on Good Friday given the absence of major economic news.
“It’s business as usual for us,” said Mark Porterfield, a spokesman for Pacific Investment Management Co. in Newport Beach, California, which manages the world’s biggest bond fund.
Any changes in bond prices tomorrow won’t be reflected in mutual fund share prices until April 5. Mutual funds are governed by their prospectus language, which typically states that a share price is calculated on days when the NYSE is open, said Peter Salmon, director of operations and technology at the Investment Company Institute in Washington.
“Funds are closed when the NYSE is closed,” Salmon said.
Jobless Claims in U.S. Decreased by 6,000 to 439,000 (Update1)
Fewer Americans filed claims for jobless benefits last week, bringing the average over the past month to the lowest level since 2008, as the economic recovery prompted companies to retain staff.
Initial jobless applications declined by 6,000 to 439,000 in the week ended March 27, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance was little changed, while those getting extended benefits rose.
Employers are slowing job cuts, a sign of confidence, as the U.S. emerges from the worst recession since the 1930s. Sustained employment gains are needed to boost consumer spending, which accounts for about 70 percent of the economy.
“We are turning a corner in the labor market,” said Julia Coronado, a senior U.S. economist at BNP Paribas in New York, who had forecast a decline in the weekly jobless claims. “Businesses are gradually starting to have more confidence in the recovery.”
Economists forecast weekly claims would fall to 440,000, from a previously estimated 442,000 for the week ended March 20, according to the median of 46 projections in a Bloomberg News survey. Estimates ranged from 420,000 to 455,000.
Stock-index futures held gains and Treasury securities declined after the report. Futures on the Standard & Poor’s 500 Index expiring in June rose 0.6 percent to 1,172.7 at 8:46 a.m. in New York. The 10-year Treasury note fell, pushing up the yield to 3.85 percent from 3.83 percent late yesterday.
Job-Cut Announcements
Employers announced fewer job cuts in March than a year earlier, another report showed today. Planned firings fell 55 percent last month to 67,611 from 150,411 a year earlier, according to data collected by the job placement firm Challenger, Gray & Christmas Inc. Announcements increased from February’s three-year low of 42,090.
Companies unexpectedly cut payrolls in March, a report from ADP Employer Services showed yesterday. The 23,000 decline in payrolls was the smallest in two years and followed a revised 24,000 drop the prior month.
The four-week moving average of claims, a less volatile measure than the weekly figures, decreased to 447,250 last week, the lowest level since September 2008, today’s report showed.
Continuing Claims
The number of people continuing to receive jobless benefits decreased by 6,000 in the week ended March 20 to 4.66 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
The number of people who’ve used up their traditional benefits and are now collecting emergency and extended payments climbed by about 264,000 to 6.03 million in the week ended March 13.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.6 percent in the week ended March 20, today’s report showed. Thirteen states and territories had an increase in claims for that same week, while 40 showed a decrease, led by California.
Payrolls declined by 36,000 in February, the Labor Department said on March 5. Economists anticipate employers added about 180,000 jobs in March, according to a Bloomberg survey before tomorrow’ report.
Jobless Rate
The jobless rate in March is projected to hold at 9.7 percent for a third consecutive month, the survey median showed. The unemployment rate has not increased since reaching a 26-year high of 10.1 percent in October.
Caterpillar Inc., the world’s largest maker of construction equipment, said last week it plans to hire 500 workers this year to expand a generator plant in Newberry, South Carolina. “The expansion is likely to take three to four years and could vary based on demand and other factors,” Jim Dugan, a Caterpillar spokesman, said March 17 in an e-mail.
Other companies are still trimming payrolls. J.M. Smucker Co., the maker of jams, Folgers coffee and Jif peanut butter, said last week it is reducing the number of North American manufacturing facilities to 18, from 22. The cuts are estimated to result in a reduction of 700 full-time positions, or 15 percent of the Orrville, Ohio-based company’s workforce.
Initial jobless applications declined by 6,000 to 439,000 in the week ended March 27, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance was little changed, while those getting extended benefits rose.
Employers are slowing job cuts, a sign of confidence, as the U.S. emerges from the worst recession since the 1930s. Sustained employment gains are needed to boost consumer spending, which accounts for about 70 percent of the economy.
“We are turning a corner in the labor market,” said Julia Coronado, a senior U.S. economist at BNP Paribas in New York, who had forecast a decline in the weekly jobless claims. “Businesses are gradually starting to have more confidence in the recovery.”
Economists forecast weekly claims would fall to 440,000, from a previously estimated 442,000 for the week ended March 20, according to the median of 46 projections in a Bloomberg News survey. Estimates ranged from 420,000 to 455,000.
Stock-index futures held gains and Treasury securities declined after the report. Futures on the Standard & Poor’s 500 Index expiring in June rose 0.6 percent to 1,172.7 at 8:46 a.m. in New York. The 10-year Treasury note fell, pushing up the yield to 3.85 percent from 3.83 percent late yesterday.
Job-Cut Announcements
Employers announced fewer job cuts in March than a year earlier, another report showed today. Planned firings fell 55 percent last month to 67,611 from 150,411 a year earlier, according to data collected by the job placement firm Challenger, Gray & Christmas Inc. Announcements increased from February’s three-year low of 42,090.
Companies unexpectedly cut payrolls in March, a report from ADP Employer Services showed yesterday. The 23,000 decline in payrolls was the smallest in two years and followed a revised 24,000 drop the prior month.
The four-week moving average of claims, a less volatile measure than the weekly figures, decreased to 447,250 last week, the lowest level since September 2008, today’s report showed.
Continuing Claims
The number of people continuing to receive jobless benefits decreased by 6,000 in the week ended March 20 to 4.66 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
The number of people who’ve used up their traditional benefits and are now collecting emergency and extended payments climbed by about 264,000 to 6.03 million in the week ended March 13.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.6 percent in the week ended March 20, today’s report showed. Thirteen states and territories had an increase in claims for that same week, while 40 showed a decrease, led by California.
Payrolls declined by 36,000 in February, the Labor Department said on March 5. Economists anticipate employers added about 180,000 jobs in March, according to a Bloomberg survey before tomorrow’ report.
Jobless Rate
The jobless rate in March is projected to hold at 9.7 percent for a third consecutive month, the survey median showed. The unemployment rate has not increased since reaching a 26-year high of 10.1 percent in October.
Caterpillar Inc., the world’s largest maker of construction equipment, said last week it plans to hire 500 workers this year to expand a generator plant in Newberry, South Carolina. “The expansion is likely to take three to four years and could vary based on demand and other factors,” Jim Dugan, a Caterpillar spokesman, said March 17 in an e-mail.
Other companies are still trimming payrolls. J.M. Smucker Co., the maker of jams, Folgers coffee and Jif peanut butter, said last week it is reducing the number of North American manufacturing facilities to 18, from 22. The cuts are estimated to result in a reduction of 700 full-time positions, or 15 percent of the Orrville, Ohio-based company’s workforce.
Gartmore Shows U.K. Firms Wary as FSA Pursues Traders (Update2)
Gartmore Group Ltd.’s suspension this week of hedge-fund manager Guillaume Rambourg underscores heightened caution among U.K. companies as the Financial Services Authority cracks down on illegal trading.
“A number of people said this sounds like this is a little bit too far, too much of a rap on the knuckles,” Jeffrey Meyer, chief executive officer of London-based Gartmore, said in a telephone interview yesterday. “But we were in consultation with the FSA. We got their views on the situation.”
Rambourg, a 15-year veteran of the firm who runs marathons to raise money for charity, may have directed buy and sell orders to favored brokers in violation of internal rules, Meyer said. The firm has a central desk with responsibility for routing trades. Its compliance managers uncovered the breaches late on March 24, and the FSA was alerted the next day.
Gartmore announced its decision on March 30, a week after the FSA, the primary financial-services regulator in Britain, arrested employees of Deutsche Bank AG, Exane BNP Paribas and Moore Capital Management LLC in a probe of insider trading. In a separate case, the FSA yesterday charged seven people in connection with an insider-trading ring that prosecutors said made about 2.5 million pounds ($3.8 million) in illegal profits.
The Conservative Party said it wants to phase out the FSA, which Prime Minister Gordon Brown created in 1997 while finance minister. The Conservatives, who are squaring off with Brown’s Labour Party in an election that must be held by June 3, argue the agency was too lax and was partly to blame for the worst market turmoil in a generation.
FSA More Aggressive
Gartmore’s decision to suspend Rambourg shows that what may have once been considered minor infractions are now being dealt with harshly, said Jon Moulton, founder and chairman of Better Capital Ltd., a London-based investment manager.
“There’s bound to be some worried traders out there,” said Moulton, the former managing partner of buyout firm Alchemy Partners LLP. “If you’re engaged in inappropriate behavior then this latest crackdown by the FSA must be pretty scary. The FSA is being much more aggressive than it used to be.”
Gartmore’s market value tumbled by almost a third within two hours of the suspension announcement. Rambourg, together with Roger Guy, managed 8.1 billion pounds, or more than a third of the firm’s assets. Guy isn’t under investigation, Gartmore said yesterday.
Guy Staying
“Boards are usually afraid of star fund managers, especially if they’re successful,” said Joe Seet, senior partner at Sigma Partnership, a London hedge-fund advisory firm. “It takes some guts to say the rules are the rules, no matter who you are.”
Speaking in a conference call with investors this morning, Guy reaffirmed his commitment to the money manager amid concern he may leave the firm after 18 years of service.
“I have a substantial amount of my own money invested in the funds that Guillaume and I run,” he said. “Very importantly, I have no intention of going anywhere else. I am totally committed to the firm.”
Traders increased their bets that Gartmore’s stock would fall before the probe was disclosed.
The percentage of shares on loan, which usually indicates short-selling interest, reached 23 percent on March 26, seven times the amount a month earlier, according to Data Explorers in London, a consultant on short selling and securities financing. Short sellers profit by borrowing shares on the expectation they will drop in price and be cheaper to buy and replace later.
Shares Rise
Gartmore jumped 14 percent, or 17 pence, to 142 pence as of 1:15 p.m. in London trading, giving it a market value of 436 million pounds. The company lost about 43 percent of its value since its December initial public offering before today.
Rambourg ranks as the firm’s second-largest individual investor with 11.8 million shares, or 3.85 percent of the company, according to data compiled by Bloomberg. Guy is the largest individual investor with a 5.6 percent stake.
Rambourg, 39, spent more than a decade running some of the U.K.’s best-performing hedge funds.
He and Guy managed Gartmore’s $2.3 billion Alphagen Capella fund since it started in 1999 and the $828 million Alphagen Tucana Fund since its inception in 2005. Tucana returned 42 percent last year, ranking in the top 20 percent of similar funds, according to data compiled by Bloomberg. Capella rose 12 percent in 2009.
Industry Award
Two months ago, the pair collected the award for 2009’s best European Equity Fund of more than $500 million from EuroHedge, an industry publication that stages an annual black- tie awards dinner for more than 800 fund managers at Mayfair’s Grosvenor House Hotel.
“He’s been in the game for a long time and is one of the industry better respected individuals,” said Morten Spenner, chief executive officer of London-based International Asset Management Ltd., which manages $3 billion in hedge funds. “On the surface the situation doesn’t seem as grave as people have interpreted it to be.”
Born in Ottawa, Rambourg is the son of United Nations diplomat whose upbringing in New York left him with an American accent. He graduated from ESSEC, one of France’s top business schools, in 1993 after majoring in finance, and joined Gartmore in 1995, according to the firm’s Web site. He became an associate member of the U.K. Society of Investment Professionals in 1997. He didn’t respond to e-mails or calls for comment.
London Marathon
Rambourg last April completed the London Marathon in three hours and 11 minutes, finishing in the top 5 percent of runners. He raised 35,000 pounds for charities Peace One Day and Get Kids Going, according to an e-mail he sent thanking supporters.
“This is a guy that in my five years in dealing with him has acted with a great deal of integrity and respect and always puts the interest of his clients first,” Meyer said. Gartmore hasn’t suffered “material outflows yet,” he said.
Analysts said withdrawals may be coming.
“I don’t see why anyone would want to put their money into Gartmore funds,” Katrina Hart, an analyst at Cannacord Adams in London, said in a telephone interview yesterday. “Once you get these reputational question marks, it is very, very difficult to contain.” The analyst cut her rating on Gartmore to “sell” from “hold.”
“A number of people said this sounds like this is a little bit too far, too much of a rap on the knuckles,” Jeffrey Meyer, chief executive officer of London-based Gartmore, said in a telephone interview yesterday. “But we were in consultation with the FSA. We got their views on the situation.”
Rambourg, a 15-year veteran of the firm who runs marathons to raise money for charity, may have directed buy and sell orders to favored brokers in violation of internal rules, Meyer said. The firm has a central desk with responsibility for routing trades. Its compliance managers uncovered the breaches late on March 24, and the FSA was alerted the next day.
Gartmore announced its decision on March 30, a week after the FSA, the primary financial-services regulator in Britain, arrested employees of Deutsche Bank AG, Exane BNP Paribas and Moore Capital Management LLC in a probe of insider trading. In a separate case, the FSA yesterday charged seven people in connection with an insider-trading ring that prosecutors said made about 2.5 million pounds ($3.8 million) in illegal profits.
The Conservative Party said it wants to phase out the FSA, which Prime Minister Gordon Brown created in 1997 while finance minister. The Conservatives, who are squaring off with Brown’s Labour Party in an election that must be held by June 3, argue the agency was too lax and was partly to blame for the worst market turmoil in a generation.
FSA More Aggressive
Gartmore’s decision to suspend Rambourg shows that what may have once been considered minor infractions are now being dealt with harshly, said Jon Moulton, founder and chairman of Better Capital Ltd., a London-based investment manager.
“There’s bound to be some worried traders out there,” said Moulton, the former managing partner of buyout firm Alchemy Partners LLP. “If you’re engaged in inappropriate behavior then this latest crackdown by the FSA must be pretty scary. The FSA is being much more aggressive than it used to be.”
Gartmore’s market value tumbled by almost a third within two hours of the suspension announcement. Rambourg, together with Roger Guy, managed 8.1 billion pounds, or more than a third of the firm’s assets. Guy isn’t under investigation, Gartmore said yesterday.
Guy Staying
“Boards are usually afraid of star fund managers, especially if they’re successful,” said Joe Seet, senior partner at Sigma Partnership, a London hedge-fund advisory firm. “It takes some guts to say the rules are the rules, no matter who you are.”
Speaking in a conference call with investors this morning, Guy reaffirmed his commitment to the money manager amid concern he may leave the firm after 18 years of service.
“I have a substantial amount of my own money invested in the funds that Guillaume and I run,” he said. “Very importantly, I have no intention of going anywhere else. I am totally committed to the firm.”
Traders increased their bets that Gartmore’s stock would fall before the probe was disclosed.
The percentage of shares on loan, which usually indicates short-selling interest, reached 23 percent on March 26, seven times the amount a month earlier, according to Data Explorers in London, a consultant on short selling and securities financing. Short sellers profit by borrowing shares on the expectation they will drop in price and be cheaper to buy and replace later.
Shares Rise
Gartmore jumped 14 percent, or 17 pence, to 142 pence as of 1:15 p.m. in London trading, giving it a market value of 436 million pounds. The company lost about 43 percent of its value since its December initial public offering before today.
Rambourg ranks as the firm’s second-largest individual investor with 11.8 million shares, or 3.85 percent of the company, according to data compiled by Bloomberg. Guy is the largest individual investor with a 5.6 percent stake.
Rambourg, 39, spent more than a decade running some of the U.K.’s best-performing hedge funds.
He and Guy managed Gartmore’s $2.3 billion Alphagen Capella fund since it started in 1999 and the $828 million Alphagen Tucana Fund since its inception in 2005. Tucana returned 42 percent last year, ranking in the top 20 percent of similar funds, according to data compiled by Bloomberg. Capella rose 12 percent in 2009.
Industry Award
Two months ago, the pair collected the award for 2009’s best European Equity Fund of more than $500 million from EuroHedge, an industry publication that stages an annual black- tie awards dinner for more than 800 fund managers at Mayfair’s Grosvenor House Hotel.
“He’s been in the game for a long time and is one of the industry better respected individuals,” said Morten Spenner, chief executive officer of London-based International Asset Management Ltd., which manages $3 billion in hedge funds. “On the surface the situation doesn’t seem as grave as people have interpreted it to be.”
Born in Ottawa, Rambourg is the son of United Nations diplomat whose upbringing in New York left him with an American accent. He graduated from ESSEC, one of France’s top business schools, in 1993 after majoring in finance, and joined Gartmore in 1995, according to the firm’s Web site. He became an associate member of the U.K. Society of Investment Professionals in 1997. He didn’t respond to e-mails or calls for comment.
London Marathon
Rambourg last April completed the London Marathon in three hours and 11 minutes, finishing in the top 5 percent of runners. He raised 35,000 pounds for charities Peace One Day and Get Kids Going, according to an e-mail he sent thanking supporters.
“This is a guy that in my five years in dealing with him has acted with a great deal of integrity and respect and always puts the interest of his clients first,” Meyer said. Gartmore hasn’t suffered “material outflows yet,” he said.
Analysts said withdrawals may be coming.
“I don’t see why anyone would want to put their money into Gartmore funds,” Katrina Hart, an analyst at Cannacord Adams in London, said in a telephone interview yesterday. “Once you get these reputational question marks, it is very, very difficult to contain.” The analyst cut her rating on Gartmore to “sell” from “hold.”
CLOs Set for Revival as ‘Green Shoots’ Emerge, Citigroup Says
Demand for collateralized loan obligations is reviving, according to Citigroup Inc., as leveraged loan prices surge to the highest in almost two years.
CLOs, shunned for their role in causing $1.76 trillion of bank write downs, buy leveraged loans and then use the payments as collateral for bonds. Citigroup last month priced a $525 million deal in the first new issue in a year. Leveraged, or junk-rated, loans typically fund buyouts.
“More deals are expected in the course of the year,” analysts led by New York-based Ratul Roy wrote in a note to clients published yesterday. The first “green shoots” can be seen by fund managers acquiring weaker rivals, Roy said.
Leveraged loans prices rose to 91.7 percent of face value this week, the highest since June 25, 2008, according to an S&P/LSTA index of the 100 largest dollar-denominated deals. The gauge fell to a low of 59 percent in Dec. 17, 2008.
Loan defaults have shrunk to a rate of 5.7 percent at the end of the first quarter from a record 11 percent in November, according to Citigroup, which forecasts a default rate of 3 percent to 4 percent this year.
At the height of the credit crisis, about two-thirds of CLOs stopped paying holders of their lowest-ranked equity pieces, according to Citigroup. Now about half of the tranches are fully paid.
Fees
“Along with better equity cash flows, manager fees are also looking healthier and should prompt more mandate transfers,” or portfolios changing hands, the analysts wrote in the report.
Deerfield Capital Corp last month agreed to buy Columbus Nova Credit Investment Management LLC, an asset manager of $1.8 billion in loans, from Bounty Investments LLC, an investment vehicle controlled by New York-based Renova U.S. Management LLC. Deerfield agreed to pay $25 million in stock and $7.5 million in deferred cash payments over five years.
Avoca Capital Holdings, a Dublin-based asset manager, in December replaced KBC Financial Products U.K. Ltd. as manager of a 350 million-euro Lombard Street CLO. Nomura Holdings Inc. is seeking to offload management of CLOs it acquired from ACA Capital Holdings Inc., according to the report.
In a leveraged buyout, private-equity firms borrow to pay for part of the acquisition by using the target company’s cash flow to repay lenders and loading it with debt. The borrowings are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.
CLOs, shunned for their role in causing $1.76 trillion of bank write downs, buy leveraged loans and then use the payments as collateral for bonds. Citigroup last month priced a $525 million deal in the first new issue in a year. Leveraged, or junk-rated, loans typically fund buyouts.
“More deals are expected in the course of the year,” analysts led by New York-based Ratul Roy wrote in a note to clients published yesterday. The first “green shoots” can be seen by fund managers acquiring weaker rivals, Roy said.
Leveraged loans prices rose to 91.7 percent of face value this week, the highest since June 25, 2008, according to an S&P/LSTA index of the 100 largest dollar-denominated deals. The gauge fell to a low of 59 percent in Dec. 17, 2008.
Loan defaults have shrunk to a rate of 5.7 percent at the end of the first quarter from a record 11 percent in November, according to Citigroup, which forecasts a default rate of 3 percent to 4 percent this year.
At the height of the credit crisis, about two-thirds of CLOs stopped paying holders of their lowest-ranked equity pieces, according to Citigroup. Now about half of the tranches are fully paid.
Fees
“Along with better equity cash flows, manager fees are also looking healthier and should prompt more mandate transfers,” or portfolios changing hands, the analysts wrote in the report.
Deerfield Capital Corp last month agreed to buy Columbus Nova Credit Investment Management LLC, an asset manager of $1.8 billion in loans, from Bounty Investments LLC, an investment vehicle controlled by New York-based Renova U.S. Management LLC. Deerfield agreed to pay $25 million in stock and $7.5 million in deferred cash payments over five years.
Avoca Capital Holdings, a Dublin-based asset manager, in December replaced KBC Financial Products U.K. Ltd. as manager of a 350 million-euro Lombard Street CLO. Nomura Holdings Inc. is seeking to offload management of CLOs it acquired from ACA Capital Holdings Inc., according to the report.
In a leveraged buyout, private-equity firms borrow to pay for part of the acquisition by using the target company’s cash flow to repay lenders and loading it with debt. The borrowings are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.
Nigeria Beats BRICs as Mobius Expects Frontier Rally (Update2)
Stocks in the smallest developing markets are beating their larger peers by the most in almost five years and Templeton Asset Management Ltd.’s Mark Mobius says they will keep rallying as consumer demand picks up.
The MSCI Frontier Markets Index rose 11 percent this year, outpacing the MSCI Emerging Markets Index by 9 percentage points, the widest gap since the second quarter of 2005. The gauge of shares from Ukraine to Kenya and Vietnam trades for 1.5 times net assets, a 29 percent discount to the MSCI emerging index, which is dominated by Brazil, Russia, India and China.
Frontier markets are outperforming even as analysts cut “buy” ratings this year in 10 of 14 countries tracked by Bloomberg and forecast earnings will trail those in the so- called BRIC nations. The estimates ignore the boost to profits from rising commodities and consumer demand in the smaller markets, making them among the best “contrarian” bets, said Mobius, who oversees about $34 billion in developing nations.
“We may go into an era where the small markets are going to steal the show,” said Antoine van Agtmael, who coined the term “emerging markets” in 1981 and now oversees about $13 billion at Emerging Markets Management LLC in Arlington, Virginia. “They haven’t been fully discovered but are very interesting, quite attractively priced and show a lot of promise.”
Discount
The MSCI frontier index’s 29 percent price-to-book discount to the emerging gauge is more than double the average 14 percent since Bloomberg began compiling the data in July 2008. The frontier gauge yields 2.9 percent in dividends, compared with 2 percent for the MSCI emerging index, Bloomberg data show.
The emerging-market gauge climbed 1.2 percent to 1,022.72 as of 7:49 a.m. in New York. Among frontier markets, Vietnam’s VN Index advanced 1.8 percent while Romania’s BET Index gained 1.7 percent and Nigeria’s All Share Index rose 1.2 percent. Ukraine’s PFTS Index fell 2.3 percent.
Consumer goods companies in the MSCI frontier index are projected to increase operating profits at a 20 percent pace for the next five years, compared with 18 percent for companies in the MSCI emerging gauge and 13 percent for those in the MSCI World Index of advanced nations, according to estimates compiled by Bloomberg.
While overall earnings are forecast to grow faster in the biggest developing countries, they are valued at cheaper levels in frontier markets. The MSCI frontier gauge of companies with an average market value of $2.1 billion trades at 10 times this year’s profit estimates, compared with 13 times for the emerging index, where the average company has a value of $8.7 billion.
‘Larger Risks’
“You’re taking slightly larger risks in terms of liquidity and transparency of these markets, but right now you’re getting paid well for taking on those risks,” said HSBC Holdings Plc’s Andrea Nannini, whose New Frontiers Fund rose 71 percent in the 12 months through February, beating the MSCI frontier index by 20 percentage points. “There may be not a lot of obvious value left in the larger emerging markets.”
The MSCI frontier gauge gained 60 percent from a 5 1/2-year low in March 2009 as governments committed about $12 trillion to revive the global economy and developing-nation borrowing costs dropped to below their level before New York-based Lehman Brothers Holdings Inc. declared bankruptcy in September 2008. Countries represented in MSCI’s frontier gauge are poised to grow about 2.5 percent on average in 2010, according to estimates from the Washington-based International Monetary Fund.
Ukraine
Ukraine’s PFTS Index has climbed 64 percent this year, the best rally among 93 stock benchmark measures tracked by Bloomberg, after a new government led by President Viktor Yanukovych pledged to resume cooperation with the IMF on a $16.4 billion loan package frozen since November. Interpipe, a Ukrainian maker of metal pipes, and steel company Mariupolsky Metallurgical Plant both soared more than 60 percent.
The largest emerging markets trailed this year’s rally in developing-nation stocks on concern rising inflation will force central banks to raise interest rates. The Shanghai Composite Index sank 5.1 percent as China lifted bank reserve requirements twice and economists in a Bloomberg survey said the central bank may raise interest rates this month.
The Reserve Bank of India unexpectedly raised interest rates last month for the first time in almost two years, while traders are betting Brazil’s central bank will boost borrowing costs by at least 50 basis points at its next policy meeting April 28. The Bombay Stock Exchange Sensitive Index gained 0.4 percent in 2010, while the Bovespa index climbed 2.1 percent. Russia’s Micex index is up 5.9 percent.
Buy Ratings
The outperformance of frontier markets is making analysts less optimistic. They cut buy ratings on shares in Romania to 37.6 percent of the total last month, the lowest level since Bloomberg began tracking at least 20 ratings in the country in July 2005. Recommendations in Kenya, Kuwait, Oman and Bahrain also sank to record lows, Bloomberg data show.
“Given their gains, I wouldn’t say that we’re finding screaming value in some of these markets now,” said Hugh Young, who counts shares in Sri Lanka, Pakistan and Nigeria among the $232 billion of assets he helps to manage as head of equities at Aberdeen Asset Management Plc in Singapore.
Developing-nation money managers have been increasing their allocation to frontier markets, said Brad Durham, managing director of Cambridge, Massachusetts-based researcher EPFR Global. Funds tracking the smallest developing nations have drawn about $269 million this year after outflows of $249 million the same period a year earlier, EPFR data show.
‘Quite Exciting’
Mobius, the Singapore-based executive chairman of Templeton Asset Management, said about 10 percent of his holdings are in frontier nations and that Nigeria, Africa’s biggest oil producer, is among the most attractive markets.
“Frontier markets in general are quite exciting,” Mobius said. “The valuations are still interesting in those markets.”
Nigerian Breweries Plc, the country’s biggest brewer, was ranked among the 10 largest holdings in Templeton’s Frontier Markets Fund as of Dec. 31, data compiled by Bloomberg show. The Lagos-based company reported a 9 percent gain in 2009 profit, and the shares have risen 17 percent this year.
“Markets are back on the boil,” said Arjuna Mahendran, Singapore-based investment strategist at HSBC’s private bank unit, which oversaw total client assets of about $460 billion as of Dec. 31. “But we’re nowhere near the exuberance that’s associated with an impending crash.”
The MSCI Frontier Markets Index rose 11 percent this year, outpacing the MSCI Emerging Markets Index by 9 percentage points, the widest gap since the second quarter of 2005. The gauge of shares from Ukraine to Kenya and Vietnam trades for 1.5 times net assets, a 29 percent discount to the MSCI emerging index, which is dominated by Brazil, Russia, India and China.
Frontier markets are outperforming even as analysts cut “buy” ratings this year in 10 of 14 countries tracked by Bloomberg and forecast earnings will trail those in the so- called BRIC nations. The estimates ignore the boost to profits from rising commodities and consumer demand in the smaller markets, making them among the best “contrarian” bets, said Mobius, who oversees about $34 billion in developing nations.
“We may go into an era where the small markets are going to steal the show,” said Antoine van Agtmael, who coined the term “emerging markets” in 1981 and now oversees about $13 billion at Emerging Markets Management LLC in Arlington, Virginia. “They haven’t been fully discovered but are very interesting, quite attractively priced and show a lot of promise.”
Discount
The MSCI frontier index’s 29 percent price-to-book discount to the emerging gauge is more than double the average 14 percent since Bloomberg began compiling the data in July 2008. The frontier gauge yields 2.9 percent in dividends, compared with 2 percent for the MSCI emerging index, Bloomberg data show.
The emerging-market gauge climbed 1.2 percent to 1,022.72 as of 7:49 a.m. in New York. Among frontier markets, Vietnam’s VN Index advanced 1.8 percent while Romania’s BET Index gained 1.7 percent and Nigeria’s All Share Index rose 1.2 percent. Ukraine’s PFTS Index fell 2.3 percent.
Consumer goods companies in the MSCI frontier index are projected to increase operating profits at a 20 percent pace for the next five years, compared with 18 percent for companies in the MSCI emerging gauge and 13 percent for those in the MSCI World Index of advanced nations, according to estimates compiled by Bloomberg.
While overall earnings are forecast to grow faster in the biggest developing countries, they are valued at cheaper levels in frontier markets. The MSCI frontier gauge of companies with an average market value of $2.1 billion trades at 10 times this year’s profit estimates, compared with 13 times for the emerging index, where the average company has a value of $8.7 billion.
‘Larger Risks’
“You’re taking slightly larger risks in terms of liquidity and transparency of these markets, but right now you’re getting paid well for taking on those risks,” said HSBC Holdings Plc’s Andrea Nannini, whose New Frontiers Fund rose 71 percent in the 12 months through February, beating the MSCI frontier index by 20 percentage points. “There may be not a lot of obvious value left in the larger emerging markets.”
The MSCI frontier gauge gained 60 percent from a 5 1/2-year low in March 2009 as governments committed about $12 trillion to revive the global economy and developing-nation borrowing costs dropped to below their level before New York-based Lehman Brothers Holdings Inc. declared bankruptcy in September 2008. Countries represented in MSCI’s frontier gauge are poised to grow about 2.5 percent on average in 2010, according to estimates from the Washington-based International Monetary Fund.
Ukraine
Ukraine’s PFTS Index has climbed 64 percent this year, the best rally among 93 stock benchmark measures tracked by Bloomberg, after a new government led by President Viktor Yanukovych pledged to resume cooperation with the IMF on a $16.4 billion loan package frozen since November. Interpipe, a Ukrainian maker of metal pipes, and steel company Mariupolsky Metallurgical Plant both soared more than 60 percent.
The largest emerging markets trailed this year’s rally in developing-nation stocks on concern rising inflation will force central banks to raise interest rates. The Shanghai Composite Index sank 5.1 percent as China lifted bank reserve requirements twice and economists in a Bloomberg survey said the central bank may raise interest rates this month.
The Reserve Bank of India unexpectedly raised interest rates last month for the first time in almost two years, while traders are betting Brazil’s central bank will boost borrowing costs by at least 50 basis points at its next policy meeting April 28. The Bombay Stock Exchange Sensitive Index gained 0.4 percent in 2010, while the Bovespa index climbed 2.1 percent. Russia’s Micex index is up 5.9 percent.
Buy Ratings
The outperformance of frontier markets is making analysts less optimistic. They cut buy ratings on shares in Romania to 37.6 percent of the total last month, the lowest level since Bloomberg began tracking at least 20 ratings in the country in July 2005. Recommendations in Kenya, Kuwait, Oman and Bahrain also sank to record lows, Bloomberg data show.
“Given their gains, I wouldn’t say that we’re finding screaming value in some of these markets now,” said Hugh Young, who counts shares in Sri Lanka, Pakistan and Nigeria among the $232 billion of assets he helps to manage as head of equities at Aberdeen Asset Management Plc in Singapore.
Developing-nation money managers have been increasing their allocation to frontier markets, said Brad Durham, managing director of Cambridge, Massachusetts-based researcher EPFR Global. Funds tracking the smallest developing nations have drawn about $269 million this year after outflows of $249 million the same period a year earlier, EPFR data show.
‘Quite Exciting’
Mobius, the Singapore-based executive chairman of Templeton Asset Management, said about 10 percent of his holdings are in frontier nations and that Nigeria, Africa’s biggest oil producer, is among the most attractive markets.
“Frontier markets in general are quite exciting,” Mobius said. “The valuations are still interesting in those markets.”
Nigerian Breweries Plc, the country’s biggest brewer, was ranked among the 10 largest holdings in Templeton’s Frontier Markets Fund as of Dec. 31, data compiled by Bloomberg show. The Lagos-based company reported a 9 percent gain in 2009 profit, and the shares have risen 17 percent this year.
“Markets are back on the boil,” said Arjuna Mahendran, Singapore-based investment strategist at HSBC’s private bank unit, which oversaw total client assets of about $460 billion as of Dec. 31. “But we’re nowhere near the exuberance that’s associated with an impending crash.”
Mittal Stokes Steel-Price Row Predicting 21% Jump (Update1)
Lakshmi Mittal, chief executive officer of ArcelorMittal, the world’s biggest steelmaker, stoked a row over how global prices are set by telling consumers that raw-material costs may push steel rates up 21 percent.
“The cost of producing steel is going to go up and will be passed on to customers,” Mittal said in an interview in London yesterday. Benchmark European hot-rolled coil prices will rise by $150 a metric ton in the second quarter, he said.
Steelmakers are passing on costs after Vale SA, the largest iron-ore producer, scrapped a four-decade system of annual price-setting and boosted prices for Japanese steelmakers as much as 90 percent. Carmakers, the biggest users of steel, are crying foul. The European Automobile Manufacturers’ Association, which represents companies including Volkswagen AG, PSA Peugeot Citroen and Fiat SpA, said yesterday members want European Union regulators to “tackle distortive developments” caused by the changes from mining companies.
“The necessity to increase prices is generating the ire of customers and a bitter battle is raging,” said Christian Georges, an analyst at Olivetree Securities who has tracked industry and resources for 15 years.
Toyota, Philips
Mittal’s forecast for benchmark hot-rolled coil would mark a 21 percent jump from levels now of about $700 a ton, based on Metal Bulletin data. The coiled steel is used by firms from Toyota Motor Corp., the world’s biggest carmaker, to Royal Philips Electronics NV, the largest lighting company.
ArcelorMittal rose 79 cents, or 2.4 percent, to 33.28 euros at 2:05 p.m. in Amsterdam trading. The stock has gained 3.4 percent this year, increasing the Luxembourg-based company’s market value to 51.9 billion euros ($70 billion).
Eurofer, a group representing steelmakers in Europe, accused the biggest iron ore suppliers of “illicit coordination of prices” and said it had notified the regulatory arm of the European Commission about possible anti-competitive practices.
Eurofer said a shift to shorter contracts for iron ore at higher rates may boost costs for their customers by as much as a third.
“Steel producers will have to pass these rises on to the consumers,” Eurofer Director-General Gordon Moffat said in a phone interview. “It’s going to create a great deal more volatility in prices.”
Auto Prices
Producers will attempt to counter those swings by forcing automakers to abandon annual supply contracts, making changes in car prices more extreme, Moffat said. European auto businesses are “very concerned” about the increase in the price of iron ore, industry association ACEA said in a statement.
Steel accounts for about 10 percent to 15 percent of the manufacturing cost of a car, ACEA said.
Daimler AG, the largest truckmaker and second-biggest maker of luxury vehicles, has partly insured itself against increased steel costs this year through long-term and hedging contracts, spokesman Sebastian Wahle said, declining to elaborate.
Ford Motor Co. Chief Executive Officer Alan Mulally told reporters at the New York International Auto Show that a run-up in commodity prices has already been “baked into our plan.”
Volkswagen AG, Europe’s largest carmaker, is seeking to minimize the effect of price swings by securing supplies in short-, medium- and long-term contracts, the Wolfsburg, Germany- based automaker said in an e-mailed response to questions.
Margin Squeeze
Without higher prices, profit margins at steelmakers, still recovering from the worst slump in demand in six decades, will be squeezed after Brazil’s Vale won a benchmark 90 percent increase for iron ore from Sumitomo Metal Industries Co. for the quarter starting today. BHP Billiton Ltd., the world’s biggest mining company, has said it will sell most of its output to Asian mills on shorter-term contracts.
“The winners in the short term will be the miners,” said Colin Hamilton, an analyst at Macquarie Group Ltd. “The losers are probably the ones that haven’t adapted their systems to this change. I would suggest some of the European steelmakers.”
U.S. producers of the metal benefit from being based in the only nation that’s a net exporter of all three key raw materials, iron ore, metallurgical coal and steel scrap, Michael Gambardella, a New York-based analyst with JPMorgan Chase & Co., said in a March 11 interview.
Charlotte, North Carolina-based Nucor Corp., the largest U.S. steelmaker by 2009 sales, will be less affected than some by the move away from annual iron-ore contracts as it uses scrap metal in its electric-arc furnaces, according to Chief Executive Officer Dan DiMicco.
The shift “moves iron ore pricing variability closer to the monthly variability for scrap buying,” he said in an e- mailed response to questions. “It lowers any competitive advantage that users of iron ore might have had in rising markets over scrap based steel makers.”
In Asia, Su Jiangang, general manager of Maanshan Iron & Steel Co., the second-biggest Chinese steelmaker listed in Hong Kong, said shorter contracts will put the company “under great pressure.”
“The cost of producing steel is going to go up and will be passed on to customers,” Mittal said in an interview in London yesterday. Benchmark European hot-rolled coil prices will rise by $150 a metric ton in the second quarter, he said.
Steelmakers are passing on costs after Vale SA, the largest iron-ore producer, scrapped a four-decade system of annual price-setting and boosted prices for Japanese steelmakers as much as 90 percent. Carmakers, the biggest users of steel, are crying foul. The European Automobile Manufacturers’ Association, which represents companies including Volkswagen AG, PSA Peugeot Citroen and Fiat SpA, said yesterday members want European Union regulators to “tackle distortive developments” caused by the changes from mining companies.
“The necessity to increase prices is generating the ire of customers and a bitter battle is raging,” said Christian Georges, an analyst at Olivetree Securities who has tracked industry and resources for 15 years.
Toyota, Philips
Mittal’s forecast for benchmark hot-rolled coil would mark a 21 percent jump from levels now of about $700 a ton, based on Metal Bulletin data. The coiled steel is used by firms from Toyota Motor Corp., the world’s biggest carmaker, to Royal Philips Electronics NV, the largest lighting company.
ArcelorMittal rose 79 cents, or 2.4 percent, to 33.28 euros at 2:05 p.m. in Amsterdam trading. The stock has gained 3.4 percent this year, increasing the Luxembourg-based company’s market value to 51.9 billion euros ($70 billion).
Eurofer, a group representing steelmakers in Europe, accused the biggest iron ore suppliers of “illicit coordination of prices” and said it had notified the regulatory arm of the European Commission about possible anti-competitive practices.
Eurofer said a shift to shorter contracts for iron ore at higher rates may boost costs for their customers by as much as a third.
“Steel producers will have to pass these rises on to the consumers,” Eurofer Director-General Gordon Moffat said in a phone interview. “It’s going to create a great deal more volatility in prices.”
Auto Prices
Producers will attempt to counter those swings by forcing automakers to abandon annual supply contracts, making changes in car prices more extreme, Moffat said. European auto businesses are “very concerned” about the increase in the price of iron ore, industry association ACEA said in a statement.
Steel accounts for about 10 percent to 15 percent of the manufacturing cost of a car, ACEA said.
Daimler AG, the largest truckmaker and second-biggest maker of luxury vehicles, has partly insured itself against increased steel costs this year through long-term and hedging contracts, spokesman Sebastian Wahle said, declining to elaborate.
Ford Motor Co. Chief Executive Officer Alan Mulally told reporters at the New York International Auto Show that a run-up in commodity prices has already been “baked into our plan.”
Volkswagen AG, Europe’s largest carmaker, is seeking to minimize the effect of price swings by securing supplies in short-, medium- and long-term contracts, the Wolfsburg, Germany- based automaker said in an e-mailed response to questions.
Margin Squeeze
Without higher prices, profit margins at steelmakers, still recovering from the worst slump in demand in six decades, will be squeezed after Brazil’s Vale won a benchmark 90 percent increase for iron ore from Sumitomo Metal Industries Co. for the quarter starting today. BHP Billiton Ltd., the world’s biggest mining company, has said it will sell most of its output to Asian mills on shorter-term contracts.
“The winners in the short term will be the miners,” said Colin Hamilton, an analyst at Macquarie Group Ltd. “The losers are probably the ones that haven’t adapted their systems to this change. I would suggest some of the European steelmakers.”
U.S. producers of the metal benefit from being based in the only nation that’s a net exporter of all three key raw materials, iron ore, metallurgical coal and steel scrap, Michael Gambardella, a New York-based analyst with JPMorgan Chase & Co., said in a March 11 interview.
Charlotte, North Carolina-based Nucor Corp., the largest U.S. steelmaker by 2009 sales, will be less affected than some by the move away from annual iron-ore contracts as it uses scrap metal in its electric-arc furnaces, according to Chief Executive Officer Dan DiMicco.
The shift “moves iron ore pricing variability closer to the monthly variability for scrap buying,” he said in an e- mailed response to questions. “It lowers any competitive advantage that users of iron ore might have had in rising markets over scrap based steel makers.”
In Asia, Su Jiangang, general manager of Maanshan Iron & Steel Co., the second-biggest Chinese steelmaker listed in Hong Kong, said shorter contracts will put the company “under great pressure.”
Apple’s IPad Bet Requires ‘Leap of Faith’ From Buyers (Update1)
Apple Inc., looking to succeed where rivals like Microsoft Corp. failed, is betting that consumers are finally ready for tablet computers, even if they have to do without some features.
Bigger than a mobile phone yet less cumbersome than a laptop, the iPad -- a touch-screen device that lets users surf the Web, read e-books, watch videos and play games -- goes on sale starting at $499 this weekend. It won’t have a camera, support for Flash video or run multiple programs at once.
“You’re asking people to take a leap of faith, regardless of how interested they are, in a category that consumers have shown very little interest in,” said Stephen Baker, an analyst with the research firm NPD Group in Port Washington, New York. “To most people, $500 is a lot of money for a product they’re not sure they need.”
Apple is trying to remake the tablet -- a thin, handheld computer that’s essentially a big screen without a physical keyboard. Also known as slate computers, tablets have been available since the 1990s, without ever catching on. They currently account for less than 1 percent of the personal- computer market, according to research firm Gartner Inc.
The initial reviews found the iPad to be a fast device with potential as a laptop replacement, even if it lacked some desirable features. The Wall Street Journal’s Walt Mossberg said it was a better e-reader than Amazon.com Inc.’s Kindle, while USA Today’s Edward Baig called the iPad “fun, simple, stunning to look at and blazingly fast.” David Pogue, a reviewer for the New York Times, also admired the speed, though he said some users would struggle with the on-screen keyboard.
Harder Sell?
While many consumers will buy any new gadget with an Apple label, NPD found that 66 percent of consumers -- and 60 percent of people who say they currently own an Apple product -- “don’t foresee an iPad purchase in their future,” according to an online survey of 2,000 consumers age 18 and older. The survey was done between Feb. 24 and March 3, NPD said.
“It’s easy to sell stuff to early adopters because they want to buy stuff,” Baker said. “It’s hard to sell to the mass market because you have to convince them what you’re selling is something new they want.”
Those early adopters may number in the tens of thousands this weekend. Apple will sell 200,000 to 300,000 iPads on Saturday and Sunday, according to Gene Munster, an analyst with Piper Jaffray & Co. in Minneapolis. Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., projects opening weekend sales of 300,000 to 400,000 iPads. That compares with the 270,000 iPhones sold in the first weekend after its 2007 debut.
Apple declined to comment, said Natalie Kerris, a spokeswoman for the Cupertino, California-based company.
New Market
Best Buy, the largest electronics retailer, sees the iPad as a “huge opportunity,” said Wendy Fritz, the company’s senior vice president of computing. The chain will start selling the iPad April 3 at 673 U.S. stores, with another wave of inventory arriving on April 11.
“We think about it as an ability to create a new market and new technology,” Fritz, 40, said in an interview.
Still, it may take a year for the mass market to embrace the iPad, Munster says. While the device should run most of the 150,000 applications available today for the iPhone, some consumers will wait for new apps and content before taking one home, he says.
Waiting for 3G
Customers may also wait for models that support speedy third-generation wireless networks, he says. Apple plans to start selling 3G versions, which begin at $629, later in April. The iPads coming out this weekend rely on Wi-Fi to go online.
The company will likely see a drop-off in demand after the early rush this weekend, Sacconaghi says. He expects Apple to sell about 5 million in the first 12 months, compared with 6.1 million iPhones in its first year on the market. Sales should pick up over time -- assuming Apple extends the iPad beyond the 10 countries already announced, he says. More content and distribution partners also will help.
“There is still a lot we don’t know about it,” said Sacconaghi, who predicts the device will account for 2 percent or less of Apple’s revenue in the fiscal year ending in September. “In the immediate term, iPad expectations appear overzealous, which could provide a relative short-term disappointment for investors.”
Record High
Apple rose to a closing high of $235.85 last month on the Nasdaq Stock Market on speculation that the iPad would be a hit. The shares, which more than doubled in the past year, rose as much as $1.92 to $236.92 in trading before exchanges opened.
The iPad will be the latest test of Chief Executive Officer Steve Jobs’s marketing prowess. Since returning to the company in 1997, he has revived the Macintosh computer business, conquered the digital music market with the iPod and moved Apple into the mobile-phone arena. That’s driven sales and profit to record levels.
Jobs, 55, aims to persuade buyers to pick the iPad over netbooks -- scaled-down notebook computers that typically sell for less than $500. Netbooks have been the fastest-growing segment of the PC market, helping to counter a slump in overall PC demand during the recession.
Jobs derided netbooks when he first unveiled the iPad in January. “They’re slow, they have low-quality displays and they run clunky old PC software,” he said.
No Flash
Unlike most PCs, the iPad won’t be able to run Adobe Systems Inc.’s Flash, which is used to view online videos and animation. That may prevent iPad users from being able to watch 75 percent of the Web’s videos.
Jobs has called Flash too slow and instead wants Web sites to support a standard called HTML5 -- the next version of the HTML language, which is used to create Web pages.
That could be a tall order, says Jeremy Allaire, CEO of online-video company Brightcove Inc. in Cambridge, Massachusetts. Flash’s dominance prevents Web sites from switching away from the software, he says. Instead, Web sites will be forced to create two versions of their videos: one based on Flash and another running on HTML5.
“There’s a lot of work involved in shifting to something else,” Allaire said. “We will live in a world of diversity and great complexity for years to come.”
There are also critics who dismiss the iPad as just a larger-screen version of Apple’s iPod Touch player, which sports a 3.5-inch (9-centimeter) screen. The iPad display will measure 9.7 inches. IPad software developers say the naysayers are missing the point: size matters.
‘Tap Tap Revenge’
Bart Decrem, CEO of the iPhone game developer Tapulous Inc., is taking advantage of the bigger screen by creating a new music game. He plans to make it available this weekend or soon after. Decrem says he’s convinced that being one of the first to release an iPhone app helped make Tapulous’s “Tap Tap Revenge” one of the top-selling programs on Apple’s App Store.
Still, it will take time for users to understand why the iPad is a better choice than a netbook or laptop, Decrem says. Apple also will fix some of the limitations of the iPad “over time,” just as it did with the iPhone, he says. When that product debuted, it lacked support for 3G networks and the global positioning system.
“With the iPhone, we already knew how it fit into our lives --- we all had a phone,” Decrem said. “With the iPad, the value proposition isn’t so clear. I do think over time this may be your next laptop, but I think it will take a year.”
Bigger than a mobile phone yet less cumbersome than a laptop, the iPad -- a touch-screen device that lets users surf the Web, read e-books, watch videos and play games -- goes on sale starting at $499 this weekend. It won’t have a camera, support for Flash video or run multiple programs at once.
“You’re asking people to take a leap of faith, regardless of how interested they are, in a category that consumers have shown very little interest in,” said Stephen Baker, an analyst with the research firm NPD Group in Port Washington, New York. “To most people, $500 is a lot of money for a product they’re not sure they need.”
Apple is trying to remake the tablet -- a thin, handheld computer that’s essentially a big screen without a physical keyboard. Also known as slate computers, tablets have been available since the 1990s, without ever catching on. They currently account for less than 1 percent of the personal- computer market, according to research firm Gartner Inc.
The initial reviews found the iPad to be a fast device with potential as a laptop replacement, even if it lacked some desirable features. The Wall Street Journal’s Walt Mossberg said it was a better e-reader than Amazon.com Inc.’s Kindle, while USA Today’s Edward Baig called the iPad “fun, simple, stunning to look at and blazingly fast.” David Pogue, a reviewer for the New York Times, also admired the speed, though he said some users would struggle with the on-screen keyboard.
Harder Sell?
While many consumers will buy any new gadget with an Apple label, NPD found that 66 percent of consumers -- and 60 percent of people who say they currently own an Apple product -- “don’t foresee an iPad purchase in their future,” according to an online survey of 2,000 consumers age 18 and older. The survey was done between Feb. 24 and March 3, NPD said.
“It’s easy to sell stuff to early adopters because they want to buy stuff,” Baker said. “It’s hard to sell to the mass market because you have to convince them what you’re selling is something new they want.”
Those early adopters may number in the tens of thousands this weekend. Apple will sell 200,000 to 300,000 iPads on Saturday and Sunday, according to Gene Munster, an analyst with Piper Jaffray & Co. in Minneapolis. Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., projects opening weekend sales of 300,000 to 400,000 iPads. That compares with the 270,000 iPhones sold in the first weekend after its 2007 debut.
Apple declined to comment, said Natalie Kerris, a spokeswoman for the Cupertino, California-based company.
New Market
Best Buy, the largest electronics retailer, sees the iPad as a “huge opportunity,” said Wendy Fritz, the company’s senior vice president of computing. The chain will start selling the iPad April 3 at 673 U.S. stores, with another wave of inventory arriving on April 11.
“We think about it as an ability to create a new market and new technology,” Fritz, 40, said in an interview.
Still, it may take a year for the mass market to embrace the iPad, Munster says. While the device should run most of the 150,000 applications available today for the iPhone, some consumers will wait for new apps and content before taking one home, he says.
Waiting for 3G
Customers may also wait for models that support speedy third-generation wireless networks, he says. Apple plans to start selling 3G versions, which begin at $629, later in April. The iPads coming out this weekend rely on Wi-Fi to go online.
The company will likely see a drop-off in demand after the early rush this weekend, Sacconaghi says. He expects Apple to sell about 5 million in the first 12 months, compared with 6.1 million iPhones in its first year on the market. Sales should pick up over time -- assuming Apple extends the iPad beyond the 10 countries already announced, he says. More content and distribution partners also will help.
“There is still a lot we don’t know about it,” said Sacconaghi, who predicts the device will account for 2 percent or less of Apple’s revenue in the fiscal year ending in September. “In the immediate term, iPad expectations appear overzealous, which could provide a relative short-term disappointment for investors.”
Record High
Apple rose to a closing high of $235.85 last month on the Nasdaq Stock Market on speculation that the iPad would be a hit. The shares, which more than doubled in the past year, rose as much as $1.92 to $236.92 in trading before exchanges opened.
The iPad will be the latest test of Chief Executive Officer Steve Jobs’s marketing prowess. Since returning to the company in 1997, he has revived the Macintosh computer business, conquered the digital music market with the iPod and moved Apple into the mobile-phone arena. That’s driven sales and profit to record levels.
Jobs, 55, aims to persuade buyers to pick the iPad over netbooks -- scaled-down notebook computers that typically sell for less than $500. Netbooks have been the fastest-growing segment of the PC market, helping to counter a slump in overall PC demand during the recession.
Jobs derided netbooks when he first unveiled the iPad in January. “They’re slow, they have low-quality displays and they run clunky old PC software,” he said.
No Flash
Unlike most PCs, the iPad won’t be able to run Adobe Systems Inc.’s Flash, which is used to view online videos and animation. That may prevent iPad users from being able to watch 75 percent of the Web’s videos.
Jobs has called Flash too slow and instead wants Web sites to support a standard called HTML5 -- the next version of the HTML language, which is used to create Web pages.
That could be a tall order, says Jeremy Allaire, CEO of online-video company Brightcove Inc. in Cambridge, Massachusetts. Flash’s dominance prevents Web sites from switching away from the software, he says. Instead, Web sites will be forced to create two versions of their videos: one based on Flash and another running on HTML5.
“There’s a lot of work involved in shifting to something else,” Allaire said. “We will live in a world of diversity and great complexity for years to come.”
There are also critics who dismiss the iPad as just a larger-screen version of Apple’s iPod Touch player, which sports a 3.5-inch (9-centimeter) screen. The iPad display will measure 9.7 inches. IPad software developers say the naysayers are missing the point: size matters.
‘Tap Tap Revenge’
Bart Decrem, CEO of the iPhone game developer Tapulous Inc., is taking advantage of the bigger screen by creating a new music game. He plans to make it available this weekend or soon after. Decrem says he’s convinced that being one of the first to release an iPhone app helped make Tapulous’s “Tap Tap Revenge” one of the top-selling programs on Apple’s App Store.
Still, it will take time for users to understand why the iPad is a better choice than a netbook or laptop, Decrem says. Apple also will fix some of the limitations of the iPad “over time,” just as it did with the iPhone, he says. When that product debuted, it lacked support for 3G networks and the global positioning system.
“With the iPhone, we already knew how it fit into our lives --- we all had a phone,” Decrem said. “With the iPad, the value proposition isn’t so clear. I do think over time this may be your next laptop, but I think it will take a year.”
Russia’s Economic Slump Eased to 3.8% in 4th Quarter (Update1)
Russia’s economic slump eased in the fourth quarter as oil, gas and metals exporters benefited from higher prices after gross domestic product slumped by a record in the first half of the year.
Output of the world’s biggest energy exporter shrank an annual 3.8 percent in the last three months of 2009 after contracting a revised 7.7 percent in the third quarter and a revised 10.8 percent in the second, the Federal Statistics Service said today. GDP fell 7.9 percent in 2009, the biggest contraction since the collapse of the Soviet Union in 1991.
A surge in oil prices bolstered state finances as the price of Urals crude more than doubled in the quarter from a low of $32.34 a year earlier. Leaner inventories, improved global sales and higher raw materials prices prompted companies including iron ore producer OAO Metalloinvest to boost output. The momentum may stall as rising joblessness and low demand for credit damp growth this year.
Russia is exiting the downturn and doesn’t face a “second wave” of the crisis, Andrei Kostin, chief executive officer of the nation’s second biggest lender, VTB Group, said in an interview in Paris on March 2. Even so, the recovery will be “quite slow and gradual,” he said.
“One of the largest problems in the near future is unemployment, the problem of increasing demand,” Kostin said. “We see that in the economy today, demand for credit resources is not very high.”
‘Weak Links’
The ruble extended gains against the dollar, rising 0.3 percent to 29.3774 against the U.S. currency at 4:04 p.m. in Moscow. It appreciated 0.4 percent to 39.6000 per euro. The 30- stock Micex Index advanced 1.5 percent to 1471.42.
Frail investment demand and the risk of rising unemployment remain the “weak links” in a recovery, Deputy Economy Minister Andrei Klepach said on Feb. 25.
Income from oil and gas, which account for about 25 percent of GDP, jumped to 3 trillion rubles, 45 percent more than planned, narrowing the budget deficit to 5.9 percent. Standard & Poor’s and Fitch Ratings raised the country’s outlook as higher prices for commodities brought in extra revenue.
Manufacturers such as OAO AvtoVAZ may aid the recovery as increasing sales and a government stimulus prod companies to boost output and replenish stockpiles.
The manufacturing revival, as well as increasing metals output, may help lead to broader economic growth after those sectors posted the steepest declines early last year, said Dmitry Polevoy, an economist at KIT Finance in Moscow.
“Their pace of growth will support positive numbers for the economy as a whole,” he said. “But the question remains if this growth will lift production to pre-crisis levels or just partly compensate for the plunge” last year.
Output of the world’s biggest energy exporter shrank an annual 3.8 percent in the last three months of 2009 after contracting a revised 7.7 percent in the third quarter and a revised 10.8 percent in the second, the Federal Statistics Service said today. GDP fell 7.9 percent in 2009, the biggest contraction since the collapse of the Soviet Union in 1991.
A surge in oil prices bolstered state finances as the price of Urals crude more than doubled in the quarter from a low of $32.34 a year earlier. Leaner inventories, improved global sales and higher raw materials prices prompted companies including iron ore producer OAO Metalloinvest to boost output. The momentum may stall as rising joblessness and low demand for credit damp growth this year.
Russia is exiting the downturn and doesn’t face a “second wave” of the crisis, Andrei Kostin, chief executive officer of the nation’s second biggest lender, VTB Group, said in an interview in Paris on March 2. Even so, the recovery will be “quite slow and gradual,” he said.
“One of the largest problems in the near future is unemployment, the problem of increasing demand,” Kostin said. “We see that in the economy today, demand for credit resources is not very high.”
‘Weak Links’
The ruble extended gains against the dollar, rising 0.3 percent to 29.3774 against the U.S. currency at 4:04 p.m. in Moscow. It appreciated 0.4 percent to 39.6000 per euro. The 30- stock Micex Index advanced 1.5 percent to 1471.42.
Frail investment demand and the risk of rising unemployment remain the “weak links” in a recovery, Deputy Economy Minister Andrei Klepach said on Feb. 25.
Income from oil and gas, which account for about 25 percent of GDP, jumped to 3 trillion rubles, 45 percent more than planned, narrowing the budget deficit to 5.9 percent. Standard & Poor’s and Fitch Ratings raised the country’s outlook as higher prices for commodities brought in extra revenue.
Manufacturers such as OAO AvtoVAZ may aid the recovery as increasing sales and a government stimulus prod companies to boost output and replenish stockpiles.
The manufacturing revival, as well as increasing metals output, may help lead to broader economic growth after those sectors posted the steepest declines early last year, said Dmitry Polevoy, an economist at KIT Finance in Moscow.
“Their pace of growth will support positive numbers for the economy as a whole,” he said. “But the question remains if this growth will lift production to pre-crisis levels or just partly compensate for the plunge” last year.
Public Mutual declares distributions for 2 funds
Public Bank’s wholly-owned subsidiary, Public Mutual, declared distributions for two of its funds. The total gross distributions declared for the financial year ended 31 March 2010 are as follows:
Fund | Gross Distribution / Unit
Public Aggressive Growth Fund | 8.00 sen per unit
Public Regular Savings Fund | 4.50 sen per unit
Public Mutual Chief Executive Officer Ms. Yeoh Kim Hong said both funds have outperformed their respective benchmarks and managed to deliver respectable double digit returns for the period ended 5 March 2010.
According to The Edge-Lipper Fund Table dated 15 March 2010, Public Aggressive Growth Fund and Public Regular Savings Fund generated one-year returns of 53.74% and 52.38% respectively for the period ended 5 March 2010. Meanwhile, the benchmarks for Public Aggressive Growth Fund and Public Regular Savings Fund recorded one-year returns of 49.53% and 49.63% respectively within the same period.
Public Aggressive Growth Fund aims to achieve high capital growth over the medium- to long-term period through investments in situational and high growth stocks. Meanwhile, Public Regular Savings Fund, which is open for EPF Members Investment Scheme, aims to achieve consistent capital growth with a steady growth of income over the medium- to long-term.
Public Mutual is Malaysia’s largest private unit trust company with 74 funds under management. It has over 2,300,000 accountholders and as at 25 February 2010, the total net asset value of the funds managed by the company was RM35.2 billion.
Fund | Gross Distribution / Unit
Public Aggressive Growth Fund | 8.00 sen per unit
Public Regular Savings Fund | 4.50 sen per unit
Public Mutual Chief Executive Officer Ms. Yeoh Kim Hong said both funds have outperformed their respective benchmarks and managed to deliver respectable double digit returns for the period ended 5 March 2010.
According to The Edge-Lipper Fund Table dated 15 March 2010, Public Aggressive Growth Fund and Public Regular Savings Fund generated one-year returns of 53.74% and 52.38% respectively for the period ended 5 March 2010. Meanwhile, the benchmarks for Public Aggressive Growth Fund and Public Regular Savings Fund recorded one-year returns of 49.53% and 49.63% respectively within the same period.
Public Aggressive Growth Fund aims to achieve high capital growth over the medium- to long-term period through investments in situational and high growth stocks. Meanwhile, Public Regular Savings Fund, which is open for EPF Members Investment Scheme, aims to achieve consistent capital growth with a steady growth of income over the medium- to long-term.
Public Mutual is Malaysia’s largest private unit trust company with 74 funds under management. It has over 2,300,000 accountholders and as at 25 February 2010, the total net asset value of the funds managed by the company was RM35.2 billion.
Barnier to Review `Insane’ Bank Pay With Geithner (Update1)
Michel Barnier, the European Union’s financial services commissioner, said he will work with the U.S. to address “insane” discrepancies between pay and performance in the finance industry.
Bonuses are “extraordinary, insane in some cases,” Barnier said in an interview in London today. He plans to meet with U.S. Treasury Secretary Timothy F. Geithner later this year, Barnier said.
“It is required to put an end to the discrepancies between remuneration and performance,” Barnier said. “There is a need to work with others to do this, and it’s something we’ll be working on with the U.S.”
Lawmakers around the world have blamed bonuses for the excessive risk-taking that contributed to the worst financial crisis since World War II. Sweden proposed laws last year that would force bankers in Europe to defer part of their bonus for three years and receive at least 50 percent in shares.
Barnier came to London to meet with representatives from the U.K.’s finance industry, including Nick Anstee, the Lord Mayor of the city, amid concerns that European laws may hurt London’s traders.
Geithner sent a letter to Barnier last month warning that a law to regulate hedge funds and private equity, proposed by the European Commission last year, discriminates against U.S. funds and may cause diplomatic disputes.
Listening to Washington
“I’ve been very attentive to the letter written by Mr. Geithner,” Barnier said today. “I’m listening to Washington and I intend to put forward the commission position of an EU passport for hedge funds.”
The proposed law would force funds based outside the EU to comply with the commission’s rules if they want to market themselves to investors in the 27-nation bloc.
Hedge funds and private equity firms are under scrutiny from regulators and lawmakers worldwide who say they are partly to blame for the financial crisis. The Group of 20 Nations in April agreed to tighter oversight of funds.
Bonuses are “extraordinary, insane in some cases,” Barnier said in an interview in London today. He plans to meet with U.S. Treasury Secretary Timothy F. Geithner later this year, Barnier said.
“It is required to put an end to the discrepancies between remuneration and performance,” Barnier said. “There is a need to work with others to do this, and it’s something we’ll be working on with the U.S.”
Lawmakers around the world have blamed bonuses for the excessive risk-taking that contributed to the worst financial crisis since World War II. Sweden proposed laws last year that would force bankers in Europe to defer part of their bonus for three years and receive at least 50 percent in shares.
Barnier came to London to meet with representatives from the U.K.’s finance industry, including Nick Anstee, the Lord Mayor of the city, amid concerns that European laws may hurt London’s traders.
Geithner sent a letter to Barnier last month warning that a law to regulate hedge funds and private equity, proposed by the European Commission last year, discriminates against U.S. funds and may cause diplomatic disputes.
Listening to Washington
“I’ve been very attentive to the letter written by Mr. Geithner,” Barnier said today. “I’m listening to Washington and I intend to put forward the commission position of an EU passport for hedge funds.”
The proposed law would force funds based outside the EU to comply with the commission’s rules if they want to market themselves to investors in the 27-nation bloc.
Hedge funds and private equity firms are under scrutiny from regulators and lawmakers worldwide who say they are partly to blame for the financial crisis. The Group of 20 Nations in April agreed to tighter oversight of funds.
CIMB leads bank stocks higher
CIMB Group Holdings Bhd rose to a record, leading a rally by Malaysian banks after central bank data showed total industry loans grew at the fastest pace in 10 months in February.
Malaysia’s second-biggest bank climbed 2.3 per cent to close at RM14.38, a record. Public Bank Bhd advanced 0.5 per cent to RM11.70 and RHB Capital Bhd added 0.4 per cent to RM5.66. The FTSE Bursa Malaysia KLCI Index rose to its highest close since March 3, 2008.
Loans grew for a third month in February, gaining 10 per cent from a year earlier, the fastest pace since April 2009, according to central bank data published after yesterday’s market close.
Malaysia’s central bank on March 24 raised the country’s 2010 economic forecast, pledging that its monetary policy will continue to support growth even as it begins to “normalize” interest rates. Southeast Asia’s third-largest economy may expand 4.5 per cent to 5.5 per cent this year after shrinking 1.7 per cent in 2009, Bank Negara Malaysia said then.
The government said in October that gross domestic product would expand by between 2 per cent and 3 per cent in 2010. - Bloomberg
Malaysia’s second-biggest bank climbed 2.3 per cent to close at RM14.38, a record. Public Bank Bhd advanced 0.5 per cent to RM11.70 and RHB Capital Bhd added 0.4 per cent to RM5.66. The FTSE Bursa Malaysia KLCI Index rose to its highest close since March 3, 2008.
Loans grew for a third month in February, gaining 10 per cent from a year earlier, the fastest pace since April 2009, according to central bank data published after yesterday’s market close.
Malaysia’s central bank on March 24 raised the country’s 2010 economic forecast, pledging that its monetary policy will continue to support growth even as it begins to “normalize” interest rates. Southeast Asia’s third-largest economy may expand 4.5 per cent to 5.5 per cent this year after shrinking 1.7 per cent in 2009, Bank Negara Malaysia said then.
The government said in October that gross domestic product would expand by between 2 per cent and 3 per cent in 2010. - Bloomberg
Oversea rises 8.7pc in Bursa debut
Oversea Enterprise Bhd, a Malaysian operator of Chinese restaurants, rose 8.7 per cent to 25 sen in its debut on the Kuala Lumpur stock exchange.
The stock was the most active on the exchange with 24.9 million shares traded.
The company sold shares at 23 sen each to help fund expansion, according to its share-sale document.
Meanwhile, Bernama reported that Oversea expects to grow its confectionary manufacturing business, as part of an expansion strategy.
Its Group Managing Director Yu Soo Chye said the manufacturing business, which currently complements the restaurant undertaking, contributed 16 per cent of group revenue in the financial year ended Dec 31, 2009.
"We want to grow our manufacturing business. At the same time, we want to stabilise our credit and cash business.
"Manufacturing is a credit business while that for the restaurant, represents dealings in cash," he told reporters after the listing ceremony in Kuala Lumpur today.
Yu added that the growth contribution from manufacturing, would likely be around 16 to 20 per cent.
The group manufactures specialty delicacies such as moon cakes, egg rolls, oriental muffins and wedding biscuits, for the local and export markets.
"With new machinery in place, we can increase the current total production of delicacies to two million pieces a year, from the current 1.6 million," he explained.
He said delicacies especially moon cakes, are always in high demand particularly during festive seasons, and the additional production capacity will cater to the market needs.
He said the export market contributed about 10 per cent to its manufacturing business revenue of RM10.2 million, as of December 2009.
"We hope to increase this contribution, between 15 and 20 per cent in line with our plan, to open a new restaurant chain in overseas market like Jakarta and Singapore," he added.
The company also exports its confectionary products to eight foreign markets, with Australia being the largest. - Bloomberg/Bernama
The stock was the most active on the exchange with 24.9 million shares traded.
The company sold shares at 23 sen each to help fund expansion, according to its share-sale document.
Meanwhile, Bernama reported that Oversea expects to grow its confectionary manufacturing business, as part of an expansion strategy.
Its Group Managing Director Yu Soo Chye said the manufacturing business, which currently complements the restaurant undertaking, contributed 16 per cent of group revenue in the financial year ended Dec 31, 2009.
"We want to grow our manufacturing business. At the same time, we want to stabilise our credit and cash business.
"Manufacturing is a credit business while that for the restaurant, represents dealings in cash," he told reporters after the listing ceremony in Kuala Lumpur today.
Yu added that the growth contribution from manufacturing, would likely be around 16 to 20 per cent.
The group manufactures specialty delicacies such as moon cakes, egg rolls, oriental muffins and wedding biscuits, for the local and export markets.
"With new machinery in place, we can increase the current total production of delicacies to two million pieces a year, from the current 1.6 million," he explained.
He said delicacies especially moon cakes, are always in high demand particularly during festive seasons, and the additional production capacity will cater to the market needs.
He said the export market contributed about 10 per cent to its manufacturing business revenue of RM10.2 million, as of December 2009.
"We hope to increase this contribution, between 15 and 20 per cent in line with our plan, to open a new restaurant chain in overseas market like Jakarta and Singapore," he added.
The company also exports its confectionary products to eight foreign markets, with Australia being the largest. - Bloomberg/Bernama
MAHB eyes RM1b Ebitda, 2 more airports
MALAYSIA Airports Holdings Bhd aims to boost Ebitda to more than RM1 billion (US$307 million) in the next five years by managing more airports, boosting commercial revenue and co-developing land.
“We are looking at managing two more airports in Asia with the hope of securing them by the end of this year,” Managing Director Bashir Ahmad Abdul Majid said in a statement today on the company’s 2010-2014 business plan.
Malaysia Airports already manages airports in Cambodia, India, Kazahkstan and Turkey as well as at home, where it is building a new low-cost carrier terminal.
The company aims to increase annual passenger numbers in Malaysia to more than 60 million by 2014, it said in the statement. It will target a return on equity of 10 per cent and Ebitda of RM1 billion, with commercial revenue as the main driver, it said. Ebitda, a measure of profitability, stands for earnings before interest, taxes, depreciation and amortization.
“Our key challenge is to ensure we provide adequate capacity at our airports to cater for the expected growth in traffic,” Bashir Ahmad said in the statement, adding that it already has state approval to expand its Malaysian facilities.
The company has an “extensive” land bank surrounding its Malaysian airports that is available for commercial development with strategic partners, he said.
“One of the key things for us in increasing revenue is to develop land bank we have,” Ahmad Bashir separately told reporters in Kuala Lumpur. “That is crucial for us because for airports commercial value is becoming more and more important for us to make profits.”
The company is already developing the Malaysia International Aerospace Centre at Sultan Abdul Aziz Shah Airport in Subang, outside Kuala Lumpur, and KLIA Aeropolis, a project around the nearby national airport.
Malaysia Airports Holdings Bhd also hopes to secure deals to manage two more Asian airports by the end of this year, Managing Director Bashir Ahmad Abdul Majid said in a statement today.
The company already manages airports overseas in Cambodia, India, Kazakhstan and Turkey, it said, without naming where the new ones might be. - Bloomberg
“We are looking at managing two more airports in Asia with the hope of securing them by the end of this year,” Managing Director Bashir Ahmad Abdul Majid said in a statement today on the company’s 2010-2014 business plan.
Malaysia Airports already manages airports in Cambodia, India, Kazahkstan and Turkey as well as at home, where it is building a new low-cost carrier terminal.
The company aims to increase annual passenger numbers in Malaysia to more than 60 million by 2014, it said in the statement. It will target a return on equity of 10 per cent and Ebitda of RM1 billion, with commercial revenue as the main driver, it said. Ebitda, a measure of profitability, stands for earnings before interest, taxes, depreciation and amortization.
“Our key challenge is to ensure we provide adequate capacity at our airports to cater for the expected growth in traffic,” Bashir Ahmad said in the statement, adding that it already has state approval to expand its Malaysian facilities.
The company has an “extensive” land bank surrounding its Malaysian airports that is available for commercial development with strategic partners, he said.
“One of the key things for us in increasing revenue is to develop land bank we have,” Ahmad Bashir separately told reporters in Kuala Lumpur. “That is crucial for us because for airports commercial value is becoming more and more important for us to make profits.”
The company is already developing the Malaysia International Aerospace Centre at Sultan Abdul Aziz Shah Airport in Subang, outside Kuala Lumpur, and KLIA Aeropolis, a project around the nearby national airport.
Malaysia Airports Holdings Bhd also hopes to secure deals to manage two more Asian airports by the end of this year, Managing Director Bashir Ahmad Abdul Majid said in a statement today.
The company already manages airports overseas in Cambodia, India, Kazakhstan and Turkey, it said, without naming where the new ones might be. - Bloomberg
Kuwait Finance Malaysia to trim bad loans
THE Malaysian unit of Kuwait Finance House, the Gulf state’s top Islamic lender, will cut its bad loans to the industry average within 5 years as it finances stronger names, its chief said today.
The Malaysian bank, which is running an audit on some of its previous contracts, had a non-performing financing level of 6.73 per cent in September, said newly appointed CEO Jamelah Jamaluddin.
This is more than three times the industry average of 2.1 per cent, according to central bank data.
“We have a 5-year plan ... to bring us in line with the industry,” Jamelah told reporters.
“We’re making all efforts to improve our asset quality and bring down the NPF. We are vigorously going to concentrate on recovery. That is one of the main thrusts for 2010.”
Net non-performing loans in the Malaysian banking system, based on a 3-month classification, stood at 1.9 per cent in February.
Kuwait Finance Malaysia was the first foreign Islamic bank to win a licence under the Southeast Asian country’s Islamic Banking Act. It is the Kuwait bank’s Asia-Pacific hub and aims to promote business between the region and the Middle East.
The subsidiary of Kuwait Finance House has said it is auditing some past transactions, with some staff on leave as part of that exercise. It did not give details of the contracts.
The audit was intended “to reinforce financial discipline and accountability” and provide “an accurate picture of certain transactions and contractual arrangements that have been undertaken over the years”, Jamelah has said.
The exercise could be extended beyond its original 6-week deadline, she said on Thursday, adding the unlisted bank was not obliged to announce the results.
Malaysian rating agency RAM Ratings had put Kuwait Finance House Malaysia’s AA2/P1 financial institution rating on negative rating watch following the audit.
Jamelah said the bank would grow its financing by up to a tenth this year compared with about 8 per cent last year.
Kuwait Finance Malaysia Chairman Shaheen AlGhanem said the bank would spend RM6 billion (US$1.84 billion) over 15 years to develop the Iskandar project in southern Johor state, a government-led effort to transform Malaysia into a banking, tourism and education hub.
The bank’s parent posted a 24 per cent drop in net profit in 2009 to 118.74 million dinars.
Islamic banks largely dodged the effects of the recent global credit crisis due to the religion’s ban on excessive speculation and requirement that transactions must be based on real assets.
But limited Islamic investing options led many shariah banks, especially in the Middle East, to rely heavily on real estate and they were hard hit when the market slumped. - Reuters
The Malaysian bank, which is running an audit on some of its previous contracts, had a non-performing financing level of 6.73 per cent in September, said newly appointed CEO Jamelah Jamaluddin.
This is more than three times the industry average of 2.1 per cent, according to central bank data.
“We have a 5-year plan ... to bring us in line with the industry,” Jamelah told reporters.
“We’re making all efforts to improve our asset quality and bring down the NPF. We are vigorously going to concentrate on recovery. That is one of the main thrusts for 2010.”
Net non-performing loans in the Malaysian banking system, based on a 3-month classification, stood at 1.9 per cent in February.
Kuwait Finance Malaysia was the first foreign Islamic bank to win a licence under the Southeast Asian country’s Islamic Banking Act. It is the Kuwait bank’s Asia-Pacific hub and aims to promote business between the region and the Middle East.
The subsidiary of Kuwait Finance House has said it is auditing some past transactions, with some staff on leave as part of that exercise. It did not give details of the contracts.
The audit was intended “to reinforce financial discipline and accountability” and provide “an accurate picture of certain transactions and contractual arrangements that have been undertaken over the years”, Jamelah has said.
The exercise could be extended beyond its original 6-week deadline, she said on Thursday, adding the unlisted bank was not obliged to announce the results.
Malaysian rating agency RAM Ratings had put Kuwait Finance House Malaysia’s AA2/P1 financial institution rating on negative rating watch following the audit.
Jamelah said the bank would grow its financing by up to a tenth this year compared with about 8 per cent last year.
Kuwait Finance Malaysia Chairman Shaheen AlGhanem said the bank would spend RM6 billion (US$1.84 billion) over 15 years to develop the Iskandar project in southern Johor state, a government-led effort to transform Malaysia into a banking, tourism and education hub.
The bank’s parent posted a 24 per cent drop in net profit in 2009 to 118.74 million dinars.
Islamic banks largely dodged the effects of the recent global credit crisis due to the religion’s ban on excessive speculation and requirement that transactions must be based on real assets.
But limited Islamic investing options led many shariah banks, especially in the Middle East, to rely heavily on real estate and they were hard hit when the market slumped. - Reuters
KFH embarks on a 5-year business plan
KUWAIT Finance House (M) Bhd (KFHMB) will embark on a five-year business plan to strengthen its operations in the country, said its chief executive officer (CEO), Jamelah Jamaluddin.
She said under the plan, KFHMB would enhance credit quality, lower non-performing financing, strengthen corporate investment banking and equity while looking at opportunities in retail business.
"Our due diligence audit is expected to take at least six weeks," she told a media briefing here today.
The audit aimed to obtain an accurate picture of certain transactions and contractual arrangements that have been undertaken over the years, she said.
Jamelah, who was appointed as CEO less than two months ago, said KFHMB aimed to improve asset quality and lower its non-performing financing in line with industry average.
"We expect to experience modest business growth this year, not more than 10 per cent," she said, adding that, KFHMB registered eight per cent growth last year.
She said the bank would adopt KFH Kuwait's business model in order to sustain growth in terms of risk management and take full advantage of opportunities in the region.
KFHMB commenced operations on Aug 8, 2005 and is wholly-owned subsidiary of Kuwait Finance House KSC, a full-fledged Islamic bank.
It has a paid-up capital of US$650 million and US$100 million Tier II capital. Currently it has seven branches in the country. - Bernama
She said under the plan, KFHMB would enhance credit quality, lower non-performing financing, strengthen corporate investment banking and equity while looking at opportunities in retail business.
"Our due diligence audit is expected to take at least six weeks," she told a media briefing here today.
The audit aimed to obtain an accurate picture of certain transactions and contractual arrangements that have been undertaken over the years, she said.
Jamelah, who was appointed as CEO less than two months ago, said KFHMB aimed to improve asset quality and lower its non-performing financing in line with industry average.
"We expect to experience modest business growth this year, not more than 10 per cent," she said, adding that, KFHMB registered eight per cent growth last year.
She said the bank would adopt KFH Kuwait's business model in order to sustain growth in terms of risk management and take full advantage of opportunities in the region.
KFHMB commenced operations on Aug 8, 2005 and is wholly-owned subsidiary of Kuwait Finance House KSC, a full-fledged Islamic bank.
It has a paid-up capital of US$650 million and US$100 million Tier II capital. Currently it has seven branches in the country. - Bernama
Hua Yang to launch RM45m Senawang Link
Main board listed property development company Hua Yang Bhd, will launch the Senawang Link, an integrated commercial and industrial development project, in Seremban.
Located on a 11.2 hectare site, it has a gross development value (GDV) of RM45 million.
Construction will begin this month on the Senawang Link, which comprises shop offices, semi-detached factories and industrial lots, the company said in a statement today.
"We have earmarked the Senawang Link as an industrial hotspot, especially for those keen to operate strategically located factories, priced from RM251,000 onwards," said its chief operating officer, Ho Wen Yan.
Strategically located along the main road of Jalan Tampin, the Senawang Link is also just next to the upcoming KTM Sungai Gadut Station, which is expected to be completed by 2010.
Meanwhile, the Senawang Link is part of the RM1 billion worth of development, earmarked by Hua Yang, for this year.
Among the others are One South, a mixed development project with a GDV of RM750 million in Sungai Besi, the RM45 million Seremban Country Heights development, the RM28 million Polo Park exclusive residential area in Johor Bahru as well as the RM200 million Symphony Heights Serviced Apartments venture in Selayang. -- Bernama
Located on a 11.2 hectare site, it has a gross development value (GDV) of RM45 million.
Construction will begin this month on the Senawang Link, which comprises shop offices, semi-detached factories and industrial lots, the company said in a statement today.
"We have earmarked the Senawang Link as an industrial hotspot, especially for those keen to operate strategically located factories, priced from RM251,000 onwards," said its chief operating officer, Ho Wen Yan.
Strategically located along the main road of Jalan Tampin, the Senawang Link is also just next to the upcoming KTM Sungai Gadut Station, which is expected to be completed by 2010.
Meanwhile, the Senawang Link is part of the RM1 billion worth of development, earmarked by Hua Yang, for this year.
Among the others are One South, a mixed development project with a GDV of RM750 million in Sungai Besi, the RM45 million Seremban Country Heights development, the RM28 million Polo Park exclusive residential area in Johor Bahru as well as the RM200 million Symphony Heights Serviced Apartments venture in Selayang. -- Bernama
Gold falls on lack of buying support
NEW DELHI: Gold prices declined by Rs 30 (US$0.66) to Rs 16,560 (US$369.4) per ten grams in the bullion market here today on reduced off-take even as the metal ruled firm in the overseas markets, PTI reported.
Standard gold and ornaments fell by Rs 30 each to Rs 16,560 and Rs 16,410 (US$366 per ten grams, respectively, while sovereign remained steady at Rs 13,900 (US$310) per eight-gram piece.
A positive trend in the metal in the overseas markets failed to influence the prices in the domestic market. The metal remained firm in the Asian region and rose by US$3 to US$1,116.60 an ounce today.
Marketmen said lack of buying support at existing levels led to the fall in gold prices.
Investors shifting their money from bullion to the rising equity markets for quick gains also reduced demand for the metal, they added. -Bernama
Standard gold and ornaments fell by Rs 30 each to Rs 16,560 and Rs 16,410 (US$366 per ten grams, respectively, while sovereign remained steady at Rs 13,900 (US$310) per eight-gram piece.
A positive trend in the metal in the overseas markets failed to influence the prices in the domestic market. The metal remained firm in the Asian region and rose by US$3 to US$1,116.60 an ounce today.
Marketmen said lack of buying support at existing levels led to the fall in gold prices.
Investors shifting their money from bullion to the rising equity markets for quick gains also reduced demand for the metal, they added. -Bernama
Maybank secures US$200m from Japan Bank
MAYBANK has secured an additional US$200 million funding facility from the Japan Bank for International Cooperation (JBIC), bringing to US$400 million the total financing it has received from the Japanese bank to date.
Maybank said the additional facility would be used to support customers which have business relations with Japanese enterprises in Malaysia and other Asean member countries where Maybank or its subsidiaries operate.
In the first agreement for US$200 million between Maybank and JBIC signed in May 2009 and fully drawn down by July 27 the same year, the loan programme was dedicated to industries in Malaysia which have business relations with Japanese enterprises.
In a statement today, Maybank President and Chief Executive Officer Datuk Seri Abdul Wahid Omar said: "Given the strong trade links between Japan and Asean which in 2009 alone totalled over US$158 billion, we believe that this new facility will go a long way in further boosting the level of business between Japan and Malaysia as well as the Asean region.
"With Maybank’s presence in seven out of 10 Asean countries, especially our large network in Indonesia, the Philippines, Singapore, Vietnam and Cambodia, the total US$400 million JBIC funding will further boost our lending capacity to clients in the region and enhance our support to them as they leverage on the economic upturn."
He said the long term nature of the facility provides Maybank with an opportunity to diversify its source of US dollar funding as well as further improve its US dollar medium term funding structure.
The facility will be repaid in 16 equal semi-annual installments commencing November 2011 until May 2019.
Meanwhile, JBIC Resident Executive Officer for Asia and Oceania Ryuichi Kaga said the second loan extended to Maybank was expected to promote business activities, including trade and investment, as well as contribute to strengthening of mutually beneficial economic partnership among Japan, Malaysia and Asean countries.
"JBIC is very keen to further strengthen its relationship with Maybank, the largest commercial bank in Malaysia which also has a broad network in Asean countries," he said.
JBIC is a wholly-owned institution of the Government of Japan. - Bernama
Maybank said the additional facility would be used to support customers which have business relations with Japanese enterprises in Malaysia and other Asean member countries where Maybank or its subsidiaries operate.
In the first agreement for US$200 million between Maybank and JBIC signed in May 2009 and fully drawn down by July 27 the same year, the loan programme was dedicated to industries in Malaysia which have business relations with Japanese enterprises.
In a statement today, Maybank President and Chief Executive Officer Datuk Seri Abdul Wahid Omar said: "Given the strong trade links between Japan and Asean which in 2009 alone totalled over US$158 billion, we believe that this new facility will go a long way in further boosting the level of business between Japan and Malaysia as well as the Asean region.
"With Maybank’s presence in seven out of 10 Asean countries, especially our large network in Indonesia, the Philippines, Singapore, Vietnam and Cambodia, the total US$400 million JBIC funding will further boost our lending capacity to clients in the region and enhance our support to them as they leverage on the economic upturn."
He said the long term nature of the facility provides Maybank with an opportunity to diversify its source of US dollar funding as well as further improve its US dollar medium term funding structure.
The facility will be repaid in 16 equal semi-annual installments commencing November 2011 until May 2019.
Meanwhile, JBIC Resident Executive Officer for Asia and Oceania Ryuichi Kaga said the second loan extended to Maybank was expected to promote business activities, including trade and investment, as well as contribute to strengthening of mutually beneficial economic partnership among Japan, Malaysia and Asean countries.
"JBIC is very keen to further strengthen its relationship with Maybank, the largest commercial bank in Malaysia which also has a broad network in Asean countries," he said.
JBIC is a wholly-owned institution of the Government of Japan. - Bernama
Naza upbeat on new Ferrari 458 Italia
Naza Italia Sdn Bhd, the local sole importer and distributor of Ferrari cars, is confident the new 458 Italia will draw strong interest from Malaysian enthusiasts given its unique and stylish features.
"It is not about the volume. We are fulfilling customers' dream and deliver the best-of-the-best car for them.
"And talking about Malaysia, demand for this car is always encouraging," said joint group rxecutive chairman Datuk SM Faisal SM Nasimuddin when asked about the sales target for the new Ferrari.
Imported from Maranello, Italy, the sports car has a starting price of RM2 million. To date, 14 units of Ferrari 458 Italia have been booked.
Speaking to reporters after the unveiling of Ferrari 458 Italia for the Malaysian market in Kuala Lumpur today, Faisal said: "This car exudes style, creative flair, passion and cutting-edge technology, all in one package.
"Thus I believe, this car is a must have for Ferrari fans and enthusiasts in Malaysia."
Naza Italia has sold about 23 cars of five ferrari models, since it was granted the exclusive right in March 2008. The company has been committed in bring in a comprehensive product line from the F430, 599 GTB Fiorano, 612 Scaglietti, Ferrari California to Scuderia Spider.
Debuted at the 2009 Frankfurt Motor Show on Sept 15, 2009, the Ferrari 456 Italia is an eight-cylinder two-seater berlinetta with a mid-rear mounted engine and represents a genuine break with the past in terms of Maranello's previous high performance sports cars.
It replaces the Ferrari F430 and delivers superb vehicle dynamics with an ideal weight balance for a mid-rear-engine sports car -- 58 per cent rear and 42 per cent front.
It produces only 307 gramme per kilometre of carbon dioxide and has a fuel consumption of just 13.3 litre per kilometre.
To extend Naza Italia's commitment in providing the highest level of customer care, SM Faisal said the company was offering the Ferrari Approved Pre-Owned Programme.
The programme is to ensure Ferrari customers that pre-owned cars come with full technical support, including the Ferrari Power Warranty.
Naza Italia has invested RM10 million to mark its commitment to the long-term success of the Ferrari and Maserati brands in Malaysia by setting up a one-stop 4S (sales, services, spare parts and system) centre next to Naza Automall in Petaling Jaya.
-- Bernama
"It is not about the volume. We are fulfilling customers' dream and deliver the best-of-the-best car for them.
"And talking about Malaysia, demand for this car is always encouraging," said joint group rxecutive chairman Datuk SM Faisal SM Nasimuddin when asked about the sales target for the new Ferrari.
Imported from Maranello, Italy, the sports car has a starting price of RM2 million. To date, 14 units of Ferrari 458 Italia have been booked.
Speaking to reporters after the unveiling of Ferrari 458 Italia for the Malaysian market in Kuala Lumpur today, Faisal said: "This car exudes style, creative flair, passion and cutting-edge technology, all in one package.
"Thus I believe, this car is a must have for Ferrari fans and enthusiasts in Malaysia."
Naza Italia has sold about 23 cars of five ferrari models, since it was granted the exclusive right in March 2008. The company has been committed in bring in a comprehensive product line from the F430, 599 GTB Fiorano, 612 Scaglietti, Ferrari California to Scuderia Spider.
Debuted at the 2009 Frankfurt Motor Show on Sept 15, 2009, the Ferrari 456 Italia is an eight-cylinder two-seater berlinetta with a mid-rear mounted engine and represents a genuine break with the past in terms of Maranello's previous high performance sports cars.
It replaces the Ferrari F430 and delivers superb vehicle dynamics with an ideal weight balance for a mid-rear-engine sports car -- 58 per cent rear and 42 per cent front.
It produces only 307 gramme per kilometre of carbon dioxide and has a fuel consumption of just 13.3 litre per kilometre.
To extend Naza Italia's commitment in providing the highest level of customer care, SM Faisal said the company was offering the Ferrari Approved Pre-Owned Programme.
The programme is to ensure Ferrari customers that pre-owned cars come with full technical support, including the Ferrari Power Warranty.
Naza Italia has invested RM10 million to mark its commitment to the long-term success of the Ferrari and Maserati brands in Malaysia by setting up a one-stop 4S (sales, services, spare parts and system) centre next to Naza Automall in Petaling Jaya.
-- Bernama
MAS to begin Dammam flights next month
DUBAI: Malaysia Airlines will further spread Malaysian hospitality to this part of the world when it starts flying to the Saudi Arabian city of Dammam next month.
The service begins on May 5, twice weekly every Wednesday and Saturday, the award-winning airline said in a statement.
A return ticket from Dammam to Dubai starts from 643 riyals, while a Dammam-Kuala Lumpur return fare starts from 1,664 riyals.
The carrier also said a return ticket from Dubai to Dammam is available from 635 dirhams.
Bookings for the all-inclusive airfares are open now till Sept 30, 2010, for travel between May 5 and Dec 31, 2010. -- Bernama
The service begins on May 5, twice weekly every Wednesday and Saturday, the award-winning airline said in a statement.
A return ticket from Dammam to Dubai starts from 643 riyals, while a Dammam-Kuala Lumpur return fare starts from 1,664 riyals.
The carrier also said a return ticket from Dubai to Dammam is available from 635 dirhams.
Bookings for the all-inclusive airfares are open now till Sept 30, 2010, for travel between May 5 and Dec 31, 2010. -- Bernama
Bank Negara to host Islamic finance forum
BANK Negara Malaysia will host the Second Global Islamic Finance Forum (GIFF 2010) from Oct 25 to 28 with the theme "Islamic Finance: Opportunities for Tomorrow".
GIFF 2010 is a key international event in the calendar of Islamic finance following the success of the inaugural GIFF in March 2007, the central bank said in a statement today.
The forum is a high-level multi-track event that brings together regulators, scholars and financial industry players who are key drivers in shaping Islamic finance globally, Bank Negara said.
It is organised in collaboration with the Association of Islamic Banking Institutions Malaysia, Malaysian Takaful Association, the International Shariah Research Academy for Islamic Finance, and the REDmoney Group.
GIFF 2010 is also in support of the Malaysian International Islamic Financial Centre initiative to develop the country as a hub for international Islamic finance.
It is a platform for regulators, Shariah scholars, industry leaders and financial market participants from across the globe to discuss and exchange views and insights on the growth potential and opportunities of Islamic finance.
Islamic finance is an increasingly important component in the international financial system given the potential for Islamic finance to contribute towards global economic growth and financial stability, the central bank said.
The multi-track events of GIFF 2010 includes Global Business Leaders Dialogue, Public Lecture, Regulators Forum, Global Islamic Liquidity Management Workshop and Takaful Rendezvous.
In view of the growing global interest in Islamic finance, Bank Negara expects the forum to attract interest from international and local participants. – Bernama
GIFF 2010 is a key international event in the calendar of Islamic finance following the success of the inaugural GIFF in March 2007, the central bank said in a statement today.
The forum is a high-level multi-track event that brings together regulators, scholars and financial industry players who are key drivers in shaping Islamic finance globally, Bank Negara said.
It is organised in collaboration with the Association of Islamic Banking Institutions Malaysia, Malaysian Takaful Association, the International Shariah Research Academy for Islamic Finance, and the REDmoney Group.
GIFF 2010 is also in support of the Malaysian International Islamic Financial Centre initiative to develop the country as a hub for international Islamic finance.
It is a platform for regulators, Shariah scholars, industry leaders and financial market participants from across the globe to discuss and exchange views and insights on the growth potential and opportunities of Islamic finance.
Islamic finance is an increasingly important component in the international financial system given the potential for Islamic finance to contribute towards global economic growth and financial stability, the central bank said.
The multi-track events of GIFF 2010 includes Global Business Leaders Dialogue, Public Lecture, Regulators Forum, Global Islamic Liquidity Management Workshop and Takaful Rendezvous.
In view of the growing global interest in Islamic finance, Bank Negara expects the forum to attract interest from international and local participants. – Bernama
Edaran Tan Chong offers HP rates from 1.98pc
EDARAN Tan Chong Motor Sdn Bhd (ETCM) will continue to offer special hire purchase packages with interest rates starting from 1.98 per cent to 2.78 per cent despite the increase in overnight policy rate (OPR).
In a statement today, ETCM said the packages would be offered to buyers of Nissan Sylphy, Grand Livina, Sentra, X-trail and Serena.
"The offer is for private registration only and the promotion is valid till Apr 30, 2010. The special interest rates are offered by Tan Chong Capital Resources Sdn Bhd," it said.
ETCM executive director, Datuk Dr Ang Bong Beng, said interest rate increase was normal given the improved economic outlook this year.
"Going forward, we expect the OPR to rise gradually and the best thing to do is to lock in the current lower interest rates before they rise further," he said. - Bernama
In a statement today, ETCM said the packages would be offered to buyers of Nissan Sylphy, Grand Livina, Sentra, X-trail and Serena.
"The offer is for private registration only and the promotion is valid till Apr 30, 2010. The special interest rates are offered by Tan Chong Capital Resources Sdn Bhd," it said.
ETCM executive director, Datuk Dr Ang Bong Beng, said interest rate increase was normal given the improved economic outlook this year.
"Going forward, we expect the OPR to rise gradually and the best thing to do is to lock in the current lower interest rates before they rise further," he said. - Bernama
Pacific Mutual declares payouts for 7 funds
PACIFIC Mutual Fund Bhd has declared income distributions for seven of its funds for the financial year ended March 31, 2010, amounting to RM22.38 million.
The funds are, the Pacific Pearl Fund (6.00 sen/unit), Pacific Dana Aman (3.50 sen/unit), Pacific Dana Murni (1.00 sen/unit), Pacific Asia Brands Fund (2.50 sen/unit), Pacific Cash Fund (0.25 sen/unit), Pacific Protected Islamic Cash (0.50 sen/unit) and Pacific SELECT Bond Fund (1.00 sen/unit).
"This payout reflects our commitment to investors, in providing consistent out-performance across the board for our funds, from local and global equities to money market funds," it said in a statement today.
Pacific Mutual, currently manages a total of 25 funds, which includes nine funds with foreign investment mandates and three wholesale funds.
As at the end of March, it managed RM1.87 billion on behalf of its unit trust investors and private mandate clients. - Bernama
The funds are, the Pacific Pearl Fund (6.00 sen/unit), Pacific Dana Aman (3.50 sen/unit), Pacific Dana Murni (1.00 sen/unit), Pacific Asia Brands Fund (2.50 sen/unit), Pacific Cash Fund (0.25 sen/unit), Pacific Protected Islamic Cash (0.50 sen/unit) and Pacific SELECT Bond Fund (1.00 sen/unit).
"This payout reflects our commitment to investors, in providing consistent out-performance across the board for our funds, from local and global equities to money market funds," it said in a statement today.
Pacific Mutual, currently manages a total of 25 funds, which includes nine funds with foreign investment mandates and three wholesale funds.
As at the end of March, it managed RM1.87 billion on behalf of its unit trust investors and private mandate clients. - Bernama
Renexus plans treatment plants in Pakistan
Malaysia's Renexus Group is investing about US$500 million to build water treatment plants at various locations in Pakistan.
Its executive chairman, John Klerr, when giving details on the investment proposal during a meeting with acting Pakistani High Commissioner to Malaysia Dr Imtiaz A. Kazi today, said Renexus would arrange all the required funding.
Renexus, Klerr said, was also interested to build, own and transfer mass housing schemes in identified areas of Pakistan.
It planned to construct a model township with 20,000 houses in the country and was capable of building up to 100,000 housing units within five years, he said a statement.
Klerr also said that Renexus was in touch with the Perak state government to construct a modern automated standard abattoir in Pakistan in order to provide bulk supply of Pakistani mutton and beef to Malaysia. -- Bernama
Its executive chairman, John Klerr, when giving details on the investment proposal during a meeting with acting Pakistani High Commissioner to Malaysia Dr Imtiaz A. Kazi today, said Renexus would arrange all the required funding.
Renexus, Klerr said, was also interested to build, own and transfer mass housing schemes in identified areas of Pakistan.
It planned to construct a model township with 20,000 houses in the country and was capable of building up to 100,000 housing units within five years, he said a statement.
Klerr also said that Renexus was in touch with the Perak state government to construct a modern automated standard abattoir in Pakistan in order to provide bulk supply of Pakistani mutton and beef to Malaysia. -- Bernama
Multi-Purpose takes 2.37pc stake in U Mobile
MULTI-Purpose Holdings Bhd (MPHB) is acquiring a 2.37 per cent stake in third generation (3G) service provider U Mobile Sdn Bhd from Detik Ria Sdn Bhd for RM54 million cash.
MPHB today signed a share sale agreement with U Mobile pertaining to the matter.
The acquisition will be financed by way of internally generated funds, the company said in a filing to Bursa Malaysia.
MPHB had on July last year acquired 15 million ordinary shares of RM1.00 each or equivalent to 1.98 per cent stake in U Mobile from U Television Sdn Bhd for RM75 million.
The company then in March this year subscribed to the one-for-one rights issue of RM1.00 each undertaken by U Mobile to acquire a further 1.98 per cent stake in U Mobile.
MPHB said the share acquisitions would enable the company to venture into the business of multimedia interactive television and telecommunication services.
The investments in U Mobile are also expected to contribute positively to future earnings, it said.
U Mobile, which is majority owned by tycoon Tan Sri Vincent Tan Chee Yioun, has a 3G spectrum and over 1,000 3G sites covering the Klang Valley, Seremban, Ipoh and Johor Baharu. It now rides on DiGi.Com Bhd's network for 2G domestic roaming.
Singapore Technologies Telemedia last month announced that it would invest RM1 billion to acquire a 33 per cent stake in U Mobile, including subscribing to the proposed rights issue by the latter.
Tan said the strategic partnership with ST Telemedia would bring good synergy to U Mobile and further enhance the competitiveness in the country's telecommunications industry.
U Mobile has been on the lookout for a strategic partner after the exit of Japan's NTT DoCoMo and South Korea's KT Freetel in September last year. - Bernama
MPHB today signed a share sale agreement with U Mobile pertaining to the matter.
The acquisition will be financed by way of internally generated funds, the company said in a filing to Bursa Malaysia.
MPHB had on July last year acquired 15 million ordinary shares of RM1.00 each or equivalent to 1.98 per cent stake in U Mobile from U Television Sdn Bhd for RM75 million.
The company then in March this year subscribed to the one-for-one rights issue of RM1.00 each undertaken by U Mobile to acquire a further 1.98 per cent stake in U Mobile.
MPHB said the share acquisitions would enable the company to venture into the business of multimedia interactive television and telecommunication services.
The investments in U Mobile are also expected to contribute positively to future earnings, it said.
U Mobile, which is majority owned by tycoon Tan Sri Vincent Tan Chee Yioun, has a 3G spectrum and over 1,000 3G sites covering the Klang Valley, Seremban, Ipoh and Johor Baharu. It now rides on DiGi.Com Bhd's network for 2G domestic roaming.
Singapore Technologies Telemedia last month announced that it would invest RM1 billion to acquire a 33 per cent stake in U Mobile, including subscribing to the proposed rights issue by the latter.
Tan said the strategic partnership with ST Telemedia would bring good synergy to U Mobile and further enhance the competitiveness in the country's telecommunications industry.
U Mobile has been on the lookout for a strategic partner after the exit of Japan's NTT DoCoMo and South Korea's KT Freetel in September last year. - Bernama
Prudential launches PRUmy Child
BEING the first of its kind in Malaysia, Prudential Assurance Malaysia Bhd, is confident that its PRUmy Child Plan, will easily secure more than 15 per cent of the estimated 500,000 new births in the country.
PRUmy Child is the first child insurance plan that can be subscribed for unborn children, from as early as the 18-month of pregnancy.
Chief Executive Officer Charlie Oropeza said.
"The plan comes with a minimum annual premium of RM600 and offers coverage during the crucial pregnancy and infancy periods," he explained, after announcing the PRUmy Child Plan ambassador here today.
Datuk Sheila Majid, singer and a mother of four children has been chosen to promote the plan and share her experiences with other women and mothers-to-be, to provide the best protection for their child.
Shiela, will also be featured in the PRUmy Child Plan marketing campaign, which runs for 14 weeks from April 5.
The campaign will be featured across multiple channels, including television, print media, radio, billboards, online as well as public relations and on-ground activities.
According to Oropeza, Prudential, will also donate RM2 of every PRUmy Child Plan policy sold between March and June towards raising funds for those suffering from congenital defects to undergo corrective surgery.
This is as part of its corporate social responsibility involvement with Gleneagles Hospital's, "A Heart for A Heart Programme". - Bernama
PRUmy Child is the first child insurance plan that can be subscribed for unborn children, from as early as the 18-month of pregnancy.
Chief Executive Officer Charlie Oropeza said.
"The plan comes with a minimum annual premium of RM600 and offers coverage during the crucial pregnancy and infancy periods," he explained, after announcing the PRUmy Child Plan ambassador here today.
Datuk Sheila Majid, singer and a mother of four children has been chosen to promote the plan and share her experiences with other women and mothers-to-be, to provide the best protection for their child.
Shiela, will also be featured in the PRUmy Child Plan marketing campaign, which runs for 14 weeks from April 5.
The campaign will be featured across multiple channels, including television, print media, radio, billboards, online as well as public relations and on-ground activities.
According to Oropeza, Prudential, will also donate RM2 of every PRUmy Child Plan policy sold between March and June towards raising funds for those suffering from congenital defects to undergo corrective surgery.
This is as part of its corporate social responsibility involvement with Gleneagles Hospital's, "A Heart for A Heart Programme". - Bernama
Energy prices 'create a floor' for palm oil
Palm oil is increasingly being supported by energy prices as demand for biofuels rises, James Fry, managing director of LMC International, said today.
“Biofuels have unwittingly transformed vegetable oil prices into part of the energy market,” he said, according to an e-mailed version of a presentation in Kuala Lumpur. “Energy prices today create a floor to the vegetable oil price.”
The price of palm oil may drop as low as RM2,400 (US$737) a ton if Brent crude drops below US$70 a barrel, Fry said on March 10. Futures may soar to RM2,950 if Malaysian stockpiles reach 1.25 million tons and crude trades at US$75, Fry said on Dec. 4.
Palm oil for June delivery on the Malaysia Derivatives Exchange dropped for the first time in three days, falling 0.8 per cent to RM2,536 a ton at the 12:30 pm trading break in Kuala Lumpur.
Crude oil in New York rose 5.5 per cent in the first quarter, after a 12 per cent surge in the fourth quarter, helping lift palm oil by 20 per cent over the six-month period. Crude lost 0.4 per cent to US$83.41 a barrel, dropping for the first day in four.
“If vegetable oils are cheap enough, no subsidy is needed to persuade people to use them as a fuel,” Fry said today.
Under the European Union’s Renewable Energy Directive in June last year, all 27 member states are obliged to meet 5.75 per cent of their road transport fuel needs using renewable sources like biofuels and hydrogen by this year, rising to 10 per cent by 2020.
Malaysia, the second-largest palm oil producer, will make it compulsory for all vehicles to use biofuel blended from the commodity starting from June 2011.
Palm oil stockpiles in Malaysia were 932,970 tons at the end of February, according to Malaysian Palm Oil Board data. -- Bloomberg
“Biofuels have unwittingly transformed vegetable oil prices into part of the energy market,” he said, according to an e-mailed version of a presentation in Kuala Lumpur. “Energy prices today create a floor to the vegetable oil price.”
The price of palm oil may drop as low as RM2,400 (US$737) a ton if Brent crude drops below US$70 a barrel, Fry said on March 10. Futures may soar to RM2,950 if Malaysian stockpiles reach 1.25 million tons and crude trades at US$75, Fry said on Dec. 4.
Palm oil for June delivery on the Malaysia Derivatives Exchange dropped for the first time in three days, falling 0.8 per cent to RM2,536 a ton at the 12:30 pm trading break in Kuala Lumpur.
Crude oil in New York rose 5.5 per cent in the first quarter, after a 12 per cent surge in the fourth quarter, helping lift palm oil by 20 per cent over the six-month period. Crude lost 0.4 per cent to US$83.41 a barrel, dropping for the first day in four.
“If vegetable oils are cheap enough, no subsidy is needed to persuade people to use them as a fuel,” Fry said today.
Under the European Union’s Renewable Energy Directive in June last year, all 27 member states are obliged to meet 5.75 per cent of their road transport fuel needs using renewable sources like biofuels and hydrogen by this year, rising to 10 per cent by 2020.
Malaysia, the second-largest palm oil producer, will make it compulsory for all vehicles to use biofuel blended from the commodity starting from June 2011.
Palm oil stockpiles in Malaysia were 932,970 tons at the end of February, according to Malaysian Palm Oil Board data. -- Bloomberg
Ringgit cimbs to a 20-month high
Malaysia’s ringgit advanced to the strongest level in 20 months as reports today added to evidence economic growth is picking up in Asia, boosting the outlook for trade and spurring demand for regional assets.
The currency rallied 5 percent in the last three months, its best quarterly performance since 1998, and the FTSE Bursa Malaysia KLCI Index of shares was headed for its highest close in two years. Reports today showed business confidence in Japan is the highest since September 2008 and China’s manufacturing expanded at a faster pace in March. South Korea announced a bigger increase in exports than economists forecast.
“The numbers are getting better and playing into the stronger Asian currency theme,” said Suresh Kumar Ramanathan, a foreign-exchange strategist at CIMB Investment Bank Bhd. in Kuala Lumpur.
“Part of that is also due to heightened expectations for yuan appreciation.”
The ringgit strengthened 0.1 percent to 3.2595 per dollar as of 10.20 am in Kuala Lumpur, according to data compiled by Bloomberg. It earlier reached 3.2510, the highest level since July 2008.
Malaysia’s trade ministry will tomorrow report a 25 per cent increase in February exports from a year earlier, according to the median estimate of economists in a Bloomberg News survey.
January’s 37 per cent gain was the biggest in more than 11 years and followed declines in all but two of the previous 15 months. - Bloomberg
The currency rallied 5 percent in the last three months, its best quarterly performance since 1998, and the FTSE Bursa Malaysia KLCI Index of shares was headed for its highest close in two years. Reports today showed business confidence in Japan is the highest since September 2008 and China’s manufacturing expanded at a faster pace in March. South Korea announced a bigger increase in exports than economists forecast.
“The numbers are getting better and playing into the stronger Asian currency theme,” said Suresh Kumar Ramanathan, a foreign-exchange strategist at CIMB Investment Bank Bhd. in Kuala Lumpur.
“Part of that is also due to heightened expectations for yuan appreciation.”
The ringgit strengthened 0.1 percent to 3.2595 per dollar as of 10.20 am in Kuala Lumpur, according to data compiled by Bloomberg. It earlier reached 3.2510, the highest level since July 2008.
Malaysia’s trade ministry will tomorrow report a 25 per cent increase in February exports from a year earlier, according to the median estimate of economists in a Bloomberg News survey.
January’s 37 per cent gain was the biggest in more than 11 years and followed declines in all but two of the previous 15 months. - Bloomberg
MOSTI's grants for 183 green tech projects
The Ministry of Science, Technology and Innovation (MOSTI) has granted about RM157 million to 183 projects for research and development of green technology.
Its Deputy Minister, Fadillah Yusof, said these projects were granted under the Intensification of Research in Priority Areas (IRPA), ScienceFund, TechnoFund, Commercialisation of Research & Development Fund (CRDF) and Community InnoFund (CIF).
"From all these projects, about ten ScienceFund projects, worth RM2 million and one IRPA project, worth RM180,000 were approved to University of Malaya (UM)," he said at the launch of Innovation and Creativity Expo UM 2010 today.
In the process of adopting green technology, the government stresses on innovation and application of green technology in daily life.
"Innovation is essential in creating and developing environmental-friendly products. The products must be practical and have the potential to commercialise," he added.--Bernama
Its Deputy Minister, Fadillah Yusof, said these projects were granted under the Intensification of Research in Priority Areas (IRPA), ScienceFund, TechnoFund, Commercialisation of Research & Development Fund (CRDF) and Community InnoFund (CIF).
"From all these projects, about ten ScienceFund projects, worth RM2 million and one IRPA project, worth RM180,000 were approved to University of Malaya (UM)," he said at the launch of Innovation and Creativity Expo UM 2010 today.
In the process of adopting green technology, the government stresses on innovation and application of green technology in daily life.
"Innovation is essential in creating and developing environmental-friendly products. The products must be practical and have the potential to commercialise," he added.--Bernama
Stocks, Metals Rally on Manufacturing Spurt; Franc Strengthens
Stocks rallied, driving the Stoxx Europe 600 Index to an 18-month high, and commodities jumped as manufacturing expanded in China, Japan and the U.K. The Swiss franc appreciated to a record against the euro for a second day.
The Stoxx Europe 600 rose 1 percent to 266.23 at 12:01 p.m. in London, the highest since September 2008. Futures on the Standard & Poor’s 500 Index added 0.4 percent and the MSCI Emerging Markets Index gained 1.2 percent, for its longest rally in a year. Copper and platinum reached their highest levels since August 2008 and oil climbed to a 17-month record. The Swiss franc strengthened as much as 0.4 percent.
China’s manufacturing accelerated, while a Bank of Japan survey showed confidence among the nation’s largest manufacturers rose for a fourth quarter. An index of U.K. output rose to its highest point since 1994, and European factory production increased at a faster pace than initially estimated in March. The Institute for Supply Management may say its U.S. factory index rose last month, while claims for jobless benefits probably decreased.
“The strength of the economic recovery was underestimated and the positive dynamic is still under way,” said Rudolf Buxtorf, who helps manage about $500 million at RBS Coutts Bank in Zurich. “It’s too early to be euphoric but the positives have moved to the foreground.”
Rio, Richemont
The Stoxx Europe 600 advanced as BHP Billiton Ltd., the world’s largest mining company, gained 1.7 percent in London after metals climbed. Rio Tinto Group, the third-biggest mining company, rose 2.2 percent. Cie. Financiere Richemont SA, the world’s largest jewelry maker, increased 2 percent in Zurich after agreeing to buy the remainder of Net-a-Porter LLC, valuing the online fashion retailer at 350 million pounds ($533 million). The MSCI Asia Pacific Index closed 1.1 percent higher.
Mergers and acquisitions gained momentum in the first quarter, with more than 2,034 cross-border transactions and 10 hostile takeovers signaling a recovery from the worst deal market in six years, according to data compiled by Bloomberg.
S&P 500 futures rose before the claims report, due at 8:30 a.m. in New York. Tomorrow, when many U.S. and world markets are closed for holidays, the government will report March payrolls. The median of economists’ forecasts in a Bloomberg survey is for an increase of 190,000, the biggest in three years.
China, Romania
The MSCI emerging markets index rallied to the highest level in almost three months, and China’s Shanghai Composite Index advanced 1.2 percent. Romania’s BET Index jumped 1.9 percent, extending last quarter’s 30 percent rally. Stocks in the smallest developing markets, including Romania, Ukraine and Nigeria, beat their larger peers by the most in almost five years last quarter as the MSCI Frontier Markets Index added 11 percent. Russia’s Micex index climbed 1.3 percent, advancing for a sixth day.
Copper for delivery in three months rose 1.8 percent to $7,929 a metric ton on the London Metal Exchange, after earlier reaching $7,938. Aluminum, nickel and zinc also gained. Platinum for immediate delivery jumped 1.1 percent to $1,662.18 an ounce, and earlier touched $1,663.50. Crude oil for May delivery added 0.8 percent to $84.41 a barrel in New York, after earlier reaching $84.62, the highest since October 2008.
‘Robust’ Expansion
“Robust economic growth among emerging economies has supported commodity prices,” said Tobias Merath, head of commodity research at Credit Suisse AG in Zurich. “Now the U.S. and Europe are getting increasingly important, as demand there has started to pick up.”
The yield on the 10-year Treasury note rose 1 basis point to 3.84 percent, climbing for the first time in three days, as analysts said the U.S. government will announce plans to auction $82.2 billion of securities next week.
The sales will include a record-tying $40 billion in three- year notes, based on a Bloomberg survey of nine primary dealers, companies required to bid at auctions. They will also consist of $8.2 billion in 10-year Treasury Inflation Protected Securities, $21 billion in 10-year notes and $13 billion in 30-year bonds, the dealers forecast. The auctions will take place over four days, starting with the TIPS on April 5.
The Swiss franc strengthened beyond 1.42 for the first time, after a report showed the nation’s manufacturing expanded at the fastest pace in more than three years in March. The dollar traded near a one-week low, at $1.35 per euro, and the yen was close to the lowest level in eight weeks compared with the euro, at 126.15.
The Stoxx Europe 600 rose 1 percent to 266.23 at 12:01 p.m. in London, the highest since September 2008. Futures on the Standard & Poor’s 500 Index added 0.4 percent and the MSCI Emerging Markets Index gained 1.2 percent, for its longest rally in a year. Copper and platinum reached their highest levels since August 2008 and oil climbed to a 17-month record. The Swiss franc strengthened as much as 0.4 percent.
China’s manufacturing accelerated, while a Bank of Japan survey showed confidence among the nation’s largest manufacturers rose for a fourth quarter. An index of U.K. output rose to its highest point since 1994, and European factory production increased at a faster pace than initially estimated in March. The Institute for Supply Management may say its U.S. factory index rose last month, while claims for jobless benefits probably decreased.
“The strength of the economic recovery was underestimated and the positive dynamic is still under way,” said Rudolf Buxtorf, who helps manage about $500 million at RBS Coutts Bank in Zurich. “It’s too early to be euphoric but the positives have moved to the foreground.”
Rio, Richemont
The Stoxx Europe 600 advanced as BHP Billiton Ltd., the world’s largest mining company, gained 1.7 percent in London after metals climbed. Rio Tinto Group, the third-biggest mining company, rose 2.2 percent. Cie. Financiere Richemont SA, the world’s largest jewelry maker, increased 2 percent in Zurich after agreeing to buy the remainder of Net-a-Porter LLC, valuing the online fashion retailer at 350 million pounds ($533 million). The MSCI Asia Pacific Index closed 1.1 percent higher.
Mergers and acquisitions gained momentum in the first quarter, with more than 2,034 cross-border transactions and 10 hostile takeovers signaling a recovery from the worst deal market in six years, according to data compiled by Bloomberg.
S&P 500 futures rose before the claims report, due at 8:30 a.m. in New York. Tomorrow, when many U.S. and world markets are closed for holidays, the government will report March payrolls. The median of economists’ forecasts in a Bloomberg survey is for an increase of 190,000, the biggest in three years.
China, Romania
The MSCI emerging markets index rallied to the highest level in almost three months, and China’s Shanghai Composite Index advanced 1.2 percent. Romania’s BET Index jumped 1.9 percent, extending last quarter’s 30 percent rally. Stocks in the smallest developing markets, including Romania, Ukraine and Nigeria, beat their larger peers by the most in almost five years last quarter as the MSCI Frontier Markets Index added 11 percent. Russia’s Micex index climbed 1.3 percent, advancing for a sixth day.
Copper for delivery in three months rose 1.8 percent to $7,929 a metric ton on the London Metal Exchange, after earlier reaching $7,938. Aluminum, nickel and zinc also gained. Platinum for immediate delivery jumped 1.1 percent to $1,662.18 an ounce, and earlier touched $1,663.50. Crude oil for May delivery added 0.8 percent to $84.41 a barrel in New York, after earlier reaching $84.62, the highest since October 2008.
‘Robust’ Expansion
“Robust economic growth among emerging economies has supported commodity prices,” said Tobias Merath, head of commodity research at Credit Suisse AG in Zurich. “Now the U.S. and Europe are getting increasingly important, as demand there has started to pick up.”
The yield on the 10-year Treasury note rose 1 basis point to 3.84 percent, climbing for the first time in three days, as analysts said the U.S. government will announce plans to auction $82.2 billion of securities next week.
The sales will include a record-tying $40 billion in three- year notes, based on a Bloomberg survey of nine primary dealers, companies required to bid at auctions. They will also consist of $8.2 billion in 10-year Treasury Inflation Protected Securities, $21 billion in 10-year notes and $13 billion in 30-year bonds, the dealers forecast. The auctions will take place over four days, starting with the TIPS on April 5.
The Swiss franc strengthened beyond 1.42 for the first time, after a report showed the nation’s manufacturing expanded at the fastest pace in more than three years in March. The dollar traded near a one-week low, at $1.35 per euro, and the yen was close to the lowest level in eight weeks compared with the euro, at 126.15.
EU Cap-and-Trade Emissions Fall More Than Forecast (Update1)
Carbon dioxide emissions from factories and power stations in the European Union’s cap-and- trade program fell faster than estimated as the region’s economy contracted, according to preliminary data from the regulator.
EU permits for 2010 delivery fell as much as 1.4 percent in London after the European Commission published data on its Web site showing that verified emissions were 1.69 billion metric tons for 2009, down from 1.9 billion in 2008. A March 30 survey of eight analysts by Bloomberg News forecast a drop of 10.2 percent. The figures reflect data that is 88 percent complete.
“Emissions dropped more than we predicted,” said Marius- Cristian Frunza at Sagacarbon, the emissions-trading unit of Caisse des Depots et Consignations. Analysts underestimated the speed at which factories reacted to the economic slowdown. “In the period of crisis, physical activity slowed down faster than the economic slowdown,” he said.
The decline in carbon emissions linked to global warming is the biggest since the 27-nation bloc started its cap-and-trade program in 2005. The system is the world’s biggest greenhouse gas market. Gross domestic product in the EU dropped 3.9 percent last year, according the International Monetary Fund.
EU carbon allowances for December have declined 23 percent since last year’s peak on May 11 of 16.63 euros ($22.45) a ton. They were unchanged at 12.83 euros a ton as of 11:45 a.m. in London.
“We may witness some shrinkage of price, but it shouldn’t fall below support at 12 euros per ton,” Frunza said today.
Carbon prices in the EU market fell as low as 1 euro cent in 2007 because the system had an oversupply of permits in its first phase, the three years starting in 2005. The second phase runs for the five years through 2012.
Installations that reported complete data to the EU were given free allocations for 1.75 billion tons of carbon dioxide allowances in 2009. They had an average surplus of 3.5 percent.
EU permits for 2010 delivery fell as much as 1.4 percent in London after the European Commission published data on its Web site showing that verified emissions were 1.69 billion metric tons for 2009, down from 1.9 billion in 2008. A March 30 survey of eight analysts by Bloomberg News forecast a drop of 10.2 percent. The figures reflect data that is 88 percent complete.
“Emissions dropped more than we predicted,” said Marius- Cristian Frunza at Sagacarbon, the emissions-trading unit of Caisse des Depots et Consignations. Analysts underestimated the speed at which factories reacted to the economic slowdown. “In the period of crisis, physical activity slowed down faster than the economic slowdown,” he said.
The decline in carbon emissions linked to global warming is the biggest since the 27-nation bloc started its cap-and-trade program in 2005. The system is the world’s biggest greenhouse gas market. Gross domestic product in the EU dropped 3.9 percent last year, according the International Monetary Fund.
EU carbon allowances for December have declined 23 percent since last year’s peak on May 11 of 16.63 euros ($22.45) a ton. They were unchanged at 12.83 euros a ton as of 11:45 a.m. in London.
“We may witness some shrinkage of price, but it shouldn’t fall below support at 12 euros per ton,” Frunza said today.
Carbon prices in the EU market fell as low as 1 euro cent in 2007 because the system had an oversupply of permits in its first phase, the three years starting in 2005. The second phase runs for the five years through 2012.
Installations that reported complete data to the EU were given free allocations for 1.75 billion tons of carbon dioxide allowances in 2009. They had an average surplus of 3.5 percent.
Chinese Output Accelerates, Boosting Global Recovery (Update1)
China’s manufacturing expanded for a 13th month, business sentiment in Japan rose to the highest since 2008 and factories in Britain and the euro region stepped up output as the global economic recovery strengthened.
The Purchasing Managers’ Index for China rose to a seasonally adjusted 55.1 in March from 52 the previous month, Hong Kong-based Li & Fung Group said today. In Japan, the Tankan index of sentiment jumped to minus 14 in March from minus 25 in December, while Europe’s manufacturing industry expanded at the fastest pace in more than three years. A gauge of U.K. manufacturing rose to a 15-year high.
Surging economic growth in China is pulling the global economy out of its worst slump in more than six decades and benefiting companies from Honeywell International Inc. in the U.S. to Germany’s Bayerische Motoren Werke AG. Stocks around the world rallied on today’s data. In the U.S., the world’s largest economy, manufacturing probably expanded last month at the fastest pace since 2005.
“It seems the epicenter of the global manufacturing cycle is in Asia,” said Ken Wattret, chief euro-area economist at BNP Paribas SA in London. “The sector is going strong, but what we see is a rebound from exceptional declines. The momentum is there, but we still have a long way to go.”
The MSCI Asia Pacific Index climbed 1 percent to 126.40 in Tokyo today. The Stoxx Europe 600 increased 1.03 percent to 266.28, an 18-month high, at 11:28 a.m. in London, while futures on the Standard & Poor’s 500 Index rose 0.5 percent.
Five Times
The International Monetary Fund forecasts that the global economy will grow 3.9 percent this year after a 0.8 percent contraction in 2009 with China expanding 10 percent, almost five times the pace expected for the U.S. The euro area economy may expand 1 percent, the IMF forecast in January.
In China, the acceleration may buttress the case for Premier Wen Jiabao’s government to consider allowing gains in the yuan for the first time since mid-2008 and raising interest rates. Central bank Governor Zhou Xiaochuan said last month that “sooner or later” China will end the contingency measures it adopted during the global recession.
“There’s a very strong pick-up in global trade,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “It’s a cycle that started in Asia led by China that’s now filtering through to developed economies and Europe in particular.”
‘Export Story’
Manufacturing in Germany, Europe’s biggest economy, expanded at the fastest pace in 14 years, today’s data showed. In Switzerland, a measure of manufacturing activity jumped last month to the highest in more than three years, while Ireland’s manufacturing industry grew for the first time since 2007.
In the U.S., the Institute for Supply Management’s factory index, which will be released later today, probably rose to 57 in March from 56.5 in the prior month, according to a Bloomberg survey. Other reports may show fewer Americans filed claims for jobless benefits and construction dropped.
Honeywell, the Morris Township, New Jersey-based maker of controls for planes and buildings, this week raised its first- quarter profit forecast on stronger orders and cost controls. BMW, the world’s biggest maker of luxury vehicles, last month forecast 2010 deliveries to rise with Chinese sales projected to show a “strong double-digit” percentage gain.
“The expansion we’re seeing is largely an export story,” said David Tinsley, an economist at National Australia Bank in London. “So, even now you’ve got very robust rates of growth according to these PMI indices, it’s just covering some of the level lost. It’s not forging a new growth trajectory.”
The Purchasing Managers’ Index for China rose to a seasonally adjusted 55.1 in March from 52 the previous month, Hong Kong-based Li & Fung Group said today. In Japan, the Tankan index of sentiment jumped to minus 14 in March from minus 25 in December, while Europe’s manufacturing industry expanded at the fastest pace in more than three years. A gauge of U.K. manufacturing rose to a 15-year high.
Surging economic growth in China is pulling the global economy out of its worst slump in more than six decades and benefiting companies from Honeywell International Inc. in the U.S. to Germany’s Bayerische Motoren Werke AG. Stocks around the world rallied on today’s data. In the U.S., the world’s largest economy, manufacturing probably expanded last month at the fastest pace since 2005.
“It seems the epicenter of the global manufacturing cycle is in Asia,” said Ken Wattret, chief euro-area economist at BNP Paribas SA in London. “The sector is going strong, but what we see is a rebound from exceptional declines. The momentum is there, but we still have a long way to go.”
The MSCI Asia Pacific Index climbed 1 percent to 126.40 in Tokyo today. The Stoxx Europe 600 increased 1.03 percent to 266.28, an 18-month high, at 11:28 a.m. in London, while futures on the Standard & Poor’s 500 Index rose 0.5 percent.
Five Times
The International Monetary Fund forecasts that the global economy will grow 3.9 percent this year after a 0.8 percent contraction in 2009 with China expanding 10 percent, almost five times the pace expected for the U.S. The euro area economy may expand 1 percent, the IMF forecast in January.
In China, the acceleration may buttress the case for Premier Wen Jiabao’s government to consider allowing gains in the yuan for the first time since mid-2008 and raising interest rates. Central bank Governor Zhou Xiaochuan said last month that “sooner or later” China will end the contingency measures it adopted during the global recession.
“There’s a very strong pick-up in global trade,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “It’s a cycle that started in Asia led by China that’s now filtering through to developed economies and Europe in particular.”
‘Export Story’
Manufacturing in Germany, Europe’s biggest economy, expanded at the fastest pace in 14 years, today’s data showed. In Switzerland, a measure of manufacturing activity jumped last month to the highest in more than three years, while Ireland’s manufacturing industry grew for the first time since 2007.
In the U.S., the Institute for Supply Management’s factory index, which will be released later today, probably rose to 57 in March from 56.5 in the prior month, according to a Bloomberg survey. Other reports may show fewer Americans filed claims for jobless benefits and construction dropped.
Honeywell, the Morris Township, New Jersey-based maker of controls for planes and buildings, this week raised its first- quarter profit forecast on stronger orders and cost controls. BMW, the world’s biggest maker of luxury vehicles, last month forecast 2010 deliveries to rise with Chinese sales projected to show a “strong double-digit” percentage gain.
“The expansion we’re seeing is largely an export story,” said David Tinsley, an economist at National Australia Bank in London. “So, even now you’ve got very robust rates of growth according to these PMI indices, it’s just covering some of the level lost. It’s not forging a new growth trajectory.”
Volkswagen, Peugeot Costs May Rise on Metal Pricing (Update1)
Volkswagen AG, PSA Peugeot Citroen and Fiat SpA, already working to counter a slump in domestic car sales, may struggle to cope with rapid increases in steel costs following changes to iron-ore pricing setups.
Carmakers in the European Union want the bloc’s antitrust regulator to “tackle distortive developments” after producers of iron ore, the main raw material in steel, announced price increases of as much as 90 percent and ended long-term supply contracts, the European Automobile Manufacturers’ Association, or ACEA, said yesterday.
“The auto industry simply couldn’t handle exposure to highly volatile material prices,” Arndt Ellinghorst, a London- based analyst at Credit Suisse Group AG, said in a telephone interview. “Adding this to the already low visibility is a killer for carmakers.”
Vale SA and BHP Billiton Ltd., the biggest and third- biggest producers of iron ore, ended a 40-year-old practice of selling their product under one-year contracts and shifted to three-month sales agreements. Steelmakers said they will be compelled to raise prices paid by carmakers by one-third and replace their own long-term contracts with quarterly pricing.
“If you move from a yearly contract to a quarterly contract, you’re much more exposed to volatility,” Sigrid De Vries, a spokeswoman at the Brussels-based ACEA, said by telephone. “Any cost increase is critical, particularly in the fragile economic circumstances we have today.”
Steel accounts for an estimated 10 percent to 15 percent of the manufacturing cost of a car, de Vries said.
ArcelorMittal’s Estimate
ArcelorMittal, the world’s biggest steelmaker, estimated yesterday that prices for the metal could jump 21 percent in the second quarter because of the iron producers’ move.
The cash price for iron ore has more than doubled over the past year and traded at $155 a metric ton yesterday, according to the Steel Index. Prices for hot rolled coil steel have gained 32 percent in China to about $645 a ton, according to Metal Bulletin.
An increase in steel-price levels and volatility would be “much more damaging” for mass-market carmakers than for luxury brands, for which the metal accounts for a smaller share of overall costs, Credit Suisse’s Ellinghorst said.
‘Impossible’ to Forecast
“With quarterly steel prices, it will just be impossible for carmakers to give any earnings guidance,” he said. “What are they going to talk about, earnings before cost?”
Volkswagen rose as much as 0.6 percent to 71.89 euros and was up 0.2 percent as of 12:30 p.m. in Frankfurt trading. Peugeot increased 0.8 percent to 21.97 euros in Paris, while Fiat gained 0.5 percent to 9.69 euros in Milan.
VW, Europe’s biggest carmaker, reduces exposure to steel- price shifts by mixing shorter- and longer-term supply contracts, the Wolfsburg, Germany-based company said in an e- mailed statement. Spokesman Christoph Adomat declined to comment further. Paris-based Peugeot, the region’s second-biggest automaker, declined to comment.
The ACEA is speaking on behalf of the region’s industry, said a spokesman at Turin-based Fiat, Italy’s largest manufacturer, adding that the company doesn’t comment on pricing issues. Fiat Chief Executive Officer Sergio Marchionne predicted on March 26 that the European car market may shrink by as much as 15 percent this year as state auto-sales incentives expire.
Backing ACEA’s Concerns
Renault SA, based in the Paris suburb of Boulogne- Billancourt, supports the ACEA’s stance, said Gita Roux, a spokeswoman. She declined to give terms or suppliers for the carmaker’s steel purchases, saying contracts come up for renewal at different times of the year.
Ford Motor Co. is “fully in line” with the ACEA’s position, said Adrian Schmitz, a spokesman for the company’s European division in Cologne, Germany. General Motors Co.’s Opel division “stands by” the ACEA’s comments, said Andreas Kroemer, a spokesman for the Ruesselsheim, Germany-based brand.
Eurofer, a group representing steel producers in Europe, said March 30 that it had written to the European Commission, the EU’s executive arm, about “possible anticompetitive practices and abuse of dominant position by the main iron ore suppliers.” It also described as “unacceptable” a planned joint venture between BHP and Rio Tinto Group.
The commission will use the Eurofer letter, which was “not a formal complaint,” as part of an information-gathering process as it looks at the BHP-Rio venture proposal and pricing mechanisms, said Jonathan Todd, a spokesman at the EU regulator.
Bayerische Motoren Werke AG, the world’s largest luxury-car maker, has “already fixed the majority of our steel supplies for 2010,” spokesman Mathias Schmidt said by phone from Munich.
Protected by Hedging
Daimler AG, the world’s largest truckmaker and second- biggest manufacturer of luxury vehicles, has protected itself against some anticipated raw-material price increases through long-term and hedging contracts, said Sebastian Wahle, a spokesman for the Stuttgart, Germany-based manufacturer. He declined to give details, adding that talks are in progress.
MAN SE, Europe’s third-biggest truckmaker after Daimler and Volvo AB, may avoid short-term supply-cost increases because it uses mainly scrap metal in vehicles, diesel engines and power generators, said Michael Melzer, a spokesman. Scrap-metal prices respond “only after several months” to a change those for in iron ore as purchasers shift to the cheaper alternative, he said. Munich-based MAN also has long-term purchase contracts to stem cost increases, Melzer said.
Carmakers in the European Union want the bloc’s antitrust regulator to “tackle distortive developments” after producers of iron ore, the main raw material in steel, announced price increases of as much as 90 percent and ended long-term supply contracts, the European Automobile Manufacturers’ Association, or ACEA, said yesterday.
“The auto industry simply couldn’t handle exposure to highly volatile material prices,” Arndt Ellinghorst, a London- based analyst at Credit Suisse Group AG, said in a telephone interview. “Adding this to the already low visibility is a killer for carmakers.”
Vale SA and BHP Billiton Ltd., the biggest and third- biggest producers of iron ore, ended a 40-year-old practice of selling their product under one-year contracts and shifted to three-month sales agreements. Steelmakers said they will be compelled to raise prices paid by carmakers by one-third and replace their own long-term contracts with quarterly pricing.
“If you move from a yearly contract to a quarterly contract, you’re much more exposed to volatility,” Sigrid De Vries, a spokeswoman at the Brussels-based ACEA, said by telephone. “Any cost increase is critical, particularly in the fragile economic circumstances we have today.”
Steel accounts for an estimated 10 percent to 15 percent of the manufacturing cost of a car, de Vries said.
ArcelorMittal’s Estimate
ArcelorMittal, the world’s biggest steelmaker, estimated yesterday that prices for the metal could jump 21 percent in the second quarter because of the iron producers’ move.
The cash price for iron ore has more than doubled over the past year and traded at $155 a metric ton yesterday, according to the Steel Index. Prices for hot rolled coil steel have gained 32 percent in China to about $645 a ton, according to Metal Bulletin.
An increase in steel-price levels and volatility would be “much more damaging” for mass-market carmakers than for luxury brands, for which the metal accounts for a smaller share of overall costs, Credit Suisse’s Ellinghorst said.
‘Impossible’ to Forecast
“With quarterly steel prices, it will just be impossible for carmakers to give any earnings guidance,” he said. “What are they going to talk about, earnings before cost?”
Volkswagen rose as much as 0.6 percent to 71.89 euros and was up 0.2 percent as of 12:30 p.m. in Frankfurt trading. Peugeot increased 0.8 percent to 21.97 euros in Paris, while Fiat gained 0.5 percent to 9.69 euros in Milan.
VW, Europe’s biggest carmaker, reduces exposure to steel- price shifts by mixing shorter- and longer-term supply contracts, the Wolfsburg, Germany-based company said in an e- mailed statement. Spokesman Christoph Adomat declined to comment further. Paris-based Peugeot, the region’s second-biggest automaker, declined to comment.
The ACEA is speaking on behalf of the region’s industry, said a spokesman at Turin-based Fiat, Italy’s largest manufacturer, adding that the company doesn’t comment on pricing issues. Fiat Chief Executive Officer Sergio Marchionne predicted on March 26 that the European car market may shrink by as much as 15 percent this year as state auto-sales incentives expire.
Backing ACEA’s Concerns
Renault SA, based in the Paris suburb of Boulogne- Billancourt, supports the ACEA’s stance, said Gita Roux, a spokeswoman. She declined to give terms or suppliers for the carmaker’s steel purchases, saying contracts come up for renewal at different times of the year.
Ford Motor Co. is “fully in line” with the ACEA’s position, said Adrian Schmitz, a spokesman for the company’s European division in Cologne, Germany. General Motors Co.’s Opel division “stands by” the ACEA’s comments, said Andreas Kroemer, a spokesman for the Ruesselsheim, Germany-based brand.
Eurofer, a group representing steel producers in Europe, said March 30 that it had written to the European Commission, the EU’s executive arm, about “possible anticompetitive practices and abuse of dominant position by the main iron ore suppliers.” It also described as “unacceptable” a planned joint venture between BHP and Rio Tinto Group.
The commission will use the Eurofer letter, which was “not a formal complaint,” as part of an information-gathering process as it looks at the BHP-Rio venture proposal and pricing mechanisms, said Jonathan Todd, a spokesman at the EU regulator.
Bayerische Motoren Werke AG, the world’s largest luxury-car maker, has “already fixed the majority of our steel supplies for 2010,” spokesman Mathias Schmidt said by phone from Munich.
Protected by Hedging
Daimler AG, the world’s largest truckmaker and second- biggest manufacturer of luxury vehicles, has protected itself against some anticipated raw-material price increases through long-term and hedging contracts, said Sebastian Wahle, a spokesman for the Stuttgart, Germany-based manufacturer. He declined to give details, adding that talks are in progress.
MAN SE, Europe’s third-biggest truckmaker after Daimler and Volvo AB, may avoid short-term supply-cost increases because it uses mainly scrap metal in vehicles, diesel engines and power generators, said Michael Melzer, a spokesman. Scrap-metal prices respond “only after several months” to a change those for in iron ore as purchasers shift to the cheaper alternative, he said. Munich-based MAN also has long-term purchase contracts to stem cost increases, Melzer said.
California Debt Beats Greece’s in Bond Sales: Credit Markets
The bond market is showing California is no Greece.
Debt issued by California, the world’s eighth-largest economy, is outperforming Greece’s bonds as funds including Cumberland Advisors say investors are betting the lowest-rated U.S. state’s credit risk has been exaggerated. The cost to protect against California not paying its obligations is the lowest relative to Greece in at least 15 months, according to data compiled by Bloomberg.
Greece, with the European Union’s largest budget deficit and an economy one-fifth the size of California’s, is grappling with a debt crisis that’s resulting in skyrocketing borrowing costs. The yield on the 10-year Greek bond rose to 7.16 percent on Jan. 28, the highest since October 1999, prompting European leaders to pledge aid to the nation. Even with an $18 billion budget gap expected over the next 15 months, California sold $3.4 billion in taxable debt last week at its lowest costs since November as overseas buyers purchased 30 percent of the securities.
“Investors are voting with their feet and they are coming to America,” said Peter Demirali, head of the fixed-income department at Cumberland Advisors in Vineland, New Jersey, which manages $1.4 billion. “They are saying that they will lend a billion dollars to California, no problem.”
California’s constitution gives debt service priority on the $88 billion general fund, second only to education. The state has never missed a bond payment. Debt service as a ratio of the general fund is 6.7 percent, according to Treasurer Bill Lockyer.
‘Too Apocalyptic’
“It’s interesting that there is this Greece analogy around, which I think is far too apocalyptic for the facts,” Lockyer said March 30 in a Bloomberg Television interview. “As sovereign entities go, our debt is rather modest, so it seems to be an unfair comparison that creates doubts with investors.”
Elsewhere in credit markets, the extra yield investors demand to own corporate bonds rather than government debt fell 1 basis point yesterday to 149 basis points, or 1.49 percentage point, the lowest since November 2007, Bank of America Merrill Lynch’s Global Broad Market Corporate Index shows.
Average yields rose to 4.015 percent, the highest since March 26. The securities returned 0.62 percent last month compared with 0.37 percent in February and 2.8 percent for the quarter through March 31, the data show.
The cost of borrowing in dollars between banks reached a new six-month high for a fifth day as the Federal Reserve prepared to end its debt-buying program designed to limit the fallout from the recession.
Dubai International
National Semiconductor Corp., the maker of chips that control power in electronic devices, sold $250 million of bonds in its first issue since June 2007. Dubai International Capital LLC, the fund owned by Dubai’s ruler, plans to sell debt for the cash it needs to prevent Oaktree Capital Management LLC from seizing its Almatis unit.
The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans rose to 0.292 percent yesterday, the most since Sept. 17, from 0.291 percent March 30, according to the British Bankers’ Association. Libor, a benchmark for about $360 trillion of financial products around the world, advanced for the 20th consecutive day.
The Fed was scheduled to complete its $1.43 trillion in purchases of mortgage-backed securities and housing-agency debt yesterday as it phases out emergency measures taken to thaw credit markets. Three-month dollar Libor climbed to 4.82 percent on Oct. 10, 2008, in the wake of Lehman Brothers Holdings Inc.’s bankruptcy a month earlier.
National Semiconductor
National Semiconductor’s 3.95 percent notes due in 2015 priced to yield 165 basis points more than similar-maturity Treasuries. In its last offering of five-year debt, the Santa Clara, California-based company’s 6.15 percent notes paid a spread of 98 basis points.
Dubai International plans to repay senior lenders to the German alumina-products maker through a sale of high-yield bonds, two people familiar with the situation said. Dubai International is seeking to issue between $600 million and $700 million of senior and subordinated bonds in the name of Frankfurt-based Almatis, which breached terms of the loans in the first half of last year as the global economic slowdown hurt demand for its goods.
Bondholder Protection
Benchmark indicators of corporate credit risk were little changed in Europe and Asia.
The Markit iTraxx Europe Index, which investors use to speculate on creditworthiness or to hedge against losses on 125 investment-grade companies, was unchanged at 78.5 basis points as of 10:48 a.m. in London, according to JPMorgan Chase & Co.
The Markit iTraxx Australia index rose 1 basis point to 86.5 basis points, according to Citigroup Inc., while the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan increased 1 basis point to 98, Royal Bank of Scotland Group Plc prices show. The Markit iTraxx Japan index also advanced 1 basis point to 115 in Tokyo, according to Morgan Stanley prices.
The Markit CDX North America Investment Grade Index Series 14 climbed 1.9 basis points to 88.2 basis points yesterday, CMA DataVision prices show.
Credit-default swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 annually on a contract protecting $10 million of debt for five years. The indexes typically increase as investor confidence deteriorates and falls as it improves.
Widest Difference
Traders in the derivatives are demanding 141 basis points more to protect against the bonds of Greece than they are for California’s, the widest difference since at least June 2008, according to CMA. On average during that period, California traded 65 basis points wider than Greece.
The average yield on a seven-year taxable California bond sold March 25 declined 18 basis points to 5.44 percent as of March 30, Bloomberg data show. Yields on seven-year notes sold by the Greek government this week have risen to 6.4 percent, up from 6 percent when the debt was issued on March 29, according to Royal Bank of Scotland prices on Bloomberg.
California’s $18.6 billion deficit is about 1 percent of the state’s $1.8 trillion gross state product, while Greece’s budget deficit equals 12.7 percent of its gross domestic product, the biggest in the euro region.
California’s outstanding tax-supported debt, about $71 billion, is less than 4 percent of the state’s gross domestic product. Greece’s debt to GDP ratio is forecast to reach 120 percent in 2010, according to government figures.
Greece Rated Higher
Moody’s Investors Service rates California’s debt Baa1, its third-lowest level of investment grade, while Greece is ranked two steps higher at A2.
Speculation that investor concern may spread to other nations caused the euro to weaken this year and highlighted tensions between leaders of European nations as they negotiated a way to save Greece from default. Greece’s quandary drew attention to a currency swap organized by Goldman Sachs Group Inc. in 2002 to hide the extent of its deficit and debt.
Prime Minister George Papandreou is battling to convince investors the nation is able to control its deficit. Greek government bonds were the worst-performing sovereign securities in the euro area in the first quarter, handing investors a 1.5 percent loss, according to Bloomberg/EFFAS indexes.
European leaders endorsed a Franco-German proposal for a mix of International Monetary Fund and bilateral loans at market interest rates to help Greece on March 25, providing the nation with a back-up in the event it fails to contain its debt.
Greece may pay about 13 billion euros more in interest over the lifetime of the debt it sells this year than it would have to had yields stayed at their pre-crisis levels relative to Germany’s, according to Bloomberg calculations, using data provided by Credit Agricole Corporate and Investment Bank.
“Greece needs to get through its current funding and start growing at a decent rate so this large amount of debt doesn’t snowball,” said Peter Chatwell, a fixed-income strategist at Credit Agricole CIB in London. “The market is currently reflecting disappointment that the seven-year deal didn’t outperform.”
Debt issued by California, the world’s eighth-largest economy, is outperforming Greece’s bonds as funds including Cumberland Advisors say investors are betting the lowest-rated U.S. state’s credit risk has been exaggerated. The cost to protect against California not paying its obligations is the lowest relative to Greece in at least 15 months, according to data compiled by Bloomberg.
Greece, with the European Union’s largest budget deficit and an economy one-fifth the size of California’s, is grappling with a debt crisis that’s resulting in skyrocketing borrowing costs. The yield on the 10-year Greek bond rose to 7.16 percent on Jan. 28, the highest since October 1999, prompting European leaders to pledge aid to the nation. Even with an $18 billion budget gap expected over the next 15 months, California sold $3.4 billion in taxable debt last week at its lowest costs since November as overseas buyers purchased 30 percent of the securities.
“Investors are voting with their feet and they are coming to America,” said Peter Demirali, head of the fixed-income department at Cumberland Advisors in Vineland, New Jersey, which manages $1.4 billion. “They are saying that they will lend a billion dollars to California, no problem.”
California’s constitution gives debt service priority on the $88 billion general fund, second only to education. The state has never missed a bond payment. Debt service as a ratio of the general fund is 6.7 percent, according to Treasurer Bill Lockyer.
‘Too Apocalyptic’
“It’s interesting that there is this Greece analogy around, which I think is far too apocalyptic for the facts,” Lockyer said March 30 in a Bloomberg Television interview. “As sovereign entities go, our debt is rather modest, so it seems to be an unfair comparison that creates doubts with investors.”
Elsewhere in credit markets, the extra yield investors demand to own corporate bonds rather than government debt fell 1 basis point yesterday to 149 basis points, or 1.49 percentage point, the lowest since November 2007, Bank of America Merrill Lynch’s Global Broad Market Corporate Index shows.
Average yields rose to 4.015 percent, the highest since March 26. The securities returned 0.62 percent last month compared with 0.37 percent in February and 2.8 percent for the quarter through March 31, the data show.
The cost of borrowing in dollars between banks reached a new six-month high for a fifth day as the Federal Reserve prepared to end its debt-buying program designed to limit the fallout from the recession.
Dubai International
National Semiconductor Corp., the maker of chips that control power in electronic devices, sold $250 million of bonds in its first issue since June 2007. Dubai International Capital LLC, the fund owned by Dubai’s ruler, plans to sell debt for the cash it needs to prevent Oaktree Capital Management LLC from seizing its Almatis unit.
The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans rose to 0.292 percent yesterday, the most since Sept. 17, from 0.291 percent March 30, according to the British Bankers’ Association. Libor, a benchmark for about $360 trillion of financial products around the world, advanced for the 20th consecutive day.
The Fed was scheduled to complete its $1.43 trillion in purchases of mortgage-backed securities and housing-agency debt yesterday as it phases out emergency measures taken to thaw credit markets. Three-month dollar Libor climbed to 4.82 percent on Oct. 10, 2008, in the wake of Lehman Brothers Holdings Inc.’s bankruptcy a month earlier.
National Semiconductor
National Semiconductor’s 3.95 percent notes due in 2015 priced to yield 165 basis points more than similar-maturity Treasuries. In its last offering of five-year debt, the Santa Clara, California-based company’s 6.15 percent notes paid a spread of 98 basis points.
Dubai International plans to repay senior lenders to the German alumina-products maker through a sale of high-yield bonds, two people familiar with the situation said. Dubai International is seeking to issue between $600 million and $700 million of senior and subordinated bonds in the name of Frankfurt-based Almatis, which breached terms of the loans in the first half of last year as the global economic slowdown hurt demand for its goods.
Bondholder Protection
Benchmark indicators of corporate credit risk were little changed in Europe and Asia.
The Markit iTraxx Europe Index, which investors use to speculate on creditworthiness or to hedge against losses on 125 investment-grade companies, was unchanged at 78.5 basis points as of 10:48 a.m. in London, according to JPMorgan Chase & Co.
The Markit iTraxx Australia index rose 1 basis point to 86.5 basis points, according to Citigroup Inc., while the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan increased 1 basis point to 98, Royal Bank of Scotland Group Plc prices show. The Markit iTraxx Japan index also advanced 1 basis point to 115 in Tokyo, according to Morgan Stanley prices.
The Markit CDX North America Investment Grade Index Series 14 climbed 1.9 basis points to 88.2 basis points yesterday, CMA DataVision prices show.
Credit-default swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 annually on a contract protecting $10 million of debt for five years. The indexes typically increase as investor confidence deteriorates and falls as it improves.
Widest Difference
Traders in the derivatives are demanding 141 basis points more to protect against the bonds of Greece than they are for California’s, the widest difference since at least June 2008, according to CMA. On average during that period, California traded 65 basis points wider than Greece.
The average yield on a seven-year taxable California bond sold March 25 declined 18 basis points to 5.44 percent as of March 30, Bloomberg data show. Yields on seven-year notes sold by the Greek government this week have risen to 6.4 percent, up from 6 percent when the debt was issued on March 29, according to Royal Bank of Scotland prices on Bloomberg.
California’s $18.6 billion deficit is about 1 percent of the state’s $1.8 trillion gross state product, while Greece’s budget deficit equals 12.7 percent of its gross domestic product, the biggest in the euro region.
California’s outstanding tax-supported debt, about $71 billion, is less than 4 percent of the state’s gross domestic product. Greece’s debt to GDP ratio is forecast to reach 120 percent in 2010, according to government figures.
Greece Rated Higher
Moody’s Investors Service rates California’s debt Baa1, its third-lowest level of investment grade, while Greece is ranked two steps higher at A2.
Speculation that investor concern may spread to other nations caused the euro to weaken this year and highlighted tensions between leaders of European nations as they negotiated a way to save Greece from default. Greece’s quandary drew attention to a currency swap organized by Goldman Sachs Group Inc. in 2002 to hide the extent of its deficit and debt.
Prime Minister George Papandreou is battling to convince investors the nation is able to control its deficit. Greek government bonds were the worst-performing sovereign securities in the euro area in the first quarter, handing investors a 1.5 percent loss, according to Bloomberg/EFFAS indexes.
European leaders endorsed a Franco-German proposal for a mix of International Monetary Fund and bilateral loans at market interest rates to help Greece on March 25, providing the nation with a back-up in the event it fails to contain its debt.
Greece may pay about 13 billion euros more in interest over the lifetime of the debt it sells this year than it would have to had yields stayed at their pre-crisis levels relative to Germany’s, according to Bloomberg calculations, using data provided by Credit Agricole Corporate and Investment Bank.
“Greece needs to get through its current funding and start growing at a decent rate so this large amount of debt doesn’t snowball,” said Peter Chatwell, a fixed-income strategist at Credit Agricole CIB in London. “The market is currently reflecting disappointment that the seven-year deal didn’t outperform.”
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