(Bloomberg) -- Thailand’s economy shrank the most in a decade as exports and spending slumped, pushing the nation into its first recession since the Asian financial crisis.
Gross domestic product fell 7.1 percent last quarter from a year earlier, after declining a revised 4.2 percent in the previous three months, the government said today. The median estimate of 17 economists in a Bloomberg survey was for a 6.5 percent drop.
“The first quarter should be the worst,” said Rajeev Malik, a Singapore-based economist at Macquarie Group Ltd. “There is a strong likelihood the economy will grow in the fourth quarter.”
Exports, Thailand’s main economic driver, sank 16.4 percent last quarter, prompting companies including General Motors Corp. and Seagate Technology Inc. to cut production and fire workers. The central bank said last week there are signs the contraction is moderating, and the stock market is poised for its best quarterly advance since 2003.
“We can see light at the end of the tunnel,” Ampon Kittiampon, secretary-general at the National Economic and Social Development Board, said at a briefing on the economic report today. “We hope the government’s second stimulus package can jump-start the economy by the fourth quarter.”
The government “will do whatever we can” to ensure economic expansion by this year’s final quarter, Prime Minister Abhisit Vejjajiva said on May 20. The same day, the Bank of Thailand ended its most aggressive string of rate cuts ever, keeping borrowing costs at 1.25 percent even while saying risks to the economy remain.
‘Worst is Behind’
Production has picked up in electronic and automotive industries and exports, and consumer demand is recovering, Finance Minister Korn Chatikavanij said May 7.
“Orders have started to come back,” said Santi Vilassakdanont, chairman of the Federation of Thai Industries, a group of manufacturers. “The worst is behind us and things should get better now.”
Thailand’s economy will contract less each quarter before returning to growth in the final three months of this year, the median estimate of the economists surveyed by Bloomberg shows. The Bank of Japan on May 22 raised its view of the economy on signs that a record contraction in the first quarter represented the worst of the recession. Singapore and Taiwan last week said their economies may be past the worst.
Stocks, Baht
Exports have fallen for six months through April, the longest contraction in seven years.
Thailand’s SET Index of stocks declined 0.3 percent to 552.42 as of 10:30 a.m., trimming the quarterly advance to 28 percent. The baht slipped 0.1 percent against the dollar.
“I don’t see any strong sign of recovery yet,” said Veeravat Kanchanadul, Senior Executive Vice President at Charoen Pokphand Group, Asia’s biggest animal-feed producer. “We can’t be sure about the state of the economy when small players are still struggling.”
Manufacturing declined 14.9 percent in the first quarter, compared with a revised 6.7 percent drop in the previous three months. Private consumption fell 2.6 percent. Total investment retreated 15.8 percent.
GDP may shrink as much as 3.5 percent this year, the government’s economic adviser, the NESDB, said today. That would be the first annual contraction in 11 years and matches the median estimate of economists surveyed by Bloomberg. The economy grew 2.6 percent last year.
Far From Good
Consumer confidence is at its lowest level in seven years. An emergency decree was imposed for 13 days in Bangkok last month to quell anti-government riots that left two people dead.
“Business was really bad after the riots,” said Doris Gerecht, general manager at Bangkok’s Montien Hotel, adding that occupancy has averaged about 50 percent so far this year compared with 75 percent a year ago. “We’re starting to see a bit of a pickup in corporate bookings, but things are still far from good.”
Thailand’s economy hasn’t shrunk for two straight quarters since the first three months of 1999. That was the last of eight quarterly contractions triggered two years earlier, when the nation cut a peg to the dollar that had overvalued the baht and slashed exports. The economic crisis eventually extended to the Philippines, Indonesia, Malaysia, Taiwan and South Korea.
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Sunday, May 24, 2009
Barclays May Hire Up to 65 Bankers for Europe M&A
(Bloomberg) -- Barclays Plc may hire as many as 65 bankers for its European mergers advisory business this year as Britain’s third-biggest bank seeks to become one of the top three global securities firms.
Barclays Capital, the investment-banking unit, plans to add 30 to 40 bankers in Italy, Germany and France, and 15 to 25 in the U.K., Paul G. Parker, global head of mergers and acquisitions, said in an interview on May 21. The firm named Mark Warham and Matthew Ponsonby co-heads of European M&A last week.
Barclays Capital, which previously focused on bonds, loans and foreign exchange, surged to fifth in U.S. takeovers after the acquisition of Lehman Brothers Holdings Inc.’s North American unit in September, according to data compiled by Bloomberg. The London-based firm ranks 21st in Europe, where Lehman’s operations were bought by Nomura Holdings Inc.
“It makes sense to hire more bankers as they need to improve industry coverage,” said Katsunobu Komizo, chief executive officer of Tokyo-based Executive Search Partners Co. “It will take time and is challenging for Barclays, which used to focus more on debt, to profit from merger advisory because the business requires strong and long-term relationships with top corporate executives.”
Barclays Capital advised Pfizer Inc. on its $64 billion acquisition of Wyeth, the biggest takeover this year, and Verizon Communications Inc. on its $5.25 billion sale of phone lines to Frontier Communications Corp. It helped Dow Chemical Co. sell a stake in a Dutch oil-refining venture with Total SA to Valero Energy Corp. for $725 million.
Hiring Teams
“We aim to be top three across all products and regions” in investment banking, said Parker, who is spending a significant part of his time in Europe, helping recruit bankers. Barclays Capital wants to be a leader in cross-border deals “by combining the firm’s global perspective with local expertise.”
Barclays Capital plans to hire teams in the U.K., Germany, France, and Italy, including heads of M&A for the countries, said Parker, 45. The additions will build upon existing coverage of the Iberian region, overseen by Inigo Paneda and a team hired last year from Nomura, Japan’s biggest brokerage.
The firm also has about 30 former ABN Amro Holding NV bankers who will continue to focus on mergers and acquisitions in eastern and central Europe, as well as a team of about 15 in Asia, also primarily from ABN Amro, according to Parker.
‘Strong Brand’
Barclays Capital has advised on European takeovers worth about $7.7 billion this year, giving it under 3.5 percent of the market, Bloomberg data show. That includes the firm’s agreement to sell its iShares exchange-traded funds business to CVC Capital Partners Ltd. for $4.37 billion.
Credit Suisse Group AG is No. 1 in European mergers, followed by Citigroup Inc., Deutsche Bank AG, Morgan Stanley and JPMorgan Chase & Co., Bloomberg data show. Goldman Sachs Group Inc. ranks seventh after Zurich-based UBS AG.
“Barclays’s strong brand in Europe coupled with its strong lending and fixed income relationships positions us well to work with existing and new clients globally on transactions,” said Parker, who joined Barclays after the takeover of Lehman, where he ran global mergers with Mark Shafir, now at Citigroup.
Jerry del Missier, president of Barclays Capital, said earlier this month that expanding in mergers advisory and stock underwriting in Europe and Asia was the “single-biggest initiative this year.” The firm aims to add about 300 people for European and Asian equities by the end of 2009.
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Barclays Capital, the investment-banking unit, plans to add 30 to 40 bankers in Italy, Germany and France, and 15 to 25 in the U.K., Paul G. Parker, global head of mergers and acquisitions, said in an interview on May 21. The firm named Mark Warham and Matthew Ponsonby co-heads of European M&A last week.
Barclays Capital, which previously focused on bonds, loans and foreign exchange, surged to fifth in U.S. takeovers after the acquisition of Lehman Brothers Holdings Inc.’s North American unit in September, according to data compiled by Bloomberg. The London-based firm ranks 21st in Europe, where Lehman’s operations were bought by Nomura Holdings Inc.
“It makes sense to hire more bankers as they need to improve industry coverage,” said Katsunobu Komizo, chief executive officer of Tokyo-based Executive Search Partners Co. “It will take time and is challenging for Barclays, which used to focus more on debt, to profit from merger advisory because the business requires strong and long-term relationships with top corporate executives.”
Barclays Capital advised Pfizer Inc. on its $64 billion acquisition of Wyeth, the biggest takeover this year, and Verizon Communications Inc. on its $5.25 billion sale of phone lines to Frontier Communications Corp. It helped Dow Chemical Co. sell a stake in a Dutch oil-refining venture with Total SA to Valero Energy Corp. for $725 million.
Hiring Teams
“We aim to be top three across all products and regions” in investment banking, said Parker, who is spending a significant part of his time in Europe, helping recruit bankers. Barclays Capital wants to be a leader in cross-border deals “by combining the firm’s global perspective with local expertise.”
Barclays Capital plans to hire teams in the U.K., Germany, France, and Italy, including heads of M&A for the countries, said Parker, 45. The additions will build upon existing coverage of the Iberian region, overseen by Inigo Paneda and a team hired last year from Nomura, Japan’s biggest brokerage.
The firm also has about 30 former ABN Amro Holding NV bankers who will continue to focus on mergers and acquisitions in eastern and central Europe, as well as a team of about 15 in Asia, also primarily from ABN Amro, according to Parker.
‘Strong Brand’
Barclays Capital has advised on European takeovers worth about $7.7 billion this year, giving it under 3.5 percent of the market, Bloomberg data show. That includes the firm’s agreement to sell its iShares exchange-traded funds business to CVC Capital Partners Ltd. for $4.37 billion.
Credit Suisse Group AG is No. 1 in European mergers, followed by Citigroup Inc., Deutsche Bank AG, Morgan Stanley and JPMorgan Chase & Co., Bloomberg data show. Goldman Sachs Group Inc. ranks seventh after Zurich-based UBS AG.
“Barclays’s strong brand in Europe coupled with its strong lending and fixed income relationships positions us well to work with existing and new clients globally on transactions,” said Parker, who joined Barclays after the takeover of Lehman, where he ran global mergers with Mark Shafir, now at Citigroup.
Jerry del Missier, president of Barclays Capital, said earlier this month that expanding in mergers advisory and stock underwriting in Europe and Asia was the “single-biggest initiative this year.” The firm aims to add about 300 people for European and Asian equities by the end of 2009.
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South Korean Stocks, Won Drop After North Tests Nuclear Weapon
(Bloomberg) -- South Korea’s stocks and won slumped after North Korea said it had successfully tested a nuclear weapon, seven weeks after launching a long-range missile.
The Kospi index declined for a third day after the North’s official Korean Central News Agency said the successful underground test would “bolster its nuclear deterrent for self- defense.” The won fell the most in more than a week as the U.S. Geological Survey detected a 4.7 magnitude earthquake in the northeast of the communist nation.
The test would complicate efforts to get North Korean leader Kim Jong Il to return to six-nation talks aimed at eliminating its nuclear weapons program. The U.S., Japan and South Korea have accused the reclusive country of developing long-range missile technology to carry a nuclear device.
“This is not a pretty picture, especially with the North’s stern stance,” said Kim Yong Tae, a fund manager at Yurie Asset Management Inc. in Seoul, which manages the equivalent of $1.2 billion in assets. “Investor sentiment will be negatively impacted and it’s going to be difficult to expect big gains in the market in the short-term.”
The won fell 1.2 percent to 1,261.80 per dollar as of 12:25 p.m. in Seoul, paring its gains to 20 percent in the past three months. The benchmark Kospi index dropped 2.3 percent to 1,369.46. Share markets across the region fell with the MSCI Asia Pacific Index down 0.2 percent, reversing an earlier advance of as much as 0.8 percent. The Hang Seng Index of Hong Kong shares dropped 0.8 percent.
United Nations
North Korea launched a rocket that flew over Japan on April 5. It was the second time Kim Jong Il’s regime detonated a nuclear device. The first was in 2006.
The Kospi earlier declined as much as 6.3 percent to the lowest this month. All but one of the 19 industry groups in the index declined. About six stocks fell for every one that rose in the benchmark index.
Samsung Electronics Co., Asia’s biggest maker of chips and flat screens, retreated 2.2 percent to 538,000 won. Posco, Asia’s third-largest steelmaker, fell 2.5 percent to 388,000. KB Financial Group Inc., the owner of South Korea’s biggest bank, dropped 3 percent to 44,050 won. Hyundai Heavy Industries Co., the world’s largest shipyard, lost 2.9 percent to 221,500 won.
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The Kospi index declined for a third day after the North’s official Korean Central News Agency said the successful underground test would “bolster its nuclear deterrent for self- defense.” The won fell the most in more than a week as the U.S. Geological Survey detected a 4.7 magnitude earthquake in the northeast of the communist nation.
The test would complicate efforts to get North Korean leader Kim Jong Il to return to six-nation talks aimed at eliminating its nuclear weapons program. The U.S., Japan and South Korea have accused the reclusive country of developing long-range missile technology to carry a nuclear device.
“This is not a pretty picture, especially with the North’s stern stance,” said Kim Yong Tae, a fund manager at Yurie Asset Management Inc. in Seoul, which manages the equivalent of $1.2 billion in assets. “Investor sentiment will be negatively impacted and it’s going to be difficult to expect big gains in the market in the short-term.”
The won fell 1.2 percent to 1,261.80 per dollar as of 12:25 p.m. in Seoul, paring its gains to 20 percent in the past three months. The benchmark Kospi index dropped 2.3 percent to 1,369.46. Share markets across the region fell with the MSCI Asia Pacific Index down 0.2 percent, reversing an earlier advance of as much as 0.8 percent. The Hang Seng Index of Hong Kong shares dropped 0.8 percent.
United Nations
North Korea launched a rocket that flew over Japan on April 5. It was the second time Kim Jong Il’s regime detonated a nuclear device. The first was in 2006.
The Kospi earlier declined as much as 6.3 percent to the lowest this month. All but one of the 19 industry groups in the index declined. About six stocks fell for every one that rose in the benchmark index.
Samsung Electronics Co., Asia’s biggest maker of chips and flat screens, retreated 2.2 percent to 538,000 won. Posco, Asia’s third-largest steelmaker, fell 2.5 percent to 388,000. KB Financial Group Inc., the owner of South Korea’s biggest bank, dropped 3 percent to 44,050 won. Hyundai Heavy Industries Co., the world’s largest shipyard, lost 2.9 percent to 221,500 won.
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Wednesday, May 20, 2009
Greenspan Says Banks Still Have a ‘Large’ Capital Requirement
(Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan signaled that the financial crisis has yet to end even as borrowing costs tumble, warning that U.S. banks must raise “large” amounts of money.
“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said in an interview yesterday in Washington. He also said that “until the price of homes flattens out we still have a very serious potential mortgage crisis.”
Greenspan’s comments suggest he sees a bigger capital shortfall in the banking system than reflected in regulators’ stress tests on the 19 biggest U.S. lenders. Treasury Secretary Timothy Geithner told lawmakers yesterday that banks have issued more than $56 billion in new stock or debt since the tests found 10 firms needed to raise about $75 billion.
A lack of capital at banks may inhibit lending to consumers and businesses, tempering any economic recovery. The former Fed chief, who left the central bank in 2006, said that the continued slump in home prices is putting at risk millions of borrowers.
“We’re on the edge and if this thing doesn’t get resolved quickly I’m worried,” he said before a meeting with House of Representatives members on financial regulation that was organized by the Washington-based Bipartisan Policy Center.
Home prices will only start to stabilize once the “liquidation” rate of single-family homes has peaked, he said. “I don’t think we’re there yet.”
‘Remarkable’ Improvement
More broadly, “things have unquestionably improved” across the economy and financial markets, he said. “They’ve improved everywhere in the world. It’s remarkable.”
The London interbank offered rate, or Libor, for three- month dollar loans fell 3 basis points yesterday to 0.75 percent, the British Bankers’ Association said, the 35th straight drop. The Libor-OIS spread, a gauge of banks’ reluctance to lend, narrowed to 55 basis points, the least since February 2008. It was as high as 364 basis points in October.
That’s an “extraordinary improvement,” said Greenspan, who last year said that the credit crisis would be at an end once the Libor-OIS spread narrowed past 25 basis points. “Virtually all of the various credit spreads not only in the U.S. but globally have come down.”
Alan Blinder, a former Fed vice chairman, also said on Capitol Hill that “if there are no more reversals, history will judge that by May 2009 we will have passed the worst of the crisis.”
Read more here
“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said in an interview yesterday in Washington. He also said that “until the price of homes flattens out we still have a very serious potential mortgage crisis.”
Greenspan’s comments suggest he sees a bigger capital shortfall in the banking system than reflected in regulators’ stress tests on the 19 biggest U.S. lenders. Treasury Secretary Timothy Geithner told lawmakers yesterday that banks have issued more than $56 billion in new stock or debt since the tests found 10 firms needed to raise about $75 billion.
A lack of capital at banks may inhibit lending to consumers and businesses, tempering any economic recovery. The former Fed chief, who left the central bank in 2006, said that the continued slump in home prices is putting at risk millions of borrowers.
“We’re on the edge and if this thing doesn’t get resolved quickly I’m worried,” he said before a meeting with House of Representatives members on financial regulation that was organized by the Washington-based Bipartisan Policy Center.
Home prices will only start to stabilize once the “liquidation” rate of single-family homes has peaked, he said. “I don’t think we’re there yet.”
‘Remarkable’ Improvement
More broadly, “things have unquestionably improved” across the economy and financial markets, he said. “They’ve improved everywhere in the world. It’s remarkable.”
The London interbank offered rate, or Libor, for three- month dollar loans fell 3 basis points yesterday to 0.75 percent, the British Bankers’ Association said, the 35th straight drop. The Libor-OIS spread, a gauge of banks’ reluctance to lend, narrowed to 55 basis points, the least since February 2008. It was as high as 364 basis points in October.
That’s an “extraordinary improvement,” said Greenspan, who last year said that the credit crisis would be at an end once the Libor-OIS spread narrowed past 25 basis points. “Virtually all of the various credit spreads not only in the U.S. but globally have come down.”
Alan Blinder, a former Fed vice chairman, also said on Capitol Hill that “if there are no more reversals, history will judge that by May 2009 we will have passed the worst of the crisis.”
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Yen Gains to 8-Week High After Fed Projects a Deeper Recession
(Bloomberg) -- The yen rose to an eight-week high against the dollar after the U.S. Federal Reserve projected a deeper recession, boosting demand for the Japanese currency as a refuge from the global slump.
The dollar fell for a third day versus the yen after minutes of the latest Fed meeting released yesterday showed policy makers may buy more assets to spur a revival in the world’s largest economy. The euro approached a four-month high against the dollar before a European manufacturing and services report that may back the case for the region’s central bank to keep interest rates unchanged. South Korea’s won rose toward a seven-month high against the dollar.
“The Fed’s downgrade of growth forecasts, occurring amid an optimistic mood, shocked markets,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest bank. “This is leading to buying of the yen.”
The yen strengthened to 94.47 per dollar as of 11:44 a.m. in Tokyo from 94.88 yesterday in New York after climbing to 94.29, the highest level since March 20. Japan’s currency advanced to 130.34 per euro from 130.77. The euro rose to $1.3801 from $1.3780 yesterday, when it reached $1.3830, the strongest level since Jan. 5.
The dollar declined to $1.5817 versus the British pound, the weakest since Nov. 10, before trading at $1.5797 from $1.5755. South Korea’s won strengthened 0.2 percent to 1,248.60 per dollar, after touching 1,225.97 on May 11, the strongest since Oct. 15.
Dollar Index
The Dollar Index fell for a fourth day after minutes of the Fed’s April 28-29 meeting released yesterday showed some policy makers said “a further increase” in the total amount of asset purchases may be needed to speed a U.S. economic recovery.
Fed governors and district-bank presidents also cut their projections for economic growth in quarterly forecasts submitted at the meeting, the minutes showed. They foresaw a deeper contraction in 2009 and a weaker recovery next year, with the unemployment rate projected to remain at 9 percent or higher.
“The Fed may expand its asset-purchase program, which would increase the supply of greenbacks in the market,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “This could undermine the value of the dollar and spur investors in the U.S. to put their funds overseas.”
The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, declined to 80.931 after yesterday dropping to 80.91, the lowest level since Dec. 31.
Record Loss
The dollar dropped a record 3.4 percent versus the euro on March 18, when the Fed announced plans to buy up to $300 billion in U.S. government debt to keep interest rates low and stimulate the economy, a measure known as quantitative easing.
The yen advanced versus all 16 of the most-traded currencies as a survey published by Barclays Capital today showed Japan’s money managers judge the market’s outlook for the U.S. economy to be too optimistic.
About 82 percent of 55 Japanese institutional investors who responded to the poll this week described the market’s outlook as either “extremely” or “somewhat” optimistic, while only 13 percent called it “appropriate.”
“The majority of Japanese investors believe the outlook for the economy currently factored into the U.S. markets is overly optimistic,” Yoshio Takahashi, head strategist for non- Japanese debt in Tokyo at Barclays Capital, wrote in a research note today.
Yen Call Options
Traders are paying a larger premium for yen call options against the dollar, which grant the right to buy Japan’s currency, over puts that provide the right to sell it. The dollar-yen’s one-month 25-delta risk-reversal rate widened to minus 2.44 percent today from minus 2.22 percent yesterday.
The euro gained for a fourth day versus the dollar before a European report that may show the region’s manufacturing and services contracted at the slowest pace in seven months.
A composite index of activity in both industries rose to 42 in May from 41.1 in April, according to the median estimate in a Bloomberg survey of economists.
“We could see PMIs come in higher than expected, highlighting the improved sentiment in the region,” analysts at Standard Chartered Bank led by Callum Henderson, Singapore-based global head of currency research, wrote in a research note today. “It looks likely the euro-dollar could establish new highs for 2009 beyond January’s $1.406 high.”
Read more here
The dollar fell for a third day versus the yen after minutes of the latest Fed meeting released yesterday showed policy makers may buy more assets to spur a revival in the world’s largest economy. The euro approached a four-month high against the dollar before a European manufacturing and services report that may back the case for the region’s central bank to keep interest rates unchanged. South Korea’s won rose toward a seven-month high against the dollar.
“The Fed’s downgrade of growth forecasts, occurring amid an optimistic mood, shocked markets,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest bank. “This is leading to buying of the yen.”
The yen strengthened to 94.47 per dollar as of 11:44 a.m. in Tokyo from 94.88 yesterday in New York after climbing to 94.29, the highest level since March 20. Japan’s currency advanced to 130.34 per euro from 130.77. The euro rose to $1.3801 from $1.3780 yesterday, when it reached $1.3830, the strongest level since Jan. 5.
The dollar declined to $1.5817 versus the British pound, the weakest since Nov. 10, before trading at $1.5797 from $1.5755. South Korea’s won strengthened 0.2 percent to 1,248.60 per dollar, after touching 1,225.97 on May 11, the strongest since Oct. 15.
Dollar Index
The Dollar Index fell for a fourth day after minutes of the Fed’s April 28-29 meeting released yesterday showed some policy makers said “a further increase” in the total amount of asset purchases may be needed to speed a U.S. economic recovery.
Fed governors and district-bank presidents also cut their projections for economic growth in quarterly forecasts submitted at the meeting, the minutes showed. They foresaw a deeper contraction in 2009 and a weaker recovery next year, with the unemployment rate projected to remain at 9 percent or higher.
“The Fed may expand its asset-purchase program, which would increase the supply of greenbacks in the market,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “This could undermine the value of the dollar and spur investors in the U.S. to put their funds overseas.”
The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, declined to 80.931 after yesterday dropping to 80.91, the lowest level since Dec. 31.
Record Loss
The dollar dropped a record 3.4 percent versus the euro on March 18, when the Fed announced plans to buy up to $300 billion in U.S. government debt to keep interest rates low and stimulate the economy, a measure known as quantitative easing.
The yen advanced versus all 16 of the most-traded currencies as a survey published by Barclays Capital today showed Japan’s money managers judge the market’s outlook for the U.S. economy to be too optimistic.
About 82 percent of 55 Japanese institutional investors who responded to the poll this week described the market’s outlook as either “extremely” or “somewhat” optimistic, while only 13 percent called it “appropriate.”
“The majority of Japanese investors believe the outlook for the economy currently factored into the U.S. markets is overly optimistic,” Yoshio Takahashi, head strategist for non- Japanese debt in Tokyo at Barclays Capital, wrote in a research note today.
Yen Call Options
Traders are paying a larger premium for yen call options against the dollar, which grant the right to buy Japan’s currency, over puts that provide the right to sell it. The dollar-yen’s one-month 25-delta risk-reversal rate widened to minus 2.44 percent today from minus 2.22 percent yesterday.
The euro gained for a fourth day versus the dollar before a European report that may show the region’s manufacturing and services contracted at the slowest pace in seven months.
A composite index of activity in both industries rose to 42 in May from 41.1 in April, according to the median estimate in a Bloomberg survey of economists.
“We could see PMIs come in higher than expected, highlighting the improved sentiment in the region,” analysts at Standard Chartered Bank led by Callum Henderson, Singapore-based global head of currency research, wrote in a research note today. “It looks likely the euro-dollar could establish new highs for 2009 beyond January’s $1.406 high.”
Read more here
Asian Stocks Decline on Yen Strength, Fed Economy Prediction
(Bloomberg) -- Asian stocks retreated, dragging the MSCI Asia Pacific Index from a seven-month high, as the stronger yen diminished earnings prospects in Japan and the U.S. Federal Reserve projected a deeper recession.
Toyota Motor Corp., which got 31 percent of its revenue in North America last fiscal year, lost 2.2 percent. Department store operator Takashimaya Co. lost 3.4 percent in Tokyo as the first cases of swine flu were confirmed in the city. Rio Tinto Group, the world’s No. 3 mining company, rose 2.4 percent after the Sydney Morning Herald reported Aluminum Corp. of China may accept a lower stake to win approval for an investment.
The MSCI Asia Pacific Index fell 0.6 percent to 99.64 as of 12:21 p.m. in Tokyo. The gauge closed at its highest level since Oct. 6 yesterday, driving stock valuations to the most expensive since 2003.
“We need to see economic fundamentals improve to match the recovery in equity markets,” said Chong Yoon Chou, Singapore- based investment director at Aberdeen Asset Management Asia Ltd., which has $27 billion of assets. “An economic recovery will take some time.”
Japan’s Nikkei 225 Stock Average declined 1.2 percent to 9,235.15. China’s Shanghai Composite Index lost 1.6 percent as a Credit Suisse Group AG report said a rebound in economic growth won’t be as “strong as many recently have hoped.” Markets in Asia fell except in Malaysia and Vietnam.
Brokerage Downgrade
Ibiden Co., which makes components for memory chips, slumped 2.5 percent after Nikko Citigroup Ltd. recommended selling the stock, citing weak profit growth. Chi Mei Optoelectronics Corp., Taiwan’s No. 2 maker of liquid-crystal displays, surged for a second day after China said it will widen subsidies to include home appliances. Online retailer Rakuten Inc. jumped 3.9 percent on speculation an outbreak of swine flu will push consumers to shop from home.
Futures on the U.S. Standard & Poor’s 500 Index lost 0.4 percent. The gauge sank 0.5 percent yesterday as American Express Co. said legislation to curb credit-card fees may reduce lending to consumers.
Fed policy makers projected a fourth-quarter U.S. contraction of 1.3 percent to 2 percent from a year earlier, according to minutes of an April 28-29 meeting released yesterday. That compares with January projections for a contraction of 0.5 percent to 1.3 percent.
U.S. unemployment surged to 8.9 percent in April, a level not seen since 1983.
Yen Strength
The yen strengthened versus the dollar to as much as 94.29 today from 95.52 at the 3 p.m. close of stock trading in Tokyo yesterday, as the Fed said it considered buying more assets, a move that could devalue the U.S. dollar. A stronger local currency diminishes the value of overseas sales for Japanese manufacturers.
“Should the yen continue to strengthen, people will likely start doubting whether companies’ rather optimistic outlooks are justified,” said Mitsushige Akino, who oversees about $632 million at Ichiyoshi Investment Management Co. in Tokyo.
Toyota sank 2.2 percent to 3,580 yen. Sony Corp., the maker of the PlayStation 3 game console, declined 1.6 percent to 2,465 yen even after the company said it plans to reduce procurement costs by a fifth.
The MSCI Asia benchmark rallied as much as 42 percent from a more-than five year low reached on March 9. Stocks included in the MSCI gauge now trade at 43 times trailing earnings, the most expensive since 2003.
Oil, Copper
Rio gained 2.4 percent to A$66.37. Aluminum Corp., known as Chinalco, is open to letting Rio sell convertible bonds to other shareholders and would be prepared to accept a stake of 15 percent, the Sydney Morning Herald said. That would potentially avoid a breach of foreign ownership limits.
Commodity producers also climbed as crude oil for July delivery jumped 3.2 percent to $62.04 a barrel in New York yesterday, the highest settlement since Nov. 10. Copper futures added 1.8 percent. Both prices fell today.
Takashimaya slipped 3.4 percent to 575 yen. Aeon Co., Japan’s second-largest retailer, declined 3.1 percent to 856 yen. Rakuten jumped 3.9 percent to 52,800 yen.
Two 16-year-old high school students have been confirmed as the first cases of swine flu in the Tokyo area, according to statements from the Tokyo and Kawasaki city governments. Japan said 234 people have the virus, which has sickened more than 10,000 people worldwide.
“Retail, restaurant and leisure businesses will be affected,” Ichiyoshi’s Akino said. “As people are likely to stay in their house, online retailers and mail-order companies will benefit.”
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Toyota Motor Corp., which got 31 percent of its revenue in North America last fiscal year, lost 2.2 percent. Department store operator Takashimaya Co. lost 3.4 percent in Tokyo as the first cases of swine flu were confirmed in the city. Rio Tinto Group, the world’s No. 3 mining company, rose 2.4 percent after the Sydney Morning Herald reported Aluminum Corp. of China may accept a lower stake to win approval for an investment.
The MSCI Asia Pacific Index fell 0.6 percent to 99.64 as of 12:21 p.m. in Tokyo. The gauge closed at its highest level since Oct. 6 yesterday, driving stock valuations to the most expensive since 2003.
“We need to see economic fundamentals improve to match the recovery in equity markets,” said Chong Yoon Chou, Singapore- based investment director at Aberdeen Asset Management Asia Ltd., which has $27 billion of assets. “An economic recovery will take some time.”
Japan’s Nikkei 225 Stock Average declined 1.2 percent to 9,235.15. China’s Shanghai Composite Index lost 1.6 percent as a Credit Suisse Group AG report said a rebound in economic growth won’t be as “strong as many recently have hoped.” Markets in Asia fell except in Malaysia and Vietnam.
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Ibiden Co., which makes components for memory chips, slumped 2.5 percent after Nikko Citigroup Ltd. recommended selling the stock, citing weak profit growth. Chi Mei Optoelectronics Corp., Taiwan’s No. 2 maker of liquid-crystal displays, surged for a second day after China said it will widen subsidies to include home appliances. Online retailer Rakuten Inc. jumped 3.9 percent on speculation an outbreak of swine flu will push consumers to shop from home.
Futures on the U.S. Standard & Poor’s 500 Index lost 0.4 percent. The gauge sank 0.5 percent yesterday as American Express Co. said legislation to curb credit-card fees may reduce lending to consumers.
Fed policy makers projected a fourth-quarter U.S. contraction of 1.3 percent to 2 percent from a year earlier, according to minutes of an April 28-29 meeting released yesterday. That compares with January projections for a contraction of 0.5 percent to 1.3 percent.
U.S. unemployment surged to 8.9 percent in April, a level not seen since 1983.
Yen Strength
The yen strengthened versus the dollar to as much as 94.29 today from 95.52 at the 3 p.m. close of stock trading in Tokyo yesterday, as the Fed said it considered buying more assets, a move that could devalue the U.S. dollar. A stronger local currency diminishes the value of overseas sales for Japanese manufacturers.
“Should the yen continue to strengthen, people will likely start doubting whether companies’ rather optimistic outlooks are justified,” said Mitsushige Akino, who oversees about $632 million at Ichiyoshi Investment Management Co. in Tokyo.
Toyota sank 2.2 percent to 3,580 yen. Sony Corp., the maker of the PlayStation 3 game console, declined 1.6 percent to 2,465 yen even after the company said it plans to reduce procurement costs by a fifth.
The MSCI Asia benchmark rallied as much as 42 percent from a more-than five year low reached on March 9. Stocks included in the MSCI gauge now trade at 43 times trailing earnings, the most expensive since 2003.
Oil, Copper
Rio gained 2.4 percent to A$66.37. Aluminum Corp., known as Chinalco, is open to letting Rio sell convertible bonds to other shareholders and would be prepared to accept a stake of 15 percent, the Sydney Morning Herald said. That would potentially avoid a breach of foreign ownership limits.
Commodity producers also climbed as crude oil for July delivery jumped 3.2 percent to $62.04 a barrel in New York yesterday, the highest settlement since Nov. 10. Copper futures added 1.8 percent. Both prices fell today.
Takashimaya slipped 3.4 percent to 575 yen. Aeon Co., Japan’s second-largest retailer, declined 3.1 percent to 856 yen. Rakuten jumped 3.9 percent to 52,800 yen.
Two 16-year-old high school students have been confirmed as the first cases of swine flu in the Tokyo area, according to statements from the Tokyo and Kawasaki city governments. Japan said 234 people have the virus, which has sickened more than 10,000 people worldwide.
“Retail, restaurant and leisure businesses will be affected,” Ichiyoshi’s Akino said. “As people are likely to stay in their house, online retailers and mail-order companies will benefit.”
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Tuesday, May 19, 2009
Japan Economy Shrinks Record 15.2% as Exports, Spending Plunge
(Bloomberg) -- Japan’s economy shrank by a record last quarter as exports collapsed and consumers and businesses slashed spending, a decline that probably marked the low point in the country’s worst recession since World War II.
Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.
Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
“There was a collapse across the board,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added, there’s “light at the end of the tunnel” and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect.
The yen traded at 95.59 per dollar at 12:56 p.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.3 percent. Economists surveyed predicted the economy would shrink 16.1 percent.
Worse Than U.S.
GDP fell 4 percent on a non-annualized basis, more than double the U.S.’s 1.6 percent slide. It’s also worse than Europe’s record 2.5 percent contraction. Without adjusting for price changes, Japan shrank 2.9 percent last quarter.
Weaker domestic demand was the biggest contributor to the decline, shaving 2.6 percentage points off GDP, the most since 1974. Net exports -- the difference between exports and imports -- was responsible for 1.4 percentage points of the drop.
Consumer spending slid 1.1 percent and business investment plunged a record 10.4 percent. Economists say companies will keep cutting spending because the decline in demand has left factories and workers underused.
“There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.”
Hitachi, a maker of nuclear reactors, home appliances and hard-disk drives, will trim costs by 500 billion yen ($5.2 billion) this fiscal year to minimize losses after a record 787.3 billion yen deficit last year. The Tokyo-based company said in January it plans to cut 7,000 jobs.
May Grow
Still, reports in the past month suggest the world’s second-largest economy may grow for the first time in a year this quarter, albeit from a low point, as exports stabilize and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, takes effect.
Consumer confidence climbed to a 10-month high in April. Exports increased in March from a month earlier, and factory output rose for the first time since September.
“Japan, first of all, will get a big boost from fiscal stimulus,” Thomas Byrne, senior vice president of Moody’s Investors Service, said in an interview in Tokyo. “Second, if the global economy picks up a little bit, that will help tremendously in Japan because of its dependence on exports.”
Byrne said Moody’s is unlikely to cut Japan’s debt rating over the next year because investors are willing to buy bonds that will fund the stimulus plans. Moody’s unified Japan’s ratings at Aa2 this week, raising the local-currency assessment from Aa3 and lowering the foreign-currency view from Aaa.
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Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.
Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
“There was a collapse across the board,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added, there’s “light at the end of the tunnel” and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect.
The yen traded at 95.59 per dollar at 12:56 p.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.3 percent. Economists surveyed predicted the economy would shrink 16.1 percent.
Worse Than U.S.
GDP fell 4 percent on a non-annualized basis, more than double the U.S.’s 1.6 percent slide. It’s also worse than Europe’s record 2.5 percent contraction. Without adjusting for price changes, Japan shrank 2.9 percent last quarter.
Weaker domestic demand was the biggest contributor to the decline, shaving 2.6 percentage points off GDP, the most since 1974. Net exports -- the difference between exports and imports -- was responsible for 1.4 percentage points of the drop.
Consumer spending slid 1.1 percent and business investment plunged a record 10.4 percent. Economists say companies will keep cutting spending because the decline in demand has left factories and workers underused.
“There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.”
Hitachi, a maker of nuclear reactors, home appliances and hard-disk drives, will trim costs by 500 billion yen ($5.2 billion) this fiscal year to minimize losses after a record 787.3 billion yen deficit last year. The Tokyo-based company said in January it plans to cut 7,000 jobs.
May Grow
Still, reports in the past month suggest the world’s second-largest economy may grow for the first time in a year this quarter, albeit from a low point, as exports stabilize and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, takes effect.
Consumer confidence climbed to a 10-month high in April. Exports increased in March from a month earlier, and factory output rose for the first time since September.
“Japan, first of all, will get a big boost from fiscal stimulus,” Thomas Byrne, senior vice president of Moody’s Investors Service, said in an interview in Tokyo. “Second, if the global economy picks up a little bit, that will help tremendously in Japan because of its dependence on exports.”
Byrne said Moody’s is unlikely to cut Japan’s debt rating over the next year because investors are willing to buy bonds that will fund the stimulus plans. Moody’s unified Japan’s ratings at Aa2 this week, raising the local-currency assessment from Aa3 and lowering the foreign-currency view from Aaa.
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Asian Stocks Advance, Led by Mitsubishi; T&D Slumps on Loss
(Bloomberg) -- Asian stocks rose, led by commodity companies, as Goldman, Sachs & Co. recommended buying Mitsubishi Corp. shares. Finance companies declined.
Mitsubishi Corp., a trading company that gets 47 percent of its revenue from metals and energy products, climbed 4.5 percent. T&D Holdings Inc., Japan’s biggest life insurer, slumped 13 percent after posting a wider-than-estimated full-year loss. Billabong International Ltd., Australia’s largest surfwear maker, tumbled 16 percent after a share sale.
The MSCI Asia Pacific Index rose 0.5 percent to 99.82 at 12:04 p.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Concern that stock valuations had overpriced earnings prospects gave the measure its biggest weekly decline in two months last week.
“People are buying and selling stocks for quick returns, driving the market up and down like a carnival,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $9.3 billion.
Japan’s Nikkei 225 Stock Average advanced 0.4 percent to 9,330.46 as a government report showed the economy contracted an annualized 15.2 percent in the three months ended March 31, less than some economists predicted. Most markets rose, except for Singapore and Hong Kong.
James Hardie Industries NV, the biggest seller of home siding in the U.S., declined 2.3 percent in Sydney after profit slumped in the fourth quarter. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.9 percent as commodity shipping rates gained for a 13th-straight session.
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Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.
Mitsubishi jumped 4.5 percent to 1,736 in Tokyo. Mitsui & Co., Mitsubishi’s closest rival, added 4.4 percent to 1,160 yen. Goldman Sachs raised its view on Japan’s trading house sector to “attractive” from “neutral.” The brokerage upgraded Mitsubishi to “buy” from “neutral.”
“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.
Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.
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Mitsubishi Corp., a trading company that gets 47 percent of its revenue from metals and energy products, climbed 4.5 percent. T&D Holdings Inc., Japan’s biggest life insurer, slumped 13 percent after posting a wider-than-estimated full-year loss. Billabong International Ltd., Australia’s largest surfwear maker, tumbled 16 percent after a share sale.
The MSCI Asia Pacific Index rose 0.5 percent to 99.82 at 12:04 p.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Concern that stock valuations had overpriced earnings prospects gave the measure its biggest weekly decline in two months last week.
“People are buying and selling stocks for quick returns, driving the market up and down like a carnival,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $9.3 billion.
Japan’s Nikkei 225 Stock Average advanced 0.4 percent to 9,330.46 as a government report showed the economy contracted an annualized 15.2 percent in the three months ended March 31, less than some economists predicted. Most markets rose, except for Singapore and Hong Kong.
James Hardie Industries NV, the biggest seller of home siding in the U.S., declined 2.3 percent in Sydney after profit slumped in the fourth quarter. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.9 percent as commodity shipping rates gained for a 13th-straight session.
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Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.
Mitsubishi jumped 4.5 percent to 1,736 in Tokyo. Mitsui & Co., Mitsubishi’s closest rival, added 4.4 percent to 1,160 yen. Goldman Sachs raised its view on Japan’s trading house sector to “attractive” from “neutral.” The brokerage upgraded Mitsubishi to “buy” from “neutral.”
“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.
Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.
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Bank of America Raises $13.5 Billion After Stress-Test Verdict
(Bloomberg) -- Bank of America Corp., the biggest U.S. bank by assets, raised about $13.5 billion in a sale of common stock after U.S. regulators determined it needed more cash to weather an extended recession.
The bank issued 1.25 billion shares at an average price of $10.77 each, according to a statement yesterday. The Charlotte, North Carolina-based company plans to boost common equity capital by $17 billion through the sale of stock and by converting preferred shares mostly held by institutional investors, Chief Executive Officer Kenneth Lewis said May 7.
“The worst is over for Bank of America and it will have absolutely no problem raising more capital,” said Kim Yong Tae, head of overseas investment at Yurie Asset Management Inc. in Seoul, which manages $2 billion in assets. “The minute the U.S. government started pumping taxpayer money into lenders its financial-system risks started easing, and now are completely gone.”
Regulators told Bank of America to raise $33.9 billion after conducting stress tests, the largest amount among the 19 banks examined. Other banks ordered to raise capital include Wells Fargo & Co., which made an $8.6 billion offering, and Morgan Stanley, which raised $4 billion, both on May 8.
“We are pleased to have this portion of our capital plan completed,” Bank of America Chief Financial Officer Joe Price said in the statement. “This strengthens and diversifies our capital structure.”
Bank of America declined 48 cents, or 4.1 percent, to $11.25 at 4:15 p.m. in New York Stock Exchange composite trading. It has dropped 20 percent this year.
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The bank issued 1.25 billion shares at an average price of $10.77 each, according to a statement yesterday. The Charlotte, North Carolina-based company plans to boost common equity capital by $17 billion through the sale of stock and by converting preferred shares mostly held by institutional investors, Chief Executive Officer Kenneth Lewis said May 7.
“The worst is over for Bank of America and it will have absolutely no problem raising more capital,” said Kim Yong Tae, head of overseas investment at Yurie Asset Management Inc. in Seoul, which manages $2 billion in assets. “The minute the U.S. government started pumping taxpayer money into lenders its financial-system risks started easing, and now are completely gone.”
Regulators told Bank of America to raise $33.9 billion after conducting stress tests, the largest amount among the 19 banks examined. Other banks ordered to raise capital include Wells Fargo & Co., which made an $8.6 billion offering, and Morgan Stanley, which raised $4 billion, both on May 8.
“We are pleased to have this portion of our capital plan completed,” Bank of America Chief Financial Officer Joe Price said in the statement. “This strengthens and diversifies our capital structure.”
Bank of America declined 48 cents, or 4.1 percent, to $11.25 at 4:15 p.m. in New York Stock Exchange composite trading. It has dropped 20 percent this year.
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Monday, May 18, 2009
Asian Stocks Rise on Growth Optimism; BHP, Toyota Motor Gain
(Bloomberg) -- Asian stocks rose as higher confidence among U.S. homebuilders, a surge in oil prices and a drop in bank borrowing costs stoked optimism the global economy is recovering.
Toyota Motor Corp., which gets a third of its sales in North America, rose 3.1 percent as the yen weakened versus the dollar. BHP Billiton Ltd., Australia’s biggest oil producer, climbed 3.4 percent after crude-oil futures rose to a six-month high. Mitsubishi UFJ Financial Group Ltd. gained 5.9 percent as the London interbank offered rate fell the most in two months. Indian stocks were poised to advance after election results triggered a surge in their American depositary receipts.
“The housing market is the most important factor in predicting the direction of an economy,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co. “When we look back on these times, we’ll see the global economy bottomed out in the April-June period.”
The MSCI Asia Pacific Index advanced 2.2 percent to 98.97 at 11 a.m. in Tokyo. Through yesterday, the gauge climbed 40 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average climbed 2.8 percent to 9,293.09. Australia’s S&P/ASX 200 Index added 2.1 percent and South Korea’s Kospi index rose 2 percent. Trading in India is due to resume trading today as a 17 percent surge in the Sensitive Index triggered a suspension yesterday.
Weaker Yen
Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 3 percent yesterday, the most in two weeks, as analysts recommended Bank of America Corp. and Lowe’s Cos. beat earnings projections. Separately, the National Association of Home Builders/Wells Fargo index of builders’ confidence advanced in May to the highest level since September.
Toyota rose 3.1 percent to 3,670 yen in Tokyo. Honda Motor Co., which makes 51 percent of its revenue in North America, added 0.9 percent to 2,705 yen. Japanese exporters also rose on speculation a weaker yen will boost the value of overseas sales.
The surge in equities signaled investors are more willing to take risk, making the yen less attractive as a haven. The yen depreciated against the dollar to as much as 96.40 today from 95.03 at the 3 p.m. close of stock trading in Tokyo yesterday. The Japanese currency weakened versus the euro to as much as 130.68 from 127.91.
BHP Billiton, the world’s biggest mining company and Australia’s largest oil producer, rose 3.4 percent to A$34.01. Inpex Corp., Japan’s largest oil explorer, climbed 4.6 percent to 702,000 yen.
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Toyota Motor Corp., which gets a third of its sales in North America, rose 3.1 percent as the yen weakened versus the dollar. BHP Billiton Ltd., Australia’s biggest oil producer, climbed 3.4 percent after crude-oil futures rose to a six-month high. Mitsubishi UFJ Financial Group Ltd. gained 5.9 percent as the London interbank offered rate fell the most in two months. Indian stocks were poised to advance after election results triggered a surge in their American depositary receipts.
“The housing market is the most important factor in predicting the direction of an economy,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co. “When we look back on these times, we’ll see the global economy bottomed out in the April-June period.”
The MSCI Asia Pacific Index advanced 2.2 percent to 98.97 at 11 a.m. in Tokyo. Through yesterday, the gauge climbed 40 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average climbed 2.8 percent to 9,293.09. Australia’s S&P/ASX 200 Index added 2.1 percent and South Korea’s Kospi index rose 2 percent. Trading in India is due to resume trading today as a 17 percent surge in the Sensitive Index triggered a suspension yesterday.
Weaker Yen
Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 3 percent yesterday, the most in two weeks, as analysts recommended Bank of America Corp. and Lowe’s Cos. beat earnings projections. Separately, the National Association of Home Builders/Wells Fargo index of builders’ confidence advanced in May to the highest level since September.
Toyota rose 3.1 percent to 3,670 yen in Tokyo. Honda Motor Co., which makes 51 percent of its revenue in North America, added 0.9 percent to 2,705 yen. Japanese exporters also rose on speculation a weaker yen will boost the value of overseas sales.
The surge in equities signaled investors are more willing to take risk, making the yen less attractive as a haven. The yen depreciated against the dollar to as much as 96.40 today from 95.03 at the 3 p.m. close of stock trading in Tokyo yesterday. The Japanese currency weakened versus the euro to as much as 130.68 from 127.91.
BHP Billiton, the world’s biggest mining company and Australia’s largest oil producer, rose 3.4 percent to A$34.01. Inpex Corp., Japan’s largest oil explorer, climbed 4.6 percent to 702,000 yen.
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Goldman, Morgan Stanley Said to Apply for TARP Exit
(Bloomberg) -- Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley applied to repay the combined $45 billion they received in October from the government’s Troubled Asset Relief Program, said people familiar with the matter.
The three New York-based banks need approval from the Federal Reserve, their primary supervisor, to return the money, according to the people, who requested anonymity because the application process isn’t public. Spokesmen for the three banks declined to comment, as did Calvin Mitchell, a spokesman for the Federal Reserve Bank of New York.
If approved, the refunds would be the biggest yet to the $700 billion TARP program established by Congress last year during the investor furor that followed the bankruptcy of Lehman Brothers Holdings Inc. Banks are keen to repay the money to shake off restrictions on compensation and hiring that were imposed on TARP recipients in February.
“It really is a way for them to break from the herd,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, which holds Goldman Sachs and JPMorgan shares among the $13.8 billion it oversees. “It’s a great way to attract customers, personnel, capital.”
JPMorgan, Goldman Sachs, and Morgan Stanley were among nine banks that were persuaded in mid-October by then-Treasury Secretary Henry Paulson to accept the first $125 billion of capital injections from the TARP program to help restore stability to the financial markets.
Stress-Test Results
The refunds would be the first by the biggest banks that participated in the program. As of May 15, 14 of the smaller banks that received capital under the program had already repaid it, according to data compiled by Bloomberg.
The 19 biggest banks were waiting for the conclusion earlier this month of so-called stress tests to determine whether they would require additional capital to withstand a further deterioration of the economy.
Goldman Sachs and JPMorgan, the fifth- and second-biggest U.S. banks by assets, were found not to need any more money. Morgan Stanley, the sixth-biggest bank, raised $4.57 billion by selling stock this month, exceeding the $1.8 billion in additional capital the regulators said the bank may require.
Treasury Secretary Timothy Geithner said on April 21 that he would welcome firms returning TARP funds as long as their regulators sign off. He added that regulators will consider whether banks have enough capital to keep lending and whether the financial system as a whole can supply the credit needed to ensure an economic recovery.
‘Wrong Time’
While executives at Goldman Sachs and JPMorgan have expressed a desire to repay their TARP money for months, Morgan Stanley Chairman and Chief Executive Officer John Mack told employees on March 30 that he thought it was “the wrong time” to repay the money.
Morgan Stanley, which reported a first-quarter loss, also slashed its quarterly dividend 81 percent to 5 cents. On May 8, when the company sold stock, it also sold $4 billion of debt that didn’t carry a government guarantee. Selling non-guaranteed debt is a prerequisite for repaying TARP money.
The banks will also have to decide whether to try to buy back the warrants that the government received as part of the TARP investments. The warrants, which could convert into stock if not repurchased, would add to the cost of repayment.
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The three New York-based banks need approval from the Federal Reserve, their primary supervisor, to return the money, according to the people, who requested anonymity because the application process isn’t public. Spokesmen for the three banks declined to comment, as did Calvin Mitchell, a spokesman for the Federal Reserve Bank of New York.
If approved, the refunds would be the biggest yet to the $700 billion TARP program established by Congress last year during the investor furor that followed the bankruptcy of Lehman Brothers Holdings Inc. Banks are keen to repay the money to shake off restrictions on compensation and hiring that were imposed on TARP recipients in February.
“It really is a way for them to break from the herd,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, which holds Goldman Sachs and JPMorgan shares among the $13.8 billion it oversees. “It’s a great way to attract customers, personnel, capital.”
JPMorgan, Goldman Sachs, and Morgan Stanley were among nine banks that were persuaded in mid-October by then-Treasury Secretary Henry Paulson to accept the first $125 billion of capital injections from the TARP program to help restore stability to the financial markets.
Stress-Test Results
The refunds would be the first by the biggest banks that participated in the program. As of May 15, 14 of the smaller banks that received capital under the program had already repaid it, according to data compiled by Bloomberg.
The 19 biggest banks were waiting for the conclusion earlier this month of so-called stress tests to determine whether they would require additional capital to withstand a further deterioration of the economy.
Goldman Sachs and JPMorgan, the fifth- and second-biggest U.S. banks by assets, were found not to need any more money. Morgan Stanley, the sixth-biggest bank, raised $4.57 billion by selling stock this month, exceeding the $1.8 billion in additional capital the regulators said the bank may require.
Treasury Secretary Timothy Geithner said on April 21 that he would welcome firms returning TARP funds as long as their regulators sign off. He added that regulators will consider whether banks have enough capital to keep lending and whether the financial system as a whole can supply the credit needed to ensure an economic recovery.
‘Wrong Time’
While executives at Goldman Sachs and JPMorgan have expressed a desire to repay their TARP money for months, Morgan Stanley Chairman and Chief Executive Officer John Mack told employees on March 30 that he thought it was “the wrong time” to repay the money.
Morgan Stanley, which reported a first-quarter loss, also slashed its quarterly dividend 81 percent to 5 cents. On May 8, when the company sold stock, it also sold $4 billion of debt that didn’t carry a government guarantee. Selling non-guaranteed debt is a prerequisite for repaying TARP money.
The banks will also have to decide whether to try to buy back the warrants that the government received as part of the TARP investments. The warrants, which could convert into stock if not repurchased, would add to the cost of repayment.
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Sunday, May 17, 2009
AIG to Accelerate Separation of AIA, Seek IPO in Asia
(Bloomberg) -- American International Group Inc., the insurer bailed out by the U.S. government, is accelerating the separation of American International Assurance Co. and will list it on an Asian exchange.
AIG has hired Blackstone Group LP to advise on the reorganization and initial public offering of its Asian life unit, which operates in 13 markets in the region with more than 20 million customers and over $60 billion of assets, it said in a statement issued through Business Wire today.
AIG, based in New York, is selling property and businesses after being bailed out four times by the U.S. government. The company has tapped about $45.5 billion from a U.S. credit line as of earlier this month.
“At this stage, we believe that a public listing for AIA would be in the best interests of all stakeholders, including U.S. taxpayers, policyholders, employees and distribution partners,” AIG Chairman and Chief Executive Officer Edward Liddy said in the statement.
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AIG has hired Blackstone Group LP to advise on the reorganization and initial public offering of its Asian life unit, which operates in 13 markets in the region with more than 20 million customers and over $60 billion of assets, it said in a statement issued through Business Wire today.
AIG, based in New York, is selling property and businesses after being bailed out four times by the U.S. government. The company has tapped about $45.5 billion from a U.S. credit line as of earlier this month.
“At this stage, we believe that a public listing for AIA would be in the best interests of all stakeholders, including U.S. taxpayers, policyholders, employees and distribution partners,” AIG Chairman and Chief Executive Officer Edward Liddy said in the statement.
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Treasuries Advance as Stocks Fall, Fed Prepares to Buy Debt
(Bloomberg) -- Treasuries rose, adding to last week’s gain, as Asian stocks extended losses and the Federal Reserve prepared to buy 10-year notes today.
Benchmark 10-year yields will fall about 40 basis points by mid-year and the U.S. economic recovery may stall, according to a report from Goldman Sachs Group Inc., one of the 16 primary dealers that trade directly with the Fed. The central bank also plans to buy Treasuries on May 20 and May 21 as part of its plan to cap borrowing costs and combat the steepest U.S. recession in 50 years.
“The economy is still in trouble,” said Takashi Yamamoto, chief trader in Singapore at Mitsubishi UFJ Trust & Banking Corp., part of Japan’s biggest bank. “Yields will go down.”
The yield on the 10-year note fell three basis points to 3.11 percent as of 10:10 a.m. in Tokyo, according to data compiled by Bloomberg. The price of the 3.125 percent security maturing May 2019 gained 1/4, or $2.50 per $1,000 face amount, to 100 1/8. A basis point is 0.01 percentage point.
Ten-year yields declined 15 basis points last week, as prices posted the first seven-day gain since the period that ended March 20.
The MSCI Asia Pacific Index of regional shares dropped 1.6 percent today, after the Standard & Poor’s 500 Index slid 1.1 percent on May 15, helping fuel demand for the relative safety of government debt.
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Benchmark 10-year yields will fall about 40 basis points by mid-year and the U.S. economic recovery may stall, according to a report from Goldman Sachs Group Inc., one of the 16 primary dealers that trade directly with the Fed. The central bank also plans to buy Treasuries on May 20 and May 21 as part of its plan to cap borrowing costs and combat the steepest U.S. recession in 50 years.
“The economy is still in trouble,” said Takashi Yamamoto, chief trader in Singapore at Mitsubishi UFJ Trust & Banking Corp., part of Japan’s biggest bank. “Yields will go down.”
The yield on the 10-year note fell three basis points to 3.11 percent as of 10:10 a.m. in Tokyo, according to data compiled by Bloomberg. The price of the 3.125 percent security maturing May 2019 gained 1/4, or $2.50 per $1,000 face amount, to 100 1/8. A basis point is 0.01 percentage point.
Ten-year yields declined 15 basis points last week, as prices posted the first seven-day gain since the period that ended March 20.
The MSCI Asia Pacific Index of regional shares dropped 1.6 percent today, after the Standard & Poor’s 500 Index slid 1.1 percent on May 15, helping fuel demand for the relative safety of government debt.
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VW Calls Off Porsche Talks, Says Atmosphere ‘Not Constructive’
(Bloomberg) -- Volkswagen AG, Europe’s largest automaker, called off talks with Porsche SE about a combination less than two weeks after the sports-car manufacturer’s controlling families agreed to pursue a merger.
“There is currently no atmosphere for constructive talks,” Christine Ritz, a spokeswoman at Volkswagen, said yesterday in a telephone interview. In a statement, Porsche said that while a meeting scheduled for today had been canceled, negotiations will resume. It didn’t give details.
The Porsche and Piech families, which together control half of Porsche, agreed May 6 to create an “integrated” carmaker that would put Porsche alongside VW brands including Skoda and Audi. Within a week, VW Supervisory Board Chairman Ferdinand Piech said that Stuttgart, Germany-based Porsche must first trim its 9 billion euros ($12 billion) in net debt before a merger, and that Chief Executive Officer Wendelin Wiedeking and Chief Financial Officer Holger Haerter were partly responsible.
“War has erupted again between Volkswagen and Porsche,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. Dudenhoeffer was head of marketing strategy and research at Porsche from 1987 to 1990. “Piech is behind that.”
Porsche owns about 51 percent of Wolfsburg, Germany-based Volkswagen, whose automotive division had 10.7 billion euros in net cash as of March 31. The maker of the 911 sports car had been accumulating Volkswagen shares since 2005 to protect ties to its largest supplier.
First Strike
Porsche Supervisory Board Chairman Wolfgang Porsche was struggling to raise financing to boost the stake to 75 percent and had been at loggerheads with Piech about how to unite the carmakers. The May 6 agreement between the families effectively put on hold Porsche’s plan to further bolster its stake in Volkswagen by acquiring VW shares.
The Porsche family is upset over Piech’s remarks and is concerned that they may hurt the value of the carmaker, Der Spiegel said on its Web site. When asked whether Volkswagen would pay 11 billion euros for Porsche AG, the operating unit of Porsche SE, Piech said that amount is “definitely a few billion too high,” according to the magazine.
Porsche workers will hold their first-ever strike today to protest the merger plan, Focus magazine reported. On May 7, a day after the initial pact, Porsche fell the most in at least 13 years on the Frankfurt exchange.
The stock has fallen 21 percent this year, cutting Porsche’s market value to 7.2 billion euros. Volkswagen has declined 12 percent, valuing the carmaker at 69.6 billion euros.
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“There is currently no atmosphere for constructive talks,” Christine Ritz, a spokeswoman at Volkswagen, said yesterday in a telephone interview. In a statement, Porsche said that while a meeting scheduled for today had been canceled, negotiations will resume. It didn’t give details.
The Porsche and Piech families, which together control half of Porsche, agreed May 6 to create an “integrated” carmaker that would put Porsche alongside VW brands including Skoda and Audi. Within a week, VW Supervisory Board Chairman Ferdinand Piech said that Stuttgart, Germany-based Porsche must first trim its 9 billion euros ($12 billion) in net debt before a merger, and that Chief Executive Officer Wendelin Wiedeking and Chief Financial Officer Holger Haerter were partly responsible.
“War has erupted again between Volkswagen and Porsche,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. Dudenhoeffer was head of marketing strategy and research at Porsche from 1987 to 1990. “Piech is behind that.”
Porsche owns about 51 percent of Wolfsburg, Germany-based Volkswagen, whose automotive division had 10.7 billion euros in net cash as of March 31. The maker of the 911 sports car had been accumulating Volkswagen shares since 2005 to protect ties to its largest supplier.
First Strike
Porsche Supervisory Board Chairman Wolfgang Porsche was struggling to raise financing to boost the stake to 75 percent and had been at loggerheads with Piech about how to unite the carmakers. The May 6 agreement between the families effectively put on hold Porsche’s plan to further bolster its stake in Volkswagen by acquiring VW shares.
The Porsche family is upset over Piech’s remarks and is concerned that they may hurt the value of the carmaker, Der Spiegel said on its Web site. When asked whether Volkswagen would pay 11 billion euros for Porsche AG, the operating unit of Porsche SE, Piech said that amount is “definitely a few billion too high,” according to the magazine.
Porsche workers will hold their first-ever strike today to protest the merger plan, Focus magazine reported. On May 7, a day after the initial pact, Porsche fell the most in at least 13 years on the Frankfurt exchange.
The stock has fallen 21 percent this year, cutting Porsche’s market value to 7.2 billion euros. Volkswagen has declined 12 percent, valuing the carmaker at 69.6 billion euros.
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Thursday, May 14, 2009
Barclays Said to Discuss Sale of BGI With BlackRock, BNY Mellon
(Bloomberg) -- Barclays Plc, the U.K.’s third- biggest bank, is in talks to sell its Barclays Global Investors asset management unit to potential buyers including BlackRock Inc. and Bank of New York Mellon Corp., according to people with knowledge of the matter.
A sale of Barclays Global Investors, with 1.04 trillion pounds ($1.6 trillion) of funds under management, would derail an agreement announced last month to sell BGI’s iShares unit to CVC Capital Partners Ltd. for $4.4 billion, said the people, who declined to be identified because the talks are private.
Barclays has until June 18 to look for better offers for the iShares exchange-traded fund business and related units under the terms of the agreement with CVC, a London-based buyout firm. BlackRock Chief Executive Officer Laurence Fink said on an April 21 conference call that he’d be interested in expanding the firm’s position in retail mutual funds through acquisitions.
“Barclays deliberately structured the deal with a go-shop clause” to attract additional bidders, Simon Maughan, an analyst at MF Global Securities Ltd. in London, who has a “neutral” rating on Barclays stock, said on May 11.
Officials at San Francisco-based BGI, New York-based BlackRock and BNY Mellon declined to comment. The Financial Times, which reported the talks earlier, said BGI may sell for about $10 billion.
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A sale of Barclays Global Investors, with 1.04 trillion pounds ($1.6 trillion) of funds under management, would derail an agreement announced last month to sell BGI’s iShares unit to CVC Capital Partners Ltd. for $4.4 billion, said the people, who declined to be identified because the talks are private.
Barclays has until June 18 to look for better offers for the iShares exchange-traded fund business and related units under the terms of the agreement with CVC, a London-based buyout firm. BlackRock Chief Executive Officer Laurence Fink said on an April 21 conference call that he’d be interested in expanding the firm’s position in retail mutual funds through acquisitions.
“Barclays deliberately structured the deal with a go-shop clause” to attract additional bidders, Simon Maughan, an analyst at MF Global Securities Ltd. in London, who has a “neutral” rating on Barclays stock, said on May 11.
Officials at San Francisco-based BGI, New York-based BlackRock and BNY Mellon declined to comment. The Financial Times, which reported the talks earlier, said BGI may sell for about $10 billion.
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Asian Stocks Advance on Sony Forecast, Bank Borrowing Costs
(Bloomberg) -- Asian stocks climbed, paring the MSCI Asia Pacific Index’s first weekly decline in three weeks, after Sony Corp. forecast a smaller loss than analysts expected and bank borrowing costs plunged.
Sony, the world’s No. 2 maker of consumer electronics, jumped 5.8 percent after the company said it will close factories as part of restructuring efforts. HSBC Holdings Plc, Europe’s largest lender by market value, rose 2.8 percent as the London interbank offer rate slumped. Tokio Marine Holdings Inc., Japan’s biggest property insurer, gained 4.8 percent after a person familiar with the matter said six U.S. insurers will receive government bailout funds.
“Optimism lifts the market, and the gain in equities further lifts optimism,” said Kiyoshi Ishigane, a senior strategist a Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion in Tokyo. “Like a drunkard waking up with a hangover, investors will eventually be hit with the reality that things haven’t improved overnight.”
The MSCI Asia Pacific Index rose 1.8 percent to 96.97 as of 12:38 p.m. in Tokyo. It declined 1 percent this week as the most expensive valuations since 2004 raised concern a two-month stock rally had outpaced earnings prospects.
Japan’s Nikkei 225 Stock Average gained 1.7 percent to 9,249.48. All markets in Asia rose except China.
Tokyo Electron Ltd. climbed 6.1 percent after saying orders for semiconductor equipment will rise this quarter. Rio Tinto Group, the world’s third-largest mining company, surged 8 percent in Sydney after saying it remains committed to a $19.5 billion investment from Aluminum Corp. of China. Singapore Airlines Ltd., the world’s second-biggest carrier by market value, gained 2.1 percent on plans to spin off a unit.
Sony Earnings
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The benchmark rose 1 percent yesterday, snapping a three-day losing streak, as declining funding costs boosted bank shares. CA Inc., the world’s second-largest maker of software for mainframe computers, led gains by technology companies after reporting earnings that beat analyst estimates.
Through yesterday, the MSCI Asia Pacific Index climbed 35 percent from a five-year low on March 9 amid speculation the worst of the financial crisis had passed. Shares on the gauge are valued at 32 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.
Sony jumped 5.8 percent to 2,540. The company forecast yesterday it will post a 110 billion yen ($1.1 billion) operating loss this year, better than the median 135.6 billion yen loss estimate in a Bloomberg survey of nine analysts.
The company also said it will close a further five factories in addition to three that have already been announced as part of the company’s restructuring plan.
Borrowing Costs
Hitoshi Kuriyama, an analyst at Merrill Lynch & Co., lifted his price target on Sony by 200 yen to 2,800 because the company “is making steady progress with structural changes and ramping up new business models,” according to a report.
Tokyo Electron, the world’s second-largest supplier of semiconductor production equipment, rallied 6.1 percent to 4,330 yen after saying orders are likely to rise this quarter.
HSBC jumped 2.8 percent to HK$3.33 on optimism central bank efforts to unlock credit markets are bearing fruit. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded lender by value, added 3.2 percent to 607 yen. Tokio Marine gained 4.8 percent to 2,945 yen.
Libor for three-month dollar-denominated loans fell almost three basis points to 0.85 percent yesterday, according to the British Bankers’ Association.
The rate surged as high as 4.8 percent in October in the aftermath of the collapse of Lehman Brothers Holdings Inc. as banks became reluctant to lend to each other amid collapsing financial markets.
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Sony, the world’s No. 2 maker of consumer electronics, jumped 5.8 percent after the company said it will close factories as part of restructuring efforts. HSBC Holdings Plc, Europe’s largest lender by market value, rose 2.8 percent as the London interbank offer rate slumped. Tokio Marine Holdings Inc., Japan’s biggest property insurer, gained 4.8 percent after a person familiar with the matter said six U.S. insurers will receive government bailout funds.
“Optimism lifts the market, and the gain in equities further lifts optimism,” said Kiyoshi Ishigane, a senior strategist a Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion in Tokyo. “Like a drunkard waking up with a hangover, investors will eventually be hit with the reality that things haven’t improved overnight.”
The MSCI Asia Pacific Index rose 1.8 percent to 96.97 as of 12:38 p.m. in Tokyo. It declined 1 percent this week as the most expensive valuations since 2004 raised concern a two-month stock rally had outpaced earnings prospects.
Japan’s Nikkei 225 Stock Average gained 1.7 percent to 9,249.48. All markets in Asia rose except China.
Tokyo Electron Ltd. climbed 6.1 percent after saying orders for semiconductor equipment will rise this quarter. Rio Tinto Group, the world’s third-largest mining company, surged 8 percent in Sydney after saying it remains committed to a $19.5 billion investment from Aluminum Corp. of China. Singapore Airlines Ltd., the world’s second-biggest carrier by market value, gained 2.1 percent on plans to spin off a unit.
Sony Earnings
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The benchmark rose 1 percent yesterday, snapping a three-day losing streak, as declining funding costs boosted bank shares. CA Inc., the world’s second-largest maker of software for mainframe computers, led gains by technology companies after reporting earnings that beat analyst estimates.
Through yesterday, the MSCI Asia Pacific Index climbed 35 percent from a five-year low on March 9 amid speculation the worst of the financial crisis had passed. Shares on the gauge are valued at 32 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.
Sony jumped 5.8 percent to 2,540. The company forecast yesterday it will post a 110 billion yen ($1.1 billion) operating loss this year, better than the median 135.6 billion yen loss estimate in a Bloomberg survey of nine analysts.
The company also said it will close a further five factories in addition to three that have already been announced as part of the company’s restructuring plan.
Borrowing Costs
Hitoshi Kuriyama, an analyst at Merrill Lynch & Co., lifted his price target on Sony by 200 yen to 2,800 because the company “is making steady progress with structural changes and ramping up new business models,” according to a report.
Tokyo Electron, the world’s second-largest supplier of semiconductor production equipment, rallied 6.1 percent to 4,330 yen after saying orders are likely to rise this quarter.
HSBC jumped 2.8 percent to HK$3.33 on optimism central bank efforts to unlock credit markets are bearing fruit. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded lender by value, added 3.2 percent to 607 yen. Tokio Marine gained 4.8 percent to 2,945 yen.
Libor for three-month dollar-denominated loans fell almost three basis points to 0.85 percent yesterday, according to the British Bankers’ Association.
The rate surged as high as 4.8 percent in October in the aftermath of the collapse of Lehman Brothers Holdings Inc. as banks became reluctant to lend to each other amid collapsing financial markets.
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Singapore’s Temasek Sells Stake in Bank of America
(Bloomberg) -- Temasek Holdings Pte, a Singapore state-owned investment company that bought stakes in Merrill Lynch & Co. and Barclays Plc amid the global financial crisis, sold its stake in Bank of America Corp.
Temasek received shares in Bank of America after the biggest U.S. bank by assets bought Merrill Lynch this year. The investment company had paid about $5.9 billion for a 14 percent stake in Merrill Lynch since December 2007, which was converted into Bank of America stock following the completion of the acquisition.
“We have divested our shares in Bank of America,” Temasek said in an e-mailed response to Bloomberg News queries. The company declined to say how much it sold the stake for or when the sale was conducted.
Temasek had 31 percent wiped from the value of its global portfolio in the eight months through November amid the slump in financial markets. The company had sold assets including power generators and Singapore Food Industries Ltd. over the past year while increasing its investments in companies such as CapitaLand Ltd. and DBS Group Holdings Ltd. through rights offers.
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Temasek received shares in Bank of America after the biggest U.S. bank by assets bought Merrill Lynch this year. The investment company had paid about $5.9 billion for a 14 percent stake in Merrill Lynch since December 2007, which was converted into Bank of America stock following the completion of the acquisition.
“We have divested our shares in Bank of America,” Temasek said in an e-mailed response to Bloomberg News queries. The company declined to say how much it sold the stake for or when the sale was conducted.
Temasek had 31 percent wiped from the value of its global portfolio in the eight months through November amid the slump in financial markets. The company had sold assets including power generators and Singapore Food Industries Ltd. over the past year while increasing its investments in companies such as CapitaLand Ltd. and DBS Group Holdings Ltd. through rights offers.
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Wednesday, May 13, 2009
JPMorgan’s China Chairman Charles Li Said to Quit After 6 Years
(Bloomberg) -- JPMorgan Chase & Co. China Chairman Charles Li is leaving after six years with the New York-based firm, two people with knowledge of the matter said.
Li, 48, will quit the investment banking industry and take up a senior position with a Hong Kong company, the people said, asking not to be identified before an announcement is made. He plans to leave around September, one of the people said.
Local newspaper Ming Pao today reported Li is the preferred candidate to replace Paul Chow as chief executive officer of Hong Kong Exchanges & Clearing Ltd., operator of Asia’s third-largest stock market, citing unidentified people.
Marie Cheung, a Hong Kong-based spokeswoman at JPMorgan, declined to comment. Hong Kong Exchanges spokeswoman Lorraine Chan declined to comment on the Ming Pao report. The bourse is in the “final stage” of choosing a new CEO, she said.
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Li, 48, will quit the investment banking industry and take up a senior position with a Hong Kong company, the people said, asking not to be identified before an announcement is made. He plans to leave around September, one of the people said.
Local newspaper Ming Pao today reported Li is the preferred candidate to replace Paul Chow as chief executive officer of Hong Kong Exchanges & Clearing Ltd., operator of Asia’s third-largest stock market, citing unidentified people.
Marie Cheung, a Hong Kong-based spokeswoman at JPMorgan, declined to comment. Hong Kong Exchanges spokeswoman Lorraine Chan declined to comment on the Ming Pao report. The bourse is in the “final stage” of choosing a new CEO, she said.
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Mitsubishi UFJ Purchase of Citigroup Bank Unit Said to Falter
(Bloomberg) -- Mitsubishi UFJ Financial Group Inc. may back out of an agreement to buy a Citigroup Inc. banking unit after failing to purchase other Japanese assets from the U.S. bank, two people with knowledge of the matter said.
Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s biggest lender, may scrap the commitment it made in December to buy NikkoCiti Trust & Banking Corp. for 25 billion yen ($262 million), said the people, who declined to be identified as they haven’t been authorized to discuss the matter publicly.
Citigroup, the recipient of a $52 billion U.S. government bailout, is auctioning off assets to raise capital and agreed to sell its Japanese retail brokerage and parts of its investment bank to Sumitomo Mitsui Financial Group Inc. for 545 billion yen this month. The New York-based bank is also seeking bidders for its local asset-management unit, four people familiar with matter said last month.
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Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s biggest lender, may scrap the commitment it made in December to buy NikkoCiti Trust & Banking Corp. for 25 billion yen ($262 million), said the people, who declined to be identified as they haven’t been authorized to discuss the matter publicly.
Citigroup, the recipient of a $52 billion U.S. government bailout, is auctioning off assets to raise capital and agreed to sell its Japanese retail brokerage and parts of its investment bank to Sumitomo Mitsui Financial Group Inc. for 545 billion yen this month. The New York-based bank is also seeking bidders for its local asset-management unit, four people familiar with matter said last month.
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Wolfensohn Says ‘No Quick Fix’ for Global Economic Slowdown
(Bloomberg) -- The global economy will likely stay mired in a protracted slowdown, said James Wolfensohn, former World Bank President and chairman of Citigroup Inc.’s international advisory board.
“The debate will continue on whether it’s going to be a V, U or L-shaped recession,” Wolfensohn, who left the World Bank in 2005, said at a forum in Shanghai yesterday evening. “My own judgment is that it’s more likely the latter. I don’t believe we’ll get a quick fix any time soon.”
Wolfensohn’s views echo those of Nobel laureate Paul Krugman, who said this week in Shanghai he considered a V-shaped recession “extremely unlikely.” Retail sales in the U.S. unexpectedly dropped in April for a second month, according to the Commerce Department yesterday, indicating that rising unemployment is prompting consumers to conserve cash.
Nouriel Roubini, the New York University professor who predicted the financial crisis, said last week that analysts expecting the U.S. economy to rebound in the third and fourth quarter were “too optimistic.” He estimated a total of $3.6 trillion of loan and securities losses in the U.S.
Losses “won’t go as far as” Roubini’s estimates, said Wolfensohn, who was giving a talk in a restored building on Shanghai’s historic Bund.
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“The debate will continue on whether it’s going to be a V, U or L-shaped recession,” Wolfensohn, who left the World Bank in 2005, said at a forum in Shanghai yesterday evening. “My own judgment is that it’s more likely the latter. I don’t believe we’ll get a quick fix any time soon.”
Wolfensohn’s views echo those of Nobel laureate Paul Krugman, who said this week in Shanghai he considered a V-shaped recession “extremely unlikely.” Retail sales in the U.S. unexpectedly dropped in April for a second month, according to the Commerce Department yesterday, indicating that rising unemployment is prompting consumers to conserve cash.
Nouriel Roubini, the New York University professor who predicted the financial crisis, said last week that analysts expecting the U.S. economy to rebound in the third and fourth quarter were “too optimistic.” He estimated a total of $3.6 trillion of loan and securities losses in the U.S.
Losses “won’t go as far as” Roubini’s estimates, said Wolfensohn, who was giving a talk in a restored building on Shanghai’s historic Bund.
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Tuesday, May 12, 2009
Citigroup’s Primerica Is Said to Seek Bids for Marketing Arm
(Bloomberg) -- Executives at Citigroup Inc.’s Primerica Financial Services unit have approached private-equity firms including J.C. Flowers & Co., Blackstone Group LP, and TPG Inc. to gauge their interest in buying the division’s 100,000- person sales arm, said four people familiar with the matter.
The executives started the talks after Citigroup failed to find a buyer for the entire life insurance company in the past year, said the people, declining to be identified because the talks aren’t public. Citigroup, the recipient of a $52 billion government bailout, hasn’t endorsed the plan, the people said.
Citigroup canceled Primerica’s annual sales convention and a trip to the Bahamas for top agents after the government rescue last year. Primerica is part of Citi Holdings, created by Citigroup Chief Executive Officer Vikram Pandit to house “non- core” units that he wants to eventually sell or wind down as he undoes the legacy of former CEO Sanford “Sandy” Weill.
Citigroup spokesman Stephen Cohen declined to comment. Blackstone and TPG declined to comment through spokespeople, and J. Christopher Flowers, founder of the private equity firm that bears his name, didn’t return a call seeking comment. Primerica’s co-CEOs, John Addison and Rick Williams, declined to comment through spokesman Mark Supic.
Addison told employees in January that he planned to remove any reference to the parent company on Duluth, Georgia-based Primerica’s business cards, brochures, and marketing materials.
New Insurer
In one plan under discussion, the marketing arm would split from Citigroup and start selling policies backed by a new insurer, while Citigroup would retain assets and liabilities from Primerica policies that have already been sold, two of the people said. A transaction wouldn’t yield Citigroup much cash because there are few tangible assets associated with the marketing arm, they said.
Founded in 1977 by Arthur L. Williams, Primerica sells life insurance and investment products such as mutual funds through a mostly part-time sales force of independent agents. Weill’s Commercial Credit Corp. took control of the firm in 1988, using it as a platform to assemble the financial-services titan eventually known as Citigroup.
The division had $2.2 billion of sales last year and net income of $355 million, according to a fact sheet provided by the company.
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The executives started the talks after Citigroup failed to find a buyer for the entire life insurance company in the past year, said the people, declining to be identified because the talks aren’t public. Citigroup, the recipient of a $52 billion government bailout, hasn’t endorsed the plan, the people said.
Citigroup canceled Primerica’s annual sales convention and a trip to the Bahamas for top agents after the government rescue last year. Primerica is part of Citi Holdings, created by Citigroup Chief Executive Officer Vikram Pandit to house “non- core” units that he wants to eventually sell or wind down as he undoes the legacy of former CEO Sanford “Sandy” Weill.
Citigroup spokesman Stephen Cohen declined to comment. Blackstone and TPG declined to comment through spokespeople, and J. Christopher Flowers, founder of the private equity firm that bears his name, didn’t return a call seeking comment. Primerica’s co-CEOs, John Addison and Rick Williams, declined to comment through spokesman Mark Supic.
Addison told employees in January that he planned to remove any reference to the parent company on Duluth, Georgia-based Primerica’s business cards, brochures, and marketing materials.
New Insurer
In one plan under discussion, the marketing arm would split from Citigroup and start selling policies backed by a new insurer, while Citigroup would retain assets and liabilities from Primerica policies that have already been sold, two of the people said. A transaction wouldn’t yield Citigroup much cash because there are few tangible assets associated with the marketing arm, they said.
Founded in 1977 by Arthur L. Williams, Primerica sells life insurance and investment products such as mutual funds through a mostly part-time sales force of independent agents. Weill’s Commercial Credit Corp. took control of the firm in 1988, using it as a platform to assemble the financial-services titan eventually known as Citigroup.
The division had $2.2 billion of sales last year and net income of $355 million, according to a fact sheet provided by the company.
Read more here
Fed Views Jump in Treasury Yields as Sign of Better Outlook
(Bloomberg) -- The Federal Reserve considers the recent jump in Treasury yields more as a reflection of a better economic outlook than a signal it needs to step up purchases of U.S. government debt, according to central bank officials who declined to be identified.
It’s too early to judge the effectiveness of the Fed’s $300 billion plan to buy Treasuries even after 10-year yields climbed 0.65 percentage point since the initiative began in March, the officials said. They added that the goal is to stimulate private lending, rather than to target government- bond rates.
The Fed officials’ stance contradicts the view of firms including BlackRock Inc. that have predicted the rise in yields will prompt the central bank to announce an increase in the size of the program as soon as next month.
“It would be very different if the economy still appeared to be in freefall and yields were backing up, but it’s not,” said John Ryding, founder of RDQ Economics LLC in New York and a former Fed researcher. Increasing Treasury purchases would “fight against what is in my opinion a recovery signal, or a signal that the recession is drawing to a close.”
Chairman Ben S. Bernanke said May 11 that the danger of deflation, or prolonged declines in consumer prices, is “receding” and earlier this month cited evidence the economy’s contraction is easing. The Treasuries market, along with stocks and some commodities, have reflected those shifts.
Inflation Expectations
Ten-year note yields closed at 3.18 percent late yesterday, up from as low as 2.46 percent after the March 18 announcement of the plan to buy long-term government debt. The gap in yields between the notes and 10-year Treasury Inflation Protected Securities, a gauge of the inflation rate expected by investors, hit a seven-month high of 1.64 percentage points last week.
The Standard & Poor’s 500 Stock Index closed at 908.35 yesterday in New York, up 21 percent from two months before. Crude-oil futures reached $60.08 yesterday, the highest level since November.
Fed policy makers committed to buy as much as $300 billion of Treasuries over a six-month period in their March 18 Open Market Committee statement. The aim was “to help improve conditions in private credit markets,” the FOMC said.
“The statement is pretty clear,” Richmond Fed President Jeffrey Lacker, who was the first FOMC member to vote for buying Treasuries this year, told reporters May 8. “It doesn’t say anything about a U.S. Treasury yield” as a target, he said after a Washington speech. “I would urge people to take it at face value.”
Fed’s Campaign
The Fed has bought $101.7 billion under the initiative so far, part of its campaign to cut borrowing costs by purchasing assets with the benchmark interest rate near zero. Policy makers in March also decided to boost purchases of mortgage securities this year to $1.25 trillion from $500 billion and buy $200 billion, double the previous amount, of federal agency debt.
Stuart Spodek, BlackRock’s co-head of U.S. bonds in New York, said in an interview last week the Fed “needs to consider increasing its purchases of Treasuries” to “stabilize” long-term yields. He told Bloomberg Television May 11 officials may announce an increase as soon as the June 23-24 meeting. Spokeswoman Melissa Garville declined to comment further.
Another fund manager, James Platz of Mountain View, California-based American Century Investments, expects the Fed to announce further purchases “at some point.”
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It’s too early to judge the effectiveness of the Fed’s $300 billion plan to buy Treasuries even after 10-year yields climbed 0.65 percentage point since the initiative began in March, the officials said. They added that the goal is to stimulate private lending, rather than to target government- bond rates.
The Fed officials’ stance contradicts the view of firms including BlackRock Inc. that have predicted the rise in yields will prompt the central bank to announce an increase in the size of the program as soon as next month.
“It would be very different if the economy still appeared to be in freefall and yields were backing up, but it’s not,” said John Ryding, founder of RDQ Economics LLC in New York and a former Fed researcher. Increasing Treasury purchases would “fight against what is in my opinion a recovery signal, or a signal that the recession is drawing to a close.”
Chairman Ben S. Bernanke said May 11 that the danger of deflation, or prolonged declines in consumer prices, is “receding” and earlier this month cited evidence the economy’s contraction is easing. The Treasuries market, along with stocks and some commodities, have reflected those shifts.
Inflation Expectations
Ten-year note yields closed at 3.18 percent late yesterday, up from as low as 2.46 percent after the March 18 announcement of the plan to buy long-term government debt. The gap in yields between the notes and 10-year Treasury Inflation Protected Securities, a gauge of the inflation rate expected by investors, hit a seven-month high of 1.64 percentage points last week.
The Standard & Poor’s 500 Stock Index closed at 908.35 yesterday in New York, up 21 percent from two months before. Crude-oil futures reached $60.08 yesterday, the highest level since November.
Fed policy makers committed to buy as much as $300 billion of Treasuries over a six-month period in their March 18 Open Market Committee statement. The aim was “to help improve conditions in private credit markets,” the FOMC said.
“The statement is pretty clear,” Richmond Fed President Jeffrey Lacker, who was the first FOMC member to vote for buying Treasuries this year, told reporters May 8. “It doesn’t say anything about a U.S. Treasury yield” as a target, he said after a Washington speech. “I would urge people to take it at face value.”
Fed’s Campaign
The Fed has bought $101.7 billion under the initiative so far, part of its campaign to cut borrowing costs by purchasing assets with the benchmark interest rate near zero. Policy makers in March also decided to boost purchases of mortgage securities this year to $1.25 trillion from $500 billion and buy $200 billion, double the previous amount, of federal agency debt.
Stuart Spodek, BlackRock’s co-head of U.S. bonds in New York, said in an interview last week the Fed “needs to consider increasing its purchases of Treasuries” to “stabilize” long-term yields. He told Bloomberg Television May 11 officials may announce an increase as soon as the June 23-24 meeting. Spokeswoman Melissa Garville declined to comment further.
Another fund manager, James Platz of Mountain View, California-based American Century Investments, expects the Fed to announce further purchases “at some point.”
Read more here
China’s Factory Output Grows Less-Than-Estimated 7.3%
(Bloomberg) -- China’s industrial production grew less than economists estimated in April as electricity output fell and exports tumbled. Retail sales climbed.
Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. Retail sales grew 14.8 percent from a year earlier.
The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries. Urban fixed-asset investment grew a more-than-expected 30.5 percent in the first four months of this year, while an export slump deepened in April, reports showed yesterday.
“The recovery is still quite fragile -- exports are still very weak,” said Isaac Meng,’’ a senior economist at BNP Paribas SA in Beijing.
Retail sales grew more than the economists’ median estimate of 14.5 percent, after climbing 14.7 percent in March.
The Shanghai Composite Index rose 0.7 percent as of 10:53 a.m. local time. The yuan traded at 6.8224 against the dollar, from 6.8226 before the data was released.
Read more here
Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. Retail sales grew 14.8 percent from a year earlier.
The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries. Urban fixed-asset investment grew a more-than-expected 30.5 percent in the first four months of this year, while an export slump deepened in April, reports showed yesterday.
“The recovery is still quite fragile -- exports are still very weak,” said Isaac Meng,’’ a senior economist at BNP Paribas SA in Beijing.
Retail sales grew more than the economists’ median estimate of 14.5 percent, after climbing 14.7 percent in March.
The Shanghai Composite Index rose 0.7 percent as of 10:53 a.m. local time. The yuan traded at 6.8224 against the dollar, from 6.8226 before the data was released.
Read more here
Monday, May 11, 2009
Kohn had Board backing for NY Fed waiver: official
(Reuters) - A waiver granted by Federal Reserve Vice Chairman Donald Kohn that allowed the chairman of the New York Fed's board of governors to stay in his job had the full backing of the Fed's Board of governors, including Chairman Ben Bernanke, a Fed official said on Monday.
The controversial waiver allowed Stephen Friedman to stay in his job as chairman of the board of governors of the New York Federal Reserve despite owning shares in Goldman Sachs (GS.N) ,which the Fed began regulating in September.
Friedman, a retired chairman of Goldman Sachs, resigned last week after it was reported in The Wall Street Journal that he had bought more Goldman shares.
The Wall Street Journal called in an editorial on Monday for Kohn's resignation, and said he had shown a tin political ear by allowing Friedman to stay at the New York Fed.
Goldman converted into a bank holding company last September in order to secure access to Federal Reserve lending facilities.
The U.S. central bank is comprised of a seven-member Board of Governors in Washington, and 12 regional Fed banks.
The Board of Governors selects some of the directors on the boards of each regional Fed, including Friedman, and these directors are banned from owning shares in Fed-regulated banks.
The Fed official said that it was unfair to single out Kohn, who had fully consulted with his board colleagues, including Bernanke, before the waiver was granted on January 21. It fell to Kohn because he heads up the committee on Federal Reserve bank affairs.
In addition, the Board of Governors in January voted to confirm Friedman as New York Fed chairman, the official said.
Read more here
The controversial waiver allowed Stephen Friedman to stay in his job as chairman of the board of governors of the New York Federal Reserve despite owning shares in Goldman Sachs (GS.N) ,which the Fed began regulating in September.
Friedman, a retired chairman of Goldman Sachs, resigned last week after it was reported in The Wall Street Journal that he had bought more Goldman shares.
The Wall Street Journal called in an editorial on Monday for Kohn's resignation, and said he had shown a tin political ear by allowing Friedman to stay at the New York Fed.
Goldman converted into a bank holding company last September in order to secure access to Federal Reserve lending facilities.
The U.S. central bank is comprised of a seven-member Board of Governors in Washington, and 12 regional Fed banks.
The Board of Governors selects some of the directors on the boards of each regional Fed, including Friedman, and these directors are banned from owning shares in Fed-regulated banks.
The Fed official said that it was unfair to single out Kohn, who had fully consulted with his board colleagues, including Bernanke, before the waiver was granted on January 21. It fell to Kohn because he heads up the committee on Federal Reserve bank affairs.
In addition, the Board of Governors in January voted to confirm Friedman as New York Fed chairman, the official said.
Read more here
Ackman says Target proxy not about him
(Reuters) - Hedge fund manager William Ackman introduced shareholders on Monday to his five nominees for the Target Corp (TGT.N) board, promising their expertise could make the retailer a better company.
"There is a lot to like, but that doesn't mean it can't be optimized," Ackman said at a town hall-style meeting in mid-town Manhattan.
While Target is well known for selling designer items, it is certainly not Gucci and the retailer, which sells the fashionable merchandise at discount prices, should be able to perform well even in difficult economic conditions, Ackman said.
For nearly two hours, the prominent investor, whose New York-based Pershing Square Capital Management owns a 7.8 percent stake in Target, downplayed fears he is only seeking a quick profit by launching this proxy contest and, instead, he played up the long resumes of his slate members.
"It's not about Bill Ackman. It's about how our directors compare with the existing nominees," Ackman said.
Target is Pershing Square's biggest single investment and Ackman lost a lot of money last year thanks to the retailer's poor performance.
Target's business faltered as shoppers, pressured by the recession, pulled back on buying trendy clothes and handbags and stuck to buying just the basics, such as food or medicine -- a trend that favored rival Wal-Mart Stores Inc (WMT.N). It is now trying to add more food to its merchandise assortment to lure shoppers into its stores more frequently.
But this year, Ackman is doing better, especially after the stock price jumped 45 percent since he announced his plan to replace four Target directors with five newcomers.
"We are the underdogs here," Ackman told about 150 people in the room and another 400 who registered to listen by webcast, according to Target's proxy advisers.
TOO CLOSE TO CALL
The outcome of this increasingly bitter proxy battle is too close to call since large shareholders such as State Street Global Advisors have not yet decided how to cast their votes before the May 28 annual meeting.
Ackman shared the stage with former Starbucks CEO Jim Donald; Richard Vague, the former CEO of Visa credit card issuer First USA; Richard Ashner, chairman and CEO of Winthrop Realty Trust; and Ronald Gilson, a law professor and corporate governance expert.
They sat in cherry red chairs -- mimicking Target's red bull's eye logo -- and answered questions about what they would do to help management perform better.
But Target has remained steadfast in defending its board members who are up for reelection.
"We believe that the four incumbent directors up for election are better qualified to serve the interests of shareholders than Pershing Square's nominees," a Target spokesman said.
Read more here
"There is a lot to like, but that doesn't mean it can't be optimized," Ackman said at a town hall-style meeting in mid-town Manhattan.
While Target is well known for selling designer items, it is certainly not Gucci and the retailer, which sells the fashionable merchandise at discount prices, should be able to perform well even in difficult economic conditions, Ackman said.
For nearly two hours, the prominent investor, whose New York-based Pershing Square Capital Management owns a 7.8 percent stake in Target, downplayed fears he is only seeking a quick profit by launching this proxy contest and, instead, he played up the long resumes of his slate members.
"It's not about Bill Ackman. It's about how our directors compare with the existing nominees," Ackman said.
Target is Pershing Square's biggest single investment and Ackman lost a lot of money last year thanks to the retailer's poor performance.
Target's business faltered as shoppers, pressured by the recession, pulled back on buying trendy clothes and handbags and stuck to buying just the basics, such as food or medicine -- a trend that favored rival Wal-Mart Stores Inc (WMT.N). It is now trying to add more food to its merchandise assortment to lure shoppers into its stores more frequently.
But this year, Ackman is doing better, especially after the stock price jumped 45 percent since he announced his plan to replace four Target directors with five newcomers.
"We are the underdogs here," Ackman told about 150 people in the room and another 400 who registered to listen by webcast, according to Target's proxy advisers.
TOO CLOSE TO CALL
The outcome of this increasingly bitter proxy battle is too close to call since large shareholders such as State Street Global Advisors have not yet decided how to cast their votes before the May 28 annual meeting.
Ackman shared the stage with former Starbucks CEO Jim Donald; Richard Vague, the former CEO of Visa credit card issuer First USA; Richard Ashner, chairman and CEO of Winthrop Realty Trust; and Ronald Gilson, a law professor and corporate governance expert.
They sat in cherry red chairs -- mimicking Target's red bull's eye logo -- and answered questions about what they would do to help management perform better.
But Target has remained steadfast in defending its board members who are up for reelection.
"We believe that the four incumbent directors up for election are better qualified to serve the interests of shareholders than Pershing Square's nominees," a Target spokesman said.
Read more here
GM says open to moving HQ from Detroit
(Reuters) - General Motors Corp is open to considering moving its headquarters from Detroit, selling U.S. plants and renegotiating its restructuring plan with its major union as it heads toward probable bankruptcy, the automaker's chief executive said on Monday.
CEO Fritz Henderson said it was more likely that GM was headed for bankruptcy by June 1 -- the U.S. government-imposed deadline for the automaker to restructure or face bankruptcy.
"It's more probable that we would need to accomplish our goals in a bankruptcy," Henderson said on a conference call with reporters. "There's still a chance for it to be done outside a court proceeding."
A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler LLC and the sharp downturn in auto manufacturing.
GM purchased its glass-towered headquarters building, known as Detroit's Renaissance Center, last year for $625 million. The 100-year-old automaker has been based there since 1996.
"As we look at the structure, look at the business, we're looking at everything, particularly as we slim down," Henderson said. "At this point, I don't have anything to report. We don't have any such plans, but if we did it would be motivated by business rationale, which would be cost-efficiency and speed.
GM needs to reach deals that would slash debt owed to bondholders and the United Auto Workers union and to win concessions from the union that would cut operating costs for its remaining U.S. plants by the end of this month under terms set by the Obama administration's autos task force.
Read more here
CEO Fritz Henderson said it was more likely that GM was headed for bankruptcy by June 1 -- the U.S. government-imposed deadline for the automaker to restructure or face bankruptcy.
"It's more probable that we would need to accomplish our goals in a bankruptcy," Henderson said on a conference call with reporters. "There's still a chance for it to be done outside a court proceeding."
A move by GM to leave Detroit would represent another blow for the economy of a region already reeling from the bankruptcy of Chrysler LLC and the sharp downturn in auto manufacturing.
GM purchased its glass-towered headquarters building, known as Detroit's Renaissance Center, last year for $625 million. The 100-year-old automaker has been based there since 1996.
"As we look at the structure, look at the business, we're looking at everything, particularly as we slim down," Henderson said. "At this point, I don't have anything to report. We don't have any such plans, but if we did it would be motivated by business rationale, which would be cost-efficiency and speed.
GM needs to reach deals that would slash debt owed to bondholders and the United Auto Workers union and to win concessions from the union that would cut operating costs for its remaining U.S. plants by the end of this month under terms set by the Obama administration's autos task force.
Read more here
Geffen offered to buy NY Times stake: source
(Reuters) - Media mogul David Geffen tried to buy a stake in the New York Times Co from hedge fund Harbinger Capital Partners, but was rejected, a source with knowledge of the matter said on Monday.
Geffen offered to buy the stake at market price, but Harbinger fund manager Philip Falcone wanted him to pay a premium, according to the source.
The two sides are not currently in talks, said the source, who spoke on condition of anonymity.
Fortune magazine first reported the news on its website in an article that said Times board member Scott Galloway, who was nominated by Harbinger, approached Google Inc co-founder Larry Page to try to get the Internet company to try to buy the Times.
Galloway and New York Times spokeswoman Catherine Mathis declined to comment.
Geffen's overture comes at a pivotal moment in the history of the New York Times Co, its namesake newspaper and the family that has controlled the company for 113 years.
One of the most venerated names in world journalism, the Times has fallen on hard financial times in recent years because of falling advertising revenue at its newspapers and looming debt payments that have forced it to borrow money at high interest rates.
Speculation is bubbling among media watchers that the Ochs-Sulzberger family might sell the paper rather than watch their empire shrivel. The move by the billionaire ex-movie producer and pop music label owner Geffen only fuels speculation that the family could bend to an attractive offer.
It also prompts speculation over whether Harbinger might give up its attempt to force the Times to change its business to survive in the 21st century. Interest in the stake has grown as the investment fund reels from losses in its funds.
Harbinger owned 19.94 percent of the Times Co as of March 6. At Monday's closing price of $6.81, the stake would be valued at about $194 million, far less than the $500 million that Harbinger paid for it.
Times shares have fallen along with other newspaper stocks, hurt by the slump in advertising spending and by circulation declines as readers turn to the Internet for free news and information.
Harbinger funded the fight against the Times, but its leader was Web entrepreneur Galloway, who convinced Falcone to front the money. To avoid a proxy battle, the Times expanded its board to allow Galloway and an ally on board.
The Times has made efforts to streamline its business, but Galloway's plan has proved a wash for Harbinger so far.
Read more here
Geffen offered to buy the stake at market price, but Harbinger fund manager Philip Falcone wanted him to pay a premium, according to the source.
The two sides are not currently in talks, said the source, who spoke on condition of anonymity.
Fortune magazine first reported the news on its website in an article that said Times board member Scott Galloway, who was nominated by Harbinger, approached Google Inc co-founder Larry Page to try to get the Internet company to try to buy the Times.
Galloway and New York Times spokeswoman Catherine Mathis declined to comment.
Geffen's overture comes at a pivotal moment in the history of the New York Times Co, its namesake newspaper and the family that has controlled the company for 113 years.
One of the most venerated names in world journalism, the Times has fallen on hard financial times in recent years because of falling advertising revenue at its newspapers and looming debt payments that have forced it to borrow money at high interest rates.
Speculation is bubbling among media watchers that the Ochs-Sulzberger family might sell the paper rather than watch their empire shrivel. The move by the billionaire ex-movie producer and pop music label owner Geffen only fuels speculation that the family could bend to an attractive offer.
It also prompts speculation over whether Harbinger might give up its attempt to force the Times to change its business to survive in the 21st century. Interest in the stake has grown as the investment fund reels from losses in its funds.
Harbinger owned 19.94 percent of the Times Co as of March 6. At Monday's closing price of $6.81, the stake would be valued at about $194 million, far less than the $500 million that Harbinger paid for it.
Times shares have fallen along with other newspaper stocks, hurt by the slump in advertising spending and by circulation declines as readers turn to the Internet for free news and information.
Harbinger funded the fight against the Times, but its leader was Web entrepreneur Galloway, who convinced Falcone to front the money. To avoid a proxy battle, the Times expanded its board to allow Galloway and an ally on board.
The Times has made efforts to streamline its business, but Galloway's plan has proved a wash for Harbinger so far.
Read more here
Economists Downgrade U.S. Recovery Outlook, Survey Indicates
(Bloomberg) -- Economists downgraded their projections for a recovery from the deepest U.S. recession in half a century, now seeing the jobless rate exceeding 8 percent through 2011, a Bloomberg News survey showed.
Unemployment will average 8.5 percent in 2011 after a 9.6 percent rate next year, higher than previously expected, according to the median forecast in the survey taken from May 4 to May 11. The economy may expand 2.8 percent in 2011, less than estimated last month, after a 1.9 percent rise in 2010.
“The worse the labor market is and the longer that lasts, the more difficult it’ll be for consumers to recover,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “The economy isn’t going to come roaring out of the box here.”
A weaker recovery will keep pressure on the Obama administration, lawmakers and Federal Reserve officials to maintain the emergency lending and stimulus programs implemented in the past year. Shapiro said the danger is that policy makers may “pull out too soon.”
The economy will contract at a 1.9 percent pace this quarter, returning to a growth rate of 0.5 percent in the July to September period and 1.8 percent in the final three months, according to the median forecast of 61 economists surveyed.
Consumer spending, after stagnating this quarter, will not exceed the first three months’ 2.2 percent gain in the second half of the year, the survey showed. Such spending accounts for 70 percent of the economy.
25-Year High
The unemployment rate jumped to 8.9 percent in April, the highest level in 25 years, and the economy has lost 5.7 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression, according to Labor Department figures.
Some companies have yet to see any signs of recovery. Airgas Inc., the biggest U.S. distributor of industrial gases, last week forecast per-share earnings may fall this year and said April sales failed to pick up as expected.
“We are expecting no improvement in the economy during the calendar year,” Chief Executive Officer Peter McCausland said on a May 6 conference call with analysts. “We’ve never seen a downturn like this. When we see a tick up, then we’ll say things have stabilized.”
More Capital
The credit crunch, while easing, is clouding prospects for a recovery. Ten of the 19 largest U.S. banks will need another $75 billion in capital to withstand deterioration in the economy almost as dire as economists now anticipate, according to results of government tests issued last week. Examiners used an “adverse scenario” of a 3.3 percent decline in gross domestic product this year, and an average unemployment rate of 10.3 percent in 2010.
“The financial crisis is still making people wonder how far and how fast this economy can come back,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Credit is the life blood of the economy and bank balance sheets are still very constrained. That will put a damper on the strength of this recovery.”
A benchmark interest rate that’s already near zero and a yawning government budget gap make it unlikely the government will step in with additional spending, Rupkey said. “We may need more stimulus, but we can’t afford more at this stage,” he said.
Read more here
Unemployment will average 8.5 percent in 2011 after a 9.6 percent rate next year, higher than previously expected, according to the median forecast in the survey taken from May 4 to May 11. The economy may expand 2.8 percent in 2011, less than estimated last month, after a 1.9 percent rise in 2010.
“The worse the labor market is and the longer that lasts, the more difficult it’ll be for consumers to recover,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “The economy isn’t going to come roaring out of the box here.”
A weaker recovery will keep pressure on the Obama administration, lawmakers and Federal Reserve officials to maintain the emergency lending and stimulus programs implemented in the past year. Shapiro said the danger is that policy makers may “pull out too soon.”
The economy will contract at a 1.9 percent pace this quarter, returning to a growth rate of 0.5 percent in the July to September period and 1.8 percent in the final three months, according to the median forecast of 61 economists surveyed.
Consumer spending, after stagnating this quarter, will not exceed the first three months’ 2.2 percent gain in the second half of the year, the survey showed. Such spending accounts for 70 percent of the economy.
25-Year High
The unemployment rate jumped to 8.9 percent in April, the highest level in 25 years, and the economy has lost 5.7 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression, according to Labor Department figures.
Some companies have yet to see any signs of recovery. Airgas Inc., the biggest U.S. distributor of industrial gases, last week forecast per-share earnings may fall this year and said April sales failed to pick up as expected.
“We are expecting no improvement in the economy during the calendar year,” Chief Executive Officer Peter McCausland said on a May 6 conference call with analysts. “We’ve never seen a downturn like this. When we see a tick up, then we’ll say things have stabilized.”
More Capital
The credit crunch, while easing, is clouding prospects for a recovery. Ten of the 19 largest U.S. banks will need another $75 billion in capital to withstand deterioration in the economy almost as dire as economists now anticipate, according to results of government tests issued last week. Examiners used an “adverse scenario” of a 3.3 percent decline in gross domestic product this year, and an average unemployment rate of 10.3 percent in 2010.
“The financial crisis is still making people wonder how far and how fast this economy can come back,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Credit is the life blood of the economy and bank balance sheets are still very constrained. That will put a damper on the strength of this recovery.”
A benchmark interest rate that’s already near zero and a yawning government budget gap make it unlikely the government will step in with additional spending, Rupkey said. “We may need more stimulus, but we can’t afford more at this stage,” he said.
Read more here
China’s Export Decline Worsens, Hampering Recovery
(Bloomberg) -- China’s export slump worsened in April, making it harder for the government to revive the world’s third-biggest economy.
Overseas sales declined 22.6 percent to $91.94 billion from a year earlier, the official Xinhua News Agency said. Imports fell 23 percent.
The collapse of world trade has cost millions of jobs in China and dragged growth to its weakest pace since at least 1999. Surging lending and a 4 trillion yuan ($586 billion) stimulus package are yet to establish solid foundations for an economic recovery, the central bank said last week.
“The export outlook remains highly uncertain and downbeat,” said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong. China will still be the first major economy to “crawl out of recession” as lending and stimulus spending fuel growth, he added.
The yuan was little changed after the report, trading at 6.8252 per dollar as of 10:19 a.m. in Shanghai, compared with 6.8230 yesterday.
April’s export decline compared with March’s 17.1 percent slump. The median forecast of 19 economists surveyed by Bloomberg News was for a 15.3 percent drop.
Seasonally-adjusted, exports rose 6.9 percent from the previous month and imports climbed 15.1 percent, Xinhua reported.
Read more here
Overseas sales declined 22.6 percent to $91.94 billion from a year earlier, the official Xinhua News Agency said. Imports fell 23 percent.
The collapse of world trade has cost millions of jobs in China and dragged growth to its weakest pace since at least 1999. Surging lending and a 4 trillion yuan ($586 billion) stimulus package are yet to establish solid foundations for an economic recovery, the central bank said last week.
“The export outlook remains highly uncertain and downbeat,” said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong. China will still be the first major economy to “crawl out of recession” as lending and stimulus spending fuel growth, he added.
The yuan was little changed after the report, trading at 6.8252 per dollar as of 10:19 a.m. in Shanghai, compared with 6.8230 yesterday.
April’s export decline compared with March’s 17.1 percent slump. The median forecast of 19 economists surveyed by Bloomberg News was for a 15.3 percent drop.
Seasonally-adjusted, exports rose 6.9 percent from the previous month and imports climbed 15.1 percent, Xinhua reported.
Read more here
Sunday, May 10, 2009
Oil Falls From Six-Month High as Global Supplies to Increase
(Bloomberg) -- Crude oil fell from a six-month high on speculation last week’s 10 percent advance won’t be sustained as global output increases.
Exports from Iraq’s Kurdistan region will begin June 1 after the state oil ministry agreed to “expedite” shipments, the provincial government said on its Web site yesterday. Venezuela, OPEC’s fifth-largest producer, seized the assets of 60 oil-field service companies on May 8 to restore operations shut over contract disputes.
“At some point you do have to be asking the question as to just how far this can go,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “The supply side really isn’t the focus of the market at the moment.”
Crude oil for June delivery fell as much as 68 cents, or 1.2 percent, to $57.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $57.99 at 11:58 a.m. in Singapore.
The contract rose 3.4 percent to $58.63 a barrel on May 8, the highest settlement since Nov. 11, as slowing job losses in the U.S. increased investor confidence and a drop in the dollar boosted the appeal of commodity investments.
Brent crude oil for June settlement declined as much as 54 cents, or 0.9 percent, to $57.60 a barrel on London’s ICE Futures Europe exchange.
U.S. Economy
Last week’s jobs report in the U.S., the world’s largest oil consumer, added to investor confidence that the worst of the recession there may be over, boosting demand expectations, Hassall said.
Ongoing weakness in the dollar will support commodities and oil may resume its rally if U.S. summer fuel demand is sufficient to start drawing down stockpiles there, he said.
Today, the euro has surged to a six-week high against the dollar as the gains in global equities has increased investors’ risk appetite.
Hedge-fund managers and other large speculators changed their bets on the direction of oil prices for a second time last week, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 11,285 contracts on the New York Mercantile Exchange on May 5, the commission said May 8. A week earlier, traders had bet on rising prices.
New York oil futures plunged to a four-year low of $32.40 on Dec. 19 as global recession slashed demand and producers cut production to slow rising stockpiles. Prices have gained 39 percent in the past two months as measures to restore global credit markets lifted global equity markets.
Read more here
Exports from Iraq’s Kurdistan region will begin June 1 after the state oil ministry agreed to “expedite” shipments, the provincial government said on its Web site yesterday. Venezuela, OPEC’s fifth-largest producer, seized the assets of 60 oil-field service companies on May 8 to restore operations shut over contract disputes.
“At some point you do have to be asking the question as to just how far this can go,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “The supply side really isn’t the focus of the market at the moment.”
Crude oil for June delivery fell as much as 68 cents, or 1.2 percent, to $57.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $57.99 at 11:58 a.m. in Singapore.
The contract rose 3.4 percent to $58.63 a barrel on May 8, the highest settlement since Nov. 11, as slowing job losses in the U.S. increased investor confidence and a drop in the dollar boosted the appeal of commodity investments.
Brent crude oil for June settlement declined as much as 54 cents, or 0.9 percent, to $57.60 a barrel on London’s ICE Futures Europe exchange.
U.S. Economy
Last week’s jobs report in the U.S., the world’s largest oil consumer, added to investor confidence that the worst of the recession there may be over, boosting demand expectations, Hassall said.
Ongoing weakness in the dollar will support commodities and oil may resume its rally if U.S. summer fuel demand is sufficient to start drawing down stockpiles there, he said.
Today, the euro has surged to a six-week high against the dollar as the gains in global equities has increased investors’ risk appetite.
Hedge-fund managers and other large speculators changed their bets on the direction of oil prices for a second time last week, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 11,285 contracts on the New York Mercantile Exchange on May 5, the commission said May 8. A week earlier, traders had bet on rising prices.
New York oil futures plunged to a four-year low of $32.40 on Dec. 19 as global recession slashed demand and producers cut production to slow rising stockpiles. Prices have gained 39 percent in the past two months as measures to restore global credit markets lifted global equity markets.
Read more here
Santos Seeks to Raise A$3 Billion for LNG Project
(Bloomberg) -- Santos Ltd. is seeking to raise A$3 billion ($2.3 billion) from a share sale to fund its portion of Exxon Mobil Corp.’s liquefied natural gas venture in Papua New Guinea, the largest investment in the Pacific nation.
Santos is offering investors two shares for every five they own at A$12.50 apiece, 27 percent below the last traded price of A$17.09, the Adelaide-based company said in a statement to the Australian stock exchange today. It would be the country’s largest share sale since National Australia Bank Ltd. raised A$3 billion in November.
Australia’s third-biggest oil and gas producer will use A$1.05 billion of the sale proceeds to fund spending at the $12.5 billion Exxon-led project. Santos expects a “step- change” in production in 2014 once the Papua New Guinea venture and a proposed gas-export project in Queensland with Petroliam Nasional Bhd. come online, it said May 6.
“Exxon putting their horsepower behind it makes this a very good project to be involved in,” said Peter Arden, a Melbourne-based analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co. “It will be a stepping stone for Santos; it will help get them a lot of credibility.”
Of the stock on offer, A$1.65 billion for sale to institutional investors is fully underwritten. The A$1.35 billion retail portion of the sale isn’t underwritten, Santos said. Caliburn is advising Santos, while JPMorgan, Citigroup and Deutsche Bank are managing the sale, the Australian Financial Review reported earlier.
Queensland Project
Additional capital raised would fund other growth projects, which include a proposed LNG venture at Gladstone in Queensland with Petronas, as Kuala Lumpur-based Petroliam Nasional is known. Their A$7.7 billion venture is due to deliver its first LNG cargoes in 2014, Santos said today. It is one of five rival projects planning to convert gas extracted from coal seams into LNG for export to Asia.
“I think Gladstone is really going to stretch Santos funding-wise,” Arden of Ord Minnett said. “It is also a bit of a crowded space there, and it might be that not everyone gets their project up.”
Santos has gained 25 percent in the past six months in Sydney, compared with the 0.5 percent decline in the local benchmark index.
LNG is natural gas that has been chilled to liquid form for transportation by ship to destinations not connected by pipeline.
Read more here
Santos is offering investors two shares for every five they own at A$12.50 apiece, 27 percent below the last traded price of A$17.09, the Adelaide-based company said in a statement to the Australian stock exchange today. It would be the country’s largest share sale since National Australia Bank Ltd. raised A$3 billion in November.
Australia’s third-biggest oil and gas producer will use A$1.05 billion of the sale proceeds to fund spending at the $12.5 billion Exxon-led project. Santos expects a “step- change” in production in 2014 once the Papua New Guinea venture and a proposed gas-export project in Queensland with Petroliam Nasional Bhd. come online, it said May 6.
“Exxon putting their horsepower behind it makes this a very good project to be involved in,” said Peter Arden, a Melbourne-based analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co. “It will be a stepping stone for Santos; it will help get them a lot of credibility.”
Of the stock on offer, A$1.65 billion for sale to institutional investors is fully underwritten. The A$1.35 billion retail portion of the sale isn’t underwritten, Santos said. Caliburn is advising Santos, while JPMorgan, Citigroup and Deutsche Bank are managing the sale, the Australian Financial Review reported earlier.
Queensland Project
Additional capital raised would fund other growth projects, which include a proposed LNG venture at Gladstone in Queensland with Petronas, as Kuala Lumpur-based Petroliam Nasional is known. Their A$7.7 billion venture is due to deliver its first LNG cargoes in 2014, Santos said today. It is one of five rival projects planning to convert gas extracted from coal seams into LNG for export to Asia.
“I think Gladstone is really going to stretch Santos funding-wise,” Arden of Ord Minnett said. “It is also a bit of a crowded space there, and it might be that not everyone gets their project up.”
Santos has gained 25 percent in the past six months in Sydney, compared with the 0.5 percent decline in the local benchmark index.
LNG is natural gas that has been chilled to liquid form for transportation by ship to destinations not connected by pipeline.
Read more here
Asian Bank Stocks Rise as Goldman Sachs Tips HSBC; Toyota Falls
(Bloomberg) -- Asian bank stocks rose as Goldman Sachs Group Inc. recommended investors buy HSBC Holdings Plc. Automakers fell after Toyota Motor Corp. cut its dividend and predicted a second annual loss.
HSBC, Europe’s biggest bank, climbed 3.3 percent in Hong Kong as Goldman Sachs said the company may benefit from possible write-backs as asset markets stabilize. Mitsubishi Corp., Japan’s No.1 trading company, gained 2.4 percent after crude- oil prices climbed on May 8. Toyota, the world’s largest automaker, slumped 5 percent in Tokyo, as it forecast a wider loss than analysts estimated.
“Banks are cyclical shares and investors buy them when they expect the economy to bottom out,” said Hisakazu Amano, who helps oversee about $39 billion at T&D Asset Management Co. “On the other hand, people are getting nervous as they aren’t sure if company profits justify current share prices.”
The MSCI Asia Pacific Index gained 0.4 percent to 98.34 as of 12:30 p.m. in Tokyo. The gauge has rallied 39 percent from a five-year low on March 9 amid mounting confidence the global economy is recovering. The index slumped by a record 43 percent in 2008.
Hong Kong’s Hang Seng Index rose 0.3 percent. Japan’s Nikkei 225 Stock Average lost 0.6 percent. Australia’s S&P/ASX 200 Index dropped 0.6 percent. Other markets in Asia advanced except New Zealand and Singapore.
Futures on the Standard & Poor’s 500 Index lost 0.8 percent. The gauge climbed 2.4 percent as Federal Reserve Chairman Ben S. Bernanke said a review of banks’ financial health should provide “considerable comfort” and a report showing fewer job losses than forecast signaled the worst of the recession is over.
Rising Valuations
The U.S. Labor Department said on May 8 that payrolls dropped by 539,000 last month after a 699,000 loss in March. The two-month rally in equities has driven the average valuation of companies in the MSCI Asia Pacific Index to 27 times reported profit, the highest since March 30, 2004.
“The overall message of the U.S. jobless report is that things are getting better,” said Tomochika Kitaoka, a strategist at Mizuho Securities Co. in Tokyo. “Government aid and a recovery in earnings will put American banks back on their feet.”
HSBC climbed 3.3 percent to HK$68.05 as Goldman Sachs raised its recommendation on the stock to “buy” from “neutral” and its share-price target to HK$84 from HK$55, according to a report today. HSBC may also benefit from a yuan trade settlement program, the report said.
China Citic Bank Co., the nation’s sixth-largest lender by market value, gained 2 percent to HK$4.09. The company will pay parent China Citic Group HK$13.6 billion ($1.8 billion) for control of a Hong Kong banking affiliate.
Read more here
HSBC, Europe’s biggest bank, climbed 3.3 percent in Hong Kong as Goldman Sachs said the company may benefit from possible write-backs as asset markets stabilize. Mitsubishi Corp., Japan’s No.1 trading company, gained 2.4 percent after crude- oil prices climbed on May 8. Toyota, the world’s largest automaker, slumped 5 percent in Tokyo, as it forecast a wider loss than analysts estimated.
“Banks are cyclical shares and investors buy them when they expect the economy to bottom out,” said Hisakazu Amano, who helps oversee about $39 billion at T&D Asset Management Co. “On the other hand, people are getting nervous as they aren’t sure if company profits justify current share prices.”
The MSCI Asia Pacific Index gained 0.4 percent to 98.34 as of 12:30 p.m. in Tokyo. The gauge has rallied 39 percent from a five-year low on March 9 amid mounting confidence the global economy is recovering. The index slumped by a record 43 percent in 2008.
Hong Kong’s Hang Seng Index rose 0.3 percent. Japan’s Nikkei 225 Stock Average lost 0.6 percent. Australia’s S&P/ASX 200 Index dropped 0.6 percent. Other markets in Asia advanced except New Zealand and Singapore.
Futures on the Standard & Poor’s 500 Index lost 0.8 percent. The gauge climbed 2.4 percent as Federal Reserve Chairman Ben S. Bernanke said a review of banks’ financial health should provide “considerable comfort” and a report showing fewer job losses than forecast signaled the worst of the recession is over.
Rising Valuations
The U.S. Labor Department said on May 8 that payrolls dropped by 539,000 last month after a 699,000 loss in March. The two-month rally in equities has driven the average valuation of companies in the MSCI Asia Pacific Index to 27 times reported profit, the highest since March 30, 2004.
“The overall message of the U.S. jobless report is that things are getting better,” said Tomochika Kitaoka, a strategist at Mizuho Securities Co. in Tokyo. “Government aid and a recovery in earnings will put American banks back on their feet.”
HSBC climbed 3.3 percent to HK$68.05 as Goldman Sachs raised its recommendation on the stock to “buy” from “neutral” and its share-price target to HK$84 from HK$55, according to a report today. HSBC may also benefit from a yuan trade settlement program, the report said.
China Citic Bank Co., the nation’s sixth-largest lender by market value, gained 2 percent to HK$4.09. The company will pay parent China Citic Group HK$13.6 billion ($1.8 billion) for control of a Hong Kong banking affiliate.
Read more here
Thursday, May 7, 2009
U.S. seen involved with Wells for some time
(Reuters) - Back in March, Wells Fargo & Co Chairman Dick Kovacevich scoffed at being pressured into taking $25 billion of taxpayer money from the government, saying his bank was healthy and didn't need it.
Now, the fourth-largest U.S. bank may find itself unable to get free of the government's clutches for some time.
The bank said on Thursday it would need $13.7 billion of capital, in light of results from the U.S. government stress test, and that it plans to sell $6 billion of common stock. The bank plans to make up the rest from internal sources like earnings.
The stress test findings give more fuel to short sellers who for months have argued that there are dangerous risks lurking on Wells Fargo's balance sheet.
And even though investors like Warren Buffett have demonstrated great faith in Wells Fargo's earnings power, government entanglement may weigh on the bank's performance in the near term, analysts said.
"Government involvement is a real impediment to doing business," said Anton Schutz, president of Mendon Capital, a fund manager focusing on financial stocks.
"Wells Fargo has tremendous earnings power, but the government's role makes valuing the company very difficult."
To investors shorting Wells Fargo, the extra capital requirements come as no surprise.
Wells Fargo has nearly $130 billion of home equity loans on its books, about a quarter of which are in California, the epicenter of the nation's housing crisis.
That loan book is about three times larger than the bank's tangible common equity, which means heavier-than-expected losses could have a big impact.
In the first quarter, as many banks were adding heavily to their loss reserves, Wells Fargo boosted its reserves by just $1.3 billion, meaning it was writing off bad loans almost as fast as it was setting aside money for them.
And the bank at December 31 had about $270 billion of off-balance sheet entities such as asset-backed commercial conduits and collateralized debt obligations that could move onto its balance sheet.
Read more here
Now, the fourth-largest U.S. bank may find itself unable to get free of the government's clutches for some time.
The bank said on Thursday it would need $13.7 billion of capital, in light of results from the U.S. government stress test, and that it plans to sell $6 billion of common stock. The bank plans to make up the rest from internal sources like earnings.
The stress test findings give more fuel to short sellers who for months have argued that there are dangerous risks lurking on Wells Fargo's balance sheet.
And even though investors like Warren Buffett have demonstrated great faith in Wells Fargo's earnings power, government entanglement may weigh on the bank's performance in the near term, analysts said.
"Government involvement is a real impediment to doing business," said Anton Schutz, president of Mendon Capital, a fund manager focusing on financial stocks.
"Wells Fargo has tremendous earnings power, but the government's role makes valuing the company very difficult."
To investors shorting Wells Fargo, the extra capital requirements come as no surprise.
Wells Fargo has nearly $130 billion of home equity loans on its books, about a quarter of which are in California, the epicenter of the nation's housing crisis.
That loan book is about three times larger than the bank's tangible common equity, which means heavier-than-expected losses could have a big impact.
In the first quarter, as many banks were adding heavily to their loss reserves, Wells Fargo boosted its reserves by just $1.3 billion, meaning it was writing off bad loans almost as fast as it was setting aside money for them.
And the bank at December 31 had about $270 billion of off-balance sheet entities such as asset-backed commercial conduits and collateralized debt obligations that could move onto its balance sheet.
Read more here
More FBI agents sought to probe financial crimes
(Reuters) - The U.S. Justice Department's proposed $26.7 billion budget for fiscal 2010 included more FBI agents to investigate mortgage fraud and white-collar crime, Attorney General Eric Holder said on Thursday.
In prepared testimony to a Senate appropriations subcommittee, Holder said the 3.8 percent increase in the total budget from the previous year included more money for combating financial fraud and for a number of other areas.
Increased funding would be used for "additional federal prosecutors, civil litigators and bankruptcy attorneys to protect investors, the market, the federal government's investment of resources in the financial crisis and the American public," he said.
The FBI has said it has 43 corporate fraud cases under investigation directly related to the financial crisis, and they include allegations of financial statement manipulation, accounting fraud and insider trading.
FBI Director Robert Mueller told Congress in late March the law enforcement agency is bracing for a wave of fraud and corruption cases stemming from the government's multitrillion-dollar effort to stimulate the economy and bail out financial institutions.
Read more here
In prepared testimony to a Senate appropriations subcommittee, Holder said the 3.8 percent increase in the total budget from the previous year included more money for combating financial fraud and for a number of other areas.
Increased funding would be used for "additional federal prosecutors, civil litigators and bankruptcy attorneys to protect investors, the market, the federal government's investment of resources in the financial crisis and the American public," he said.
The FBI has said it has 43 corporate fraud cases under investigation directly related to the financial crisis, and they include allegations of financial statement manipulation, accounting fraud and insider trading.
FBI Director Robert Mueller told Congress in late March the law enforcement agency is bracing for a wave of fraud and corruption cases stemming from the government's multitrillion-dollar effort to stimulate the economy and bail out financial institutions.
Read more here
Oil Set for Biggest Weekly Gain Since March on Demand Optimism
(Bloomberg) -- Crude oil rose for a third day in New York, poised for the biggest weekly gain since March, on signs the global economy may be starting to recover.
Oil has advanced this week after reports showed fewer Americans filed claims for unemployment benefits, China’s manufacturing expanded for the first time in nine months and Australia’s jobless rate unexpectedly dropped last month.
“We are getting a bit of a consistent run of slightly better-than-expected economic data out of the U.S.,” said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne. “Oil is maybe moving to a higher trading range, pushing through what looked like a key resistance level of $55 a barrel.”
Crude oil for June delivery rose as much as 68 cents, or 1.2 percent, to $57.39 a barrel in electronic trading on the New York Mercantile Exchange, and was at $57.27 at 11:20 a.m. Singapore time.
Oil is set to reach $62.65 a barrel “in the near future” and rally to $78 within six months as prices retrace the surge that started in 1998, according to technical analysis by PVM Oil Associates Ltd.
Yesterday, oil closed at $56.71, the highest settlement since Nov. 14. Prices have gained 7.6 percent this week, poised for the largest gain since the week ended March 20, and are up 28 percent this year.
Intraday High
Crude retreated from an intraday high of $58.57 yesterday as declines in U.S. financial, telephone and technology shares snuffed out an early rally. The S&P 500, which has risen 34 percent from a 12-year-low in March, slid 1.3 percent to 907.39. The Dow Jones Industrial Average decreased 1.2 percent to 8,409.85.
Prices earlier climbed on signs that U.S. refiners were ramping up production ahead of the peak driving demand season this summer. Processors increased their utilization by 2.7 percentage points to 85.3 percent last week, the Energy Department said in a May 6 report.
Refiners have more incentive to produce gasoline as the so- called crack spread, the profit from making motor fuel versus crude oil, has climbed 48 percent in the past two weeks to $13.64 a barrel today. It was $8.10 a barrel a year ago.
“With gasoline prices lower than last year, you’d think we’d have a more healthy driving season,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “You can argue that people will drive more because it’s a cheaper form of travel. Directionally we’re coming into a stronger demand season.”
Gasoline Gains
Gasoline for June delivery has risen to $1.6853 a gallon today at 10:48 Singapore time on the Nymex, the highest in six months. That’s 46 percent less than a year ago.
U.S. crude oil inventories rose 605,000 barrels to 375.3 million during the week ended May 1, the highest since 1990, said the Energy Department. Analysts forecast a gain of 2.5 million barrels. Gasoline supplies fell 167,000 barrels to 212.4 million, leaving stockpiles 2.8 percent above the five-year average for the period.
The number of Americans filing for unemployment insurance fell last week to the lowest level in three months. Initial jobless claims dropped by 34,000 to 601,000 in the week ended May 2, the fewest since late January, the Labor Department said in Washington yesterday.
Read more here
Oil has advanced this week after reports showed fewer Americans filed claims for unemployment benefits, China’s manufacturing expanded for the first time in nine months and Australia’s jobless rate unexpectedly dropped last month.
“We are getting a bit of a consistent run of slightly better-than-expected economic data out of the U.S.,” said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne. “Oil is maybe moving to a higher trading range, pushing through what looked like a key resistance level of $55 a barrel.”
Crude oil for June delivery rose as much as 68 cents, or 1.2 percent, to $57.39 a barrel in electronic trading on the New York Mercantile Exchange, and was at $57.27 at 11:20 a.m. Singapore time.
Oil is set to reach $62.65 a barrel “in the near future” and rally to $78 within six months as prices retrace the surge that started in 1998, according to technical analysis by PVM Oil Associates Ltd.
Yesterday, oil closed at $56.71, the highest settlement since Nov. 14. Prices have gained 7.6 percent this week, poised for the largest gain since the week ended March 20, and are up 28 percent this year.
Intraday High
Crude retreated from an intraday high of $58.57 yesterday as declines in U.S. financial, telephone and technology shares snuffed out an early rally. The S&P 500, which has risen 34 percent from a 12-year-low in March, slid 1.3 percent to 907.39. The Dow Jones Industrial Average decreased 1.2 percent to 8,409.85.
Prices earlier climbed on signs that U.S. refiners were ramping up production ahead of the peak driving demand season this summer. Processors increased their utilization by 2.7 percentage points to 85.3 percent last week, the Energy Department said in a May 6 report.
Refiners have more incentive to produce gasoline as the so- called crack spread, the profit from making motor fuel versus crude oil, has climbed 48 percent in the past two weeks to $13.64 a barrel today. It was $8.10 a barrel a year ago.
“With gasoline prices lower than last year, you’d think we’d have a more healthy driving season,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “You can argue that people will drive more because it’s a cheaper form of travel. Directionally we’re coming into a stronger demand season.”
Gasoline Gains
Gasoline for June delivery has risen to $1.6853 a gallon today at 10:48 Singapore time on the Nymex, the highest in six months. That’s 46 percent less than a year ago.
U.S. crude oil inventories rose 605,000 barrels to 375.3 million during the week ended May 1, the highest since 1990, said the Energy Department. Analysts forecast a gain of 2.5 million barrels. Gasoline supplies fell 167,000 barrels to 212.4 million, leaving stockpiles 2.8 percent above the five-year average for the period.
The number of Americans filing for unemployment insurance fell last week to the lowest level in three months. Initial jobless claims dropped by 34,000 to 601,000 in the week ended May 2, the fewest since late January, the Labor Department said in Washington yesterday.
Read more here
Macquarie Said to Bid for AIG Unit in Strategy Shift
(Bloomberg) -- Macquarie Group Ltd., Australia’s biggest investment bank, is bidding for an American International Group Inc. fund unit with about $100 billion under management, said two people with the knowledge of the matter.
AIG expects to sell the unit for as much as $500 million, one of the people said, speaking on condition of anonymity because the talks are private. Macquarie is among several firms pursuing AIG Investments, a New York-based fund manager put up for sale in January, the people said.
Macquarie last week raised A$540 million ($407 million) in a stock sale and would more than triple assets under management at its fund division with a successful bid. Chief Executive Officer Nicholas Moore is shifting focus from infrastructure investments to businesses such as managing stocks and bonds for clients after a 16-year run of rising profits was snuffed out by writedowns.
“It would make sense,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney, including Macquarie shares. “The business model of Macquarie is going to be more orientated toward transactional-type management rather than recycling assets as they have done in the past because the structure of the market has changed.”
Macquarie slipped 0.5 percent to A$35.03 in Sydney trading at 11:35 a.m. The stock has more than doubled since slumping to a decade-low on March 3.
Forced Seller
AIG Investments, run by Win Neuger, has 46 offices from Atlanta to Zurich and manages money for institutions, pension funds and wealthy individuals in stock, bond, private equity and hedge funds, according to the company’s Web site.
AIG, once the world’s largest insurer, is selling assets to raise cash after its near collapse led to four U.S. government rescues worth $182.5 billion in all.
“AIG is a forced seller, so it could be quite attractive from a valuation point of view,” Xiradis said.
The insurer received about a half-dozen bids in all for the unit, including from private equity firms and rival asset managers, the Wall Street Journal reported on April 7, citing unidentified sources.
Macquarie spokeswoman Fiona Tyndall and AIG spokesman Peter Tulupman declined to comment.
‘Global Scale’
Macquarie’s Funds Group manages A$49.7 billion in assets, the company said May 1. The unit’s earnings plunged 85 percent from a year earlier to A$45 million on higher expenses, writedowns and impairments.
The Funds Group “will use Macquarie’s strong capital position to seek to gain global scale through acquisitions,” the company said in a May 1 investor presentation.
Macquarie on May 1 sold 20 million shares to raise A$540 million and announced a stock purchase plan for ordinary shareholders, which may raise as much as A$200 million according to a person with knowledge of the sale.
Following the share sales, which come two months after the company said it didn’t need to raise capital, Macquarie will have A$4.1 billion to spare above its regulatory minimum.
“What we have always done is raised capital ahead of needing the capital,” Moore said in an interview on May 1. “Whether it is because of uncertain markets or opportunities coming from the markets, we always want to make sure we are in a very strong capital position.”
Read more here
AIG expects to sell the unit for as much as $500 million, one of the people said, speaking on condition of anonymity because the talks are private. Macquarie is among several firms pursuing AIG Investments, a New York-based fund manager put up for sale in January, the people said.
Macquarie last week raised A$540 million ($407 million) in a stock sale and would more than triple assets under management at its fund division with a successful bid. Chief Executive Officer Nicholas Moore is shifting focus from infrastructure investments to businesses such as managing stocks and bonds for clients after a 16-year run of rising profits was snuffed out by writedowns.
“It would make sense,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney, including Macquarie shares. “The business model of Macquarie is going to be more orientated toward transactional-type management rather than recycling assets as they have done in the past because the structure of the market has changed.”
Macquarie slipped 0.5 percent to A$35.03 in Sydney trading at 11:35 a.m. The stock has more than doubled since slumping to a decade-low on March 3.
Forced Seller
AIG Investments, run by Win Neuger, has 46 offices from Atlanta to Zurich and manages money for institutions, pension funds and wealthy individuals in stock, bond, private equity and hedge funds, according to the company’s Web site.
AIG, once the world’s largest insurer, is selling assets to raise cash after its near collapse led to four U.S. government rescues worth $182.5 billion in all.
“AIG is a forced seller, so it could be quite attractive from a valuation point of view,” Xiradis said.
The insurer received about a half-dozen bids in all for the unit, including from private equity firms and rival asset managers, the Wall Street Journal reported on April 7, citing unidentified sources.
Macquarie spokeswoman Fiona Tyndall and AIG spokesman Peter Tulupman declined to comment.
‘Global Scale’
Macquarie’s Funds Group manages A$49.7 billion in assets, the company said May 1. The unit’s earnings plunged 85 percent from a year earlier to A$45 million on higher expenses, writedowns and impairments.
The Funds Group “will use Macquarie’s strong capital position to seek to gain global scale through acquisitions,” the company said in a May 1 investor presentation.
Macquarie on May 1 sold 20 million shares to raise A$540 million and announced a stock purchase plan for ordinary shareholders, which may raise as much as A$200 million according to a person with knowledge of the sale.
Following the share sales, which come two months after the company said it didn’t need to raise capital, Macquarie will have A$4.1 billion to spare above its regulatory minimum.
“What we have always done is raised capital ahead of needing the capital,” Moore said in an interview on May 1. “Whether it is because of uncertain markets or opportunities coming from the markets, we always want to make sure we are in a very strong capital position.”
Read more here
Australian Economy to Shrink 1.25% Before Recovering, RBA Says
(Bloomberg) -- Australia’s central bank said the nation’s economy will shrink 1.25 percent in the 12 months through June before the lowest interest rates in five decades spur a “gradual” recovery next year.
The bank today revised its gross domestic product forecasts in line with Governor Glenn Stevens’ statement last month that the economy is in a recession. The bank said GDP will contract this year before gaining 0.25 percent in the 12 months through June, 2010, compared with its February prediction of 0.25 percent growth this fiscal year and 1.25 percent a year later.
A record 4.25 percentage points of interest-rate cuts since September and government spending will “provide significant support to domestic demand,” the central bank said in its quarterly monetary policy statement released in Sydney. Signs that a recovery may already be emerging include reports this week showing retail sales jumped in March, the unemployment rate dropped and exports to China have surged 80 percent this year.
“They don’t look keen to cut rates again,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “If we see a recovery, inflation will rise.”
The bank said today that inflation will slow to 1.5 percent in the 12 months through June, before accelerating to 2.5 percent the following year. Inflation will then cool again to 1.5 percent in the year through June 2011, it said.
‘Less Severe’
The Australian dollar fell to 75.20 U.S. cents at 1 p.m. in Sydney from 75.38 cents just before the statement was released. The two-year government bond yield dropped 2 basis point to 3.53 percent. A basis point is 0.01 percentage point.
Australia’s recession will be “less severe” than in many other countries, helped by lower borrowing costs for home buyers and businesses, the nation’s healthier financial system, a decline in the currency and “the recent recovery in the Chinese economy,” today’s statement said.
The central bank’s view echoes Australia & New Zealand Banking Group Ltd. Chief Executive Officer Mike Smith, who said Australia’s recession won’t be as “deep or protracted” as other developed economies.
“Our region remains the best-performing part of the world economy,” Smith said in a speech in Brisbane yesterday.
Read more here
The bank today revised its gross domestic product forecasts in line with Governor Glenn Stevens’ statement last month that the economy is in a recession. The bank said GDP will contract this year before gaining 0.25 percent in the 12 months through June, 2010, compared with its February prediction of 0.25 percent growth this fiscal year and 1.25 percent a year later.
A record 4.25 percentage points of interest-rate cuts since September and government spending will “provide significant support to domestic demand,” the central bank said in its quarterly monetary policy statement released in Sydney. Signs that a recovery may already be emerging include reports this week showing retail sales jumped in March, the unemployment rate dropped and exports to China have surged 80 percent this year.
“They don’t look keen to cut rates again,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “If we see a recovery, inflation will rise.”
The bank said today that inflation will slow to 1.5 percent in the 12 months through June, before accelerating to 2.5 percent the following year. Inflation will then cool again to 1.5 percent in the year through June 2011, it said.
‘Less Severe’
The Australian dollar fell to 75.20 U.S. cents at 1 p.m. in Sydney from 75.38 cents just before the statement was released. The two-year government bond yield dropped 2 basis point to 3.53 percent. A basis point is 0.01 percentage point.
Australia’s recession will be “less severe” than in many other countries, helped by lower borrowing costs for home buyers and businesses, the nation’s healthier financial system, a decline in the currency and “the recent recovery in the Chinese economy,” today’s statement said.
The central bank’s view echoes Australia & New Zealand Banking Group Ltd. Chief Executive Officer Mike Smith, who said Australia’s recession won’t be as “deep or protracted” as other developed economies.
“Our region remains the best-performing part of the world economy,” Smith said in a speech in Brisbane yesterday.
Read more here
Wednesday, May 6, 2009
Atlanta bank failure to have big impact
(CNNMoney.com) -- When regulators announced last Friday they had seized control of the relatively unknown Silverton Bank, its collapse struck many as just another minor casualty in the ongoing economic crisis.
But the demise of the Atlanta-based bank could have broad implications for the entire industry, given Silverton's unique role as a so-called "bankers' bank".
Unlike the 31 other banks that have failed so far this year, Silverton did not take deposits from, or make loans to consumers. Instead, its primary purpose was to offer a variety of services such as check clearing and credit card operations to community banks around the country that find it too costly to do this on their own.
Silverton also often acted as the lead banker on some syndicated commercial real estate loans, a business that helped contribute to its failure.
All told, Silverton serviced approximately 1,400 community banks in 44 states, according to the Federal Deposit Insurance Corporation, making it one of the largest of the 20 or so "bankers' banks" in the country.
But even as regulators attempt to smooth the transition for Silverton's clients, many community banks will suffer as a result of its collapse.
Arguably among the hardest hit will be the hundreds of community banks that were shareholders in Silverton's holding company. Their stakes have been completely wiped out as a result of the failure. Most bankers' banks are cooperatively owned by their community bank customers.
The total dollar impact may be tough to discern at this point, but some individual banks are already warning that they are on the hook for millions as a result.
Nashville-based Pinnacle Financial Partners (PNFP), for example, revealed last week that it would write off $21.55 million in its second-quarter results as a result of the Silverton failure.
Banks that participated on some of the troubled commercial real estate loans that Silverton helped generate may also find themselves at risk, notes Chris Cole, a vice-president and senior regulatory counsel for the Independent Community Bankers of America.
In addition, the institutions that relied on Silverton on a daily basis for services now have to deal with the disruption of finding a new provider.
"There will be some pain," said Cole.
Read more here
But the demise of the Atlanta-based bank could have broad implications for the entire industry, given Silverton's unique role as a so-called "bankers' bank".
Unlike the 31 other banks that have failed so far this year, Silverton did not take deposits from, or make loans to consumers. Instead, its primary purpose was to offer a variety of services such as check clearing and credit card operations to community banks around the country that find it too costly to do this on their own.
Silverton also often acted as the lead banker on some syndicated commercial real estate loans, a business that helped contribute to its failure.
All told, Silverton serviced approximately 1,400 community banks in 44 states, according to the Federal Deposit Insurance Corporation, making it one of the largest of the 20 or so "bankers' banks" in the country.
But even as regulators attempt to smooth the transition for Silverton's clients, many community banks will suffer as a result of its collapse.
Arguably among the hardest hit will be the hundreds of community banks that were shareholders in Silverton's holding company. Their stakes have been completely wiped out as a result of the failure. Most bankers' banks are cooperatively owned by their community bank customers.
The total dollar impact may be tough to discern at this point, but some individual banks are already warning that they are on the hook for millions as a result.
Nashville-based Pinnacle Financial Partners (PNFP), for example, revealed last week that it would write off $21.55 million in its second-quarter results as a result of the Silverton failure.
Banks that participated on some of the troubled commercial real estate loans that Silverton helped generate may also find themselves at risk, notes Chris Cole, a vice-president and senior regulatory counsel for the Independent Community Bankers of America.
In addition, the institutions that relied on Silverton on a daily basis for services now have to deal with the disruption of finding a new provider.
"There will be some pain," said Cole.
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