Monday, July 23, 2012

20120723 1811 FCPO EOD Daily Chart Study.

FCPO closed : 2990, changed : -52 points, volume : higher.
Bollinger band reading : side way range bound.
MACD Histogram : falling, seller taking position.
Support : 2970, 2950, 2920, 2900 level.
Resistance : 3020, 3050, 3070, 3100, 3150 level.
Comment :
FCPO closed recorded substantial loss with better volume exchanged. Soy oil currently trading lower by more than 1.5% after last Friday closed marginally lower while crude oil price currently plunge significantly lower after recent rallies.
FCPO price drops to 3 week low after news on slower 3rd quarter China GDP forecast and persisting European region crisis raised worries on the already slowing down demand concern.
Daily chart analysis adjusted to suggesting a side way range bound little downside biased market development.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.

20120723 1726 FKLI EOD Daily Chart Study.

FKLI closed : 1634 changed : -13 points, volume : higher.
Bollinger band reading : pullback correction upside biased.
MACD Histogram : weakening, buyer taking profit.
Support : 1630, 1623, 1615, 1600 level.
Resistance : 1640, 1650, 1660, 1670 level.
Comment :
FKLI continue to closed weaker with improved volume transacted doing 2 points discount compare to cash market that also ended lower. Last Friday U.S. markets traded lower and today Asia markets closed negatively while European markets currently recording loss.
World markets fall after news on China central bank forecast lower 3rd quarter GDP growth and Euro era record high Spanish 10 year bond yields sending Euro currency to 2 year low against the U.S. dollar(flying high now).
FKLI technical chart continue recommending a pullback correction upside biased market development after recorded gains for 3 consecutive weeks.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.

20120723 1658 Regional Markets EOD Daily Chart Study.

 DJIA chart reading : side way range bound.
 Hang Seng chart reading : side way range bound with MACD indicator cross down.
KLCI chart reading :  pullback correction upside biased.

20120723 1604 Global Markets & Commodities Related News.

GLOBAL MARKETS: Asian shares slid as Spain sparked concerns about its ability to stave off a sovereign bailout after two indebted regions sought financial assistance from the central government.  European shares were set to extend the previous session's steep losses on concerns Spain might need a full-blown sovereign bailout and as bond yields in the heavily-indebted country climbed to their highest since the euro was created. U.S. stocks broke a three-day winning streak on Friday as Europe's debt crisis engulfed markets with renewed fears that Spain may be unable to dodge a costly bailout.

FOREX: The euro fell to a near 12-year trough against the yen and plumbed record lows versus the Australian dollar, starting the week under pressure from fears that Spain may eventually need a full sovereign bailout.

FOREX-Euro feels Asia heat as Spanish fears prevail
TOKYO, July 23 (Reuters) - The euro was hammered to a near 12-year trough against the yen and plunged to record lows versus the Australian dollar on Monday, starting the week under strong pressure from fears that Spain may eventually need a full sovereign bailout.
Such was the lack of market confidence that Spanish bond yields hit their highest levels since the euro was created, even as euro zone finance ministers approved the terms of a loan of up to 100 billion euros on Friday for Madrid to recapitalise its banks.

China's tight job market defies economic downturn
Workers living through the slowest run of global economic growth in more than three years are in fear for their jobs everywhere except in the very place investors are most concerned about - China.

Second Spanish region reaches out for aid –paper
Tiny Murcia on Sunday became the second Spanish region to say it would tap an 18-billion-euro ($22 billion) government programme to keep its finances afloat, while media reported half a dozen governments are ready to follow in the footsteps of Valencia.

U.S. CFTC-Funds extend bullish natgas bets
Money managers, including hedge funds and commodity trading advisers, raised their net long position in natural gas futures, options and swaps for the fourth week in a row, data from the U.S. Commodity Futures Trading Commission showed on Friday.

UK risks 'botching' clean energy market reform-MPs
The British government's proposals to decarbonise the country's electricity market are flawed and ministers should rework the suggested market mechanism over the summer to salvage the reform, an influential group of politicians said on Monday.

Lightning sparks Nebraska wildfire amid drought
A wildfire sparked by lightning strikes in tinder-dry rangeland swept through a remote village and has burned about 150 square miles (388 square km) in north-central Nebraska.

GRAINS: Chicago corn and soy slid after marking record highs last week, tracking declines in broader markets as worries on Europe's debt woes festered, though relentless heat in the U.S. grain belt continued to destroy crops.

OIL: Brent crude slipped to $105 per barrel as fears about the global economy returned to the forefront due to worries that Spain may not be able to avoid a costly sovereign bailout, which could impact oil demand.

Euro Coal-Physical prices rise, China returns to spot market
LONDON, July 20 (Reuters) - Physical prompt coal prices rose slightly on Friday in thin trade on steady demand from Asia and China's return to the spot market.
"Prices are still in a range, tracking oil to a degree but overall it's typically-slow summer trading," one European trader said.

Asia Coal-Prices slip below $88/T on surplus, weak demand
SHANGHAI, July 20 (Reuters) - Prompt Australian thermal coal prices slipped lower to stand below $88 a tonne during the week, pressured by a persistent oversupply in the seaborne traded market and low bids from top consumer China, trade sources said on Friday.
"It is probably going to be around two months before falling inventories spark a decent buying interest for winter supplies," said a Singapore-based trader.

China's June coal imports up 65 pct on yr - customs
SHANGHAI, July 23 (Reuters) - China's coal imports in June jumped 64.7 percent from year ago to reach 22.53 million tonnes, official customs data showed on Monday. 
Total shipments in June were also higher than the 20.53 million tonnes recorded in May.

COLUMN-Aluminium's enigma machine cranks up again
--Andy Home is a Reuters columnist. The opinions expressed are his own--
LONDON, July 20 (Reuters) - What is going on with the aluminium spreads on the London Metal Exchange (LME)?  The benchmark cash-to-three-months period  was valued Thursday at $19 per tonne contango. As recently as May it was trading at $40 contango.
The tightest part of the period is the September-October spread , which was valued at $4.5 backwardation.

Anglo American says Q2 iron ore, copper up
LONDON, July 20 (Reuters) - Global miner Anglo American  posted a rise in second quarter output for its key commodities, with iron ore and copper helped higher by production ramp ups at the flagship Kolomela and Los Bronces mines, while platinum and diamonds were weaker.
Anglo announced production results for the second quarter just a day after a major reshuffle at its South African units that included a new bosses for platinum, Kumba Iron Ore  and thermal coal units, triggered by the departure of Neville Nicolau from the helm of Anglo American Platinum . He will be replaced by Kumba's Chris Griffith.

Global steel output dips in June - Worldsteel
LONDON, July 20 (Reuters) - Global steel output slipped in June as the industry grapples with weak demand and falling prices, data from an industry body showed on Friday.
Crude steel production declined by 0.1 percent to 128 million tonnes in June, compared with the same month a year earlier, according to data from the World Steel Association (Worldsteel).

June's daily aluminium output drops to 67,700 T -IAI
LONDON, July 20 (Reuters) - Daily average primary aluminium output in June dropped to 67,700 tonnes compared with 67,900 in May and 70,000 in June 2011, figures from the International Aluminium Institute (IAI) showed on Friday.
Total production in June was 2.030 million tonnes, compared with a revised 2.106 million tonnes in May and 2.099 million tonnes in June 2011.

Iron Ore-Shanghai rebar falls over 2 pct to new low
SHANGHAI/BEIJING, July 23 (Reuters) - China steel futures fell over 2 percent  to a record low of around 3,650 yuan ($570) a tonne, with their outlook darkened by high stockpiles and tepid demand.
"Obviously we are hoping that there will be some stimulus from the government but I personally don't think we will get anything soon - they are just relying on measures like interest rates to try to improve demand," said a manager with an international iron and steel trading firm in Beijing.

Copper market in 384,000 T deficit Jan-April 2012-ICSG
July 20 (Reuters) - The global market for refined copper was in a 384,000-tonne deficit from January to April 2012, up sharply from a 26,000-tonne deficit during the same period of 2011, the International Copper Study Group said Friday.
World refined usage stood at 6.948 million tonnes for the first four months of the year, while production reached 6.564 million tonnes, ICSG said in its latest monthly bulletin.

Chinese near term copper demand may rise -Aurubis
HAMBURG, July 20 (Reuters) - A revival of Chinese copper demand in the second half of 2012 is expected to help boost the global market when the outlook for European demand is less promising due to the euro zone crisis, Aurubis , Europe's biggest copper smelter, said.
London Metal Exchange copper prices have generally been rangebound between $7,500 and $7,700 a tonne in the last month "without indicating a clear direction", Aurubis said on Friday.

BASE METALS: Copper prices retreated amid growing concerns of a spreading debt contagion in the euro zone as Spain risks becoming the fourth country in the bloc to seek a sovereign bailout, denting the outlook for metals demand worldwide.

PRECIOUS METALS: Gold edged lower under the pressure of a stronger dollar, as worries about the euro zone debt crisis deepened after Spain stoked fears that it might need a sovereign bailout.

METALS-Shanghai copper at lowest in over 1 mth on demand fears
SHANGHAI, July 23 (Reuters) - Copper prices retreated on Monday amid growing concerns of a spreading debt contagion in the euro zone as Spain risks becoming the fourth country in the bloc to seek a sovereign bailout, denting the outlook for metals demand worldwide.
Worries about the health of the global economy pushed Shanghai copper futures down more than 2.5 percent, bringing prices to their lowest since June 29. The most active November copper contract  dropped as low as 54,540 yuan ($8,600) per tonne, its biggest percentage fall since June 4, before recovering some ground by the midday trading break.

PRECIOUS-Gold inches down on heightened Spain worries
SINGAPORE, July 23 (Reuters) - Gold edged lower on Monday under the pressure of a stronger dollar, as worries about the euro zone debt crisis deepened after Spain stoked fears that it might need a sovereign bailout.
Spain's woes, highlighted by two indebted regions seeking financial aid from the central government, drove the euro to a two-year trough against the dollar, which strengthened the greenback and made gold and other commodities priced in the U.S. currency less attractive.

Slow shipping activity pushes Baltic index lower
July 20 (Reuters) - The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry commodities, fell on Friday as sluggish shipping activity in the Atlantic and Pacific basins weighed on rates.
"Not a huge amount of activity has been seen in the Pacific. Rates are unexcitingly consistent,"  broker firm Braemar Seascope said in a note.

20120723 1220 Global Markets & Commodities Related News.

GLOBAL MARKETS-Shares, euro pressured as Spain stokes bailout fears
TOKYO, July 23 (Reuters) - Shares fell and the euro stayed vulnerable after hitting fresh lows early in Asia, as concerns grew about Spain's ability to stave off a sovereign bailout.
"There is nothing good from Europe and that keeps the euro under pressure, especially the first half of the week when we have euro zone data," such as consumer confidence and manufacturing, said Yuji Saito, director of foreign exchange at Credit Agricole Bank in Tokyo.

COMMODITIES-Soy, corn extend highs; oil down but up on week
NEW YORK, July 20 (Reuters) - U.S. soybean and corn prices extended their record highs o n F riday from the crop damage in America's drought-baked heartland, while oil and copper markets fell on renewed worries about European debt.
"Everything today is focused on the weather for soybeans," said Karl Setzer, analyst at MaxYield Cooperative in West Bend, Iowa. "Historically, August is when the soy yield is determined, but because everything is early this year, we are seeing the buying interest show up earlier."

The July Brent oil rally and the Urals crunch
--Robert Campbell is a Reuters market analyst. The views expressed are his own--
NEW YORK, July 20 (Reuters) - Oil analysts have struggled to explain the strong rally in Brent crude oil futures since the start of July but none of the macro-level explanations make sense without a look at the underlying physical market mechanics.
To be sure, there must be some sort of "risk-on" element as oil is not the only market rising. Equities have gained as well even as economic data suggest a slowing global economy

OIL-Oil falls as Europe debt woes revive economic fear
NEW YORK, July 20 (Reuters) - Oil prices fell on Friday, snapping a string of seven straight higher settlements, as the euro zone debt crisis brought economic concerns back in focus and strengthened the dollar.
"The dollar spiking higher versus the euro on Spain banks needing help pushed oil lower. Some geopolitical fatigue seemed to emerge as well, with the rumours about Assad taking a deal. Looks like if he goes we will get a selloff," said John Kilduff, partner at Again Capital LLC in New York.

US oil below $80 could slow shale oil drilling boom-Baker Hughes
NEW YORK, July 20 (Reuters) - Leading oil services firm Baker Hughes Inc  warned on Friday that booming drilling in the shale oil fields of North Dakota and even south Texas could slow if U.S. prices drop below $80 a barrel.
While it has been clear for months that the pull-back in oil prices and searing costs have begun to temper the race to tap into the country's shale oil plays, Baker Hughes CEO Martin Craighead's comments were the bluntest yet to suggest that crude oil prices are already hovering near a key break point.

Sudan fuel subsidy not fully lifted until end 2013
KHARTOUM, July 22 (Reuters) - Sudan will not fully remove fuel subsidies until the end of 2013 since austerity measures worth 7 billion Sudanese pounds ($1.5 billion) are sufficient to turn around the ailing economy, a senior ruling party official said on Sunday.
The Arab African country is struggling with a worsening economic crisis after losing much of its oil wealth - the main source for revenues and dollars needed for imports - when South Sudan became independent last year.

NATURAL GAS-US natural gas futures end up, front hits 6-1/2-mth high
NEW YORK, July 20 (Reuters) - U.S. natural gas futures ended higher on Friday for a third straight session, with bullish weekly inventory data and still-warm forecasts for the Northeast and Midwest driving the front-month contract to a fresh 6-1/2-month high.
"We've got forecasts for warmer than normal temperatures for the next two weeks, and we continue to see a constructive trend in storage (declining surplus)," Citi Futures Perspective analyst Tim Evans told Reuters.

EURO COAL-Physical prices rise, China returns to spot market
LONDON, July 20 (Reuters) - Physical prompt coal prices rose slightly on Friday in thin trade on steady demand from Asia and China's return to the spot market.
"Prices are still in a range, tracking oil to a degree but overall it's typically-slow summer trading," one European trader said.

20120723 1218 Malaysia Corporate Related News.

MMC Corp is believed to have proposed to the government to form a special purpose vehicle (SPV) with Pengurusan Asset Air Berhad (PAAB) to take over the country's water assets. MMC MD Datuk Hasni Harun revealed the proposal to co-own the water assets with PAAB two weeks ago in a presentation to the government with the Finance Ministry, Energy, Green Technology and Water Ministry, and PAAB. "Yes, there was a presentation and they do have such plans, but the proposals have not been thought through yet...there're still a lot of grey areas" a government official said. Some government officials say it would be tricky for MMC to realise the plan. "It is not easy for MMC to venture into the water sector after PAAB was given the mandate to develop and manage the country's water assets. It will be a step backwards..." an official said. Such plan would be contradictory to the initial goal of PAAB ie. water asset nationalisation. (Financial Daily)

The three government-linked funds that were the cornerstone investors in Felda Global Ventures Holdings Bhd (FGV) IPO have been actively trading the stock, which has gained over 17% since listing. Kumpulan Wang Persaraan increased its stake from 5.3% to 6.02% as at July 17. Pilgrimage fund Tabung Haji reduced its shareholdings in FGV to 7.28% from 7.55% as at July 10. The Employee Provident Fund (EPF) ceased to be a substantial shareholder of FGV on July 10, with a balance of 4.94% stake. (Financial Daily)

Sime Darby plans to build palm oil bulking facilities in Liberia or neighbouring areas in the next one or two years. This will be a preparatory move in storing the edible oil before it is exported to markets such as Africa, Europe and the United States. Bulking facilities consist of tank farms used to store processed palm oil such as palm olein or crude palm oil in a regulated environment before they are pumped into vessels and shipped to their export destinations. A source said Sime Darby had tasked Felda-Johore Bulkers with building a tank farm as a preparatory move before it starts harvesting its oil palm plantations in Liberia. Sime Darby also owns a 10% stake in Felda-Johore. (BT)

Malaysia may soon risk losing investments in the palm oil refining industry to neighbouring Indonesia if it does not come up with a policy to create a level playing field. The industry has been suffering since last October because of the duty structure which Indonesia has put in place in August last year to boost downstream activities by lowering export taxes for processed palm oil products. A refiner said the delay in the government's decision to come up with a new policy, had been costly for the past 10 months. It has led to negative refining margins, in sharp contrast to the Indonesian refiners who enjoy a 5%-6% margin. The Palm Oil Refiners Association of Malaysia (Poram) lamented that the broad supply chain in the RM80bn industry will also be affected. (BT)

With additional 5GW of power capacity expected to come onstream by 2020, Malaysia will be the fastest growing power market in Asean and this has caught the eye of international investors. HSBC Southeast Asia’s director of resources and energy group Troy Little said there are many foreign buyers interested in acquiring power assets in Malaysia but there aren’t any willing sellers. Little said foreign investors are eager to add a Malaysian independent power producer to the portfolio because of the lucrative and steady returns as well as the potential upside in the longer run as Malaysia plants up. (Financial Daily)

Proton Holdings Bhd may have to pump in another STG100m (RM491m) in troubled British sportscar maker Group Lotus plc in order to keep it afloat. The money will have to be pumped in by March 2013, said DRB-HICOM Bhd managing director Datuk Seri Mohd Khamil Jamil. Proton has pumped in STG100m into Lotus so far this year after several banks cut their credit lines to the sportscar maker. "Lotus' cash flow is very bad right now. Proton is funding the cash flow but I think there is light at the end of the tunnel," said Mohd Khamil. Mohd Khamil said Lotus was being funded via internally generated funds from Proton and DRB-HICOM. He also confirmed a Business Times report early this week that Proton had submitted a revised plan to the national carmaker's six big lenders. "I have made a personal presentation to the bankers and we are looking to work out a solution where we can draw down the loan. "Between now and December, they (the bankers) will decide," said Mohd Khamil. Lotus has already drawn down more than STG200m before the banks stopped the remaining STG62.5m to be disbursed to Lotus, a move that could push the Hethel, Norfolk-based sportscar maker into technical insolvency. "If Lotus fails, DRB-HICOM will fail. The problem is not here in Hethel. The problem will be in Shah Alam as Proton has given the guarantees (for the loan)," said Mohd Khamil. (BT)

DRB-Hicom aims to see Group Lotus in a healthy financial position in three years. Under the new business model which DRB-Hicom is crafting, Lotus will be in a positive cash-flow not later than 2014. The conglomerate has managed to reduce opex to GBP5m from GBP7m previously. Datuk Seri Mohd Khamil Jamil envisaged that Lotus would need not more than GBP100m in capital by 2013. (Financial Daily)

UMW Toyota Motor Sdn Bhd believes that The Star’s new augmented reality feature, iSnap, will help to bridge the gap between traditional and digital media - and in the process enhance the appeal of the country’s leading English daily. “Traditional medium like the newspapers is moving with time. It is no longer confined to texts and images only. Reading a newspaper can now be very enjoyable with the iSnap function. This innovative tool by The Star bridges the connection between traditional and digital media. “It helps to increase the return on investment of our adverts in terms of expanding the boundaries of what information can be included in a full page ad. It is a revolutionary step by The Star, to evolve its traditional platform to bring life to whatever we intend to communicate in the print ad,” UMW Toyota Motor president Ismet Suki says. (Starbiz)

Berjaya Land Bhd's (BLand) The Great Mall of China (GMOC) is set to outdo others for the bragging rights as the world's largest shopping mall. And BLand has every reason to be confident of GMOC's success, particularly in 'terms of demand for space leasing' as Beijing has high per capital income of US$12,447 (RM39, 200) in 2011. GMOC, the world's biggest integrated mall complex, is estimated to be worth about RM7.5bn on a 32ha site in China's Hebei Province. It is expected to be completed in five years. GMOC has strategically positioned itself in an area where massive integrated public transportation project is due to take place. One notable project is a big subway station, which is expected to be completed in 2018, linking it to neighbouring TongZhou. TongZhou is about 20km away, and the subway will bring its distance to GMOC within 2km, reducing travel time to mere minutes from half an hour now. Beijing's population of over 21 million people, excluding the population of its neighbouring cities such as Tian Jin, Hebei and Yan Jiao, which are also booming due to the country's sound economy, is expected to give rise to the project's popularity. Unlike other shopping malls in Beijing, which are mostly purely shopping driven, GMOC will be the first to break out of the ordinary shopping culture in China by housing three indoor theme parks. GMOC will also impress its patrons with its many world-class amenities, including a multi-purpose convention hall to cater to all forms of business needs. With Phase One due to be completed in October next year boasting of three all-weather and indoor theme parks namely Extreme Park, Family Park and Water Park, GMOC is poised to set the Malaysian flag sailing high globally. (BT)

Demand for CIMB Bank’s newly launched 5-year senior unsecured notes issuance under its US$1bn euro medium term note programme attracted in excess of US$1.2bn with Asian investors accounting for 86% of the allocation with the balance 14% to European accounts. The notes were priced at a spread of 190 bps over the 5-year US Treasury, equivalent to yield of 2.505% pa, with a coupon of 2.375%. (Star Biz)

CIMB: Still keen on QFB licence in Singapore
CIMB Group Singapore is still keen to have a Qualifying Full Bank (QFB) licence in Singapore despite the republic requiring foreign banks with large deposits to incorporate their retail operations locally. Late last month, the Monetary Authority of Singapore (MAS) said foreign banks that fell under the QFB programme must also meet the republic’s stringent capital requirements. Mak Lye Mun, country head of CIMB Group Singapore and CEO of CIMB Bank Singapore, said CIMB was not deterred by the new rules. Instead, he said, CIMB Group Singapore was encouraged by MAS’ recent announcement that it would continue to consider awarding new QFBs to foreign banks operating in Singapore. He noted that such licences were awarded by MAS under the free trade agreement negotiations. (Business Times)

GE Aviation is implementing the world’s first network of Required Navigation Performance Authorisation Required (RNP AR) in Malaysia with AirAsia. GE’s unit would design, deploy, validate and maintain a network of precise RNP procedures to utilise the performance characteristics of AirAsia’s A320 fleet. GE said the highly-precise paths would improve operating efficiencies for AirAsia by reducing track miles and fuel burn while also providing aircraft with precise lateral and vertical arrival and missed approach guidance. (Bernama)

Tune Talk is eyeing one million active users by year-end, from the current 700,000, driven by its partnership to be the official Asian telecommunication partner of English football club, the Queens Park Rangers. Tune Talk subscribers can look forward to exclusive QPR contents, such as match highlights and player updates. They would also be entitled for discounts on merchandise as well as football-related packages such as tickets to matches, flights and accommodation. (Bernama)

MK Land says there will always be a demand for affordable houses and will continue to build them even during an economic downturn. Chairman Tan Sri Mustapha Kamal Abu Bakar said the company has a 2,800 ha. landbank on which 114,000 houses can be built and will focus on Selangor, Perak and Kedah. MK Land has completed 44,479 houses valued at RM5.6bn, including some 30,000 affordable units. It will build 2,300 houses valued at RM500m in the next two years. (Bernama)

Guan Chong Bhd shareholders have approved the company’s plan for a secondary listing in Singapore at an EGM. Guan Chong said the greenlight concluded all the necessary approvals needed from the relevant stakeholders in both Malaysia and Singapore. “This paves the way for the group to continue to the next agenda on its Singapore listing timeline, the launching of its initial public offering (IPO) prospectus,” it said. Managing director and CEO Brandon Tay said the details on the launch of the IPO prospectus were now being finalised. “We will make the necessary announcement at the appropriate time,” he said. (Starbiz)

Alliance Financial Group: Not primed for M&As
Alliance Financial Group (AFG) is not being primed for any near-term mergers and acquisitions (M&A), said Alliance Bank group CEO Sng Seow Wah. He downplayed talk of consolidation for the country’s second-smallest bank by market capitalisation. When asked if the bank’s loan-to-deposit ratio of 76% as at end-March gave it comfortable headroom to digest an acquisition, he replied that the buffer is to protect the group’s stakeholders and not for building a warchest for M&A activity. Chairman Datuk Oh Chong Peng also said AFG was not privy to the negotiations between Singapore’s DBS Bank Ltd and Temasek Holdings. (StarBiz)

Perwaja Holdings: On track to get large iron ore mine
Perwaja Holdings is on track to get a giant share in one of the largest iron ore mines in the country, fending other local steel players eyeing the mine, located in resource-rich Terengganu. State government officials say they are still evaluating the iron ore mining concession in Bukit Besi but are committed to giving Perwaja a large tract, as they had agreed to last year. An official says the plan to allow the mining of iron ore on a concession basis is very much intact.  However, he said the feasibility study is taking longer than expected because it is quite thorough. (The Edge Weekly)

Southern Steel: To build flat-steel plant
Tan Sri Quek Leng Chan’s Southern Steel has joined the ranks of those seeking to build flatsteel plants in the country, an area that has been largely controlled by Tan Sri William Cheng’s Lion Group. Executives close to Southern Steel say the company obtained the approval of the Malaysian Industrial Development Authority about six months ago to set up a flat-steel plant on the premises of its long-steel plant in Prai, Penang. (The Edge Weekly)

Catcha Media: Plans to list iCar Asia Ltd
Catcha Media is planning to list iCar Asia Ltd on the Australian Stock Exchange. iCar is a special purpose vehicle held by Catcha Group Pte Ltd, Catcha Media’s major shareholder. Catcha Media has proposed to inject various assets into iCar Asia, which will operate as a regional online advertising service provider and car magazine publisher. Post-listing, the group will have a 40.04% stake in iCar Asia. The listing will allow Catcha Media to raise funds as working capital for iCar Asia so that it can accelerate expansion and strengthen its market position in the Asean region. (The Edge Weekly)

Banking: Mobile banking services coming up      
Malaysian Electronic Clearing Corp Sdn Bhd (MyClear), a wholly-owned subsidiary of Bank Negara, has teamed up with 3 banks and is working with another three this year to offer mobile banking services. The 3 banks that it has tied up with to offer mobile banking service, scheduled for the fourth quarter, are Maybank, CIMB Bank and Public Bank. It, however, did not disclose the names of the other 3 banks. MD Mohd Suhail Amar Suresh said it was currently piloting the mobile banking services with the first three banks in collaboration with three telecommunication companies, namely Maxis, Celcom and DiGi. As a facilitator of mobile banking, MyClear via its mobile infrastructure MyMobile system, allows banks to connect to all participants (telcos and banks) without having to link up with individual parties. Mohd Suhail said MyClear was projecting about 590,000 transactions this year through its MyMobile services. (StarBiz)

20120723 1218 Local & Global Economy Related News.

Malaysian companies must adapt to new ways of doing business and be ready for a new era of competition which extends globally. Malaysian Competition Commission (MyCC) Chief Executive Officer Shila Dorai Raj saud under the Competition Act 2010, business chambers must make their members understand the implications of breaking the law. The Act does not condone anti-competitive behaviour among businesses, including price fixing, cartel-like activities, market sharing, and controlling of supply or pricing. (NST)

The Finance Ministry is studying, with a view to restructuring all forms of subsidies, especially oil and gas, to ensure that they meet the target groups and help to reduce the burden of low-income earners. Towards this end, Deputy Finance Minister Datuk Dr Awang Adek Hussin, said he welcome suggestions from any quarters to be included for tabling of Budget 2013. He said the Government had placed the price of RON97 under “managed float” and maintained the subsidy for RON95, which was used mostly by low-income earners. (The Star)

The international reserves of Bank Negara Malaysia amounted to RM429.4bn (equivalent to USD134.4bn) as at 13 July 2012. The reserves position is sufficient to finance 9.4 months of retained imports and is 4.3 times the short-term external debt. (Bank Negara Malaysia)

Malaysian banks plan to tighten rules for the local interbank lending market amid a global probe into manipulation of benchmark borrowing costs that led to record fine for Barclays Plc last month. The 12 bank whose estimates were used to compile the Kuala Lumpur interbank offered rate, or Klibor, would be required to lend funds to other banks at that day’s rate during a five-minute period from 11 am every day, said Finance Markets Association of Malaysia president Dato’ Lee Kok Kwan. A limit would be set for the amount of money, he said. The rules were being drafted in consultation with Malaysia’s central bank and would be announced next week, said Lee, who is also deputy CEO of CIMB Group Holdings Bhd. The new rules would also stipulate a spread between Klibor and the rate that the 12 participating banks must pay for deposits during that five-minute window, Lee said. (StarBizweek)

China’s expansion may cool to 7.4% this quarter, whilst a decline in producer prices in tandem with consumer inflation may hurt investment returns of industrial companies, damping their desire to expand, warned People’s Bank of China monetary policy committee adviser Song Guoqing. (Bloomberg)

China’s MNI flash business sentiment indicator fell to 49.63 in Jul from 53.21 the final Jun survey, indicating a contraction in business during the month. (Bloomberg)

Greece and the European Investment Bank reached an agreement today for the lender to resume lending to Greek firms and for infrastructure projects to the tune of €1.44bn by the end of 2015. (Bloomberg)

Russian President Vladimir Putin signed the bill ratifying Russia's entry to the World Trade Organisation after 18 years of often acrimonious negotiations. (AFP)

Sri Lanka announced the completion of a US$2.6bn IMF bailout, but it was seeking fresh loans to support an economy emerging from decades of ethnic war. (AFP)

Bank Indonesia says it will prepare Rp89.4tr (US$9.5bn) of hard cash to anticipate demand for money and the traditionally higher number of transactions during Ramadhan. (The Jakarta Post)

Indonesia is targeting a 42% increase in fund inflows next year as economic growth accelerates, according to estimates by Bank Indonesia deputy governor Halim Alamsyah, who announced plans to attract capital and foreign direct investment inflows of US$12.2bn this year and US$17.3bn in 2013. The central bank forecasts GDP will expand in the range of 6.3-6.7% next year, from a range of 6.1-6.5% in 2012. (The Jakarta Globe)

Bank Indonesia has identified 10 commercial banks that could be at risk of being acquired or merged with another, based on its new guidelines, according to governor Darmin Nasution who said that the new rule would “by natural selection” force a degree of consolidation to the country’s banking system. (The Jakarta Globe)

Fitch Ratings says the Bank Indonesia’s new rule on bank ownership will likely expedite banking consolidations but will pose challenges for smaller lenders “notably because of a concentrated shareholding structure, especially family-owned, which has been cited as one factor behind bank failures in Indonesia in the past.” (The Jakarta Globe)

Cambodia, Myanmar, Laos and Indonesia vowed that rules and regulations are being improved to embrace an investment flow in light of the activation of the ASEAN Economic Community in 2015. (Asia News Network)

20120723 1209 Global Market Related News. Better Corporate Earnings Drive Risk-On Rally, Better Economic Data Helps Bernanke Sit Tight (source:
By - Fri 20 Jul 2012 15:49:41 CT
- Fed Chairman Bernanke appeared before House and Senate committees this week for his semi-annual monetary policy report. Ahead of the testimony, there was some speculation that Bernanke would finally provide some hints about QE3. However the chairman simply reiterated his prior outline of strategies the Fed might have at its disposal to further ease policy and stuck to his script from the June decision. A trio of data reports out this week suggested that the US economic conditions were not nearly bad enough to justify QE3: the July Empire Manufacturing survey was much better than expected, June industrial production data indicated that US output likely snapped back from the dire conditions seen in May, and June US housing starts climbed 6.9%, hitting their highest level since October 2008. In addition, the MBA mortgage report for the week ended July 13th jumped 17% as mortgage rates hit fresh record lows. It wasn't all good news, however: June retail sales fell for the third straight month, making for the longest downtrend since 2008 and the July Philly Fed index was lower than expected, although it ticked up from the very poor -16 reading in June. Some better corporate earnings reports helped drive mild equity gains through the middle part of the week, although trading volumes were notably light. On Friday, the brief risk-on rally came to a halt on press reports that Spain's Valencia region has requested aid from Madrid even as its Spain's European partners worked on formally approving the bank bailout scheme. Shorter-term debt issued by Germany, France, the Netherlands, Switzerland, Finland and Austria saw negative yields, while Italy's and Spain's 10-year yields surged back above six and seven percent, respectively. There was some better economic data out of China, although the NDRC warned that the economic slowdown might extend beyond Q3. Despite the gyrations, US equities posted modest gains on the week.
- The financial sector had a rough ride this week. After JPMorgan's very mixed report last Friday, there were flattish or poor results from Citigroup, Goldman Sachs, Bank of America and Morgan Stanley this week. Ultra low rates are taking their toll on interest margins, regulatory reforms have cut deeply into trading revenues, the European crisis lurks in the background and the recovery in mortgage lending has been very mild. BoA reported a decent profit versus a giant loss in the year ago quarter, but its shares still fell 3% this week. Morgan Stanley's revenue was down 24% from the year-ago quarter, with steep declines seen across the firm's core businesses. Goldman's profits were down 12% on a y/y basis. Citi's profits were down slightly y/y.
- Visa, MasterCard and other card issuing firms agreed to a $7.3B debit card swipe fee settlement with US merchants this week. If approved, the deal would resolve lawsuits filed by retailers in 2005. The card companies and banks would also allow stores to start charging customers extra for using certain credit cards. Shares of Visa and MA gained on the news, but poor results from American Express on Thursday dragged down the card issuers.
- Johnson & Johnson and Coca-Cola provided the usual in-line performance, up on a modest basis y/y. Business for both giants was pretty good in the quarter, with the exception of Coca-Cola's Europe volumes, which continue to decline. The strong USD hurt both names, cutting profits by approx 4% a piece in the quarter. Verizon saw some softness in new wireless and new FiOS customers in Q2. The company does not break out iPhone sales, but one industry watcher said Verizon only sold 2.7M iPhones (v estimates of around 3.4M units, and 3.2M units last quarter), given credence to the notion that iPhones sales are slowing ahead of the expected launch of the new model this fall. YUM! Brands missed earnings expectations and reported some softness in its China business due to inflation.
- Three major chip names - Intel, AMD and Qualcomm - reported varying results this week. Intel met expectations in its Q2 and analysts seem to agree that while its Q3 and FY12 revenue outlooks are not great, they could have been worse. Shares of AMD plummeted on its very weak forecast for Q3. Qualcomm met expectations and said it expects a "strong December quarter" as it will have overcome a shortfall in its advanced chip supply by the end of 2012. IBM beat earnings estimates, although the firm was a hair behind revenue targets, thanks to flat software revenue and declines in its overall Americas segment revenue. The firm complained about the very large FX translation headwinds it has been facing. Microsoft reported solid, in-line performance and had lots of brave words on the firm's Windows 8 rollout. Google saw very strong revenue, and both gross ad revenue and paid clicks continue growing at a healthy rate. Google had little to say about Marissa Mayer, a long time executive who defected to become Yahoo's latest CEO in a surprise announcement.
- After several months of rejected approaches, GlaxoSmithKline has finally found the right price point for partner Human Genome Sciences, which agreed to be acquired for $14.25/share or a total of $3 billion. This compares with GSK's prior $13/share offer. The acquisition will secure GSK's rights to recently launched lupus drug Benlysta and full ownership of experimental medicines for diabetes and heart disease.
- EUR/USD remained locked within the 1.2150 to 1.2330 corridor this week as euro buy-stops accumulated just above top end of the range. Decent bill auction results out of Europe stabilized the single currency to a certain degree but the effects were offset by a weak Spanish bond auction on Thursday. There were some headwinds as well from talk that the Swiss National Bank was selling off euros accumulated from its defense of the EUR/CHF floor at 1.2000. By the end of the week concerns over possible contagion in Europe pushed the 10-year Spanish/German government bond spread to a fresh EMU record level above 600 bps, squashing the euro.
- The BoE minutes weakened the pound sterling. Analysts believed that the vote to hike the Asset Purchase Target by £50B was unanimous, but the minutes showed that there were two dissenters, Broadbent and Dale, provoking some uneasiness. The BoE also tweaked its view on interest rates, noting that the MPC would reconsider rate cuts in light of the new initiatives. Back in June the MPC discussed the merits of cutting rates but saw no advantages to further QE at the time. The GBP shook off weakness provoked by the minutes and benefitted from the weak euro. EUR/GBP plumbed three-and-a-half year lows as it tested below the 0.78 handle.
- USD/JPY remained under pressure from the start of the week, breaching the 200-day moving avg around the ¥79 handle and extending its losses below ¥78.50, a 6-week low. The stronger JPY provoked further verbal intervention from Japanese authorities, as Finance Minister Azumi called the yen strength "speculative" and Bank of Japan Gov Shirakawa cautioned that the European debt crisis is contributing to JPY gains. Later in the week, the chairman of Japan Automobile Manufacturers Association remarked that the USD/JPY exchange rate "around ¥80" is still very tough for Japan automakers.
- The case for a China soft landing made by last week's release of Q2 GDP was further supported by surprisingly strong housing figures and lending estimates. June new home prices only fell in 21 out of 70 major cities, less than half the May figure, while measured prices in all Chinese cities was flat m/m - the first non-negative print in 9 months. Chinese lenders are also increasingly more active, as press reports suggested the top 4 banks' loans in the first half of July already reached CNY50B, more than twice the amount in the same period of June. The National Bureau of Stats was quick to respond to the latest data, noting it will keep the lid on property speculation with price oversight remaining a part of Beijing's long-term policy objective. Separately, an IMF quarterly review cut 2012 and 2013 GDP targets by 0.2pts and 0.3pts to 8.0% and 8.5%, respectively.
- In Australia, the RBA policy meeting minutes tilted toward the less dovish stance, pointing to stronger than expected GDP data, rising household consumption, and more positive developments in the China economy. The Australian central bank concluded it was appropriate for rates to be "a little below average" in light of slower global growth, suggesting domestic conditions may have to deteriorate again in order for RBA to consider another easing. Later in the week, press reports indicating the Bundesbank was joining other global central banks in diversifying their reserves into the Aussie dollar elevated AUD/USD above $1.04, its highest level in nearly 3 months.

20120723 1209 Metal Related News.

SILVER: A Metal of Sunken Treasure and ChampionsBy Eric McWhinnie - Sat 21 Jul 2012 12:05:10 CT (source: CME)
Earlier this week, Odyssey Marine Exploration, a world leader in deep-ocean shipwreck exploration, announced it successfully recovered approximately 48 tons of silver bullion from the SS Gairsoppa. The British ship was torpedoed by a German U-boat and sank in three miles of water off the coast of Ireland during World War II. Despite the silver being submerged for 71 years, it is still a highly prized discovery as the precious metal has appreciated in value.
In a press release, the company explained the initial recovery of the sunken treasure totaled 1,203 silver bars or approximately 1.4 million troy ounces of silver. The total operation, which also includes the SS Mantola, could bring to the surface about 240 tons of silver, a record-breaking amount. The recovery is the heaviest and deepest haul of precious metals to date.
"With the shipwreck lying approximately three miles below the surface of the North Atlantic, this was a complex operation," commented Greg Stemm, chief executive officer. "Our capacity to conduct precision cuts and successfully complete the surgical removal of bullion from secure areas on the ship demonstrates our capabilities to undertake complicated tasks in the very deep ocean."
Don't Miss: GOLD: Safe Haven or Risky Investment?
Companies such as Odyssey are willing to go to such great lengths to recover precious metals, because hard assets such as gold and silver tend to hold their value exceptionally well over the long-term. The SS Gairsoppa sank in 1941, a year in which the average silver price was 35 cents per ounce. However, in 2011 the average price of silver was $35 per ounce. Currently, the price of silver is about $27 per ounce, but Odyssey's haul of 1.4 million ounces is still valued at roughly $38 million.
Silver is an amazing metal. Not only is it known for historic monetary characteristics, but also for its industrial usage. Almost all electronics are configured with silver. The precious metal is used in everything from automobiles to alternative energy needs. According to The Silver Institute, over 36 million ounces of silver are used annually in automobiles. Meanwhile, silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common type of solar cell.  Over 100 million ounces of silver are projected to be used on these solar cells by 2015. The white metal has also been used in medicinal and preservative purposes around the world for generations.
Gold is often called the money of kings, but silver will be known as the money of champions come the London Olympics. When athletes receive a gold medal at the Summer Olympics, only 1.34 percent of it will contain actual gold. The rest is comprised of 93 percent silver and 6 percent copper, according to CNNMoney. In fact, solid gold medals have not been issued since the 1912 Olympic games in Sweden.
Considering silver's unique industrial qualities and ability to endure years of abuse and still come out a winner, it seems only appropriate to have the precious metal at the top of the podium.

20120723 1208 Crude Oil & Energy Related News.

Oil move higher on the week By Dominick Chirihella - Sun 22 Jul 2012 03:30:34 CT (source: CME)
Just when you thought Europe was moving into the background the markets were quickly reminded on Friday that the EU sovereign debt problems have not changed and are here to stay until the EU leadership solves them once and for all. As Spanish bond yields soared again the market quickly moved back into a risk aversion mentality and embarked on a modest round of profit taking selling that dominated all of the main risk asset markets throughout the trading session. Spanish bond yields hit another record high even as the EU Finance Ministers gave their final approval to the bank bailout program for Spanish banks. Simply put the market continues to interpret all of the actions by the EU leadership as just not enough to be comfortable that the debt issues that have been evolving for the last three years are truly a problem that has been solved.
Friday's selling action sent the euro down thru another key technical support level hitting the lowest level since 6/14/2010 and seemingly now on a path to test the lows made in early June of 2010. The euro now seems like it is gaining momentum to test the next level of support at 1.1875. If the next level of support is breached the value of the euro versus the US dollar will be back to levels not seen since the second half of 2005! Market players are once again talking about the possibility of the euro and the US dollar trading in parity. If the market does not become convinced that the debt problems have truly been arrested the euro is going to remain under pressure.
Certainly the recipient of a weak euro is the US dollar which will continue to firm and thus act as a negative or bearish catalyst for oil and the broader commodity complex as well as equities if all of the historical relationship remain in play. At the moment the US dollar Index is hovering near levels not seen since the middle of 2010. If the US dollar continues to strengthen it will be very difficult for the short term oil bulls to remain very comfortable barring an elevation of the geopolitical risk and/or an offset to the rising US dollar... more US quantitative easing.
As I suggested last week the risk asset markets... including oil are in a battle between a slowing global economy versus money printing coming from all corners of the world. Supply and demand balances for oil are very comfortable at the moment. There are no shortages of oil anyplace in the world. Global inventories are mostly above normal for both crude oil and refined products. According to reports in the media a larger volume of Iranian crude oil (then originally expected) seems to be in the market as China continues to buy deeply discounted barrels. The only shortage of oil at the moment is not on the supply side rather it is on the demand side as global oil demand growth is continuing to contract with both the US and Europe expected to show a decline in oil consumption in 2012 while the main oil demand growth engine of the consuming much less oil than previously forecast. Bottom line barring an increase in the geopolitical risk of a supply interruption and/or more quantitative easing oil prices may be very close to a short term top.
The markets are heading into the lower liquidity part of the summer season as many players move into vacation mode. That said corporate earnings reports will continue to be hitting the media airwaves and have at least a short term impact on equity markets and due to the high level of macro correlation risk they will also impact commodities. In addition the market will be looking at every macro economic data point very closely leading up the next US Fed FOMC meeting on July 31- August 1. The more negative the economic data the more quickly the market will interpret the data point as increasing the likelihood of the Fed embarking on QE3. The coming week is a light week for economic data out of the US with the second half of the week a bit more interesting as jobless claims, durable goods orders, GDP and sentiment data hit the airwaves. These are all gauges that the market will quickly interpret as supportive or not supportive for more quantitative easing.
In spite of the selling on Friday most risk asset markets over the last week... including the oil complex was stronger across the board with WTI and Brent about equal in their weekly moves. The August WTI contract increased by about 4.98% or $4.34/bbl while the September Brent contract ended the week with an increase of 4.33% or $4.33/bbl. The spot Brent/WTI spread widened by only about $0.09/bbl for the week as the normalization process is still interrupted by lower loadings out of the North Sea. I still expect the spread to gradually continue to narrow over the next 3 to 6 months as the surplus in the US mid-west is also starting to recede from a combination of exports of crude oil out of the region through the Seaway pipeline coupled with refinery utilization rates at the highest level in months.
On the distillate fuel front the Nymex HO contract increased by 4.88% or $0.1361/gal on the week even as distillate fuel inventories surged higher for the second week in a row versus an expectations for a more modest build. Gasoline prices increased on the week after a small surprise draw in gasoline stocks. The spot Nymex gasoline price increased 4.51% or $0.1269/gal this past week.
Nat Gas futures increased surged on the week after a smaller than expected injection into inventory. The August Nat Gas futures contract increased by 7.2% or $0.207/mmbtu on the week and is now trading around well above the key psychological level of $3.00/mmbtu.
Just about every risk asset market was lower on Friday with the excepting of Nat Gas. I have not been able to make that kind of comment very much over the last several years... in fact it was just the opposite statement as Nat Gas was in such a strong downtrend. Nat Gas has staged a decent recovery rally since bottoming out after hitting a low of around the $1.90/mmbtu level on April 20th. Since then the spot futures price has risen by about $1.15/mmbtu or about 60%. The recovery so far has been driven based on an improvement in the current fundamentals. The overhang or surplus in inventory compared to last year and the five year average for the same week peak around the 900 BCF level. Since then the overhang in inventory has been steadily declining and is now hovering around the 500 BCF level. The inventory overhang has declined by about 45% since peaking. Simply put that is why Nat Gas prices have moved higher.
The two main reasons why the inventory overhang has been declining is a modest voluntary reduction in supply and an improvement in demand. The demand impact has been a much more significant impact on the overall supply and demand balances than the supply cuts seen to date. The improvement in demand over last year has been three-fold... a small increase in industrial consumption related to the small increase in economic activity in the US, coal to Nat Gas switching and an increase in cooling related Nat Gas demand due to the extreme heat during the first half of the summer. The increase has resulted in weekly injections underperforming. The injection season to date has averaged 67.3% of last year's fill rate and 67.6% of the injection level of the five year average.
As I have been discussing the economics of coal to Nat Gas switching has moved back to being more economically favorable to coal than Nat Gas for the majority of the time over the last several weeks. With high inventories of coal at many utility locations coupled with unfavorable economics for Nat Gas over coal I would expect some utilities to move back to coal... if they have not already done so. The big increase in Nat Gas demand as a result of coal to Nat Gas switching has peaked and is now on the down swing. Future injections will be impacted.
Cooling related Nat Gas demand is also likely to start receding as the latest temperature forecast by NOAA is projecting above normal temperatures over a smaller portion of the US than what was actually experienced during the first part of the summer. The extreme is projected to be mainly in the mid section of the US... bad for the crop but not as severe for cooling demand as this section of the US is a lower population area compared to the coastal areas...which are both projected to experience normal to even below normal temperatures into very early August. Unless the projected area of the country expecting extreme heat increases significantly I now expect cooling related Nat Gas demand to also have peaked.
The last variable in the short term that has been keeping Nat Gas prices bid has been the large amount of nuclear power generation capacity that is currently down versus last year and the five year average. As of today 9,200 MW of capacity is out of service versus 2,700 MW last year and 4,400 MW for the five year average for the same week. However some of the capacity that was shut down over the last several days is already back into restart mode suggesting that nuclear capacity should be closer to normal for this time of the year in the not too distant future.
Overall I still view Nat Gas futures prices as overvalued versus the current fundamentals. There is still an exposure of the industry prematurely hitting maximum storage capacity especially if some of the increases in demand do start to recede as describes above. Also do not lose sight of the simple fact that even if the industry does not prematurely hit storage limitations there will be a record amount of Nat Gas in storage prior to the start of the upcoming winter heating season. there will not be a shortage or supply related issues anytime soon ...barring some unforeseen tropical activity in the US Gulf of Mexico.
On the financial front equity markets around the world were mostly higher on the week. The financial markets were mostly impacted by better than expected corporate earnings as well as growing belief that more easing is on the way. Global equity values increased as shown in the EMI Global Equity Index table below and is now marginally in positive territory for the year.
The EMI Index increased by 0.5% on the week and is in now back in positive territory for the year by 0.1%. Over the last week the Index increased in value in most all of bourses with three bourses still in negative territory for the year. At the moment the global equity markets are struggling to stay in positive territory except for Germany which is soaring higher based on the falling euro which is a major benefit to this export driven economy.
The euro lost ground on the week while the US dollar firmed marginally. Last week the global equity markets were a neutral price driver for oil and most commodity markets for most of the week until the selling on Friday.
I still think the oil price is overvalued. However, the combination of the evolving geopolitical concern around Iran and the Middle East as well as the view that the global Central Banks are more likely to ease monetary policies further as well as initiating a new round of stimulus should contribute the market stabilizing (after some profit taking selling). For the moment the oil complex is still trying to establish a new trading range.
I am keeping my view at neutral as the hot weather that has persisted across major portion of the US has subsided a bit and the rest of July is not likely to be as hot over the entire US as it was for the second half of June. In addition the economics of coal switching now favors coal which will result in a reduction in Nat Gas demand. Finally Nat Gas at current price levels is overvalued and is becoming more susceptible to a round of selling.

20120723 1208 Global Market Related News.

Asia FX By Cornelius Luca - Sun 22 Jul 2012 17:17:09 CT (Source:CME/
The European and commodity currencies open under pressure in the Far East after tanking on Friday amid concern that the US economy is heading for another recession. All eyes remain on the euro and franc, which took their downtrends to new lows. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short only the euro and franc.  Good luck!

Canada: The Consumer Price Index has contracted 0.4% in June after expanding 0.2% in May.

Today's economic calendar
Australia: Producer Price Index for the second quarter

Asia Stocks Fall for Second Day on China Slowdown, Greece (Source: Bloomberg)
Asian stocks dropped for a second day after a Chinese central bank adviser forecast an economic slowdown and on renewed concern that Greece may not meet its bailout targets, damping demand for riskier assets. Shimao Property Holdings Ltd. paced losses among Chinese developers in Hong Kong, falling 2 percent. Samsung Electronics Co. (005930), which gets 47 percent of its revenue in China and Europe, lost 2.7 percent in Seoul. China Pacific Insurance (Group) Co. slumped 7.3 percent in Hong Kong on a share sale plan. BHP Billiton Ltd. (BHP), the world’s largest mining company, lost 2.9 percent in Sydney as lower oil and metal prices weighed on growth-sensitive companies. Gauges of volatility in Asia rose, reflecting rising risk aversion among investors. The MSCI Asia Pacific Index lost 1.5 percent to 114.97 as of 11:40 a.m. in Tokyo with more than seven stocks dropping for each that gained. The measure rose 1.2 percent last week.
“There are many global macro headwinds,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian unit. The Swiss bank has about $1.5 trillion in assets under management. “Risk aversion persists for many investors. Cautious corporate guidance remains, given the many different macro and political challenges.” The MSCI Asia-Pacific Index fell 9.5 percent from this year’s high on Feb. 29 through last week amid concern China’s economy will slow and Europe’s sovereign-debt crisis will worsen. The regional benchmark trades at 11.8 times estimated earnings, compared with a multiple of 13.2 for the S&P 500 Index and 10.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Asian Stocks Drop With Euro as Treasuries Gain on Growth Concern (Source: Bloomberg)
Asian stocks fell, while the euro weakened to an 11-year low against the yen and Treasury 10-year yields dropped to a record as a Chinese central bank board member warned of slowing growth and on concern Greece may exit the currency bloc. Corn declined after touching a record. The MSCI Asia Pacific Index tumbled 1.5 percent at 11:14 a.m. in Tokyo as Hong Kong’s Hang Seng Index slid 2.6 percent. Futures on the Standard & Poor’s 500 Index dropped 0.4 percent. The euro touched a two-year low against the greenback, and the Australian and New Zealand dollars each fell 0.6 percent. The yield on the U.S. 10-year note slumped to 1.4348 percent, while Asian government bonds rallied. Corn lost 1 percent after climbing to an all-time high of $8 a bushel.
“It’s going to be volatile, it’s going to be difficult,” said Raymond Chan, chief Asia-Pacific investment officer at Allianz Global Investors, which oversees about $300 billion. “We’ve not seen any solutions to make sure that the euro stays intact.” In China, “we don’t expect a strong recovery but we’ve probably seen the worst already,” Chan said in a Bloomberg Television interview. China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months to September, said Song Guoqing, a member of the People’s Bank of China monetary policy committee. Greece’s creditors meet this week amid doubts that the country will meet its bailout commitments. German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. A July 27 report may show the U.S. economy grew in the second quarter at the slowest pace in a year.

Japan Stocks Drop to One-Month Low on China, Euro Concern (Source: Bloomberg)
Japanese stocks fell, heading for their lowest close in a month, as a Chinese central bank adviser warned of slowing growth and after the yen rose to a 11-year high against the euro amid renewed concern Greece may exit the currency bloc, curbing the outlook for exporters. Komatsu Ltd. (6301), a maker of construction machinery that gets 14 percent of its sales in China, fell 2.6 percent. Ricoh Co. (7752), a producer of office equipment that counts on Europe for 21 percent of revenue, retreated 5.6 percent. Nippon Steel Corp. (5401) paced declines in the sector on a report the company will probably report an 80 percent fall in first-quarter profit. The Nikkei 255 Stock Average (NKY) slid 1.5 percent to 8,542.65 at the 11:30 a.m. trading break in Tokyo, the lowest since June 12. The broader Topix Index fell 1.1 percent to 725.82, with more than three shares declining for each that rose.
“There’s a lot of bad news to start the week with,” David Gaud, a senior portfolio manager at Edmond de Rothschild Asset Management in Hong Kong, said on Bloomberg Television. “The markets are facing a lot of negative news, a lot of uncertainty from Europe. Second quarter GDP in China was probably a little below what official numbers are stating.” Stocks fell on expectations China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months through September, according to Song Guoqing, an academic member of the People’s Bank of China monetary policy committee. Komatsu fell 2.6 percent to 1,667 yen. Taiyo Yuden Co., a maker of electronic parts that gets 30 percent of sales in China, slid 5.9 percent to 636 yen.

Profit Growth Doubts at Baidu Spur ADRs Tumble: China Overnight (Source: Bloomberg)
Chinese stocks fell for a third week in New York before Internet companies from Baidu Inc. to International Ltd. (CTRP) report second-quarter earnings that analysts estimate will show slower profit growth. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. sank 1.9 percent last week to 86.11. Baidu, the nation’s largest online search engine, hit an 18- month low while online travel agency Ctrip capped the longest losing streak since 2008. New Oriental Education & Technology Group Inc. (EDU) fell the most on record after saying the U.S. regulator is investigating its accounting practices and Muddy Waters LLC questioned its ownership structure.
Analysts expect Baidu to report today that profit in the three months ended June 30 rose 52 percent, after growing at least 70 percent in the previous nine quarters, according to data compiled by Bloomberg. Government reports showed net income for state-owned companies dropped 12 percent in the first half while gross domestic product expanded last quarter at the slowest pace in three years. “They will give us very little upside surprise,” Michael Ding, lead manager of the China Region Fund (USCOX) at U.S. Global Investors Inc., which oversees $2.2 billion, said in a telephone interview from San Antonio, Texas on July 20. “Advertising sales of Internet companies slowed down amid a slowdown in consumption. Baidu’s growth is on the downside as it doesn’t have many new revenue sources.”

European Stocks Rise for Seventh Week on Company Earnings (Source: Bloomberg)
European stocks climbed for a seventh straight week, the longest winning streak in more than six years, as better-than-expected earnings offset concern that the euro area crisis is deepening. ASML Holding NV (ASML), Europe’s biggest semiconductor equipment maker, Akzo Nobel NV, the world’s largest paintmaker, and SEB AB (SEBA) all advanced this week after posting results that beat analyst estimates. The Stoxx Europe 600 Index climbed 0.8 percent to 258.17 this week, for the longest stretch of gains since January 2006 even after falling 1.4 percent on Friday. The gauge has rebounded 10 percent from this year’s low on June 4 as central banks from Europe to China eased monetary policy to help spur economic growth. “Investors have been given the rare opportunity to focus on companies as the earnings reporting season continued to filter through,” said Simon Reynolds, a fund manager at Octopus Investments in London. “Upbeat U.S. earnings have helped lift equity markets.”
Of the 46 companies on the Stoxx 600 that have reported earnings this quarter, 48 percent beat forecasts, according to data compiled by Bloomberg. On the Standard & Poor’s 500 Index, 73 percent of the 118 companies that have reported quarterly earnings have topped analyst estimates, the data show.

S&P 500 Has First Back-to-Back Weekly Gain Since June (Source: Bloomberg)
U.S. stocks rose for the week, giving the Standard & Poor’s 500 Index its first back-to-back gain since June, as results from International Business Machines Corp. (IBM) to Baker Hughes Inc. beat forecasts and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus. The benchmark index snapped a three-day rally on the final day amid concern Europe’s crisis is intensifying. Baker Hughes surged 16 percent to lead energy shares to the biggest weekly gain among 10 S&P 500 groups. Technology stocks rose 1.9 percent as IBM climbed 3.5 percent and EBay Inc. (EBAY) jumped 12 percent amid better-than-expected earnings. Financial companies had the biggest retreat after Bank of America Corp. (BAC) and Morgan Stanley (MS) sank more than 9 percent amid disappointing results. The S&P 500 added 0.4 percent to 1,362.66 during the week, extending its gain for the year to 8.4 percent. The Dow Jones Industrial Average climbed 45.48 points, or 0.4 percent, to 12,822.57, the biggest weekly gain since June 29.
“There is this euphoria that maybe things are starting to turn around,” Linda Bakhshian, a money manager with Federated Investors in Pittsburgh, said in an interview. Her firm oversees $363.6 billion. “Expectations were pulled back. Companies are beating and the market is happy again because things are not that bad.”

Recap Stock Index Market Report (Source:CME)
The September S&P 500 trended lower throughout the trading session and erased all of yesterday's gains and more. Fresh concerns over the European debt situation inspired a round of profit-taking after the recent run up and ahead of the weekend. Earnings this morning from General Electric came in slightly better than expected but revenues fell short of estimates. Some analysts indicated that while the recent earnings flow has been above expectations, there are signs that weakness in Europe was filtering through. Most of the major sector indices were lower, led by declines in technology and financial-related shares. The September S&P 500 finished the week with a fractional gain after breaking out to its highest level since May 3rd on Thursday.

FOREX-Euro seen vulnerable to selling on Spain concerns
LONDON, July 20 (Reuters) - The euro eased against the U.S. dollar and hovered near a record low versus the Australian dollar, looking vulnerable to further losses as investors fretted about Spain's fiscal woes and favoured currencies with a higher yield.
"We have still got a market that fundamentally does not believe Spain will be in a position to support itself going forward. The euro will probably stay in a range today but pressure will return to the downside," said Simon Derrick, head of currency research at Bank of New York Mellon.

Australian, N.Z. Dollars Fall Amid European Debt Concern (Source: Bloomberg)
The Australian and New Zealand dollars slid for a second day as Asian stocks extended a global equity rout amid concern Europe’s debt crisis is worsening, reducing demand for higher-yielding assets. The so-called Aussie dollar fell against the yen before data this week forecast to show Australian inflation eased, giving the Reserve Bank more room to consider reductions in borrowing costs. New Zealand’s currency, known as the kiwi, dropped versus most of its major peers after Spanish yields rose toward a euro-era record last week and on renewed prospects Greece will exit the currency union. “The European crisis is far from solved and those concerns are weighing on the market,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest- rate risk-management company. “Risk sentiment is very fragile and very volatile. You’ll likely to see the Aussie and the kiwi follow equities south.”
The Australian dollar fell 0.6 percent to $1.0319 as of 12:04 p.m. in Sydney from the close in New York on July 20, when it dropped 0.5 percent. The Aussie lost 0.8 percent to 80.81 yen. New Zealand’s dollar declined 0.6 percent to 79.48 U.S. cents. It dropped 0.8 percent to 62.25 yen. Australia’s government bonds advanced, pushing the yield on the benchmark 10-year security down by as much as 12 basis points, or 0.12 percentage point, to 2.81 percent, the lowest since June 5.

Euro Turns Carry Traders’ Favorite in Worst Year Since 2003 (Source: Bloomberg)
The euro’s strength against the U.S. dollar in the face of the region’s three-year banking and sovereign-debt crisis masks a nine-year low against other currencies, suggesting more weakness to come. While above a lifetime average of about $1.21, the 17- nation currency is at the lowest level since 2003 on a trade- weighted basis, according to a Deutsche Bank AG index that includes the yen, pound and Swiss franc. The European Central Bank’s July 5 reduction of its deposit rate to zero spurred investors to borrow euros to buy higher-yielding assets elsewhere, generating gains from the carry-trade for the first time in two years.
Even though the euro has slumped 24 percent from a high of $1.6038 in July 2008 as the debt crisis threatens to push the region into recession for a second time in three years, the drop is only about half the collapse versus Australia’s dollar. At the same time, the euro’s depreciation following ECB President Mario Draghi’s rate cuts is making exports more competitive and damping concern that the currency union will break up. “The euro has now joined the ranks of the funding currencies,” Ian Stannard, head of European currency strategy at Morgan Stanley in London, said in a July 20 telephone interview. “As far as safe havens are concerned, you can easily come to the conclusion that there are better alternatives to holding core European assets, which have negative yields, so you could see an outflow from Europe developing and the euro coming under broad pressure.”

Euro Drops to 11-Year Low Versus Yen Before Spain Auction (Source: Bloomberg)
The euro touched the lowest level in more than 11 years against the yen as concern escalated that Europe’s debt crisis is deepening. The 17-nation currency continued its decline against the dollar into a fourth day as a surge in Spain’s 10-year note yields toward a euro-era record last week dimmed the outlook for a bill sale tomorrow. The euro also weakened before data that economists said will show a gauge of consumer confidence hovered near a three-year low as Greece’s creditors assess the country’s progress in meeting its bailout targets. “The foreign-exchange market is going to be watching European bond market developments extremely closely this week,” said Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd. (NAB) in Sydney. “The euro-dollar rate will continue to go down.”
The common currency touched 94.75 yen, the lowest since November 2000, and traded at 94.80 as of 11:32 a.m. in Tokyo, 0.7 percent lower than the close in New York on July 20. It declined 0.3 percent to $1.2117 after sliding to as low as $1.2106, a level unseen since June 2010. The dollar fell 0.3 percent to 78.22 yen. Spain, the euro region’s fourth-biggest economy, will auction bills tomorrow maturing in three and six months. The nation’s benchmark 10-year yield climbed to 7.284 percent on July 20, almost matching the euro-era record 7.285 percent reached a month ago.

Treasury Yields Drop to Records (Source: Bloomberg)
Treasuries advanced, pushing 10- and 5-year yields down to record lows, before reports this week that may show growth in world’s biggest economy cooled and manufacturing and services output in the euro area stalled. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., wrote on Twitter that real assets are a “better bet” amid negative real interest rates in the U.S. Treasuries have handed investors a 1.2 percent return this month after a 0.4 percent decline in June, according to data from Bank of America Merrill Lynch. “Soft data in the U.S. is pretty consistent with what’s been happening across the globe,” said Michael Turner, an economist at RBC Capital Markets Ltd. in Sydney. “Yields are pretty low and there’s probably a fair bit of safe haven-type flow into them.”
Ten-year yields touched a record 1.4347 percent and were at 1.44 percent as of 11:44 a.m. in Tokyo, two basis points below the close on July 20. The 1.75 percent security due in May 2022 rose 5/32, or $1.56 per $1,000 face amount, to 102 27/32. The five-year yield slid to an all-time low of 0.5555 percent, while the rate on two-year U.S. government debt declined to as low as 0.1933 percent, the least since September 2011. The U.S. economy probably grew 1.4 percent in the three months through June, according to the median forecast in a Bloomberg News survey before the Commerce Department releases the data on July 27. That would be the slowest pace since the quarter ended June 2011 and compares with a 1.9 percent pace in the previous period.

Treasury 5-Year Yields Fall to Record on Europe Crisis (Source: Bloomberg)
Five-year Treasury note yields fell to a record low as data showed the U.S. economic growth slowing and investor concern Europe’s debt crisis is worsening led to increased demand for the safest assets. U.S. government debt gained for a fourth consecutive week as yields on Spain’s bonds climbed to record highs relative to German bunds. The pace of economic expansion in the U.S. probably cooled, data next week may show. The Treasury will sell $99 billion of two-, five-and seven-year notes next week. “Europe remains a big question,” said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, one of the 21 primary dealers required to bid on the securities. “Flight-to-quality bids will remain. We’re pricing in weak growth in the U.S.”
The five-year note yield fell this week five basis points, or 0.05 percentage point, to 0.57 percent, according to Bloomberg Bond Trader prices. It touched 0.5684 percent yesterday, below the previous mark of 0.577 percent set July 16. The benchmark 10-year Treasury yield fell three basis points to 1.46 percent after touching 1.4403 percent on July 16. It set a record low of 1.4387 percent June 1. The two-year rate fell four basis points 0.2015 percent, the lowest level since Sept. 23. Spain’s 10-year benchmark bond yields yesterday climbed above the 7 percent threshold for the first time since Prime Minister Mariano Rajoy unveiled his fourth austerity package last week. That’s the level that prompted bailouts for Greece, Ireland and Portugal.

Nasdaq Increases Payout in Facebook IPO to $62 Million Cash (Source: Bloomberg)
Nasdaq OMX Group Inc., the second- biggest U.S. stock exchange owner, revamped its proposal to compensate brokers that lost money in the public debut of Facebook Inc. (FB), boosting the payout to $62 million cash. The amendment, which follows criticism from Wall Street market makers and exchanges about the original plan, increases the compensation pool from $40 million and does away with a proposal to credit most of the money through reduced trading costs, according to a submission with the Securities and Exchange Commission. Member brokers who accommodated customers for losses will get paid first, it said. “It’s an attempt by Nasdaq to show that they recognize that their clients are very unhappy,” Larry Harris, a professor of finance and business economics at the University of Southern California in Los Angeles and a former chief economist at the SEC, said in a phone interview. “Clearly, making it all-cash is more palatable for regulators and for competitors.”
Delays and malfunctions on the Nasdaq Stock Market were the first signs of trouble in the May 18 Facebook initial public offering that burned investors, spurred losses on Wall Street and prompted lawsuits against the company, its exchange and the underwriters. At yesterday’s close of $28.76, the stock remains down 24 percent from the price set by underwriters, although it has recovered from its low of $25.87 in June.

Bank of America Defends China’s GDP Data (Source: Bloomberg)
Bank of America Corp. has stepped in to defend China’s second-quarter economic-growth data after analysts from Barclays Plc to Mizuho Securities Co. said the figures may be overstated. Shen Jianguang of Mizuho said in a research report this week that deeper slowdowns in industrial and electricity output contradict the gross domestic product statistics. Lu Ting, a Bank of America economist in Hong Kong, said in a July 19 note that industrial production is in line with GDP and that electricity data may fail to capture some growth. The debate shows how China’s government is still struggling to win the trust of economists and investors for GDP statistics that contain a fraction of the data released by the U.S. and Germany. Vice Premier Li Keqiang said in 2007 that GDP figures were “man-made” and “for reference only.”
“No country’s economic data are absolutely reliable, but China’s economic data are particularly unreliable,” said Dong Tao, Credit Suisse Group AG’s Hong Kong-based head of Asia economics excluding Japan, who has been covering the Chinese economy for the Swiss bank since 1998. “It’s subject to political intervention from both local governments and the central government -- that’s why people are suspicious of the data.” Shen, Mizuho’s Hong Kong-based chief Asia economist, said in an e-mail that actual growth is probably around 7 percent when considering monthly data including electricity, housing, infrastructure projects and lending. China may enact a “larger- than-expected stimulus package,” he said.

Top 2% Not Job Creators or Millionaires in Tax Debate (Source: Bloomberg)
President Barack Obama describes them as “millionaires and billionaires” who can afford to pay higher taxes. Republicans call them “job creators” who need to keep their money so they can hire more workers. As the Democratic president and his Republican opponents debate whether to extend the George W. Bush-era tax cuts for the top 2 percent of U.S. taxpayers -- individuals earning more than $200,000 a year and married couples making more than $250,000 -- their poll-tested phrases obscure the truth about who would be affected. They are two-earner professional couples living on the East and West Coasts, doctors, lawyers, engineers and Wall Street executives. Few are billionaires or earn more than $1 million a year, and most are not employers. “The 2 percent, they’re people who are successful in their professions, but they’re not the absolute rock stars,” said Leonard Burman, an economist at Syracuse University in New York. “There’s a big difference between the 99th percentile and the 99.9th.”

Growth Cooled as Americans Curbed Spending: U.S. Economy Preview (Source: Bloomberg)
The U.S. economy probably expanded in the second quarter at the slowest pace in a year as a weaker labor market prompted Americans to cut back on their spending, economists said before a report this week. Gross domestic product, the value of all goods and services the nation produced, rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of 70 economists surveyed by Bloomberg News. Factory orders softened and new-home sales were little changed, other data may show. Consumer purchases, which account for about 70 percent of the world’s largest economy, are weakening at a time Europe’s debt crisis and looming U.S. tax-policy changes threaten to further restrain corporate investment. The deceleration in growth, a concern Federal Reserve Chairman Ben S. Bernanke highlighted last week, will make it harder to trim unemployment stuck above 8 percent since February 2009.
“We’re seeing weak numbers pretty much across the board,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York. “Softening consumption is definitely a big part of the slowdown. The uncertainty over Europe and the fiscal cliff will impinge on business decisions and activity.” A projected 1.3 percent gain in second-quarter household spending would be the smallest in a year and follow a 2.5 percent rise in the January to March period, according to the median projection ahead of the GDP release by the Commerce Department on July 27.

Canada Growth Risks Lagging U.S. as Exports Cool: Economy (Source: Bloomberg)
Canada’s economic growth is at risk of falling behind the U.S. next year for the first time since 2006 as exports slow and spending by companies and consumers cools. A lower-than-forecast increase in consumer prices reported today by Statistics Canada adds to evidence of a slowdown. Data this month showed the trade deficit widened in May and factory sales fell. Bank of Canada Governor Mark Carney this week lowered his growth projection for the world’s 10th largest economy this year to 2.1 percent from 2.4 percent. Carney reiterated that it “may become appropriate” to raise the benchmark lending rate for the first time since September 2010, even as a slowing global economy prompts central banks from China to the U.S. to ease policy. Investors are skeptical of Carney’s outlook: trading based on overnight index swaps shows no chance of an increase through the end of the year. The median estimate of economists surveyed by Bloomberg is for the first increase to come in the second quarter of 2013.
While today’s report probably doesn’t fundamentally change the central bank’s outlook, it “does allow them to stay on hold for longer given that inflation has been surprising on the low side,” said Doug Porter, deputy chief economist at Bank of Montreal, by telephone. The consumer price index climbed 1.5 percent in June from a year earlier, compared with a 1.2 percent gain the prior month, Statistics Canada said today. The core rate, which excludes eight volatile products, increased 2.0 percent after a gain of 1.8 percent in May. Economists surveyed by Bloomberg projected a 1.7 percent gain for CPI and 2.3 percent increase for the core figure.

China Central Bank Adviser Forecasts Growth Slowdown to 7.4% (Source: Bloomberg)
A Chinese central bank adviser predicted the nation’s expansion may cool to 7.4 percent this quarter, adding to concern that the world’s second-biggest economy has yet to bottom out. Song Guoqing, an academic member of the People’s Bank of China monetary policy committee, also warned that a decline in producer prices in tandem with consumer inflation may hurt investment returns of industrial companies, damping their desire to expand. China’s economic growth slowed to 7.6 percent in the three months ended June, the sixth straight deceleration, as Europe’s fiscal crisis sapped exports and a crackdown on property speculation curbed domestic demand. Premier Wen Jiabao said the momentum for a recovery isn’t yet in place, according to a July 15 Xinhua News Agency report, and warned two days later that the labor situation will become more “severe.”
“The consensus is that China’s economic growth rate will be close to 8 percent in coming months, but I personally am more pessimistic because there are problems on the export side,” Song said at a forum in Beijing on July 21. With Europe’s debt crisis still unfolding, “there is a risk of insufficient government measures if Chinese exports fall more sharply than expected in coming months,” he said.

Aging Japan-Chinese Workers Drive Jobs to Southeast Asia (Source: Bloomberg)
Jose Winylito Tanquis has reason to be proud as he raises a flag to signal the launch of the 58,000- ton “Ocean Symphony” in the Philippines. Not only did he help build the cargo vessel, his son John now works at the yard. “Now, he can buy his own stuff, like shoes and clothes,” said Tanquis, 47, a foreman at Tsuneishi Holdings Inc.’s yard in Balamban on Cebu Island. At 21, John is the eldest of six siblings who will enter the workforce in the next decade. The so-called demographic dividend from a rising supply of young workers is one reason Japan’s second-largest shipbuilder expanded in the Philippines, where workers are on average half the age of its Japanese employees. Tsuneishi is considering Indonesia, the Philippines and Myanmar for another shipyard, said Hitoshi Kono, chief of the company’s local operation.
Asia’s manufacturing powerhouses -- Japan, South Korea and China -- are among the fastest-aging countries in the world, while developing nations in Southeast Asia are among the youngest in the region. As factories, jobs and investment flow south to tap cheaper labor, growth in the 10-member Association of Southeast Asian Nations is poised to accelerate, propelling the area’s currencies and fueling consumer and property booms, Bank of America Corp. says. “The demographic dividend is over for Japan and Korea, and it will be over for China soon,” said Yoshimasa Maruyama, chief economist at Itochu Corp., Japan’s third-largest trading company. “It’s happening now in the Asean area, and it will continue for some time.”

South Korea to Ease Mortgage Lending Rule to Spur Consumption (Source: Bloomberg)
South Korea will ease a rule on mortgage lending to stimulate the real-estate market and boost consumption as faltering global demand hurts the export-reliant economy, an adviser to President Lee Myung Bak said. “We have seen that there are many irrational aspects to the debt-to-income ratio limit” banks apply to residential mortgage borrowers, Kim Dae Ki told reporters yesterday in Seoul. “While we will maintain the basic framework of the regulation, we concluded that certain irrational parts of the rule should be eased,” he said, without elaborating. South Korea’s central bank unexpectedly cut its benchmark interest rate on July 12 for the first time in more than three years as policy makers stepped up measures to counter the impact of Europe’s debt crisis, a Chinese slowdown and muted U.S. job creation.
Growth in Asia’s fourth-largest economy may have slowed to 0.5 percent in the second quarter from the previous three months, according to the median estimate in a Bloomberg News survey ahead of a preliminary report due July 26. “We expect Korea’s export-oriented economy to continue to struggle amid tougher global economic conditions,” economists led by Mark Williams and Andrew Kenningham at London-based Capital Economics Ltd. wrote in a note dated July 23. “As a result, the Bank of Korea’s policy rate cut this month is likely to be followed up with more loosening soon,” they wrote.

Maruti Suzuki Imposes Lockout at India Plant After Riot (Source: Bloomberg)
Maruti Suzuki India Ltd. (MSIL), the country’s largest carmaker, locked out workers at a factory near New Delhi and ruled out restarting production until a probe is completed into rioting that led to the death of a manager. The automaker, majority owned by Suzuki Motor Corp. (7269), won’t import cars to make up for the loss of production at its Manesar factory, which accounts for about 40 percent of its total capacity, Chairman R.C. Bhargava told reporters in New Delhi on July 21. He didn’t say how long the investigation would take or when workers would return to the plant. The latest production stoppage is the fourth in the past year at Manesar factory. All 3,000 union workers at the plant will be charged with murder and attempted murder for the mob attack that caused the death of Awanish Kumar Dev, a human resources general manager, and at least 70 injuries, Indian police said July 19.
The Federation of Indian Chambers of Commerce and Industry, one of the nation’s two largest business lobbies, said that the violence threatens India’s investment reputation. “It’s a matter of deep concern for a country that seeks to project itself as offering an environment that is business- friendly,” R.V. Kanoria, president of the lobby, said in an e- mailed statement on July 21, calling for authorities to deal “firmly” with the situation. Maruti has no plans to relocate the plant out of Manesar in northern Haryana state, Bhargava said. A factory at Gurgaon, about 12 miles northeast of Manesar, is operating at full capacity, he said. Suzuki has said production facilities weren’t damaged by the unrest.

Rupiah Declines Most in a Week on China Slowdown; Bonds Steady (Source: Bloomberg)
Indonesia’s rupiah declined the most in a week on concern growth in the world’s second-largest economy may slow further, reducing appetite for emerging-market assets. Government bonds were little changed. The Bloomberg-JPMorgan Asia Dollar Index dropped to a one- week low after Song Guoqing, a Chinese central bank adviser, said July 21 the nation’s growth may slow to 7.4 percent this quarter from 7.6 percent in the previous period. Global funds withdrew 1.1 trillion rupiah ($116 million) from local bond holdings in the first three days of last week, finance ministry data show. China is the largest market for Indonesian exports. “Negative external sentiment still weighs on the rupiah,” said Gusti Kahari, a foreign-exchange dealer at PT Bank Artha Graha Internasional in Jakarta. “It is unlikely to fall below 9,500 as Indonesia’s fundamentals are still relatively good.”
The rupiah weakened 0.4 percent to 9,490 per dollar as of 9:02 a.m. in Jakarta, the biggest drop since July 12, prices from local banks compiled by Bloomberg show. One-month implied volatility, which measures exchange-rate swings used to price options, held at 8 percent.

Australia May Have One Rate Cut Left in Cycle, Deloitte Says (Source: Bloomberg)
Australia’s central bank may cut the benchmark interest rate once more in this cycle if China can maintain its growth outlook, Deloitte Access Economics said. China has “boosted the ability of banks to lend and accelerated the go-ahead on everything from steel mills to alternative energy, hospitals and railways,” the Canberra-based research company said in a report today. “That mix helps limit blowback on global growth, which may not be far below longer term trend. But the risks are real. Either Europe or China -- or, heaven forbid, both -- could upset the applecart.” The Reserve Bank of Australia kept borrowing costs unchanged this month as domestic economic growth and previous interest-rate reductions help the local economy weather global disruptions. The central bank reduced rates by a total of 75 basis points in May and June to help cushion the economy from the fallout in Europe and slower growth in China.
“Much still hinges on Europe and China,” Deloitte said today. “Provided neither generates worse news than already expected -- an admittedly key caveat -- then we’d stick to the view we’ve had for a while: that the overall outlook for Australian growth is still looking rather better than most people realize.” Australia’s core inflation probably slowed to 1.9 percent last quarter, below the central bank’s 2 percent to 3 percent target range, a survey of economists showed before a July 25 government report.

Argentine Factory Output Tumbles as Brazil Buys Fewer Cars (Source: Bloomberg)
Argentina’s industrial production fell more than 4 percent for a second straight month in June, the biggest two-month drop in a decade, as slowing growth in Brazil undermines automobile exports and steel production. Output fell 4.7 percent last month from a year earlier and 0.1 percent from May, the national statistics institute said today in Buenos Aires. The annual decline was steeper than forecast by eight economists surveyed by Bloomberg, whose median estimate was for a 4.5 percent fall. Auto production, which led industrial growth in recent years, dropped 34 percent in June, mainly because of lower demand from neighboring Brazil. South America’s second-biggest economy, which defaulted on $95 billion in late 2001, will expand 2.45 percent this year, the least since 2009, according to the median estimate of six economists surveyed by Bloomberg. Economic activity fell 0.5 percent in May from a year earlier, the first year-over-year decline since July 2009, the agency said.
Brazil’s economy is recovering more slowly than expected from a contraction in last year’s third quarter. Gross domestic product expanded at a 0.8 percent annualized rate in the first quarter, and economists in the latest central bank survey lowered their 2012 growth estimate for the 10th straight week, to 1.9 percent.

Brazil Inflation Unexpectedly Jumps, Ending Downward Trend (Source: Bloomberg)
Brazil’s inflation unexpectedly accelerated this month, reinforcing investors’ bets that the central bank will soon end a cycle of interest rate cuts that has taken borrowing costs to a record low.
Consumer prices as measured by the IPCA-15 price index rose 0.33 percent in the month through July 13, exceeding all 42 analyst estimates in a Bloomberg survey whose median forecast was for a 0.18 percent increase. The annual inflation rate accelerated for the first time in 10 months to 5.24 percent, the national statistics agency said in Rio de Janeiro today. Brazil’s central bank has cut the benchmark Selic rate by 450 basis points since August to a record low 8 percent, saying slower global growth will have a disinflationary effect on Latin America’s biggest economy. Traders pared bets that the central bank will cut the key rate to as low as 7.25 percent this year as today’s report showed inflation remains a concern. “The downward trend has run its course and you’re now going to see inflation hovering above 5 percent,” Newton Rosa, chief economist at SulAmerica Investimentos, said in a phone interview from Sao Paulo. “This is beginning to limit the central bank’s ability to keep cutting.”

U.K. Second-Quarter GDP Seen Declining 0.2% as Recession Deepens (Source: Bloomberg)
The U.K. economy probably contracted for a third consecutive quarter in the three months through June as a double-dip recession deepened, economists said. Gross domestic product fell 0.2 percent, according to the median estimate of 36 economists in a Bloomberg News survey. It shrank 0.3 percent in the first quarter and 0.4 percent in the last three months of 2011. The Office for National Statistics will publish the data on July 25. The Bank of England expanded its emergency bond-purchase program this month and introduced measures to boost lending. The International Monetary Fund said this week that the recovery has “stalled” and the government may need to consider easing its budget squeeze if central bank efforts fail to help the economy gather momentum.
“Tight fiscal policy and still significant problems for consumers” will “limit U.K. economic activity,” said Howard Archer, an economist at IHS Global Insight in London. “Ongoing euro-zone sovereign debt problems and weakened economic activity are expected to continue to weigh down on U.K. recovery prospects.” From a year earlier, the economy probably shrank 0.3 percent in the second quarter, according to a separate Bloomberg survey. Activity in the quarter was probably affected by the extra public holiday for the queen’s Jubilee in June. Bank of England policy makers expanded stimulus by 50 billion pounds ($78 billion) to 375 billion pounds on July 5. In the minutes of the meeting, they said they may review the merits of cutting their benchmark interest rate, currently at a record- low 0.5 percent.

Spain Insists $15 Billion Aid for Regions Won’t Swell Debt (Source: Bloomberg)
Spain’s plan to offer cash-strapped regional administrations emergency loans leaves the Treasury with 12 billion euros ($15 billion) of additional funding needs that the government says won’t affect its borrowing plans. The central government will tap the lottery for part of the 18 billion-euro fund for regions, leaving 12 billion euros for the Treasury to finance. While Economy Minister Luis de Guindos said yesterday that the plan won’t affect the nation’s borrowing program, economists including Jose Carlos Diez at Intermoney SA say it will be hard to sustain without selling more debt. “Where will it come from?” said Diez, chief economist at the Madrid-based brokerage, which is Spain’s biggest bond trader. “In the end it has to add to their financing needs.”
Spain’s Cabinet approved the creation of the fund on July 13 to help regions that have lost access to markets meet debt redemptions and finance deficits. The decree states that the facility will be funded with public debt and the Treasury’s borrowing program will “incorporate the amounts” needed. Valencia, the second-most indebted region, said today it was preparing to tap the fund as it faces a liquidity squeeze.

Greece Back at Center of Euro Crisis as Exit Talk Resurfaces (Source: Bloomberg)
Greece retakes its position at the heart of the European debt crisis this week as its creditors assess how far off course the country is from bailout targets, raising again the specter of its exit from the euro. Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow amid doubts the country will meet its commitments and reluctance among euro-area states to put up more funds should it fail. “If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told broadcaster ARD yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.”
After euro finance ministers failed to staunch a fresh low for the single currency last week with the approval of a 100 billion-euro ($122 billion) aid package for Spain, the troika will be tasked with determining the fiscal position of the nation where the crisis began almost three years ago. Greece is clamoring for more help as efforts to cut its debt to 120 percent of gross domestic product by 2020 fall short.