Asia Stocks Fall as World Outlook Damps China Easing Speculation

January 12, 2012, 12:30 AM EST By Jonathan Burgos

Jan. 12 (Bloomberg) -- Asian stocks fell, with a regional benchmark index snapping three days of gains, as weaker Japan trade data added to evidence of a global slowdown, damping speculation that lower inflation in China may result in looser monetary policy.

Sony Corp., Japan’s biggest exporter of consumer electronics, fell 2.5 percent after the nation’s current-account surplus narrowed. QBE Insurance Group Ltd. plunged 13 percent in Sydney after saying 2011 profit dropped as much as 50 percent. Infosys Ltd., India’s second-largest software exporter, tumbled after cutting its sales forecast. Zoomlion Heavy Industry Science & Technology Co., a Chinese construction machinery maker, gained 1.6 percent in Hong Kong.

The MSCI Asia Pacific Index dropped 0.4 percent to 115.9 as of 1:54 p.m. in Tokyo, with three shares falling for every two that rose. The gauge advanced 1.7 percent in the past three days amid bets that China will ease monetary policy. The MSCI Asia Pacific excluding Japan Index was little changed after rising as much as 0.3 percent.

“If inflation keeps coming down, it increases the likelihood that China will deem it appropriate to continue to ease monetary policy,” said Will Seddon, who helps oversee $300 million at White Funds Management in Sydney. “The market has largely digested the possibility of a recession in Europe.”

Regional Indexes

China’s Shanghai Composite Index fell 0.2 percent, reversing gains of as much as 0.8 percent as the nation’s inflation cooled for a fifth straight month in December. Hong Kong’s Hang Seng Index slipped 0.1 percent, after advancing as much as 0.6 percent earlier.

Japan’s Nikkei 225 Stock Average slipped 0.9 percent. Australia’s S&P/ASX 200 Index lost 0.2 percent, with QBE Insurance as the main drag, according data compiled by Bloomberg.

South Korea’s Kospi Index added 0.3 percent and the BSE India Sensitive Index dropped 0.7 percent as Infosys declined.

Futures on the Standard & Poor’s 500 Index slid 0.1 percent today. The gauge was little changed in New York yesterday. The U.S. economic expansion improved last month across most of the country, while hiring was limited and housing remained stagnant, the Federal Reserve said in its Beige Book business survey.

Japanese exporters slid as the nation’s current-account surplus shrank 86 percent from a year earlier as slowing growth in China and Europe and the appreciation of the yen damped demand for Japanese products.

Japan’s Exporters

Sony, the maker of Bravia televisions and PlayStation game consoles, dropped 2.5 percent to 1,316 yen. Toyota Motor Corp., the world’s biggest carmaker by market value, dropped 1.4 percent to 2,589 yen. Canon Inc., the No. 1 camera maker, slipped 1.4 percent to 3,240 yen.

Infosys sank 6.7 percent to 2,636.55 rupees. The company reduced its full-year forecast for sales in dollar terms, citing weaker demand in developed economies including Europe.

The MSCI Asia Pacific Index gained 2.1 percent this year through yesterday, compared with a 2.8 percent advance by the S&P 500 and a 2.2 percent increase by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.2 times estimated earnings on average, compared with 12.3 times for the S&P 500 and 10 times for the Stoxx 600.

QBE Insurance tumbled 13 percent to A$11.30 in Sydney, the biggest decline on the regional benchmark index. The company said 2011 profit fell as much as 50 percent on record natural disaster claims and losses on bond investments.

‘Falling Knife’

“There won’t be too many brave investors stepping in to catch this falling knife,” Peter Esho, Sydney-based chief market analyst at City Index Ltd., a London-based provider of trading services in bonds, stocks and commodities, said in a note. “The number of catastrophes in such a short period of time have finally caught up to hurt the group’s bottom line.”

Chinese construction companies and machinery makers advanced after China’s inflation cooled to a 15-month low and producer-price gains were the smallest in two years in December, leaving the government more room to support growth as a global slowdown hurts exports.

Zoomlion Heavy gained 1.6 percent to HK$9.58 in Hong Kong. China Communications Construction Co., a builder of transport infrastructure, increased 2.2 percent to HK$6.85.

Solar energy producers surged after the China said it plans to start developing 3 gigawatts of solar power capacity in the five years through 2015.

GCL-Poly Energy Holdings Ltd., a Chinese producer of polysilicon used in solar panels, jumped 14 percent to HK$2.50. Trony Solar Holdings Co Ltd., a panel maker, climbed 8.3 percent to HK$1.17.

OCI Co., a South Korean supplier of polysilicon, surged 15 percent to 255,000 won in Seoul, the most on the MSCI Asia Pacific Index. Unit OCI Solar Power said it plans to build 400 megawatts of solar energy projects for CPS Energy in Texas.

--Editors: Nick Gentle, Jim Powell

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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China’s December Lending, Money Supply Signal Easing Conditions

January 08, 2012, 6:33 PM EST By Bloomberg News

Jan. 9 (Bloomberg) -- China’s December lending and money supply growth exceeded economists’ estimates, signaling monetary conditions may be easing as the nation’s central banker said it must be prepared for possible shocks from the U.S. and Europe.

New loans totaled 640.5 billion yuan ($101 billion) for the month, exceeding the estimates of all 18 economists surveyed by Bloomberg. M2, a measure of money supply, rose 13.6 percent, compared with the 12.9 percent median of 18 estimates.

People’s Bank of China Governor Zhou Xiaochuan said yesterday the nation must be ready to combat possible shocks from Europe’s debt crisis and an uncertain U.S. economic outlook, echoing comments by Premier Wen Jiabao. China last month cut the reserve requirement for banks for the first time since 2008 as Europe’s debt crisis eroded demand for its exports and consumer prices moderated to the slowest pace in 14 months.

“This is better-than-expected monetary data, suggesting monetary conditions have started to ease,” said Liu Li-Gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd., who previously worked at the World Bank. Liu said he expects that the central bank may cut the reserve requirement again before the Lunar New Year on Jan. 23. “Such easing will help ensure a soft landing for the Chinese economy,” he said.

The statement posted to the central bank’s website yesterday didn’t contain a figure for China’s foreign-exchange reserves, which are usually released with lending and money supply data issued at the end of each quarter.

External Shocks

Zhou yesterday said in an interview with the official Xinhua News Agency that the global economy will face “a string” of difficulties in 2012 as a result of the European debt crisis, uncertainties in the U.S. and slowing growth in emerging markets. China must be ready to pick appropriate policy instruments to combat external shocks, Zhou was cited as saying.

Fighting inflation is not as urgent now as it was in early 2011, Xinhua cited Zhou as saying after a two-day meeting of financial regulators in Beijing. The National Financial Work meeting, which was attended by senior officials including Premier Wen, is held every five years to form development plans for the financial sector, Xinhua reported.

Wen last week pledged to fine tune monetary policy to preserve growth as business conditions in the first quarter may be “relatively difficult.” The nation’s export growth slowed in November to the weakest pace since 2009.

China is scheduled to release data for December exports, imports and trade balance on Jan. 10. It’s also due to issue December inflation figures on Jan. 12 and data for annual 2011 and fourth-quarter economic growth on Jan. 17, according to the nation’s statistics bureau.

Money Supply

The central bank’s data yesterday showed that December money supply grew at the fastest pace since July. The 12.7 percent pace reported for November was the weakest since 2001.

Lending in December was the highest monthly figure since April. The median estimate of 18 economists surveyed by Bloomberg was for 575 billion yuan of loans in the month.

For the year, lending totaled 7.47 trillion yuan, according to the statement. The central bank may target lending in 2012 of 9 trillion yuan to 9.5 trillion yuan, said Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong.

The central bank still needs to ease liquidity in the money market to achieve more lending this year, Kowalczyk said. He said there is likely to be a cut of 250 basis points this year in the amount banks have to hold as reserves, with the first cut before the Lunar New Year holiday.

Deposits

Easing in monetary conditions as indicated by the December data could also reduce the urgency for further policy easing, said Ken Peng, a Beijing-based economist at BNP Paribas SA.

In addition to lending and money supply, the December data also showed Chinese banks added 1.43 trillion yuan of deposits in the month. These funds largely came from the release of fiscal deposits into the commercial banking system as government agencies conducted concentrated spending at the end of the year, Peng said.

A “tepid” M1 money supply growth of 7.9 percent in December suggests that the increased bank deposits may have a “lifting impact” on January money supply, Peng said.

In a separate statement also issued yesterday, the central bank said it will continue to implement prudent monetary policy this year while maintaining policy continuity and controlling inflation expectations. It will also make adjustments more targeted, flexible and forward looking, the central bank said.

--With assistance from Victoria Ruan in Beijing. Editors: John Liu, Dick Schumacher.

To contact Bloomberg News staff on this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net

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Contraction in China’s Manufacturing Boosts Easing Case: Economy

December 30, 2011, 10:45 PM EST By Bloomberg News

Dec. 30 (Bloomberg) -- China’s manufacturing contracted for a second month in December as Europe’s debt crisis cut export demand, fueling speculation that the central bank may cut lenders’ reserve requirements within days.

A purchasing managers’ index was at 48.7 in December from 47.7 in November, HSBC Holdings Plc and Markit Economics said today. A reading below 50 indicates a contraction.

Export orders fell in December for the first time in three months and domestic demand was “sluggish,” today’s report said. Demand for cash ahead of the week-long Chinese Lunar New Year holiday starting Jan. 23 may give officials an additional reason to cut banks’ reserve ratios after a reduction last month that was the first since 2008.

“A reserve ratio cut is likely to happen by Jan. 3, before markets resume trading,” said Li Wei, a Shanghai-based economist with Standard Chartered Bank. China’s exports are under threat because “the euro area is slipping into a recession and the U.S. is also expected to slow down in early 2012,” Li said.

A deeper slowdown in China, the world’s second-biggest economy, would impair a global expansion that is already faltering because of Europe’s austerity measures. Asian stocks rose today, paring the regional index’s first annual decline in three years, on signs of strength in the U.S. economy, where a report yesterday showed stronger-than-forecast home sales.

‘Starting to Bite’

The MSCI Asia Pacific Index added 0.2 percent at 12:42 p.m. in Tokyo, heading for an 18 percent drop this year.

In China, “weakening external demand is starting to bite,” said Qu Hongbin, a Hong Kong-based economist for HSBC. Policy easing may enable China’s economy to avoid a “hard landing,” he said.

Elsewhere in Asia, data from South Korea showed the government wrestling with elevated inflation even as threats to growth mount. The leadership handover in North Korea as Kim Jong Un takes control after the death of Kim Jong Il may undermine confidence in the South by adding to the risk of instability on the Korean peninsula.

South Korea’s inflation exceeded the central bank’s target and all forecasts in a Bloomberg News survey, limiting the scope for an interest-rate cut in January to support growth. Consumer prices rose 4.2 percent from a year earlier, matching November’s gain, Statistics Korea said. The median estimate of 12 analysts was 4 percent, and the central bank targets inflation of 2 percent to 4 percent.

Australian Lending

In Australia earlier, a central bank report showed private lending by banks and other financial companies rose 0.3 percent in November from the prior month, matching the median of nine economists’ forecasts.

In Europe today, reports may show house prices in the U.K. were unchanged in December from a month ago and German retail sales rose 0.2 percent in November from the prior month, according to the median estimates of economists surveyed by Bloomberg.

In Spain, a report may show consumer prices advanced 2.5 percent in December from a year ago, while figures on Italian producer prices may show a 0.1 percent gain in November from the month before, surveys showed.

The Chinese manufacturing index released today is based on answers to questionnaires sent to purchasing executives at over 400 manufacturing companies. The statistics bureau and the China Federation of Logistics and Purchasing will release a separate manufacturing index on Jan. 1. Last month, that gauge showed the first contraction since February 2009.

In November, China’s export growth was the weakest since 2009, excluding seasonal distortions at the start of each year.

Hitachi Construction Machinery Co., Japan’s second-largest heavy-equipment maker, said this month that Chinese demand for excavators will decline in the first half of next year, as the government prolongs a crackdown on property speculation.

Developer China Vanke Co.’s contract sales dropped 36 percent last month from a year earlier, while new home prices in Shanghai, Beijing, Shenzhen and Guangzhou slid from the previous month.

China’s inflation slowed to 4.2 percent in November, the slowest pace in 14 months. Third-quarter economic growth of 9.1 percent was the least in two years.

--Victoria Ruan with assistance from Ailing Tan in Singapore. Editors: Paul Panckhurst, Brendan Murray

To contact Bloomberg News staff on this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net

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Euro-Area Inflation Slowed in May, Easing Pressure on ECB

May 31, 2011, 7:48 AM EDT By Simone Meier

(Updates with comment from economist starting in fourth paragraph.)

May 31 (Bloomberg) -- European inflation unexpectedly slowed in May, giving the European Central Bank room to keep borrowing costs on hold next month.

Inflation in the 17-nation euro region slowed to 2.7 percent from 2.8 percent in April, the European Union’s statistics office in Luxembourg said today in an initial estimate. Economists had forecast no change in the inflation rate, the median of 33 estimates in a Bloomberg News survey showed. Unemployment held at 9.9 percent in April from the previous month, a separate report showed.

ECB President Jean-Claude Trichet has signaled that the central bank may keep interest rates on hold in June after last month increasing the benchmark rate 25 basis points to 1.25 percent to fight price pressures. With the recovery losing momentum and governments cutting spending to plug budget gaps, the Organization for Economic Cooperation and Development said on May 25 that further rate increases “are not required immediately.”

“The decline was largely down to lower energy prices and the unwinding of the ‘late Easter effect,’ which led to a surge in inflation in the leisure and entertainment sector last month,” Martin van Vliet, an economist at ING Groep NV in Amsterdam, said in an e-mailed note to investors.

Energy, Food Prices

“Looking ahead, euro-zone headline inflation is set to stay well above 2% in the remainder of this year as energy and food prices continue to have an upward impact on consumer prices,” van Vliet said.

The euro extended gains after the data were released, trading at $1.4415 at 11:34 a.m. in Brussels, up 0.9 percent.

The OECD forecasts euro-region growth to accelerate to 2 percent this year from 1.7 percent in 2010, with unemployment averaging 9.7 percent and 9.3 percent this year and next. Harmonized consumer prices may rise 2.6 percent in 2011 and 1.6 percent in 2012, the Paris-based group said.

Crude oil prices have surged 38 percent in the past year, trading at $102.03 a barrel today. That’s putting pressure on companies to protect earnings and pass on higher costs. Euro- region producer-price inflation unexpectedly accelerated in March and a gauge measuring households’ confidence in their ability to purchase big-ticket items in the coming year dropped in May from the previous month.

‘Second-Round Effects’

“We have to avoid commodity-price increases becoming entrenched in longer-term inflation expectations, which could have second-round effects on wages and prices,” Trichet said on May 26. “We are carefully monitoring the situation and we stand ready to do whatever is necessary.”

With rising prices sapping consumers’ spending power and governments from Spain to Ireland toughening austerity measures, the euro-region economy may struggle to gather strength. European services and manufacturing growth weakened in May and German investor confidence dropped more than economists forecast. European economic confidence also declined.

About 15.5 million people were unemployed in April, down 115,000 from the previous month, today’s report showed. At 20.7 percent, Spain had the highest jobless rate within the euro region. The Netherlands and Austria reported the lowest rate at 4.2 percent.

Michael O’Leary, chief executive officer of Ryanair Holdings Plc, Europe’s largest discount airline, told Francine Lacqua on Bloomberg Television’s “Countdown” on May 23 that while he’s “quite concerned” about economies, he remains “cautiously optimistic” for the full year.

‘Under Control’

“We have the costs very well under control,” O’Leary said. “We do better in a downturn because everybody gets more price-sensitive. We see strong growth in the first half of the year, being the summer months. As oil prices rise, we are going to cut capacity during the winter months.”

The statistics office will release a breakdown of May consumer prices next month. Euro-region core inflation accelerated to 1.6 percent in April from 1.3 percent in the previous month. That’s the fastest pace since April 2009.

The ECB is scheduled to hold its next monetary assessment on June 9 in Frankfurt.

--With assistance from Jurjen van de Pol in Amsterdam, Kristian Siedenburg in Budapest and Francine Lacqua in London. Editors: Patrick Henry, Jennifer M. Freedman

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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