Stocks Await Their Tipping Point

If you really think about it, Fed Chairman Ben Bernanke has this Clark Kent thing going on. By night, he is a soft-spoken family man, more blue collar than blue blood—an academic who carries a Jos. A. Bank charge card. By day, he flexes monetary superpowers, including the ability to conjure up trillions of dollars to buy Treasuries and mortgages.

One thing SuperFed can’t do—at least not directly—is goose the economy and popular confidence by buying stocks. It can, however, do this transitively, by inducing what Wall Street likes to call a “pain trade”—forcing investors out of the perceived safety of risk-lite Treasuries. Then, if all goes as planned, they will find themselves maxing opportunity out of yield-sapped corporate bonds, including higher-risk junk bonds. Bernanke, you see, is making investors grovel for return. And if they grovel long enough, they are bound to finally make that capital-structure leap of faith to the stock market. Retirement-account values will go up. Companies will have more valuable currency with which to make acquisitions. Hiring and consumption could well take heart.

Fifteen years after Bernanke’s predecessor Alan Greenspan famously warned of irrational exuberance in markets, the long-awaited great migration back to equities (following the 2000s’ two growling bear markets) has yet to happen. But if things continue apace, and Bernanke keeps doing what he’s doing, it could take hold any day now.

“We’ve come from financial depths that none of us have ever seen,” says Meg Green, chief executive officer of Meg Green & Associates, an Aventura (Fla.) wealth manager. “As night follows day, though, there’s light at the end of the tunnel. Riding the market waves should become second nature, letting longer-term portfolios travel on an upward trend.”

In the meantime, it’s been all fixed-income, all the time. (Not that stocks have been banished to Vladivostok. The Standard & Poor’s 500-stock index is up 14 percent so far this year, and has more than doubled off its financial-crisis low.) Investors have plowed just under half a trillion dollars into bond funds this year, according to EPFR Global. Thanks in large part to record-low borrowing costs brought on by the largesse of the Federal Reserve and its overseas counterparts, the bond market is putting the finishing brushes on an all-you-can-eat year. Corporate bond sales from the U.S. to Europe and Asia have crossed 2009’s record to reach $3.89 trillion, up from $3.29 trillion last year and $3.23 trillion in 2010, according to data compiled by Bloomberg. In the U.S. alone, issuance also set a record, hitting $1.45 trillion, compared with $1.13 trillion last year.

Amid that feeding frenzy, the extra yield investors demand to own corporate bonds over Treasuries is at a mere 2.23 percentage points, compared with 3.51 at the end of last year, according to Bank of America Merrill Lynch’s Global Corporate & High Yield index. “Junk” is no longer a pejorative.

As the corporate bond market gets its dregs scraped, repeatedly, Wall Street’s capacity to transact the stuff is being strained. An average of $16.93 billion of investment-grade and high-yield bonds traded every day this year, while the value of outstanding corporate bonds rose to $5.72 trillion. Last year’s average daily trading volume of $15.73 billion occurred amid $4.86 trillion of debt outstanding.

Mark Freeman, chief investment officer of Westwood Holdings Group in Dallas, thinks this pigout is primed to relocate to equity markets, which have yet to revisit their records. “A group of investors, which I refer to as ‘bond market refugees,’ have to find a new home in order to meet their income needs,” he says. To underscore how crowded a trade he believes bonds have become, Freeman highlights that the investment-grade universe trades at a price-earnings multiple of 58, while junk bonds change hands at 16 times earnings. He says that “if corporate earnings can show any growth at all next year, which I believe they will, it is very unlikely the Standard & Poor’s 500 index will continue to trade at a p/e of 13, especially given that it has a higher yield and the potential for earnings growth—something bonds cannot offer.” Of the emerging risk-reward calculus, Freeman says: “Given the current environment, bond investors will eventually find high-quality, dividend-paying stocks as an attractive alternative.”

The question is, can the Fed pain trade last long enough—and without a shock that’s out of its control—to push investors en masse into the stock market. For all Bernanke’s superpowers, he’s not omnipotent.

In a Dec. 17 report entitled The “Bond Bubble”: Risks and Mitigants, Fitch Ratings noted that if interest rates were to revert rapidly to early-2011 levels, a typical, 10-year investment-grade corporate bond could lose 15 percent of its market value, while a 30-year equivalent would take a 26 percent hit.

Such a blindsiding—you can actually lose money in bonds?—would spoil the long-awaited rapprochement with equities.

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Are Stocks Doomed by Demographics?

The stock market got a big boost on Sept. 13 when the Federal Reserve announced it would be pumping money into the financial system for as long as it takes to lift the economy. But what if the Fed is up against a force that’s stronger than money—demographics?

Last week I came across a gloomy analysis on the aging of America’s impact on the economy. Then I found strategists who are using demographics to make a bullish case. Here are the details.

An economics blog posted a depressing speech given by author and newsletter writer Harry Dent, called “A Decade of Volatility: Demographics, Debt, and Deflation.” “There is,” Dent says, “simply no way the Fed can win the battle it’s currently waging against deflation, because there are 76 million Baby Boomers who increasingly want to save, not spend. Old people don’t buy houses!”

He explains that the peak of the recent housing boom featured upper-middle-class families living in 4,000-square-foot McMansions. “About ten years from now,” he says, “what will they do? They’ll downsize to a 2,000-square-foot townhouse. What do they need all those bedrooms for? The kids are gone. They don’t visit anymore. Ten years after that, where are they? They’re in 200-square-foot nursing homes. Ten years later, where are they? They’re in a 20-square-foot grave plot. That’s the future of real estate. That’s why real estate has not bounced in Japan after 21 years. That’s why it won’t bounce here in the U.S. either. For every young couple that gets married, has babies, and buys a house, there’s an older couple moving into a nursing home or dying.”

Would the gentleman like Prozac gravy with that hunk of cold turkey?

Dent tracks a 46-year leading indicator that he says identifies a predictable peak in spending of the average household. He notes the Baby Boom birth index started to rise in 1937 and continued its ascent until 1961 before it fell. The result: “Add 46 to 1937, and you get a boom that starts in 1983. Add 46 to 61, and you get a boom that ends in 2007.”

And you know how marvelous things have been since 2007. Dent’s argumentative upshot: Painful, chronic deflation is here for quite some time. And there’s not much anyone can do about it. Lest you attempt to look for demographic silver linings, he urges, “Don’t hold your breath for the Echo Boomer generation.” That would be the group born between the early 1980s and mid-’90s.

Well, Tobias Levkovich, Citi’s chief U.S. equity strategist, put out a note this week that enthused about that very cohort. It got picked up by Bloomberg charts whiz Dave Wilson and by Josh Brown’s Reformed Broker blog. Levkovich posits that demographics are about to shift in favor of equities for the first time since the 1990s. Saving and investing by the Echo Boomers, writes Levkovich, “would generate a new set of equity fund inflows.” Levkovich plotted a century-long chart of the number of people aged 35 to 39 and found that it tracked fairly well against stock prices. That relationship suggests a coming spike in stocks as Echo Boomers reach that potent age level. This age group is on the verge of increasing for the next 17 years.

Dave Wilson charted the number of Americans who were 35 to 39 years old at midyear, as compiled by the U.S. Commerce Department, with the Standard & Poor’s 500-stock index’s performance since 1980. At least where equity valuations are concerned, the picture does not lend weight to Dent’s inevitable-inexorable-deflation thesis.

For Josh Brown’s part, he and business partner Barry Ritholtz observed that the timeline of a boom in 35- to 39-year-olds “coincides perfectly with the time frame we’re guesstimating as the end of the secular bear market we’ve been in since 2000. (They tend to run 17 years on average.)”

Meanwhile, at the intersection of these two world views is the lesson of the past four years: The stock market can inflate in a broadly deflationary economy.

Farzad is a Bloomberg Businessweek contributor.

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How Did Stocks Get So High?

Really, what business does the stock market have setting multiyear highs right now? The U.S. economy grew at an anemic 1.7 percent in the second quarter. It’s creating 139,000 jobs a month on average this year; that is only a fraction of the monthly hires needed to bring the unemployment rate back to pre-crisis levels by 2015. The uncertainty of a close presidential election looms, and no one knows whether Congress and the president will reach an agreement to avert the so-called fiscal cliff—the spending cuts and tax hikes that could stall the economy next year. Europe’s financial crisis remains unresolved.

In the face of all that, Standard & Poor’s 500-stock index is up 25 percent over the past 12 months, and 14 percent in 2012. Stocks have reached levels unseen since before the fall of Lehman Brothers and Bear Stearns. “This is about the strangest market environment I’ve ever seen,” says Donald Luskin, chief investment officer at Trend Macrolytics.

There are some strong forces propelling the rally. Over the long term, stock prices tend to reflect corporate earnings. While S&P 500 profits may decline 1.8 percent this quarter, according to estimates compiled by Bloomberg, they will rebound 11 percent in the final three months of the year, 11 percent next year, and 12 percent in 2014, reaching record levels with every gain. Investors are also counting on help from the Federal Reserve, which is widely expected to start a third round of bond purchases to boost the economy. “The Fed has come out and said that things are weakening and that they’re willing to act,” says Gregory Peterson, director of investment research at Ballentine Partners. And Apple’s (AAPL) success—the stock is up 64 percent in 2012 through Sept. 11—is having an outsize impact on the indexes and the overall economy. With a market value of $620 billion, Apple represents 4.8 percent of the S&P 500 and close to 13 percent of the Nasdaq Composite Index, which has surged to a 12-year high. J.P. Morgan’s (JPM) chief U.S. economist calculates that sales of the company’s iPhone 5, which is being introduced on Sept. 12, could add up to 0.5 percent to annualized fourth quarter U.S. economic growth.

Impressive though that may be, the threats to the market are formidable. Chief among them is the fiscal cliff. Under a law passed last year in the heat of Washington’s debt-ceiling impasse, the failure of lawmakers to agree on some combination of spending cuts and tax increases could result in $1.2 trillion of automatic cuts and accompanying tax hikes in January 2013. That combination could shave 2.9 percent off economic activity in the first half of 2013, according to the Congressional Budget Office. “These are significant risks that the market, in our view, hasn’t really appreciated,” said Goldman Sachs (GS) chief U.S. equity strategist David Kostin at a Sept. 10 conference. Luskin says that even if you assume there’s a 75 percent chance a deal will be struck, that means “25 percent of the time we sail off the cliff and into recession. Would you get on a plane if the pilot told you there was a 25 percent chance it would crash?”

Europe also remains a potent threat, what with Athens having yet to ratify the spending cuts necessary to receive life-or-death bailout funds—and no guarantee that Spain, already reeling from 25 percent unemployment, will agree to more austerity in exchange for the European Central Bank’s financial aid.

There is one wild card that could keep driving the market higher. Hedge funds have woefully missed out on this rally. From the start of the year through the end of August, the main Bloomberg hedge fund index gained 0.5 percent, compared with 13 percent for the S&P 500. “Hedge funds must be sitting on large cash positions or have outsized short positions—how else to explain their underperformance?” says Jenny Van Leeuwen Harrington, chief executive officer and portfolio manager of Gilman Hill Asset Management. High-priced money managers obviously don’t want to finish the year lagging the market by such a wide gap. If they abandon their caution and pile into stocks in a bid to catch up, that belated buying could send indexes even higher, she says.

Individual investors could also decide to get with the program. They pulled money from U.S. equity mutual funds for a fifth straight year in 2011, the longest streak in data going back to 1984, according to the Investment Company Institute. So far this year, they’ve yanked $75 billion. True to form, their timing has been unfortunate.

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A Sick Rally, So to Speak, for Hospital Stocks

Conventional wisdom says a bigger government hand in health care means more scrutiny of outlays to highly profitable pharmaceuticals, insurers, and medical device makers. Indeed, with the Supreme Court voting 5-4 to uphold the Affordable Care Act, these sectors are all down today, amid a broad market pullback.

But it is telling that shares of hospital companies are simultaneously up big—making them the biggest immediate beneficiary of the ruling, next to, perhaps, the Foggy Bottom liquor store that supplies celebratory kegs to the White House. The upheld health-care law is expected to insure millions of patients who otherwise would have entered hospitals without having any coverage. Since most hospitals cannot simply turn away the uninsured, they must invest a good deal of labor and expense into recouping costs, especially those related to emergency room admissions.

The landmark law endeavors to expand coverage to at least 30 million people, chiefly by expanding Medicaid and establishing a competitive online marketplace for consumers to more easily buy coverage. All of which means potentially far less hassle getting paid if you’re a large hospital chain like HCA Holdings (HCA) and Tenet Healthcare (THC): Their shares shot up 10 percent and 7 percent, respectively. Meanwhile, executives from Medicaid insurers were likely sending Chief Justice John Roberts ginormous Hug-Grams. Molina Healthcare (MOH), for example, jumped 7 percent.

“No one in the hospital land really expected the entire law to be upheld,” says Sheryl Skolnick, a health-care analyst at CRT Capital Markets in Stamford, Conn. “They expected something in the muddy middle. And with surprise, you get big swings.”

Time for one more “Harry and Louise” reshoot?

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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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Asian Stocks Swing Between Gains, Losses on U.S., Europe Concern

January 11, 2012, 1:32 AM EST By Jonathan Burgos and Yoshiaki Nohara

Jan. 11 (Bloomberg) -- Asian stocks swung between gains and losses as optimism about the U.S. economy tempered concern Europe’s debt crisis is worsening ahead of a German bond sale.

James Hardie Industries SE, a supplier of building materials that gets most of its sales in the U.S., climbed 3 percent in Sydney. AU Optronics Corp., a supplier of liquid crystal displays to companies including Nokia Oyj and Dell Inc., gained 4.4 percent in Taipei. China Unicom (Hong Kong) Ltd. fell 3.3 percent amid concern competition will increase among mainland carriers.

“There are more positive signs particularly on employment and consumer,” spending in the U.S., said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outlook in the U.S. is for modest growth this year, and that’s better than Europe. Expectations are Europe will be in a recession.”

The MSCI Asia Pacific Index slid 0.1 percent to 115.98 as of 2:30 p.m. in Tokyo, with five shares rising for every four that fell. The gauge advanced 0.9 percent last week as manufacturing growth from China to the U.S. bolstered confidence in the global economy.

Australia’s S&P/ASX 200 Index increased 0.9 percent. Hong Kong’s Hang Seng Index was little changed. Japan’s Nikkei 225 Stock Average rose 0.2 percent. South Korea’s Kospi Index lost 0.5 percent.

China Inflation

China’s Shanghai Composite Index decreased 0.6 percent, heading for its first decline in four days, on concern inflation will hamper the government’s ability to ease lending curbs. A report due to be released tomorrow will probably show consumer prices rose 4 percent in December.

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge rose 0.9 percent in New York yesterday as global equities rallied amid bets that China will ease monetary policy to spur growth in the world’s second-largest economy.

Exporters advanced as U.S. employers hired 4.15 million workers in November, 107,000 more than in the prior month, the Labor Department said yesterday. A survey by Chief Executive magazine showed confidence among American CEOs rose last month to the highest level since May.

--Editors: Nick Gentle, John McCluskey

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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Opportunity in China Real Estate Stocks, UBS Says

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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U.S. Stocks Rise as S&P 500 Posts Second-Best Start Since 2006

January 07, 2012, 6:09 AM EST By Katia Porzecanski and Lu Wang

Jan. 7 (Bloomberg) -- U.S. stocks rose this week, sending the Standard & Poor’s 500 Index to its second-best start of a year since 2006, as reports on manufacturing from America to China bolstered optimism about the global economy.

Equities fell on the last day of the week after growth in U.S. jobs failed to lift the S&P 500 above its October high. Bank of America Corp. and Microsoft Corp. jumped more than 8.3 percent to lead advances in the Dow Jones Industrial Average during the holiday-shortened week. Netflix Inc. soared 25 percent after reporting online viewing that surpassed an estimate from BTIG LLC. Sears Holdings Corp. and AutoNation Inc. fell more than 8.1 percent to pace declines among retailers.

The S&P 500 climbed 1.6 percent to 1,277.81 in the first four trading days of the year, the second-best start in the past six years after a 2.4 percent gain in 2010, according to data compiled by Bloomberg. The Dow added 1.2 percent, or 142.36 points, to 12,359.92 for the week.

“The pace of growth is slowing but we’re still seeing corporate growth,” Peter Jankovskis, who helps manage about $2.4 billion at Oakbrook Investments in Lisle, Illinois, said in a phone interview. “The U.S. economy is moving along reasonably well. When the negative factor of Europe goes away, that comes back to the fore and allows the markets to move forward.”

Top of Range

Stocks gained during the week after reports showed U.S. factory output grew in December at the fastest pace in six month while manufacturing data in China beat economists’ estimates. The S&P 500 has jumped 16 percent from its 2011 low as better- than-expected economic data boosted optimism that the world’s largest economy can weather Europe’s sovereign-debt crisis. The rally has brought the index toward the top of a trading range it has been stuck in since August and pushed the Chicago Board Options Exchange Volatility Index, a gauge of market fear, to 20.63, the lowest level since July.

The S&P 500 snapped a three-day gain on Dec. 6 even after figures from the Labor Department showed payroll growth in December beat forecasts and the unemployment rate dropped to the lowest level in almost three years. A report showing German factory orders had the biggest drop in almost three years spurred concern that Europe was headed into a recession.

Raw-materials producers and financial shares led the S&P 500’s gain during the week, jumping 3.8 percent and 3.1 percent as a group, respectively. Bank of America rallied 11 percent to $6.18 amid speculation the U.S. may introduce a new mortgage refinancing program. A government official, who asked for anonymity, denied that the White House is considering a trillion-dollar plan to refinance home loans.

Latin American Farmers

Monsanto Co. surged 11 percent to $77.51. The world’s largest seed company posted first-quarter earnings that exceeded estimates because of demand from Latin American farmers. U.S. orders are ahead of last year, Monsanto said.

Alcoa Inc., due to start the earnings season on Jan. 9, added 5.9 percent to $9.16. The biggest U.S. aluminum producer may say it lost 1 cent a share in the fourth quarter, according to the average estimate from analysts in a Bloomberg survey.

Microsoft, the software maker that’s scheduled to report results on Jan. 19, climbed 8.3 percent to $28.11.

S&P 500 companies, which beat analysts’ estimates in the previous 11 quarters, are forecast to report a 6 percent increase in per-share profit during the September-December period, according to projections compiled by Bloomberg. That would mark the slowest growth since the third quarter of 2009.

Online Viewing

Netflix surged 25 percent to $86.29 for the biggest gain in the S&P 500. The owner of the streaming and DVD-by-mail service said its online customers watched more than 2 billion hours of content in the last three months of 2011. Rich Greenfield, an analyst with BTIG, estimated 1.2 billion hours.

AutoNation posted the biggest loss on the S&P 500, sinking 9.3 percent to $33.44. Edward Lampert’s hedge fund cut its stake in the auto retailer to 52.5 percent from 56.4 percent, according to a regulatory filing.

Sears fell 8.1 percent to $29.20, extending its slump for a fifth week. The largest U.S. department store chain had its debt rating cut by S&P and Moody’s Investors Service on deteriorating earnings.

“What U.S. investors are focused on are three exogenous variables: the sovereign debt mess in Europe, the prospect of slower growth out of emerging markets and the policy dysfunction that we’re dealing with in Washington,” Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., said in a telephone interview. His firm oversees about $355 billion. “If those issues didn’t exist, the S&P 500 would be at something like 1,800, because of this improvement in domestic economic fundamentals that we’ve seen.”

--With assistance from Whitney Kisling, Ksenia Galouchko and Jeff Kearns in New York. Editors: Jeff Sutherland, Nick Baker

To contact the reporters on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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U.S. Stocks Erase Yearly Gain as S&P 500 Moves Least Since 1947

January 02, 2012, 2:39 AM EST By Ksenia Galouchko and Lu Wang

Dec. 31 (Bloomberg) -- U.S. stocks fell this week, leaving the Standard & Poor’s 500 Index virtually unchanged for the year, as concern Europe’s debt crisis will weigh on the economy halted a two-year rally in equities.

The benchmark gauge for U.S. equities lost 0.04 point to 1,257.60 in 2011, the smallest annual change since 1947. Financial shares slid 1.3 percent in the week and 18 percent this year, the worst drop among 10 industries, as Bank of America Corp. tumbled 58 percent. Commodity producers fell 12 percent as a group. First Solar Inc. had the biggest drop in the S&P 500, losing 74 percent, followed by coal producer Alpha Natural Resources Inc. with a 66 percent loss.

Gauges of health-care companies, utilities and makers of household products and other consumer staples climbed more than 10 percent this year as investors bought companies whose profits are least-tied to economic growth. Cabot Oil & Gas Corp. in Houston rose 101 percent in 2011 for the gauge’s biggest rally, followed by pipeline owner El Paso Corp. and Sunnyvale, California-based medical device maker Intuitive Surgical Inc.

“It’s the year I’d like to forget because of all the tumult in the markets,” Brian Jacobsen, who helps oversee $209 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said in a telephone interview. “The U.S. data has been looking better but it’s not just the matter of the U.S. data but what’s the outlook, and investors are still concerned about whether or not economic recovery is losing steam.”

European Concerns

The S&P 500 fell 0.6 percent this week as Spain’s widening budget deficit and a surge in the European Central Bank’s balance sheet stoked concern over the region’s debt crisis, offsetting better-than-expected U.S. consumer confidence and home sales data. The Dow Jones Industrial Average declined 76.44 points, or 0.6 percent, to 12,217.56, paring its 2011 gain to 5.5 percent.

The S&P 500 finished the year recording record price swings and correlations. The benchmark index started the year with a rally, rising as much as 8.4 percent to a three-year high by the end of April and extending its rebound from a March 2009 bear- market low to 102 percent.

The index tumbled throughout the summer as Congress and President Barack Obama struggled over U.S. deficit cuts, leading S&P to strip the nation of its AAA rating in August, and concern grew that the euro-area’s debt crisis was threatening the global economic recovery. The S&P 500 fell as much as 19 percent from April to its low for the year on Oct. 3.

Rising Correlations

Developments in Europe’s efforts to tame its debt crisis led to near-lockstep movement in equity prices. The 50-day correlation of S&P 500 stocks to gains or losses in the full index increased to a record 0.86 in October, according to data compiled by Westport, Connecticut-based Birinyi Associates Inc. A level of 1 would mean all 500 stocks moved together. Correlation was 0.78 on Dec. 30, 73 percent higher than its average since 1980.

The Dow alternated between gains and losses of more than 400 points on four days for the first time ever in August. Daily share swings in the S&P 500 averaged 2.2 percent that month, the most for any August since 1932, Bloomberg data show. The index moved an average of 1.9 percent a day from May through the end of the year, compared with the 50-year average of 0.6 percent before the collapse of Lehman Brothers Holdings Inc. in 2008.

Fund Withdrawals

Investors have been pulling money from mutual funds that focus on U.S. stocks for a fifth year. Outflows totaled $116 billion in the first 11 months of this year, the highest since 2008, according to data compiled by Bloomberg from the Investment Company Institute, a Washington-based trade group.

U.S. companies have beaten analyst profit estimates for 11 straight quarters as the country climbed out of the worst recession since the Great Depression. Earnings from S&P 500 companies are forecast to reach a record $98.79 a share this year, and climb 9.7 percent in 2012 and 12 percent in 2013, according to analysts’ estimates compiled by Bloomberg.

As stock prices failed to keep up pace with earnings, valuations reached levels cheaper than 72 percent of the time since 1954, according to data compiled by Bloomberg. The S&P 500 ended the year trading at 13.2 times reported earnings, 20 percent below the average multiple of 16.4, the data show.

‘Murky Outlook’

“If you look at balance sheets and cash flow statements, stocks are attractively valued, but they’re not incredibly cheap considering the murky outlook that we have from the political arena,” Jacobsen at Wells Fargo said. “People are clamoring for safer assets, the classic defensive sectors.”

The Morgan Stanley Consumer Index, which tracks drugmakers and food companies, added 0.7 percent this year, compared with a 16 percent loss in the firm’s cyclical measure of commodity producers and transportation providers.

The S&P 500 Dividend Aristocrats index, which follows companies that have raised payout for at least 25 consecutive years, returned 8.3 percent. The S&P 500 ended the year with a dividend yield of 2.1 percent, compared with a rate of 1.88 percent for 10-year Treasuries, and the index returned 2.1 percent in 2011 including reinvested dividends.

Bank of America plunged 58 percent to $5.56 in 2011, making it the worst performer in the Dow, as concern about mounting mortgage losses and a global economic slowdown weighed on the second-biggest U.S. lender. The decline erased almost $80 billion of shareholder value, and was the firm’s largest drop since a 66 percent plunge in 2008, when a U.S. bailout staved off a collapse.

Alcoa, First Solar

Alcoa Inc., largest U.S. aluminum producer, slumped 44 percent to $8.65 this year for the second-worst drop in the Dow as prices of the lightweight metal tumbled 18 percent.

First Solar tumbled 74 percent to $33.76. The biggest manufacturer of thin-film solar cells slashed its sales and profit forecasts for 2011 after ousting Rob Gillette as chief executive.

Alpha Natural declined 66 percent to $20.43 after acquiring Massey Energy Co. for $7.1 billion and announcing earnings that missed analysts’ estimates for the first two quarters of 2011.

Cabot Oil surged 101 percent to $75.90 this year. The company, which has fields in Pennsylvania, Texas and Oklahoma, projected output will rise as much as 55 percent next year. El Paso, based in Houston, rallied 93 percent to $26.57 in 2011 after agreeing to be bought by Kinder Morgan Inc. for $21 billion.

Intuitive Surgical jumped 80 percent to $463.01. The maker of a robotic system to perform surgery reported earnings that beat analyst estimates for the 10th straight quarter, according to data compiled by Bloomberg.

Netflix Inc. dropped 61 percent to $69.29. The video- streaming and DVD subscription service reduced its subscriber forecast and predicted losses in 2012.

--With assistance from Inyoung Hwang and Katia Porzecanski in New York. Editors: Michael P. Regan, Jeff Sutherland

To contact the reporters on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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European Stocks Gain This Week, Pare First Annual Loss Since ’08

January 02, 2012, 2:39 AM EST By Adam Haigh

Dec. 31 (Bloomberg) -- European stocks climbed in the last week of 2011 as U.S. data showed the recovery in the world’s largest economy is gathering pace and optimism grew that euro- area policy makers will contain the debt crisis.

Banco Comercial Portugues SA and Banco Espirito Santo SA, Portugal’s largest lenders, jumped more than 15 percent after a report that the government may recapitalize the banks without becoming a shareholder. Britvic Plc led food and beverage producers higher, extending this year’s gains for the industry.

The benchmark Stoxx Europe 600 Index rose 1.1 percent to 244.54, the highest since Oct. 28. The second-straight week of gains helped trim this year’s losses to 11 percent. The gauge has rallied 14 percent from this year’s low on Sept. 22 as euro- area leaders planned to channel central-bank loans through International Monetary Fund to debt-ridden nations and the European Central Bank took steps to ease a cash squeeze.

“There is a risk of losing sight that gradually progress has been made,” said William De Vijlder, who oversees $778 billion as the global chief investment officer of Paris-based BNP Paribas Investment Partners. “The ECB has eased its policy. The firepower of the IMF is being increased.”

Reports this week showed business activity in the U.S. expanded more than forecast and confidence among American consumers rose in December to the highest level in eight months.

Dwindling Volumes

Post-Christmas trading was slow, with daily volume in the Stoxx 600 this week dipping to 32 percent of this year’s average, according to data compiled by Bloomberg.

The Stoxx 600 gained 5.6 percent from the start of the year to its peak on Feb. 17. From there, the index tumbled 26 percent to its low on Sept. 22, entering a bear market. The gauge had its worst third quarter since 2002, dropping 17 percent, as U.S. leaders wrangled over deficit cuts and European policy makers remained divided on their response to the debt crisis.

An Oct. 26 agreement to bolster the region’s bailout fund, the European Financial Stability Facility, stalled as Germany and France differed over how tackle the crisis. France called for using the ECB as a backstop, while Germany rejected it. Chancellor Angela Merkel listed using the ECB as the lender of last resort, issuing joint euro-area bonds and going in for a “snappy debt cut” as unworkable proposals.

Lenders Lead Losses

Banks had the biggest drop among 19 industry groups this year, sinking 32 percent, amid growing concern that the fiscal crisis will force at least one nation to default on its debt. Health-care and food stocks advanced as investors sought companies whose earnings are less tied to economic growth.

The decline in European equities compares with an 17 percent tumble in the MSCI Asia Pacific Index and a 0.4 percent gain in the S&P 500 at the close on Dec. 29.

Banco Comercial Portugues advanced 16 percent to a two- month high. Chinese banks may be interested in investing in the lender, news agency Lusa reported citing Cao Guangjing, chairman of China Three Gorges Corp.

Banco Espirito Santo rose 15 percent. Portugal may recapitalize the country’s banks without becoming a shareholder, Jornal de Negocios reported, without saying where it got the information. The state may subscribe contingent convertible bonds sold by the banks, the newspaper said. So-called CoCos are bonds that convert into equity if a bank’s capital drops below a set level.

Britvic rallied 4.7 percent. Unilever climbed 1.6 percent. Nestle SA added 1.5 percent.

Rio Tinto Group declined 1 percent, as copper slid on the London Metal Exchange this week.

--With assistance from Adria Cimino in Paris. Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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Asian Stocks Decline as Euro Weakens on Growth, Europe Concern

January 02, 2012, 2:42 AM EST By Shiyin Chen and Saeromi Shin

Jan. 2 (Bloomberg) -- Asian stocks declined on the first trading day of 2012, while the South Korean won and the euro weakened on concern that the global economic recovery will be hampered as Europe’s debt crisis enters a new year.

The MSCI Asia Pacific excluding Japan Index slipped 0.4 percent as of 3:08 p.m. in Singapore. Euro Stoxx 50 Index futures retreated 0.4 percent. Financial markets from Japan to the U.K. and the U.S. are closed for a holiday. The won fell 0.3 percent to 1,155.86 per dollar and the euro decreased 0.1 percent to $1.2941. Silver advanced as much as 0.2 percent to $27.8875 per ounce, set for a third day of gains.

Indexes of stocks and commodities had the worst yearly returns since the financial crisis in 2008. South Korea said yesterday export growth will slow this year and Singapore’s government said its economy grew less than previously forecast in 2011. Data today may confirm European manufacturing shrank for a fifth straight month, as regional leaders return to work from the Christmas holidays seeking to buy time to rescue the single currency from fragmentation.

“With many markets closed, it’s hard to make one-way bets especially in the absence of strong leads,” said Lim Chang Gue, a fund manager in Seoul at Samsung Asset Management Co., which oversees about $28 billion. “There’s the ongoing crisis in Europe, and global demand will continue to be generally weak this year. The thing is how much China could provide buffers, but it’s still unclear.”

More than three shares retreated for every one that rose on MSCI’s Asia Pacific ex-Japan Index. Taiwan’s Taiex Index sank 1.7 percent, Indonesia’s Jakarta Composite index dipped 0.3 percent and the BSE India Sensitive Index slid 0.5 percent, a fifth day of losses.

Korea, Singapore

South Korea’s export growth will probably slow to 6.7 percent this year from 19.6 percent in 2011, the Ministry of Knowledge Economy said yesterday. Finance Minister Bahk Jae Wan said the economic outlook will be more uncertain and difficult in 2012 and called for a strengthening of contingency plans to prevent contagion from Europe’s debt crisis.

Separately, Singapore’s Prime Minister Lee Hsien Loong said the island’s gross domestic product rose 4.8 percent in 2011, compared with the government’s earlier forecast of a 5 percent increase, and said the economy will expand 1 percent to 3 percent in 2012. Indonesia said exports grew 8.3 percent in November from a year earlier, slowing from an increase of 16.7 percent the previous month.

Data yesterday showed China’s purchasing managers’ index climbed to 50.3 in December from 49 in November, beating all forecasts in a Bloomberg News survey of 15 economists. A gauge of euro-region manufacturing was 46.9 in December from 46.4 the previous month, according to economists surveyed by Bloomberg News before Markit Economics releases the data today. A reading below 50 indicates contraction.

Europe’s Debt

The euro weakened against 11 of its 16 most actively traded peers. The currency weakened for a second year in 2011 and fell on Dec. 30 below 100 yen for the first time since June 2001. Some 157 billion euros ($203 billion) in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. By the end of that period, leaders have pledged to draft a stricter rulebook for controlling government spending. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin Jan. 9 to work out details.

The Dollar Index, which tracks the U.S. currency against those of six major trading partners, rose 0.1 percent, the first increase in three days. It climbed 1.5 percent in 2011. Treasuries gained 9.78 percent last year, the most since 2008, as investors sought the relative safety of U.S. debt.

‘Wary’ Investors

“Investors are demanding dollars as they are wary of the ongoing European debt crisis,” said Ha Jun Woo, a Seoul-based currency dealer at Daegu Bank in Seoul.

The Institute for Supply Management’s factory index climbed to a six-month high of 53.4 in December, while spending on construction projects advanced 0.4 percent in November, the fourth straight monthly gain, economists surveyed by Bloomberg projected ahead of U.S. reports tomorrow. Payrolls climbed by 150,000 workers after rising 120,000 in November, according to the median forecast of 62 economists in a Bloomberg News survey before Labor Department data on Jan. 6.

--With assistance from Jiyeun Lee in Seoul. Editors: Richard Dobson, Ovais Subhani

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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Fifth Third's Wirtz on Investment Strategy, Stocks

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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U.S. Stocks Erase Yearly Gain as S&P 500 Moves Least Since 1947

December 31, 2011, 12:23 AM EST By Ksenia Galouchko and Lu Wang

Dec. 30 (Bloomberg) -- U.S. stocks fell this week, leaving the Standard & Poor’s 500 Index virtually unchanged for the year, as concern Europe’s debt crisis will weigh on the economy halted a two-year rally in equities.

The benchmark gauge for U.S. equities lost 0.04 point to 1,257.60 in 2011, the smallest annual change since 1947. Financial shares slid 1.3 percent in the week and 18 percent this year, the worst drop among 10 industries, as Bank of America Corp. tumbled 58 percent. Commodity producers fell 12 percent as a group. First Solar Inc. had the biggest drop in the S&P 500, losing 74 percent, followed by coal producer Alpha Natural Resources Inc. with a 66 percent loss.

Gauges of health-care companies, utilities and makers of household products and other consumer staples climbed more than 10 percent this year as investors bought companies whose profits are least-tied to economic growth. Cabot Oil & Gas Corp. in Houston rose 101 percent in 2011 for the gauge’s biggest rally, followed by pipeline owner El Paso Corp. and Sunnyvale, California-based medical device maker Intuitive Surgical Inc.

“It’s the year I’d like to forget because of all the tumult in the markets,” Brian Jacobsen, who helps oversee $209 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said in a telephone interview. “The U.S. data has been looking better but it’s not just the matter of the U.S. data but what’s the outlook, and investors are still concerned about whether or not economic recovery is losing steam.”

European Concerns

The S&P 500 fell 0.6 percent this week as Spain’s widening budget deficit and a surge in the European Central Bank’s balance sheet stoked concern over the region’s debt crisis, offsetting better-than-expected U.S. consumer confidence and home sales data. The Dow Jones Industrial Average declined 76.44 points, or 0.6 percent, to 12,217.56, paring its 2011 gain to 5.5 percent.

The S&P 500 finished the year recording record price swings and correlations. The benchmark index started the year with a rally, rising as much as 8.4 percent to a three-year high by the end of April and extending its rebound from a March 2009 bear- market low to 102 percent.

The index tumbled throughout the summer as Congress and President Barack Obama struggled over U.S. deficit cuts, leading S&P to strip the nation of its AAA rating in August, and concern grew that the euro-area’s debt crisis was threatening the global economic recovery. The S&P 500 fell as much as 19 percent from April to its low for the year on Oct. 3.

Rising Correlations

Developments in Europe’s efforts to tame its debt crisis led to near-lockstep movement in equity prices. The 50-day correlation of S&P 500 stocks to gains or losses in the full index increased to a record 0.86 in October, according to data compiled by Westport, Connecticut-based Birinyi Associates Inc. A level of 1 would mean all 500 stocks moved together. Correlation was 0.78 on Dec. 30, 73 percent higher than its average since 1980.

The Dow alternated between gains and losses of more than 400 points on four days for the first time ever in August. Daily share swings in the S&P 500 averaged 2.2 percent that month, the most for any August since 1932, Bloomberg data show. The index moved an average of 1.9 percent a day from May through the end of the year, compared with the 50-year average of 0.6 percent before the collapse of Lehman Brothers Holdings Inc. in 2008.

Fund Withdrawals

Investors have been pulling money from mutual funds that focus on U.S. stocks for a fifth year. Outflows totaled $116 billion in the first 11 months of this year, the highest since 2008, according to data compiled by Bloomberg from the Investment Company Institute, a Washington-based trade group.

U.S. companies have beaten analyst profit estimates for 11 straight quarters as the country climbed out of the worst recession since the Great Depression. Earnings from S&P 500 companies are forecast to reach a record $98.79 a share this year, and climb 9.7 percent in 2012 and 12 percent in 2013, according to analysts’ estimates compiled by Bloomberg.

As stock prices failed to keep up pace with earnings, valuations reached levels cheaper than 72 percent of the time since 1954, according to data compiled by Bloomberg. The S&P 500 ended the year trading at 13.2 times reported earnings, 20 percent below the average multiple of 16.4, the data show.

‘Murky Outlook’

“If you look at balance sheets and cash flow statements, stocks are attractively valued, but they’re not incredibly cheap considering the murky outlook that we have from the political arena,” Jacobsen at Wells Fargo said. “People are clamoring for safer assets, the classic defensive sectors.”

The Morgan Stanley Consumer Index, which tracks drugmakers and food companies, added 0.7 percent this year, compared with a 16 percent loss in the firm’s cyclical measure of commodity producers and transportation providers.

The S&P 500 Dividend Aristocrats index, which follows companies that have raised payout for at least 25 consecutive years, returned 8.3 percent. The S&P 500 ended the year with a dividend yield of 2.1 percent, compared with a rate of 1.88 percent for 10-year Treasuries, and the index returned 2.1 percent in 2011 including reinvested dividends.

Bank of America plunged 58 percent to $5.56 in 2011, making it the worst performer in the Dow, as concern about mounting mortgage losses and a global economic slowdown weighed on the second-biggest U.S. lender. The decline erased almost $80 billion of shareholder value, and was the firm’s largest drop since a 66 percent plunge in 2008, when a U.S. bailout staved off a collapse.

Alcoa, First Solar

Alcoa Inc., largest U.S. aluminum producer, slumped 44 percent to $8.65 this year for the second-worst drop in the Dow as prices of the lightweight metal tumbled 18 percent.

First Solar tumbled 74 percent to $33.76. The biggest manufacturer of thin-film solar cells slashed its sales and profit forecasts for 2011 after ousting Rob Gillette as chief executive.

Alpha Natural declined 66 percent to $20.43 after acquiring Massey Energy Co. for $7.1 billion and announcing earnings that missed analysts’ estimates for the first two quarters of 2011.

Cabot Oil surged 101 percent to $75.90 this year. The company, which has fields in Pennsylvania, Texas and Oklahoma, projected output will rise as much as 55 percent next year. El Paso, based in Houston, rallied 93 percent to $26.57 in 2011 after agreeing to be bought by Kinder Morgan Inc. for $21 billion.

Intuitive Surgical jumped 80 percent to $463.01. The maker of a robotic system to perform surgery reported earnings that beat analyst estimates for the 10th straight quarter, according to data compiled by Bloomberg.

Netflix Inc. dropped 61 percent to $69.29. The video- streaming and DVD subscription service reduced its subscriber forecast and predicted losses in 2012.

--With assistance from Inyoung Hwang and Katia Porzecanski in New York. Editors: Michael P. Regan, Jeff Sutherland

To contact the reporters on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Asian Stocks Edge Higher on Signs U.S. Weathering Europe Crisis

December 30, 2011, 12:37 AM EST By Yoshiaki Nohara and Norie Kuboyama

Dec. 30 (Bloomberg) -- Asian stocks edged higher on the last trading day of 2011, with the region’s benchmark index set for its first yearly drop since 2008, as rising U.S. home sales signaled the world’s largest economy is weathering Europe’s debt crisis.

Sony Corp., Japan’s biggest exporter of consumer electronics, gained 1.6 percent. Techtronic Industries Company Ltd., a maker of industrial products that gets about 73 percent of its revenue in North America, added 1.5 percent in Hong Kong. Cnooc Ltd., China’s largest offshore energy explorer, rose 0.9 percent after oil gained. Chiyoda Corp. gained 2.7 percent after a report operating profit may top the Japanese engineering company’s forecast.

The MSCI Asia Pacific Index added 0.2 percent to 113.02 as of 11:23 a.m. in Tokyo. The measure has lost 0.5 percent this month and is set for an 18 percent drop this year. For the week, the gauge is down 0.6 percent.

“Investors increasingly feel the U.S. economy is firmer than they had expected,” said Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc. “The economic data is looking good and that will boost stock markets, especially when concern about Europe’s debt issues aren’t in the forefront.”

The Asia Pacific gauge has lost about $1.78 trillion this year amid concern Europe’s three-year debt crisis will drag the global economy into recession. Stocks on Asia’s benchmark are valued at 12.6 times estimated earnings on average, compared with 12.6 times for Standard & Poor’s 500 Index and 10.5 times for the Stoxx Europe 600 Index.

Fukushima Dai-Ichi

Utilities have fallen 27 percent this year, dropping the most among the 10 industry groups on the Asian gauge. Japanese power producers tumbled amid a nuclear crisis at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant. The utility has lost 91 percent this year, the biggest drop on the MSCI All Country World Index.

Japan’s Nikkei 225 Stock Average gained 0.3 percent today. Trading volume was about half the 100-day average ahead of a four-day weekend. Hong Kong’s Hang Seng Index rose 0.4 percent. Australia’s S&P/ASX 200 lost 0.3 percent. South Korea’s market is closed today for a holiday.

Futures on the S&P 500 Index slid 0.1 percent The gauge advanced 1.1 percent yesterday in New York after a report showed a jump in pending sales of existing homes that exceeded economist estimates by almost five times.

Sony, James Hardie

Exporters to the U.S rose. Sony added 1.6 percent to 1,376 yen in Tokyo, Techtronic Industries rose 1.5 percent to HK$8.04.

Gains in stocks may be limited after Italy yesterday fell short of its target in a debt auction. Prime Minister Mario Monti said his government won’t “rule out” more aggressive efforts to reduce debt.

“Markets will continue to be unstable for the first quarter of next year,” said Masaru Hamasaki, Tokyo-based chief strategist at Toyota Asset Management Co., which oversees the equivalent of $24 billion. “European nations will need to unite as they debate how to rehabilitate the region’s finances. The leadership will be tested.”

Cnooc rose 0.9 percent to HK$13.70. Crude oil for February delivery gained as much 0.2 percent on the New York Mercantile Exchange amid potential supply disruptions by Iran around the Strait of Hormuz and on optimism about the U.S. economy.

--Editors: Jason Clenfield, Jim Powell.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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

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Asian Stocks Drop as U.S. Home Prices Slip; China Mengniu Falls

December 28, 2011, 6:06 AM EST By Yoshiaki Nohara

Dec. 28 (Bloomberg) -- Asian stocks fell for a second day amid slow trading, with the regional benchmark index headed for its biggest annual decline since 2008, after U.S. housing prices fell, damping the earnings outlook for Asia’s exporters.

Sony Corp., Japan’s No. 1 exporter of consumer electronics, dropped 2.4 percent. SK Telecom Co. paced declines among South Korean companies that went ex-dividend today. China Mengniu Dairy Co. plunged 24 percent after saying moldy feed given to cows led to excessive levels of a toxin in its milk. Tokyo Electric Power Co. fell to the lowest level in at least 37 years after Japan’s trade minister said the utility should consider temporary government control.

The MSCI Asia Pacific Index slipped 0.6 percent to 113 as of 7:41 p.m. in Tokyo, with all but one of the gauge’s 10 industry groups falling. For the month, the index is heading for a 0.5 percent decline. The measure has dropped 18 percent this year, the most since 2008.

“The U.S. housing market has yet to get on a firm recovery path because we don’t know if prices will actually come back,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $29.6 billion. “Market participants are in vacation mode and aren’t doing much.”

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent today. The gauge was little changed yesterday in New York as better-than-estimated U.S. consumer confidence overshadowed a decline in home prices and concern about Europe’s debt crisis.

‘No Incentive’

Japan’s Nikkei 225 Stock Average fell 0.2 percent after a report showed factory output fell 2.6 percent in November as Thailand’s floods disrupted supply chains at manufacturers such as Sony and Honda Motor Co. Trading volume on the Nikkei was 43 percent below the 100-day average.

“There’s no incentive for investors to move their positions at the end of year,” said Hisakazu Amano, who helps oversee the equivalent of $29 billion at Tokyo-based T&D Asset Management Co. “The bottleneck is U.S. housing data. Corporate earnings are recovering and consumer confidence was good.”

South Korea’s Kospi Index lost 0.9 percent. Yesterday was the last day to buy shares and still get a year-end dividend in 15 percent of the companies included in the 785-member gauge.

Australia’s S&P/ASX 200 lost 1.3 percent, while Hong Kong’s Hang Seng Index slid 0.6 percent. Markets in Australia and Hong Kong reopened today after a four-day weekend.

Exporters dropped after the S&P/Case-Shiller index of property values in 20 U.S. cities dropped 3.4 percent in the year ended October after decreasing 3.5 percent in the year ended September, the New York-based group said yesterday.

Sony fell 2.4 percent to 1,354 yen, and Canon Inc., the world’s biggest camera maker, slid 1.6 percent to 3,415 yen.

Going Ex-dividend

SK Telecom led declines among firms that have the highest dividend yields among South Korea’s 50 largest publicly traded companies, according to data compiled by Bloomberg. SK Telecom retreated 6.3 percent to 141,500 won. Rival KT Corp. slipped 4.8 percent to 35,850 won. Korea Exchange Bank fell 5.1 percent to 7,450 won.

China Mengniu Dairy plunged 24 percent to HK$20.00, the biggest loss since September 2008. In a random inspection, the level of a toxin in a batch of the firm’s milk was more than double the nation’s permitted level, an unidentified official at the General Administration of Quality Supervision, Inspection and Quarantine said in an interview with the Xinhua News Agency.

Tokyo Electric Plunges

Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12.8 times for the S&P 500 and 10.5 times for the Stoxx 600. Utilities have lost 27 percent this year, the worst among the 10 industry groups on the Asian benchmark gauge, as Japanese power generators tumbled after a nuclear crisis at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant.

Tepco, as the utility is known, slumped 12 percent to 186 yen today, the lowest since at least September 1974. The company needs to consider all options related to its survival, including the government taking temporary control of the utility, trade minister Yukio Edano told company president Toshio Nishizawa yesterday.

Tepco has lost 91 percent this year, the biggest drop in the MSCI All Country World Index, which includes both emerging and developed world markets.

--With assistance from Norie Kuboyama in Tokyo. Editors: Jason Clenfield, Jim Powell

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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Asian Stocks Decline in Holiday Trade as BOJ Warns of Downside

December 27, 2011, 2:40 AM EST By Yoshiaki Nohara

Dec. 27 (Bloomberg) -- Asian stocks fell amid slow holiday trading, with the regional benchmark headed for its worst year since 2008, as the Bank of Japan warned of downside risks to the economy and South Korean consumer confidence slid.

Nissan Motor Co., Japan’s third-largest carmaker by market value, fell 1.7 percent. Anhui Conch Cement led losses among Chinese industrial companies after a report profit growth slowed in the sector. Samsung Electro-Mechanics Co. fell 6.8 percent in Seoul after saying it will sell its stake in a light-emitting diode business for less than investors expected. Nishimatsu Construction Co. led gains among Japanese construction firms after a report the country will build three bullet train lines.

The MSCI Asia Pacific Index fell 0.3 percent to 113.59 as of 4:09 p.m. in Tokyo, with more than two stocks falling for each that rose. The measure is headed for an 18 percent loss this year, its biggest annual decline since 2008. Markets in Australia, New Zealand and Hong Kong are closed today.

“Economic uncertainty is deepening around the world, which is showing up in some Japanese statistics on exports and production,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co. “Investors find it hard to move near year-end.”

Japan’s Nikkei 225 Stock Average lost 0.5 percent after minutes from a central bank meeting last month showed a few board members said Europe’s sovereign-debt crisis and the yen’s rise pose increasing risks to economic growth. Trading volume on the gauge was more than 59 percent below the 100-day average, according to data compiled by Bloomberg.

‘No Catalyst’

“There’s no outstanding catalyst to buy stocks,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Trading energy plunged in the Tokyo market yesterday. Today as well, we can’t expect foreign investors to buy shares as the overseas markets are closed.”

Nissan lost 1.7 percent to 684 yen. Sharp Corp., Japan’s largest maker of flat-panel displays, slid 1.4 percent to 711 yen.

South Korea’s Kospi Index fell 0.8 percent after consumer sentiment slipped. The gauge dropped as much as 2.3 percent after a mistaken order was apparently placed, according to La Sung Chae, an official at the market trading analysis team of Korea Exchange Inc. Shares also fell amid unsubstantiated rumors concerning the health of the new leader of North Korea and the nation’s relations with China, the official said.

Shanghai Stocks

The Shanghai Composite Index dropped 1.1 percent. Shares of mainland industrial companies fell after a report that profit growth declined to 24.4 percent in the first 11 months of the year from 25.3 percent in the 10 months through October.

Anhui Conch Cement slid 2.4 percent to 15.11 yuan. Sany Heavy Industry Co. fell 1.9 percent to 11.94 yuan.

Samsung Electro-Mechanics retreated 6.8 percent to 80,700 won in Seoul. The maker of electronic parts will sell its stake in an LED venture to Samsung Electronics Co. for 283 billion won ($244 million), according to a regulatory filing. The value of the deal is lower than expected, Woori Investment & Securities Co. said in a report today. Samsung Electronics gained 0.7 percent to 1.07 million won.

Japanese construction companies advanced after the Nikkei newspaper said the nation will start work on three bullet train lines, citing Transportation Minister Takeshi Maeda. Nishimatsu added 3.2 percent to 129 yen. Matsui Construction Co. rose 3 percent to 307 yen.

Stocks in the MSCI Asia Pacific Index are valued at 12.7 times estimated earnings on average, compared with 12.8 times for the S&P 500 and 10.5 times for the Stoxx 600. Utilities have lost 27 percent this year, the worst among the 10 industry groups on the Asian benchmark gauge, as Japanese power generators tumbled after a nuclear crisis at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant.

--With assistance from Toshiro Hasegawa and Norie Kuboyama in Tokyo. Editors: Jason Clenfield, Jim Powell.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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Japanese Stocks Climb on U.S. Jobs Report, Extension of Tax Cut

December 26, 2011, 3:00 AM EST By Norie Kuboyama

Dec. 26 (Bloomberg) -- Japanese stocks gained, with the Nikkei 225 Stock Average rising to its highest in nearly two weeks, after U.S. unemployment claims unexpectedly dropped and American lawmakers extended a tax cut.

Fanuc Corp., a maker of industrial robots that earns 75 percent of its revenue overseas, gained 2.9 percent. Mitsubishi Corp., Japan’s biggest commodities trader by revenue, rose 1.7 percent after oil and metals prices increased. Canon Inc. climbed 1.3 percent after the Nikkei newspaper said the camera maker may pay a 120 yen dividend this year.

“The U.S. economic data is not bad on the whole,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion. “Congress passed a two-month U.S. payroll tax cut extension, which reduced concerns in the market because investors had worried the end of the tax cut would likely weigh on January-March GDP.”

The Nikkei 225 rose 1 percent to 8,479.34 at the 3 p.m. close in Tokyo, the highest since Dec. 14. The broader Topix advanced 0.5 percent to 726.44, with trading volume 38 percent below the 30-day average.

The Topix has fallen 19 percent this year amid concern U.S. growth is sputtering and Europe’s debt crisis will damage the banking system, damping demand in two of Japan’s biggest export markets. The decline has cut the price of shares on the index to 0.87 times book value, near the lowest since March 2009.

Payroll Tax Cut

The Standard & Poor’s 500 Index added 0.9 percent in New York on Dec. 23 as claims for unemployment benefits unexpectedly dropped last week to the lowest since April 2008 and the U.S. Congress passed a two-month extension of a payroll tax cut eight days before it was due to expire.

“The worst-case scenario was avoided, and that was a positive for stocks,” said Naoki Murakami, chief economist at Monex Group Inc. in Tokyo.

JPMorgan Chase & Co. and Nomura Holdings Inc. cited the tax cut extension as a positive for the economy. JPMorgan raised its estimate for U.S. growth to 2.5 percent in 2012 from an earlier projection of a 1.9 percent rise.

Commodity prices gained on speculation an economic recovery in the U.S. may spur demand for oil and industrial metals. Crude oil for February delivery gained 0.2 percent to $99.68 a barrel in New York on Dec. 23, the highest settlement since Dec. 13. The London Metal Exchange Index of prices for six industrial commodities including copper and aluminum rose 0.7 percent.

Turnover on the first section of the Tokyo Stock Exchange fell to 500.8 billion yen ($6.4 billion) today, the lowest on a full-day basis since May 27, 2003.

The following are among the most active shares in the Japanese market today. Stock symbols are in parentheses after company names.

Machinery makers: Okuma Corp. (6103 JT), SMC Corp. (6273 JT) and other companies in the sector advanced after U.S. orders for durable goods such as commercial aircraft rose in November by the most in four months. Okuma gained 2.7 percent to 497 yen. SMC added 1.6 percent to 12,230 yen, while THK Co. (6481 JT) climbed 2.4 percent to 1,544 yen.

Canon Inc. (7751 JT), the world’s biggest camera maker, gained 1.3 percent to 3,460 yen, after the Nikkei reported the company is likely to pay a 120 yen dividend for this year, matching last year’s record payment. Canon anticipates an earnings recovery next year after Thailand floods and a strengthening yen cut profit, the report said.

Ebara Corp. (6361 JT), a hydraulic pump maker, climbed 3 percent to 278 yen, after the Nikkei said Ebara will boost production capacity in Southeast Asia. The company will invest as much as 3 billion yen to double sales in the region in three years, the report said.

Japan Hotel & Resort Inc. (8981 JT) rallied 5.8 percent to 164,900 yen, while Nippon Hotel Fund Investment Corp. (8985 JT) rose 1.2 percent to 187,300 yen after the real estate investment trusts said they will merge on April 1. Japan Hotel will be delisted shortly before the tie-up, according to a statement.

Makita Corp. (6586 JT), a maker of electric power tools, jumped 7.9 percent to 2,537 yen, its biggest rise since March 16. The company said it will buy back up to 1.45 percent of its outstanding shares.

Tokyo Electric Power Co. (9501 JT), the utility known as Tepco, lost 4.1 percent to 213 yen after the Nikkei reported the company may seek several hundred billion yen in fresh aid to compensate nuclear disaster victims. Tepco received 890 billion yen in state assistance last month.

-- With assistance from Toshiro Hasegawa in Tokyo. Editor: Jim Powell, Jason Clenfield.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

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

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Asian Stocks Advance After U.S. Reports Lift Earnings Outlook

December 26, 2011, 3:17 AM EST By Yoshiaki Nohara

Dec. 26 (Bloomberg) -- Asian stocks rose, extending last week’s gain, as orders for U.S. durable goods and home sales climbed, boosting confidence in the world’s biggest economy and the earnings outlook for Asia’s exporters.

Fanuc Corp., a maker of factory robots that gets 75 percent of its sales outside Japan, rose 2.9 percent in Tokyo. CSR Corp., a trainmaker, dropped 7.3 percent in Shanghai after a report China’s railway ministry will cut construction spending. Mitsubishi Corp., Japan’s biggest commodities trader by revenue, rose 1.7 percent after prices of raw materials and metals increased. Woongjin Energy Co. slipped 7 percent in Seoul after clients canceled orders for solar-energy equipment.

“America is holding up amid concern Europe’s problems would drag the world down,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees the equivalent of $68 billion. “The U.S. economy will need policy backing to stand its ground. Moves in equities will be limited this week before investors start seeking a trend in the next year.”

The MSCI Asia Pacific Index gained 0.2 percent to 113.90 as of 4:20 p.m. in Tokyo, with eight out of the 10 industry groups advancing. The measure added 1.1 percent last week. The gauge has tumbled 17 percent this year amid concern Europe’s debt crisis will slow global economic growth.

Japan’s Nikkei 225 Stock Average rose 1 percent today after a public holiday on Dec. 23. Trading volume on the gauge was 51 percent below the 100-day average, according to data compiled by Bloomberg.

South Korea’s Kospi Index fell 0.6 percent, while China’s Shanghai Composite Index slipped 0.7 percent. Markets in Hong Kong, Australia and Singapore are shut today for holidays.

U.S. Data

The Standard & Poor’s 500 Index added 0.9 percent in New York on Dec. 23. as orders for durable goods rose in November by the most in four months and sales of new U.S. homes advanced last month to a seven-month high.

Stocks also gained after the U.S. Congress passed a two- month extension of a payroll tax cut. President Barack Obama signed the measure, and negotiators are making plans to start work on a longer-term deal.

‘Worst Avoided’

“There was a consensus that 2012 U.S. growth would fall,” said Naoki Murakami, chief economist at Monex Group Inc. in Tokyo. “The worst-case scenario has been avoided, and that’s a positive for stocks.”

Exporters to the U.S. advanced. Fanuc added 2.9 percent to 11,780 yen. Honda Motor Co., Japan’s second-largest carmaker by market value, rose 1.3 percent to 2,354 yen.

Stocks in the MSCI Asia Pacific Index were valued at 12.7 times estimated earnings on average as of Dec. 23, compared with 12.8 times for the S&P 500 and 10.5 times for the Stoxx Europe 600 index, according to data compiled by Bloomberg.

Utilities posted the biggest decline among the 10 industry groups in the Asia-Pacific gauge this year as Japanese power generators tumbled after meltdowns at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant.

Tepco, as the utility is known, lost 4.1 percent to 213 yen today after the Nikkei newspaper reported the company may seek several hundred billion yen in fresh aid to compensate nuclear disaster victims. Tepco received 890 billion yen ($11.4 billion) in state assistance last month.

Railway Stocks

CSR dropped 7.3 percent to 4.42 yuan after Xinhua News Agency said China’s railway ministry will reduce construction spending to 400 billion yuan ($63 billion) in 2012 from 469 billion yuan this year. China Railway Construction Corp. lost 1 percent to 3.99 yuan.

Mitsubishi Corp. climbed 1.7 percent to 1,539 yen after the Thomson Reuters/Jefferies CRB Index of raw materials added 0.1 percent on Dec. 23 and a gauge of prices for industrial metals advanced in London. Itochu Corp., a Japanese trading firm, rose 1.1 percent to 769 yen.

Woongjin Energy slipped 7 percent to 4,500 won after three clients canceled orders for solar-cell wafers because of the global economic slowdown and lower demand for alternative energy, according to regulatory filings.

--With assistance from Norie Kuboyama and Toshiro Hasegawa in Tokyo. Editors: Jim Powell, Jason Clenfield.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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European Stocks Rise as U.S. Data Offsets Debt-Crisis Concern

December 26, 2011, 3:15 AM EST By Adam Haigh

Dec. 23 (Bloomberg) -- European stocks rose, capping the first weekly rally since Dec. 2, as U.S. durable-goods orders and new home sales increased, reinforcing optimism that the recovery in the world’s largest economy is gathering strength.

Wavin NV jumped 22 percent after Mexichem SAB raised its bid for the Dutch manufacturer by 11 percent to 10 euros a share. BP Plc led oil and gas producers higher as crude headed for its biggest weekly gain in two months.

The Stoxx Europe 600 Index rose 0.9 percent to 241.83 at the close in London. The gauge has advanced 3.5 percent this week and rebounded 13 percent from this year’s low on Sept. 22 amid optimism that U.S. economic growth is holding firm and euro-area leaders are moving to stem the region’s debt crisis.

“The U.S. is beginning to show signs of life,” said John Haynes, the head of research at Investec Wealth & Investments in London. “There is some positive momentum in the U.S. economy.” He spoke in a Bloomberg Television interview with Mark Barton.

Orders for U.S. durable goods rose in November by the most in four months as an increase in demand for aircraft outweighed declines in spending on computers and equipment.

Bookings for equipment meant to last at least three years rose 3.8 percent after no change in the prior month that was previously reported as a decline, data from the Commerce Department showed today in Washington.

U.S. Property Market

A separate report showed sales of new U.S. homes rose to a seven-month high in November. Purchases of single-family properties increased 1.6 percent to a 315,000 annual pace, pushing the number of new homes on the market to a record low.

Data yesterday showed new unemployment claims unexpectedly fell by 4,000 to 364,000 in the week ended Dec. 17, the lowest level since April 2008.

Despite this week’s rally, the Stoxx 600 has still tumbled 12 percent this year as the crisis spread to Italy and Spain. Banks and commodity companies have posted the largest declines among 19 industry groups on the gauge, both slumping more than 30 percent.

The volume of shares changing hands across Europe has fallen this week as the Christmas holiday break approaches. Trading on the Stoxx 600 this week was 22 percent below the average for 2011, according to data compiled by Bloomberg.

National benchmark indexes climbed in all 18 western- European stock markets. The U.K.’s FTSE 100 Index rose 1 percent, Germany’s DAX gained 0.5 percent and France’s CAC 40 gained 1 percent.

Quantitative Easing

European Central Bank Executive Board member Lorenzo Bini Smaghi said that policy makers shouldn’t shirk from using quantitative easing if deflation becomes a danger to the euro region. Unlike the U.S. Federal Reserve and the Bank of England, the ECB has offset liquidity created by purchases of government bonds so that such operations don’t amount to quantitative easing that stokes inflation.

“I do not understand the quasi-religious discussions about quantitative easing,” Bini Smaghi, who will leave his post at the end of the month, said in an interview published yesterday by the Financial Times. The ECB confirmed the comments. “It is appropriate if economic conditions justify it, in particular in countries facing a liquidity trap that may lead to deflation.”

Wavin soared 22 percent to 9.58 euros as it granted access to Mexichem to carry out due diligence, after the Latin American chemical producer increased its bid for Wavin to 10 euros from 9 euros.

BP rose 2.1 percent to 459.70 pence, while Total SA added 2.1 percent to 38.64 euros. Crude oil climbed for a fifth day in New York, the longest stretch of gains since Nov. 8.

EDP-Energias de Portugal dropped 0.3 percent to 2.32 euros, erasing an earlier gain of 3.7 percent, after Fitch Ratings reaffirmed the company’s long-term credit rating at BBB+. EDP had advanced after Portugal said China Three Gorges Corp. will pick up a stake in the company.

--Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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Adding Do-Good Stocks to the Stocking

By Charles Kenny

There are some great ways to give wonderful gifts this holiday season that also help some of the world’s poorest and most disadvantaged. If you got the hand-woven baskets from Tanzania for Aunt May last year, the enameled jewelry from Morocco already adorns Cousin Betty’s ears, and you purchased a goat for an Ethiopian farmer in the name of Uncle George in 2008, what about giving them some socially conscious corporate love this year? Buy them stock in a company that’s doing good for the world’s downtrodden.

Think mobile-phone companies providing service to rural and remote communities, drug companies selling life-saving medicines at cost, or even breweries creating jobs and clean water in some of the world’s most fragile places. None of these companies is doing this out of the goodness of its heart, obviously; they see money to be made. Still, …. Give these stocks as gifts to your kids and you might just turn junior into a future Warren Buffett of emerging markets (the Sage of Accra?), all while lowering the interest (or at least capital) costs of the companies in question.

More good news: Adding these enterprises to your friends’ and family’s portfolios will do their finances a favor, too. Many companies active in developing markets are doing well by doing good. African stocks in particular are weakly correlated with the S&P 500 index, making them a strong diversification play. What’s not to love? Here are nine suggestions to get you started. They’ll be far more welcome presents than a bunch of ladies doing tap. (Stock information reflects market closing prices on Friday, Dec. 16.)

GlaxoSmithKline
Stock price: 44.90 USD

The drugs company gives away deworming drugs for use across Africa, provides rotavirus vaccines that prevent diarrhea—a major global killer—at a small fraction of their developed-world cost, and has a general policy of pricing drugs in least-developed markets at no more than 25% of the prices they fetch in the developed world.

Gilead Sciences
Stock price: 37.16 USD

Gilead is providing HIV treatment drugs at cost in low-income countries and providing partners with rights to produce low-cost generic versions. The company suggests that nearly one-quarter of all people receiving any form of HIV treatment in developing countries are using low-cost branded or generic versions of Gilead’s HIV therapies.

Vodafone
Stock price: 27.17 USD

Vodafone is a mobile-phone company working in African markets from the Democratic Republic of Congo to Ghana and Lesotho. In Kenya, the Vodafone-managed Safaricom network has brought banking to millions via an innovative mobile-banking product, M-PESA.

Orascom (ORTE:EY)
Stock price: 2.98 EGP

If you want to support social-networking revolutions, you can’t buy public shares in Twitter or Facebook (yet). But a lot of the tweets and updates posted during the Arab Spring will have traveled over Orascom’s networks—it owns the largest mobile provider in Egypt.

Philips Electronics
Stock price: 19.09 USD

Philips is a major developer and best-known manufacturer of solar-powered lighting that meets the technical specifications for the Lighting Africa initiative, which is trying to get solar lamps to off-grid consumers across the continent. For the 1.6 billion people who lack access to electricity worldwide, a solar lamp is a cleaner, safer, and cheaper alternative to kerosene, candles, or dung-burning to see where you are going after nightfall.

Standard Chartered Bank (STAN:LN)
Stock price: 1,363 GBP

Standard Chartered is the biggest multinational operation in Africa’s financial sector—active in 14 markets, providing valuable services to business and helping the region’s economies grow.

Letshego (LETSHEGO:BG)
Stock price: 155 BWp

A pan-African personal insurance and micro-lending bank with over 125,000 customers, Letshego is extending the reach of financial services to an emerging African middle class. If you are worried about buying a stock in Botswana, the country’s exchange is probably one of the safest and easiest to work with on the continent.

Procter and Gamble
Stock price: 65.14 USD

P&G is working at the bottom of the pyramid across the developing world to sell soap and tampons, which help girls keep attending school during their periods. There isn’t another multinational consumer-products company reaching out to the world’s poorest purchasers on such a scale.

SABMiller (SAB:LN)
Stock price: 2,151 GBP

SABMiller is the first major foreign investor in South Sudan, outside the fledgling country’s oil sector. It provides clean water, tax revenue, lease payments, more than 200 local jobs, and increased demand for local agricultural produce in the capital city of Juba—along with beer, of course.

Kenny is a fellow at the Center for Global Development and the New America Foundation.

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