Showa Shell Considers Solar Unit IPO; Shares Gain

Sept. 8 (Bloomberg) -- Showa Shell Sekiyu K.K., a Japanese refiner, is considering selling shares in a solar-panel unit to fund an expansion of its renewable energy business and cut reliance on fuel sales. The stock rose.
Shares in Showa Shell Solar K.K. may be sold either in Japan or overseas, Chairman Shigeya Kato said in an interview in Tokyo yesterday. The funds may be used to build a fourth factory, probably in the Middle East, to make panels that convert sunlight into electricity, he said. Kato didn’t say how much money may be raised or when the proposed initial public offering may be held.
The unit of Royal Dutch Shell Plc aims to enlarge its share of the global solar-panel market to at least 10 percent by March 2015 from the current 1 percent, and diversify from refining as Japan’s petroleum demand declines because of a shrinking population and increased energy conservation. Showa Shell said it will build a 100 billion-yen ($1.1 billion) factory in southern Japan to boosts its solar-panel capacity 10-fold.
“In a head-to-head race in the global solar market, Showa Shell can’t let up in efforts to invest, expand, and make theirs the top-of-the-line product,” Hirofumi Kawachi, an analyst at Mizuho Investors Securities Co., said by phone from Tokyo. “Fundraising through an IPO probably wouldn’t be a good idea this year or next given the state of the global market, but the door may be open from 2011 onwards.”
Global Race
Showa Shell climbed 2.3 percent to 995 yen in Tokyo trading, the highest closing price since Aug. 14. The stock has gained 24 percent in six months, beating the 17 percent rise in the 11- member TOPIX Oil and Coal Product Index.
Showa Shell is competing with market leaders such as Germany’s Q-Cells SE, Arizona-based First Solar Inc., Sharp Corp. and Kyocera Corp.
Q-Cells was the biggest producer last year, with 574 megawatts, or 8.5 percent of global sales, according to California-based researcher iSuppli Corp. Showa Shell’s new factory, in Miyazaki prefecture, will add 900 megawatts of capacity for solar cells, which it assembles into panels.
“We must prove to potential investors that our solar business model is globally competitive and provides a decent rate of returns on investment if we go ahead with an IPO,” Kato said. “We may further expand capacity as soon as we see sales growth and establish ourselves as leading competitors.”
JPMorgan Rating
JPMorgan Chase & Co. analyst Masayuki Nagano called the plan to build the new plant “positive” in a report released today, in which he maintained his “overweight” rating on the shares.
Showa Shell began making photovoltaic, or solar, panels in 2007, commissioning its first plant, also in Miyazaki, with initial capacity of 20 megawatts a year. The company in June started a second factory in the prefecture and expanded capacity to 80 megawatts.
A fourth plant may be located at home or abroad, in places such as the Middle East where solar-power demand is likely to grow quickly, Kato said. Showa Shell has said it will ally with state-owned Saudi Arabian Oil Co., known as Saudi Aramco, to build small solar-power plants to supply schools, hospitals and households in the region.
Climate Pledge
Prime minister-designate Yukio Hatoyama yesterday renewed his party’s pledge to reduce Japan’s emissions of greenhouse gases by 25 percent by 2020 from 1990 levels, contingent on other countries adopting similar targets. Incentives introduced by the Democratic Party of Japan to attain its goal may result in a 20-fold surge in solar sales by 2020, Goldman Sachs Group Inc. analysts Hiroyuki Sakaida and Ikuo Matsuhashi said in an Aug. 17 report.
Some 190 countries will meet in Copenhagen in December to negotiate a new United Nations treaty to fight climate change, which may include targets for reducing emissions blamed for global warming.
Japan’s oil consumption has slumped since touching a peak of 247 million kiloliters in 1996, damped by a shrinking population and a switch to cleaner alternatives. Demand is forecast to continue to decline by an average of 3.5 percent a year to March 2014, according to the trade ministry

China to Sell 6 Billion Yuan of Bonds in Hong Kong

Sept. 8 (Bloomberg) -- China’s Ministry of Finance said it plans to offer 6 billion yuan ($879 million) of government bonds in Hong Kong for the first time to elevate the “international status” of its currency.
The sale on Sept. 28 to individuals and institutions will encourage acceptance of the yuan for global trade and promote growth of Hong Kong’s fixed-income market, according to a statement from the ministry. China started a trial in July allowing companies in the city and on the mainland accept yuan for payment of goods.
“The move will help expand yuan investment channels outside China and promote cross-border yuan settlement,” said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the nation’s third-largest bank. “It’s an important step in the long-term mission of making the yuan fully convertible.”
China is promoting greater use of the yuan overseas after Premier Wen Jiabao expressed concern in March that the U.S. dollar will weaken, eroding the value of its $2.1 trillion in foreign-exchange reserves. Brazil, Russia and India have also said the world is too reliant on the greenback.
Yuan Appreciation
The yuan is little changed this year against the dollar after rising 21 percent since a fixed rate was scrapped in July 2005 through to Dec. 31, 2008 as China seeks to support exporters. Yuan forwards rose for a sixth day, the longest winning streak in four months. Twelve-month contracts, based on the value of the currency in a year, climbed 0.3 percent to 6.7485 per dollar as of 1:26 p.m. in Shanghai, the highest level since July 28.
The city’s residents have been seeking ways to profit from a stronger Chinese currency. Hong Kong’s yuan deposits increased by 932 million yuan to 54.4 billion yuan in June, official figures show.
Bank of China Ltd., Export-Import Bank of China, Bank of Communications Ltd. and China Construction Bank Corp. are also among Chinese banks that have sold yuan debt in the city.
HSBC Holdings Plc and Bank of East Asia Ltd. sold 6 billion yuan of bonds in Hong Kong this year. HSBC Bank (China) Co., the mainland unit of HSBC, said yesterday it received orders for 4.4 times the amount of debt it planned to sell, allowing it to raise 2 billion yuan. The two-year notes pay an annual interest rate of 2.6 percent compared with 0.8 percent on a one-year deposit in Hong Kong.
Yuan Bond Market
The sale will help “improve the international status of the yuan, promote development of the yuan bond market in Hong Kong, and help provide a pricing benchmark for mainland institutions’ bond sales in Hong Kong,” according to the statement from the Ministry of Finance, which didn’t give the maturities of the securities.
The central bank on July 2 allowed companies in Shanghai and four cities in the southern Guangdong province to settle trade in yuan with businesses in Hong Kong, Macau and the 10- countries of the Association of Southeast Asia Nations. China should expand channels for firms to invest yuan in order for the trial to succeed, Zhang Xiaoming, general manager at the international banking department of Bank of Communications Co., said on July 22 in Shanghai.
“This shows the government is trying to enrich yuan investment products in Hong Kong to facilitate the pilot cross- border settlement program,” said E Yongjian, an analyst at Bank of Communications, the nation’s fifth-largest lender. “It’s obvious the government’s final goal is making the yuan an international currency.”
Government Support
China may sell up to 100 billion yuan of government bonds in Hong Kong over several stages, the city’s English language Standard newspaper reported today before the official announcement was made, citing people it didn’t identify.
Hong Kong is seeking to become an offshore center for the yuan after China’s government in April gave Shanghai until 2020 to become a global financial hub. The issuance announced today is “a new milestone” for developing yuan business in the city, Hong Kong’s government said.
“Six billion yuan is a small amount on the mainland market, but it shows the central government’s support for Hong Kong as an international financial center,” said Zhao Qingming, an analyst at China Construction Bank Corp. in Beijing. “It expands the channels of yuan usage

Gold Breaches $1,000 an Ounce on Dollar’s Weakness, Inflation

Sept. 8 (Bloomberg) -- Gold futures punched through $1,000 an ounce for the first time in more than six months as a weaker dollar and concern that inflation may accelerate boosted the precious metal’s appeal.
The contract for December delivery surged to $1,004.70 on the Comex division of the New York Mercantile Exchange, taking this year’s rise to about 14 percent. Immediate-delivery metal rose to $1,002.73 an ounce. Gold is set for a ninth yearly gain.
Governments have cut interest rates and boosted spending to fight the worst recession since World War II, spurring investors to buy bullion as a hedge against potential inflation and debasement of currencies. The Dollar Index has lost 4.2 percent this year. Gold typically moves inversely to the U.S. currency.
“There’s not many good options for investors to hedge against a declining dollar and rising inflation,” Hwang Il Doo, head of trading with KEB Futures Co., said today from Seoul. “Gold will rise to $1,100 an ounce by the end of the year, once physical demand from China and India adds fuel to the rally.”
Gold last traded at more than $1,000 on Feb. 20, the first time the metal had breached that price since March 2008. Futures then retreated to as low as $865 on April 6. The December contract added 0.7 percent to $1,003.80 an ounce in New York at 2:19 p.m. in Singapore. Spot gold traded at $1,001.60.
The metal’s advance boosted producers. Newcrest Mining Ltd., Australia’s largest gold-mining company, gained as much as 5 percent to A$34.18, and Lihir Gold Ltd., the second-largest, increased 4.7 percent. Zijin Mining Group Co., China’s largest producer, rose 5 percent in Hong Kong.
Haven Investment
Gold may be cementing its status as a haven investment as governments seek to flood the financial system with cash in an effort to haul the global economy out of a recession. The record for gold futures is $1,033.90 an ounce, reached March 17, 2008.
“The reasons to own gold as an investment make sense,” Sydney-based Greg Gibbs, a Royal Bank of Scotland Group Plc strategist, said in advance of the metal’s gain to $1,000 today. “It is a hedge against policy makers losing control of fiscal and quantitative monetary policies.”
The Dollar Index, a six-currency gauge of the dollar’s value, declined for a third day today.
U.S. President Barack Obama has increased U.S. marketable debt to an unprecedented $6.78 trillion as he borrows to spur the world’s largest economy. Goldman Sachs Group Inc. predicts that the U.S. will sell about $2.9 trillion of debt in the two years ending September 2010.
‘Hint of Hyperinflation’
“Money has been printed massively,” said investor Jim Slater, who was deputy chairman of Galahad Gold Plc before it liquidated in 2008. “Inflation will follow fairly soon” and there may be “a hint of hyperinflation. Even a hint will be very good news for gold,” said Slater.
Crude-oil futures, used by some investors as an inflation- outlook guide, have soared 54 percent this year. Consumer prices will rise 0.9 percent in advanced economies next year compared with 0.1 percent in 2009, the International Monetary Fund forecast in July. In other countries, prices may gain 4.6 percent in 2010, from 5.3 percent this year, the fund said.
Gold at more than $1,000 may attract more investors seeking to take advantage of the longest advance in the metal’s price in 60 years. Assets in some of the industry’s largest exchange- traded funds have reached all-time highs the past few months.
The SPDR Gold Trust, the biggest ETF backed by the metal, reached a record 1,134.03 metric tons on June 1. The fund, which held 1,077.63 tons as of Sept. 4, has overtaken Switzerland as the world’s sixth-largest gold holding.
Indian Demand
Investors bought 222.4 tons of bullion in the second quarter, 46 percent more than a year earlier, the World Gold Council said in August. That’s less than 595.9 tons in the first quarter, when investment demand exceeded usage by jewelers for the first time since at least 2004.
The National Spot Exchange Ltd. in India, the world’s largest consumer, launched small-denomination contracts in June to lure households to trade physical gold. In China “ongoing strength in demand” led by individual investors boosted sales 6 percent in the second quarter, the World Gold Council has said.
“The market has the power to move up further,” said Ellison Chu, a metals manager with Standard Bank Asia Ltd., citing dollar weakness. Still, “the risk is that speculative investors could be tempted to sell out,” said Chu.
Other precious metals have outperformed gold this year. Silver for immediate delivery gained as much as 2.3 percent to $16.705 an ounce today, the highest since August 2008. It has climbed 46 percent this year.
Platinum added 0.6 percent to $1,267.50 an ounce, increasing its gain this year to 36 percent. Palladium, the best performing precious metal this year, was 0.3 percent lower at $293.25 an ounce. It has gained 57 percent in 2009.
“We are still skeptical that this is a sustainable rally and a comeback could be very painful,” Andrey Kryuchenkov, a VTB Capital analyst in London, said before today’s advance in gold. “Risk-averse buying is nowhere near the levels we saw last winter.”

U.S. hiring outlook dips, better elsewhere: Manpower

NEW YORK (Reuters) - A forward-looking measure of hiring intentions dipped slightly in the United States even as it improved in many other countries, according to a quarterly survey by Manpower Inc.
The survey offers a hint that jobs in Europe and Asia may recover earlier than in the United States, but it also raises questions about whether such a recovery could be cut short without the support of U.S. consumers, Manpower said.
The global employment services company said its seasonally adjusted U.S. net employment outlook slipped to minus-3 for the fourth quarter, from minus-2 in the prior quarter. A year ago, the index stood at plus-9, according to the survey released on Tuesday.
The index, based on interviews with 28,000 U.S. employers, measures the difference between those who plan to add to their workforce and those who expect to cut staff.
Of 13 U.S. industry sectors, employers in only one -- education and health services -- were more positive about jobs prospects than they were in the third quarter. Other sectors -- like construction, leisure and hospitality, and professional and business services -- showed a deteriorating outlook.
"Companies are still not going to be in hiring mode," said Manpower Chief Executive Jeff Joerres. "They are in cautious mode."
A mark of that caution is that two-thirds of U.S. employers plan no change to staffing, a higher proportion than is typical, he added.
Manpower's outlook comes a few days after a U.S. government report showed the jobless rate rose to a 26-year high of 9.7 percent in August even as the pace of job losses slowed.
Manpower's U.S. survey dates back to 1962 and is considered a leading indicator of labor trends. The Milwaukee-based company does business in 80 countries and generates most sales and earnings outside the United States.
EUROPE, ASIA SEEN LEADING
Manpower's international survey of 72,000 employers found improved hiring expectations in 20 of 34 countries and territories versus the prior quarter, though nearly all reported weaker hiring intentions compared with a year ago. In 15 countries and territories, the number of employers cutting jobs outweighed those planning to add jobs, Manpower said.
Prospects improved in several Latin American countries, were stronger or stable in much of Asia and Western Europe, but weaker in Eastern European countries.
In Mexico, as in the United States, hiring plans are the weakest in the survey's history. Optimism rose in Canada, reflecting better prospects in construction, finance and real estate.
Indian employers are the most optimistic in Asia, while hiring intentions also improved in China, Hong Kong and Singapore. The employment outlook was flat in Japan.

U.K. Union Gives Kraft Job Pledge a Wary Response

LONDON -- Kraft Foods Inc.'s pledge to safeguard Cadbury PLC's U.K. staff if its bid is successful received a lukewarm response from a key workers' representative Monday.
"It is essential that no one makes rash promises which give false hope to the work force, and in particular to our members under threat of redundancy at the Somerdale plant," said Jennie Formby, national officer for the food sector at the U.K.'s largest labor union, Unite.
The closure of Somerdale and the cuts at Bournville form part of Cadbury's current cost-cutting plan. Kraft says it would keep the Somerdale plant in southwest England open and reverse some of Cadbury's cost cuts at the Bournville factory in Birmingham. "We believe we would be in a position to operate the Somerdale facility, which is currently planned to be closed, and invest in Bournville, thereby preserving U.K. manufacturing jobs," Kraft Chairman and Chief Executive Officer Irene Rosenfeld said.
These commitments are based on Kraft's belief it can expand volumes of Cadbury's products faster than Cadbury can as a standalone company.
The deal's provision to protect U.K. workers has been seen as a way to fend off political criticism from within the U.K., where Cadbury is a much-loved brand. Few U.K. companies are held in such high regard by U.K. consumers. A spokesman for Labour Prime Minister Gordon Brown Monday declined to comment on a possible Cadbury takeover.
But Kraft's commitment to a "net increase" in U.K. jobs isn't a commitment to protect all U.K. jobs, and Kraft didn't provide a time span for the net increase. Michael Osanloo, Kraft's executive vice president of strategy, said Monday that there would likely be job cuts outside of the U.K.
Unite has requested meetings with Kraft and Cadbury so it can evaluate what the bid means for the long-term future of U.K. jobs at all Cadbury sites, as well as its impact on workers' conditions and pensions.
In July, Unite threatened industrial action at Cadbury unless the company reconsidered its stance on pay.
"Recent years have seen a great deal of upheaval for Cadbury workers in this country," said Ms. Formby.

Kraft’s Rosenfeld Met With Cadbury’s Carr in Expansion Push

Kraft, the world’s second-largest foodmaker, said yesterday it will pursue the takeover to create a company with $50 billion in annual revenue. Since Rosenfeld took command of Northfield, Illinois-based Kraft in June 2006, the company completed the purchase of the Iberian units of United Biscuits Group and paid $7.8 billion for Paris-based Groupe Danone SA’s biscuit unit.
“She’s doing the right thing,” Donald Yacktman, an investor who holds Kraft shares, said yesterday in a telephone interview. Yacktman, founder of Yacktman Asset Management Co. in Austin, Texas, said Rosenfeld may sell off certain parts of Cadbury and expand others if a deal were to be reached.
Rosenfeld, 56, took the bid for Cadbury directly to shareholders yesterday after the U.K. maker of Trident Gum and Dairy Milk chocolate rejected Kraft’s offer as inadequate. The purchase would give her access to emerging markets such as India and complementary products for Kraft’s lines of biscuits, powdered drinks, chocolate and dairy foods.
“This proposed combination is about growth,” Rosenfeld said in a statement yesterday. According to a letter from Rosenfeld to Cadbury Chairman Roger Carr that was released by Kraft, the two met Aug. 28 to discuss the takeover proposal.
The meeting took place in London, according to two people familiar with the matter. Kraft has been interested in Cadbury since before Kraft was spun off from Altria Group Inc. in 2007, the people said.
PepsiCo Ties
Rosenfeld was named CEO in June 2006 and has spent about 25 years at Kraft, with a three-year interruption to run PespiCo Inc.’s Frito-Lay snack-food unit. Last month, Forbes magazine ranked her No. 6 on its list of the world’s most powerful women, three behind PepsiCo CEO Indra Nooyi.
Nooyi last month reached an agreement to retake control of her company’s two biggest bottlers after an initial rebuff.
Cadbury jumped 215 pence to 783 pence yesterday in London, exceeding the 745 pence a share Kraft offered. Cadbury said July 29 that revenue will rise about 4 percent this year and profit margins will widen as it cuts expenses and raises prices.
Kraft, which traded at about $31 when Rosenfeld was named CEO, rose 11 cents to $28.10 Sept. 4 on the New York Stock Exchange. Revenue has declined the past two quarters.
‘Limited Scale’
“Cadbury’s prospects, ability to fully realize operational efficiencies and capacity to invest are necessarily constrained given its limited scale and scope relative to larger global competitors,” Rosenfeld said in her letter to Carr.
During her earlier stint at Kraft, Rosenfeld pushed to expand into ready-to-drink beverages by buying Capri Sun. The division containing that business “grew at a double-digit rate” in the second quarter, the company said in August.
More recently, Rosenfeld sold Post Cereals, the maker of Shredded Wheat and Grape-Nuts, in 2008 for about $2.6 billion. The sale has still left Kraft dependent on revenue from North America with more than 60 percent of sales coming from the region last quarter.
“Kraft is a bit landlocked,” said Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania. He has about $150 million of Cadbury stock. “They know they have to get away from the U.S. to grow.”
Russo said that while Rosenfeld has placed renewed importance on the consumer at Kraft, he sold his shares in 2008 because of the lack of international presence.
By contrast, about 40 percent of Cadbury’s revenue comes from developing markets and represents almost 70 percent of the company’s growth, Russo estimates. Cadbury’s emerging-market brands include Bournvita, a cocoa-based drink, and Perk chocolate wafers, both sold in India.
At Frito-Lay, Rosenfeld boosted sales of Tostitos and Doritos chips through increased advertising. She returned to Kraft as the company was trying to respond to surging commodity costs and prevent customers from switching to less-expensive private-label brands of cheese and coffee. She is thoughtful about relations with the U.S. consumer, Russo said.
“Her insights are very good because they focus on the consumer and the customer,” Russo said.

Japan Stocks Rise on Outlook for Chipmakers, Auto Sales, Dollar

Sept. 1 (Bloomberg) -- Japanese stocks rose on speculation chipmakers’ earnings prospects are improving and after higher domestic sales and a strengthening dollar boosted automakers.
Toshiba Corp., Japan’s biggest maker of semiconductors, climbed 2.7 percent and was the country’s most-actively traded stock by value after the Nikkei newspaper said the chip unit will book an operating profit. Nikon Corp., the nation’s No. 1 manufacturer of steppers used to make chips, rose 4.3 percent. Honda Motor Co., which gets almost half its sales in North America, added 1.2 percent after the dollar climbed and a report showed Japanese car sales rose for the first time in 13 months.
The Nikkei 225 Stock Average rose 0.4 percent to close at 10,530.06 in Tokyo after flipping between gains and losses seven times. The broader Topix index advanced 0.3 percent to 968.77, with four stocks gaining for every three that fell. The number of shares traded in Tokyo was the lowest since Feb. 16.
“Investors would like to wait and see whether demand for finished products will grow,” leading to this directionless market, said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “I don’t expect demand to expand vigorously but think it will recover very slowly.”
The Nikkei 225, which has risen and fallen on alternate days since Aug. 14, has rallied 49 percent from its lowest close in more than a quarter century on March 10. That lifted the average price of stocks on the index to 42.7 times estimated net income, higher than 17.1 times for the Standard & Poor’s 500 Index in the U.S., data compiled by Bloomberg show.
Return to Profit
Toshiba’s semiconductor business will likely book an operating profit of “a few billion yen” in the three months to September, and orders from automakers are rebounding at NEC Electronics Corp., the Nikkei reported today. Separately, global semiconductor sales rose 5.3 percent from the previous month to $18.2 billion, the Semiconductor Industry Association said in a statement yesterday.
Toshiba added 2.7 percent to 491 yen. Sumco Corp., the world’s No. 2 maker of silicon wafers, soared 10 percent. NEC Electronics, Japan’s No. 4 chipmaker, surged 11 percent.
Honda, the nation’s No. 2 automaker, advanced 1.2 percent to 2,970 yen, and bigger rival Toyota Motor Corp. increased 0.8 percent to 4,020 yen. Domestic car sales rose 2.3 percent last month, the Japan Automobile Dealers Association said today. The two carmakers and Toshiba were the three biggest contributors to the Topix’s gains today.
“The business climate will continue to improve and there’s no reason for investors to sell,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “There are companies that will raise their full-year earnings forecasts when they report first-half results.”
China Concern, Commodities
Automakers were also buoyed by the stronger dollar, as it boosts the value of overseas sales at Japanese companies when converted into their home currency. The dollar appreciated against the yen to as much as 93.20 today from 92.82 at the close of Tokyo stock trading yesterday.
Kawasaki Kisen Kaisha Ltd., the nation’s No. 3 shipping line, decreased 1.5 percent, and bigger rival Mitsui O.S.K. Lines Ltd. declined 2 percent. Shipping companies collectively had the steepest drop among the Topix’s 33 industry groups.
“Investors are concerned shipping demand will slow globally, particularly in China,” said Masatsugu Okeya, a fund manager at Chiba-Gin Asset Management Co. Low shipping rates “are little help in getting people excited about their earnings outlooks.”
China’s Shanghai Composite Index slumped the most since June 2008 yesterday, sparking declines in commodities and U.S. equities. The gauge lost 23 percent from its 15-month high on Aug. 4, crossing the 20 percent threshold that signals the beginning of a bear market.
The Baltic Dry Index, a gauge of rates to carry dry bulk commodities such as iron ore, coal and grain, has tumbled 79 percent from its record high in May 2008.

Asian Stocks Advance on Hon Hai Earnings, China Manufacturing

Sept. 1 (Bloomberg) -- Asian stocks rose, led by technology and mining companies, after Hon Hai Precision Industry Co. earnings beat estimates and China’s manufacturing expanded at the fastest pace in 16 months.
Hon Hai Precision, the world’s No. 1 contract maker of electronics, climbed 6.8 percent in Taipei, as it beat analysts’ profit targets by 29 percent. Rio Tinto Group, the mining company that got 19 percent of its revenue in China last year, added 2.2 percent in Sydney. Industrial & Commercial Bank of China Ltd. rose 2 percent in Shanghai, where the benchmark index gained following its biggest one-day decline since June 2008.
“I don’t see why the stock market should collapse,” said Khiem Do, head of the multi-asset group at Baring Asset Management (Asia) Ltd. in Hong Kong, which holds $7 billion assets. “We are not looking at a reversal of the growth trend in China. Technology is among the sectors benefiting from this global recovery, particularly those in Taiwan and South Korea.”
The MSCI Asia Pacific Index rose 0.6 percent to 114.09 as of 4:29 p.m. in Tokyo. Two shares advanced for each one that fell on the gauge. Speculation of a global economic recovery drove the index to the highest in more than 10 months on Aug. 14. The measure is little changed since then.
China’s Shanghai Composite Index added 0.6 percent amid speculation yesterday’s 6.7 percent decline was excessive. Hong Kong’s Hang Seng Index rose 0.6 percent. China Life Insurance Co. and Ping An Insurance (Group) Co. gained more than 4 percent in Shanghai after UBS AG upgraded their ratings.
Global Rally
Japan’s Nikkei 225 Stock Average gained 0.4 percent. Nippon Sheet Glass Co. rose 3.4 percent after the Nikkei newspaper said solar glass sales are rising. Clarion Co., a navigation-systems maker, rose 4.2 percent after the Nikkan Kogyo newspaper said the company took on more workers to meet orders.
Futures on the U.S. Standard & Poor’s 500 Index added 0.3 percent. The gauge dropped 0.8 percent yesterday amid concern the global rally in equities has outpaced the prospects for an economic recovery. The MSCI World Index sank 0.8 percent yesterday, the most since Aug. 17.
MSCI’s Asia Pacific measure rallied 61 percent from a more than five-year low on March 9 through yesterday. That lifted the average price of stocks on the index to 23.5 times estimated net income, higher than 17 times for the S&P 500, data compiled by Bloomberg show.
Hon Hai climbed 6.8 percent to NT$118.50. Second-quarter net income rose 27 percent to NT$15.1 billion ($459 million) from a year earlier. Hon Hai was expected to report profit of NT$11.7 billion, according to analyst estimates compiled by Bloomberg.
Beating Estimates
Goldman Sachs Group Inc. raised its share-price target on the stock by 4.7 percent to NT$135.
The rally in Asian stocks since March has been driven in part by profit reports in the past month that have exceeded analyst estimates. Some 35 percent of the 633 companies in the MSCI Asia Pacific Index that have reported net income since early July have beaten analyst predictions, while about 21 percent have missed, according to data compiled by Bloomberg.
In Seoul, Samsung Electro-Mechanics Co. surged 9.7 percent to 98,000 won. Kevin Lee, an analyst at Woori Investment & Securities Co., raised the target price on the stock to 110,000 won from 83,000 won. The analyst increased his operating-profit estimate, a report today said.
Rio gained 2.2 percent to A$57.36 on optimism industrial demand for metals in China will increase. BHP Billiton Ltd., the world’s largest mining company, added 1.3 percent to A$37.29.
Influential Economy
The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said in an e-mailed statement today in Beijing. A reading above 50 indicates an expansion.
“China is seen as one of the few growing economies and it has influence over the commodity market because of its demand prospects,” said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong.
Speculation that Chinese demand will fall caused crude oil to dive 3.8 percent to $69.96 a barrel in New York yesterday, the biggest decline since Aug. 14. Copper lost 4.2 percent, the most since June 22.
The Shanghai Composite Index fell into a bear market yesterday on concern that the world’s third-biggest economy will slump as banks rein in credit growth to avert asset bubbles and bad loans. The measure sank 21 percent in the past month, the world’s worst performing major index in that time.
Banks, Insurers
Industrial & Commercial Bank, the nation’s biggest lender, added 2 percent to 4.56 yuan, ending a three-day, 5.5 percent slide. China Construction Bank Corp., the nation’s second- biggest lender, climbed 2.1 percent to 5.25 yuan, following a two-day, 7.7 percent decline.
China Life, the nation’s biggest insurer, gained 4.3 percent to 26.18 yuan, while smaller rival Ping An climbed 4.1 percent to 44.92 yuan. UBS upgraded China Life to “buy” from “neutral” and Ping An to “neutral” from “sell.”
Nippon Sheet, a maker of glass for autos, solar panels and buildings, rose 3.4 percent to 337 yen after the Nikkei newspaper reported sales of glass for solar cells in the April- to-September period will likely rise 15 percent to about 15 billion yen ($161 million).
Clarion gained 4.2 percent to 99 yen. The company tripled the number of its non-regular employees to meet orders from Ford Motor Co., the Nikkan Kogyo newspaper reported. Kazumasa Okazawa, the company’s public relations representative, confirmed the report and said domestic orders were also increasing.
STATS Chippac Ltd., a provider of chip testing and packaging services, rose 5 percent to 84.5 Singapore cents. The company said its parent Temasek Holdings Pte is still considering if it will take the company private and delist it from the exchange.

China stocks end up 0.6 pct in range-bound trade

SHANGHAI, Sept 1 (Reuters) - China's key stock index closed up 0.6 percent on Tuesday, led by banking stocks, winding up a day of range-bound trading with technically inspired buying and positive manufacturing data balancing weak sentiment and fresh negative news on share supplies.
The Shanghai Composite Index .SSEC closed at 2,683.724 points, after rising more than 2 percent during intraday trading and falling as much as 1 percent.
The number of gaining Shanghai A shares virtually matched losers at 422 to 445, while turnover for Shanghai A shares fell to 101 billion yuan ($15 billion) from Monday's already thin 124 billion yuan, reflecting a lack of interest.
Shanghai Pudong Development Bank (600000.SS) rose 3.92 percent to 18.54 yuan after the official Shanghai Securities News cited a bank official denying a report that the lender had suspended lending in August. "Some technical buying has emerged after yesterday's steep fall, but the rebound apparently lacks momentum," said analyst Li Wenhui from Huatai Securities in Nanjing, adding that there would be a battle to recapture the key 125-day moving average, now at 2,760, in the short term.
The index tumbled 6.74 percent on Monday, while posting its second-biggest monthly loss in 15 years in August, hit by new share supplies and high share valuations that had got ahead of earnings improvements.
The plunge pushed the 14-day Relative Strength Index (RSI) to a reading of 31 at Monday's close, near the oversold mark of 30.
And the average premium of mainland-listed A shares over Hong Kong-listed H shares of the same companies .HSCAHPI dropped to its lowest since January, at about 16 percent.
On Tuesday, China posted its official purchasing managers' index (PMI) for August, which inched up to a 16-month high of 54.0 from July's 53.3.
It was the sixth straight month that the official PMI stood above 50, indicating an expansion of activity in the manufacturing sector. The PMI plumbed a record low of 38.8 in November. [ID:nPEK62430]
On the negative side, China's stock regulator said late on Monday that it would review on Friday an application by China National Chemical Engineering Co for a stock IPO worth around $428 million. [ID:nSHA61121] (Reporting by Claire Zhang and Edmund Klamann

2008-09 PUBLIC ACCOUNTS SHOW STELLAR YEAR FOR SASKATCHEWAN

With record revenues and the highest-ever surplus in provincial history, Saskatchewan enjoyed exceptional financial circumstances last year, according to the 2008-09 Public Accounts released today.
Increased revenues allowed the government to reduce the provincial debt and interest costs to their lowest levels in 20 years.
Finance Minister Rod Gantefoer said the 2008-09 Public Accounts show Saskatchewan is in excellent financial shape, largely due to resource revenues and strong economic activity.
"We have experienced a strong year and Saskatchewan is expected to continue leading the nation in economic growth," Gantefoer said. "This was our government's first budget - our ‘Ready for Growth' budget - and we wound up with more revenue growth than anyone anticipated."
The Public Accounts show a General Revenue Fund (GRF) surplus of $2.39 billion - the highest surplus in Saskatchewan history.
GRF revenues totalled $12.33 billion, nearly $3 billion or 31.6 per cent higher than the 2008-09 Budget estimate, primarily due to higher resource revenues, as well as higher sales tax revenue:
• Potash $1.36 billion (up $1.01 billion)
• Crown land sales $928.25 million (up $735.75 million)
• Oil $1.62 billion (up $561.47 million)
• Sales tax revenue $1.11 billion (up $190.63 million)
GRF expenses totalled $10.36 billion, a 13.6 per cent increase over the 2008-09 Budget estimate, largely due to accelerated spending for infrastructure projects across Saskatchewan.
"Our good fortune last year allowed the government to address the priorities of Saskatchewan people through infrastructure spending, debt reduction and significant tax relief," Gantefoer said.
The government lowered income tax by over $300 million dollars last year and committed an unprecedented $1.5 billion to construction of infrastructure projects.
As well, the government used the unprecedented increase in revenue to pay down debt by $2.68 billion or almost 40 per cent. This lowered government debt in the GRF to $4.15 billion - the lowest level since 1988-89. Net interest costs paid on debt were cut to $332 million - also the lowest level since 1988-89. The government general debt-to-GDP ratio stood at 6.2 per cent at March 31, 2009 - the lowest level since March 31, 1984.
The Summary Financial Statements (SFS) - which include the financial results of the GRF plus Crown corporations, agencies, boards and commissions - show a surplus of $2.97 billion for 2008-09, well exceeding the estimated budget deficit of $133 million.
There is now an accumulated surplus of $1.4 billion in the SFS - the first time there has been an accumulated surplus in the 18 years these statements have been published.
"In other words, for the first time, the government balance sheet has a positive net value - our overall assets are greater than our liabilities," Gantefoer said. "This is a major accomplishment for Saskatchewan to post a surplus in both sets of statements during a time of global economic uncertainty. At a time when most governments are racking up more debt, our government is paying down debt."
The government has maintained a $1.2 billion balance in the Growth and Financial Security Fund to act as a financial cushion in uncertain economic times.
"While Saskatchewan is better positioned than most jurisdictions, we are not immune to what's happening worldwide," Gantefoer said. "It is important to have that cushion, in case we face an economic downturn."

FIRST QUARTER FINANCIAL REPORT: PROVINCE STILL ON TRACK FOR SURPLUS BUDGET

Saskatchewan is still on track to post a surplus provincial budget this fiscal year, in spite of a $1.3 billion reduction in projected potash revenues.
This decline is significantly offset by higher-than-expected oil, taxes and other revenue, totaling $668.1 million.
In order to maintain a balanced budget, Finance Minister Rod Gantefoer today released a plan to deal with this challenge which includes:
An additional special dividend of $185 million from the Crown Investments Corporation (CIC), from proceeds of the Saskferco sale - this is equivalent to the dividend that was budgeted but not taken in 2008-09 when the province's revenues were higher;
Deferring $132.3 million in capital projects that are still in the planning stages, including $95 million for the Children's Hospital in Saskatoon and $30 million for education capital funding that has not yet been committed (the government maintains its $200 million commitment to the Children's Hospital with this funding to be provided in future years as construction takes place);
Additional expenditure restraint of $49.2 million, beginning with vacancy management and reduced travel while further savings are identified.
As a result of these measures, the government will show a net decline in revenues of $558.4 million, while still posting a pre-transfer budget surplus of $50 million for the 2009-10 fiscal year.
In addition, government will transfer $399.5 million from the Growth and Financial Security Fund to maintain government debt at $4.2 billion.
Gantefoer said that while the extremely volatile commodity markets pose serious challenges to provincial revenues, Saskatchewan's economy remains strong compared to other provinces in Canada.
"The goal of the 2009 budget was to keep Saskatchewan's economy strong and steady, and Saskatchewan continues to lead the country with the best job creation record and lowest unemployment rate in Canada," Gantefoer said.
"Despite the current challenges in the potash industry, we are the only province that has more people working than a year ago. We think that's a pretty positive sign and proof that our budget is working for Saskatchewan people."
Gantefoer said that strong revenues last year allowed the province to forgo a $185 million CIC dividend. It has decided to take that dividend this year to keep needed infrastructure projects moving forward to maintain the province's economic momentum.
As a result of the government's plan, the Growth and Financial Security Fund (GFSF) balance will be $841 million.
"The fund - our fiscal insurance policy - is working exactly as it should. There is still a healthy balance as protection against further volatility in commodity markets or other unforeseen events," Gantefoer said.