Archive for February, 2007

28 February, 2007 | No comments

Think Twice Before Betting On Japan Funds

It often makes sense to consider out-of-favor categories, and Japan funds were the worst-performing type of international offering in 2006, losing 2% on average, as their chosen market was the most sluggish in the developed world. What’s more, many experts are optimistic about the Japanese economy, particularly with respect to exports to China and other Asian countries and corporate earnings and governance.

However, there are several reasons to think twice about buying Japan funds. For starters, these funds aren’t quite as downtrodden as they might first appear. Their 2006 losses were modest rather than marked in absolute terms. They didn’t get the big currency bounce that most other overseas offerings received last year. (The U.S. dollar was relatively flat against the yen last year and thus currency didn’t help or hurt returns of Japan funds; but the U.S. dollar weakened significantly against the euro and some other currencies and that weakness boosted the U.S.-dollar returns of funds with exposure to the latter currencies by quite a bit.) Further, Japan funds surged 33%–and outgained all other types of equity funds except for Latin America and natural-resources offerings–in 2005, and they posted double-digit returns in 2004. Thus, they have 12% annualized gains over the past three years, which are pretty strong in absolute and historical terms–and better than those of many domestic-equity offerings–even if they’re not as good of those of most other international-stock funds.

Meanwhile, the optimism about the Japanese economy is far from universal at present. Some experts are worried that the Bank of Japan might raise interest rates too soon and trigger the return of deflation, for example, while others are concerned about consumer spending and whether the new prime minister is as committed to economic reform as the last one was. In fact, the consensus view on the macro situation in Japan has switched back and forth between the glass being half full and glass being half empty a number of times during the past decade. And due to those changing perceptions, as well as some genuine problems and real risks, Japan funds have been more volatile than most other types of international-stock offerings over the shorter and longer terms.

Moreover, the vast majority of investors will find that they already have substantial exposure to Japan without adding a fund that focuses on that market. The average foreign large-cap fund devotes about 20% of its assets to Japan and several dozen such funds, including http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=LLINX http://quote.morningstar.com/Switch.html?ticker=LLINX and http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=POVSX http://quote.morningstar.com/Switch.html?ticker=POVSX , have 25% or more of their assets invested there at present, so nearly all investors with core international holdings have sizable stakes in Japan. Individuals who own foreign small/mid-value or foreign small/mid-growth funds as their supplemental foreign holdings are taking on a significant amount of extra Japan exposure, because those funds also keep 20% of their assets in the land of rising sun. And there are more than 50 diversified U.S. stock funds with 5% or more of their assets invested in Japan currently, including such prominent funds as http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=DODGX http://quote.morningstar.com/Switch.html?ticker=DODGX and http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=TAVFX http://quote.morningstar.com/Switch.html?ticker=TAVFX .

Finally, investors who are willing to take on the risks of a pure-Japan offering and want even more exposure to that market than they already have will find that they don’t have a lot of terrific choices. Most funds in the Japan category are pricey. (The typical no-load Japan fund is more expensive than the average no-load foreign large-cap offering, the typical no-load Europe fund, and the average no-load foreign small/mid-cap offering.) And many have manager-turnover or performance problems as well.

Meanwhile, even the most-attractive Japan offerings have their issues. http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=EWJ http://quote.morningstar.com/Switch.html?ticker=EWJ and http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=DXJ http://quote.morningstar.com/Switch.html?ticker=DXJ are attractively priced and have other strengths, but these ETFs have pronounced blue-chip biases and thus overlap even more than most of their peers do with the Japanese portions of foreign large-cap holdings. The all-cap orientations of http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=PRJPX http://quote.morningstar.com/Switch.html?ticker=PRJPX and http://quicktake.morningstar.com/FundNet/MorningstarAnalysis.aspx?Country=USA&Symbol=MJFOX http://quote.morningstar.com/Switch.html?ticker=MJFOX lessen the overlap problem, and both have real promise as well as fetching expense ratios.However, the former enjoyed something of a headwind in Campbell Gunn’s first few years and then lagged in 2006, and the latter has really struggled in the past two years.

In short, while there is real merit in considering beaten-up types of offerings, it’s important to recognize that Japan funds have actually been solid performers in absolute terms in recent years, that their commitment to a single, challenging market comes with real issues, that most investors already have a lot of Japan exposure, and thatmany of the options have significant limitations.

28 February, 2007 | No comments

SKorea current account swings to deficit in Jan as trade surplus shrinks -UPDATE

SEOUL (XFN-ASIA) - The current account was in deficit by 510.7 mln usd in January compared to a surplus of 146.7 mln in the previous month as a smaller merchandise trade surplus offset an improved income account, the Bank of Korea said.

The current account is the broadest measure of trade, covering the flow of goods, services and money across borders.

Before January, the current account had been in surplus since September. The last deficit was 638.3 mln usd in August.

On a seasonally adjusted basis, the current account yielded a deficit of 836.8 mln usd in January

against a surplus of 600.5 mln a month earlier.

The central bank expects the current account surplus to shrink to 2 bln usd this year, the smallest in 10 years and compared to 6.09 bln in 2006.

The merchandise trade surplus on a free-on-board basis fell to 1.21 bln usd last month from 1.95 bln in December. Exports fell to 28.61 bln usd from 29.02 bln while imports slightly expanded to 27.4 bln usd from 27.07 bln.

Customs-cleared exports grew 20.9 pct year-on-year to 28.12 bln usd in January on brisk overseas sales of ships, semiconductors and steel products.

Customs-cleared imports rose 20.3 pct year-on-year to 27.78 bln usd in January on stronger demand for nonferrous metals, chemical products, machinery and electronics devices.

The service account deficit widened to 1.94 bln usd in January from a deficit of 1.88 bln usd in the preceding month, pressured by smaller transportation account surplus and as more Koreans traveled and studied abroad.

The income account surplus improved to 547.1 mln usd in January, compared to 285 mln usd a month earlier, backed by more interest income and a decline in dividends payments.

The capital account surplus narrowed to 3.03 bln usd in January from 5.46 bln usd in December.

shinsaeromi@xinhuafinance.com

For more information and to contact AFX: www.afxnews.com and www.afxpress.com

28 February, 2007 | No comments

Asian economic and corporate news summary

BEIJING (XFN-ASIA) - A summary of Asian economic and corporate news at 0500 GMT:

JAPAN:

-Jan industrial output falls 1.5 pct from Dec, beats forecast

-Jan retail sales down 0.8 pct year-on-year, falling for 3rd straight month

-Jan auto production up 4.2 pct year-on-year

-Tokyo bourse briefly halts Topix futures, options trading

-Fuji Heavy aims for 80 bln yen in operating profit in year to March 2011

SOUTH KOREA:

-Current account swings to deficit in Jan as trade surplus shrinks

-Samsungcard board clears plan to list this year

HONG KONG:

-GDP in 2006 up 6.8 pct

-Govt sees 2007 GDP growth at 4.5-5.5 pct, CPI up 1.5 pct

-Govt sees year to March 2007 budget surplus at 55.1 bln hkd

-Govt sees year to March 2008 expenditure at 248.4 bln hkd

-Govt sees year to March 2007 fiscal reserves at 365.8 bln hkd

-Govt to accelerate infrastructure projects to create more jobs

-Govt to widen personal income tax bands to 2002/03 levels

-Govt to waive property rates for April-Sept 2007, subject to a ceiling

-Govt fixes stamp duty at 100 hkd on property deals of 1-2 mln hkd

-Govt cuts duties on alcoholic beverages and wine by half

-MTR says Tseung Kwan O Area 56 land premium assessed at 3.35 bln hkd

CHINA:

-GDP in 2006 unchanged at 10.7 pct after revision

-Energy use per unit of GDP falls in 2006 1.23 pct

-World Bank approves 147 mln usd loan for waste water projects in east

-China Life Insurance Jan premium income 23 bln yuan

-Supor Cookware unaudited 2006 net profit 102.21 mln yuan vs 69.23 mln yuan

-Suning Appliance 2006 net profit more than doubles on new stores

-Ping An Insurance to list on Shanghai bourse tomorrow

-PetroChina sees Changqing field oil output at 12.01 mln tons in 2007

-China Railway Engineering Group wins 1.15 bln usd construction contract in Sudan

-Shanghai Petro Exchange to trade styrene, toluene and diethylene in early March

-Network CN completes 1.5 mln usd additional private placement

-China Finance Online turns to loss of 1.7 mln usd on investment write-off

-Match.com acquires online dating firm eDodo

SINGAPORE:

-Jan M3 273 bln sgd vs 225 bln sgd; M2 266 bln sgd vs 219 bln sgd

-Jan commercial bank lending 197 bln sgd vs 183 bln sgd

-Jan credit card bad debt write-offs 8.8 mln sgd vs 9.2 mln sgd

-Celestial Nutrifoods 2006 net profit 370 mln yuan vs 281 mln yuan

-Isetan Singapore 2006 net profit 14.35 mln sgd vs 9.68 mln sgd

-Hong Kong-listed eSun unit makes takeover bid for Media Asia

MALAYSIA:

-Govt to announce winning bids for WiMax licenses by Friday

-Malaysian Airlines, KLM expand code-sharing cooperation

INDONESIA:

-Adira Finance 2006 net profit 463.94 bln rupiah vs 476.37 bln rupiah

-Astra Agro sees 2007 CPO output flat at 920,000 tons

PHILIPPINES:

-SM Development 2006 net profit rises 51 pct on higher revenue

-Hong Kong’s First Pacific makes full payment for additional PLDT stake

AUSTRALIA & NEW ZEALAND:

-Australia Jan private sector credit up 1.3 pct from Dec, up 14.9 pct year-on-year

-Australia well placed to weather market volatility - Treasurer

-Origin Energy H1 net profit 233 mln aud vs 194 mln aud

-Origin Energy H1 net profit up 20 pct on upstream gains

-Centro acquires US property trust New Plan for 3.4 bln usd

-Harvey Norman H1 net profit 180.5 mln aud vs 131.9 mln aud

-Harvey Norman H1 net profit jumps 36.9 pct from one-offs, sales

-Alinta 2006 net profit 172.7 mln aud vs 232.2 mln aud

-Alinta 2006 net profit down 25.6 pct in absence of one-off gains

-Smorgon Steel H1 net profit 75.3 mln aud vs 60.5 mln aud

-Smorgon Steel H1 profit rises on one-offs amid margin pressure

-Symbion Health H1 net profit 59.1 mln aud vs loss 54.1 mln aud

-Symbion Health H1 underlying earnings rise on organic growth

-Lend Lease H1 net profit slips 1.1 pct on UK project delays

-QBE Insurance raises 406 mln aud through share placement

-TCW Group offers 812 mln aud for Queensland Gas Corp

-Straits Resources 2006 net profit falls 25 pct on higher costs

ivy.cheng@xinhuafinance.com

For more information and to contact AFX: www.afxnews.com and www.afxpress.com

28 February, 2007 | No comments

Oil Tumbles After Inventory Build

Updated from 12:37 p.m. EST

Wall Street was stumbling Thursday as tech stocks deteriorated amid a selloff in Apple (AAPL) and a flood of economic data.

The Dow Jones Industrial Average was down by a point at 12,576, and the S&P 500 was giving back 2 points, or 0.1%, at 1429. The Nasdaq Composite, however, was lower by 26 points, or 1.1%, at 2453.

The moves came after the release of the Labor Department’s consumer price index for December. The index was up 0.5%, compared with expectations for an increase of 0.4%. The so-called core index, which excludes food and energy prices, rose 0.2%, matching estimates.

Core inflation, a closely monitored figure, is now up 2.6% over the past year. The data follow by a day the latest reading of the producer price index, which rose 0.9% last month, a greater-than-expected increase. The core PPI was up 0.2%, also ahead of forecasts. The PPI report measures inflation at the wholesale level.

The CPI is considered the more important of the two when it comes to influencing Federal Reserve decisions on interest rates, but both are factored in to the central bank’s planning.

Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission, said that there will likely be no change in Fed interest rate policy following the CPI number.

In an emailed statement, he said that “more favorable news on core inflation will be needed for the Federal Reserve to lower its guard.”

Also on the economic docket, the Commerce Department said U.S. housing starts increased 4.5% in December to 1.64 million annualized units. Economists expected housing starts to decline slightly. Building permits were 5.5% higher for the month.

Additionally, the Philadelphia Fed said its manufacturing index rose to a reading of 8.3 in January, compared to negative 2.3 in December. The government also said initial jobless claims unexpectedly fell by 8,000 to 290,000 for the week ended Jan. 12. Economists were predicting a rise to 315,000 claims.

On top of all the data, Fed Chairman Ben Bernanke was speaking on Capitol Hill. Though his prepared testimony featured no remarks on monetary policy, he did warn that budget deficits could prevent the U.S. from solving its economic problems.

Treasuries were holding steady, with the benchmark 10-year note up 3/32 in price to yield 4.77%. The dollar was rising against the euro and the yen.

The U.S. market is coming off a session in which tech stocks were hit by a selloff in Intel (INTC) . Blue chips also slipped, but not nearly as dramatically as the technology sector. The same pattern was being repeated as the new day continued.

One of the biggest drags was Apple (AAPL) . After the previous close, the company posted blowout numbers for the most recent quarter but offered conservative guidance. Shares of the computer and iPod maker were down about 4.6%, despite numerous price target upgrades.

As for other earnings, Merrill Lynch (MER) was off 0.2% even after the broker reported fourth-quarter net income of $2.35 billion, or $2.41 a share, a surge of 68% from the same quarter a year ago. Results handily beat the Thomson First Call consensus.

Merrill also said it will raise its quarterly dividend 40% to 35 cents a share. The stock was lower by 15 cents at $96.66.

The Bank of New York (BK) reported fourth-quarter adjusted earnings that beat Wall Street’s expectations by 3 cents. Revenue came in at $1.89 billion, also ahead of forecasts. The Bank of New York was gaining 75 cents, or 1.9%, to $41.

Meanwhile, Fifth Third Bancorp (FITB) saw fourth-quarter earnings drop 80% from a year ago but still trumped the average estimate. Shares were adding 1.3% to $40.15.

Harley-Davidson (HOG) , Knight Capital (NITE) and Continental Airlines also topped analysts’ expectations.

Among those missing expectations was drug giant Novartis (NVS) , and its shares were edging lower by $1.37, or 2.3%, to $58.16.

Away from stocks, oil prices resumed their slide following the Energy Department’s weekly inventory report. Crude, which halted its recent decline on Wednesday by surging above $52 a barrel, was lately down $1.92 at $50.32. Most other commodities were lower.

The report showed that crude inventories unexpectedly rose by 6.8 million barrels last week. Distillate supplies rose by 900,000 barrels, and gasoline stocks climbed by 3.5 million barrels.

Precious metals were losing ground in a choppy session. Gold was falling $4.10 at $629.20 an ounce, and silver was off 19 cents to $12.70 an ounce.

Overnight in Asia, Japan’s Nikkei added 0.6% to 17,371, and Hong Kong’s Hang Seng was higher by 1.1% to 20,277. In Europe, London’s FTSE 100 was up 0.1% to 6210. Germany’s Xetra DAX dipped by 0.2% to 6689.

28 February, 2007 | No comments

Ministers take their foot off the brakes and get trade talks moving

A road map on how to reach agreement on stalled World Trade Talks could emerge from Davos after 30 ministers from 26 countries decided to hold an informal summit at the ski resort on Saturday.

There is a sense of momentum building despite deep divisions over farm subsidies and tariffs with President Bush urging a fresh push after meeting Jose Manuel Barroso, President of the European Commission, at the White House earlier this month.

Some WTO negotiators believe that if the talks resume in earnest in the next few weeks, a breakthrough deal on agriculture could be possible by May.

Peter Mandelson, the EU Trade Commissioner, told The Times that there had been secret bilateral talks between US and EU officials since late last year. There is also understood to have been a private trilateral meeting in Washington with Brazil. Mr Mandelson arrived in Davos cautiously optimistic that Saturdays informal summit could put the negotiations back on track.

This outlook is somewhat rosier than Mr Mandelsons previous position and reflects a resumed dialogue with Susan Schwab, the US trade representative, the EU Trade Commissioner said.

Tony Blair, who will give the closing address at Davos on Saturday, is expected to say that movement on trade positions is vital not only from the US and G20 but also from the EU.

Mr Mandelson said: I am prepared to move. I have indicated informally to everyone who wants to know that we have flexibility.

Despite reports that the French are refusing to give Mr Mandelson any more rope to negotiate lower EU tariffs in return for reduced US subsidies, he added: I negotiate on behalf of all 27 members of the EU who have given me a clear mandate. I will neither exceed it nor will I fall short of it.

Pascal Lamy, the WTO chief, is understood to have told Ms Schwab earlier this month that a failure by Congress to renew Mr Bushs Trade Promotion Authority which expires at the end of June could be the end of the round. Congress is also due to settle farm subsidy levels in March which could bring a halt to American negotiating flexibility.

The informal WTO session in Davos will include the trade ministers of the US, Brazil, India, Japan, Korea, Australia, Indonesia, Egypt, Canada, Egypt and South Africa.

European business will add its weight today to the clamour to kickstart the stalled Doha Round negotiations when about 40 chief executives will personally endorse the moves to liberalise multilateral trade.

Among them is Martin Broughton, the British Airways chairman and co-chair of the Transatlantic Business Dialogue. He points to the need for predictable and transparent international trade rules to help companies manage increasingly global supply chains and business operations.

Other companies whose chief executives have expressed their support include BT, Cadbury Schweppes, British American Tobacco, ABN Amro, Ericsson and DaimlerChrysler.

The initiative is designed to rebut criticism from Mr Mandelson and others that the companies that stand to gain most from easier access to international markets are refusing to lend their support.

The campaign is being co-ordinated by Unice, the European umbrella organisation for national business organisations, which this week changed its name to BusinessEurope, and six other Brussels-based pan-European federations.

They point to the benefits that businesses and consumers will gain from further dismantling of tariff and non-tariff trade barriers, better market access for service industries, simpler customs procedures and improved multilateral rules.

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