Thursday, August 16, 2007

Honda Leads Carmakers' Decline as Yen Strengthens

From Bloomberg today:

Honda Leads Carmakers' Decline as Yen Strengthens

Honda Motor Co., Japan's second- biggest carmaker, fell the most in five months on the Tokyo Stock Exchange, leading a decline among automakers as the yen rose to the highest in more than four months against the euro and dollar.

Honda shares fell 140 yen, or 3.6 percent, to close at 3,780 yen. Toyota Motor Corp., Japan's largest carmaker, fell 2.6 percent to 6,670 yen, while Nissan Motor Co., the third- largest, fell 2.6 percent to 1,119 yen.

The value of earnings from exports declines when the yen strengthens against foreign currencies. Japan's biggest carmakers get as much as 65 percent of their operating profit from North America, according to analysts.

``With export-oriented stocks, investors are less willing to buy when the yen rises,'' said Mitsuo Shimizu, a market analyst at Cosmo Securities Co. in Tokyo.

Toyota's annual operating profit falls about 35 billion yen for every 1 yen Japan's currency gains against the dollar, and 6 billion yen for every 1 yen rise against the euro, according to Koji Endo, a senior analyst at Credit Suisse Group in Tokyo.

Mazda Motor Corp., which exports about 75 percent of domestic production, fell 2.9 percent to close at 605 yen.

The yen gained to 115.93 per dollar from 116.61 and reached 115.71, the strongest since March 8. It climbed as high as 155.01 per euro, the strongest since March 19, before trading at 155.60, from 156.76 yesterday.

Japan's currency has rebounded from a record low of 168.99 per euro on July 23, and 124.13 per dollar on June 22, the weakest since December 2002.

Asian stocks tumbled, set for their biggest two-day drop in a year, after Australia's Rams Home Loans Group Ltd. said it was unable to refinance $5 billion of debt amid a widening credit crunch.

South Korea's Kospi index plunged 6.9 percent, its largest loss since June 2002. Macquarie Bank Ltd., Australia's biggest securities company that's lost almost a third of its value in the past four weeks, led a slide in financial stocks.

Toyota Motor Corp. and Samsung Electronics Co. fell after reports showed U.S. home sales dropped to a four-year low and prices declined in a third of the nation's cities. BHP Billiton Ltd., the world's biggest mining company, slumped as concerns about slower global growth dragged commodities prices lower.

``Blood is hitting the streets, everyone seems to be panicking, and there's reason to panic,'' said Patrick Chang, who helps manage $4.5 billion at CIMB-Principal Asset Management Bhd. in Kuala Lumpur. ``There's been so much blow-up, we don't know when it's going to end. Liquidity is drying up.''

The Morgan Stanley Capital International Asia-Pacific Index lost 2.7 percent to 141.58 as of 5 p.m. in Tokyo, set for the lowest close since March and its biggest two-day decline since June 2006. About 10 stocks retreated for each that gained today as benchmarks slid across the region.

Japan's Nikkei 225 Stock Average dropped 2 percent to 16,148.49, its lowest close since November. Sony Corp. led Japanese exporters lower after the yen strengthened to the highest against the dollar since March. South Korea's Kospi plunged the most in five years following a one-day holiday yesterday when the MSCI Asia index lost 2.5 percent.

Risk Averse

The Standard & Poor's 500 futures were 0.5 percent lower today. U.S. stocks fell yesterday on speculation Countrywide Financial Corp., the nation's biggest mortgage lender, may be forced into bankruptcy. The S&P 500 erased its gains for the year, dropping 1.4 percent.

U.S. Treasury Secretary Henry Paulson said financial turmoil will ``extract a penalty'' on U.S. growth rates, yet the economy is strong enough to weather problems without falling into recession, the Wall Street Journal reported today.

Macquarie fell 4 percent to A$64. Woori Finance Holdings Co., South Korea's third-biggest financial services company by market value, dropped 2.3 percent to 21,500 won. HSBC Holdings Plc, Europe's biggest bank, slid 1.3 percent to HK$136.10 in Hong Kong.

Rams Home Loans Group said it was unable to refinance A$6.17 billion ($5 billion) of short-term U.S. loans because of a ``lack of market liquidity'' caused by a global credit rout. It plunged 46 percent to 86.5 Australian cents, 65 percent lower than the price at its initial share offering last month.


``It's a selling panic,'' said Mark Mobius, who oversees $30 billion at Templeton Asset Management Ltd. in Singapore. ``We're seeing a lot of negative news with very few positives.''

The MSCI Asia-Pacific Financial Index dropped 2.8 percent today, taking its one-month loss to 14 percent, the second-worst performance among the broader measure's 10 industry groups.

Countrywide may go bankrupt if creditors force the company to sell assets at depressed prices or investors lose confidence in its ability to raise cash, Merrill Lynch & Co. said. KKR Financial Holdings LLC, a unit of Henry Kravis's buyout firm Kohlberg Kravis Roberts & Co., said it may lose up to $290 million from a drop in the value of mortgage-backed bonds it owns.


Stocks also dropped on signs investors are fleeing equities for less risky assets. Two-year Treasury yields held near the lowest in 22 months as a global stocks slide fed demand for the relative safety of government debt. More than $3.6 trillion has been wiped off global stock markets since July 23.

Fund managers are the most risk averse in a year, with 38 percent saying their willingness to take on investment risk is ``lower than normal'' because of the subprime crisis, a Merrill Lynch & Co. survey showed.

``Panic has been triggered by concern that the upward trend of the past three to four years has been broken,'' said Park Seh Ick, who helps manage $1.3 billion at Hanwha Investment Trust Management Co. in Seoul. ``People are overreacting.''

Toyota, the world's No. 1 automaker by value, slumped 2.6 percent to 6,670 yen. James Hardie Industries NV, the biggest supplier of home siding in the U.S., lost 5.5 percent to A$7.25 in Australia. Samsung Electronics, which gets more than 80 percent of its revenue overseas, fell 5.2 percent to 580,000 won.

The National Association of Home Builders/Wells Fargo index of builder confidence slid to 22 from 24 in July, its sixth month of decline, the U.S. group said. A reading below 50 means most respondents view conditions as poor. A National Association of Realtors report said the median price for a single-family home fell in 50 of the 149 metropolitan areas it studied.


Hon Hai Precision Industry Co., Taiwan's biggest electronics exporters, retreated 6.7 percent to NT$244.50. Tata Consultancy Services Ltd., India's largest computer-services exporter, slid 3 percent to 1,095.5 rupees.

Sony, the maker of the Vaio computer and PlayStation game console, lost 1.8 percent to 5,420 yen. Honda Motor Co., Japan's second-biggest automaker, slid 3.6 percent to 3,780 yen.

The yen strengthened to as high as 115.71 to the dollar today, the highest since March 8. A stronger yen decreases the value of Japanese exporters' dollar-denominated sales when converted into local currency.

Other Asian currencies dropped, with the New Zealand dollar heading for its biggest weekly loss since the 1987 stock market crash. South Korea's won declined, wiping out all its gains this year, and prompted Vice Finance Minister Lim Young Rok to say the government will closely monitor financial markets and take measures when necessary.


BHP declined 0.6 percent to A$33. Sumitomo Metal Mining Co., Japan's No. 1 nickel producer, lost 1.7 percent to 2,320 yen. PT International Nickel Indonesia, the country's biggest nickel miner by market value, slumped 17 percent to 39,900 rupiah.

A measure of six metals traded on the London Metal Exchange fell 1.5 percent yesterday to the lowest since March 9. Copper declined 1.4 percent, nickel fell 2.9 percent, and zinc lost 2 percent.

``The miners have been the winners over the past few years so they've been the victims as people wind back their exposure to risk and retreat to safety,'' said Shane Oliver, who helps manage $83 billion at AMP Capital Investors in Sydney.

China's CSI 300 Index retreated from a record, sliding 1.6 percent on speculation the central bank will raise interest rates for the fourth time this year.

Fixed-asset investment grew 26.6 percent in the first seven months of 2007 from a year earlier, the government said today. The People's Bank of China last week described investment growth as ``too fast'' and pledged to keep monetary policy ``moderately tight.''

China Vanke Co., the country's largest listed real-estate developer, lost 4.9 percent to 32.08 yuan. Poly Real Estate Group Co. declined 2.5 percent to 71.92 yuan.

``It's a solid number and may put pressure on the central bank to raise rates in September to cool growth and stock gains,'' said Mo Fan, an analyst at Soochow Asset Management Co. in Shanghai.

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