The following are the day's top business stories:
1. Euro Is Near Three-Month Low on Concern Over Europe's Debt Sales This Week 2. Wall Street Dumps Most Treasuries Since 2004 as Dealers Betting on Growth 3. Reserves Set for $2.8 Trillion to Spur `Intense Tightening': China Credit 4. JBS Said to Consider Another Offer to Purchase Sara Lee After Bid Rejected 5. Bennenbroek Leads Most-Accurate Currency Analysts Favoring Dollar in 2011 6. Equity Analysts Prove Hazardous to Returns as Contrarian Stocks Rise 165% 7. Former TCI Asia Head's Janchor Hedge Fund Raises $500 Million, Returns 35% 8. Freight Rates Poised to Tumble as 35-Mile Line of Ships Passes Coal Demand 9. Toyota Delivers Prius `Family' to Counter Nissan, GM Green Car Challenge 10.U.A.E. Sukuk to Gain on Debt Restructuring, Yield Pick-Up: Islamic Finance 11.Moutai's 106-Proof Deal-Sealing Libation Shields Investors From Inflation 12.Eclectica's Hendry Turns Greece Chaos Profit Into Bet That China Will Fail
1. Euro Is Near Three-Month Low on Concern Over Europe's Debt Sales This Week
The euro traded near a three-month low against the dollar on speculation European nations will struggle to raise funds, diminishing the allure of their assets. Europe´s currency declined versus 13 of its 16 major counterparts before Portugal, Spain and Italy sell government debt this week. Australia´s dollar was near a three-week low as heavy rain worsened flooding in the state of Queensland, which accounts for about 20 percent of the nation´s economy. "It looks as though the market is pricing in some further deterioration in the sovereign debt story," said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. "Obviously the Portugal auction on Wednesday will be closely watched. I see euro weakness continuing." The euro was at $1.2904 at 8:30 a.m. in Tokyo from $1.2907 in New York on Jan. 7, after touching $1.2867, the lowest since Sept. 14. The single currency traded at 107.26 yen from 107.32 yen last week, when it reached 106.95 yen, the weakest since Sept. 14. The dollar fetched 83.11 yen from 83.15 yen.
2. Wall Street Dumps Most Treasuries Since 2004 as Dealers Betting on Growth
Wall Street banks are cutting their holdings of Treasuries at the fastest pace since 2004 as the world´s biggest bond firms bet that the economy will strengthen and demand for higher-yielding assets will increase. The 18 primary dealers that trade with the Federal Reserve reported that holdings of U.S. government debt tumbled to a net $2.34 billion on Dec. 29 from $81.3 billion on Nov. 24, the most since June 2009, according to the most recent central bank data. While the stake is the lowest since February, corporate bond and mortgage securities have risen from the lows of the year. Dealers had stocked up on U.S. debt anticipating demand from customers who wanted to sell the securities to the central bank as part of Fed Chairman Ben S. Bernanke´s plan to buy $600 billion of Treasuries. Government bonds lost their allure as stocks rose, corporate financing conditions eased, expectations for inflation increased and the dollar strengthened. "Slowly but surely the economy´s getting on stronger footing," said John Fath, who helps manage $2.5 billion as a principal at investment firm BTG Pactual in New York and was the former head government bond trader at UBS Securities LLC, a primary dealer. "There are people moving or thinking of moving out of risk-free assets. This is what Bernanke wanted."
3. Reserves Set for $2.8 Trillion to Spur `Intense Tightening': China Credit
China´s foreign-exchange reserves probably rose 4 percent to $2.76 trillion in the fourth quarter, adding to pressure on the central bank to drain cash from the economy and allow the yuan to strengthen. The world´s largest currency holdings jumped $112 billion after a $194 billion gain in the third quarter, according to the median estimate in a Bloomberg survey of nine economists before the central bank releases the data this week. Reserves probably climbed $361 billion for the year, compared with $453 billion in 2009. People´s Bank of China Governor Zhou Xiaochuan ordered lenders to increase funds on deposit at the authority six times in 2010, as the yuan´s interest-rate advantage over the dollar attracted capital that stoked inflation. The yuan may gain the most among currencies in the so-called BRIC nations, rising 5.4 percent by year-end, compared with a 0.8 percent drop for Brazil´s real, a 0.3 percent increase for Russia´s ruble and 5 percent advance for India´s rupee, according to Bloomberg surveys of strategists. "We will probably see a round of pretty intense tightening in the first half," said Ren Xianfang, an economist in Beijing for Lexington, Massachusetts-based research company IHS Global Insight. "The yuan´s appreciation in 2011, particularly in the first half, should be faster than last year."
4. JBS Said to Consider Another Offer to Purchase Sara Lee After Bid Rejected
JBS SA, the Brazilian meat processor, is considering making another offer to buy Sara Lee Corp. after its bid last month was rejected as too low, according to two people with knowledge of the matter. JBS executives are traveling to the U.S. this week to help prevent their takeover efforts from collapsing, said the people, who declined to be identified because the matter is private. JBS offered about $17.50 a share for Sara Lee in mid-December, valuing Sara Lee at about $11 billion, the people said. Sara Lee hasn´t given JBS a purchase price, though the Downers Grove, Illinois-based company is likely looking for about $20 a share, or almost $13 billion, one person said. JBS, which is being advised by JPMorgan Chase & Co., has been trying to determine whether to raise its bid while it seeks potential ways to raise more money, said another person. Sara Lee, the owner of meat and coffee businesses, has also been weighing spinning off one of its main units, and plans to make a decision about whether to sell or break up the company by the end of this month, according to the people. Sara Lee´s European coffee division is the likeliest business to be spun off to shareholders as a new company, said one person, adding that no final decision has been made. Sara Lee´s board is scheduled to meet at the end of the month to determine the company´s fate, the person said.
5. Bennenbroek Leads Most-Accurate Currency Analysts Favoring Dollar in 2011
The world´s most accurate foreign- exchange forecasters say the dollar will be the best currency to own this year as the Federal Reserve´s bond purchases bolster the U.S. economy instead of debasing America´s legal tender. Wells Fargo & Co., Bank of Tokyo-Mitsubishi UFJ Ltd. and SJS Markets Ltd., the top analysts in the six quarters ended Dec. 31, according to data compiled by Bloomberg News, say the dollar will strengthen against the euro, yen and pound. Nick Bennenbroek, the head strategist at Wells Fargo in New York and the most accurate of the group, predicts about a 5 percent gain against the euro over the year and 11 percent versus the yen. The survey underscores the sudden turnaround in the U.S. economy two months after the greenback fell to its weakest level in almost a year in November. Traders have turned their focus away from the Fed´s plan to print cash to buy $600 billion of Treasuries and toward Europe´s debt crisis, deflation in Japan and U.K. austerity programs. "The superior growth performance of the U.S. should shine through in 2011," said Bennenbroek, 40, who joined the bank in 2007 and began his career in the forecasting department at the New Zealand Treasury in Wellington. "We will see the economic recovery in the U.S. outpacing that of Europe, Japan and even the U.K., which would see the dollar stronger against those currencies."
6. Equity Analysts Prove Hazardous to Returns as Contrarian Stocks Rise 165%
Following the advice of equity analysts may be perilous for your profits. Companies in the Standard & Poor´s 500 Index that analysts loved the most rose 73 percent on average since the benchmark for U.S. equity started to recover in March 2009, while those with the fewest "buy" recommendations gained 165 percent, according to data compiled by Bloomberg. Now, banks´ favorites include retailers and restaurant chains, the industry that did best in last year´s rally and that are more expensive than the S&P 500 compared with their estimated 2011 profits. Investors who look at the analysts as a contrary indicator are buying shares of utilities, which pay the highest dividends after telephone stocks, and banks, whose earnings are likely to grow three times as fast as the S&P 500 this year. Don Wordell, a fund manager at Atlanta-based RidgeWorth Capital Management Inc., says equities that Wall Street firms rate lowest are more likely to beat the market. "When you have a stock that has 15 analysts covering it and it has 15 buys, I can´t imagine it has much outperformance left," said Wordell, whose $1.64 billion RidgeWorth Mid-Cap Value Equity Fund topped 98 percent of peers in the past five years. "You´ve got a stock that has 15 sells on it, you´re set up there to have some strong outperformance."
7. Former TCI Asia Head's Janchor Hedge Fund Raises $500 Million, Returns 35%
John Ho, former Asia head of the Children´s Investment Fund Management UK LLP, has stopped marketing his hedge fund to new investors after assets expanded to about $500 million in its first year. Janchor Partners Pan Asian Fund grew assets from about $40 million when it started investment in January 2010. The fund is estimated to have returned 35.5 percent in its first year, Hong Kong-based Ho, 34, said in an interview Jan. 7. Janchor expanded assets after returning more than four times the Eurekahedge Asia Long/Short Equities Hedge Fund Index´s less than 8 percent gain for 2010, based on preliminary data. It drew investors with fee discounts for capital committed for longer periods, declining management fees after fund assets hit $500 million, and by offering to partially refund some performance fees if the fund makes an annual loss. The capital raised by Janchor is on average locked up for 2.5 years, said Ho. "Because our fees will start dropping beyond this point, we are going to be even more careful about capital-raising," Ho said. "Because our business model doesn´t allow us to get more fees, we want to know every dollar we have makes returns."
8. Freight Rates Poised to Tumble as 35-Mile Line of Ships Passes Coal Demand
At a time when analysts anticipate record profits for the biggest mining companies and a third year of gains in commodity prices, shipping lines carrying raw materials are set for the lowest freight rates since 2002. Leasing costs for capesizes, 1,000-foot-long ships hauling iron ore and coal, will drop 34 percent to average $22,000 a day this year, according to the median in a Bloomberg survey of eight fund managers and analysts. The last time that happened, China´s economy, the biggest consumer of the minerals used in steel and power, was 75 percent smaller and the benchmark Standard & Poor´s GSCI commodity index 67 percent lower. While Clarkson Plc, the world´s biggest shipbroker, expects seaborne trade in the two cargoes to exceed 2 billion metric tons for the first time this year, the 7 percent increase won´t be enough to eliminate a glut. About 200 capesizes, spanning some 35 miles end-to-end, will leave shipyards this year, expanding the fleet by 18 percent, the Bloomberg survey showed. "The market was able to take a punch in the face in the form of 200 capesizes and loads of smaller vessels last year but I doubt it will manage another punch without having to hit the deck," said Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo who correctly forecast in July that rental costs would more than triple by the fourth quarter.
9. Toyota Delivers Prius `Family' to Counter Nissan, GM Green Car Challenge
Toyota Motor Corp. aims to boost demand for the Prius, the top-selling alternative-power car for a decade, by extending the brand to counter new rechargeable challengers to its status as an environmental icon. Toyota President Akio Toyoda is to unveil the Prius V, a wagon-type model larger than the current gasoline-electric car, today in Detroit at the North American International Auto Show. Along with the wagon and a previously announced electric plug-in Prius due by 2012, Toyota is to show a concept version of a possible fourth model for the Prius line in Detroit. "The wagon/minivan market needs a compelling hybrid, something to carry three kids and cargo," said Jim Kliesch, senior engineer for the Union of Concerned Scientists in Washington. "The challenge is to avoid diluting the Prius brand as Toyota branches out, to make it fuel-efficient enough to meet the public´s perception of what Prius is." Since its introduction in Japan in 1997, Toyota has sold more than 2 million Prius units worldwide, including 955,438 in the U.S. from 2000 through last year. Nissan Motor Co.´s all- electric Leaf hatchback and General Motors Co.´s plug-in Volt sedan, both released in December, are designed to appeal to U.S. drivers seeking vehicles with technology that´s a step beyond Toyota´s gasoline-electric system.
10.U.A.E. Sukuk to Gain on Debt Restructuring, Yield Pick-Up: Islamic Finance
Islamic bonds from the United Arab Emirates are poised to extend gains after climbing to a record last week, buoyed by progress in debt restructuring and a pickup in appetite for high-yielding assets in the Persian Gulf. The HSBC/NASDAQ Dubai UAE US Dollar Sukuk Index, which tracks 10 sovereign and corporate securities, climbed to 131.15 on Jan. 4, the highest since HSBC started tracking their performance in January 2005. The notes returned 16.5 percent last year after a gain of 23 percent in 2009, the index shows. Shariah-compliant debt sold by Dubai issuers will gain between 6 percent and 7 percent in 2011, outpacing counterparts in the Persian Gulf, according to Dubai-based Mashreq Capital DIFC Ltd. Dubai World, one of Dubai´s three main state-owned holding companies, received approval from its creditors in October to change terms on $24.9 billion of loans. Nakheel PJSC, a property unit of Dubai World seeking to delay payments on at least $10.5 billion of debt, said Dec. 30 it received funds from the Dubai government to repay Islamic bonds maturing this month. "Risk appetite is back in fashion for 2011," said Usman Ahmed, senior fixed-income fund manager at Emirates NBD Asset Management, which oversees $300 million in bonds at the unit of the U.A.E.´s biggest lender, said in an e-mailed response to questions Jan. 5. "That should bode well for Dubai and U.A.E. sukuk, which are considerably higher yielding."
11.Moutai's 106-Proof Deal-Sealing Libation Shields Investors From Inflation
Guo Haoda says he doesn´t care that the price of Moutai liquor keeps rising. For the building contractor in Beijing, sharing the 106-proof sorghum-based spirit is the best way to forge ties and clinch contracts. "In China, deals are done at the dinner table, not the boardroom," said Guo, 37, who paid 2,200 yuan ($330) for two bottles of the grain liquor at a supermarket, enough to cover the rent of a studio apartment. "Breaking out the Moutai is still the easiest way to build trust with prospective customers and officials." Investors are betting that consumers like Guo will keep paying more for Kweichow Moutai Co.´s namesake spirit, shielding the world´s second-largest distiller by market value from an erosion in profit as inflation accelerates. The company, which took its name from the town in southern Guizhou province, increased wholesale prices by 20 percent this month. Analysts are predicting the stock will gain 37 percent in the next 12 months, according to data compiled by Bloomberg, as higher liquor prices protect the widest profit margins among domestic competitors.
12.Eclectica's Hendry Turns Greece Chaos Profit Into Bet That China Will Fail
Hugh Hendry is a man worried about the future. Although the hedge-fund manager beat more than 80 percent of his peer group rivals in 2010, Hendry laments that he´s part of an oppressed minority -- and likens the threat of hedge-fund regulation to the plight of the Roma migrants expelled from France last summer by President Nicolas Sarkozy. "Social mood is hardening, changing, deteriorating: We see that not just in hedge funds; we see that in the very polite, previously libertarian societies," says Hendry, dressed in an open-necked gray shirt and light-blue linen jacket at his Eclectica Asset Management LLP in London. "Hedge funds are a minority. Guess who else is a minority? People from overseas." Hendry, gesturing for emphasis, is just getting started on his defense of the downtrodden, Bloomberg Markets magazine reports in its February issue. "My little French friend Sarkozy, he´s picked on the Roma gypsies, the minorities," he says. "This is the beginning of a movement, which, if left unchecked, has very worrisome implications."
-0- Jan/10/2011 00:35 GMT