BIGCAPITAL's Blog

March 29, 2011

Japanese reconstruction may boost GDP growth

Japanese reconstruction may boost GDP growth

Experts suggest the massive Japanese earthquake may push up the country’s gross domestic product (GDP) as a result of the reconstruction efforts but Japanese equities and insurers are likely to suffer.

A report from Citi expects reconstruction demand will materialise in the second half (H2) of 2011, eventually pushing up GDP.

“We estimate the net impact on GDP growth in 2011 at +0.2% to 0.3% points,” said Citi.

This supposition was supported by rating’s agency Moody’s.

“Reconstruction spending will likely prove to be a very effective and justifiable fiscal stimulus. Such expenditure will likely offset the economic impact from immediate losses in production and demand,” it said.

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That is why Warren Buffett said Japan represents a buy opporunity: Pace of reconstruction in stunning

That is why Warren Buffett said Japan represents a buy opporunity: Pace of reconstruction in stunning

Tsunami came and left giant gaps on Japan well constructued roads. That was the story of the Tsunami and the earthquake of March 11.

But then came the power of the Japanese people as they reconstructed what the quake had taken away. The astonishing speed of reconstruction is being used to highlight the nation’s ability to get back on its feet. Work began on March 17 and six days later the cratered section of the Great Kanto Highway in Naka was as good as new. It was ready to re-open to traffic last night.

Warren Buffett: Japan Disaster Presents A ‘Buying Opportunity’

Filed under: Uncategorized — bigcapital @ 3:12 am
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Warren Buffett: Japan Disaster Presents A ‘Buying Opportunity’

in South Korea (MarketCall.net) – Billionaire investor Warren Buffett believes Japan’s devastating earthquake is the kind of extraordinary event that creates a buying opportunity for shares in Japanese companies.

Japan, the world’s third-largest economy, has been battling to bring an overheating nuclear plant under control after it was battered by the March 11 earthquake and tsunami that rattled global markets and prompted massive intervention in currency markets by the Group of Seven industrial nations.

‘It will take some time to rebuild, but it will not change the economic future of Japan,’ Buffett said on Monday on a visit to a South Korean factory run by a company owned by one of his funds. ‘If I owned Japanese stocks, I would certainly not be selling them.

‘Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don’t think Japan will be an exception,’ said the 80-year-old investor, dubbed the ‘Sage of Omaha’ for his successful long-term investment strategy.

Buffett heads Berkshire Hathaway Inc, which has substantial insurance and utility investments globally.

Japan’s Nikkei share average rose 2.7 percent on Friday, buoyed by the G7 support, but still ended the week down around 10 percent, with some $350 billion wiped off share values — the market’s biggest weekly slide since the global financial crisis in 2008. Japanese markets were closed on Monday.

Buffett said Berkshire Hathaway, which at the year-end was sitting on $38 billion of cash equivalent and last week bought U.S. specialty chemicals maker Lubrizol for $9 billion, was looking for more large-scale acquisitions anywhere in the world.

In his annual letter to Berkshire Hathaway shareholders last month, Buffett had said he was looking for more acquisitions.

‘The United States is most likely where we will do something,’ he said at a ground-breaking ceremony for a South Korean factory run by a unit of an Israeli firm owned by his investment vehicle.

Buffett will have yet more money to invest after Goldman Sachs buys back $5 billion of its preferred stock from Berkshire Hathaway, which the fund bought at the height of the global financial crisis.

EYE ON KOREA

Buffett, ranked the world’s third-richest man by Forbes this year, said he was also looking to buy entire businesses and large-cap shares in South Korea — where Berkshire is already a leading shareholder in steelmaker POSCO.

He said geopolitical risks associated with North Korea had not curbed his interest in South Korea, Asia’s fourth-largest economy. Berkshire also owns a stake in Chinese car and battery maker BYD.

Buffett did not disclose any holdings in Japan on Monday, and Berkshire Hathaway’s annual report did not show any major investments there. He had been due to visit Japan later this week, but canceled due to the earthquake.

Unlike many foreign fund managers, Buffett, who arrived in the southeastern city of Daegu on Sunday by private jet, won plaudits from ordinary South Koreans.

Sporting gray sweat pants and running shoes, Buffett was greeted by signs reading ‘Mr Buffett: Daegu Loves You.’

Many in this country of nearly 50 million people have bad memories of the 1998 Asian financial crisis when a deal with the International Monetary Fund bailed out the country but at the cost of tens of thousands of jobs.

Some U.S. hedge funds have been branded ‘vultures’ for buying South Korean assets on the cheap in the wake of that crisis.

‘It’s a once in a life-time opportunity. I’m honored to meet such a respected businessman,’ said Seo Hyun-joo, a housewife wearing Korean traditional dress.

Buffett later meets South Korean President Lee Myung-bak in Seoul and heads to India on Tuesday to launch his firm’s insurance selling portal.

Source: http://marketcall.net/

December 31, 2010

Goldman Sachs Boosts Global Growth Forecasts 2011

 

Goldman Sachs Boosts Global Growth Forecasts 2011

 Economists at Goldman Sachs Group Inc., the most profitable Wall Street firm, increased their forecasts for U.S. and global growth in 2011, predicted an acceleration in 2012 and recommended investors buy banks.

 The U.S. economy will grow at a 2.7 percent rate next year, up from a previous forecast of 2 percent, and 3.6 percent in 2012, economists led by Jan Hatzius in New York said in a report today. The global economy will grow 4.6 percent in 2011 and 4.8 percent in 2012, Dominic Wilson, senior global economist, said in a separate report.

 They recommended U.S. bank stocks, junk bonds, commodities, Japanese stocks and China’s currency as the first of the firm’s “top trades” for 2011. The forecasts are a departure from the pessimism that characterized Goldman Sachs’ projections since 2006.

 “This outlook represents a fundamental shift in the thinking that has governed our forecast for at least the last five years,” Hatzius said in the report. “The hand-off from policy stimulus to private demand — which seemed elusive just a couple of months ago — now appears to be developing.”

 U.S. stocks started what is historically their best month with a rally today after ADP Employer Services data showed companies added 93,000 jobs last month, the Federal Reserve said the economy gained strength across most of the nation and manufacturing in China expanded at the fastest pace in seven months. The Standard & Poor’s 500 Index advanced as much as 2.3 percent, the most since Sept. 1.

 Underlying Demand

 The Goldman Sachs economists said underlying demand, a measure of growth that excludes the effects of fiscal stimulus and inventory restocking, has strengthened and is on track to expand at a 5 percent rate in the fourth quarter.

 On average, economists surveyed by Bloomberg expect the U.S. economy to grow 2.5 percent next year and 3.1 percent in 2012. The Organization for Economic Cooperation and Development lowered its forecast for global growth last month to 4.2 percent for 2011 from 4.5 percent, and predicted 4.6 percent for 2012.

 Even as growth accelerates, U.S. unemployment will remain elevated by historical standards, declining to 8.5 percent by the end of 2012 from 9.6 percent in October, the economists said. The jobless rate increased to 10.1 percent in October 2009, the highest monthly figure since 1983.

 Inflation, Unemployment

 Core inflation, which excludes food and energy prices, is likely to be 0.5 percent in each of the next two years, Goldman Sachs said. The combination of high unemployment and low inflation is likely to keep the Federal Reserve from raising interest rates, the economists said.

 Conditions will be “positive for risky assets,” they wrote. The S&P 500, the main benchmark for American equities, will likely end next year at 1,450, up 20 percent from 1,206.07 at 4 p.m. in New York.

 The S&P 500 has gained 8.2 percent this year and recouped three-fifths of its decline from a record in October 2007. Concerns about the economic fallout from government debt reduction by some European countries caused rallies to stall in April and November and are the principal risk to Goldman’s outlook, the economists said.

 Growth in emerging markets may slow next year as acceleration in the U.S. prompts China, other Asian economies and Brazil to tighten monetary policy, the economists said.

 For its top trades, Goldman recommended betting on a decline in the value of the U.S. dollar against the Chinese renminbi via two-year non-deliverable forwards for an expected return of 6 percent.

 Bets on the KBW Bank Index will return 25 percent, and selling protection on high-yield corporate bonds via credit- default swaps will return 8.7 percent, they predicted.

 Japan’s Nikkei 225 Stock Average is likely to return 20 percent next year, while a basket of crude oil, copper, cotton, soybeans and platinum will gain 28 percent, they said.

October 21, 2010

Japanese Stocks Poised for Bounce to 11,000

Filed under: Uncategorized — bigcapital @ 12:21 pm
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Japanese Stocks Poised for Bounce to 11,000
Japanese Nikkei 225 Stock Average, which has lost 9.6 percent this year, may rise 20 percent through February next year, according to a technical analysis by Mitsubishi UFJ Morgan Stanley Securities Co.

The gauge may climb toward 11,408, the intraday high for the year achieved on April 5, said Naohiko Miyata, chief technical strategist at the brokerage unit of Mitsubishi UFJ Financial Group Inc., Japanese biggest bank by market value. Miyata says the gauge may be set for a sustained period of advance as the yen enters its final phase of gains against the dollar and after the measure found support at a key Fibonacci level.

Day-by-day we are seeing more signs that the gauge has bottomed out. Miyata said in a telephone interview. It;s very possible that the Nikkei will start testing its April high in a pattern similar to the one we saw last year.

Miyata also believes the yen may start weakening next month, helping to boost the Nikkei.

The dollar-yen rate has been moving in an 11-month cycle, touching its low when it enters a new phase, he said. The Japanese currency rose to its highest level for 2009 when it traded at 84.83 on Nov. 27. Taking that as a starting point, the end of the 11-month cycle will be this month.

The yen should start to weaken significantly from next month, with the Nov. 3 Federal Open Market Committee meeting as a turning point, Miyata said.

As the saying goes: buy on expectation and sell on fact. If the U.S. does carry out quantitative easing as people expected, there will be selling of the yen, Miyata said.

The Fibonacci sequence was identified by Italian mathematician Leonardo Fibonacci in the 13th century. The ratio between the numbers, about 0.618, is known as the golden mean, and is used by technical analysts to find levels of resistance and support.

According to Paul Chesson, manager of Invesco Perpetual’s Japan fund, which tops the best 10-year performance tables, it’s all about timing.

In 2002, he said after the Nikkei bounced that it was “a false dawn”. And again in 2006, he said that valuations were “too high” to be a bull. He was right both times.

“People usually sell Japan at the low points, and are all over it like a cheap suit when it has gone up for a couple of years. Last time everyone recommended it was 2006 when the market was 100pc higher than it is today.

“If you buy on a high you’ll be disappointed,” said Mr Chesson, who says valuations are a key factor today. “The market was too expensive 10 years ago, but now it’s too cheap. A fund manager only invests in 30 companies, not the whole market, so he can still perform well even if the market does not.”

Mr Chesson’s change of heart is the main reason why some investors are optimistic.

Deflation has long been a factor in Japan, but Mr Rose said this should not concern the investor too much.

“It has been tackled several times over the past 10 years, but I invest in companies, not politicians, and these will succeed.”

Although Japan may be geographically linked to the big emerging markets of China and Russia, economically it could not be more different.

Japan is a developed market and so does not have the same room for exponential growth that its neighbours have experienced in the past decade – and are expected to continue to have.

He invests in companies that are undervalued. He stresses that he picks companies, rather than invests in sectors or the stock market as a whole.
 

 

Japan Sets Interest Rates at 0 pct

Japan’s central bank has launched a 5 trillion yen ($60 billion) effort to buy a wide range of debt, including government bonds, corporate IOUs, real-estate investment trust funds and exchange-traded funds, setting off global concerns that central banks around the world are prepared for more quantitative easing.

The moves by the Japanese and U.S. central banks indicate that global monetary policy is approaching the end of the road, having exhausted nearly every tool of monetary policy available to stimulate economies that remain resistant to job growth.

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October 13, 2010

Japanese core machinery orders rise +10.1% Results Above View

Filed under: Uncategorized — bigcapital @ 8:41 am
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Japanese core machinery orders rise +10.1% Results Above View

Japanese core machinery orders +10.1% in August vs previous month on back of growth in manufacturing sector. Result much better than median forecast for 4.5% decline in poll of economists surveyed by Dow Jones.

“This is absolutely a surprise. The market may enjoy gains in early trade,” says Kenichi Hirano, strategist at Tachibana Securities.

Core machinery orders unexpectedly rose 10.1% in August on-month, due to growing demand from manufacturing sector. Machinery stocks higher.

Chip-related stocks higher on strong after Intel (INTC) earnings last night.

September 16, 2010

Goldman Sachs: Japan’s intervention will be a success

Filed under: Uncategorized — bigcapital @ 4:24 pm
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Goldman Sachs: Japan’s intervention will be a success

Analysts at Goldman Sachs Group Inc. in London believe that Japan’s currency intervention will turn out to be successful.

According to the specialists, the efforts of Japanese monetary authorities will drive yen’s down to 90 yen per dollar in a year.

As a result, Japan may have to sell more yens in order to prevent national currency from excessive gains that affect the country’s economy.

There are different estimates for Japan’s intervention – from $1.2 billion by the Nikkei newspaper to $20 billion from BNP Paribas SA’s point of view.

UPDATE: September 16, 2010 04:17 ET (08:17 GMT)

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