21 Mar, 2009 - deVere Insight – 21st March 2009

VIEWS – In this edition we feature a view on Fixed Interest from HSBC plus the Weekly and Economic View from Henderson Global Investors

http://www.hsbcprivatebank.com/perspective/market-views-fixed-income.html

http://www.henderson.com/content/research/weeklyupdate/fullversion/weeklymarketupdate.pdf

'The market is as cheap as in 1953' - When the market turns it will be one of the most stunning bull markets any of us has experienced.

These are truly extraordinary times. Share prices of many smaller companies are almost unbelievably low. I was once told by an editor never to use the word "cheap" and he had good reason. You can say something looks "cheap" today and look pretty silly when it is even cheaper tomorrow.  But really these times make it very difficult not to employ the "c" word.

There is no pleasing the market. On Monday, two of the companies in which I have serious stakes, worth more than 7% of my portfolio, announced results. Aero Inventory, which manages aircraft parts for airlines, produced excellent profits, up by nearly half. How did the shares respond? They fell 17%. 

Yes, there were one or two reasons for the fall. Above the rest, the company said it had not been able to agree terms for a new contract with a major airline.  That was a disappointment.  But the irony is in the past six months or so, I have been told that the share price has been weak because of fear of overexpansion leading to a need for capital-raising.  So, one minute the company is distrusted because it is expanding too fast, the next it is spurned for not expanding quickly enough.  Damned if you do, damned if you don't.

The other company that reported on Monday is safe and exciting.  Healthcare Locums, an agency for health and social workers, still slumped 6% on Tuesday morning.

Sometimes the market seems moody. Shares can rise or fall 20% with no apparent cause. I wonder if it can be occasionally a single, relatively modest buyer or seller who moves the market a great deal because the turnover in shares has fallen so low.  Some of my shares, REA Holdings for example, can easily go through a day without a share being bought or sold.  I would also guess that sometimes the buying and selling is just because some people, or funds, need cash.

In theory, this should provide an ideal hunting ground for those seeking good long-term investments.  Aero Inventory is forecast by Numis Securities to make earnings per share this year of 83p.  The share price earlier this week was 168p.  So the share price was only a fraction over two times forecast earnings. Normally my rule of thumb is to say that anything with an earnings multiple of less than 10 is lowly rated.  A good company on a multiple of five I would normally regard as extremely good value.  But a multiple of two?  That is astonishing.

No, gritting my teeth, I won't use the "c" word.  But what can you say?  It is hard to do justice to how astonishing this kind of valuation is.  And it is not as though the company is in any discernible danger.  Yes, it is geared but it is profitable and has banking facilities right the way through to 2013.  Aero Inventory is an extreme example of the market as a whole.

On the bad side, the chart of the FTSE 100, like the chart of Aero, offers no encouragement.  There has been no break in the downward trend.  On the other, by any traditional measure, shares are excellent value. The redemption yield on 15-year government stock is currently 3.6%, whereas the dividend yield on shares is 5.3%.

Normally, it is the other way around: the dividend yield is lower than the return on government stock for the simple reason that, over time, dividends have historically risen whereas the yield on a government stock does not.  True, some companies are reducing or cutting their dividends but this is at the margin.  On this method of valuation, as far as I can discover, shares have not been such good value compared to government stock since about 1953.

My view is simple: shares are extremely good value, but it is impossible to know when the turn will come. When it does arrive, from this low valuation, it will be one of the most stunning bull markets any of us has experienced.  By James Bartholomew  20 Mar 2009 DAILY TELEGRAPH

HOPE SPRINGS AT SIGNS OF LIFE IN US HOUSING MARKET - Economists have hailed the first convincing glimmer of hope that the American housing market may have finally turned the corner.  The number of new houses being constructed leapt by 22.2% in February.  The news sent a tentative shoot of optimism through the market, since many economists have said that should the US housing market start to recover it will mark the beginning of the end for the financial crisis.

The vast majority of so-called toxic assets are tied in some way to the US housing market, so its recovery could help put a floor on asset prices worldwide.  The unexpected increase in housing starts brings to an end the longest period of contraction in the US home-building market in 18 years, according to the Commerce Department.  It said work began on 583,000 homes last month, with the figures boosted in particular by an 82% leap in construction of apartments and townhouses.

The US has suffered its worst housing slump in history as the debt bubble built up over the past decade has unraveled. However, with the Federal Reserve having slashed interest rates to just above zero and the federal government having pumped billions of dollars into measures supporting the market, economists have held out hope for some time that its decline would soon come to an end.

Economists said that although the figures should be treated with some caution, they represented an important break in the incessant stream of bad news.

Bill Cheney, chief economist at John Hancock Financial Services said: "Even if we get housing starts just bouncing along the bottom for a while, at least that means they won't be subtracting from GDP growth.  This could be the end of the downward trend, but I don't think it's likely to be the beginning of an upward trend."

The news helped push US stocks higher, lifting the Dow Jones by 1% to 7292 points in late trading.  It comes ahead of the Federal Reserve's meeting today, at which it is expected to increase the amount of cash it is pumping directly into the economy, and coincided with tentatively encouraging statistics from China on bank lending and on appetite for copper imports. By Edmund Conway 18 Mar 2009 DAILY TELEGRAPH

CURRENCIES – Sterling rose against the dollar on Friday, with the U.S. currency set for its biggest weekly percentage fall since the early 1970's after the Federal Reserve's shock move this week to buy long-term Treasuries.

On the domestic front even though economic data this week has continued to point to a deep downturn, the Bank of England's chief economist hinted that Britain may have seen much of the recession.

The dollar has fallen more than 5% against a basket of major currencies .DXY this week, on track for the steepest decline since the early 1970's.   That came after the Fed said it would start buying $300 billion worth of long-dated U.S. Treasuries over the next six months in order to stimulate lending, a strategy already adopted by the Bank of England.

Sterling has benefited by default from the U.S. currency's losses, having already borne the brunt of dollar-supportive risk aversion in recent months.

"It's certainly the whole dollar weakness argument which has continued," said James Knightley, senior economist at ING in London.

By 0930 GMT, the pound was up a quarter of a% at $1.4544, after rising to its highest in over three weeks on Thursday just shy of $1.46.  Sterling has appreciated more than 4% this week against the dollar and technical strategists have said a move to $1.46 could open the way to fresh gains.

"The outlook is positive, with yesterday's breach and subsequent close above the $1.4410 trend channel resistance opening the way for a run at $1.4975," CBCM said in a note to clients.

The euro was down 0.1% at 94.02 pence.

UK economic data this week has continued to point to poor domestic fundamentals, with figures showing people claiming jobless benefit rose in February by the biggest amount on record and unemployment above 2 million for the first time since 1997.

Separate data showed Britain posted its biggest February budget deficit on record last month.  But BoE chief economist Spencer Dale told the Financial Times that Britain is already a long way through the recession, but added a more prolonged downturn could not be ruled out.

He said the economy will begin growing again by the end of the year and expand at normal rates throughout 2010, citing large cuts in interest rates and the introduction of quantitative easing as two factors that would make a difference. Dale is an important voice. It is a positive signal that the BoE is reiterating its forecast despite the weakness of the economic data," ING's Knightley said.

"But to be honest it's a bit of a stretch to expect a recovery before the end of this year. I doubt that we get economic growth before next year," he added.

COMMODITIES – Gold crept down on Friday as dealers in China and Southeast Asia booked profits, taking advantage of bullion's rise to a near three-week high a day earlier, but a holiday in Japan may keep volumes thin.

As the dollar heads for its biggest weekly fall in 24 years and holdings of the largest gold-backed exchange-traded fund hit a record, traders said sentiment remained strong as investors scrambled for safe-haven assets.

"Some physical selling from China and Southeast Asia came in this morning," said a Hong Kong-based trader. "They found the price close to $960 a good level to sell a few positions."

Another trader echoed gold's safe harbour allure at a time of wavering risk appetite, saying: "People are still not confident about investing in stocks.  They have nowhere to go."

Spot gold was trading at $956.30 an ounce by 0540 GMT, down from New York's notional close of $958.60. Earlier in the day, it was down as much as 1%.  On Thursday, gold hit $961.50 an ounce, its loftiest level since Feb. 27.

Gold is down 5% from its 11 month high above $1,000 struck in February after investors booked profits and sales of scraps intensified as holders sold back jewellery and coins for cash.  It hit a record of $1,030.80 last March.

Bullion rose 3% this week, largely supported by the weakening dollar after the Fed said it planned to buy long-dated U.S. Treasuries along with U.S. mortgage and agency debt in a big way, the central bank's most aggressive purchase since the early 1960s.

Reflecting gold's continued popularity, the SPDR Gold Trust GLD said its holdings rose to a record 1,103.29 tonnes by March 19, up 18.96 tonnes, or 1.7%, from the previous day.

"The ETF trend, successive records and that too very frequently, is a clear indication that sentiment is strong and will remain strong in the near term," said another Hong Kong-based trader.  "Some physical selling took place but gold looks like one of the safest assets at the moment. And the dollar weakness is a key factor."

Commodity prices rallied this week, with the Reuters-Jefferies CRB index, a global commodities benchmark, touching a five-week high Thursday, as the softer dollar made them cheaper for overseas buyers, while others looked for a hedge against potential inflation.

Investors, fearing the Fed's plans to buy government debt would cheapen the world's reserve currency, had sent the dollar down more than 5% against a basket of major currencies.

"The underlying bullish outlook remains firmly intact with the past four weeks' major corrective phase now fully confirmed to be complete," global brokerage Newedge said in a report. "Expect values to head back towards the February peaks in and around the $1,005-$1,010 zone in the days and weeks ahead."

The U.S. dollar index was pinned at 83.135, having fallen as far as 82.631 on Thursday, the lowest in 10 weeks. The euro was at $1.3655, having climbed to a peak of $1.3737 in New York, the highest since Jan. 8.

OIL - Bank of America Securities-Merrill Lynch on Friday raised its 2009 oil price forecast but lowered its 2010 predictions.  Commodities strategist Francisco Blanch wrote in a research note that tighter-than-expected market balance heading into the second half of 2009 prompted the revision.

"We are revising up our 2009 Brent forecasts to $52 a barrel from $50 a barrel," the note said.  "The combination of sharp OPEC output cuts in recent months and the worsening outlook for non-OPEC production means less supply availability in the second half of 2009."

The bank cut its forecast for 2010, however, citing weak demand.

"Given our expectation of a shallow oil demand recovery in 2010 and the increased spare crude production and refining capacity, we are lowering our 2010 WTI (West Texas Intermediate) and Brent crude oil price forecasts from $70 a barrel to $62 a barrel," the note said.

The weak economy and slumping demand have knocked crude oil prices off record highs over $147 a barrel reached in July to $51 on Friday.  Merrill Lynch also lowered its forecast for U.S. natural gas prices.

"Against a more positive crude oil outlook, we lower our U.S. NYMEX natural gas prices forecasts for 2009 from $6.00/mmBTU to $4.60/mmBTU due to the very weak fundamentals of the North American gas market," the note said.

WARSAW - Polish builder Polimex MOSD.WA expects sales to grow 15-20% in 2010 as demand for road and railway construction should carry the group through the difficult year for the sector, its chief executive said.

MADRID - Telefonica, Spain's largest telecoms operator, expects its Latin American operations to generate double digit revenue growth this year, its chief operating officer told the Financial Times.

Julio Linares told the newspaper in an interview published on Friday the group had also identified significant opportunities for cost cutting, notably in Europe.

"We are still seeing a lot of growth potential in Latin America," he said. "We believe our operations in European countries are going to continue performing well, even taking into account the economic downturn."

Telefonica's Latin American operations recorded full-year 2008 organic revenue growth of 12.9% and Linares said: "We are planning to have double-digit growth in 2009 as well."

CHINA - Qualcomm is seeing strong demand for higher-end smartphones despite a weak economy and expects promising growth from the issue of 3G licenses in China, a senior executive at the world's largest maker of cellphone chips said.

Some chipmakers and PC vendors are pinning hopes on fast-growing sales of feature-jammed smartphones to help insulate them from the worst effects of the global economic slowdown, which is sapping demand for personal computers and other hi-tech gadgets.

"Consumer demand for higher-end smartphones remains strong as the demand for wireless Internet, multimedia, and value-added services continues to grow," Jing Wang, a Qualcomm executive vice president, said on Friday in an e-mailed response to Reuters' questions on the outlook for the cellphone and cellphone chip markets.

"While inventories have contracted, global 3G adoption is continuing to grow as subscribers migrate from second-generation to third-generation networks and manufacturers are shipping more 3G devices this year than last year," the executive said.

Credit Suisse said in a report in February the global smartphone market will grow to 204 million units in 2011 from 141 million units in 2008. Wang, who is in-charge of Qualcomm's business in the Asia Pacific, Middle East and Africa regions, said Qualcomm will continue to support the growth of Chinese companies in the development of 3G CDMA networks, devices, and applications.

"The issuance of 3G licenses in China is a significant development that presents an exciting opportunity for growth," he said.

The number of CDMA subscribers in China is expected to increase to 211 million in 2013 from 30 million in 2008, he said, citing data from a research house.

China's government has worked hard to develop its homegrown TD-SCDMA 3G standard to promote its own industries and avoid hefty royalties demanded by companies behind the world's most widely accepted 3G standards, WCDMA and CDMA 2000.

Qualcomm currently has license agreements with more than 30 companies based in China, including 10 new agreements executed over the past 12 months, Wang said, without identifying them.   Qualcomm is a major client of TSMC, the world's biggest contract chipmaker, and its chips help power smartphones sold by Taiwan's HTC Corp, which expects sales in China to double this year.

When asked if Qualcomm will place more new orders to TSMC later this year, Wang said: "Any improvement in market conditions that would drive increased volumes of Qualcomm's chipset shipments would also be expected to drive increased volume for our suppliers."

DUBAI - The UAE real estate market will bounce back within the next 8 to 12 months, says a leading Dubai-based real estate developer.  Memon Investments, has based its optimistic forecast on recent industry findings, which reflect a decline in the construction cost per square foot within the emirates by an average of 30 per cent since the onset of the economic crisis.

The developer has also committed to continue fostering its strong relationships with leading construction companies, in line with its goals to hit the delivery targets for its projects ¼ starting with the 75 million UAE dirhams 'Champions Tower I', which is due for delivery by the end of this year.

Industry experts point to the massive drop in the prices of steel, as well as that of other materials including aluminium, wood, glass and diesel.

The declining cost of labour and supervision due to recent redundancies and terminations has also contributed to the dip in construction expenditures, which are now pegged between 400 to 900 dirhams per sq/ft in Dubai and Abu Dhabi, and to as low as 170 and 200 dirhams per sq/ft in Ajman.

Amidst speculations of further decrease in construction costs in the coming months due to plunging oil prices, building materials costs and transportation prices, Memon Investments is focusing all its resources towards hitting the delivery deadline set for all its announced projects.

"In lieu of the massive correction in the prices of basic construction materials, we are now focusing our strategy on the implications of this development, particularly with regards to the construction and delivery of our launched projects," said Memon Investments managing director Ahmed Shaikhani.

"Our strategic planning and consolidation efforts are being driven by our strong resolve to stay true to our promises to our customers in the face of this economic crisis, and we are proud that our actions are paying off with the steady progress we are witnessing in all our projects."

Memon Investments currently has a portfolio of projects valued at close to 1.34 billion dirhams, which includes the high profile residential 'Champions Towers' series, the luxurious 'Gardenia I & II', the 'Frankfurt Sports Tower I' and the 'Cambridge Business Centre'.

The developer also announced that it has identified major master developments in Dubai, including Jumeirah Village South, MIZIN and Downtown Jebel Ali as locations for its new projects, which will include luxury residential, commercial and mixed-use developments.

NEW YORK - U.S. stocks rose on Friday as technology and pharmaceutical shares advanced, more than offsetting bleak corporate outlooks and fears of inflation.

The NASDAQ briefly added more than 1%, but the S&P 500 was near break even as bank shares extended losses.

The Dow Jones industrial average gained 20.23 points, or 0.27%, to 7,421.03. The Standard & Poor's 500 Index .SPX dropped 0.62 points, or 0.08%, to 783.42. The Nasdaq Composite Index rose 9.95 points, or 0.67%, to 1,493.43.

EUROPEAN MARKETS - European shares traded slightly higher at midday on Friday, with losses in telecoms equipment makers Ericsson and Nokia offset by gains in drugmaker Bayer.

At 1235 GMT, the FTSEurofirst 300 index of top European shares was up 0.1% at 716.14 points, having fallen as much as 1.4% earlier in the session.  Analysts linked the upward move to U.S. stock index futures turning into positive territory.

Ericsson fell 8.8% after Sony Ericsson, the world number four mobile phone maker, said it expected to make a pretax loss of 340-390 million euros in the first quarter, citing weak consumer demand and de-stocking.

"We see this as a negative leading indicator for the Q1 reporting season in the handset market," WestLB analyst Thomas Langer said in a note.

Nokia, the world's biggest maker of mobile phones, fell 5.6%.  The DJ Stoxx technology index was the top sectoral loser, down 3.9 percent.

"Disappointing corporate news is still bad news for share prices. Only once this effect has dissipated can equities trade at significantly higher levels," said Commerzbank analyst Gunnar Harmann.

But German brokerage Steubing said stock markets appeared to have priced in the worst.

"Equities are close to valuations which last have been observed in 2003, which was the beginning of the previous primary bull market trend," Steubing said in a note.

And Barclays Wealth flagged a shift in favour of cyclicals.

"It is the right time to start looking at moving from a defensive stance in portfolios and add more cyclical exposure," said equity analyst Amanda Purton.

"The rationale is that the equity sectors that tend to rally as we get further through a recession are cyclical, with defensives underperforming," she said.  "We are now looking at re-weighting towards the long-term sector calls of overweight industrials and materials at the expense of consumer staples and utilities, sectors that look fundamentally overvalued," Purton added.

On the day of expiry for futures and options on stock indexes and individual shares, banks reversed eight days of gains on the DJ Stoxx sector index, which was down 1.7 percent.

HSBC fell 7.8% as the stock traded ex-rights. HSBC investors backed its record £12.9 billion rights issue on Thursday, and trading the nil-paid shares allows investors to sell their rights to new shares.

Barclays was down 4.0% and Santander fell 2.3%, the latter after Venezuelan President Hugo Chavez said he will go ahead with the nationalisation of the Spanish bank's local unit.

Shares in DTZ Holdings Plc fell 10.7% after the global real estate agent warned of a full year pretax loss as conditions in the property market continued to deteriorate and played down prospects of any improvement before 2011.

Bayer shares rose 7.6% following backing for its key new drug against blood clots, Xarelto, from a U.S. Food and Drug Administration panel, putting it on track to win approval in its largest market.

Investors were also digesting news that the U.S. Federal Reserve intends to pump another $1 trillion into the financial system, a move which analysts said reignited worries about economic growth near term and inflation in the longer term.

"(The Fed's) decisions could be seen as a sign that it already knows of a clearly worse development of the economy than foreseen until now," Landesbank Berlin said in a strategy note.

Data published on Friday showed euro zone industrial output fell 3.5% in January against December for a 17.3% annual drop, the deepest decline since records began in 1990.

"The outcome strengthens our view that Q1 will be even worse than Q4. With global demand still at very depressed levels, companies are reluctant to resume production plans even though inventories are judged less heavy than at end-2008," UniCredit said in a note.

Across Europe, London's FTSE 100 index, Germany's DAX and the French CAC 40 were up between 0.3% and 0.6%.

TOKYO - Japan's Nikkei average dipped 0.3% on Thursday as a stronger yen hit Honda Motor and other exporters, but steps by the U.S. and Japanese central banks to ease the credit crisis helped boost banking shares.

The banking subindex shot up 14.2% on the week, the biggest weekly jump since late 2003 when Japan's banking crisis was in its final stages.  That compared with a 5% gain for the benchmark Nikkei.

Shares of Casio Computer Co tumbled 13.5% or by its daily limit of 100 yen, after the electronics maker warned it would post its first loss in seven years on asset write-downs and sluggish digital camera sales.

Tokyo stocks started Thursday firmly after the U.S. Federal Reserve decided to buy long-dated government bonds, while the Bank of Japan is also boosting its buying of government bonds, in its latest move to ease the credit crisis.  But the Nikkei drifted into negative territory as investors booked profits before a three-day weekend in Japan, starting on Friday.

"In the very short term, the market looks overheated," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"It appears to be in a stalemate for now as investors who want to buy don't have enough reasons to keep buying as fundamentals haven't improved, while those who want to sell can't actively sell because they're afraid of short covering."

In light trade, the Nikkei ended down 26.21 points at 7,945.96 after briefly rising above 8,000.

The Nikkei posted a five-week closing high of 7,972.17 the previous day, marking a four-day rally in which it gained nearly 11%. The broader Topix was flat at 764.77.

The dollar fell 0.2% against the yen to 95.98 yen, extending the previous day's slide after the Fed engineered a sharp fall in U.S. bond yields with its vastly expanded plans to buy assets.

"Easing of policy such as the one by the Fed will help the economy from deteriorating further," Akino said.

"The news has buoyed shares of U.S. banks and that makes those of their Japanese peers look undervalued in the eyes of investors who watch the sector globally, leading them to buy Japanese banks."

Japan's top lender Mitsubishi UFJ Financial Group climbed 2.3% to 489 yen, while No.2 Mizuho Financial Group gained 1.5% to 209 yen. Sumitomo Mitsui Financial Group, the third-ranked bank, jumped 5.4% to 3,540 yen.  The banking subindex advanced 1.8 percent.

A poll also showed on Thursday that Japanese manufacturer sentiment hit a record low and looks set to stay low as the spreading pain of the global economic malaise reinforces fears of a long and deep recession in the world's No. 2 economy.

Honda Motor skidded 3% to 2,230 yen, becoming the second biggest drag on the Nikkei 225, on the rise in the yen, and as Moody's Investors Service downgraded to A1 from Aa3 its long-term credit rating.

A stronger yen prompts investors to sell exporter shares as it deflates Japanese firms' overseas profits when repatriated.

Advantest, the world's biggest supplier of machines that test semiconductors, shed 2.6% to 1,444 yen after the book-to-bill ratio of Japanese chip-making equipment fell to a record low of 0.35 in February.

Casio plunged 13.5% to 640 yen.  The company said on Wednesday that it now expects a net loss of 23 billion yen ($239 million) in the year ending this month. Its prior forecast was for a profit of 1.5 billion yen.

But Toshiba gained 1.2% to 261 yen after the company said it has tapped Norio Sasaki as its new chief executive, entrusting the experienced head of its power division with a $3 billion cost-cutting plan as the electronics giant heads for a record loss.

Shares in Japan's Universal Studios theme park operator USJ were untraded with a flood of buy orders at 44,700 yen, up 9.8% from Wednesday's close, after Reuters reported that USJ was likely to go private with the help of Goldman Sachs.

Some 1.87 billion shares changed hands on the Tokyo exchange's first section, compared with last week's daily average of 2.05 billion.  Advancing stocks outpaced declining ones, 871 to 689.

HONG KONG - Hong Kong shares fell 2.3% on Friday as analyst downgrades dominated after a string of key earnings, including heavyweight China Mobile, which slid after reporting its slowest quarterly profit growth in four years.

Chinese bank stocks, which had racked up strong gains earlier this week, tanked ahead of their earnings announcements in the final week of March. Shares in China Construction Bank slid 5.2%, after gaining 7.6% in the first four days of the week, while top lender ICBC gave up 5.4%.

"This is pretty much in line with the sell-off in bank stocks on Wall Street. People are worried the Fed's new efforts to fight the recession will revive inflation worries again," said YK Chan, fund manager with Phillip Capital Management.

The benchmark Hang Seng Index ended 297.41 points lower at 12,833.51, but rose 2.5% on the week.

"As results are revealed, a declining 2009 growth outlook becomes clearer...After the results period, analyst downgrades will dominate," said ICEA Securities in a report.  "HSI's forward price earnings will be lifted to around 12 times from 11 times at 13,000 points. Assuming the index has to drop to below 10 times at market bottom, there is 20% downside."

Turnover on the mainboard shrank to HK$43.9 billion ($5.6 billion) from Thursday's HK$48.6 billion.

Margins at China's top e-commerce firm were squeezed by rising marketing costs to counter falling global trade. Citigroup downgraded the stock to sell from hold, advising investors to take profit following a sharp rally, about 29%, since the beginning of the year.

Shares of Europe-focused fashion brand Esprit Holdings rose 4.1% to HK$46, adding to Thursday's 7% rally, helped by a stronger euro this week.

Merrill Lynch rated the stock a buy and set its target price at HK$60.6, saying Esprit's valuation, at 7.8 times estimated 2009 earnings, was attractive.

Offshore oil producer CNOOC climbed 1.2% after oil prices shot up 7.5% overnight, supported by the U.S. Federal Reserve's latest plan to fight the recession by buying Treasuries and the weak dollar.

Other commodity counters also notched up strong gains, with gold miner Zijin Mining piling on 16.4% to rise to a seven-month high of HK$5.88 after the price of the precious metal hit a three-week high a day earlier.

In February, Zijin forecast a 17% growth in its 2008 net profit owing to a surge in gold and copper prices. The company is set to announce its final results later on Friday.

SAO PAULO - Brazil's stocks rose on Thursday as heavyweights Petrobras and Vale tracked commodity prices higher, but a sell-off on Wall Street limited the market's upside, while the currency was up only slightly against the dollar.

The Bovespa index closed up 0.78% at 40,453.43, after having gained more than 1% earlier in the day.

Wall Street stocks slid amid concerns that the Federal Reserve's latest efforts to stem the U.S. recession are too costly and may spark inflation, prompting investors to book profits on the previous day's rally.

The markets had rallied on Wednesday after the Federal Reserve surprised Wall Street, announcing it would buy long-term Treasury bonds for the first time in four decades. On Thursday it also expanded its consumer and small business lending program.

The gains were led by Petrobras which jumped 3.4% to 29.25 as oil prices surged more than 7% to $51.61 a barrel. Mining giant Vale rose 1.3% to 27.30 as copper prices shot higher.

Brazilian steelmakers also benefited from the improved outlook for commodities, with CSN up 1.6% to 34.10 reais and Usiminas soaring 6.4% to 25 reais.

But banks fell in sympathy with financial shares on Wall Street. Banco Itau ITAU4.SA ended down 2.6% at 24.76 reais while Banco Bradesco slid 3.2% to 21.91 reais.

Banco do Brasil, however, managed to buck the trend, climbing 1.9% to 15.80 reais.

MOSCOW - The first cargo of liquefied natural gas from Russia's Sakhalin II export project was heading to the Hazira terminal in India, according to AISLive ship tracking data on Reuters.  Project operator Gazprom had previously said that the first cargo from Sakhalin II was intended for Japan.

Sakhalin Energy said Friday it had dispatched what it said was a "test cargo" but did not identify a destination. It said the first non-test export cargo would be shipped to Japan later this month.

"It was a test cargo," a Sakhalin Energy spokeswoman said. "The plant was commissioned last month, they started LNG producing and now they need to test the tanker and the whole system. It is a part of the start-up process. The first export cargo will be shipped as planned later in March and will go to Japan."

The Grand Aniva tanker was last seen in the East China Sea on Thursday and was expected to arrive at Hazira on April 8, according to the data.

"The tanker commenced loading on the 16th March and is scheduled for discharge in Hazira," Houston-based Waterborne Energy said in its weekly report Friday.

According to Waterborne, two more tankers were expected to load at the terminal before the end of March, including the Energy Frontier which was expected to load on March 29 for the Sodegaura terminal in Japan.

The Sakhalin II plant will have the capacity to produce 9.6 million tonnes per year of LNG from two 4.8 million tonnes trains.  LNG is currently being produced from Train 1. Train 2 was expected to be commissioned in the first half of this year.

SHANGHAI - JPMorgan Asset Management's China fund venture plans to launch a bond fund this year and expects regulatory approval soon to launch segregated accounts as it targets high net-worth clients, a senior executive said.

China International Fund Management Co, whose nine existing funds under management are mostly stock focused, plans to launch lower-risk products such as bond funds to help clients diversify asset exposure, Executive Vice President William Fu told Reuters.

The company, 49% owned by JPMorgan, is aiming to expand market share in the country's 2 trillion yuan (£201.4 billion) fund sector.

Approval for segregated accounts will allow it to offer hedge fund type accounts to institutions and wealthy individuals. At least nine Chinese fund companies have already obtained licences for such accounts since regulators began issuing them late last year.

"Segregated accounts account for one-third of total fund assets in the United States," Fu said. "So there's a huge potential for such business in China."

Although China's stock market has gained more than 20% this year, bolstered by government stimulus plans, he said the rally was unlikely to be sustained due to economic uncertainty both at home and abroad.

"We're still cautious on the economy. There are positive signs but it's still hard to say whether the economy has bottomed out."

The stock market may have already bottomed out, however, due to low valuations and restored investor confidence, so this may be a good time to invest for future growth, Fu said.

NEW YORK - U.S. copper futures rose early to a 4½ month peak as a rebound in the dollar and a huge jump in London stockpiles produced a pause in the rally, traders said.

Copper for May delivery HGK9 was up 0.85 cent at $1.8160 a lb by 10:22 a.m. EDT (1422 GMT) on the New York Mercantile Exchange's COMEX division.  Morning range from $1.7870 to $1.8530, a new high dating back to Nov. 10.

For the week, benchmark May contract up over 11%.  Larry Young, senior trader at Infinity Futures Inc. in Chicago, cited some mild investor profit-taking amid a pause in the recent rally.  Next upside target at psychological $2.00 a lb, while initial support eyed at $1.75.

The dollar rebounded against the euro on Friday after a two-day sell off tied to the U.S. Federal Reserve's plan to buy Treasury debt.  The Fed powered commodity markets higher on Thursday with a decision to buy $300 billion of longer-term government debt, an aggressive move to fight a deep recession.

Commodity markets are seen as getting ahead of themselves, given the still daunting macro-economic backdrop, according to MF Global analyst, Edward Meir.

Euro zone industrial output fell 3.5% in January against December for a 17.3% annual drop, the deepest decline since records began in 1990.  (European Union's statistics office.)

On the supply-side, London Metal Exchange copper warehouse stocks surged 10,500 tonnes on Friday, bringing total inventory levels to 503,950 tonnes.

Canceled warrants, material earmarked for delivery, rose to 24,525 tonnes from 22,650 tonnes on Thursday.  Jump in LME stockpiles offset by weekly decline in Shanghai warehouses - Meir.

Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 10% to 31,408 tonnes from 34,735 tonnes a week ago.

Budding optimism about the recovery in China's real demand for industrial metals may prove premature, despite a batch of strong indicators, as stimulus measures take time to revive the sector.

BEIJING - China's economy will probably grow by 6% to 7% this year, close to the pace needed to create enough new jobs, the head of the Organisation for Economic Co-operation and Development (OECD) said on Friday.

Angel Gurria, secretary-general of the OECD, stopped short of giving the Paris-based group's forecast for Chinese growth, which is set to be released on March 31.

However, he estimated that the "cruising speed" China needed in order to keep unemployment at an acceptable level was close to 7%, which was why Chinese policy makers were not being complacent about the outlook and were taking measures to hit their target of 8% growth.

"We do see the growth of China at between 6 and 7 percent," Gurria told reporters in Beijing.

The OECD forecast last November that the Chinese economy would grow by 8% this year and 9.2% in 2010.

Gurria said he thought Beijing's 4 trillion yuan ($585 billion) stimulus package might kick in more strongly in 2010 than this year, but he did not give an estimate for 2010 growth.  The rough projection of 2009 growth is in line with that of the World Bank, which earlier this week lowered its forecast for Chinese growth this year to 6.5%, from the 7.5% outcome it forecast in November.

BANGKOK - Southeast Asian stock markets edged higher on Friday, with rises in oil prices driving gains in energy-related firms such as Keppel Corp and PTT PCL, sending Singapore and Thailand to three-week highs.  

A recent 7% rise in world oil prices, spurred by the latest U.S. Federal Reserve plan to fight recession, buoyed sentiment in Asia and encouraged buying of energy and commodity stocks, although worries over the impact of the Fed package on inflation initially prompted selling of financial firms.

"The markets moved in the same direction across the region, with investors taking profits in financial shares due to concerns about inflation caused by the Fed's plan," said Pichai Lertsupongkij, head of sales at Thanachart Securities in Bangkok.

"The upside momentum should continue next week if energy prices keep moving up," he said, although he expected regular profit-taking to keep a lid on gains.  Singapore's benchmark Straits Time Index rose 0.76% to its highest close since Feb. 26 due to demand for energy-related stocks and some final-hour buying of major banks.

The world's top offshore oil rig builder, Keppel Corp, rose 1.83%, and number two Sembcorp Marine moved 3.4% higher, after U.S. crude oil futures settled above $50 for the first time in almost four months.

DBS Group, Southeast Asia's largest bank, reversed a 1.3% fall to rise 0.52%, while United-Overseas Bank Corp and Oversea-Chinese Banking both erased earlier drops to edge higher.

In Bangkok, petrochemical firms led the market gains, with PTT Chemical, Thailand's largest olefins maker, rising 6.2% to a three-week high on hopes the company would benefit from demand for petrochemical products in China.

Bangkok's SET Index ended 0.45% higher, with last-minute buying of major banks helping push the index up to a three-week closing high.  Indonesia's main stock index rose 1.44% and earlier touched its highest since Jan. 19, led by a 3.63% rise in state-run PT Perusahaan Gas Negara, while coal producer Bumi Resources gained 4.2%.

Malaysia's main stock index was in the red in morning trade but turned round to climb 0.54% to a two-week closing high.  Among gainers, mobile phone company TM International, the most actively traded stock, rose nearly 5% after RHB Investment Management said it was buying more local telecom and gaming stocks due to their attractive dividend yields.  

But Public Bank, Malaysia's third-largest, bucked the trend, falling 2.03% after it said it planned to sell up to 5 billion Malaysian ringgit of debt to boost its Tier I capital.  The Philippine index added 3% to a one-week closing high, helped by a 3.42% rise in  Philippine Long Distance Telephone Co, the country's dominant telecom firm.

MOSCOW - Shares in Russia's PIK Group rose by more than 24% on Friday after business daily Vedomosti said billionaire Suleiman Kerimov was in talks to buy 40-45% of the housing developer.  PIK's spokeswoman Natalya Konovalova declined to comment on the report.

At 0850 GMT, PIK's Moscow traded shares were up 22.06% at 34.42 roubles ($1.02), outperforming a broader MICEX index which rose 1.31%.

ABU DHABI - South Korea's SK Engineering & Construction Co Ltd said on Friday it had won a $912 million order from a unit of Abu Dhabi National Oil Company to build a gas plant.

JOHANNESBURG - AngloGold Ashanti said on Friday it had resumed full production at its Moab Khotsong mine in South Africa after it said on Tuesday the operation had been shut following a fatality.

"The mine re-opened as of yesterday (Thursday) evening and full production has re-started," AngloGold's spokeswoman Julia Schoeman said in a statement.  Schoeman had said the mine would lose about 45 kg of gold (1,447 ounces) per day during its closure.

Moab Khotsong produced 71,000 ounces of gold in the December quarter, up 4% from the September quarter.  South Africa said 168 workers died in its mines last year, down 24% from the previous year.  So far more than 30 workers have died in mines this year.

KUALA LUMPUR - MMC Corp says shareholders approved its 1.7 billion ringgit acquisition of Senai Airport Terminal Services Sdn Bhd (SATS) by a majority of 97%.  It added on completion, the acquisition will result in MMC owning 100% equity interest in SATS.

MEXICO CITY - Mexico's central bank surprised the markets and slashed its key interest rate by 75 basis points to 6.75% on Friday to jump start the country's shrinking economy, which has been broadsided by the U.S. recession.

The cut was much bigger than expected as most economists polled by Reuters had predicted the bank would cut the overnight rate by 25 basis points.

Mexico's export volume has tumbled as U.S. consumers buy fewer cars, televisions and other products made in Mexican factories. This has led to hundreds of thousands of workers being laid off.  The bank hopes lower borrowing costs will stanch some of that pain.

"The balance of risks has deteriorated substantially more for economic growth than for inflation," the central bank said in its monthly monetary policy statement.

The bank said the Mexican economy would shrink during the first quarter on a similar scale to the 1.6% contraction seen during the fourth quarter of last year.  It also warned that turbulence in financial markets poses ongoing risks to Mexico meeting the bank's inflation targets.

Economists have taken the bank's discomfort over reeling financial markets as an indication it is worried about a sharp decline in the value of the peso currency.

Mexico's peso has lost around 30% of its value against the dollar since last August amid growing pessimism that the U.S. downturn is driving Mexico into its deepest recession since 1995.

Speaking earlier in the day, Central Bank Gov. Guillermo Ortiz said Mexico's economy will continue to weaken during the first half of this year.  Asked in a television interview when it would hit bottom, Ortiz said he expected that "in the second half of the year."

Finance Minister Agustin Carstens said in a separate interview with Mexico's Televisa network that he would like to see the battered peso back below 14 per dollar.  "Below 14 would be an acceptable level," Carstens said.

Ortiz and Carstens were both speaking at an annual banking convention in the Pacific beach resort of Acapulco.

Mexico's Deputy Finance Minister Alejandro Werner said on Thursday that Mexican economy could shrink as much as 1.9% in 2009 -- a gloomier outlook than previous government predictions of a contraction of up to 1%.

KAMPALA - Standard Bank, the parent company of Stanbic Uganda, has been awarded two accolades in the Euro-money Magazine’s Trade Finance Deals of the Year awards, underlining the bank’s formidable capacity for investment financing.

A statement from Standard Bank said the accolades reinforced “the bank’s expertise in trade and project finance in Africa also confirming its credentials as a leading emerging markets bank.”

Standard’s winning loan deals involved Zain Tanzania, which was advanced $270 million and Farmsecure Capital (South Africa), worth $100 million.

“This was the largest recorded debt financing to a private sector entity in Tanzania. It enabled the Zain group to significantly increase investment in network coverage and capacity of their Tanzanian operation, with obvious benefits for their local franchise, but also the availability and quality of telecoms services in Tanzania more generally,” said Nina Triantis, Global Head of Telecoms and Media at Standard Bank.

Ms Triantis hailed the Zain Tanzania financing deal for its unique combination of dollars and Tanzanian shilling financing, an arrangement she said helped hedge against risks associated with the local currency revenues.

“The financing demonstrates Standard Bank’s continued commitment to the growth of developing countries,” she said.

Farmsecure Capital’s $100 million loan, which was co-funded by Standard Bank in conjunction with Standard Chartered Bank, is a facility to help purchase production inputs and “hedge costs of selected agri-producers under a structure allowing for the active management by an approved contract administrator,” the statement reads in part.

OPINION - The Best Countries For Business - 2009.  Everyone's in a downturn. A look at who's best equipped to bounce back.  The economic downturn that's swept the globe has crushed financial markets, exploded unemployment and shaken confidence in the banking system.

The disaster isn't shared equally, though. Some countries are in a much better position than others to rebound from the current malaise by attracting entrepreneurs, investors and workers.

Our fourth annual Best Countries for Business ranking looks at business conditions in 127 economies. Topping the list for 2009: Denmark, for a second straight year, takes the No. 1 spot.   The U.S. is up two spots to No. 2, Canada is up four spots to No. 3, Singapore is up four to No. 4 and New Zealand is up seven to No. 5.

Big movers included New Zealand (No. 5, up seven spots), followed by Jordan (No. 33, up 28), Australia (No. 8, up five), United Arab Emirates (No. 46, up 28) and Malaysia (No. 25, up 13).

This is not a tally of economies with high gross domestic product growth, or low unemployment. The goal is to quantify for entrepreneurs and investors the often-qualified information about dynamic economies and what they would consider desirable conditions for business.

All was not lost in a tough year for believers in low taxes, free trade and limited bureaucracy. Despite swelling budget deficits, at least 50 countries recently cut or passed plans to cut taxes on individuals and businesses, including eight of the top 10, with individuals and investors in the U.S. and Norway left in the lurch.

The United Arab Emirates, in particular, has made strides in protecting intellectual property rights through initiatives like educational seminars for thousands of students, with support from corporations like Procter & Gamble, Estée Lauder and General Motors.

New Zealand improved its free-trade ranking by pursuing talks with India, Korea and Hong Kong, while securing the first (for a developed nation) free-trade deal with China late last year. Infrastructure improvements to the Jordanian stock market are improving enforcement of investment laws and compliance by broker members.

FRANKFURT - Bayer AG climbed the most in five months in Frankfurt trading after the German drugmaker and partner Johnson & Johnson won a U.S. panel’s backing to introduce the first new anti-clotting pill in 55 years.

Bayer gained 3.82 euros, or 11% to 37.74 euros, the biggest increase since Oct. 29. Germany’s largest drugmaker is targeting total peak sales of at least 2 billion euros ($2.7 billion) from the drug.  The 15-2 vote in favor of using rivaroxaban in hip and knee surgery gives Bayer a better chance to win approval for other conditions, said Karl-Heinz Scheunemann, an analyst at Landesbank Baden-Wuerttemberg.

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