HONG KONG/BEIJING (Reuters) – China’s BYD Co Ltd (1211.HK), backed by U.S. billionaire Warren Buffett, warned on Monday of a slowdown in car sales during the second half of the year and said it will launch new models to lessen the impact.

Sluggish sales in the past few months and high inventory have seen several dealers in Beijing and other areas pulling out of BYD’s sales network, a setback for the high-flying carmaker, the China Business News reported on Monday.

BYD joins the ranks of its rivals in terms of expectations for a slowdown in the second half, largely as the result of Beijing applying the brakes to the economy’s breakneck expansion in 2009.

The month of July saw the slowest growth for Chinese car sales in 15 months as the fading effects of Beijing’s policy initiatives, the slower economy and widespread natural disasters kept buyers from showrooms.

But BYD Chairman Wang Changfu said the China Business News report was exaggerated, adding that dealer churn rates at the automobile firm were at normal levels.

“We have dealers joining and leaving the network all the time,” he told reporters on Monday after BYD reported disappointing second-quarter results.

Shares of BYD, 10 percent owned by Buffett’s Berkshire Hathaway (BRKa.N), were down 3.8 percent in Monday afternoon trade after BYD reported a lower-than-expected 2.6 percent rise in second-quarter net profit. The second-quarter profit was down substantially from the previous quarter.

China surpassed the United States last year to become the world’s No. 1 auto market as sales took off, fueled by a raft of policy incentives from Beijing to boost consumption during the global economic slowdown.

That growth is expected to ease to more normal levels in the second half of the year.

Wang said BYD would focus on developing overseas markets and expand its production capacity of electric vehicles to meet market demand.

Starting next year, the company plans to export large quantities of its E6 electric car to the United States to compete with the likes of Nissan’s (7201.T) Leaf and GM’s GM.UL Volt.

BYD, which previously cut its 2010 sales target to 600,000 units from a previous target of 800,000, has prepared for a slowdown in China’s auto market, Wang said. But he would not comment on how likely the company is to meet the new target.

“We will launch several new models later this year.” he said. “The fourth quarter traditionally is a peak season and sales should pick up.”

Among BYD’s rivals, carmakers who have more aggressively pushed out new models or have a wider product portfolio, such as Chinese top automaker SAIC Motor Corp Ltd (600104.SS) and Dongfeng Motor Group Co (0489.HK), are set to hold up relatively well.

BYD aims to seek an A-share listing this year in Shenzhen, Wang said. The size of the fundraising will depend on the company’s need and market conditions.

The company plans to issue up to 100 million A shares to fund its lithium-ion and solar battery production and the expansion of automobile products and accessories.

FLEEING DEALERS

A large number of BYD’s departing dealers have recently left the Chinese automaker’s sales network because high inventory tied up their cash, the China Business News reported on Monday.

The departures follow that of Ping Tong, BYD’s flagship dealer in the southwestern city of Chengdu. Ping Tong, set up in June last year, sold 1,500 of BYD’s F0 car that year, but its inventory for the model surged to as high as about 1,000 units a year later, locking up more than 35 million yuan ($5.15 million) as BYD continued to ship cars despite a market slowdown, it said.

“The growth of car sales in China will continue to slow down and the high inventory of BYD with dealers should take some time to digest,” said Alfred Chan, chief dealer at Cheer Pearl Investment Ltd.

Fast expansion of BYD’s sales network was also blamed for the closure of BYD dealers in Chengdu and other provinces, including Zhejiang, Shandong and Henan.

BYD has about 14 dealerships in Chengdu, while the best performer in the city, Shanghai Volkswagen, has 13. Shanghai Volkswagen is a car venture between Volkswagen AG (VOWG.DE) and SAIC Motor Corp Ltd.

“Because of high inventory levels, many dealers are competing to cut prices. We were forced to sell cars even at a loss,” the China Business News quoted an unnamed BYD dealer as saying.

Normal inventory is equivalent to sales for 1- months, analysts said, while BYD’s inventory could double that level.

($1=6.790 Yuan)

(Editing by Doug Young, Chris Lewis and Valerie Lee)

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The JPY advanced against all 16 major counterparts before reports this week forecast to show US existing home sales fell and Japan’s export growth slowed in July. Australia’s currency weakened after the election failed to deliver a majority government for the first time in 70 years. The EURUSD traded near a five-week low ahead of European data that may show growth in the EU’s services and manufacturing industries fell to 56.3 (prev. 56.7). The EURJPY dropped to 108.50, USDJPY fell to 85.36 and EURUSD traded at 1.2711 after it reached 1.2664 on Friday, the lowest since July 13, AUDUSD slipped 0.3% to 0.8911 and AUDJPY dropped 0.6% to 76.08. Sales of US existing homes probably dropped 12.9% to 4.68 million annual pace, Japan’s exports probably advanced 21.8% (prev. 27.7%) slower than last month according to data to be released on Aug. 25. Gains in the JPY were sustained after reports said currency intervention wasn’t discussed between Prime Minister Naoto Kan and BOJ Governor Masaaki Shirakawa in their telephone conference today. The Nikkei 225 retreated 0.8% to 9,108.58, the lowest since November, MSCI Asia Pacific Index fell 0.1% while S&P 500 Index futures climbed 0.2%.

The EURGBP declined to a seven-week low after France’s government last week cut its forecast for economic growth next year as President Nicolas Sarkozy prepares for the biggest budget squeeze in at least two decades. France will probably grow 2% (prev. 2.5%) in 2011, slower than previous forecast. France has pledged to cut the budget deficit to 6% of the GDP next year and to 3% by 2013 from about 8% in 2010. Europe’s sovereign risks may re-emerge amid lingering concerns about its fiscal health, giving further strength to a case of a weak EUR. ECB council member Axel Weber said on Aug. 20 that the ECB should help banks through end-of-year liquidity tensions before deciding when to withdraw emergency lending measures triggering concern about Europe’s recovery.

Currency Tech

EURUSD
R 2: 1.3250
R 1: 1.3000
CURRENT: 1.2725
S 1: 1.2680
S 2: 1.2540

USDJPY
R 2: 87.20
R 1: 86.80
CURRENT: 85.37
S 1: 85.00
S 2: 84.50

GBPUSD
R 2: 1.5925
R 1: 1.5750
CURRENT: 1.5608
S 1: 1.5525
S 2: 1.5350

AUDUSD
R 2: 0.9200
R 1: 0.9070
CURRENT: 0.8925
S 1: 0.8810
S 2: 0.8725

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

Published on Mon, Aug 23 2010, 09:14 GMT

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The yen rose against the dollar in Asia Monday as Japan’s prime minister and top central banker limited their dialogue on foreign-exchange matters to a telephone conversation. This lead investors to think that Tokyo may not take immediate action to tame the yen’s recent strength.

Bank of Japan Gov. Masaaki Shirakawa and Prime Minister Naoto Kan on Monday morning discussed recent foreign exchange market movement as well as economic conditions at home and abroad.

A stronger yen is considered negative for the export-reliant economy because it deflates exporters’ profits overseas when repatriated.

As a result, the dollar fell to JPY85.35 as of 0450 GMT, down from JPY85.77 in New York Friday.

The euro, meanwhile, was at JPY108.55 and USD1.2718 from JPY108.71 and USD1.2676 last Friday. Investors said the European unit’s outlook depends on share price moves. If shares decline, the euro should extend losses against its major rivals.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.954 from 83.237 Friday.

The British pound extended its decline against the US dollar as concerns of a faltering global economic recovery boosted safe-haven currencies. Despite positive UK retail sales figures, the sterling continued to be pressured by the probability of further austerity measures implemented by the Bank of England.

The Australian dollar traded lower in Asia Monday after the country’s general election on the weekend left it unclear who will govern, though the currency gained as the session wore on.

Market expectation

Dealers said investors may resume buying the yen actively if share prices deteriorate in Europe and the U.S. later in the day.

European stocks are expected to open higher Monday, managing a positive start after Wall Street closed off its session lows Friday and boosted by the mining sector, which rallied after the Australian general election result at the weekend.

EURCHF is set to test its all-time low of 1.3072 reached in July, though it should find psychological support at around 1.3000, say analysts. This is important support and should hold the currency pair, say technical analysts. If not, the longer-term 100% Fibonacci extension at 1.2997 will probably be reached.

GBP up slightly as short-term-focused investors take advantage of somewhat calm Asian session to square short positions they made recently; Japanese share prices managing to limit losses also a plus for GBP, say dealers. GBPJPY rises to JPY133.15 from JPY132.73, GBPUSD up at USD1.5595 from USD1.5553. Tips GBPJPY resistance at JPY133.30, GBPUSD may raise to USD1.5620. Investors will pay attention to euro-zone August PMI data due later in day for further trading cues; Economists tips headline figure to log 56.7; data due at 0800GMT.

Investors are likely to push the euro down further against the franc, said analysts, testing whether the Swiss central bank will intervene to stem its currency’s strength, as had been the bank’s recent practice.

Most important events of the day

Published on Mon, Aug 23 2010, 07:37 GMT

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Data concerning the Taiwan’s economy released today noted the economic expansion during the second quarter, where the GDP index has recorded a growth of 12.53% compared to the expected growth of 10.15%, where as the previous reading showed a growth of 13.27% and this reading has been modified to 13.71%.

The first factor behind the growth in Taiwan was the increase of exports, although there was a weakness in the level of demand from the American and Chinese economy lately.

It was released besides today’s report that expectations points out to that the Taiwanese economy is on its way to record a growth of 8.24% during 2010 and a growth of 4.64% during the next year. It should be noted that Taiwan has been a victim of the economic recession during 2009, but it managed to record a fast growing pace since 1978 during the first quarter of this year.

The stable level of exports expansion points to the flexibility enjoyed by the Asian economies especially when it comes to facing the global financial crisis, Taiwan has joined Malaysia that has announced an expansion in growth beside Hong Kong that might exceed economists’ expectations.

Taiwan’s exports to china and Hong Kong represent 40% of the total Taiwan’s exports which increased by 3.8% during the month of July. Expectations points out that the total export level will increase by 33.2% during this year, which is higher previous expectations which noted an increase of 24.5%

The stable economic conditions in Taiwan encouraged the Taiwan’s central bank to take an unexpected decision during June’s meeting to increase the interest rates to 1.375% after it was 1.250%. On the other hand fears of increased inflation rates could persuade the central bank to keep sticking to the policy of increasing interest rates, especially that consumer prices has increased by 1.31% during the month of July, for the seventh consecutive month.

Published on Fri, Aug 20 2010, 06:24 GMT

fxstreet.com

SYDNEY/LONDON (Reuters) – Brewing groups SABMiller (SAB.L) and Asahi Breweries (2502.T) are looking at Foster’s Group’s (FGL.AX) beer operations, valued at more than $10 billion, but have not yet made any formal offers, sources said.

Long-running interest in the Australian brewer’s beer business, know as Carlton & United Breweries, resurfaced on Monday after newspaper reports said SABMiller was considering buying Australia’s biggest brewer.

Foster’s said in May it would split the beer unit from its ailing wine business, putting its valuable beer operations with brands including Foster’s Lager, Victoria Bitter and Pure Blonde at the center of takeover talk in the brewing world.

The Australian beer market is a virtual duopoly with some of the highest profit margins in the brewing world and Foster’s controls half the market, with most of the rest held by Kirin-owned (2503.T) Lion Nathan. The national beer market is broadly stable rather than in decline like Western Europe.

Most of the other big brewers such as Anheuser-Busch InBev (ABI.BR), Heineken (HEIN.AS) and Carlsberg (CARLb.CO) are likely to be restricted from bidding due to high debts from previous deals, and so analysts expect a narrow field in an auction.

A SABMiller spokesman had no comment to make on Foster’s and said it planned no announcements on Monday. After an early fall, SABMiller’s shares rose 0.5 percent to 18.60 pounds by 1100 GMT.

Analysts expect any suitors will only emerge after Foster’s splits off its wine division in early 2011 when complex debt and structural issues are resolved, and they were doubtful over an early beer sell-off deal.

“We remain skeptical that any bid will come here before the planned demerger of the beer division in early 2011,” said analyst Ian Shackleton at brokers Nomura in London.

Analyst Matthew Webb at JP Morgan Cazenove believes SABMiller will look at Foster’s beer business, could entirely debt fund the deal, be moderately earnings enhancing in the first year and make annual cost savings of around $150 million.

He values Foster’s beer business at a historic 13.3 times core EBITDA earnings putting a value on it of $11 billion.

Asahi, Japan’s No.2 brewer after Kirin, is also interested in Foster’s, sources said. It has been building up a war chest for acquisitions and keen to expand outside Asia, but Asahi declined to comment. Nomura and Rothschild are advising Asahi.

“SAB and Asahi are the two names that keep popping up and given the demerger process in train you would expect people who ever thought they might look at Foster’s to get teams together to do so,” said one source familiar with the situation.

OTHER BIDDERS?

Analysts say Foster’s beer could also be a target for Canadian brewer Molson Coors (TAP.N), which owns a derivative- based 5 percent stake in Foster’s, and Coca-Cola Amatil (CCL.AX) which has a joint venture with SABMiller in Australia.

The takeover talk pushed Foster’s shares up more than 7 percent to their highest level in more than two years, with volume three times the daily average over the past 30 days.

The shares closed up 7.6 percent at A$6.26.

Responding to a media report in Britain’s Sunday Times over SABMiller’s interest, Foster’s said on Monday it was not aware of any unannounced information driving the stock.

The Australian newspaper reported on Monday that SABMiller had hired JPMorgan and Royal Bank of Scotland as advisers for a potential bid but no decision had been made. Sydney-based Gresham Advisory Partners is advising Foster’s.

SABMiller, which is the world’s second largest brewer after AB InBev and brews Peroni, Miller Lite and Grolsch already owns the brewing rights to Foster’s beer in the United States and in India, while Heineken owns the rights in Europe.

Asahi President Naoki Izumiya said this month he expects to have $9.2 billion for acquisitions over the next five years, with eyes on Asia and Oceania. It has already bought Cadbury’s Australian soft drinks business Schweppes for $995 million and a 19.9 percent stake in China’s Tsingtao Brewery (600600.SS) for $667 million, both in 2009.

Japanese brewers have been scrambling to diversify, mainly by overseas acquisitions, to cut their reliance on the local beer market, which has lost 15 percent in volume in the past decade due to a sputtering economy and shrinking population.

(Additional reporting by James Topham in Tokyo; Editing by Anshuman Daga and Louise Heavens)

($1=.6431 Pound)

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NEW YORK (Reuters) – Stock index futures rose on Monday, following two weeks of losses for the S&P and Dow, as sentiment was lifted by several potential mergers and deals.

Hewlett-Packard Co (HPQ.N) bid $24 a share in cash for data storage company 3PAR Inc (PAR.N), sending the stock up 37 percent to $24.70 in premarket trading. HP, a Dow component, fell 1 percent to $39.45.

Campbell Soup Co (CPB.N) may make a $2.3 billion break-up bid for Britain’s United Biscuits, which is owned by private equity firms PAI Partners and Blackstone Group LP (BX.N), according to the London-based Sunday Times.

And George Buckley, the chief executive of 3M Co (MMM.N), said the Dow component may spend about $2 billion on acquisitions in 2010, twice its previous estimate.

“All this M&A activity is a sign of confidence that the situation out there has a silver lining about it,” said Andre Bakhos, director of market analytics at Lek Securities in New York.

“Nothing seems to be of heavy impact, but these things are all adding up.”

Last week Intel Corp (INTC.O) moved to acquire software maker McAfee Inc (MFE.N) for $7.7 billion.

S&P 500 futures rose 5.6 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 37 points, and Nasdaq 100 futures rose 11.5 points.

Concerns about the strength of the recovery have intensified in recent weeks, with weak economic data adding to the cautious tone and depressing trading volume levels.

A $20 billion compensation fund for economic victims of the BP Plc (BP.L) (BP.N) Gulf oil spill opens for business on Monday amid accusations that the rules established by its administrator are unfair. U.S.-listed shares of BP slid 1 percent to $36.03 in premarket trading.

October crude futures edged slightly higher to $74.12 per barrel, though prices were close to last week’s six-week lows on bulging inventories.

The Federal Reserve plans to reduce American International Group Inc’s (AIG.N) credit line by about $3.6 billion in a sign of growing confidence that the government bailed-out insurer can emerge from taxpayer support, Bloomberg said, citing a person with knowledge of the proposal.

U.S. stocks slipped on Friday and the S&P 500 and Dow fell for a second straight week on persistent concerns the recovery has tapered off. For the week, the S&P 500 was down 0.7 percent and the Dow slipped 0.9 percent, while the Nasdaq gained 0.3 percent on some positive outlooks in technology shares.

(Editing by Padraic Cassidy)

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The Thailand’s annualized gross domestic product inclined 9.0% during the second quarter of the year, compared with a previous 12.0% a year earlier, while the actual reading came higher than expectations that referred to 8.0%.

Moreover, quarterly gross domestic product for the second quarter rose by 0.2%, compared with a previous reading 3.8% during the first quarter, which was revised to 3.3%, while the analysts’ expectations were set at -1.4%.

Analysts indicates that higher exports is the main reason behind the expansion, while it is a possibly offset the decline in consumer demand, whereas the monetary policy of the Bank of Thailand may hike the interest rate by 25 basis points in upcoming period.

According to the Thailand’s report, where the nation’s exports rose 46% during June from a year earlier, which is the most in more than 18 years, before cooling to a 20.6% pace last month.

Today’s report showed that the exports of cars and electronics advanced from the previous, and the tourists are rebounding Phuket’s beaches after protests ended.

On the other side, the Central Bank of Thailand indicates that the economy may expand as much as 7.5%, which would be the strongest pace since 1995, helping the curb the Asian financial crisis in which Thailand, Indonesia and South Korea.

Monetary policy noted that overseas sales may decrease during the second half of the year, reflecting that a cooling demand in the global economy, even as the government raised its exports growth target by 20%.

Published on Mon, Aug 23 2010, 06:21 GMT

fxstreet.com

LONDON (Reuters) – Oil rebounded to top $74 a barrel on Monday on a weaker dollar, but prices stayed close to last week’s six-week lows on bulging U.S. inventories and a lack of hurricane activity in the Gulf of Mexico.

The market gained support from the weaker U.S. dollar, which makes oil cheaper for holders of other currencies .DXY, and from a firmer start to trading by European equities.

U.S. crude for delivery in October was up 31 cents to $74.13 a barrel by 0856 GMT (4:56 a.m. EDT), having earlier risen as high as $74.30. October Brent crude was up 44 cents to $74.70.

“We’re still basically trading sideways and close to the bottom of the range, but I don’t think we’re necessarily into a nosedive,” said Christopher Bellew, a broker at Bache Commodities in London.

“Demand from developing countries such as China is supportive, and on the bearish side there’s fears of weak demand in Western economies.”

Oil in New York ended last week at the lowest since early July, after prices touched an intraday low of $73.19. Prices have fallen more than 10 percent from an August 4 high of $82.97.

Even though forecasts are for the Atlantic hurricane season to be the most active in five years, there was little imminent threat of hurricane-related disruptions to oil output or refining in the Gulf of Mexico.

Tropical Storm Danielle formed over the mid-Atlantic on Sunday and could become a hurricane by Tuesday night, the U.S. National Hurricane Center said, but it was headed for Bermuda, posing no threat to oil and gas infrastructure in the Gulf.

“The upcoming storm in the Atlantic is expected to deviate north and will again be a storm that will not have any impact on oil assets in the U.S. Gulf,” said Olivier Jakob, analyst at Petromatrix, in a report.

Oil this year has traded in a $64.24-$87.15 range as recovering demand has been insufficient to drain ample supplies. U.S. petroleum stocks climbed to a record since weekly records began in 1990 in the week ended Aug 13.

“We’ve broken some short-term support at around $74.50 and the next short-term support would be around $72,” Bellew said, referring to Brent crude.

Last week’s economic reports included data showing U.S. jobless claims hit a nine-month high and U.S. regional manufacturing contracted for the first time in a year, reviving fears of a double-dip recession in the world’s largest economy.

Investors’ interest in oil diminished last week. Money managers cut net long crude oil positions on the New York Mercantile Exchange, the Commodity Futures Trading Commission said on Friday.

(Reporting by Alex Lawler in London and Alejandro Barbajosa in Singapore, editing by Alison Birrane)

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