Heavy Equipment Industry News Updates

Tokyo - Japan's crisis-stricken industries are signs of a breakthrough
major merger.
The largest conglomerate in the country, Hitachi, and the leading
manufacturer of heavy equipment, Mitsubishi Heavy Industries
considering sources said the merger of their core business. So is the
creation of a global heavyweight in competition with General Electric
or Siemens before, with annual sales of $ 150 billion in 2013.
The two companies have entered into discussions about the combination
of critical infrastructure and information technology businesses, said
three people familiar with the negotiations said Thursday. A merger of
two of the oldest groups in the country could initiate much needed
consolidation in Japan's industry. So far, Japanese companies have
shied away before.
"This is a historic event, if it should prove true," said analyst
Fujido Ando of Chibagin Asset Management. "If they enforce this and
form a new group of several other companies that deserves high
praise." One such step has so far been extremely difficult to
implement than in Japan. A merger could help the economy of the
country, however, fund managers said Kiyoshi Noda of MU Investments.
"You would have to compete not against each other when they are
looking for international infrastructure projects. This increases
their chances."

No decisions have yet been passed, it said in the circles. Many
fundamental questions are still open "? Who takes the lead where what
happens to businesses that overlap What happens to the alliances of
the two companies," one of the enumerated persons familiar with the
plans. Finally, the sources said the talks should have even been on
the brink, after the economy had newspaper "Nikkei" reported it. An
announcement for the Thursday release was withdrawn.
SECOND LARGEST INFRASTRUCTURE GROUP BY GE
Japanese industrial groups suffer from the weakness of the global
economy and a strong yen, which is extremely expensive their products
abroad. The country braces itself but with power against the weak
economy caused by the earthquake and tsunami in March this year, was
reinforced. On Thursday, the Fed eased further in the country on their
already lax monetary policy and intervened in the foreign exchange
market against the strong yen.
To remain competitive and cost savings, mergers are clearly brought to
the fore. Both Hitachi, whose product range as well as rice cookers,
televisions, excavators, mowers and computer chips includes, as well
as Mitsubishi Heavy have for years under their high cost. Hitachi
succeeded in the last financial year (ending March) the first time in
five years, to the black. In the last ten years the company has lost $
14.3 billion. For comparison, the world's largest conglomerate General
Electric earned during the same period of $ 160 billion. Mitsubishi
Heavy quarrels with his ship and aircraft sectors. Total operating
profit of Boeing's partner, according to data from Thursday in the
first quarter fell within a year by one percent to 38.7 billion yen.
Together, Hitachi and Mitsubishi Heavy came on revenues of $ 150
billion and would thus according to GE's second largest infrastructure
companies in the world that has next to nuclear plants and
conventional power plants, water treatment, renewable energy and rail
cars on offer. By market value, the new group would be in relation to
other conglomerates such as GE, Siemens and ABB but still small.
Hitachi comes to 27 billion dollars and Mitsubishi Heavy to $ 16
billion. GE has a market value of 182 billion dollars and Siemens of
nearly 110 billion dollars.

Commodities and energy are vital for China's rapidly growing economy. Consequently, the Chinese government increasingly invested more money in commodities or companies in this industry and retired from U.S. bonds. China pulls back noticeably from U.S. government bonds. Instead, more money flows into commodities or companies in this industry. The interested investors can benefit from the change in investment behavior in China.

China is still the largest creditor of America? Maybe not for long. Mid-2009, China had about 1,000 billion dollars in U.S. government bonds. By September 2010, the stock fell to 883 billion dollars.


For many years China had bought U.S. bonds to 100 billion dollars a year. Not anymore. In the first half year, China has purchased more U.S. government bonds worth 23 billion dollars. Estimates is expected to increase this amount in 2010 to 55 billion. In the same period, China invested 31 billion U.S. dollars, however, in so-called hard assets, and for the first time in more than U.S. government bonds.

Why China has so much appetite for hard assets, mainly involve the raw materials? The simplest reason is the need for supplies for the industrialization. The reduction in purchases of American bonds and the strong increase in the purchase of raw materials is also part of the monetary strategy. The Chinese currency specialists consider to be about 40 percent undervalued against the dollar. Therefore, China can be the currency that is officially tied to the dollar, rising each year by about 2 to 3 percent against the dollar.

Now that the dollar is becoming weaker, it istt from the perspective of the Chinese government makes little sense to be invested in treasury bills or other dollar assets. The annual interest income can easily be lost by the exchange loss. China is also reflected in the opinion of experts worried about the creditworthiness of U.S. debt. From this perspective, it is reasonable to invest in facilities retain their value or even likely to increase.

China is in many countries is a welcome investor

Iron ore in Sierra Leone and South Africa, coal and gas in Australia, Brazil and Venezuela in oil have already purchased. Even forest in Canada raises interest in Chinese. Recently, China has increased the expectations of the uranium needed for its nuclear power plants.

The new purchases of government bonds by the U.S. Federal Reserve to make the dollar less attractive, accessible from the Chinese perspective. In our opinion, the Chinese policy is toward diversification. Therefore, raw materials and commodity companies are bought as a strategic investment.

China has of course a balance between prudent, long-term investment and ensure that the U.S. remains financially sound enough to buy many Chinese exports. This point, however, over time, less important, since China itself is produced in domestic purchasing power and the country becomes less dependent on exports.

In many African countries, where investments by the end of the Cold War had fallen sharply, China is a very welcome investor. In addition to direct investments, China offers a mix of cheap loans and infrastructure improvements as well as railway lines and roads and favorable export financing.



Georg Thilenius is managing partner of the bank-affiliated asset management Dr. Thilenius Management GmbH in Stuttgart. The Company is regulated by BaFin.
The potential target companies to buy Chinese acquisitions is not worth the attempt. There are too many potential target companies and no one knows what China will be interested next. Money invested in these companies may be dead money for years to come.

Interestingly, there is Joy Global, a leading American manufacturer of heavy mining equipment. The company produces machinery for mining and transporting coal, copper and iron ore. The machines of Joy Global, in addition to the acquired straight from the view of Bucyrus Caterpillar mining experts as a particularly reliable. Accordingly, these machines are in use worldwide. The industry has given the complexity of the machine high entry barriers. This, together with the top technical position, the position of Joy Global, in our opinion very well. The long-term growth in earnings per share is expected at about 13 percent in the year are. The price-earnings ratio of 15.8 for the year 2011 is not low, but the growth potential and market position the company appropriately. Joy Global also has a strong market position in China.

As long as commodity prices remain high, for which some evidence, investors can benefit from Chinese companies with the interest in commodities.