HSBC Eyes Australian Expansion
will beef up its corporate-finance business in Australia, part of a
strategy to increase its presence in an economy booming on the back of
Asia's demand for commodities, the lender's local chief executive
said.
"There's a lot of interest in good corporate fundamentals coming out
of Australia," Paulo Maia, HSBC's Australia head, said in an interview
with The Wall Street Journal.
A greater emphasis in Australia comes as HSBC and other international
lenders search for low-risk opportunities outside more traditional
markets in the U.S. and Europe, which are recovering more slowly than
Asia from the global financial crisis. Asia accounts for more than
half the bank's total earnings.
The bank plans to hire for its Australian debt capital markets team as
well as expand its onshore leveraged acquisition and loan syndication
operations, said Mr. Maia, who was previously deputy chief executive
of the European bank's Brazilian business.
HSBC particularly wants to tap into the growing market for leading
local corporations and banks to borrow money offshore. Already this
year, the volume of nonbank corporations issuing foreign-currency debt
has grown by 35% to 13.97 billion Australian dollars (US$13.71
billion) split across 26 deals, according to Dealogic.
HSBC's first-half pretax profits from Australia grew 28% compared with
a year earlier to A$152 million. Still, that's a slower rate of growth
than seen at local rivals, including Commonwealth Bank of Australia,
which in the same period recorded a 37% jump in pretax profits.
Compared with its Australia rivals, HSBC has a relatively small retail-
branch network in the country. But Mr. Maia rulef out buying a smaller
local bank to build its presence in big urban centers like Sydney,
Melbourne and Brisbane.
"We haven't been able to identify any bolt-on acquisitions that would
make sense for us," he said. "We want to play on the mass affluent; we
don't want to go too much downmarket."
HSBC's enthusiasm for Australia comes as the bank remains locked in a
war of words with the British government over the rising cost of
basing itself in Europe. The bank's outgoing CEO, Michael Geoghegan,
and his successor, Stuart Gulliver, have warned separately that new
rules proposed to curb pay in the financial-services industry are
putting it at a disadvantage to its U.S. rivals in international
markets.
From The Wall Street Journal - WSJ.com
By Market Talk via News -
China Steps Up Measures to Curb Inflatio
WTI crude oil price surged to a 2-year high of 88.63 in early November as Fed's announcement of additional QE measures had sent USD lower. Moreover, investors speculated that Fed's liquidity injection would stimulate oil demand. However, price failed to advanced further and recent strong rebound in USD has made it trading within a range of 80-85. At an interview in London, OPEC Secretary-General Abdalla El-Badri said the cartel is comfortable with prices at around 78 and doesn't expect price to reach 100 this year. Moreover, OPEC will not increase supply unless there is 'real' oil demand.
In China, the government is stepping up measures to curb inflation. The Shanghai Futures Exchange announced it will increase margins and daily price limits on commodity futures it trades. After the market closes on November 29, margins on copper, aluminum, steel wire, gold and fuel oil will rise to 10%, steel-reinforcing bars and zinc to 12% and rubber to 13%. Daily price limits for all products will widen to 6% from November 30. The National Development and Reform Commission (NDRC) described the government's move as measures to 'clamp down strictly on market manipulation and other illegal activity, and curb excessive speculation'. This has sent the public a signal that the government is committed to curb speculations and cool inflation. We believe a rate hike is imminent and should have negative impacts on commodity prices, especially oil and base metals.
On the dataflow, Japan's national core CPI contracted -0.6% y/y in October, easing from -1.1% in the prior month. The leading Tokyo core CPI dropped -0.5% y/y in November. Economic indicators in Europe and the US are sparse and the attention should remain on the European periphery.
Proposed New Looks Of U.S. Currency
CHINA- Beijing’s Focus on Food Prices Ignores Broader Inflation Risk NOW METALS CAN RISE..
China took steps Wednesday to control rising prices at the most basic consumer level. But Beijing faces a severe challenge in preventing higher global commodity prices from igniting broader inflation that could threaten China's streak of powerful economic growth.
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With prices rising this autumn for many commodities like sugar and cotton, the country's cabinet announced on Wednesday evening that it would impose price controls on food, introduce subsidies for the needy and increase the availability of fuel supplies.
So far, the inflation in consumer goods in China has been largely confined to food and energy, and government policy makers want to keep it that way. But avoiding more general inflation could prove difficult.
And in terms of economic diplomacy, the measures announced Wednesday were almost precisely the opposite of the steps the Obama administration and many Western economists have been urging Beijing to take.
China's broadly measured money supply has surged in the last two years, soaring 54 percent as its central bank has supported the export economy by intervening in currency markets to keep the renminbi [CNY=X 6.6335 
But China's leaders are now clearly worried about the inflationary side effects of those financial policies. The premier, Wen Jiabao, has toured southern China over the last week and was shown on national television late Tuesday night expressing concern about rising food prices and promising that the government would take action.
Zhou Xiaochuan, the governor of the central bank, had said earlier on Tuesday that the amount of money racing through the global economy was putting pressure on emerging economies that want to control inflation. And Yao Jian, a commerce ministry spokesman, said at a press conference on Tuesday that the government would tighten scrutiny of foreign investment so as to prevent too much money from pouring into China as foreign investors seek higher returns than are currently available in the West.
Imposing price controls and other administrative controls on the Chinese economy runs counter to the steps recommended by many Western experts. They have suggested that China should further deregulate its economy, let the renminbi appreciate and otherwise rely on market forces to tame inflation.
The standard policy prescription from Washington has been that China should raise interest rates, as a way to slow investment and prevent the economy from overheating. And American policy makers from President Obama down have argued that if China would let the renminbi rise against the dollar, oil and other commodities would be less expensive in China, helping to tame inflation. But Beijing has resisted, in large part because Washington's prescribed medicine would reduce the price competitiveness of Chinese exports to the United States and elsewhere.
Still, even as China is zigging when Washington would rather it zag, some corporate economists are cautiously optimistic that China may be able to tame inflation with its approach — for now, at least.
"Given that food prices are spearheading immediate inflationary pressures, supply-side measures should be more effective than rate hikes," Qu Hongbin, the co-head of Asian economics research at the international bank HSBC, wrote in a research note on Wednesday night. "There's no need to panic, as Beijing has more than enough effective policy options to combat inflation."
And yet, while there may be limits to China's ability to keep a lid on inflation, it is better prepared than many countries to cope with rising world commodity prices. That is because China is self-sufficient in most foods, has an enormous trade surplus and has accumulated copious foreign reserves that reached $2.65 trillion at the end of September.
Qu Hongbin
Co-head of Asian Economics Research, HSBC
In contrast, the United Nations Food and Agriculture Organization warned on Wednesday that food import bills were up 10 percent this year for the world's poorest countries.
But many economists were surprised by the accelerated inflation in China that the National Bureau of Statistics disclosed in Beijing last week. Overall consumer prices were 4.4 percent higher last month than a year earlier.
Chinese leaders have repeatedly made clear over the years that fighting inflation is a top priority, because it could fuel social unrest. And they have publicly set a target of not allowing the annual increase in consumer prices to reach 5 percent again. It peaked at 8.5 percent in the spring of 2008.
If food and energy prices are removed from the consumer price index, the prices for everything else are up only 1.3 percent from a year earlier, according to the government. But that is not necessarily a reassuring measure, some economists suggest.
Chinese and Western economists worry that the Chinese price index may underestimate inflation separate from food and energy. The Chinese index has longstanding methodological problems — like measuring apartment rents but not the cost of buying and living in an apartment, which has soared in recent years.
While climbing food and energy prices are a global problem, they particularly affect lower-income countries like China, where such necessities claim a far larger share of household incomes than in more affluent nations. China's consumer price index, which is based mainly on urban spending patterns, assumes that groceries represent a third of a family's spending.
That is extremely high by Western standards. And it shows how far China must still go to create the kind of broad-based consumer society that American officials recommend and that Chinese leaders say they want to adopt in the long term in place of their current export-led model. In the United States, groceries represent only 8 percent of the Consumer Price Index.
The State Council, China's cabinet of ministers, decided on Wednesday that it would stabilize prices for grain, oil, sugar and cotton in particular, according to a statement on a government Web site. The State Council also said that the government would make sure that more diesel reached filling stations, to fuel trucks, and that utility power stations had ample supplies of coal.
The high prices and relative scarcity of diesel fuel have resulted in part from its use by factories, which have been burning it in backyard generators as power companies have cut back electricity generation to meet national targets for limiting energy consumption.
Meanwhile, utilities have struggled to buy enough coal because the government requires coal mines to sell it to power companies at low, regulated prices. The mines, of course, prefer to sell their coal at higher prices on the open market.
Last week, in another move against inflation, Beijing ordered commercial banks to put more of their assets in low-yield accounts at the central bank. The measure, an increase in the so-called reserve requirement, was meant to cool a frenzy of lending over the last two years that has priced urban real estate beyond the reach of most working-class families.
Liang Huoqiao, a 22-year-old plastics worker, said in an interview earlier this year in Guangzhou in southern China that his pay was rising 10 percent a year, to around $300 a month. But his entire annual pay would be enough to buy only about two square meters of an apartment, or 21.5 square feet.
So he planned to buy a car as soon as possible, and worry about a home later.
Fed Orders 2nd Round of Stress Tests | Nov 18,2010 | WSJ
Officials Want Banks to Prove Viability in 'Adverse' Conditions; a Preface to Raising Dividend Levels
Washington
The Federal Reserve plans to scrutinize the nation's top 19 banks for a second time, the latest indication federal regulators are seeking to toughen oversight of the nation's biggest financial institutions.
The Fed, in guidance issued Wednesday, said the 19 largest bank-holding companies must submit capital plans by early next year showing their ability to withstand losses under a set of conditions to be determined by the central bank, including "adverse" economic conditions and continuing real-estate-related woes. The banks are the same that underwent highly publicized "stress tests" at the height of the financial crisis in early 2009.
Government officials said the new capital reviews weren't triggered by any particular concern but are instead part of the Fed's efforts to step up bank supervision in the wake of the crisis. The central bank said it plans to perform such reviews "on a regular basis" as part of its "efforts to enhance supervision of banking organizations." The Fed, along with other banking and regulatory agencies, has been faulted for failing to detect problems at large financial firms and not doing enough to curb risk-taking on Wall Street.
Earlier Graphic: Stress Test Results
Compare the 19 banks that were tested in 2009.
The sweeping financial-regulatory overhaul passed by Congress this summer enacted a host of new requirements, including rules to curb risk-taking. Banking regulators have also toughened oversight in the wake of the crisis, including tightening lending standards for banks that make commercial and consumer loans.
In 2009, U.S. regulators tested the resilience of the same 19 companies. Regulators made the first round public in large part to help assuage investor fears about the extent of losses at the nation's largest financial firms. The tests, which showed banks faced a total of $599 billion in losses over two years, directed 10 banks to add altogether nearly $75 billion to their capital buffers. They are widely credited with helping restore confidence to the financial sector and pulling the U.S. from the brink.
This time, bankers said another round won't be as taxing given that many of them already perform such tests on themselves and have taken steps to improve their health. Banks with large credit-card operations have taken steps to curb lending. American Express Co., for example, had about $57 billion in outstanding loans in the third quarter, down from about $72 billion in late 2008. J.P. Morgan Chase & Co. has reduced its card portfolio by about 15% in the past year or so.
In addition, the results of the new capital reviews won't be made public.
The Fed on Wednesday also issued a road map for banks that want to raise dividends or buy back stock, with regulators saying firms must show they have capital cushions in place to withstand losses over the next two years and demonstrate an ability to satisfy new, tougher global capital requirements.
![[FEDBANK]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_t3m13GadJ_7mWnWXVD__3w7M4uJRf8jrTN9MciDF97g7Yphm-IWnO42PvurNx6pka8QrI0SmGSr75A5ezIhZpORaaZYYEO5g7HtsCjQuxGivxBUrg-3VKJOyHGlmdgzKfjKyXMLUrGz8SNjypRJ8lvYc0=s0-d)
The Fed's two moves—on dividends and the capital tests—will serve as another demarcation point between the healthy and the weak among big U.S. banks. J.P. Morgan, Wells Fargo & Co., PNC Financial Services Group and U.S. Bancorp are expected to be among the first to be allowed to raise dividends. Bank of America Corp. and Citigroup Inc., on the other hand, could face more hurdles.
Bank stocks dropped Wednesday on the news. Bank of America declined to comment. Citigroup had no immediate comment.
The tougher regulatory environment has triggered concern at some financial firms, in particular smaller banks, who complain examiners are making it harder for them to provide credit at a critical moment in the economic recovery.
Eugene Ludwig, a former U.S. comptroller of the currency, said the Fed's decision to impose another round of stress tests is a "natural extension of what they rightly see as having been a successful program. There's no doubt that there's been international focus, including Federal Reserve focus, on the importance of these capital cushions as a key element in financial institution safety."
Concerns about the health of most large institutions have decreased, though investors remain nervous about the extent of losses banks face if they are required to repurchase flawed mortgages and mortgage-related investments. As part of its review, the Fed will require banks to assess their exposure to so-called "put-backs" of mortgages.
The capital assessments are a precondition for banks that want to raise dividends or buy back stock. Many U.S. banks have been clamoring to boost payments to shareholders, citing improved profits, because they have long relied on a steady stream of dividends to lure investors. Federal regulators had balked at allowing banks to divert capital for such purposes, insisting they wait until global regulators hashed out new capital rules. With those rules largely in place, the Fed said it is prepared to begin giving the green light to banks in the first quarter of 2011.
U.S. Bancorp Chief Executive Richard Davis said he expects the Fed to allow a group of banks to repay at once. "I want to be among the first," he said. "It's very important to me."
A spokeswoman for Ally Financial Inc. said the bank has been conducting its own internal stress testing in addition to the Federal Reserve's tests and said, "we are prepared to fully comply with their requests."
--
Bill Bonner-Gold Is Getting Into A Serious Correction-It Could Decline To $ 700/oz
A serious correction will take the price down 10%...or 20%...or 50%.
What should you do if gold goes down 10%? Buy it!
And what if it goes down another 10%? Buy more!
And what if it goes down 50%? Back up the truck.
The dollar-based money system is going to fall apart. Gold going down? It's a gift. Take advantage of it.
And here is why the money system is going to come unhinged. Here's David Leonhardt, in The New York Times:
Imagine that Democrats and Republicans somehow came together and agreed on a grand bargain to cut the deficit.
They decided to cut the pay of federal workers over the next several years, close military bases, reduce foreign aid, eliminate earmarks, expand the payroll tax and cut Social Security benefits for high earners, as the chairmen of a bipartisan commission recommended last week.
Democrats also accepted the plan from John Boehner, the presumptive House speaker, to make large cuts to social programs. Republicans accepted President Obama's proposal to let the Bush tax cuts expire on income above $250,000.
If the two parties managed to do all of this, how much of the country's long-term deficit would they eliminate?
About one-third of it.
The government has not yet solved the deficit problem, the economist William Gale of the Brookings Institution says, because voters have not yet demanded it. They have rewarded politicians who say they are worried about the budget much more than politicians willing to make specific benefit cuts and tax increases. All of us would prefer generous benefits and low taxes.
"Whatever the eventual solution is," Mr. Gale said, "it will probably be something that is not politically feasible now."
Remain optimistic of future despite recent mkt slump: HUL
Below is a verbatim transcript. Also watch the accompanying video.
Q: What have you made of the recent pause in market growth?
A: Obviously the markets are slowing down a bit but they are still growing and if you look at a longer-term view of India. There is absolutely no question that we should be seeing some good growth coming here longer term. It is difficult to predict what's going to happen exactly in the next 6 months or the next one year. But we remain very optimistic about the future if you take it into the longer context.
Q: But what would you attribute this short term slowdown to and when you talk of the long term picture what is the sort of time horizon that you are looking at and what kind of growth can we expect?
A: The question really is when we talk about slowdown meaning the markets were growing very fast. The markets are still growing. The question is we are not growing at the rate at which they were growing, but we are still in growth markets. So the way to look at it is that going forward the consumer confidence is not shaken or anything and so in developing countries we have to be a little cautious about not interpreting 1% drop or 2% drop as suddenly something sort of dramatically changing.
Q: I want to talk to you about the sustainable living plan that's been put out by Unilever. You have a sustainability report that you put out annually, how different is this from that sustainability report and why did you feel the need to actually put this out?
A: This is a very comprehensive approach in terms of what we intend doing between now and 2020. If we can make our consumer take some small actions which individually may be a small action but collectively it can make a big difference. If you take for example what we are doing on say Surf Excel Quick Wash in India where the product has been formulated to save two buckets of water everyday, every time you wash your clothes you save two buckets of water.
It's greatly convenient in water stressed areas and generally I would say in the country. But importantly now multiply these two buckets of savings with the millions of consumers who are using our brands and see the impact it can make. From the time we buy the raw materials, to the time we convert it in our factories, to the time we distribute it, to the time it gets consumed and disposed we want to make sure that it is an end-to-end approach to reducing our environmental impact across the lifecycle of our operations or of our brands.
--
CA.RAJESH DHIRAJLAL DESAI
"Print this mail only if absolutely necessary. Save Paper. Save Trees."
Consumer Price Hikes Tame Despite Increases in Energy prices in US
Consumer Price Hikes Tame Despite Increases in Energy
US consumer prices rose less than expected in October and the increase in the year-on-year core rate was the smallest on record, data showed on Wednesday, further supporting the Federal Reserve's decision to ease monetary policy.
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AP |
The Labor Department said its Consumer Price Index increased 0.2 percent last month, as energy costs rose, after edging up 0.1 percent in September. October's increase was below economists' expectations for a 0.3 percent gain.
Excluding volatile food and energy prices, core CPI was flat for a third straight month in October and the annual increase of 0.6 percent was the smallest since records started in 1957, the department said.
Economists polled by Reuters had expected core CPI to edge up 0.1 percent in October and the year-on-year rate to rise 0.7 percent after a 0.8 percent increase in September.
The data came on the heels of a report on Tuesday that showed core producer prices recorded their biggest decline in more than four years in October as vehicle prices tumbled.
The report could help to ease criticism of the Fed's Nov. 3 decision to inject additional money into the economy through purchases of $600 billion worth of government debt.
The U.S. central bank's unpopular decision was driven by policymakers' desire to prevent the current disinflation environment from translating into a crippling phase of deflation and to boost a sluggish labor market.
TNS ASIA MORNING BRIEF: Shares down, Bank of Korea ups key rates
Phone: +91 (22) 6147 5100. feedback@tickerplantindia.com
TIGER AFFRIGHT, AS THE DRAGON ROARS
 By Geetanjali Kedia The Indian stock markets have reacted very sharply as Shanghai Composite slipped 3.5% today. The Chinese markets have lost nearly 10% in the last four trading sessions, while both BSE Sensex and S&P CNX Nifty are down about 2% today, with Sensex slipping below the 20K mark first time in past 18 days. There are fears of China hiking interest rates in order to curb the domestic inflationary pressures, especially to control its accelerating food inflation. Inflation in China is at a 25 month high, with consumer price inflation rising 4.4% (YoY) in October. Of this, food, which makes up about one-third of China's consumer price index, led the way, by climbing 10.1%, while non-food items increased just 1.6%. Global prices of grains, cotton and edible oil have risen noticeably, leading to added pressure on China's food inflation. There is also speculation that price controls may be introduced by the Chinese Government to control inflation, which will curb raw material demand and in-turn hurt the earnings of commodity companies and property developers. As a knee-jerk reaction, a lot of selling is seen on metals, realty and capital goods counters in India. BSE Realty index is down 2.4%, while the Capital Goods index is 2.6% in the red. Sharpest beating has been taken by the high beta Metal index which is down 3.6% today. Any slowdown in Chinese economy has repercussions across the globe as it might lead to a slowdown in demand for commodities, and metals in particular. Although there seems to be no major concern on the domestic front which has seen good Q2 results, Indian equity markets is witnessing some unwinding of the over-leveraged positions by hedge funds. FIIs have been net buyers in the last 5 trading session in the Indian equity market, which re-affirms that they continue to maintain bullish view on India. Hence, until and unless the sign of weakness disappear and the global situation improves, domestic markets will have to face the music. Downside seems to be limited for our markets. However, volatility is here to stay, till clarity emerges on the dragon's next move. |
A broad-based decline
The key benchmark indices slumped as stocks fell across the globe on concerns of a possible rate hike in China and on renewed concerns over the European sovereign debt crisis. Worries that US funds will close positions in emerging markets stocks ahead of the year-end to cash in on recent gains, also added to the decline. The barometer index BSE Sensex fell below the psychological 20,000 mark and the 50-unit S&P CNX Nifty fell below the psychological 6,000 mark.
Realty, banking, metal, consumer durables and capital goods stocks led the decline. All the sectoral indices on BSE were in the negative zone and the market breadth was weak. The BSE 30-share Sensex was provisionally down 438.78 points or 2.16%, up close to 40 points from the day's low and off close to 510 points from the day's high.
The market edged lower in early trade as most Asian stocks fell. The market moved in a narrow range in the negative zone in morning trade. The key benchmark indices weakened once again after recouping most of the initial losses in mid-morning trade as weak Asian stocks dampened investor sentiment. The market slumped in early afternoon trade as Chinese stocks tumbled. Bargain hunting emerged in afternoon trade that lifted the key benchmark indices from the day's lows. The market hit a fresh intraday low in mid-afternoon trade. Stocks hovered near the day's lows in late trade.
The stock market remains closed tomorrow, 17 November 2010, on account of Bakri-Id.
NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, was up 4.34% at 21.13. The index had lost 6.38% to 20.25 on Monday, 15 November 2010, a day after Friday's (12 November 2010) sharp surge. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.
European shares retreated on Tuesday, led lower by miners, on concerns about Ireland's debt ahead of a key meeting of euro zone finance ministers and renewed talk of further policy tightening in China.. The key benchmark indices in France, Germany and UK fell by between 0.47% to 1.22%.
Euro zone finance ministers will try to find a way to end Ireland's debt crisis on Tuesday, with Dublin resisting pressure to seek a state bailout by signalling that only its banks may need help. European Union officials are saying its fund facility is ready, but Ireland hasn't come forward, saying it's fully funded until the middle of 2011 and can also dip into its EUR25 billion pension reserve.
Asian stocks were mostly lower Tuesday as an interest rate hike in South Korea added to speculation China will also tighten monetary policy to cool inflation. China's Shanghai Composite slumped 3.98%, leading the fall. Any slowdown in the Chinese economy, the world's second-largest and fastest growing, would likely reduce its demand for oil, metals, grains and other imports and be felt around the world.
South Korea's Kospi fell 0.77% after the Bank of Korea raised its key interest rate for the second time in four months to 2.5% from 2.25%.
The key benchmark indices in Singapore, Indonesia, Hong Kong and Japan fell by between 0.31% to 1.39%. But, Taiwan's Taiwan Weighted rose 0.87%.
New York stocks had a mixed finish Monday, 15 November 2010, as the dollar posted its second day of gains over concerns that Europe is on the edge of another bailout.
Sales at US retailers posted their strongest gain in seven months during October, adding to signs the economy was regaining strength after hitting a soft patch in the summer. The generally upbeat report was tempered somewhat by news that a manufacturing gauge in New York state fell this month to its lowest level since April 2009.
Trading in US index futures indicated that the Dow could fall 66 points at the opening bell on Tuesday, 16 November 2010.
Back home, India's exports in October 2010 rose an annual 21.3% to $18 billion, while imports for the month grew 6.8% on the year to $27.7 billion, Trade Secretary Rahul Khullar said on Monday, 15 November 2010. Khullar said exports could touch $200 billion in the fiscal year that ends in March 2011 (FY 2011). He also said that the trade deficit will not top $135 billion. The trade deficit had widened to a 23-month high of $13.06 billion in August 2010 and Khullar had said the deficit could touch $135 billion for FY 2011, higher than his earlier forecast of $120 billion. The government is targeting close to 15% export growth in the current fiscal.
The wholesale price index rose 8.58% in October 2010, a touch slower than 8.62% increase in September 2010, data released by the government Monday, 15 November 2010, showed. The annual reading for August 2010 was upwardly revised to 8.82% from 8.5%.
Industrial output in September 2010 rose at a much slower-than-expected 4.4% in September 2010 from 8.2% a year ago, government data released on Friday, 12 November 2010, showed. The September IIP data is the lowest in 15 months. Meanwhile, the index of industrial production for August was revised upwards from 5.6% to 6.9%.
The $1.7 billion follow-on public offer of state-run Power Grid Corporation received strong response. The issue was subscribed 14.88 times.
While global liquidity remains ample, a section of the market is worried that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 80000 crore from equity and debt issue over the next three to six months. Steel Authority of India and Indian Oil Corp are some of the other state-run firms that are planning large share sales in coming months.
Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said.
Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflow in 2010 stands at $28.53 billion, above last year's $17.45 billion. The annual inflows are at record levels this year.
Chairman of the prime minister's Economic Advisory Council C. Rangarajan, last week, said that the Indian economy has the capacity to absorb capital inflows of up to $70 billion annually without government intervention. "The quantitative easing by the US Federal Reserve may have implications in terms of capital inflows, but as I had indicated earlier, India's current-account deficit will be around 3% of gross domestic product" this fiscal year, C. Rangarajan said.
On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 3243 firms surged 45.5% to Rs 104504 crore on 19.9% growth in sales to Rs 930662 crore in Q2 September 2010 over Q2 September 2009.
The Reserve Bank of India (RBI) at its second quarterly monetary policy review on 2 November 2010 hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.
The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said. The Reserve Bank of India (RBI) next reviews monetary policy on 16 December 2010.
As per provisional figures, the BSE 30-share Sensex was down 438.78 points or 2.16%, to 19,870.91. The Sensex slumped 477.47 points at the day's low of 19,832.22 in mid-afternoon trade. The Sensex rose 70.41 points at the day's high of 20,380.10 in early trade.
The S&P CNX Nifty was down 134.60 points or 2.2% to 5,987 as per provisional figures. The Nifty hit a low of 5,970.60.
The BSE Mid-Cap index fell 2.16% and matched the Sensex's fall. The BSE Small-Cap index fell 2.9% and underperformed the Sensex.
BSE clocked turnover of Rs 4656 crore, higher than Rs 4635.05 crore on Monday, 15 November 2010.
The market breadth, indicating the health of the market, was weak in complete contrast with a strong breadth earlier in the day. On BSE, 2516 shares fell while 523 shares rose. A total of 64 shares remained unchanged.
From 30 share Sensex pack, 29 fell and just one rose.
Index heavyweight Reliance Industries (RIL) fell 2.32%, with the stock falling for the sixth straight day.
India's largest listed telecom operator by sales Bharti Airtel rose 1.26%. It was the only Sensex gainer.
Metal stocks fell on worries over monetary tightening in China, the world's biggest consumer of consumer of copper and aluminium. Tata Steel, Jindal Steel & Power, Hindustan Zinc, National Aluminum Company, Steel Authority of India, Hindalco Industries and Sterlite Industries fell by between 1.42% to 5.21%.
India's largest realty player by sales DLF fell 2.56%, extending last three days' sharp losses on weak Q2 results. Among other realty stocks, Unitech, Omaxe, Ackryti City, Indiabulls Real Estate, HDIL and Phoenix Mills fell by between 0.16% to 6.18%.
Capital goods stocks fell on profit taking. India's largest engineering and construction firm by sales Larsen & Toubro (L&T) fell 3.26%. A consortium led by L&T has bagged its largest overseas EPC order worth $764 million for the design and development of the New Salalah International Airport in Oman. The project is in consortium with Oman-based Galfar Engineering & Contracting SAOG. L&T's size of the order is pegged at $500 million, to be completed in 30 months. Upon completion, the airport will have a capacity to handle two million passengers per annum.
Among other capital goods stocks, BEML, SKF India, Bhel, Thermax and Siemens fell by between 0.11% to 2.76%.
Consumer durables stocks reversed initial gains. Lloyd Electric, Videocon Industries, Titan Industries and Gitanjali Gems fell by between 2.12% to 5.36%.
Bank stocks fell on profit taking. India's largest bank by branch network and net profit State Bank of India (SBI) fell 2.81%. The stock had jumped 4.41% on Monday, 15 November 2010, on reports the state-run bank is eyeing acquisition of a bank in Indonesia in an all cash deal not exceeding $100 million to expand its operations in Southeast Asia. Meanwhile, bank will start a road show next week for its planned euro bond issue, Chairman O.P. Bhatt said on Monday, 15 November 2010. Bhatt had said last week SBI was planning to launch a benchmark-size 5-year euro bond issue.
The bank reported lower than expected Q2 result last week. On a consolidated basis, SBI's net profit fell 22.52% to Rs 2363.95 crore on 14.57% increase in total income to Rs 37925.44 crore in Q2 September 2010 over Q2 September 2009. As State Bank of Indore was merged with SBI with effect from 26 August 2010, the Q2 September 2010 are not comparable with the corresponding period of the previous year. The bank announced Q2 result after market hours on 8 November 2010.
India's second largest private sector bank by net profit HDFC Bank fell 1.06%. India's largest private sector bank by net profit ICICI Bank fell 1.25%.
PPI Data DISAPPOINTS US DOLLER MAY GO ABOVE 79 N THEN 80-81 Levls.. SO GO SHORT ON HIGHS>.
Core Producer Prices of US Fall, Disinflation Fears have arrived Now DOLLER MAY CROSS 79-82..
U.S. core producer prices unexpectedly fell in October to post their largest decline in more than four years, according to a government report on Tuesday that underscored the Federal Reserve's concerns about the low inflation environment.
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AP |
The Labor Department said the core producer price index, which excludes food and energy costs, fell 0.6 percent—the biggest drop since July 2006—after edging up 0.1 percent in September. Economists polled by Reuters had expected core PPI to gain 0.1 percent in October.
The headline PPI index rose 0.4 percent last month, well below economists' expectations for a 0.8 percent increase, after gaining 0.4 percent in September.
"It's a dollar negative—It's certainly undercutting all the arguments that inflation is ready to break out here," said Brian Dolan, chief currency strategist at Forex.com. "We've had a backup in Treasury yields, and I expect them to come off even further. It'll also keep a lid on dollar/yen and put a floor under the euro, as would a resolution of Ireland's issues."
"The euro fell to an area of pretty significant support in the $1.3550-60 range and I think we could see it stabilize," Dolan continued. "Commodity prices have come up, but this data shows producers can't pass it along. So inflation is probably not going to show up in the CPI data either."
US Stocks FALL More than 1.5% Amid Euro Worries and CHINA RATE HICK
Stocks Sink More than 1.5% Amid Euro Worries
Stocks continued to plunge Tuesday as investors focused on the European Union's efforts to address Ireland's debt troubles.
The Dow Jones Industrial Average fell nearly 200 points after eking out a gain Monday after stocks slumped in the last hour of of the trading session.
The S&P 500 and the Nasdaq also slid. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 21.
The key S&P 500 sectors all skidded, led by materials, telecom and energy.
The dollar [.DXY 79.13 0.61 (+0.78%)
], meanwhile, rose against a basket of currencies , although it was flat against the euro as investors took heart from stronger-than-expected economic data in Germany.
In Europe, finance ministers were working to stem a crisis involving Ireland's banks, to avoid a spillover into other nations. The Irish government will be making a statement about the situation at noon.
Commodities fell on speculation China may take more aggressive steps than initially thought to stem inflation, as well as enacting food price controls. The price of oil skidded more than 2 percent to just above $83 a barrel, while goldfell below $1,340.
In U.S. economic news, an index of home building sentiment in the U.S. rose slightly, but less than expected, for a second month, although the index remains historically low, according to a survey released by the National Association of Home Builders/Wells Fargo Housing Market on Tuesday. The index rose to 16 from 15 last month.
The producer price index rose 0.4 percent in October, the same level as September, but core PPI, which excludes volatile food and energy prices, fell 0.6 percent, after rising 0.1 percent in September. The drop was the biggest since July 2006, and has triggered disinflation concerns.
U.S. industrial production was weaker-than-expected in October, coming in flat, according to Federal Reserve data released Tuesday. Economists surveyed by Reuters had expected a 0.3 percent gain. Manufacturing rose 0.5 percent, but utilities output dropped 3.4 percent, dragging down the overall index.
The capacity utilization rate, a measure of slack in the economy, was flat at 74.8 percent, 5.8 points below average from 1972-2009.
Foreign buying of U.S. debt fell in September, although China and Japan, top buyers, added to their holdings, U.S. Treasury Department said Tuesday. The net long-term capital inflow fell to $81 billion in September, from an inflow of $128.7 billion a month earlier.
Revised tax treaties between Switzerland and other European countries may cause UBS to lose up to $41 billion in customer withdrawals, UBS said Tuesday. The bank said Tuesday that "15-40 billion francs are still at risk as a result of changes in the tax regulations."
New York Fed President Bill Dudley backed up comments from Treasury Secretary Timothy Geithner last week by saying that Fed policy is not intended to weaken the dollar.
Treasury international capital flow data is due at 9 a.m. The National Association of Home Builders releases its housing index at 10 a.m.
European shares were lower, with mining stocks in the red. European finance ministers will be meeting in Brussels to discuss a mechanism for resolving the euro-zone crisis. A possible bailout of Ireland was also expected to be discussed.
Asian stocks also saw heavy selling. The Shanghai Composite Index fell 4 percent on worries about rate tightening in China to combat inflation. In commodities, the price of gold and oil gave back some of their recent gains as the dollar rose versus the yen.
Coming Up This Week:
TUESDAY: Microsoft shareholders meeting, Atlanta Fed Pres Lockhart speaks.
WEDNESDAY: Weekly mortgage applications, CPI, housing starts, oil inventories, St. Louis Fed Pres Bullard speaks, GM IPO pricing, LA auto show kicks off, Qualcomm analyst meeting; Earnings from Target and Applied Materials.
THURSDAY: Weekly jobless claims, leading indicators, Philadelphia Fed survey, Cisco shareholder meeting; Earnings from Dell and Gap.
FRIDAY: Bernanke speaks at ECB Central Banking Conference, Harry Potter movie premieres.
India’s catching up with Asian peers
Algo Trade May Account For 30% Of Cash Volume By '12 From 20% Now
ALGORITHMIC trading in shares listed on Indian stock exchanges could account for 30% of the overall cash market volumes by 2012, compared with around 20% at present, according to US-based consulting firm Celent, citing liquid stock exchanges, sophisticated technology and connectivity as the enabling factors.
Algorithmic trading — also commonly known as programmed trading — entails the use of a pre-written software code to execute transactions, without manual intervention. They are of two types: execution and situational. Execution algorithms minimise the impact cost while executing large orders by spreading them through the day, with price and volume specifications. Situational algorithms are more sophisticated and triggered when certain conditions are fulfilled. For instance, a complex algorithm could generate a buy order depending on a combination of moves in stock price, index level and currency rate.
"India represents an excellent opportunity for algorithmic (quantitative or systematic) tradersduetotheconfluenceofseveral factors: a supportive legal and regulatory framework, well-established and liquid stock exchanges, sophisticated technology and connectivity to the exchanges, presence of all major banks and broking firms, abundance of people with relevant knowledge and experience, and limited competition in the space," says the Celent report, titled, "Electronic Trading in Asia-Pacific: A Market by Market Update on the Dynamic Region".
According to the Celent report, algorithmic trading in five of Asia's leading markets -- Singapore, Hong Kong, Japan, Australia, and India -- has seen a sharp rise in the past couple of years.
Celent expects that within three years, these markets will have caught up with the European market in terms of volumes of algorithmic trading and high frequency trading (HFT). For instance, in Singapore, the introduction of ADR trading was accompanied by tax exemptions to encourage market makers to participate. Similarly, there are rebates for options trading in Hong Kong.
In the case of India, the report says that adoption of new technology has been gradual compared with some of its peers in Asia, and this trend could continue.
"The tight spreads (difference between bid and ask prices), low visible liquidity on the bid and offer, and high trade rate require a lot of effort and skill to execute a good trade," says the report, adding that the imposition of securities transaction tax has reduced the prospects for arbitrageurs and high-frequency traders, and impacted algorithmic trading to some extent.
"Another issue is that the algorithms have to be scrutinised by the market regulator and the stock exchanges before permission is granted. On the NSE, approximately 60 pre-trade risk parameters are tested as part of the approval process. Order flow is limited by the exchange to 200 orders per second from within the exchange and 40 orders per second from outside," the report says.
Estonia On Final Countdown To Euro Adoption
Estonia on final countdown to euro adoption
With only one and a half month to go before the introduction of the
euro in Estonia, the Commission today assessed the state of its
practical preparations for the changeover. The Commission concluded
that Estonia's preparations are well advanced, while recommending
further efforts in some areas during the final phase of the
changeover. Estonia will be the 17th member of the euro area and will
bring to 330 million the number of people in the European Union who
share the single currency.
The Commission today adopted the eleventh regular 'Report on the
practical preparations for the enlargement of the euro area'. It
focuses on Estonia, which will adopt the single currency on 1 January
2011.
"I am looking forward to welcoming Estonia in the euro area in
January. The preparations in the financial sector are well advanced
and the authorities are informing the public about the euro. I am
confident everything will go well and I am convinced that Estonia will
continue to pursue the stable and sound budgetary and macro-economic
policies that will enable it to take full advantage of the euro", said
Olli Rehn, European Commissioner for Economic and Monetary Affairs.
Estonia has ordered around 45 million banknotes and 194 million coins
to introduce the euro in cash. The banknotes will be borrowed from a
National Central Bank in the euro area (Finland), in line with the
practice in the recent changeovers. The euro coins are provided by the
Mint of Finland following a public tender procedure.
The Central Bank of Estonia will start providing euro banknotes to
commercial banks (so-called frontloading) in mid-November. The
frontloading of euro coins started already in mid-September. As from 1
December 2010, all those retailers and businesses that have signed a
specific contract with their bank will also be provided with euro
cash. . All professional euro cash transports will be assured with the
highest security.
As from 1 December 2010, 600,000 'euro coin mini-kits' will be on sale
at banks and post offices for people to by them in advance of the
changeover. They will also be able to exchange their kroon cash
holdings free of charge at the official conversion rate (1 EUR=
15.6466 EEK).
During the first two weeks of the changeover, Estonian kroons and euro
will circulate in alongside each other. . Shops are however expected
to give change in euro only whenever possible. This is important in
order to speed up the changeover and reduce the cost of having to
handle two currencies simultaneously.
In order to address consumers' concerns about price increases and
abusive practices in the changeover period, a Fair Pricing Agreement
was launched at the end of August. The subscribers to the Agreement
(e.g. retailers, financial institutions, local governments, internet
shops etc) commit not to increase their prices without justification
during the changeover to the euro and to respect the changeover rules.
This is a very important initiative and special attention should be
paid to improve its coverage, especially among small and medium-sized
companies.
According to the latest Eurobarometer survey, carried out in September
2010, there has been an important income in the degree to which
respondents in Estonia feel informed about the euro in comparison with
May 2010, with 65% now feeling well informed (+15pp). This is
encouraging, but efforts need to be pursued in order to reach all
Estonian residents, in particular vulnerable groups, in time with the
necessary information.
A staff working document attached to the report looks at the state of
preparations in the other Member States that have not yet introduced
the euro (except UK and Denmark that have a formal opt-out from the
single currency)
=Estonia at a glance=
Estonia joined the European Union in 2004 and will adopt the euro on 1
January 2011
Surface area: 45 230 km2
Population: 1 340 341(Eurostat 2009)
Joined the European Union: 1 May 2004
Currency: kroon (EEK). Euro as of 1 January 2011
=Euro information=
Status: As of 1 January 2011, Estonia will be a member of the euro
area. The kroon joined the Exchange Rate Mechanism (ERM II) on 28 June
2004 and observed a central rate of 15.6466 to the euro with standard
fluctuation margins of ±15%. On 13 July 2010 the Council gave its
green light to the adoption of the euro by Estonia on 1 January 2011.
Fixed conversion rate: €1 = 15.6466 Estonian kroonid
Adoption of the euro: Estonia will adopt the euo as of 1 January 2011
INFO : http://baltic-review.com/2010/11/12/estonia-on-final-countdown-to-euro-adoption/
SOURCE: http://marketpin.blogspot.com/
