Tuesday, March 10, 2009
Hang Seng, Shanghai register good gains while Nikkei strive for advance
in Asian region tried to recoup some of its losses on Tuesday, 10 March 2009, led by financials and commodities despite the weaker closing of the U.S markets overnight.
Stocks at Wall Street once again met with a weak finish that was actually meant to be a strong start. Despite hovering in the green for quite a few times earlier during the day, US stocks ended with losses led by weakness in technology and telecom sectors.
Though the financial sector reversed its course of direction in the final hours of trading, it failed to direct the market in making a U turn. Also, investors seemed to show little interest in the merger plan announced between the pharmaceutical companies – Merck and Schering Plough.
The Dow Jones Industrial Average ended lower 80 points at 6,547, the Nasdaq closed lower by 25 points at 1,268 and the S&P 500 closed lower by 7 points at 676. Merger news dominated the day today at Wall Street.
In the commodity market, crude oil traded near $47 a barrel after rising yesterday to a two-month high on speculation the Organization of Petroleum Exporting Countries will decide to reduce output when ministers gather in Vienna on 15 March 2009.
Crude oil for April delivery was at $47.29 a barrel, up 22 cents, in electronic trading on the New York Mercantile Exchange at 11:10 a.m. London time. It earlier rose as high as $47.44 a barrel. Yesterday, futures rose $1.55, or 3.4%, to close at $47.07 a barrel, the highest settlement since 6 January 2009.
Brent crude oil for April settlement rose as much as $1.01, or 2.29%, to $45.14 a barrel at 11:10 a.m. London time. The contract fell 1.6% to $44.13 yesterday.
Gold futures fell as some investors sold the precious metal following a two-session rally. Gold futures for April delivery fell $24.70, or 2.6%, to $918 on the New York Mercantile Exchange’s Comex division. The price rose 20 cents last week. . The metal traded at $912.10 at 11:10 a.m. in London.
In the currency market, the Japanese yen was quoted at 98.70 against the US dollar..
The Hong Kong dollar was trading at HK$ 7.7560 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.
In Sydney trades, the Australian dollar corrected further on Tuesday, in the face of more gloomy economic data, with falling job advertisements signaling rising unemployment. The Australian dollar closed the trades at $US0.6384, little changed from $US0.6352 before the data release, but well below 63.97 US cents seen at the closing on Monday
In Wellington trades, the New Zealand dollar ended the day at US49.76c from US50.25c yesterday, having hit a low of US49.17c during the day. The currency recovered from early weakness today but risk aversion meant it remained subdued.
The South Korean currency surged 2.48% against the U.S. dollar on Tuesday, extending its gaining run to three sessions, as foreign investors turned strong buyers to snap up local shares.
The local currency closed at 1,511.5 won to the greenback, up 37.5 won from Monday, after rising as high as 1,500 won at one point in afternoon trade. For the past three sessions, the won rose 3.74% against the dollar.
The Bank of Korea said earlier in the day that South Korea's entire foreign exchange reserves, totaling some US$201.54 billion, are available at any time because they are invested in highly liquid assets that are easily converted into cash.
The comment by the central bank that total foreign reserves are immediately available and dollar sales by local card issuers related to Visa Inc's dividend payouts also gave some relief to the local currency.
The Taiwan dollar strengthened as it was trading at NT$ 34.6000 up by NT$ 0.2150 from yesterday’s close of NT$34.815
Coming back in equities, in Japan, closed at a fresh 26-year low, with automobile stocks tracking Wall Street lower and Takeda Pharmaceutical extending losses on concerns a U.S. approval for its diabetes drug could be delayed. The benchmark ended down 0.4% at 7054.98, although it withstood selling pressure that threatened to pull it below the psychologically important 7000-point level through the session. The broader Topix was down 7.03 points or 0.99%, to 703.50.
On the economic front, Japan’s key economic indexes were down in January. Japan’s coincident index that tracks the current state of the Japanese economy fell by 2.8% to 89.6 in January from 92.2 in December. The composite index of leading economic indicators as well as the lagging indexes decreased indicating contraction in economic activity. The Cabinet Office maintained its assessment on the coincident index, saying that the Japan's economy was worsening.
In Mainland China, stocks ended higher in anticipation of further interest rate cut by the country's central bank. The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, added 1.88% or 39.82 points to 2,158.57 points after fluctuating between 2,159.27 and 2,088.16 points. The Shenzhen Component Index on the smaller Shenzhen Stock Exchange grew 1.24% or 98.87 points to 8,045.66 points, after touching an intraday low of 7,786.86 points.
In Hong Kong, stock markets rebounded from its four and half month low, as HSBC recovered from its biggest sell-off in at least three decades ahead of its $18 billion cash call.
The Hang Seng Index ended jumped by 349.47 points, or 3.08%, to 11,694.05. The Hang Seng China Enterprise Index, which tracks H shares of Chinese companies, gained 155.09 points, or 2.31% to 6,880.67. The Hang Seng Index moved in the narrow range of 11747.11 – 11542.88.
In Australia, stock market in Australian managed to close higher, after trading in the red for most of the morning session, following a rebound among banking stocks. The benchmark S&P/ASX200 spurted of 30 points or 1% ending the day at 3,184.50. The broader All Ordinaries gained 21.5 points or 0.7% closing at 3,143.20.
On the economic front, the ANZ Banking Group survey found total job advertisements slipped 10.4% in February, the largest recorded monthly fall since the series began in 1999. It was the 10th consecutive monthly decline and the second time in three months that the survey recorded a double-digit percentage fall. On an annual basis, the number of job advertisements in newspapers and on the Internet has backpedaled 39.8% in the 12 months to February - the worst outcome in the history of the survey.
In another economic release, business conditions slumped in February as a slowdown in the global economy continued to hit Australia. The National Australia Bank (NAB) monthly business survey's measure of business conditions fell nine index points to - 20 points, a level last seen in June 1992. The measure of business confidence rose 10 index points in February, to -22 points. But the lift in business confidence followed the worst reading of confidence in the survey's 20-year history in January.
In New Zealand, stock market continued its downward slide as the benchmark index dipped down for the third consecutive session on Tuesday. The benchmark NZX50 fell 0.26% or 6.468 points to close at 2462.706. The NZX 15 ended in the down 0.30% or 13.843 points to 4646.751.
In South Korea, stock market closed higher, as the local currency's strength against the U.S. dollar helped soothe investor sentiment. After starting weaker, the Seoul bourse turned higher and extended earlier gains on the back of the Won's sharp gain and foreign investors' stock buying. The Korea Composite Stock Price Index increased by 20.47 point or 1.91% closing the day at 1,092.20
In Taiwan, stock market regain its two month closing high, after DRAM makers Powerchip and Nanya Technology up after the government said it would inject up to T$30 billion into a new DRAM company it is setting up to consolidate the island's industry. The main Taiex share index resumed gaining by closing higher by 42.78 points or 0.92% at 4,671.02, regaining its two month high, i.e. the highest closing since 7 January 2009 when the market closed at 4789.84.
In Philippines, the stock market continued to sail downwards for the third consecutive day taking cues from the losses on Wall Street overnight, which ended around 12-year lows, amid continued uncertainty about the economy. Moreover, frail economic news also weighed down the benchmark index. The benchmark index PSEi declined 0.92% or 17.40 points to 1,873.22, while the All Shares index fell 0.74% or 9.05 points to 1,201.73.
Elsewhere, Malaysia's Kula Lumpur Composite index was down 1.27% or 11.02 points to 858.22, while Indonesia’s Jakarta composite decreased by 1.38 points or 0.11% to 1,286.69. In Thailand, the Thai Stock exchange added 2.40 points or 0.58% to 419.51.
Stock markets in India were closed on the account of public holiday.
In other regional market, European shares bounced off 12-year lows Tuesday, as an upgrade for U.K. lender Barclays helped sentiment in the banking sector and a double upgrade for Daimler injected some life back into the auto sector. At the regional level, the German DAX 30 index jumped 1.7% to 3,753.20, outpacing the French CAC-40 index, up 1.1% to 2,547.87 and the U.K.'s FTSE 100 index, up 1.2% to 3,585.41.
From: Vikram Pandit
Subject: Capital Strength and Earnings Power
Sent: Mon Mar 09 21:12:44 2009
Dear Citi Colleagues,
After a broad sell off in the markets last week, I thought I would give you a quick update on our position.
Despite the steps we’ve taken to strengthen our capital base, I am, like you, disappointed with our current stock price and the broad-based misperceptions about our company and its financial position. I don’t believe it reflects the strengths of Citi; our newly strengthened capital base, our unique global franchise and most importantly, the quality of our people. These are unprecedented times in the markets, but over time, the markets will recognize the many strengths of Citi.
I believe there are two key issues to focus on — capital strength and earnings power.
First, on capital strength, as you know, the preferred exchange we announced nearly two weeks ago is expected to make Citi the strongest capitalized large U.S. bank as measured by tangible common equity (TCE) and Tier 1 ratios. While our Tier 1 ratio will remain at 11.9% as of December 31, 2008, assuming 100% participation in the exchange, our TCE could increase to as much as $81 billion. Despite this addition of tangible common equity, some people continue to question our capital strength because of our net deferred tax asset (DTA) and the quality of our assets.
* DTA: Even if near-term conditions deteriorate significantly, we expect to be able to realize the majority of our DTAs.
* Asset quality: The Fed will conduct stress tests for all large banks in coming weeks. We’ve done our own stress testing using assumptions that are more pessimistic than the Fed has outlined and we are confident about our capital strength.
* In addition, the Smith Barney joint venture and the conversion of mandatory convertibles is expected to add another $14 billion to our tangible common equity over time.
In addition to our strong capital position, I am most encouraged with the strength of our business so far in 2009. In fact, we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007. In January and February alone, our revenues excluding externally disclosed marks were $19 billion. Our client businesses are strong: our deposits are relatively stable, our client-driven Securities and Banking businesses have been performing well, including our recent #1 rank in M&A, and we continue to provide credit to consumer and corporate customers. You have all done a very impressive job driving revenues and reducing our cost structure, and it is gratifying to see the results first hand.
I also appreciate how distracting the confusion in the markets and the media can be. In case you missed it, you should read the article in Friday’s Wall Street Journal Deal Journal entitled “Citi Woes Don’t Distract Its Investment Bankers” (http://www.citigroup.net/citigrouptoday/2009/inthepress/itp090309a.shtml). It was great to see you get the recognition you deserve and how you have remained focused on your clients and customers.
Lastly, I spent time last week talking to groups of colleagues and clients in Europe. It was good to hear from them. Not only did I learn a lot about what was on their minds, I was able to give them the full story of Citi and where we are today, including our full commitment to our global network and presence in over 100 countries, which is our key competitive differentiator. I would encourage each of you to continually engage with your colleagues and clients to ensure open lines of communication. To help in this effort, I have attached some important information points as an aid in your discussions. Please send me any feedback you may receive or any questions you are not able to answer.
Thank you again for your dedication. These are the times that will define us all.
SBI March 2009 futures at discount
Nifty March 2009 futures were at 2545.50, at a discount of 27.65 points as compared to the spot closing of 2573.15. Turnover in NSE's futures & options (F&O) segment was Rs 37,897.25 crore, much lower than Rs 48,734.94 crore on Friday, 6 March 2009.
Volumes were low as day-traders and other short-term traders stayed away ahead of holidays. The market remains closed on Tuesday, 10 March 2009 and Wednesday, 11 March 2009, on account of public holidays on those two days.
State Bank of India (SBI) March 2009 futures were at discount at 887.30 compared to the spot closing of 895.30.
Reliance Industries March 2009 futures were at discount at 1149 compared to the spot closing of 1153.35.
ICICI Bank March 2009 futures were near spot price at 262.50 compared to the spot closing of 262.95.
In the cash market, the S&P CNX Nifty lost 47 points or 1.79% at 2573.15.
Strong dollar pushed precious metals lower
The strong dollar pushed bullion metals lower on Monday, 09 March, 2009. Prices fell after two days of consecutive rise last week.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.
On Monday, Comex Gold for April delivery fell $24.7 (2.6%) to close at $918 an ounce on the New York Mercantile Exchange. Last week, the yellow metal remained almost unchanged. For the month of February, gold ended higher by 7.4%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 3.8%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped somewhat (8.9%) since then.
On Monday, Comex silver futures for March delivery rose 38.3 cents (2.8%) to end at $12.95 an ounce. Last week, silver rose 1.7%. In February, 2009, silver had rose 4.3% after climbing 14% in January. Year to date, silver has climbed 17.5% this year. For 2008, silver had lost 24%.
In the currency market on Monday, the dollar rose against most of its rivals. The dollar index, which measured the strength of the dollar against its six counterparts, rose 0.2% today.
In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.
Sun TV Network slipped 0.90% to Rs 154.35 at 14:15 IST on BSE, after the company said a promoter has pledged 1.65 crore shares which is 4.19% of the equity capital of the company.
The company made this announcement during trading hours today, 9 March 2009.
Meanwhile, the BSE Sensex was down 174.02 points, or 2.09%, to 8,151.80.
On BSE, 5,195 shares were traded in the counter. The stock had an average daily volume of 2.86 lakh shares in the past one quarter.
The stock hit a high of Rs 157.50 and a low of Rs 153.50 so far during the day. The stock hit a 52-week high of Rs 390 on 30 May 2008 and a 52-week low of Rs 125.10 on 1 December 2009.
The mid-cap stock had outperformed the market over the past one month till 6 March 2009, falling 6.32% as compared to the Sensex's 10.48% fall. It had also outperformed the market in the past one quarter, declining 5.98% as compared to the Sensex's 7.13% fall.
The company's current equity is Rs 197.04 crore. Face value per share is Rs 5.
The current price of Rs 154.35 discounts the company's Q3 December 2008 annualized EPS of Rs 11.39, by a PE multiple of 13.55.
Chairman & Managing Director (CMD) Kalanithi Maran, also a promoter of Sun TV Network, has pledged more than 1.65 crore shares or 4.19% stake of the firm. The company did not mention with whom the shares were pledged. Kalanithi Maran's shareholding in the company stood at 77% as on 31 December 2008.
The issue of pledged shares has gained importance in the recent past after it was discovered that the entire promoter stake of the fraud-hit Satyam Computers was pledged with various financial institutions. Securities & Exchange Board of India (Sebi) has since made it mandatory for companies to disclose details related to pledge shares.
There are fears that the lenders may dump the pledged shares if the promoters fail to repay the loan.
The company had on 5 February 2009 launched its new Tamil comedy channel named 'Adithya'.
Sun TV Network's net profit rose 9.7% to Rs 112.24 crore on 24.4% rise in net sales to Rs 270.83 crore in Q3 December 2008 over Q3 December 2007.
Sun TV Network is a leading television broadcaster in all southern states of India. It offers four Tamil language channels including Sun TV, Sun News, Sun Music and KTV as also two Malayalam channels Surya TV and Kiran TV, apart from Telugu and Kannada channels.