Sunday, November 14, 2010
China’s yuan was headed for a second weekly gain amid speculation that spiraling inflation could force policymakers in Beijing to allow faster appreciation in its currency and avert a full fledged trade war with major partners such as the US. China allowed the yuan to lead Asian currency gains this week after inflation rose at the fastest pace in two years and world leaders discuss the rising global imbalances at a Group of 20 nations’ summit in Seoul, South Korea. The yuan hit 6.6173 on November 11, the strongest since 1993. The People’s Bank of China set the reference rate for yuan trading at 6.6239 per dollar, the strongest since a peg ended in July 2005. The Chinese currency rose 0.4% this week.
China's benchmark stock index plummeted on Friday, with property and resources stocks bearing the brunt of the selling amid mounting fears that the central bank would hike interest rates further to check spiraling inflation. The Shanghai Composite Index ended down 5.15% to shut shop at 2,985.44, after falling as low as 2,975. It earlier touched a day's high of 3,150 after opening at 3,121. This was the biggest single day fall for the index in more than a year. The CSI 300 Index plunged 6.2% to close at 3,291.83. The Shenzhen Composite index tumbled 6.1% to 1,296.96, after sliding as low as 1,294.44.
Shares of Reliance Power surged this week to 52-week high of Rs 191 after the ADAG company announced a US$5 bn (nearly Rs 220bn) funding from the US Export Import Bank for executing about 9,000 MW of gas-based and renewable energy projects. RPower chairman Anil Ambani and the US Ex-Im Bank president Fred Hochberg signed a memorandum of understanding (MoU) during the visit of US President Barack Obama. The agreement would make available long-term dollar loans in the next three years. RPower also said that it was procuring equipment worth about Rs 100bn from General Electric (GE) and other US companies for its power and coal mining projects.
Indian Oil Corp (IOC) surpassed Reliance Industries Ltd. to regain its position as nation's biggest refiner after it completed expansion of its Panipat unit. "We have this week completed expansion of our Panipat refinery (in Haryana) to 15 million tonnes (from 12 million tonnes)," IOC director (Refineries) B.N. Bankapur was quoted as saying. Before the expansion, IOC's eight refineries had a total crude oil refining capacity of 51.2 million tons a year. Together with its subsidiary Chennai Petroleum Corp Ltd. (CPCL), it had a combined refining capacity of 61.7 million tons. After Panipat expansion, IOC group's refining capacity has increased to 64.7 million tons, ahead of 62 million tons of refining capacity that Reliance has at Jamnagar in Gujarat. IOC was the largest oil refiner in the country before Reliance started its 29 million tons a year only-for-exports unit adjacent to its 33 million tons a year plant at Jamnagar.
India's food inflation, based on the annual Wholesale Price Index (WPI), eased in the last week of October while fuel inflation remained steady, Government data showed. However, food inflation is still pretty high, justifying the RBI's decision last week to hike policy rates for the sixth time this year.
The Comptroller and Auditor General Vinod Rai submitted its report on the 2G spectrum matter, saying that non-auction of 2G spectrum in 2008 may have cost the exchequer up to Rs 1.40 lakh crores besides. An additional loss of over Rs 360bn was caused after the award of additional spectrum to the existing telecom players, says the CAG report. But, the Union Telecommunications Ministry moved the Supreme Court, disputing the CAG claim that Telecom Minister A. Raja caused massive losses to the Centre by awarding 2G licences at throw-away prices to new and existing operators in 2008.
The fireworks during the Diwali week had raised hopes of a new all-time highs, but the market had ideas of its own. A spate of fresh global issues prompted investors to shun risk. Corporate earnings were a mixed bag with Bharti, DLF and SBI falling short of target while Tata Motors and Hindalco came out with robust numbers. The IIP report for September too came way below expectations, sparking a broad-based selloff on Friday. Some jittery moments were witnessed towards the end on Thursday too following a sell-off in the Korean market.
India's industrial output slowed further in September from the previous month to touch a 16-month low, sending stocks and the rupee down while bonds rose. The data is bound to put the policymakers and the central bank in a fix as they grapple with erratic statistics on the one hand and high inflation on the other. Industrial output, as measured by the index of industrial production (IIP), grew by a paltry 4.4% in September 2010 versus 8.2% in the same month last year, the Commerce & Industry Ministry said. IIP for September 2010 had been forecast to grow by 6-7% on average.