Market Outlook for 13th Aug 2009

NIFTY FUTURES LEVELS

RESISTANCE

4484

4501

4532

4547

4578

SUPPORT

4450

4433

4385

4339

4324

4278

Buy DHAMPUR; EDSERV SOFTSYSTEMS

 

MSCI adds Unitech, Mahindra Satyam to global standard indices

NHPC IPO final book
-Overall 24 times; QIB 29 times; HNI 57 times Retail 3.9 times
-Enam garnered 52% or $11 billion of QIB book

 Jaypee Group & L&T
-Sign contract for super critical equipments
-Rs 4000 crore contract for super thermal project

 

Strong & Weak  futures  
This is list of 10 strong futures:

Tata Motors, Patni, Bharat Forge, Aban Offshore, Shree Renuka, Jindal Saw, Aurobindo Pharma, Cummins India, Mphasis & GT Offshore.

And this is list of 10 Weak futures:

Chambal Fert, MLL, Divi'S Lab, Suzlon, Colpal, Nagarjun Fertil, IOB, Federal Bank, Union Bank Of India  & HeroHonda.
 Nifty is sideways 
 
NIFTY FUTURES (F & O):
Above 4484 level, expect short covering up to 4499-4501 zone and thereafter expect a jump up to 4530-4532 zone by non-stop.

Support at 4433 & 4450 levels. Below these levels, selling may continue up to 4385-4387 zone and thereafter slide may continue up to 4339-4341 zone by non-stop.

Below 4324-4326 zone, expect panic up to 4278-4280 zone and have caution.

On Positive Side, cross above 4545-4547 zone can take it up to 4576-4578 zone. Supply expected at around this zone and have caution.
 
Short-Term Investors:  
Bullish Trend. 3 closes above 4473 level, it can zoom up to 4988 level by non-stop.
Stop Loss Triggered. 3 closes below 4473 level, it can tumble up to 4215 level by non-stop.
 
BSE SENSEX:
Higher opening expected. Profit Booking should start. 
Short-Term Investors:
 
Short-Term trend is Bearish and target at around 14235 level on down side.
Maintain a Stop Loss at 15973 level for your short positions too.

 

POSITIONAL BUY:
Buy DHAMPUR SUGAR MI (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 88 level can be used to buy. If uptrend continues, then it may continue up to 92 level for time being. 

If crosses & sustains at above 94 level then uptrend may continue.

Keep a Stop Loss at 85 level for your long positions too.

 
Buy EDSERV SOFTSYSTEMS (NSE Cash) 
Uptrend to continue.

Mild sell-off up to 82 level can be used to buy. If uptrend continues, then it may continue up to 86 level for time being. 

If crosses & sustains at above 89 level then uptrend may continue.

Keep a Stop Loss at 79 level for your long positions too.

FII DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	12-Aug-2009	2260.82	2765.81	-504.99

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	12-Aug-2009	1536.57	1345.99	+190.58

 

Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,361.61. Up by 120.16 points.
The Broader S&P 500 closed at 1,005.81. Up by 11.46 points.

The Nasdaq Composite Index closed at 1,998.72. Up by 28.99 points.

The partially convertible rupee INR=IN ended at 48.37/38 per dollar on yesterday, lower than Tuesday's close of 47.97/98.
 
 Interesting findings on web:
Stocks rallied Wednesday, buoyed by an improved outlook from the Fed and an encouraging housing report.

"I think [traders] like the rosy outlook from the Fed," said Dan Cook, senior market analyst at IG Markets. "The initial reactionwas to sell off a bit but when the market fully digested the statement, it seemed to like it," Cook added.

Cook says he would still be cautious of today's gains, particularly after the market's recent four-week rally, in which it gained 15 percent.

"There's still some downside to the market that's not priced in," Cook said, citing the shaky jobs front, a big credit restraint on consumers and commercial real estate among the potential speed bumps for the market. "A substantial correction would not be out of line at this point," he said.

On Wednesday at the New York Stock Exchange, the Dow Jones Industrial Average jumped 120.16 points, or 1.3%, to 9361.61, the Standard & Poor's 500 rose 11.46 points, or 1.15%, to 1005.81 and the Nasdaq Composite rose 28.99 points, or 1.47%, to 1998.72.

Financials were the biggest gainer, with the S&P financial-sector index up 2 percent, rebounding off a 3.5-percent slide Tuesday.

Good news on the housing front this morning: Existing-home sales rose 3.8 percent to an annual rate of 4.76 million in the second quarter, the National Association of Realtors reported. And the median sales price rose 4 percent to $174,100 in the second quarter from the first, though prices are still down nearly 16 percent from a year ago.

The Federal Reserve said the economy was improving and left interest rates at their lowest level in history. The major indexes jumped early in the session and rallied again after the central bank's statements.

The Fed closed out its two-day policy meeting this afternoon without making any major changes to stimulus programs while saying the economy appears to be stabilizing.

Financials shares led the market Wednesday after the Fed left interest rates low and Merrill Lynch analysts upgraded insurer Allstate ( ALL - news - people ). The Financial Select Sector SPDR, an exchange-traded fund, gained 2% during regular trading.

Allstate was up 6.3%.

Technology shares also helped the session's gains with the Technology SPDR ETF up 2% for the day after chip equipment firm Applied Materials ( AMAT - news - people ) beat analysts estimates Tuesday evening. Applied gained 3.3% for the day.

Toll Brothers [TOL  23.42    2.94  (+14.36%)   ] also delivered some much-needed good news on the housing sector. The homebuilder projected a 42-percent drop in third-quarter revenue but said the number of contracts signed increased for the first time in 16 quarters.

Toll Brothers shares jumped more than 14 percent. Beazer gained more than 9 percent, while Lennar and Pulte advanced 4 percent.

Mortgage applications fell 3.5 percent, however, as rising mortgage rates depressed refinancing demand. And the trade gap widened in June to $27 billion as higher prices on oil imports offset gains in exports.

Today's Treasury auction of $23 billion in 10-year notes was met with mediocre demand. The high yield was 3.734 percent, and the bid-to-cover ratio was 2.49, in line with the recent average of 2.48. This latest round will conclude tomorrow with a 30-year auction.

AIG [AIG  25.33    0.41  (+1.65%)   ] shares rose 1.7 percent after the insurer agreed to sell its Hong Kong consumer finance and India-based IT services units.

Macy's [M  16.40    0.93  (+6.01%)   ] jumped 6 percent after the retailer beat expectations, helped by cost-cutting efforts, but fell short with its full-year outlook.

And Sara Lee [SLE  9.72    -1.08  (-10%)   ], which makes everything from coffee cakes to Jimmy Dean sausages, also topped forecasts. But its shares fell 10 percent as sales fell sharply.

There are signs that the IPO market is returning to normal: Emdeon shares [EM  16.52    1.02  (+6.58%)   ] jumped 6.6 percent on their debut, the 15th of 17 IPOs this year to rise on their first day of trading.

And Starwood Property Trust [STWD  20.00  ---  UNCH  (0)   ] closed at $20, its IPO price. Both Starwood and Emdeon increased the size of their IPOs at pricing to meet demand.

Centex (CTX: 12.54, 0.59, 4.94%) also one of the gainers.

Ford Motor Co. (F: 7.71, -0.1, -1.28%) said it will boost production of its Ford Focus vehicle, including working factories overtime and Saturday shifts, Dow Jones reported.

The U.S. Department of Justice and Swiss bank UBS (UBS: 15.3199, 0.5999, 4.08%) said they have reached an agreement in principle regarding the release of 52,000 accounts tied to wealthy American banking clients. The accounts are part of an IRS tax probe into offshore assets that allegedly American clients hid to avoid paying taxes. The details of the agreement were not released and the settlement is pending court approval.

Microsoft (MSFT: 23.53, 0.4, 1.73%) and Nokia (NOK: 13.21, 0.11, 0.84%) announced a partnership to bring Microsoft Office software onto Nokia mobile devices.

Clothing retailer Liz Claiborne (LIZ: 3.99, -0.029, -0.72%) reported a loss of 48 cents, compared with an 11-cent profit a year ago as revenue plunged by nearly a third $683.8 million. Analysts polled by Thomson Reuters expected a loss of 40 cents and revenue of $691 million.

The Federal Reserve on Wednesday gave its most upbeat assessment of the American economy since the financial crisis unfolded, adding its voice to a number of recent reports suggesting that the great recession was ending.

Policymakers at the Fed, after warning about a steep economic decline just a few months ago, said the economy was pulling out of its slump and the central bank was winding down one of the debt-purchase programs it had created to stimulate growth.

"Economic activity is leveling out," the Fed monetary policymaking committee said after its two-day meeting.

"We're no longer at DEFCON 1," Richard Yamarone, economist at Argus Research, said, referring to the defense term for being under siege. "The Fed is pulling in some of its life preservers now that the economy is no longer sinking."

The more upbeat assessment reassured investors that they've been making the right bets and stocks bounded higher, with the Dow Jones industrial average rising 120 points.

But there was still plenty of caution in the Fed's language, and as expected it left official interest rates at record levels of near zero.

As in its previous statement after meeting in late June, the Fed said Wednesday that "economic activity is likely to remain weak for a time." And the central bank expressed concerns about ongoing job losses, lower household wealth, tight credit and sluggish income growth -- all factors constraining consumer spending, which accounts for about 70 percent of U.S. economic activity.

What is more, the Fed gave no indication that it was considering imminent hikes in the key federal funds rate -- the rate banks charge one another for overnight loans. Policymakers voted 10-0 to maintain the rate at zero percent to 0.25 percent, where it has been since December, and reiterated that they would likely keep it there for "an extended period."

"They're nowhere close to thinking about ... raising rates," said Alan Levenson, chief economist at T. Rowe Price Group in Baltimore. Many analysts believe the Fed won't lift rates until next year, and some say not until 2011.

Yet the Fed stated more strongly than before that household spending was stabilizing and that businesses were making progress in aligning inventory with sales. Many companies have pulled back sharply on inventory in recent months, suggesting that they soon will have to ramp up production and orders so they can restock store shelves and warehouses.

With economic conditions improving, the Fed also said Wednesday that in October it would phase out its program to purchase $300 billion of Treasury securities, which the central bank undertook to reduce long-term interest rates and help prop up the economy. The program was announced in March and slated to expire in September.

Some analysts said that the end of the Treasury purchases signaled the beginnings of an eventual withdrawal of liquidity injected by the central bank. Fed Chairman Ben Bernanke has pushed extraordinary stimulus measures to pump money into the economy to loosen up credit markets and help revive the economy.

"I think it's a vote of confidence in the economy," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi in New York.

"They're taking their foot off the gas pedal," he said of the winding down of the Treasury purchases.

The Fed did not announce changes in its other programs to buy various debt, including $1.25 trillion of mortgage-backed securities.

U.S. markets weren't able to make much Wednesday of a Federal Reserve statement that showed only a very subtle improvement in policymakers' views of the economic recovery.

While stocks embarked on a slow climb, government bond prices dipped below the session lows hit the previous hour on a disappointing auction of 10-year notes. The dollar initially exploited a tentative upgrade in the statement's language on the economy, with a rally against the euro and yen, but then it fell back.

By 3:15 p.m. in New York, the euro was at $1.4214 from $1.4154, and the dollar also pared gains against the yen, still higher on the day at Y96.23 from Y95.93. The Dow Jones Industrial Average was up 172 points at 9413.61, and 10-year Treasury note had recovered from a swoon to hit breakeven for a 3.70% yield.

The most striking revision in the Federal Open Markets Committee's latest statement is it now sees "economic activity leveling out." The last one, in June, referred to a slower pace of contraction.

But for the government bond market, the key was the FOMC's decision to delay the expiry of its Treasurys purchase program from

September, to end-October. The extra month allows it to spread out the remaining 15% of the $300 billion it committed to the program when it launched in March, spending less with each market intervention.

The Fed is "buying time" by extending the Treasury purchase program to keep a moderate influence over yields and avoid upsetting the market with a more sudden withdrawal, said James Newman, head of U.S. government and agency trading in New York at Keefe, Bruyette & Woods Inc.

The Fed gave no hints of a timeline for withdrawing the other special lending and purchase programs that have seen financial markets through the last 18 months of crisis, though, reiterating instead that the central bank "is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

The Fed surprised no one by leaving its key target rate at the 0%-0.25% range it has held for the past eight months, and repeated that "economic conditions are likely to warrant exceptionally low levels [in the target] for an extended period."

Bets on a hike are little changed in the futures markets since the statement's release - positions in Fed funds contracts are evenly split on the likelihood of a rise to 0.5% by February next year.

Bucking bad news, oil tracked the stock market Wednesday and closed above $70 a barrel. Data showed a rise in U.S. stockpiles and the International Energy Agency lowered its forecast for demand next year.

The dollar fell against most major currencies on Wednesday after the U.S. Federal Reserve said it would keep interest rates low for an extended period.

The Fed decided to keep its key rate at zero to 0.25 percent at its monetary policy meeting on Wednesday, in line with expectations. The central bank said it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period".

Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out, said the Fed in a statement released after the meeting.

The Fed said the U.S. economic activity is likely to remain weak for a time and committed to employ all available tools to promote economic recovery and to preserve price stability. It also decided to gradually slow the pace of buying Treasury securities to "promote a smooth transition in markets."

The euro bought 1.4214 dollars in late New York trading compared with 1.4148 dollars it bought late Tuesday. The pound rose to 1.6511 dollars from 1.6476 dollars.

The dollar fell to 1.0879 Canadian dollars from 1.1015 Canadian dollars, and fell to 1.0772 Swiss francs from 1.0819 Swiss francs. It rose slightly to 96.23 Japanese yen from 96.02 Japanese yen.

Oil& Gold:

Oil prices hovered around $70 per barrel Wednesday afternoon after the Federal Open Market Committee held the benchmark Federal Funds rate between 0% and 0.25% and signaled an eventual end to its program of buying long-term Treasury's to help bolster the economy.

"The announcement was initially bearish for oil," said Phil Flynn, senior market analyst at PFG Best Research in Chicago. 

"The (Federal Open Market Committee) is talking out of both sides of their mouth, sending a signal that quantitative easing is coming to an end but they kept the door open that if conditions change they can go back to it. But in a clear way they are sending a message that the party is over."

Light crude for September delivery closed up 71 cents a barrel on the New York Mercantile Exchange, surprising some analysts who expected crude to drop after an earlier EIA report that inventories rose by 2.5 million barrels over last week. That number was far higher than the expected 1 million barrels. Crude continued to dance around the $70 per barrel mark in after-hours trading.

Flynn said a weak dollar has bolstered crude prices and the government's attempts to prop up the economy have also proved bullish for oil.

"I think what is happening is, oil is torn," he said. The good news is the economy is getting better so we should be using more oil.  The bad news is the economy is getting better, which will lead to a reverse in the stimulus money, which could send oil lower.  I think oil will remain under pressure particularly as the dollar gets stronger.   

The Paris-based International Energy Agency also released its monthly report Wednesday, saying growth in worldwide demand will be lower in 2010 than previously forecast.    

Oil companies such as Exxon Mobil (XOM: 69.11, 0.96, 1.41%), Marathon Oil (MRO: 30.54, 0.63, 2.11%) and Total (TOT: 54.9704, 1.5704, 2.94%) were higher on the day.

Gold inched up towards $950 onThursday maintaining the previous day's uptrend after the U.S.Federal Reserve signalled its resolve to keep interest rates near zero, a move seen boosting bullion's status as an inflation hedge.

Bonds:

In Treasury bonds, short-dated notes posted gains while benchmark 10-year notes fell, a steepening of the yield curve that analysts attributed to the Fed's decision to hold down short-term rates into the future. The 10-year note closed at a yield of 3.72%, already down sharply from a two-month high last Friday of 3.89%.

What to expect:

THURSDAY: Retail sales; weekly jobless claims; import/export prices; business inventories; Treasury 30-year auction; Earnings from Wal-Mart, Kohl's and Nordstrom.

FRIDAY: CPI; industrial production; consumer sentiment; Earnings from JCPenney.

The following data is expected on Thursday: ECON

German flash GDP for Q2                        (0600 GMT) -

French preliminary GDP for Q2                  (0645 GMT) -

Swiss combined producer/import prices for July (0715 GMT) -

ECB publishes monthly bulletin                 (0800 GMT) -

Eurozone flash GDP figure for Q2               (0900 GMT) -

U.S. import/export prices for July             (1230 GMT) -

Weekly U.S. jobless claims                     (1230 GMT) -

U.S. retails sales for July                    (1230 GMT) -

U.S. business inventories for June             (1400 GMT) -

Markets will take measure of the American consumer Thursday, when monthly retail sales for July are released and Walmart reports its quarterly earnings.

Retail sales, reported at 8:30 am New York time, will continue to show a consumer under pressure but could be slightly better than last month's number. Economists forecast that July sales will be up 0.8 percent. Excluding autos, it is expected to be up 0.1 percent.

Discounter Walmart reports earnings before the opening bell and is expected to show flat results of 86 cents per share. Other reports of note include weekly jobless claims and import prices, both at 8:30 am and business inventories at 10 am. Other earnings expected Thursday include Dr. Pepper Snapple, Estee Lauder, Kohl's, Urban Outfitters, Autodesk and Nordstrom.

Accounting rule maker FASB holds a board meeting Thursday that is getting a lot of attention for its potential impact on banks. FASB is expected to consider a proposal to have financial instruments carried on balance sheets at fair value. There is no immediate action expected on this proposal, but if it results in modification of the mark-to-market rule it could impact bank earnings.

Stocks Wednesday broke a two-day losing streak, with the Dow up 120 points, or 1.3 percent at 9361. The S&P 500 recovered 11 points, or 1.1 percent, to close at 1005. The financial sector was the best performer, up 2 percent.

The dollar, back in step with the "reflation trade," fell as the stock market moved higher.

Long-term Treasurys were weaker as the government auctioned $23 billion in 10-year notes, and the Fed said it would wind down its purchases of government debt in October. The yield on the 10-year rose to 3.72 percent from Tuesday's 3.67 percent.

On Thursday, the Treasury plans to auction another $15 billion in 30-years.

The Fed, in its post-FOMC statement Wednesday, also said the economy is leveling out and said it would keep its Fed funds rate near zero, as expected.

Traders were encouraged by late afternoon news that hedge fund manager John Paulson was loading up on bank stocks in the second quarter. In an SEC filing, Paulson & Co reported that it held 168 million Bank of America [BA  46.34    0.95  (+2.09%)   ] shares as of June 30.

CNBC's Charles Gasparino was first to report the Paulson holdings.

Paulson's investments are closely watched since he predicted the collapse of the mortgage market and melt down in bank stocks. Paulson alsoreported holding 35 million shares of Regions Financial and 2 million shares of Goldman Sachs, among others.

Asia:

Japan's stock market rose slightly on Thursday, lifted by exporters such as Honda Motor after the Federal Reserve suggested the U.S. economy is  through the worst of the recession.

The benchmark Nikkei [JP;N225  10511.14    76.1397  (+0.73%)   ] slipped 1.4 percent the previous day after rising to a 10-month high of 10,587.36 on Tuesday.

Toyota Motor Corp. (7203) shares rose for the first time in three trading days Thursday morning on news that it plans to introduce a new low-price hybrid as early as 2011.

Shares in Astellas Pharma Inc. (4503) ended their two-day retreat Thursday, rising as much as 60 yen to 3,630 yen, despite a brief dip earlier that morning.

Namura Shipbuilding Co. (7014) shares opened bid-only Thursday morning, before trading limit-up at 660 yen, 100 yen above Wednesday's close.

The broader Topix gained 0.8 percent.

Kawasaki Heavy Industries and other companies involved in making trains gained after the chief of state-owned Vietnam Railways told  the Nikkei business daily that Vietnam will use Japan's bullet train technology in building its high-speed railway system connecting Hanoi and the southern commercial hub of Ho Chi Minh City.

Mazda Motor rose after the Nikkei business daily said the company could raise its domestic production outlook for April-September by about 10 percent as stimulus programs in Japan and abroad boost demand.

Mazda outperformed the transport subindex, which rose 1.2 percent.

Australian shares were also higher in early trade, bolstered by banks, though top miner BHP Billiton and Telstra slipped  after their results.

The benchmark S&P/ASX 200 index [AU;XJO  4400.6    57.50  (+1.32%)   ] was up, as was New Zealand's benchmark NZX 50 index.

But in Asia, investors were also a little cautious on how Chinese stock markets may fare Thursday. The Shanghai Composite Index dropped 4.7% Wednesday to a one-month low amid concerns China was already curbing bank lending, though Beijing has recently repeated its intention to keep its monetary policy loose and supportive.

First NZ Capital strategist Chris Green said: "Given that China's a key motivator of why people are more confident about an economic upturn, if there is any question about that, that will have a negative impact. That is the major risk to the global growth story."

The Tokyo stock market was lifted by short covering, and as auto stocks bounced after declining Wednesday. Toyota Motor was up 1.2% and Honda gained 1.6%.

Steel and brokerage stocks were also stronger but "there are not enough buying cues for players to buy beyond short-covering," said Yumi Nishimura, a market analyst at Daiwa Securities SMBC. With no domestic trading cues, "once short-covering runs its course, the market will just wait for more U.S. economic indicators."

Commonwealth Bank of Australia was the biggest contributor to the market's strength in Sydney as the stock rose 2.6% courtesy of broker upgrades after the bank's healthy results Wednesday. BHP was down 0.6% on concerns over high valuations.

Telstra was 2.5% lower, even though it reported full year profits rose 10.3%, beating expectations. The quality of the results was slightly weaker than expected, said Macquarie, with growth driven by cost cutting, offsetting disappointing sales revenue growth of 2.9% compared with the 3.4% Macquarie expected.

In New Zealand, First NZ Capital broker James Lee said the FOMC's comments, "which didn't really change the world," were not responsible for the local market gains, as investors chased cyclical stocks, building materials, airline and manufacturers. "The rally we've seen in markets is well beyond the worst being over - the market is now pricing recovery."

Fletcher Building was up 2.9% while Air New Zealand rose 4.1%, Nuplex Industries gained 4.7% and Fisher & Paykel Appliances was up 3.7%.

Korean stocks were lifted by banks and auto stocks, and as foreigners were net buyers. Shinhan Financial rose 3.1% while Kia Motors added 1.9%.

Ssangyong Motor was up by its daily limit of 15% as its creditor Korea Development Bank said it would provide KRW130 billion to help Ssangyong normalize its operations.

Foreign exchange markets were quiet as the FOMC "took a very balanced approach" in its statement, said Hideaki Inoue, a senior dealer at Mitsubishi UFJ Trust and Banking.

He said if global stocks gained more in coming weeks, that could push yen-crosses up, "and in that case, the dollar/yen could go into a 97 to 98 range." The euro in turn was likely "to be sensitive to moves in Chinese share markets, which have become a key focus recently."

The U.S. dollar was at Y96.05 from Y96.19 in late New York trade. The euro was at $1.4214, from $1.4196 and at Y136.53, from Y136.63.

Japanese government bonds were higher, but gains were limited by the rise in Tokyo shares. The lead September futures contract was up 0.01 at 137.51 points and the two-year cash yield was 0.5 basis point lower at 0.26%.

JGBs were supported as investors relieved the week's major events were done, RBS Securities strategist RuiXue Xu said. "This may help make domestic investors feel comfortable to return to the market."

Spot gold was at $949.20 per troy ounce, up $2.00 from the New York close. Barclays Capital said gold was trending higher, but remained in the middle of a large range. "In the bigger picture, we regard the contracting range of the past six months as constructive for an eventual move through $981 toward the $1,033 peak and beyond, to new all-time highs."

Base metals were still largely flat with the LME three-month copper contract steady from the London kerb at $6,190 per ton and aluminum at $1,979 per ton, down $6.

The September Nymex crude futures contract was up 56 cents at $70.72 per barrel on Globex

HSI 20815.57 +380.33 +1.86%. (08.37 AM IST).

Hong Kong shares rebounded Thursday after the U.S. Federal Reserve said economic activity was leveling out and promised to keep interest rates exceptionally low. But Shanghai shares extended their decline on fears bank lending would slow. The Shanghai Composite dropped 1.1% to 3,079.86 on top of its 4.7% slump the day before, with banks and metal producers falling further. In Hong Kong, the Hang Seng Index rose 2% to 20,847.09 on gains across the board, while the Hang Seng China Enterprises Index added 1.8%.

'The World Is in Trouble': Deutsche Bank Chief Economist

The global economy still faces turmoil as government try to figure out how to move out of fiscal rescue packages, which could lead to another two downturns, Deutsche Bank Chief Economist Norbert Walter said Thursday.

In addition, nervousness on the part of major dollar holders could pressure the greenback and lead to a very worrying 2010, Walter said.

Norbert said recently in research notes "the world is in trouble."

"I believe that the rescue packages brought on have been so costly for so many governments that the exit from this fiscal policy will bevery painful, very painful indeed," he said. "Some of us are already talking about a W-shaped recovery. I'd probably talk about a triple-U-shaped recovery because there are so many stumbling blocks here to get out of this."

"There are a few countries that have not dismissed people, they had a dramatic drop in their sales but they kept on people because they believed the recession would be very shallow," Walter said. "They now have to fire people. That will increase unemployment and they therefore, of course, may be endangering retail sales in some countries."

If Australia hikes rates in September or October, markets "will certainly shiver" and cause zig-zagging at the bottom of the recession, Walter said.

And while the White House struggles with issues like health care and puts a fiscal policy exit strategy on the back burner, there are big concerns of about the direction of the U.S. dollar.

"I'm deeply worried about the worries of those investors who have invested a lot, really a lot into the dollar" like the Chinese, Japanese, Arabs and Russians, he said.

"If they have second thoughts about the quality of this currency then the dollar is bound to weaken" which means higher long-term interest rates for a country where government debt is approaching 100 percent of gross domestic product, he said.

If that happens, "2010 could be a worrisome year for all of us," he said.

Chinese bank eyes top insurer for growth

Bank of Communications (BOCOM), China's fourth-largest lender by market value, may launch its own insurance unit as early as this year as part of its efforts to become a financial conglomerate in the long run, said Thursday's China Daily.

The bank plans to buy a stake in China Life-CMG Life Insurance Co, an insurer now 51-percent owned by China Life Insurance, said Dicky Yip, vice-president of the bank. He declined to reveal details of the deal.

The move echoed earlier market rumors that a slew of major Chinese lenders, including China Construction Bank and Industrial and Commercial Bank of China, are eyeing stake buys in the nation's insurers in a bid to diversify their financial services portfolios.

In a high-profile deal in early June, Ping An Insurance (Group) announced it was buying a controlling stake in Shenzhen Development Bank (SDB), initiating its ambitious goal to become a comprehensive financial supermarket offering a wide range of services under one roof.

The tie-up is still awaiting regulatory approval, which could take several more months, adding to concerns for other Chinese financial firms that seek to undertake such cross-sector acquisitions, analysts said.

China drafts regulation on monopoly price

China's top economic planner, the National Development and Reform Commission, unveiled Wednesday a draft regulation on monopoly prices.

The regulation applies to cases of monopoly prices both inside and outside the country, when monopoly prices outside the country impact the domestic market, according to the regulation posted on the commission's Web site.

Other than deals reached among more than two parties for the purpose of monopolizing prices, power abuse of government agencies to eliminate or limit competition is also regarded as violation of the regulation.

Those who violate the regulation would be punished according to stipulations in the country's anti-monopoly law, according to the commission.

Individual retailers or producers may face confiscation of illegal earnings and a fine of up to 10 percent of last year's sales, while industry associations are subject to a fine of no more than 500,000 yuan (73,529.4 U.S. dollars) or could be dismissed as an association.

Government agencies that violate the regulation would be ordered by their superiors to orrect their actions, and officials held responsible would be disciplined according to relevant laws.

The commission said the regulation was aimed to prevent monopoly prices and to endorse fair competition so as to safeguard the interests of consumers and the public.

The commission is soliciting public opinion for the regulation until Sept. 6.

China's fiscal revenue up 10.2% in Jul

China's fiscal revenue grew 10.2% year on year to RMB 669.59 billion in July, said the Ministry of Finance in a statement published on its website.

The central government's revenue increased 12.1% from a year earlier to RMB 375.24 billion in July, while local government revenues rose 8% to RMB 294.35 billion, according to the statement.

In the first seven months, the nation's fiscal revenue totaled RMB 4.07 trillion, slightly down 0.5% from the same period of last year.

Fiscal revenue has been on the rebound since May when it grew 4.8% year on year. There was a 19.6% increase in June. In the first four month of this year, the figure declined 9.9% on a yearly basis.

In the first seven months, there was a 3.5% year-on-year decline in domestic value added tax, a 69.8% surge in domestic consumption tax, an 8.2% growth in sales tax, an 8.9% decline in corporate income tax, a 29.3% decrease in customs duties and a 69.2% plunge in stock trading stamp tax.

China's fiscal expenditure was RMB 498.57 billion in July, up 9.3% year on year. The figure brought the total fiscal expenditure in the first seven months to RMB 3.39 trillion, up 23.5% from a year earlier.

SingTel Posts First Profit Increase in Five Quarters

Singapore Telecommunications Ltd., Southeast Asia's largest phone company, posted its first profit gain in five quarters, helped by higher earnings from India.

Net income rose 7.7 percent to S$945.4 million ($654 million), or 5.92 Singapore cents a share, in the three months ended June 30 from S$878.1 million, or 5.5 cents, a year earlier, the company said in a statement today. Profit from wireless units overseas, including India and Indonesia, gained 16 percent, generating more than half of SingTel's earnings.

Bharti Airtel Ltd., India's biggest phone company, accounted for 24 percent of SingTel's income and was the biggest profit contributor from overseas. SingTel is counting on Bharti, which is negotiating a merger with South Africa's MTN Group Ltd., to tap countries with higher growth potential as markets including Singapore and Philippines become saturated.

"The current operating environment remains a challenge," Chief Executive Officer Chua Sock Koong said in the statement. "We will also explore and monitor investment opportunities and will be disciplined when reviewing these opportunities."

SingTel fell 1.6 percent to S$3.18 in Singapore trading yesterday. First-quarter net income was in line with the S$943.5 million median of four analyst estimates compiled by Bloomberg. Sales rose 1.9 percent to S$3.85 billion.

    
 

INVESTMENT VIEW
Is Bombay Dyeing Over-Valued? Well, there are no financials at all.
 
Bombay Dyeing-Look At The Q1 2010 Numbers

Revenues Q1 Rs crore Rs 349 (Rs 330)

Loss Rs 19 crore (Rs 48 crore)

Equity Rs 38.6 (Rs 38.6)

 

-The above numbers have been achieved after booking a profit of Rs 60 crore on transfer of company's interest in freehold property to a wholly owned subsidiary-a case of fictitious accounting.

 

-Bombay Dyeing has also not made any provision for loss of Rs 22 crore on account of Forex Hedges it has taken in the past.

 

-Surprisingly investment in Real Estate is as big a business for Bombay Dyeing with investment at Rs 745 crore, those in Polyester and Textiles business is roughly Rs 1400 crore.

 

-Is Bombay Dyeing now a Real Estate entity? Will Real Estate operations sustain over a length of time is difficult to say, but it is obvious that the Textile operations are losing money hand over fist.

 

-So is this stock carrying a fictitious or a totally speculative bubble value?
 

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
 
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Arvind Parekh
+ 91 98432 32381