NIFTY FUTURES LEVELS
SUPPORT
4659
4630
4601
RESISTANCE
4683
4700
4731
4759
4788
4788
4817
Buy VALECHA ENGINEERING;HYDERABAD INDSStrong & Weak futures
This is list of 10 strong futures:
This is list of 10 strong futures:
Aban Off shore, India Bulls Retail, Ansal Infra, DCHL, Unitech Ltd, Bhushan Steel, ICSA, Praj Industry, Recltd & GSPL.
And this is list of 10 Weak futures:
Sesa Goa Ltd, Tata Steel, Colpal, Hind Uni Lvr, Federal Bank, Dabur India, Power Grid, Dr Reddy, Sail Ltd & GTL.
Nifty is in Up trend
Nifty is in Up trend
NIFTY FUTURES (F & O):
Selling may continue up to 4659-4661 zone for time being.
Selling may continue up to 4659-4661 zone for time being.
Hurdles at 4683 & 4700 levels. Above these levels, expect short covering up to 4729-4731 zone and thereafter expect a jump up to 4757-4759 zone by non-stop.
Sell if touches 4786-4788 zone. Stop Loss at 4815-4817 zone.
On Negative Side, break below 4630-4632 zone can create panic up to 4601-4603 zone. If breaks and sustains this zone then downtrend may continue.
Short-Term Investors:
Bearish Trend. 3 closes below 4623.80 level, it can tumble up to 4092.20 level by non-stop.
SL triggered. 3 closes above 4623.80 level, expect short covering up to 4889.60 level by non-stop.
BSE SENSEX:
Lower opening expected. Selling should continue.
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 VALECHA ENGINEERING (NSE Cash)
Recovery should start.
If crosses & sustains at above 95 level then uptrend may continue.
Keep a Stop Loss at 86 level for your long positions too.
Buy HYDERABAD INDS (NSE Cash)
Mild sell-off up to 403 level can be used to buy. If uptrend continues, then it may continue up to 419 level for time being.
If crosses & sustains at above 433 level then
Keep a Stop Loss at 389 level for your long positions too.
Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,496.28. Down by 47.92 points.
The Broader S&P 500 closed at 1,020.62. Down by 8.31 points.
Buy VALECHA ENGINEERING (NSE Cash)
Recovery should start.
Mild sell-off up to 89 level can be used to buy. If recovery starts, then it may continue up to 92 level for time being.
If crosses & sustains at above 95 level then uptrend may continue.
Keep a Stop Loss at 86 level for your long positions too.
Buy HYDERABAD INDS (NSE Cash)
Uptrend may continue.
Mild sell-off up to 403 level can be used to buy. If uptrend continues, then it may continue up to 419 level for time being.
If crosses & sustains at above 433 level then
uptrend may continue.
Keep a Stop Loss at 389 level for your long positions too.
Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,496.28. Down by 47.92 points.
The Broader S&P 500 closed at 1,020.62. Down by 8.31 points.
The Nasdaq Composite Index closed at 2,009.06. Down by 19.71 points.
The partially convertible rupee INR=IN closed at 48.83/84 per dollar on yesterday, weaker than its previous close of 48.65/66.
FUNDS DATA
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 31-Aug-2009 | 2573.76 | 2844.61 | -270.85 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 31-Aug-2009 | 1370.83 | 1352.18 | 18.65 |
Interesting findings on web:
A sharp sell-off in Chinese stocks raised fears about China's ability to lead an economic recovery, dragging down equity prices around the world on Monday and knocking crude prices down more than 4 percent on demand worries.
A sharp sell-off in Chinese stocks raised fears about China's ability to lead an economic recovery, dragging down equity prices around the world on Monday and knocking crude prices down more than 4 percent on demand worries.
Risk aversion helped drive the yen to a seven-week high against the dollar and to rise against other currencies. The yen was also buoyed by a decisive opposition victory in Japan, which sparked hopes that new policies will help support consumer spending and fuel the economy.
The Shanghai Composite Index .SSEC> fell 6.7 percent to a three-month closing low, adding to August losses that marked the second-biggest monthly loss in 15 years on worries that corporate earnings do not justify stock valuations.
Selling in Asian markets was widespread, hitting consumer discretionary, energy, telecommunications and materials sectors.
"Investors in the United States felt it was important for China to help lead the path to economic recovery," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville. "If their markets are going to misbehave, it opens the question of whether they are going to see a recovery."
After giving the stock market a big gain during August, investors still worried about the economy backtracked on the last day of the month.
Stocks fell in light trading Monday after a 6.7% plunge in China's main stock market unleashed a wave of selling around the world and added to concerns that stocks had rocketed too high, too fast since hitting 12-year lows in March.
China's Shanghai composite index had skyrocketed more than 90 percent from January through early August, which led some investors to wonder whether the country would help lead the world out of a recession. But much of that growth seems to have been propelled by massive government lending programs that officials have begun to rein in. Chinese markets have been sliding since early August, and the index plummeted 6.7 percent on Monday. It is down 23 percent since Aug. 4, sending China into bear-market territory.
On Monday, U.S. stocks fell along with other world markets after shares in Shanghai slid on continued uneasiness about China's economy.
The Shanghai market is down more than 20% from its peak in early August, putting it in bear market territory.
On Wall Street, September -- the worst month on average for the stock market over the last 80 years -- begins today with an expected report on manufacturing that, along with job data due Friday, could upend the market's 6-month-old rally or help push it forward.
The drop in stocks Monday was broad, with all but one of the 10 major industry groups in the Standard & Poor's 500 index falling. Energy and material stocks posted some of the biggest losses as prices for commodities including crude oil and copper slid on concerns that demand from China would fall.
The Dow fell 47.92 points, or 0.5%, to 9,496.28. The S&P 500 index slid 8.31 points, or 0.8%, to 1,020.62, while the Nasdaq composite dropped 19.71 points, or 1%, to 2,009.06.
The Russell 2000 index of smaller companies lost 1.3%.
But all three major indexes gained for the month of August: The Dow rose 3.5 percent, the Nasdaq advanced 1.5 percent and the S&P 3.4 percent. For the Nasdaq and S&P, it was their sixth straight monthly gain. The Dow is up five of the past six months, but this is only the second consecutive monthly gain.
The Standard & Poor's 500 index, which is the basis for many mutual funds, ended August higher to post its sixth straight monthly gain. It is up 50.9 percent since early March, the best run since 1938.
The Standard & Poor's 500 index rose 3.4% in August for its sixth straight monthly gain. It is up 51% since early March, the best six-month run since 1938.
Three stocks fell for every one that rose on the New York Stock Exchange, where volume was light.
The retreat in U.S. stocks shaved some gains from the market's best August since 2000. For the month, the Dow rose 3.5% and the Nasdaq composite index rose 1.5%.
Since its low in March, the Dow is up 45% and the Nasdaq is up 58%.
Shares of commodity producers fell. Aluminum maker Alcoa slumped 3.6%. Freeport-McMoRan Copper & Gold slid 3.8%.
September has been the worst month for the stock market over the past 80 years, and it begins with many analysts already worried that investors have bet too soon on a recovery. Data due Tuesday on manufacturing and employment on Friday could upend the market's six-month-old rally or help push it forward.
The drop in U.S. stocks Monday was broad and a 48-point drop in the Dow Jones industrial average was the biggest in two weeks. Energy and materials stocks fell the most as prices for commodities like crude and copper plummeted.
"The markets have been looking like they've been somewhat reluctant to hold their gains over the last couple of sessions," said Blaze Tankersley, chief market strategist at Bay Crest Partners, adding that the news out of China provided investors with a good excuse to sell.
Two big acquisitions totaling close to $10 billion did little to excite investors. The Walt Disney Co. said it plans to buy Marvel Entertainment Inc. for $4 billion in cash and stock, while oilfield services company Baker Hughes Inc. said it will buy BJ Services Co. in a cash-and-stock deal valued at $5.5 billion.
Investors also looked past a report showing an improvement in Midwest business conditions. The Chicago Purchasing Managers index, which measures business activity in Illinois, Michigan and Indiana, jumped to 50.0 in August from 43.4 in July, ending 10 consecutive months of drops.
The index is considered a precursor to the Institute for Supply Management's manufacturing index, which is due Tuesday. A reading above 50 indicates growth in manufacturing, something that hasn't happened since January 2008.
Trading is expected to be light this week but there are still several important reports on the economy that could sway the market one way or the other.
The most closely watched data will come from the government's monthly jobs report on Friday. Economists are expecting another 220,000 jobs were lost, down from 247,000 in July.
Last month's report showed an unexpected dip in the unemployment rate and investors are anxious to see whether the rate continues to fall. If fewer jobs are being lost, consumers might start to feel comfortable spending again and help get the economy back on its feet.
Analyst reports on Monday perhaps fanned investors' jitters about September, bringing reminders that the month often brings trouble for stocks. It was nearly a year ago that the market slide turned into a plunge with the mid-September collapse of Lehman Brothers and the freeze in credit markets that made the recession tighten.
Sam Stovall, chief investment strategist, U.S. equity research at Standard & Poor's, noted that since 1929 the S&P 500 index has lost an average 1.3 percent for the month. But in the 14 Septembers that followed the end of down markets, the index has gained about 2 percent.
Oil dropped nearly $3, settling below $70 a barrel [US@CL.1 70.17 0.21 (+0.3%) ] as the selloff in China raised doubts about the recovery here in the U.S. Shares of Dow energy components Chevron [CVX 69.94 -0.74 (-1.05%) ] and ExxonMobil [XOM 69.28 -0.84 (-1.2%) ] each lost more than 1 percent.
Financial stocks retreated after their strong rally last week. Rochdale Securities analyst Richard Bove wrote that, in the short term, "a reaction to the recent move up in the stocks may develop." And Barron's recommended profit-taking in Citigroup [C 5.00 -0.23 (-4.4%) ] and said AIG [AIG 45.33 -4.90 (-9.76%) ] shares were overpriced after gaining more than 50 percent last week. Citi shares lost 4.4 percent and AIG fell nearly 10 percent.
Morgan Stanley [MS 28.96 -0.55 (-1.86%) ] shares dropped 1.9 percent after Bank of America-Merrill Lynch downgraded its rating on the stock, in part due to a belief that more investors are turning retail rather and institutional brokerages. BofA-Merrill also said Morgan's shares are no longer undervalued.
Financials have been on such a tear that they locked four of the five top spots on the Dow for August: American Express and Bank of America jumped 19 percent, while Travelers shot up 17 percent, and JPMorgan Chase gained 13 percent.
The nonfinancial in the Dow's top five for August was Boeing, which gained 16 percent.
The bottom five were Verizon, P&G, Coca-Cola, Cisco and ExxonMobil.
The curious rise in government-sponsored entities Fannie Mae [FNM 1.93 -0.11 (-5.39%) ] and Freddie Mac [FRE 2.29 -0.11 (-4.58%) ] may be running out as well: FBR Capital said the August surge of the two stocks was based on speculation of a reverse stock split.
Ford [F 7.60 -0.13 (-1.68%) ] is ramping up production as new models have been well received, stirring speculation that it may eclipse Toyota for the No. 2 spot.
Still to come this week, we'll get readings on auto sales on Tuesday and the August jobs report on Friday.
Small-cap pharmaceutical Delcath Systems [DCTH 3.60 0.56 (+18.42%) ] saw its shares soar more than 18 percent Friday after health regulators granted an orphan drug status to doxorubicin, a chemotherapy agent, for the treatment of primary liver cancer.
As the first anniversary approaches of the Lehman Brothers collapse, PriceWaterhouseCoopers says claims against Lehman could reach as much as $100 billion.
Oil, Gold & Currencies:
Oil futures tumbled $2.78 to settle at $69.96 a barrel on the New York Mercantile Exchange.
Gold also fell as the dollar moved higher against other major currencies.
The yen traded near a seven-week high against the dollar amid speculation asset prices are overblown, boosting demand for the relative safety of the Japanese currency.
The yen may extend a two-day advance versus the Singapore dollar after a technical chart signaled the 61 percent rally in Asian stocks since the March low was excessive. The Australian dollar was close to the highest level this year against the greenback on optimism the nation's central bank will shift its bias toward lifting interest rates at today's meeting.
"Investors are turning risk averse amid worries over the sustainability of the economic rebound," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. "The bias is for the yen to strengthen."
The yen traded at 93.14 per dollar as of 11:05 a.m. in Tokyo from 93.13 in New York yesterday, when it rose to 92.55, the highest level since July 13. The currency was at 133.51 per euro from 133.48. The euro bought $1.4335 from $1.4334.
The Australian dollar fetched 84.39 U.S. cents from 84.39 cents. It reached 84.78 cents on Aug. 14, the highest level since Sept. 22, 2008. It was at 78.60 yen from 78.57 yen.
Japan's currency traded at 64.66 versus Singapore's dollar from 64.61 yesterday, when it advanced to 64.17, the strongest level since July 15. The MSCI Asia Pacific Index of regional shares advanced 0.4 percent today, having rallied 61 percent from a more than five-year low on March 9.
Technical Charts
The index's 14-day stochastic oscillator climbed to 78.8 today from 69.5 yesterday, approaching the 80 threshold that indicates an asset price may have risen too fast and is poised to decline. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in an asset's value.
Benchmark interest rates are 0.1 percent in Japan and as low as zero in the U.S., compared with 3 percent in Australia, making the South Pacific nation's assets attractive to investors seeking higher returns. The risk in such trades is that currency market moves may erase any profits.
Yen strength was limited after a Chinese government report showed the nation's manufacturing expanded at the fastest pace in 16 months in August, allaying concern that the economic recovery may falter.
The official Purchasing Managers' Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion.
The yen posted a monthly gain in August versus all of the 16 most-traded currencies tracked by Bloomberg except for the New Zealand dollar, rising 1.8 percent against the greenback and 1.1 percent versus the euro. The U.S. dollar declined 0.5 percent against the euro in August.
RBA Meeting
Australia's dollar may gain for a fourth day against its U.S. counterpart on speculation the Reserve Bank of Australia will signal possible increases in its benchmark interest rate, increasing demand for the nation's assets.
RBA Governor Glenn Stevens said Aug. 14 the benchmark rate would rise from its "emergency" setting at a half-century low of 3 percent. Economists in a Bloomberg News survey don't expect a rate change when the bank gives its decision later today.
"The big risk about the RBA today is whether they move to an explicit tightening bias, which would be a big policy turnaround," said Amber Rabinov, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne. "We could see the Aussie dollar head toward 85 U.S. cents."
Bonds:
Demand for the safety of government debt rose, pushing down yields while underscoring investors' uneasiness. The yield on the benchmark 10-year Treasury note fell to 3.4% from 3.45% late Friday.
What to expect:
All those clunkers that were littering car dealers' lots are now temporarily clunking up economic data.
That will be apparent in Tuesday's monthly auto sales, when automakers show temporary outsized gains in August from sales related to the clunkers program. It will also be somewhat apparent as a blip in the Institute of Supply Management manufacturing survey, released at 10 am New York time.
Economists expect the ISM to rise above 50 for the first time in 19 months. A reading over 50 indicates the economy is growing.
Other data Tuesday includes pending home sales and construction spending, also released at 10 am, but the big focus is on ISM.
A small amount of the improvement in ISM is expected to come from the activity around the spike in auto sales, related to the government's "cash for clunkers" program. Under that program, consumers received a cash incentive to turn in old cars when they purchased some 690,000 new, more fuel-efficient models.
The seasonally adjusted annual rate of auto sales for August is expected to be about 14.3 million, the best rate since April 2008.
Economists had forecast a pickup in auto manufacturing, even without the clunkers program. They also have been watching the early stirrings of a manufacturing recovery to see if it can help lift the rest of the economy.
"The ISM is about good old-fashioned inventory restocking," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. "The clunkers is maybe worth half a point. This is really about inventory restocking."
LaVorgna expects ISM to come in at 52, revised form his earlier forecast of 51. Last month, the reading was 48.9.
"The clunkers aren't going to impact whether you're bullish or bearish," he said.
ISM hit a low of 32.9 in December, 2008. LaVorgna said a primary driver behind the improvement is the increased activity, following the restructuring of GM and Chrysler earlier in the year.
Asia:
Asian shares were mostly higher Tuesday, but gains were limited after Wall Street fell, and investors awaited China's open after Monday's slump. Shipping and steel stocks were early decliners in Tokyo.
Japan's Nikkei 225 was up 0.2% while South Korea's Kospi nudged up 0.4% and Australia's S&P/ASX 200 added 0.3%. New Zealand's NZX-50 though was 1% lower. Dow Jones Industrial Average futures were recently 13 points higher in screen trade.
The Shanghai Composite Index slumped 6.7% Monday amid concerns about share supply and a slowdown in lending growth. They were also awaiting the release later Tuesday of CLSA's Purchasing Managers Index for China.
"China will be the biggest concern today," said Mizuho Securities market analyst Yukio Takahashi. "Should the PMI be horrible, we could have a breakdown in equities and risk (appetite)," added Westpac Bank markets strategist Imre Speizer.
There was already one reading out Tuesday morning on China PMI for August, with the China Federation of Logistics & Purchasing's index hitting 54.0, from 53.3 in July, offering some comfort on the economic outlook.
Shipping and steel stocks were lower in Tokyo, with Mitsui O.S.K. Lines down 2.0% and JFE Holdings 1.9%.
Technology stocks were higher in Korea after recent encouraging results from U.S. technology companies, with Samsung Electronics up 0.4% and Samsung Electro-Mechanics up 1.1%.
In Australia, ANZ was up 0.8% as brokers upgraded their target prices for the stock, though materials and energy stocks were mostly lower on falling commodity prices, with BHP down 0.4% and Woodside Petroleum 1.5% lower.
Investors were awaiting the outcome of the Reserve Bank of Australia's policy meeting Tuesday, with most expecting no change in interest rates.
Shares in New Zealand were lower with Telecom off 1.8% and Contact Energy down 1.0%. PGG Wrightson fell another 2.9%, amid concerns it may raise fresh capital.
Nikkei 225 10,540.61 +48.08 ( +0.46%) (08.25 AM IST)
Japan's Nikkei average danced in and out of positive territory on Tuesday with market players saying that moves in dollar/yen were largely driving the market, along with moves in Chinese stocks.
The benchmark Nikkei .N225 was up 0.5 percent or 48.08 points at 10,540.61.
Fast Retailing Co. (9983) shares traded lower for the fourth straight day Tuesday morning, in advance of the firm's Wednesday announcement of same-store sales data for August.
TCM Corp. (6374) shares rose for the first time in four trading days Tuesday morning, surging 34% from Monday at one point to 188 yen.
Nippon Sheet Glass Co. (5202) shares gained ground for the first time in five trading days Tuesday morning.
HSI 19823.78 +99.59 +0.5% (08.29 AM IST)
Hong Kong stocks rebounded Tuesday after falling in the previous three sessions as investors looked for bargains in China Petroleum & Chemical Corp., or Sinopec, and China Southern Airlines after recent sharp losses. The Hang Seng Index rose 0.9% to 19,899.48 in early action, while the Hang Seng China Enterprises Index gained 1% to 11,383.75, aided by an advance in a volatile Shanghai market. Shares of China Southern /quotes/comstock/22h!e:1055 (HK:1055 2.41, -0.03, -1.23%) /quotes/comstock/13*!znh/quotes/nls/znh (ZNH 15.51, -0.73, -4.50%) rose 1.6% and Sinopec /quotes/comstock/22h!e:386 (HK:386 6.47, 0.00, 0.00%) /quotes/comstock/13*!snp/quotes/nls/snp (SNP 83.95, -2.46, -2.85%) added 1.4% in Hong Kong. But in Shanghai, Sinopec dropped 0.7% after sliding in the previous three sessions on continued disappointment that Beijing hasn't allowed fuel price increases as expected and may limit future price hikes. The Shanghai Composite rose 0.4% in early morning trade after moving in both directions. The benchmark plunged 6.7% in the previous session.
Hang Seng Index opens 237 points higher on Tue
Hong Kong stocks rose on Tuesday morning, with the benchmark Hang Seng Index opening 237 points higher at 19,961.
The Hang Seng China Enterprise Index, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, opened 164 points higher at 11,442.
Sinopec<600028><0386><SNP> rose 2.01% and opened at HK$6.6. PetroChina<601857><0857><PTR> increased 1.64% from the previous closing to HK$8.7.
SSE Composite 2673.73 + 0.22 (08.31 AM IST)
Chinese stocks open 0.7% lower on Tue
Chinese stocks opened lower on Tuesday morning, tracking losses from the previous closing.
The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 2,649.17 points, down 0.7% or 18.58 points from the previous closing.
The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 1.15% or 122.04 points lower at 10,463.04 points.
China's key stock index opened down 0.7 percent on Tuesday, led by Yangtze Power (600900.SS), as negative factors including weak investor sentiment and the stock regulator's continued reviews of initial public offerings offset a positive purchasing managers' index.
The Shanghai Composite Index .SSEC opened at 2,649.168 points, after diving 6.74 percent on Monday and posting its second-biggest monthly loss in 15 years in August, hit by new share supplies and high share valuations that got ahead of earnings improvements.
Yangtze Power, the most active stock in early trade, tumbled 4.29 percent to 12.72 yuan after it said its shareholders had approved a plan for a private share placement.
China's stock regulator said late on Monday it would review on Friday an application by China National Chemical Engineering Co (CNCEC) for a stock IPO worth around $428 million.
State media reported on Tuesday that China's four biggest state-owned banks issued only 135 billion yuan in new loans in the first 30 days of August, with all banks lending less than 300 billion yuan in the month, down sharply from July's already small 356 billion yuan.
The small lending figures were in line with an earlier Reuters report on August lending.
"Reviewing an IPO after a steep market fall, plus shrinking bank lending -- all this negative news is leading the index to fall and fill a gap on the charts from late May around 2,635 points," said Wen Lijun, analyst from Nanjing Securities.
She added, however, that the steep fall in the Chinese stock market did not necessarily reflect expectations or developments regarding China's economic recovery.
Indeed, China's official purchasing managers' index (PMI) for August inched up to 54.0 from July's 53.3.
It was the sixth straight month that the official PMI stood above 50, indicating an expansion of activity in the manufacturing sector. A reading below 50 suggests contraction. A record low of 38.8 was plumbed in November.
China's stock regulator said late on Monday it would on Friday review an application by China National Chemical Engineering Co (CNCEC) for a stock initial public offering (IPO) worth around $428 million.
The China Securities Regulatory Commission (CSRC) has been continuously reviewing and pushing new offers into the market since it resumed IPOs in June after a 10-month suspension.
Worries, however, over too many new share supplies helped push China's key stock index down 22 percent in August to record its second-biggest monthly loss in 15 years.
China Chemical, a construction and engineering company focused on the domestic chemical industry, needs around 2.92 billion yuan ($428 million yuan) to buy equipment and supplement working capital for key projects, it said in a draft prospectus.
It plans to issue up to 1.23 billion A-shares denominated in yuan, or 25 percent of its expanded capital after the IPO, for a listing on the Shanghai Stock Exchange, it said in the prospectus published on the CSRC's website, www.csrc.gov.cn.
($1=6.83 Yuan)
Home Inns mulls Taiwan expansion plan: report.
FIL raises shareholding in ZTE to 5.4%.
Yanchang Petroleum to issue RMB 2 bln in financing bills.
BoCom eyes 60% rise in assets under management.
Sina Q2 net profit hits US$13.30 mln.
China Railway sees steady growth in H2.
China Mobile launches Ophones.
PetroChina to buy RMB 21.99 bln in assets from CNPC.
China's NDRC to subsidize loans for raw material imports.
Financial Street to issue RMB 5.6 bln in corporate bonds.
Shareholders back China Pacific HK share offer
Shareholders of China Pacific Insurance have approved the firm's plan to float shares in Hong Kong, the company said on Tuesday, in an offer that analysts have estimated to be worth around 24 billion yuan.
China Manufacturing Grows at Fastest Pace Since 2008
China's manufacturing expanded at the fastest pace in 16 months in August as the economy maintained momentum after record lending in the first half of the year.
The official Purchasing Managers' Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion.
Investors and economists are split on the outlook for the world's third-biggest economy as banks rein in credit growth to counter the risk of asset bubbles and bad loans. The plunge by the Shanghai Composite Index into a bear market yesterday contrasted with a Bloomberg News survey showing economists expect the government to top its 8 percent economic growth target this year.
"The recovery is still on track," said Paul Cavey, an economist with Macquarie Securities in Hong Kong.
The benchmark stock index tumbled 6.7 percent yesterday, capping its biggest monthly loss since October.
New loans plunged to 355.9 billion yuan ($52 billion) in July, less than a quarter of June's level, and may slump to 200 billion yuan in August, the Beijing-based business magazine Caijing reported yesterday without citing anyone.
Domestic Demand
Subsidies for purchases from cars to home appliances are aiding manufacturers by stoking domestic demand as the global recession cuts exports. Shenzhen-based BYD Co., a Warren Buffett-backed maker of cars and rechargeable batteries, said first-half profit almost doubled as stimulus measures boosted sales.
The State Council, China's cabinet, said last month that it saw signs of a recovery in manufacturing and also announced plans to curb overcapacity in the steel and cement industries.
China's economic growth accelerated to 7.9 percent in the second quarter from a year earlier on the nation's $585 billion stimulus package and more than $1 trillion of new loans in the first half. The 6.1 percent expansion in the first three months of the year was the weakest in almost a decade.
Growth will continue to quicken in the third and fourth quarters, reaching 8.3 percent for the year, according to the Bloomberg survey of 21 economists.
In contrast, former Morgan Stanley Asia economist Andy Xie predicts the Shanghai Composite Index may fall a further 25 percent because China's recovery "isn't sustainable."
Government efforts to control lending have included requiring lenders to raise reserves to 150 percent of non- performing loans by the end of this year. Bank of China Ltd., which advanced the most new credit in the first half, said Aug. 27 that it will slow loan growth in the second half and improve loan quality.
China official PMI rises for sixth straight month
One of two competing indexes measuring manufacturing activity in China indicated expansion in August, marking the sixth consecutive month activity has held above the boom-or-bust level, suggesting industrial activity will continue to pick up speed in coming months.
The Purchasing Managers Index rose to rose to 54.0 in August from 53.3 in July, the China Federation of Logistics and Purchasing said Tuesday. The index came in below 50 from October to February.
August's 0.7 percentage-point rise outpaced 0.1 percentage point gains in both June and July. The index came in below 50 from October to February.
"Industrial activity should continue to grow in the coming months, driven by strength in domestic demand and a rebound in exports," wrote J.P. Morgan's Jing Ulrich, managing director and chairman of China equities in Hong Kong.
The CFLP conducts its PMI survey on behalf of China's National Bureau of Statistics. A competing PMI, previously issued by financial firm CLSA and this month being taken over by banking giant HSBC, is due out later Tuesday.
HSBC China PMI at 55.1 in August from 52.8 in July.
China funds cut stock weightings on liquidity fears
Chinese fund managers reduced their recommended allocation to equities for the first time in six months, on concerns that a possible liquidity tightening may sap demand for stocks, the latest monthly Reuters poll of fund managers shows.
Average weighings for stocks within a balanced portfolio over the next three months dipped to 83.9 percent from a high of 84.4 percent last month, the first drop since February. A boom in initial public offerings was also cited by some fund managers as a risk to the stock market, which rallied 60 percent in the first six months of this year on ample liquidity and an improving economy.
The fund managers also raised their suggested bond allocation to 4.8 percent, from 4.4 percent last month, while increasing their recommended cash holdings to 11.3 percent, from 11.1 percent. China's IPO resumption in June is also weighing on the market with an influx of equity supplies. Metallurgical Corp of China, which plans to raise about 16.85 billion yuan ($2.47 billion) via a Shanghai IPO, said on Monday it would take subscriptions from investors next week. Energy stocks were the second most heavily favoured, with a suggested weighting of 12 percent. reuters
Shanghai Index May Drop 25% on Economy, Xie Says
The Shanghai Composite Index, the world's worst performer in August, may fall another 25 percent as China's economic recovery isn't "sustainable," former Morgan Stanley Asian economist Andy Xie said.
The measure plunged 6.7 percent to 2,667.75 yesterday, the most since June 2008, and entered a bear market on concern a slower lending growth may derail a rebound in the world's third- largest economy. Xie said the index "should be 2000 or less."
"The market is in deep bubble territory," Xie, 49, who correctly predicted in April 2007 that China's equities would tumble, said in an interview with Bloomberg Television.
China's retreat sent the MSCI World Index of 23 developed nations down 0.8 percent, while MSCI's emerging-market index lost 1.5 percent, the biggest drop in two weeks. The Bank of New York Mellon China ADR Index, tracking American depositary receipts of Chinese shares, lost 2.3 percent, led by commodity producers.
The Shanghai gauge slumped 22 percent in August, the biggest decline among 89 benchmark indexes tracked by Bloomberg, as banks reined in lending to avert asset bubbles and policy makers advised industries such as steel and cement to curb overcapacity. The decline stopped a rally that had sent the measure up 103 percent from a November low on prospects the government's 4 trillion yuan ($586 billion) stimulus program and a record amount of new credit would ensure the economy grows at least 8 percent this year.
Strong Numbers
"The local market bears are convinced that tightening is already underway," said Howard Wang, head of the Greater China team at JF Asset Management, which oversees $50 billion. Only "a very strong set of macro numbers in August" or "stronger statements from central authorities" would change this trend, Wang said.
Still, Chinese stocks are trading at the steepest discount in the world compared with analysts' price targets after the month-long slump. The gap of 13 percent below analysts' combined price targets is the largest among the world's 10 largest markets, data compiled by Bloomberg show.
Equities in China remain "a bright spot" among global stocks because of the nation's strong growth potential, Goldman Sachs Group Inc. said yesterday.
'Exit Strategy'
"We think the market concerns about a near-term 'exit strategy' appear premature as the government remains pro- growth," Thomas Deng and Kinger Lau, analysts at Goldman Sachs, wrote in a research note.
Goldman Sachs has boosted its growth forecasts for China's economy to 9.4 percent this year from an earlier estimate of 8.3 percent, it said in the note. Gross domestic product may increase 11.9 percent in 2010, higher than an earlier estimate of 10.9 percent, it added.
The People's Bank of China will also have "very limited room" to raise interest rates by the end of this year, Deng and Lau wrote.
"The A share market is undergoing a correction rather than a bursting of the bubble," said Richard Gao, who helps manage $2.8 billion at Matthews International Capital Management LCC in San Francisco. "Short term trading will be very volatile but we believe a strong economic recovery is underway in China and remain quite positive on the long-term growth potential."
The government will maintain its fiscal and monetary policies because the economy faces many "uncertainties," Premier Wen Jiabao said this month. Economic growth will slow in the fourth quarter as exports remain mired in a slump, Xie said.
"The recovery is not sustainable," Xie, who resigned as Morgan Stanley's chief economist in Asia in 2006 and now works as an independent economist, said in the interview yesterday from Shanghai.
Expectations
"This is a short-term negative," said E. William Stone, who oversees $101 billion as chief investment strategist at PNC Wealth Management in Philadelphia. "Expectations have been too high that China would be a driver of everything. Much has to come out of the expectations balloon."
At least 150 stocks on the 898-member Shanghai index dropped by the daily 10 percent limit. Industrial Bank Co. and Aluminum Corp. of China Ltd. tumbled by the permitted cap after Caijing magazine reported new loan growth this month may be almost half that of July. Lower profits dragged Baoshan Iron & Steel Co., the nation's biggest steelmaker, and China Southern Airlines Co. down at least 7 percent.
The Shanghai index trades at 29.39 times reported earnings, according to Bloomberg data. The MSCI Emerging Markets Index, a 22-country benchmark, trades for 18.9 times profit.
New Loans Drop
China may have 200 billion yuan of new loans in August, the Beijing-based Caijing reported today on its Web site. That compares with 7.4 trillion yuan for the first half of 2009 and 355.9 billion yuan in July alone. The government plans to tighten capital requirements for financial institutions, three people familiar with the matter said this month.
An estimated 1.16 trillion yuan of loans were invested in stocks in the first five months of this year, China Business News reported June 29, citing Wei Jianing, a deputy director at the Development and Research Center under the State Council.
"The government is now pulling the plug on liquidity," said Xie, who is a guest columnist for Caijing. "Hopefully, it's not too late."
Treasuries Little Changed, Snapping Gain, Before Factory Report
Treasuries were little changed, following two months of gains, on speculation a private report today will show U.S. manufacturing expanded for the first time in 19 months.
A revival in the U.S. economy from the steepest economic recession since the 1930s is fueling speculation investors will seek higher yields outside of government bonds. The Institute for Supply Management's factory gauge increased to 50.5 in August from 48.9 in July, according to the median estimate in a Bloomberg News survey before the report today. Fifty is the dividing line between expansion and contraction.
"Yields should go up," said Kei Katayama, who oversees $1.6 billion of non-yen debt in Tokyo as leader of the foreign fixed-income group at Daiwa SB Investments Ltd., part of Japan's second-biggest investment bank. "The economic figures have been better."
The yield on the 10-year note rose two basis points to 3.41 percent as of 11:31 a.m. in Tokyo, according to BGCantor Market Data. The 3.625 percent security maturing in August 2019 fell 1/8, or $1.25 per $1,000 face amount, to 101 25/32.
MSCI's Asia Pacific Index of regional shares advanced 0.2 percent, recouping losses from yesterday and helping curtail demand for debt.
Ten-year yields will climb to 3.76 percent by year-end, according to a Bloomberg survey of banks and securities companies with the most recent forecasts given the heaviest weightings. Katayama said he is avoiding the longest maturities, those that will fall most if yields rise.
Fed Buying
The Federal Reserve is scheduled to buy Treasuries due from May 2012 to November 2013 today as part of its plan to cap borrowing costs, according to its Web site.
Another industry report today will show pending home sales grew for a sixth month, according to a separate Bloomberg survey.
"Housing appears to be bottoming," said Michael Pond, an interest-rate strategist at Barclays Capital Inc., one of the 18 primary dealers that are required to bid at government bond sales. "We expect the data to continue to come in strong. Bond yields will move much higher."
Ten-year rates will climb to 4.2 percent, Pond said yesterday on Bloomberg Radio.
The financial crisis started with the collapse of the U.S. property market in 2007 and has triggered $1.61 trillion of writedowns and credit losses at banks and other financial institutions.
Stock Rally
Treasuries rose yesterday on speculation a six-month stock rally outpaced prospects for economic growth.
Demand also advanced on the last day of the month as investors bought U.S. debt to match changes in the indexes they use to gauge their portfolios' performance.
Yields on two- and 10-year notes touched the lowest level since Aug. 21 yesterday as stocks dropped worldwide.
"It's not a matter of whether or not we're going to come out of recession or see a significant number of defaults in corporates; it's really how quickly growth is going to come back," Ira Jersey, head of U.S. interest-rate strategy in New York at RBC Capital Markets Corp., said in a Bloomberg Radio interview. The company is also a primary dealer. "The question is, have risky assets gotten ahead of themselves?"
Treasuries returned 0.9 percent in August, adding to a 0.4 percent gain in July, according to Merrill Lynch & Co.'s U.S. Treasury Master index. The gain is the first two-month advance since November and December.
INVESTMENT VIEW
Jai Balaji Industries-BUY
Focus shifting from capacity addition to profitability: Jai Balaji Industries (JBIL) has built capacities aggressively in the last 2-3 years at a capex of Rs16b. This has enabled it to reach a critical size of 1mtpa - the largest among listed secondary steel producers, and seek large allocation of coal blocks. Now, its focus is shifting towards reducing costs and developing coal blocks to fuel earnings growth.
INVESTMENT VIEW
Jai Balaji Industries-BUY
Focus shifting from capacity addition to profitability: Jai Balaji Industries (JBIL) has built capacities aggressively in the last 2-3 years at a capex of Rs16b. This has enabled it to reach a critical size of 1mtpa - the largest among listed secondary steel producers, and seek large allocation of coal blocks. Now, its focus is shifting towards reducing costs and developing coal blocks to fuel earnings growth.
Expect strong earnings growth, going forward: Over FY09-12, volume growth of 20-22% from existing assets, contribution from value-added products like DI pipe, and cost reduction through captive coal mine and captive power plants will drive strong earnings growth.
Consequently earnings will quadruple over FY10-12. JBIL intends to deploy its cash flows during the period towards the development of various coal assets. Its 2mtpa sponge iron capacity and 400MW captive power plant at the Greenfield site of Purulia would drive earnings growth from FY13.
Valuations attractive; upgrading to Buy: JBIL's earnings were adversely impacted in the last 2-3 quarters due to high volatility of steel prices and high cost inventories. Pressure on margins has eased due to improvement of steel prices and depletion of high cost inventories. The stock trades at 1.3x FY11E BV, with FY11E RoE of over 20%.
Buy.
(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
